Phi Beta Lambda, Stevens’ Business Honors Society, hosted its Speaker Series Part II in the form of a “fireside chat” last Wednesday. This style features an informal conversation with audience interaction, creating a relaxed atmosphere to have an engaging talk with the crowd. Dr. George Calhoun, director of the Quantitative Finance program at Stevens, was essentially a moderator for the main speaker John Schwall, the Chief Operating Officer (COO) of the Investors Exchange, better known as IEX.
The name John Schwall may not ring a bell for those not keeping up with recent finance news, but those who do recognize his importance on Wall Street and the business of stock exchanges. What sets IEX apart from other exchanges is that they do not allow any trading participants to purchase a speed advantage. Most exchanges pride themselves on the speed in which trades can be executed, and some ultra fast high frequency traders have the opportunity to take advantage of trading events before they are recognized by other market participants, including stock markets, thereby giving them a chance to have profitable trading results over slower investors. IEX developed a “speed bump” of 350 millionths of a second, which may not seem like a big change, but it’s enough to slow down certain fast participants to give more investors an opportunity for a better execution outcome through IEX.
IEX is not against high-frequency traders; they’re against a system where exchanges offer premium paying members with faster access to information. IEX’s main goal is to provide an Exchange in which no participant can purchase a speed advantage. The Exchange itself is faster than its fastest participants. That’s IEX’s way of creating an even playing field for all traders and investors.
Another amazing feat of IEX is their recent approval to become a full stock exchange. In mid-2016, the Securities and Exchange Commission greenlighted the application by IEX to compete against 12 other current U.S. exchanges, including New York Stock Exchange, Nasdaq, Bats, and the 40+ dark pools. Beginning in early-September 2016, IEX began operating as an Exchange and has now achieved a respectable 2% market share in the US stock market.
Schwall was featured in the novel Flash Boys by Michael Lewis, which focuses on the rise of high-frequency trading. This has made him a local finance celebrity whose path is only just beginning. As an undergraduate and graduate alum of Stevens, he has some advice to current students interested in becoming either an entrepreneur or pursuing a career in the financial services industry:
“You don’t have to be the smartest guy in the room, just be incredibly hard-working, and incredibly committed to the company mission. Be knowledgeable by doing research to go above and beyond to be the expert in your domain. Be willing and able to take professional risks. Voice your opinions with facts, but be considerate and respectful when listening to peers and superiors. And last, don’t be afraid to challenge the status quo, especially if it’s something where you have strong conviction.”
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