IEX debate: calls for lawmakers to amend market rules
IEX Group has responded to criticism over its application to become a registered US stock exchange, stating it offers a solution that counteracted the advantages that high-speed trading firms have gained over other investors. Its speed-bump concept, currently used on its private trading venue has won the support of many large institutional investors, but funds that use high-frequency trading software and a number of exchanges claim it could hurt smaller investors. The debate raises larger questions about the best way to improve a market which has become increasingly fragmented over the last decade, with some calling on lawmakers to change the rules that gave rise to all of this complexity.

A proposal to create the first new American stock exchange in five years has set off a fierce debate over how to solve problems created by increasingly complex and high-speed stock markets.

The proposal comes from the Investors Exchange, or IEX, a company that became a symbol of the fight against high-frequency trading detailed in Michael Lewis’s book “Flash Boys.”

Simply put, the application submitted by IEX to regulators in September explains that as an exchange it intends to use a 350-microsecond “speed bump” to stand in the way of traders that place and cancel orders more frequently than that.

The speed bump concept, which has already been tested on IEX’s private trading venue, has won the company support from many large investors who have filed letters in support of the IEX application.