An ruling from the U.S. Securities and Exchange Commission (SEC) that shot down certain market data fees at a couple of major U.S. stock exchanges is a negative for the exchange companies. says New York-based Moody’s Investors Service in a new report.
Last week, the SEC set aside certain fee increases for market data on exchanges operated by the Intercontinental Exchange Inc. (ICE) and Nasdaq Inc., after finding that the exchanges failed to justify the fees. The exchanges have both indicated that they intend to appeal the regulator’s decision.
The SEC’s ruling is credit negative for all operators of U.S. cash equity exchanges, including ICE, Nasdaq and Cboe Global Markets, Inc., Moody’s says the report, because the credit rating agency sees “an increased possibility that the legal challenges will be successful and there will be increased analytical and legal costs associated with defending the fees.”
Specifically, exchange operators must now create a process to consider more than 400 other rule filings that have been challenged by securities industry trade group, the Securities and Financial Markets Association and Bloomberg, LP “to consider the effect of the SEC’s first ruling on these challenges.”
A couple of SEC commissioners expect this to be “a momentous task for the exchanges, and they said significant sums will be spent on litigating each increase in data fees, which they said will almost certainly involve expensive analyses to establish that each increase is fair and reasonable,” the report says.
Conversely, the SEC’s rulings are credit positive for firms that pay for market data, the report says, such as global investment banks and high-frequency trading firms.