13 ms·

Genuine question: They can just do that ? Issue a trading halt because they don't like the direction it's going ? > “There’s a reason why they have those circu

Genuine question: They can just do that ? Issue a trading halt because they don't like the direction it's going ? > “There’s a reason why they have those circuit breakers -- it’s to give people time to come back from panicked feelings,” Seems strange that the market is kinda able to be manipulated like that. I'm not saying this is a bad move, just surprised that someone can do it.

empath75 7y ago
It's not meant to manipulate the market, it's meant to stop a flash crash from automated trading. It gives people time to recalibrate their algorithms if something is faulty. If the fundamentals are such that it should continue to go down, then it will continue to go down.
oh_sigh 7y ago
Yes
darawk 7y ago
I believe it's true for the other direction as well, it's just pretty rare to see a 7% upward move in a single day. I mean, it's rare to see it on the downside too, but not as rare. Limit up/down rules are not discretionary. They're circuit breakers that fire deterministicly.
- _se 7y ago
  It's important to note that limit up/limit down (LULD) is not the same thing as the circuit breakers. They have a very specific meaning and operate independently (with much more complicated rules as well). You probably know this, but others reading your comment will probably not! There is also no automatic upside circuit breaker.
_se 7y ago
"They" don't do anything - this is called a circuit breaker, and is automatically triggered. There are three breakers: L1 - 7% down before 3:25pm - 15 minute halt L2 - 13% down before 3:25pm - 15 minute halt L3 - 20% down - halted for the remainder of the day Only a single L1 and a single L2 breaker can occur in a single day, e.g. the market falling below 7%, rising, then falling again will not trigger a second L1 breaker, but falling to 7%, up to 5%, then down to 13% would trigger an L2. FYI this is the kind of thing you have to know to become registered as a securities representative.
- bilekas 7y ago
  Okay thats fine, but who implements/decides these circuit breakers ? And what purpose to they serve only to limit a mass sell off ? Nice point about only 2 daily. But still seems crazy.
  - allovernow 7y ago
    AFAIK people can still trade in private, just not on the NYSE. So don't worry, it's only us regular guys that get screwed. Big firms can still contact each other to make deals.
    - mumblemumble 7y ago
      Having worked for one of the (smaller) big firms, and had a chance to watch from the sidelines and seen how days like this work: No, these circuit breakers don't screw the regular guys. They discourage the regular guys from screwing themselves. There are a lot of firms whose core business strategy is to keep a level head and take advantage of people who panic and (over)react on days like this. They get damn rich doing it, too.
      - allovernow 7y ago
        > They discourage the regular guys from screwing themselves. If you're a little guy who believes that, say, 2019ncov is about to tear the world a new asshole, that's probably a decision you'd like to make for yourself. I don't doubt what you're saying, but it's a matter of perspective. Sometimes the "panic" is the correct reaction. We're sitting on top of a perfect storm which is shaping up to be a massive potential black swan. And with the current circuit breakers, trading is only interrupted for something similar in concept to "the 99%". Across all indicators, too! Oil price, US markets, international markets, t-notes, gold price, and a bunch I'm probably not aware of because I'm not a professional investor. China just shut it's economy down for two weeks. Long term outlook is rightfully poor.
        deleted 7y ago
daenz 7y ago
Consider the alternative.
totally 7y ago
Would they also circuit break on 7% increase, in order to give people time to come back from positive feelings?
- anarazel 7y ago
  Looks like it's also on increases, yes: https://www.sec.gov/oiea/investor-alerts-bulletins/investor-alerts-circuitbreakersbulletinhtm.html https://www.sec.gov/oiea/investor-alerts-bulletins/investor-...
  - evanpw 7y ago
    Single-stock volatility halts happen in either direction, but market-wide circuit breakers only happen on down moves.
  - mattkrause 7y ago
    Limit-up/Limit-down applies to individual equities that are moving strongly in either direction. The market-wide circuit breakers, which triggered this morning, only apply to declines.
  - andrewla 7y ago
    The limits for individual stocks are up/down limits, but the market-wide halts are only for declines.
- WrtCdEvrydy 7y ago
  Of course not... that doesn't help the rich get richer...
- codeulike 7y ago
  Now thats a really good question.
- airstrike 7y ago
  No, because if the market is up 50% because we humanity has discovered an immortality serum, nobody is panicking. There's no downside in great news (other than the possibility of a quick reversal thereafer...)
draw_down 7y ago
Everyone loves free markets until they don't.
A4ET8a8uTh0 7y ago
Without going into too much detail, short answer is yes. Most people don't seem to know how far away current setup is from 'free market' touted in school. It is weird given that this information is not hidden. It is just not widely spread.
- eej71 7y ago
  These rules are completely in keeping with the free market.
  - deleted 7y ago
    [deleted]
  - deleted 7y ago
    [deleted]
  - A4ET8a8uTh0 7y ago
    Would you care to elaborate? I would argue that guard rails and controlled falls are in opposition to actual free market. The qualifier 'completely' seems misplaced.
    - eej71 7y ago
      These rules are chosen by the participants. By the owners of the property. They are not government imposed. Consider an analogy. Suppose you were a stamp collector and you wanted to run a weekly stamp exchange. You and your fellow collectors may establish rules about how the trading should happen and the agreed upon behaviors. By-laws if you will. You could of course have no rules. Or you could choose some that promote the overall longevity of the venue and that encourage robust participation. The choice is up to the owners. Both are free. But one will be more successful than the other.
      - OscarCunningham 7y ago
        Sure, but I think it makes sense to say that one market is more free than another, even when neither is controlled by a government. In many cases the reasons why it's good for governments to allow free markets are also reasons why its good for private entities to allow free markets.
eej71 7y ago
These are well documented rules. They have been built up over years of experience. Not to say its perfect. But they are established and understood by the participants. Further refinements may happen based on today's experience.
Isamu 7y ago
Also because of algorithmic trading. You don't want to get into an accelerated get-out-now spiral.
- take_a_breath 7y ago
  This sounds like something we should teach the algorithms.
  - Isamu 7y ago
    Heh, yeah but it's an adversarial problem. Do you assume the other bots are going to "do the right thing" and not intensify the panic? Maybe not. Maybe you just act on immediate information and try to optimize your position for the next few milliseconds.
  - gpm 7y ago
    "We" (the group of people represented by the government) do not control the algorithms, so we can't easily and without many other side effects force that to happen. We do (indirectly) control the stock exchange rules, so we can put systems like this in place that limit the damage done to us when it does happen.
abraxas 7y ago
I too think it's inane. Some of us want to get into the market but not at these prices. Yet the whole system is built around trying to push markets into higher and higher prices at all times. Here's a brilliant idea, introduce a rule that says you can only sell a security for more than what you paid. Voila, endlessly rising prices forever! Feels like a con.
- davis_m 7y ago
  Would you want to get into the market if it wasn't a system built around increasing market value?
burlesona 7y ago
In large part these are designed to break the feedback loops that can happen in automated high frequency trading and give humans a chance to look at things. These policies were implemented by all the stock exchanges after flash crashes triggered by ML algorithms encountering something "weird" and going into hard sell mode. https://en.wikipedia.org/wiki/Flash_crash https://en.wikipedia.org/wiki/Flash_crash
- deleted 7y ago
  [deleted]
- chungus_khan 7y ago
  The breakers were originally implemented as a response to Black Monday in 87, which was before algorithms were so dominant, but it happens that humans are really good at panicking and acting irrationally too.
  - TremendousJudge 7y ago
    Somebody said above that it was due to the 29 crash, which one is right?
    - totalZero 7y ago
      1987. From the 1988 "Report of the Presidential Task Force on Market Mechanisms : submitted to The President of the United States, The Secretary of the Treasury, and The Chairman of the Federal Reserve Board": --- Our understanding of these events leads directly to our recommendations. To help prevent a repetition of the events of mid-October and to provide an effective and coordinated response in the face of market disorder, we recommend that: • One agency should coordinate the few, but critical, regulatory issues which have an impact across the related market segments and throughout the financial system. • Clearing systems should be unified to reduce financial risk. • Margins should be made consistent to control speculation and financial leverage. • Circuit breaker mechanisms (such as price limits and coordinated trading halts) should be formulated and implemented to protect the market system. • Information systems should be established to monitor transactions and conditions in related markets. https://archive.org/details/reportofpresiden01unit/mode/2up https://archive.org/details/reportofpresiden01unit/mode/2up
tylersmith 7y ago
Why would they not be allowed to manage their platform in this way? I'd be surprised if they were unable to.
jcrawfordor 7y ago
One view of the circuit breakers that Matt Levine just discussed this morning is that they help to avoid price drop due to liquidity issues. That is, algorithmic trading aside, many trades are still done by human beings who may not be paying rapt attention when a crash happens. The 15-minute pause gives them time to find out that something is up, at which point they may choose to start buying at the depressed prices, which will stabilize things. This also makes sense with the fact that the L1 and L2 breakers only trigger once each, once an L2 breaker has triggered everyone will probably be paying close attention to what's going on traders simply not being at their desks will become less of an issue.
danmaz74 7y ago
IIRC this was instituted after the crash of 1987, when they realised that automated trading could set off a crazy plunge. At any rate, it's public knowledge, not some sort of ad-hoc manipulation.
wycy 7y ago
When you think about it, the whole market sort of follows these arbitrary-seeming rules. The actual prices of stocks are constantly changing 24/7/365, but the market is only open from 9:30am-4:00pm on weekdays excluding holidays.
- airstrike 7y ago
  The exchange is open from 9:30am to 4:00pm, but you and I are free to trade amongst ourselves at midnight on a Friday if we'd like
  - wycy 7y ago
    Aren't we also free to trade amongst ourselves during a market circuit breaker event?
    - airstrike 7y ago
      Yes, but it's much, much slower to trade directly than through a market-maker in the exchange
      - lbotos 7y ago
        how does one actually technically go about that? I have no plans to do it, just been curious about it over the past few months.
        jkulubya 7y ago
        In my part of the world, tell your broker that you’ve done a deal with someone, tell that someone to tell their broker that they done a deal with you. The brokers should be able to report it to the exchange for publishing. Then they should see through the clearing and settlement. Of course your brokers might feel that your little deal is just not worth the hassle, and ask you to take your business elsewhere.
        will4274 7y ago
mikestew 7y ago
The markets are not a public utility, they have owners (I own a teensy, weensy piece of NASDAQ (NDAQ), for instance). The owners can do what they want, within regulations. Use whatever metaphor works for you, but after 1987, it was thought to be a good idea to have an automated breather so that we can get our collective heads back in the game instead of panic-selling. There is, however, no "liking" or "disliking" market direction. It's automated, with clearly-outlined rules. There's no manipulation; if A, then B.
Hoasi 7y ago
> Genuine question: They can just do that ? Issue a trading halt because they don't like the direction it's going ? This is a dangerous game, in that it is indeed revealing the artificial, make-belief, nature of financial markets.
- icebraining 7y ago
  Were people under the belief that financial markets grew on trees or were formed by lithification?
  - Hoasi 7y ago
    That's funny. But I was only pointing out that this is akin to markets saying: this game only works as long as we can change the rules. This kind of statement is not conducive to trust. Unfortunately, the whole financial field needs trust to thrive.
    - icebraining 7y ago
      I'd agree if the rules had been changed on the fly, as a response to the current events, but they weren't. The rules were known and they were activated as expected.
      - Hoasi 7y ago
        > The rules were known and they were activated as expected. True, if surprising to me. It's a rule from the onset. I didn't know that.
xenocyon 7y ago
It turns out nobody really trusts the "free market" :)
- war1025 7y ago
  I trust electricity to be generally a safe and efficient way to improve my life, but I also sure as hell want circuit breakers in place to keep my house from burning down.
ouid 7y ago
Those circuit breakers are not to allow people to come back from "panicked feelings". It's to stop algorithms from deterministically destroying hundreds of billions of dollars.
anigbrowl 7y ago
Yes, they've been put in after previous panics. I've always thought it rather odd that there aren't any corresponding restrictions on sharp upward movement, since euphoria can be just as dangerous as panic.
efficax 7y ago
investors are herd animals and nobody has any idea what's going on. if everybody else is selling then i better sell too!
totalZero 7y ago
The trading halt is a result of previously established exchange rules. It's not a manipulation, it's a guardrail that is visible to every market participant. If the price is going to go lower for an organic reason, it will go lower regardless of a brief delay.
ryanmarsh 7y ago
There's a great book on behavior like this, "Extraordinary Popular Delusions and The Madness of Crowds" by Charles MacKay. It was first published in 1841 but feels like it could have been written today. McKay was editor of The Illustrated London News in 1850's. https://www.amazon.com/gp/product/B081ZD9CL1/ref=dbs_a_def_rwt_hsch_vapi_tkin_p1_i0 https://www.amazon.com/gp/product/B081ZD9CL1/ref=dbs_a_def_r...
headmelted 7y ago
It’s really more a protection against recursive trading loops by HFT systems. In the flash crash (2010), it was later determined that the largest part of the drop was driven by competing systems racing to the bottom solely because competing systems were selling off too.
fc_barnes 7y ago
Reminder that markets are human creations and not some natural phenomenon.
Youden 7y ago
The decision isn't made real-time by actual people like I think you're suggesting. The rules are well-known and set in advance by the SEC and exchanges. In this case it's SEC Rule 80B and NYSE Rule 7.12. You can read more about trading curbs here [0] and this one in particular here [1]. [0]: https://www.investopedia.com/terms/t/tradingcurb.asp https://www.investopedia.com/terms/t/tradingcurb.asp [1]: https://www.nyse.com/markets/nyse/trading-info https://www.nyse.com/markets/nyse/trading-info
IAmEveryone 7y ago
There is no market separate from society that has any “interests” such as not being manipulated. We get to design such systems in whatever way best serves us. It’s funny how this “ideology of the pure market” has become popular. This idea here is essentially the same as the outrage when obviously wrong transactions are rolled back. The number of people willing to, or entirely oblivious of the possibility not to, let (others) be harmed by fraud or mistakes, in pursuit of some romanticized purity is astonishing.
danans 7y ago
> Seems strange that the market is kinda able to be manipulated like that. You might consider it manipulation, but these circuit breakers have been in place for a long time now, IIUC ever since the major market crashes of the 80s when there was no way to slow down the drop. The idea is to potentially lessen panic selling by allowing more time for more information to come to light which might mitigate some of the volatility. Of course, there is no guarantee that better news will surface in the meantime, but even if the eventual slide will be much larger, its better that it takes place over several days to allow counter-measures to be put into place.

empath75 7y ago

It's not meant to manipulate the market, it's meant to stop a flash crash from automated trading. It gives people time to recalibrate their algorithms if something is faulty. If the fundamentals are such that it should continue to go down, then it will continue to go down.

oh_sigh 7y ago

Yes

darawk 7y ago

I believe it's true for the other direction as well, it's just pretty rare to see a 7% upward move in a single day. I mean, it's rare to see it on the downside too, but not as rare. Limit up/down rules are not discretionary. They're circuit breakers that fire deterministicly.

_se 7y ago
It's important to note that limit up/limit down (LULD) is not the same thing as the circuit breakers. They have a very specific meaning and operate independently (with much more complicated rules as well). You probably know this, but others reading your comment will probably not! There is also no automatic upside circuit breaker.

_se 7y ago

"They" don't do anything - this is called a circuit breaker, and is automatically triggered. There are three breakers: L1 - 7% down before 3:25pm - 15 minute halt L2 - 13% down before 3:25pm - 15 minute halt L3 - 20% down - halted for the remainder of the day Only a single L1 and a single L2 breaker can occur in a single day, e.g. the market falling below 7%, rising, then falling again will not trigger a second L1 breaker, but falling to 7%, up to 5%, then down to 13% would trigger an L2. FYI this is the kind of thing you have to know to become registered as a securities representative.

bilekas 7y ago
Okay thats fine, but who implements/decides these circuit breakers ? And what purpose to they serve only to limit a mass sell off ? Nice point about only 2 daily. But still seems crazy.
- allovernow 7y ago
  AFAIK people can still trade in private, just not on the NYSE. So don't worry, it's only us regular guys that get screwed. Big firms can still contact each other to make deals.
  - mumblemumble 7y ago
    Having worked for one of the (smaller) big firms, and had a chance to watch from the sidelines and seen how days like this work: No, these circuit breakers don't screw the regular guys. They discourage the regular guys from screwing themselves. There are a lot of firms whose core business strategy is to keep a level head and take advantage of people who panic and (over)react on days like this. They get damn rich doing it, too.
    - allovernow 7y ago
      > They discourage the regular guys from screwing themselves. If you're a little guy who believes that, say, 2019ncov is about to tear the world a new asshole, that's probably a decision you'd like to make for yourself. I don't doubt what you're saying, but it's a matter of perspective. Sometimes the "panic" is the correct reaction. We're sitting on top of a perfect storm which is shaping up to be a massive potential black swan. And with the current circuit breakers, trading is only interrupted for something similar in concept to "the 99%". Across all indicators, too! Oil price, US markets, international markets, t-notes, gold price, and a bunch I'm probably not aware of because I'm not a professional investor. China just shut it's economy down for two weeks. Long term outlook is rightfully poor.
      - deleted 7y ago

daenz 7y ago

Consider the alternative.

totally 7y ago

Would they also circuit break on 7% increase, in order to give people time to come back from positive feelings?

anarazel 7y ago
Looks like it's also on increases, yes: https://www.sec.gov/oiea/investor-alerts-bulletins/investor-alerts-circuitbreakersbulletinhtm.html https://www.sec.gov/oiea/investor-alerts-bulletins/investor-...
- evanpw 7y ago
  Single-stock volatility halts happen in either direction, but market-wide circuit breakers only happen on down moves.
- mattkrause 7y ago
  Limit-up/Limit-down applies to individual equities that are moving strongly in either direction. The market-wide circuit breakers, which triggered this morning, only apply to declines.
- andrewla 7y ago
  The limits for individual stocks are up/down limits, but the market-wide halts are only for declines.
WrtCdEvrydy 7y ago
Of course not... that doesn't help the rich get richer...
codeulike 7y ago
Now thats a really good question.
airstrike 7y ago
No, because if the market is up 50% because we humanity has discovered an immortality serum, nobody is panicking. There's no downside in great news (other than the possibility of a quick reversal thereafer...)

draw_down 7y ago

Everyone loves free markets until they don't.

A4ET8a8uTh0 7y ago

Without going into too much detail, short answer is yes. Most people don't seem to know how far away current setup is from 'free market' touted in school. It is weird given that this information is not hidden. It is just not widely spread.

eej71 7y ago
These rules are completely in keeping with the free market.
- deleted 7y ago
  [deleted]
- deleted 7y ago
  [deleted]
- A4ET8a8uTh0 7y ago
  Would you care to elaborate? I would argue that guard rails and controlled falls are in opposition to actual free market. The qualifier 'completely' seems misplaced.
  - eej71 7y ago
    These rules are chosen by the participants. By the owners of the property. They are not government imposed. Consider an analogy. Suppose you were a stamp collector and you wanted to run a weekly stamp exchange. You and your fellow collectors may establish rules about how the trading should happen and the agreed upon behaviors. By-laws if you will. You could of course have no rules. Or you could choose some that promote the overall longevity of the venue and that encourage robust participation. The choice is up to the owners. Both are free. But one will be more successful than the other.
    - OscarCunningham 7y ago
      Sure, but I think it makes sense to say that one market is more free than another, even when neither is controlled by a government. In many cases the reasons why it's good for governments to allow free markets are also reasons why its good for private entities to allow free markets.

eej71 7y ago

These are well documented rules. They have been built up over years of experience. Not to say its perfect. But they are established and understood by the participants. Further refinements may happen based on today's experience.

Isamu 7y ago

Also because of algorithmic trading. You don't want to get into an accelerated get-out-now spiral.

take_a_breath 7y ago
This sounds like something we should teach the algorithms.
- Isamu 7y ago
  Heh, yeah but it's an adversarial problem. Do you assume the other bots are going to "do the right thing" and not intensify the panic? Maybe not. Maybe you just act on immediate information and try to optimize your position for the next few milliseconds.
- gpm 7y ago
  "We" (the group of people represented by the government) do not control the algorithms, so we can't easily and without many other side effects force that to happen. We do (indirectly) control the stock exchange rules, so we can put systems like this in place that limit the damage done to us when it does happen.

abraxas 7y ago

I too think it's inane. Some of us want to get into the market but not at these prices. Yet the whole system is built around trying to push markets into higher and higher prices at all times. Here's a brilliant idea, introduce a rule that says you can only sell a security for more than what you paid. Voila, endlessly rising prices forever! Feels like a con.

davis_m 7y ago
Would you want to get into the market if it wasn't a system built around increasing market value?

burlesona 7y ago

In large part these are designed to break the feedback loops that can happen in automated high frequency trading and give humans a chance to look at things. These policies were implemented by all the stock exchanges after flash crashes triggered by ML algorithms encountering something "weird" and going into hard sell mode. https://en.wikipedia.org/wiki/Flash_crash https://en.wikipedia.org/wiki/Flash_crash

deleted 7y ago
[deleted]
chungus_khan 7y ago
The breakers were originally implemented as a response to Black Monday in 87, which was before algorithms were so dominant, but it happens that humans are really good at panicking and acting irrationally too.
- TremendousJudge 7y ago
  Somebody said above that it was due to the 29 crash, which one is right?
  - totalZero 7y ago
    1987. From the 1988 "Report of the Presidential Task Force on Market Mechanisms : submitted to The President of the United States, The Secretary of the Treasury, and The Chairman of the Federal Reserve Board": --- Our understanding of these events leads directly to our recommendations. To help prevent a repetition of the events of mid-October and to provide an effective and coordinated response in the face of market disorder, we recommend that: • One agency should coordinate the few, but critical, regulatory issues which have an impact across the related market segments and throughout the financial system. • Clearing systems should be unified to reduce financial risk. • Margins should be made consistent to control speculation and financial leverage. • Circuit breaker mechanisms (such as price limits and coordinated trading halts) should be formulated and implemented to protect the market system. • Information systems should be established to monitor transactions and conditions in related markets. https://archive.org/details/reportofpresiden01unit/mode/2up https://archive.org/details/reportofpresiden01unit/mode/2up

tylersmith 7y ago

Why would they not be allowed to manage their platform in this way? I'd be surprised if they were unable to.

jcrawfordor 7y ago

One view of the circuit breakers that Matt Levine just discussed this morning is that they help to avoid price drop due to liquidity issues. That is, algorithmic trading aside, many trades are still done by human beings who may not be paying rapt attention when a crash happens. The 15-minute pause gives them time to find out that something is up, at which point they may choose to start buying at the depressed prices, which will stabilize things. This also makes sense with the fact that the L1 and L2 breakers only trigger once each, once an L2 breaker has triggered everyone will probably be paying close attention to what's going on traders simply not being at their desks will become less of an issue.

danmaz74 7y ago

IIRC this was instituted after the crash of 1987, when they realised that automated trading could set off a crazy plunge. At any rate, it's public knowledge, not some sort of ad-hoc manipulation.

wycy 7y ago

When you think about it, the whole market sort of follows these arbitrary-seeming rules. The actual prices of stocks are constantly changing 24/7/365, but the market is only open from 9:30am-4:00pm on weekdays excluding holidays.

airstrike 7y ago
The exchange is open from 9:30am to 4:00pm, but you and I are free to trade amongst ourselves at midnight on a Friday if we'd like
- wycy 7y ago
  Aren't we also free to trade amongst ourselves during a market circuit breaker event?
  - airstrike 7y ago
    Yes, but it's much, much slower to trade directly than through a market-maker in the exchange
    - lbotos 7y ago
      how does one actually technically go about that? I have no plans to do it, just been curious about it over the past few months.
      - jkulubya 7y ago
        In my part of the world, tell your broker that you’ve done a deal with someone, tell that someone to tell their broker that they done a deal with you. The brokers should be able to report it to the exchange for publishing. Then they should see through the clearing and settlement. Of course your brokers might feel that your little deal is just not worth the hassle, and ask you to take your business elsewhere.
      - will4274 7y ago

mikestew 7y ago

The markets are not a public utility, they have owners (I own a teensy, weensy piece of NASDAQ (NDAQ), for instance). The owners can do what they want, within regulations. Use whatever metaphor works for you, but after 1987, it was thought to be a good idea to have an automated breather so that we can get our collective heads back in the game instead of panic-selling. There is, however, no "liking" or "disliking" market direction. It's automated, with clearly-outlined rules. There's no manipulation; if A, then B.

Hoasi 7y ago

> Genuine question: They can just do that ? Issue a trading halt because they don't like the direction it's going ? This is a dangerous game, in that it is indeed revealing the artificial, make-belief, nature of financial markets.

icebraining 7y ago
Were people under the belief that financial markets grew on trees or were formed by lithification?
- Hoasi 7y ago
  That's funny. But I was only pointing out that this is akin to markets saying: this game only works as long as we can change the rules. This kind of statement is not conducive to trust. Unfortunately, the whole financial field needs trust to thrive.
  - icebraining 7y ago
    I'd agree if the rules had been changed on the fly, as a response to the current events, but they weren't. The rules were known and they were activated as expected.
    - Hoasi 7y ago
      > The rules were known and they were activated as expected. True, if surprising to me. It's a rule from the onset. I didn't know that.

xenocyon 7y ago

It turns out nobody really trusts the "free market" :)

war1025 7y ago
I trust electricity to be generally a safe and efficient way to improve my life, but I also sure as hell want circuit breakers in place to keep my house from burning down.

ouid 7y ago

Those circuit breakers are not to allow people to come back from "panicked feelings". It's to stop algorithms from deterministically destroying hundreds of billions of dollars.

anigbrowl 7y ago

Yes, they've been put in after previous panics. I've always thought it rather odd that there aren't any corresponding restrictions on sharp upward movement, since euphoria can be just as dangerous as panic.

efficax 7y ago

investors are herd animals and nobody has any idea what's going on. if everybody else is selling then i better sell too!

totalZero 7y ago

The trading halt is a result of previously established exchange rules. It's not a manipulation, it's a guardrail that is visible to every market participant. If the price is going to go lower for an organic reason, it will go lower regardless of a brief delay.

ryanmarsh 7y ago

There's a great book on behavior like this, "Extraordinary Popular Delusions and The Madness of Crowds" by Charles MacKay. It was first published in 1841 but feels like it could have been written today. McKay was editor of The Illustrated London News in 1850's. https://www.amazon.com/gp/product/B081ZD9CL1/ref=dbs_a_def_rwt_hsch_vapi_tkin_p1_i0 https://www.amazon.com/gp/product/B081ZD9CL1/ref=dbs_a_def_r...

headmelted 7y ago

It’s really more a protection against recursive trading loops by HFT systems. In the flash crash (2010), it was later determined that the largest part of the drop was driven by competing systems racing to the bottom solely because competing systems were selling off too.

fc_barnes 7y ago

Reminder that markets are human creations and not some natural phenomenon.

Youden 7y ago

The decision isn't made real-time by actual people like I think you're suggesting. The rules are well-known and set in advance by the SEC and exchanges. In this case it's SEC Rule 80B and NYSE Rule 7.12. You can read more about trading curbs here [0] and this one in particular here [1]. [0]: https://www.investopedia.com/terms/t/tradingcurb.asp https://www.investopedia.com/terms/t/tradingcurb.asp [1]: https://www.nyse.com/markets/nyse/trading-info https://www.nyse.com/markets/nyse/trading-info

IAmEveryone 7y ago

There is no market separate from society that has any “interests” such as not being manipulated. We get to design such systems in whatever way best serves us. It’s funny how this “ideology of the pure market” has become popular. This idea here is essentially the same as the outrage when obviously wrong transactions are rolled back. The number of people willing to, or entirely oblivious of the possibility not to, let (others) be harmed by fraud or mistakes, in pursuit of some romanticized purity is astonishing.

danans 7y ago

> Seems strange that the market is kinda able to be manipulated like that. You might consider it manipulation, but these circuit breakers have been in place for a long time now, IIUC ever since the major market crashes of the 80s when there was no way to slow down the drop. The idea is to potentially lessen panic selling by allowing more time for more information to come to light which might mitigate some of the volatility. Of course, there is no guarantee that better news will surface in the meantime, but even if the eventual slide will be much larger, its better that it takes place over several days to allow counter-measures to be put into place.