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U.S. Securities and Exchange Commission

SEC to Publish for Public Comment Proposed Rules Expanding Stock-by-Stock Circuit Breakers


Washington, D.C., June 30, 2010 — The Securities and Exchange Commission today is publishing for public comment proposals by the national securities exchanges and FINRA to expand a recently adopted circuit breaker program to include all stocks in the Russell 1000 Index and certain exchange-traded funds.

The circuit breaker program was approved earlier this month in response to the market disruption of May 6 and currently applies to stocks listed in the S&P 500 Index. Trading in a security included in the program is paused for a five-minute period if the security experiences a 10 percent price change over the preceding five minutes. The pause gives the markets an opportunity to attract new trading interest in an affected stock, establish a reasonable market price, and resume trading in a fair and orderly fashion. The circuit breaker program is in effect on a pilot basis through Dec. 10, 2010.

"The proposals would expand the uniform circuit breakers to many more stocks and ETFs," said SEC Chairman Mary Schapiro. "We look forward to receiving comments from the public on the proposed addition of the Russell 1000 Index securities and the selected exchange-traded funds to the circuit breakers."

A list of the securities included in the Russell 1000 Index, which was rebalanced on June 25, is available on the Russell website. The exchange-traded funds included in the proposal will be available on the SEC's website along with the proposed rule changes under Exhibit 3 to each filing.

The circuit breaker pilot program was developed after Chairman Schapiro convened a meeting of exchange leaders and FINRA at the SEC immediately following the May 6 market disruption. The markets will continue to use the pilot period to make appropriate adjustments to the parameters or operation of the circuit breakers as warranted based on their experience. "It is my hope to continue to expand the program to additional publicly traded companies," added Chairman Schapiro.

At Chairman Schapiro's request, the SEC staff is also:

  • Considering ways to address the risks of different order types and their potential to contribute to sudden price moves.
  • Considering steps to deter or prohibit the use by market makers of "stub" quotes, which are not intended to indicate actual trading interest.
  • Studying the impact of other trading protocols at the exchanges, including the use of trading pauses and self-help rules.
  • Continuing to work with the exchanges and FINRA to improve the process for breaking erroneous trades, by assuring consistency across markets.

The SEC staff also is working with the markets to consider recalibrating market-wide circuit breakers currently on the books — none of which was triggered on May 6. These circuit breakers apply across all equity trading venues and the futures markets.

Once the proposals have been published in the Federal Register, the public will have 10 days to submit comments.

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Modified: 06/30/2010