The upstart trading platform IEX Exchange aims to gain more business from retail investors, and the process is calling for regular meetings of some large brokerages in an effort to increase equity trading for retail investors, which some critics have described as handicapped.
The IEX says it is forming a retail trade advisory committee, or RTAC, which includes platforms with strong retail presence, including Fidelity Investments, Interactive Brokers Group Inc. IBKR,
Robinhood Markets Inc.,
And TD Securities, among others, to discuss ways to improve the trading experience for individual investors, especially as segment interest has exploded during the Cowid crisis.
According to JMP Securities, more than 10 million new brokerage accounts were opened in the first half of 2021, roughly equal to the total number of accounts opened last year.
IEX has long been trying to enjoy its image as a crusader for market integrity and price fairness. Based on Michael Lewis ’2014 book“ Flash Boys: A Wall Street Revolt, ”the company is considered a champion to the average investor, highlighting the efforts to thwart sophisticated high-speed traders.
As its push for a larger share of the retail trade, IEX plans to launch an improved way for brokers to run a retail business of at least 100 shares at the so-called midpoint of information, later this month or later. In other words, half the way the stock is bought and sold, which is considered a fair way of conducting business and which is not usually paid to the average investor.
IEX2019 started midpoint retail trading in 2019, but this period includes features that hopefully will make it easier to identify retailers, including electronically flying midpoint trades called retail liquidity indicators or RLIs.
IEX has also implemented features to ensure that the retail business is not coming from authentic and computer-driven trading techniques.
The regulator of Wall Street, the Securities and Exchange Commission, measures the best performance for stocks by studying the prices offered on so-called “lit” exchanges such as the Intercontinental Exchange ICE,
Owned New York Stock Exchange or Nasdaq. But retail orders on the Dark Exchange are increasingly being met and those orders are not used to estimate the official best price, called the National Best Bid Offer, or NBBO.
Ronan Ryan, president and co-founder of IEX, told MarketWatch that “retail is under-tapped in exchange” and that following retail investors represents “a natural breakthrough for IEX”.
Within the retail business world, IEX has become a frequently mentioned name on social media sites like Reddit and Discord because of the notion that the company is fighting on behalf of the average investor. Some sophisticated investors provide a guide to “direct route” to IEX if trading platforms offer this feature.
Ryan said IEX’s retail program is good for private investors. “Retail is shaking better,” because executions at midpoint prices are only given to banks and institutions. IEX was founded in 2012 by Ryan and Brad Katsuyama, its chief executives, as well as John Shoal and Rob Park.
It is unknown at this time what he will do after leaving the post.
Ryan, however, was optimistic that increasing contact with retail brokers through RTAC would be fruitful for all parties.
“IEX has always been working to align the interests of market participants, and RTAC is the latest example,” Ryan said.
“Any retail volume we have at IEX is a new business,” he said, acknowledging that competition for market share on Wall Street has intensified. IEX knows that “other exchanges are going to see similar things.”
Uncertainty about the regulatory landscape can be a factor that helps drive retail brokers into greater alignment.
SEC Chairman Gary Jensler has pledged to be a champion of individual investors.
Last month, when Jensler reported that he said banning payments for order flows was an option “on the table”. In an interview with Baron, the SEC chief said the practice of paying for the flow of orders – through which stockbrokers sell retail orders to market makers in exchange for profits – has resulted in “inherent conflicts of interest” and a situation where retail investors do not see optimal execution. , Critics complain.
Increasing the effectiveness of retail sales may be due to Gensler’s.
“Like other exchanges, IEX has a retail program and despite their existence, we still see a large part of the retail order flow through off-exchange,” Ryan said.
“The hope is that with our upcoming new retail program and the creation of RTAC, we can move the market structure dialogue with retail brokers forward so that we can work with them to meet and exchange their liquidity needs,” he said.