Crash of the stock may induce new Broker rules, Gensler says

04 October 2010, 12: 33 PM EDT by Jesse water quality

(Updates with Gensler comment in the eleventh paragraph).

OCT. 4 (Bloomberg)--Commodity Futures Trading Commission Chairman Gary Gensler said the APR dive stock market raises questions about whether the brokers and traders will have to face new rules for handling and reporting of orders, speaking today Gensler to a Conference in Washington, said brokers hydrogeologic computer may need to deal with price limits or the size can perform clients. He also questioned whether the market participants can benefit from better visibility ' exchanges series books the CFTC and the titles and the Commission said in a report last week that helped large trader's mutual guarantee for damages set off a chain of events that sent the Dow Jones Industrial Average 998.50 points on 6 May. The trader, who tried to sell futures 75,000 worth 4.1 billion dollars, used an algorithm that has no price or time into account. "the great client does not perform managed to trade, but use a Gensler executing broker," said at the meeting of the wholesale Broker link indicators. Event raises questions about whether brokers "should adopt certain commercial practices when performing a wide range of Participants," he said. futures market can only "See through the offer or supply in a book orders," Gensler said. Liquidity may not be so "have overwhelmed" by a single, large sell order on 6 may if traders have greater transparency, he said; Neither Gensler and regulators Oct. 1 report with the name of the vendor of the so-called E-mini futures linked to the company standard & poor's 500 Index. Waddell & Waddell & Reed financial ReedThe Inc., according to two people with knowledge of the report's conclusions. Overland Park, Kansas-based mutual fund company said on the market can absorb usually orders of magnitude this trade initiated. on 6 may not be performed because there are no parties wishing to buy the order and to hold for an extended period, Gensler said."A large part of the volume on 6 may be simply moving locations and back issue seconds between high-frequency traders and other market makers," he said."Large trader class actually absorbed by the market, we had to find fundamental or opportunistic buyers who were willing to hold the position, at least for a few seconds."The SEC and CFTC share the report with a table that will advise regulators about new rules and recommendations aimed at preventing another crash. Gensler said it is prepared to hear the views of the Panel if regulators should require that brokers exit and entry into the market "methodically. Wishes the group, whose members include former President CFTC Brooksley born and former President SEC David Ruder, to advise on whether brokers should be obliged to monitor the distribution and" non-disruptive commercial decisions. "said he also Gensler looks forward to reviewing the views of the Panel to negotiate pauses that stop purchases during periods of volatility.

--Editors: Gregory Mott, William Ahearn

To contact the reporter on this story: Jesse water quality in Washington on jwestbrook1@bloomberg.net.

To contact the editor responsible for this story: Lawrence Roberts in lroberts13@bloomberg.net

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