Curbing a Crash
BOSTON — After 1987, stock exchanges and regulators took a hard look at their internal wiring and found it lacking. So they enlarged the conduits and added "circuit breakers."
New York Stock Exchange
* Can handle 2.5 billion shares a day, five times the daily average. In 1987, it could handle only twice the daily average.
* When the Dow moves 50 points from the previous day's close, the exchange puts "collars" on arbitrage index trades, which exploit price differences between a stock index and individual stocks in the index.
* If the Dow falls 350 points from the previous close, all trading stops for half an hour; at 550 points, trading halts for an hour. These circuit breakers haven't been used.
* If the Chicago Mercantile Exchange's futures contract on the Standard & Poor's 500 index falls 12 points, computerized program-trading in all 500 stocks halts for five minutes. If an imbalance persists, trading of particular stocks may be stopped.
Nasdaq Stock Market
* Automated system can handle 1.5 billion shares a day - five times 1987 volume.
* No "circuit-breakers." Trading would be halted under extreme circumstances.