AFTAs 2014: Most Cutting-Edge IT Initiative—IEX Group

The True Price matching engine uses real-time pricing information consolidated from displayed protected markets. It is designed to ensure that its market participants cannot receive and act upon changes in market data before the market itself, on the market’s own matching engine.

The platform consists of two parts. First is the ultra-low-latency InRush ticker plant, which was provided by Redline Trading Solutions. IEX calculates NBBO after consuming BBO from each of the Reg NMS protected venues through direct feeds..

The second piece of the puzzle is a patent-pending architecture, which the company’s chief strategist, Ronan Ryan, describes as a “simple but elegant solution that delays all incoming orders by 350 microseconds to ensure no trader with slightly faster technology can know a more accurate price than IEX knows.”

In order to provide the built-in latency—or a speed bump, as it is called—the dark pool created a 38-mile coil of fiber optic cable between True Price, which is located at the CenturyLink/Bats datacenter in Secaucus, NJ, and IEX’s “front door” at Equinix in Mahwah, NJ. The length imposes a delay precisely calculated to exceed the time the IEX system takes to calculate the most accurate NBBO, according to IEX. Ryan calls the fiber IEX’s “magic shoebox” that protects resting orders from arbitrage sharks.

While IEX has been portrayed as anti-high frequency trading (HFT), the company is simply looking to create a fairer playing field through the use of technology, Ronan Ryan noted at the Waters USA conference last month in New York. In fact, some of IEX’s staff are former high-frequency traders themselves, and don’t have an ideological problem with the practice.

In order to provide the built-in latency—or a speed bump, as it is called—the dark pool created a 38-mile coil of fiber optic cable between True Price, which is located at the CenturyLink/Bats datacenter in Secaucus, NJ, and IEX’s “front door” at Equinix in Mahwah, NJ.

As regulators and attorneys general continue to examine the practice of HFT and of the use of brokerage-run dark pools, IEX is aiming to come up with new and inventive ways to improve this market practice. It’s about more than words on paper—it’s about technology investment.