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New data rules are not the big picture of exchange stock tapes

Stock exchange rules have changed when it comes to market data returns, but investors don’t have to be game changers.

Exchanges have always fought hard for market share in stock trading. This helps to partially determine how much of the market’s Securities Initiation Protocol (SIP) aggregate data charges will be sent to the exchange. However, Wednesday’s Securities and Exchange Commission adopted rules to open its exclusive data to competition. Analysts point out that in theory this threatens the exchange’s SIP revenue, as market participants may obtain that data directly or from competing aggregators. Cboe Global Market CBOE 2.49%

According to Piper Sandler analysts, SIP data generated about 9% of net revenue in 2019. Since the announcement of the SEC, its inventory has fallen by more than 6%.

But investors need to keep the big picture in mind.Already a participant in the stock exchange industry, including Nasdaq and the Intercontinental Exchange, which owns the New York Stock Exchange,

Apart from pure transaction-linked revenue, we have diversified our revenue streams and entered a wider range of information services, including data for pre-transaction analysis and post-transaction performance assessment. It was. A Moody’s Investors Services report last week predicted “future deals that extend to non-traditional acquisitions of data, technology, cybersecurity, software services, etc.” for exchange operators.

Revenue impact will not occur for some time as new competition is phased in after testing and development and the exchange continues to have packages containing the most detailed data to sell to the most sophisticated customers. There is a possibility. The exchange, like any other measure, can also challenge the SEC in court. In addition, from a data and price protection perspective, there are other parts of the rule that can theoretically increase earnings or volume, such as treating trading orders for a particular sub 100 share as if they were larger orders. Analysts at Piper Sandler argue that as high-priced stocks trade more, the number of stocks tends to decrease, potentially moving from off-exchange locations to the exchange.

According to Moody’s, this year’s retail trading boom will support exchanges through initial public offering listing rates, but retail trading tends to take place off-exchange, so the overall volume is It doesn’t affect much. Different phases of the market, characterized by some change in that trend, or increased volatility or uncertainty about rates, can cause a more institutional tilt that helps the exchange share of overall activity.

Stocks of four major US exchange companies, including CME Group,

It has not caught up with the overall 15% rise in S & P 500 Financial over the last three months. In part, it reflects investors’ focus on short-term vaccine-driven credit, banking and other economic rebounds, but this does not provide a clear boost to the deal. This delay and sold-out data rules trade one way to bet on long-term rises in rates and volatility.

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New data rules are not the big picture of exchange stock tapes

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