[ I N D U S T R Y
P R O F I L E
|
I E X
C O - F O U N D E R S ]
“The prevailing culprits in this - and we strongly
believe this, which is why we put our money
where our mouth is to set up an exchange - are
the exchanges themselves.”
RONAN RYAN
we would be something close to
that percentage of the total market.
The best part about the future for
us is that this is in the buy-side’s
hands to fix and I think the more
educated they become, the more
data they can analyse and the more
they understand the incentives in
this market, they will see a greater
incentive for them to want to con-
tinue to work with us. That for us
is very encouraging.
RR: The data is absolutely critical
and we are 2% and immensely
proud of that. We have only been
an exchange for a couple of months
and what is very different around
that is when we were an ATS and
if we wanted to compare ourselves
to other ATS’S & dark pools, it
was basically impossible to do so
because there’s not much transpar-
ency among individual dark pools.
As an exchange there’s something
called TAQ data, which allows us
to compare ourselves against other
exchanges, and this is irrefutable
and can be pulled by anyone. So far,
the data is proving that we have the
best execution quality.
Separate to that, buy-side traders
care about block trading and mid-
point execution, we’re still trading
over 50% of our volume as a con-
tinuous market at mid-point and
we are executing more blocks than
any of the current exchanges. So,
we’re doing exactly what we want
to be doing and what the originator
of the orders wants us to do.
46
TheTrade
Winter 2016
HM: Does IEX have plans to branch
out into other asset classes or into
Europe?
BK: We have looked at other asset
classes but the opportunity in
US equities is big and we haven’t
found - at this point in our compa-
ny’s growth - another opportunity
that is as big enough in front of us.
We get asked about whether
we will expand into Europe a lot
and our stance on that is similar
to branching out into other asset
classes. We will focus on US equi-
ties and perhaps further down the
line it would be considered, but it’s
not something that we have on the
road map. We go to Europe a cou-
ple of times a year and there are a
lot of institutional investors that
trade US equities and have been
big supporters of IEX. It’s certainly
something we will look at further
down the line.
RR: The European buy-side has
been a very engaging group in
this for the last few years. Their
progressive knowledge of market
structure and interest in IEX has
been really humbling. We enjoy
going over to Frankfurt, London
or Paris and meeting with the buy-
side there.
HM: Based on feedback from your
members, what do they like about
what IEX does and what do they
feel could be developed or done
differently?
BK: When we talk to the buy-side
and the brokers that trade on their
behalf, the focus is on execution
quality. Interestingly enough, a
lot of the things IEX has imple-
mented that differentiates us - like
the speed bump - was designed
to avoid trades that are extremely
adverse to one category and en-
suring that we are trading on their
conditions, so our focus continues
to be on execution quality.
A lot of people will say they like
the fact that IEX’s market data is
free or the fact that we don’t pay
rebates, but then say they don’t
like the speed bump. That opinion
is very impractical because if we
didn’t have the speed bump then
we would look just like any other
exchange. If we were like any other
exchange, then we would have
to pay rebates because how else
would we get someone to send us
an order? If it were not for execu-
tion quality, then we would have to
pay them. If we pay them, then we
have to charge for market data, so
all these things work together.
As an exchange, you’re either ful-
ly committed to representing and
protecting the interest of investors,
or you’re not. And the exchanges
chose different priorities and it’s
their business right to do so, but I
think half-in and half-out is com-
pletely disingenuous.
RR: The exchanges have their
business model and it is what it is,
but truly when you speak to the
institutional investors, the buy-side
and sell-side brokers that represent
them, they know for sure that we
have got their back. Our business
model is an overall philosophy
and nobody questions that when