Why IEX Chose to Exit the Listings Business

Traders Magazine Online News, September 23, 2019

Brad Katsuyama

Why we chose to exit the corporate listings business

We have decided to exit the corporate listings business because we have concluded that we can have a greater impact by continuing to grow our core exchange trading business and other new businesses. 

One of the best pieces of advice I have ever received is that “true disruptors are not afraid to disrupt themselves." I think about that often when faced with an important strategic choice, and our decision to exit listings is no exception.

We started IEX with the lofty goal of setting a new standard in terms of building fairer markets. And this year we are on pace to achieve record numbers in market share, volume, revenue, and profit as a company – in other words, we are indeed having an impact. In addition to our core trading business we have also embarked on a mission to disrupt other areas away from stock trading with the launch of three new businesses which apply our expertise and technology in unique ways (I highlight more on these below). 

These are exciting times at IEX, but we are also cognizant that one of the natural byproducts of growth and expansion is increased complexity. For us, the best way to counter it is to more heavily lean into opportunities that best leverage our company ethos and strengths. And we have come to understand that corporate listings is currently not one of those opportunities. 

I think Steve Jobs summarized our thinking best when he said, “People think focus means saying yes to the thing you've got to focus on. But that's not what it means at all. It means saying no to the hundred other good ideas that there are."

Will exiting listings have an impact on trading?

What many people do not realize, is that all stock exchanges can trade any stock regardless of where it is listed. In fact, the majority of U.S. exchanges do not have a listings business – and IEX trades between 6,000 and 7,000 different stocks and ETFs per day. Our core trading business has grown to become the 8th largest stock exchange company globally, trading more daily notional volume than the London Stock Exchange and the Toronto Stock Exchange. Our growth has been fueled by innovations such as our patented machine-learning Signal designed to protect orders from trading at stale prices. Since inception, IEX has worked to protect over 113 billion shares using this technology and has gained wide-spread support from brokers, large investment funds and pensions as a result. It should be no surprise that investing in our exchange trading business continues to be our number one priority.

Why did IEX enter the listings business?

The two most critical and foundational players in the public markets are investors and companies. After the book Flash Boys was published, we received many inquiries from companies, and we were compelled to respond and help support them by offering the opportunity to list with IEX.

Listings at IEX started in 2018, when we were proud to welcome Interactive Brokers (IBKR) as our first listed company; they were also the first retail broker to trade on IEX back in 2013, and IBKR founder Thomas Peterffy is an industry icon who I have admired for many years. It was our collective hope that other companies would follow suit, enabling us to scale the listings business and extend the benefits of IEX’s trading innovations to more companies and their shareholders. 

But after a year, it has become clear that the legacy exchanges have a stronghold on this market, and, to succeed, we would need to compete in a way that does not align with our mission to build fairer markets. Therefore, the best choice for us at this time is to exit listings and to serve companies in a way that is more aligned with IEX's strengths and our brand. This is why we took our patented machine-learning technology and have customized it to help companies buy back shares at fairer prices, for instance. Over the past several years we have worked with many companies on their buybacks, saving them millions of dollars. This is the type of service and innovation IEX is known for, and is the most authentic way for us to continue to develop these relationships.

In summary

The decision to exit the listings business was a tough one emotionally — those who know IEX know we don’t shy away from a good fight. But it is the right decision to make at this moment. Our industry is on the cusp of major change and we want to keep our focus on the performance and transparency that investors and brokers seek. At the same time, we need to put our efforts into new businesses and markets where we believe IEX can have an outsized impact:

IEX Cloud – a developer platform designed to democratize access to financial data for everyone.

IEX Astral – a technology platform, built in collaboration with the world’s largest asset managers, designed to help them collect, normalize, and store their trading data, and providing them the transparency they seek.

IEX Event Stream – a data messaging platform that utilizes IEX’s core technology in areas outside of finance. You will hear more about this initiative in the coming months.

Our goal is to never become complacent and we will seek to continue to disrupt from a position of strength. IEX has never been in a stronger position both strategically and financially. Our growing team (we have added over 30 people this year alone) is ready to execute, and we are excited to redeploy the listings team to areas of the company where they can be better utilized. We have grand ambitions for IEX and I have never been more confident than I am today, that we now have the right things on our plate, and the right resources in place, to create the greatest impact for current and future clients. 

Onward and upward,

Brad 

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