(Bloomberg) —While the New York-based exchange operators purchase of ISE gives itthree options markets, it also snagged licenses that could be used to run more equity-trading venues. Nasdaq, which already runs three stock markets and three options exchanges, is looking to put those licenses to use “within a reasonable period of time,” according to Chief Executive Officer Robert Greifeld. One avenue under consideration is a so-called speed bump to slow orders to buy and sell shares, he said.
The Stock Exchange Mergers That Rocked The Markets.
The chance to experiment comes as the U.S. Securities and Exchange Commission decides whether to approve IEXs application to convert its dark pool to an exchange with a 350-microsecond delay on orders. IEX, which is rapidly gaining market share, has shown that such an offering is popular among a portion of the investing community thats worried about super-fast trading.
“Weve been playing with this concept for the last four years and to the extent the Commission becomes more amenable to those kinds of things, we certainly will have the active license to explore,” Greifeld said in a phone interview.
The idea of a speed bump isnt unique to IEX. Nasdaq sought approval to add a programmed time delay to its PSX exchange in 2012. While IEX uses a coil of fiber-optic cable, Nasdaqs earlier plan would have used software. The company withdrew its request based on feedback from regulators, Greifeld said. That doesnt mean it wouldnt try a similar model again, though Nasdaq will consider a number of different market models and not just an order delay, he said.
Fairer Market
Nasdaq said on Wednesday that it had agreed to buy ISE for $1.1 billion, a deal that will make it the largest operator of U.S. options exchanges.
IEX pitches its speed bump as a way to make markets more fair by reducing advantages that the highest-speed traders have over others. In comment letters to the SEC, critics have argued that approving its model would add unnecessary complexity to the stock market — and even encourage companies to start competing exchanges that also impose delays. IEX spokesman Gerald Lam declined to comment on Nasdaqs plans.
Exchange groups including Nasdaq, NYSE Group Inc. and Bats Global Markets Inc. have weighed in to the SEC saying IEXs application should not be approved. Greifeld said on Nasdaqs most recent earnings call that the SEC should revisit the rules that underlie the entire stock market before it approves IEX.
