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New Market-Wide Circuit Breakers Coming
CNBC.com | September 27, 2011 | 01:30 PM EDT

After much delay, the SEC is filing proposals to revise the existing market-wide circuit breakers.

The changes reduce the percentage declines needed to halt trading and simplifies the structure of the circuit breakers. It also changes the reference index from the Dow Industrials to the S&P 500.

The current circuit breakers, adopted in October 1988, kick in when the Dow Industrials drop 10, 20, and 30 percent.

The only time the circuit breakers actually kicked in was Oct. 27, 1997, when traded was halted twice.

And that's the problem: they were useless during the "Flash Crash," because the Dow never dropped more than 10 percent.

The SEC has put out the proposed changes for a 21-day comment period.

The changes will greatly simplify the current cumbersome structure. It will:

1) Reducethe market decline percentage thresholds necessary to trigger a circuit breaker. Instead of 10, 20, and 30 percent declines, the threshold will be reduced to 7, 13, and 20 percent declines from the prior day’s closing price.

2) Shorten the duration of the trading halts to 15 minutes.

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