America's newest stock exchange is now going after 'one of the touchiest subjects' on Wall Street

America’s newest stock exchange isn’t finished shaking up the establishment.

IEX, the trading firm famous for its efforts to undercut high-speed traders, just launched as an exchange after winning regulatory approval in July.

The exchange-application process was a drawn out and ugly affair, with IEX throwing barbs at its rivals, and establishment players like Nasdaq and the New York Stock Exchange returning the favour.

This back-and-forth was typically carried out via comment letters to the Securities and Exchange Commission, and so it is fitting that IEX’s first SEC comment letter since going live as an exchange is stirring the pot once again.

In a letter sent September 9 in response to a NYSE filing about co-location fees, IEX took aim at market data and access fees. Co-location refers to the practice of customers placing their trading computers in the same data center that houses an exchange’s servers.

IEX suggests NYSE set out how these fees have changed over time, and questions NYSE’s assertion that these fees are optional for clients. NYSE states in its filing that if these fees were excessive, customers could decide to terminate their co-location agreements. In response, IEX said:

“Some broker-dealers trading for clients, because of the nature of their business, may be practically required to buy and consume proprietary market data feeds directly from exchanges in order to provide competitive products for those clients. This trading environment imposes a form of trading tax on all members by offering different methods of access to different members.”

It added:

“Those participants who make investments in technology should have the opportunity to capitalise on short-term inefficiencies in the stock market that do not harm the interests of long-term investors. However, when exchanges become one of the largest vendors of relative speed in the marketplace, their ability to set the terms and costs of access can have a distort ive effect by allocating trading advantages to those willing and able to pay the exchange, and creating a tax on all others who are attempting to compete.”

A spokeswoman for NYSE declined to comment.

That IEX is making noise about this topic shouldn’t come as a surprise. IEX CEO Brad Katsuyama told Business Insider in June that “m
arket data is one of the touchiest subjects in the industry” and that “prices are egregious.”

“My general sense is that exchanges are charging the industry that they serve many, many multiples, many billions of dollars more than they should for the services they provide,” he said then.

If nothing else, the IEX letter proves that while IEX’s battle to win exchange status is over, the war on the establishment isn’t.

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