The New York Stock Exchange, Nasdaq and BATS Global Markets are seeking to harmonize certain critical functions in a bid to increase market resiliency during times of extreme volatility.
The exchanges announced on Thursday that they plan to file a proposed set of rules and update to the plan for dealing with extraordinary volatility, known as the limit up limit down (LULD) plan with the U.S. Securities and Exchange Commission (SEC) in the coming weeks.
The LULD plan, which the SEC approved on a pilot basis in 2012, aims to prevent trades in individual securities at extreme prices. The proposed update to that plan would eliminate the times at which securities could trade without those limits; eliminate the rules for dealing with erroneous trades when those limits are in place; and standardize how the exchanges carry out automated re-openings after a trading pause.
The exchanges are also working to reduce trading halts and price dislocations and they will be proposing changes to align the LULD’s parameters “to improve the price discovery process after a trading pause.”
Apart from these co-ordinated efforts, the various exchanges are also taking a variety of other steps designed to “improve the stability and resiliency of their respective markets,” they note.