equity markets

FINRA and National Securities Exchanges File Limit Up-Limit Down Proposal with the SEC

On April 5, 2011, FINRA and national securities exchanges filed a proposed plan with the SEC to establish a new “limit up-limit down” mechanism to address extraordinary market volatility in U.S. equity markets. The proposed mechanism would limit trades in listed equity securities to a price band set at a percentage level above and below the average price of the security over the preceding five-minute period, subject to certain exceptions. If approved, this mechanism would replace the circuit breakers which were put in place in response to market events on May 6, 2010. Comments must be submitted within 21 days from the date of publication in the Federal Register. SEC Release. Proposed Plan.

SEC Approves Rules Prohibiting Market Maker Stub Quotes

On November 8, the SEC approved new rules to strengthen the minimum quoting standards for market makers and effectively prohibit “stub quotes” in the U.S. equity markets.  Executions against stub quotes represented many of the trades executed at extreme prices on May 6 and subsequently broken.  The rules require market makers in exchange-listed equities to maintain continuous two-sided quotations during regular market hours that are within a certain percentage band of the national best bid and offer.  The requirements become effective on December 6. SEC Release. SEC Rule.