Exchange tells brokers to use limit orders to avoid pricing snags

The London Stock Exchange yesterday advised stockbrokers to introduce controls - so-called "limit orders" - to protect clients against "unusual price movements" caused by SETS, its new electronic trading system.

In a letter sent to all its member firms, the Exchange warned that it was important for brokers and clients to understand the pricing problems, which tend to occur at the beginning and the end of the trading day.

Martin Wheatley, head of market development at the Exchange, said dealers should move to protect clients by using limit orders, which set parameters outside which a stock cannot be traded.

The Exchange acknowledged yesterday that a key problem with SETS is that at certain times of the day the spread - or the difference between a stock's buy and sell price - is extremely wide. There has been concern in recent weeks that investors trading at these times could lose out. Investors using "execution-only" stockbrokers, which are prohibited from giving advice, and those buying or selling "at best", the best price available, are particularly at risk. These investors could be unwittingly trading when spreads are wide, and receiving unfavourable prices.

SETS' pricing difficulties are caused by illiquidity, or a relatively low amount of stock market activity, at certain points of the day. The problems tend to be most marked in the first 45 minutes and the last 15 minutes of the trading day, according to figures released by the Stock Exchange yesterday.

Aside from "educating member firms", the Exchange is not yet taking concrete steps to solve the pricing problems. Mr Wheatley yesterday ruled out any structural changes at least until the New Year. He said: "It is too early to start thinking about major steps". C

Changes that have been suggested include moving the trading day back one hour, a move that Mr Wheatley said he had not completely ruled out, forcing major institutions, many of which do not start trading until 10am, to trade earlier in the day, and calculating closing prices before the Exchange's official closing time of 4.30pm.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with excess, cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings