Market data feed case heats up

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Market data has been a huge issue on Wall Street in recent years, as the traditional consolidated tape has been usurped by expensive private data fees that offer more timely price data.

In the view of some technology companies and brokers, data feeds as a profit center doesn't sit well. Some of these tech firms once got basic market data for free. These days, it will cost you, though not as much as the fancy private feeds that hedge funds traders rely on. The NetCoalition technology trade group, which includes the likes of Google, Bloomberg, Yahoo and others (and is winding down), recently took the SEC to court for "not objecting to new market data fees filed with the agency by units of NYSE Euronext and Nasdaq OMX," according to Reuters.

Dodd-Frank gave the exchanges the ability to expedite passage of market data fee changes. The tech group, which suspects that the NYSE and Nasdaq actually make money on the sale of data, would like a breakdown of expenses. All of this has ended up in court, with arguments already commencing already.

The big issue seems to be the extent to which market data are subject to competitive forces. The plaintiffs say they are not, while the exchanges maintain they are. These issues were hashed out in a previous case. A court ruled in August 2010 that a market-based approach to evaluating whether market data fees are "fair and reasonable" was permissible. But "the court said the SEC had not proven that competition actually constrained market data prices and it took issue with the agency's assertion that fees proposed by NYSE Arca were not that of a monopolist."

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