Here's What 'Rule 48' Is

Some historians may refer to Monday, August 24, 2015 as "The Second Black Monday."

In pre-market trading S&P futures are down 4.1 percent, NASDAQ 100 futures have fallen nearly 5 percent and the Dow is off 4.2 percent. Overnight, European markets fell between 4 and 5 percentage points, while the Shanghai Composite closed down 8.5 percent.

The trading action comes after a poor showing on Friday that had many investors considering the possibility of a 15-20 percent correction.

Rule 48

At market open on Monday, the New York Stock Exchange revealed it will invoke "Rule 48," which was enacted by the SEC in late 2007.

Allow the NYSE to explain:

Rule 48. Exemptive Relief — Extreme Market Volatility Condition

(a) In the event that extremely high market volatility is likely to have a Floor-wide impact on the ability of DMMs to arrange for the fair and orderly opening, reopening following a market-wide halt of trading at the Exchange, or closing of trading at the Exchange and that absent relief, the operation of the Exchange is likely to be impaired, a qualified Exchange officer may declare an extreme market volatility condition with respect to trading on or through the facilities of the Exchange.

(b) In the event that an extreme market volatility condition is declared with respect to trading on or through the facilities of the Exchange, a qualified Exchange officer shall be empowered to temporarily suspend at the opening of trading or reopening of trading following a market-wide trading halt: (i) the need for prior Floor Official or prior NYSE Floor operations approval to open or reopen a security at the Exchange (Rules 123D(1) and 79A.30); and/or (ii) applicable requirements to make pre-opening indications in a security (Rules 15 and 123D(1)).

(c) A suspension under section (b) of this Rule is subject to the following provisions:

(1) (A) Before declaring an extreme market volatility condition, the qualified Exchange officer shall consider the facts and circumstances that are likely to have Floor-wide impact for a particular trading session, including volatility in the previous day's trading session, trading in foreign markets before the open, substantial activity in the futures market before the open, the volume of pre-opening indications of interest, evidence of pre-opening significant order imbalances across the market, government announcements, news and corporate events, and such other market conditions that could impact Floor-wide trading conditions.

(B) Such review shall be undertaken in consultation with relevant officers of NYSE Market and NYSE Regulation, as appropriate. Following the review, the qualified Exchange officer or his or her designee shall document the basis for declaring an extreme market volatility condition.

(2) The qualified Exchange officer will, as promptly as practicable in the circumstances, inform the Securities and Exchange Commission staff that an extreme market volatility condition has been declared, the basis for such declaration, and what relief has been granted.

(3) An extreme market volatility condition may only be declared before the scheduled opening or reopening following a market-wide halt of securities at the Exchange.

(4) A declaration of an extreme market volatility condition shall be in effect only for the particular opening or reopening for the trading session on the particular day that the extreme market volatility condition is determined to exist. The Exchange may declare a separate extreme market volatility condition on subsequent days subject to sections (b)(1) through (b)(3) above.

(5) A declaration of extreme market volatility shall not relieve DMMs from the obligation to make pre-opening indications in situations where the opening of a security is delayed for reasons unrelated to the extreme market volatility condition.

(d) For purposes of this Rule, a "qualified Exchange officer" means the Chief Executive Officer of ICE, or his or her designee, or the Chief Executive Officer of NYSE Regulation, Inc., or his or her designee.

Adopted: December 6, 2007 (NYSE-2007-111).

Amended: October 7, 2008 (NYSE-2008-102); October 24, 2008 (NYSE-2008-46); December 10, 2008 (NYSE-2008-127); December 29, 2008 (NYSE-2008-139); March 31, 2009 (NYSE-2009-35); April 13. 2009 (NYSE-2009-18); August 15, 2013 (NYSE-2013-42); May 13, 2014 (NYSE-2014-23).