IEX Report Highlights Fee Discrepancies Among Exchanges

Investors Exchange released a report that discloses details about its costs to provide market data and connectivity to market participants such as investors, brokers, and market makers. IEX says its report provides evidence that NYSE, Nasdaq, and Cboe “are leveraging their unique regulatory position to egregiously overcharge the industry for the market data and connectivity needed to compete in modern markets.” According to the Wall Street Journal, the major exchanges reject IEX’s claims and contend that IEX is not fully disclosing all of its costs. In its report, IEX describes three basic categories of exchange offerings: market data, physical connectivity, and logical connectivity and compares its costs to provide these services to fees charged by other exchange operators for comparable products and services. IEX reported the following findings:

• For depth of book data products, other exchanges charge fees 900–1,800% over IEX’s costs to offer a comparable product.
• For physical connectivity in their data centers, other exchanges charge fees 2,000–4,200% over IEX’s costs to offer comparable services.
• For virtual sessions needed to trade (“logical connectivity”), other exchanges charge fees 500–1,800% over IEX’s cost to offer comparable services.

IEX conducts only a small percentage of stock trades compared to the big three exchanges, which have faced scrutiny from regulators and criticism from banks and brokerages for their fees. IEX’s report assailed the exchanges’ pricing and charged that the “size of these markups suggest the entrenched exchanges engage in monopolistic pricing.”