Volatility and Circuit Breakers
With increased market volatility in names like AMC in recent days, we want our traders to be prepared for certain market mechanics which may come into effect with continued volatility.
With increased volatility in names like AMC in recent days, we want our traders to be prepared for certain market mechanics which may come into effect with continued volatility.
We ask that customers please prepare by reading the implications this increased demand may have on order executions within the trading ecosystem.
With an uptick in volatility surrounding names like AMC Entertainment ($AMC) several exchange-mandated trading halts may be enforced.
This may occur due to the following:
- A 20% movement inside the first 15 minutes or last 25 minutes of the session within a 5 minute period
- A 10% movement between these times within a 5 minute period.
Each halt lasts for 5 minutes. More information can be found here.
During AMC’s 96% run during Wednesday’s session (2/6/21), the stock was halted on 5 separate occasions. During Thursday’s session (3/6/21), the stock was halted on 3 separate occasions during market open.
What Happens To Orders During Halts
An order placed before a trading halt may be held and executed once trading recommenced.
An order for a full share placed during a trading halt could be executed once trading recommences. Orders for fractional shares can be subject to rejection by the exchange and need to be placed again once trading recommenced.
For more information on circuit breakers read here.
Managing Your Risk During Volatility
Such volatility can bring some particular risks to investors. We have prepared the following piece, to bring your attention to ‘gap risk’ and ‘liquidity risk’, two factors to consider while managing your portfolio during such periods.