IEX, The New Stock Exchange
IEX was given the final approving nod by the Securities and Exchange Commission, (SEC) earlier in 2016 to become the most recent and thirteenth stock exchange of the United States, and is the first of stock exchanges to offer transparency for high frequency traders (HFT’s) and day traders alike. Day traders have typically been at the mercy of high frequency traders, whose trading volume comprises approximately 50% of all of the market trades combined.
IEX does away with the practice front-running orders by HFT’s, a common practice for many high frequency trading firms. Front-running refers to the practice of HFT firms installing direct data cables to exchanges, allowing them to see other purchasers’ orders seconds prior to the Securities Information Processor, (SIP), completing the trade. This has been a big frustration for day traders trying to place buy and sell orders, when they find that the current available shares are immediately unavailable within seconds of placing the order.
Motivation for a Change
In the New York Times bestseller, “Flash Boys”, author Michael Lewis raised awareness to the predatory practices of some HFT’s by exposing these and other questionable trading practices. Traders have been frustrated from competing with HFTs in an unbalanced, and marginalized environment. IEX founders, Brad Katsuyama and Ronan Ryan decided to do something about it. The main goal of IEX is to protect all investors. Founders Brad and Ronan uphold their ethical values by enforcing the regulations of NBBO, to offer the best available price when buying and selling securities.
Brad and Ronan found a way to counteract the attack brought on many predatory algorithms; install a 38- mile cable, and do not allow HFT’s to co-locate equipment adjacent to their servers. While this seems like a simple solution, IEX is the first to unveil this groundbreaking technology which establishes a fair and equitable trading environment.
In an interview by Trading Venues from November of 2016, Ronan Ryan states that “we have always said that we are not anti-HFT but we are against the creation of advantages for some to the detriment of others.” Brad Katsuyama states In the same interview that “For us it’s about educating the end investor and rallying them together in a fair and totally transparent way that is aligned with their interests, so that they want to trade on IEX”. The Investors Exchange and their novel approach to trading is changing the way that traders buy and sell, while alleviating a lot of headaches.
Great Point Capital, LLC offers buying power, access to Takion software platform with excellent IT support, and the benefits of working with an experienced team. We are pleased to currently trade approximately 10% of our volume on IEX, the Investors Exchange.