Regulator proposes stock circuit breaker

IIROC hopes to prevent another “flash crash”.



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Canadian stock market regulators have proposed a mechanism to suspend trading in stocks that surge past a trigger point in either direction.

The Investment Industry Regulatory Organization of Canada (IIROC) announced Thursday its plan to create single-stock automatic circuit breakers in order to prevent stocks from experiencing conditions like last May’s “flash crash”. In that incident, North American stocks plummeted in value—some down to pennies—before recovering to previous levels, all in the same day.

IIROC’s new policy would see trading halted for five minutes for TSX-listed shares if a stock increased or decreased by either 10% or 10 trading increments (whichever is greater) in the span of five minutes. Stocks on the TSX Venture or CNSX would be halted after jumps of at least 20%, or 20 trading increments, over 10 minutes.

Such mechanisms already exist for broader market movements, but not individual stocks.

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