Transcript
Page 1: Understanding Exchange Agreements and Fees

UNDERSTANDING EXCHANGE AGREEMENTS

AND FEESStephane DuboisCEO & Founder, xignite

[email protected]@sdubois

Page 2: Understanding Exchange Agreements and Fees

CONTENT

• A Little History of U.S. Stock Exchanges• Key Concepts in U.S. Equity Markets• Fees and Agreements• What Solution Is Right For You?

AudienceIf you are building a web site or application that will require delayed or real-time exchange data, this presentation is for you. It will familiarize you with some key concepts as well as what to expect in terms of fees and agreements.

This presentation only covers U.S equity markets. Things are a bit different in other countries and for other asset classes such as futures and options.

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1949Baltimore

1954Washington

1969Pittsburgh

NASD1938

Philadelphia 1875Stock Exchange

1971

1908

NY Curb Market

NY Curb Exchange

1929 1953

American Stock Exchange (AMEX)

New York Stock Exchange (NYSE)

1817

2007

Boston Stock Exchange (BSE)1834

NASDAQBX

2008

2008

NYSE AlterNext

1998

NASDAQNASDAQ & AMEXMarket Group

2002

FINRA

2002

1998 Island ECN INET

1967 Instinet 2003

2005

NYSE Regulation 2007

OMX

2007

ArchipelagoSecuritiesExchange

2005

Pacific Exchange

1997

2006

1882

Los Angeles Oil Exchange

1957

San Francisco Stock and Bond ExchangeEuroNext

2007NYSE Arca

NASDAQ PHLX

NYSE Mkt

2005

BATS Trading1998

Attain ECN

2005

DirectEdgeKnight

2007

ISE Stock Exchange

2006

CHI-X Europe

2011Copyright Xignite © 2012-2014

Chicago Stock Exchange (CHX)

1882

St Louis – Cleveland - Minneapolis1949

New Orleans1959

1993

1885

Cincinnati Stock Exchange National Stock Exchange

20032007

CBOE Stock Exchange

2011

1790 Board of Brokers

2013

2000

2013

A LITTLEHISTORY OFU.S. STOCK

EXCHANGES

US Stock Markets Go Back 220 Years…Stock exchanges are a persisting symbol of capitalism. Their rich complex history demonstrate how the spirit of entrepreneurship has inhabited our financial markets for hundred of years.

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KEY CONCEPTS IN US EQUITY MARKETS

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FINANCIAL MARKET DATA IS NOT FREE!

• This domain is complex:• Depends on the data, how you get it and

what you do with it, etc.• Changes on a regular basis • Subject to SEC regulation• Lots of corner cases and exceptions

• If you don’t follow the rules you will be liable!• So let’s begin demystify…

Receiving delayed or real-time exchange data is generally subject to agreements and fees

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THE CONTEXTSo you want to receive exchange data for your app, web site or fintech platform?

EXCHANGE

VENDOR DISTRIBUTOR

USER

USER

USER

USER

USER

USER

EXCHANGE

Owns The DataConsolidatesDistributes

ConsolidatesDistributes

PresentsDistributes

ViewsConsumes

Feeds Feed APIxigniteYou are here

By receiving and distributing market data, you become a distributor in the eyes of the exchange.

This means that you may have to have an agreement with the exchange and pay fees.

Note that many exchanges will treat Internal Distributors and External Distributors differently.

External

Internal

Page 7: Understanding Exchange Agreements and Fees

MONEY FLOWSWho pays for what rights and service and to whom?

EXCHANGE

VENDOR DISTRIBUTOR

USER

USER

USER

USER

USER

USER

EXCHANGE

xignite

There is a difference between licensing the rights to use the data with the data owner (the exchange) and buying a services to access the data (which could be the exchange if you go directly to them or could be your vendor).

You pay the exchange for the license to the data and your vendor for access to that data.

Licenses/pays for access to dataLicenses/pays for right to redistribute data to othersLicenses/pays for right to use/view data

External

Internal

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IF YOU RECEIVE OR DISPLAY DATA

Delay (Delayed Quotes/Real-Time Quotes)

Depth (Last Sale/BBO/Level 2/Depth of Book)

Breadth (Single Exchange/Consolidated Tape)

Source (NYSE/NASDAQ/BATS/etc.)

Type of User (Pro/Non-Pro)

Usage (Display/Non-Display/Wallboard/Web/etc.)

Control (Control of Access/Control of Display)

You become a Data Distributor for the exchange.

As a distributor, you may need to sign an agreement and pay licensing fees. Those fees will depends on:

Many factors come into play regarding agreements and fees when you get data from an exchange.

The more data you get, the higher the costs and the licensing requirements.

Make sure you don’t get overboard and simply match your solution to your requirements.

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IMPACT ON COSTS

• Real-Time data is fee-liable and requires exchange agreements.• Delayed data is often not fee liable, but licenses may need to be in place

either way (ex NASDAQ).• Historical data is often not fee-liable based on the delay policies, though

access to historical data is often fee liable.

DELAY

• Last Sale data is generally cheaper than BBO, Depth of Book, or Level 2 data for a given exchange.

DEPTH

• Consolidated Tape data is fee liable (CTA, UTP).• Direct Exchange data or alternative access to consolidated data is priced

differently via various models. Exchanges can assist you based on your needs.

• Exchange-specific data is priced by each exchange using different pricing models.

BREADTH

The choices you make will impact your costs!!!

COSTS

BREATDH

DEPTH DELAY

Understanding market data means understanding the key factors that will affect costs and functionality in your solution.

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DELAYWhat do the terms Delayed and Real-Time really mean?

Trade Occurs Market Close

15mn 15mn

Real-Time Delayed End of Day

4:00pm

Delays have a large impact on costs and licensing but also a significant impact on user experience.

End of Day data is not fee liable in the US (with exceptions like Mutual Fund prices).

Real-time data is always fee-liable.

Think about what the minimum requirements for your app are.

TYPE OF DATA

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DEPTHWhat depth of quote information is available?

LAST SALE BEST BID OFFER* DEPTH OF BOOK LEVEL 2

Symbol MSFTLast Sale 25.17 Last Qty 500

Symbol MSFTLast Sale 25.17 Last Qty 500

Bid Qty Bid Ask Ask Qty500 25.15 25.17 300

Symbol MSFTLast Sale 25.17 Last Qty 500

Bid Qty Bid Ask Ask QtyTop of Book 500 25.15 25.17 800

2,000 25.14 25.18 9003,400 25.13 25.19 1,3005,000 25.12 25.20 6,2006,500 25.11 25.21 8,500700 25.10 25.22 800

1,200 25.09 25.23 1,760505 25.08 25.24 900

1,200 25.07 25.25 1,650

Dept

h of

Boo

k

Symbol MSFTLast Sale 25.17 Last Qty 500

Market Maker Bid Qty Bid Ask Ask Qty Market MakerARCA 500 25.15 25.17 400 CIBCBRUT 1,000 25.14 25.17 400 MSCO

COWN 500 25.14 25.18 400 MLCOSCHB 500 25.14 25.18 300 RAJAIBKR 1,000 25.13 25.18 200 MRTINCA 200 25.13 25.19 100 BTRDMLCO 1,000 25.13 25.19 200 NITEITGI 200 25.13 25.19 300 NMRA

LEGG 5,000 25.12 25.19 700 ARCA

Depth can impact price as well as your ability to display the data to large user base (e.g. on a public web site).Make sure you determine what you really need. Chances are that Last Sale and BBO are all you need for your app.

* aka BBO, LEVEL 1, Top of Book

Depth is simply the amount of information you get in your data feed. It ranges from only the price of the last sale or trade to details about all outstanding bids and asks and the name of market makers who placed those orders (Level 2 data).

Level 2 is the top BBO from each Market Participant. Some exchanges also offer feeds with every single BBO from each participant at every price (e.g. NASDAQ TotalView).

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Consolidated Feed

NASDAQ

PSX

BX

TRF

NYSE

NYSE ARCANYSE

MKT

BATS

Direct

Edge

NSX

CBSX

CHX

BREADTHThere are many equity exchanges in the US and data feeds can include some or all of them

* Or some other formula

• Merges all feeds from all exchanges• Price is latest price on any exchange• Volume is consolidated volume across all

exchanges• Feeds are fee liable and subject to End-User

Fees

Consolidated Feed

• Only includes trades/quotes from that exchange

• Includes data for stocks listed on other exchanges

• Price is from last trade on that exchange*• Volume is sum of trades on that exchange• Liquidity and coverage vary based on market

share• Pricing is set by each exchange

Exchange Specific Feeds

If you thought there were just a couple exchanges in the US, think again! Wanting a consolidated feed can have a significant impact on costs—especially if you need real-time data. Exchange specific feeds provide more cost effective alternatives that could work well for your use case.

aka Securities Information Processor. There are 2 in the US:

CTA and UTP.

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TRADING vs LISTINGHow come I can get quotes for NYSE-listed securities from a NASDAQ feed?

• The primary listing exchange is the main exchange were a security is bought/sold.

• This is the exchange were the IPO occurs.• Not all exchanges list (only NYSE, NASDAQ, CHX

and BATS do).

About Listing

• Exchanges receive orders from participants• Exchanges must by law provide best execution,

which means routing orders to other exchanges.• Market centers can execute orders for securities

they do not list. Some are not even the first market center for securities they list.

• This means that exchanges have quotes for securities they do not list.

About Trading

Institutions

Individuals

InstitutionalBroker/Dealers

RetailBroker/Dealers

OrderMatching

OrderRouting

Market Makers

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EXCHANGE MARKET SHAREIn terms of volumes and value traded

NASDAQ NYSE BATS CHX NSX CBSX TRF & FINRA0%

5%

10%

15%

20%

25%

30%

35%

40%Volume Value The chart shows

data for April 2014.

NASDAQ has 3 venues (NASDAQ, BSX and PSX). NYSE has 3 venues (NYSE, ARCA and MKT) and BATS has 4 venues (BZX, BYX, EDGX, and EDGA).

TRF and FINRA are the trades occurring off exchange (dark pools and internalized trades reported to the tape).

While NASDAQ and NYSE list most securities in the US, every exchange trades each others’ listed securities. So an exchange-specific feed will actually give you quotes on most securities. But you will only get a fraction of the market liquidity—which depends on the exchange market share shown on this chart.

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TYPE OF USERS

PROFESSIONAL SUBSCRIBER• Any natural person who is either:• Registered or qualified in any capacity with the SEC, the CFTC, and other

organizations• Engaged as an "investment advisor" (whether or not registered or qualified) • Employed by a bank or other organization exempt from registration to

perform functions that would normally require registration or qualification

NON PROFESSIONAL SUBSCRIBER• Any natural person who is not a Professional Subscriber

This element matters when you display real-time data to users

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FEES FOR U.S. EQUITY PRODUCTS

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AGREEMENTS

• You will need an agreement if either:• You receive a datafeed• You receive real-time data (even as an individual)

• Exceptions:• The data is hosted by another firm (not a Datafeed)• You are a firm receiving only NYSE Delayed Data• Beware when a vendor says an agreement is not

needed. Check with the exchange!• Agreements:

• Are executed directly with exchanges• Will define your reporting requirements.

• Your vendor can initiate the process for you and provide contact information.

When will you need an agreement?

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REPORTING

• Exchanges require detail reporting for:• Real-time External Professional Subscribers• Real-time & delayed Datafeed Recipients

• Exchanges do not require reporting for:• Delayed Internal and External Subscribers• BATS requires no user reporting

• Reporting is done monthly using each exchange’s reporting system• Exchanges bill you based on what you report

• Exchanges can back-bill you for misreported data!

• Exchange can audit you so follow the rules!

Will you be subject to reporting?

Page 19: Understanding Exchange Agreements and Fees

WHAT IS A DATAFEED?

• You get data from a vendor. Is it a datafeed?• You need to answer two simple questions:

• Do you control the display of the data?• Do you control access or entitlement to the data?

• If the answer is Yes to any of those questions, you are getting a datafeed.

• An API is always a Datafeed.

This is a key concept to determine whether you have to pay fees or not.

DATAFEEDS• Continuous Feeds (Sockets,

etc)• REST & SOAP APIs (XML,

JSON)• Files (CSV, Binary)

NON DATAFEEDS• Hosted Widgets• Hosted Web Pages• Hosted Terminals

Page 20: Understanding Exchange Agreements and Fees

MONTHLY DISTRIBUTOR FEES

Delay Depth UTP3 CTA3

Delayed

NBBO1 n/a n/a n/a

$250+$250 Annual Admin

FeeNo Fee

Full NASDAQ4,8,7

$2,500NYSE/MKT2

$1,250 n/a n/a n/a

Real-Time

Level 2

NASDAQ$2,500

NYSE/MKT2

$1,250NYSE6

$8,000MKT2

$1,000ARCA $3,500

PITCH4

$5,000 n/a

Level 1

NASDAQ Basic4,8

$1,500NYSE5 $4,000

MKT2,5

$2,250ARCA5

$2,250TOP4

$2,500 $1,500 n/a

NBBO1 n/a n/a n/a $1,500 NYSE

$2,250ARCA/MKT

$1,600

Last Sale

NASDAQ Last Sale4,8

$1,500NYSE$2,500

MKT2 $1,500

ARCA$1,500

Last Sale4

$2,500 $1,500 NYSE$1,750

ARCA/MKT$1,400

For U.S. Exchanges as of June 2014 – Indirect Fees for External Distribution

1. “National BBO” across all markets via a CTA/UTP consolidated feed2. NYSE MKT previously known as American Stock Exchange3. UTP Administered by NASDAQ. CTA Administered by NYSE.4. Includes data for all US equities (NASDAQ, NYSE, MKT, etc.)

NOTES• These are only the exchange fees. Vendor subscription fees are additional.• These prices are indicative. The exchange offering maybe more extensive than suggested.• Please check the web sites of each exchange of additional information.• BATS fees are for BZX market only (BYX and DirectEdge excluded).

If you receive a Datafeed, you will need to pay the Distributor Fees.

Fees can be different for Internal (employees only) versus External Distribution. What we show here are External Distribution fees.

There are also fees associated with taking feeds directly from the exchange. What we show here are indirect fees (i.e. you take the data from a vendor like Xignite).5. Includes BBO and LS

6. Via NYSE OpenBook Product7. Via NASDAQ TotalView Product8. Plus an additional $1,000/Year Administration Fee

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MONTHLY USER FEES

Delay/Depth UTP4 CTA4

Delayed

NBBO1 n/a n/a n/a No Fee No Fee

FullNASDAQ5,8

Pro: $70 Non-Pro: $14

NYSE/MKT2 Pro:$6

Non-Pro:$1n/a n/a n/a

Real-Time

Level 2

NASDAQ Pro: $45

Non-Pro: $9

NYSE/MKT2 Pro:$6

Non-Pro:$1

NYSE7

Pro: $60Non-Pro: $15

MKTPro: $5

Non-Pro: $1

ARCAPro: $40

Non-Pro: $10None n/a

Level 1

NASDAQ Basic5

Pro: $13 Non-Pro: $0.50

NYSE/MKT2

Pro: $6.50Non-Pro: $0.25

NYSE6

Pro: $4 Non-Pro:

$0.20

MKT:Pro: $1

Non-Pro: $0.05

ARCA6:Pro: $4; Non-Pro:

$0.25None

Pro: $23Non-Pro:

$1n/a

NBBO1 n/a n/a n/a

Pro: $23Non-Pro:

$1

NYSE3

Pro <1000 users: $30

Non-Pro: $1

ARCA/MKT2:

Pro: $24 Non-Pro: $1

Last Sale

NASDAQ3,5: <10,000 Users: $0.60

NYSE/MKT2,3: <10,000

Users: $0.30

NYSE:Pro: $4

Non-Pro: $0.20

MKT2:Pro: $1

Non-Pro: $0.05

ARCA:Pro: $4 Non-Pro:

$0.25None

Pro: $23Non-Pro:

$1

NYSE3

Pro <1000 users: $30

Non-Pro: $1

ARCA/MKT2:Pro: $24

Non-Pro: $1

For U.S. Exchanges as of June 2014 – Per User Fees for External Distribution

User Fees can be different for Internal (employees only) versus External Distribution. What we show here are External Distribution User fees.

Usage fees apply to any Distributor irrespective of the means of transmission or access.

There are also fees associated with taking feeds directly from the exchange. What we show here are indirect fees (i.e. you take the data from a vendor like Xignite).

1. “National BBO” across all markets via a CTA/UTP consolidated feed2. NYSE MKT previously known as American Stock Exchange3. Sliding scale available. Pricing goes down as number of users increases. 4. UTP Administered by NASDAQ. CTA Administered by NYSE.5. Includes data for all US equities (NASDAQ, NYSE, MKT, etc.)

NOTES• These are only the exchange fees. Vendor subscription fees are additional.• These prices are indicative. The exchange offering maybe more extensive than suggested.• Please check the web sites of each exchange of additional information.• BATS fees are for BZX market only (BYX and DirectEdge excluded).

6. Includes BBO and LS7. Via NYSE OpenBook Product8. Via NASDAQ TotalView Product9. Plus an additional $1,000/Year Administration Fee

Page 22: Understanding Exchange Agreements and Fees

WHAT’S RIGHT FOR YOU?

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DECISION SUPPORT DRAFT

Is delayed data sufficient for my

use case?

UseDelayed Data

Do I absolutely need all trades and quotes or is

this data for display only?

Use a Consolidated Feed solution

Do I care about depth of

coverage and data quality?

UseNASDAQ Last

Sale or NASDAQ BASIC

Use a BATS-only Solution

What’s the right market data solution for my project?

• Contact us at [email protected] to discuss your requirements.

• We can help you:• Figure out what service is best for you• Estimate your exchange fees and costs• Help you get started with your exchange agreements• And more…

Yes

Yes

Yes

No

No

No

Depth of coverage is the amount of information you get in your data feed. It ranges from every single quote/trade to just the best bid/offer or last sale trade.

Fees can be different for various depths and how you distribute the data.


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