In a letter filed with the Securities and Exchange Commission, the FIA Principal Traders Group has raised concerns about Investors Exchange's plans to operate a new options exchange (IEX Options) as a fully automated trading system built on the core functionality of the IEX equities platform.
Consistent with FIA PTG's previous opposition to IEX’s intentionally artificially introduced latency delay (the “speedbump”) in their equity markets, FIA PTG opposes the proposal’s plans for replicating this model in the options markets.
FIA PTG also does not support the proposal’s plan to provide additional protection to options market makers through the use of an Options Risk Parameter (ORP). ORP introduces the novel concept of a displayed options quote being repriced by the exchange based on a signal driven from equities trading activity. For the first time, an exchange will adjust prices of a quote in one asset class using inputs from another asset class. FIA PTG believes the uniqueness of this market structure mechanism warrants further industry discussion and evaluation before it is allowed.
Accordingly, FIA PTG encourages the SEC not to approve the proposal.
Read the letter here.
