IEX: Ethical Leadership in Finance [1]

As we at Ethical Systems often state, we believe that integrity in business can be enhanced by leaders who take a systems-approach to the organizations and environments in which they operate.

IEX is a model of such leadership and systems thinking in business. Jonathan Haidt [2] and I had the pleasure to meet the team there in January and learn about their motivations, practices and approach to business relationships and investor protection. The meeting was initiated by Chatham Financial [3], who succinctly summarizes the opportunities and challenges of running an ethical business by highlighting IEX's role in improving trust in the financial services in an OpEd on CNBC [4].

The ability of certain high frequency traders to benefit from structural nuances of the market, as uncovered and described by Michael Lewis in Flash Boys: A Wall Street revolt, is an example of a market failure, where information asymmetry and complexity allows a few market participants to benefit at the expense of others. In this case, the level of complexity and barriers to entry (co-location and access to speed) are steep and the downside even steeper, thereby disadvantaging a group that comprises the vast majority of stock holders. IEX has provided a game-changing approach in how the market functions. They are in-the-know insiders who are using their knowledge to fix what others may perceive as a regulatory failure. Their business model emphasizes transparency and investor protection, and they should be recognized as a leader of long-term thinking in business.

IEX currently has an application pending before the SEC to be approved as a national securities exchange. Ethical Systems submitted a comment letter in support of approval of that application and we invite you to read it here [5].

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