23. The Commission is aware that some exchanges already have price collars in place for at least a portion of the contracts traded in their markets. Please comment on whether exchanges should utilize price collars on all contracts they list.
24. Would price collars provide additional protection in mitigating credit risk to DCOs?
5. Maximum Order Sizes
Maximum order sizes are intended to protect against execution of orders for a quantity larger than a predetermined "fat finger" limit. Like other controls, these limits can function at multiple levels; for example, at the firm level, in which firms prevent the submission of orders beyond certain limits, or at the clearing level, in which clearing members prohibit transmission of customer orders in excess of predetermined limits.
The Commission believes that most, if not all, exchanges currently have the capability to set maximum order sizes, but understands that such controls may vary among exchanges in their ability to set limits by product, product class, customer, or clearing member. /80/ The Commission is interested to understand the following:
FOOTNOTE 80 See Carol Clark &
25. Are such controls typically applied to all contracts and customers, or on a more limited basis?
26. Do exchanges allow clearing members to use the exchange's technology to set maximum order sizes for specific customers or accounts?
27. Would additional standardization in the capabilities of this technology or more uniform application of this technology to all customers and contracts improve the effectiveness of such controls?
The Commission understands that some, but perhaps not all clearing firms may utilize the exchange's systems, and possibly their own systems, in order to conduct pre-trade maximum order size screens. /81/ The Commission is interested to understand the following:
FOOTNOTE 81 See, e.g.,
28. To what extent are clearing firms and trading firms conducting pre-trade maximum order size screens? Please explain whether firms are conducting such screens by utilizing: (1) Their own technology; (2) the exchange's technology, or (3) a combination of both.
29. Would regulatory standards regarding the use of such technology provide additional protection to the markets?
6. Trading Pauses
The Commission wants to better understand the existing implementation of trading pauses for trading platforms, and whether any additional types of pause mechanisms would be beneficial. A wide range of pause methodologies are currently in effect at exchanges, such as stop-logic functionality and interval price limits. These methodologies include market pauses when the execution of resting stop orders would cause excessive price movements, when prices move in excess of a dynamic threshold over a given time period, or simply when prices have moved more than a given amount during the trading day. /82/ Often, the market will monitor the order book during the pause, and determine when it is "safe" to re-open the market to further executions or re-open after a specified interval. Trading pauses have mitigated price movements during particularly volatile times in the past. /83/
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