- IEX published a video on its YouTube channel mocking the high fees other exchanges charge. The video is set to run as an ad on CNBC on February 26 and February 27, according to a spokesman.
- The video, which was shot in the style of an infomercial, is the latest punch thrown by the startup exchange in its fight against the three large exchange groups: Nasdaq, Intercontinental Exchange, and Cboe Global Markets.
- In January, IEX published a whitepaper outlining market data fees at all the exchanges.
Wall Street firms are known for filing detailed comment letters and publishing lengthy white papers when voicing their opinion on complex market issues. But in today’s day and age, sometimes the best way to get your point across is an infomercial.
That’s the latest approach IEX has taken in its ongoing fight over exchange fees. The lone independent stock exchange published a video on its YouTube page mocking the fees some of its competitors charge to access the markets they run.
The video is set to run as an ad on CNBC on February 26 and February 27, according to a spokesman. Given CNBC often films from the floor of the New York Stock Exchange and that TV screens tuned in to CNBC are common on Wall Street trading floors, the ad’s designed to get traders’ attention.
The three major exchange groups – Intercontinental Exchange, Nasdaq and Cboe Global Markets – faced significant pushback at the end of 2018 against their fees. Exchange fees have long been criticised by market participants, but regulators stepped in for the first time in October 2018 when the Securities and Exchange Commission ruled against fee increases by NYSE and Nasdaq on certain market data.
The video, which runs just under a minute and a half, features a salesman pitching the importance of what appears to be a simple ethernet cord to obtain trading access to the stock market.
“Are you one of those folks that wants to connect to the traditional stock exchanges? Then I am about to show you something you cannot succeed without, literally,” the salesperson in the video says, speaking to the camera and a studio audience. “This cable looks ordinary right? And it is. But plug it into your trading systems and woah, you open a whole new world of shockingly basic access to those fusty old exchanges and the data they distribute.”
With the enthusiasm and style similar to that of a late-night infomercial, the sales person goes on to outline the importance of the cable, with its ability to offer access to a “pay-to-play system that is anti-competitive”. He finishes the video by saying regardless of whether you want the product or not, you have to buy it.
The video’s also set to appear as a commercial on CNBC.
The Intercontinental Exchange, Nasdaq and Cboe Global Markets, the three major exchange groups, were not named in the video. However, IEX’s criticism of the fees charged by those firms has been well documented. IEX does not charge members for market data or co-location.
In late January, Brad Katsuyama, the exchange’s co-founder and CEO, published a letter on LinkedIn he sent to the SEC outlining the costs IEX charges its members for connectivity and market data compared to Ice, Nasdaq and Cboe. The exchange also published a whitepaper, which found market data fees at other exchanges were as high as 1,800% more than what it cost IEX to offer its market data to members.
On the same day the whitepaper was released, Nasdaq published data of its own criticising IEX’s analysis. Phil Mackintosh, Nasdaq’s chief economist, argued that IEX’s policy of not charging for market data and co-location actually is more detrimental to the market, as the cost of other services is used to subsidise those which are provided for free. Others have also argued that it’s not fair to compare fees when considering IEX’s smaller size. The exchange, which received regulatory approval in 2017, holds roughly 2.788% market share in stock trading.
The traditional exchanges have also shown their willingness to fight back. On February 14, NYSE, which is owned by ICE, filed a suit against the SEC for its Transaction Fee Pilot, which was approved in December and is meant to examine how exchange’s transaction fees and rebates impact where brokers choose to route clients’ orders. Nasdaq and Cboe followed with suits of their own the following day.
You can watch the entire video here:
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