Jonathan Kellner Has Big Money Backing His U.S. Stock Trading Startup

When he was handed a debit card with $70 million in the bank, Jonathan Kellner realized his startup was different. ¶ Members Exchange, known as MEMX, started as a protest by banks and market makers against the rising data and connectivity fees charged by U.S. stock exchanges. In the two years since Kellner, 52, signed on as chief executive officer, MEMX Holdings LLC has locked in more than $135 million in funding from 18 stock trading and investing heavyweights, including BlackRock, Citadel Securities, and Morgan Stanley. ¶ Since it went fully live in October, MEMX has clinched 1% of the U.S. market share. Kellner, previously the CEO of Nomura Holdings Inc.’s Instinet, spoke with Bloomberg Markets in February about launching during a pandemic and the surge in meme stocks.

- LANANH NGUYEN

Why did you join?

When I started talking to MEMX about coming on board, my biggest concern was that it was all about [trying to reduce] market data fees and connectivity fees. And I asked, “If all of a sudden Nasdaq, the New York Stock Exchange, and Cboe changed their fees, are you done with MEMX?” [But it became] clear to me that it was much bigger. The investors were incredibly frustrated with the incumbent exchanges and felt it was really important to bring competition, technological innovation, and more efficiency to the exchange space and really to be a voice for them around the market structure debate.

Your 18 investors include many fierce rivals in the markets. How do you balance their competing interests?

Fortunately, one thing that seems to be consistent is that all of our investors ultimately want a level playing field. We focus on what is fair. And then they all go off and compete based on what is unique about what they bring to the table.

U.S. stock exchanges handle more than $360 billion in trading daily. What’s your edge?

One area where we are really differentiated is the fact that we do our whole exchange on one [server] rack. We are able to put a lot of computing, storage, and networking in a small amount of space. A much smaller footprint is much more cost-effective for us. Second, you have fewer hops across the exchange, so you have fewer points of failure and a more stable exchange. And you also have a much shorter distance from when the customer gets to our exchange to when they get to the matched order.