Black Monday: Reforms - Business in United States of America

Black Monday

Black Monday: Causes

The reforms implemented after Black Monday were designed to sustain the stock market’s structure during a crisis. Circuit breakers or trading halts were instituted to forestall a complete collapse of the stock exchange: If the market’s value were to fall by a certain number of points, trading would be automatically suspended for a specified period of time to allow brokers and investors to calm down. Other improvements included improved coordination among federal agencies and among the various markets, more authority being given to the SEC to act on an emergency basis, and restrictions being placed on computer trading. Over-the-counter (OTC) market specialists and market makers were held more accountable and were required to publicize their quotes more openly, clearance and settlement systems were improved, and cross-margining programs were implemented. These reforms collectively reduced but did not eliminate the possibility of another severe stock market crash.

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