IEX Press Release
Evidence that NYSE, Nasdaq, and Cboe abuse their regulatory power and position to over-charge brokers and investors for vital products and services
NEW YORK - January 29, 2019 - IEX Group, Inc. which operates the Investors Exchange (IEX), today became the first national stock exchange to publicly disclose its costs to provide market data and connectivity in a report titled “The Cost of Exchange Services.” The report provides critical evidence that supports long-held industry complaints that NYSE, Nasdaq, and Cboe have been abusing their regulatory position by charging excessive markups on products necessary for brokers to stay competitive in today’s markets and best serve their clients.
For over a decade, the entrenched stock exchanges have defended their excessive market data and connectivity prices by claiming that they compete vigorously in setting those fees and that they are “fair, reasonable, and competitive” as required by the Exchange Act of 1934. Investors, brokers, market makers, and most recently regulators, have challenged these assertions but have lacked the necessary data on exchange costs and markups to validate these claims.
The SEC recently convened a roundtable of industry participants that revealed a complete lack of transparency from entrenched exchanges into their costs to offer these products. As a new, innovative and independent stock exchange, IEX undertook an in-depth analysis to describe and account for their own costs to provide these products to provide all market participants with the transparency that they have requested.
The first-of-its-kind study by IEX provides evidence that:
- For proprietary depth of book market data products, other exchanges charge fees 900 - 1,800% above IEX's costs to offer a comparable product.
- For physical connectivity to the exchange, other exchanges charge fees 2,000 - 4,200% above IEX's costs to offer comparable services.
- For virtual sessions needed to trade (i.e., order entry and drop copy sessions), other exchanges charge fees 500 - 1,800% above IEX's costs to offer comparable services.
By publicly disclosing its own costs, IEX shows the extent to which the three entrenched exchange operators are egregiously marking up these vital products and services. Simply put, the markups charged by the legacy exchange operators are only possible in markets where exchanges have monopolistic control over pricing for products that many participants require to conduct their business.
“Although the New York Stock Exchange (ICE), Nasdaq, and Bats (Cboe) are publicly traded, for-profit companies, they also enjoy special privileges and status operating as self-regulatory organizations with a government issued exchange license,” said IEX Group Co-Founder and CEO Brad Katsuyama in a letter to the SEC outlining the findings of the study. "In turn, all exchanges, including IEX, have a distinctive responsibility to help maintain a healthy capital markets ecosystem and must be held to a higher standard than any other participant. With this unique regulatory position comes the responsibility to prove that the prices they charge the industry are fair, reasonable, and promote rather than undermine competition. The exchanges owe us all some answers.”
IEX Group is on a mission to build fairer markets. Founded in 2012 and headquartered in New York City, IEX Group introduced its first trading venue in 2013 and launched the Investors Exchange (IEX), an independent U.S. stock exchange, in 2016.