After a couple of incidents of mistaken orders generated by humans or algorithmic systems which highlighted risks that could disrupt markets, it was being speculated since long that the U.S. Securities and Exchange Commission or SEC would pass new risk management standards. Although it was a necessary step, particularly in the aftermath of the May 6 "Flash Crash," the need to adopt such standards gained more prominence. Later on, SEC unanimously voted 5-0 to abolish so-called naked access to stock markets and require broker-dealers to check trades before they are made.
The law requires brokers or dealers with market access to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory, and other risks of this business activity.
Thereby it becomes increasingly important for us to know about the changes this law will bring in for the stock market professionals especially the broker-dealers segment.
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