ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, April 9, 1996 TAG: 9604090074
SECTION: BUSINESS PAGE: B-5 EDITION: METRO
DATELINE: NEW YORK
SOURCE: Associated Press
CONCERN THAT THE ``CIRCUIT BREAKERS'' are out of date has grown amid a more than doubling in the value of the Dow Jones industrial average since 1988, when the curbs went into effect.
The New York Stock Exchange is proposing to loosen restrictions on sharp market swings for the first time since the curbs were imposed after the October 1987 stock market crash.
The so-called ``circuit breakers'' were designed by the NYSE and the federal Securities and Exchange Commission to slow the market's plunge in the event of another wrenching sell-off.
But concern that the rules are out of date has grown amid a more than doubling in the value of the Dow Jones industrial average since 1988, when the rules went into effect.
The NYSE said Monday it wants to ease only its two strictest curbs. These rules would temporarily shut down trading when the Dow average, an important barometer of broader stock-price action, rises or drops by 250 and 400 points, which has never happened since the rules were imposed.
The exchange would not alter its most common curbs - limits on trading triggered by market movements of 50 points. These curbs are routinely spurred in today's markets, such as Monday's Dow plunge of more than 88 points.
But market experts said the NYSE's proposal, which must be approved by federal regulators, could lay the foundation for possible bigger changes as the nation's biggest stock market monitors the situation this year.
``It would bring to the regulators the argument that the market had doubled, and that therefore some changes in these point-oriented rules should be put in,'' said Michael Lipper, president of Lipper Analytical Services Inc., a mutual-fund research company.
The NYSE board approved the proposals Thursday and plans to submit them for approval to the SEC within the next few days, an NYSE spokesman said Monday.
The NYSE is proposing to halve delays in trading that would be triggered by the two extreme Dow movements.
Under the proposals, a 250-point change in the Dow from the previous day's close would spur a halt in trading for 30 minutes, down from one hour. The trading delay for a 400-point Dow change would be cut to one hour from two.
There would be no changes to limits in computer-generated trading that kick in after the Dow industrials move 50 points in either direction from the previous day's close.
For their part, market experts argue that the curbs will grow increasingly irrelevant unless the NYSE raises the point thresholds. For example, a 250-point plunge would have been a remarkable 12 percent decline in October 1988 when the rule was first tested on the NYSE. Today, because the market has more than doubled in value since then, the Dow only has to fall about 4.5 percent before it would trigger such a trading halt.
LENGTH: Medium: 58 linesby CNB