A collaborative culture has been key to IEX's success. "Everybody is invited into every discussion. Everyone's viewpoint is heard," says Park. "At the end of the day, we come to decisions as a team."
A key innovation is that IEX slows down all orders by 350 microseconds before they enter its matching engine. This speed bump creates a "buffer," so that IEX can ensure that orders from high-speed traders can't trade ahead of orders based on stale quotes. Since many institutions use so-called midpoint peg orders, this gives IEX time to slide certain orders to the midpoint of the NBBO. Also, IEX doesn't let firms co-locate directly next to its marketplace; it requires them to connect through a point of presence (POP).
"The concept of a POP was a very intense discussion with the delay in time," he says. "In fact, it was IEX's network engineer [James Cape] who came up with the idea to spool the fiber coil." Rather than allowing trading firms to co-locate directly next to its matching engine, IEX forces a 38-mile fiber route.
Relationships with several key technology partners have been essential to the startup's growth. The dark pool utilizes the Inrush market data ticker plant from Redline Trading Systems to consume direct feeds from all national market system (NMS)-protected data feeds.
IEX also uses B2Bits from EPAM Systems as its client and exchange facing FIX gateways. Its third major technology partner is Kx, maker of Kdb, a real-time in-memory database used to store data. IEX produces about 60 GB of data per day. This equates to roughly 15 TB per year, according to Park. "Kdb is a key asset of ours to build out our data analytics platform."
IEX has gained efficiencies from LaSalle Partners' FIX Conductor as a FIX certification environment for new subscribers to test. "This is a fantastic tool because it provides a simulation environment which is up 24/7 for future subscribers to test on their own." After they use the automated tool and correct any errors, an IEX head of FIX certification manually walks them through all the steps to achieve final FIX certification.
Various banks have a FIX certification department with as many as 12 people. "With this technology, it gives us the flexibility to have one-and-a-half people assigned to the role," says Park. IEX also uses VeriFIX from Greenline Financial Technologies for black-box testing. "VeriFIX will simulate a client entering orders, and it will get a response from our system. It ensures that we have a set of rules to verify that the output from their system is correct."
Measuring IT success
IEX measures the success of its IT projects by how much it grows the business, says Park. Since going live last October, the dark pool's average daily volume has grown from 1 million shares to 43 million in July, according to Tabb Group's Equities Liquidity Matrix. In July, IEX's average daily volume ranked No. 7 among alternative trading systems and single-dealer platforms, including UBS, Deutsche Bank, and Goldman Sachs. (Not all ATSes report their volumes to Tabb).
In recent weeks, participant volume has exceeded 100 million shares per day, according to the company. "Our business has become profitable in the first nine months of operation," Park says.
Now he is on to the next challenge -- transforming IEX into a stock exchange. In September, IEX Group raised $75 million in a second round of funding from venture capital firms to pursue registration as a full-fledged stock exchange. It expects to have exchange status by the third quarter of 2015, pending regulatory approval.
"From the outset, we always planned to become an exchange," says Park. Though IEX has built an ATS, it will need to develop new features for the exchange, such as a lit order book, a proprietary data feed, and hidden order types. But the firm's software development life cycle will remain intact.
"Here as an exchange, the tech buildout is different." But the firm has an "incredibly talented engineering team," and he has hired people from backgrounds at exchanges, banks, and HFT firms.
As Park prepares for the exchange buildout, he has a number of projects on his plate. First, he must create the rulebook and prepare to create a proprietary market data feed. IEX is also expanding its analytics platforms for terabytes of data, which is a big data project. "Not only do we need to store data, but we have to be able to extract information out of it." He is also preparing IEX for compliance with the SEC's Regulation Systems Compliance and Integrity (Reg SCI).
And though IEX has a small IT team of 14, including two from network operations, "we do plan to expand the team, primarily because as an ATS we have a limited product set, whereas at an NMS protected exchange, that product set grows," he says. "We're going to need more bodies to cover those roles."Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio