Friday, August 12, 2016

Stock Exchanges Propose Fix to Prevent Another Wild Session

The changes come after months of industry discussion on the appropriate way to stave off a similarly wobbly trading session. Last year’s Aug. 24 rout included brief plunges of 21 percent in JPMorgan Chase & Co. and General Electric Co.’s share prices. The swoon illustrated the need to adjust safeguards, put in place after a market crash in May 2010, that are meant prevent sudden erratic lurches.

“We look forward to the accelerated implementation of the new reopening procedures, and the continued progress by the exchanges and the industry to address the other key areas outlined in our letter,” the money managers said in the statement.
The system the exchanges are addressing is called limit-up/limit down. Their proposed changes include measures to smooth the market’s process of determining the right price for securities after they come out of a trading pause. The exchanges have already reduced unnecessary trading halts by 75 percent by using different a reference price to calculate the halt-trigger threshold in some cases, according to the exchanges’ release.