'More Hair-Triggered’ Kill Switches Needed, Ketchum Says

WASHINGTON, D.C. — Faster ‘kill switches’ are needed to prevent market disruptions such as the August 1 flood of erroneous orders from market maker Knight Capital, the head of the independent regulator of brokers said Thursday.
”Kill switches have to be far more hair-triggered than they have been in the past,’’ said Richard Ketchum, chief executive of the Financial Industry Regulatory Authority.
Brokers need to have careful supervisory procedures in place, to prevent the harm of an incident like the Knight Capital runaway algorithm on August 1. That new piece of code, which had a “large software bug’’ in it, unleashed a flood of orders in the first 45 minutes of trading onto the New York Stock Exchange and other markets.
Kill switches that stop orders flowing, in such cases, are needed, as are better monitoring and testing procedures, he said at the Security Traders Association conference on market structure here.
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