Stock trading briefly halted after plunge over coronavirus fears. What does it mean?
Trading on the New York Stock Exchange stopped after a precipitous drop in prices tripped a “circuit breaker” that automatically halted trading for 15 minutes Monday.
The circuit breaker tripped when the S&P500 dropped by more than 7%, the NYSE said.
The circuit breakers, at least in their current form, have never been triggered before, according to CNBC.
When the market reopened after the short trading stop, the S&P had dropped 7.2%. The Dow dropped 2,030 points, 7.9%, and the Nasdaq Composite was down 7.2%, according to CNN.
According to the stock exchange, “A market-wide trading halt can be triggered if the S&P 500 Index declines in price as compared to the prior day’s closing price of that index. The triggers have been set by the markets at three circuit breaker thresholds—7% (Level 1), 13% (Level 2), and 20% (Level 3).”
Level 1 and 2 circuit breakers will stop trading for 15 minutes when they’re triggered between 9:30 a.m. and 3:30 p.m. A Level 3 breaker stops trading for the rest of the day, according to the stock exchange.
“Market-wide circuit breakers are important, automatic mechanisms invoked if markets experience extreme broad-based declines,” according to NYSE. “They are designed to slow the effects of extreme price movement through coordinated trading halts across securities markets when severe price declines reach levels that may exhaust market liquidity.“
According to CNBC, “Stocks tumbled on Monday as investors braced for the economic fallout from the spreading coronavirus, while a shocking all-out oil price war added to the anxiety.”
“After OPEC talks fizzled over the weekend, Saudi Arabia slashed oil prices, triggering a price war and sending U.S. crude oil prices plunging by more than 25%,” ABC News reports.
An earlier circuit breaker system on the New York Stock Exchange did not stop the 2010 “flash crash.”
Futures trading was halted Sunday night when the S&P500 futures dropped 5%, according to Barron’s.
This story was originally published March 9, 2020 at 7:31 AM with the headline "Stock trading briefly halted after plunge over coronavirus fears. What does it mean?."
