On October 5, the Securities and Exchange Commission announced that it has approved new exchange rules for breaking stock trades that deviate so substantially from current market prices that they are considered "clearly erroneous." That is, the new rules allow an exchanger to consider breaking a trade only if the price exceeds the consolidated last sale price by more than a specified percentage amount: 10 percent for stocks priced under $25; 5 percent for stocks priced between $25 and $50; and 3 percent for stocks priced over $50. In addition, the erroneous trade review process generally must commence within 30 minutes of the trade, and be resolved within 30 minutes thereafter. The rules would, for the first time, provide a consistent standard across stock exchanges and reduce uncertainty about what happens to a trade depending on where it is executed.
To view the SEC’s full press release, click here.