Exchanges Propose Adjustments to U.S. Trading-Curb System

AP/Richard Drew

Bloomberg News – By Nina Mehta       May 31, 2012

U.S. stock exchanges proposed changes to trading curbs meant to safeguard equity markets, revising an April 2011 proposal for a system that would prevent trades at prices outside a certain band.

The curbs would give markets that list companies and exchange-traded funds new flexibility to pause stocks when doing so may damp volatility, according to a Securities and Exchange Commission filing dated May 24 from venue operators including NYSE Euronext and Nasdaq OMX Group Inc. (NDAQ) The system would be implemented in February as a one-year pilot program, said the group, which includes the Financial Industry Regulatory Authority, overseer of more than 4,400 brokers.

Regulators and exchanges introduced curbs after the May 2010 rout known as the flash crash to halt individual stocks when they rise or fall at least 10 percent. Exchanges asked for permission 13 months ago to test a replacement system known as limit-up/limit-down, and the May 24 filing augmented that request in response to comments from brokers and other market participants. The 2011 proposal was never implemented.

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