The Path Forward (By Bill Harts, Modern Markets Initiative)


Initiative I’ve been watching the latest SEC debate kicked off by IEX’s exchange application with some wonderment.  After all, the law is pretty clear: exchanges aren’t allowed to employ intentional delays, let alone selectively-applied intentional delays.  At the same time, the SEC was clear about the fact that they were searching for a fair way to approve IEX’s application while promoting competition and a level playing field between markets.

So the Commission did a remarkable thing: as the rancor over the IEX application reached a fever pitch, they hit the pause button.  They singled out the market structure issue at the heart of the controversy and asked market participants to comment on their attempt to define what constitutes an allowable delay.  No marketing. No name-calling.  An adult conversation.  Just the law, and whether or not changing it is good for the markets.

Like a few other people, I wrote a comment letter against intentional delays and waited to see who disagreed (someone always disagrees).

The result?

No commenter supported the SEC’s proposal to permit “de minimis” intentional delays in our stock exchanges.


When asked if they supported the general principle behind IEX’s selectively delayed exchange model, no one raised their hand.

Even IEX, the would-be exchange that prompted the whole exercise, couldn’t support the SEC’s proposed rule change.  They were clearly conflicted — their comments came more than a week after the SEC’s deadline – but they couldn’t support the general principle.

Not surprisingly, they largely urged the SEC to ignore the adult conversation about market structure, and instead to return to their wish that market structure be tweaked on a one-off basis every time a new business model comes along.  Especially IEX’s business model.

We hope the path forward is clear to the SEC at this point: everyone agrees that intentional delays in exchanges would damage our National Market System.  Now that the principle is established, deciding the first case should be easy.

Bill Harts
CEO, Modern Markets Initiative

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