IEX Group announced Wednesday that it has raised $75 million from firms such as Bain Capital Ventures and Spark Capital, and the funds would facilitate its efforts to become registered on a U.S. stock exchange besides exploring other opportunities.
Currently there are 11 exchanges and over 50 private trading venues and dark pools in the U.S.
IEX to seek regulatory approval within a week
IEX, an upstart stock-trading platform, had the starring role in the Lewis book Flash Boys. The book exposed the fact that high frequency traders can identify a trader’s order intention and then trade in the blink of an eye ahead of the trader to skim fractions of pennies off each trade. Dark Pools are generally opaque trading venues used by large institutional investors such as hedge funds, who believe their trading intentions can be better hidden.
The Wall Street Journal reported in May that IEX seeks additional funding to spearhead growth in Europe as well as become a regulated exchange.
Citing people familiar with the developments, The Wall Street Journal reports that the private trading venue plans to seek U.S. regulatory approval to become a full-fledged stock exchange within a week. The exchange status would facilitate IEX in boosting its revenue stream and add legitimacy to its business model. The exchange status would also let IEX tap into new revenue sources, such as fees exchanges charge for market data and for companies that list shares on the exchange.
$75 million funding
IEX indicated in a statement Wednesday that it has raised $75 million and the latest round of financing was led by boutique venture capital firm Spark Capital, and included Bain Capital Ventures, MassMutual Ventures, and investment manager Franklin Resources.
In the event of IEX becoming a stock exchange, it would compete against 11 other stock exchanges, including those run by NASDAQ OMX Group, Inc. (NASDAQ:NDAQ), BATS Global Markets, Inc. Class A Common Stock (BATS:BATS), and Intercontinental Exchange Inc (NYSE:ICE).
Exuding confidence at the company’s growth, IEX chief executive Brad Katsuyama said: “Our intention from day one was to challenge the status quo by building a market that prioritizes the needs of traditional investors and issuer companies”. He further added: “We are encouraged by our recent growth, which has been driven by both investors and their brokers. This additional capital enables us to build and operate a world-class stock exchange.”
Just recently, the start-up firm has achieved several important milestones including breaking even last month, besides consistently accounting for between 0.8% and 0.9% of stock trading volume.