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This sounds more like a planned event (like the 550 point decline on
10/27/97)after the introduction of the
500 point circuit breaker. It's my interpretation that there will be a
900 point(in one day or less)decline before the end of the quarter.
This would be appropriate given the public is used to the idea of an
"October Panic". This time it will be a "September Smash" that can
take advantage of the maximum drop with most of the crowd caught off
guard...
http://dailynews.yahoo.com/headlines/bs/story.html?s=v/nm/19980812/bs/trading_1.html
>>900-point drop in Dow needed to trigger trade halt
NEW YORK (Reuters) - While the Dow Jones industrials closed down by
112 points Tuesday amid growing concern over Asia, new circuit breaker
trading halts will not kick in until the Dow falls by 900 points, or
about 10 percent.
The circuit breaker rules, which were first set up after the October
1987 market crash, were greatly expanded in April 1998.Under the new
rules, stock market trading halts will be tripped by one-day declines
of 10 percent, 20 percent and 30 percent
in the Dow Jones industrial average.
On Tuesday, the Dow closed off 112 points at 8462.85.
Previously, trading on the New York Stock Exchange, the American Stock
Exchange and Nasdaq would halt for 30 minutes if the Dow fell 350
points, or for one hour, if it fell 550 points.
Such halts were triggered only once, on October 27, 1997, when the Dow
slid 554 points or 7.2 percent.
After that October 1997 experience, many market players complained
that the halts may have worsened the sell-off by acting like a magnet
for selling, and called for a widening of the trigger points.
Under the new rules, point levels are set quarterly at 10 percent, 20
percent and 30 percent of the Dow. The levels are readjusted every
quarter, using the Dow's closing value of the previous month rounded
to the nearest 50 points.
The new levels are readjusted December 30, March 30, June 30 and
September 30, and go into effect the next trading day.
Under the latest figures, for trading during the third quarter of
1998, it would take 900-point decline in the Dow drop to halt trading
for one hour if the decline occurs before 1400 EST (1800 GMT).
Trading will be halted for 30 minutes if the drop happens between 1400
and 1430 Eastern time. There will be no effect if the 850-point drop
occurs between 1430 and 1600 Eastern Time.
A 1,750-point drop will halt trading for two hours if the sell-off
occurs before 1300 Eastern time; for one hour if before 1400 Eastern
time, and for the rest of the day if between 1400 and 1600 Eastern time.
A 2,650-point drop will halt trading for the remainder of the day,
regardless of when the decline occurs.
The Chicago Mercantile Exchange and the Chicago Board of Trade also
revised circuit breakers for stock-index futures.<<
Regards,
Gary
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