February 3, 2016
Mr. Brent J. Fields
U.S. Securities and Exchange Commission
450 Fifth Street, N.W .
Washington, D.C. 20549
Dear Mr. Fields:
I submit the following letter in support of the application by Investors Exchange LLC (IEX) to become a National Stock Exchange.
Ethical Systems is a non-profit organization formed by 22 collaborators who are among the top experts in the world on business ethics and related topics. 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, and should be encouraged.
The challenge of business ethics is to provide companies and individuals incentives to behave ethically in the gray area of activities that remain legal, though perceived to be unethical. As noted by fellow comment letters, currently available stock exchanges disadvantage long-term investors due to their lack of transparency and allowance of superior access to certain high frequency traders who negatively influence the market. This is an example of a classic market failure, where information asymmetry and complexity allows a few market participants to benefit at the expense of those with less access to, and prospect for, control of the market -- a group that comprises the vast majority of stock holders.
Ameliorating such market failures requires either additional government regulation or an innovative market-based solution. Where some companies saw an opening in the market and created businesses that benefit them, IEX has instead used its inside knowledge of the intricacies of electronic trading and created an innovative business model that provides a systemic solution. They are demonstrating that a business emphasizing transparency and trust can deliver results in the long-term, not only for themselves but also for their customers. Their success thus far is a testament to the need of such a service and the willingness of the market to embrace this solution. Approval of their application to become a national stock exchange advances their opportunity to serve a broader group of investors.
The SEC's approval of this application will even the playing field and serve the regulatory purpose of Regulation NMS to promote fair competition among markets and to protect long-term investors.
CEO, Ethical Systems