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General
Direct Edge considers an execution to be clearly erroneous when the print is substantially inconsistent with the current trading pattern of the security. Transactions are reviewed in light of the circumstances at the time of the transactions and with a view toward facilitating a fair and orderly market. A market participant’s simple assertion that it made a mistake in entering an order or that it failed to pay attention to quotes and prices in the marketplace may not be sufficient to establish that a transaction was clearly erroneous.
Clearly Erroneous Review Requests
Numerical Guidelines
Numerical Guidelines have been revised to create clear standards for determining what constitutes a clearly erroneous transaction. These Numerical Guidelines represent the general consensus approach and were developed based on the collective experiences of a market-wide group, and are being implemented in conjunction with the other exchanges. Direct Edge believes that the thresholds established are fair and appropriate, and apply evenly to all participants.
Under the uniform guidelines, a transaction executed during the pre-market trading session, the core trading session and post-market trading session may be found to be clearly erroneous only if the price of the transaction to buy is greater, or less in the case of a sale, than the Reference Price by an amount that equals or exceeds the Numerical Guidelines for a particular transaction category (as set forth below).
Direct Edge will generally use the consolidated last sale as the Reference Price to determine whether a trade is clearly erroneous. The execution time of the transaction under review determines which Numerical Guideline is applied. The chart below outlines the details.
Reference Price:
Consolidated Last Sale |
Core Trading Session Numerical Guidelines
(Subject transaction's % difference from the Consolidated Last Sale): |
Pre-market and Post-market Trading Session Numerical Guidelines
(Subject transaction's % difference from the Consolidated Last Sale): |
| Greater than $0.00 up to and including $25.00 |
10% |
20% |
| Greater than $25.00 up to and including $50.00 |
5% |
10% |
| Greater than $50.00 |
3% |
6% |
| Multi-Stock Event - Filings involving five or more securities by the same subscriber will be aggregated into a single filing |
10% |
10% |
| Multi-Stock Event - Filings involving twenty or more securities whose executions occurred within a period of five minutes or less |
30% |
30% |
| Leveraged ETF/ETN Securities |
Core Trading Session Numerical Guidelines multiplied by the leverage multiplier (e.g., 2x) |
Core Trading Session Numerical Guidelines multiplied by the leverage multiplier (e.g., 2x) |
Direct Edge may consider additional factors to determine whether an execution is clearly erroneous. These factors include, but are not limited to, system malfunctions or disruptions, volume and volatility for the security, derivative securities products that correspond to greater than 100% in the direction of a tracking index, news released for the security, whether trading in the security was recently halted/resumed, whether the security is an IPO, whether the security was subject to a stock-split, reorganization, or other corporate action, overall market conditions, pre-market and post-market session executions, validity of the consolidated tapes trades and quotes, consideration of primary market indications, and executions inconsistent with the trading pattern in the stock. Each additional factor shall be considered with a view toward maintaining a fair and orderly market, the protection of investors and the public interest.
Volatile Market Opens
During a Volatile Market Open, Direct Edge may expand the Numerical Guidelines applicable to transactions occurring between 9:30 a.m. and 10:00 a.m. based on the disseminated value of the S & P 500 Futures at 9:15 a.m.:
- When the S & P 500 Futures are up or down from 3%, to up to but not including 5% at 9:15 a.m., the Numerical Guidelines are doubled for executions occurring between 9:30 a.m. and 10:00 a.m.
- When the S & P 500 Futures are up or down 5% or greater at 9:15 a.m., the Numerical Guidelines are tripled for executions occurring between 9:30 a.m. and 10:00 am.
Unusual Circumstances
In Unusual Circumstances, Direct Edge may use (while attempting to maintain a fair and orderly market, protect investors and public interest) a Reference Price other than the consolidated last sale. Unusual Circumstances can include periods of extreme market volatility, sustained illiquidity, or widespread system issues. Other Reference Prices may include the consolidated inside price, the consolidated opening price, the consolidated prior close, or the consolidated last sale prior to a series of executions.
Joint Market Rulings
In circumstances that involve other markets, Direct Edge could potentially use a different Reference Price and/or Numerical Guideline. In these circumstances, the Reference Price would be determined based on a consensus among the exchanges where the transactions occurred.
Reviews Initiated by Direct Edge
In its sole discretion, Direct Edge reserves the right to initiate a review of a transaction if it determines that circumstances warrant such a review, regardless of whether or not a client request has been submitted. Any affected clients shall be notified accordingly.
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