IEX – It’s Been One Week Since You Looked at Me…
It’s been one week since you looked at me
Threw your arms in the air
and said “You’re crazy”
Five days since you tackled me…
Bare Naked Ladies
IEX has been trading stocks for about a week, and they have just released statistics about activity in their pool. This is quite novel to us. While we are accustomed to seeing statistics from dark pools via a few firms that offer that information commercially, before IEX we have never seen an ATS simply report their statistics in transparent fashion to the public on their website. As a matter of fact, we remember great secrecy around some other dark pool launches, as the new dark pools did not want to advertise the fact that they traded so little at the onset.
In addition the dark pool information in those commercially available sources was self-reported. Often times we were perplexed how a specific dark pool would skyrocket in a one month period to the top of market-share charts. Perhaps such firms picked up a new high frequency liquidity provider…
Anyhow, here are IEX’s stats:
IEX’s Statistics after Seven Days
– Average Order Size = 1,403 shares
– Average Fill Size = 382 shares
– % of fills: 100 shares = 61.1%
– % of fills: 5k-10k shares = 0.55%
– % of fills > 10k shares = 0.48%
How Does IEX Compare to Other Dark Pools?
Guess what? On their new market structure website, the SEC has just published a working research paper, Alternative Trading Systems: Description of ATS Trading in National Market Stocks. One could not have hoped for a more objective yardstick to compare IEX’s results to.
– Average Order Size = 374 shares
– Average Fill Size = 232 shares
– % of fills: 100 shares = 67.2%
– % of fills: 5k-10k shares = 0.18%
– % of fills > 10k shares = 0.08%
What Can We Learn From This Comparison?
IEX’s first week was successful.
– Their average order size was 275% greater than that of the average ATS.
– Their average fill size was 65% greater than that of the average ATS.
– Their % of 100 share fills is smaller than the average ATS.
We’ll go out on a limb and state that IEX compares even more favorably than those figures demonstrate.
– Other ATS’s for example, “bunch liquidity” so as to maximize their internalizing of orders with larger minimum trade sizes on them. Small contra sides, which institutions typically seek to avoid interaction with, get herded together to meet an institution’s minimum fill requirement (which serves the pool operator, but defeats the intention of the larger institutional flow). We would argue that the typical ATS in general would transact less, and with even smaller trade sizes, if they did not bunch orders.
– IEX’s statistics should become even more favorable as other broker dealers come on line. The bulge firms are not currently on, although some of them are in the process of connecting with IEX. Hopefully, connecting competitors will send orders to IEX with increasing frequency and increasing size.
– Routes are being built to allow institutions to rest large blocks solely in IEX. We currently do this for our clients manually, but firms that build their own technology are facilitating this as well, and as more buyside firms make use of that clean resting, IEX trade metrics will improve even more.
For the record, we have no special allegiance, connection, or financial interest in IEX. We are members, and we have traded with IEX. Our average trade size exceeds the averages that they have just published. If we have been vocal about them recently, it is because we believe their model is clean, that our trading experiences with them have been rewarding, and we appreciate the transparency surrounding their matching logic and actual trade metrics.
Please consider supporting their business model to the fullest extent that you can. Unashamed, we at Themis of course offer a way for you to do that.
Good to see a relatively trouble free launch. Some comments on your post;
IEX have also not published volume stats, presumably because they do ‘not want to advertise the fact that they traded so little at the onset’. I don’t fault them for this but you can’t say they are differentiating themselves vs other dark pools.
IEX also aggregate orders to meet minqty, so again no differentiation there.
In our experience, this published average fill size is heavily skewed by large fills on the first day (beware of averages, remember?) I’m seeing an average of under 230 shares since Wednesday (way less than our order size) albeit with some decent chunky fills mixed in. Are you seeing the same? I wonder who started on Wednesday that caused it to drop?
I will pass your comment along to IEX; thanks for the feedback.
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