Interactive Brokers Defects From Nasdaq To IEX As "Dominoes Start To Fall"

Not much has been heard from IEX since the Securities and Exchange Commission (much to our amazement) flipped the bird to the all-powerful HFT lobby and granted the exchange's request for a license, cementing IEX's status as the US's 13th stock exchange while also approving the company's vaunted "speed bump" - a mechanism that slows down trades by 350 millionths of a second to help protect its customers from being front run by predatory HFT algos.

That was more than two years ago. But on Wednesday, headlines about the subject of Michael Lewis's best-selling novel "Flash Boys" hit the tape when Interactive Brokers announced that it would become the first company to list its shares on IEX. The shares, which are presently listed on the Nasdaq, will migrate to IEX's platform on Oct. 5, where it will start trading under the ticker IBKR.

IEX broke the news in a press release Wednesday morning:

IEX Group, Inc., which operates America’s newest stock exchange, announced today that Interactive Brokers Group, Inc. (NASDAQ GS:IBKR), an automated global electronic broker, will be the first company to list its stock on IEX. Interactive Brokers’ common stock, which is currently listed on the Nasdaq Stock Market, is expected to begin trading on IEX on Friday, October 5, 2018 and will continue to be listed under the IBKR ticker symbol.

"We are excited and honored to welcome Interactive Brokers as the inaugural IEX Founding Issuer," said Brad Katsuyama, CEO and co-founder of IEX Group, Inc. "Interactive Brokers is a visionary financial services company that shares IEX’s philosophy and commitment to fairer markets."

"I have long admired Interactive Brokers Chairman and Founder Thomas Peterffy’s bold, candid, and consistent view that equity markets are here to serve investors and his critical role in innovating the industry over the past four decades. In fact, his 2010 keynote speech to the World Federation of Exchanges on the important role that stock exchanges play in the marketplace partly inspired me to co-found IEX, so for me personally, things have certainly come full circle," said Mr. Katsuyama.

Thomas Peterffy, Interactive Brokers' founder and chairman, said that while being the first company to list with a new exchange has its risks, he believes that Interactive Brokers will now be able to offer better execution for its institutional and retail clients (particularly since HFTs won't be able to wedge themselves between their buy and sell orders).

IEX

As CNBC points out, despite their initial resistance, other exchanges have adopted their own versions of IEX's "speed bump" to try and signal to customers that they, too, were willing to take a stand against HFT manipulation. However, rivals like the NYSE included exceptions for certain "electronic market makers".

On twitter, traders heralded Interactive Brokers' move, pointing out that now that the levee has broken, each successive defection would come more quickly and easily. As Sal Aruk points out, Peterffy has been consistent on Payment for Order Flow and internalization to ensure customers get the best execution possible.

 

Others asked: Will the dominoes now start to fall?

IEX's rivals are probably wondering the same thing. Because after failing to stop IEX at every turn - first by lobbying against IEX receiving its license and then trying to undermine it by instituting their own versions of IEX's speed bump - the established exchanges might now need to consider something they've heretofore resisted: Genuine change that would benefit retail and institutional customers over HFT.