Commentary

Tim Quast
Traders Magazine Online News

We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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February 1, 1998

Circuit Breakers

By John A. Byrne

It would take a plunge of at least 20 percent, or roughly 800 points in the Dow Jones Industrial Average at current levels, to halt trading under new circuit-breaker rules adopted by the New York Stock Exchange. The rules are expected to be approved by the Securities and Exchange Commission. The current rules triggered the circuit breakers that shut down trading on Oct. 27 when the Dow sank 7.2 percent, or 554 points. Under the new proposal, that would not have happened because circuit breakers would be triggered at higher levels, based on the Dow, updated every three months. The triggers would first take effect on a ten-percent decline, closing the market for an hour before 2 p.m.; for 30 minutes by 2:30 p.m. Trading would resume in either case by 3 p.m. If a ten-percent decline occurred after 3 p.m., trading would not be halted.

The circuit breakers would next take effect when the Dow dropped 20 percent, closing trading for two hours before 1 p.m.; one hour before 2 p.m. The market would reopen by 3 p.m. If a 20-percent drop hit after 2 p.m., the market would close for the day. The market would also close for the day if the Dow dropped 30 percent.

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