BATS Document Suggests LULD Delay

A timetable for the implementation of limit-up limit-down (LULD) measures, a form of market circuit breakers in the event of wild price swings, has been published by BATS, suggesting that the enactment date of February will be postponed to April.

Last year, the Securities Industry and Financial Markets Association (SIFMA) expressed concern over the timeframe for implementation in a letter to the US Securities and Exchange Commission (SEC), saying that the technology needed to facilitate the measures could not be put in place by February.

While the SEC, which announced the rules in June 2012, has yet to officially approve the revised SIFMA timetable, the inclusion of the date in an official exchange notice is significant. Under BATS' timetable, April 8 will be the start date for the first phase of the project, with August 1 being the start date of the second roll-out. Direct Edge, in its own timetable, has the official start date but references the proposed timetable. BATS also mentions in the notice that the timeframe has yet to receive SEC approval.

LULD measures are specifically designed to mitigate the effect of events like the Flash Crash, which temporarily wiped $1 trillion from the value of the US stock markets in May 2010. The value recovered minutes later but spooked participants and regulators alike, with algorithmic and high-frequency trading receiving the popular blame despite a joint SEC and Commodity Futures Trading Commission (CFTC) study absolving it.