Kaz,
You liked that last article so much LOL that I thought I would post another from the same paper that I hate as much as you, the always on the wrong side of an issue New York Times:
March 28, 1999
Who Holds the Deed to Stock Data?
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The New York Times: Your Money
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By DIANA B. HENRIQUES
At 24 seconds after 12:16 p.m. last Thursday, 75,000 shares of Lucent Technologies sold on the New York Stock Exchange for $101 apiece.
Who owned that information? The exchange, the brokers involved or the buyer and seller? And whoever owns that factoid, how much should the rest of us pay for it?
With individual investors devouring more up-to-the-second market data each day, the answers to those questions are becoming important enough to have drawn the attention of Congress and market regulators.
A lot of money is at stake. The Big Board and the Nasdaq market both take in millions of dollars by selling market data; the money helps them compete against their increasingly numerous rivals, some of whom could soon claim some of that revenue by registering as exchanges with the Securities and Exchange Commission.
Major on-line brokers, meanwhile, want big cuts in what they pay for data. Such brokers pay the same flat fees for real-time quotations as full-service brokerages do. But they want to cut the extra fees they pay for quotes they provide to their on-line clients via computer. Full-service brokers provide such quotes free to clients by telephone.
The Big Board and other exchanges sell their combined market data to commercial information vendors like Reuters and Bloomberg through the Consolidated Tape Association, a cooperative controlled by the exchanges. The Nasdaq market sells its data separately to vendors. In both cases, the vendors sell and distribute the information to the public.
"In the old days, my dad called his broker at Paine Webber 19 times a day to check his stocks," said Kenneth Pasternak, president of Knight/Trimark Group, the largest Nasdaq market maker. "The exchanges did not charge Paine Webber 5 cents for every telephone call for Pasternak."
Individual investors clearly want more market data at lower cost. But the risk is that they could wind up with a marketplace in which market data are more fragmented -- or one in which the loss of data revenue impairs the maintenance of the technological and regulatory infrastructure.
The issue has become so heated that the board of the National Association of Securities Dealers last Thursday approved a one-year pilot program that will cut the fees that individuals pay for Nasdaq data.
Congress is already in the act. In the House, Rep. Howard Coble, R-N.C., has introduced a bill to provide anti-piracy protection to commercial data base owners. The bill's fine print would affirm the exchanges' ownership of their market data and allow them to sue in federal court to prevent misuse or misappropriation of data.
That bill is opposed by on-line brokers and several large Nasdaq market makers, some of which question whether the exchanges own their ticker information at all. They argue that the bill would create an "information monopoly."
Sen. John S. McCain, R-Ariz., has introduced a bill that would amend federal law to assure that there is no limitation on the public dissemination of stock ticker data. Such data are crucial to American investors, McCain said. "This kind of information is facts, and facts should not be proprietary," he added.
McCain, chairman of the commerce committee, faces some jurisdictional obstacles because bills affecting the stock market are the province of the Senate Banking Committee's securities subcommittee; he is seeking to act through his own panel. But the chairman of the securities subcommittee, Sen. Rod Grams, R-Minn., has also expressed concern about data fees.
Meanwhile, the SEC and the Securities Industry Association, a trade group, are both studying how much brokers and their customers pay for real-time market data.
Both the tape association and Nasdaq require commercial vendors to apply different fee structures for market professionals, like brokerage houses, and for nonprofessional investors. Until 1997, professionals paid a flat monthly fee regardless of usage, and nonprofessionals were charged either a flat monthly fee or a half-cent for each stock quote, whether current or several hours old.
Late that year, the monthly professional fees were raised, the nonprofessional fee for delayed quotes was eliminated and the nonprofessional fee for each real-time quote was doubled, to a penny. In Thursday's action, Nasdaq moved to roll back its increase in per-quote fees, pending approval by the SEC.
On-line investors have little interest in delayed quotes, and demand for real-time quotes has exploded. Because most on-line brokers absorb the cost of their customers' real-time quotes, the fee increase has raised sharply the on-line brokers' costs.
Industry lobbyists say they are determined to put a rollback of Big Board and Amex ticker fees high on the regulatory agenda -- with help from Congress, or without.
DrRisk |
