SEC proposes 'circuit-breaker rule' for lurching stock prices

19 May 2010

The Securities and Exchange Commission (SEC) has proposed a measure designed to prevent a repeat of May 6th 2010, when the Dow Jones index plummeted 9.5 per cent in a 20-minute period.

To stop another "flash crash", the SEC wants to introduce a "circuit breaker" system, in which trading is suspended for five minutes in any stocks that experience rapid movement of more than ten per cent in their value.

Mary Schapiro, chair of the SEC, said: "We continue to believe that the market disruption of May 6th was exacerbated by disparate trading rules and conventions across the exchanges."

She added that the "uniform circuit breakers" would be an important measure in preventing future stock market volatility.

Last month, two inside sources told the Financial Times that the SEC wants to bring in rules which would see the names of broker-dealers who make high-frequency trades made public.

It was said the move would improve regulation of such deals.

By Asim Shah

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