9 ms·

"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 h

by _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
        [deleted]
      - karlkatzke 7y ago
        > Sometimes the "panic" is the correct reaction. Panic is almost never the correct reaction. Deciding that there's going to be a downturn and you should prepare yourself for it financially is one thing, but under what circumstances would it be optimal for you as an individual to panic-sell? In my mind, panic is the thing you do when you realize that you haven't prepared. That you don't have enough resources for an extended downturn, that you're financially over-leveraged, and that you are in danger of losing your home and being unable to feed yourself and your family. There are TONS of people who are experiencing this right now in China and Italy, and many others of us who will be experiencing it the next few weeks in the rest of the world. But panic also implies that you don't have time to fix that, and there's nothing you can do as an individual to change it. If that's the case, you probably don't have a lot of investments in the stock market anyway. Or if you do, and you're over-leveraged in the markets because you were gambling with your money instead of investing with it, then yes, you're panic-selling right now.
        bluGill 7y ago
        Panic sell is the correct thing when your doctor gives you a short time to live. Since your money will be worthless no matter what happens you may as well get it all now and spend it on whatever can buy a moment happiness. There is an exception if your religion lets you take your stock with you. I don't believe in one, but I guess if you want to.
        deleted 7y ago
        [deleted]
      - wbl 7y ago
        You can take that position after we all wait 15 min and take a breath.
      - kortilla 7y ago
        If you’re a little guy that truly believed that, you wouldn’t have waited until the panic to happen to sell then.
  - umanwizard 7y ago
    How exactly are you getting personally screwed by a 15-minute stop in trading?
  - airstrike 7y ago
    > So don't worry, it's only us regular guys that get screwed. Big firms can still contact each other to make deals. And when everyone is selling, who do you think is buying? No one is moving much of anything for those 15 minutes
    - allovernow 7y ago
      How do you sell stock if no one is buying? If people are selling, others are buying.
      - bluGill 7y ago
        Market makers are buying - their job is to always buy or sell stock from everybody. They (generally computers, but humans traditionally) will always buy your stocks, or sell you stocks. Their algorithm is simple: buy for $.10 (or some other tiny number) less than you sell - if the amount of stock owned is too low raise the price, if the amount is too much lower the price. They pretty much always make money in the long run.
        tialaramex 7y ago
        For agreeing to do this (and having the capital to do it) the Market Maker for a stock typically secures certain benefits from the market in respect of that stock. For a very popular stock on a typical day the market maker isn't really necessary. Your trades would absolutely execute immediately based on positions other people wanted. When your stock is more thinly traded, or when things are a bit frantic the market maker is your saviour. When everybody and their dog is selling, the market maker will buy anyway. Under some circumstances market makers can signal they intended to cease to make a market for specific stocks. When the market makers exit, all hobbyists should make sure they are gone too. Once there is no market maker for the stock you're holding, you will need somebody else to actually take the other side of your trades. "Prices" without a market maker are just a guess, there may be nobody actually promising to take your stock at any price, even if the last trade was for $1.40 your stock might be not sell even at 14¢. This makes for an exciting space in which to gamble with money you can afford to lose if you really know what you're doing, otherwise it's just a way to throw money away.
  - evanpw 7y ago
    Nope, trading stops everywhere. Even Canada stops trading when the US has a market-wide halt.
  - thawaway1837 7y ago
    The idea that the little guys largely have a chance actively trading in a fast moving market like today’s where they are gonna be crushed by algos is ridiculous to begin with. If anything this is helps the little guy, by not completely crushing their stock value, and hurts the big guys who can outlast huge swings (something little guys cannot).
- totaldude87 7y ago
  https://www.nasdaq.com/articles/market-wide-circuit-breakers%3A-what-you-need-to-know-2020-03-09 https://www.nasdaq.com/articles/market-wide-circuit-breakers...
- londons_explore 7y ago
  Really it's just saying "the market is now closed". But you can still sell those securities on other markets or direct to someone who wants to buy or sell.
- deleted 7y ago
  [deleted]
- HolyLampshade 7y ago
  Mass sell offs tend to create unorderly markets, which is not beneficial for anyone. The concept was introduced in US equities after the ‘87 crash, but was only consistently implemented for NYSE-listed stocks. In ‘13 these were made consistent and market wide (thus MWCB), set against a widely published value of the S&P (so that the control was predictable; thus how it executed today). FYI, there are also bidirectional halts that exist intraday (Limit-Up/Limit-Down) that serve a similar purpose and control rapid, uncontrolled movements in individual stocks. These are also defined in exchange regulation and are well defined so that they are predictable.
  - rwmj 7y ago
    > Mass sell offs tend to create unorderly markets, which is not beneficial for anyone. It's beneficial for people who want to buy stocks cheaply or if we truly believe that markets are about price discovery.
    - HolyLampshade 7y ago
      > markets are about price discovery Exactly, and when you have an unorderly market, price discovery becomes problematic. It’s the same reason the single stock LULD bands exist (which put the brakes on both rapid downward and rapid upward movement). Stopping for 15 minutes (or 5 in the case of a LULD pause) is not detrimental to the process of establishing orderly price discovery. In the event a stock is going to keep rising or falling due to legitimate changes in valuation it will continue to do so (look at NASDAQ’s halts page today to see stocks that have hit their bands multiple times).
    - jrockway 7y ago
      > if we truly believe that markets are about price discovery I think you can discover the price tomorrow.
    - leetcrew 7y ago
      > we truly believe that markets are about price discovery. this is not incompatible with the believe that prices over a single day (or hour) can be dangerously noisy.
- emberswitch 7y ago
  The exchange does. Exchanges are companies too.
isoskeles 7y ago
> Only a single L1 or L2 breaker can occur in a single day. Then why does L2 exist? It seems redundant, L1 would get triggered before L2, and only one can occur in a single day, so why have L2 at all? What am I missing here? Edit: Also, anyone who downvoted me for posting the same question as someone at the same minute, you know what to do.
- _se 7y ago
  See my other response to a similar comment - I will edit the original.
  - isoskeles 7y ago
    Makes sense, thanks.
- deleted 7y ago
  [deleted]
- kick 7y ago
  No matter how much you didn't deserve downmodding, complaining about them only invites more. You have a better chance of recovery by not bringing them up, and the News Guidelines ask that you don't. Please don't comment about the voting on comments. It never does any good, and it makes boring reading. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
  - rat9988 7y ago
    Your paragraph was a lot more annoying than his sentence.
    - dang 7y ago
      It's true that such comments are annoying, but they're necessary as a feedback mechanism to regulate the site. Otherwise the site guidelines would have negligible effect. They're more tedious to write than to read, if that helps at all. https://hn.algolia.com/?dateRange=all&page=0&prefix=true&query=by%3Adang%20tedious%20write%20read&sort=byDate&type=comment https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
jagged-chisel 7y ago
> Only a single L1 or L2 breaker can occur in a single day. I don't follow. You'd hit 7% before 13%, so how would L2 ever execute?
- _se 7y ago
  Sorry - I meant that neither L1 nor L2 can trigger twice in a day, E.g. down 8%, up 2%, down 9% does not trigger a second L1 breaker.
  - jagged-chisel 7y ago
    > neither L1 nor L2 can trigger twice in a day This phrasing makes sense. Thanks!
  - rococode 7y ago
    Especially relevant today since after hovering around -5% for most of the session after the first halt, right now we're at -6.9% and threatening to push below 7% again.
- rogerkirkness 7y ago
  This means each execute once, not mutually exclusive.
- patleeman 7y ago
  I'm pretty sure these need to be hit consecutively.
- deleted 7y ago
  [deleted]
- deleted 7y ago
  [deleted]
- deleted 7y ago
  [deleted]
- TeMPOraL 7y ago
  As I understand GP: L1 and L2 can each fire only once per day. So if you hit L1, and after a brief rebound the market still goes down, you'll hit L2. If after that it still keeps falling, it'll get stuck at L3.
noja 7y ago
Do they have circuit breakers in the other direction?
- kasey_junk 7y ago
  No. This is just one of several places where the laws systematically favor the bulls.
  - ghouse 7y ago
    Believe this is not a "law" but a "policy" Regardless, your sentiment is spot-on.
    - kasey_junk 7y ago
      Its an enforcement policy directed by the SEC. Its effectively a law, you can’t opt out for instance.
      - hawaiianbrah 7y ago
        Well, you can choose not to follow laws (but you'll face the consequences if caught!).
  - apcragg 7y ago
    You are wrong about that. See T5, T6, and H10 halts.
    - 3fe9a03ccd14ca5 7y ago
      T5: Single Stock Trading Pause in Effect Trading has been paused by NASDAQ due to a 10% or more price move in the security in a five-minute period. T6: Halt - Extraordinary Market Activity Trading is halted when extraordinary market activity in the security is occurring; NASDAQ determines that such extraordinary market activity is likely to have a material effect on the market for that security; and 1) NASDAQ believes that such extraordinary market activity is caused by the misuse or malfunction of an electronic quotation, communication, reporting or execution system operated by or linked to NASDAQ; or 2) after consultation with either a national securities exchange trading the security on an unlisted trading privileges basis or a non-NASDAQ FINRA facility trading the security, NASDAQ believes such extraordinary market activity is caused by the misuse or malfunction of an electronic quotation, communication, reporting or execution system operated by or linked to such national securities exchange or non- NASDAQ FINRA facility. H10: Halt - SEC Trading Suspension The Securities and Exchange Commission has suspended trading in this stock.
rafiki6 7y ago
I thought these circuit breakers actually existed to stop algo's from going haywire?
- bluGill 7y ago
  They have existed since the crash of 1929. There were no algorithms in place then. The goal was just to force human traders caught up in the moment to take a break and stop panicking. I assume they have been tweaked since 1929, but they started with the crash back then. Edit: someone else is claiming 1987 as the start. My memory says 1929. If this matters do your own research.
  - jcape 7y ago
    https://www.investopedia.com/terms/c/circuitbreaker.asp https://www.investopedia.com/terms/c/circuitbreaker.asp
    - bluGill 7y ago
      Well something was put into place after 1929...
    - jahlove 7y ago
      > Regulators put the first circuit breakers in place following the market crash of October 19th 1987, when the Dow Jones Industrial Average (DJIA) shed 508 points (22.6%) in a single day. The crash, which began in Hong Kong and soon affected markets worldwide, came to be known as Black Monday.
  - jahlove 7y ago
    > In 1933, the U.S. Congress passed the Glass–Steagall Act mandating a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities. https://en.wikipedia.org/wiki/1933_Banking_Act https://en.wikipedia.org/wiki/1933_Banking_Act
    - 7y ago
Frost1x 7y ago
To address OPs point, someone did do this. Someone (or more accurately, a lot of people) stepped in and introduced an artificial construct that constrains trading under certain conditions. It's not intrinsically a "bad" thing per se and it was something already established long before the current set of conditions arose. But none the less, it's an artificial constraint introduced on trade systems that is likely beneficial.
- SubiculumCode 7y ago
  To those who believe that all markets are rational and efficient, that interventions cause more harm than good, y, an enforced halt seems to be anti-capitalist. But we are not rational actors. We can get into panics. Panics can stir more panic. Forced breaks allow for the market to reassess data for a few minutes without fear of loss for not acting immediately.
  - bo1024 7y ago
    You would think, by the same arguments, that the stock market could always just trade at 15-minute intervals. Why not? But people go crazy when researchers (e.g. Eric Budish at U. Chicago) suggest lowering the frequency to milliseconds, let alone seconds or minutes.
    - deleted 7y ago
      [deleted]
    - twic 7y ago
      There are different, additional, objections to that. For example, it would make life rather difficult for market makers, which would mean a lot of the liquidity would dry up, which means the spread would widen out, which means trading would be more expensive. I think there is scope for designing market mechanisms which have the volatility-reduction effects of periodic auctions, but which still allow market makers to hedge. I hope people are working on those.
      - 7y ago

by _se 7y ago

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
      [deleted]
    - karlkatzke 7y ago
      > Sometimes the "panic" is the correct reaction. Panic is almost never the correct reaction. Deciding that there's going to be a downturn and you should prepare yourself for it financially is one thing, but under what circumstances would it be optimal for you as an individual to panic-sell? In my mind, panic is the thing you do when you realize that you haven't prepared. That you don't have enough resources for an extended downturn, that you're financially over-leveraged, and that you are in danger of losing your home and being unable to feed yourself and your family. There are TONS of people who are experiencing this right now in China and Italy, and many others of us who will be experiencing it the next few weeks in the rest of the world. But panic also implies that you don't have time to fix that, and there's nothing you can do as an individual to change it. If that's the case, you probably don't have a lot of investments in the stock market anyway. Or if you do, and you're over-leveraged in the markets because you were gambling with your money instead of investing with it, then yes, you're panic-selling right now.
      - bluGill 7y ago
        Panic sell is the correct thing when your doctor gives you a short time to live. Since your money will be worthless no matter what happens you may as well get it all now and spend it on whatever can buy a moment happiness. There is an exception if your religion lets you take your stock with you. I don't believe in one, but I guess if you want to.
        deleted 7y ago
        [deleted]
    - wbl 7y ago
      You can take that position after we all wait 15 min and take a breath.
    - kortilla 7y ago
      If you’re a little guy that truly believed that, you wouldn’t have waited until the panic to happen to sell then.
- umanwizard 7y ago
  How exactly are you getting personally screwed by a 15-minute stop in trading?
- airstrike 7y ago
  > So don't worry, it's only us regular guys that get screwed. Big firms can still contact each other to make deals. And when everyone is selling, who do you think is buying? No one is moving much of anything for those 15 minutes
  - allovernow 7y ago
    How do you sell stock if no one is buying? If people are selling, others are buying.
    - bluGill 7y ago
      Market makers are buying - their job is to always buy or sell stock from everybody. They (generally computers, but humans traditionally) will always buy your stocks, or sell you stocks. Their algorithm is simple: buy for $.10 (or some other tiny number) less than you sell - if the amount of stock owned is too low raise the price, if the amount is too much lower the price. They pretty much always make money in the long run.
      - tialaramex 7y ago
        For agreeing to do this (and having the capital to do it) the Market Maker for a stock typically secures certain benefits from the market in respect of that stock. For a very popular stock on a typical day the market maker isn't really necessary. Your trades would absolutely execute immediately based on positions other people wanted. When your stock is more thinly traded, or when things are a bit frantic the market maker is your saviour. When everybody and their dog is selling, the market maker will buy anyway. Under some circumstances market makers can signal they intended to cease to make a market for specific stocks. When the market makers exit, all hobbyists should make sure they are gone too. Once there is no market maker for the stock you're holding, you will need somebody else to actually take the other side of your trades. "Prices" without a market maker are just a guess, there may be nobody actually promising to take your stock at any price, even if the last trade was for $1.40 your stock might be not sell even at 14¢. This makes for an exciting space in which to gamble with money you can afford to lose if you really know what you're doing, otherwise it's just a way to throw money away.
- evanpw 7y ago
  Nope, trading stops everywhere. Even Canada stops trading when the US has a market-wide halt.
- thawaway1837 7y ago
  The idea that the little guys largely have a chance actively trading in a fast moving market like today’s where they are gonna be crushed by algos is ridiculous to begin with. If anything this is helps the little guy, by not completely crushing their stock value, and hurts the big guys who can outlast huge swings (something little guys cannot).
totaldude87 7y ago
https://www.nasdaq.com/articles/market-wide-circuit-breakers%3A-what-you-need-to-know-2020-03-09 https://www.nasdaq.com/articles/market-wide-circuit-breakers...
londons_explore 7y ago
Really it's just saying "the market is now closed". But you can still sell those securities on other markets or direct to someone who wants to buy or sell.
deleted 7y ago
[deleted]
HolyLampshade 7y ago
Mass sell offs tend to create unorderly markets, which is not beneficial for anyone. The concept was introduced in US equities after the ‘87 crash, but was only consistently implemented for NYSE-listed stocks. In ‘13 these were made consistent and market wide (thus MWCB), set against a widely published value of the S&P (so that the control was predictable; thus how it executed today). FYI, there are also bidirectional halts that exist intraday (Limit-Up/Limit-Down) that serve a similar purpose and control rapid, uncontrolled movements in individual stocks. These are also defined in exchange regulation and are well defined so that they are predictable.
- rwmj 7y ago
  > Mass sell offs tend to create unorderly markets, which is not beneficial for anyone. It's beneficial for people who want to buy stocks cheaply or if we truly believe that markets are about price discovery.
  - HolyLampshade 7y ago
    > markets are about price discovery Exactly, and when you have an unorderly market, price discovery becomes problematic. It’s the same reason the single stock LULD bands exist (which put the brakes on both rapid downward and rapid upward movement). Stopping for 15 minutes (or 5 in the case of a LULD pause) is not detrimental to the process of establishing orderly price discovery. In the event a stock is going to keep rising or falling due to legitimate changes in valuation it will continue to do so (look at NASDAQ’s halts page today to see stocks that have hit their bands multiple times).
  - jrockway 7y ago
    > if we truly believe that markets are about price discovery I think you can discover the price tomorrow.
  - leetcrew 7y ago
    > we truly believe that markets are about price discovery. this is not incompatible with the believe that prices over a single day (or hour) can be dangerously noisy.
emberswitch 7y ago
The exchange does. Exchanges are companies too.

isoskeles 7y ago

> Only a single L1 or L2 breaker can occur in a single day. Then why does L2 exist? It seems redundant, L1 would get triggered before L2, and only one can occur in a single day, so why have L2 at all? What am I missing here? Edit: Also, anyone who downvoted me for posting the same question as someone at the same minute, you know what to do.

_se 7y ago
See my other response to a similar comment - I will edit the original.
- isoskeles 7y ago
  Makes sense, thanks.
deleted 7y ago
[deleted]
kick 7y ago
No matter how much you didn't deserve downmodding, complaining about them only invites more. You have a better chance of recovery by not bringing them up, and the News Guidelines ask that you don't. Please don't comment about the voting on comments. It never does any good, and it makes boring reading. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- rat9988 7y ago
  Your paragraph was a lot more annoying than his sentence.
  - dang 7y ago
    It's true that such comments are annoying, but they're necessary as a feedback mechanism to regulate the site. Otherwise the site guidelines would have negligible effect. They're more tedious to write than to read, if that helps at all. https://hn.algolia.com/?dateRange=all&page=0&prefix=true&query=by%3Adang%20tedious%20write%20read&sort=byDate&type=comment https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...

jagged-chisel 7y ago

> Only a single L1 or L2 breaker can occur in a single day. I don't follow. You'd hit 7% before 13%, so how would L2 ever execute?

_se 7y ago
Sorry - I meant that neither L1 nor L2 can trigger twice in a day, E.g. down 8%, up 2%, down 9% does not trigger a second L1 breaker.
- jagged-chisel 7y ago
  > neither L1 nor L2 can trigger twice in a day This phrasing makes sense. Thanks!
- rococode 7y ago
  Especially relevant today since after hovering around -5% for most of the session after the first halt, right now we're at -6.9% and threatening to push below 7% again.
rogerkirkness 7y ago
This means each execute once, not mutually exclusive.
patleeman 7y ago
I'm pretty sure these need to be hit consecutively.
deleted 7y ago
[deleted]
deleted 7y ago
[deleted]
deleted 7y ago
[deleted]
TeMPOraL 7y ago
As I understand GP: L1 and L2 can each fire only once per day. So if you hit L1, and after a brief rebound the market still goes down, you'll hit L2. If after that it still keeps falling, it'll get stuck at L3.

noja 7y ago

Do they have circuit breakers in the other direction?

kasey_junk 7y ago
No. This is just one of several places where the laws systematically favor the bulls.
- ghouse 7y ago
  Believe this is not a "law" but a "policy" Regardless, your sentiment is spot-on.
  - kasey_junk 7y ago
    Its an enforcement policy directed by the SEC. Its effectively a law, you can’t opt out for instance.
    - hawaiianbrah 7y ago
      Well, you can choose not to follow laws (but you'll face the consequences if caught!).
- apcragg 7y ago
  You are wrong about that. See T5, T6, and H10 halts.
  - 3fe9a03ccd14ca5 7y ago
    T5: Single Stock Trading Pause in Effect Trading has been paused by NASDAQ due to a 10% or more price move in the security in a five-minute period. T6: Halt - Extraordinary Market Activity Trading is halted when extraordinary market activity in the security is occurring; NASDAQ determines that such extraordinary market activity is likely to have a material effect on the market for that security; and 1) NASDAQ believes that such extraordinary market activity is caused by the misuse or malfunction of an electronic quotation, communication, reporting or execution system operated by or linked to NASDAQ; or 2) after consultation with either a national securities exchange trading the security on an unlisted trading privileges basis or a non-NASDAQ FINRA facility trading the security, NASDAQ believes such extraordinary market activity is caused by the misuse or malfunction of an electronic quotation, communication, reporting or execution system operated by or linked to such national securities exchange or non- NASDAQ FINRA facility. H10: Halt - SEC Trading Suspension The Securities and Exchange Commission has suspended trading in this stock.

rafiki6 7y ago

I thought these circuit breakers actually existed to stop algo's from going haywire?

bluGill 7y ago
They have existed since the crash of 1929. There were no algorithms in place then. The goal was just to force human traders caught up in the moment to take a break and stop panicking. I assume they have been tweaked since 1929, but they started with the crash back then. Edit: someone else is claiming 1987 as the start. My memory says 1929. If this matters do your own research.
- jcape 7y ago
  https://www.investopedia.com/terms/c/circuitbreaker.asp https://www.investopedia.com/terms/c/circuitbreaker.asp
  - bluGill 7y ago
    Well something was put into place after 1929...
  - jahlove 7y ago
    > Regulators put the first circuit breakers in place following the market crash of October 19th 1987, when the Dow Jones Industrial Average (DJIA) shed 508 points (22.6%) in a single day. The crash, which began in Hong Kong and soon affected markets worldwide, came to be known as Black Monday.
- jahlove 7y ago
  > In 1933, the U.S. Congress passed the Glass–Steagall Act mandating a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities. https://en.wikipedia.org/wiki/1933_Banking_Act https://en.wikipedia.org/wiki/1933_Banking_Act
  - 7y ago

Frost1x 7y ago

To address OPs point, someone did do this. Someone (or more accurately, a lot of people) stepped in and introduced an artificial construct that constrains trading under certain conditions. It's not intrinsically a "bad" thing per se and it was something already established long before the current set of conditions arose. But none the less, it's an artificial constraint introduced on trade systems that is likely beneficial.

SubiculumCode 7y ago
To those who believe that all markets are rational and efficient, that interventions cause more harm than good, y, an enforced halt seems to be anti-capitalist. But we are not rational actors. We can get into panics. Panics can stir more panic. Forced breaks allow for the market to reassess data for a few minutes without fear of loss for not acting immediately.
- bo1024 7y ago
  You would think, by the same arguments, that the stock market could always just trade at 15-minute intervals. Why not? But people go crazy when researchers (e.g. Eric Budish at U. Chicago) suggest lowering the frequency to milliseconds, let alone seconds or minutes.
  - deleted 7y ago
    [deleted]
  - twic 7y ago
    There are different, additional, objections to that. For example, it would make life rather difficult for market makers, which would mean a lot of the liquidity would dry up, which means the spread would widen out, which means trading would be more expensive. I think there is scope for designing market mechanisms which have the volatility-reduction effects of periodic auctions, but which still allow market makers to hedge. I hope people are working on those.
    - 7y ago