Group Co.
Leave Ordinary Investors Out of the High-Speed Data Battle
Traders Magazine Online News, November 5, 2018
This article first appeared in The Hill
Wall Street firms and stock exchanges have been feuding for over a century over the price and quote data that fuel the markets: Who owns it, how much should it cost and what is the role of government in regulating it?
This battle has recently heated up as the Securities and Exchange Commission (SEC) has now engaged with the exchanges over the issue. The full commission recently overturned a ruling of one of its own judges that found in favor of the exchanges.
One of the SEC’s commissioners has publicly championed the side of institutional investors and high-frequency traders while claiming that the real victims in the market data debate are “ordinary investors.”
There is a false narrative in this debate: that stock exchange market data fees somehow harm individual investors. The opposite is true. The exchanges have passed on the savings from modern technology to the individual investor.
The inflation-adjusted price charged by the exchanges for nonprofessional consolidated real-time data has dropped 96.3 percent since 1987. Delayed data are given away for free.
The charges for exchange data are designed so that the professional traders who benefit from the data the most, pay the most. The professional players pay over 80 percent of the cost of the consolidated stock market data. And the revenues to the exchanges from this consolidated data have fallen 23.7 percent in inflation-adjusted terms since 2008.
The stakes are high for putting to rest the false myth that individual investors are being harmed. This is a policy debate between large sophisticated players over the “new oil” of advanced market data products and technologies. Retail investors don’t really pay for this data and to suggest they do is misleading.
The monthly cost to an individual investor of accessing the real-time data feed that is the backbone of our stock market — and which pumps out stock quotes and prices 5,000 times faster than the blink of an eye — is less than one sip of a Starbucks mocha.
Yes, brokerage firms are charged for real-time data that offers a consolidated view of the market across all exchanges, but the cost per customer per quote comes to less than a penny, and the monthly fee is capped at $3 per month for non-professionals. They pay a lot less if a customer pulls down less than 400 queries in a single month.
Indeed, the super-low cost to retail investors of souped-up data is just another in the list of benefits that make ours a golden age for individual investors. Trading costs are at historical lows. Mutual and exchange traded fund (ETF) management fees are approaching zero.
Anyone with an internet connection can invest with confidence at little or no cost. Indeed, zero-fee trading services like Robinhood couldn’t exist today if fees were rising for retail traders or were anywhere near their old levels.
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