Nasdaq sues ‘Flash Boys’ Exchange IEX for patent infringement


Nasdaq Inc. said it will sue rival IEX Group Inc. for patent infringement, claiming the smaller firm stole aspects of its trading technology.

In a lawsuit filed Thursday, Nasdaq said seven of its patents were violated by IEX, which transformed itself from a private trading venue to a full-fledged stock exchange in 2016. The technology that IEX allegedly ripped off powers Nasdaq’s trading systems, including its end-of-day closing auction, how orders are matched on its exchange and how its data feeds work.

IEX employs several former Nasdaq employees with knowledge of the inner workings of its exchange, according to the statement. The employees weren’t identified.

It’s not the first time Nasdaq has accused another exchange operator of patent infringement. Last year Nasdaq sued Miami International Technologies LLC, alleging similar kinds of intellectual property theft involving former employees, but for options-trading technology. Nasdaq holds more than 250 patents for the technology underpinning its exchanges.

IEX has earned a contrarian reputation in the U.S. stock market, gaining fame from Michael Lewis’s 2014 book ‘Flash Boys.’ Nasdaq and fellow incumbent NYSE Group Inc., a unit of Intercontinental Exchange Inc., were both vocal opponents of IEX’s effort to turn itself into a public stock exchange, but U.S. regulators approved it anyway. IEX processes about 2.3 percent of U.S. equity trading volume, compared with about 19 percent handled by Nasdaq’s three stock exchanges.

The case is Nasdaq v IEX Group, 18-cv-3014, District of New Jersey (Trenton).