Trading  in Citigroup shares, one of the most heavily tradedstocks in the USA, paused for five minutes after an over-the-counter trade of about 8,821 shares was posted at a price of $3.3174, or 12.7% lower than the $3.80 price of the previous trade.

The trade was later cancelled, according to Nancy A Condon, a spokeswoman for the Financial Industry Regulatory Authority, which regulates brokerage firms. Even so, Citigroup shares closed 5% lower for the day, at $3.79.

The circuit breaker rules, in place across all stock markets two weeks ago on the recommendation of the Securities & Exchange Commission, require exchanges to pause trading for five minutes in any individual Standard & Poor’s 500 stock that moves 10% or more in either direction in a five-minute period.

It was first triggeredon June 16, after the share price of the Washington Post Company nearly doubled in an instant. That movement was also ascribed to an erroneous trade, and trades cancelled, according to exchange officials.




The circuit breaker program being tested for six months, is in response to a minicrash on May 6 that affected a range of stocks causing a rapid, 1,000-point decline in the Dow Jones industrial average. Wall Street analysts said that the halting of Citigroup’s shares on Tuesday highlighted the effectiveness of the mechanisms being tested to prevent disruptive movements in share prices.

Until this month, only the New York Stock Exchange had circuit breakers in place on individual stocks. Regulators have said that a lack of common rules across all markets worsened the flash crash, causing it to spread across a broad range of stocks.

Automated trading systems analysed the slowdown in trading on the exchange incorrectly, regulators have said, and bid down the prices in hopes of attracting buyers.

Despite the new rules, it is felt price movements were exacerbated by the fact that exchanges are using different circuit breaker systems. The New York Stock Exchange switches from electronic to manual trading when a single stock moves as little as 2% on the day.

Experts however feel that this creates a vacuum that makes price falls worse until the marketwide circuit breakers kick in, and are urging the need for a standardised platform.