Nasdaq's under attack over a product that could expose big traders — but one rival says it has been doing this for years

Nasdaq is preparing to launch a new data product called Intellicator, which aims to
That's prompted criticism from rivals. Startup exchange
IEX published a blog Monday calling out Nasdaq for "selling out investors" in order to make money.
Nasdaq, which is best known as a US equities exchange operator, has made data a focus of its business.

"Enough is enough."

IEX, the startup stock exchange, isn't a fan of Nasdaq's latest foray into data. The exchange operator's newest product — called Intellicator — has raised opposition from a number of market participants, including IEX and SIFMA, a large organization representing big trading firms. The objections are all basically around the idea that the product might give away information about large firms' trading strategies in one of Nasdaq's options markets.

But IEX, which was made famous in Michael Lewis' "Flash Boys," says Intellicator is just the tip of the iceberg.

In a blog post published Monday, IEX's Eric Stockland called out Nasdaq for over a decade of selling data products, which they say "sell out" investors in favor of traders.

"Market Velocity and Market Forces"

To minimize market impact, investors do everything they can to disguise their intentions — including breaking up large orders into smaller ones so they aren’t obviously coming from a large investor," IEX said. "Pathfinders directly undermines those efforts."

Data has quickly become an important area of profit for exchanges and a point of contention on Wall Street.

Big traders have long accused Nasdaq and its rival the New York Stock Exchange for unfairly spiking the cost of their proprietary market data, which market-makers claim is essential to competing in the trading business.

Revenues brought in from data have increased for Nasdaq from $337 million in 2012 to $427 million in 2016, according to the exchange. Nasdaq is putting more capital behind data products, according to its updated strategy.

But Oliver Albers, head of sales and account management for Nasdaq's Global Information Services, however, told Business Insider that the SEC has encouraged exchanges to create products that make markets more transparent.

“For many years, the industry has alleged that exchanges have market power over data, but when the SEC’s Chief Administrative Law Judge looked at that issue, she ruled that market data pricing is subject to competitive forces."

To be sure, there are a number of market participants who welcome these products.

"Greater transparency and more granular information about market microstructure ought to be an unadulterated good for making markets efficient," he said.

Sharma, the head of smaller investment shop, said he would benefit from a product like because it provides his firm with a view of the market that is typically only available to larger firms.

Nasdaq's under attack over a product that could expose big traders — but one rival says it has been doing this for years

"Market Velocity and Market Forces"

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