FTX US Buys Stake in Stock Exchange IEX

Centralized crypto exchange FTX US bought a stake in IEX Group, operator of US stock exchange Investors' Exchange (IEX). IEX announced the deal on April 5, 2022, and pending regulatory approval, will close next month. The terms of the deal are not public, but FTX has claimed off the record that it is acquiring a “significant” stake in IEX.

IEX is a stock exchange owned by buy-side investors, positioning itself as a pro-investor exchange that is focused primarily on institutional investors. For instance, IEX publishes the matching rules used in its automated order matching engine. It also combats high-frequency trading in its dark pools by not allowing co-location of trading firms' internet equipment near its base and artificially slowing down trading. IEX refuses to pay for order flow, which means the exchange doesn't offer kickbacks to brokers for routing trades through their platform.

IEX is only 10 years old, and while its market share is growing, the exchange is tiny compared to the NYSE and Nasdaq. The exchange likely sees institutional crypto trading as an untapped income source and a new growth area in which it can capture market share.

IEX CEO Brad Katsuyama believes a partnership with FTX US adds a strong foundation for trading cryptos in a legally compliant manner. While much of FTX's product line is illegal to trade in the United States, FTX US is completely legal–which is why its offerings are so limited compared to the worldwide version of FTX.

Sam Bankman-Fried, CEO of FTX, has long been a proponent of regulating cryptos in the United States, because he believes regulation will open the crypto markets to massive institutional liquidity. Within that context, IEX seems like a strong American partner for FTX US.