In France, the main French stock index is called the CAC 40. Daily price limits are implemented in cash and derivative markets. Securities traded on the markets are divided into three categories according to the number and volume of daily transactions. Price limits for each security vary by category. For instance, for the more[most?] liquid category, when the price movement of a security from the previous day's closing price exceeds 10%, the quotation is suspended for 15 minutes, and transactions are then resumed. If the price then goes up or down by more than 5%, transactions are again suspended for 15 minutes. The 5% threshold may apply once more before transactions are halted for the rest of the day. When such a suspension occurs, transactions on options based on the underlying security are also suspended. Further, when more than 35% of the capitalization of the CAC40 Index cannot be quoted, the calculation of the CAC40 Index is suspended and the index is replaced by a trend indicator. When less than 25% of the capitalization of the CAC40 Index can be quoted, quotations on the derivative markets are suspended for half an hour or one hour, and additional margin deposits are requested.
From October 6–10 the Dow Jones Industrial Average (DJIA) closed lower in all five sessions. Volume levels were record-breaking. The DJIA fell over 1,874 points, or 18%, in its worst weekly decline ever on both a points and percentage basis. The S&P 500 fell more than 20%. The week also set 3 top ten NYSE Group Volume Records with October 8 at #5, October 9 at #10, and October 10 at #1.
The economy had been growing for most of the Roaring Twenties. It was a technological golden age, as innovations such as the radio, automobile, aviation, telephone, and the power grid were deployed and adopted. Companies that had pioneered these advances, like Radio Corporation of America (RCA) and General Motors, saw their stocks soar. Financial corporations also did well, as Wall Street bankers floated mutual fund companies (then known as investment trusts) like the Goldman Sachs Trading Corporation. Investors were infatuated with the returns available in the stock market, especially by the use of leverage through margin debt.
Who Was President During 911?
Markets can also be stabilized by large entities purchasing massive quantities of stocks, essentially setting an example for individual traders and curbing panic selling. However, these methods are not only unproven, they may not be effective. In one famous example, the Panic of 1907, a 50 percent drop in stocks in New York set off a financial panic that threatened to bring down the financial system. J. P. Morgan, the famous financier and investor, convinced New York bankers to step in and use their personal and institutional capital to shore up markets.
For example, the United States has a set of thresholds in place to guard against crashes. If the Dow Jones Industrial Average (DJIA) falls 2,400 points (threshold 2) before 1:00 p.m., the market will be frozen for an hour. If it falls below 3,600 points (threshold 3), the market closes for the day. Other countries have similar measures in place. The problem with this method today is that if one stock exchange closes, shares can often still be bought or sold in other exchanges, which can cause the preventative measures to backfire.
The following day, Black Tuesday, was a day of chaos. Forced to liquidate their stocks because of margin calls, overextended investors flooded the exchange with sell orders. The Dow fell 30.57 points to close at 230.07 on that day. The glamour stocks of the age saw their values plummet. Across the two days, the Dow Jones Industrial Average fell 23%.