John Ramsay is Chief Market Policy Officer at IEX.
What were the key theme(s) for your business in 2023?
Two related major themes for IEX were strengthening our best-in-class execution quality and substantially increasing our volume in displayed trading. On the first point, we introduced several performance enhancements to our Signal, which is used to power the execution quality of our flagship order types. On the second point, we applied these Signal improvements to our displayed D-Limit order type and added a small per share rebate for displayed adding volume. This has already resulted in an increase in displayed volume of ~20%, while maintaining the same execution quality of trades from both displayed and undisplayed orders.
What was the highlight of 2023?
The introduction of our Signal V6 was a key highlight. Our goal was to bring enhanced trading stability to a marketplace that has seen two new U.S. equities exchanges introduced, increased market volumes, and an increase in the average number of NBBO quote changes. Another highlight was the chance to understand further investors’ perspectives on the nuances of Reg NMS reforms proposed by the SEC. We surveyed the buyside and heard back from 217 institutional investors across mutual funds, pensions, endowments, hedge funds, RIAs, and private wealth funds. 94% of the institutional investors surveyed agree that U.S. equity market regulation should be updated to keep better pace with changes in technology and participant activity.
What are your expectations for 2024?
At IEX, we look forward to a further increase in displayed volume and more performance-enhancing order type innovations. On the regulatory front, we hope to see the SEC adopt targeted reforms to Reg NMS, including changes to tick size and access fees. With Reg NMS being largely unchanged since 2005, updates that match the realities of trading in equities markets 18 years later are long overdue.
What are some of the key regulatory developments to watch in 2024?
The key focus will be the nature and scope of market structure reform. Many market participants fully expect some updated version of Rule 605 to be enacted. We believe that must be accompanied by other needed updates to Reg NMS as mentioned above. We’ll also be watching and participating in the debate on the use of rebate tiers. That debate will likely not be resolved soon, but we support the Commission’s effort to rein in the discriminatory and anticompetitive effects of tiered pricing.
What surprised you in 2023?
On the market front, one surprising development was the increase in the volume of trading in “sub-dollar” securities. Recently, trading of that group has reached an astounding 15-20% of all market volume, raising additional questions about distortions in trading and routing incentives. On a personal note, we were surprised we had almost 100 players at our two IEX Chess Tournaments this year, including three International Masters at our Fall Tournament! This is one of our hottest tickets of the year: Traders seem to really love chess.
