The coronavirus-fueled sell-off for stocks is prompting traders to ask what else regulators can do to intervene in cascading markets.

The virus’s spread -- combined with a harrowing decline for oil after top producers initiated a price war -- already set off a circuit breaker Monday that halted trading for 15 minutes when the S&P 500 Index plunged more than 7% from the previous day’s close.

If the carnage worsens, the U.S. Securities and Exchange Commission and other financial watchdogs around the globe could conceivably step in and take more extreme measures. These include banning short selling, imposing stricter halts in trading of companies whose shares suffer precipitous falls and, though it would be a radical measure, shutting down stock markets.

Wall Street has a bit of a love-hate relationship with such tactics. Many industry executives consider them an unnecessary intrusion in the markets and question whether they actually work. Some even argue the moves can exacerbate slumps by making already nervous traders even more anxious.

But Wall Street embraced regulatory intervention during the 2008 financial crisis. Bank leaders started fretting that their cratering share prices could contribute to runs on their firms, with clients and depositors potentially pulling funds en masse from seemingly teetering institutions. Bank chief executive officers weren’t shy about expressing their concerns to regulators, who ultimately banned bearish bets against almost 1,000 financial stocks. It was a highly questioned and scrutinized decision.

With markets again sliding, here’s an overview of the weapons regulators have in their arsenals to fight back:

Circuit Breakers
Circuit breakers were introduced in the U.S. after the Dow Jones Industrial Average plunged 23% on Black Monday in October 1987. They trigger a timeout from trading after prices tumble by a predetermined amount.

The market wide circuit breaker for the S&P 500 works like this: If the index falls 7% intraday, trading is paused for 15 minutes. If trading restarts and the index then falls by 13% from the previous day’s close, trading is halted for another 15 minutes. If the decline hits 20%, markets close for the day.

Following the 2010 “flash crash,” in which stocks plunged almost 10% in minutes before quickly recovering, trading limits were implemented for individual securities. The current restrictions, known as limit up and limit down, aim to curb stocks from mistakenly trading outside of specified price bands. As a result, stocks can’t be quoted 5% lower or higher than their average reference price in the preceding five minutes for most of the day. If no trades can be executed within that band, then trading is halted for five minutes.

Presumably, regulators could tighten these safeguards to respond to coronavirus.

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