Why Is Citadel Securities Frightened Of The IEX Exchange?

IEX AMC

The lawsuit regarding the D-Limit order type is taking place on Monday, October 25th. Citadel is suing the SEC arguing that this new order type from the IEX Exchange will harm tens of millions of retail investors, via Reuters.

But will it?

Let’s dive deep into what the IEX Exchange is supposed to do for retail investors, how the D-Limit order will innovate the market, and what it will mean for AMC and GME.

franknez.com

Welcome to Franknez.com – I’ve been doing some more digging and what’s occurring with Citadel and the SEC is a lot bigger than I thought. This is an important time in history.

Let’s get started!

Impact Of IEX Exchange In Markets

IEX Exchange

So, what is the IEX Exchange anyway? IEX, or the “investors exchange” is a fair and transparent stock exchange dedicated to investor and issuer protection.

There are more than 150 broker members using it and around 10,643 unique symbols currently being traded.

The innovation behind the IEX Exchange relies heavily upon it’s D-Limit order type that is supposed to outperform displayed order prices on other exchanges.

This means that predatory strategies such as market arbitrage, where high frequency firms profit from lower prices in foreign exchanges, will no longer be able to do so.

High frequency trading has been used against retail investors to not only gain better prices on stock from other ‘slow loading’ exchanges, but by also using this advantage to sell stock significantly cheaper.

So when you find an exchange that is showing lower prices, hedge funds betting against certain tickers may borrow high in another exchanges while benefiting the difference from selling the stock in those displaying lower prices.

The D-Limit order uses AI technology that provides more consistent and accurate data across all exchanges.

This order type is going to provide high quality prices in the market and is truly innovative and for retail.

How Will The IEX Exchange Affect Citadel Securities?

Citadel

In short, Citadel Securities and other high frequency trading firms will lose a lot of money.

The reason being is they are making money every second from using this high frequency trading technology to their benefit by getting better prices than anyone else in the market.

The IEX Exchange would put Citadel Securities in the same courtyard as retail investors, leveling the playfield.

IEX would create a foundation for a fair market and Citadel Securities is suing the SEC for it.

The use of high frequency trading is not protecting retail investors, on the contrary it’s betting against them and the SEC has recognized this saying, “Citadel enjoys unfair advantages over other participants”.

Fighting against this order type is like getting angry for having to share your cake at your own birthday party.

Citadel processes close to 50% of the entire market’s orders. The company would face massive losses from eliminating high frequency trading alone.

Not to mention, the heavily shorted stock they have been betting against.

What Would IEX Mean For AMC and GME?

AMC GME

We know that high frequency trading gives these firms a trading edge over heavily shorted stock.

They’re able to locate and identify foreign exchanges where the price is significantly lower, and use these means to cheat the system by buying back borrowed shares low; profiting the difference from selling high and driving these stocks down.

IEX would seal these cracks in the system. The D-Limit is meant to keep prices equal and consistent throughout the markets.

This order type will essentially put a halt to high frequency trading, changing the entire game in the markets.

We would have transitioned from an older world of finance, to an innovative one that may bring more participants to the market.

So, How Will This Affect AMC And GameStop?

AMC GameStop

The price moves based on supply and demand would be significantly more accurate.

I would expect massive price moves from retail momentum finally display in the lit market.

IEX is the first step towards a fair market and retail investors must support it’s innovative structure to fight high frequency trading.

Only then could we move on to the checklist of eliminating dark pool trading and other predatory strategies.

What Are The Chances Of The D-Limit Order Type Being Approved?

This would highly depend on the judge(s) looking into this matter. There are a lot of factors that can take place here and Dave Laurer, a former Citadel Securities employee said it well in a recent interview with Trey.

He mentioned you never know what kind of deals are being made behind-the-scenes that may influence certain decisions.

And although Dave Laurer wasn’t very optimistic, I believe the energy we should be feeding is that of positive impact and real change in the markets.

The D-Limit order type would be a significant innovation in our markets and must be upheld.

It would be up to retail investors to fight for justice and a fair market should it not be upheld in court.

This is a developing story so make sure to subscribe to the blog or follow me on social media to get notified on the next updates.

Is The D-Limit Order Type That Good?

To put things into perspective, the IEX Exchange has done numerous tests observing the accuracy of the D-Limit order type.

They’ve found over several tests that not only does the AI match prices but also sets new and higher prices in the market.

The IEX Exchange would give the market a much needed refresh that would allow stocks to perform significantly better than the current model.

IEX Order Displayed Orders Improving
IEX Displayed Orders Improving

This is the closest we’ve come to restructuring the markets and is massively bullish in my opinion.

For our community to be part of this incredible innovation alone is a massive win.

This is what we do. People like us fight for a fair market.

And whether this D-Limit order type goes through or not, this is what we’re going to be known for.

Our community is a beacon for change.

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4 Comments

  1. fz

    Next, the SEC needs to ban “dark pools”

    • Frank Nez

      I agree 💯💯💯

  2. brad kesel

    “…cheat the system by selling borrowed shares low;” ?? Don’t they cheat by selling borrowed shares high and buying (to cover) low?

    • Frank Nez

      💯You’re right. Actually I just rephrased it so it’s easier to understand

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