In a letter submitted to the SEC today, FIA PTG encouraged the Commission to consider the impact and overall fairness of this mechanism, which proposes to modify the resting price of its Discretionary Peg Order type, on any displayed protected quotes on IEX. There would seem to be a conflict between the proposed change and the promotion of price discovery through the display of protected quotes that are the hallmark of our national market system. In considering these conflicts FIA PTG recommends the Commission establish standards or guidelines for the use of discretionary price mechanisms, as well as the ability of matching engines to automatically adjust order prices based on predictive signals. FIA PTG cautioned that approval of the IEX proposal without any principles or guidelines could open the door to some very complex order types in which matching engines are able to price and re-price orders based on any complex series of predictive signals for any purpose, including those that may create inherent conflicts between orders.
The full letter is available here.