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IEX shuttering listings business as Interactive Brokers rejoins Nasdaq

IEX Group Inc. is exiting the corporate listings business after struggling to break through its larger rivals' duopoly on the market.

A year after securing its first — and what would be its only — corporate listing in Interactive Brokers Group Inc., the upstart exchange operator has made the decision to shutter its listings business. The move marks the end of a yearslong campaign from IEX to distinguish itself as a viable listing alternative to the Intercontinental Exchange Inc.-owned New York Stock Exchange and Nasdaq Inc., which together control nearly every U.S. corporate listing.

"It has become clear that the legacy exchanges have a stronghold on this market, and, to succeed, we would need to compete in a way that does not align with our mission to build fairer markets," IEX co-founder and CEO Brad Katsuyama wrote in a LinkedIn post published Sept. 23. "Therefore, the best choice for us at this time is to exit listings and to serve companies in a way that is more aligned with IEX's strengths and our brand."

With the announcement, Interactive Brokers plans to move its stock back to Nasdaq, where it was listed before switching to IEX in late 2018. The online broker/dealer expects its shares to begin trading at Nasdaq on Oct. 7 under its current ticker symbol IBKR. Interactive Brokers' decision to move back to Nasdaq comes as IEX struggled to gain other listings, founder and Chairman Thomas Peterffy said in a statement. Peterffy also cited the fewer number of market makers who actively traded Interactive Brokers' stock on IEX versus Nasdaq as a reason for the move.

The company also had concerns about the size of its spreads, or the difference between the highest price to buy and lowest price to sell its stock, a person familiar with the matter said in an interview. Wider spreads are largely thought to lead to higher transaction costs for end investors. Interactive Brokers approached Nasdaq about relisting on its exchange roughly six months ago, the person said.

IEX, which was prominently featured in Michael Lewis' 2014 best-seller "Flash Boys," had been trying to break into the corporate listings business for several years before landing Interactive Brokers. But the effort was an uphill climb, as issuers proved to be wary of moving away from the NYSE and Nasdaq's established listings businesses, which have been built up over several decades.

Now, with nearly 3% market share, IEX plans to refocus its efforts on its trading division and a handful of new initiatives including its entry into the cloud business.

"The decision to exit the listings business was a tough one emotionally — those who know IEX, know we don't shy away from a good fight," Katsuyama wrote on LinkedIn. "But it is the right decision to make at this moment."