Cboe BZX Implements New Rule to Prevent Extreme Trades
Published Date: 4/24/2026
Notice
Summary
Cboe BZX Exchange is updating its rules to protect traders from getting stuck with really bad prices when the best available buy and sell prices (NBBO) are far apart. This new wide market protection kicks in right away to help keep trades fair and avoid surprises. Traders and investors using BZX will benefit from safer, smarter order executions starting immediately, with no extra costs announced.
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Analyzed Economic Effects
6 provisions identified: 5 benefits, 0 costs, 1 mixed.
New Wide Market Protection on BZX
The Cboe BZX Exchange added a "wide market protection" under Rule 21.17(a)(6) to reduce the risk that orders execute at extreme or adverse prices when the National Best Bid and Offer (NBBO) is determined to be "wide." The rule filing was made April 10, 2026 and is intended to pause and route applicable orders into a drill-through process so they have additional execution opportunities instead of executing immediately at extreme prices.
Which Orders Get Paused and Protected
The wide market protection will apply to certain inbound market and limit orders and elected Stop (Stop-Loss) and Stop-Limit orders that would post or execute at prices more than an Exchange-determined buffer above/below the NBBO. When triggered, such orders enter the BZX Book at a Benchmark Price and begin the Exchange's iterative drill-through process instead of executing immediately.
Iterative Drill-Through: Timing and Price Benchmarking
The drill-through process displays an order at a Drill-Through or Benchmark Price and iterates it to more aggressive displayed prices over consecutive time periods; each iteration period is set by the Exchange on a class-by-class basis and may not exceed three seconds. The rule text also describes how the Benchmark Price is chosen (least aggressive of NBB/NBO ± buffer, last trade when appropriate, or NBBO midpoint) and uses Exchange-determined buffer amounts.
Certain Orders Are Excluded from Protection
The wide market protection will not apply to bulk messages, Intermarket Sweep Orders (ISOs), Immediate-or-Cancel (IOC) orders, and M and N capacity orders. The Exchange may apply the wide market protection on a class-by-class basis, so protection can vary across option classes.
No Protection During Final Pre-Close Window
The Exchange will not apply the wide market protection during an Exchange-determined period just before the close of Regular Trading Hours (Regular Trading Hours are 9:30 a.m. to 4:00 p.m. ET). This gives market participants a final opportunity to use Stop and Stop-Limit orders to exit positions before the end of the trading session.
Market Orders in No-Bid/No-Offer Series May Be Entered
The Exchange amends protections for market orders in no-bid (NBB = 0) or no-offer (NBO = 0) series so that certain market orders that would otherwise be canceled or rejected may instead enter the BZX Book and be displayed at the Benchmark Price as the first drill-through iteration, with remaining size continuing through the drill-through process.
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