The Securities Industry and Financial Markets Association (SIFMA) filed a comment letter calling the Securities and Exchange Commission (SEC) proposed order approving a proposal by NYSE Arca to establish fees for certain market data “fatally flawed” and unveiled a related study to support that contention. By law, financial firms are required to provide trading data to exchanges at no cost and then buy back the consolidated market data from the exchanges. The Exchange Act requires the SEC to review associated fees to ensure they are “fair” and “reasonable.”
In its letter, SIFMA contends the SEC’s proposed order is “fatally flawed: its competition analysis is faulty, internally inconsistent, and wholly inadequate.” The order’s entire analysis of market data fees assumes that competition for order flow among exchanges equates to competition in the sale of market data. Yet, market professionals must buy this data from both exchanges, even where each exchange’s share of liquidity approaches fifty percent.
In addition to SIFMA, Citigroup, the U.S. Chamber of Commerce, and NetCoalition have also filed comments on the order.
The proposed order is available on the SEC’s webiste.