Market Data Sparks Strife With New York Stock Exchange
You know those user agreements that pop up every time you update the software on your computer, the ones you’ve probably never read? Well, as it turns out, some folks actually do read those, and in the case of the New York Stock Exchange (NYSE), it’s caused quite the controversy, according to Morningstar.
Market Data and Wall Street
At the heart of the matter is the use of market data generated by some of the largest firms on Wall Street. Their beef? That same data that firms like J.P. Morgan Chase, Citigroup and Goldman Sachs send to NYSE as stocks are traded, aggregated and sold back via high-speed feeds.
As frustrating as it may be to purchase data you’ve helped create, the real controversy centers around wording in NYSE’s new Master User Agreement that these firms are required to sign. The language therein transfers ownership of such data to the NYSE itself. Exchange participants understandably believe the data they submit to NYSE should remain theirs.
A Monopoly on Big Data?
Those data feeds, which are now an integral source of revenue for NYSE, bring up important issues surrounding the use of big data — namely, ownership and pricing. Doug Cifu, chief executive of Virtu Financial Inc., sums it up nicely.
“This dispute demonstrates the fundamental point market participants have been making about the exchange’s unchecked control over market data and its pricing,” Cifu told Morningstar. He went on to explain that data ownership and lack of market oversight are the two main issues.
“You’d be hard-pressed to find another industry where a government-licensed entity can take your intellectual property and sell it back to you at an arbitrarily high markup,” said Cifu, according to the source.
As it turns out, big data is a hot commodity. According to Morningstar, NYSE’s parent company Intercontinental Exchange Inc. generated 44 percent of its net revenue from the sale of market data last year. That figure represents a 9 percent increase from just five years prior. While not all of the revenue associated with the increase can be attributed to data fees, firms worry that they’re giving exchanges a monopoly over their own intellectual property.
Oddly enough, NYSE’s Master User Agreement is actually tied to an infrastructure revamp. The exchange has been upgrading networking hardware as they roll out new technology called Pillar. The overhaul was initially aiming for a Feb. 13 release but has since been delayed for various reasons. The actual date for going live remains to be seen, as does the result of these firms’ protests,