Clearly Erroneous Transactions Policy During Pilot Period Set To Expire On The Earlier Of August 11, 2011 Or The Date On Which A Limit Up / Limit Down Mechanism To Address Extraordinary Market Volatility, If Adopted, Applies.
To file a Clearly Erroneous Transaction Request, complete and submit the online filing form.
When filing your request, please note the toll filing deadline. A phone call is not necessary prior to filing and may cause delay in the filing process.
Erroneous Review Guidance
NASDAQ OMX is providing general guidance on when transactions may be deemed erroneous under Rule 11890. This guidance is not a mandate of the rule but is information on how NASDAQ OMX generally applies the terms of the rule (at NASDAQ OMX’s discretion) to determine whether an execution is clearly erroneous.
The terms of a transaction executed on NASDAQ are "clearly erroneous" when there is an obvious error in any term, such as price, number of shares or other unit of trading, or identification of the security. A transaction made in clearly erroneous error and cancelled by both parties or determined by NASDAQ to be clearly erroneous will be removed from the consolidated tape.
An erroneous complaint must be transmitted online or via facsimile to NASDAQ OMX MarketWatch within a certain time period, depending on when the alleged erroneous trade was executed.
Except as provided below, any member or person associated with a member that seeks to have a transaction reviewed shall submit a written complaint to NASDAQ MarketWatch within 30 minutes of the execution time. Routed executions to other market centers will generally have an additional 30 minutes from receipt of their participant's timely filing, but no longer than 60 minutes from the time of the execution at issue, to file with NASDAQ for review of transactions routed to NASDAQ from that market center and executed on NASDAQ.
In the case of an Outlier Transaction, a NASDAQ OMX official may at its sole discretion, and on a case-by-case basis, consider requests received pursuant to this rule after 30 minutes, but not longer than sixty minutes after the transaction in question.
"Outlier Transaction" means a transaction where:
(A) the execution price of the security is greater than three times the current Numerical Guidelines, or
(B) the execution price of the security in question is not within the Outlier Transaction parameters, but the execution price breaches the 52-week high or 52-week low. In such cases, NASDAQ OMX may consider Additional Factors in determining if the transaction qualifies for further review or if NASDAQ OMX shall decline to act.
Transactions after 8:00 p.m., ET
If you are filing for Erroneous Trade adjudication after 8:00 p.m., ET:
- Please submit your request in writing to NASDAQ OMX MarketWatch, via online submission or fax to 301-978-8511. (A phone call is not necessary prior to filing.)
- Clearly Erroneous filings received by MarketWatch after 8:00 p.m. ET will be processed on the next business day.
Documentation Required for Filing a Complaint
A complaint must include the following information:
- Time Of the Transaction(s)
- Security symbol(s)
- Number of shares executed
- Price(s) or range of filing
- Side (Buy, Sell or Both)
- The factual basis for believing that the trade is clearly erroneous
If NASDAQ OMX receives a complaint that does not contain all the required supporting information, NASDAQ OMX will immediately notify the filer that the complaint is deficient. NASDAQ OMX encourages market participants to use the complaint filing form found on this website, which lists all the required information. While it is not mandatory, this form assists both the initiator of the complaint and NASDAQ OMX in its adjudication of the petition.
Reference Price Determination
NASDAQ OMX generally uses the Numerical Threshold of a trade when determining whether a transaction is clearly erroneous. A transaction executed shall be found to be clearly erroneous only if the price of the transaction to buy (sell) that is the subject of the complaint is greater than (less than) the Reference Price by an amount that equals or exceeds the Numerical Guidelines set forth below. The execution time of the transaction under review determines whether the threshold is Regular Trading Hours or Pre-opening and After Hours Trading Hours (which occurs before and after the Regular Trading Hours). The Reference Price will be equal to the consolidated last sale immediately prior to the execution(s) under review except for: (A) Multi- Stock Events involving twenty or more securities, (B) transactions not involving a Multi- Stock Event that trigger a trading pause and subsequent transactions, and (C) in other circumstances, such as, for example, relevant news impacting a security or securities, periods of extreme market volatility, sustained illiquidity, or widespread system issues, where use of a different Reference Price is necessary for the maintenance of a fair and orderly market and the protection of investors and the public interest.
NASDAQ OMX does not normally break trades that are between the Reference Price and up to but not including the Numerical Threshold. Refer to the chart below for more details:
|Reference Price, Circumstance or Product||Regular Trading Hours Numerical Guidelines (Subject transaction's % difference from the Reference Price):||Pre-Opening and After Hours Trading Session Numerical Guidelines (Subject transaction's % difference from the Reference Price):|
|Greater than $0.00 up to and including $25.00||10%||20%|
|Greater than $25.00 up to and including $50.00||5%||10%|
|Greater than $50.00||3%||6%|
|Multi- Stock Event - Filings involving five or more, but less than twenty, securities whose executions occurred within a period of five minutes or less||10%||10%|
|Multi-Stock Event - Filings involving twenty or more securities whose executions occurred within a period of five minutes or less||30%, subject to the terms of below||30%, subject to the terms of below|
|Leveraged ETF/ETN securities||Regular Trading Hours Numerical Guidelines multiplied by the leverage multiplier (ie. 2x)||Regular Trading Hours Numerical Guidelines multiplied by the leverage multiplier (ie. 2x)|
Multi-Stock Events Involving Twenty or More Securities: During Multi-Stock Events involving twenty or more securities the number of affected transactions is such that immediate finality may be necessary to maintain a fair and orderly market and to protect investors and the public interest. In such circumstances, NASDAQ may use a Reference Price other than consolidated last sale. With the exception of those securities under review that are subject to an individual stock trading pause as described below, and to ensure consistent application across market centers when this paragraph is invoked, NASDAQ will promptly coordinate with the other market centers to determine the appropriate review period, which may be greater than the period of five minutes or less that triggered application of this paragraph, as well as select one or more specific points in time prior to the transactions in question and use transaction prices at or immediately prior to the one or more specific points in time selected as the Reference Price. NASDAQ will nullify as clearly erroneous all transactions that are at prices equal to or greater than 30% away from the Reference Price in each affected security during the review period selected by NASDAQ and other markets consistent with this paragraph.
Additional Factors: Except in the context of a Multi-Stock Event involving five or more securities, and individual stock trading pauses as described in below a NASDAQ official may also consider additional factors to determine whether an execution is clearly erroneous, including but not limited to, system malfunctions or disruptions, volume and volatility for the security, derivative securities products that correspond to greater than 100% in the direction of a tracking index, news released for the security, whether trading in the security was recently halted/resumed, whether the security is an IPO, whether the security was subject to a stock-split, reorganization, or other corporate action, overall market conditions, Pre-Opening and After Hours Trading Session executions, validity of the consolidated tapes trades and quotes, consideration of primary market indications, and executions inconsistent with the trading pattern in the stock. Each additional factor shall be considered with a view toward maintaining a fair and orderly market and the protection of investors and the public interest.
Individual Stock Trading Pauses: For purposes of this paragraph, the phrase "Trading Pause Trigger Price" shall mean the price that triggered a trading pause pursuant to NASDAQ Rule 4120 (a)(11). The Trading Pause Trigger Price reflects a price calculated by the primary listing market over a rolling five-minute period and may differ from the execution price of a transaction that triggered a trading pause. In the event a primary listing market issues an individual stock trading pause in any eligible securities, and regardless of whether the security at issue is part of a Multi-Stock Event involving five or more securities as described in paragraphs above, NASDAQ shall utilize the Trading Pause Trigger Price as the Reference Price for any transactions that trigger a trading pause and subsequent transactions occurring before the trading pause is in effect on NASDAQ. NASDAQ will rely on the primary listing market that issued an individual stock trading pause to determine and communicate the Trading Pause Trigger Price for such stock. Notwithstanding the discretion otherwise provided by the first sentence of paragraph (b)(ii) below, NASDAQ shall review, on its own motion pursuant to paragraph (b)(ii), transactions that trigger a trading pause and subsequent transactions occurring before the trading pause is in effect on NASDAQ. In connection with the review of transactions pursuant to this paragraph, NASDAQ will apply the Numerical Guidelines set forth in paragraph (C)(1) above other than the Numerical Guidelines applicable to Multi-Stock Events. In conducting this review, and notwithstanding anything to the contrary contained in paragraph (C)(1), where a trading pause was triggered by a price decline (rise), NASDAQ will limit its review to transactions that executed at a price lower (higher) than the Trading Pause Trigger Price.
Complaints Failing to Meet Documentation Requirements
NASDAQ OMX staff will notify the complainant immediately of any deficiencies in the filing so the complainant can revise and resubmit documentation, if possible, within the 30-minute time frame established by the rule.
In cases where a market participant’s claim is not eligible for review because the complaint does not include the required documentation, the market participant may appeal to the Market Operations Review Committee (MORC) by alleging a mistake of material fact upon which it believes the NASDAQ OMX Official’s determination was based. The MORC will not substantively review an appeal of a determination that does not allege a mistake of material fact. If the MORC finds the determination was based on a mistake of material fact, the MORC remands the matter to the NASDAQ OMX Official for adjudication. If the MORC finds the determination was not based on a mistake of material fact, the determination is final and binding.
Reviewing Transactions on NASDAQ’s Own Motion
System Disruption or Malfunctions: In the event of any disruption or a malfunction in the operation of any electronic communications and trading facilities of NASDAQ in which the nullification of transactions may be necessary for the maintenance of a fair and orderly market or the protection of investors and the public interest exist, the President of NASDAQ or any designated officer or senior level employee ("Senior Official") of NASDAQ, on his or her own motion, may review such transactions and declare such transactions arising out of the operation of such facilities during such period null and void. In such events, the Senior Official will rely on the provisions of above, but in extraordinary circumstances may also use a lower Numerical Guideline if necessary to maintain a fair and orderly market, protect investors and the public interest. Absent extraordinary circumstances, any such action of the Senior Official pursuant to this paragraph shall be taken within thirty (30) minutes of detection of the erroneous transaction. When extraordinary circumstances exist, any such action of the Senior Official must be taken by no later than the start of Regular Trading Hours on the trading day following the date of execution(s) under review. Each Member involved in the transaction shall be notified as soon as practicable by NASDAQ, and the party aggrieved by the action may appeal such action in accordance with the provisions of Rule 11890(c)(1).
Senior Official Acting on Own Motion: A Senior Official, acting on his or her own motion, may review potentially erroneous executions and declare trades null and void or shall decline to take any action in connection with the completed trade(s). In such events, the Senior Official will rely on the provisions of above. Absent extraordinary circumstances, any such action of the Senior Official shall be taken in a timely fashion, generally within thirty (30) minutes of the detection of the erroneous transaction. When extraordinary circumstances exist, any such action of the Senior Official must be taken by no later than the start of Regular Trading Hours on the trading day following the date of execution(s) under review. When such action is taken independently, each party involved in the transaction shall be notified as soon as practicable by NASDAQ, and the party aggrieved by the action may appeal such action in accordance with the provisions of Rule 11890(c)(1).
Preventing and Monitoring Erroneous Transactions
Fat Finger Checks (via Pre-Trade Risk Management)
- Fat Finger Checks allow you to compare price instructions on incoming orders against the current displayed size and price in the market. If the order is not in line with the displayed price and size, the order will be rejected before it can execute.
- Firms can set order limits at several levels to ensure that fat fingered orders never execute.
For more information, please visit our Pre-Trade Risk Management Fact Sheet.
Reg Recon, available as an add-on service to the NASDAQ OMX Workstation® and WeblinkACT 2.0, offers a Clearly Erroneous Trade Viewer that gives firms an alert for any potentially erroneous trades executed on the NASDAQ OMX Exchange. If a trade meets the guidance referenced above, an alert will appear for that trade allowing the customer to decide at a glance whether or not to send a filing request to NASDAQ OMX MarketWatch.
Later this month, users will have a fully automated way to select and send their erroneous filings to NASDAQ OMX MarketWatch.
Firms that do not have Reg Recon can subscribe by completing the NASDAQ OMX Front-End Access Order Form (PDF) and faxing it to NASDAQ OMX Subscriber Services at 212.231.5426.
Appeal of Clearly Erroneous Rulings
- An appeal must be received in writing within 30 minutes after the person making the appeal is given notification of the determination being appealed. Appeals may be faxed to 301-978-8511.
- Once a written appeal has been received, the counterparty to the trade will be notified of the appeal, and both parties can submit any additional supporting written information until the time the appeal is considered by the appropriate committee.
- The party initiating the appeal shall be assessed a $500 fee if the Market Operations Review Committee (MORC) upholds the decision of the NASDAQ OMX official who made the initial determination. The fee will be reflected in the monthly invoice.
- Either party to a disputed trade may request the written information provided by the other party during the appeal process.
- An appeal shall not operate as a stay of the determination being appealed, and the scope of the appeal shall be limited to trades to the person making the appeal.
- Once a party has appealed a determination to the appropriate committee, the determination shall be reviewed and a decision rendered, unless both parties to the transaction agree to withdraw the appeal prior to the time a decision is rendered, or the party filing the appeal withdraws its appeal prior to the notification of counterparties.
- Upon consideration of the record, the MORC shall affirm, modify, reverse or remand the determination.
- The decision of a committee pursuant to an appeal, or a determination by a NASDAQ OMX officer that is not appealed, shall be final and binding upon all parties and shall constitute final action on the matter. Any determination by a NASDAQ OMX officer or any decision by a committee shall be rendered without prejudice as to the rights of the parties to the transaction to submit their dispute to arbitration.
NASDAQ OMX members will be charged a $250 fee for each additional complaint filed exceeding two unsuccessful clearly erroneous complaints during a calendar month. Each security listed in a filing is treated as a separate complaint for purposes of this fee. An unsuccessful complaint is one in which NASDAQ OMX does not break any of the trades included in that complaint.
Parties who appeal the filing fee are subject to a $500 fee for unsuccessful appeals of Clearly Erroneous Rule 11890 adjudications if the Market Operations Review Committee (MORC) upholds the decision of the NASDAQ OMX official who made the initial determination. The fee will be reflected in the monthly invoice.
For complete information please refer to our pricing schedule.