NYSE Circuit Breaker Trigger Levels, 2011, Q3
August 8, 2011, Submitted by: Ken Tweet
Given that we are likely in for a rough and perhaps scary ride this week (particularly this upcoming day) with regards to the stock market and the reaction to the recent S&P downgrade of the United States, I happened across this tidbit of interesting news from George Ure’s site, UrbanSurvival.com,
(George)
You may want to print out this NYSE News Release from June 30th and keep it handy by the computer, TV, or barf bucket in case you’re about to see your already damaged retirement dreams whacked again:
News Releases
NYSE Announces Third-Quarter 2011 Circuit-Breaker Levels
NEW YORK, June 30, 2011 — The New York Stock Exchange will implement new circuit-breaker collar trigger levels for third-quarter 2011 effective Friday, July 1, 2011. Circuit-breaker points represent the thresholds at which trading is halted marketwide for single-day declines in the Dow Jones Industrial Average (DJIA). Circuit-breaker levels are set quarterly as 10, 20 and 30 percent of the DJIA average closing values of the previous month, rounded to the nearest 50 points.
In third-quarter 2011, the 10-, 20- and 30-percent decline levels, respectively, in the DJIA will be as follows:
Level 1 Halt
A 1,200-point drop in the DJIA before 2 p.m. will halt trading for one hour; for 30 minutes if between 2 p.m. and 2:30 p.m.; and have no effect if at 2:30 p.m. or later unless there is a level 2 halt.
Level 2 Halt
A 2,400-point drop in the DJIA before 1:00 p.m. will halt trading for two hours; for one hour if between 1:00 p.m. and 2:00 p.m.; and for the remainder of the day if at 2:00 p.m. or later.
Level 3 Halt
A 3,650-point drop will halt trading for the remainder of the day regardless of when the decline occurs.
Background: Circuit-breakers are calculated quarterly. The percentage levels were first implemented in April 1998 and the point levels are adjusted on the first trading day of each quarter. In 2011, those dates are Jan. 3, April 1, July 1 and Oct. 3.
Update, end of day, August 8, 2011
Today suffered a -634 plunge in the DJIA, which is the 6th largest absolute point drop in Dow Jones Industrial Average history. Overall, stocks have fallen by about 15 percent over the past two weeks.
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This is one more example of how we are protecting us from ourselves yet again.
Circuit breakers are meant to prevent a total sell off but could actually be the trigger to set off the next huge drop. If the stock market is ever halted for the day, the next day people could be totally frantic because the stocks were shut off. It might be in some circumstances better to let a sell off run its course rather than stop it suddenly and let people worry about the situation overnight or over the course of a weekend.