The Mysterious Circuit Breaker Attacks AMR Corp. (AMR) Shares
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Dear NYSE,
Please explain what was the point of numerous trading pauses on AMR Corp. (NYSE: AMR) stock Tuesday?
Regards,
StreetInsider.com
Last year, the SEC passed a proposal which would implement a five minute pause in trading should a stock deviate 10 percent or more from the proceeding five minute period. The pause applies to the primary market shares are traded on, as well as secondary markets or over-the-counter trades.
Upon re-opening, if there is an imbalance, trading will remain paused for 10 minutes, and other exchanges may begin trading should the primary exchange fail to re-open the stock. And so on.
But back to AMR's price action.
The company filed bankruptcy before the market opened and the stock didn't begin trading until after 10am ET, however most investors wouldn't call what AMR shares did this morning "trading." Shares were halted by the infamous circuit breaker 16 times after the open. Guess how much shares moved? Here's opening and closing trades for the first few pauses:
Can we say overkill?
Similar hi jinx in shares of Clearwire (Nasdaq: CLWR) has happened several times recently (although not to the same extent as Tuesday's action in AMR), also seemingly to much confusion. While news of the circuit breaker rule last year initially had the feel of a kind of "let's see how this works" test, its been a long year, with a plethora of "testing" on such circuit breakers.
To put it plainly, where are the regulators on this? The current system is just ludicrous.
Please explain what was the point of numerous trading pauses on AMR Corp. (NYSE: AMR) stock Tuesday?
Regards,
StreetInsider.com
Last year, the SEC passed a proposal which would implement a five minute pause in trading should a stock deviate 10 percent or more from the proceeding five minute period. The pause applies to the primary market shares are traded on, as well as secondary markets or over-the-counter trades.
Upon re-opening, if there is an imbalance, trading will remain paused for 10 minutes, and other exchanges may begin trading should the primary exchange fail to re-open the stock. And so on.
But back to AMR's price action.
The company filed bankruptcy before the market opened and the stock didn't begin trading until after 10am ET, however most investors wouldn't call what AMR shares did this morning "trading." Shares were halted by the infamous circuit breaker 16 times after the open. Guess how much shares moved? Here's opening and closing trades for the first few pauses:
- Open - $0.65, close $0.20
- Open - $0.22, close - $0.25
- Open - $0.25, close - $0.2315
- Open -$0.23, close - $0.2342.
Can we say overkill?
Similar hi jinx in shares of Clearwire (Nasdaq: CLWR) has happened several times recently (although not to the same extent as Tuesday's action in AMR), also seemingly to much confusion. While news of the circuit breaker rule last year initially had the feel of a kind of "let's see how this works" test, its been a long year, with a plethora of "testing" on such circuit breakers.
To put it plainly, where are the regulators on this? The current system is just ludicrous.
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