NYSE Reverses Course, Opting to Implement ‘Speed Bump’ Across its Markets

After once opposing similar efforts, the NYSE has embraced the utilization of 'speed bumps' across its NYSE MKT.

The narrative in the United States has staunchly shifted, with the approval of the IEX and its ‘speed bump’ model prompting change across domestic changes. Despite exercising strong disapproval of the model previously, the New York Stock Exchange (NYSE) has reversed course and now opted to introduce its own application for a 350 microsecond delay on NYSE MKT.

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NYSE MKT constitutes the exchange’s market for small to mid-cap companies, which, following regulatory approval, is slated to be rebranded as NYSE American. Last June, the US exchange space underwent a key addition, after it approved the country’s 13th national stock exchange, effectively greenlighting the Investors’ Exchange LLC (IEX) to register as a National Market System (NMS).

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A key development was the SEC’s provision of an interpretation that required all other trading centers to honor the small delay, known as a ‘speed bump’, when automated securities prices are being accessed under the intentional latency.

The speed bump slows all orders down in order to deter predatory order flow or latency-driven arbitragers who use high-frequency trading (HFT) techniques to exploit time delays, while at the same time the speed bump is small enough keep the degree of latency controlled as to not affect genuine traders negatively.

New Strategy

According to the a recently disclosed 2017 Market Equity Strategy from the NYSE, the group will now move to “file rules with the SEC for new features that promote midpoint trading, including a 350 microsecond delay upon order entry, proprietary data and outbound routing, as well as a Discretionary Pegged Order.”

According to Tom Farley, NYSE President, in a recent statement on the about face: “We recognize certain market models are appropriate for ETFs or less liquid securities, and we are excited to provide our customers with more choice in how they list, invest and trade.”

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