Why didn’t the circuit breakers hit Monday?

October 1, 2008 7:05 am

Do you remember a time that when the market was down 100 points or so the trading collars would “kick in” to provide a relief from any unusual movement? How about the often discussed recession of the up-tick rule for short selling?

Each of these mentioned (and surely others) are all in the investing hall-of-fame, retired and all but forgotten. They served a purpose in their time, but have been relegated to the scrap heap with other ideas that had “no verifiable” benefit.

So, now, we are stuck with a only a 1/2 hour trading stoppage for a 10% drop (see chart below). Notice the lack of a 2-minute rule as we have with football for market declines after 2:30pm for a mere 10% drop. Good news though… if the DJIA is down 20%, the market will close if it is after 2:30pm.

Do you think the removals of the trading collars and the up-tick rule have helped to exacerbate the recent market gyrations? Thanks to the WSJ for this excellent graphic…

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