[ N E W S
R E V I E W ]
“We applaud the Commission’s efforts to hold
exchanges accountable for justifying the fees
they charge for market data and connectivity
– services where exchanges have rightly been
criticised for exerting monopoly pricing power.”
JOHN RAMSAY, CHIEF MARKET POLICY OFFICER AT IEX GROUP
T
he Securities and Exchange
Commission (SEC) has
enforced its position on the
contentious issue of market data
fees that has caused an ongoing
stand-off between exchange groups
and the regulatory watchdog.
The US securities regulator
filed guidelines on 21 May on how
exchange operators justify the fees
they charge for access to market
information, starting that “fees (in-
cluding rebates) are reasonable, that
they are equitably allocated, that
they are not unfairly discriminatory,
and that they do not unduly burden
competition.”
The move marks the first time the
regulatory body has clearly speci-
fied what it expects from exchanges
that have drawn ire for perceived
mark-ups over the fees charged for
access to market data, a service that
has become an integral part of their
offering to market participants, as
part of the overall evolution of the
exchange group’s value proposition.
NYSE recorded revenues of $546
million during Q1 2019 from market
data – just under half of its total rev-
enues for the period – while Nasdaq
recorded $156 million from market
data in the first quarter.
In October last year, in a land-
mark move, the SEC overturned
its decision supporting an increase
in market data fees at the New
York Stock Exchange (NYSE) and
Nasdaq, which had been in place
since 2010. The regulator deemed
that NYSE and Nasdaq had failed
to meet their obligation to demon-
strate that the challenged fees were
fair and reasonable.
Industry discontent over access to
market data and the fees connected
with it have been bubbling for years,
and shortly after the SEC’s October
U-turn, the regulator hosted a
roundtable discussion where Wall
Street duked it out over exchange
market data and access fees.
Participants from Virtu Finan-
cial, Cboe Global Markets, T. Rowe
Price and Investors Exchange
(IEX) argued their corners on the
issue, focusing on SIPs (Securities
Information Processor feeds) and
direct data feeds, which invest-
ment banks, broker-dealers and
trading firms maintain are grossly
overpriced considering how little
they allegedly cost to produce and
how important they are in terms of
regulatory compliance. Exchange
representatives meanwhile stated
that it is not market data and access
fees that are increasing, but client
demand for capacity, speed and
content, and that transparency into
costs cuts both ways for all industry
participants.
IEX Group, which released a
report at the start of 2019 publicly
disclosing its costs of producing
market data and connectivity with
the objective of providing depth of
book market data, physical connec-
tivity and logical connectivity, wel-
comed the SEC filing.
“We applaud the Commission’s ef-
forts to hold exchanges accountable
for justifying the fees they charge
for market data and connectivity
– services where exchanges have
rightly been criticised for exerting
monopoly pricing power,” said
John Ramsay, chief market policy
officer at IEX Group. “Today marks
a major milestone in bringing more
transparency in service of investors
and their agents.”
However, incumbent exchanges
were not as pleased with the SEC’s
guidance and a spokesperson for
Cboe Global Markets told The
TRADE: “Cboe is reviewing the
guidance issued by SEC staff. If the
staff’s guidance is consistent with
Exchange Act requirements, then
Cboe does not anticipate any chang-
es to its operations.
“We are concerned, however, that
elements of the guidance may go
beyond the requirements of the
Exchange Act and add unnecessary
complexity to exchange fee filings,
thereby impeding competition to
the detriment of investors.”
Issue 60 // TheTradeNews.com // 23