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Tuesday, February 16, 2016

Equity Trader Alert #2016 - 29
Nasdaq to Launch New Limit-Up, Limit Down Pricing Pilot

Category:

  • Pricing

Markets Impacted:

Contact Information:

Limit Up-Limit Down Pricing Pilot


Pending filing with the Securities and Exchange Commission (SEC), Nasdaq will introduce a Limit Up-Limit Down (LULD) Pricing Pilot effective Friday, April 1, 2016.

Our LULD Pricing Pilot is designed to increase liquidity during times of market volatility. The pilot provides additional incentives to Registered Nasdaq Market Makers for entering executable orders when a pilot symbol enters a limit down state (i.e. straddle state or limit state) or a trading pause.

Following the market events of May 6, 2010, the Joint CFTC-SEC Advisory Committee¹ noted that a peak load pricing solution to encourage liquidity where rebates rise in turbulent markets could be beneficial to the markets. This LULD Pricing Pilot is being initiated to test this premise, with the hopes the program can be expanded and modified to better support Nasdaq-listed securities in times of market stress.

For eligible symbols, displayable buy orders entered by Nasdaq Market Makers from the time a symbol enters a limit down state, up until Nasdaq receives a message from the SIP that the symbol has exited the state, will be eligible to receive an additional add displayed rebate of $0.0010 per share executed upon execution. Details include:

  • Buy Orders must be priced at or better than the Lower Price Band
  • Orders will remain eligible to receive the additional displayed liquidity rebate of $0.0010 when executed, unless canceled by the entering party
  • The $0.0010 will be in addition to all other applicable rebates
  • The message is received from the SIP in approximately 200 microseconds

When an LULD trading pause is declared for a symbol, all orders entered during the pause will receive a $0.0005 rebate upon execution during the re-open process.

Executions within the LULD Pricing Pilot will receive new liquidity codes. More information on the new codes will be forthcoming. Refer to the list of eligible securities here.

¹ See Recommendation Regarding Regulatory Responses to the Market Volatility Events of May 6, 2010

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Nasdaq (Nasdaq: NDAQ) is a leading global provider of trading, clearing, exchange technology, listing, information and public company services. Through its diverse portfolio of solutions, Nasdaq enables customers to plan, optimize and execute their business vision with confidence, using proven technologies that provide transparency and insight for navigating today's global capital markets. As the creator of the world's first electronic stock market, its technology powers more than 90 marketplaces in 50 countries, and 1 in 10 of the world's securities transactions. Nasdaq is home to approximately 3,900 total listings with a market value of approximately $13 trillion. To learn more, visit: business.nasdaq.com.

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