High-Frequency Trading Leaders Forum 2010 to Analyze 'Flash' Crash and Possible SEC Actions

New York, NY, May 26, 2010 --(PR.com)-- The New York Times' Peter Henning reports today that "the S.E.C.’s chairwoman, Mary L. Schapiro, told a Senate hearing that the commission’s enforcement division was taking part in the review process to determine whether broker-dealer firms might have shirked their obligations to customers that fed into the rapid decline that day." Panelists at GoldenNetworking.net's High-Frequency Trading Leaders Forum 2010, "Innovating and Profiting from High-Frequency Trading in 2010 and Beyond", will dissect the 'flash' crash of May 6th and what actions the SEC might take moving forward, Thursday May 27th, at Flatotel Hotel, in New York City.

The White Collar Watch note continued: "The enforcement division will focus on registered broker-dealer firms that acted as market makers, a term we heard used quite often in the recent Goldman Sachs hearing in April. While a market maker does not owe a fiduciary duty to clients, as Goldman repeatedly stressed, it is obligated to fulfill the “best execution” duty, which means it must seek the most favorable terms reasonably available under the circumstances in fulfilling an order for a client. According to Ms. Schapiro, some market makers may have disappeared during the worst moments of the flash crash, thereby pulling a key prop out from under the market that could have exacerbated the precipitous fall in stock prices."

Mr. Henning goes on to explain why any enforcement action against broker-dealers seems unlikely: "Determining whether a registered broker-dealer engaged in fraudulent activity by failing to fulfill the best execution obligation may also be difficult. Like the other antifraud provisions of the federal securities laws, proving a violation of Rule 15c1-2 requires the S.E.C. to show the firm, or any individual associated with it, acted with scienter — i.e., intent to defraud. Intent is usually the most difficult element in a case, and proving it would be particularly hard in the flash crash because of the very narrow time frame involved. The usual evidence the S.E.C. relies on to prove intent, such as e-mail messages and documents, may not exist because much of the market drop took place in less than half an hour. Without circumstantial evidence of intent, a fraud case could not be established. Moreover, even showing that a broker-dealer walked away from the market during the steep decline will be difficult because it requires the S.E.C. to prove that the absence of trading activity was done purposefully and not due to other reasons. The flash crash was a bit like driving by a small town on the highway — blink and you missed it. The tumult occurring on the floor of the New York Stock Exchange and the tremendous leap in trading volume through the electronic exchanges may well explain why a firm did not act as a market maker during the decline, so showing what anyone did — and did not — do might well be impossible."

High-Frequency Trading Leaders Forum 2010 is produced by Golden Networking (http://www.goldennetworking.net), the premier networking community for business executives, entrepreneurs, investors and diplomats, founded by former McKinsey consultant and Columbia Business School MBA Edgar Perez. Upcoming Leaders Forums and Business Networking receptions include:
· High-Frequency Trading Happy Hour, (http://www.HFTHappyHour.com), June 8th, New York City
· Real Estate Leaders Forum 2010, "Successfully Investing in Distressed Real Estate Assets" (http://www.RealEstateLeadersForum.com), June 17th, New York City

Panelists, speakers and sponsors are invited to contact GoldenNetworking.net by sending an email to eperez@goldennetworking.net. Golden Networking has been frequently featured in the press, including recent articles in The New York Times, "Golden Networking Helps Job Seekers Make Overseas Connections" (http://www.nytimes.com/2009/11/07/nyregion/07network.html), Los Angeles Times, "Speed-addicted traders dominate today's stock market" (http://articles.latimes.com/2010/may/16/business/la-fi-new-exchanges-20100516) and Columbia Business School's Hermes Alumni Magazine, "10 Under 10" (http://www7.gsb.columbia.edu/alumni/news/ten-under-ten).

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