Debate over IEX's application continue

The Securities and Exchange Commission (SEC) continues to review IEX's application to become an exchange, which includes a proposal to add a 350 microsecond speed bump into its trading system. As the SEC deliberates, members from all parts of the trading community continue to argue for and against it. 

Currently, market rules state that quotes must be available immediately to investors, but IEX claims that too many delays with technology make it an unrealistic rule. The SEC has already proposed a thousand microsecond speed bump that won't cause delay, according to experts. The proposition allows for IEX's speed bump, but observers say that the SEC's interpretation of what is and isn't a delay can create inconsistencies in the meaning of "immediately available" for quotes. 

"While the SEC's interpretation seems to open the door for IEX, it may also open the door for enormous unintended consequences" says Tyler Gellasch, Executive Director of Healthy Markets. Other market experts hold similarly worried opinions. 

"If the SEC gives me a one millisecond grace period, what can I do if I am nefarious?" says Larry Tabb, founder of the Tabb Group. "I can look back and fill my customer at the worst price in that millisecond."

Other experts have welcomed the change, arguing that introducing a minimum threshold is the only logical response to real world trading limitations brought about by geography. The nature of global trading means thousands of miles and the entire atmosphere contained therein creating natural delays.

"You cannot move information any faster than the speed of light" says James Angel, a professor at Georgetown University. "Given our large country, it takes several milliseconds for information to get from Chicago to New York."  

IEX sees a lot of arguments being brought forth as separate to their application. 

"We see the benefit of modernising rules to keep pace with the change in technology, but also believe IEX's application should be judged on our own merits and our compliance with existing rules" says John Ramsay, Chief Market Policy Officer of IEX. "Although IEX's application has sparked a much-needed conversation about speed and its relevance to the market, argument over de minimis latency is a separate and broader debate."