Fast Market Rule

DEFINITION of 'Fast Market Rule'

A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current. The purpose of the fast market rule is to maintain an orderly market during a time of chaos. Under the rule, market makers must turn off their computerized trading systems, called black boxes. They do not have to quote share prices based on the London Stock Exchange's screen prices while the fast market is in effect, but they are still required to make firm quotes.

BREAKING DOWN 'Fast Market Rule'

Fast markets are rare and are triggered by highly unusual circumstances. For example, the London Stock Exchange declared a fast market on July 7, 2005, after the city experienced a terrorist attack. Share prices were falling dramatically and trading was exceptionally heavy.


The fast market rule is made possible because circuit breakers are not used. Circuit breakers allow exchanges to temporarily halt trading during sharp price declines to prevent panic selling. With a circuit breaker, the sharper the decline, the longer trading is halted.

RELATED TERMS
  1. Market-Maker Spread

    The difference between the price at which a market maker is willing ...
  2. Circuit Breaker

    Circuit breakers are measures approved by the SEC to curb panic-selling ...
  3. Fast Market

    A condition that will be officially declared by a stock market ...
  4. Market Maker

    A broker-dealer firm that accepts the risk of holding a certain ...
  5. Quote

    1. The last price at which a security or commodity traded, meaning ...
  6. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
Related Articles
  1. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  2. Fundamental Analysis

    Where's The Market Headed Now?

    Whether up, down or sideways, learn about some of the factors that drive stock market moves.
  3. Mutual Funds & ETFs

    Did ETFs Cause The Flash Crash?

    On May 6, 2010, the DJIA plunged 998.5 points in twenty minutes. Find out more about what happened that day.
  4. Options & Futures

    An Introduction To LIBOR

    This influential rate is published daily in Britain, and felt all around the world.
  5. Economics

    Understanding the American Dream

    The American dream is the belief that anyone, regardless of where they’re born or into what class, can attain their own version of success.
  6. Mutual Funds & ETFs

    The Top 5 ETFs to Track the FTSE X0 for 2016 (UK)

    Read about some of the best ETFs offering exposure to mid- and large-cap companies in the United Kingdom, and decide whether they match your investment needs.
  7. Investing Basics

    What's an Elephant?

    In the financial world, an elephant is a large institution that influences the markets and prices in big ways whenever it makes high-volume trades.
  8. Term

    What's Cockroach Theory?

    A cockroach theory suggests that one piece of bad news indicates more bad news will follow.
  9. Term

    What's a Dog and Pony Show?

    A dog and pony show is a presentation that markets new securities as an initial public offering, or securities on a secondary basis.
  10. Term

    What Is Capitulation?

    Capitulation occurs when investors sell equity positions as quickly as possible.
RELATED FAQS
  1. What are the advantages and disadvantages of listing on the Nasdaq versus other stock ...

    The primary advantages for a company of listing on the Nasdaq exchange are lower listing fees and lower minimum requirements ... Read Full Answer >>
  2. Will technology ever disrupt the role of the custodian bank?

    Custodian banks, along with other financial institutions that hold custodian accounts, are likely to be disrupted but not ... Read Full Answer >>
  3. How do I close a long position in forex?

    Closing a long position in forex trading depends on whether you are using a broker operating under U.S. trading regulations. In ... Read Full Answer >>
  4. When do stock market exchanges close?

    Closing times for stock market exchanges vary, but they generally close in the evening except on holidays. A stock market ... Read Full Answer >>
  5. What are the historical beginnings of the securities industry?

    The earliest beginning of securities trading goes back to 12th century France, with commodities brokers managing debts between ... Read Full Answer >>
  6. Who are cambrists and how do I become one?

    Cambrists (sometimes seen as "cambists," although the two terms aren't completely synonymous) are experts in the field of ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center