The fact that the NYSE has copied some of IEX’s features show IEX’s threat potential.
The SEC has given the New York Stock Exchange the green signal for implementing what is known as a speed bump on one of its exchanges, thus allowing it to compete head-to-head with its rival – Investors’ Exchange.
The NYSE Group, owned by Intercontinental Exchange Inc, plans on adding a delay of a fraction of a second for incoming and outgoing orders on its NYSE MKT exchange, which is now going to be renamed as NYSE American.
NYSE stated that the new exchange will be based on a similar model to that of the IEX Group’s Investors’ Exchange, including the introduction of a 350-microsecond delay. However it will additionally feature electronic market makers with obligations that ease the trading of NYSE American-listed stocks.
This is the second time the SEC has allowed the introduction of an artificial delay, as per data on regulatory filings.
Pioneered by IEX, the delay triggering device thrust the company into the spotlight before it even acquired a license to operate an exchange: the launch of a book named “Flash Boys: A Wall Street Revolt,” authored by Michael Lewis featured followed IEX as it built the device, for what it believed would be a fairer, simpler market.
Back then in 2014, the book had ignited a firestorm of debates after Lewis stated that the stock market was rigged by profit-hungry exchanges in favor of high-frequency trading firms.
The speed bump – the delay – is just one of the measures IEX said it took to level the playing field for market participants.
Although NYSE had strongly opposed IEX’s exchange application, saying it was a bad model for the market to follow, it later amended its statement saying, it would be copying some of its aspects in order to better compete with it.
According to data from exchange operator Bats, IEX has a market share of 2.33% in U.S. stock trading, as for NYSE MKT, it has managed to grab just 0.19% this month.
The New York Stock Exchange currently has a 12.69% share while the NYSE Arca has cornered 9.30% of the market. The combination of the two makes NYSE the largest U.S. exchange operator.
IEX plans on starting a listings business this year which will compete with NYSE and Nasdaq Inc.