U.S. regulators face pressure to show they have a grip on stock markets that are increasingly fragmented and dominated by computers after last week's plunge fueled lawmaker concerns about electronic trading.
The Securities and Exchange Commission is already contemplating rules to address disparities between competing exchanges, even though it hasn't said what caused the Dow Jones Industrial Average to fall more than 9% in minutes on May 6. SEC officials are discussing whether uniform curbs should be imposed across markets to slow trading during periods of cascading prices, two people familiar with the matter said.
“The SEC is under tremendous pressure,” said James Angel, a finance professor at Georgetown University in Washington. “It's the duty of the SEC to guarantee fair and orderly markets, and I don't think anybody would say last week's tornado was fair and orderly.”
U.S. Senators Ted Kaufman, D-Del., and Richard Shelby, R-Ala., are among lawmakers who have questioned whether regulators have a firm enough grasp on how an increase in electronic trading is affecting stock swings. Mr. Kaufman asked in a May 6 speech on the Senate floor whether the SEC knows enough about “what is happening” in the market.
NYSE Euronext and Nasdaq OMX Group Inc. have seen their share of total U.S. stock trading volume plunge to less than 30% from as much as 80% a decade ago because of competition from mostly electronic venues.