March 18, 2016
It is difficult to understand the intended purpose and market participant segment that this rule about Non-Displayed Orders and Reserve orders is intended to benefit. If it is intended to allow market participants to maintain order status as Non-displayed and Reserve orders when routed to another exchange, I object to the proposed rule. As discussed in the attachment below, proliferation of order types, of which Non-displayed and Reserve orders are two types, adds to complexity of markets, and limits participation by individual and retail investors. Having orders which are transmitted to another exchange fall back into displayed and unreserved orders would seem to simplify order types and increase the transparency of orders and market strategies. Complexity which benefits only professional traders and shadows the nature of transactions, including maintaining the opaque nature of orders which are sent from one exchange to another platform does not seem desirable, when the objective of the Commission, and markets, should be to reduce order types, increase transparency, and reduce unmanageable complexity. Under the proposed rule, orders appear to go from one exchange to another, and back, all the while maintaining complexity and limiting public disclosure of the quantity, price and execution and liquidity revealed by these less than simple orders. The Commission should consider further whether this proposed rule is consistent with maintaining or increasing
market simplicity, or whether instead it benefit only a limit segment of market participants at the cost of greater inaccessability of information from others. It may be appropriate, for example, to have the Equity Market Structure Advisory Committee address proposed rules like this within the context of a discussion of whether greater complexity, or lesser, is desirable.
Complexity is one of the factors to which flash crash events like August 24 can be attributed, and back and forth transfer of complex orders should not be undertaken without due consideration of the implications.
Copyrighted material redacted. Author cites:
Mackintosh, Phil. "News & Perspectives." Demystifying Order Types. KCG Holdings, Inc., 01 Sept. 2014. Web. 18 Mar. 2016. Available at https://www.kcg.com/news-perspectives/article/demystifying-order-types.