US equity markets are expected to stabilise after last week’s Securities & Exchange Commission approval of self-regulatory organisation (SRO) rules proposed by the Financial Industry Regulatory Authority (FINRA) and US stock exchanges. But trading halts under the programme could result in imperfect closing prices.
The one year SRO pilot program is scheduled to begin on February 4 2013. It modifies market-wide circuit breakers and implements a new limit up – limit down plan. The amendments are expected to result in less price volatility with fewer erroneous trades as well as more frequent trading halts for a shorter period of time.
Gerard Citera, counsel at Davis Polk & Wardwell and a former executive director at UBS Investment Bank, said the new SRO rules should lower market volatility, in theory, by preventing transactions and quotations outside of the [price] band and thus preventing wide swings...