Starting on April 3, 2025, the EDGX Options Exchange will implement a new feature known as wide market protection (WMP), with broader adoption across additional exchanges like Cboe Options, C2 Options, and BZX Options set for April 7, 2025, pending regulatory approval. This initiative aims to mitigate the risks associated with executing orders at unfavorable prices by temporarily halting specific types of orders whenever the National Best Bid and Offer (NBBO) reflects a wide spread.
The functionality of WMP kicks in when market orders, limit orders, or elected stop/stop limit orders are received while the NBBO is considered wide. In such cases, protected orders will be initially displayed at a benchmark price and can subsequently adjust to more aggressive pricing levels, limited to their set caps.
Notably, WMP will be deactivated 30 seconds before regular trading and curb session closures to streamline operations. The criteria for defining a “wide” NBBO involve pre-established, configurable parameters that determine the acceptable bid/ask spread. The set thresholds for the WMP are intentionally tighter than those for obvious errors, thereby providing an additional layer of protection for traders.
WMP will trigger under certain events, including receipt of market or limit orders during a wide NBBO or when a stop or stop limit order is activated and leads to a wide market. This approach is designed to prevent potential adverse price executions and enhance the overall trading environment for participants.