IEX is kicking off a targeted TV advertising campaign that is likely to ratchet up hostilities in an industry donnybrook over fees that some of the biggest stock exchanges charge customers.
The ad takes the form of a spoofy late-night infomercial, with a pitchman intoning to a studio audience: “Now, tell me: Are you one of those folks who needs to connect to the traditional stock exchanges? Then, I’m about to show you something that you cannot succeed without, literally,” as he holds up what he refers to as “Wonder cable” — a basic yellow internet cable.
“This cable looks ordinary, right? And it is, but plug it into your trading systems, and whoa! — you open up a whole new world of shockingly basic access to those fusty old exchanges and the data they distribute. We’re talking monopolistic levels of access like, ‘What am I paying for?’ levels of access,” the character says.
The commercial, which runs about a minute and half, is the most recent salvo in what has become a testy fee war waged by the upstart exchange, run by CEO Brad Katsuyama.
Read: Battle over stock-exchange fees heats up with latest salvo from ‘Flash Boys’ notable IEX
Last month, IEX, which competes against those larger exchange rivals, released a report titled “Overcharged and underserved,” comparing its costs providing market data and connectivity to its clients with fees levied by the big exchanges, claiming that the trio charge between 10 times and 19 times its costs for market data — and in some cases more than 40 times.
The exchange says the cost of providing a type of market data feed to customers is $12,000 a year, but it pays the NYSE $226,320 and Nasdaq $196,000 annually for a similar offering, for example.
The commercial is scheduled to air on channels such as CNBC early next week, and would mark the scrappy exchange’s first TV ad of any kind. It is likely to draw a swift rebuke from its targets: the Intercontinental Exchange-owned ICE, +0.52% New York Stock Exchange, Nasdaq and Cboe Global Markets CBOE, -0.33% which operate Bats Global Markets.
IEX is calling for greater fee transparency from the big three exchanges, which, combined, account for the lion’s share of trading activity. Some Wall Street brokers have said that the dominance of the largest exchanges means that they must pay increasingly higher fees for services, without clarity on the profits associated with those increases.
“Outrageous pricing deserves a bold call-out. This has been going on so long that it’s easy to forget that $20,000 a month for what’s basically a cable isn’t reasonable — so we used humor to call attention to the egregious pricing we see in this space,” IEX spokeswoman Sara Forster told MarketWatch. “The industry deserves better (and a little levity doesn’t hurt either),” she said.
The larger exchanges, however, have accused IEX of cherry-picking its data, and they make the case that the all-in costs to trade on their exchanges are far smaller than IEX’s.
A spokeswoman for the Big Board said the “NYSE doesn’t comment on competitor’s marketing activities.”
In a November blog on LinkedIn, the NYSE’s head of transactions, Michael Blaugrund, wrote: “Exchanges are integrated enterprises that bring broad value through trading and technology services, but not all clients use every exchange offering.”
“Allowing investors to order a la carte empowers each to select the blend of services they need,” and likened charging high transaction fees but “giving away” data and connectivity to “requiring all diners to order a prix fixe tasting menu,” Blaugrund wrote.
He argued that “the current competitive market structure allows investors both choices.”
Back in January, Phil Mackintosh, Nasdaq’s chief economist, echoed the idea that traders should care more about all-in costs to trade, in a report titled “Is Free Fair to All?”
Officials at Bats and Nasdaq either declined to comment or didn’t immediately respond to a request for one.
Check out the full IEX advert below, which is already on YouTube:
IEX — made famous by Michael Lewis’s 2014 book “Flash Boys”— has been fighting to garner market share from its rivals — a fact that is often pointed to as a cause for skepticism in the company’s push for an equitable and transparent fee structure because such a regime, in theory, could benefit from it.
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