Kill switch contains potential danger, experts say

11/1/2013 | Risk.net (subscription required)

The introduction of a kill switch, a plan the Securities and Exchange Commission has endorsed to help platforms shut down algorithms experiencing glitches, might come with risks, experts say. "Because these kill switches are not adaptive, they can't recognize when 'normal' has changed, and when you may want to stay in the market even though you may have passed some predefined thresholds," said David Lauer of Verdande Technology. "Likewise, they can't recognize abnormal behavior if it does not exceed a threshold, even though such behavior could be costly."

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