NEW YORK: A year after disrupting the U.S. stock market with a new approach to handling trades, upstart stock exchange operator IEX Group is planning to nab listings from rivals by charging simpler, cheaper fees, Sara Furber, IEX's head of listings, said in a recent interview.
In October, IEX will roll out a flat fee structure for the first companies that call its Investors' Exchange their home, Furber said. Other venues charge companies based on the number of outstanding shares they have, which is costlier not only for companies with more shares but potentially for those that perform stock splits or make acquisitions.
"If it's complicated, but doesn't serve a purpose and we can eliminate it and make it better for clients, that's sort of the sweet spot of where we'd like to be," said Furber.
To get companies on board for the launch, IEX has also been offering to waive the first five years of listing fees for the initial group of companies that list on its exchange, said an executive at one company that IEX pitched, who requested anonymity to discuss private business negotiations.
IEX launched as a trading venue exactly a year ago on Aug. 19, but its founders had already been portrayed as crusaders against predatory trading tactics in the controversial 2014 book "Flash Boys: A Wall Street Revolt." It upended the status quo by introducing new concepts like a "speed bump" to slow trading, and flat pricing for other types of services, all of which it says benefit investors.
IEX now executes just over 2 percent of U.S. stock trading, and building out a listings business is the next stage of its development. That will allow IEX to compete for more volume during the busy open and close periods of trading, when 5 to 15 percent of the volume of each individual stock trades, Furber said.
In trying to attract companies, IEX hopes to shatter the near-duopoly currently held by the New York Stock Exchange and Nasdaq Inc. But rivals may simply copy IEX's tactics, much as they have done with previous IEX innovations such as speed bumps.
IEX expects its first listings to be from companies that switch from other exchanges, as opposed to initial public offerings, Furber said. It has a strong pipeline of potential clients from various industries including finance, technology and hospitality, she added.
Casino magnate Steve Wynn, an investor in IEX, has said he may switch Wynn Resorts Ltd stock to IEX from Nasdaq. A Wynn spokesman confirmed that is still the case.
New York-based IEX is also highlighting its startup-status in an attempt to land listings from Silicon Valley. The exchange recently brought on Snap Inc Chairman Michael Lynton as a board member, and has backing from Iconiq Capital, the multifamily investment adviser used by Facebook Inc CEO Mark Zuckerberg.
A successful listings franchise could give the closely held company a boost in revenue and volume.
IEX now generates nearly all of its revenue from trading, as opposed to selling things like market data and high-speed laser connections, which have become big money-makers for its rivals. And its market share growth has stalled, partly because it has refused to pay incentives to attract trading volume, which it says creates conflicts of interest.
Getting companies to list is "not about a near-term bump," Furber said. "But I do think it gives us a broader pool of revenues and a broader base of clients."