SEC Approves ‘Limit Up-Limit Down’ Plan To Curb Volatility In Stock Market, As High-Frequency Trading Grows

Reuters – By John McCrank – June 1, 2012

June 1 (Reuters) – U.S. securities regulators have approved a one-year pilot program for a plan designed to protect equity markets from volatile price swings in the wake of the “flash crash” of May 6, 2010.

Scott Eells/Bloomberg

The Securities and Exchange Commission said on Friday that beginning in February, individual U.S.-listed stocks will be prevented from trading outside a range based on recent prices.

The so-called “limit up-limit down” initiative would pause trading for five minutes for securities if attempted trades remain outside the price band for more than 15 seconds. During that timeout period, traders could assess whether the move was based on fundamentals.

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