‘IEX has sunk to a new low’: NYSE blasts upstart rival’s claims that it’s misleading its listed companies in brutal letter

Traders work on the floor of the New York Stock Exchange as the market closes in New York October 17, 2014.

caption
Traders work on the floor of the New York Stock Exchange as the market closes in New York October 17, 2014.
source
REUTERS/Lucas Jackson

  • The debate over rebates tearing apart Wall Street has gotten even more heated.
  • In a new letter, NYSE is blasting IEX’s accusations that it is misleading listed companies.

Just when we thought the war tearing apart Wall Street couldn’t get any more heated, it just did.

The New York Stock Exchange has submitted a brutal letter to the US Securities and Exchange Commission, responding to accusations made by IEX in its own comment letter about a pilot that would shake up US stock trading.

The so-called transaction fee pilot would ban exchanges in certain instances from using rebates, which are incentives to lure traders to their venues. Upstart exchange IEX has long-called for the elimination of rebates, but most recently it blasted rival NYSE for calling on its listed companies to urge the SEC to pump the brakes on the pilot.

IEX criticized NYSE’s actions, noting that many of NYSE’s listed companies have shareholders that publicly support the pilot. IEX says this is tantamount to NYSE urging listed companies to act against the interest of shareholders. Notably, a string of large asset managers and pension firms from Fidelity to the Ontario Teachers Pension Plan have sided with IEX on the pilot.

“We believe that issuers and investors should be able to trust that exchanges will deal with them in an honest and transparent way, especially on matters of market structure,” IEX said.

Now, NYSE has responded. And the exchange venue didn’t mince its words, starting off with a frank criticism of IEX, which was granted approval by regulators to operate as an exchange in 2016.

“By any objective measure, IEX has failed to have a meaningful impact as an exchange,” NYSE said in a letter dated July 10. “So how does it try to cling to relevance when its high-cost, low-volume business model is jeopardized? By blaming others and disparaging NYSE’s name to attract attention.”

As for whether NYSE is acting against the interest of its listed companies, the exchange operator said IEX’s claims were “untrue and offensive.”

NYSE said, “Most issues have two or more sides, and reasonable people can disagree. NYSE Group understands that many professional investment managers strongly dislike maker-taker pricing.”

The letter reaffirmed the NYSE’s position that the pilot would widen-spreads, which would adversely impact investors.