Sell-off fuels US regulation push -Pimco’s El-Erian

NEW YORK, May 7 (BestGrowthStock) – The violent and vexing stock
market sell-off on Thursday will bolster arguments that a
heavier regulatory hand is needed to restore stability and
confidence in U.S. financial markets, the head of the world’s
biggest bond fund said on Friday.

Mohamed El-Erian, chief executive officer of Pacific
Investment Management Co., said banks in particular would feel
the brunt of stronger regulation.

El-Erian, in an interview with Reuters Insider, said Pimco,
which manages $1.07 trillion, was “very taken aback” on
Thursday as the Dow Jones industrial average went into a steep
spiral that in minutes more than doubled its losses to bring it
down nearly 1,000 points, raising questions over control of
trading on Wall Street and worries about its damaging impact on
other markets.

The market slide may have been exacerbated by an erroneous
trade, and it also led to heightened calls for a crackdown on
computer-driven, high-frequency trading.

El-Erian said that what appears to be a trading anomaly
gives fuel to lawmakers pushing the biggest changes to Wall
Street and bank regulation since the 1930s, and will increase
public mistrust of financial markets.

“We should expect the regulators to use every tool
available to them to lower the speed limit on financial
markets, and especially on banks,” El-Erian said. “You will see
regulation, taxation and enforcement all being used.”

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To see Reuters Insider interview, see:
http://link.reuters.com/zaq23k

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Stability is more important to regulators than the
efficiency of Wall Street, he said.

High-speed trading uses sophisticated computer algorithms
based on specific scenarios to automate transactions at speeds
in the millionths of a second and now accounts for about 60
percent of U.S. equity volume.

El-Erian said Pimco was “defensively positioned” before the
wild swing in stocks because of the headwinds from the Greek
debt crisis, which is now spreading globally.

Even if the magnitude of the stock sell-off was hard to
explain, there was a solid reason for its direction, he said.

“The market was already under pressure because of the
growing recognition that the crisis in Greece has gone from
being a Greek problem to a regional problem, and now it’s
morphing into a global problem,” he said.

Stock Basics
(Reporting by Jen Rogers, writing by Al Yoon; Editing by
Leslie Adler)

Sell-off fuels US regulation push -Pimco’s El-Erian