Price Banding Delayed, But Testing Starts
January 28, 2013
National exchanges Saturday began industry-wide testing of new limits on the movement up or down of stocks during trading and are moving ahead on market-wide circuit breakers being mandated by the Securities and Excchange Commission.
But they won’t be in place in February, as originally planned.
So called “limit up, limit down’ price bands were set to go into effect next week, on February 4. But the Nasdaq Stock Market and other exchanges say the implementation of the new controls, which would be be set at a percentage level above and below the average price of the security over the immediately preceding five-minute period, won’t start being rolled into effect until starting in April. And that the new schedule requires SEC approval
Also included in the rollout are revised market-wide circuit-breakers.
The Limit Up-Limit Down (LULD) testing "went as planned over the weekend,” said BATS Global Markets spokesperson Suzanne O'Halloran.
“It was a good, first step for the industry. Generally speaking, it went well,'' said Direct Edge spokesman Jim Gorman. "We’ll learn more with each successive round.”
Nasdaq and NYSE Euronext declined to comment on their testing.
On May 13, the SEC approved on a pilot basis the Limit Up-Limit Down plan to address extraordinary market volatility.
The roll out was pushed back at the request of the exchanges and the Securities Industry and Financial Markets Association (SIFMA). SIFMA said it was "extremely concerned" that there was not enough information on the plan to properly develop the technology specifications for the systems and coding changes in time for the Feb. 4 launch.