Invented a fairer stock market - Brad Katsuyama

If Brad Katsuyama gets his way, it will no longer be possible for a handful of professional investors to get an early peek at the trading of other market players. They won’t be able to jump in and fill orders at less-than-perfect prices — and pocket the difference.

His brainchild is a new stock exchange called the Investors Exchange, or IEX. If it succeeds, IEX will be a less expensive way for large traders like mutual funds to buy and sell stocks on behalf of ordinary investors. “Cheaper trades boost investment returns,” explains Joe Brennan, head of the equity index group at fund giant Vanguard, which has been complaining about high-speed trading abuses for years.

At issue is so-called high-frequency trading, a strategy that uses powerful computers to rapidly buy and sell stocks, often looking to gain advantage over competitors by mere fractions of a second. Katsuyama’s IEX battles back by slowing down trading by 350-millionths of a second—a “speed bump” so small that humans don’t notice, but that eliminates high-frequency traders’ edge.

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