U.S. stock exchanges will propose doubling the number of companies covered by a 2-week-old test of trading curbs and expanding the program to include hundreds of ETFs, according to two people with direct knowledge of the matter.
NYSE Euronext and Nasdaq OMX Group will ask the SEC to broaden circuit breakers triggered by 10% moves to Russell 1000 index companies from those in the S&P 500, according to the people, who declined to be identified because the information isn’t public. More than 300 exchange-traded funds, including the SPDR S&P 500 ETF Trust, would be covered, one of the people said.
Regulators are seeking to prevent declines in one or more securities from causing panic among investors, prompting a cascade of losses across markets. During the May 6 rout that erased $862 billion in value from U.S. equities in less than 20 minutes, ETFs and companies such as Accenture fell as much as 99%. The SEC and Commodity Futures Trading Commission said the plunge might have been fueled by curbs that applied on some venues and not others.
Securities in the National Market System are companies or ETFs listed on the New York Stock Exchange, NYSE Arca and NYSE Amex — all owned by NYSE Euronext — or Nasdaq OMX’s Nasdaq Stock Market. They can be traded on venues including public markets and private platforms known as dark pools.
The SEC is testing the program that pauses trading for five minutes in S&P 500 companies when their stock rises or falls at least 10% in less than five minutes after 9:45 a.m. ET.
John Heine, a spokesman for the SEC in Washington, declined to comment on the exchanges’ plans for the program, which lasts through December. Eric Ryan, a spokesman at NYSE Euronext, declined to comment, as did Robert Madden of Nasdaq OMX.
CME Group CEO Craig Donohue said June 22 that curbs on ETFs tracking a large portion of the market could cause dislocations given that their prices are derived from underlying baskets of stocks and are linked to equity-index futures, which may continue trading while the ETF is paused.