SEC Approves CSX Speed Bump

The US Securities and Exchange Commission has approved a 24-month pilot of the Chicago Stock Exchange’s proposed Liquidity Enhancing Delay, which would provide a 350-microsecond speed bump for all new incoming orders, cancel, and cancel/replace messages.

According to the CSX’s filing, the only message that would not be subject to the delay would be those providing liquidity as well as cancel messages from a new class of market maker, the LEAD Market Maker, that have heightened quoting and trading obligations.

The CSX also will publicly disclose statistics regarding quote quality, matched trade differences, volume, and variable processing statistics.

“We appreciate the opportunity to implement our pilot program and demonstrate [the plan’s] positive effect on market quality,” said John Kerin, CEO of the CSX, in an email to the Wall Street Journal.

Whether the pilot will bring additional liquidity to the bourse, which has a 0.4% share of the equities market according to the September 2017 Tabb Group’s LiquidityMatrix, is up for debate.

Market structure expert Justin Schack, a managing director and partner at Rosenblatt Securities, noted that the SEC’s approval of the CSX speed bump could set sets a precedent that the Investors Exchange could follow if it wanted to by launching a lit version of its discretionary peg order
type.

SEC yes to CHX bump opens door for IEX to launch DPEG for lit quotes, which could help it boost displayed liquidity as it pursues listings

— Justin Schack (@JustinRBLT) October 20, 2017

All in all, it’s just another block in the Jenga tower, Sal.

— Justin Schack (@JustinRBLT) October 20, 2017

Imagine all the fun surprises we’d have to look forward to if Reg NMS gets repealed or rolled back.

— Justin Schack (@JustinRBLT) October 20, 2017