(Bloomberg) — U.S. equity options exchanges agreed to a set of rules in an effort to avoid market mishaps.
The measures include steps designed to stop quotes and trades taking place at extreme prices and from too many trades happening in a short period of time, according to a statement today from venue operators including NYSE Group Inc., Nasdaq OMX Group Inc., CBOE Holdings Inc. and International Securities Exchange Holdings Inc. The exchanges agreed that they should have kill switches that wall off a broker if its bombarding markets with mistaken trades.
The announcement comes just over a year after an error at Goldman Sachs Group Inc. caused the firm to send unintentional orders that pushed the prices on dozens of contracts to a dollar each, according to a person whod been briefed on the matter. The issue of options market stability was among the topics the market executives discussed with Securities and Exchange Commission Chair Mary Jo White at a meeting on Sept. 12, 2013, when she told them to work on remedies.
These comprehensive risk control standards, and the incentives that we have designed to encourage their adoption by all U.S. options exchanges, further our collective goal of enhancing industry protections, Craig Donohue, executive chairman at Options Clearing Corp., an industry group thats helping with the overhaul, said in todays statement.
OCC said that starting on June 30, 2016, it will impose a 2-cents-per-contract charge for trades executed on exchanges not in compliance with the rules.
