WASHINGTON - Federal regulators must address the "casino environment" on Wall St where computerised high-frequency trading can trigger market-shaking turmoil, Senate banking committee chairman Chris Dodd said yesterday.
Dodd pointed to the new phenomena of computers buying and selling stock in nanoseconds as a possible cause of last Friday's meltdown.The market fell nearly 1000 points in minutes before rebounding.
The committee's top Republican, Richard Shelby of Alabama, joined Dodd on CBS television's Face the Nation to agree something must be done about a situation in which technology has got ahead of the regulators.
"You've got a high risk in the market place that something could go wrong and once it really goes wrong it could be catastrophic," Shelby said.
Dodd said his committee would hold hearings on Friday's events. But he said for now the priority was for the Securities and Exchange Commission and the Commodities Futures Trading Commission to come up quickly with answers for dealing with high-frequency trading marked by a lack of marketwide circuit breakers to prevent the market from spiralling out of control.
Dodd said he did not see a need for new legislation. The financial overhaul bill now being debated in the Senate did have early warning systems to detect problems such as having circuit breakers at only one exchange, he said.
"You shouldn't have a crisis like this happen before noticing that."
The freefall on Wall St occurred when there was good economic news: a sharp growth in jobs, he said. "So you are getting sort of this casino environment that's appearing in our markets."
White House counter-terrorism adviser John Brennan told Fox News Sunday there was no evidence that a cyber attack was behind the market shakeup, as had been speculated.
