MBA Alum Takes on Stock Market's Status Quo
Careful readers of "Flash Boys," author Michael Lewis's new expose on high-frequency trading, may spot a name they recognize.
Matt Trudeau, MBA '05, makes an appearance on several pages of the book as what Trudeau himself terms a "very minor character."
What he's doing is anything but minor, though. Trudeau is the head of product at IEX, an equity trading venue that is garnering significant attention, both as the subject of Lewis's latest book and for what IEX represents to the larger world of stock trading.
In his book, Lewis investigates traders who use technology to shave fractions of a second from the time it takes to place stock orders — time savings that can add up to profits in the ultra-high-speed world of financial markets, but can hurt investors who don't have access to that same technology.
To offer an alternative, IEX has created a stock market that welcomes a self-selecting group of participants who agree to play by a common set of rules. "We've designed it in such a way that we've tried to systematically eliminate some of the trading strategies that we think are taking advantage of investors on other markets," Trudeau says. "We've been almost surgical in our approach."
Trudeau says being part of the small IEX team requires individuals who can operate like Swiss army knives, fulfilling multiple functions. At IEX, Trudeau manages strategic partnership opportunities, vendor relationships with third-party trading technology providers, and the company's intellectual property portfolio. He also is responsible for internal functions around technology project management and product delivery, as well as looking toward eventual opportunities in other regions and asset classes as the business grows.
"The MBA education at McCombs was really critical to preparing me to be exposed to all the different elements of a business and giving me some reference points and some understanding. It's been really useful," he says.
Trudeau stays in contact with McCombs faculty, including John Doggett and Sandy Leeds. He credits McCombs for instilling a global perspective, which is especially important for a career that has taken Trudeau to New York, Canada, Europe, South America, and Asia. McCombs classes "really helped me as I started to get outside of Austin," he says.
Additionally, Trudeau says his experience at IEX reminded him of a case study from McCombs, entitled "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism." In the study, which examines the quality of purchases in the context of asymmetric information, all the good used vehicles are forced out of the used car market, leaving any unsuspecting car buyers more likely to purchase a lemon. IEX has done the inverse of that, creating a market where the goal is to force out the lemons.
"We're taking on the status quo, and we're really trying to push for changes that many recognize and agree need to be made. But it's very difficult to get people to change," Trudeau says.
"We're using technology to try to institutionalize fairness."