U.S. market curbs will be proposed on Tuesday

Market regulators and major exchanges have been searching for solutions to protect investors and the integrity of the U.S. markets after the brief market freefall.

Securities and Exchange Commission Chairman Mary Schapiro said the new rules, or circuit breaker mechanisms, to halt trading will be proposed. The restrictions would not go into effect immediately because the rules are in the proposal stage and need to be ironed out.

Circuit breakers will act as "speed bumps to help the market adjust quickly to the high levels of volatility," Schapiro said by video link from Washington at a conference in Boston.

The SEC and exchanges are considering circuit breakers that would halt trading in a company's stock if the stock fell more than 10 percent in five minutes, multiple sources have said.

Regulators are also mulling circuit breakers that would halt trading across all markets, giving investors time to digest any news and adjust trading strategies. There are already broad index-based breakers in place, but those were not tripped when the Dow fell nearly 1,000 points before recouping some of its losses.

Breakers that would temporarily stop trading when the broader market falls 5 percent are being considered, people familiar with the talks told Reuters. That is tighter than the minimum 10 percent threshold already in place.

Regulators have not yet pinpointed what caused the afternoon market plunge and quick recovery on May 6, which rattled investors around the world.

Later on Tuesday, the SEC and the Commodity Futures Trading Commission are due to disclose their preliminary findings on the meltdown.

(Reporting by Svea Herbst-Bayliss, Jonathan Spicer and Rachelle Younglai; editing by Gerald E. McCormick and John Wallace)