Market reforms would not prevent August stock volatility

Author: Danielle Myles | Published: 4 Oct 2011
Stock market volatility in August and other so-called mini flash crashes should not be assimilated with the Dow Jones’ plummet and recovery over 20 minutes on May 6 2010, warned equity market participants.

Measures that securities regulators are looking at to dampen volatility and maintain liquidity in equity markets include trade pauses under the limit-up/limit-down proposal, and more extensive market maker obligations.

Last week the Securities and Exchange Commission (SEC) also proposed updating its market wide circuit breakers.

Speakers at Securities Industry and Financial Markets Association’s (Sifma) market structure conference on September 21 urged that comparing less drastic price movements with the May 6 flash crash is counterproductive for equity market reform.

"May 6 was probably a...