IEX has struggled to grow market share in equities for years, having languished in the 2-3% range since 2015. Yet the exchange says it's been profitable since early in its history. How? Let's do some math and find out:
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First, let's try to estimate IEX's trading income. in 2019, 1.8 trillion shares traded on the stock market. IEX handled 48 billion of them, or ~3%. IEX's standard fee is $.0009 per share traded. 48 billion x $.0009 = ~$44 million in 2019 trading revenue. Not too shabby.pic.twitter.com/GMJxhcCQzV
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The 2nd big revenue driver comes from data. IEX takes pride in charging $0 for connectivity & proprietary market data, but that leaves out 1 key product: the Securities Information Processor, or SIP.
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Think of the SIP as a combined public feed of all stocks. Each exchange sends data to the Consolidated Tape Association (CTA), which packages this data and produces one big feed of all exchange's quotes & trades. People pay to see this feed, and CTA pays back the exchanges.pic.twitter.com/wEWy1IkUuo
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in 2019, the SIP made ~$260 million (!) in fees. Each exchange gets a % of this money according to their equity market share. IEX had ~3% share, so they get 3% of the fees. 3% x $260 million = ~$7 million in SIP revenue per year.
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If IEX says they're profitable, they're saying they can support their exchange technology & staff costs on less than ~$50 - $60 million in revenue per year. https://www.bloomberg.com/news/articles/2016-07-19/iex-makes-money-but-lack-of-rebates-may-slow-growth-ceo-says …pic.twitter.com/dGVVKBHwzi
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