FIA PTG encourages the SEC to reject IEX Discretionary Limit Order Type Proposal

21 January 2020

In a letter submitted to the SEC today, the FIA Principal Traders Group encouraged the Commission to disapprove the Proposal citing among other things that the Proposal:

  • Will negatively impact institutional and retail investors who are likely to experience increased quote fading and declining fill rates, particularly with respect to larger orders, as a result of the “Discretionary Limit” order type;
  • Inappropriately favors IEX liquidity providers by giving those that use the “Discretionary Limit” order type a unique mechanism to avoid unfavorable executions, which should allow them to increase their profitability compared to liquidity providers on other exchanges; and
  • Inappropriately advantages IEX over member firms by bypassing its speed bump to reprice displayed quotes.

In summary FIA PTG said “Market participants rely on the displayed NBBO to provide a reliable, transparent, and objective standard against which investors can measure execution quality and hold their broker-dealers accountable. Permitting an order type that allows systematic quote fading undermines these benefits and raises fundamental concerns around market transparency, competition, and fairness.”