Bloomberg reports Biggest Exchanges Propose Circuit-Breaker Trial for Next Month

The biggest U.S. equity markets will urge regulators to begin a program next month for temporarily halting individual stocks that swing more than 10 percent, two people familiar with the matter said.

The circuit breakers would be triggered in all markets when individual stocks in the Standard & Poor’s 500 Index moves 10 percent over five minutes, said the people, who asked not to be identified because the plans aren’t public. The test would begin June 7, under the plan being sent to the U.S. Securities and Exchange Commission.

“We’re expecting to receive the proposals from exchanges today” on circuit breakers, said SEC spokesman John Heine.

Executives from NYSE Euronext and Nasdaq OMX Group Inc. said in congressional testimony last week they support temporary halts for individual stocks when they fall 10 percent or more over preset time periods.

Under the proposal, primary listing markets would be responsible for restarting trading in the stock. Should that take longer than 10 minutes, other markets would be allowed to trade the stock. If the listing market is having technical problems, other markets can restart trading after five minutes.

The trial would begin June 7 for a smaller group of stocks, with circuit breakers extended to all S&P; 500 companies by June 14, according to the people. It would expire on Dec. 10.

Details are scant at the moment. Moreover, the statements above are inconsistent.

For example, the statement “circuit breakers would be triggered in all markets when individual stocks in the Standard & Poor’s 500 Index moves 10 percent over five minutes” implies both up and down.

However, the statement “Executives from NYSE Euronext and Nasdaq OMX Group Inc. said in congressional testimony last week they support temporary halts for individual stocks when they fall 10 percent or more over preset time periods.” indicates the procedure is one-sided.

There was no hint at how long the trigger lasts. One can only wonder “What’s Next?”

Mike “Mish” Shedlock
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