[ M A R K E T
R E V I E W
|
E X C H A N G E S ]
‘Exchanges owe us
answers’ says IEX
IEX becomes the first exchange operator to disclose its costs with a detailed report
revealing incumbent exchanges are grossly marking up fees.
I
nvestors Exchange (IEX) has
publicly disclosed its costs of
producing market data and
connectivity, suggesting that in-
cumbent exchanges could be mark-
ing up charges for such services by
as much as 4,000%.
Through a detailed review of
the costs for IEX to provide depth
of book market data, physical
connectivity and logical connec-
tivity, co-founder and CEO Brad
Katsuyama said in a statement
that “exchanges owe us all some
answers”.
IEX concluded in its review that
for depth of book data products,
incumbent exchange operators
including NYSE, Nasdaq and Cboe,
are charging fees that are between
900-1,800% more than IEX’s costs
to offer the same product. In ad-
dition, for physical connectivity in
54 // TheTrade // Spring 2019
data centres, IEX said incumbent
exchanges charge fees that are
between 2,000-4,000% more than
IEX’s costs to provide the same
connectivity.
A spokesperson for NYSE told
The TRADE: “While IEX is free
to cherry pick and conflate their
numbers, the fact remains that
the all-in cost to trade on NYSE is
lower than IEX.”
Similarly, a spokesperson from
Cboe said: “The IEX Group report
fails to take into account signif-
icant differences in transaction
fees when comparing IEX with the
leading exchanges that operate ful-
ly displayed markets. By focusing
exclusively on direct expenses the
study overlooks the full range of
costs incurred to attract displayed
liquidity and operate trading
platforms that produce valuable
market data. It also ignores the sig-
nificant value of exchange data that
contributes to meaningful price
discovery. Transparent markets
are valuable to investors and our
charges reflect that value.”
“Interestingly the “free
data and colocation
model” offered by IEX
is the most expensive
exchange on a per-
share basis.”
PHIL MACKINTOSH, CHIEF
ECONOMIST, NASDAQ
The bold move by IEX makes it
the first US exchange operator to
publicly disclose its costs of produc-