The New York Stock Exchange may soon have a “kill switch,” which could shut down trading if a software snafu causes problems. The switch would stop trading to avoid any the kind of problems which have led to extensive losses. The NYSE or a member company would be able to cancel open orders or block new orders by simply by pushing a button.

"We have all engaged in a much more detailed assessment of how a kill switch could work," Joe Mecane, executive vice president at the New York Stock Exchange, told Senators before a U.S. Senate Banking committee on Tuesday, Reuters reported. A more detailed plan could be offered in Q1 of 2013, Mecane said.

One of the most recent trading messes was in May when the Nasdaq saw problems with the Facebook (News - Alert) initial public offering. The Nasdaq wants to pay $62 million to brokerages which lost money during the IPO malfunction. In August, Knight Capital Group lost $440 million due to trading glitches related to software, TMCnet reported.

"There has got to be consequence for a system-wide failure of the type that we've experienced in the Facebook circumstance," ITG CEO Robert Gasser testified before the Senate committee on Tuesday. "Our clients suffered, other broker dealers suffered, clearly there were some decisions that were made that were, with all due respect, the wrong ones in terms of opening that stock."

"All the SROs [self-regulatory organizations] and firms on this panel have been involved in discussions around kill switches," Mecane testified, according to The Deal. "We're all engaged in assessing how [it] might work. It's very complex, but we believe we're getting close to a framework."

"Part of what we want to do is make sure this issue is not ignored," Reed said. "We are going to keep asking questions, both of the regulators and the industry. And we're going to if we feel legislation is in order, propose it. If not, we'll continue to keep the attention focused on this issue."

Among those testifying before the Senate Banking Committee on Tuesday were officials from NYSE Euronext, Nasdaq OMX Group Inc., Credit Suisse Group and Investment Technology Group.

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