December 18, 2015
Dear SEC
Major news publications are now reporting the changes non HFT partcipants demand in our equity markets.
It is the responsibility of the SEC and current law to favor long term investors and provide this alternative by approving the IEX application.
From Gretchen Morgenson at the New York Times:
Scores of investors, in a fistful of comments, have told the Securities and Exchange Commission that they want to be able to trade stocks on a more level playing field.
IEXs application has received overwhelming support from small and large investors alike.
IEX aims to offer investors an alternative to exchanges that provide information advantages to participants prepared to pay a hefty fee for an inside track. One advantage comes in the form of proprietary data about trading action in stocks. The other is something known as co-location, which cuts down on the time it takes to transmit a buy or sell order for execution. Both systems allow preferred investors to react ahead of others.
IEX, which currently operates as an alternative trading system, is already a place where investors can meet with minimal interference from middlemen.
The company has received praise, and business, from institutional investors concerned that their trades are being disadvantaged on other systems.
In its current form, traders can skirt IEX even when it posts the best bid or offer on its system.
In correspondence with the S.E.C., IEX said that it sought exchange status to protect investors from practices on the dominant exchanges that unduly focus on the speed of quoting and trading, and unduly rely on ever-increasing fees for both access and market data that their members are effectively required to pay in order to trade for themselves and to seek best execution of their customers orders.
David L. Brooks, head of global equity trading at the Boston Company Asset Management, an investment boutique of BNY Mellon, praised the speed bump.
Weve looked at the quality of executions that were getting back from IEX and we see some real advantages versus some other venues we trade at, Mr. Brooks said in an interview. The central part of their design is specifically geared to taking out that structural speed advantage for some participants.
The vast majority of comments were in support of IEX. Professional money managers overseeing $1 trillion in assets are among them.
IEX presents a free-market and competitive solution that is really meant to put all market participants on a level playing field, Mr. Schrank said. The incumbent exchanges are no longer in the game of matching buyers and sellers to earn a straightforward fee. They enable one class of trader to pay more for enhanced and exclusive market data as well as closer and faster access to the exchanges matching engine.
This strikes me, Mr. Schrank added, as being in direct opposition to the purpose of the capital markets.
When the S.E.C. devised new rules to modernize the national market system a decade ago, it said that it hoped to benefit all investors by expanding automated trading in exchange-listed stocks. It also acknowledged that the interests of long-term investors would not always be aligned with those of short-term traders.
When those interests conflicted, the S.E.C. said at the time, the commission believes that its clear responsibility is to uphold the interests of long-term investors.
So what is the S.E.C. waiting for?