NYSE Continues to Increase Resiliency During Times of Extreme Volatility

August 10, 2016

From Brexit to interest rate conversations, volatility is a constant in today’s global equity markets. Therefore, the New York Stock Exchange is continually analyzing and enhancing its trading systems and processes to ensure they perform at an optimal level in any market condition. Over the last eighteen months, NYSE has placed considerable focus on implementing a range of actions and initiatives to deliver tangible benefits to market participants, liquidity providers and global investors.

The following high level timeline provides an overview of the initiatives delivered by NYSE to enhance U.S. equity markets:

September 2015: Enhancing NYSE Arca’s Opening Auction Collars

  • NYSE Arca enhanced its opening collars to better balance price discovery with volatility protection.
  • The following pricing collar parameters were implemented as a result:
    • Securities priced between 0.01 to 25.00 - 10% price collar
    • Securities priced between 25.01 to 50.00 - 5% price collar
    • Securities priced between 50.01 and higher - 3% price collar.
  • Same collar parameters expanded to re-opening auctions in early 2016.

October 2015: Increased the transparency of pre-opening indications by continuing to publish NYSE imbalance feed data until each security opens for the day

  • Continuous imbalance data helps to attract liquidity regardless of market conditions.

October 2015: New incentives for the Arca Lead Market Maker (LMM) program

  • Changes to the ETP LMM program were developed in order to bolster liquidity in lower volume exchange traded products.

January 2016: Release of an independent report on U.S. Market Structure

  • NYSE undertook research and analysis to identify opportunities to further enhance market. structure and trading rules.  NYSE also retained McKinsey & Company to conduct interviews with market participants to gather feedback on market structure changes.
  • NYSE’s review and analysis of the research was released in a detailed report which also included a list of recommendations.

February 2016: Commenced the roll-out of Pillar, a state of the art trading technology platform

  • NYSE began the roll-out of Pillar, its integrated trading technology platform that will eventually enable clients to connect to all of NYSE’s equity and options markets using a single specification.  Pillar was designed to reduce complexity, while enhancing consistency, performance and resiliency.

February 2016: Elimination of Stop and GTC (Good-to-Cancel) order types

  • Elimination of these order types preserves market quality by protecting against potentially unexpected trading experiences during volatile markets and is part of the NYSE’s call for industry-wide conversations and education on the impact and behavior of certain order types.

May 2016: Implementation of enhanced NYSE market order protections

  • NYSE adjusted market order behavior to access additional liquidity of away markets at multiple price levels leading to superior execution quality.

June 2016: NYSE Arca temporarily widens its price collar thresholds for the Opening and Trading Halt Auctions to prepare for predicted volatility

  • In the early hours of Friday, June 24, 2016, the United Kingdom released the results of its European Union (EU) membership referendum, also known as Brexit.
  • NYSE Arca temporarily widened its price collar thresholds for the core open auction and trading halt auctions to better facilitate fair and orderly auctions on a highly volatile trading day.

July 2016: Approval for rules to enhance the NYSE opening process

  • NYSE will introduce new opening procedures that adjust for volatility, while seeking to maintain a balance between price discovery, transparency and efficiency in varied market conditions.
  • New rules clarify when opens may be automated, permit more of them, and increase opening transparency during volatile periods, allowing for the elimination of Rule 48.
  • Designated Market Makers retain the discretion to open securities manually if warranted.

July 2016: Implementation of Limit Up Limit Down Plan Amendment 10

  • NYSE worked in collaboration with Bats, Nasdaq and other markets to revise the Limit Up Limit Down (LULD) Plan to change the reference price at the market open if there is no opening auction trade.
  • Since the implementation, there has been an approximately 75% reduction in spurious LULD trading pauses.

August 2016: Enhancements to Limit Up Limit Down Procedures

  • NYSE completes implementation of enhanced procedures to ensure the presence of Limit Up/Limit Down price bands immediately after the opening and upon resumption of trading after a halt. Final Arca implementation is scheduled for completion in the third quarter.