IIAC seeks stricter regulation of market data fees

The Investment Industry Association of Canada (IIAC) is once again calling on Canadian regulators to curb market data costs, a longtime concern for the industry.

In a letter to members of the Canadian Securities Administrators (CSA), the IIAC said “excessively high” market data fees raise costs for investors.

“The IIAC believes the exchanges’ monopoly on market data production and distribution should end because it creates an uncompetitive environment where the barriers to entry are almost insurmountable to other potential players,” it said in the letter to regulators.

“While we acknowledge that ending the monopoly could reduce exchanges’ revenue stream, it would also increase competition, foster innovation and benefit the broader market and investors,” it said.

Among other things, the IIAC argued that regulators should require trading venues to provide detailed disclosure on the costs involved with producing data and the revenue it generates. This would enable industry firms and investors to evaluate whether the market data fees are “fair” relative to costs, it said.

Once those costs are disclosed, the trade group said, the fees charged for data should be regulated in proportion to the costs.

It also called for regulators to have the power to audit the trading venues’ reported costs to determine whether they are accurate, and to oversee licensing contracts for market data to ensure that they are not too restrictive.

“This is consistent with the regulator’s public interest mandate given the importance of market data,” it said.

The regulators already oversee data fees and have previously sought to address industry concerns about the cost of market data.

In 2016, following a public consultation, the CSA adopted a new methodology for assessing and overseeing data fees (both new and existing fees), and markets are required to seek approval for changes to their fees.

Regulators’ reviews of these fees also include assessing whether data costs “unreasonably” limit access or discriminate among market players.

Nevertheless, the IIAC is now advocating for tougher oversight.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.