The New York Stock Exchange removed a slew of exchange traded funds from a new pilot program designed to tighten bid/ask spreads on lightly traded products after unexpected trade disruptions.
The NYSE pulled out 530 funds from its limit-up/limi-down (LULD) trading system, reports Oily Ludwig for IndexUniverse.
“NYSE Arca will work with the SEC and other markets to identify the best methodology for incorporating low volume derivative securities into the LULD Plan,” the Big Board said in a statement. “In the interim, we will temporarily remove these securities from the LULD Pilot to ensure the pilot operates as intended and address the potential adverse impact of these types of trading halts.” [New Rules Trigger ETF Trading Halts]
Once all the kinks are worked out, the program would protect investors from harmful trades due to widening spreads, providing predictable and reliable orders. The new system would also replace the old circuit breaker fail safe.