Citadel Securities, a major market maker in the US stock and options, has moved to court against the Securities and Exchange Commission (SEC) over the regulator’s approval of a new order type introduced by stock-exchange operator IEX Group Inc.
The lawsuit was filed last Friday and was first reported by The Wall Street Journal. It asked the US Court of Appeals for the District of Columbia Circuit to review the SEC’s decision.
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The dispute is over IEX’s ‘D-Limit’ order type that will allow traders to buy and sell stocks on the exchange while protecting their position from unexpected price moves. It came into effect from October 1.
“The SEC failed to properly consider the costs and burdens imposed by this proposal that will undermine the reliability of our markets and harm tens of millions of retail investors,” a Citadel Securities spokesperson said in a statement.
The SEC approved the order type in August despite a previous request by Citadel Securities to squash it. The company then argued that this order type would damage the US market’s integrity.
Notably, Citadel Securities is one of the top five market makers on IEX’s exchange.
Other market players, including FIA Principal Traders Group, Nasdaq, and Hudson River Trading, are also opposing the order type.
Good for the Traders?
“D-Limit is already proving valuable to a broad set of market participants and the SEC’s decision to approve it is based on overwhelming evidence and support from brokers and investors representing over 100 million beneficiaries,” IEX’s co-founder and president, Ronan Ryan said. “We are confident that it will be upheld.”
“From our perspective, this recent action should only encourage more investors, brokers, and market makers to use D-Limit given that the protections we have created are clearly working.”
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