How Design Thinking Helped Create A Fairer Stock Exchange

With a user-focused ethos that’s closer to OXO Good Grips than Goldman Sachs, the Investor’s Exchange is rethinking how stock exchanges operate.

How Design Thinking Helped Create A Fairer Stock Exchange
[Photo: Hiroshi Watanabe/Getty Images]

In 2011, Brad Katsuyama was an obscure stock trader working out of the Royal Bank of Canada’s New York office–a backwater compared to giants such as Goldman Sachs and JPMorgan Chase. Katsuyama might have remained obscure if he hadn’t noticed something strange with his trades: Every time he placed an order for stocks, it seemed like the price would jump up just by a cent or two before his trade had a chance to clear.


Katsuyama eventually realized that high-frequency traders were sniffing out his orders, and, in a flash of a second, buying up the stock he wanted and reselling it to him, for a tiny, guaranteed profit. The big question was how those orders were being detected. It turns out, the high-frequency traders (HFTs) were constantly sending tiny orders to the dozens of exchanges around the U.S. to glean what others such as Katsuyama were doing. Because big orders aren’t filled all at once, but rather in tiny increments at different exchanges sometimes hundreds miles apart, HFTs could then use the info they’d gleaned to buy up stocks everywhere else–and thus control the market for a split second.

Kastuyama’s team eventually hit on an ingenious hack that would keep this from happening to them: a speed bump that would actually slow down his orders so that they arrived roughly at the same time on all of Wall Street’s exchanges. Using that speed bump, which was really just a long coil of fiber optics that sent a trading signal around in a circle for a split second, no one would be able to detect his orders on one exchange, and then beat him to all the others before he could execute his trades. The hack worked so well that Katsuyama left RBC to found his own stock exchange, the Investor’s Exchange (IEX), which would use speed bumps to slow down all orders, so that traders there wouldn’t ever fall prey to high-speed sharks.

In 2014, the conception of IEX became fodder for Michael Lewis’s best-selling book Flash Boys. In June of 2016, the exchange finally opened up to public trading. Today, it accounts for about 2% of the trades in America–not large, but at 160 million shares a day, a fairly large start.

Though finance would seem like the furthest thing from design, design thinking plays an integral role at the upstart company. IEX not only aims to overturn how people trade on Wall Street, the company itself works with an ethos closer to OXO Good Grips than Goldman Sachs.

Adrian Facini [Photo: Joshua Blackburn]
As Katsuyama and his team began designing all the rules that would govern how people bought and sold stocks on IEX, they were guided by a powerful insight familiar to designers: Complexity is a trap that benefits the few while making everyone else worse off. By encouraging banks to create all kinds of specialized ways of buying and sell stocks, the HFTs were in fact creating traps that kept the average stock trader in the dark. “We had to ask, ‘What can we offer that’s unique?'” says Adrian Facini, IEX’s head of product. “We had to figure out the simplest thing we could offer that was of value.”

Before coming to IEX, Facini spent over a decade working his way up the ranks of Wall Street’s geek class, first as a developer, and then eventually as the manager of an electronic trading platform at a major investment bank. By the time he had come out on top, he was disillusioned with the industry: not because of the work, by because of the culture. “It wasn’t about putting the interests of mom and pop at the top,” Facini recalls. “It was instead about serving whatever subset of the community was going to pay you the most.”


While planning his exit, Facini began applying for a product role at Apple. “I love the simplicity and the attention to detail,” he explains. “I’m pretty specific about things being done for a reason, then being done perfectly.” At the same time, he got a call from a former coworker who told him about the vision for IEX. In less than a week, he had a job offer.

Today, Facini says that IEX’s culture has evolved to become user-centered in a way that’s rare on Wall Street. “When we think about how to create something, we think about how it can be used or abused,” Facini says. “If something can be manipulated, we nix it.”

Put another way, IEX hopes to look at every tiny detail–from the way bids are tabulated to the rules that can be attached to whether a computer will automatically execute a trade–from the standpoint of all its users, rather than just a few: “We try to think about things that can reinforce positive behavior.” Today, in running his own teams at IEX, Facini puts every idea through a vetting process inspired by another famously user-focused organization: Amazon. Inspired by Jeff Bezos, Facini asks that his team put every idea in a six-page memo. A key benefit is in making sure everyone on the team has the same understanding of a new idea before they begin to vet it. “You might have one mental model of an idea, and someone else has a different one,” he explains. “Then you don’t realize until later that they’re not the same. I’d rather do that up front.”

IEX plans to do its first stock listings this year, just as NASDAQ and the NYSE do. (Eventually, they plan to do IPOs as well.) But to do that, they have to rethink something that no one ever considers: the way the closing price of a stock is calculated. The idea is to create new, more transparent rules for disseminating stock prices, so that there aren’t tiny fluctuations that can again be gamed. Of course, jumping into a market that’s been owned by the same few players for decades won’t be easy. The other exchanges are now looking at IEX as a model for what they can do as well. For example, NYSE, at one time a fierce opponent of IEX, has now copied its speed-bump idea. But Facini isn’t worried. Having seen enough of Wall Street, he thinks that while other stock exchanges rejigger their own design, they’ll always lag in thinking holistically about their users. “Anyone can try to copy our rule book,” Facini says. “They can’t copy our ethos. That’s where we’ve reaped the benefits.”

About the author

Cliff is director of product innovation at Fast Company, founding editor of Co.Design, and former design editor at both Fast Company and Wired.