by Wayne A. Thorp
The days of free Web-based real-time market data may be numbered for individual investors if proposals from two major U.S. stock exchanges are allowed to go into effect. A battle is brewing between such Internet heavyweights as Yahoo Inc. and Google and the New York Stock Exchange (NYSE) and the NASDAQ Stock Market, which derive millions of dollars each year from fees they charge for data.
Most of us probably think of a stock exchange as a place where the shares of listed companies are bought and sold. However, stock exchanges are much more than that: Today, exchanges such as the NYSE and NASDAQ derive a substantial amount of revenues from selling trading and related data to securities firms, third-party data providers and operators of Web sites.
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During the dot-com boom of the late 1990s, real-time market data from electronic communication networks such as Archipelago and Instinet was a staple of most financial Web sites. However, after the NYSE bought Archipelago and NASDAQ purchased Instinet, you could only find free real-time stock quotes at on-line brokerage sites or from a handful of financial sites. The ranks were thinned even more last year after NASDAQ raised its fees for providing real-time market data. A common practice is to charge Web sites each time a new or unique visitor views a Web site. For the more popular financial Web sites, with millions of viewers each month, this is not an insignificant cost to bear. As a result, Yahoo!, Forbes.com and other sites have stopped offering free real-time quotes.
Faced with the rising costs of offering market data, NetCoalition.coma trade group whose trustees include Yahoo Inc., Bloomberg, CNET Networks and Googlehas been lobbying the Securities and Exchange Commission (SEC) to review the fees levied by the exchanges for market data. The SEC has agreed to review its approval of the NYSEs fee increase for distributing quotes on its Arca network. NetCoalition.com has also asked the SEC to stay any future fee increases so that it may conduct a full review of market data charges.
Given the amount of money involved here for both sides, it could take awhile before all this plays out.
Real-Time Data for Technical Analysis and Charting
In a similar vein, beginning this year, subscribers to real-time quote and charting services will probably have to pay a little more to access real-time market data as well.
Typically, in order to receive real-time data for stocks, futures, and options, exchanges impose a monthly fee that is in addition to the charge for the quote or charting service. There is usually a two-tier structure in place, with professionals normally paying significantly higher fees than non-professionals. For non-professionals, these monthly fees can range from $2 for real-time NASDAQ, NYSE, and American Stock Exchange quotes to as much as $97 per month for real-time New York Board of Trade data.
Several exchanges increased the fees for real-time access to their data, including the Options Price Reporting Authority (OPRA), Chicago Mercantile Exchange (CME), and the Chicago Board of Trade (CBOT).
The comparison beginning on page 9 in this issue highlights several of the top on-line technical analysis and charting services, some of which offer real-time capabilities.