NYSE invokes Rule 48 to curb early swings

Circuit breakers, a plunge protection team (that either doesn’t exist or is doing a very poor job)… and now Rule 48. One has to wonder how many more tricks are in the bag. Perhaps that was the last one, perhaps there’s many more. Even if there’s more, it won’t stop the ever-strengthening avalanche.


The New York Stock Exchange on Tuesday again invoked measures meant to promote an orderly opening as the US stock market endured heavy selling in early trading.

In contrast to the wild trading of Monday, August 24, when the exchange also invoked so called Rule 48, activity on Tuesday was mostly orderly in spite of declines, market participants said.

But some complained that it took too long for some stocks to open, which is likely to keep attention on the rule. The S&P 500 fell 3 per cent.

Rule 48 relieves the exchange’s market makers from having to give price indications to the market with certain delays before opening on days when sharp moves are anticipated. The rule is also meant to speed the open of trading.

Some participants have since raised concerns about Rule 48, questioning whether the elimination of price indications may have made it difficult to know where stocks would open. A larger than usual number of shares also still opened with delays.

The NYSE’s model for opening stocks with a blend of human oversight and sophisticated technology results in less volatile opens and enhanced price discovery, in particular for important days such as IPOs and during extreme market volatility.

The trading limit rules implemented after the Flash Crash of 2010 when stocks see-sawed in minutes have also come under scrutiny. Meant to prevent large, panic swings in the market, these rules mandate trading halts on movements of 5 or 10 per cent for most shares and ETFs, but those amounts double at the opening.

Full article: NYSE invokes Rule 48 to curb early swings (Financial Times)

Comments are closed.