Matt Turner, Business Insider, The heroes of ‘Flash Boys; just went off on the New York Stock Exchange, here. Wait, so Dan Bollerman is just figuring out the binary protocols have lower latency than the FIX protocol? I’m thinking Bollerman listens to a lot of B.o.B. The whole IEX and Michael Lewis coverage reads like a post from Shares from Your Aunt.
Last year, IEX noticed that its ability to access displayed quotations (our “fill rate”) on New York Stock Exchange (NYSE) had degraded to as low as 84% (meaning we were able to, on average, trade 84 shares out of every 100 shares that were quoted at the time we attempted to trade). On some days, 1 out of every 10 orders sent to NYSE missed ALL available liquidity. In contrast, IEX’s fill rate averages about 96.9% across all other U.S. exchanges. We found this especially curious given that our fill rate on ARCA, an exchange owned by NYSE located in the same data center, was 96.8%.
After consulting with NYSE, they advised that we might consider upgrading from the NYSE FIX gateway to their Binary gateway instead. One of the few public documents we found stated that the Binary gateway is a “new, faster protocol [which] reduces bandwidth and latency“.
After making the change, we noticed our fill rate on NYSE immediately improved to 97.0% on average. The practical explanation is that the FIX connection was so much slower than Binary that market participants seeing IEX’s Router trade on other exchanges were able to race ahead of our routing client and cancel or trade with quotes on NYSE through the faster Binary gateway before IEX’s client order arrived through the slower FIX gateway.