As I understand, only the exchange itself can cancel an executed trade, for reasons such as improper dissemination of news.

But can a stock exchange cancel an executed trade even after settlement, e.g. T+3?

1 Answer 1


This 2010 SEC rule seems to say that under extraordinary circumstances, a trade can be cancelled, by the exchange, any time after it was made:

Release No. 34-62259; File No. SR-NYSEArca-2010-47 Rule 6.89

...According to the proposal, in the event of any verifiable disruption or malfunction in the use or operation of any electronic communications and trading facilities of the Exchange, in which the nullification or modification of transactions may be necessary for the maintenance of a fair and orderly market or the protection of investors and the public interest exist, a Trading Official, on his or her own motion, may review such transactions and declare such transactions arising out of the use or operation of such facilities during such period null and void or modify the terms of these transactions, in accordance with the guidelines contained in sections (a)(3)(C)(i)(aa)-(bb) of Rule 6.87. Pursuant to the proposal, the Trading Official, absent extraordinary circumstances, must initiate action under this authority within sixty (60) minutes of the occurrence of the erroneous transaction that was a result of the verifiable disruption or malfunction. [Italics are mine.] http://www.sec.gov/rules/sro/nysearca/2010/34-62259.pdf

This rule seems to have gone into effect because it was cited in this news article: http://www.bloomberg.com/news/2014-04-29/nyse-options-markets-cancel-almost-20-000-trades-following-error.html

This is an interesting rule I had not known about previously, I wonder if it gives too much power to the exchange...

  • 2
    No it doesn't gives too much power to the exchange. Exchanges cannot willy nilly use the rule. They will have to justify or else customers will take their business to other exchanges. And the regulators will also be happy to have a go too.
    – DumbCoder
    Commented Jul 31, 2014 at 8:14
  • 1
    I can't imagine how a busted trade could be 100% enforced after settlement. What if the client has already canceled his/her account with the broker? Certainly some trades will be impossible to bust. (Maybe in those cases the exchange would volunteer to reimburse the counterparties who could not get their positions back?)
    – dg99
    Commented Jul 31, 2014 at 18:11
  • I think the proper answer here is actually closer to, No, a trade cannot be busted after settlement. In the segment to italicized, clearly the intent is that the action must be initiated as soon as possible (60 minutes!) They mention "extraordinary circumstances," but I don't think that includes 3 days of extraordinary circumstances—if things were so disastrous, the exchanges would freeze operations before that much time passed. @dg99, would you agree? Commented Jul 31, 2014 at 22:12
  • So, okay, the true, true answer here, is that that has never happened before, and probably will never happen due to exchanges' abilities to freeze operations if something so disastrous were to happen, so there is actually no precedent. The event itself is deemed virtually impossible. Commented Jul 31, 2014 at 22:14

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