The NYSE has invoked Rule 48 – for the first time since the €750bn eurozone bail out was announced on May 10.
An overview of the Tin Hat Rule:
Rule 48 provides the Exchange with the ability to suspend the requirement to disseminate price indications and obtain Floor Official approval prior to the opening when extremely high market-wide volatility could cause Floor-wide delays in opening of securities on the Exchange.
Rule 48 is intended to be invoked only in those situations where the potential for extreme market volatility would likely impair Floor-wide operations at the Exchange by impeding the fair and orderly opening of securities.
Accordingly, the rule sets forth a number of factors to be considered before declaring such a condition, including:
* Volatility during the previous day’s trading session;
* Trading in foreign markets before the open;
* Substantial activity in the futures market before the open;
* The volume of pre-opening indications of interest;
* Evidence of pre-opening significant order imbalances across the market;
* Government announcements;
* News and corporate events; and,
* Any such other market conditions that could impact Floor-wide trading conditions.
Sure enough, US stocks sunk at the opening on Thursday in New York, with the S&P 500 slipping straight through the 1100 level.
Still, if you can’t stand watching markets melt in real-time, catch a live blog of the investigation into the last sudden market crunch. The FT’s Alan Rappeport is following SEC chair Mary Schapiro and CFTC chair Gary Gensler as they testify before a Senate banking committee on the events of May 6 – the day of the Flash Crash.
Related links:
Fresh bout of euro selling sees flight from risk – FT.com