SEC seeks new stock exchange firewalls

WASHINGTON, May 11 (UPI) -- U.S. regulators have asked stock exchange leaders to erect new firewalls to prevent market free falls, such as the 15-minute dive that took place last Thursday.

Securities and Exchange Commission Chairman Mary Schapiro has given six exchange directors 24 hours to come up with a plan that would prevent a repeat of Thursday's sudden market plunge, in which the Dow Jones industrial average lost nearly 600 points before recovering almost as fast as it fell, The Washington Post reported Tuesday.

"The parties agreed on a structural framework … for strengthening circuit breakers and handling erroneous trades," SEC said in a statement.

Regulators have not been able to fully explain Thursday's sudden plunge. The Wall Street Journal reported Tuesday the event appears to have been triggered by a rare set of circumstances that provoked a cascade of sell orders among high-speed, computerized investors.

In effect, sell orders overran the system. The Post said the New York Stock Exchange's attempt to slow down the orders to find enough buyers resulted in sell orders being re-routed to other stock exchanges, which quickly became overwhelmed.