Larry Tabb On “EDGA, The Hot Tub Time Machine Of Stock Trading” Re CBOE And Speed Bumps

According to TABB Group founder and research chair, the Cboe reportedly is looking to implement a 3- to 4-millisecond speed bump for liquidity-taking orders on its EDGA equity exchange. While the delay may attract new market makers, the asymmetric speed bump effectively will give liquidity providers a time machine that will provide them with much greater clairvoyance into who they do business with and at what price, transferring risk from the liquidity provider to the liquidity taker.avb

Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

We respect your email privacy

Q2 hedge fund letters, conference, scoops etc


nextvoyage / Pixabay

The Wall Street Journal recently reported that Cboe is working on adding a speed bump to its smallest exchange (EDGA) (“New ‘Speed Bump’ Planned for U.S. Stock Market”). EDGA was one of the four US equity exchanges Cboe obtained when it acquired BATS, which obtained EDGA when it acquired DirectEdge in 2014.

The Journal reported that Cboe has been discussing the addition of an asymmetrical 3- to 4-millisecond speed bump for liquidity-taking orders, so marketable orders (those that take displayed liquidity) would be delayed for 3 to 4 milliseconds before they reach the resting limit orders in its trading book. The article also mentioned that Cboe would preclude this market from being covered by Reg NMS Rule 611, more commonly known as the “Order Protection Rule.” This means that EDGA would not be subject to order routing requirements that force all stock exchanges to honor other exchanges’ most aggressive quotes. The elimination of order protection for this market would allow other exchanges to bypass EDGA’s displayed limit orders.

"While most people reading this piece understand the words above, I am not sure everyone will grasp what this actually means to US equity market structure."

For the rest of his comments, go to


Saved Articles

Are you a smart investor? Join tens of thousands of sophisticated investor reading our authoritative free newsletter

* indicates required

Congrats! Are you a smart person?

We have an exclusive targeted for being a sophisticated and loyal reader.

Sign up today and get three months free

Use coupon code vip19 or click on the button below

Limited time offer only ENDS 9/130/2019 or after next 25 15 subscribers take advantage whichever comes first – please do not share this discount with others