We all know the routine for this week's stock market: fasten your seatbelts. This is going to be a bumpy ride.
However, what many investors have forgotten is that about a year ago the Securities and Exchange Commission (SEC) responded to the Flash Crash by implementing a series of new market circuit breakers to provide a first line of defense in the face of massive price gyrations. Read First Things' First: Stock Circuit-Breakers in Place (June 11, 2010). As I noted in that article, " Thankfully, someone at the SEC ran for the fire extinguisher before the small brushfire consumed the entire market. Kudos to Chairman Schapiro and the SEC."
Below is a graphic illustration provided by the New York Stock Exchange that explains how the new circuit breakers are intended to work. Although the illustration is still labelled "Second QUARTER 2011," the NYSE reiterated the same levels for the Third Quarter on June 30, 2011. Let us hope that everything works as planned.