NYSE braces for possible trading halt

August 25 05:03 2015

The New York Stock Exchange said it’s prepared to put the brakes on trading if stock losses further spiral out of control on fears of an economic slowdown in China. The storied exchange, a unit of NYSE Euronext, issued a trader alert Monday saying it will halt trading if the S&P 500 index falls by at least 7%. Trading halts are designed to slow or stop trading during times of extreme market pressure to allow traders to collect themselves and reset automatic trading systems. The fear is that panic can overwhelm markets leading to severe dropsAP FINANCIAL MARKETS WALL STREET F USA NY

Panic ruled U.S. trading at the open, but fears subsided by mid-day. The Dow had been down roughly 1000 points earlier Monday, but it’s now down 2.8% to 15,999. This follows a 10% drop last week from the Dow’s recent peak — marking the indices’ worst plunge since 2011. The S&P 500 index of common large-cap stocks traded down 2.5% to 1921.54, early Monday.

Trading otherwise appeared normal on the three major exchanges. Neither the Bats stock exchange nor the Nasdaq stock exchange issued trading alerts tied to Monday’s downturn. Wall Street is rattled amid fears that China’s economy is worse than initially expected. China’s Shanghai composite index fell over 8.5% Monday to 3209.91 following recent moves there to cut its currency in an effort to boost exports.

The Chinese stock market, which is more than 80% mom-and-pop investors, has been plunging on fears that the government may not step in as aggressively as it did earlier this summer to protect investors. When stocks there started plunging in June, the government shielded investors from losses by relaxing rules on margin, or the use of borrowed money to buy stocks, among other initiatives.