Investors trading Facebook Inc. (FB:US) after its $16 billion initial public offering opens may have to navigate circuit breakers adopted after the crash of May 2010.
Stocks that rise or fall 10 percent or more within five minutes are paused across all 13 U.S. equity exchanges and other markets to curb volatility. Trading in Caesars Entertainment Corp. (CZR:US), a casino company, was halted on the first day of trading on Feb. 8 after the stock rose 50 percent minutes after the IPO.
Mark Turner, head of U.S. sales trading at New York-based Instinet Inc., which accounts for almost 5 percent of daily U.S. equities volume, said he’d be surprised if circuit breakers don’t halt trading in Facebook shares more than once. The pauses last for five minutes.
“Given the interest in the stock, I think it’s likely to be very volatile,” Turner said in a phone interview. “There are likely to be a lot of players, a lot of retail flow, institutional flow, and price discovery right around when it opens will be quite frantic.”
Peter Jankovskis, who helps manage about $2.9 billion at Oakbrook Investments in Lisle, Illinois, said that while he doesn’t think Facebook will trigger a circuit breaker, he’s glad the curbs are in place. He said he doesn’t plan to purchase Facebook shares.
“For something like an IPO that doesn’t have a long trading history and is probably subject more to animal spirits than the trading of a seasoned issue, circuit breakers are probably a good thing,” he said in a phone interview. “It would probably frustrate me, but on the other hand it’s probably better than having an order coming in several dollars higher than I would’ve expected.”
To contact the reporters on this story: Nina Mehta in New York at email@example.com; Joseph Ciolli in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Nick Baker at email@example.com