Citadel Securities, LLC, a giant high-speed trading firm, are taking the SEC to court on 10/25 because they want to stop the Investor's Exchange (IEX) discretionary limit (D-limit) order. In August 2020, the SEC approved using this D-Limit order type created by the IEX group.
While I work to provide a good summary for you below, there is a must-see excellent writeup by high-frequency trading regulation expert David Lauer here. An excellent walkthrough of how large, high-speed trading firms scalp money from your transactions can be found here.
If you prefer a good TLDR summary instead:
What is the Investor's Exchange? The IEX is an investor-centric exchange founded in 2021 to mitigate the damaging effects of High-Frequency Trading (HFT). In brief, HFT firms can abuse faster internet/transmission speeds to skim/scalp money from everyday investors and traders. The Investor's Exchange is built to eliminate the bizarre and unfair disadvantage "can't afford to pay millions to have my internet extremely physically close to the NYSE".
What is a discretionary limit order (a "D-limit order")? This is a proprietary type of order for the IEX that is fully described (and source-cited) in David Lauer's expert writeup. In essence, the D-Limit order is the thing that puts retail traders solidly into the same speed class as the richest high-speed trading firms.
Why would a giant high-speed trading firm like Citadel Securities decide to sue the United States Securities and Exchange Commission over the D-limit order? Citadel has stated in court documents that they are operating on your behalf to give you the best "efficiency", which also happens to be the way that allows them to scalp the maximum amount of money from transactions. If the D-Limit order were introduced, all trades through IEX could be slowed down by 350ms to ensure equal speed footing for all participants in the market. The SEC approved the D-limit order type in August 2020 and then Citadel Securities sued them.
Why would I care? Citadel Securities has directly stated in court documents that they are operating on behalf of you. If you have bought or sold stock, Citadel has very likely touched your transactions. Did they do that on your behalf, with your consent? Do they get to skim money off every trade for themselves, on your behalf, at your request? Is it OK with you that a titanic high-speed trading firm, fined by regulators and enforcement agencies many times in the past, standing up in a United States court of law and saying they get to decide what is best for you? That is what this petition is about.
We are collecting undeniable evidence that Citadel Securities does not speak or act on behalf of retail investors without their consent. By signing this petition, you make clear that they do not have your consent to speak on your behalf in court, especially when it comes to how they want to touch your money.
