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One Stock 'Christens' the Circuit Breakers

The circuit breakers get christened.

The Washington Post Co. was the first stock that triggered the new circuit breakers. At 3:07pm ET, WPO was trading at roughly $454.

Suddenly, there were three trades over $900 off the NYSE floor: a 100-share trade at $929.18, a 200-share trade at $919.18, and a 400 share trade at $919.18, all at the same time.

All of these trades were subsequently cancelled.

However, they were sufficient to trigger the circuit breaker. The rule is that when a stock price moves 10 percent or more in a 5-minute period, an automatic trading halt is triggered for 5 minutes. The stock was halted, and when it resumed trading, the stock went back to trading roughly where it was trading, about $455.

What happened? This seems to be clearly erroneous trades, but no official statement has been issued yet.

Does this cure erroneous trades? No. It wasn't designed to prevent any erroneous trade. Some, like Jeff Rubin at Birinyi, have suggested that a simpler solution would be, for example, that a stock can't trade more than 10 percent away from the last trade, rather than a five minute trading halt.

This wouldn't prevent erroneous trades, but would be a different way to approach the problem.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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