Stop The Press – Exchanges See No Unfairness!


We have been pounding the table for years about how our markets have been kidnapped, with the aid of for-profit stock exchanges. Simple supply and demand has been replaced by an arms and speed race centered around a little “market making” video game of rebate arbitrage. Policy makers in other countries agree. As Nathaniel Popper of The New York Times puts it, “countries around the globe are now using America as a model for what they don’t want to look like.”

Yesterday Traders Magazine published an online article titled Exchanges See No Fairness in Data Delivery Speeds. The author of the article spoke to four different US Stock Exchange executives before he began his article with:

“You get what you pay for.”

Ed Provost of the CBOE said:

“The speed of the SIPs has increased tremendously, but there’s still a difference between the direct feeds and the SIPs and obviously people are willing to pay for that. They think it’s worth it.”

Joe Mecane of NYSE Euronext said:

“A variety of firms take the direct feeds. It’s not just the proprietary [trading] firms. All the major sellside participants take the direct feeds for one purpose or another. It’s largely a matter of choice for industry.”

Gary Katz of the International Securities Exchange, owned by Germany’s Deutsche Bourse, and also partial owner of DirectEdge (along with Knight, Citadel, and Goldman Sachs) said:

“The 20 percent of brokerage firms not receiving the proprietary feeds are not necessarily at a disadvantage. They may not have a need for [the proprietary feeds]. They’re not running automated systems that generate orders… they don’t want to pay the extra money for that sub-millisecond advantage. We are helping them by maintaining a lower cost base. It really depends on the need for the data and what it’s being used for.”

And Eric Noll of NASDAQ had this to say:


“The latency differential between public and private feeds is due to the number of “hops,” or aggregation stages necessary when consolidating data for the public feed. The processing time alone is going to add some degree of latency to the system.”


He also spoke out on speed not being the only critical factor for proprietary trading firms – he specifically brought up the enriched data feeds NASDAQ sells:


“The direct feeds are much richer. There’s much, much more information. And it’s not just to the advantage of the prop trading firms, but to all broker-dealers who take those direct feeds. They want that richer data set.”


We would like to hear Eric Noll talk more about what he means when he says, “there’s much, much more information.”


We all know a few things about the Stock Exchanges enriched data feeds. We all know they have more information – like order IDs, cancel replace information, order identifiers and modifiers, and of course hidden order information. Some of us even know how “approved order types” are created by essentially combining other order types. And of course you may recall from our 2010 whitepaper, Exchanges and Data Feeds: Data Theft On Wall Street, that NASDAQ leaks information on supposedly hidden orders on its exchange.


We are shocked. When we read this quick article we were taken about how the major stock exchanges still do not get it. After the Flash Crash. After the failed BATS IPO. After Facebook’s technically-botched IPO. After daily flash crashes/smashes. After runaway market-making algos. After $5million fines. They still have that same culture and mindset that caters to traders, and not investors. They still have the same mindest, born out of their SOES bandit culture.


Will a real leader, somewhere, please step in and remind these children what the real purpose of our markets is supposed to be? Will somebody remind the exchanges of the importance of being neutral referees?


Let’s close today’s note with a little humor; click on and enjoy the below cartoon!