SEC WILL EASE CURBS ON TRADING.Byline: Rob Wells Associated Press The Securities and Exchange Commission on Friday agreed to loosen the stock markets' so-called ``circuit breakers Circuit breakers Measures instituted by exchanges to stop trading temporarily when the market has fallen by a certain percentage in a specified period. They are intended to prevent a market free fall by permitting buy and sell orders to rebalance. ,'' the trading curbs that are aimed at averting panic selling Panic Selling High volume selling brought about by sharp price declines. Notes: The main problem with panic selling is that investors are not evaluating fundamentals. Instead, they are selling on pure emotion. of securities. It's the first time the SEC altered the circuit breakers since the curbs were imposed after the October 1987 stock market crash. Simply put, the circuit breakers are designed to slow the market's plunge through a series of increasingly tough trading restrictions. For example, all stock markets are required to 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. sheds 250 points in a day. A two-hour halt occurs after a 400-point fall in the Dow. So far, such action hasn't been necessary. There were no changes made in a 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. circuit breaker circuit breaker, electric device that, like a fuse, interrupts an electric current in a circuit when the current becomes too high. The advantage of a circuit breaker is that it can be reset after it has been tripped; a fuse must be replaced after it has been used known as the 50-point collar, which limits some types of computerized trading when the Dow average rises or falls 50 points. Although this restraint has been triggered more frequently as the market has risen in value, NYSE NYSE See: New York Stock Exchange officials and other traders have said it has proven to be an effective suppressant of sudden knee-jerk swings in stock prices that can unnerve the market. Under the SEC's action: Trading will be halted for 30 minutes instead of an hour when the Dow falls 250 points or more. Trading will be halted for one hour instead of two when the Dow falls 400 points. And the SEC eliminated plans for a brief after-hours trading session if either circuit breaker came late enough in the day to force temporary closing of the markets. |
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