May 19, 2010
I think you need to reconsider the proposed circuit breaker rules for individual stocks. This will negatively affect the general public in more adverse ways than you would expect.
When a stock has news on it during the trading hours, you will no longer be able to get out at a reasonable price. Take for example TIVO from this past Friday 5/14/10. They had a court case. If you were an investor who was long and saw it when it was down to $15 it would be too late because it would have been halted in in the new circumstances at ~$16. In the old scenario, you would have taken a loss on the day of a few dollars. Under your proposed circuit breaker rules it would halt and probably open up at $10. An investor would have lost an extra 30% unnecessarily.
I advise you to reconsider your proposed rules and it cause negative effects on individual investors.
I like the overall idea behind what you're doing. A suggestion:
Use the average spreads on the S&P 500 stocks. Track the average spread in the stock for the last 5 minutes and when the spread widens out to more 1000%, then halt the stock. So if a stock has an average 1 penny spread and it widens to $1.00 then halt. 2 penny spread to $2.00 then it halt (with perhaps a max spread in there of > $5) creates a halt. This keeps a fast market fast without interference and at the same time protects another incident like we most recently had where the spreads widened in the S&P stocks.