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US takes tougher management on stock market

05-12-2010 14:00 BJT Special Report: Europe's Debt Crisis |

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The top US securities regulator has found no single event responsible for triggering last Thursday's mysterious market plunge.

The US Securities and Exchange Commission said it would take time to pinpoint the cause. But it reiterated an agreement with major exchanges to strengthen trading curbs in response to large market moves.

Mary Schapiro, Chairman, US Securities & Exchange Commission, said, "The sudden evaporation of meaningful prices for many major exchange-listed stocks in the middle of a trading day is unacceptable and clearly contrary to the vital policy objective of maintaining fair and orderly financial markets. The SEC is working around the clock to identify the causes of this sudden spike and to make changes that will help prevent disruptions of this type in the future.

The commission hosted a meeting on Monday with the heads of major exchanges. The parties agreed to a framework that would strengthen circuit breakers and safeguard markets from such chilling drops.

Major stock exchanges have agreed that circuit breakers would apply to individual shares. This means that if individual stocks drop by a certain range in the future, their trading will be halted. Previously, this mechanism only applied to some indexes.

But some analysts believe that circuit-breakers are not a solution to the underlying problem.

Mark Williams, Former Federal Reserve Bank Examiner, said, "In essence, we had a dam that broke last Thursday and these circuit-breakers are just barriers around that dam. We still don't know why that dam broke and we do know that dams will break again in this financial market."

Currently, circuit-breakers are tripped at the 10-percent and 20-percent thresholds. Both the Dow Jones Industrial Average and the Standard and Poor's 500 never reached the crucial trigger point last Thursday.

Editor:Zhang Jingya |Source:

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