There are private markets housed inside banks and of course many exchanges to trade on. The industry trades on 13 major exchanges. But Bank of America, Morgan Stanley and Fidelity Investments are 3 of about 10 financial institutions that are backing a new trading platform called Members Exchange. With about ten institutions investing in the platform, it seeks to create instantaneous sustainable volume just based on the owners alone.
According to reports, cost of fees that traders pay is one of the central reasons for the venture. Financial institutions can be frustrated with fees paid to the thirteen major exchanges. Data feeds are expensive. If banks can find a way to move around those fees and still bring a fair price to their customers they will do it.
With fees being squeezed across the board including retail commission, traders are looking to cut pass along fees any way that they can. Members Exchange is promising lower pricing for data and a dramatic savings overall. Some people are skeptical, and think that it is simply a strategic move to try and negotiate lower fees from the 13 exchanges that these institutions do business with. However, they are looking to launch in early 2020.
Whether this particular initiative works or not, the trend to find ways to squeeze the middle man in the entire financial industry will continue. Digital services will become more efficient, and everyone from retail advisors, asset managers and even exchanges are going to have to adjust their business models. It is already happening, but this is just another example of the type of positioning that will happen.