Someone will call this a submarine article for IEX but I don't think this is far, it was written as an oped by Dave Swensen, the famous head of Yale's endowment fund.

Just so the issue is clear, almost all hedge funds don't do active/passive also called maker/taker, but rather they pay a flat fee per share traded to their sell side broker.

The sell side broker will then collect/pay the exchange fees. This means that the sell side broker has an incentive to post the order to a market that pays them the largest rebate rather than the market with the shorted queue.

The buy side clients are not getting worse prices necessarily as you still need to fill orders at the NBBO.

So the argument would be, why not post on the exchange with the shortest queue always. And the response would be that

1) markets move fast, and what is the shorted queue when the order is dispatched may not be the shortest queue when the order arrives.

2) Other markets may be more active, ie more orders routed to them first so the shortest queue may not be the best place to route at all.

To be fair its not a consensus that the IEX approach is better than maker taker, there is no clear consensus as to what the correct approach is even when you take out the HFT opinions.

In case anyone wants to see here's a link to the BATS cash equities execution quality page.

https://www.bats.com/us/equities/market_statistics/execution...