Nasdaq Stock Market is planning to implement a single stock circuit breaker, Volatility Guard, to protect investors and listed companies while increasing transparency in the US equity markets during times of volatile market conditions.
Reportedly, Nasdaq Volatility Guard will pause trading based on predetermined thresholds across all Nasdaq-listed securities. The Nasdaq Volatility Guard will allow data to be globally available before, during and after the trading pause. In addition, the reopening process will be available to all market participants for better price discovery.
According to the Nasdaq, the Volatility Guard will supplement the coordinated effort by the Securities and Exchange Commission (SEC) and US exchanges for an initial pilot program ending December 10, which establishes a trading pause for individual stocks within the Standard & Poor’s 500 Index that experience a price change of 10% or more.
Bob Greifeld, CEO of Nasdaq OMX, said: “Nasdaq’s Volatility Guard will protect investors and increase transparency by preventing anomalous trades like the ones that took place on May 6, while supporting market-makers who bring liquidity to the investor community and our listed companies.”
The Nasdaq Volatility Guard is expected to be effective in the third quarter of 2010.