Interview, Fireside Chat
Brad Katsuyama – CEO of IEX
- The proliferation of speed bump-type exchanges is expected to exceed a dozen across stocks, FX, and treasuries by next year.
- Competitors are predicted to develop their own machine learning signals, prompting IEX to advance to subsequent innovations as current predictive analytics catch up.
- IEX anticipates that market data sentiment has shifted, with exchanges positioning themselves at a disadvantage ("in the corner") regarding data and rebate systems, while the SEC considers a pilot to eliminate rebates.
- Data is identified as the future of the business model, though it may be utilized by some exchanges as a method of control.
- IEX maintains profitability from 2015 onward and operates with fewer than 100 employees, having executed $15 billion in trading on the interview day.
- IEX holds approximately 3% US market share, a volume that the speaker notes makes the exchange larger than the London Stock Exchange.
- The company focuses on quality over quantity, targeting large trade blocks ($5 million) which represent 30% to 40% of market share on any given month, rather than chasing the total trade volume.
- As the sole US exchange not paying rebates, IEX provides free market data to ensure accessibility for academics and journalists.
- The speed bump concept, originally created in 2012 and implemented in 2013 using a $10,000 piece of equipment, is considered "table stakes," though the physical unit has been removed from operation.
- IEX's machine learning predictive analytics signal is currently on its sixth version and drives the performance metrics used today.
- The company operates with a dual strategy of long-term fighting for market structure reform and short-term building of capabilities.
- Future growth acceleration is expected to adjust as market structures evolve, including the high-profile merger between the London Stock Exchange and Refinitiv valued at nearly $30 billion.
- The speaker notes that while the initial controversy regarding the speed bump and rebate challenges began around 2012, the company remains committed to the long haul.