Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

SEC OKs 'flash crash' fix

By Blake Ellis, staff reporter


NEW YORK (CNNMoney.com) -- The Securities and Exchange Commission approved new rules Thursday that will halt trading uniformly across all U.S. markets for stocks experiencing wild price swings to prevent a repeat of last month's "flash crash."

Under the new rules, which could go into effect as early as Friday, exchanges are required to stop trading in an individual stock for five minutes across U.S. stock markets if the stock experiences a 10% price swing in the preceding five-minute period.

The pause, also called a circuit breaker, "would give the markets the opportunity to attract new trading interest in an affected stock, establish a reasonable market price, and resume trading in a fair and orderly fashion," the SEC said in a statement.

The SEC proposed the rules last month in response to the market's so-called "flash crash," when about 30 stocks dropped at least 10% in a five-minute period and the Dow Jones industrial average (DJIA) plummeted nearly 1,000 points.

"The May 6 market disruption illustrated a sudden, but temporary, breakdown in the market's price setting function when a number of stocks and ETFs were executed at clearly irrational prices," SEC Chairwoman Mary Schapiro said in a prepared statement.

"By establishing a set of circuit breakers that uniformly pauses trading in a given security across all venues, these new rules will ensure that all markets pause simultaneously and provide time for buyers and sellers to trade at rational prices," Schapiro said.

The new rules are expected to be adopted as early as Friday and will be implemented on a pilot basis through Dec. 10 to give markets time to make adjustments to the new circuit breakers, according to the SEC.

As of now, the pause will only apply to stocks in the Standard & Poor index, but the SEC said it hopes to expand the rules to include other securities "as soon as practicable."

CNNMoney's Ben Rooney contributed to this report. To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.50%3.49%
15 yr fixed2.65%2.67%
5/1 ARM2.93%2.94%
30 yr refi3.39%3.46%
15 yr refi2.67%2.70%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 18,261.45 -131.01 -0.71%
Nasdaq 5,305.75 -33.78 -0.63%
S&P 500 2,164.69 -12.49 -0.57%
Treasuries 1.61 -0.02 -1.04%
Data as of 12:24am ET
Company Price Change % Change
Apple Inc 112.71 -1.91 -1.67%
Bank of America Corp... 15.52 -0.08 -0.51%
Procter & Gamble Co 87.76 -1.23 -1.38%
Yahoo! Inc 42.80 -1.35 -3.06%
Chesapeake Energy Co... 6.63 -0.24 -3.49%
Data as of Sep 23

Sections

Wells Fargo is under increasing pressure to punish the executives who oversaw the bank during a massive fraud that involved creating more than 2 million unauthorized accounts. More

American voters of all different political and socioeconomic backgrounds tell CNNMoney they are really unhappy with Donald Trump and Hillary Clinton. The concern is whether they will stay home on Election Day -- or pull back on their spending. More

Twitter and Square CEO Jack Dorsey is putting a link to voter registration on everyone's digital Square receipts. More

The nationwide college financial aid form, FAFSA, has changed. That means you need to apply earlier -- as soon as October 1. Here's what you need to know. More