One Response to “Our Brief Comments on the SEC Limit Up Limit Down (Plan to Address Extraordinary Market Volatility)”

1. DavidC
   July 26th, 2011 at 12:51 pm
   

   Everything the SEC has done (or not) has been to try and mitigate further effects as something is occurring or has already occurred.

   Why can’t they endeavour to stop these things occurring in the first place? Nanex’s stuff is fantastic, with a great recent piece about the Flash Crash.

   http://www.nanex.net/Research/NewFlashCrash1/FlashCrash.CQS.Saturation.html

   It should be obvious, even to a child, to
   1 – mandate that quotes HAVE to have a minimum lifespan. This would stop the quote stuffing with no intention of ever trading, trying to slow down competitors’ analysis of quotes and trades (not to mention the fact that this is self-defeating when they’re all trying to do it to one another!).
   2 – Reduce the rebate dependent upon the number of cancelled orders or trades (or as a percentage of quotes or trades).

   Instead of making pipes ever bigger to take more and more quotes, in less and less time, which do less and less, without providing true liquidity, we will have continued mini flash crashes nearly every day, the retail market will withdraw even further and trade volumes will fall even further. And, meanwhile, the SEC (and banks, although what do they care when they’re HFT Algo trading between themselves and don’t care about true investment) will continue to be bewildered as to why volumes are so low.

   DavidC

   
   

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