New York (AFP)
To avoid panic movements, American stock markets have set up circuit breakers that suspend trading for a few minutes when certain levels are reached, while investors regain consciousness.
The first circuit breakers were put in place after Black Monday on October 19, 1987, when the flagship index of the New York Stock Exchange, the Dow Jones, collapsed by 22.6% in a single day.
According to the rules in place since 2013, a first temporary blocking of exchanges ("circuit breaker" or "circuit breaker") is imposed on the New York Stock Exchange when the broad index S&P 500 crosses a plateau of 7% downwards .
This index is considered to be the most representative of the health of American companies since it includes the 500 largest companies listed in New York.
When a fall of at least 7% occurs (a "Level 1" according to the terminology of the American stock market policeman, the SEC), a 15-minute break is instituted before trading can resume.
When the index accelerates its losses and crosses the 13% loss bar, ie a "Level 2", a second 15-minute break is automatically put in place.
These first two limits are imposed until 3:25 pm, thirty-five minutes before the close of trade.
For the session to be definitively interrupted, the S&P 500 must display a 20% plunge "at any time during the trading day", specifies the New York Stock Exchange (NYSE). Once this level is crossed, the exchanges are stopped and postponed to the next session.
© 2020 AFP