Circuit Breakers Expanded Change Will Require 350-Point Decline In Stock Market Before Trading Is Halted

Major U.S. stock exchanges informally agreed to expand by about 40 percent the market-decline triggers that automatically halt trading, stock market executives said Friday.

Representatives of all major U.S. markets, including the New York Stock Exchange, agreed Thursday to change the benchmark that halts trading for half an hour to a 350-point decline in the Dow Jones Industrial Average, according to Allan A. Bretzer, Chicago Stock Exchange senior vice president.

The markets also agreed at a meeting in Washington to loosen the hour-long trigger to 550 points, said Bretzer and four other executives who were present.

The stock exchanges are now required to halt trading for 30 minutes if the Dow falls 250 points in a single trading day. The cooling-off period expands to an hour if the decline reaches 400 points.

These so-called circuit breakers were put in place after the October 1987 stock market crash and are intended to prevent trading panic that could accelerate in volatile market declines.

Since falling to as low as 1712 in October 1987, the Dow index has risen almost fourfold to 6460 today. That means the existing circuit breaker limits “aren’t realistic any more,” Bretzer said. “The feeling is that the markets should stay open.”

As it turns out, the current trigger points have never been reached since they were installed following the Oct. 19, 1987, stock market crash, when the Dow fell 508 points, or 22.6 percent, in one day. The closest it came to a shutdown was on March 8 of this year when the Dow index fell 217 points.

Under the informal agreement, reached at a meeting at Securities and Exchange Commission headquarters, the exchanges would review these levels each year. The only potential obstacle to a final agreement is winning official ratification from the full NYSE board.