Greasing the skids for BK:
SEC chief sees 'circuit breaker'
proposal taking effect soon
By MARCY GORDON
The Associated Press
01/21/98 5:16 PM Eastern
WASHINGTON (AP) -- A plan to let the Dow industrials fall further before
automatically shutting down stock trading likely will take effect within a few
months, the government's top securities regulator said Wednesday.
Arthur Levitt Jr., chairman of the Securities and Exchange Commission, said he
planned to "encourage" adoption of the proposal, put forward last November
by the New York Stock Exchange. It would approximately triple the threshold
for halting trading during steep selloffs.
Under the plan, the trading halts, known as "circuit breakers," would be
activated at declines of 10 percent and 20 percent in the Dow Jones industrial
average. Currently, drops of about 4.5 percent and 7 percent temporarily halt
trading. The changes would not only raise the threshold, but also widen the
distance between the first and second triggers.
Levitt, responding to a question on the subject, said he expected such a revision
of the circuit breakers to "become a reality very shortly" and promised to work
toward that end in the coming months.
Hearings on the issue are among the first items pending when Congress returns
next week.
The change in circuit breakers would be the second in two years and the third
since the mandatory pauses were implemented in response to the October 1987
market crash, when the Dow lost 508 points, giving up 22.6 percent of its
value. They were designed to slow the plunge in the event of another wrenching
selloff.
The Dow plunged 554 points last Oct. 27, in a selling spree some said was
aggravated by a half hour halt to trading when the blue-chip average had fallen
350 points. When trading resumed, the free-fall intensified and, within 25
minutes, trading was halted for the day when the 550-point circuit breaker was
passed.
While the biggest point drop ever, the Dow's percentage decline of 7.2 percent
did not match the depth of the 1987 crash.
Earlier, in his speech to a group of women financial professionals, Levitt warned
that Year 2000 computer problems, if unresolved, could have a "catastrophic"
effect on banks, brokerage firms and other financial services companies.
"I'm talking about ... survival," Levitt said. |
