Petition for Transparency of Funding of Consolidated Market Data
Summary
SIFMA, Investment Company Institute (ICI), Managed Funds Association (MFA) and Council of Institutional Investors (CII) along with several other market participants submit a rulemaking petition to the Securities and Exchange Commission (SEC) for transparency of funding of consolidated market data.
Excerpt
Ms. Vanessa Countryman
Secretary
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-1090
Re: Petition for Transparency of Funding of Consolidated Market Data
Dear Ms. Countryman:
The Securities Industry and Financial Markets Association (“SIFMA”), Investment Company Institute (“ICI”), Managed Funds Association (“MFA”) and Council of Institutional Investors (“CII”) and the undersigned capital market participants (collectively, the “Petitioners”)1 are writing to petition the Securities and Exchange Commission (the “SEC” or “Commission”) to require that the self-regulatory organizations (“Plan Participants”) that manage the three joint-industry plans (the “Plans”) under which the securities information processors (“SIPs”) collect and disseminate consolidated equity market data publicly disclose basic information about the funds collected from users under the Plans and how those funds are used. In brief, we are requesting that the Commission amend the Plans to require quarterly disclosure, at a minimum, of (i) the amounts of fee revenue, by category, received by the Plans, and revenues received as a result of audits; (ii) the amounts that are paid out to the Plan Participants, processors, administrators, and others; and (iii) amounts that are paid to operate and enhance the SIPs. We believe these disclosures are necessary for stakeholders to be able to evaluate the appropriateness of SIP fees in general and how the Plan Participants are managing the SIPs, which are intended to operate as public utilities for the benefit of those stakeholders.
Background
In December 2017, a broad cross-section of 24 equity market participants, including many of the undersigned firms, petitioned the SEC to actively address widespread concerns over the high costs of market data and connectivity fees charged by exchanges and under the SIP plans.2 That petition asked the Commission to take action, among other things, to require more transparency of all market data revenues and related costs and to require that SIP fee filings be subject to notice and comment before they may become effective. The Petitioners endorse and support all the recommendations contained in that letter.
Since that time, the Commission has taken various actions to require that the exchanges and the SIPs provide a high and appropriate level of transparency when they seek to justify new fees and fee increases, and to reject fee filings that fail to provide a clear basis to support a decision that they meet the standards established by the Securities Exchange Act of 1934 (the “Act”). The staff has also provided additional guidance concerning this issue.3 Accountability for transparency in market data and connectivity fee filings is particularly necessary because exchanges have a natural monopoly over market data their members generate with their trading activity, as well as a monopoly over access to their own markets, and they collectively control the governance of and the setting of fees for the Plans.
1 Descriptions of the signing associations and names of signing firms are provided in the attached Appendix.
2 Letter to Brent J. Fields, Secretary, SEC (December 6, 2017), avail. at https://www.sec.gov/rules/petitions/2017/petn4-716.pdf.
3 Securities Exchange Act Release No. 83755 (July 31, 2018), avail. at https://www.sec.gov/litigation/opinions/2018/34-83755.pdf (order granting motion for stay of fee amendment to the Consolidated Tape Association (CTA) Plan) (“Bloomberg Order”); Securities Exchange Act Release No. 83148 (May 1, 2018), 83 FR 20126 (May 7, 2018) (abrogating fee amendment to the CTA Plan); Securities Exchange Act