Higher data fees prompt backlash against US equity exchanges

US equity exchanges increasingly depend on charging for data in a world of rapid-fire automated trading and that has sparked plenty of friction with the broader market. In the latest salvo, Healthy Markets Association, an investor trade group whose dozen or so members include Calpers and OppenheimerFunds, this week released a report on market data that describes a system rife with conflicts and calls for a broad overhaul led by chief US regulator the Securities and Exchange Commission.

Echoing a recent report from the US Treasury, Healthy Markets makes the argument that market participants are under increasing pressure to buy premium data both to stay competitive and comply with rules requiring them to execute trades at the best price available in the market at any given moment.

In its 80-page report, Healthy Markets says “exchanges have exploited an overwhelmed regulatory approval process to push through numerous significant changes and fee hikes in both the public and private data feeds that impact nearly all market participants, sometimes raising fees hundreds of per cent over just a few years”.

It found that a market participant who wanted the fastest connections with the most relevant trading information for CBOE, New York Stock Exchange and Nasdaq has seen its costs rise from $72,150 per month on June 1 2012 to $182,775 per month on June 1 2017.

“This has evolved from a problem that was really constricted to vendors and brokers to now impact every investor and other market participant,” says Tyler Gellasch, executive director at Healthy Markets. “Investors pay for these fees directly and they also have them passed through from their brokers and other service providers. Add it all together, and they get to be very significant.”

NYSE, Nasdaq and CBOE declined to comment on Healthy Markets findings or for this article.


Among Healthy Markets’ recommendations are a review of fee changes for “fairness, reasonableness and potential discriminatory impacts and undue burdens on market participants” as well as allowing investment advisers and broker-dealers greater say in market governance.

Read more in the Financial Times here.

Conflicts of Interest Rarely Kept SEC Chairmen From Voting

On enforcement matters, SEC staff “try to negotiate their way through things to keep it all moving” and avoid complications, said Tyler Gellasch, a former Stein counsel and executive director of the Healthy Markets Association trade group.

“Commissioners typically aren’t eager to hold up a case just because they may deadlock on something political that is outside of the case,” he told Bloomberg Law.

Read more in Bloomberg Big Law.

MiFID II: The Big Picture

The UK’s Financial Conduct Authority drew up MiFID II with two primary concerns: that individual investors were overpaying — albeit indirectly — for research, and that investment advisors were not providing sufficiently robust trade-execution protections. That’s according to Tyler Gellasch, executive director of industry trade group Healthy Markets Association.

U.S. trading and investing firms that don’t transact in European markets aren’t specifically covered by MiFID II need not worry about complying with the regulation on January 3, but over time those that aren’t aligned with its broad intent risk falling behind the curve. “I suspect that those firms are going to catch up and will adopt many of the same best practices as the global firms,” Gellasch said.

Continue reading in MarketsMedia here.

Wall Street Resigned to a CAT Delay

“It’s not surprising to see so many folks using the SEC’s mishandling of its own data breach to call for yet another delay,” added Tyler Gellasch, executive director of Healthy Markets Association. “It is probably not lost on the SEC that most of those same voices have been fighting the CAT for years on every front.”


The EDGAR breach is a bit of a red herring regarding the CAT since the platforms use different technology, noted Gellasch.

“I suspect the SEC and market participants will take comfort in the fact that the technology firm working on the CAT has been working on the SEC’s MIDAS for years without any known incidents,” he said.


It is hard to argue against taking a few months to make sure the CAT is up to snuff from a cyber-security perspective, given the amount of time and effort that has already gone into the project, according to Gellasch.

“After seven years of planning and fighting, the SEC might finally get a surveillance tool that is about half as valuable what most Americans would suspect the SEC would have had for decades,” he said. “The data breach is not the biggest threat to the CAT’s successful implementation, the enormous holes in its design, including the failure to include futures market information and legal entity identifiers, are much greater concerns.”

Continue reading on MarketsMedia here.

U.S. Shields Wall Street From MiFID Threat to Research Model

The SEC “went out of its way to make things worse for U.S. retirees and education savers, in an effort to help a few Wall Street banks,” said Tyler Gellasch, who runs the Healthy Markets Association, whose members include the California Public Employees’ Retirement System and Janus Henderson Group Plc. The reprieve “has empowered some banks to force bundling of commissions -- even though that means higher costs and less transparency for investors.”

To continue reading this Bloomberg article, click here.

Stock Exchanges Question SEC’s Plan to Revamp Trading

Tyler Gellasch, a former SEC lawyer who now leads an industry trade group, said he didn’t think the letter would dissuade the commission from launching the experiment.

“It’s aggressive, but they are basically trying to buy time,” said Mr. Gellasch, who leads the Healthy Markets Association. “An extended maker-taker pilot program could threaten their competitiveness when there is already a significant amount of off-exchange volume.”

Continue reading in the Wall Street Journal here.

New Skirmish in an Old Battle: Wall Street vs. the Customer

“Separately shopping for research and trading will significantly reduce investors’ costs,” said Tyler Gellasch, executive director of the Healthy Markets Association, a nonprofit organization focused on improving the integrity of the nation’s financial markets. “That directly translates to higher returns and more money for retirees and college savings funds.”

For the rest of The New York Times article, click here.

Banks Lobbying to Stem MiFID II Spread Sparks US Client Revolt

“It’s understandable that some very large firms that provide research and trading would want to preserve a cash cow,” said Tyler Gellasch, who runs the Healthy Markets Association, whose members include the California Public Employees’ Retirement System and Janus Henderson Group Plc. “What I don’t necessarily understand is how anyone could think that it’s good policy to do that.”

Please click here to continue reading in Bloomberg News.

Dalia Blass could tackle fiduciary standard as first order of business at SEC

Ms. Blass has the chops to navigate a controversial rulemaking like fiduciary duty, according to Tyler Gellasch, executive director of the Healthy Markets Association and a former counsel to SEC Commissioner Kara Stein.

"Directing the staff is only part of the job; it's also about working with the commissioners to find consensus," Mr. Gellasch said.


"That could fundamentally change how retail investors invest in the markets," said Mr. Gellasch. "You could have a real significant change in how we think actively managed funds should look. It will be interesting to see how she addresses the risks that come with a lack of transparency in funds that are traded in real time."

Continue reading in InvestmentNews.

Treasury Preps Market Review

“Just by the number of meetings they have been having and the discussions, there are signs that this is not a knee-jerk, ideological report but a much more thoughtful and carefully measured study and recommendations,” he said. “They were very careful not to tip their hand as to one side of things or the other. I was very encouraged by the types of questions that they brought to the discussion. They are looking at the key issues for market participants.”

Although the Treasury has not announced when it will publish its capital markets review, Gellasch senses that the regulator is close to shifting into a new phase. “They made it clear that they are wrapping up some of the outreach,” he said.

Continue reading on Markets Media here.

Wall Street Wins Round in Fight With Exchanges Over Audit System

“It’s not surprising that the funding structure is under scrutiny,” said Tyler Gellasch, a former SEC official who’s now at the Healthy Markets Association, a market-structure advisory group with members including OppenheimerFunds and Janus Capital Group. “It is surprising that it’s taken this long for the SEC to show any inclination that it appreciates the conflicts of interest posed by having one set of for-profit entities setting the costs for other market participants, including some of their competitors.”

College Kids Pitched on a Secret Stock Exchange to Help Pay Off Student Debt

“Its structure is very unusual in retail trading,” said Tyler Gellasch, executive director of the Healthy Markets Association and a former SEC counsel. “I would expect regulators might have a lot of questions about how the firm manages its conflicts of interest.”

Empty seats at regulators hold back Trump bid to undo Dodd-Frank

“Many are waking up now to the reality that two Democratic commissioners at two little regulators may stand in the way,” said Tyler Gellasch, a former aide to Stein who’s now executive director of the Healthy Markets Association, whose members include mutual funds and other large investors. “They don’t get to write the rule, but they can stop it.”

Amazon Gets New Foothold in Stock Market Tracking, After a Miss

Amazon.com Inc., which last month missed out on helping build a database to track more than 50 billion U.S. stock orders a day, just got a consolation prize: a smaller version of the project for academics.

The Healthy Markets Association is developing a tool to examine stock trading with Amazon Web Services, the Seattle-based company’s cloud platform, and trading-analytics company MayStreet, according to a statement Monday from the investor advocacy group.

Continue reading on Bloomberg

Order Routing Under the Microscope

The Healthy Markets Association, an industry organization focused on market transparency and integrity, has released an order-routing due-diligence checklist.

The 200-item questionnaire, which is available to members and non-members, spans issues that include general firm information, technology, order-routing strategies, venue monitoring, conflict and leakage, third-party relationships, as well as treatment of non-directed orders.

Continue reading on Markets Media

IEX: US equity market upstart has to prove slow is best

“IEX has the potential to greatly improve equity trading, but the proof will be in the prints,” says Tyler Gellasch, executive director of Healthy Markets, a non-profit group focused on market structure reform.

“If IEX protects investors and reduces investors’ trading costs, then investors and brokers may flock to it, and other venues may recognise that they don’t necessarily have to indiscriminately chase all HFT to remain profitable,” says Mr Gellasch.

‘’If IEX doesn’t deliver, then investors and brokers will quickly look elsewhere. That would leave us pretty close to exactly where we are today,” says Mr Gellasch.

Continue reading on Financial Times

SEC decision on new stock exchange imminent

IEX’s solution, Macey said, is to put a kind of speed bump along the motorcyclists' or the high-speed traders’ paths so they can’t make such a maneuver. 

“So they're not going to be at a distinct advantage they might be on many of the other current exchanges and other venues,” said Tyler Gellasch, executive director of Healthy Markets Association, a group of institutional investors. 

IEX is already operating as a private trading venue. It's not clear how much influence it would have as a public stock exchange. But Gellasch said brokers would be forced to route trades through IEX in its public form — if it offers the best prices.

Listen to the full story on NPR's Marketplace here.