SEC approves circuit breaker rules to ease flash crash fears

City A.M. Reporter
US securities regulators approved new so-called “circuit breakers” yesterday in an attempt to prevent a repeat of the still-unexplained 6 May sudden US stock market plunge or “flash crash”.

The Securities and Exchange Commission said the exchanges could begin implementing the new rules as soon as today as they aim to restore confidence among investors, some of whom have begun to complain of a lack of transparency in markets.

The rules will require the exchanges to pause trading in S&P 500 stocks across US equities markets if the price moves 10 per cent or more in a five-minute period. Some investors believe the measures are a necessary first step while others question their effectiveness.

Regulators are still looking for answers to the 6 May crash, which exposed flaws in the electronic US marketplace and rattled investors. The Dow Jones industrial average fell some 700 points in minutes before sharply rebounding. Too much fragmentation, too little liquidity, and high frequency trading have emerged as factors in the fall, but regulators say they may not find a single cause.