Nasdaq amends disputed fee proposal for key stock market data

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By John McCrank | NEW YORK

NEW YORK Nasdaq Inc no longer plans to
charge additional fees to access key data essential for stock
market operations following complaints of price gouging from
other exchanges, trading firms and an industry trade group,
according to a regulatory filing.

The data is related to systems called securities information
processors, or SIPs, which consolidate stock orders and last
sales prices from the 13 U.S. stock exchanges. Regulators use
the information to determine the best market prices, which
brokers must give their clients when executing trades.

In August, Nasdaq said it planned to separate its
proprietary trading data from third-party data – including the
SIP for Nasdaq-listed stocks – it offers its customers.

The third-party data would be housed on a new network that
could be accessed for additional fees, Nasdaq said in a filing
with the U.S. Securities and Exchange Commission. Increased
capacity of the new network connections would ensure the data
could be accessed during peak demand, making the system more
robust, it said.

Governance of the SIPs has been a contentious issue since
August 2013, when a software glitch following unusually high
message volume crippled the Nasdaq SIP, leading to a three-hour
halt in trading of Nasdaq-listed stocks, including Apple Inc and Facebook Inc.

After the outage, Nasdaq received industry support to
undertake measures to make the SIP more resilient, including
moving the system over to the same technology used to run its
exchanges.

But Nasdaq’s latest proposal drew opposition from exchange
operators Bats Global Markets and IEX Group,
trading firms Virtu Financial, KCG Holdings and
Citadel Securities, as well as the Securities Industry and
Financial Markets Association trade group.

In letter to the SEC, they argued the SIP is an industry
utility and fee increases must be approved by a committee that
includes representatives from all the exchanges. They also said
the increased capacity was not technically necessary and was
just an excuse for Nasdaq to hike fees.

Nasdaq said it “strenuously disagrees” with the arguments
against its plan, in a letter to the SEC dated Thursday.

But the exchange operator said it amended its proposal to
give each of its customers one connection to the SIP at no
additional cost.

It also said its customers could choose between a
lower-capacity connection and the higher-capacity connection to
the new network, though firms that choose the lower-capacity
option would have to take responsibility if problems arise as a
result.



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