SEC moves to tighten circuit breaker rules

September 27, 2011, 12:25 PM

The Securities and Exchange Commission has moved to tighten the rules triggering so-called circuit breakers, designed to halt extreme market volatility.
The proposed new rules would:

• cut the market decline percentage triggers from 10, 20, and 30 percent to 7, 13, and 20 percent
• shorten the resulting trading halts to 15 minutes.
• simplify circuit breakers to those that occur before 3:25 p.m. and those that occur on or after 3:25 p.m.
• use S&P 500 index SPX as the pricing reference to measure a market decline, rather than the Dow Jones Industrial Average INDU.
• recalculate trigger thresholds daily rather than quarterly.

The new rules would replace existing ones adopted in 1988 in the wake of the October 1987 market crash. The current rules have only been triggered once, in 1997. The were not triggered in the so-called flash crash in May, 2010.
-Tom Bemis

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