NEW YORK (Reuters) - U.S. stock and option exchanges said on Tuesday they have reached a general agreement on how to strengthen securities markets in response to the trading halt in Nasdaq stocks in August, and preliminary timetables to implement those plans.
The exchanges said specific details of their proposals will be presented in subsequent rule filings to the Securities and Exchange Commission and amendments to the SEC’s rules governing securities trading in the national market system, or Reg NMS.
The proposals by the exchanges, known as self-regulatory organizations (SROs), will be subject to public comment and SEC approval, the SROs said in a press release.
The exchanges and other SROs, including the Financial Industry Regulatory Authority and clearing houses Depository Trust & Clearing Corporation and Options Clearing Corporation, agreed on five areas to strengthen the market from a spate of technology failures that have rattled public confidence.
Those areas include the securities information processor (SIP) whose failure in August caused a three-hour outage in the trading of Nasdaq-listed stocks. SEC Chair Mary Jo White met with exchange officials in September and urged the SROs to come up with “action plans” in response to technology failures.
The SROs said their proposals would address the SIP, critical infrastructure, halts and trading resumptions, trade breaks and kill switches.
The SROs and their committees that govern the SIPs compiled proposals designed to improve the operational resiliency of the processors, strengthen interoperability standards and disaster recovery capabilities related to them and establish a clear testing framework.
The SROs also said they have established a pathway to identify contingencies related to such critical areas of the marketplace as the open and close of the markets, initial public offerings and outages at the clearing houses, among other issues.
Reporting by Herbert Lash; Editing by W Simon and Chizu Nomiyama