The Securities and Exchange Commission announced that the national securities exchanges and the Financial Industry Regulatory Authority are filing proposals to revise existing market-wide circuit breakers that are designed to address extraordinary volatility across the securities markets. When triggered, these circuit breakers halt trading in all exchange-listed securities throughout the U.S. markets. The existing market-wide circuit breakers, which were originally adopted in October 1988, have only been triggered once (in 1997). These circuit breakers were not triggered during the severe market disruption of May 6, 2010, which led the exchanges and FINRA, in consultation with SEC staff, to assess whether the circuit breakers needed to be modified or updated in light of today’s market structure.
The proposals would update the market-wide circuit breakers by:
- Reducing the market decline percentage thresholds necessary to trigger a circuit breaker;
- Shortening the duration of the resulting trading halts that do not close the market for the day to 15 minutes;
- Simplifying the structure of the circuit breakers;
- Using the broader S&P 500 Index as the pricing reference to measure a market decline (rather than the Dow Jones Industrial Average); and
- Providing that the trigger thresholds are to be recalculated daily rather than quarterly.
Click here to read the SEC Press Release.