News on Manipulated markets

ESMA launches consultation on cost of market data and consolidated tape -
The European Securities and Markets Authority (ESMA), the EU securities markets’ regulator, has launched a public consultation on the development in prices for pre- and post-trade data and on the post-trade consolidated tape (CT) for equity instruments. MiFID II/MiFIR aims at ensuring fair access to and lowering the cost of market data and has established the legal framework for the provision of a CT. However, to date, no CT has emerged and, based on ESMA’s analysis, it appears that MiFID II has so far not delivered on its objective to lower the prices of market data.

Pricing of Market Data
Presentation by Kerstin Hermansson - View Presentation 

ATM - Portuguese Investors' Association launched a European petition
On January 6, 2016 the ATM - Portuguese Investors' Association launched a European petition to prevent predatory pricing practices from stock market data and allow brokers and investors to obtain fair prices for access to these data.

On 18 May 2016 was published the Commission Delegated Regulation (EU) 2017/567, which established the obligation to provide market data on a reasonable commercial basis (see Article 6), obligation to provide market data on the basis of cost (see Article 7) and to obligation to provide market data on a non-discriminatory basis (see Article 8).

On 9 June 2016 the European Commission decided that the issues raised in the petition were admissible for conducting a preliminary investigation and later for a thorough investigation

This issue, together with "coercive tied selling" and the costly flaws of Directive 2004/25 / EC (on takeover bids) with regard to the right sell out are the ATM's top priorities at the Financial Services  Users Group (of the European Commission), where the ATM is represented by me.

It's completely clear that prices for market data continue to increase without any correspondence with costs (which have fallen due to the improvement of the underlying technology) and this is a clear violation of the article 102.° of the threat of Lisbon(1), considering the dominant position of the providers in each relevant market.

So, it's only a question of enforcement and nothing more.

(1) Article 102° 
Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.

Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

Traders Want to Know What Exchanges Earn From Market Data
Banks, asset managers ask SEC to regulate exchanges’ market-data feeds. A group of 24 firms say the SEC should impose a rule forcing exchanges to reveal their profit margin for market-data products, as well as the number of clients that buy them.

WASHINGTON—Some of Wall Street’s biggest banks, asset managers and high-speed trading firms have united in a battle over a shared adversary: stock exchanges and the profit they earn from selling market data.

A group of 24 firms—including Morgan Stanley, Vanguard Group, and Virtu Financial Inc.—have asked the Securities and Exchange Commission to rein in prices that exchanges charge for premier data packages offering the most detail about market activity. In recent years, exchanges have sought to boost profits by slicing and dicing the torrent of electronic orders that pour through their systems.

The firms say the SEC should impose a rule forcing exchanges to reveal their profit margin for market-data products, as well as the number of clients that buy them. The SEC has historically taken a hands-off approach to exchanges’ customized market-data products. Instead, it has focused on regulating the quality of the consolidated tape, a less complete picture of market activity that is generally shown to investors trading on retail brokerage platforms.

“For-profit exchanges enjoy an oligopoly over the dissemination and sale of market data,” the firms say in their request, which was submitted to the SEC on Wednesday. An SEC spokesman declined to comment on the firms’ request.

Securities laws require exchanges to distribute market data on terms that are “fair and reasonable” and nondiscriminatory. The group of brokers, traders and asset managers argue exchanges’ published rules don’t disclose enough to judge whether the price increases conform with legal standards.

“They tend to be rote descriptions of what the product is, the amount of the increase and a lot of boilerplate justification,” said John Ramsay, chief market policy officer for IEX Group Inc., an exchange that doesn’t sell its market data. IEX is one of the companies that signed the letter to the SEC.

Nasdaq, Cboe Global Markets Inc., and Intercontinental Exchange Inc., the owner of the New York Stock Exchange, have countered that market-data pricing is fair and that no trader is obligated to purchase faster and more comprehensive order data.

Some studies have found big increases in traders’ market-data bills as exchanges have introduced richer views of market data. A trader needing the fastest connection to the most detailed order data pays about $182,775 a month in 2017, up from $72,150 a month in 2012, according to Healthy Markets Association, a coalition of investment managers.

Wall Street brokers such as Morgan Stanley and Citigroup Inc. have waged a long-running legal battle with exchanges over market-data prices. In June, an SEC administrative law judge ruled for exchanges and against the brokers’ trade association. The brokers appealed the decision to the full three-member SEC, which hasn’t ruled on the appeal.

The rule-making request also asks the SEC to require that exchanges disclose how much revenue they earn from the sale of consolidated-tape data, which only shows the latest trade and best current price for stocks. Exchanges should also be required to seek public comment before they increase prices for consolidated-tape data, the letter says.

The SEC has rarely acted in recent years on rule-making requests filed by investors or companies. But brokers have won the support of the U.S. Treasury Department for their cause, a factor that could affect how the SEC responds. The Treasury Department recommended in October that the SEC scrutinize exchanges’ market-data offerings more closely because the business “is not fully competitive.”

The companies that signed the rule-making request also include Bloomberg LP, Citadel Securities, Citigroup Inc., E*Trade Financial Corp. , Fidelity Investments, Hudson River Trading LLC, Charles Schwab Corp. , TD Ameritrade Inc., T. Rowe Price Group Inc. and UBS Group AG .

Write to Dave Michaels at

LSE Postpones Introduction of Delayed Data Fees
The London Stock Exchange Group has backtracked on changes to its real-time market data agreements that would have seen the group begin charging fees for delayed data, following push-back from its data clients.
Read the article from WatersTechnology

The Dirty Little Secret of Finance: Asymmetric Information
There’s a very deep, important concept in economics that gets way too little attention from the public (and possibly from economists themselves). This is the idea of asymmetric information. The concept has been around for decades, and research about it has won Nobel prizes, but neither the profession nor the public has ever put it at the center of our understanding of markets. That should change. When today we debate issues like financial regulation or high frequency trading, it helps to think about financial markets as being driven by differences in how much people know.

Trade bodies urge Commission to review MiFID II exchange data rules
Several trade associations have called for the European Commission to review rules on market data pricing for trading venues under MiFID II. A MiFID II implementation roundtable - hosted by the UK’s Financial Conduct Authority (FCA) in May this year – saw questions raised about trading venues pricing market data on a “reasonable commercial basis.”

This man wants to upend the world of high-frequency trading
Over the past 15 years, meanwhile, the global financial market has fragmented: Where there were once three main U.S. exchanges, there are now more than 40 exchanges and alternative trading systems.
And high-frequency trading companies have largely replaced traditional broker-dealers, using algorithms instead of human traders to make decisions in milliseconds, mostly in response to orders made by other algorithms.

Some HFT companies are using laser in order to get data from exchanges
Some HFT (High Frequency Traders) companies are now using laser in order to get data from exchanges in order to eliminate 0.18 millisecond microwave latency used by other HFT companies. The data regular investors are paying is not real time and not even delayed by XXI century measures.
Read the article from Zero hedge.

French regulator sanctions HFT Virtu Europe
French regulator sanctions HFT Virtu Europe for market manipulation and Euronext Paris for failing to meet its obligation to operate with impartiality. Ordinary investors pay for real-time and delay time when information is outdated while some participants carry transactions within a few milliseconds. Sign the petition

Small Brokers have an increasing urgent focus on market data
Small Brokers have an increasing urgent focus on market data because costs are spiraling and often are prohibitive to the volume executed in particular exchanges. Also they have to satisfy regulatory demands and transparency issues surrounding the industry, as well as ensuring they comply with vendor contracts on the distribution and usage of data. Managing costs becomes further complicated when measuring internal costs of looking after the acquired data, that goes across various internal departments systems and processes.

"Predatory" high frequency trading practices have eroded investor confidence in capital markets. Paulo Pinto of DIF Broker says "All it takes is for each order to be obliged to be in the market for 1 second to promote the confidence and deter HFT firms".

The need for speed is what brought a new business for exchanges, selling co-location services and just like that providing advantages to some traders because it let's them get access to data faster.

If you think it is not right to pay for exchange data fees sign the petition here

The equity markets have evolved over time, from a structure in which trading in a particular security was concentrated on a single listing exchange to one in which multiple marketplaces compete for trading in the same securities. For brokers this can mean paying data feeds in one exchange and executing orders in a different market place. Issues with market data fee have become apparent at different levels. If you think this is unfair because it is not giving a critical competitive trading environment sign the petition here.

Real-time market data consists of pre-trade and post-trade data that is distributed immediately after an order has been entered, amended or cancelled or a trade has been executed. Small brokers and investors have access to "real time data" that has been used millions of times by certain participants, that have been authorised to see pre-trade details of orders entered and have identified the price and volume. 
If you think this is unfair because it is not giving a critical competitive trading environment sign the petition here.

High-profile attorney Michael Lewis filed a class-action lawsuit against 13 stock exchanges
High-profile attorney Michael Lewis filed a class-action lawsuit against 13 stock exchanges over high-frequency trading. The lawyer is of no relation to author Michael Lewis, whose book "Flash Boys" explained high-frequency trading earlier this year.

The case, filed on behalf of Harold Lanier, is filed in U.S. District Court for the Southern District of New York. It charges, among other things, that the exchanges discriminated against some investors by selling "advance access" to market data using private feeds and co-location services.
New York Stock Exchange, BATS Exchange, Nasdaq OMX and Chicago Board Options Exchange declined to comment.

Class Action Case in court brought by Nanex against Exchanges
The case is about broken promises. Plaintiff Harold Lanier, and other Subscribers, entered into Contracts with the Exchange defendants, all of which are securities exchanges, to receive electronic market data services offered by the Exchange Defendants. The Exchange Defendants promised to be fair by:
(1) providing the market data service in a non-discriminatory manner; and (2) providing the Subscribers with “valid” data (i.e., the actual data that is accurate and not stale). The Exchange Defendants did not live up to either promise.

CME Sued on Claims High-Frequency Traders Bought Access
CME Group Inc. (CME), owner of the world’s largest futures market, was sued by three of its users who alleged the company sold access to order information to high-frequency traders ahead of other market participants.

The monopolistic pricing of information is responsible for diminish access and discrimination between investors but represents more and more income for exchanges. This income is now above 30% of total income for certain exchanges. Exchanges should make its money by taking a "small" trading and clearing fee for every successful trade, not for selling pricing information to brokers and investors. See below how important this area of business has become for Deutsche Boerse, with the launch of BSE India Information products.

"The new Information Products BSE India Spot Market ultra, BSE India Derivatives Market ultra and BSE India Indices ultra can be licensed via Deutsche Börse - Market Data + Services. The data is disseminated directly via BSE India’s trading interface."

The American Security Industry also understand that the onerous fees charged by exchanges are limiting access to anyone unwilling or unable to pay them. Trade organization the Securities Industry and Financial Markets Association (SIFMA) has filed two petitions with the US Securities and Exchange Commission that it hopes will pave the way for a judicial review of the way exchanges introduce new fees for their market data.

Sweeping ASX Fee Rises Anger Consumers
In a notification sent to end users and vendors in April, the exchange informed customers that it will introduce a price change for ASX and Sydney Futures Exchange Level 1 and Level 2 data on July 1. Global access for ASX 24 data from ASX’s Trade24 proprietary derivatives trading platform will increase by seven percent from A$70 to A$75 per subscriber per month for a continuous real-time feed for..