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Nasdaq Plans to Compete With, Not Fight, IEX

The Wall Street Journal reports that Nasdaq is developing a new order type designed to compete with newly approved exchange, IEX.  In an interview, Nasdaq chief executive, Robert Greifeld, stated that despite earlier threats of a lawsuit and although Nasdaq has a “very strong” case that IEX should not have received regulatory approval to operate as an exchange, “Nasdaq decided to compete rather than fight, by finding its own way to slow down the market for some investors.”

IEX utilizes a “speed bump” of 350 microseconds that is designed to protect investors from high frequency traders.  In contrast, Nasdaq’s plan would not apply to all orders on the exchange.  Instead, the article explains that Nasdaq is developing new “extended life order type” which would allow certain orders to move ahead of others if the traders agree not to cancel the order for about one second.  SEC approval will be required because the new order type will change the how quotes are currently prioritized on the exchange.  According to Nasdaq, the order type is designed to appeal to institutional investors, including mutual funds.