Nearly one year after its launch, IEX Exchange has scored another key victory, this time with approval from the US Securities and Exchange Commission. The recent approval will enable the alternative exchange to open and close the market ahead of a targeted October launch of listings.
IEX is looking to roll out new listings in October 2017, though was looking for regulatory approval from the SEC – in particular, the group was pursuing a plan for opening auctions for initial public offerings (IPOs) on listing day and transfers of listings from other exchanges, per an FT report.
Established pecking order
Presently, IEX is one of thirteen exchanges in the United States, with many supporting the trading of US stocks – however, opening and closing prices are dictated by the listing exchange, a key goal that IEX had been pursuing for some time. IEX itself is a very unique entity in the US and broader exchange framework.
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The co-founders of the firm, known industry-wide after the publication of the book “Flash Boys” by Michael Lewis, have been aiming to democratize market access for traders that are being front run by high-frequency trading (HFT) shops. IEX’s strategy is based on what the firm calls a ‘speed bump’ which slows down trading, requiring all trades to go past by 350 microseconds in a bid to prevent high-frequency traders from racing ahead of slower investors to take advantage of changes in bids and offers before they update.
The recent SEC approval however is a gamechanger for IEX, which will now allow the venue to take on the New York Stock Exchange (NYSE) and Nasdaq – the approval is instrumental in facilitating an October listings launch, which are presently dominated by a hegemonic structure, notably the NYSE and Nasdaq. The new approval will look to make IEX more competitive in terms of listings, away from the other traditional exchanges.
Presently, IEX retains a market share of only 2.4 percent, still a small figure relative to other industry leaders. The efforts also mirror those of Bats, which also recently applied with the SEC to offer an alternative to the closing auctions dominated by the NYSE and Nasdaq.