A US buy-side-owned equity trading venue that seeks to better moderate high-frequency behaviour to protect asset managers has confirmed it will launch Friday.
The new venue, called IEX, confirmed to theTRADEnews.com late last week it would launch on Friday, weeks after registering with the Financial Industry Regulatory Authority (FINRA).
The venue, which will operate as a dark alternative trading system (ATS) states on its website that despite being owned by a consortium of investors that include mutual funds and hedge funds, it will limit its subscribers to the broker community, eschewing direct buy-side connectivity.
It adds that it will operate an automated electronic order book for orders to buy and sell National Market System (NMS) equities with a continuous, automated matching function.
“The ATS will offer a limit order book with non-displayed order types, as well as routing functionality with direct connectivity to all venues displaying protected quotations as defined by Regulation NMS,” information on the IEX website reads.
According to the ATS, the platform's matching logic will prioritise agency and riskless principal orders ahead of principal orders when a broker is trading with themselves, while also providing free internalisation for brokers that match both sides of a trade on IEX.
So far, over 60 brokers have, or are in the process, of arranging connectivity to the venue, including Goldman Sachs, Instinet and Morgan Stanley.
In a report published last week by consultancy TABB Group, author and firm CEO Larry Tabb suggested the processes of new venues – including IEX specifically – would address critical market structure issues brought about by the growth of high-frequency activity and market complexity could have a significant impact on the market.
New platforms such as IEX and Deep Liquidity are experimenting with auction markets and randomised queue priorities where the first firm to respond may not be the first to trade,” Tabb wrote.
“It will be an interesting market-structure experiment to see if they can attract enough buy- side liquidity to create a critical mass, or if liquidity providers can manage risk given the unpredictability of a match.”
The ATS will be run by IEX president and CEO Brad Katsuyama, former global head of electronic sales and trading for RBC Capital Markets.