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And the SEC is going full force to ratchet up rules for risk management at the stock exchanges all eyes on the possibility of another technology breakdown.
In high frequency trading after night capitals huge software glitch sent the stock tumbling with me now is former SEC commissioner.
-- -- compost and Georgetown University professor Jim Angel gentlemen thank you so much for joining me.
Thank you thank you -- we look at these new rules being ushered in I think to myself and also this went over to you first -- Even the best regulation that you could possibly have -- a giant loss of money at the company loses you know almost half a billion dollars.
Does does the best deterrent down the road to making some kind of mistake again.
Yes date set yet 440 million dollar loss hits -- -- it really hurts in the pocketbook that's gonna do a whole lot more than any regulation.
To make sure that every company make sure they're technology will not fail.
Yeah well think about that because in this case they didn't lose you know clients' money.
This was all their own money -- on profits there were forced to do about the huge stake in the company you know investors will gain a 73% stake in the company and three board seats that's it you punishment -- a -- not.
Well it it certainly is enough from from the standpoint of the company.
But but remember it's it's a bigger issue that we're dealing with here from the regulators standpoint with the ball here is is keeping the market safe.
Keeping investor confidence in the markets and and not having the sense that the markets are broken.
And that every day small investors who have 401 -- have got brokerage accounts.
You know can be and there are you know and and have a strategy allows them to -- make money preserve their.
Preserve their right in the retirement.
OK so let's so let's go over some of the things and then you can tell me if you think that this will help to that end.
New SEC rules of -- trading testing for glitches or software glitches firms must inform regulators of computer problems that we have Apple's -- says -- senior officials.
At each firm -- shirt certified that the company's technology is up to snuff.
In force automatic review policies public disclosure of system changes -- Jim what do you think having had these things that will make a difference it doesn't sound like -- it's really that.
-- Well all of these things are motherhood and apple -- If you talk to the technology people in the markets they'll tell you they're doing all these things now how well they're doing -- is another story.
We need to treat market which is the way we treat airline crashes.
We need to investigate them thoroughly with competent -- with the technical skills to understand what's going wrong.
Can recommend technical fixes we need to send in the market plumbers.
Unfortunately the SEC is gonna send in the lawyers we're gonna say you know we have to have rules that say -- technology does not break.
GAAP and therefore -- -- -- rules -- policies and procedures you have to document -- policies and procedures you have to have a lot of paperwork.
So when are people come in they can check the box to save your paperwork in order -- that may not help brought what do you think these fixes -- -- anything.
Well -- that none of them by themselves will will fix -- you know of that technology a bad program.
That integration and in all of those sort of things.
Indeed the the SEC and as Jim says it is hampered it's an agency of lawyers they don't have enough technologist Mary Schapiro tried to bring in more people.
But they're not enough plumbers that is as it stated.
So there's gonna have to be a EI joint effort by the industry and the SEC in the regulator to make things work.
All only that you know will won't will allow this to happen.
And -- and assuming that everybody is in the same place underlining the markets to be to have integrity.
Well it's stressing the SEC will never have the right people in place.
To regulate this -- get -- -- -- because the smartest people who can work with computers and fix these things wanna make more money in the private sector -- work for the SEC.
That that's that's a huge problem.
And god there's no way that congress is going to allow all a particular.
Raid of compensation for for high technologist.
So you wait it's it's a challenge.
Other other places in the world have -- more compensation for folks if from their regulators we don't.
-- easily you know the average investor watches this and sees what happened with -- -- MF global and everything else and just sort of turns their back on the stock market how do you restore investor confidence.
For the regular got a retail investor.
Well for one thing by preventing future market glitches and by making sure debt.
We understand what went wrong and make sure it doesn't happen again.
But on a lot of this is driven by fundamental economic problems we have to slow recovery -- a lot of fear of what's going on in Europe.
-- the the glitch we had with Knight was basically -- noise you know I just handed 440 million dollars to the rest of us.
So chances are your mutual fund probably picked up some of that money market well that's a good point one they -- gentlemen thanks so much for your time today.