Direct Edge Trading Notice #13-06: Limit Up-Limit Down Testing Update

Effective Monday, February 4, 2013, Direct Edge^® will provide support for Limit Up-Limit Down (LULD) testing in our production environment. Members can use the following test symbols from 9:45 a.m. to 3:30 p.m. daily:

In addition, in coordination with other exchanges and market participants, Direct Edge will participate in industry–wide testing for LULD functionality on Saturday, February 2, 2013. Please note Market-Wide Circuit Breakers (MWCB) will not be tested. The next MWCB test is scheduled for Saturday, March 2, 2013.

Test Schedule for Saturday, February 2^nd

Exchanges will run through core scenarios outlined below starting at 9:30 a.m., Eastern Time (ET) and continuing until 12:00 p.m., ET.  LULD bands will not be in effect until 9:45 a.m., therefore any tests against inactive (or zero) bands may be performed during the first 15 minutes of the test.

Symbol Lists

Exchanges have been assigned specific symbols to use during the test.  Members are asked to refrain from using any of the following symbols in their tests as these are for exchange use only:

The following is a list of symbols that all market participants may use to test:

*Member testing is permitted in the symbol only after 10:30 a.m., ET  

Anticipated Test Scenarios
Direct Edge anticipates running the following LULD core scenarios:

• Test 1 – Booked Order Bands Start (9:45 a.m., ET) – Order Priced Outside
  • At 9:45 a.m., when the bands become active under Phase 1, a previously booked order is priced outside the first bands of the day.
    • Both a booked order on the passive side and aggressive side should be tested coming into 9:45 a.m.
      • Passive – Depending on Exchange, either remains booked (flagged as non-executable) or cancels.
      • Aggressive – Depending on Exchange, either Price slides to band or cancels.

• Test 2 – Standard Sell and Buy Executions
  • Execute a buy and sell order within the NBBO and LULD Price Bands.

• Test 3 – Limit State / No pause
  • Trigger a limit state with a buy order, cancel or execute the order before 15 seconds have elapsed.
  • Trigger a limit state with a sell order, cancel or execute the order before 15 seconds have elapsed.

• Test 4 – Limit State / Pause
  • Trigger a limit state with a buy or sell order and allow the order to trigger a trading pause.

• Test 5 – Multiple Limit States / No pause
  • Trigger multiple limit states with aggressive buy and sell orders, but cancel or execute each order prior to triggering a trading pause.

• Test 6  – Multiple Limit State / Pause
  • Trigger multiple limit states and then allow a trading pause to occur.

• Test 7 – Straddle / Market Comes In
  • Straddle the lower price band with two orders, and then execute trades near the lower price band to move the reference price so that the buy order becomes executable.

• Test 8 – Aggressive Sell >$3.00 Stock Tier 1
  • Send an IOC sell order that aggressively crosses the lower band.

• Test 9 – Aggressive Buy > $3.00 Stock Tier 1
  • Send an IOC buy order that aggressively crosses the upper band.

• Test 10 – Aggressive Sell between $0.75 - $3.00 Tier 1
  • Send an aggressive DAY sell order that crosses the lower price band.
  • Execute the order before a pause is triggered.

• Test 11  – Aggressive Buy between $0.75 - $3.00 Tier 1
  • Send an aggressive DAY buy order that crosses the upper price band.
  • Execute the order before a pause is triggered.

More Information

• Refer to our LULD Implementation FAQ document.