The Securities and Exchange Commission has released a plan by stock exchanges to create a new “limit up-limit down” mechanism to deal with market volatility in U.S. equity markets. As per the proposal, trades in listed stocks will have to be executed within a range linked to recent prices for that security.
The new mechanism will replace the existing single stock circuit breakers. It will prevent trades in listed equity securities from taking place outside of a specified price band, which will be set at a percentage level above and below the average price of the security over the immediately preceding five-minute period.
Click here for the release from Securities and Exchange Commission.