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Nasdaq CEO: 'De minimis' standard for sub-millisecond delays would lead to thousands of new order types

Labelingorder delays under a millisecond in length as "" — in effect, too smallto be significant — would lead exchanges to create thousands of new order typesthat execute at different speeds, Nasdaq Inc. CEO Robert Greifeld said April 12.

Speakingduring the Securities Industry and Financial Markets Association's EquityMarket Structure Conference in New York, Greifeld said such a ruling by the SECwould lead to a catalog of perhaps 5,000 order types, as opposed to the roughly360 current types.

Thenew order types would offer trades at incrementally faster speeds, advancing atthe microsecond, or millionth of a second.

"Thatworld will be incredibly complex," Greifeld said. "And that could begood for the market. It'll be hard to understand, but you'll have differentpeople who want different speeds."

Themajor exchanges currently sell colocation services, in which trading firms canpay to house their own servers in the same room as the exchange's to offerthose brokers a speed advantage over those who do not pay for colocation. Thepractice has been cited as evidence that "speed bumps" similar to theone proposed byIEX Services LLC,which would delay orders by 350 microseconds as it passes in and out of IEX,already exist in the market.

Amillisecond is an "unbelievably long" time in today's marketstructure, Greifeld said. Nasdaq does $3 billion worth of equity trades in agiven millisecond, he noted.

Butthe millisecond threshold is not future-proof, he cautioned. Nobody thoughtmarket speeds would break a millisecond, Greifeld said, and currently thedebate revolves around a microsecond-level delay. Vendors operate on ananosecond basis and "are not stopping," and "a pico-second iswithin the next couple years," he said.