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Rout in U.S. Stock Futures Would Trigger Trading Curbs at 5% (trading halt possible)
Bloomberg
Updated on March 9, 2020, 5:00 AM MST
The rout in U.S. stocks deepened toward levels that would trip New York Stock Exchange trading pauses put in place after the 1987 Black Monday crash.
Futures on the S&P 500 Index plunged 4.89% overnight, triggering exchange rules that limit losses and distorting price discovery for the cash market. The biggest exchange-traded fund that tracks the index sank 6.7% in premarket trading as of 7:50 a.m. in New York. When markets open at 9:30 a.m., the exchange operator will halt trading for 15 minutes if the index falls 7% to 2,764.3 at any time before 3:25 p.m. in New York. The breaker last tripped in December 2008 at the depths of the financial crisis.
When trading resumes, another 15-minute pause will happen if losses reach 13%, a drop that would put the S&P 500 at 2,585.96. If the decline hits 20%, or 2,377.9, markets will close for the day. Only the 20% rule applies in the final 35 minutes of cash trading. Traders have never seen a 13% or 20% breaker trip.
“Even though people are concerned it could create more problems, it does allow people to step back and re-assess what they’re doing,” said Matt Maley, an equity strategist at Miller Tabak & Co. “The one thing is it’s been a long time since any of these circuit breakers kicked in. Back then, it was positive. It allowed people to calm down a little bit.”
Futures on the S&P 500 Index plunged 4.89% overnight, triggering exchange rules that limit losses and distorting price discovery for the cash market. The biggest exchange-traded fund that tracks the index sank 6.7% in premarket trading as of 7:50 a.m. in New York. When markets open at 9:30 a.m., the exchange operator will halt trading for 15 minutes if the index falls 7% to 2,764.3 at any time before 3:25 p.m. in New York. The breaker last tripped in December 2008 at the depths of the financial crisis.
When trading resumes, another 15-minute pause will happen if losses reach 13%, a drop that would put the S&P 500 at 2,585.96. If the decline hits 20%, or 2,377.9, markets will close for the day. Only the 20% rule applies in the final 35 minutes of cash trading. Traders have never seen a 13% or 20% breaker trip.
“Even though people are concerned it could create more problems, it does allow people to step back and re-assess what they’re doing,” said Matt Maley, an equity strategist at Miller Tabak & Co. “The one thing is it’s been a long time since any of these circuit breakers kicked in. Back then, it was positive. It allowed people to calm down a little bit.”
More: https://www.bloomberg.com/news/articles/2020-03-08/rout-in-u-s-stock-futures-would-trigger-trading-curbs-at-5
Watch futures here: https://www.bloomberg.com/markets/stocks/futures
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