How Companies Execute Buybacks: Rule 10b-18

How companies execute buybacks is less exotic than the announcements make it sound. The dominant method is the open market repurchase: the company hires a broker and buys its own shares on the exchange, in the same queue as everyone else. What separates it from any other buyer is Rule 10b-18, an SEC safe harbor that sets four conditions on how those orders may be placed.

Why a buyback needs a safe harbor

A company bidding for its own stock sits close to the textbook definition of manipulation. It is the one buyer that knows the quarter before the market does, and on many days it is the largest single bidder in the name. Rule 10b-18, adopted in 1982, settles that tension with a bargain: buy inside four conditions and the SEC will not treat the repurchase as manipulative under the anti-manipulation provisions of the Exchange Act.

Two points keep the rest of this straight. The safe harbor is voluntary. A company that buys outside the conditions is not automatically breaking the law, it simply gives up the protection and carries the litigation risk itself. The harbor also covers the manner of buying and never the disclosure around it. A company repurchasing while it holds material nonpublic information has a problem that 10b-18 does not touch.

The four conditions of a 10b-18 buyback

1. One broker a day. Every repurchase that day runs through a single broker or dealer.
2. Timing. The company stays out of the opening transaction, and out of the last 10 minutes of the session in the most heavily traded stocks. Everything smaller stops 30 minutes before the close.
3. Price. No bid and no purchase above the higher of the highest independent bid and the last independent sale price. The company follows the market up, it never leads it.
4. Volume. The day's repurchases stay at or under 25% of the stock's average daily trading volume over the four calendar weeks before. One block trade a week can sit outside the cap, on a day with no other repurchases.

All four apply day by day, and missing one costs the harbor for that day's buying rather than for the whole programme. The last three conditions are where the trading actually gets shaped.

What is the daily limit on a company buyback?

Condition four is the one with a number attached. Average daily volume over the previous four calendar weeks sets a ceiling at one quarter of a normal day. Priced at closing prices over that same window, here is the ceiling for 6 large companies that run standing repurchase programmes.

SELECT
    ticker                                                            AS symbol,
    round(avg(toFloat64(volume) * toFloat64(close)) / 1e6, 0)         AS avg_daily_dollars_m,
    round(0.25 * avg(toFloat64(volume) * toFloat64(close)) / 1e6, 0)  AS daily_cap_dollars_m
FROM global_markets.stocks_daily_aggs
WHERE ticker IN ('AAPL', 'MSFT', 'XOM', 'KO', 'PG', 'JNJ')
  AND date >= today() - 28
  AND date <  today()
GROUP BY ticker
HAVING count() >= 10
ORDER BY avg_daily_dollars_m DESC

AAPL turns over about $17301 million of stock on an average session, which puts a single day's safe harbor ceiling near $4325 million. At the quiet end of the panel, PG trades roughly $1152 million a day, for a ceiling of $288 million. Set a $20 billion authorization against ceilings of that size and the arithmetic returns months of daily buying, which is the plain answer to why a programme announced in February is still printing in October. The cap also floats: it is measured off the previous four weeks, so a heavy month of trading lifts the following month's ceiling.

Why the timing condition brackets the open and the close

Condition two keeps the company out of the two moments that matter most to the tape. The panel below splits the continuous session into half hours and shows what share of the day's shares change hands in each.

SELECT
    b.et_time                                     AS et_time,
    round(100 * b.aapl_volume / t.aapl_total, 2)  AS aapl_pct_of_volume,
    round(100 * b.ko_volume   / t.ko_total,   2)  AS ko_pct_of_volume
FROM
(
    SELECT
        formatDateTime(toStartOfInterval(toTimeZone(window_start, 'America/New_York'), INTERVAL 30 MINUTE), '%H:%i') AS et_time,
        toFloat64(sumIf(volume, ticker = 'AAPL')) AS aapl_volume,
        toFloat64(sumIf(volume, ticker = 'KO'))   AS ko_volume
    FROM global_markets.delayed_stocks_minute_aggs
    WHERE ticker IN ('AAPL', 'KO')
      AND window_start >= today() - 45
      AND (toHour(toTimeZone(window_start, 'America/New_York')) * 60
           + toMinute(toTimeZone(window_start, 'America/New_York'))) >= 570
      AND (toHour(toTimeZone(window_start, 'America/New_York')) * 60
           + toMinute(toTimeZone(window_start, 'America/New_York'))) <  960
    GROUP BY et_time
) AS b
CROSS JOIN
(
    SELECT
        toFloat64(sumIf(volume, ticker = 'AAPL')) AS aapl_total,
        toFloat64(sumIf(volume, ticker = 'KO'))   AS ko_total
    FROM global_markets.delayed_stocks_minute_aggs
    WHERE ticker IN ('AAPL', 'KO')
      AND window_start >= today() - 45
      AND (toHour(toTimeZone(window_start, 'America/New_York')) * 60
           + toMinute(toTimeZone(window_start, 'America/New_York'))) >= 570
      AND (toHour(toTimeZone(window_start, 'America/New_York')) * 60
           + toMinute(toTimeZone(window_start, 'America/New_York'))) <  960
) AS t
ORDER BY et_time

The first half hour carries 16.49% of AAPL's continuous-session volume and the final half hour 16.03%, against 5.53% in the half hour beginning 12:30 ET. KO traces the same U, at 15.95% and 19.21% on the two edges. The open is where the overnight news gets priced. The close sets the number that lands in index calculations and in most performance benchmarks. A large buyer leaning on either edge is moving a price that many other things are measured against, which is the mischief the timing condition is written around.

The other ways companies execute buybacks

Open market buying is the workhorse. Three other structures show up when a company wants the shares faster than the daily cap allows, or wants them from a specific seller.

Accelerated share repurchase

The company pays a bank a lump sum up front and receives most of the shares immediately, commonly around 80% of the expected total on day one. The bank borrows those shares to deliver them, then buys in the open market over the following weeks to cover. At the end the two sides settle up against the volume weighted average price over the period, the VWAP, with the difference paid in shares. The company gets its count down on day one and hands the execution to the bank, which charges for taking it.

Fixed price and Dutch auction tenders

A tender offer skips the exchange. The company offers to buy directly from its own shareholders at a stated price, usually above the market, over a window of at least 20 business days. A fixed price tender names one price and one quantity. A Dutch auction tender names a range, collects the price each holder will accept, then pays every accepted share the same price: the lowest one that fills the offer. Tender offers run under Rule 13e-4 and its own disclosure schedule, not under 10b-18.

A privately negotiated block

The company buys straight from one large holder, a founder diversifying or a fund unwinding a position. The price is negotiated and the shares never cross the public order book. The purchase still lands in the quarterly repurchase table described below.

How a buyback keeps running through a blackout

Companies close a trading window for their own executives ahead of an earnings release. The repurchase programme has the same problem: for several weeks a quarter the company knows the numbers and the market does not. Rule 10b5-1 is the release valve. The company adopts a written plan at a moment when it holds no material nonpublic information. The plan fixes amounts and dates in advance, or hands the broker a formula that produces them, and from then on the broker executes with no further input. That is how repurchases keep printing through a blackout window and across an earnings release.

The 2022 amendments tightened the version insiders use. A director or officer now waits at least 90 days between adopting a plan and its first trade, and those adoptions and cancellations appear in the quarterly filing. The Commission did not extend that waiting period to the company's own plans.

How to check whether a buyback actually happened

An announcement is an authorization, not a purchase. A board approves a dollar amount, and the amount can sit unused for years. Two records show the follow through.

The first is the repurchase table inside every quarterly and annual filing. Under Item 703 of Regulation S-K a company reports, month by month, the shares it bought, the average price it paid, how many of those shares fell under a publicly announced programme, and the dollar value still authorized. The SEC adopted a rule in 2023 that would have added day by day detail. A federal appeals court vacated it in December 2023, and the monthly table is what remains.

The second record needs nothing from the company. Diluted shares outstanding is the denominator of earnings per share, it appears in every income statement, and it moves only when stock is retired or issued.

SELECT
    toString(toStartOfQuarter(period_end - 15))                                        AS quarter_date,
    round(toFloat64(maxIf(diluted_shares_outstanding, has(tickers, 'AAPL'))) / 1e9, 2) AS aapl_shares_b,
    round(toFloat64(maxIf(diluted_shares_outstanding, has(tickers, 'MSFT'))) / 1e9, 2) AS msft_shares_b,
    round(toFloat64(maxIf(diluted_shares_outstanding, has(tickers, 'KO')))   / 1e9, 2) AS ko_shares_b
FROM global_markets.stocks_income_statements
WHERE timeframe = 'quarterly'
  AND hasAny(tickers, ['AAPL', 'MSFT', 'KO'])
  AND period_end >= '2021-01-01'
  AND diluted_shares_outstanding > 0
GROUP BY quarter_date
HAVING aapl_shares_b > 0 AND msft_shares_b > 0 AND ko_shares_b > 0
ORDER BY quarter_date

Since the start of 2021, AAPL's diluted count has gone from 16.93 billion to 14.81 billion, a quarterly grind with no drama in it. MSFT moved from 7.6 billion to 7.46 billion over the same stretch. KO sits at 4.31 billion against 4.33 billion at the start, and Coca-Cola returns most of its cash as a dividend instead, a trade-off the buybacks versus dividends comparison takes apart.

Widen the lens and the same measurement sorts a group of household names by what three years of programmes actually did.

SELECT
    symbol,
    shares_3y_ago_m,
    shares_latest_m,
    round(100 * (shares_latest_m - shares_3y_ago_m) / shares_3y_ago_m, 1) AS shares_change_pct
FROM
(
    SELECT
        symbol,
        round(argMaxIf(shares, (filing_date, period_end), period_end <= subtractYears(today(), 3)) / 1e6, 0) AS shares_3y_ago_m,
        round(argMax(shares, (filing_date, period_end)) / 1e6, 0)                                           AS shares_latest_m
    FROM
    (
        SELECT
            arrayJoin(tickers)                    AS symbol,
            filing_date,
            period_end,
            toFloat64(diluted_shares_outstanding) AS shares
        FROM global_markets.stocks_income_statements
        WHERE timeframe = 'quarterly'
          AND period_end >= subtractYears(today(), 4)
          AND diluted_shares_outstanding > 0
          AND hasAny(tickers, ['AAPL', 'MSFT', 'GOOGL', 'JNJ', 'PG', 'KO', 'XOM', 'CVX', 'WFC', 'T'])
    )
    WHERE symbol IN ('AAPL', 'MSFT', 'GOOGL', 'JNJ', 'PG', 'KO', 'XOM', 'CVX', 'WFC', 'T')
    GROUP BY symbol
)
WHERE shares_3y_ago_m > 0
ORDER BY shares_change_pct

WFC shows the deepest reduction in the group at -16%. At the other end, XOM moved 2.4% over the same three years. Acquisitions paid for in stock, and stock handed to employees, both push the count up while a repurchase programme runs underneath, which is why the share count is the better receipt. It nets everything. Retired shares also leave the free float, the pool of stock actually available to trade.

FAQ

What is Rule 10b-18?

Rule 10b-18 is an SEC safe harbor for companies buying their own stock on the open market. A repurchase that meets its conditions on broker, timing, price, and volume is protected from a claim of price manipulation under the Exchange Act. It is voluntary, and buying outside it is not automatically unlawful.

Can a company buy back stock during a blackout period?

Yes, through a Rule 10b5-1 plan adopted while the company holds no material nonpublic information. The plan sets amounts and dates in advance, or a formula for them, and a broker executes it without further input from the company.

How much stock can a company buy back in one day?

Under the safe harbor, 25% of the stock's average daily trading volume over the four calendar weeks before the purchase. One block trade a week can fall outside that cap. The first panel above prices that limit for several large companies.

What is the difference between a buyback and a tender offer?

An open market buyback is the company buying anonymously on the exchange over months at market prices. A tender offer is a public offer to buy directly from shareholders at a stated price, usually above the market, inside a window of at least 20 business days.

Where can I see how many shares a company repurchased?

Every quarterly and annual filing carries a table of issuer purchases, broken out by month, with the average price paid and the amount still authorized. The diluted share count on the income statement is the independent check on it.

Every panel here ships with the SQL that produced it, so the calculation is one click away. To size the daily cap on a name you follow, or to watch a share count over your own window, ask it in plain English on the Strasmore terminal.