NEW YORK (Reuters) - Stock exchange operator IEX Group on Tuesday challenged rival bourses to better justify the fees they charge brokers for market data, especially compared to the “dramatic, and at times egregious” difference to what it actually costs to produce.
The price of market data, which is essential information for trading and meeting the best execution obligations of brokers, has been a contentious issue for more than a decade and has recently come under greater regulatory scrutiny.
IEX, which operates the Investors Exchange, released a paper on Tuesday detailing its own costs to provide proprietary market data and exchange connectivity to its clients. It compared them to an extensive list of fees charged by Nasdaq Inc, Cboe Global Markets and New York Stock Exchange owner Intercontinental Exchange Inc.
IEX, which has a market share of a little over 2.5 percent and does not charge for market data, said other exchanges charge 2,000 percent to 4,200 percent more for physical connectivity to their data centers than it costs IEX to offer comparable services.
It said that for “depth of book” data products, which show bids and offers beyond the best prices, indicating supply and demand, other exchanges charged between 900 percent and 1,800 percent more than what it costs IEX to offer comparable products.
The “markups charged by the three entrenched exchange operators are only possible in markets where exchanges have de facto monopoly control over products that many participants require to conduct their business,” Brad Katsuyama, IEX’s chief executive officer, said in a statement.
A Cboe spokeswoman declined comment. Spokespeople for NYSE and Nasdaq pointed to higher transaction fees on IEX.
“While IEX is free to cherry pick and conflate their numbers, the fact remains that the all-in cost to trade on NYSE is lower than IEX,” NYSE spokeswoman Kristen Kaus said.
The U.S. Securities and Exchange Commission has called for more transparency around market data costs specifically. The regulator held a heated industry roundtable on the topic in October.
Some market participants argued that while overall trading costs have declined in recent years, market data and exchange access fees have exploded.
“Market data costs are excessively high, they’ve been growing at an abnormal rate relative to other technology, and it is clearly the exchanges leveraging what they have as almost monopoly power to be able to do that,” Joe Wald, CEO of broker-dealer Clearpool, who participated in the SEC roundtable, said in an interview.
Reporting by John McCrank; Editing by Leslie Adler