The New York Stock Exchange set new circuit breaker thresholds
for the second quarter, a measure that is meant to guard against
extreme market volatility.
Circuit breaker measures call for a pause in trading if the Dow
Jones Industrial Average falls roughly 10% in a single day, and
tighter restrictions if it drops 20% or 30%. The thresholds are
reset each quarter to account for changes in the value of the
index. The new levels are effective Monday.
Under the new calculation, a drop of 1,450 points in the Dow
before 2 p.m. New York time would trigger the first halt. Trading
would be halted for one hour if the drop occurs before 2 p.m., for
30 minutes if between 2 p.m. and 2:30 p.m. and not halted if the
drop occurs at 2:30 p.m. or later, unless there is a level 2
halt.
A decline of 2,900 points before 1 p.m. will halt trading for
two hours, or for one hour if between 1 p.m. and 2 p.m. or halted
for the remainder of the day if the drop is reached at 2 p.m. or
later. A decline of 4,350 points would halt trading for the
remainder of the day regardless of when the drop occurs.
The Securities and Exchange Commission said in June it had
approved tighter limits for thresholds that prompt trading pauses.
The changes came as a result of the May 6, 2010, flash crash, a
30-minute period of wild market swings that took regulators months
to understand, though some still dispute the causes.
-Write to Nathalie Tadena at nathalie.tadena@dowjones.com
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