Bulletins

IEX gets SEC approval for change to trade pricing

Trades at the NBBO midpoint could bring more trades back to exchanges that market makers currently handle in their own dark pools.

Stock charts
Tech stocks are soaring amid election uncertainty
Image: Greg Ory, Ataur Rahman and Protocol

Stock exchange IEX has received approval from the SEC for a change to its retail trading program that it believes will provide better prices for retail investors.


First launched in 2019, IEX's retail program was designed to bring more retail trades to exchanges. In the current system, large exchanges typically handle trading mainly for large institutional clients while market makers handle retail trading separately and typically off of exchanges, getting paid by retail brokers for order flow. Some experts believe that this bifurcation has resulted in worse pricing both for retail investors and for large institutions.

IEX recently proposed changes to this program to try to generate more interest. One major proposed change that was approved by the SEC is allowing IEX to flag when it has a buyer or seller who wants to trade at the midpoint of a particular stock — as long as it is at least a tenth of a penny better than the National Best Bid or Offer, or NBBO, price — through its own data feeds and the public SIP feed. The midpoint between the NBBO bid and ask price is theoretically the best price available. Retail orders sent to IEX as part of this program execute for free.

Previously IEX was not flagging that it had this midpoint price, so retail investors, or more typically the market makers who execute on their behalf, did not know that it was available. Now these investors will be able to see that these trades are available, which should draw more interest from retail orders and market makers, IEX believes, while institutional traders on the other side who want to offer those midpoint prices to retail trades will find more counterparties.

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