Newest U.S. Stock Exchange MEMX Debuts, Keeps It Simple

Suzanne Cosgrove

Suzanne Cosgrove


After more than a year of preparation, Members Exchange (MEMX) CEO Jonathan Kellner is more than ready for Monday’s launch of the new U.S. stock exchange at 9:30 a.m. ET.

“We’ve had industrywide connectivity tests,” and everything went well, Kellner said in an interview. Only registered broker-dealers can be MEMX members, and close to 50 were connected as of late Friday.

“I am excited about the diversity we see,” he said. “We are not launching with a focus on one type of investor. We want to reach the buy-side, sell-side, retail brokers and institutions,” he said. 

Asked if he was nervous about the debut, Kellner acknowledged mild first-day jitters. “I liken it to having your first child go off to school for the first time,” he said.

The MEMX exchange will begin trading with seven stocks Monday (ticker symbols: ACST, BB, ED, F-B, GOOG, ICSH and XOM), and it will be open for the trading of all National Market System stocks by September 29.

In its application filed last year with the SEC seeking to register as a national securities exchange, MEMX indicated it would offer a different kind of electronic trading model — a unified order entry messaging standard, a simplified market data and distribution model, and simplified order types and order routing.

“We’ve also tried to make it as easy as possible to connect,” Kellner said. Members can use off-the shelf encoders to establish connectivity to FIX protocol, he said, although ultimately everybody comes to the exchange through a broker-dealer. Internal messaging is proprietary. 

“We leveraged technology to make the experience consistent,” Kellner added. “We started building from scratch and spent a lot of time with members and investors to make the technology less complicated and have a more consistent outcome.” 

Founding MEMX members included big-name market players like Bank of America Merrill Lynch, Charles Schwab, Citadel Securities, E*TRADE, Fidelity Investments, Morgan Stanley, TD Ameritrade, UBS, Virtu Financial and others who have raised in excess of $135 million to underwrite the exchange. MEMX currently claims 18 investors as well as 50 members.

Nonetheless, the new stock exchange will be up against formidable competition in a drive for market share against more than a dozen other exchanges. Kellner named its top competitors as Nasdaq, NYSE and Cboe Global Markets. 

Kellner noted that about 40 percent of U.S. equity volume is currently executed off exchange, and about 10 to15 percent is executed at the open or close. That leaves about 45 percent of intraday on-exchange volume to compete for, and that’s the piece MEMX is after, he said.

To better compete with the established exchanges, MEMX announced a pricing structure earlier this month that includes no fees for exchange market data. That’s in stark contrast with other exchanges, which have found data sales to add to their bottom lines.

“We want to launch with as little friction as possible,” Kellner said. “We do intend to charge for data and connectivity once we have established more market share,” he said. “But when we do charge, we want to set an example of transparency for the industry.”


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