US stock markets have rules in place to call automatic halts to trading activity during extreme volatility. In the event of a 1,100 point decline, or 11.5 per cent drop, in the Dow Jones industrial average before 2 p.m. EDT (6 p.m. GMT), trading is halted for one hour. Between 2 p.m. and 2.30 p.m., a half-hour halt is called for such a drop. After 2.30, no halt is called. Should the Dow drop 2,150 points, or 22.4 per cent, before 1 p.m., stock market activity is halted for 2 hours. Between 1 p.m. and 2 p.m., stock markets are halted for one hour for such a drop. If such a drop happens after 2 p.m., markets close for the day. Markets also close for the day if the Dow drops 3,250 points, or 33 per cent, at any time during the trading session.
Certain types of trading restrictions are put in place at lower levels of volatility. If the Dow rises 210 points during the day, all index arbitrage buy orders of S&P 500 stocks must be stabilizing. If the Dow drops 210 points, all index arbitrage sell orders of S&P 500 stocks must be stabilizing. These collars are removed if the Dow moves back within 100 points of the previous days close.
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