How to trade the NYSE's Rule 48

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Trader on the floor of the New York Stock Exchange.

The New York Stock Exchange on Tuesday again invoked its little-known Rule 48 in advance of a rocky market opening. Traders on Wall Street were responding to another drop in the Chinese stock market and further fears of a factory slowdown in Asia.

The Rule 48 regulation was approved by the Securities and Exchange Commission in 2007 and is meant to help the market in times of extreme volatility. By suspending a requirement that stock prices be disseminated at the market's open, the idea is to speed up the opening and reduce instability.

But like any sign that there are doubts in the market, the invocation of Rule 48 can introduce its own uncertainty into trading. It's sort of a chicken and the egg thing: Do traders respond to the invocation of Rule 48 by selling, or is the market heading down already and Rule 48 is just a flag thrown on the way down? In any case, when Rule 48 is called it can mean rough trading on the Big Board.

The S&P 500 has a median return of negative 1.14 percent on days that Rule 48 has been invoked, according to data from market research firm Kensho.

Stocks in energy and basic industries sectors saw the worst performance on Rule 48 days overall, according to the Kensho study. For example, the AES Corporation and Halliburton had median returns of negative 3.01 percent and negative 2.81 percent, respectively. Their trades on those days were positive about 30 percent of the time.

Often in times of volatility, investors flock to consumer goods and materials to calm their fears. Indeed, the S&P materials sector and consumer discretionary are the market's outperformers on Rule 48 days. Michael Kors Holdings saw a median return of 4.55 percent and Delphi Automotive bumped up 1.78 percent, for example.

The study from Kensho looked at how stocks performed if they were bought the day before Rule 48 was invoked and sold the day after.

With the call this week and three last week, Rule 48 has been invoked 77 times its creation, according to the NYSE's website. The majority of occurrences were during the shaky days of the financial crisis: That includes 35 times in 2008, nearly half of its total uses. There's just a handful of times its been invoked three times in a row and hasn't been called four times in two weeks since October 2008.

It also tends to be called during the late-year slump—36 percent of calls were in September and October.

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Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.