Can someone tell me if the view in "Flash Boys: Not So Fast" is accurate on IEX? In "Flash Boys" Brad Katsuyama says some ridiculous things, showing he doesn't know how exchanges work. In fact, the entire book is basically complaining that they can't trade large blocks without changing the price.<p>Is IEX actually doing things in good faith or are they just playing off of people that are scared?
The original plan for IEX sounds like a wonderful extortion racket. By law, you cannot buy or sell stock on someone else's behalf unless you check with all major US stock exchanges first to verify that you are getting your client the best price. IEX intentionally, massively delays answering back unless you pay them buckets of money. Thus, unless you pay IEX buckets of money, you are at a huge disadvantage on every stock market, not just IEX. Quite a racket.<p>Has anything changed with either the laws or IEX's plan since then?<p>Update: IEX did indeed change their proposal to remove the favored order routing. Which still affects trades in other exchanges, and still affects negatively effects traders on all markets, but at least its "fair" now.
<i>Opponents of IEX, including the other stock exchanges, have argued that the structure of the new exchange will add unnecessary new complexities into an already complex stock market, and potentially end up hurting small investors.</i><p>Yeah they are really looking out for the small investors. How very considerate.
The SEC’s decision may not be the end of the fight. Last month, attorneys for Nasdaq argued that the SEC could be sued if it approves IEX, saying the SEC would first have to change its own rules to explicitly allow for a speed bump.<p>To this, the SEC issued an interesting response: addressing concerns about the legality of speed bumps, the SEC separately said that delays of less than one millisecond are consistent with its Regulation NMS.<p>According to the SEC [1], IEX's 350 microseconds delay is negligible, and thus the market is automated and the quote is protected. The practical interpretation is that the SEC has set a ceiling for what it deems the speed race among HFT firms (with fiber optics, microwaves, lasers...)<p>So with this decision, the SEC has capped what technological advancement in trading can achieve going forward, as now a 350ms delay will become the norm, while anything below 1 millisecond is deemed a "de minimis" delay. Which is no good for HFTs, where microseconds can mean all the difference between profit and loss.<p>[1] <a href="https://www.sec.gov/divisions/marketreg/automated-quotations-under-regulation-nms.htm" rel="nofollow">https://www.sec.gov/divisions/marketreg/automated-quotations...</a>
Citadel is not happy:<p>“Today’s decision will test and potentially reverse the gains in fairness, efficiency and transparency that have been made to our markets over the last decade. We must be vigilant to identify unintended consequences, and firm in our commitment to equitable and consistent treatment for all investors.” [1]<p>[1] <a href="http://www.reuters.com/article/us-usa-sec-iex-idUSKCN0Z32NM" rel="nofollow">http://www.reuters.com/article/us-usa-sec-iex-idUSKCN0Z32NM</a>