Latest in Culture

Image credit:

New stock exchange fights unfair online trading

IEX slows down every transaction to prevent shady internet traders from getting the upper hand.
Jon Fingas, @jonfingas
August 21, 2016
Share
Tweet
Share

Sponsored Links

Chris Goodney/Bloomberg via Getty Images

Some (such as The Big Short author Michael Lewis) see high-frequency, algorithm-based stock trading as a serious threat to the economy. There's a concern that big trading firms are cornering the market by paying for ultra-fast connections that give them unfair advantages, such as front running (exploiting knowledge of advance orders from customers) and otherwise closing transactions before most rivals. Those financial heavyweights might not get to abuse the system if IEX has its way, though. It just opened a US stock exchange that aims to prevent these computer-driven attempts to game the system.

To begin with, every trade is slowed down by 350 microseconds -- you can't just pay for a faster connection to beat the competition. Not that you could if you wanted to. IEX bans trading houses from paying for servers that live closer to the stock matching engine, so wealthier outfits can't just buy their way to success.

Will it succeed? Not necessarily. There are 13 American stock exchanges now that IEX is around, and getting companies to trade there may be difficult when the the likes of NASDAQ and the New York Stock Exchange are more popular. But if it does catch on, it could be the key to changing a financial system that's often driven more by automation than human decisions.

All products recommended by Engadget are selected by our editorial team, independent of our parent company. Some of our stories include affiliate links. If you buy something through one of these links, we may earn an affiliate commission.
Comment
Comments
Share
Tweet
Share

Popular on Engadget

Windows XP source code leak sheds light on Microsoft's OS history

Windows XP source code leak sheds light on Microsoft's OS history

View
SpaceX scales back plans for Starship's first high-altitude flight

SpaceX scales back plans for Starship's first high-altitude flight

View
Dark mode is coming to WhatsApp for Android

Dark mode is coming to WhatsApp for Android

View
The best wireless workout headphones

The best wireless workout headphones

View
How 'Microsoft Flight Simulator' became a 'living game' with Azure AI

How 'Microsoft Flight Simulator' became a 'living game' with Azure AI

View

From around the web

Page 1Page 1ear iconeye iconFill 23text filevr