Reply #49: S.E.C. Weighs Trading Limits to Avert Extreme Volatility

[Demeter]

http://www.nytimes.com/2011/04/06/business/06limit.html?_r=1

WASHINGTON — The Securities and Exchange Commission said on Tuesday that it would consider limits on the amount by which a stock’s price can move in any five-minute period, a fixture that would replace the single-stock circuit breakers installed after the so-called flash crash volatility on May 6, 2010.

The mechanism, known as a limit up-limit down rule, would apply to trades on national securities exchanges and would prevent shares from gyrating wildly outside a specified band of 5 or 10 percent of the recent price. It was proposed by the exchanges and the Financial Industry Regulatory Authority, the self-regulatory body known as Finra.

If trading is unable to occur within the price band for more than 15 seconds, a five-minute trading pause would be initiated on that specific stock, allowing market participants to find a new price at which to reopen trading, the S.E.C. said. The percentage bands would be doubled during the opening and closing periods of market trading, and broader price bands would apply to stocks below $1.

Mary L. Schapiro, the chairwoman of the S.E.C., said that the circuit breakers that were put in place last June after the May 6 market break “helped to limit significant volatility and bring uniformity to decisions regarding trading halts in individual stocks.”

“But we felt that we could improve upon the system,” she added, and therefore have been working with Finra and the exchange on ways “to limit extraordinary market volatility.”

MAYBE IF THE RULES SAID YOU HAD TO HOLD A STOCK FOR....2 WEEKS. THAT WOULD TAKE OUT THE HFT AND SPECULATORS....