For vendors in the market data connectivity business, the Securities and Exchange Commission’s initiative to modernize the public feeds of US equities data is an enticing business proposition. The regulator has finalized a rule that is part of its efforts to, as it says, modernize market structure. The “infrastructure rule” creates a system in which—instead of two securities information processors (Sips) pumping out bid/ask quotes, consolidated from US trading venues to consumers—a decentralized system of providers called competing consolidators (CCs) will gather and disseminate the data.
As I reported back in March, a handful of companies that have various specialties in market data dissemination and connectivity—including McKay Brothers, the Miami Exchange (Miax), Exegy, MayStreet, and NovaSparks—were quick to say they were interested in becoming one of those CCs. For that article, I spoke to companies that had started thinking about how they would differentiate themselves in what they would offer the market—the SEC’s stated goal of paving the way for 12-odd Sips to emerge is to widen choice and competition, after all.
But while they could look at the revenue side, the costs were—and remain—unknown. The governance side of these infrastructure changes is yet unresolved, and these businesses don’t know how much the exchanges are going to charge them to consume the data they will be consolidating.
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