Besides ensuring orderly pricing in equity markets, outflows from stock mutual funds that have occurred every single week in the four months since the May 6 Flash Crash, for estimated redemptions totaling more than $50 billion, are causing grave concerns at the
That was one of the startling messages from SEC Chairman Mary Schapiro in her speech yesterday before the
“Retail broker-dealers have told us that individual investors have pulled back from participating in the equity markets since May 6. Indeed, according to mutual fund data, every single week since May 6 has seen an outflow of funds from equity mutual funds,” Schapiro said. “The trend is troubling.”
Data on equity fund flows from the
Schapiro admitted that “there may be a variety of reasons for reduced participation in the equity markets”—alluding to the drag on the markets by continued U.S. unemployment of 9.6% and the European debt crisis. However, echoing a recent report from
As a result, besides revisiting circuit breakers, the SEC is considering requiring high-frequency traders and dark pools to bring liquidity to the market in times of great stress.
Schapiro noted that a decade ago, 80% of U.S. equities were traded on the
“Nearly 30% of volume in U.S.-listed equities is executed in venues that do not display their liquidity or make it generally available to the public. The percentage executed by these dark, non-public markets is increasing nearly every month,” Schapiro said.