Second-Level Trading Curb in Sight as Market Rout Continues

The U.S. stock market is heading for another tumble at the open Monday after futures were halted shortly after they opened Sunday night. That’s after the Federal Reserve cut interest rates back to zero and said it would buy $500 billion of Treasuries and $200 billion of mortgage-backed securities in the coming months.

By Lisa Beilfuss March 16, 2020, 10:35 a.m. EDT

The U.S. stock market is heading for another tumble at the open Monday after futures were halted shortly after they opened Sunday night. That’s after the Federal Reserve cut interest rates back to zero and said it would buy $500 billion of Treasuries and $200 billion of mortgage-backed securities in the coming months.

While futures have been closed, other products have been trading in pre-market and suggest an ugly start to the regular session. The SPDR S&P 500 exchange-traded fund (ticker: SPY), was down 11% at 9 a.m. Eastern time.

This puts a level two-circuit breaker in sight. It takes a 5% fall in the S&P 500 from the previous session’s close to halt trading during the pre-market session, which is what happened Sunday night. If the index falls 7% from Friday’s close, it triggers a 15-minute market-wide halt. A 13% drop activates another 15-minute break, and a 20% fall means trading is closed for the rest of the day.

Until recently so-called trading curbs rarely kicked in during pre-market trading and hadn’t been activated during the regular session since 1997. Market volatility tied to the spreading coronavirus and fears of its health and economic repercussions triggered trading curbs several times last week.

Below are the levels to watch for further broad market halts during the trading day Monday.

Level One Breach

Next is a 7% decline in the S&P 500 from Friday’s close of 2711.02. It would take a 190-point decline to 2521.25 to trigger a 15-minute halt. Trading wouldn’t be interrupted if the drop came at or after 3:25 p.m.

Level Two Breach

The next threshold is 13%. A decline in the S&P 500 by that much would similarly result in a 15-minute halt.

To trigger a level-two circuit breaker Monday, the index would have to drop 352 points to 2358.59. Trading wouldn’t be interrupted if the drop came at or after 3:25 p.m.

Level Three Breach

It takes a 20% drop in the S&P 500 to trigger a level-three circuit breaker. If this happens at any point in the trading day, market-wide trading is halted for the remainder of the day.

To hit level three on Monday, the S&P 500 would need to fall 542 points to 2168.82.

Single Stocks

A different rule covers single stocks, for which the Securities & Exchange Commission has price bands set by tier (Tier One covers members of the S&P 500, Russell 1000 and some exchange-traded products, while Tier Two covers other securities) and by price.