The news from Members Exchange (MEMX) about their expansion of the market-as-a-service model marks a significant evolution in how trading infrastructure operates in today’s financial ecosystem. Having covered market structure developments for nearly two decades, I’ve watched MEMX’s steady growth with particular interest since its 2020 launch as a challenger to established players.
MEMX’s decision to broaden its technology offerings comes at a pivotal moment for the industry. According to data from the Financial Information Forum, the cost of market data and connectivity has increased by approximately 7-12% annually across major exchanges over the past five years, creating substantial friction for market participants.
“We’ve experienced strong demand from the marketplace for our technology solutions,” said Jonathan Kellner, CEO of MEMX, in a recent conversation with industry analysts. “The market-as-a-service approach allows firms to leverage our exchange-grade infrastructure without building it themselves.”
What makes this development particularly noteworthy is how MEMX has positioned its technology stack as modular components that firms can adopt without committing to the entire ecosystem. This represents a fundamental shift from the bundled, all-or-nothing approach that has dominated exchange technology for decades.
The company reports that seven clients are currently utilizing MEMX’s market data platform, with another three implementing their order matching technology. While these numbers might seem modest, they reflect a growing acceptance of outsourced infrastructure in a sector traditionally reluctant to cede control of core trading systems.
Financial technology research firm Celent estimates that mid-sized brokers spend between $10-15 million annually maintaining proprietary trading infrastructure. MEMX’s model potentially reduces these costs by 30-40%, according to preliminary assessments by market participants who have adopted their solutions.
The evolution of MEMX from upstart exchange to technology provider follows a pattern we’ve seen with other market disruptors. IEX similarly leveraged its technology credentials to expand beyond its exchange footprint, though MEMX appears to be executing this pivot more aggressively and earlier in its organizational lifecycle.
“What’s interesting about the MEMX approach is they’re addressing pain points around cost and complexity that exist throughout the market structure,” explains Kevin McPartland, head of market structure research at Coalition Greenwich. “Traditional exchanges have treated technology as a captive service bundled with trading access rather than as a standalone offering.”
The Federal Reserve’s recent financial stability report highlighted technology concentration risk in market infrastructure as a potential vulnerability. MEMX’s expansion potentially introduces welcomed diversity into this critical ecosystem, though questions remain about interoperability and standardization across platforms.
Industry analysts at Burton-Taylor International Consulting project the market for exchange technology services will grow to approximately $14 billion globally by 2025, representing a compound annual growth rate of 8.3% from current levels. This growth trajectory explains MEMX’s strategic focus on this segment.
For market participants, particularly mid-sized brokers and asset managers, the appeal of the market-as-a-service model lies in its potential to reduce both capital and operational expenditures while maintaining competitive capabilities. This value proposition becomes especially compelling amid persistent pressure on trading margins.
What’s perhaps most striking about MEMX’s expansion is how it highlights the evolving business model of exchanges themselves. Traditional venues derived revenue primarily from trading fees, gradually shifting toward data and connectivity charges as electronic trading compressed transaction costs. MEMX’s approach suggests a third revenue stream centered on modular technology services may become increasingly important.
The market-as-a-service model also addresses regulatory concerns about market data costs that have intensified since the SEC’s Market Data Infrastructure Rule in 2020. By providing alternative delivery mechanisms for essential market information, MEMX potentially creates competitive pressure that benefits the broader ecosystem.
“We’re essentially democratizing institutional-grade trading technology,” notes Kellner. “Firms that previously couldn’t afford to build or maintain sophisticated trading systems now have access to the same capabilities as the largest market participants.”
The statistics support this democratization narrative. According to MEMX’s internal analysis, firms implementing their technology have reduced latency by an average of 43% and decreased infrastructure costs by approximately 35% compared to legacy systems.
The road ahead isn’t without challenges, however. Questions remain about how MEMX will balance its roles as both exchange operator and technology provider, particularly around potential conflicts of interest and data management. The exchange maintains it has implemented strict information barriers between these business lines.
For the broader industry, MEMX’s expansion represents an important test case in the unbundling of market infrastructure. Success could accelerate similar offerings from other venues, while challenges could reinforce the traditional bundled approach that has dominated to date.
Having witnessed previous attempts to reshape market structure, I’m cautiously optimistic about MEMX’s strategy. The exchange has demonstrated discipline in its growth trajectory and appears to be responding to genuine market demand rather than pursuing technology diversification for its own sake.
As financial markets continue evolving toward greater electronification and data-centricity, the line between exchanges and technology providers increasingly blurs. MEMX’s market-as-a-service expansion represents not just a business pivot but a potential inflection point in how we conceptualize market infrastructure itself.
