SEC sets unified stock-halt rule for drops of 10%

Quote from Angrycat:



So, if a company reveals REALLY bad news and trades down 10%, the breaker is tripped. When it re-opens, it'll re-open down 50% with no opportunity to trade anywhere between down 10% and down 50%. The market will become very volatile and the risk will be higher.
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Really? We've already seen that with continuous trading, a stock can trade from 10% down to 99.9% down with nothing in between. Besides, trading halts already exist when big breaking news is released.

I agree that 10% is too small a band for an individual stock, but I don't think the principle of price limits per se is a bad one - it doesn't seem any worse than the idiocy that took place on May 6th. In most cases it can enhance liquidity and smooth trading by actually allowing liquidity providers (genuine ones, not no-show tick-fuckers) sufficient time to update their orders across multiple stocks during a major market move.

There are downsides to using price limits, but with a mere 5 minute halt time, it is silly to pretend that there are only negatives to it, and that there are no negatives whatsoever to the status quo. 2 weeks ago the US markets were a total joke, complete amateur hour, and the laughing stock of the world. Letting that go on would be dumb.
 
Quote from freewilly:

earning miss, lawsuit, FDA phase II failed, etc.....

almost everyday, there are few stocks that have 20% gap downs.

If FDA decision comes in trading hours, I have seen plenty small bio companies took 80% haircut in 1 minute.
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But what is the problem with a 5 minute halt and letting the stock re-open in that situation?
 
Quote from freewilly:

earning miss, lawsuit, FDA phase II failed, etc.....

almost everyday, there are few stocks that have 20% gap downs.

If FDA decision comes in trading hours, I have seen plenty small bio companies took 80% haircut in 1 minute.
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If you read the prosposed rule you would see that none of the situations you described fit.

It doesn't start until 9:45. The market opens at 9:30 for those of you who don't actually trade, so gap ups and downs wouldn't count.

It only effects SP500 stocks so small bios wouldn't count.

FDA decisions always cause a halt before the release. A trader would know this.

Your an idiot. Sorry, but it's true
 
Quote from Mike Morrison:

Do any of you guys actually trade or are you just career poster's?

How many SP500 stocks move 10% in 5 minutes in any given month? Not many thats for damn sure.
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Yes, I trade for a living at a trading company. I'm not a retail trader.

What you don't seem to grasp is that how often it happens is not that relevant. And...um...in illiquid securities it happens much more frequently and usually because of a large order (relative to normal volume). As usual, the SEC has issued a blanket order on all stocks without regard for normal volume, news stories or any other parameters.
 
Quote from Angrycat:

.in illiquid securities it happens much more frequently and usually because of a large order (relative to normal volume). As usual, the SEC has issued a blanket order on all stocks without regard for normal volume, news stories or any other parameters.
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thought it was only s&p500 companies?
 
Quote from Ghost of Cutten:

Really? We've already seen that with continuous trading, a stock can trade from 10% down to 99.9% down with nothing in between. Besides, trading halts already exist when big breaking news is released.

I agree that 10% is too small a band for an individual stock, but I don't think the principle of price limits per se is a bad one - it doesn't seem any worse than the idiocy that took place on May 6th. In most cases it can enhance liquidity and smooth trading by actually allowing liquidity providers (genuine ones, not no-show tick-fuckers) sufficient time to update their orders across multiple stocks during a major market move.

There are downsides to using price limits, but with a mere 5 minute halt time, it is silly to pretend that there are only negatives to it, and that there are no negatives whatsoever to the status quo. 2 weeks ago the US markets were a total joke, complete amateur hour, and the laughing stock of the world. Letting that go on would be dumb.
More...

The idiocy that happened on May 6th is a direct result of the lack of liquidity providers because the SEC has been screwing with the market for two years (worse than usual) and driving market makers out of business. Tens of thousands have left the business. Some have left not because they weren't profitable but because they just didn't want to deal with the SEC's bullshit anymore. So, now HFT shops provide 50-70% of the liquidity on any given day and a few of them turned off their boxes. No liquidity, no bids. Simple, really.

What the SEC should do instead of these stupid bands is stop torturing the capital markets so that people aren't afraid to provide liquidity. Have stub quotes ever been hit out before? Not that I can remember. So, somebody must have been bidding before, right? It's the bids that prevent the May 6th's. The bands don't produce bids - just more volatility.

So, yeah....the status quo sucks, but it's a new creation of the SEC and this "fix" doesn't fix the fundamental problem the SEC has caused which led to May 6th.
 
Quote from Mike Morrison:

If you read the prosposed rule you would see that none of the situations you described fit.

It doesn't start until 9:45. The market opens at 9:30 for those of you who don't actually trade, so gap ups and downs wouldn't count.

It only effects SP500 stocks so small bios wouldn't count.

FDA decisions always cause a halt before the release. A trader would know this.

Your an idiot. Sorry, but it's true
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Not all news causes a halt. Some news - like terrorist attacks and Greeks burning down their banks and killing bank workers - happens during the day.

It's a stupid fix. Your claim that it's not that bad is just idiotic when it doesn't fix the actual problem and the problem is liquidity which the SEC has systematically killed for two years.
 
Quote from The Big D:

Agreed. Regardless of whether limits are good or bad, and how they're implemented, 10% is way too small a limit.
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It's 10% in a 5-min span - the only time a stock is going to dump like that on an exchange is if it's in free-fall. When was the last time you saw a stock fall 10% in 5 min and there wasn't a problem?
 
Quote from freewilly:

earning miss, lawsuit, FDA phase II failed, etc.....

almost everyday, there are few stocks that have 20% gap downs.

If FDA decision comes in trading hours, I have seen plenty small bio companies took 80% haircut in 1 minute.
More...

small bio companies are not in the s&p 500.
 
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