IEX has announced plans to launch a new U.S. options exchange. This new venture will leverage IEX’s proprietary solutions for risk management and markout optimization, providing an electronic venue for access to the entire multi-listed options market.
The exchange will operate on a pro-rata model and aims to bring IEX’s unique order protection innovations to the options market, pending regulatory approval.
IEX actively seeks partnerships with LPs for options trading
The proposed exchange marks a significant step in IEX’s expansion strategy. To address the risk management challenges faced by market participants, IEX will actively seek partnerships with liquidity providers. The company is positioning its new exchange as a solution to improve efficiency and meet the evolving needs of market makers in the options space.
IEX’s new options exchange is built on the company’s reputation for innovation in trading technology. Since launching in 2016, IEX’s U.S. equities exchange has been recognized for its transparent business model and proprietary order protection solutions, including its Signal and D-Limit order types. IEX captures 2.5-3% of the U.S. equities market and has traded over $3.5 trillion in notional value using D-Limit.
By working closely with industry participants, IEX aims to make onboarding to the options exchange seamless for current Members of its equities platform. The company’s new options exchange is expected to offer a differentiated venue that prioritizes risk management and enhances market-making activities.
IEX appoints John Palmer as Head of Options
To lead the new exchange, IEX appointed John Palmer as Head of Options after having hired the executive from Cboe in June. At the time he was announced with no properly defined role besides “New Market Expansion”. The appointment of John Palmer followed Cboe’s recent decision to close Cboe Digital and fully integrate its digital asset derivatives into its existing Global Derivatives and Clearing businesses.
John Palmer joins IEX after holding numerous leadership positions at Cboe, most recently as President of Cboe Digital, overseeing the development of digital asset trading platforms and services. He previously held roles leading business and product strategy for Cboe’s Options and Futures businesses. He briefly worked at CrossTower as Global Head of Product Strategy, responsible for the digital exchange’s product roadmap, go-to-market strategy, and competitive positioning,
Palmer will continue reporting to Bryan Harkins, IEX Group president, who oversees both IEX’s equities exchange and this new options initiative.
In addition, Ivan Brown, formerly head of options and business development at the New York Stock Exchange (NYSE), has joined IEX to lead business development and product design for the new options exchange. Brown brings over 15 years of experience in capital markets, including overseeing the NYSE’s options platform, driving its revenue and market share growth.
“Expertise in understanding the needs of liquidity providers”
Bryan Harkins, President of IEX, stated: “We are focused on understanding the challenges of our Members and having discussions with market participants to guide our entry into the options market. IEX’s experience and expertise in understanding the needs of liquidity providers provides a great foundation as we begin to offer options market makers a set of tools designed to drive performance.”
Brad Katsuyama, Founder and CEO of IEX, said: “IEX spent the last decade innovating to build technology that is designed to protect liquidity providers, and we have now added a team of leaders with deep multi-asset expertise that can help guide IEX through our next stage of growth. We have been encouraged by the conversations this team has had with market makers about moving into the options market which underscores the opportunity for us to deepen our relationships with clients and to further improve execution quality in US markets by expanding into options.”
Ronan Ryan, co-founder and COO at IEX, commented: “Bryan, John, and Ivan are proven operators who have built successful trading platforms across asset classes. We are committed to bringing together the best people in the trading industry to disrupt the status quo in options trading with a unique market architecture, highly differentiated products, and deep commitment to client relationships.”
John Palmer, Head of Options at IEX, stated: “We are excited to enter this space and work with some great brands to deliver unique value and make better markets.”
IEX prevents high-frequency trading
Founded in 2012, IEX operates a portfolio of Exchange, Digital Assets, and Technology businesses, having launched a new kind of securities exchange in 2016 that combines a transparent business model with innovative design to better protect investors and level the playing field.
IEX Exchange has been aiming to draw in more business from retail investors, and in the process, the upstart trading platform convened regular meetings with many brokerages. The exchange operator, which was the subject of Michael Lewis’ 2014 book “Flash Boys”, obtained SEC’s approval to register as the 13th national securities exchange earlier in June 2016.
Unlike other exchanges, the heart of IEX’s strategy is based on what the firm calls a ‘speed bump’ which slows down trading, requiring all trades to go past by 350 microseconds in a bid to prevent high-frequency traders from racing ahead of slower investors to take advantages of changes in bids and offers before they update.
