NEW YORK (Reuters) – Exchange operator IEX Group, on Tuesday said it is planning to introduce a new way to place stock orders, which will reduce the risk of the trade, where the price is likely to move, and the leveling of the playing field between fast and slow traders.
IEX has asked regulators for approval of a type of a sequence is referred to as the Discretionary Limit, and makes use of a machine to learn to predict if a stock price is going to change, and only the fastest traders are able to respond to and, subsequently, the prices of the resting orders on the exchange, so that they don’t get hit during that time.
The New York-based exchange said to have been machine learning based on the “crumbling quote indicator has been on for 0.02% of the trading day, which is 24% of all the trade occurs, this means that advanced traders take advantage of small windows of time when prices are about to change. (link.medium.com/30b6IADFu2)
IEX-was thrust into the spotlight in 2014, when it was presented in Michael Lewis’s book “Flash Boys: A Wall Street Revolt,” which claimed markets were rigged to favor high-speed traders. IEX is a proprietary trading platform that is known as an alternative trading system (ATS), and the book followed the founders as they build up an exchange, that it would be contrary to the benefits of the fastest traders.
IEX run for about 3% of daily stock volume, with the majority of the focus is on the protection of the hidden commands, but it is said that it is a new type of order would be to improve on the performance shown in the trade by all participants in the market.
“Would you like to buy a share of stock at $10 when there is less than two milliseconds later, you could buy it at $9.99? No one would want to buy it at $10,” IEX’s President, Ronan, Ryan, said in an interview.
The buyers and the sellers of the shares in the hyper-competitive, with 13 exchanges, of which five are run by the New York Stock Exchange’s parent, Intercontinental Exchange, Inc., four by the Cboe Markets around the world, as well as three by Nasdaq, Inc., The supervisors also recently approved a new exchange, and two more are in progress, and there are about 30 to ATSs.
In that fragmented environment, that the fastest traders have an advantage over the others.
“To be honest, we are not in a position to see the deterioration in the quotation, and get out of the way,” said Mehmet Kinak, global head of systematic trading at T. Rowe Price. “IEX said: ‘oh, that’s the one, it is at risk, you’re not fast enough to do it yourself, we will do it for you.”
Reporting by John McCrank; Editing by Nick Zieminski