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Thursday, July 28, 2016

Equity Trader Alert #2016 - 172
Nasdaq To Implement New Limit Order Protections

Category:

  • New Functionality

Markets Impacted:

Contact Information:

Resources:

Subject to SEC approval, The Nasdaq Stock Market LLC (“Nasdaq”), NASDAQ BX, Inc. (“BX”) and NASDAQ PSX (“PSX”) are implementing new price protections on incoming limit orders that exceed calculated pre-set standard limits. The new protections are designed to prevent the execution of erroneous orders. This feature will be rolled out starting August 22, 2016.

Current risk protections allow for partial executions of orders with the remainder of the order rejected back when a threshold is reached.

With the new Limit Order Protection (LOP), Nasdaq, BX and PSX will use the National Best Bid or Offer (bid for sell orders and offer for buy orders) as the LOP Reference Price to calculate the Limit Order Price Protection Threshold. If the order price exceeds the greater of 10% or $.50 of the LOP Reference Price the entire order will be rejected at the time of order entry. These protections will be in place for all securities across all trading sessions. The changes will offer improved customer protections and eliminate partial executions from occurring on transactions that are the result of unintended prices.

All quotes and orders will be subject to Limit Order Protection with the exception of:

  • Market Orders
  • Securities that are not trading (Halts/IPOs)
  • Orders that are directed to an opening/closing auction
  • Orders marked as ISO
  • Orders marked with a Market Maker Peg attribute
  • Orders where the Limit Order Protection has been suspended

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