US securities regulators are considering new curbs to slow stock trades when markets are plunging following Thursday's dramatic sell-off, two people familiar with the matter said on Saturday.
Securities and Exchange Commission officials are considering whether trading restrictions should be imposed across markets for companies that have fallen a certain percentage within a specific time-frame, one source said.
Another source said more circuit breakers at a stock level are among many items being discussed and expected to evolve next week, adding "logistics are tough."
The sources requested anonymity because the investigation is ongoing. The SEC could not immediately be reached for comment. The SEC and the Commodity Futures Trading Commission are still trying to determine the causes for the massive stock market meltdown fuelled by computerised trades that caused a nearly 1,000-point plunge in the Dow Jones industrial average.
Although the regulators have been working around the clock at initial data since Thursday to find the causes, they have yet to notify exchanges of an "official inquiry" into the sell-off, a third source familiar with the review told Reuters. That step would trigger the release of more information to regulators.
When that data comes, the investigation will likely focus on who quoted the "bids" and "offers" throughout the market dive, the bid-ask spreads, trading volumes, and a full list of the cancelled trades, the source said. The third source added regulators conducting the probe "are being diligent" but said they were calm about it despite ongoing jitters on Wall Street.
The source said regulators had moved away from a theory that the stock plunge was called by a trading mistake, or a so-called "fat finger" episode in keyboard data entry.
Regulators are looking at links between futures and cash markets for stocks.
At one point on Thursday, at least a half-dozen stocks, including Accenture and Exelon Corp briefly traded for as low as a penny a share.
Critics of the New York Stock Exchange said the routing of trades to all-electronic venues accelerated selling and exposed the need for market-wide, stock-specific circuit breakers to stop such meltdowns. The NYSE on Friday defended its slowing down of trading on the floor as prudent in the face of the market plunge.
Trading speeds and volumes have ramped up in the last few years as regulators encouraged the proliferation of new trading venues to challenge the incumbent exchanges' near monopoly. But in the past year, the SEC had raised some red flags about the fragmented marketplace and so-called high-frequency trading, although it has made few changes.
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