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Cost of proprietary market data to be big concern in 2018

The New York Stock Exchange

The new year will see increased concern by money managers and asset owners about the cost of purchasing proprietary market data from exchanges, panelists at a Security Traders Association of Chicago conference said late Wednesday.

"The buy side is going to be more alert to this than it has in the past," said panelist John Ramsay, chief market policy officer at IEX Group Inc., an exchange that does not sell market data. He and other panelists said the cost of market data, previously a concern of the sell side exclusively, is being passed on to buy-side participants.

Vlad Khandros, managing director, global head of market structure and liquidity strategy at UBS and the panel's moderator, said his firm's fastest growing data costs come from U.S. equity information sold by stock exchanges.

Joseph Mecane, head of execution services at Citadel Securities, said on the panel that there's a "structural problem" in that market participants have no choice but to buy the exchange data given the increasing complexity and fragmentation of the markets.

"The reality is that you can't measure best execution without depth of book," Mr. Mecane said. "You're sort of forced to get these proprietary feeds to get best execution."

However, panelist Michael Blaugrund, head of equities at the New York Stock Exchange, said market fragmentation is the real issue, and not that exchanges are attempting to increase revenue by raising the price for proprietary data.

"We see proprietary data costs moderating," Mr. Blaugrund said, adding that NYSE gets $90 million a year in revenue from its proprietary market data sales. "It's the fragmented markets that requires people to get more data to get best execution."

IEX's Mr. Ramsay said that the Securities and Exchange Commission needs to update its rules on market data sales, which he said was based on assumptions the agency made in 2000 that no longer apply.

"More SEC scrutiny will be needed on market data filings to see how current the fair and reasonable standards set by the SEC in 2000 still are," Mr. Ramsay said.