Limit up-limit down (LULD)

LULD is designed to prevent extreme price swings by establishing upper and lower price bands on individual stocks and ETFs, beyond which trades cannot immediately occur. The LULD is an industry-wide mechanism in U.S. equity markets, and applies specifically for National Market System (NMS) securities, which include stocks and ETFs listed on major exchanges like the New York Stock Exchange (NYSE) and NASDAQ.

Introduced by the SEC on May 31, 2012 in response to the 2010 Flash Crash, LULD curbs volatility by enforcing price bands around recent trades. These are based on a predetermined percentage and constantly published by the SIPs.

When a stock breaches these bands, it first enters a limit state, where only orders that bring the price back within range are accepted. If the price doesn't revert for over 15 seconds, a 5-minute trading halt is triggered and trading is resumed with an auction.

Sometimes, technical errors in the publication of LULD bands by the SIPs can cause unexpected price spikes, as seen with a recent incident on NYSE on June 3, 2024.