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by jegutman
3653 days ago
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Well to be fair, those were Michael Lewis's second hand telling. I personally know the author of FB:NSF, but haven't spoken to him in a while. I think I agreed with 95% of what he wrote. I think IEX will likely stumble, but will continue. The problem is not that IEX is doing something bad, but they're just not different enough to be meaningful. They have been very good at marketing though and brought up a lot of issues, but definitely raised some that are not accurate. The unfortunate problem (that's hard to resolve) is those executing on agency will always be at a disadvantage to those executing on principal. For example if someone wants to buy 5000 shares, they can route in a way that risks them buying 8000 to get better prices (by sending extra orders to dark pools, etc), someone executing on agency can never do that and so it might not make sense for them to route to dark pools, but almost all of the routers do that (fidelity, schwab, etc) so they disadvantage some of their customers (although they do advantage the smallest customers). Basically I think ultimately the reg-nms order protection is probably a little too rigid of a structure to fit the diversity of behavior into. I'm not really sure what they're long term hope is. I do find equities to be basically the most fair trading ground on the exchange (which is why they had any foothold at all). It would be nice if they were trying to disrupt the really expensive trading markets like fixed income where the spreads are much wider compared to the risk being exchanged and the dealers have so much leverage that they won't support anybody who is trying to cut into that spread. |
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Flash Boys: NSF? Please elucidate.