The IEX Exchange: 8 Consequences for Investors

The SEC has approved IEX. The question now is: What’s next? How will the approval of IEX impact US market structure?

In my view, copycat platforms will proliferate, spreads will widen, market structure complexity will increase, retail investors will be hurt, large buy-side firms will pay more, sophisticated trading firms will profit, and the quality of the US equity markets will deteriorate.

The acceptance of IEX as an exchange with a protected quote is a turning point for global market structure. In no other market have regulators forced exchanges and brokers to trade on an exchange displaying delayed prices. This will open a floodgate of copycat and unique speedbump markets that will increasingly make it much more difficult to determine the best price, trade efficiently and achieve best execution. This, I believe, will hurt the price discovery process, which will in turn hurt investors, issuers, and the efficiency and effectiveness of our equity markets.