Thomas Peterffy, billionaire trading pioneer and founder of Interactive Brokers, is moving the company’s stock from the Nasdaq (where it’s been listed since 2007) to fledgling exchange IEX, as the exchange’s first listing.
What the heck is IEX? And why would any company ditch the big two US exchanges (the New York Stock Exchange and Nasdaq) for a newcomer?
First of all, what’s IEX?
Founded as an exchange in 2016, IEX features a 350-microsecond delay on its trading platform.
Why? Well, as Quartz put it, a large criticism of the US stock market is that it’s too fragmented (it’s made up of over a dozen trading venues), giving speedy traders a chance to invest between exchanges — a massive money making leg up on slower firms.
The founding group came together in 2012 to fight against trading inequality, and shot to fame via Michael Lewis’ book Flash Boys — which dramatized the team as crusaders against the speedy traders.
So why’s it a fit for Peterffy?
The Hungarian-born billionaire helped pioneer the transition into electronic market-making as exchange rules changed and technology advanced.
In other words, the man, referred to by Forbes as “the father of digital trading,” has seen it all… because he helped create the quantity over quality culture that captures the market today. Now, he’s looking to deconstruct.
Peterffy said IEX’s highly controversial delay is part of the reason he made the switch, believing it will save the Interactive Brokers money and give investors that buy through IEX a better deal than other exchanges.
But, will anyone else follow suit?
Realistically, it’s going to be tough to compete with the amount of liquid cash available in the mainstream Nasdaq-NYSE duopoly.
Making the switch to IEX also means the stock will be removed from certain indexes, forcing some exchange-traded funds to sell their shares if they move, a decision even Peterffy acknowledges will be a tough sell to many risk-averse executives.