Federal regulators have got to address the "casino environment" on Wall Street where computerized high-frequency trading can trigger market-shaking turmoil, Senate Banking Committee Chairman Chris Dodd said Sunday.
Dodd, D-Conn., pointed to the new phenomena of computers buying and selling stock in nanoseconds as a possible cause of last Thursday's meltdown. The market fell nearly 1,000 points within minutes before rebounding.
The top Republican on the committee, Sen. Richard Shelby of Alabama, joined Dodd on CBS' "Face the Nation" to agree that something must be done about a situation in which technology has gotten ahead of the regulators. "You've got a high risk in the market place that something could go wrong and once it really goes wrong it could be catastrophic," Shelby said.
Dodd said his committee will hold hearings on last Thursday's events. But he said that for now the priority is for the Securities and Exchange Commission and the Commodities Futures Trading Commission to come up quickly with answers for dealing with high-frequency trading marked by a lack of marketwide circuit breakers to prevent the market from spiraling out of control.
Dodd said he did not see a need for new legislation. The financial overhaul bill now being debated in the Senate does have early warning systems to detect problems such as having circuit breakers at only one exchange, he said.
"You shouldn't have a crisis like this happen before noticing that," he said.
Dodd noted that the freefall on Wall Street occurred when there was good economic news: a sharp growth in jobs, particularly in the manufacturing sector. "So you are getting sort of this casino environment that's appearing in our markets," he said. "It does not reflect what's going on in the real economy."
Shelby said he had no information on speculation that the meltdown may have been the result of a cyber attack. White House counterterrorism adviser John Brennan said on "Fox News Sunday" that there was no evidence that a cyber attack was behind the market shake-up.
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