Will broker/dealers be paying more for market data from now-public securities exchanges? Who owns the market data that is created by market makers and broker/dealers trading for themselves and their customers? What is the value that’s added by the NYSEArca and Nasdaq taking data from brokers on trades–that must, by law, be reported to the exchanges–and spitting that out in the form of a consolidated feed that B/Ds buy to use in trading operations, and Web service providers–like Google, and Yahoo, for example–use to provide real-time quotes to the investing public?
At issue is the public utility function of an exchange versus the pressure of a publicly-owned company to drive profits for shareholders. How should newly public exchanges like NYSEArca and Nasdaq balance what some say are enormous and very fundamental conflicts of interest?
These are some of the questions prompting two very different industry groups–the Securities Industry and Financial Markets Association (SIFMA), representing B/Ds, and NetCoalition–representing Internet service providers, to file briefs petitioning the Securities and Exchange Commission to reexamine its approval of NYSEArca’s request to charge much higher fees for this data.
Last May, NYSEArca proposed to the SEC a rule change that would allow it to charge fees for market data that had been available for free, and the SEC’s Division of Market Regulation approved the rule change in October. NetCoalition then filed a petition asking the SEC to “review and set aside” its approval of NYSEArca’s request. SIFMA filed comments about the NYSEArca data fees proposal and had separately commented to SEC about other market data proposals by Nasdaq and Amex. The SEC granted NetCoalition’s petition for a review of the NYSEArca data fees approval, and ordered a new period for filing statements.
NetCoalition and SIFMA seem to be on the same page, though from two completely different perspectives. “The petition obviously struck a chord with [SIFMA's] membership,” says Markham Erickson, executive director and general counsel at NetCoalition. “Now that many of [SIFMA's] largest members are really no longer on the boards of the exchanges, they are looking at this area and saying, ‘You know, we don’t really want to give the exchanges a blank check to charge whatever fees they want either,’ because what more captive audience is there than the broker/dealer community for these feeds? They, by law, have to buy whatever best, most comprehensive information is available to them. My members and clients don’t have to do that, but they do, and if there’s not an adequate process to ensure that those fees are reasonable, then you’re really just giving the exchanges a blank check to charge whatever they can get away with.”