IEX Chief Strategist Defends HFT

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Michael Lewis’ recent book Flash Boys was practically guaranteed to make a splash when the author told reporters that the market is ‘rigged’ because of the role that high-frequency trading (HFT) plays, but it seems that not everyone at IEX, the exchange that Lewis touts as the market’s savior, agrees with him.

“We’re not anti-high-frequency trading; we’re pro-fairness,” said IEX chief strategy officer Ronan Ryan in a recent interview with Hung Tran at

And Ryan isn’t just mincing words, he goes out of his way to talk about how important HFT is for the market. He gives the example of a big trade happening in Canada that throws pricing in the US and Canada temporarily out of whack. HFT comes in and corrects the discrepancy, taking exchange rate risk if nothing else, all with very low latency.

“They have made the markets far more efficient in that regard and it’s great for everybody, from brokers all the way down to the mom-and-pop shops,” says Ryan. “It’s fantastic.”

IEX v HFT conflict may be overblown

It’s understandable that Lewis has to pull together a strong narrative, both to sell books and to give people outside the world of finance some context to work with, but listening to Ryan defend HFT, you can’t help but feel that the depiction of IEX going to battle against HFT is overblown.

For Ryan, the problem comes in when exchanges start adapting their policies to benefit one type of client over another.

“With technology and trading, everything has gone more electronic. High-frequency trading  comes along, provide a huge amount of liquidity on the exchanges venue and becomes their No. 1 client,” says Ryan. “What do you do to your No. 1 client? Over time, you kind of bend over backward.”

Ryan says that he is opposed to predatory strategies and unnecessary intermediation, terms that still leave plenty of room for debate, but the way that he frames IEX stands in stark contrast to the book, less of a reckoning and more of a re-balancing.

IEX looking to list ETFs, at some point

Ryan says that IEX has already had providers including iShares and ProShares approach them about listing ETFs, and he indicates that it is one of the company’s eventual goals as ETFs continue to grow. He didn’t reveal any specific plans on when ETFs might be listed, but the combination of a low-fee investment vehicle with the fairness of the now famous fairness of the IEX is likely to have enormous popular appeal.

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