Chris Nagy on the Need for a Consolidated Audit Trail to Prevent the Next Flash Crash

Benzinga recently caught up with Chris Nagy, a TD Ameritrade managing director overseeing routing strategy at the firm, to discuss flash crashes, splash crashes, and what needs to be done to prevent these from happening in the future.

"More needs to be done," Mr. Nagy said with regard to regulations that have been put in place by the SEC and others to mitigate the negative effects that high-frequency trading can have on exchanges in moments of crisis. When asked about the single most important thing that needed to be done, he was decisive.

"Consolidated audit trail. It was kind of inexcusable in a lot of ways for the government to take more than six months to tell us exactly what happened. What were the sequence of events that happened in the flash crash?" Mr. Nagy went on to explain that such a mechanism would "provide the regulators with real time trade information to take a look as trades are coming into the marketplace."

This is especially important, Mr. Nagy pointed out, due to the fact that "the markets of today are nothing like the markets of just 10 years ago. All of the major stock exchanges in our country have gone from not-for-profit, mutually-owned companies to, now, for-profit, publicly-traded companies that people want to buy and sell." This changing dynamic increases the need for a consolidated audit trail as more and more access is granted by exchanges to various types of traders, including the high-frequency variety. After all, it is difficult to regulate that which we don't yet fully understand.

Be sure to check out the full audio of the conversation here: TD Ameritrade's Chris Nagy on the regulatory aftermath of the flash crash

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