Citadel Securities asks SEC to approve new type of inventory order

Electronic trading giant Citadel Securities on Friday sued the Securities and Exchange Commission against the agency’s decision to approve a new stock trading mechanism at upstart exchange operator IEX Group Inc.

The lawsuit marks an escalation by Citadel Securities in an obscure litigation over IEX’s “D-Limit” order type, which is designed to give traders a way to buy or sell stocks on the stock exchange while keeping them. protecting against adverse price movements.

Citadel Securities had previously urged the SEC to reject IEX’s proposal, arguing that the D limit would harm the integrity of the US stock market and unfairly discriminate against certain investors. But the SEC sided with IEX in August and allowed the plan to move forward.

“The SEC failed to properly account for the costs and burdens imposed by this proposal which will undermine the reliability of our markets and harm tens of millions of retail investors,” said a spokesperson for Citadel Securities in a press release.

In a brief court filing dated Friday and seen by the Wall Street Journal, Citadel Securities asked the District of Columbia Circuit Court of Appeals for a review of the SEC’s decision to approve the D-Limit order.

An SEC spokeswoman declined to comment. IEX representatives did not immediately respond to a request for comment.

IEX is best known for appearing in Michael Lewis’ 2014 book, “Flash Boys: A Wall Street Revolt,” which portrays its founders as crusaders against predatory super-fast traders.

IEX has called D-Limit an innovative way to protect brokers and trading firms from “latency arbitrage” – a strategy in which high-speed traders detect that a stock’s price is about to fall. move, then buy or sell it in the blink of an eye, before other market participants have time to adjust their orders.

The proposal has garnered the support of a number of institutional investors, including Allianz Global Investors, the New York State Common Retirement Fund and the Vanguard Group.

Like standard limit orders offered by other exchanges, D-Limit orders on IEX allow traders to publicly display the highest price they are willing to pay for a stock, or the lowest price. to which they are willing to sell. But unlike standard limit orders, D-Limit orders contain a built-in function in which IEX will automatically adjust the price of the order if the exchange detects that the stock price is about to move in one direction. unfavorable to the trader.

Citadel Securities and other opponents have said D-Limit will unfairly discriminate against companies that might try to buy and sell shares of traders using the new order type. They also said that D-Limit commands could potentially raise doubts as to whether the quotes posted on IEX were genuine or illusory.

Write to Alexander Osipovich at

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