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SEC Proposes New Rules in Response to 'Flash Crash'

Published: Tuesday, 18 May 2010

U.S. stock exchanges would briefly halt trading of some stocks that have big prices swings under new trading rules aimed at avoiding market plunges and proposed by federal regulators.

The rules would take effect in mid-June under a six-month pilot program agreed to by major exchanges and the Securities and Exchange Commission. The SEC announced them Tuesday and put them forward for public comment, in a response to the stunning plunge of May 6.

Under the plan, trading of any Standard & Poor's 500 stock that rises or falls 10 percent or more would be halted for five minutes. These rules, known as "circuit breakers," would be applied if the price swing occurs between 9:45 a.m. and 3:35 p.m. Eastern time.

"We continue to believe that the market disruption of May 6 was exacerbated by disparate trading rules and conventions across the exchanges," SEC Chairman Mary Schapiro said in a press release. "As such, I believe it is important that all the exchanges quickly reached consensus on a set of uniform circuit breakers that would be triggered when needed."