Tuesday, 18 October 2016

IEX: dark and expensive

IEX is not a restaurant. Being overwhelmingly dark and expensive is not something a public exchange should be proud of.

Here is a graphic I just knocked up from the IEX self published data showing the lit volume as a percentage of total shares handled. The majority of the balance is dark with some being routed away.
(Sourced form IEX website data. Click to enlarge)

This is especially interesting as the fee structure at IEX is currently on a fee holiday - zero cost - for displayed, and it costs $0.0009 per share for dark interactivity. It's a bit more complicated than that, but that is the rough summary. Here is the table from the current IEX web site's schedule:

Fee Code Description Fee Fee < $1.00
L Displayed Match Fee FREE

Taking Displayed Liquidity
Providing Displayed Liquidity

I Non-Displayed Match Fee $0.0009 0.30% of TDVT

Taking Non-Displayed Liquidity *
Providing Non-Displayed Liquidity

S Internalization Fee FREE

Member executes against resting liquidity provided by such Member

Alpha Routing and removing liquidity (all routing options) ** Cost + $0.0001

* $0.0009 (0.30% of TDVT for < $1.00), otherwise FREE if Taking Non-Displayed Liquidity with a Displayable Order and at least 90% of TMVD was identified by IEX as Providing Displayed Liquidity (i.e., the Member’s execution reports reflect that the sum of executions with Fee Code L and a Last Liquidity Indicator (FIX tag 851) of '1' (Added Liquidity), divided by the sum of executions with Fee Code L, is at least 90% for the calendar month​).

** The Exchange will pass-through in full any Costs to the Member and add the IEX fee ($​0.0001).


In the words of the great Led Zeppelin, "Ooh, it makes me wonder." Why is such an expensive, parasitic exchange a public exchange?

An expensive, parasitic exchange with complex order types, requiring co-location, potentially gameable from the SIP requiring additional non-local infrastructure, and with a not too simple fee structure. Not quite the original simple "Flash Boys" plan is it?


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