Limit up-limit down (LULD)

Limit up-limit down (LULD) is the US mechanism that prevents individual stocks from trading outside price bands set around their recent average price. If a stock cannot trade within its bands for 15 seconds, trading pauses for five minutes. It has been in effect since 2013.

How it works

Each stock has a reference price, generally its average trade price over the prior five minutes. Upper and lower bands are set a percentage away from that price:

The bands are doubled during the opening period (9:30 to 9:45 a.m. ET). They are also doubled in the final 25 minutes (3:35 to 4:00 p.m. ET) for lower-priced Tier 2 stocks, while Tier 1 stocks and Tier 2 stocks above $3 keep their normal bands into the close.

When the national best offer equals the lower band or the national best bid equals the upper band, the stock enters a "limit state." If it does not exit within 15 seconds, the primary exchange declares a five-minute trading pause, then reopens through an auction. Trades cannot execute outside the bands.

Why it matters for traders

LULD pauses are the "halted, volatility" events that interrupt fast moves in small caps after news. They can stop a stock several times in a session. Because the reference price keeps moving, a stock can keep running in 10% steps, pausing at each.

Stop orders offer little protection here: the reopening auction can print well past the band, and your order fills at that price.

Example

Hypothetical Bluefin Robotics (ticker BFRB), a Tier 2 stock, has a reference price of $20.00 at 11:00 a.m. Its bands are $18.00 and $22.00. On contract news, buyers push the best bid to $22.00 and it stays there for 15 seconds. Trading pauses for five minutes, and the reopening auction prints at $23.40, with new bands set around the updated reference price.

FAQ

What does LUDP mean on a halt list?

LUDP is the code for a volatility trading pause triggered under the LULD plan.