The Securities
Industry and Financial Markets Association (SIFMA) urged the Securities and
Exchange Commission (SEC) to implement
a moratorium on market data rule filings for U.S. exchanges until the SEC is
able to address 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,”
said 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,” added
Lackritz.
SIFMA 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 is advocating that prior to
approving any new exchange market data fees, the SEC should comprehensively
review the underlying cost data and competitiveness issues for all exchanges
that provide market data (including NYSE, Nasdaq, AMEX). As part of this review, 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.
The issue is
perhaps 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 redistributed this data back to the broker-dealer community and
investors free of charge as a stimulus to generate liquidity and trading
activity. NYSEArca recently filed a fee
proposal with the SEC to begin charging for this data, but failed to provide
any evidence that its proposed fees are fair or reasonable, as mandated by U.S.
securities laws and regulations.
The text of the filing
can be found on SIFMA’s Web site at the following address: http://www.sia.com/2007_comment_letters/16934.pdf
