SEC head calls software glitch "unacceptable"
Traders work on the floor of the New York Stock Exchange. (Spencer Platt/Getty Images, file)
(CBS/AP) WASHINGTON - The head of the Securities and Exchange Commission says the agency is reviewing what caused a software glitch that threw the stock market into turmoil on Wednesday, calling the error "unacceptable."
SEC Chairman Mary Schapiro says technical problems like the one caused by Knight Capital Group illustrate how investor confidence can be shaken. The technical problem briefly put trading of dozens of stocks into chaos.
While the markets must rely on computers, regulators and market officials must still try to reduce the chances of technical errors and limit their impact when they occur, according to Shapiro.
"In addition, existing rules make it clear that when broker-dealers with access to our markets use computers to trade, trade fast, or trade frequently, they must check those systems to ensure they are operating properly," she said.
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Some of the trading controls put in as a result of the May 6, 2010 "flash crash" helped to limit the impact of Knight's error Wednesday, Shapiro said.
According to Knight, the company's erroneous trade position resulted in a realized pre-tax loss of roughly $440 million. That's nearly four times what the firm earned last year.
The loss, Knight said, had "severely impacted" its capital base, and the company said it was looking at "strategic" alternatives, business-speak for saying it might sell itself.
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