The Securities and Exchange Commission today announced that, yes, the May 6 “flash crash” was scary enough that it would expand the number of stocks that would trigger circuit breakers that halt trading when the market is gripped by extraordinary volatility.
The circuit-breaker rule says that trading in a security stops for five minutes if that security’s price moves 10 percent or more within five minutes. “The pause gives the markets an opportunity to attract new trading interest in an affected stock, establish a reasonable market price, and resume trading in a fair and orderly fashion,” the SEC said.
The SEC is also considering a retooling of market-wide circuit breakers, which might be smart, considering that the flash crash, which saw the Dow Jones Industrial Average lose some 700 points in a matter of minutes, failed to trigger any such existing safeguards.
