IEX, short for Investors Exchange, is a U.S. stock exchange designed to give everyday investors and their brokers a fairer deal by neutralizing speed advantages that high-frequency trading firms use on other exchanges. Founded in 2012 and approved as a national securities exchange by the SEC in 2016, IEX handles roughly 4% of all U.S. equity trading volume. Its defining feature is a built-in delay of 350 microseconds on all incoming and outgoing messages, a mechanism widely known as the “speed bump.”
How the Speed Bump Works
At the heart of IEX is a coil of fiber-optic cable, sometimes called the “shoebox” because of its physical size, that every order must travel through before reaching the exchange’s matching engine. This coil adds a 350-microsecond delay (about one-third of a millisecond) to all incoming orders, cancellations, and outgoing trade confirmations. That tiny fraction of time is meaningless to a human investor but significant in the world of high-frequency trading, where firms spend millions to shave microseconds off their connection speeds.
The delay solves a specific problem called latency arbitrage, sometimes referred to as “quote sniping.” Here’s how it works on a traditional exchange: when a stock’s price shifts on one exchange, high-frequency traders can race to other exchanges and buy or sell against quotes that haven’t been updated yet. Market makers (the firms that post buy and sell offers) get stuck filling orders at outdated prices, which costs them money. To compensate, they widen the gap between buy and sell prices, and that wider spread is ultimately paid by ordinary investors.
IEX’s matching engine receives price data from other exchanges without the delay, so it always knows the current best prices across the market. But because incoming orders are slowed down, the engine has time to adjust its own posted prices before a fast trader can exploit stale quotes. The result is that market makers on IEX face less risk of being picked off, which allows them to quote tighter spreads and better prices for buyers and sellers.
IEX’s Fee Structure
Most major stock exchanges operate on what’s called a maker-taker model. In this system, the exchange charges up to 0.3 cents per share (the regulatory maximum) for “taking” liquidity, meaning you send an order that immediately matches with a resting order. At the same time, the exchange pays a rebate to the firm whose resting order got filled, rewarding them for “making” liquidity available. The math gets complicated fast: some high-volume brokers receive enough in rebates and tiered discounts that the exchange effectively pays them to trade there, while smaller firms subsidize those payments through higher fees.
IEX takes a different approach. It charges a flat fee per share to all members and does not pay rebates. Market data feeds and exchange connectivity, which can cost six or seven figures annually at other venues, are provided free. The logic is straightforward: you pay IEX when you trade, and you pay nothing when you don’t. This removes the incentive for brokers to route orders to whichever exchange offers the richest rebate rather than the best price for the customer.
Why IEX Was Created
IEX grew out of concerns, popularized in Michael Lewis’s 2014 book “Flash Boys,” that the U.S. stock market had become structurally tilted in favor of high-frequency trading firms. These firms invested in co-location (placing servers physically next to exchange computers), private data feeds, and ultra-fast network connections to gain a few microseconds of advantage over everyone else. That advantage translated into billions of dollars in profits extracted from slower market participants, including mutual funds, pension funds, and retail investors.
Brad Katsuyama, a former trader at a major Canadian bank, led the team that built IEX initially as an alternative trading system (a type of private trading venue sometimes called a “dark pool”). After gaining traction and proving the concept, IEX applied for and received SEC approval to become a full national securities exchange in June 2016. That distinction matters because it means IEX quotes are included in the national best bid and offer, giving its prices equal standing with those on the NYSE and Nasdaq.
IEX’s Role in Today’s Market
As of late April 2026, IEX holds about 4.1% of U.S. equity trading volume. That’s a small share compared to the NYSE or Nasdaq, but it’s meaningful for an exchange that has existed for barely a decade and deliberately avoids the rebate payments that attract volume to competing venues. IEX’s influence extends beyond its own order book: after its launch, several other exchanges introduced their own versions of speed bumps or modified their fee structures, a sign that the competitive pressure IEX introduced shifted industry norms.
For individual investors, IEX’s impact is mostly indirect. You typically can’t choose which exchange your broker routes an order to, though some brokers do allow you to specify IEX as a preferred venue. The bigger effect is on execution quality across the market. When exchanges compete to offer tighter spreads and fairer pricing rather than faster access and richer rebates, the savings flow through to anyone buying or selling stocks, whether they know it or not.