On Friday, IEX ratcheted up a simmering dispute over the fees that some of the biggest stock exchanges charge customers.
The upstart exchange takes issue with a claim from the New York Stock Exchange that “all-in” costs to trade on the Big Board and other exchanges are lower than those of the smaller outfit.
“Why complain about the fixed costs, they seem to say. When you mash all the fees together, we’re actually a great bargain!” wrote John Ramsay, chief market policy officer at IEX Group Inc., in an article on LinkedIn. “The problem — and it’s really a pretty obvious one — is that nobody pays an average.”
On Tuesday, IEX, which competes with the Intercontinental Exchange Inc.–owned
NYSE, Nasdaq Inc.
and Cboe Global Markets Inc.
, which operates the Bats Global Markets exchange, released a report titled “Overcharged and underserved,” comparing its costs with those of its larger rivals, claiming that the trio charge between 10 times and 19 times its costs for market data and in some cases more than 40 times.
IEX said that its cost of providing a type of market data feed to customers is $12,000 a year, but it pays the NYSE $226,320 and Nasdaq $196,000 annually for a similar offering.
The Wall Street Journal, covering the spat, wrote that IEX’s business model differs from those of the big exchanges because it doesn’t charge its customers annual subscription fees for data and connectivity, instead charging them based on the size of trades executed on its platform.
NYSE Spokesman Josh King reportedly told the Journal that IEX was cherry picking its figures and “the fact remains that the all-in cost to trade on NYSE is lower than IEX.”
Ramsay wrote that the exchanges calculate so-called all-in costs by combining their fixed rates with other variable costs to derive an average. IEX’s study highlighted expenses related to providing customers data and connectivity.
Now, IEX, helmed by CEO Brad Katsuyama, is calling for greater fee transparency from the big three exchanges, which, combined, account for the lion’s share of trading activity on Wall Street, and have been steadily lifting fees without providing clarity on the profits associated with those rate increases.
Wall Street brokers have said that the dominance of the largest exchanges means that they must pay increasingly higher fees for services.
“The simple conclusion is this: until the entrenched exchanges share the data behind their claims, anything they say to the contrary amounts to a public relations effort to get people to look the other way,” Ramsay wrote Friday.
For its part, IEX — made famous by Michael Lewis’s 2014 book “Flash Boys” — has been battling to gains market share against those larger rivals. That fact has tended to elicit skepticism from those critical of its longstanding campaign for a more equitable and transparent fee structure because such a regime, in theory, could benefit the upstart exchange, which has pledged to challenge the bigs in everything from matching buyers and sellers to providing a platform for lucrative IPOs.
ICE shares finished the week up 2.3%, while Nasdaq’s stock gained 2%, and shares of Cboe booked a weekly decline of 2.1%. That compares with a weekly gain of 1.3% for the Dow Jones Industrial Average
and a weekly advance of 1.6% for the broad-market S&P 500 index
. IEX is privately held.