Nasdaq Panel Rejects Volatility Plan

A Nasdaq Stock Market panel rejected a proposal for temporarily halting trading of exceptionally volatile stocks, after some broker-dealers voiced concern about how such halts would be triggered and whether they could just worsen the problem they are meant to solve.

Supporters argued that trading halts would let investors adjust to rapidly changing share prices. However, in a surprise decision Monday night, a majority of industry executives on the panel disagreed with that view and voted against the proposal.

“A halt could accelerate volatility as traders try to get their orders in before the wire,” said Jeff Citron, chief executive of electronic brokerage Datek Online Holdings Corp., and one of the panel members opposing the proposal. He called the idea “a very dangerous mechanism.”

The panel was convened two months ago to examine ways for the Nasdaq market to respond to wide price swings on some Internet-related stocks. The trading halt proposal was the only plan it considered. Opinion on the panel was split between representatives of wholesale dealers, who backed the idea, and those from retail brokerages, institutional firms and investment advisors, who opposed it.