Tuesday, May 18, 2010

Regulators don't know why but they will (try to) fix it anyway....

Some logical people might say that you need to know why a problem occurred to fix it. Well this isn't the case with the government (again). 'Fixing' (pun intended) the stock market is another blatant attack on the free market. The stock market isn't a sandbox where everyone is a winner and no one can hurt anyone's feelings. The stock market (and all markets) have to be free in order to allocate resources efficiently. There's really no need to explain, read some economic 101 level material if you want an explanation.

Link to article

Here's the highlights of the article:

"Regulators say it makes sense to reach for remedies now, even though they have yet to determine the exact cause of the May 6 market dive."

"The rules would take effect in mid-June under a six-month pilot program agreed to by major U.S. exchanges and the Securities and Exchange Commission."

"Under the plan, trading of any Standard & Poor's 500 stock that rises or falls 10 percent or more within a five-minute span would be halted for five minutes. These rules, known as "circuit breakers," would be applied if the price swing occurs between 9:45 a.m. and 3:35 p.m. Eastern time. That's almost the entire trading day."

"Importantly, the new circuit breakers would apply to all U.S. exchanges. Most of the 50 or so U.S. exchanges regulate themselves and design their own tools for slowing or halting trading."

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