The TRADE 59 - Q1 2019 | Page 50

[ M A R K E T R E V I E W | E X C H A N G E S ] MEMX: The road ahead Following news of major US players seeking to establish a member-owned equities exchange, industry experts agree the move could prove to be positive for markets but warn the road ahead for MEMX may be a difficult one. W all Street kicked off 2019 with a bang, as news of major US players banding together to take on incumbent exchange operators with a potentially game-changing move. Nine institutions encompassing retail brokers, banks, global market makers and an asset manager have agreed to launch a new equities exchange, known as Members Ex- change, or MEMX for short. Details at this stage are vague, but what we do know is that MEMX aims to reduce the fixed costs of trading and simplify execution in the US equities space through basic order types, a low-cost fee struc- ture and the latest technology. Some industry experts and analysts have deliberated that the 50 // TheTrade // Spring 2019 development is hardly shocking and more of a cyclical industry trend. Aite Group analyst, Spencer Mindlin, summarised this within a blog post on the news, explaining that over the past 20 years, the form of BATS and Direct Edge, which chipped away at incumbent exchange market share by catering for the next generation of traders. The market has now consoli- dated itself down to three major “We simply don’t know yet what MEMX plans to do that’s original. So far they have only talked about offering lower fees and that won’t be a paradigm shift.” ALASDAIR HAYNES, CHIEF EXECUTIVE, AQUIS EXCHANGE US exchange industry has been through two major arcs of modern market fragmentation and consol- idation. The trend saw the rise of con- sortium-led challengers in the exchange groups: NYSE, Nasdaq and Cboe, with one independent exchange – the Investors Exchange (IEX) – alongside various Alterna- tive Trading Systems (ATSs) and dark pools.