Opposition Letters Sent to SEC
When the New York Stock Exchange (NYSE) and Nasdaq raised their data fees, again, several comment letters were written to the SEC asking for justification. Brad Katsuyama, CEO of IEX, the newest stock exchange, commented for a story by Business Insider, stating that "Exchanges don't create any unique content — market data is generated by their members and other market participants including real investors — so it's very hard to believe that exchanges can perpetually charge their members more every year to look at the members' own data."
For additional information on IEX, see our blog on How IEX Will Change Markets for Day Traders. Big trading firms are voicing their dissatisfaction on rising costs for direct data feeds, on the level of abusive practices with monopolistic power.
Exchanges Address Concerns of Critics
The NYSE defended their position on raising their fees for premium products to the SEC, stating that it was increasing fees of their own proprietary feed, which users are not obligated to purchase not increasing fees for market data. What they are not admitting is that while users may not be obligated to purchase the direct feed, they cannot perform their job functions if they do not.
Exchanges argue that alternatives do exist. Just because not every user will find the alternatives equally attractive, does not mean that they don’t exist. They point out that firms can terminate their colocation agreements for direct data feeds anytime, they are optional.
One recent court ruling regarding the quick rise in stock exchange data fees may have set a scary precedent as SEC Judge Brenda Murray rejected a petition to put off fee increases for data connections by Nasdaq and NYSE Arca, citing the force of competition as the reason behind the increase in fees.
Our View on Rising Data Fees
The SEC needs to realize that exchanges acting as data centers is counter-productive to trading! It hinders an honest trade of ownership and futures of corporations based on supply and demand. Exchanges that sell their end users’ data do not enhance this very crucial aspect of that relationship, nor does it promote liquidity for market investors.
Great Point Capital is headquartered in Chicago with a second location in Austin, TX serving the trading community since 2001. Our 100+ prop traders actively trade the firm’s capital, specializing in equities and equity options.