SEC strengthens exchange technology rules

SEC strengthens exchange technology rules

The Securities and Exchange Commission has approved new rules designed to strengthen the US market's technology infrastructure, which has frequently buckled under increasing strain in recent years.

Regulation Systems Compliance and Integrity (Regulation SCI) was approved in a unanimous vote, requiring exchanges, ATSs, plan processors, and certain clearing agencies to put in place comprehensive policies and procedures for their technological systems.

The new rules were first proposed in early 2013 after a series of major IT glitches such as the 2010 Flash Crash, Nasdaq OMX's botched handling of the Facebook IPO and the $461 million Knight Capital debacle.

The framework requires those it covers to take corrective action when systems issues occur; provide notifications and reports to the SEC regarding systems problems and systems changes; inform members and participants about systems issues; conduct business continuity testing; and conduct annual reviews of their automated systems.

SEC Chair Mary Jo White says: "The rules provide greater accountability for those responsible for our critical market systems, helping ensure that such systems operate effectively and that any issues are promptly corrected and communicated to market participants and the Commission."

Kara Stein, a Democratic SEC commissioner voted for the rule, calling it an "important first step" in dealing with an increasingly computerised market. But Stein warned that the regulation is "not enough" because it leaves out the likes of broker dealers, smaller trading venues and proprietary trading firms.

"Shouldn't everyone with direct access to the trading centres have to implement basic policies and procedures to ensure that their computer systems are stable, secure, and contribute to resiliency in our market?" asks Stein.

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