Upstart alternative trading venue IEX, formed in 2013, has become a household word.
The venue, founded in 2012 and officially opened in October of last year, is backed by the buyside and designed to keep out high-frequency traders and other traders deemed predatory. By keeping out predatory traders that hinder large block trading, the venue has looked to meet the buysides two most important goals – execute block trades and keep its intentions private.
And so far, it has. Lauded by many on the buyside, the venue, started by ex-RBC veterans Brad Katsuyama, Ronan Ryan, Robert Park and John Schwall, has seen its fortunes shine.
The newest trading venue went from zero percent of trading volume to almost 1 percent of U.S. equity volume in just one year and has become the sixth largest private market in the U.S., according to FINRA data. And not content to be just an alternative trading venue, the pool is now actively seeking to become an exchange and complete with the likes of NYSE Euronext, Nasdaq OMX and Direct Edge/BATS.
Since Q1 2014, IEX has reported that its average daily trading volume has climbed by more than 100 million shares.
“Our intention from day one was to challenge the status quo by building a market that prioritizes the needs of traditional investors and issuer companies,” Katsuyama, IEX’s CEO and co-founder, told Traders back in September. “We are encouraged by our recent growth, which has been driven by both investors and their brokers. This additional capital enables us to build and operate a world-class stock exchange.”
But IEX really thundered into the limelight and mainstream American discourse thanks to the Michael Lewis book Flash Boys, released in April and profiled on national TV on 60 Minutes. In the book, Lewis wrote about the deleterious effects of high-frequency trading and how the $24 trillion stock market is rigged. IEX, Lewis wrote, was trying to bring fairness and transparency to the marketplace.
Not content to stop at being an ATS, in September IEX conducted its latest round of funding. The $75 million funding event was led by Spark Capital with participation from Bain Capital Ventures, Franklin Resources, Jim Clark (co-founder of Netscape), MassMutual Ventures and investor Steve Wynn.
Other participants in this round include private investment firms Cleveland Capital Management and TDF Ventures. The financing will be used to pursue registration as a U.S. national exchange and to explore other opportunities to leverage IEX’s brand, capabilities and market position.
Also, IEX recently hired John Ramsay, the former acting director of the SECs Division of Trading and Markets, as its chief market policy and regulatory officer. Ramsay will oversee the firms compliance obligations, including those that would result from the company succeeding in upgrading its regulatory status to an exchange.