* Hearing to feature top exchange, bank officials
* Senators to explore rules for high-speed trading
* Sen. Reed called for review after Knight, Nasdaq glitches
* Senators also expected to ask about SEC's security lapse
* SEC had left sensitive data on unencrypted laptops
By Sarah N. Lynch
WASHINGTON, Dec 11 A U.S. Senate banking
subcommittee will hold a hearing next Tuesday to examine whether
regulators should impose new rules to protect markets from
glitches in a world of high-speed computerized trading.
The event will mark the latest hearing on the issue to be
called by Rhode Island Democrat Jack Reed, who chairs the Senate
Banking subcommittee on securities.
Reed pledged in September to take a closer look at the
safety and soundness of the equity markets following a string of
high-profile technology errors, including Nasdaq's
botched handling of the Facebook IPO and Knight Capital's
$440 million in losses due to a software error. [I.D.
Those events, he said at the time, raise serious questions
about whether regulations have kept pace with changing
technology in the marketplace.
The Securities and Exchange Commission is also in the
process of reviewing potential new regulations, such as a "kill
switch" mechanism that can shut off access to the market before
a glitch can have a ripple effect.
Exchange officials scheduled to testify next week include
New York Stock Exchange Chief Operating Officer Lawrence
Leibowitz and Nasdaq OMX's Vice President of
Transaction Services Eric Noll, as well as executives from
Credit Suisse and ITG.
In addition to looking at issues raised by automated
trading, some U.S senators are also expected to ask questions
about the SEC's failure to encrypt some computers containing
highly sensitive stock exchange data, according to a Senate
The security lapses were detailed in a non-public Aug. 30
report by Interim Inspector General Jon Rymer. The report has
been reviewed by Reuters.
The report found that some staff in the SEC's Trading and
Markets Division did not encrypt computers, iPads and other
devices containing confidential data from the exchanges and
clearing agencies they were overseeing.
Those employees were responsible for reviewing the cyber
security policies and practices at the exchanges. They urged
exchanges to tighten cyber protections at the same time they
were using unprotected computers.
The SEC has said there is no evidence any data was
compromised, and that two of the employees responsible have left
However, exchanges remain worried, partly because the
inspector general's report says only "several select laptops" of
28 were tested for potential breaches.
The New York Stock Exchange has gone so far as to hire
former Homeland Security Secretary Michael Chertoff to dig
deeper into the matter. [I.D. nL1E8MG95K]