SEC Adopts New Rules To Reduce System Glitches On Nasdaq, NYSE

The Securities and Exchange Commission announced Wednesday that it would enforce new rules designed to protect U.S. stock markets from technological irregularities. The rules will force exchanges to ensure they are protected against technological malfunctions and can prevent problems -- like “flash crashes” and other glitches that have caused worry throughout Wall Street.

Over the next year, a number of organizations will have to comply with the new rules, which the SEC says will protect all of the market’s players from issues with increasingly technology-based systems that control the market.

SEC Chairwoman Mary Jo White said in a release that the regulations will “provide greater accountability for those responsible for our critical market systems.” They will also help “ensure that such systems operate effectively and that any issues are promptly corrected.”

The new rules, called Regulation SCI, are the first of their kind following a set of voluntary standards implemented after the market crash on Oct. 19, 1987, known as Black Monday. Exchanges like the Nasdaq Stock Market, the New York Stock Exchange and a number of dark pools operated by UBS and Credit Suisse Group AG will also have to test their backup systems to ensure they will work in the case of a natural disaster or terrorist attack.

The exchanges also must inform the SEC of any major issues no more than a day after they occur. White said that mandatory regulations were necessary following a Nasdaq system failure that halted trading for three hours in August 2013.