The Ultimate Best Execution Conflict of Interest? A Speed Bump Designed to Enable Predatory High-Frequency Trading

Abstract

Best execution is one of the most actively discussed topics in market structure. Despite all the attention and concern this topic garners, it is surprising to see that some marketplaces continue to deliver new services that further impede quality of execution. An interesting example of this is the speed bump that the TMX introduced on one of its trading platforms–TMX Alpha–in September 2015. This speed bump was created in response to a speed bump introduced by the Aequitas NEO Exchange, but as will be demonstrated in this article, not all speed bumps are created equal.