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Investor Alerts and Bulletins


Investor Bulletin: Measures to Address Market
VolatilityUpdated flag

The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to inform investors of safeguards approved by the SEC to address market volatility in U.S. equity markets.

Limit Up-Limit Down Mechanism – On May 31, 2012, the SEC approved a  “Limit Up-Limit Down” mechanism to address market volatility by preventing trades in listed equity securities when triggered by large, sudden price moves in an individual stock.  The limit up-limit down mechanism is intended to prevent trades in individual securities from occurring outside of a specified price band.  This price band is set at a percentage level above and below the average price of the stock over the immediately preceding five-minute trading period.  These price limit bands are 5%, 10%, 20%, or the lesser of $.15 or 75%, depending on the price of the stock. Additionally, these price bands double during the opening and closing periods of the trading day. If the stock’s price does not naturally move back within the price bands within 15 seconds, there will be a five-minute trading pause.

Revised Market-Wide Circuit Breakers – The securities and futures exchanges have procedures for coordinated cross-market trading halts if a severe market price decline reaches levels that may exhaust market liquidity.  These procedures, known as market-wide circuit breakers, may halt trading temporarily or, under extreme circumstances, close the markets before the normal close of the trading session.

Market-wide circuit breakers provide for cross-market trading halts during a severe market decline as measured by a single-day decrease in the S&P 500 Index.  A cross-market trading halt can be triggered at three circuit breaker thresholds—7% (Level 1), 13% (Level 2), and 20% (Level 3).  These triggers are set by the markets at point levels that are calculated daily based on the prior day’s closing price of the S&P 500 Index.

A market decline that triggers a Level 1 or Level 2 circuit breaker before 3:25 p.m. will halt market-wide trading for 15 minutes, while a similar market decline “at or after” 3:25 p.m. will not halt market-wide trading.  A market decline that triggers a Level 3 circuit breaker, at any time during the trading day, will halt market-wide trading for the remainder of the trading day.

For additional information about the limit up-limit down mechanism and market-wide circuit breakers, please read the following:

National Market System Plan – Market Volatility

National Market System Plan – Market Volatility – Amendment 2

National Market System Plan – Market Volatility – Amendment 3

Market-Wide Circuit Breaker Approval Order


We have provided this information as a service to investors.  It is neither a legal interpretation nor a statement of SEC policy.  If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.

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Modified: Jan. 4, 2016