I think that such bitUSD/BTSX volatility is not beneficial for the system and it would only produce panic.
I think limiting the shorts at 110% of the price feed will prevent BTSX/bitUSD price volatility and might be better for the system.
Essentially there will be forced market peg and trade might cease during high volatility periods and resume afterwards.
The other option is force-cover as Bytemaster suggested.
Is there any other?
if you stop trading every time there is volatility, you no longer have a market that is worth participating in. Imagine the being locked out and not able to execute. That will cause people to turn away from using the system.
I have noticed on the NXT asset exchange mgwBTC : NXT spreads have narrowed dramatically over the last two weeks. More users are causing the spread to narrow. There are no limits or rules and the system is getting better.
I like the bitshares platform but you cannot force a market to behave the way , you the developers want. or you may get the market to behave the way you want, but you will have fewer market participants. Are you going to try and impose rules on every pair within the system?