The Washington Post reported on Wednesday that the SEC is going to keep a data base (an “audit trail”) of every trade made through the NY exchange.

What an extraordinarily intrusive, expensive, and dangerous piece of folly this is. If we ever needed the final proof that the SEC is a useless, vindictive, and corrupt outfit, here it is.  Do you think this is about protecting ordinary investors? What nonsense. The system already has circuit-breakers to interrupt crashes like the one on May 6. They were put in place after 1987.

Then in 1997, when they were used after a smaller market crash, there was a lot of criticism of the circuit -breakers. Some felt they exacerbated the problem. Others felt that studies hadn’t shown any proof they helped the situation.

It’s interesting to see who came out publicly against circuit-breakers in 1997: Jim Rogers, formerly of Soros’ Quantum Fund,  was one. He thought the circuit breakers mainly benefited the big banks. Gerald Corrigan a senior Goldman Sachs official and President of the NY Fed during the 1987 crash, also objected.

Now, we need more of them, says the SEC, and the government also needs to keep tabs on every trade that goes through the system.

May 6 is an excuse. Likely, the crash was engineered, as many suspect, precisely to give an excuse to the clowns in government to get their nose into every one’s trading book.

What this also does is allow the big banks who are cozy with the government (Goldman Sachs, Morgan and the rest) to have a clear view of the trades made by the rest of the players. For what purpose if not to manipulate the market in their favor and against competitors and the investing public?

Sack the SEC. It’s the only solution.

Here’s the piece:

“Federal regulators moved Wednesday toward requiring a uniform system for tracking all securities orders on U.S. exchanges, in hopes of making it easier to investigate market disruptions like the May 6 plunge.

Members of the Securities and Exchange Commission proposed, on a 5-0 vote, requiring exchanges to maintain an “audit trail” covering trading orders from start to routing to execution.

The regulators say that would make it easier to investigate market disruptions like the so-called “flash crash” earlier this month that sent the Dow Jones industrials down nearly 1,000 points in less than 30 minutes.

The new system, however, would be phased in under the SEC proposal and wouldn’t be fully operational until about three years from now, SEC officials said at a public meeting. It would cost market players, including exchange monitoring bodies and brokerage firms, about $4 billion to put into place and $2 billion a year to operate, according to SEC estimates.

The proposed rule could be formally adopted sometime after a 60-day public comment period, possibly with changes.

More than 19 billion shares changed hands on May 6. Requirements for keeping “audit trails” vary among exchanges and markets, making it hard for regulators to get their hands on current order data.

The technology used by regulators for market oversight and surveillance hasn’t kept pace with fast-evolving and splintering markets, where sleek electronic trading platforms compete with the traditional exchanges and powerful computers give traders a split-second edge in buying or selling stocks.

A new system would allow regulators to get access in real time to most of the data needed to reconstruct the type of market disruption that occurred on May 6, with the remaining data available in days rather than weeks, SEC Chairman Mary Schapiro said before the vote.

The change “would be an important next step in our efforts to maintain fair, orderly and efficient markets,” she said.

A systemwide audit trail could help regulators pinpoint the cause of market disruptions but may not eliminate every gap in tracking trades, said Menachem Brenner, research professor of finance at New York University Stern School of Business. For instance, trades of U.S. stocks executed on overseas exchanges likely won’t be included in the audit trail, Brenner said.

“We always kind of leave out that there’s a lot trading that happens outside the U.S. in places like London and Hong Kong,” Brenner said. “But any measure being implemented by the SEC is only going to apply to U.S. exchanges.”

Still, he said, the plan should help regulators avoid future market irregularities. “Hopefully by knowing what causes the problem, they’ll be better able to come up with a solution,” Brenner said.

Following the “flash crash,” the SEC and the major exchanges unveiled a plan to adopt market-wide “circuit breakers” to pause trading during periods of high volatility.

Under that plan, trading of any Standard & Poor’s 500 stock that rises or falls 10 percent or more within a five-minute period would be halted for five minutes. The rules would be applied if the price swing occurs between 9:45 a.m. and 3:35 p.m. Eastern time – nearly the entire trading day.

The break is intended to head off a chain reaction of human and computerized selling, one of several possible causes of the May 6 plunge. The drop briefly wiped out $1 trillion in market value as some stocks traded as low as a penny…..”