Q&A: How are LRPs calculated?

By: Ray Pellecchia

File Under: NYSE

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Next, the LRP Matrix?

A trader asks:

How are the prices for the LRP ranges calculated? That is, if a stock is trading at 49.90 and has a 25 cent sweep in a single print, does that trigger the LRP, or would it need to be over 50 cents (assuming it trades 1,000,000 shares daily) because the stock is now over $50? Is the LRP tier group calculated based on the prior day\'s closing price?

Also, how is the average daily volume for LRP levels calculated? Over what period of time is the average taken?
-- William Williams

William -- Smart question. Here's the answer:

Our Liquidity Replenishment Point matrix defines the LRPs based on the issue's price and average daily share volume. The prices are based on the previous day's close, and are not adjusted intra-day. That is, if an issue crosses a price category during the course of the trading day, the LRP value remains unchanged from the start of the day. The average daily volume is updated quarterly and is based on the prior quarter's volume.

Hope that answers it, William. Thanks for the good question, and thanks to my colleague for the answer.

BTW, I emphatically deny the rumor that "Liquidity Replenishment Point Matrix" is the working title for an upcoming prequel to the "Matrix" trilogy. Though I would get a kick out of seeing John Thain in those cool Keanu Reeves shades.

Tags: New York Stock Exchange, Hybrid Market, NYSE, NYSE Euronext, NYX, trading, stock market, The Matrix