Fed, Treasury, SEC Fault Circuit-Breaker Plan

The nation’s top financial regulators told Congress they oppose a proposal by U.S. securities markets to suspend trading for the day if stocks plunge dramatically. “Closed markets create panic, create fear, create uneasiness, create uncertainty,” Securities and Exchange Commission Chairman Arthur Levitt told the Senate banking subcommittee on securities. “That’s when investors get scared.” The staffs of the New York Stock Exchange and 10 other U.S. securities markets agreed this week to a plan that would close markets for the rest of the day if the Dow Jones industrial average falls 10% after 2:30 p.m. EST or 20% at any time. Markets also would close for an hour if the Dow index fell 10% before 1 p.m., and 30 minutes if the 10% decline occurred between 1 and 2:30 p.m. The NYSE board is scheduled to consider the proposal Thursday. Levitt said he hopes the NYSE board will drop “some of the more dramatic recommendations with respect to closing the market for the day.” Levitt, whose commission must approve any NYSE proposal, also threatened to have the SEC and Commodity Futures Trading Commission unilaterally change the rules if the exchange doesn’t act “to protect investors adequately.” Treasury Department Undersecretary John D. Hawke Jr. and Federal Reserve Board Gov. Susan M. Phillips echoed Levitt’s concerns. NYSE spokesman Rich Adamonis declined to comment.