An investor David is taking on one of Wall Street's Goliaths: the Depository Trust and Clearing Corporation, or DTCC.
Themis Trading LLC, of Chatham, N.J., released a white paper earlier this month that argues the DTCC is selling investor data that can leak information about their trading intentions.
"DTCC is using institutions' trading activity to help those who purchase the data feeds gain a competitive advantage," said Joseph Saluzzi, a co-founder of Themis and co-author of the paper, in an interview.
DTCC provides clearing and settlement to the financial markets and is designated a systemically important financial market utility by the U.S. government.
Themis Trading is an institutional agency brokerage firm founded in 2002, and Mr. Saluzzi said his paper was aimed at helping bring transparency to his clients.
"We do not make markets and we do not trade proprietarily. We do not own a dark pool. Our only business is providing best execution for our institutional clients," Mr. Saluzzi said. Themis clients include pension funds, mutual funds and hedge funds, he said.
"I spoke with one of our pension fund clients. And they are very concerned about this practice" of DTCC selling trading data, he said. "DTCC does a great job with clearing and settlement," Mr. Saluzzi said. "But what are they doing in the data business?"
DTCC's two data feed products under scrutiny, called Equity Kinetics and Investor Kinetics, were introduced in 2018 and 2020, respectively.
DTCC, for its part, issued a statement May 11 saying all data included in DTCC's Kinetics line of products "is anonymized and/or aggregated and shared on a delayed basis. DTCC has implemented rigorous product development controls to ensure our data products cannot be used to identify any party to a trade directly or indirectly through reverse engineering alone or in combination with generally available third party data sources."
