Top financial industry group urges scrutiny of IEX's options exchange proposal

June 30 (Reuters) - A top U.S. financial industry group has raised concerns over stock exchange IEX's proposal to launch a new options trading platform, urging regulators to scrutinize whether the plan meets market fairness and transparency standards.

IEX has proposed an options exchange that would introduce a 350-microsecond pause on trades, designed to prevent ultra-fast traders from exploiting brief price differences.

The Securities Industry and Financial Markets Association, which represents broker-dealers, investment banks and asset managers, said that the proposed setup could harm investors.

Brokers are required to send orders to the exchange that display the best price. However, under IEX's plan, those displayed prices might disappear before the trade is executed, potentially leaving customers with inferior deals, SIFMA said.

The group urged the Securities and Exchange Commission to examine whether IEX's system would unfairly benefit certain traders while making it more challenging for others, including everyday investors, to obtain competitive pricing.

"It has been well established by the SEC and Federal Court that IEX innovations ... help investors and do not harm them," the company's chief market policy officer John Ramsay said.

"We have publicly provided extensive data and analysis to show that it will be targeted to meet that purpose and will have the same beneficial impact in the options markets."

Last week, market maker Citadel Securities also requested that the SEC reject IEX's proposed options exchange.