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SEC delays new ‘circuit breaker’ test for stocks

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After Friday’s stock market rout this may be tempting fate, but here it is: The plan to test a new “circuit breaker” idea for individual stocks, to combat wild price moves, will be delayed at least a week, the Securities and Exchange Commission said.

The New York Stock Exchange had been preparing to begin testing the circuit breaker plan on Monday, in response to the bizarre -- and as yet not fully explained -- May 6 “flash crash” that saw some big-name stocks briefly plunge to as little as 1 cent a share as computerized sell orders flooded the market.

The pilot program would halt trading in any Standard & Poor’s 500 index stock for five minutes in the event that the stock experienced a 10% change in price over the preceding five minutes. The idea would be to “give the markets the opportunity to attract new trading interest in an affected stock, establish a reasonable market price, and resume trading in a fair and orderly fashion,” the SEC said in a request-for-comment letter it published May 18.

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But on Friday the SEC said it needed more time to review comments received and to present the proposal to the full commission.

From a statement on the SEC’s website:

Two weeks ago, in response to the market disruption of May 6, the SEC sought public comment on proposed rules that would require the national securities exchanges and FINRA [the Financial Industry Regulatory Authority] to pause trading in certain individual stocks if the price moves 10% or more in a five-minute period. The rules were proposed by the national securities exchanges and FINRA.The SEC staff is now reviewing and analyzing the comments that were received over the course of a public comment period that ended yesterday.The staff expects to present the proposals to the Commission next week. If approved, the staff anticipates full implementation within a week thereafter.

-- Tom Petruno

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