Stock Exchanges to Get 'Circuit Breakers'

SEC rules hope to prevent crazy plunges
By Newser Editors and Wire Services
Posted May 18, 2010 5:55 PM CDT
Stock Exchanges to Get 'Circuit Breakers'
Stephen Mara works on the floor of the New York Stock Exchange May 6, the day of the quick plunge.   (AP Photo/Henny Ray Abrams)

US stock exchanges would briefly halt trading of some stocks that have big prices swings under new trading rules aimed at avoiding market plunges and proposed today by federal regulators. The rules would take effect in mid-June under a 6-month pilot program agreed to by major US exchanges and the SEC. The agency put them forward for public comment in response to the stunning plunge of May 6.

Under the plan, trading of any Standard & Poor's 500 stock that rises or falls 10% 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 am and 3:35 pm Eastern time, nearly the entire trading day. Importantly, the new circuit breakers would apply to all US exchanges. Most of the 50 or so US exchanges regulate themselves and design their own tools for slowing or halting trading. (Read more stock market stories.)

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