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

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.26%4.48%
15 yr fixed3.30%3.31%
5/1 ARM3.30%3.35%
30 yr refi4.25%4.45%
15 yr refi3.29%3.34%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 16,373.31 110.75 0.68%
Nasdaq 4,059.41 25.25 0.63%
S&P 500 1,853.13 10.15 0.55%
Treasuries 2.65 0.03 0.99%
Data as of 9:58am ET
Company Price Change % Change
Bank of America Corp... 15.89 -0.50 -3.05%
Yahoo! Inc 36.54 2.33 6.81%
Intel Corp 27.00 0.23 0.86%
Facebook Inc 59.79 0.70 1.18%
Microsoft Corp 40.22 0.47 1.18%
Data as of 9:42am ET

Sections

The banking giant says legal costs tied to various mortgage bond settlements dragged down earnings in the first quarter. More

Observers are warning that risks of a blow up in China's property market are rising, threatening a slowdown that could hurt global growth. More

Yahoo is still in the midst of its turnaround, but investors liked what they saw in the company's first-quarter results. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

Pamela Knighton, a 51-year-old social worker from Cuthbert, Ga. who earns less than $25,000 a year, had been really looking forward to her $4,300 tax refund last year. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.