NYSE Rule 48

Last week, the opening bell in the stock market on “Black Monday” has triggered the call for NYSE Rule 48. It has been invoked three times in one single week. 

This preemptive, unfamiliar, rarely-used rule is used in the occasion to prevent panic selling. In recent years, Rule 48 has only been called several times. Market turmoil in 22nd, January 2008 and 20th May 2010 have invoked rule 48.

NYSE Rule 48

What is Rule 48?

Rule 48 was approved in 2007 by the Securities and Exchange Commission.

This rule allows market makers or officials to halt temporarily the need to disseminate price indications ahead of the market opening bell.

In other words, it speeds up the opening by suspending the regulation that the prices of stocks be approved by the market floor managers before the trading starts.

The call for rule 48 is adopted to smooth the stock trading at the opening or the re-opening of trading in the occasion where the stock market is halted.

The need of having the Rule 48 is essential as in the volatile markets (like what happened this week), the number of incoming orders at the opening require more people on the floor to perform the pre and post auction checks.

In order to make sure the stocks open smoothly and quickly, Rule 48 will normally be called. Therefore, it is normally called under market volatility condition. To be specific, it is called depending on following conditions:-

  • Unstable fluctuations in the previous stock trading session;
  • Transaction status before the opening of foreign markets;
  • The volume of trading before the opening of stock market;
  • Any notices from the government.

When was it called historically?

Rule 48 was called in January 2008 – due to the concerns of the global economic recession and stock market volatility and May 2010 and September 2011, the European debt crisis. Early this year of 2015, the rule was invoked due to the massive snowstorm events in the United States.

This time further intensified market volatility in China sent ripples of fear around the globe. The United States stock fell sharply (more than 700 points) and this has triggered  the Rule 48 to tame the wild market.

NYSE Rule 48

“Volatility is always highest at the opening of stock market”

This post is meant to share some information on NYSE rule 48. I hope you learned a little more how the stock market works.

Interested to know what to do during the crash of stock market? Read this article, “What To Do With Global Stock Market Plunge” in case you missed my previous post.

Regards,

Alex

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