If you are building a financial 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.
Text of Understanding Exchange Agreements and Fees
UNDERSTANDING EXCHANGE AGREEMENTS AND FEES Stephane Dubois CEO
& Founder, xignite [email protected] @sdubois
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? Audience If 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.
1949 Baltimore 1954 Washington 1969 Pittsburgh NASD1938
Philadelphia 1875 Stock Exchange 1971 1908 1929 1953 New York Stock
Exchange (NYSE) 1817 2007 Boston Stock Exchange (BSE) 1834 NASDAQ
BX 2008 2008 NYSE AlterNext 1998 NASDAQ NASDAQ & AMEX Market
Group 2002 FINRA 2002 1998 Island ECN INET 1967 Instinet 2003 2005
NYSE Regulation 2007 OMX 2007 Archipelago Securities Exchange 2005
Pacific Exchange 1997 2006 1882 Los Angeles Oil Exchange 1957 San
Francisco Stock and Bond Exchange EuroNext 2007 NYSE Arca NASDAQ
PHLX NYSE Mkt 2005 BATS Trading 1998 Attain ECN 2005
DirectEdgeKnight 2007 ISE Stock Exchange 2006 CHI-X Europe 2011
Copyright Xignite 2012-2014 Chicago Stock Exchange (CHX) 1882 St
Louis Cleveland - Minneapolis 1949 New Orleans 1959 1993 1885
Cincinnati Stock Exchange National Stock Exchange 2003 2007 CBOE
Stock Exchange 2011 1790 Board of Brokers 2013 2000 2013 A LITTLE
HISTORY OF U.S. STOCK EXCHANGES US Stock Markets Go Back 220
YearsStock 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.
KEY CONCEPTS IN US EQUITY MARKETS
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 dont follow the rules you will be
liable! So lets begin demystify Receiving delayed or real-time
exchange data is generally subject to agreements and fees
THE CONTEXT So 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 Data Consolidates Distributes
Consolidates Distributes Presents Distributes Views Consumes Feeds
Feed API xignite 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
MONEY FLOWS Who 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 data Licenses/pays for right to
redistribute data to others Licenses/pays for right to use/view
data External Internal
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 dont get
overboard and simply match your solution to your requirements.
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.
DELAY What 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
DEPTH What depth of quote information is available? LAST SALE
BEST BID OFFER* DEPTH OF BOOK LEVEL 2 Symbol MSFT Last Sale 25.17
Last Qty 500 Symbol MSFT Last Sale 25.17 Last Qty 500 Bid Qty Bid
Ask Ask Qty 500 25.15 25.17 300 Symbol MSFT Last Sale 25.17 Last
Qty 500 Bid Qty Bid Ask Ask Qty Top ofBook 500 25.15 25.17 800
2,000 25.14 25.18 900 3,400 25.13 25.19 1,300 5,000 25.12 25.20
6,200 6,500 25.11 25.21 8,500 700 25.10 25.22 800 1,200 25.09 25.23
1,760 505 25.08 25.24 900 1,200 25.07 25.25 1,650 DepthofBook
Symbol MSFT Last Sale 25.17 Last Qty 500 Market Maker Bid Qty Bid
Ask Ask Qty Market Maker ARCA 500 25.15 25.17 400 CIBC BRUT 1,000
25.14 25.17 400 MSCO COWN 500 25.14 25.18 400 MLCO SCHB 500 25.14
25.18 300 RAJA IBKR 1,000 25.13 25.18 200 MRT INCA 200 25.13 25.19
100 BTRD MLCO 1,000 25.13 25.19 200 NITE ITGI 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).
Consolidated Feed NASDA Q PSX BX TRF NYSE NYSE ARCA NYSE MKT
BATS Direct Edge NSX CBSX CHX BREADTH There 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
costsespecially 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.
TRADING vs LISTING How 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 Institutional Broker/Dealers Retail
Broker/Dealers Order Matching Order Routing Market Makers
EXCHANGE MARKET SHARE In terms of volumes and value traded 0%
5% 10% 15% 20% 25% 30% 35% 40% NASDAQ NYSE BATS CHX NSX CBSX TRF
& FINRA 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 liquiditywhich depends on the exchange market share
shown on this chart.
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
FEES FOR U.S. EQUITY PRODUCTS
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?
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 exchanges 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?
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
MONTHLY DISTRIBUTOR FEES Delay Depth UTP3 CTA3 Delayed NBBO1
n/a n/a n/a $250 +$250 Annual Admin Fee No Fee Full NASDAQ4,8,7
$2,500 NYSE/MKT2 $1,250 n/a n/a n/a Real- Time Level 2 NASDAQ
$2,500 NYSE/MKT2 $1,250 NYSE6 $8,000 MKT2 $1,000 ARCA $3,500 PITCH4
$5,000 n/a Level 1 NASDAQ Basic4,8 $1,500 NYSE5 $4,000 MKT2,5
$2,250 ARCA5 $2,250 TOP4 $2,500 $1,500 n/a NBBO1 n/a n/a n/a $1,500
NYSE $2,250 ARCA/MKT $1,600 Last Sale NASDAQ Last Sale4,8 $1,500
NYSE $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 feed 2. NYSE MKT previously known as
American Stock Exchange 3. 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 Product 7. Via NASDAQ TotalView Product 8. Plus an
additional $1,000/Year Administration Fee
