A rule on the New York Stock Exchange mandating that trades stop for a certain amount of time if the Dow Jones Industrial Average falls 10%, 20%, or 30% in a single trading day. This measure is designed to prevent panic selling by stopping trading after a security or an index has fallen by a certain amount. For example, if the Dow Jones Industrial Average falls 10% in a trading day, the New York Stock Exchange suspends trade for at least one hour. Rule 80B is intended to allow investors to determine whether a situation is really as bad as it looks. See also: Suspended trading, collar.
A New York Stock Exchange rule that restricts trading for specified periods in the event the Dow Jones Industrial Average experiences one of three specified percentage declines. See also circuit breaker.
Case Study New York Stock Exchange Rule 80B is a circuit breaker designed to limit panic selling during serious market declines and extreme volatility. The rule provides for brief trading halts during a severe market decline as measured by a single-day decrease in the Dow Jones Industrial Average. Circuit breakers on the NYSE are currently in effect for three thresholds: 10%, 20%, and 30% declines in the Dow.
- 10% decline in the Dow
- One-hour trading halt if the decline occurs prior to 2 p.m.
- Half-hour trading halt if the decline occurs between 2 and 2:30 p.m.
- No trading halt if the decline occurs after 2:30 p.m.
- 20% decline in the Dow
- Two-hour trading halt if the decline occurs prior to 1 p.m.
- One-hour trading halt if the decline occurs between 1 and 2 p.m.
- The market closes if the decline occurs after 2 p.m.
- 30% decline in the Dow
- The market closes for the day regardless of the time.