Google, Yahoo ask SEC to review higher fees for stock quotes
EmptyNEW YORK -- Google Inc., Yahoo Inc. and other Internet companies are asking the Securities and Exchange Commission to review fees that U.S. stock exchanges charge for market data, challenging a major source of income at the exchanges.
NetCoalition.com, a Washington-based trade group whose members include Yahoo, IAC/Interactive Corp. and CNET Networks Inc., will petition the SEC Tuesday to halt recent fee increases that the New York Stock Exchange imposed for displaying trading data from its Archipelago electronic market, said Markham Erickson, NetCoalition.com's executive director.
"The exchanges are increasingly seeking to restructure fee arrangements with the most popular Web sites and Internet companies in order to maximize the exchanges' profits at the expense of average consumers and investors," Erickson wrote SEC Chairman Christopher Cox in a Nov. 6 letter.
NetCoalition.com believes the exchanges may seek to charge by the number of viewers of stock quotes on currently free Web pages, Erickson said in a phone interview.
In a formal petition for review of the NYSE increases Tuesday, Net.Coalition.com also will ask the SEC for a comprehensive review of market data issues.
"We are asking them to decide whether there should be a more rigorous review of what is being provided and at what cost," he said. Exchanges have a right to charge fair and reasonable fees for their data, but haven't explained their methodology in their rate applications. The SEC might want to study how the distribution of data to hundreds of millions of Internet users contributes to market liquidity and trading fees at the exchanges, he said.
Internet companies are willing to license a certain amount of information, but fear that without a policy scheme from the SEC they will be at the mercy of the exchanges and may ultimately have to change their free-access models.
"It's not about whether Google can afford to pay," he said. "It's about whether costs will have to be passed on to consumers."
Yahoo Finance, AOL's Money and Finance, Forbes.com and other financial Web sites have already stopped displaying real-time quotes from electronic marketplaces owned by the NYSE and the Nasdaq Stock Market because of fee increases.
Time Warner Inc.'s AOL unit, which isn't part of NetCoalition.com, pulled the real-time data on Sept. 1 after the exchanges started charging $1 per month per viewer of their data. The increase made it "prohibitively expensive" to offer the information for free, said Mary Moe, general manager of AOL Money and Finance. The quotes, which had been free from the exchanges, are now available real-time for a fee on AOL.
"The result is that market data information seems to be one of the only areas of the World Wide Web where Internet users cannot easily access real-time information," NetCoalition.com wrote Cox last week.
The SEC's division of market regulation on October 12 approved higher fees for Archipelago data, some of which were previously free. NetCoalition.com's decision to seek formal review of the increases puts the approval on hold and rolls back the price rises, said Robert Colby, deputy director of the SEC's division of market regulation.
Nasdaq Stock Market also has proposed higher market data fees on some products, including a 30% increase in a basic level service trading and compliance data package, NetCoalition.com said. The SEC hasn't yet ruled on the application.
Securities firms, the biggest users of the data, have long squabbled with exchanges over market-data charges but outside pressure from Internet firms are likely to cast a longer public-interest shadow.
"This matters a lot to the exchanges," Colby said. "It's a considerable part of their revenue."
Market-data fees typically provide 10% to 20% of the NYSE's revenue, and much more at regional exchanges such as the Philadelphia Stock Exchange and Chicago-based National Stock Exchange.
Nasdaq, which doesn't break out its market-data fees, sells real-time data to more than 100 distributors, it says on its Web site. "Nasdaq reaches approximately 2 million professional and non-professional data subscribers by delivering data to vendors, who redistribute and make the data available to end users," according to data on the exchange's Web site.
Spokesmen for the NYSE and Nasdaq didn't return calls for comment.