Nasdaq today issued a reminder regarding the procedures for coordinated cross-market trading halts in the event of a severe market price decline.
These procedures, known as market wide circuit breakers “MWCB”, may halt trading temporarily or, under extreme circumstances, close the markets before the normal close of the trading session. The circuit breakers are calculated daily based upon the prior day’s value of the S&P 500 index.
All NMS securities will be halted in the event a MWCB threshold is breached.
What are the circuit breakers thresholds and time durations?
- Level 1 halt (7% decline in S&P 500 index)
• Trading will halt for 15 minutes if drop occurs before 3:25 p.m.
• At or after 3:25 p.m.—trading will continue, unless there is a Level 3 halt.
- Level 2 halt (13% decline in S&P 500 index)
• Trading will halt for 15 minutes if drop occurs before 3:25 p.m.
• At or after 3:25 p.m.—trading will continue, unless there is a Level 3 halt.
- Level 3 halt (20% decline in S&P 500 index)
• At any time during the trading day—trading will halt for the remainder of the trading day.
If a trading pause is triggered in a Nasdaq-listed security, Nasdaq reopens the security using the Nasdaq Halt process set forth in Nasdaq Rule 4753. Additionally, Nasdaq calculates Auction Collars by taking 5% of the Nasdaq last sale price and adding and subtracting the calculated value from the Nasdaq last sale price to determine the upper and lower collar prices, respectively.
An MWCB Level 1 or Level 2 halt period will be extended by an additional 5 minutes if at least one of the following two conditions exists:
- The auction price at which the most shares would be traded is outside the range of the pre-defined Auction Collars; or
- There is a market order share imbalance.
At the start of each 5 minute halt extension, the Auction Collars will be widened by an additional 5%, but only in the direction of the expected auction price or in the direction of the imbalance. Opposite side Auction Collars will remain unchanged.
