Nasdaq CEO says ‘Flash Boys’ rule may complicate the US stock market
Apr 13, 2016 02:18 AM EDT
On Tuesday, Nasdaq Chief Executive Officer Robert Greifeld said the approval of the new regulatory standard related to the U.S. stock exchange application of startup trading platform IEX group might complicate the market.
According to Reuters, the US Securities and Exchange said on March that delays by exchanges of less than a millisecond in responding to tax orders would not have the ability to harm the market participants in accessing stock quotes. However, the Nasdaq Chief Executive Officer, Robert Greifeld, indicated that markets operate at nearly the speed of light, adding that the addition of one-millisecond standard would lead to a proliferation of new order types - instructions on how the governing trades are executed.
At Securities Industry and Financial Market Association conference, Greifeld said "You'll have different people that want different speeds." He added that the number of order types would climb from about 360 currently to a huge 5,000 increase if the millisecond standard is approved.
The Globe and Mail wrote that IEX would also benefit in the process as it would pave the way for them to be a public stock exchange. IEX, which was featured in the 'Flash Boys: A Wall Street Revolt,' pauses stock order for 350 millionths of a second. IEX is currently known to be operating as an alternative trading system. It says that their role is to prevent predatory high-frequency traders from picking up trade signals wherein they would use their fast technology to devour slower investors, hence the word, "Flash Boys."
Canmua reported that IEX applied to be an exchange in September which led to a flood by SEC with more than 400 letters. Most of the investors urged the approval but trading firms and existing exchanges and Nasdaq have criticized the IEX's speed bump which would prevent exchanges from pausing orders.
Currently, there are 13 US stock exchanges, most of which execute trades in data centers in New Jersey and Chicago. The time it takes to send an order via fiber optic cables to exchange venue vary from the distance where the order is sent.