Exchange introduction and market competition: The entrance of MEMX and MIAX

In September of 2020, two new equity exchanges, Members Exchange and Miami International Holdings Pearl Equities Exchange, were introduced further fragmenting an already vast array of venues that trade equities in the United States. In this paper we examine several aspects exchange competition following the introduction of these exchanges. We find that NASDAQ appears to lose market share and IEX appears to gain market share in the post-introduction period. This is interesting as IEX is a fee-based model, where order routers will not receive a rebate, and also introduces a speed bump, which could result in slower executions. Using Rule 605 data we document that IEX exhibits faster execution following the introduction. Finally, we examine clientele effects and find that known proxies for algorithmic trading and retail trading increase in the post introduction period.