Market design in stock exchanges

Source:

"The Securities and Exchange Commission, which oversees the capital markets, has proposed a "consolidated audit trail" requiring exchanges to report every trade to a central repository, where they could later be analyzed. 

"The project is a "very high priority" for the SEC, says an official, but the agency doesn't know when the rules for it will be completed. The main obstacle: agreeing on how to standardize the various formats that brokers and exchanges use to gather trading data. 

"It will cost money to improve and modernize market structure," says Bryan Harkins, chief operating officer at Direct Edge, the fourth-largest stock exchange. "But the short-term money pales in comparison to boosting investor confidence in the long term." 

"The SEC has estimated that a centralized order-tracking system would cost approximately $4 billion to set up and $2.1 billion a year to maintain. 

"Mr. Leinweber of Berkeley has a simpler, and probably cheaper, solution in mind. He proposes that supercomputers—like those at national laboratories such as Berkeley's—should track every trade in real time. If volume began surging dangerously, the system would flash a "yellow light." Regulators or stock exchanges could then slow trading down, giving the market time to clear and potentially averting a crisis."