The management team of Southeastern Asset Management headed by O. Mason Hawkins urged the Securities and Exchange Commission (SEC) to approve the application of Investors’ Exchange LLC (IEX) to operate a national securities exchange.
IEX is seeking to become a registered stock exchange in the United States. The firm is anti high-frequency trading, and aims to start its operations in the first quarter of 2016.
Southeastern noted that the Commission tried to increase market competition and reduce the execution costs for the benefit of investors through its rulemaking combines with technological advancements over the past few decades.
Carlson Capital's Black Diamond Arbitrage Partners fund added 1.3% net fees in the first quarter of 2021, according to a copy of the firm's March 2021 investor update, which ValueWalk has been able to review. Q1 2021 hedge fund letters, conferences and more At the end of the quarter, merger arbitrage investments represented 89% of Read More
According to Southeastern, the efforts of the SEC were largely successful, but it also resulted to various unintentional consequences, which were discussed by buy-side firms in numerous comment letters.
Southeastern is not an investor in IEX
In its leter to the SEC, Southeastern explained that it is supporting the application of IEX to become a national securities exchange to improve the market experience of investors further.
Southeastern said it was not an investor in IEX. However, both firms share the same objectives—innovating for the benefit of investors, reducing structural inefficiencies in the market, and offering a more balanced and simplified market design.
IEX could help evolve the competitive landscape
Southeastern believes that the introduction of IEX to the National Market System is a market-based coultion that could help evolve the competitive landscape in the industry while addressing investors’ concerns including:
- Conflict-Free Pricing- IEX charges low fee for both liquidity makers and takers, which would eliminate rebate distortions. It would also further align brokers with clients
- Simple Order Types- IEX offers only a handful order type that provide simplistic functionality to all market participants
- Safe Technology- IEX uses a 350-microsecond “speed bump” that precludes certain participants from exploiting advance price information from other markets
- Equal Access- IEX welcomes all participants on equal terms. As a result, certain high-frequency trading firms have become active users, showing that all types of firms can provide valuable liquidity to the market under IEX’s construct
- Transparency- IEX was the first ATS to disseminate its SEC Form ATS to the public, and its website provides details regarding order types, order parameters, market data, execution costs, and order-book priority
“IEX offers market participants a differentiated choice with regard to how to trade their orders as they pursue the best execution possible. The equity market’s structure and all participants will fully realize the benefits of this choice when IEX begins operating as an exchange,” according to Southeastern.