Wednesday 16 August 2017

Irishman targets more disruption in 'trading war' with Wall Street

Dublin-born former flash trader Ronan Ryan turns up heat in battle against the NYSE, writes Simon Rowe

IEX’s strategy is based on a 350-microsecond delay in the time it takes for orders (Stock picture)
IEX’s strategy is based on a 350-microsecond delay in the time it takes for orders (Stock picture)

Simon Rowe

The Dublin-born businessman behind America's newest securities market has said his "war" with Wall Street is only beginning as he plans more "disruption".

Ronan Ryan, a former trader and co-founder of Investors Exchange (IEX), has turned up the heat in his simmering row with the New York Stock Exchange after filing a complaint with a US watchdog over unfair pricing for brokers.

In a letter lodged with the US Securities and Exchange Commission, his firm has accused NYSE - a publicly traded and for-profit institution - of unfairly increasing the price of market data, connectivity, and co-location for brokers.

Under a SEC ruling, US brokers must scan the entire market for the best prices when quoting equity prices to clients - instead of relying on snapshots from a single exchange. The effect of this ruling means brokers must fork out millions each year to exchanges that keep increasing market data prices, said Ryan.

"Exchanges are by definition monopoly providers of co-location services in their own datacentres, and the products they sell as monopoly providers should be subject to heavy scrutiny," the letter warns.

"IEX agrees with an industry consensus that exchanges can and do exercise enormous pricing leverage over firms."

Data costs have increased 20pc annually in the last five years. Ryan's complaint is the latest twist in a battle that has pitted his firm against the NYSE and NASDAQ, as well as major high-frequency trading firms. NYSE, which has refuted IEX's claims, fiercely opposed IEX's bid to secure SEC approval for its so-called 'speed bump' exchange that delays orders to curb the advantages of flash traders.

IEX's strategy is based on a 350-microsecond delay in the time it takes for orders. This prevents high-frequency traders from racing ahead of slower investors to take advantages of changes in bids and offers before they update.

Backed by one of the world's biggest investment groups Capital Group - a $1.4tn asset manager - and a staff of 74 including senior Wall Street hires, IEX aims to "break the 46-year-old duopoly" held by the two venerable US stock exchanges. "This has been a good war so far," said Ryan, speaking from his firm's Manhattan office. "We like a good scrap. We consider ourselves disruptors and we're only going to disrupt things further.

"We are on the right side of history over a brewing revolt in the industry against upward-only charges," said Ryan who was raised in Dundrum in south Dublin and who featured in Michael Lewis' book Flash Boys.

"We can potentially break this oligopoly of unnecessary fees levied on everyone."

After just six months of trading IEX has secured 2pc of the US securities trading market. IEX is now targeting the lucrative listings business to compete with the NYSE and NASDAQ. Listings represent about 12pc of NYSE revenues, and 13pc of NASDAQ's.

IEX is winning the war on Wall Street because of price and fairness, said Ryan.

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