The New York Stock Exchange's Board of Directors on Thursday moved to loosen the curbs imposed during volatile trading, a move welcomed by program traders.
Currently, the NYSE imposes trading limits anytime the Dow Jones Industrial Average moves up or down by more than 50 points.
The new "collars" will be 2 percent of the average closing value of the Dow for the previous month, and will be recalculated quarterly.
Trading limits were first imposed in 1990. The move was prompted by the 1987 market crash when the Dow lost more than 500 points in one day.
The Board's recommendation will take effect after approval from the Securities and Exchange Commission, the NYSE said.
Orders that are entered when the curbs are in effect must work to stabilize the market and are required to be entered as a "buy minus" or a "sell plus."
Traders said the changes to the program trading collars had been anticipated for some time. Program traders disliked the earlier collars, claiming they prevented them from exploiting inefficiencies in the market.
Program trading "is a very profitable part of profits" for large Wall Street firms, said Ned Collins, head of trading at Daiwa Securities. "It allows them to take advantage of virtually risk-less situations."
The NYSE directors also eliminated the related "sidecar" provision. The sidecar rules restrict program trading orders when the S&P 500 futures contract drops 12 points from the previous day's close.
Written By Emily Church and Stephanie O'Brien