MFA Letter Raises Concerns that an Asymmetric Speedbump will Harm Investors

On October 22, MFA submitted comments to the SEC on Cboe EDGA’s proposed asymmetric speedbump in response to the SEC Order to determine whether to approve EDGA’s asymmetric speedbump, designed to benefit certain liquidity providers by allowing them to cancel resting orders during a 4 millisecond speedbump for incoming orders.  The letter supplements MFA’s August 2 letter to the SEC and responds to EDGA and other comments the SEC received regarding the proposed EDGA rule change.

MFA’s letter expresses concerns that an asymmetric speedbump will harm the ability of institutional investors to access displayed liquidity and states that the SEC should not approve a rule proposal that would allow liquidity providers to fade away from large institutional orders.  In addition, MFA’s letter raised concerns that the EDGA rule proposal will discriminate against institutional investors by: (1) discriminating amongst liquidity providers as most won’t have the capability to immediately process cross-market signals and fade their order; and (2) serving as an unfair and inequitable fee on market participants.  Finally, MFA raised concerns that the EDGA rule proposal will deteriorate market quality.