January 31, 2016
I am submitting this comment in support of the IEX exchange application.
I would like to opportunity to avoid being victimized by high frequency traders who are using stale quotes to game my orders.
I hope that the SEC takes direct and expedient action to approve the IEX application as filed in light of the recent revelations presented by IEX regarding the NYSE Binary Gateway.
More information is available here: http://www.businessinsider.com/iex-posts-oped-on-nyse-2016-1
With the following excerpt being of particular interest:
"So why does this matter?
First, it offers more validation that quote fading, or latency arbitrage at the microsecond level is real.
Second, by offering the faster binary access method, NYSE effectively imposed a Speed Bump on all of its participants who did not upgrade. They effectively slow down everyone else by offering a faster means of access that only a few have bothered to adopt given the amount of development work necessary to do so. We found very little documentation about this offering, and no public filings with the SEC.
Most interesting, the difference we found in the speed between NYSE FIX and Binary ranged from approximately 200 to 400 microseconds. And those microseconds translated into over a ten percentage point difference in fill rates NYSE's speed bump was intentionally imposed on existing participants with very little disclosure, and without any review or approval by the SEC. All the while, NYSE continues to be a registered stock exchange with a protected quotation.
Moreover, this isn't just some temporary transitional system upgrade NYSE has offered both means of access in parallel since 2011.
By comparison, IEX's speed bump is 350 microseconds and is equally applied to all our participants – there is only one lane. IEX has been fully transparent in our dealings with members and our filings with the SEC, but this transparency is being used against us as existing exchanges, including NYSE, are citing the speed bump as a reason to prevent IEX from having a protected quotation, the status that NYSE enjoys under its current fast lane/slow lane model.
Does this mean only exchanges that offer an uneven playing field and varying speeds of access will be allowed to operate? And that an exchange that offers a level playing field, with uniform access for all will not be allowed to compete?
Some would have you think that the debate over our exchange application is about rules, or even market structure philosophy, but it's not. What the debate is really about is commercial interests. IEX slows everyone down to make our market more fair. Other exchanges offer different speeds of connectivity: connection ports, co-location, and market data – charging a premium to the fast enabling them to make money trading against the slow. Manufacturing those kinds of trading opportunities creates market share and revenue for those exchanges."