What is ETP 10b5-1?

An employee trading plan (ETP) is an online form of the SEC Rule 10b5-1 plan that allows employees to sell their employer-issued stock on a predetermined schedule.

 A 10b5-1 plan provides affirmative defenses for company insiders to sell stock as long as they adopt the plan in good faith, prior to becoming aware of any material non-public information.

ETP, by design, is the simplest form of 10b5-1 online instructions, thus, it can be offered at scale without creating an excessive administrative burden for the employers or the brokers.

ETP is also a convenient way for employees to sell their company stock without having to constantly deal with the trading blackouts, all the while, having affirmative defense against insider trading as per SEC rule 10b5-1. 

An ETP, to maintain simplicity, offers only two types of sell orders to participants :

Sell all shares as they vest for the grants at a volume-weighted average price (VWAP).

1. Sell all shares at a volume-weighted average price (VWAP) as they vest during the ETP trading period.
2. Sell already held shares at a market price on a predetermined schedule during the ETP trading period.

Currently, both Charles Schwab and Morgan Stanley offer online Employee Trading Plans (ETP 10b5-1).

An ETP will generally have the following characteristics:

1. An enrollment window of two to four weeks during which participants set up the future sell instructions. Followed by:
2. A cooling-off period of 30 to 90 days during which no trades can be made. Followed by:
3. A trading period of twelve months or longer during which the brokers will sell shares as per the instructions.

Depending on the nature of your company’s business, size, and stock compensation plan there will be specific policies and nuances layered on top of the basic characteristics of an ETP.