Binance is implementing a critical new trading rule to shield users from extreme volatility, following warnings of a potential 10% market correction. The exchange will roll out its Spot Price Range Execution Rule (PRER) across multiple token markets, a direct response to erratic price discovery during periods of high volatility. This system prevents orders from executing outside a dynamic, predetermined price range, aiming to curb the abnormal trades seen in flash crashes. The rule, already integrated into Binance's API, mandates that all connected applications continuously monitor the reference price, reinforcing the platform's role as a key but stabilizing hub during turbulent market sentiment.
The new feature arrives after Binance introduced an expanded liquidity program for altcoins. The additional safeguards may make Binance safer even in a market with some distrust of altcoins.
PRER will launch on April 14, gradually introduced to not disrupt trading. Under normal trading conditions, the mechanism will not affect price discovery.
The aim of PRER is to restrict orders to only execute when there is liquidity within a certain price range. If the price deviates significantly due to volatile trading, the orders will not be filled.
All taker orders with execution prices outside the dynamic liquidity range will expire and not be filled. This will protect the market from erratic price movements and flash crashes. Binance has seen multiple spot trades outside normal price ranges, usually dismissed as inherent to crypto.
Binance has so far denied it was at fault for the October 10 crash. The exchange operated similarly to other markets, and cited external conditions as the main cause for volatile trading.
The biggest problem was caused by the depegging of the USDe stablecoin. The stablecoin had no problem functioning on-chain, but on Binance, the asset fell from $1 to $0.65. The sharp price move caused a wave of redemptions and liquidations, ending up with $19B erased from the market.
Trading within a predetermined price range may prevent similar price moves, especially for stablecoin pairs. Orders at extreme price ranges, set up to benefit from errors, will not be filled under the new rules.
The PRER trading rule will not protect retail users from volatility entirely. It will only prevent some orders from being filled during events like a flash crash. The exact trading rules may change with time, and each traded symbol will have its own limitations and price range.
Binance currently carries most of its trading on the futures market, but spot price discovery is key for oracles and affects the wider crypto ecosystem.
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