IEX Group has received permission from the Securities and Exchange Commision (SEC) to launch its own stock exchange, the 13th of its kind in the US.

IEX is operated by critics of high-frequency trading, and already operates as a private trading pool, with 1.6% of all daily trading volume.

The new exchange will use a “speed bump” that will slow orders by 350-millionths of a second. The firm says it does this to protect investors from “predatory” high-speed trading. Opponents have said that such a system runs the risk of manipulation and delays in trading.

Commissioners determined the delays “wouldn’t prevent investors from accessing stock prices in a fair and efficient matter”.

“It does mark a pendulum shift where ‘speed is king’ may have reached the furthest point it can go,” Andrew Upwards, Head of Market Structure at brokerage Weeden & Co, told the Wall Street Journal.

“They’ve had a victory in this debate about the importance of speed in markets, and it’s a setback for those who think speed and efficiency are the end all and be all.”

IEX and its Chief Executive Brad Katsuyma were profiled in the book “Flash Boys”, which cast them in the light of saviours for the stock market.

“We are grateful and humbled by the support we’ve received from the investor community. Without it, we may have faced a different result,” Katsuyama says.

“This is a milestone for all of those who have supported IEX, and we look forward to becoming a stock exchange, which will provide us the opportunity to have an even greater impact on the markets.”

Trouble could be on the horizon for the SEC, as a number of existing trade firms have been stirred up by the decision. Rumblings from NASDAQ are that the firm might sue the commissioners should IEX go ahead and set up an exchange.

Calls for the SEC to revisit its decision will only increase as the opinion that it has made exceptions for one firm over others grows.

By Alex Hamilton

by Alex Hamilton
Alex is Senior Reporter at IBS Intelligence, follow him on Twitter or contact him at: