02.21.2017
By Rob Daly

Debating Market Data

The Investors Exchange launched the latest salvo in the fight between exchange operators and clients over market data access fees.

In a comment letter filed with the US Securities and Exchange Commission, IEX took exception to Nasdaq’s planned rollout of a new data offering, which would include the Consolidated Tape Association’s Tape A and Tape B, the Unlisted Trading Privilege Plan’s Tape C, and the Options Pricing Authority consolidated feeds.

The planned offering, called Third Party Connectivity Service, would require clients to subscribe to a new 1 Gbps or 10 Gbps Ultra connectivity in addition to their current connections.

If a customer selected a 1 Gbps connection, Nasdaq also would require the firm to sign a waiver acknowledging that the slower connection could affect the market data’s latency, according to Nasdaq’s filing. And if a client only consumes SIP data, the exchange operator will waive the costs of the first connection.

Nasdaq officials claim within its filing that “the ever-increasing demand for capacity has strained current connectivity options,” and that it will “require significantly greater capacity than current UTP SIP data feeds.”

The IEX, as well as market makers like Virtu Financial, find Nasdaq’s capacity argument specious.

“We reviewed peak utilization of Virtu’s 10 Gb Ultra connection through which we receive all of Nasdaq’s proprietary and UTP SIP data and concluded that there was enough capacity left over to accommodate any additional requirements arising from the migration of the UTP SIP to INET technology,” wrote Douglas Cifu, CEO of Virtu Financial in a comment letter to the SEC. “We believe that a more comprehensive review of capacity requirements and connectivity options is necessary before a conclusion can be drawn that the only option is a separate 10 Gb Ultra connection.”

However, the Third Party Connectivity Service also would include every non-proprietary data feeds that Nasdaq provides, including multiple feeds from Finra, the New York Stock Exchange, Bats Global Markets, the Chicago Mercantile Exchange, and the Toronto Stock Exchange.

The IEX’s greatest concern regarding the plan is that Nasdaq did not seek approval from the leadership of the Security Information Processor for the UTP plan.

“There is a principle here that the committee should be able to make the judgments,” John Ramsay, chief market policy officer at IEX, told Markets Media. “And if this is approved, that means they can do away with that waiver or that they could increase the fees next week, next month, next year by making a filing that is immediately effective without going to the committee or consulting other members of the group because they never think that they are obligated to.”

Nasdaq declined to comment for this article.

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