SEC proposes plan to address market volatility

The Securities and Exchange Commission announced a proposal on Tuesday to address extraordinary market volatility in U.S. equity markets in response to the May 6 "flash crash." 

Under the proposal establishing a new “limit up-limit down” mechanism, trades in listed stocks would have to be executed within a range tied to recent prices for that security, which would be set at a percentage level above and below the average price of the security over the immediately preceding five-minute period. 

For stocks currently subject to the circuit breaker pilot, the percentage would be 5 percent, and for those not subject to the pilot, the percentage would be 10 percent, SEC said in a statement. 

If approved by the SEC, the new system would replace the existing single-stock circuit breakers that were put into place as part of a pilot program shortly after the market events last year.

Under the existing circuit breaker pilot, trading pauses across the markets for a five-minute period if the stock experiences a 10 percent change in price over the preceding five minutes. 

The circuit breaker pilot was initially approved by the SEC on June 16, and is set to expire on Aug. 11.