Washington (Platts)--18Feb2011/943 am EST/1443 GMT

An advisory committee Friday released a series of regulatory recommendations the US Commodity Futures Trading Commission and the Securities and Exchange Commission may institute in order to quell market volatility.

The report, prepared by the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues, is expected to be presented at a meeting Friday between the SEC and CFTC.

The committee was formed following the May 6 "flash crash," when the Dow Jones industrial average fell more than 600 points in minutes before rebounding.

The committee's recommendations include calling on the CFTC and derivatives exchanges to look at setting a "second tier of pre-trade risk safeguards" that are longer than the five-second circuit breakers the CME Group has in its E-mini market and for both agencies to evaluate system-wide circuit breakers.

Other recommendations include restrictions on co-location and direct access; incentives for market participants to provide liquidity in markets, such as new fees on order cancellations, and calling on the CFTC to enhance its data collection of orders and executions.

In prepared remarks for the meeting, CFTC Chairman Gary Gensler said the recommendations were needed as both the CFTC and SEC move to alter its regulations as high frequency trading strategies grow in these markets.

"Our regulations have to adapt as the markets increasingly move from man to machine," Gensler said. "The events of May 6 were stark reminders of the need for regulators to evolve as rapidly as the markets."

--Brian Scheid, brian_scheid@platts.com

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