In the wake of May’s “flash crash” that hit some stocks and exchange traded funds (ETFs), regulators deemed it necessary to implement “circuit breakers” to limit price swings on some stocks. The pilot program expires on Friday, but some exchanges want an extension on the breakers.
Stock exchange market operators want an extension on stock and ETF circuit breakers until April 11, reports Jacob Bunge for The Wall Street Journal.
The circuit breakers stop trades on securities that experience price movements of 10% or more within a five-minute trading period. The program covers 1,000 stocks and 344 ETFs and will expire on Dec. 10. [SEC Expands Circuit Breaker Program to ETFs.]
Currently, there is an ongoing discussion on replacing the current single-stock circuit breaker system with an upgraded “limits” model, or similar to what is done in the futures markets, that would stop the freezing all trade in a stock or ETF if the security crosses the price range since it would be less disruptive to trading activity.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.
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