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. Circuit Breaker

    Circuit breakers are measures approved by the SEC to curb panic-selling ...
  2. Trading Curb

    A temporary restriction on program trading in a particular security ...
  3. Fast Market

    A condition that will be officially declared by a stock market ...
  4. Deal Breaker

    An issue that, if left unresolved, prompts one party to discontinue ...
  5. Market Capitalization Rule

    A rule set by the New York Stock Exchange (NYSE) to determine ...
  6. Uptick Rule

    A former rule established by the SEC that requires that every ...
Related Articles
  1. Investing Basics

    What is Rule 48?

    Rule 48 is a tool used by market operators to expedite trading in the opening hour, during periods of extreme volatility.
  2. Investing News

    Oil Continues Downward Slide

    Oil prices fell by almost 5% in yesterday's trading due to concerns about the state of China's economy.
  3. Retirement

    Electronic Trading: The Role of a Market Maker

    Market makers compete for customer order flows by displaying buy and sell quotations for a guaranteed number of shares. The difference between the price at which a market maker is willing to ...
  4. Active Trading Fundamentals

    The Uptick Rule Debate

    This rule was deemed ineffective and repealed in 2007, but critics argue it protects the market from bear raids.
  5. Investing News

    Will China Slip Into a Recession?

    The Chinese economy is an entanglement of many factors gone wrong: an overvalued, engineered stock market, slow GDP growth and a devalued currency. What happens next and what will be the global ...
  6. Stock Analysis

    Short Circuited (CC)

    With a weak recent quarter and few catalysts for the near-term future, Circuit City appears to be shorting out.
  7. Forex Education

    Market Makers Vs. Electronic Communications Networks

    Learn the pros and cons of trading forex through these two types of brokers.
  8. Investing Basics

    Stock Exchanges Around The World

    We tell you about five of the most popular stock exchanges from around the globe.
  9. Investment Firms Could Be the Losers in New Fed Rule

    A new Fed rule attempts to prevent another financial crisis by rewriting financial contracts between investment firms and big banks.
  10. Investing News

    China's Chief Securities Regulator Steps Down

    China's stock market turmoil took its first victim this morning. According to a WSJ report, the head of China Regulatory Commission, Xiao Gang, is expected to step down from his post in the coming ...
RELATED FAQS
  1. What is the difference between the rule of 70 and the rule of 72?

    Find out more about the rule of 70 and the rule of 72, what the two rules measure and the main difference between them. Read Answer >>
  2. What is a call rule?

    A call rule is a rule used in the futures exchange market. It is a rule that requires the formal bidding amount of a cash ... Read Answer >>
  3. What can I use the Rule of 70 for?

    Discover how the rule of 70 works, and learn about some of the different ways it can be applied to future forecasting and ... Read Answer >>
  4. What is Black Monday?

    Monday October 19,1987, is known as Black Monday. On that day, stockbrokers in New York, London, Hong Kong, Berlin, Tokyo ... Read Answer >>
  5. What kinds of restrictions does the SEC put on short selling?

    Learn about the rules and regulations on short selling enforced by the U.S. Securities and Exchange Commission, or SEC, including ... Read Answer >>
  6. What are the SEC (Securities And Exchange Commission) rules about OTC (over-the-counter) ...

    Find out how the Securities and Exchange Commission and the Financial Industry Regulatory Authority regulate trades on the ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center