Saturday, May 08, 2010

Did Chris Cox Cause Thursday's Wall Street Plunge?

It sure looks like it, after reading yesterday's Washington Post article by David Cho and Jia Lynn Yang:
In 2007, the SEC put in place new rules for how stocks are traded, led by then-Chairman Christopher Cox. The goal was to give investors more control over how their trades were executed and to guarantee the best price when they buy stocks.

When the NYSE received an order for a stock, for instance, the rules required the exchange to route the order to the platform offering the best price.

The new SEC rules toppled the dominance of NYSE. The trading of its own listed stocks dropped from 85 percent to 21 percent, said James Angel, a professor at Georgetown University's McDonough School of Business.

As a result, a single entity can no longer put a stop to panicked selling. The markets Thursday were a preview of what happens when other trading venues take over, he said.

"We are dangerously unprotected from a real-time meltdown," Angel said.

Market officials and regulators are now unwinding millions of the trades that occurred on the electronic exchanges Thursday...
More on this at this video documentary website: Stock Shock: