Dark pool operator IEX Group on Friday received SEC permission to operate as a registered stock exchange.
IEX's application with the Securities and Exchange Commission proposed listing stocks on an exchange that would trade with a speed bump of 350 microseconds — enough of a delay to keep high-frequency traders from taking an early advantage on the rest of the market, IEX said.
The firm gained prominence following references to it in the best-selling Michael Lewis book, “Flash Boys,” in 2014.
Simultaneously, the SEC issued an updated interpretation that will require trading centers to honor automated securities prices that are subject to a small delay, or speed bump, when being accessed.
“Today's actions promote competition and innovation, which our equity markets depend on to continue to deliver robust, efficient service to both retail and institutional investors,” said SEC Chairwoman Mary Jo White. “A critical role of the commission's regulatory framework is to facilitate the ability of market participants to craft appropriate market-based initiatives, consistent with our mission to protect investors, maintain market integrity, and promote capital formation.”
IEX must satisfy certain standard conditions specified in the SEC's order before it is able to begin transitioning its operation to a national securities exchange, including participating in a variety of national market system plans and joining the Intermarket Surveillance Group.
Pension funds that publicly supported IEX's application were the $187.4 billion California State Teachers' Retirement System, West Sacramento; $127 billion Texas Teacher Retirement System, Austin; Norges Bank Investment Management, which manages Norway's 7 trillion Norwegian kroner ($845 billion) Government Pension Fund Global, Oslo; and the €183.3 billion ($206.2 billion) Dutch pension fund manager PGGM, Zeist, Netherlands.
Citadel Group, Nasdaq, Intercontinental Exchange and BATS Global Markets were among those that have filed comment letters opposing the application.