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U.S. securities regulators are seeking a market-wide "circuit breaker" tied to moves in the Standard & Poor's 500 stock index, alongside individual guidelines for component stocks of that index, according to people close to the discussions.

Regulators are also seeking to tighten up rules for identifying and canceling clearly erroneous trades, with a smaller window of price moves acceptable before transactions are voided, the people said.

The Securities and Exchange Commission and U.S. exchange operators are working together to quickly craft a new set of rules designed to curb price volatility in stocks, after tremendous price swings seen May 6 for reasons that remain unclear.

SEC Chairman Mary Schapiro said Tuesday that regulators haven't found evidence of a "single cause" for the stock-market dive that saw the Dow Jones Industrial Average shed nearly 1,000 points before staging a partial recovery.

Current market-wide circuit-breaker levels, tied to moves in the Dow Jones Industrial Average, remained far out of reach even at the height of the May 6 volatility, prompting regulators to push for new limits on how far individual stocks or the broader market can fall before trading is halted, allowing traders to reassess prices.

Recent discussions have laid out targets for circuit breakers tied to moves in a major index, with a 5% drop triggering a 15-minute halt in trading, and a 10% decline prompting a half-hour time-out, according to a person close to the discussions. A slide of 20% would see trading end for the remainder of the session.

Circuit-breakers tied to movements in individual stocks are likely to be implemented for stocks included in the S&P 500 index, along with some of the more heavily traded exchange-traded funds, according to the person.

Regulators are also seeking tighter guidelines for canceling erroneous trades. Current discussions are centered on allowing exchanges to void trades executed at prices 15% to 30% away from the most recent printed price, according to persons briefed on the matter.

Last Thursday, the SEC and major U.S. exchanges held an emergency conference call following the market mayhem to determine which trades would be honored. After some debate, the decision was made to cancel all trades executed at prices that were greater than or less than 60% away from the prices printed prior to 2:40 p.m. EDT.

That figure was criticized as being too low by some in the market, who argued that investors could have been saved a lot of money if a narrower range of trades were allowed to stand.

Under pressure from regulators and lawmakers, exchanges are hastening to craft the new rules, with implementation seen beginning as early as next week.

Eric Noll, head of transaction services for Nasdaq OMX Group Inc. (NDAQ), said in testimony before U.S. Representatives Tuesday that the exchange could move "very quickly" to put in place a new cross-market circuit breaker.

-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@dowjones.com

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