The SEC ruled that the exchanges failed to justify fee increases for market
data, and set aside 400 contested fee increases.
The Commission also remanded over 400 other fee challenges for consideration by the exchanges before resubmitting the their fee increase requests.
The Commission also remanded over 400 other fee challenges for consideration by the exchanges before resubmitting the their fee increase requests.
Among other things: the ruling will likely make it harder for the exchanges to raise
fees for their data and related charges for connectivity to their systems.
Exchanges have been battling trading firms over market-data fees in lawsuits dating back to 2009 and Tuesday’s decision is unlikely to end the wrangling. (Bloomberg)
My take: increased scrutiny of exchange fees is a welcome development. It's unsurprising that the appointment of former J.P. Morgan executive Brett Redfearn caused concern from the exchanges; Mr. Redfearn knows well the pricing power exchanges have and their ability to extract monopoly rents from market participants. Adding a little transparency to a traditionally overlooked and opaque corner of the industry can only be a good thing. And when you're a monopoly provider, you ought to justify the fees you're charging. It's not like customers can get your product from another provider.
My take: increased scrutiny of exchange fees is a welcome development. It's unsurprising that the appointment of former J.P. Morgan executive Brett Redfearn caused concern from the exchanges; Mr. Redfearn knows well the pricing power exchanges have and their ability to extract monopoly rents from market participants. Adding a little transparency to a traditionally overlooked and opaque corner of the industry can only be a good thing. And when you're a monopoly provider, you ought to justify the fees you're charging. It's not like customers can get your product from another provider.
As Max Bowie at Waters put it (subscription required):
"Both sides know market data is essential, but differ on its inherent worth. The SEC’s new processes will force exchanges to justify that worth—which, by the way, doesn’t automatically assume that current prices are inflated or that we’ll see lower prices; it just means that the price will have to be carefully justified, using the costs and investments behind it."
Hard to find any fault in that.
At the end of the day, it seems likely that the exchanges, as they diversify their revenue streams into analytics, AI and indexes, will end up offering basic exchange data for free. But in the meantime, we should expect them to fight tooth and nail to get full value for their listings data. This battle is just beginning.
Press Round-up:
SEC rules NYSE and Nasdaq did not justify data fee increases (FT)
SEC sends Nasdaq, NYSE fees back for more justification (P&I)
Wall Street Fractures Over Stock Exchanges’ Data Sales (WSJ)
The Exchange Data Fee Debate: Trick or Treat? (Waters)
- Kevan Huston
"Both sides know market data is essential, but differ on its inherent worth. The SEC’s new processes will force exchanges to justify that worth—which, by the way, doesn’t automatically assume that current prices are inflated or that we’ll see lower prices; it just means that the price will have to be carefully justified, using the costs and investments behind it."
Hard to find any fault in that.
At the end of the day, it seems likely that the exchanges, as they diversify their revenue streams into analytics, AI and indexes, will end up offering basic exchange data for free. But in the meantime, we should expect them to fight tooth and nail to get full value for their listings data. This battle is just beginning.
Press Round-up:
SEC rules NYSE and Nasdaq did not justify data fee increases (FT)
SEC sends Nasdaq, NYSE fees back for more justification (P&I)
Wall Street Fractures Over Stock Exchanges’ Data Sales (WSJ)
The Exchange Data Fee Debate: Trick or Treat? (Waters)
- Kevan Huston
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