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Wall Street scores win over exchanges in market-data fee battle

Wall Street brokerages scored a big win over the New York Stock Exchange and Nasdaq Tuesday when the SEC said the exchanges failed to justify fee increases that are crucial to their businesses.

The SEC's decision to set aside some charges that NYSE and Nasdaq impose on brokers for market data follows a years-long legal battle that has pitted the exchanges against Wall Street’s biggest trade group, the SIFMA.

The fees that the SEC rejected include details like the best available bids and offers for stock trades. In a separate decision, the regulator sent back to the exchanges another 400 fee increases that were contested by SIFMA and Bloomberg LP, the parent company of Bloomberg News. The trading platforms shared almost $400 million in revenue from selling market data in 2017, a March report shows, and then they individually collected even more from their proprietary feeds.

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While Tuesday’s SEC decisions are limited in scope, it’s the latest sign the regulator is taking seriously complaints that fees for market data are too high and that exchanges have too much leeway to increase them. In both rulings, SEC Chairman Jay Clayton and his fellow SEC commissioners voted 5-0 against the exchanges.

"I believe these actions, taken together with other initiatives of the commission and our dedicated staff, will improve our regulation of market structure as it exists today and will inevitably continue to evolve," Clayton said in a Tuesday statement.

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Pedestrians pass in front of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 13, 2018. U.S. stocks gave up earlier gains and turned lower as investors assessed positions ahead of the weekend with trade uncertainty and tension in the Middle East hanging over financial markets. The dollar fell with Treasury yields and oil rose for fifth straight day. Photographer: Michael Nagle/Bloomberg

One of Clayton’s top deputies, Brett Redfearn, is leading a two-day public event on the topic next week and Commissioner Robert Jackson last month gave a speech calling for much tougher oversight of the exchanges.

Redfearn, who before joining the SEC was a top executive at JPMorgan Chase, had been a frequent critic of many of the exchanges’ practices while in the private sector. NYSE and Nasdaq recently asked for Redfearn to be excluded from market-data decisions given his ties to SIFMA before joining the SEC.

Exchanges have been battling trading firms over market-data fees in lawsuits dating back to 2009 and Tuesday’s decision is unlikely to end the wrangling. Nasdaq said Tuesday it plans to appeal the SEC’s ruling.

“We are disappointed by the SEC’s decision given the strength of our evidence, convincing record of facts and our track record in the courts,” the exchange said in a statement. “This decision represents the latest in a 20-year-long series of attempts to overregulate the best capital markets in the world, in order to benefit the largest financial institutions.”

The NYSE said in a statement that the decision "represents a troubling shift by the SEC from pursuing its core mission of ensuring the long-term health of our financial markets to regulatory overreach prioritizing the interests of powerful Wall Street interests over protecting the interests of retail investors and listed companies."

"We believe the commission’s decision will not withstand our challenge," the exchange added in the statement.

SIFMA applauded the ruling. “Today’s decision should prompt further examination of policy reforms to ensure the efficiency of public market data feeds and fairness of fees,” the organization said in a statement.