Circuit breakers could halt trading on stock market
NEW YORK — This morning, stock market futures trading hit limits as investors bet that the market would take a plunge. Dow Jones industrials futures hit negative 550 points, triggering a "circuit breaker," a mechanism designed to limit panic selling.
If stocks fall enough in regular trading, more circuit breakers could be triggered, resulting in automatic timeouts in trading. The New York Stock Exchange implemented the automatic halts after the stock market crashed in the late 1980s to force traders to take a break from frenzied selling.
The Dow Jones industrial average would have to fall 1,100 points in a day to trigger the first halt. If that point is reached before 1 p.m. CDT, the market would shut down for an hour. If the threshold is breached between 1 p.m. and 1:30 p.m., the halt will last 30 minutes. No trading stops will take place if the plunge occurs after 1:30 p.m.
Based on Thursday’s Dow close of 8,691, the threshhold number to cause the market stop in one day would be 7,591 get a free credit report.
If the index were to fall 2,200 points before 12 p.m., the market would close for two hours. If such a decline took place between 12 p.m. and 1 p.m., there would be a one-hour pause. The market would close for the day if stocks sank to that level after 1 p.m.
In the event of a 3,350-point decline, the market would close for the day, regardless of the time.
The thresholds are computed at the beginning of each quarter to establish a specific point value for the quarter. The 1,100-point drop represented a 10 percent decline at that time; the 2,200 level, a 20 percent drop and the 3,350 level is a 30 percent drop.
The rules would halt trading on the major securities and futures exchanges in a coordinated cross-market halt if the circuit breaker is enacted.
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