March 2020 was one of the most volatile months ever measured by the CBOE Volatility Index, largely as a result of the COVID-19 pandemic, and volatility has remained elevated compared to historic norms. Regulators such as the SEC, FINRA, the CFTC, the NYSE and Nasdaq have tools available to help them and the firms they regulate respond to market volatility.
Our aim is to highlight how regulators used their existing regulatory authority effectively during this period to promote market stability, to examine certain limitations of these tools, and to provide some historical context for these actions. Moreover, with continuing uncertainty as to the future economic effects of COVID-19 and regulatory, public health, and consumer responses thereto, markets may continue to experience volatility.
Market participants should revisit these considerations whenever volatile conditions arise.