Nasdaq OMX Group Inc. announced a proposal to temporarily halt trading for any stock it lists in the U.S. when its price moves a specified amount, supplementing a Securities and Exchange Commission plan to pause transactions during periods of volatility.
The trading curb would be triggered by levels depending on the price of the stock, according to Wayne Lee, a spokesman for Nasdaq. For shares trading below $1.75, the threshold is a 15% rise or fall, he said. Between $1.75 and $25, it’s 10%; $25 to $50, 5%; and more than $50, 3%, he said. The SEC proposed a halt last month for S&P 500 Index companies that rise or fall at least 10% in 5 minutes.
Nasdaq Volatility Guard will “protect investors and listed companies while increasing transparency in the U.S. equity markets during times of volatile market conditions,” according to a statement distributed by Globe Newswire on Wednesday.
Nasdaq is responding to regulators, who 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 rout erased $862 billion from the value of U.S. equities in less than 20 minutes and drove the Dow Jones Industrial Average to an almost 1,000-point decline, according to data compiled by Bloomberg.
The SEC and Commodity Futures Trading Commission proposed six potential causes of the crash 12 days later, highlighting losses in exchange-traded funds and futures, curbs that applied at the New York Stock Exchange but not elsewhere, and an unwillingness to match orders among some electronic traders.