Two dozen of the largest investing and trading companies on Wall Street are pushing their chief regulator to review stock exchanges' market data businesses.
In a Dec. 6 letter, the companies, which include Virtu Financial Inc., E*TRADE Financial Corp. and Morgan Stanley & Co. LLC, asked the U.S. Securities and Exchange Commission to institute rule-making proceedings surrounding the exchanges' increasingly profitable, and highly criticized, market data businesses.
Exchange operators such as Intercontinental Exchange Inc., Nasdaq Inc. and Cboe Global Markets Inc. have all developed their respective market data businesses to become one of their most profitable ventures. But market participants have felt it is necessary to purchase the different exchanges' proprietary data feeds "to remain commercially competitive," the letter read.
"Today, for-profit exchanges enjoy an oligopoly over the dissemination and sale of market data," the letter read.
The 24 companies asked the SEC to consider requiring the exchanges to disclose fee-related information and introduce a public notice and comment process for SEC review related to market data fees. The companies also requested that the SEC review equity market data fee structures.
The letter was also signed by Bloomberg LP, Citadel Securities LLC, Citigroup Global Markets Inc., Clearpool Group, Inc., Hudson River Trading LLC, IEX Group, Inc., IMC, Interactive Brokers Group Inc., Investment Technology Group Inc., MFS Investment Management, RBC Capital Markets LLC, Charles Schwab Corp., Scottrade Inc., Sun Trading LLC, Susquehanna International Group Ltd., TD Ameritrade Holding Corp., Tower Research Capital LLC, T. Rowe Price Group Inc., UBS Securities LLC, Vanguard Group Inc. and Fidelity Investments.
Exchange executives have argued that concerns over market data are not relevant in today's space and say the business line accounts for a much smaller-than-believed portion of their revenues.
For ICE, equity market data products are expected to bring in about $90 million in annual revenue this year, executives said during the company's third-quarter call, compared with the company's total 2016 revenue of about $1.51 billion. Meanwhile, Nasdaq's information services business, which includes market data, has accounted for about a quarter of total net revenues.
"I feel like the controversy around this is a legacy issue that's been going on for a long time, and we're still debating the 'Flash Boys' mentality in a world where I don't believe that the same dynamics exist today," ICE Chairman and CEO Jeffrey Sprecher said on a Nov. 2 earnings call.
Spokespeople for the New York Stock Exchange and the SEC declined to comment. Spokespeople from Nasdaq and Cboe did not respond to requests for comment.