IEX Doubles Predictive Power of IEX Signal

Latest enhancement increases tool’s ability to predict price changes in market to approximately 26 percent.

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The Investors Exchange (IEX) announced the enhancement of IEX Signal, part of IEX’s Discretionary Peg (D-Peg) order type that protects orders from being traded at stale prices.

IEX Signal, which uses a proprietary model to predict when National Best Bid (NBB) will fall by one minimum price-variant (MPV or $0.01 for most stocks) or the National Best Offer (NBO) will rise one MPV in a gradual, observable way, has doubled its ability to predict price changes in the market. The improvement has led IEX Signal to correctly predict approximately 26 percent of total price changes in a trading day, which is up from 9 percent with the previous version. On a volume-weighted basis, that represents 44 percent of price changes.

In addition to the enhancements made to IEX Signal, the exchange also modified its Primary Peg order type. Primary Peg orders will be pegged 1 MPV lower than NBB for buy orders and 1 MPV higher than the NBO for sell orders, with the option to move up or down for trade at NBB or NBO, respectively, as long as the IEX Signal doesn’t predict a price move against the order.

IEX released a white paper, entitled “The Evolution of the Crumbling Quote Signal”, discussing the research and development done to create the newest version of the Signal.

"IEX's commitment to protecting investors means working and evolving continuously to improve the exchange on their behalf," said IEX CEO Brad Katsuyama in a statement. "These new innovations complement and extend the protective benefits of the IEX Speed Bump to deliver even better trading outcomes for investors, their brokers, and market-makers on IEX, and further distance us from the legacy exchange model."

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