[ by Howard Haykin ]

NYSE EVP Joe Mecane, in testimony on Tuesday before a U.S. Senate Banking panel regulators and exchanges are getting closer to a framework for a "kill switch" that could be used to shut down trading before software glitches get out of control and wreak havoc on markets. 

Mr. Mecane. had this to say:  "We have all engaged in a much more detailed assessment of how a kill switch could work.  I think we are hopeful to have something to report in the first quarter of next year."

Exchanges, brokerage firms and the SEC have been trying to come up with the right regulatory response after a series of high-profile glitches this year shook markets - including Nasdaq's botched handling of the Facebook IPO, and Knight Capital's $462 million in losses due to a software error.  [ C-I Note:  And, in our opinion, some ill-placed hubris on the part of KCG CEO Tom Joyce - i.e., reacting to the NYSE launch of a investor liquidity program that was expected to take away order flow from market makers like Knight.  Bet he never imagined that his "reckless decisions" could lead to such a monstrous program blow-up - and put the leading market maker in the U.S. on 'death's bed." ]

Tuesday's hearing follows the October 2012 SEC roundtable, where market participants explored in detail how a kill switch, one of the leading options, might work.  Senator Jack Reed, who chaired Tuesday's subcommittee hearing, has pledged to hold a series of hearings to explore what, if any, new market structure rules are needed to reduce systemic risk to the marketplace.

Aside from Joe Mecane, top officials from Nasdaq, Credit Suisse and agency broker ITG testified and explored a variety of market structure issues.  One such issue was whether the SEC should enact rules to shed more light on "dark pools."
 

For further details, go to:  [ Reuters, via CNBC, 12/18/12 ].