The Securities and Exchange Commission filed proposed rules under which exchanges would halt trading in individual stocks that swing more than 10%.
The circuit breakers, proposed jointly with the Financial Industry Regulatory Authority, would be triggered in all markets by gains or declines over five minutes in Standard & Poor's 500 Index companies, according to an e-mailed statement. During the pilot program that goes until Dec. 10, the agency will also examine risks to investors created by market orders, and consider steps to deter stub quotes.
Regulators are examining ways to slow down trading during investor panics after the market plunge on May 6 showed how conflicting rules across as many as 50 different U.S. equity venues may worsen selloffs. The SEC is scheduled to release a preliminary report today on the causes of the crash, which sent the Dow Jones Industrial Average down almost 1,000 points and erased about $1 trillion in value before losses were pared.
“We continue to believe that the market disruption of May 6 was exacerbated by disparate trading rules and conventions across the exchanges,” said SEC Chairman Mary Schapiro in a statement. “As such, I believe it is important that all the exchanges quickly reached consensus on a set of uniform circuit breakers that would be triggered when needed.”