Analyst view: SEC unveils new trading curbs after flash crash

NEW YORK (BestGrowthStock) – The largest stocks face new trading curbs after regulators on Tuesday unveiled a plan meant to avoid a repeat of the mysterious May 6 market drop that quickly spiraled out of control.

The Securities and Exchange Commission proposed so-called circuit breakers that would halt trading in a stock for five minutes, if it fell more than 10 percent in five minutes.

The new restrictions will apply to all stocks in the Standard & Poors 500 index under the SEC’s joint plan with major exchanges and market watchdog Finra.

The following is reaction from analysts and investors:


“My first read on it is it looks like they’re using the commodities circuit breakers kind of as a guide. They’re not sure if it’s going to probably work on exchanges. This I assume is extending to exchange-traded funds, but does this extend to the networks outside where they’re trading in house?

“It looks like what they’re modeling it after is really the commodity curbs. The crash of ’87 was triggered by portfolio insurance.

“It’s kind of like a programed type trading situation that they’re concerned about…the idea is to give people somewhat of a breathing space so they can figure this out.

ANDREW HACKEL, RESEARCH ANALYST, R.F. LAFFERTY & CO., NEW YORK (a boutique full-service broker-dealer)

“It should address it; the only thing that could happen is if one stock falls and they halt it, the whole market tends to come down. You won’t get that full quick rebound. It might stem the falling but that quick rebound that we had, it could slow that down.

“I don’t see it affecting the liquidity in single stocks. It’s hard to say how it would, but that’s I think why they’re running the pilot program. And it really won’t be on the opening. And if the company’s going to release some news they usually halt trading anyway.”

There’s no perfect solution to anything. This is better than what we currently have.”

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(Reporting by Emily Flitter)

Analyst view: SEC unveils new trading curbs after flash crash