Trading rules aim to avert another epic market dive
5/19/2010WASHINGTON - U.S. stock exchanges would briefly halt trading of some stocks that have big price swings under new trading rules proposed yesterday by federal regulators with an aim toward avoiding market plunges.
The rules would take effect in mid-June under a six-month pilot program agreed to by major U.S. exchanges and the Securities and Exchange Commission. The SEC announced them and put them forward for public comment, in a response to the stunning plunge of May 6.
Under the plan, trading of any Standard & Poor's 500 stock that rises or falls 10 percent or more - within a five-minute span - would be halted for five minutes. These rules, known as "circuit breakers," would be applied if the price swing occurs between 9:45 a.m. and 3:35 p.m. Eastern time. That's almost the entire trading day.
Importantly, the new circuit breakers would apply to all U.S. exchanges. Most of the 50 or so U.S. exchanges regulate themselves and design their own tools for slowing or halting trading.
The SEC would vote on approving the rules sometime after a 10-day comment period, unusually short for the agency's rule-making and indicating the urgency of the issue. The changes are intended to prevent a recurrence of the epic dive in which the Dow Jones industrials lost nearly 1,000 points in less than a half-hour.