Circuit-breaker points represent the thresholds at which trading is halted market wide for single-day declines in the Dow Jones Industrial Average. Circuit-breaker levels are set quarterly as 10, 20 and 30-percent of the DJIA average closing values of the previous month, rounded to the nearest 50 points.
In second-quarter 2005, the 10-, 20- and 30-percent decline levels, respectively, in the DJIA will be as follows:
- A 1,050-point drop in the DJIA before 2 p.m. will halt trading for one hour; for 30 minutes if between 2 p.m. and 2:30 p.m.; and have no effect if at 2:30 p.m. or later.
- A 2,150-point drop in the DJIA before 1 p.m. will halt trading for two hours; for one hour if between 1 p.m. and 2 p.m.; and for the remainder of the day if at 2 p.m. or later.
- A 3,200-point drop will halt trading for the remainder of the day regardless of when the decline occurs.
In second-quarter 2005, trading collars will be implemented as follows:
- A decline in the DJIA of 210 points or more will require all index-arbitrage sell orders of the S&P 500 stocks to be stabilizing, or sell plus1, for the remainder of the day, unless on the same trading day, the DJIA advances 100 points or less below its previous day’s close.
- An advance in the DJIA of 210 points or more will require all index-arbitrage buy orders of the S&P 500 stocks to be stabilizing, or buy minus2, for the remainder of the day, unless the DJIA retreats to 100 points or less above its previous day’s close.
- The restrictions will be re-imposed each time the DJIA advances or declines 210 points from its previous day’s close.
Circuit breakers are calculated quarterly. The percentage levels were first implemented in April 1998 and are adjusted on the first trading day of each quarter. In 2005, those dates are Jan. 3, April 1, July 1 and Oct. 3. The trading collars are also calculated quarterly, as 2 percent of the average closing value of the DJIA for the last month of the previous quarter, rounded down to the nearest 10 points. They are removed when the DJIA advances or retreats from the prior day’s close to less than or equal to half of the 2 percent value, rounded down to the nearest 10 points.
1 A market order to sell “plus” is a market order to sell a stated amount of a stock provided that the price to be obtained is not lower than the last sale if the last sale was a “plus” or “zero plus” tick, and is not lower than the last sale plus the minimum fractional change in the stock if the last sale was a “minus” or “zero minus” tick. A limited price order to sell “plus” would have the additional restriction of stating the lowest price at which it could be executed.
2A buy “minus” is a market order to buy a stated amount of a stock provided that the price to be obtained is not higher than the last sale if the last sale was a “minus” or “zero minus” tick, and is not higher than the last sale minus the minimum fractional change in the stock if the last sale was a “plus” or “zero plus’ tick. A limited price order to buy “minus” would have the additional restriction of stating the highest price at which it could be executed.
