While brokers and dealers were enjoying the cloak of complexity and customer ignorance, in the past few weeks since the “Flash Boys” release, they are being inundated with annoying requests from their customers about what incentives they are collecting from exchanges, High Frequency Traders and dark pools. Customers are saying they would rather not serve as sacrificial lambs to slaughter thank you very much and are requesting that their orders be routed through the new non-HFT exhange: IEX. The next step is to force brokers to stop selling their client order flow to the highest bidders. So far, some brokers are agreeing to add the new IEX exchange as an option, others are trying to resist. See: Fidelity, Scottrade deny clients anti-HFT choice.
“The popular brokerage firms Fidelity Investments and Scottrade have sent letters to clients declining to route stock trades through IEX, the new trading platform featured in Michael Lewis’ book “Flash Boys” as the antidote to high-speed trading, according to documents reviewed by CNBC.
The letters reviewed by CNBC came in response to written requests from the clients to route their trades to IEX. In their responses, Fidelity and Scottrade offered different reasoning but both declined to route all of a customer’s trades to IEX. In the case of Scottrade, the brokerage wrote that it was unable to comply with the client’s request because it does not have a relationship with IEX.”