Canadian and U.S. regulators have established new circuit-breaker levels for the upcoming quarter. The indicators are used when deciding whether to halt trading on stock markets.

The levels are calculated by the New York Stock Exchange at the beginning of each calendar quarter, using the average closing value of the Dow Jones industrial average for the preceding month.

The trigger points are set at three fluctuating levels representing 10%, 20% and 30% of the Dow. Each trigger is rounded to the nearest 50 points.

In Canada, it is the policy of Market Regulation Services Inc. to co-ordinate trading halts with U.S. markets when circuit breakers are invoked.

During the first quarter of 2005, the 10-, 20- and 30-percent decline levels, respectively, in the Dow will be as follows:

  • A 1,050-point drop in the Dow before 2 p.m. will halt trading for one hour; for 30 minutes if between 2 p.m. and 2:30 p.m.; and have no effect if at 2:30 p.m. or later.
  • A 2,150-point drop in the Dow before 1 p.m. will halt trading for two hours; for one hour if between 1 p.m. and 2 p.m.; and for the remainder of the day if at 2 p.m. or later.
  • A 3,200-point drop will halt trading for the remainder of the day regardless of when the decline occurs.

Trading collars, which restrict index-arbitrage trading, will be triggered during first-quarter 2005 when the Dow moves 210 points or more above or below its closing value on the previous trading day, and will be removed when the Dow is above or below the prior day’s close by 100 points.

In the first quarter of 2005, trading collars will be implemented as follows:

  • A decline in the Dow of 210 points or more will require all index-arbitrage sell orders of the S&P 500 stocks to be stabilizing, or sell plus[1], for the remainder of the day, unless on the same trading day, the Dow advances 100 points or less below its previous day’s close.
  • An advance in the Dow of 210 points or more will require all index-arbitrage buy orders of the S&P 500 stocks to be stabilizing, or buy minus[2], for the remainder of the day, unless the Dow retreats to 100 points or less above its previous day’s close.
  • The restrictions will be re-imposed each time the Dow advances or declines 210 points from its previous day’s close.