SEC: No More 'Naked' Access to Stock Market for Traders
The U.S. Securities and Exchange Commission unanimously voted Wednesday to bar traders from having unfiltered access to trading markets.
The move, meant to prevent mistaken or malicious trades from disrupting the stock markets, is part of a series of changes the Commission has made after the "flash crash" of May 6, when the Dow plunged more than 600 points in mere minutes, then recovered most of that within 20 minutes.
The new rule will prevent brokers from giving customers special access codes that allow for end-user trading without any risk controls in place, the SEC said Wednesday. Granting so-called "naked access" is like "giving your car keys to a friend who doesn't have a license and letting him drive unaccompanied," SEC Chairman Mary Shapiro said in a statement. With today's vote, traders would be forced to run orders through their brokers' risk controls instead of automatically putting them through.