High-frequency trading firms have been ripping off investors in the $22 trillion U.S. stock market by paying large firms like Goldman Sachs for the right to trade in the secrecy of “dark pools”, paying stock exchanges to purchase locational advantage by placing their servers in direct proximity to the exchanges for lightening fast trading, and buying preferential access to client order flows from broker/dealers in order to get ahead of and scalp profits off unsuspecting clients.
The new investor-owned IEX is an alternative US exchange which delays reports of order executions by 350 millionths of a second, in order to knock out unfair advantage taken by HFT firms. Micheal Lewis’s new book on the issue last week, has now brought a surge of business to the new exchange and away from the other conventional platforms engaged in predatory business practices.
But this is not just a US exchange issue. In Canada the same smart order routing system will soon be available via Aequitas, a new Canadian exchange that will use speed bumps and fees to discourage high-speed trading. Like IEX, Aequitas also rejects the maker-taker model, which pays rebates to market makers for providing bids and offers.
Following some revisions requested by regulators in January, Aequitas says its services are set to be available within the first half of 2015. See: ‘RBC Nice” pays off amid High-Frequency-Trading outcry