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Digital Subscriptions > The Hedge Fund Journal > Issue 116 - September 2016 > The SEC Approves The Investors Exchange Speed Bump

The SEC Approves The Investors Exchange Speed Bump

What next?

The debate that engrossed observers of the equity markets over the application of the dark pool featured in Michael Lewis’s Flash Boys: A Wall Street Revolt, has faded. As well, the Investors Exchange LLC (“IEX”), application for approval as a public exchange has died down for the time being. What may reignite the controversy is the filing of a suit threatened by other exchanges or high frequency traders, or both, challenging the SEC’s June 2016 decision to approve the application.

Central to the threatened lawsuit is the claim, advanced most forcefully by the exchanges and Citadel Investment Group, that IEX’s strategy violates Regulation NMS, and specifically Rule 600(b)(3). The problem, they say, is an innovation by IEX commonly referred to as a “speed bump,” which consists of 38 miles of coiled fiber-optic cable. The speed bump adds 350 microseconds (350 millionths of a second) to the time it takes orders to reach IEX’s system.

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