Virtu Financial, one of the largest global market makers, has expressed support for IEX Group’s planned launch of IEX Option in a comment letter submitted to the U.S. Securities and Exchange Commission.
The letter puts Virtu at odds with rival market maker Citadel Securities, which contends the IEX options exchange would be harmful for market participants and the SEC should not give its approval.
In its July 9 letter, Virtu described IEX’s proposal as a thoughtful and data-driven effort to introduce greater competition and innovation into the options market.
The firm focused in particular on the Options Risk Parameter (ORP) Indicator, a key feature of the IEX Options model. The ORP would allow market makers to automatically cancel or reprice quotes based on a predictive formula that anticipates imminent price changes.
Virtu argued that this mechanism could enable market makers to post deeper, more competitive quotes without taking on undue risk—benefits that would ultimately flow to all market participants.
“Virtu is not in the business of picking winners and losers in terms of business models,” wrote Thomas Merritt, the firm’s Deputy General Counsel. “We believe the ORP could be an innovative risk management and execution efficiency tool in the execution toolbox.”
The firm added that IEX has addressed concerns raised by some market participants with additional data and transparency in its revised filings.
In a comment provided to Traders Magazine, IEX Chief Market Policy Officer John Ramsay cited Virtu’s letter among several that have been supportive of the proposed new options exchange.
“We appreciate that a broad range of industry participants and market makers, such as Virtu, CTC, All Options, and HAP Trading, are willing to go on the record in support of our Options filing, and in particular, the feature that protects market makers from latency arbitrage,” said on July 10. “Our exchange is designed to foster competition and deliver better prices for investors – a theme that is consistently reflected in their endorsements.”
Virtu’s stance contrasts with a June 23 letter submitted by Citadel Securities, which called on the SEC to reject IEX’s proposal. SIFMA, Charles Schwab, MEMX and Nasdaq have also written comment letters critical of the IEX proposal.
Citadel Securities’ critique focused on IEX’s plan to combine its well-known “speed bump”—a brief delay in order execution—with the ORP, warning that this could create “illusory quotations” and unfair quoting practices that mislead market participants. Citadel argues that such a structure would result in displayed prices that appear accessible but are in fact subject to cancellation or repricing before execution.
“As detailed in our comment letter, IEX proposes to introduce an unprecedented quote canceling scheme in the U.S. options market to enrich its shareholders and its select cadre of market makers – all at the expense of millions of American investors,” a Citadel Securities spokesperson told Traders Magazine on July 10.
The full set of comments to the SEC regarding IEX options can be found here.
