Investor-owned equity trading platform IEX has raised $75 million in funding to help it become a registered stock exchange.
A variety of investors, led by venture firm Spark Capital, participated in the financing, including Bain Capital, MassMutual Ventures, Franklin Resources, private investment firms Cleveland Capital Management and TDF Ventures, and prominent entrepreneurs Jim Clark and Steve Wynn.
“Our intention from day one was to challenge the status quo by building a market that prioritizes the needs of traditional investors and issuer companies,” Brad Katsuyama, IEX’s CEO and co-founder, said. “We are encouraged by our recent growth, which has been driven by both investors and their brokers. This additional capital enables us to build and operate a world-class stock exchange.”
The dark pool was made famous by Michael Lewis’ Flash Boys: A Wall Street Revolt as the first exchange owned by buy-side investors. Lauded for battling against high-frequency traders “rigging” the stock market, it has grown quickly since inception last October.
According to IEX, its daily trading volume has tripled since the first quarter of 2014, and in recent weeks, it experienced more than 100 million shares handled per day. As of September 2, its market share was 0.813%.
IEX’s newest funding comes amid numerous investigations into dark pools by US regulators.
In July, Barclays’ dark pool trading volume plummeted 37% following New York Attorney General Eric Schneiderman’s lawsuit against the bank for alleged “systematic fraud and deceit.” UBS and Deutsche Bank also announced they are facing dark pool-related inquiries by Schneiderman, the US Securities and Exchange Commission, and the Financial Industry Regulatory Authority.
Alex Finkelstein, Spark Capitals’ general partner and soon-to-be IEX board member, said the financing supports the exchange’s “vision of next-generation capital markets.”
“The best way to truly improve the way the financial markets work is by giving investors and brokers an opportunity to vote with their trades for a fairer marketplace,” he said. “We’re confident that the IEX team will successfully change the way that Wall Street operates for the better.”
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