IEX Update – and Leadership


This morning we just want to update you on IEX’s dark pool. For the week ending Friday May2nd 2014, IEX averaged 74.9 million shares per day crossed, double counted (which is the metric used by most other dark pools that report their trading volumes). To put that number in context, BIDS trading, another successful dark pool focused more on achieving larger trade sizes, crossed 75.8 million shares on Friday – also double counted. BIDS is owned by a consortium of financial industry firms including Goldman, Barclays, Bloomberg, Credit Suisse, Deutsche Bank, JP Morgan, KnightGetco, Morgan Stanley, UBS, and NYSE.

This is remarkable for two reasons:

–          First, BIDS has been in operation since 2007. In its 1st year of operation it crossed 4 billion shares. IEX hit the 3 billion share number after just six months.

–          Second BIDS uses an order-flow-sharing order type called the conditional order, while IEX does not. IEX is trading nearly the same amount per day without that potential leakage.


Here are some more statistics on IEX to date: While the five largest dark pools have an average order size of 364 shares, and an average trade size of 219 shares, IEX has an average order size of 749 shares and an average trade size of 475 shares. IEX’s average trade size is also increasing each month – without the use of conditional orders. Anecdotally we are comfortable saying that our average order size and average trade size on IEX is actually much larger than the average – this has to do with the fact that we tend to trade less algorithmically for our clients, and that we rest more often and for longer time periods than we suspect the average SOR in the street does.

Here are two additional charts that you may find interesting:



If IEX were a publicly traded company, it would be bought by every growth mutual fund manager in the country. Notice not only the growth in shares traded, but the trajectory of its market share.

What IEX’s growth is telling anyone looking to just take a cursory glance is that, whether or not our regulators, exchange CEOs, and industry market structure experts say that there is a very real problem with systematic disadvantaging of investors – and market fairness, investors in the market are voting with their dollars.  IEX is growing despite a sizable industry pushback, and despite an order flow environment street-wide which is in decline. That says it all, doesn’t it?

IEX is apparently raising the bar in the industry with regard to transparency, as well. While FINRA’s recent enhanced dark pool disclosure rules has upped the requirements quite modestly, IEX’s leadership is demonstrating that we all want more. Just this past Friday ITG announced that it too is publishing its Form ATS, just as IEX did. We are sure others will follow.

One final thought on the topic of leadership in general… If you recall, back in 2009 several stock exchanges testified before the Senate Banking Committee on the topic of the “Flash Order”. NASDAQ in particular testified that it felt the order type was harmful and damaging to investors. Yet, when asked why they embraced it, they replied that they had to – as their stock exchange competitors down the block were offering at, and NASDAQ was losing market share to them. In other words, past leadership, or lack thereof, brought down the quality of trade execution. Compare this to the leadership demonstrated by several market-reform-oriented voices, and specifically the actions and business model of IEX – and how they all are raising the quality of trade execution by example.

You have choices where you execute; you can and do make a substantial difference, not only for your own executions and clients, but for the industry as a whole.

Writing this morning note has made me smile, for a change.