Exchanges are trying a new tactic in their battle with the SEC over market data fees, arguing in court documents that some fees cannot be challenged and claiming that Brett Redfearn, director of the agency's trading and markets division, had improper influence over recent denials of fee increases.
The fight began in October, when SEC commissioners unanimously upheld a challenge from the Securities Industry and Financial Markets Association to fee increases for "depth-of-book" market data filed by Nasdaq and NYSE Arca. The SEC also remanded more than 400 market data fee and other filings for the exchanges to revisit under the standards cited in the order, which said that exchanges need to provide more factual and legal support to continue charging those fees.
The exchanges immediately appealed the SEC decision, and the case is now before the U.S. Court of Appeals for the District of Columbia, where oral arguments have not been scheduled.
Nasdaq and NYSE are asking the court to vacate the commission's order and dismiss the challenge by SIFMA, a Washington trade group representing securities firms, banks, and asset management companies. In their most recent brief, filed Monday, the exchanges argue that the SEC did not follow proper legal procedures for such fee challenges, and that SIFMA lacked standing.
In addition, the commission's review of what was originally a decision by an administrative law judge allowing the fees "was tainted by Brett Redfearn's involvement," the brief argued. Mr. Redfearn used to work for SIFMA member J.P. Morgan Chase & Co. The exchanges allege in the brief that he played a central role in SIFMA's legal strategy for challenging the fees, and that the SEC "adopted SIFMA's arguments in their entirety, a complete about-face from the position it had held for over a decade," the filing said.
"The decision-making process was tainted because he both assisted SIFMA in bringing the case and advised the SEC on how to decide it," said an exchange official who declined to be identified. The SEC declined to comment.
Exchanges are also questioning Mr. Redfearn's role in new guidelines issued May 21 requiring stock exchanges to provide significantly more detail before being allowed to raise fees for market data, connectivity or offering discounts to favored traders.