WatersTechnology: US Competing Consolidators Grapple with Pricing Uncertainty as SEC, Exchanges Battle Over New SIP Regime

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When the US Securities and Exchange Commission (SEC) finalized a rule that made major changes to US equities market infrastructure in December 2020, it opened the door for interested technology vendors to become suppliers of consolidated market data.

The new rules create a system in which, instead of two exchange-run securities information processors (Sips) pumping out bid/ask quotes consolidated from US trading venues to consumers, a decentralized system of entities called competing consolidators will perform that role.

Some technology vendors with experience in market infrastructure have expressed interest in becoming competing consolidators, including MayStreet, McKay Brothers, Activ Financial, NovaSparks and the Miami International Securities Exchange (Miax).

These vendors believe they have unique capabilities and experience they can leverage to become the new Sips. However, although they will be providing an industry service, those services will be operated as commercial solutions rather than as utilities, and that exchange data doesn’t come for free. So before they can formulate the business plans that will underpin their bids, they need to know how much the exchanges will charge them for the data they will be using, and how revenues will be distributed.

“Everything revolves around how high the new Sip fees redistributed to the exchanges will be. That is the parameter that will make or break this modernization initiative,” says Stephan Tyc, co-founder of McKay Brothers and Quincy Data.

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