April 19, 2017
Dear Mr. Fields,
I realize the comment period is past due, but I write this in the hope that you or someone at the commission may still read this. I appreciate the opportunity to comment, thank you.
I'm an independent investor/trader who in November had his data fees "theoretically" increase 2000%. I say theoretically because I have not received a formal bill for "non-display" CTA data yet, but am being told by a NYSE representative that I will be back-billed soon. It's my assumption that NYSE is likely waiting for approval of this action in order to commence billing. I assume they may have questioned the legality of their actions with respect to their handling of my broker who alerted me to the fee increases. I am not one to pass judgement on this though, I am far from a legal expert, but I feel compelled to give a short synopsis of what has been occurring at my retail broker in order to give an idea of the impact that is already occurring in the industry with respect to this proposal.
In October 2016 I was alerted that at the beginning of November all NYSE data (CTA in my case), would be turned off if non-display declarations were not made. I did not consider my data use-age "non-display", neither did my retail broker who was also my data provider. However, they had undergone an audit by NYSE that concluded that API users of their platform would be considered "non-display". In order to avoid being "back-billed" for all the months that they had been distributing data "in violation of the non-display policies", they required everyone at the broker to submit to NYSE non-display subscriber agreements and all retail clients would begin to report to them directly. It is still not clear to me whether NYSE is vendor, SRO, or licensee of the data, however it WAS clear that if you refused to sign, the data was turned off.
A little background on the platform. It is a typical UI based platform with an API for analytics and/or order placement. The majority of their customers are small retail individuals with API use-age over the internet with symbol data subscriptions in the dozens of symbols. In addition, they also provide higher speed trading facilities for more advanced traders. That "high speed" data, however, is still accessed indirectly via normalized feeds and via authenticated subscription per symbol. They are a small retail brokerage and did not have the money to contest the allegations.
In addition, it was made clear that the data received would be considered "Direct Access", which essentially doubles the fee of the already extremely high "non-display" fees. In the CTA market data policy, "Direct Access" is defined clearly as a firm having direct connection to SIAC. My broker does not have direct connections. Indirect Access fees are defined as everything else and they give the example of a vendor using normalized data. Our broker distributes normalized data. However, outside of the policy, and inside the private user agreement I compulsorily signed in order to continue to receive data, there is a clause under the Indirect Access definition that states that NYSE considers EVERY customer Direct Access by default and it is at their discretion to assign a Subscriber an Indirect Access designation, regardless of actual circumstances. I asked the NYSE official to in the very least have an Indirect designation, since it very closely matched the description, but was denied.
In my quest to find ways to reduce the burden of these fees, I found the policy language stating that the fees are charged at the "firm" level. What this means, is that if you are a trading firm, say Virtu, with 500 traders all using direct access connections with low latency raw data, NYSE would consider your firm a "Subscriber", and you would pay data at the "firm level", ie for CTA data approx $10,000 a month. None of the individuals in the firm would have to pay these fees. Just the firm, one time. If however you are a retail investor, subscribing to a high latency, normalized feed, over the internet, via an API, then you are ALSO considered a "Subscriber" and would individually have to also pay $10,000 a month. To me, this seems inherently unfair, that a retail investor with a sub-standard data feed would have to pay the same as an entire trading firm receiving much higher quality data.
In my brokers case, there are many clients who stopped using their API services, and in my case will ultimately have to as well. It's a 6 figure a year data burden. For someone who does not make much more than that a year, I cannot afford to stay in business. It would be great if the SEC could take a close look at this proposal and what NYSE is currently, and has already doing in its name. I should say, the CTA, but it's clear from my experience that the CTA is just another arm of the NYSE market data department. It's my hope here, that in their targeting of retail investors with institutional fees, they may have finally crossed the line.
Sincerely,
Edward Foda
p.s.
I did not include the name of the broker in the letter above, but if the commission would like to contact me privately I could go into greater detail.