Exchange Bust Rule

Discussion in 'Order Execution' started by bbk, Sep 17, 2009.

  1. bbk


    Does anyone know how the exchange determines the bust price range? Especially for those ECNs, ARCA, Island...

  2. on arca the guideline is $1 out of market or 10%. if no one complains and it's even outside the guideline they will usually let it stand, as long as it's within reason. if the other party complains arca issues a ruling. they will usually let the trade stand if it's within the guidelines but sometimes they will break it. ultimately it is their discretion. there is also the possibility of a trade adjustment if both parties agree.

    on nasdaq it is 20% away for a trade break.
  3. bbk


    Thanks for reply.

    Are sure about the 20% away for a trade break on nasdaq? I used to have one trade only 8% away but got busted.

    20% away from the market, so what is the market price? The price of the next trade?

  4. trom


    I've been involved with many busted/adjusted trades. I've gotten explanations from NASDAQ that are completely inconsistent and the opposite of the reasoning given for other break decisions. They have a bunch of guidelines. But, it usually just comes down to "we do what we want."
  5. bbk


    Is that anyway we can complain about it? I don't even got any exapanations. A few thousands profit was gone.

  6. there is usually a small time frame within which you can appeal the decision. for arca it costs $500. you have to get your firm to make the appeal. when you have a trade that is borderline a lot of it comes down to your firm. if they fight for you they can prevent a break or at least get it adjusted. if they don't arca usually just breaks it.

    I find nasdaq a lot more inconsistent than arca. nasdaq says 20% but they do what they want basically.
  7. bbk


    You mean I can ask my broker to fight for me when I was told the trade was under review? Good to know.

  8. mnx


    sadly, you have been misinformed.

    Bust thresholds range from 3-10% for RTH on nasdaq. I believe these guidelines have been implemented marketwide for some time now.

    Here's a link with all the details.

    - mnx