Oct. 19 (Bloomberg) — Paul Tudor Jones, founder of $11 billion hedge-fund firm Tudor Investment Corp., said market regulators should cap how much stocks and derivatives can rise or fall to avoid a repeat of the May 6 stock crash.
Every financial instrument that’s traded on an exchange should have some type of price limit, and existing limits should be reviewed with the goal of tightening many, he said yesterday at the Global Financial Leadership Conference in Naples, Florida. Equity index futures and options shouldn’t be allowed to climb or decline more than 8 percent on a day, he said.
“Anything greater than an 8 percent move in stocks in one day is probably because of something either so fantastic or so bad that taking more than another day to think about it is a good thing,” Jones, 56, said.
Regulators are facing pressure from investors to explain whether trading rules have failed to keep pace with markets after a chain of events sent the Dow Jones Industrial Average down as much as 998.50 points on May 6. The U.S. Securities and Exchange Commission said this month that the automatic execution of a sale order on a large block of futures with no regard for price helped trigger the crash, which snowballed into an $862 billion rout.