Michael Lewiss 2014 best seller Flash Boys brought mass-market attention to IEX Group and the alternative trading system that it launched the year before. Today a much more technical document an application to the Securities and Exchange Commission to become a full-fledged exchange puts IEX in a different kind of spotlight. The objective of gaining exchange status is not to further fragment equity trading, which would not be good for customers, says Rob Park, chief technology officer of New Yorkbased IEX. There has to be a reason why IEX as an exchange should exist: to create fair markets. Indeed, fairness and transparency are the mantras of buy-side-owned IEX. The firm was founded by a team from RBC Capital Markets, where Park was head of global algorithmic trading and IEX CEO Brad Katsuyama (No. 23 last year) was global head of electronic sales and trading. IEXs defining technological element is a 38-mile-long coil of fiber-optic cable called the POP (short for point of presence) that slows orders by 350 microseconds. The speed bump is an antidote to latency arbitrage, or trading strategies that capitalize on delays in exchanges updates of price quotes, which Park sees as an invisible tax on the investment process. Noting that IEX has been criticized for its smart order router, which sends trade notifications to buyers and sellers through the speed bump, Park, 37, says, The heated debate around this confirmed for us that 350 microseconds really do matter. Anticipating that it will be operating an open exchange, Parks team over the past year has created a lit order book and a proprietary data feed; it 2014 it launched a new order type, dubbed discretionary peg, that puts requested trades on hold when IEX predicts favorable price changes are about to occur. Achieving exchange status would place us at the table, where we can become a voice for those that have been victimized in the current marketplace, Park says.
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