On April 23, the Committee submitted a comment letter to the Securities and Exchange Commission (the “SEC”) regarding a proposed rule change by the Investors Exchange LLC (“IEX”). IEX’s proposal would create “discretionary limit orders” that are effectively exempt from its existing speed bump. It would thereby potentially establish an asymmetric speed bump.
The Committee has previously expressed its opposition to asymmetric speed bumps, because they distort markets by conferring a trading advantage on market participants that use order types that are exempt from the speed bump. For this reason, the Committee has repeatedly reiterated its position that any speed bumps “should be equally applied to all market participants.”
When the SEC rejected CBOE’s proposed asymmetric speed bump in February 2020, it stated that: (i) exchanges bear the burden of demonstrating why proposed rules are consistent with the requirements of the Exchange Act; and (ii) CBOE failed to meet this burden. In particular, when a proposed rule discriminates against different order types or market participants, the exchange must present “detailed and specific” information for the SEC to make an affirmative finding that the rule does “not permit unfair discrimination.” The Committee supports this standard of review and encourages IEX to provide specific and detailed information as to why the IEX Proposal would not permit unfair discrimination.
The Committee’s letter can be found here.