New US equity trading venues must bring innovation to the market and ensure they do not replicate existing functionality to avoid unnecessary liquidity fragmentation and complexity, the head of markets from recently launched dark pool IEX has said.
With nearly 50 trading venues executing US equities, including exchanges and dark pools, complexity for market participants has increased, although Donald Bollerman, head of market operations for IEX, believes there is scope for new entrants if they bring desired functionality.
Speaking at the TradeTech USA conference in New York this week, Bollerman said venues like IEX, which has sought to create platform free of predatory behaviour, improve execution quality for the buy-side despite increasing the total number of venues.
“We believe there is enough difference between for us to be a viable model,” he said, but added that the high number of US trading venues were “close to carbon copies” of each other.
IEX is expected to begin displaying lit quotes in the coming months as it transfers from a dark pool to a lit exchange.
Bollerman said IEX’s decision to display lit orders and eventually a full-blown lit equities exchange, was an issue upon which the platform’s team had voiced divergent views.
“I’m not completely sure of my position,” Bollerman said. “But I think the benefits of being a lit exchange will outweigh the downsides of displaying a quote.”
He said IEX had also sought to shift the debate on speed in equities trading by adding 350 microseconds of latency to all messages on the platform, so IEX itself could remain “at least as fast as its fastest participant”.
Despite this enforced latency, IEX attracts high-frequency market-makers to provide liquidity but deters unnecessary "professional intermediaries" through a combination of pricing, technology and the model by which it processes orders.