Exchange operator IEX Group submitted a fee filing Friday to the Securities and Exchange Commission aimed at providing transparency into the cost of connecting to exchanges.
IEX has offered free connection ports since its launch in 2016, but officials there found it led to waste and inefficiency due to uneven use by exchange members. The proposed new fee structure would provide the first five logical ports for free, and then $100 per month for each extra port. Logical ports, also called trading sessions, are used by broker-dealers to submit orders to exchanges.
The change would not go into effect until Oct. 1, to allow time for public comments.
The proposed rule change was welcomed by advocates for more transparency into how exchanges operate and charge customers. "This is the most user-friendly fee filing we have come across. This fee filing demonstrates that an exchange can indeed impose reasonable fees on its members while closely adhering to the SEC's recent staff guidance," said Lev Bagramian, senior securities policy adviser at Better Markets, a non-profit organization.
The SEC staff guidance, issued May 21, requires stock exchanges to provide significantly more details before being allowed to raise fees for market data or connectivity or to offer discounts to favored traders.
"The yardstick created by IEX should be used by the SEC to measure and evaluate future fee filings by the other exchanges," Mr. Bagramian said in an email.
Ray Ross, co-founder and chief technology officer of agency broker Clearpool Group, said he is "encouraged" by the filing, because there is concern that smaller market participants frequently subsidize the cost of the largest players.
"The IEX filing empirically demonstrates in their analysis of port fees that 76% of the message traffic is generated by a minority of its members. We applaud their efforts to transparently share the data ensuring the proposed fees are equitably distributed based on message volume and the incremental ports necessary above the five they give for free to support such volumes," Mr. Ross said in an email.
