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FIA PTG: MELO contributes to spiraling complexity of equity market structure

FIA PTG: MELO contributes to spiraling complexity of equity market structure

19 September 2017 6:00pm EDT

FIA PTG submitted comments to the SEC today opposing Nasdaq's proposal to create a new “Midpoint Extended Life Order (MELO).  FIA PTG's comments echoed Citadel's opposition to MELO, and build upon the principles expressed in prior comments opposing the Extended Life Order (ELO)

Both ELO and MELO introduce latency by requiring orders to rest in the market for varying times before being executed. Moreover, whereas the recently approved ELO proposal fundamentally changes Nasdaq’s order book queue priority from a price/display/time priority to a price/display/ELO/time priority, MELO goes a step further and essentially creates a second, independent order book within the Nasdaq matching engine. At a time when the equity marketplace is already overly complex, we are concerned that the costs of approving mechanisms like ELO and MELO far outweigh the potential benefits.

FIA PTG continues to urge the SEC to impose a moratorium on exchange proposals like this one until it is able to complete a comprehensive review of equity market structure and move forward on consensus goals for market reform including: 
1. Reducing complexity, order type proliferation and fragmentation;
2. Enhancing true exchange competition;
3. Preserving the benefits of order protection for investors;
4. Enhancing the value of displayed quotes;
5. Enhancing competition between lit and dark venues; and
6. Improving transparency for investors.

The full letter is available here.

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2017-09-19_SEC_Nasdaq_MELO.pdf (318.96 KB)

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