Mar 18, 2024

March 18, 2024

How is 4 > 30+?

IEX Exchange’s rebate is only 4 mils1 compared to an average of 33 mils on large maker-taker exchange exchanges (at the top tier). But performance-sensitive clients know that rebates are only part of the story.

Most exchanges offer large rebates for displayed adding to offset the (large) costs of adverse selection. IEX is the only exchange to offer a different solution: D-Limit. Using IEX's Crumbling Quote Indicator (Signal)2, D-Limit is designed to help avoid adverse selection, rather than just trying to offset it.

Source: IEX Market Data, NYSE TAQ Data

For context, the top-tier rebates on the other seven maker-taker venues range from 31 to 36 mils, with an average, median, and mode of 33 mils. In this analysis, we use '30+' to represent the general range of these top-tier rebates, highlighting that IEX's 4 mil rebate is competitive when considering the full picture of all-in performance.

We typically calculate adverse selection via markouts, a measure comparing the trade price vs. the midpoint of the NBBO shortly after the trade. For example, looking at exchange pricing as of March 2024, we see that IEX’s 4 mil rebate pales in comparison to the 30+ mil top tier rebate offered by other maker-taker exchanges. However, looking at 1-second markouts, we see that IEX’s +22 mils is substantially better than the negative markout figures seen at other maker-taker exchanges. When we add the rebate to the 1 second markout to get an "all-in" performance in the above chart, we see that IEX comes out on top. While inverted exchanges (EDGA, BATY, National) have markouts that are slightly higher than IEX, after incorporating the fee to add liquidity we see their “all-in” markout drop below IEX (although still above maker-taker exchanges).

Therefore, comparing IEX’s rebate to that of other exchanges is only half the story. Looking at the whole picture of all-in performance (rebates/fees, plus markouts), IEX is the most performant stock exchange for displayed trading.

1. IEX Exchange offers a 4 mils rebate to add displayed liquidity. Full information on IEX Exchange’s fee schedule is available here:

2. While IEX Exchange endeavors to utilize data and calculations that it believes to be reliable, IEX Exchange cannot ensure the timeliness, accuracy, reliability, or completeness of any data or calculations, including our measure of when we determine the quote to be crumbling.