Sources tell CNBC that the SEC’s new single stock circuit breaker rules will likely go into effect next week.
The proposed rules, created in response to the May 6 market plunge, would halt trading in a stock for five minutes “in the event that the stock experiences a 10 percent change in price (up or down) over the preceding five minutes.” The halt is only applicable between 9:45am and 3:45pm, and initially involves only the stocks in the S&P 500 index. The rules would be in effect at least through December 10, 2010, which currently marks the last day of the pilot period.
Since the SEC’s announcement a couple of weeks ago, the proposed rules have been subject to a 10-day open comment period. That comment period ends today.
Following this period, staff members at the SEC will review the comments and make a recommendation to the Commission. The Commission will then vote on the rules, and upon approval, those rules will be sent to the exchanges for implementation.
While a specific launch date has not officially been set yet, the SEC tells CNBC that the “Commission expects to act expeditiously” following the termination of the 10-day comment period today. However, sources tell CNBC that the new rules could be enacted as early as this Monday (June 7), and if not then, probably by the middle of next week. The actual launch date is dependent on when the SEC votes on the rules, and that specific date has not been determined yet.
Some sources say the rollout of the rules for each of the 500 S&P stocks will be done gradually, likely over the course of a week. This would help ensure the systems are operating properly. On the first day, only a handful of stocks will be subject to the new circuit breaker rules. Following that, the rules would be expanded to the other S&P 500 stocks gradually over the course of a one-week period.
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