Nasdaq OMX is challenging the Securities and Exchange Commission over its decision to disapprove a Nasdaq proposal for a novel pricing strategy aimed at retail brokerages.
The exchange operator has engaged Eugene Scalia, a partner at attorneys Gibson, Dunn & Crutcher, and the son of Supreme Court Justice Antonin Scalia, to represent it in its quest to win the right to package two products under one pricing scheme.
In September, the SEC barred Nasdaq from tying the pricing of its execution services to that of its market data feeds, following complaints by the Securities Industry & Financial Markets Association and the NetCoalition. The SEC decided Nasdaq was abusing its "monopoly" position in market data.
This month, Scalia sent a "Petition for Review" to the SEC, seeking to force the regulator to reconsider its position. Nasdaq, through its attorney, argued the SEC did not provide any evidence supporting its position, and ignored evidence of competition in the two markets.
Specifically, Nasdaq wants to offer fee cuts for retail brokerages. If ultimately approved, those retail shops that trade heavily on Nasdaq’s books and subscribe to its depth-of-book data feeds would get price breaks on both services
With the proposal, Nasdaq is looking to grab market share from brokers that internalize their order flow. In its petition, Nasdaq told the SEC it was attempting to "compete more effectively against new exchange competitors and alternative trading systems, including dark pools, which have lower regulatory costs and often attract order flow by providing market data free of charge."
Nasdaq’s plans were thwarted by a joint letter to the SEC from SIFMA and NetCoalition, a proponent of freer access to market data that includes Bloomberg, Google and Yahoo! In their letter, they claimed that Nasdaq exercised a monopoly over its market data products and should price them at marginal cost.
