- Nasdaq, the exchange operator, has filed a lawsuit against upstart rival IEX in a New Jersey court.
- It claims IEX, the exchange made famous in the popular book “Flash Boys,” used its intellectual property and it is seeking compensation.
Nasdaq, the exchange operator, filed a patent infringement lawsuit against IEX, the company made famous in Michael Lewis’ hit book “Flash Boys,” in a federal court in New Jersey, the company announced Thursday.
Nasdaq alleges that IEX used seven of its patented electronic trading technologies, which Nasdaq says cost “millions of dollars in investment over decades.”
In the suit, Nasdaq says four of its former employees – with knowledge of its patented technology – joined IEX and were involved in the building of IEX’s trading platform.
“IEX admitted in public filings that its closing auction process was ‘designed based on extensive review of’ Nasdaq’s patented process and that the information its system is designed to disseminate to the market during closing auctions is ‘substantially similar’ to the ‘Nasdaq Net Imbalance Order Indicator,’ one of the key features of patents asserted in the lawsuit,” Nasdaq said in a statement.
A spokesperson for IEX wrote in an email, “Similar to our exchange application process, this is yet another attempt by Nasdaq to obstruct an innovative new competitor.”
Nasdaq and the New York Stock Exchange fought tooth and nail to keep IEX from getting a licence to operate as an exchange. IEX got permission to do so in 2016.
It’s been a tough go for IEX, which commands just 2% of the market share in the exchange trading business. Since it got the green light from regulators, it has been trying to lure companies from NYSE and Nasdaq. Many observers expected Wynn Resorts to be the first company to switch to its exchange venue, but that hit a snag when its founder Steve Wynn was ousted after allegations of sexual misconduct.
The company said in October it expected to have its first listings in early 2018.