How IEX Utilizes a Time Delay

The Securities and Exchange Commission gave the approval earlier this year, in June, 2016, for IEX to be approved as the thirteenth stock exchange in the United States.  IEX began trading as an (ATS), an Alternative Trading System in October, 2013, and employs the same time delay technology as an exchange, that it practiced as a dark pool.  IEX offers a transparent market environment to Day Traders, who have historically been at the mercy of HFT’s front-running their orders.

Several HFT firms operating with surreptitious algorithms have the advantage of seeing orders from other traders seconds or even micro-seconds prior to  the SIP (Securities Information Processor) being able to process them.  They accomplish this by installing and utilizing high-speed fiber optic cables directly linked to certain stock exchanges.  This gives those HFT’s the ability to snatch up other buyers’ orders just in time to re-sell  to the original buyer at even a very slightly higher price, thus altering the NBBO (National Best Bid and Offer).  

The founders of IEX, The Investors Exchange, Brad Katsuyama, and Ronan Ryan, developed a system to counteract this all to common practice by installing a 38-mile fiber optic cable for processing their orders.  This creates a 350-microsecond delay in the arrival and departure of orders, which may seem miniscule, it is just enough time to allow traders to complete their orders without fear of a predatory algorithm from an HFT blocking the confirmation.  They also do not allow trading firms to co-locate equipment adjacent to their servers, creating a level playing field for all.

This “speed bump” gives day traders, and even other HFT’s , the peace of mind in knowing they are not falling prey to the exploitive software that is all to prevalent in other exchanges.  Most day traders agree, they can breathe a little easier making trades on IEX.  

Great Point Capital, LLC offers buying power, access to Takion software platform with excellent IT support, and the benefits of working with an experienced team.  We are pleased to currently trade approximately 10% of our volume on IEX, the Investors Exchange.