Regulators, meanwhile, may understand law and finance, but they're not software people, they're not data processing professionals. Even if they were, they can't do the kind of ongoing, detailed procedural requirements monitoring that Visa can. The stock exchange's regulatory arm, NYSE Regulation, is more concerned with the what of trading than the how.
The key to technical regulation is that it defines how you do things. Action can be taken and penalties assessed before something goes wrong. Establishing, maintaining, publishing and enforcing those kinds of rules won't keep bad things from happening. But it will make them less likely, it will minimize them, and it will establish a checklist of procedures to follow before software goes live and a checklist to follow when something does go wrong.
Any company whose computer systems are part of the equity order flow, not just those engaged in high frequency trading, as CFTCLaw puts it, should be subject to regulation of this sort, private regulation that will kick in and get processors kicked offline long before the SEC or CFTC would ever be called, even before firms could put themselves at risk.
I don't think our stock trades have the same protection as our credit card transactions.That scares me. Does it scare you? At the time of publication, the author had no investments in the companies mentioned here.. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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