SHORT TAKE: Limit Up/Limit Down for Life


Let’s keep the price bands.

ITG recently published its monthly research note and pointed out that the New York Stock Exchange has officially petitioned the Securities and Exchange Commission to make permanent the Limit Up / Limit Down (LULD) rules which have operated under pilot status since 2013.

“As set forth below, the Participants now propose to: (i) amend Section VIII of the Plan to transition the Plan from operating on a pilot to a permanent basis; (ii) adopt a mechanism for periodic review and assessment of the Plan; (iii) eliminate the doubling of the Percentage Parameters between 9:30 a.m. and 9:45 a.m.;21 and (iv) eliminate the doubling of the Percentage Parameters between 3:35 p.m. and 4:00 p.m., or in the case of an early scheduled close, during the last 25 minutes of trading before the early scheduled close, for Tier 2 NMS Stocks with a Reference Price above $3.00. “

As ITG pointed out, part of the petition, the widening out of volatility bands for the first 15 minutes of the day would be eliminated. The bands would continue to be widened in the final 25 minutes of trading for tier 1 (more liquid) stocks. The new rules also call for a small change to the price used if the primary market has no opening print.

“SEC Chair Jay Clayton is seeking to bring the current 17 market structure pilots down to a single-digit number, so we expect this petition to be approved without much debate,” ITG analysts wrote.

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