ATLANTA (LN) — The Eleventh Circuit on Friday denied Citadel Securities LLC’s petition challenging the Securities and Exchange Commission’s approval of Investors Exchange LLC’s plan to extend its signature speed-bump technology to options trading, ruling the agency acted within its discretion in approving the novel market structure.
The three-judge panel upheld the SEC’s September 2025 order authorizing IEX Options, which uses a 350-microsecond delay on incoming orders and a software tool that can cancel or reprice stale quotes when prices on other exchanges shift. The court rejected all five challenges Citadel raised under the Administrative Procedure Act, finding substantial evidence supported the agency’s core findings and no legal error in its regulatory analysis.
“High-frequency trading in securities markets is technologically sophisticated and almost incomprehensibly fast,” Circuit Judge Rosenbaum wrote for the panel. “The dispute in this case centers on 350 microseconds, about one-third of one-thousandth of a second.”
Citadel, which handles roughly 30 percent of U.S. consolidated equity options trading volume, argued the SEC lacked sufficient evidence that latency arbitrage—a trading strategy that exploits split-second price discrepancies between exchanges—poses a problem in options markets. The court disagreed, pointing to comment letters from five options market makers describing the practice as costly and pervasive, along with data showing a near-doubling of bid-ask spreads over the past decade.
One market maker reported spending at least $10 million annually to reduce, but not eliminate, pickoff trades from latency arbitrageurs. Another, Volant Trading, said the escalating costs forced it to exit the business altogether.
The court also rejected Citadel’s argument that the SEC should have required the same quantitative data IEX provided when it won approval for its equities exchange. IEX Options is not yet operational, so such data was unavailable. The APA imposes no general obligation on agencies to produce empirical evidence, the panel held, citing precedent.
On the question of whether quotes subject to IEX’s Options Risk Parameter qualify as “protected quotations” triggering mandatory order-routing obligations, the court found no legal error. The Options Plan—not Regulation NMS, which Citadel urged the panel to apply—governs options markets, and IEX’s rules identify only four scenarios in which quotes lose their firm status, none of which apply when the ORP activates.
Citadel also contended the ORP unfairly discriminates in favor of market makers by letting them cancel or reprice quotes when prices are about to move against them. The court characterized this argument as resting on a misunderstanding of how the system works: incoming orders must traverse the speedbump before reaching IEX’s matching engine, so the ORP accelerates price updates the market maker would be making anyway to maintain the derivative pricing relationship between an underlying security and its options.
“The ORP’s protection against latency arbitrage is commensurate with the risk uniquely undertaken by market makers because of their continuous quoting obligations across a large number of options,” the Approval Order stated, a finding the panel found reasonable.
The court further rejected arguments that the SEC failed to assess competitive conditions before approving the proposal and that IEX Options would impose an undue burden on competition. The panel found the agency’s analysis of market-structure differences between options and equities—options markets list roughly 135 times more securities than equities and lack any over-the-counter alternative—provided a rational basis for concluding the speedbump would not harm competition.
IEX launched its equities exchange in 2016 and won approval for publicly displayed quotes in 2020. The D.C. Circuit upheld that approval against a prior Citadel challenge in 2022. Friday’s ruling lets the SEC’s approval order stand.