Reg NMS says you cannot code a system or intentional device to delay access to a quotation. Nasdaq had tried doing this on one of their smaller markets in software many years ago, but the SEC did not approve their proposal. Geographic or network latency is not regulated by Reg NMS. For example, there is a very small stock exchange that operates out of Chicago, which is many milliseconds away even by microwave vs. New Jersey where most of the equities market trades.
There are a lot of SEC comment letters claiming IEX's delay coil is an "intentional device"[1][2] but the SEC approved their exchange application because they consider the delay to be "de minimis." One area where the IEX delay differs from simple geographic latency is that IEX delays incoming orders, outgoing fills, and outgoing market data, but they do not delay market data from other exchanges. That difference makes it more difficult to "pick off" a stale order on IEX, but on the flip-side, it also means IEX orders get to free ride the price discovery happening on other markets without taking risk.
This delay also raises issues because under Reg NMS, brokers have to route orders to exchanges with the best price when trading through an entire price. Since IEX's data is lagged, it may be showing a quote that is no longer accessible. Brokers would face additional slippage/execution uncertainty if they need to route at this phantom quote and wait 700 microseconds to find out it wasn't there. Canada has exchanges with delays similar to IEX, but IIROC ruled that they are not "protected" quotes so brokers have discretion not to route there if they feel it would harm their execution quality.
There are a lot of SEC comment letters claiming IEX's delay coil is an "intentional device"[1][2] but the SEC approved their exchange application because they consider the delay to be "de minimis." One area where the IEX delay differs from simple geographic latency is that IEX delays incoming orders, outgoing fills, and outgoing market data, but they do not delay market data from other exchanges. That difference makes it more difficult to "pick off" a stale order on IEX, but on the flip-side, it also means IEX orders get to free ride the price discovery happening on other markets without taking risk.
This delay also raises issues because under Reg NMS, brokers have to route orders to exchanges with the best price when trading through an entire price. Since IEX's data is lagged, it may be showing a quote that is no longer accessible. Brokers would face additional slippage/execution uncertainty if they need to route at this phantom quote and wait 700 microseconds to find out it wasn't there. Canada has exchanges with delays similar to IEX, but IIROC ruled that they are not "protected" quotes so brokers have discretion not to route there if they feel it would harm their execution quality.
1: https://www.sec.gov/comments/10-222/10222-300.pdf
2: https://www.sec.gov/comments/10-222/10222-16.pdf