NYSE Arca, a unit of NYSE Euronext, has filed with the Securities and Exchange Commission to introduce a new price collar designed to safeguard the execution of market orders.
The new price collar is the latest in a series of steps implemented to improve market practices and structure since the flash crash of May 6, 2010.
According to NYSE Arca, the new collar will prevent market orders to buy stock from executing or routing to another trading venue at a price above the collar. Conversely, market orders to sell will not execute or route at a price below the trading collar.
The collar for issues priced $25 or less will be 10% above or below the last trade price; for issues priced above $25 up to and including $50, the collar will be 5%; and for issues above $50, the collar will be 3%.
These limits will help prevent erroneous trades from inadvertently triggering the individual-stock circuit breakers and are consistent with those in the newly implemented rules concerning the cancellation of erroneous trades, the company said.
Joseph Mecane, EVP and co-head of US listings and cash execution at NYSE Arca, said: “The market-order collar is an additional protection that complements those already in place and addresses a specific issue highlighted by the flash crash market orders that were executed at anomalous prices in electronic markets.
“The new collar is designed to help limit potential harm from extreme market volatility by preventing trades from occurring a specified percentage away from the last trade price.”