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Reshaping the Market, One Trade at a Time

Traders Magazine Online News, June 19, 2017

Eric Stockland

One year ago, the SEC approved IEX to become a national securities exchange. It was an exhilarating moment, opening the door for us to continue our mission to level the playing field for investors.

We’re proud to stand behind the progress we’ve made since then, and realize that there is still a lot of work to do.

Some peers, observers and pundits dismiss us as a “non-event.” But the changes that we’ve already brought to investors and the broader market tell another story.

Quantity from Quality
In the nine months since we launched as an exchange, our overall market share has grown 56%. Our lit market share has tripled, although we still trail behind exchanges who pay rebates for displayed orders. But more important is the fact that we’ve done it without compromising our focus on providing higher-quality trading to investors. In fact, just nine months into being a stock exchange, our competitor ranks IEX #1 in execution quality amongst all exchanges.

We’ve grown in this way because we don’t operate like other exchanges. Rather than prioritizing market share at any cost, we are laser-focused on what investors want us to be good at: trading in size without moving the price. Our most recent white paper uses public data to demonstrate our success in this area.

Do we trade more in the dark than displayed? Yes. Nearly 50% of the broader market is non-displayed, and investors have adapted to a toxic marketplace by displaying less and seeking to trade with other naturals without showing their hand. IEX has adapted to their needs (much to the chagrin of certain market participants) by building a different type of exchange.


Sticking to our Principles
Some detractors have questioned whether IEX walks the walk in terms of prioritizing the needs of investors. For the record: we are fair access. Anyone can trade on our venue (or attend our parties).

From day one, we have focused on thwarting toxic strategies, not firms. In fact, the composition of market participants on IEX has remained largely unchanged as we moved from ATS to Exchange and continue to grow?—?it is still a dynamic mix with HFT participation approximately one-half of what it is industrywide.


But we haven’t changed our focus or our design to placate anyone, or to grab more market share or revenue in the short term. Anyone who trades on IEX trades on the same terms, without special advantages like a faster connection or faster data.

And we won’t compromise in the future either. For instance, we won’t apologize for highlighting that exchange rebates have introduced a toxic conflict into our markets. They create the incentive for participants to route for rebate payments, rather than the best execution quality. It happens. Public data proves it, and we will not relent on this point.

If You Can’t Beat ’Em…Pretend to Join ’Em?
After years of subjecting the industry to the Race to Zero, exchanges are suddenly pursuing innovations in the name of “deprioritizing speed” or “helping institutional investors.”

NYSE filed to relaunch its smallest exchange with a speed bump, but given that they make more money from selling speed than from trading, we believe that our speed bump is the only speed bump designed to protect investors.

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