October 9, 2016
This is a great proposal to enhance liquidity in the public markets by helping market-makers and long-term investors meet on-exchange. However, exchanges with asymmetric access delays should not be considered a "Protected Quotation" under Rule 611 of Regulation NMS. Canada approved a similar market model recently on the TSX Alpha exchange. It is not covered by their similar Order Protection Rule because its quotations are not immediately accessible.
Likewise, their market data should not be included in the consolidated quotation or used as a benchmark price for pegged orders/off-exchange trading. Their displayed prices/quantities would not be a reliable indicator of immediately accessible supply/demand and could lead to poor execution quality on other markets if included in the NBBO.
Broker-dealers should have the right, but not the obligation, to route to these delayed markets. If forced to route to a delayed exchange by Rule 611, broker-dealers would face increased execution uncertainty. The effects in ETPs could be severe during periods of elevated volatility if market-makers were forced to hedge on an unreliable market.