On May 31, the Securities and Exchange Commission approved two proposals submitted by the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) with the goal of addressing extraordinary volatility in individual securities and the broader U.S. stock market.
The first proposal establishes a “limit up-limit down” mechanism that will prevent trades in individual stocks from occurring outside of specified price bands. The second proposal modifies the existing marketwide circuit breakers, which temporarily halt trading or prematurely close the market in the event of extreme market declines, with new circuit breakers that are designed to better account for today’s high-speed electronic trading systems.
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