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NYSE Proposing Rule Change to Longstanding Market-on-Close (“MOC”)/Limit-on-Close (“LOC”) Order Handling Requirements

NYSE Proposing Rule Change to Longstanding Market-on-Close (“MOC”)/Limit-on-Close (“LOC”) Order Handling Requirements

On December 14, 2021, the NYSE proposed a change to rule 7.35B relating to the cancellation of MOC, LOC and Closing IO Orders. NYSE rules have historically allowed the cancellation of MOC, LOC and Closing IO orders to correct legitimate errors between 3:50 PM and 3:58 PM.  Attempts to cancel at 3:58 PM or later are rejected by NYSE systems.  “Legitimate Errors’’ are errors in any term of an order, such as price, number of shares, side of the transaction (buy or sell) or identification of the security.

The NYSE has proposed to modify Rule 7.35B(f)(2) to provide that any requests to cancel or modify an MOC, LOC or Closing IO order entered between 3:50 PM and the close (4:00 PM) would be prohibited. This change would eliminate the existing exception for legitimate errors. Any request to cancel or modify an MOC, LOC or Closing IO Order would need to  be received prior to 3:50 PM. In order to avoid closing price dislocation, the NYSE would have the ability to temporarily suspend the prohibition on canceling an MOC or LOC order within 10 minutes of the scheduled end of Core Trading Hours (4:00 PM), provided that the cancellation is necessary to correct a legitimate error and the execution of the MOC or LOC Order would cause significant price dislocation at the close.

In practice, the NYSE proposal to amend Rule 7.35B(f)(2) would result in NYSE systems rejecting requests to cancel or modify MOC or LOC orders after 3:50 PM. The NYSE noted that, since August 2021, it has not received any requests to cancel or modify an MOC, LOC or Closing IO order between 3:50 PM and 3:58 PM, so it believes the impact on the industry will be minimal. 

ViP: Validus maintains procedures specific to how MOC and LOC orders can be entered, changed or canceled.  In particular, Validus monitors for the entry of orders where no order imbalance is present, where the order size exceeds the imbalance posted and where attempts to cancel were made after the cut-off time. Should the proposed NYSE rule change be approved, the Validus MOC/LOC procedure regarding cancellations and modifications will be updated accordingly to reflect the amended requirements. As a reminder, Validus maintains additional procedures for monitoring activity leading up to and at the close, including market dominance at the close and marking the close.

 

About Eventus Systems

Eventus Systems is a leading global provider of multi-asset class trade surveillance and market risk solutions. Its powerful, award-winning Validus platform is easy to deploy, customize and operate across equities, options, futures, foreign exchange (FX), fixed income and digital asset markets. Validus is proven in the most complex, high-volume and real-time environments of tier-1 banks, broker-dealers, futures commission merchants (FCMs), proprietary trading groups, market centers, buy-side institutions, energy and commodity trading firms, and regulators. The company’s rapidly growing client base relies on Validus and Eventus’ responsive support and product development teams to overcome its most pressing regulatory challenges. For more, visit www.eventussystems.com.