Implementation of Market Wide Circuit Breakers

Market Wide Circuit Breakers (MWCB) will be implemented on April 8th, 2013 (date pending SEC approval). Under the current criteria, there would be a market halt of 30 minutes, should the Dow Jones Industrial Average change by approximately 1300 points. Under the new criteria, a 15 minute halt will be instituted should the S&P 500 change by more than 100 points (approximately). Here is the summary of changes to the MWCB from Colin Clark’s blog “Updating the Market-Wide Circuit Breaker” (see also the SEC Approval Order)

  • The DJIA index will be replaced with the S&P 500 index for determining whether circuit breaks are triggered
  • The markets will be halted based on a decline of 7% rather than 10%
  • The percentage decline calculation will be based on the change from previous day’s close instead of the last month of quarter average
  • The halt time will be shorter, only 15 minutes instead 30, 60, or 120 minutes.
  • Simplify the time when the trading halt is triggered from six to two relevant time periods.

[1]This summary is designed to give a basic overview of Limit Up/Limit Down and excludes many additional details including how LULD will work under various different trading situations. For a full explanation of LULD, please read the recommended links imbedded in the blog.

[2]As of December 1, 2012.