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Why IEX's 'speed bump' Model will change Trading as we know it. - Alldamoney

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Why IEX's 'speed bump' Model will change Trading as we know it.


IEX's group application to join the likes of the New York Stock Exchange (NYSE), Nasdaq and BATS Global Markets was Recently approved by The Securities and Exchanges Commission. This however seem to split the industry between supporters who champion an alternative to established exchanges like the New York Stock Exchange and Nasdaq, and many of their high speed customers; and those who argue that IEX’s delay simply does not meet current rules.
IEX Group business model which rely mainly on (marginally) slower trading, won a rare victory in a world where markets move at lightning speed. IEX’s plan to introduce a speed bump of just 350 microseconds  a thousand times faster than a blink of an eye  into its systems . The IEX argues that it wants to use the speed bump to protect investors from potentially harmful trading that may involve the front running of orders.

Being now caught between a desire to promote competition and apply their own rules as a main regulator of the US equity market, the SEC could well end up exacerbating the complexity of buying and selling shares for investors, its updated rule would compel other markets to honor trades subject to a small delay referred to as a "speed" bump that will effectively slow down trading by a fraction of a second even as other markets process trades in the blink of an eye.
Elongating the controversy, both the NYSE and NASDAQ argue that existing stock market rules say you cannot deliberately slow the markets down.
Who’s then right?  The SEC released a reinterpretation of their rule that said any delay below one millisecond would be consistent with its rules. therefore with its decision, IEX's 350 millisecond delay is ok.
From the other end, Bob Greifeld head of NASDAQ told CNBC that allowing sub millisecond could open doors to many new order types that take advantage of various sub millisecond time delays.For violating its own rules, i will definetly sue the SEC he said.

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