circuit breakers

SEC Approves Proposals on Extraordinary Volatility in Stocks and Market

On June 1, the SEC approved two proposals submitted by the national securities exchanges and FINRA that are designed to address extraordinary volatility in individual securities and the broader U.S. stock market. One initiative establishes a “limit up-limit down” mechanism to prevent trades in individual exchange-listed stocks outside of a specified price band. The second initiative updates existing market-wide circuit breakers which halt trading in all exchange-listed securities throughout the U.S. markets when triggered. The changes lower the percentage-decline threshold for triggering a trading halt and shorten the period of time that trading is halted. Changes will be implemented by February 4, 2013, and have been approved for a one-year pilot period. SEC Release. National Market System Plan Approval Order. Market-Wide Circuit Breaker Approval Order.

FINRA and National Securities Exchanges File Limit Up-Limit Down Proposal with the SEC

On April 5, 2011, FINRA and national securities exchanges filed a proposed plan with the SEC to establish a new “limit up-limit down” mechanism to address extraordinary market volatility in U.S. equity markets. The proposed mechanism would limit trades in listed equity securities to a price band set at a percentage level above and below the average price of the security over the preceding five-minute period, subject to certain exceptions. If approved, this mechanism would replace the circuit breakers which were put in place in response to market events on May 6, 2010. Comments must be submitted within 21 days from the date of publication in the Federal Register. SEC Release. Proposed Plan.