SEC equity committee approves LULD and circuit breaker modifications

SEC’s equity market structure advisory committee voted on changes earlier this week.

The Securities and Exchange Commission’s (SEC) equity market structure advisory committee has approved tweaks to the limit-up limit-down (LULD) and circuit breaker mechanisms.

The equity market structure advisory committee convened earlier this week to vote on several market quality issues proposed by its subcommittees.

The committee approved plans to modify LULD ensuring a stock that has triggered the mechanism is given four minutes to leave the limit state and prevent it from trading below the limit-down price.

After four minutes, the LULD bands will be reset to the previous triggered band as the new reference price, allowing the stock to trade freely inside the new bands.

Stocks that have triggered the LULD band will also be allowed to trade back up or down to its reference price without triggering the opposite side band.

The LULD modifications were approved by a 15-1 vote by the committee.

The committee has also widened the market-wide circuit breaker’s threshold from 7% to 10% in a unanimous vote.

News of Chair at the SEC, Mary Jo White, and trading and markets director, Stephen Luparello, departing the US regulator could see a delay in implementation.

“As we begin the transition process to new leadership at the commission and to having a full commission, we need to ensure continuity of all of the agency’s many functions and responsibilities to protect investors, promote fair, orderly and efficient markets, and facilitate capital formation,” White said to the committee this week. 

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