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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 onl

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.
bilekas 7y ago
> Mass sell offs tend to create unorderly markets So are we saying the market will be perpetual because it's not allowed to fail ? At what point does the https://en.wikipedia.org/wiki/Pareto_efficient https://en.wikipedia.org/wiki/Pareto_efficient not apply ? If it's manipulated, the efficient seems moot.
- azernik 7y ago
  Pareto efficiency does not apply, because it is a theoretical construct that assumes perfectly rational actors. It's useful for thinking about the market, but not an actual law. (For a more humorous statement: https://www.youtube.com/watch?v=oap6_U8-HvI https://www.youtube.com/watch?v=oap6_U8-HvI)

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.

bilekas 7y ago

> Mass sell offs tend to create unorderly markets So are we saying the market will be perpetual because it's not allowed to fail ? At what point does the https://en.wikipedia.org/wiki/Pareto_efficient https://en.wikipedia.org/wiki/Pareto_efficient not apply ? If it's manipulated, the efficient seems moot.

azernik 7y ago
Pareto efficiency does not apply, because it is a theoretical construct that assumes perfectly rational actors. It's useful for thinking about the market, but not an actual law. (For a more humorous statement: https://www.youtube.com/watch?v=oap6_U8-HvI https://www.youtube.com/watch?v=oap6_U8-HvI)