Sec Oks Changes In Trade Rules ‘Circuit Breakers’ Upgraded

The Securities and Exchange Commission agreed Friday to upgrade stock markets’ “circuit breakers,” the trading limits designed to prevent a market free-fall during dramatic price swings.

Under the new rules, the New York Stock Exchange and other markets will shut down for an hour if the Dow Jones Industrial Average falls more than 550 points. Previously, a one-hour shutdown would occur if the Dow fell by more than 400 points.

In addition, the SEC changed the trigger for a half-hour market shut down to a 350-point fall in the Dow, up from the current 250-point trigger.

The change is the second revision of the system since it was imposed after the 1987 stock market crash. The SEC and others said new trigger points are needed because the market’s dramatic rise in recent years made it too easy to cause a trading halt.

The new triggers, effective Monday, were approved for a year.

The Commodity Futures Trading Commission approved a similar expansion for stock index futures and options contracts on the Chicago Mercantile Exchange, the Kansas City Board of Trade and the New York Futures Exchange.

The New York Stock Exchange had been hesitant to alter the circuit breakers, fearing the change might confuse investors, but asked the SEC to make the changes last December.

The new SEC rules do not revise the most common curb - a limit on some types of computerized trading imposed when the Dow average moves 50 points. This routine curb only slows trading, and supporters say it has helped stabilize the market by preventing knee-jerk investor reactions to smaller price swings.

The system of increasingly tough trading restrictions was designed by the NYSE and the SEC after the October 1987 stock market crash to slow the market’s plunge in the event of another wrenching sell-off.