Investors Exchange (IEX) Building A Market that Works for Investors

FLASH BOYS: A WALL STREET REVOLT

THE STOCK MARKET HAD BECOME AN ILLUSION

DISCOVERY OF A PROBLEM $ Client order 2 milliseconds NYSE NASDAQ DISTANCE NYSE Mahwah, NJ 25K shares AMD NASDAQ Carteret, NJ 25K shares AMD Direct Edge Secaucus, NJ 25K shares AMD BATS Weehawken, NJ 25K shares AMD NYC 2 milliseconds LATENCY $ BUY ORDER 100K shares AMD

Electronic “front-running” LATENCY ARBITRAGE WAS THE CAUSE OF THE PROBLEM Electronic “front-running” DISTANCE Client order NYSE Mahwah, NJ NASDAQ Carteret, NJ 25K shares AMD 15,000 shares AMD Direct Edge Secaucus, NJ ~50-60% FILL RATES 25K shares AMD 12,500 shares AMD BATS Weehawken, NJ 25K shares AMD NYC 476 microseconds LATENCY $ BUY ORDER 100K shares AMD

WE COUNTERED SPEED BY SLOWING THINGS DOWN THOR DISTANCE NYSE Mahwah, NJ 25K shares AMD NASDAQ Carteret, NJ 25K shares AMD Direct Edge Secaucus, NJ 25K shares AMD 100% FILL RATES BATS Weehawken, NJ 25K shares AMD NYC 290 microseconds LATENCY $ BUY ORDER 100K shares AMD

EXCHANGES ARE NOT WHAT YOU THINK THEY ARE ILLUSION WALL STREET TIMES SQUARE REALITY MAHWAH, NJ CARTERET, NJ

WHY DOES A STOCK EXCHANGE EXIST? Study Says Broker Rebates Cost Investors Billions May 6, 2012 “In recent years, though, brokers have had another enticement that can pull them in a different direction: payments from stock exchanges in return for sending them business. The practice has attracted criticism from several industry participants and former regulators who say the so-called rebates that the exchanges pay Wall Street firms could give those firms an incentive to profit at the expense of investors. Now a new study using industry data says that the rebates could be costing mutual funds, pension funds and ordinary investors as much as $5 billion a year.” August 9, 2010 NYSE Opens Mahwah Data Center “The new data center features colocation space for trading firms seeking high-speed access to the matching engines. NYSE Euronext says it has sold out all the available colocation space in its first phase at Mahwah – reported to be at least two 20,000 square foot pods. Three additional pods are planned as expansion space, for a total of 100,000 square feet of colocation space.” CME, Nasdaq Plan High-Speed Network Venture March 28, 2013 “CME Group Inc. and Nasdaq OMX Group Inc. have detailed plans to launch a wireless network joint venture in May that will beam stock and derivatives prices between Chicago and New York in fractions of a second. The service is pitched at high-frequency traders and Wall Street banks seeking a competitive edge using the data to place trades more quickly than rivals.” Slow Dark Pools Cost Investors, Study Says August 25, 2015 “The technological shortcomings can cost mutual funds and hedge funds millions of dollars over time, New York research firm Tabb Group plans to say in a release Wednesday. What they found is the Boston Company’s orders at times were getting filled at prices that were “suboptimal” in some dark pools, meaning they could potentially have gotten a better result if a trade was carried out more quickly.” July 27, 2009 Direct Edge in Crosshairs of “Flash Orders” Debate “The practice gives banks, hedge funds, and some dark pools, where orders are matched anonymously, an advanced look at order flow. The service helped spark Direct Edge's impressive growth, and was closely imitated early last month by formal exchanges Nasdaq Stock Market and BATS Exchange. Critics…say they provide an unfair advantage to select participants, creating a "two-tiered" market that undermines the confidence of those without lightning-quick computer trading software.”

WHY DO EXCHANGES SELL FAST DATA AND TECHNOLOGY? Those who pay will know of a price change before those who don’t pay. The only way to profit from this is to trade quickly before others get the same information. Exchanges sell Fast Technology That allow fast traders to profit from advanced knowledge. This has enabled the rise of High Frequency Trading from ~25% of market volume to ~50% of volume

BUT…WE HAD NO MONEY! Potential Sources of Funds: Brokers / Banks Exchanges Mutual Funds / Hedge Funds / Public Companies Good partners Creates potential conflicts of interest Limits Disruption Cash rich Competitor Incentive to maintain status quo End users No Conflicts Has Never Been Done It took 9.5 Months to raise our first round. But we had resolve to do it right, or it wasn’t worth doing at all…..

OUR RESOLVE PAID OFF: CONFLICT-FREE OWNERSHIP

IEX CREATES A LEVEL PLAYING FIELD IEX is a seasoned TEAM OF EXPERTS from large banks, asset managers, exchanges, and regulators We SLOW DOWN high- speed traders to make our market safe for investors We AVOID CONFLICTS in pricing and operations of our market. VS. FLAT FEE PRICING & SIMPLE MARKET REBATE PRICING & COMPLEX MARKET VS.

IEX QUARTERLY GROWTH

WHAT CAN YOU DO TO CHANGE HISTORY? Ask Questions Ask what exchanges and dark pools your orders are trading in and ask WHY you are trading there Seek Transparency Work with brokers and exchanges to understand how each market is handling your order and providing a fair marketplace for investors Vote With Your Feet Take greater control of your orders and support solutions that are aligned with your interests Every Order Makes a Difference……

Investors Exchange Fair, Simple, and Transparent www.iextrading.com

HOW TO CHANGE THE COURSE OF HISTORY… START BY UNDERSTANDING WHY HISTORY REPEATS ITSELF Regulation Scandal Loophole INNOVATION TALENT Exploitation

Market- Based Solution BREAK THE HISTORICAL CYCLE TO CREATE POSITIVE CHANGE Regulation v INNOVATION Scandal Loophole TALENT Market- Based Solution Exploitation