Why We’re Excited About the New “Competing Consolidator” SIP Model (and Hope to Become One)

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The recent ruling by the SEC to decentralize the SIPs and expand the core content they will offer is a massive step in the right direction. It’s a step that we at MayStreet, as well as countless others across the industry with whom I’ve spoken, wholeheartedly support. The Commission and everyone involved in the effort deserve a tremendous amount of credit for their work to overhaul this critical component of equity market infrastructure. Fast, transparent market data available to all is a big part of why the US markets are the envy of the world, and the Commission’s new ruling will go a long way toward ensuring they remain that way.

At MayStreet, we’ve long advocated modernizing market data collection, consolidation and dissemination to better meet the demands of today’s and tomorrow’s investors, with timely access to ultra-high-quality data only getting more important by the day. We’ve built a business on meeting this need, and for that reason I’m pleased to announce that we plan to throw our hat in the ring and apply to become a competing consolidator. 

Clearly, the SEC—and, to their credit, the exchanges—have invested much time and energy to get this plan right, and we are grateful for their efforts. The coming inclusion of new content, reduced latency and potential adjacent features (such as snapshots) will greatly benefit all market participants. 

But undoubtedly the most significant change in the new rule is opening the SIPs to competition. This will lead to significant new efficiencies and cost reduction for market data users. I fully anticipate that other tech-native firms like MayStreet will also look to enter this space, and believe the competition will drive us all to continually improve by delivering higher quality market data faster and at lower prices. 

Over the coming weeks and months, we’ll be drafting our blueprint for how we intend to develop our system. While clarification of a few key details—including the exchange data handoff process and the exchanges’ fee structure for new consolidators—is needed for participants to determine whether a new and improved SIP will allow them to reduce reliance on proprietary data feeds, we are hopeful that it ultimately will. When we’ve formalized our plan, we’ll circulate it widely to elicit feedback from the dozens of market participants with whom we’ve informally discussed our initial thinking over the past few months. The SIPs are rightfully viewed as an industry utility, and we firmly intend to approach this opportunity in keeping with that spirit.

In October we outlined what we believe a new SIP should minimally include a distributed model that allows data to be received at (or very close to) the three major NYC-area exchange data centers—thereby eliminating the unnecessary transit latency we currently have—will be imperative. Not only will this significantly reduce latencies, it will importantly enable market participants to determine the best bid/ask at both an exact time and location. In addition, billing and audit requirements must be simplified, the Cloud must be leveraged for delivery, APIs must be supported and new content such as odd lot bids and offers, auction data and five levels of order book depth should be added.

The SEC has essentially laid out a rough timeline of two years for the first competing consolidators to go live. Based on the timeline, we’re cautiously optimistic that we’ll be able to file our registration in late 2021 or early 2022, by which time we’ll have completed the necessary development work. Following launch, the SEC has indicated there will be a short interval where both the existing SIPs and the new ones run in parallel, allowing the Commission to evaluate the performance of the decentralized consolidation model and make a recommendation on how it should work over the long term. 

We firmly believe that the successful implementation of a competing consolidator model, even if it’s just one, can dramatically reduce explicit costs while also providing a path to easier access and innovation. We intend to deliver a solution that offers not only performance and content improvements, but also provides a clear and transparent pricing model while removing the administrative burden of tracking professional versus non-professional users, display versus non-display usage and enterprise-wide caps. And most importantly of all, it should be priced accordingly. 

The market deserves a SIP built for how market data is used today, not in the 1970s when the current system was devised. With the SEC’s new ruling, the SIP has the potential to move significantly forward, and MayStreet is excited to play its part in helping the SIP realize its full potential to serve the market data needs of investors in a modern and affordable manner. 

Patrick Flannery, Co-Founder and CEO