SEC Seeks to Tighten Circuit Breaker Rules

Furthering its efforts to avoid another “flash crash” like the one that occurred last May, the Securities and Exchange Commission on Tuesday announced that the national securities exchanges and the Financial Industry Regulatory Authority are filing proposals to revise existing market-wide circuit breakers that are designed to address extraordinary volatility across the securities markets.

When triggered, the SEC says these circuit breakers halt trading in all exchange-listed securities throughout the U.S. markets.

The proposals update the market-wide circuit breakers by taking measures like reducing the market decline percentage thresholds necessary to trigger a circuit breaker, shortening the duration of the resulting trading halts, and changing the reference index used to measure a market decline.

“This new market-wide circuit breaker together with the other post-Flash Crash measures is designed to reduce extraordinary volatility in our markets,” said SEC Chairman Mary Schapiro, in a statement the same day. “We look forward to reviewing the comments, including any views on how the proposed circuit breaker changes might work together with the proposed limit up-limit down mechanism for individual securities.”