Later this month, derivatives exchange the Bourse de Montréal Inc. (MX) will implement new trading curbs designed to prevent extreme volatility.
The MX announced that it will introduce new “top-of-the-book” price limits after the market close on Jan. 23.
Last year, the exchange proposed rule changes to expand its existing set of market thresholds. The new curbs are intended primarily to address the risk of short-term volatility early in the trading day before the cash markets are open.
“Early session trading can be more sensitive to unexpected movements due to the absence of trading on
the underlying asset,” the MX stated, adding that it will initially use the new controls on index futures in the early trading session (2:00 a.m. to 9:15 a.m.).
“The top-of-the-book price limits are expected to reduce erroneous and disruptive orders during
early session hours by preventing orders that are not consistent with the principles of market integrity,” the MX said.
“This enhancement will encourage market participants to trade at a price closer to the bid/ask that better
reflects reliable and available information in a fair and orderly fashion,” it added.