IEX SEC staff recommends approval of IEX, approval likely soon: WSJ

[NEW YORK] The US Securities and Exchange Commission is preparing to act on a controversial request by new trading group IEX Group Inc to launch a new US public stock exchange, and has received a recommendation from its staff that it approve the exchange, according to a Wall Street Journal report on Tuesday.

The proposed exchange from IEX, made famous by the Michael Lewis book Flash Boys: A Wall Street Revolt, is notable because it would be the only one in the United States to include a so-called "speed bump" - a 350 millionths-of-a-second delay in all incoming and outcoming orders.

The theory behind that, according to IEX, is that it protects investors from high-frequency traders who can pick up on trading signals and use their faster technology to electronically front-run slower investors.

Other exchanges, including Nasdaq, the New York Stock Exchange and BATS Global Markets have been vocal in their opposition to an IEX approval. Nasdaq has suggested that any SEC approval could be challenged.

The SEC is facing a June 18 deadline to act on the IEX proposal. An internal source told Reuters that the commission wanted to see competition to the existing model of electronic trading and order execution, and was unlikely to miss that deadline.

The WSJ report said the commission was likely to vote on the order Friday and that approval was likely.

REUTERS