Starting on April 3, 2025, the EDGX Options Exchange will implement a new feature called Wide Market Protection (WMP), with the same functionality set to take effect on the Cboe Options (C1), C2 Options, and BZX Options Exchanges from April 7, 2025, pending regulatory approval. This initiative aims to mitigate the risks associated with executing orders at unfavorable prices.
The WMP system activates whenever a market order, limit order, or designated stop/stop limit order is placed while the National Best Bid and Offer (NBBO) is considered wide. Once engaged, WMP will process protected orders using an initial benchmark price and gradually adjust to more competitive levels, but not beyond the specified limits.
Notably, WMP will deactivate 30 seconds before the conclusion of regular trading hours and curb sessions, where applicable.
Under the WMP protocol, there will be a suspension on incoming market orders, limit orders, or elected stop/stop limit orders if the NBBO is classified as “wide” according to predefined and adjustable criteria. An NBBO is deemed wide if the bid/ask spread exceeds a determined threshold, which is less lenient than the levels set for obvious errors, providing a more protective framework for traders.
WMP will activate under two key circumstances:
1. When a limit or market order is logged while the NBBO is wide.
2. If a stop or stop limit order is triggered and the subsequent NBBO is determined to be wide.
This new feature is expected to enhance the security of trading activities by offering protective measures against large deviations in order execution prices, ultimately fostering a more stable trading environment.