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Cinnamon

Oil Prices Fall Below $30 a Barrel

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LONDON—Oil prices tumbled below $30 a barrel on Friday, with U.S. crude dropping around 5% as continued turmoil in Chinese markets and concerns over Iranian supplies adding to the global glut took their toll on the market.

Oil has shed about a fifth of its value since the beginning of this year on growing fears about the health of the Chinese economy, the world’s second-biggest oil-consumer.

“China’s slowdown continues to spook markets and has now become a systemic risk for oil” said Abhishek Deshpande, chief oil analyst at Natixis.

Brent crude for March delivery, the global oil benchmark, fell 3.6% to $29.76 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures for February were trading down 5% at $29.64 a barrel.

<snip>

http://www.wsj.com/articles/oil-prices-fall-below-30-a-barrel-1452853918

 

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At what percentage does the plunge protection team show up? I think China halted trading at a 7 percent drop. 

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Stock exchanges attempt to ease panic selling by taking certain steps to halt trading. These moves are called market circuit breakers—or collars.

So how do they work? When are they used? CNBC explains.

What are market circuit breakers?

This is when a major stock or commodities exchange stops trading temporarily because an index, or even an individual stock, has fallen a certain percentage during a trading day.

The purpose is to prevent a market or stock price free-fall by trying to rebalance buy and sell orders.

For example, if the Dow Jones Industrial Average falls by 10 percent, the New York Stock Exchange (NYSE) might halt market trading for one hour. There are other circuit breakers for 20 percent and 30 percent declines.

In addition to market-wide circuit breakers,the Securities and Exchange Commission approved market rules on a trial basis in 2010 allowing circuit-breaker pauses for certain individual securities whose prices move 10 percent or more in a five-minute period.

These circuit-breaker pauses apply to stocks in the S&P 500 Index, the Russell 1000 Index, and several hundred exchange traded products. They halt trading in the applicable security in all U.S. markets for five minutes.

When were market circuit breakers first conceived?

The markets instituted circuit breakers in the wake of 1987's "Black Monday." On Oct. 19, 1987, the market plunged 508.32 points, 22.6 percent, or $500 billion lost in one day. This was the largest one-day percentage drop in history until that time.

Circuit breakers were first used in October 1989, following a major stock market drop.

Until 1997, the markets used a point drop rule—that is, looking at how many points the markets declined, rather than the percentage of the move, to trigger circuit breakers to stop trading.

This point-drop rule caused trading to halt on Oct. 27, 1997, even though the decline was only about 7 percent. The rule was subsequently changed to respond to percentage drops rather than point drops. The rules have since been changed back to point drops as well as percentage declines.

When do market circuit breakers kick in?

The rules for using circuit breakers have changed over the years, and are usually calculated on a quarterly basis.

On June 30, 2011, the NYSE issued these guidelines for using circuit breakers:

Level 1 Halt

A 1,200-point drop in the Dow industrial average before 2 p.m. ET will halt trading for one hour; for 30 minutes if between 2 p.m. and 2:30 p.m. ET; and have no effect if happens at 2:30 p.m. or later, unless there is a level 2 halt.

Level 2 Halt

A 2,400-point drop in the Dow industrials before 1 p.m. will halt trading for two hours; for one hour if occurs between 1 p.m. and 2 p.m.; and for the remainder of the day if at 2 p.m. or later.

Level 3 Halt

A 3,650-point drop will halt trading for the remainder of the day regardless of when the decline occurs.

The percentage levels were first implemented in April 1998, and the point levels are adjusted on the first trading day of each quarter. In 2011, those dates are Jan. 3, April 1, July 1 and Oct. 3.

What is Rule 48?

Unlike a circuit breaker that stops stock trading, the Securities and Exchange Commission's Rule 48 makes it easier and faster to open the stock markets — when there are fears that the market could open with a lot of volatility that would disrupt trading.

Where circuit breakers and Rule 48 may be related is the the rule could be used the day after a circuit breaker has been enforced.

Rule 48 speeds up the opening by suspending the requirement that stock prices be announced at the market open. Those prices have to be approved by stock market floor managers before trading actually begins. Without that approval, stock trading can begin sooner.

To invoke Rule 48, an exchange would have to determine that certain conditions exist that would cause market disruptions. Those conditions include:

  • volatility during the previous day’s trading session
  • trading in foreign markets before the open
  • substantial activity in the futures market before the open
  • the volume of pre-opening indications of interest
  • government announcements

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At the start of each quarter, the NYSE sets three circuit breaker levels at levels of 7% (Level 1), 13% (Level 2), and 20% (Level 3) of the average closing price of the S&P 500 for the month preceding the start of the quarter, rounded to the nearest 50-point interval. For example, during the first quarter of 2014, these levels were 126 points, 234 points, and 360 points, respectively.[2] Depending on the point drop that happens and the time of day when it happens, different actions occur automatically: Level 1 and Level 2 declines result in a 15-minute trading halt unless they occur after 3:25pm, when no trading halts apply. A Level 3 decline results in trading being suspended for the remainder of the day.

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2 minutes ago, A said:

At the start of each quarter, the NYSE sets three circuit breaker levels at levels of 7% (Level 1), 13% (Level 2), and 20% (Level 3) of the average closing price of the S&P 500 for the month preceding the start of the quarter, rounded to the nearest 50-point interval. For example, during the first quarter of 2014, these levels were 126 points, 234 points, and 360 points, respectively.[2] Depending on the point drop that happens and the time of day when it happens, different actions occur automatically: Level 1 and Level 2 declines result in a 15-minute trading halt unless they occur after 3:25pm, when no trading halts apply. A Level 3 decline results in trading being suspended for the remainder of the day.

Thanks for posting that, A, this is the kind of stuff we need to learn. 

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1 hour ago, Cinnamon said:

Thanks for posting that, A, this is the kind of stuff we need to learn. 

We do need to know these things,knowledge,but isnt like knowing the rules to a game that is rigged.it really doesnt matter??

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4 hours ago, yaknow said:

We do need to know these things,knowledge,but isnt like knowing the rules to a game that is rigged.it really doesn't matter??

That's my stance because it's ALL rigged. Pure theatre, so might as well insulate yourself, prepare to live outside the system and just watch the show. It may sound harsh but detaching is a primary defense mechanism for my survival and allows for adaptation to a rapidly changing environment. Every time the power goes out during a storm I learn a little more about myself, my husband and my neighbors.

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