The Securities Industry and Financial Markets Association (SIFMA) today urged the Securities and Exchange Commission (SEC) to implement a moratorium on market data rule filings for US exchanges until it addresses “the fundamental legal and policy issues created by for-profit exchanges.”
“The SEC cannot simply ignore the conflicts of interest inherent in today’s for-profit exchanges,” says Marc Lackritz, Co-CEO of SIFMA. “The exchanges’ unique regulatory status allows them to profit from their market data without the threat of competition, but this conflicts with their congressional mandate to promote transparency. This is a matter of investor protection. All investors and the professionals who serve them must have access to the same best quotes, based on the best information, to meet best execution obligations.”
SIFMA says it does not oppose market data fees per se, as exchanges should be able to recoup their costs and make a reasonable profit for providing this service. But, given the exchanges’ stranglehold on this data, SIFMA says that the SEC must review the underlying cost data and competitiveness issues for all exchanges that provide market data (including NYSE, Nasdaq, AMEX) before approving any new exchange market data fees.
As part of this review, says SIFMA, the SEC should conduct an economic and regulatory analysis to determine whether appropriate access to the product is available, and whether the proposed fee is fair and reasonable to firms, vendors and investors.
SIFMA says the issue is best illustrated by NYSEArca’s “ArcaBook” market data product, which consists of “depth of book” market data that broker-dealers are legally required to provide NYSEArca. Until now, NYSEArca has redistributed this data back to broker-dealers and investors free of charge as a stimulus to generate liquidity and trading activity. But NYSEArca recently filed a fee proposal with the SEC to begin charging for this data, but, adds SIFMA, failed to provide any evidence that its proposed fees are fair or reasonable, as mandated by US securities laws and regulations.