IIAC calls for greater transparency on market data fees

The SEC found that the exchanges “did not provide sufficient justification” for their market data fees, the IIAC says in the letter.

The investment industry trade group, which has long complained about market data fees here in Canada, argues that the SEC decision is also applicable to the Canadian market.

“We believe the findings in the SEC decision are directly relevant to the Canadian scenario in respect of marketplace fees. Although the precise scenario considered in the decision is not replicated in the Canadian context, the general findings about the nature of competition, marketplace monopoly over data and the resulting fairness of certain marketplace fees are applicable to the Canadian market structure,” the IIAC says in the letter.

The IIAC argues that aspects of the market structure framework in Canada, such as the order protection rule (OPR), best execution obligations, and the designation of protected marketplaces creates similar monopoly pricing power in Canada. “Excessive pricing for market data undermines efficiencies by raising execution costs as data fees are passed on to investors,” it says.

Additionally, it argues that the exchanges have adopted other fees in recent years that “are abuses of their market power, do not reflect the cost of providing such services, and are not tempered by market competition.”

As a result, the IIAC requests the CSA “consider the market power of the exchanges and ATSs, and the effective monopoly they exercise over their own market data, as well as certain access fees imposed by the marketplaces.”

“The marketplaces should be required to clearly justify their fees, in light of their monopoly power, and not use market competition as an argument that the market will constrain unfair or excessive fees. We also request that marketplace fees be subject to greater transparency and industry comment, so that the regulators obtain a more complete picture of the effect of such fees on the industry,” the IIAC says.