Posted today at RealMoney:
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David Merkel |
| Bye-bye to Trading Curbs | ||
| 11/7/2007 2:37 PM EST |
When the NY Composite fell 2% today, no trading curbs kicked in. Program trading went on unfettered by a need for upticks. Around 1:20, when the curbs would have kicked in, the market fell a little, stabilized, and began to rally. So much for the curbs. Now all that remains are the circuit breakers, which kick in when the DJIA is down 10% and 20%. The circuit breakers only came into existence in 1987, and to the best of my knowledge, have never been triggered. (Anyone else know for sure? I don’t have intraday data.)
Using closing data since 1900 (again, I don’t have intraday), the circuit breakers would have been triggered 5 and 2 times each. That’s once every 21 and 54 years, respectively. To me, that’s not frequent enough to have a rule in place, even if intraday data would double the frequency.
Position: none
As it was, the market finished down nearly 3% today.? I suspect that curbs wouldn’t have helped much, but who can tell.? The market is a lot more game-friendly than it used to be; far fewer rules to observe (or flout).
On an unrelated note, here are my two REIT charts from yesterday, in thumbnail form, for those who had a hard time with them yesterday.
Mortgage REITs
Equity REITs
On October 27, 1997 the Dow Jones Industrial Average plummets 554 points, triggering the NYSE’s “circuit breaker” rule for the first time. Trading halts at 3:30 p.m.
The following year they reset the limits, I do not recall a subsequent triggering.
Re: Circuitbreakers. I recall them being hit in either ’97 or ’98 b/c they actually closed the market early. The boss sent us home.