With Market Data Fees in Focus, Industry Grapples with Appropriate Fix
Picking up on the debate that began at the SEC’s two-day Market Data roundtable in October, industry participants at the Security Trading Association of Chicago’s (STAC) 93rd Annual Mid-Winter Meeting last week were divided on the scope of the problem with market data costs and the appropriate solution.
While the issue of exchange data fees were the simmering topic throughout the conference, particularly with the announcement earlier this month of plans by nine financial institutions to launch MEMX, the discussion reached a crescendo during Wednesday afternoon’s market data panel.
“If you’re a broker who wants to be taken seriously in the execution space, the SIP is simply not adequate,” said Dash Financial Technologies’ Chief Growth Officer Glenn Lesko, a participant on the panel. “That means you need to purchase the direct feeds from the exchanges, and the costs on those are considerable.”
Tom Wilson, Head of Sales and Business Development at HPR, a provider of ultra high-performance trading technology solutions, noted that data fees are top of mind across the industry.
“The issue of market data fees is one of the biggest topics of discussion today,” he said. “Clearly, there are concerns on the part of many, evidenced by the announcement of MEMX by nine of the biggest payers of exchange data fees. But what comes next is anyone’s guess. There really doesn’t seem to be any sort of consensus forming on a path forward.”
For Dash’s Lesko, the focus on data costs alone is a case of missing the larger point. He believes Regulation NMS’s Order Protection Rule, which requires brokers to ensure they are not trading at an inferior price to one that exists on another market, is the root of much market complexity, and that transparency is the solution.
“I’ve spent a significant portion of my career working in the equities industry overseas, and I can tell you without a doubt that our markets are the envy of the world,” he said. “But Reg NMS is over 10 years old now, and many of its provisions, while well intentioned, have resulted in considerable unintended consequences given how different our markets are today than when it was written. We believe there should be a holistic review of the regulation, and if any changes are made, have them be more about adding transparency through enhancements to things like Rule 606.”
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