US SEC to consider proposal to prevent market glitches next week

WASHINGTON Wed Feb 27, 2013 5:36pm EST

WASHINGTON Feb 27 (Reuters) - U.S. securities regulators said Wednesday they will convene a public meeting next week to weigh new rules that aim to prevent software errors and other problems from disrupting capital markets.

The Securities and Exchange Commission's proposal comes as a response to several high-profile technology debacles last year, including Nasdaq's botched handling of the Facebook initial public offering and Knight Capital's $440 million in losses due to a software error.

SEC Chairman Elisse Walter said earlier this month in a speech that the rules being considered, known as "Regulation SCI," would require exchanges and other trading platforms to perform business continuity testing. [ID nL1N0BJ8OD]

The rules would also require exchanges, alternative trading systems and clearing agencies to provide notifications about disruptions and meet certain technological standards.

The public meeting to discuss the rules will be March 6.

If the SEC ultimately votes to propose the rules, then they will be issued for public comment. A second vote would be required before they could be adopted.

The regulations to be considered would replace a long-time voluntary standard known as "automation review policies" or ARP.

The SEC first developed ARP following the 1987 market crash.

ARP sets forth guidance for exchanges, some alternative trading systems and clearing agencies to help ensure their systems are stable, secure and have the capacity to deal with glitches that can send markets into a tailspin.

By replacing the voluntary police with rules, it would permit the SEC to take enforcement actions against entities that fail to comply with them.

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