The Securities and Exchange Commission (SEC) approved stock circuit-breaker rules on Thursday, June 10, that require a pause in the trading of individual stocks if the price moves 10% or more in a five-minute period.
The rules, which the exchanges and the Financial Industry Regulatory Authority (FINRA) will begin implementing as early as June 11, come in response to the market disruption of May 6. On that day, an unusual glitch in trading led to a “flash crash” that saw the Dow Jones industrial average plunge by nearly 1,000 points in a matter of minutes. The market also recovered in a matter of minutes, but the episode left investors worried about the safety and soundness of equity trading markets.
The pause applies to stocks in the Standard & Poor’s 500-stock index, according to the SEC’s June 10 release.