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NYSE & Nasdaq's 60% Cancellation Mystery

Why 60 percent? Traders have asked me why the NYSE Arca (the all-electronic platform of NYSE Euronext ) and Nasdaq chose to cancel all trades executed 60 percent away from the market from 2:40pm ET to 3:00pm ET.

What is it about 60 percent — how was that number derived?

As near as I can tell from talking to market participants, there is no rule on this. This appears to be a compromise reached among the electronic markets.

But why 60 percent? Why not, say, 40 percent, or 30 percent? Not clear, but one obvious answer is that there are a lot fewer trades that need to be busted when it's at 60 percent versus say, 40 percent. This saves a lot of grief.

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