Monday, January 13, 2014

Equity Trader Alert #2014 - 3
Limit Up/Limit Down Update and Testing Details

Markets Impacted:

Contact Information:

What you need to know:

  • NASDAQ OMX will offer testing to support the implementation of Limit Up/Limit Down for the last 15 minutes of regular trading that is currently scheduled to begin on Monday, February 24, 2014.
  • NASDAQ OMX equities markets will be available for testing on Saturday, February 8, 2014 and Saturday, February 22, 2014.
  • NASDAQ submitted a filing to the SEC to update rules related to the Closing Cross when there is a LULD pause during the last 10 minutes of regular trading.

Will NASDAQ OMX equities markets be available for testing of the February 24th implementation of LULD?

Yes. The NASDAQ Stock Market® (NASDAQ®), NASDAQ OMX BXSM (BXSM) and NASDAQ OMX PSXSM (PSXSM) will offer testing on Saturday, February 8, 2014 and Saturday, February 22, 2014 to prepare for the February 24th NMS date that will add the last 15 minutes of regular trading to the Limit up/Limit Down Plan (LULD). Additional test details including testing scripts will be published at a later date.

What is the purpose of these tests?

NASDAQ OMX® is conducting these Saturday tests as part of an effort to ensure that our Members are prepared for the market wide changes relating to the implementation of Limit Up/Limit Down to the closing period (final 15 minutes of regular trading). In addition to the market wide changes, NASDAQ has filed with the SEC to reflect changes to the existing closing processes and would like to offer firms the opportunity to test these changes.

What is changing regarding the NASDAQ Closing Cross in the event of an LULD pause between 15:50 and 16:00?

If a security is paused due to LULD between 15:50 and 16:00, trading will not resume prior to the close and the system will conduct a LULD Closing Cross at 16:00. After the LULD Closing Cross, extended hours trading will commence.

The LULD Closing Cross will be extended in one minute increments past 16:00 if:

  • A market order imbalance exists at the scheduled time of the LULD Closing cross, or
  • The price of the cross moves by more than 5% or $0.50 cents (whichever is greater) at any time during the last 15 seconds of the pause.

How will the closing price be determined when an LULD pause occurs in the last 10 minutes of regular trading?

If a LULD pause occurs during the last 10 minutes of regular market hours, a LULD Closing Cross will be used to determine the closing price. The LULD Closing Cross price is determined by taking all closing interest (MOC, LOC, and Imbalance Only (IO) orders), the remaining orders on the continuous book prior to the LULD pause, and any new interest entered after the LULD pause (i.e. during the LULD pause/halt period). Any excess interest at the calculated closing price will be available for execution against available imbalance only orders on the opposite side of the market.

What happens to previously booked orders that were intended for the closing cross?

If a LULD pause occurs at or after 15:50 and a LULD Closing Cross will occur, all MOC, LOC, and IO orders, and resting continuous book orders will remain on the book and be eligible to participate in the Closing Cross. Continuous book orders (including those entered prior to and during the LULD pause) may be cancelled or modified at any time prior to the LULD Closing Cross, however any previously entered MOC, LOC, and IO orders may not be cancelled or modified. In addition, new market and limit orders may be entered, modified, and cancelled during the pause for participating in the LULD Closing Cross. New IO orders may also be entered and modified (to increase shares only), but not cancelled during the LULD pause/closing cross. All time-in-force (TIF) orders are eligible to participate in the LULD Closing Cross.

Where can I find additional information?

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