U.S. program to curb stock price swings triggered frequently; The roll-out of a new program to limit wild price swings in publicly traded securities triggered dozens of trading halts as highly illiquid names were phased into the program

August 21, 2013 Leave a comment

U.S. program to curb stock price swings triggered frequently

Mon, Aug 19 2013

NEW YORK (Reuters) – The roll-out of a new program to limit wild price swings in publicly traded securities triggered dozens of trading halts on Monday as highly illiquid names were phased into the program. By the session’s end, 48 exchange-traded products (ETPs) had been halted or paused on NYSE Arca, a unit of exchange operator NYSE Euronext, according to trading information provided by exchange operator Nasdaq OMX Group Inc. Seven other securities were halted on Nasdaq.About 570 securities were rolled out on NYSE Arca as part of the second phase of the “Limit UP, Limit Down” program, which was approved by the Securities and Exchange Commission last year.

A trading halt is triggered if a price rises or falls more than 5 percent over a five-minute span for the most heavily traded shares, composed mostly of securities with a market cap of about $1.8 billion or greater.

The second phase of the program, with the price band widening to 10 percent to trigger a halt, includes more illiquid stocks, some of which do not trade on many days.

A NYSE Euronext spokeswoman said the new program was in its initial phase of an expanded universe of ETPs. She said the exchange was working within established guidelines and would explore the trading limits with regulators and other exchanges.

NYSE Arca accounts for about 90 percent of ETPs, a reason why so many of the trading halts occurred on its platform.

The SEC declined to comment.

The spread between the bid and offer price of an illiquid ETP can be so wide it will readily trigger a trading halt under the new program, said Dennis Dick, a proprietary trader in Detroit at Las Vegas-based Bright Trading LLC.

“In some cases even a small-sized order could be enough to cause the price band threshold to be exceeded, which would trigger a trading pause,” Dick added.

Filed under Macro Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment