By John McCrank
NEW YORK (Reuters) - IEX Group, the upstart trading venue featured in Michael Lewis's book "Flash Boys: A Wall Street Revolt," began operations as a public stock exchange on Friday after more than 2-1/2 years as an off-exchange trading platform.
The Investors' Exchange is the 13th U.S. stock exchange and will compete with the likes of Nasdaq Inc (O:NDAQ), Bats Global Markets (Z:BATS) and Intercontinental Exchange Inc's (N:ICE) New York Stock Exchange.
IEX plans to win market share without paying brokers incentives to trade on its exchange - it has a flat pricing structure - and not allowing trading firms to pay to house their servers next to the exchange's stock matching engine to gain a speed advantage, common practices on most other exchanges.
The U.S. Securities and Exchange Commission received hundreds of comment letters related to IEX's exchange application. Most, including from firms such as Goldman Sachs (N:GS) and Virtu Financial (O:VIRT), were positive.
"We've been a customer and supporter of IEX from day one because we believe in competition, transparency and innovation," Virtu's Chief Executive Officer, Doug Cifu, said on Friday.
But some trading firms and other exchanges were vehemently opposed to IEX's unique model, saying it would actually make the market more complex and less fair. ICE CEO Jeffrey Sprecher even called IEX "un-American."
Interest in IEX was partly driven by "Flash Boys," which followed the exchange's founders as they built what they saw as a more investor-focused market.
The book ignited a storm of controversy in March 2014 after Lewis claimed profit-hungry exchanges had rigged the market in favor of high-frequency trading firms that used sophisticated technology to front run investors.
Lewis, who has written books such as "Money Ball" and "The Big Short," said on Friday he was relieved to see IEX operating as an exchange.
"They are by far the most direct, honest and trustworthy characters in a market riddled with terrible incentives," he said in an email. "It's going to be interesting to watch whatever happens next."
IEX use a "speed-bump" to slow stock orders by 350 millionths-of-a-second, saying the feature helps prevent predatory trading practices.
While other exchanges initially opposed the speed bump, some have said they were looking into implementing similar features after IEX won its exchange license.
"It's encouraging," said Adrian Facini, IEX's head of product management. "This market is based on competition, so we encourage them to try to create new products."