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Ban Robo-Trading? That's so 1980s

As if it hadn't already been clear that these were extraordinary times, Phelan told me he'd picked up his ringing home telephone on the previous Saturday to be greeted by then-president Ronald Reagan, who was checking in about the crisis.

Dealing with a 22% decline on a 600-million-share trading day -- a record back then -- had similarities to the disasters he sometimes confronted as an avid gardener, Phelan told me. "Just when everything looks perfect, you get a blight or fungus or bugs," he said in the interview he granted me for a story in USA Today.

"Bugs" is an apt description of today's problems. A software malfunction at Knight triggered crazy price swings in dozens of stocks on Aug. 1, and sent the firm to the brink of collapse after $440 million in losses. Problems at Nasdaq botched the initial public offering of Facebook (FB) on May 18.

Bats Global Markets withdrew its initial public offering in March after problems with its trading system set off erratic losses in some stocks it traded. And who can forget the May 6, 2010, "Flash Crash" in which the Dow plunged almost 1,000 points in minutes?

The mounting examples of market failure have led to talk about there being too much speed in the markets. "I think the only way to stop this arms race is through regulation that forces delay onto the markets," said Frank Partnoy, author of the recently released "Wait: The Art and Science of Delay."

It is a sensible idea, but not a new one in the 25-year debate over how to keep computerized trading in check. Two years after Black Monday, the Dow lost 6.9% on Friday, Oct. 13, 1989, in a rout attributed in part to program trading. "We've got to find some way to slow those things down," Phelan said that weekend.

We have, to some degree. There are circuit breakers that kick in if a stock moves sharply in a five-minute period, for example. But circuit breakers don't address whether computers trading in fractions of seconds can trade ahead of customer orders to buy or sell.

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