Study Notes pg 6 Ch 1 - Introduction: Futures and Options Markets

[Dr. Jayanthi Sankaran]

Hi David,

As referenced above, you mention that "Equities typically do not have limits on price movements or the size of positions".

Q: Correct me if I am wrong, but are not the US stock markets governed by the "up-tick" rule since the 1988 stock market crash (Black Monday)?

Thanks!
Jayanthi

 

[ShaktiRathore]

Hi Jayanti,
Yes David would be talking about this in relation to derivatives like equity options/futures where there are position and price limits,these limits are not so restrictive in case of equities. Equities do would have position limits and price limits but should not be as typical as derivatives. Derivatives unusually large positions and price movements can create mishaps so there are restrictions for them.
Uptick rule is usually for price limits of short positions in equities http://en.m.wikipedia.org/wiki/Uptick_rule . I think above statement seems more valid for long equities positions. Nevetheless Equities in general do not have limits particularly typical as in case of derivatives.
Thanks

 

[Dr. Jayanthi Sankaran]

Hi Shakti,

Thanks for your reply, I was actually talking about 'circuit breakers' which were instituted at the NYSE after the Black Monday 1987 crash. As of now, these have been eliminated - see link http://en.wikipedia.org/wiki/Trading_curb....

Jayanthi