Ever since last October's stock market crash, various groups - including a federally-appointed task force - have tried to devise ways to prevent, or at least slow, a similar plunge in the future.
Most of the ideas proposed by government - including those calling for more federal regulation - have had a deservedly lukewarm reception on Wall Street. A new proposal by the chief players themselves is getting more support.The plan, put forth jointly by the New York Stock Exchange and the Chicago Mercantile Exchange, would publicly identify "program traders" whose massive computer-directed buying and selling is blamed by some for the collapse. Publicity would tend to discourage such trading and seems reasonable.
Unfortunately, the plan also contains the same fatal flaw as earlier proposals, namely, shutting down trading when the market drops so far in a single day. The latest idea would suspend trading for one hour if the Dow Jones industrial average fell 250 points, and for two hours if the Dow fell 400 points in a single session.
Such "circuit breaker" delays, designed to let cooler heads prevail and stave off panic buying and selling, has problems of its own. Halts in trading may only frighten investors who may feel that can't sell their stocks before prices fall even further.
Experience tends to support this thesis. When the Mercantile and Hong Kong exchanges were shut down during last October's dizzying plunge, prices fell even faster after the markets were reopened.
The nation and the stock market seem to have recovered from the October collapse without any lasting harm. Unless there are more compelling reasons to limit free market activity, it should be left alone.