NEW YORK (Reuters) - Nasdaq OMX Group
Controlling risk has been a major focus for the securities industry in the wake of high-profile snafus like the August 2012 glitch at Knight Capital Group, now a part of KCG Holdings Inc
Knight was one of the biggest executors of U.S. trades and the incident, which cost the firm $461 million, highlighted the risks in the high-speed, nearly fully electronic market.
The chair of the U.S. Securities and Exchange Commission called the heads of the U.S. exchanges to Washington in September and instructed them to offer kill switches as part of a series of reforms aimed at making the markets safer and giving investors peace of mind. The meeting came after a software glitch in August led to a three-hour trading halt in all Nasdaq listed stocks.
Nasdaq plans to offer the kill switch functionality by March 1, according to the filing, which was made available on the SEC website on Wednesday.
Firms can use the tool to set limits on the sizes of positions they can afford to take on. The tool will send email warnings as the limits are neared, and if they are breached, the
kill switch will be triggered, trading will be prevented, and the firm's open orders in the system will be canceled.
If a member firm wants to reauthorize trading after a kill switch has been triggered, it will have to contact Nasdaq and explain why the breach occurred and why it is safe for the exchange to reauthorize order entry.
(Reporting by John McCrank; Editing by Jonathan Oatis)