Limit up-limit down (LULD)

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

Once triggered by sharp price movements, LULD pauses trading momentarily to allow market participants to react, helping to provide a buffer against erroneous trades and sudden volatility.

LULD was introduced in response to the "Flash Crash" of May 6, 2010, during which the U.S. stock market experienced a rapid and severe decline, with the S&P 500 index dropping nearly 9% within minutes before rebounding. Consequently, the Securities and Exchange Commission (SEC) approved the LULD plan on May 31, 2012 as a pilot solution.