NYSE Euronext (NYX) and Nasdaq OMX Group Inc. (NDAQ) said new
measures meant to prevent wild stock-market swings may be delayed
in order to allow securities firms time to prepare their systems
for the change.
The measures, "circuit breaker" techniques that halt or slow
trading in periods of extreme stock or index volatility, were
conceived in response to the 2010 "flash crash." As the
implementation date has drawn nearer, market participants have
warned they may need more time to run tests on how their computer
systems would react to the new rules.
Under the proposed delay, the rules would go into effect April
8, rather than early next month as originally planned, according to
notices NYSE and Nasdaq sent to customers Monday.
The memos follow stock-exchange operator BATS Global Markets
Inc. sending a similar communiqué to its customers last month. Last
week, people familiar with preparations at U.S. exchanges told Dow
Jones Newswires several exchanges were planning to seek Securities
and Exchange Commission approval for a delay.
Nasdaq and NYSE cautioned in their notices the new dates were
subject to SEC approval. As of Monday evening, the exchanges hadn't
filed an official request for such a change, a spokesman for the
agency said.
At issue are tightened safeguards against extreme stock
volatility the SEC approved last May.
One of the new rules would replace a single-stock "circuit
breaker" system--which automatically halts trading in individual
stocks if they jolt higher or lower--with a process that is more
sensitive to rapid price swings but would allow some trading to
continue.
Another rule would strengthen circuit-breaker rules targeting
the broader market. A 7% drop in the Standard & Poor's
500-stock index would trigger a marketwide trading halt, rather
than the 10% slide in the Dow Jones Industrial Average that
triggers a halt in most situations under the current framework.
An NYSE spokesman said Monday that "the changes to the
implementation schedule are in response to requests by the
securities industry for additional time for systems testing."
The Securities Industry and Financial Markets Association, a
trade group, has raised alarms about firms' preparedness. The group
said in a Nov. 30 letter to the SEC it was "extremely concerned
that there is not enough information available" for market
participants to adapt their technology to the new changes.
Technological problems during the past year have highlighted
securities firms' need to carefully prepare for changes in the
rules regarding stock trading and the technology that underlies
it.
For example, a computer glitch that caused erratic trading at
Knight Capital Group Inc. (KCG) last year stemmed from software
prepared in advance of an NYSE trading program meant to offer
better pricing for individual investors, Knight's chief executive
said.
Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com
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