U.S. lacks market maker SEC feared for the stability of the stock market

The events of May 6, 2010, when the collapse of the New York Stock Exchange (NYSE) for 20 minutes reduced its capitalization by 862 billion dollars and the Dow Jones index dropped by more than 9%, was seriously puzzled by U.S. regulators. In the course of a lengthy investigation by the Commission on the Securities and Exchange Commission (SEC) found several possible causes of the collapse. One of them was the virtual absence in the market of traditional market maker.

According to the rules (NYSE) is market-makers before carrying major risks: a collapse of the market at the moment they had to actively buy a depreciating asset, giving investors an opportunity to sell the falling paper. The activities of the players in conjunction with the restriction on opening short positions on the market decreasing gave significant results to prevent landslides.

Exodus of the traditional market maker, for example, the company LaBranche, which was founded in the early last century, have contributed to the reform of SEC. For example, the controller ordered the U.S. brokers and dealers to move to a small step for the display of applications. After that, prices for an asset were to be displayed with an accuracy of one cent. This measure has reduced the difference between bid and ask prices have hurt profits market maker.

Then, the traditional market-makers at the largest U.S. trading floors were gradually replaced by automated trading systems, which gave control function of liquidity. However, due to a number of legislative changes in the firm, supporting the liquidity of electronic means, were not particularly burdened by obligations to buy in a falling market. As a result, the traditional market-makers almost extinct as a species. Thus, since 2000 their number on the NYSE fell from 25 to 5 firms.

Now, the SEC is no easy task - to make the existing market maker to work not only on the normal market, accumulating profits, but also to perform its functions in times of crisis. The current problem is compounded by the rather large number of trading floors - in the U.S., there are 11.

"Today, liquidity is fragmented into different electronic exchanges (ECN), and no single center, and no specialist dealing with a specific action and the leading order book. All this makes it impossible to give a market maker functions to control liquidity, especially in difficult times - explained RBC daily, former development director of sales in international markets one of the largest brokerage firms of Russia Nikolai Makarichev. - Another attempt to fight the regulator, first with "dark pool", but now for the full restoration of function binding liquidity support could lead to control and ban the activities of automated trading systems, or to restrict the activities of ECN. As we remember, in the summer regulator have been attempts to limit the speed of delivery of applications in cases surge in volatility. " However, according to Mr. Makarycheva, at the moment it is unclear exactly how the regulator will be able to control the stability of the market. After all, SEC will not be able to turn back the technological progress and transplanted traders on dial telephones, making voice to give instructions to buy shares of more than 1000 pieces. Nor will the regulator on and off the electricity in data centers, where servers are electronic brokers, said Mr. Makarichev.

AIG is bursting to freedom

The American insurance company AIG has been negotiating with the U.S. government to accelerate the process of re-privatization. As reported by The Wall Street Journal, it is expected that the transfer of the insurer in private hands will start in early 2011 and will take several years. The Treasury plans to turn owned preferred shares of AIG for 49 billion dollars in common and slowly sell them to private investors. Specific dates and details of the translation group in private hands will be released in the next few weeks.

Buffett does not believe in recession

"I have a very" bullish "attitude about this country (USA). Repeated recession, we will not be completely accurate. I see that our business in almost all directions comes back to normal, "- said the billionaire Warren Buffett, expressing the view that most economists predicted the opposite.