U.S. exchanges propose replacement of circuit breaker pilot
Early last month, the U.S. SEC announced that national securities exchanges and the Financial Industry Regulatory Authority (FINRA) had filed a proposal to replace the circuit breakers for individual stocks, currently in place as part of a pilot project, with a "limit up-limit down" mechanism. Circuit breakers are trading pauses imposed in individual securities due to extraordinary market volatility. The proposed new mechanism, however, would prevent trades in a security from occurring outside of a specified price band. Stocks subject to the current circuit breaker (being those on the S&P 500 Index, the Russell 1000 Index and certain others) would generally be limited to a 5% trading price band, while other equities would be limited to 10% (as compared to prices of that security in the preceding five-minute period during a trading day).
For more information on the circuit breaker pilot project, see our posts of May 19, June 7 and September 21, 2010. Notably, the pilot project has been extended to the earlier of August 11, 2011 or the date on which the limit up-limit down mechanism is adopted.
