Trader Talk

Jefferies Halt Shows Problem with Single-Stock Circuit Breakers

Jefferies has been halted twice Thursday morning. The halts occurred within 10 minutes of each other and highlight a problem with the single stock circuit breakers.

Sandra Baker | Photographer's Choice | Getty Images

The first halt occurred when Jefferies moved 10 percent in 5 minutes or less. Trading was halted for five minutes under the rules governing single stock circuit breakers.

Fair enough. But when it reopened, JEF moved from $9.79 to $10.80, a 10 percent move ON THE UPSIDE in less than five minutes. Under the rule, the stock was halted AGAIN.

How to deal with this? There are proposed "limit up, limit down" rules under consideration that would allow a stock to trade within a band rather than be halted. So, for example, JEF might have been halted the first time for five minutes, but upon reopening was trading within the "band" it had traded in that day ($9.79-$12.33), so it would remain OPEN.

This is a more sensible solution: look for the SEC to adopt it in the near future.

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