The New York Stock Exchange invoked Rule 48 this morning in order to smooth the opening of trading amid signs of potential volatility. The obscure trading rule allows the exchange’s market-makers to refrain from disseminating price indications ahead of the markets opening bell. In theory, this makes it easier and faster to open stocks on days when trading could be volatile, said one observer.
Signs of market volatility are present this morning. At presstime, the Standard & Poors 500-stock index was down 2.1 percent, and the Dow Jones industrial average had slipped 364 points, or 2.2 percent. These metrics come on the heels of reports that Chinas manufacturing had slipped in August to a three-year low, stoking fears that the second largest economy was slowing down at a faster pace than expected.
If this news were not grim enough, managing director of the International Monetary Fund Christine Lagarde warned today that the world economy would most likely expand at only a moderate pace. She added that it would probably be weaker than the I.M.F. had forecast just two months ago, reports the New York Times.
This is not the first time the NYSE has invoked the rarely used Rule 48. According to Valuewalk.com, [i]n the past, the stock exchange has used the rule very sparingly, although the stock exchange invoked it on three consecutive trading days last week and again this morning before opening bell. Since 2008, it has only been invoked 77 times. The Securities and Exchange Commission approved Rule 48 in December 2007.
So far, Rule 48 has become a trending topic on Twitter, most explaining the arcane trading rule of the NYSE.
