 (Oct 15) The Securities and Exchange Commission is reviewing exchange-traded product pricing and exchange circuit breaker rules in the wake of extreme volatility in equity markets that occurred Aug. 24, when the drastic swings in ETPs caused more than 1,000 trading halts. "We're exploring whether the behavior of ETPs can be explained by uncertainty in the pricing of the underlying assets, the nature of liquidity demand and supply for ETPs and/or the low trading volume in many individual ETPs," Chair Mary Jo White said at a meeting of the agency's Investor Advisory Committee. The Aug. 24 volatility could alter how the agency regulates exchanges, including circuit breaker rules that are designed to rein in trading in times of wild price swings. "We didn't seek seek out this mini-stress test on August 24, but it has yielded a lot of very useful data for analysis," adding that the agency could use the data to tweak exchange rules forbidding trades outside certain price bands in times of market turmoil. The so-called limit up limit down rules were approved by the SEC as a pilot program, and White said the data could affect how the rules could change if made permanent. Industry executives say rules for U.S. markets need to be updated because they aren't designed to cope with the proliferation of ETFs, which have become a $2 trillion business.
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