SEC OKS REVISED LIMITS TO CURB MARKET DROPS.Byline: Associated Press The Securities and Exchange Commission agreed Friday to upgrade stock markets' ``circuit breakers,'' the trading limits designed to prevent a market free fall during dramatic price swings. Under the new rules, the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. and other markets will shut down for an hour if the Dow Jones industrial average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. falls more than 550 points. Previously, a one-hour shutdown would occur if the Dow fell by more than 400 points. In addition, the SEC changed the trigger for a half-hour market shutdown to a 350-point fall in the Dow, up from the current 250-point trigger. The change is the second revision of the system since it was imposed after the 1987 stock market crash. The SEC and others said new trigger points are needed because the market's dramatic rise in recent years made it too easy to cause a trading halt. The new triggers, effective Monday, were approved for a year. The Commodity Futures Trading Commission The Commodity Futures Trading Commission (CFTC), the federal regulatory agency for futures trading, was established by the Commodity Futures Trading Commission Act of 1974 (88 Stat. 1389; 7 U.S.C.A. 4a), approved October 23, 1974. approved a similar expansion for stock index futures and options contracts on the Chicago Mercantile Exchange Chicago Mercantile Exchange (CME) Chicago Mercantile Exchange (CME) is the largest futures exchange in the United States and the second largest exchange in the world for the trading of futures and options on futures. , the Kansas City Board of Trade Kansas City Board of Trade (KCBT) The U.S.-based futures and options exchange for no. 2 red wheat futures and, options, Value Line Index futures and Mini Value Line futures and options. and the New York Futures Exchange New York Futures Exchange (NYFE) A wholly owned subsidiary of the NYSE that trades futures and options on the NYSE composite index. . The New York Stock Exchange had been hesitant to alter the circuit breakers, fearing the change might confuse investors, but asked the SEC to make the changes in December. The new SEC rules do not revise the most common curb - a limit on some types of computerized trading imposed when the Dow average moves 50 points. This routine curb only slows trading, and supporters say it has helped stabilize the market by preventing knee-jerk investor reactions to smaller price swings. The system of increasingly tough trading restrictions was designed by the NYSE and the SEC after the October 1987 stock market crash to slow the market's plunge in the event of another wrenching sell-off. |
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