SIFMA OBJECTS TO SEC’S PROPOSED APPROVAL OF MARKET DATA FEES

Posted July 11, 2008

WASHINGTON, D.C. – The Securities Industry and Financial Markets Association (SIFMA) is opposing the Securities and Exchange Commission’s (SEC) Release No. 34-57917, a proposed order issued June 4 concerning market data fees which approves a 2006 filing by NYSE Arca Inc. for the right to charge fees to users of its market data.

SIFMA objects to the SEC order as “fatally flawed” in its competition analysis, saying the order assumes that competition for order flow among exchanges equates to competition in the sale of market data. Market professionals have to buy data from the major exchanges, NYSE and Nasdaq, even where each exchange’s share of liquidity is near 50 percent, SIFMA stresses.

“If they finalize this order, the SEC will be ignoring its congressional mandate to ensure these prices are fair and reasonable, which is unacceptable,” says Ira Hammerman, Senior Managing Director and General Counsel of SIFMA. “Both the NYSE and Nasdaq market data streams are necessary components for investment professionals’ businesses – like gas and water service are necessary utilities in one's home. Gas power cannot serve as a substitute for water service – each is unique and therefore retains its monopoly pricing power – exactly like the exchanges' market data products.”

A study prepared by the Securities Litigation & Consulting Group for SIFMA, based in part on quantitative analysis of economic data including measured market shares and concentrations, and public statements and financial disclosures by exchanges themselves, finds that NYSE and Nasdaq are “exercising monopoly pricing power by charging broker dealers and the investing public fees for depth-of-book data that are significantly higher than the relevant costs associated with distributing the data.”