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This study concerns how well stock market regulators prevent trading by using trading halts when they suspect asymmetric information in the market. Security trading halts in the Portuguese stock market are analysed to measure the effectiveness of trading halts imposed by market authorities as well as their timing in interrupting and restarting trading. Stock price returns, abnormal returns and volatility are used to compare the significance of differences for pre‐and post‐halt periods. First the global sample is used to analyse abnormal returns and then it is split into good and bad news halts. A GARCH (1,1) model is also applied and found to be a more sensitive instrument on justifying trading halts. Justification for trading halts tends to rise as event window size increases, suggesting that supervisory authorities tend to spot the dominant changes better. In fact, when very short time‐sampling periods are used weaker justifications for stock halting are found. The opportunity for market authorities to interrupt trading seems to be increasing. In terms of timing they seem, on the whole, to be delayed when imposing trading halts or anticipated when authorising the restart. Nevertheless, when considering good news, although the halt tends to be late the restart seems to be on time. It is concluded that all methodologies should be jointly applied by stock watch departments of supervision authorities for detecting trading under asymmetric information, but special attention is drawn to GARCH methodologies that show superior ability for detecting changes in stock characteristics.

The purpose of this paper is to provide selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in June, July, and August 2012.

The paper provides FINRA Regulatory Notice 12‐40, SEC Approves New FINRA Rule 5123 Regarding Private Placements of Securities; Regulatory Notice 12‐44, SEC Approves Amendments to FINRA Rule 4210 (Margin Requirements); Regulatory Notice 12‐55, Guidance on FINRA's Suitability Rule; and Regulatory Notice 13‐13, Trading and Quotation Halts in OTC Equity Securities; Trade Reporting Notice of April 17, 2013: Reduction of Reporting Times for Agency Pass‐Through Mortgage‐Backed Securities Traded TBA.

Notice 12‐40: FINRA Rule 5123 is part of a multi‐pronged approach to enhance oversight and investor protection in private placements; the rule will provide FINRA with more timely and complete information about the private placement activities of firms on behalf of other issuers. Notice 12‐44: The SEC approved amendments to FINRA Rule 4210 (Margin Requirements) related to option spread strategies, maintenance margin requirements for non‐margin eligible equity securities, free‐riding, “exempt accounts” and stress testing in portfolio margin accounts. Notice 12‐55: This Notice addresses two issues discussed in Regulatory Notice 12‐25: the scope of the terms “customer” and “investment strategy.” Notice 12‐25 provided guidance in a “frequently asked questions” format in FINRA Rule 2111 (Suitability). Notice 13‐13: The SEC approved amendments to FINRA Rule 6440, which provides authority for FINRA to initiate trading and quotation halts in OTC equity securities in circumstances where it is necessary to protect investors and the public; the rule provides authority to impose foreign regulatory halts, derivative halts and extraordinary event halts. Trade Reporting Notice of April 17, 2013: FINRA reminds firms of the coming reduction in reporting periods for the timely reporting of transactions in agency pass‐through mortgage‐backed securities traded TBA (to be announced) for good delivery and products not traded for good delivery.

These FINRA notices are selected to provide a useful indication of regulatory trends.

This article provides a resource for traders and other market participants by providing an overview of certain automatic circuit breaker mechanisms and discretionary powers that the U.S. Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA) and the U.S. president, as applicable, can exercise to pause or stop the trading of individual securities or trading activities across exchanges during extreme market volatility, each of which can cause interruptions to trading activity.

This article surveys automatic and discretionary mechanisms to halt trading activity under extreme market conditions. In particular, the article examines automatic cross-market circuit breakers, limit up-limit down pauses, the alternative uptick rule, as well as discretionary authority to stop short selling of particular securities and to stop trading across exchanges.

The article concludes that market participants must be cognizant not only of automatic cross-market circuit breakers, but also several other forms of potential market disruptions that may occur due to increased market volatility during the COVID-19 pandemic and beyond.

By exploring various mechanisms that respond to market disruption, this article provides a valuable resource for traders and other market participants looking to identify and respond to potential interruptions to their trading activity.

In October of 1987 stock market prices all over the world fell by staggering amounts. A financial panic spreading beyond stock markets did not occur and it would appear that any real economic consequences of the crash have, thus far, been small. A superficial reading of economic history suggests that things might have turned out a whole lot worse. It is this thought that makes an evaluation of various restrictions designed to limit stock market volatility ‐ so called circuit breakers ‐ timely.

The purpose of this summary is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in April, May, and June 2010.

The paper provides excerpts from FINRA Regulatory Notice 10‐18, Master Accounts and Sub‐Accounts; 10‐22, Regulation D Offerings; 10‐23, Trade Reporting and Compliance Engine (TRACE); 10‐24, Trade Reporting; 10‐27, Customer Complaint Reporting; and 10‐30, Trading‐Pause Pilot Program; provides summaries of selected disciplinary actions.

(10‐18) If a firm has notice that the sub‐accounts of a master account have different beneficial ownership (but does not know the identities of the beneficial owners) or the firm is privy to facts and/or circumstances that would reasonably raise the issue as to whether the sub‐accounts, in fact, may have separate beneficial owners, then the firm must inquire further and satisfy itself as to the beneficial ownership of each such sub‐account. (10‐22) A broker‐dealer has a duty – enforceable under federal securities laws and FINRA rules – to conduct a reasonable investigation of securities that it recommends, including those sold in a Regulation D offering. (10‐23) On February 22, 2010, the SEC approved the second major proposed expansion of TRACE to include Asset‐backed Securities as TRACE‐Eligible Securities, to require the reporting of Asset‐backed Securities transactions and to establish reporting fees. (10‐27) Starting on July 1, 2010, the beginning of the third calendar quarter, firms must use revised and new product codes to report statistical information regarding written customer complaints relating to annuities and life settlement products. (10‐30) On June 10, 2010, FINRA began a pilot program in which it will halt trading otherwise than on an exchange with respect to securities included in the S&P 500® Index where the primary listing market has issued a trading pause due to extraordinary market volatility. Selected disciplinary actions: FINRA announced that it has settled charges with two additional firms relating to the sale of auction rate securities (ARS) that became illiquid when auctions froze in February 2008. FINRA announced that it has fined five broker‐dealers a total of $385,000 for the illegal sale of more than 8 billion shares of penny stock on behalf of their customers.

These are direct excerpts designed to provide a useful digest for the reader and an indication of regulatory trends. The FINRA staff is aware of this summary but has neither reviewed nor edited it. For further detail as well as other useful information, the reader should visit www.finra.org.

This article is an exploration of the history of the regulation of stock futures leading up to the recent regulatory resolution in which the regulators (SEC and CFTC) share responsibilities, thus leading to the trading of single stock futures.

The purpose of this paper is to provide the current state of knowledge about the Flash Crash. It has been one of the remarkable events of the decade and its causes are still a matter of debate.

This paper reviews the literature since the early days to most recent findings, and critically compares the most important hypotheses about the possible causes of the crisis.

Among the causes of the Flash Crash, the literature has propsed the following: a large selling program triggering the sales wave, small but not negligible delays suffered by the exchange computers, the micro-structure of the financial markets, the price fall leading to margin cover and forced sales, some types of feedback loops leading to downward price spiral, stop-loss orders coupled with scarce liquidity that triggered price reduction. On its turn leading to further stop-loss activation, the use of Intermarket Sweep Orders, that is, orders that sacrificed search for the best price to speed of execution, and dumb algorithms.

The results of the previous section are condensed in a set of policy implications and recommendations.

This paper aims to analyze the impact of price-limit hits by hit type and when such hits start and stop using intraday trades and quotes at a one-second frequency for firms included in the BIST-50 index during the 13-months starting with March 2008. Like the recent COVID-19 period, this period includes the heightened stress in global financial markets in September 2008.

Using intra-day trades and quotes at a one-second frequency, the authors examine the market effects of price limits for firms included in the BIST-50 index during the global financial crisis. The authors compare the values of various metrics for 60 min centered on price-limit hit periods. The authors conduct robustness tests using auto regressive integrated moving average (ARIMA) models with trade-by-trade and with 3-min returns.

The findings are supportive of the following hypotheses: magnet price effects, greater informational asymmetric effects of market quality and each version of price discovery. Results are robust using samples differentiated by cross-listed status, same-day quotes instead of transaction prices and equidistant and trade-by-trade returns.

The authors use intraday data to reduce measurement error that is particularly pronounced when daily data are used to assess price limits that start and/or stop during a trading session. The authors contribute to the micro-structure literature by using ARIMA models with trade-by-trade and 3-min returns to alleviate some bias due to the autocorrelations in returns around price-limit hits in the presence of a magnet effect. The authors include some recent regulation changes in various countries to illustrate the importance of circuit breakers using price limits during COVID-19.

The purpose of this summary is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in July, August, and September 2010.

The paper provides excerpts from FINRA Regulatory Notices and Disciplinary Actions.

Regulatory Notice 10‐32: Effective August 2, 2010, the Board composition and governance structure of FINRA Dispute Resolution, Inc. (a subsidiary of FINRA) will more closely parallel the composition and governance structure of the FINRA, Inc. Board of Governors (FINRA Board). 10‐34: The SEC approved amendments to FINRA Rule 8312, which governs the release of information 10‐36: Effective September 7, 2010, amendments to FINRA Rule 2360 (Options) extend the cut‐off time for the submission of certain contrary exercise advices (CEAs) by one hour to 7.30 pm Eastern Time (ET). 10‐42: Effective February 11, 2011, and May 9, 2011, are new FINRA rules that extend certain Regulation NMS protections to quoting and trading of over‐the‐counter (OTC) Equity Securities. 10‐43: On September 10, 2010, the SEC approved amendments to FINRA Rule 6121 (Trading Halts Due to Extraordinary Market Volatility) to expand the trading‐pause pilot, originally adopted on June 10, 2010, to include all stocks in the Russell 1000 Index and specified ETPs.

These are direct excerpts designed to provide a useful digest for the reader and an indication of regulatory trends. The FINRA staff is aware of this summary but has neither reviewed nor edited it. For further detail as well as other useful information, the reader should visit www.finra.org

The purpose of this study is to examine how the volatility interruption (VI) mechanisms affect idiosyncratic volatilities in Korean stock markets.

Collecting the South Korea Stock Market (KOSPI) data from June 15, 2015 to March 31, 2019, we collect each residual,  εi,t, from three different estimated models: capital asset pricing model (CAPM), FF3 and FF5. To estimate the conditional idiosyncratic volatility, the authors employ two conditional time-varying measurements: GARCH and TGARCH.

The results show that the conditional idiosyncratic volatility increases when stock prices reach the upper and lower static limits, indicating the implementation of adopting static VI mechanism neither stabilize market conditions nor reduce excess volatility along with the existence of price limits.

Although market regulators and policymakers improve market conditions with the advanced VI mechanism, the empirical results show the adverse effect of the mechanism. Not allowing investors to earn above average returns without accepting above average risks makes Korean stock markets inefficient along with advanced VI mechanisms.