Nice treat from the Wall Street gang:
Wall Street's circuit breaker system
MSNBC
July 7 -In response to the market breaks in October 1987 and October 1989, the New York Stock Exchange instituted several circuit breakers to reduce market volatility and promote investor confidence. The following is a list and brief explanation of these circuit breakers.
When the Dow Jones industrial average moves 50 points or more from the previous day's close, index arbitrage orders in component stocks of the S&P 500 are subject to a tick test. In down markets sell orders may be executed only on a plus or zero-plus tick; in up markets buy orders may be executed only on a minus or zero-minus tick. The rule applies for the remainder of the day, unless the Dow moves back within 25 points of the previous days close.
CIRCUIT BREAKERS AND TRADING HALTS:
In addition to the above circuit breakers, trading can be halted if the Dow falls over 900 points from the previous day's close. The breakers listed below went into effect July 1 and will be adjusted Oct. 1. The point levels are set quarterly at 10, 20, and 30 percent of the Dow Jones industrial average by using the Dow's average closing values of the previous month, rounded to the nearest 50 points. Point levels are adjusted on Jan. 1, April 1, July 1, and Oct. 1.
LEVEL 1:
A drop of 900 points triggers a 1-hour trading halt if the downside move occurs before 2 p.m. ET. If such a fall occurs between 2 and 2:30 p.m., trading is halted for 30 minutes. If the 900-point drop occurs after 2:30 p.m., there is no trading halt until the Dow reaches Level 2.
LEVEL 2:
A drop of 1,750 points triggers a 2-hour trading halt if the fall occurs before 1 p.m. Between 1 p.m. and 2 p.m., such a drop triggers a 1 hour trading halt. After 2 p.m., the NYSE closes trading for the rest of the day if the Dow drops 1,750 points or more.
LEVEL 3:
A drop of 2,650 points or more will close the NYSE for the remainder of the day. More information on NYSE circuit breakers can be found at NYSE Circuit Breakers. |
