January 15, 2016
Dear Mr. Fields,
I appreciate the opportunity to share my views regarding Investors' Exchange LLC's ("IEX") exchange application.
Many of the comment letters and repeated meetings with SEC officials appear to be motivated by malice and coordinated by High Frequency Trading advocates to try and maintain their unfair advantage over other participants in our markets.
This minority interest considers everyone who opposes their ability to reap enormous profits through latency arbitrage as uninformed masses.
They encourage captured academics, journalists and lobbyists to repeat their talking points ad verbatim and go to greate lengths to suggest ways these talking heads can incorporate misleading and superfluous terms such as "provide liquidity", "tighten spreads" and "improving market stability and quality" in their rhetoric to sound intelligible.
These perpetrators are acting out an agenda to create a warped appearance that their activities are good for our markets. Treating this as a platform to blatantly lie, as they are effectively doing wherever possible, is highly inappropriate.
I would recommend that the SEC take such flagrant violation of the Exchange Act and the SEC's own Reg NMS seriously and filter out both their comment letters and their pleading with the SEC to let them keep ripping people off.
With that said, I believe the Commission carefull consider two issues that IEX provides solutions for that the SEC has yet to satisfactorily address.
1.An additional exchange with the IEX model will eliminate speed advantages from our markets and slow down the arms race. This allows longer term investors the opportunity to avoid the predatory trading methods that HFT employ and provide an alternative to NOT participate with these firms.
Suppose for the sake of argument, that HFT's claims were true. That IEX would be disruptive and unfair with its 350 microsecond delay. It is highly improbable that this would be disruptive to anyone outside of HFT since currently, firms like Citadel take MUCH longer to execute retail orders and the Chicago Exchange already has a protected quote with a much larger delay.
2.IEX allows retail investors to avoid internalization. This practice, championed by Bernie Madoff and which Citadel claimed in 2004 that: "the potential long term impact of internalization is so corrosive to our national market system that the Commission should take every possible step to curtail this business practice". Citadel now, of course is the largest internalizer in our markets. One has to wonder why the change of heart? Perhaps they clearly saw that Madoff was on to something. We all know how that turned out (for him and the SEC).
The vast majority of investors welcome the IEX approach and would like to see its application approved. However, I and many others are skeptical that granting IEX exchange status is something the SEC is willing to do because "no one is going to end run Citadel at the SEC".
Yours faithfully
Richard Long