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SEC Rules for SIFMA in Market Data Case
Traders Magazine Online News, October 17, 2018
The US Securities and Exchange Commission has set aside NYSE’s and Nasdaq’s depth-of-book fees as of October 16.
The fees falling under the judgment are those fee that Nasdaq and NYSE Arca put in place on September 15, 2010, and November 9, 2010, respectively.
The Commission’s decision rests on the exchange operators failure to meet their burden to demonstrate that the fees “are fair and reasonable and not unreasonably discriminatory,” wrote the authors of the decision. “We do not, by our findings here, conclude that the fees are not fair and reasonable. Rather, the factual record submitted and the theories based on the record part forward by the exchanges are insufficient to support a finding that the fees at issue meet the statutory test.”
The decision marks a change from the 2016 decision by Law Judge Brenda Murray, who rule that there was a competitive environment between Nasdaq and NYSE’s depth-of-book offerings and that SIFMA failure to prove that depth-of-book data is a “need” rather than a “want.”
“Today we also remanded hundreds of similar requests seeking to increase the price of information necessary to participate in America’s stock markets,” noted SEC Commissioner Robert Jackson in a prepared statement. “The exchanges will now have the opportunity to review those requests under the standards articulated in today’s landmark opinion—which requires exchanges to be prepared to show us that any price increases are justified by competition rather than the exchanges’ market power.”
“This pragmatic ruling by the SEC indicates increasing recognition by policymakers that the fee structure for proprietary market data products is broken," added Melissa MacGregor, managing director and associate general counsel at SIFMA, in a prepared statement. "As noted in the unanimous decision, ‘the exchanges fail to meet their burden to demonstrate that the fees are fair and reasonable and not unreasonably discriminatory’ as required under current law. Today's decision should prompt further examination of policy reforms to ensure the efficiency of public market data feeds and fairness of fees."
Nasdaq is disappointed by the SEC decision given the strength of its evidence, convincing record of facts, and its track record with the courts, a Nasdaq spokesperson told Markets Media. "This decision represents the latest in a 20-year long series of attempts to over-regulate the best capital markets in the world, in order to benefit the largest financial institutions. We intend to appeal this decision."
In a statement, IEX co-founder and CEO, Brad Katsuyama said:
“This is not a ruling by the SEC against exchanges, it is the SEC ruling in favor of fairness and competition. As an exchange, IEX supports this ruling and believes this is a huge win for the industry and investors who have long suffered the consequences of price gouging by NYSE and Nasdaq.”
IEX doesn’t sell prop market data, and gives away connectivity for free.
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