James Angel of Georgetown University’s Department of Finance writes: “High quality data are essential for markets to function efficiently. This study describes the production and dissemination of U.S. stock market data and explores how much individual investors are paying for the data. The joint nature of the production of information along with trading, surveillance, and listing services makes it difficult to allocate the fixed costs to customer classes. Data from the competing exchanges are consolidated and distributed through entities known as Securities Information Processor (SIPs). The costs of providing this data fall mainly on the professional investors who value it the most. Professional traders pick up over 80% of the cost of the SIP data. The SIPs intentionally provide real-time data at very low cost to nonprofessional investors and delayed data for free. The inflation-adjusted price of real-time Tape C nonprofessional data has fallen 96.3% since 1987. Since 2008, inflation-adjusted SIP revenues allocated to the exchanges have fallen 23.7%. These cost reductions are one of the many contributors to the massive reduction in trading costs that has occurred in recent years. Not only has the price fallen, but the latency, the amount of time the SIPs take to process and report trades and quotes, has fallen as well. Latency has fallen 99.7% since 2010. The cost for nonprofessional data is quite low. For a very large broker, the cost of real-time nonprofessional data is about $0.17 per customer per month, about the same as a sip of Starbucks.”
Exchanges Say Some Equities-Data Revenue Declined Over 10 Years
A committee of U.S. exchanges including NYSE Group Inc. and Nasdaq Inc. said the revenue earned from data feeds has decreased since 2007, even as traders and banks complain that they are paying too much for vital market information.
Data revenue from NYSE-listed stocks and other venues fell to below $175 million a year in 2017 from a 10-year peak of more than $200 million, according to a statement Thursday. For Nasdaq-listed stocks and others, revenue remained flat at around $120 million a year.
Nasdaq Pours Cold Water on the Arguments Fueling a Civil War on Wall Street
Traders have long griped about the cost of accessing exchanges’ proprietary data, but they’re overlooking key facts, according to Ed Knight, Nasdaq’s general counsel.
In this op-ed, Knight says exchange innovation has actually democratized data and costs have only increased for traders because they have more options and products to use.
Measuring the Impact of Changing the Tick Size on the Liquidity and Trading of Smaller Public Companies
The Securities and Exchange Commission in 2015 issued an order approving a plan to implement a Tick Size Pilot by the exchanges and FINRA. The Order approved the Pilot for a two-year period beginning October 2016, and it introduced a new quoting and trading rules for smaller public companies that were included in one of three Test Groups created by the Pilot. The Equity Markets Association believes the Pilot is a first step toward assessing whether liquidity in smaller companies can be enhanced.
Importance of Market Data to Investors and Regulators
The market data used by professional and nonprofessional investors – as well as by federal regulators – is a critical component to the transparency of U.S. equity markets, according to a new report by the Equity Markets Association (EMA), an industry association representing the interests of U.S. exchanges.
In a whitepaper issued for federal policymakers, the EMA report provides an overview of market data’s role in the U.S. capital markets, including identifying different types of market data, the role of consolidated Security Information Processor (SIP) market data, and the responsibility for and governance of SIPs.