IEX gets nod to be 13th US stock exchange

NEW YORK • The United States Securities and Exchange Commission (SEC) has approved alternative trading group IEX Group Inc's request to launch a new US public stock exchange, in a move likely to intensify arguments over the current market structure.

The IEX exchange, made famous by Michael Lewis' 2014 book Flash Boys: A Wall Street Revolt, is notable because it would be the only one in the US to include a so-called speed bump - a delay of 350 millionths of a second in all incoming and outgoing orders.

According to IEX, that delay - an eternity in a stock exchange universe in which computers can buy and sell stocks in billionths of a second - would protect investors from high-frequency traders who can pick up on trading signals and use their faster technology to electronically front-run slower investors.

The approval came after months of delays and a brutal lobbying battle that divided Wall Street. The move makes IEX Group the 13th official stock exchange in the US.

The SEC approved the speed bump under what it called an interpretation of Regulation NMS, or National Market System, a rule which disallows intentional delays of price displays. Despite that regulation, the agency said it had determined that "a small delay will not prevent investors from accessing stock prices in a fair and efficient manner".

Said IEX co-founder and chief executive Brad Katsuyama: "This is a milestone for all of those who have supported IEX and we look forward to becoming a stock exchange, which will provide us the opportunity to have an even greater impact on the markets."

The approval marks the first time in three years that the SEC has sanctioned a new trading exchange. The most recent approval was when International Securities Exchange's options exchange, ISE Gemini, received the green light in July 2013.

It also opens the door for other exchanges to petition for their own speed bumps.

REUTERS, NEW YORK TIMES

A version of this article appeared in the print edition of The Sunday Times on June 19, 2016, with the headline 'IEX gets nod to be 13th US stock exchange'. Print Edition | Subscribe