IEX Options: SEC Ponders New Trading Playground for Wall Street
Published Date: 4/25/2025
Notice
Summary
The Investors Exchange (IEX) wants to start a new options trading platform called IEX Options. The SEC is now deciding whether to approve or reject the rules that would govern this new trading spot. This affects investors and traders who use IEX, and the decision could impact how and when they trade options, possibly changing costs or opportunities soon.
Analyzed Economic Effects
5 provisions identified: 0 benefits, 1 costs, 4 mixed.
IEX would add 350µs order delay
IEX proposes to add a hardware-based delay of 350 microseconds to every incoming order and quote message using coiled optical fiber. The Exchange says the 350 microsecond delay is meant to let IEX update its view of the market before processing orders.
Optional ORP can cancel or reprice quotes
IEX would offer an optional Options Risk Parameter (ORP) that can cancel or reprice resting quotes when its quote instability calculation indicates an imminent adverse price change. The ORP uses an Options Quote Indicator (based on Black-Scholes), real-time quoting from eleven "Signal Exchanges," and a proprietary quote instability calculation; quote instability determinations may not be generated more often than every 200 microseconds for the same side.
Priority overlays give 60% / 40% allocations
IEX proposes priority overlays that give Specialists and Directed Market Makers entitlement to 60% of contracts (if one other non-Priority Customer is at the NBBO) or 40% (if two or more) of contracts allocated at the same price when quoting at the NBBO. A Small-Size Order Entitlement would give a Specialist priority to execute against orders of five or fewer contracts under specified conditions.
Key ORP parameters set by Trading Alerts
IEX would set and periodically change three ORP-related components—the quote instability threshold, the measuring period for implied volatility (initially a half-hour), and the delta bound band—by Trading Alert rather than filing them in the rule text. Changes to the quote instability threshold and measuring period would be communicated with at least 30 days' notice; the delta bound band would be announced but the proposal did not set a fixed advance notice period for it.
Quoting time obligations for market makers
IEX would require Registered Market Makers to provide continuous two-sided quotations for 60% of the trading day and Specialists for 90% of the trading day in their appointed classes, but only for options classes with time to expiration under nine months.
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