sec chairman mary schapiro said there was a severe mis-match in liquidity, which was made worse by different trading rules among exchanges. "...possibly exacerbated by the withdrawal of liquidity by electronic market makers and the use of market orders, including automated stop loss market orders..." she said the situation was possibly exacerbated by the withdrawl of liquidity by electronic market makers and the use of market orders, including automated stop loss market orders. at the end of this month, the sec is expected yo approve a new circuit breaker for single stocks. under the new rule, if a single stock in the s&p 500 index drops 10% or more within 5 minutes - trading will be halted for 5 minutes. that's across all exchanges. after a trial period, the s-e-c may decide to expand that rule to all market indexes. from the drop in the euro to banks' toxic assets. we're answering viewer's questions in today's viewer mail segment. but first, one money manager tells where he's finding opportunity in today's market. that's coming up next. woman on p.a.: cassandra mirasson. [radio transmissio

mary schapiro is chair of the securities and exchange commission. >> been two weeks, our staffs have been working around the clock. but there is an extraordinary amount of data that we have to plow through. we had 19 billion shares traded that day and 66 million different trades. 17 million of them alone were between 2:00 and 3:00. so the enormous amount of data coming from multiple sources in different format, captured in different ways is creating an enormous amount of work for us. >> brown: also under the mike scope today the 21,000-- trades cancelled on may 6th. they were determined to be erroneous but kentucky republican jim bunning noted that many traders had to live with their losses. >> i am very concerned that trades were cancelled on an arbitrary basis. very concerned. that is unfair, undermines market discipline, and is nothing more than a bailout of sellers who would have faced losses from their own decisions to use market orders. >> brown: as they pursue the answers to may 6th, the sec and the major exchanges have already announced a new circuit breaker plan. it would ha

commissioner -- chairman mary schapiro's credit and to her real credit she began a process of studyinghigh-frequency trading last october. i have to say however the pace of the commission's progress has been slow, indeed as many of my colleagues know, i have come to the the floor repeatedly to call for a greater sense of urgency. for example, last year, september 23, i spoke on the senate floor and asked about high-frequency trading strategies. and i quote from that september 23 2009, speech. "to these high-tech practices and the about ballooning daily volumes pose a systemic risk?" question number one. "what do rewe willly know about the cumulative effect of all of these changes on the stability of our capital markets? in order to maximize speefd execution, many sponsored access participants may neglect important pretrade credit and compliance checks that ensure faultial algorithms cannot set out erroneous trades." that was my quote. on november 20, 2009, i wrote a letter to the s.e.c. chair mary schapiro asserting that "transparency, disclosure, and risk compliance requirements ojt t

there are others like sheila bear in the treasury department' and mary schapiro ad gary gensler and -- back in the clinton administration was dubious about regulating these instruments. he has come back and has been one of the most particulates advocates within the administration for the kind of legislation working its way through congress. host: there is talk about one approaching chairman greenspan and been rejected. there is a piece yes today that i read talking about that she came up with concepts for regulating the derivatives. but she never put forth proposals for this. even that was not received well. guest: there is a pbs frontline documented in -- documentary the details this entire experience. i am sure it is on the website. in early 1998, we saw the market was developing. at that time it was $27 trillion. we saw this market had no transparency. it did not have capital been brought to the table. people were making billions of dollars with commitment and nothing in the bank to back it up. that is like selling a stock to a bond or insurance. everybody has to have capital, but

hear testimony from governor regulators including securities and exchange commission chairman mary schapiro. this is three and a half hours. >> host: the subcommittee on the from sponsored enterprises will come to order. each side will have 15 minutes for opening statements without objection all members open statements will be made part of the record. i would ask unanimous consent, or be allowed to produce a bit in today's subcommittee hearing. without objection so ordered. >> good afternoon. ri today's hearing we will subcome the frightening afternoon of may 6th, 1 of the >> most volatile trading days in, history. within minutes stock market industries dropped precipitous y erasing more than $1 trillion o capitalization before recovery.1 while we may not yet have had all of the fact about these had defense we must quickly analyze what happened in place reforms t to restore the market integritye and promote investor confidencet to read the wingback to 2,003 questions surrounding the market structure have received considerable attention in the have subcommittee. many of the issues we have ex

there are others like sheila bear in the treasury department' and mary schapiro ad gary gensler and -- back in the clinton administration was dubious about regulating these instruments. he has come back and has been one of the most particulates advocates within the administration for the kind of legislation working its way through congress. host: there is talk about one approaching chairman greenspan and been rejected. there is a piece yes today that i read talking about that she came up with concepts for regulating the derivatives. but she never put forth proposals for this. even that was not received well. guest: there is a pbs frontline documented in -- documentary the details this entire experience. i am sure it is on the website. in early 1998, we saw the market was developing. at that time it was $27 trillion. we saw this market had no transparency. it did not have capital been brought to the table. people were making billions of dollars with commitment and nothing in the bank to back it up. that is like selling a stock to a bond or insurance. everybody has to have capital, but

there are others like sheila bear in the treasury department' and mary schapiro ad gary gensler and -ack in the clinton administration was dubious about regulating these instruments. he has come back and has been one of the most particulates advocates within the administration for the kind of legislation working its way through congress. host: there is talk about one approaching chairman greenspan and been rejected. there is a piece yes today that i read talking about that she came up with concepts for regulating the derivatives. but she never put forth proposals for this. even that was not received well. guest: there is a pbs frontline documented in -- documentary the details this entire experience. i am sure it is on the website. in early 1998, we saw the market was developing. at that time it was $27 trillion. we saw this market had no transparency. it did not have capital been brought to the table. people were making billions of dollars with commitment and nothing in the bank to back it up. that is like selling a stock to a bond or insurance. everybody has to have capital, but not

chair mary schapiro, with whom we have been working very closely and diligently since last thursday to explore and see what we can find out about the events. before i turn to those events, let me just say something about the stock futures market. stock index futures trade on centralized exchanges and they are based upon the broad market index. the total outstandings about $360 billion. this compares to approximately $13 trillion of the overall equity market. but stock index futures do play an integral role to the pricing of the overall market. the largest contract called the e-mini s&p 500 contract trades on the chicago mercantile exchange. it's about 80% of that market. and we'll focus a little bit of that in our testimony. there are procedures on that contract, and i want to mention four quick procedures that are risk management procedures to ensure the orderliness of the market. electronic trading systems on all of the markets for these contracts reject orders priced outside of a narrow band. about 1% band up or down. secondly, the exchanges actually have maximum order sizes. congre

view with respect to other aspects of the sec, nor when he was there, nor now, under chairman mary schapiro. >> could you talk about some technical aspects? are there differences in the disclosure requirements for long positions against short positions, generally speaking, and then, maybe more specifically, mutual funds against hedge funds? if there are differences, do you think a play a role in some of what we have been talking about today with regard to potential manipulation of market activities? >> let me see if i can be helpful. let's start with hedge funds and mutual funds. the regime for reporting mutual funds is very particular, because mutual funds are regulated investment companies. there is a particular regime for disclosure. you can find out information on every security that they hold, a listing will be provided periodically, that kind of information is provided to you. that is because mutual-fund are -- that is because mitchell funds are an individual product -- and mutual funds and individual product. hedge funds are different. the advisor could be registered. there is no reg

witnesses include mary schapiro. the committee is chaired by illinois senator durvin. -- durbin. this is about 50 minutes. >> the budget request would allow us to better pursue our mission of facilitating capital formation and regulating markets. when i joined the commission, we were emerging from an economic crisis. markets were trying to regain a firm footing. confidence in government generally and the sec specifically was badly shaken. thanks to the song support this -- the strong support this subcommittee has provided, we have made significant changes to virtually every aspect of our operation. we brought in new leadership, streamlined procedures, and reformed operations. we employ new technologies and initiated a significant investor focus rulemaking agenda. we undertook a top to bottom review leading to a restructuring. things limiting internal communication were torn down. a layer of management was eliminated, freeing professionals for front-line duty. we created specialized units that will build a focus to market abuse and structured products. these efforts are paying div