The Securities and Exchange Commission will take another two months to decide whether to approve a proposed service from Nasdaq OMX Group Inc. (NDAQ) aimed at limiting volatility in Nasdaq-listed shares.

The service, which Nasdaq has dubbed its "Volatility Guard," would pause trading in 100 Nasdaq stocks if prices move too far too fast. A regulatory decision on whether to approve the service--developed by Nasdaq following the May 6 flash crash--was due by Tuesday, 180 days after the SEC in October initiated proceedings to determine whether or not to "disapprove" it.

The SEC said in a regulatory filing Tuesday it is electing to extend its consideration period another 60 days, making March 12 the new deadline for its decision on the Volatility Guard. In moving to delay the decision, the SEC cited a need for more time to consider potential issues such as whether trading pauses on Nasdaq could exacerbate trading volatility in other trading centers still open.

Another concern, the SEC said, is "whether the operation of the Volatility Guard will interfere with, or otherwise limit the effectiveness of, the circuit breakers" that were implemented across the stock market in June that trigger five-minute trading pauses in more than 1,000 stocks and exchange-traded funds when they move more than 10% within a rolling five-minute period. The regulator noted the threshold for the Volatility Guard and the length of its resulting trading halt differs from those of the market-wide circuit breakers.

"Extending the time within which to approve or disapprove this proposed rule change will enable the Commission to more fully consider these issues," the SEC added.

Nasdaq OMX said it believes "the Securities and Exchange Commission understands NASDAQ OMX's desire to provide measures of risk abatement to the investing public during times of unreasonable or unexpected volatility."

"We're happy that the Commission has granted an extension to our filing so that they may consider the merits of Volatility Guard and how it fits into the larger market structure," the exchange added.

NYSE Euronext (NYX) already has in place a similar exchange-specific "slow period" for highly volatile stocks, known as its Liquidity Replenishment Point, or LRP, system.

-By Donna Kardos Yesalavich, Dow Jones Newswires; 212-416-2188; donna.yesalavich@dowjones.com
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