Tired of paying both high fees to the major exchanges as well as the "payment for order flow" that was at the heart of a scandal over "free" brokerage app Robin Hood's business model late last year, a handful of major banks and two of the country's biggest HFT firms are launching an independent exchange that they say will offer better service to investors at a lower cost.

In exchange, firms like Virtu and Citadel, which handle roughly 40% of daily stock-trading volume, according to the Wall Street Journal, will gain unfettered access to their customers' order flow - offering a business model that's basically the inverse of independent exchange IEX's "no HFT" model.

The "Member's Exchange" - or "MeMex" as its founders are calling it - will be controlled by nine firms: Morgan Stanley, Fidelity Investments, Citadel Securities, BAML, UBS, Charles Schwab, E-Trade and TD Ameritrade. The name is evocative of the early partnership model whereby exchanges were cooperatively owned by their members - which changed in the 1990s as exchange operators started going public and converted to a "for profit" model.

The firm plans to apply to the SEC to become an exchange by the end of the year. Though, as the investing public learned with IEX, the process to win approval to handle trading as an official exchange can take 12 months or longer, meaning the exchange likely won't be up and running until 2020 or later. Still, it has already attracted $70 million in investment.

As WSJ pointed out, there's no guarantee that the exchange will succeed - though it would infuse more competition into the heavily concentrated exchange industry.

A launch would inject new competition into the heavily concentrated stock-exchange business. Today, all but one of the 13 active U.S. stock exchanges is owned by three corporations: NYSE parent Intercontinental Exchange Inc., known as ICE for short, Nasdaq and Cboe Global Markets Inc. Between them they handle more than three-fifths of U.S. equities trading volume. Despite its prominent backers, there is no guarantee that MEMX will succeed. New exchanges often struggle to attract trading activity away from established markets. IEX Group Inc., a startup that was founded in 2012 and now runs the only independent exchange not owned by the big three, handles 2.5% of U.S. equities trading volume. But brokers looking to save costs could be drawn to MEMX’s low fees. ICE, Nasdaq and Cboe have faced criticism for raising fees for services such as the data feeds that brokers use to monitor moves in stock prices. The three big exchange groups say their prices are fair.

But just as millennial stock traders have been enticed by Robin Hood's no-fee trading app (and even after learning that the firm makes money by selling their orders to HFT firms, many decided they simply didn't care), brokerage firms might be willing to ignore the fact that HFT firms could be front-running all of their orders if it means lower fees. After all, that's pretty much the status quo.

@ReformedBroker Is it paranoia to think that this new stock exchange is going to front-run every trade it handles since one of the founding members is an HFT firm? — Tom Scherschel (@TomScherschel) January 7, 2019

So why not cut out the middle man (NYSE, Nasdaq etc.) and just hand the order flow straight to Citadel and Virtu?