The US Securities and Exchange Commission has greenlighted IEX’s plan to launch “IEX Options”.
The market which features a 350-microsecond symmetric access delay and an optional Options Risk Parameter (ORP) that can cancel or reprice market-maker quotes deemed stale when the underlying stock moves to ward off picking by latency arbitrager.
The SEC said: “After careful review, the Commission finds that the Exchange’s proposal, as modified by Amendment No. 3, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange”
The decision follows a heated process. Citadel, as well as other large market makers and exchanges argued the delay/ORP would enable quote “fading” and harm investors and urged the SEC not to approve. IEX, smaller market makers, and academics said it would curb latency arbitrage and improve displayed liquidity. Support also came from trading firms such as Virtu, which called the design “well-intentioned” and potentially beneficial for retail execution.
Daniel Schalepfer had summarised the view of many mid tier liquidity providers saying: “Citadel’s intensely orchestrated campaign against IEX’s option market proposal has nothing to do with supposed concerns about fading liquidity or inaccessible quotes, or the welfare of retail investors”.
Read more : Citadel routing argument vs IEX “doesn’t hold weight”, academics say
Brad Katsuyama, founder and CEO of IEX Group said to Global Trading: “We appreciate the SEC’s review and approval of the IEX Options proposal and thank the broad range of industry participants who went on the record in support of our options filing. IEX remains dedicated to innovating for performance and superior execution quality and looks forward to taking the next steps towards launching our options exchange.”
The story is developing, Citadel and other stakeholders had not commented at the time of publishing.
