45. Should exchanges develop detailed, pre-determined criteria regarding when they can adjust or cancel a trade, or should exchanges be able to exercise discretion regarding when they can adjust or cancel a trade? What circumstances make pre-determined criteria more effective or necessary than the ability to exercise discretion, and vice versa?
46. Do error trade policies that favor price adjustment over trade cancellation effectively mitigate risk for market participants that are counterparties to error trades? Are there certain situations where canceling trades would mitigate counterparty risk more effectively? If so, what are they and how could such situations be identified reliably by the exchange in a short period of time?
47. Should error trade policies be consistent across exchanges, either in whole or in part? If so, how would harmonization of error trade policies mitigate risks for market participants, or contribute to more orderly trading?
Order Cancellation Capabilities
48. The Commission's discussion of kill switches assumes that certain benefits accrue to their use across exchanges, trading and clearing firms, and DCOs. Please comment on whether such redundant use of kill switches is necessary for effective risk control.
49. What processes, policies, and procedures should exchanges use to govern their use of kill switches? Are there any different or additional processes, policies and procedures that should govern the use of kill switches that would specifically apply in the case of DMA?
50. What processes, policies, and procedures should clearing firms use to govern their use of kill switches when using such a safeguard to cancel and prevent orders on behalf of one or more clients?
51. What objective criteria regarding kill switch triggers, if any, should entities incorporate into their policies and procedures?
52. What benefits or problems could result from standardizing processes, policies, and procedures related to kill switches across exchanges and/or clearing firms?
53. Please explain how kill switches should be designed to prevent them from canceling or preventing the submission of orders that are actually risk reducing or that offset positions that have been entered by a malfunctioning ATS.
54. The Commission requests comment regarding whether kill switches used by clearing firms already have or should have the following capabilities: (a) Distinguish client orders from proprietary orders; (b) distinguish among orders from individual clients; and (c) cancel working orders and prevent additional orders from one or more of the clearing firm's clients, or for all the clearing firm's proprietary accounts, without cancelling and preventing all orders from the clearing firm.
55. The Commission is aware of proposals that would enable FCMs to establish credit limits for customers that are stored at a central "credit hub" for the purpose of pre-trade credit checks. If such a model were implemented, is it possible that it could also be enabled with kill switches that cancel existing working orders and prevent additional orders from being submitted by one or more market participants? Should such an approach be designed to complement kill switches that are controlled by exchanges, clearing members, and trading firms, or to replace these kill switches? What benefits and drawbacks would result from each approach?
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