Remember the below chart which we are so fond of posting on Zero Hedge occasionally? Well, it will have to be redone very soon, because the SEC has just submitted a proposal for public comment to cut market-wide circuit breakers in half from the current thresholds of 10%, 20% and 30%, by 33%. And if the SEC is actually proactively looking at something such as marketwide circuit breakers, a glaring admission that vol is about to surge, but not quite enough to actually trigger the 30% market collapse needed for a full day market halt, then all hell must be about to break loose.
As a reminder this is how the global circuit breaker looks like right now:
And this is what the SEC is now proposing:
The proposals would revise the existing market-wide circuit breakers by:
- Reducing the market decline percentage thresholds necessary to trigger a circuit breaker from 10, 20, and 30 percent to 7, 13, and 20 percent from the prior day’s closing price.
- Shortening the duration of the resulting trading halts that do not close the market for the day from 30, 60, or 120 minutes to 15 minutes.
- Simplifying the structure of the circuit breakers so that rather than six there are only two relevant trigger time periods — those that occur before 3:25 p.m. and those that occur on or after 3:25 p.m.
- Using the broader S&P 500 Index as the pricing reference to measure a market decline, rather than the Dow Jones Industrial Average.
- Providing that the trigger thresholds are to be recalculated daily rather than quarterly.
Be afraid. Be very afraid. Especially after 3:25 pm.