SEC Approves New Rule to Address Computer Trading Risks; Reg SCI Rule Is in Response to Dramatic Increase in Computerized Trading
WASHINGTON--Market regulators approved a new rule putting in place more stringent safeguards and oversight for computer trading on U.S. stock and options markets.</br></br>The rule, proposed in March 2013, is a response to the dramatic increase in computerized trading in recent years and the ensuing glitches that have plagued markets and harmed investor confidence.</br></br>From the "flash crash" of May 6, 2010, to the breakdown in trading on the Nasdaq Stock Market in August 2013, technology failures have become increasingly common, raising concerns about the potential for broader market failures and systemic risk.</br></br>On Wednesday, the five-member Securities and Exchange Commission unanimously approved the rule, called Regulation Systems Compliance and Integrity, or Reg SCI, which will require stock and options exchanges, clearinghouses and certain other trading venues to implement procedures to safeguard computer trading systems. The rule will require so-called SCI entities to immediately notify the SEC about any major computer glitches and submit annual reports detailing how they are complying with its requirements.</br></br>"The number and significance of technology-related incidents have grown as our securities markets have attained unprecedented levels of automation, demonstrating the need for stronger, mandatory rules that reflect current market reality," SEC Chairman Mary Jo White said at the agency's open meeting.