http://www.marketwatch.com/story/sec-proposes-creating-unified-stock-halt-system-2010-05-18-1727380 WASHINGTON (MarketWatch) -- Top regulators and stock-exchange officials on Tuesday proposed the creation of a unified circuit-breaker system for all exchanges to halt or slow down trades of a particular stock if the price moves 10% or more in a five minute period. The proposal, which would be market-wide, comes in the wake of the Dow Jones Industrial Average's sudden drop of nearly 1,000 points on May 6 before swiftly recovering to end with a 348-point loss.
I wonder how this will affect us traders who enjoy the intraday volatility. How long will the stock-halt last? Won't this screw up some intraday mean reversion traders?
The key question seems to be how long the halt will last, how they will handle a series of them, and how trading will re-start when the halt is over. If a stock shits the bed for some legitimate reason, will it now move down in a series of limit-sized moves similar to how an ag future moves? Futures support the concept of bidding or asking the limit as a means of restarting trading. It doesn't appear they're going to do that here...
My instinct is that 10% is too small a range for it to kick in. Lots of stocks have that kind of volatility.
Agreed. Regardless of whether limits are good or bad, and how they're implemented, 10% is way too small a limit.
10% only? this is a joke. let the price go where it wants to go. eventually it will get to where it wants halt or no halts, what it will do is create an inefficiency that will result in traders being stopped out due to the halt-unhalt volatility. another possible thing is we have tremendous opening gaps, followed by little or no intra-daytrading volatility AND liqudity. Bunch of retards
The regulators are NEVER sorry because they'll just keep watching porn like always. It'll be the retail guys who are sorry because the market makers will have plenty of time to cancel their bids and re-open lower. This is just another stupid meddling move by the clueless regulators who screwed everything up in the first place, killed liquidity and are now going to screw everything up even more in order to deal with the first series of problems they caused. funniest parts is that while retail gets screwed, they are the ones begging for this.
You understand that what you're saying is WAYYYY to logical for the flunkies euphemistically known to us as "regulators". They quickly threw this thing together so they could go back to "monitoring" online porn.
Looks like she, Mary L. Schapiro chairwoman of the SEX, thinks that the stocks which the price moves by 10 percent or more in a five-minute period are erroneous trades and she wanted to set a fair and consistent process for judging them.