Financial Regulators, Markets Struggle To Avert Massive Stock Dives
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Federal financial regulators forged ahead to try to prevent a repeat of the May 6 roller-coaster stock ride, though they had not determined the cause of the sudden, steep decline in prices that day.
Federal financial regulators forged ahead to try to prevent a repeat of the May 6 roller-coaster stock ride, though they had not determined the cause of the sudden, steep decline in prices that day.
Federal financial regulators forged ahead to try to prevent a repeat of the May 6 roller-coaster stock ride, though they had not determined the cause of the sudden, steep decline in prices that day.
Federal financial regulators forged ahead to try to prevent a repeat of the May 6 roller-coaster stock ride, though they had not determined the cause of the sudden, steep decline in prices that day.
Officials from the Securities and Exchange Commission and the major stock exchanges agreed to immediately revise marketwide circuit breakers that temporarily halt stock trading in the event of a major decline,
and to draft similar measures for individual stocks that will be applied uniformly across markets …
Neither the S.E.C. nor the Commodity Futures Trading Commission, which oversees trading in stock index futures and other derivatives, [br]
revealed any further information about their investigations into the decline, in which the Dow Jones industrial average fell some 600 points in a few minutes.
In the meetings between the exchanges and regulators and separately with Treasury Secretary Timothy F. Geithner,
market officials and regulators spent more time talking about steps to prevent another sudden decline than they did wrestling with the probable causes of the May 6 plunge, according to people who participated in the sessions …
Nearly all of the exchange officials agreed that the differing rules among the various stock markets about temporarily halting or slowing trading in individual stocks worsened the decline,
according to the participants, who spoke on the condition of anonymity because they were not authorized to go beyond the S.E.C.’s brief formal statement.
The exchanges were directed to work together to come up with parameters for the new circuit breakers quickly, officials said to reporters for this article in the New York Times.
In particular, the group is seeking to simplify the marketwide circuit breakers that currently halt trading based on what time of day a decline occurs.
The exchanges participating in the meetings included the New York and Nasdaq exchanges, Bats Global Markets, Direct Edge, the International Securities Exchange and the Chicago Board Options Exchange.
The CME Group and the Intercontinental Exchange, which trade futures contracts, also met with Mr. Gensler, head of the Commodity Futures Trading Commission, and later with Mr. Geithner.
Currently, trading in stocks, options and stock index futures contracts is halted for one hour if the Dow falls by 10 percent before 2 p.m. Eastern, or for 30 minutes if it falls that much from 2 to 2:30 p.m. [br]
After 2:30, there is no halt unless the market falls by 20 percent, in which case it closes for the rest of the day.
In addition, if the Dow falls by 20 percent before 1 p.m., trading is halted for two hours, or one hour if the 20 percent decline occurs between 1 and 2 p.m.
After 2 p.m., a 20 percent decline closes the market for the rest of the day.
And if the Dow falls by 30 percent, all trading is halted for the remainder of the day. Trading normally ends at 4 p.m.
“We want to have easier-to-understand circuit breakers,” said one participant in the meetings.
The exchanges also will try to formulate a uniform method of temporarily halting trading in an individual stock if it declines more than a certain percentage during the trading day.
Currently, the New York Stock Exchange has such rules; its use of those rules on May 6 forced some trading to migrate to alternative, less liquid markets, a situation that regulators say they believe worsened the sharp decline.
Participants in the meeting also agreed to try to come up with uniform parameters for deciding when trades are deemed to be “clearly erroneous” and subject to cancellation.
Trades in hundreds of stocks were canceled after Thursday, when some stock prices fell to as low as a penny.
Some of the exchanges decided to cancel trades made on the 6th in which a stock’s price fell by more than 60 percent in a short period.
Regulators told the exchanges that they should come up with a uniform standard that investors would know could be applied before the trades were made.
