SEC approves rules for breaking clearly erroneous trades
The Securities and Exchange Commission (SEC) today announced its approval of new exchange rules (see, for example, filings respecting NYSE Arca, NASDAQ and the Chicago Board Options Exchange) for "breaking stock trades that deviate so substantially from current market prices that they are considered 'clearly erroneous.'" Specifically, the rules seek to provide consistent standards across equity markets.
Generally, the rules provide that a trade may be found to be clearly erroneous only if the price of a transaction occurring during regular trading hours exceeds the consolidated last sale price by more than 10% for stocks priced under $25, 5% for stocks priced between $25 and $50 and 3% for stocks priced over $50. The thresholds are set at 20%, 10% and 6%, respectively, for transactions occurring outside of regular trading hours. A filing involving five or more securities will be aggregated into a single filing, to which a 10% threshold will apply. Further, the erroneous trade review process must generally begin within 30 minutes of the trade.
Compare these quite specific rules to the more general discretion that applies on Canadian marketplaces by virtue of UMIR Rule 10.9, which has resulted in cancellations being quite rare events in Canada.
