SEC Reviewing Exchange-Traded Funds, Circuit Breakers

Securities Law Daily provides daily coverage of developments in the regulation of federal, state, and international securities and futures trading, with objective coverage of the...

By Rob Tricchinelli

Oct. 15 — The Securities and Exchange Commission is reviewing the drastic swings in exchange-traded products (ETPs) that occurred Aug. 24 and caused more than 1,000 trading halts.

“We’re exploring whether the behavior of ETPs can be explained by uncertainty in the pricing of the underlying assets, the nature of liquidity demand and supply for ETPs and/or the low trading volume in many individual ETPs,” Chairman Mary Jo White said Oct. 15 at a meeting of the agency’s Investor Advisory Committee.

Limit Up Limit Down

The Aug. 24 volatility could alter how the agency regulates exchanges, including circuit breaker rules that are designed to rein in trading in times of wild price swings.

“We didn’t seek out this mini stress test of August 24, but it is yielding a lot of very useful data for analysis,” White said.

The agency could use the data to tweak exchange rules forbidding trades outside certain price bands in times of market turmoil, she added.

The so-called limit up limit down rules were approved by the Securities and Exchange Commission as a pilot program, and White said the data could affect how the rules could change if made permanent.

Report Soon

The agency is “racing” to publish a preliminary report on Aug. 24, top agency official Stephen Luparello said Oct. 1.

The report would arrive “certainly before the information becomes stale,” Luparello, who heads the Division of Trading and Markets, said then. 

To contact the reporter on this story: Rob Tricchinelli in Washington at

To contact the editor responsible for this story: Phyllis Diamond at