US financial system regulators seek to stop future market crashes

The Securities and Exchange Commission, drawing on lessons from last year's flash crash, is seeking to overhaul the 13 year old rules that currently are designed to shut down the stock market during periods of volatility. The proposed curbs now would be triggered when the Standard & Poor's 500 Index falls 7%.

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The Securities and Exchange Commission, drawing on lessons from last year's Flash Crash, is seeking to overhaul the 13 year old rules that currently are designed to shut down the stock market during periods of volatility.

The proposed curbs now would be triggered when the Standard & Poor's 500 Index falls 7%.

The index now used for the circuit breakers is the Dow Jones Industrial Average. In addition to changing the triggering index, the new plan, according to proposals submitted by US equities exchanges and the Financial Industry Regulatory Authority would shorten the duration of the halts, and also pause trading in stock futures.

"This new marketwide circuit breaker together with other post-flash crash measures is designed to reduce extraordinary volatility in our markets," SEC chairman Mary Schapiro said.

S&P 500 declines of 7%, 13% and 20% from the previous day's close would set off halts across all markets, narrowing the current thresholds of 10%, 20% and 30%, according to the statement.

The SEC will seek comment on the proposed rule changes, and will study how the proposed circuit breaker changes might work together with the proposed limit-up/limit-down mechanism that would apply to individual securities. That earlier proposal, also by the exchanges and Finra, in the same way was in response to last year's brief but devastating May 6 plunge which for a time erased $862 billion.

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