The Toronto Stock Exchange Broadcast Centre in Toronto.MARK BLINCH
Canada's investment dealers are pushing to have regulators step into a long-running fight with stock markets over the price of data such as quotes to set limits on the prices.
The Investment Industry Assocation of Canada Tuesday called for "pro-active regulatory oversight of the pricing of market data," which the brokerages say is priced by markets with a virtual monopoly on data sales.
The particular focus is on TMX Group Inc., which gets a big chunk of revenue from data sales. IIAC hired a U.S. consulting firm to produce a report on the situation. According to the report, regulators "cannot rely on competitive market forces to provide securities market data to investors on fair and reasonable terms."
The report marks the latest salvo in a long-running battle between the brokerage industry and the stock market operators over data.
The group has been pushing TMX to lower prices for years, and TMX recently said it would. IIIAC isn't satisfied, saying the cuts are not deep enough.
In addition to the TMX, IIAC is now planning to push Canada's multiple alternative trading systems to lower their fees. In total, they collect much more relative to their market share than TMX. That will pit the industry group against Alpha Group, the biggest ATS, which is owned by the brokerages.
If that doesn't work, the regulators will be the next stop.
"You don't go complaining to the principal before you have had a discussion with the teacher," said Doug Clark, managing director of research at brokerage ITG Canada. Mr. Clark has been working on the issue for IIAC.
On the data side, the industry has long argued that the total bill that brokerages pay in Canada to markets to see quote and trade data is far too big. It now runs close to $200 a month to get access to all the necessary markets, with about 40 per cent of that going to the TMX and the other 60 per cent going to smaller alternative trading system, according to the report.
According to the IIAC-commissioned study, Canada's data prices are high relative to the rest of the world.
An interesting wrinkle in IIAC's argument are the implications for the bank-backed Maple Group bid for TMX Group. If there's monopolistic behaviour in data sales already, as the IIAC-backed report says, what are the ramifications of more concentration in the trading business that would come with the Maple plan to buy TMX and merge it with Alpha Group, the biggest alternative trading system, and CDS Inc., the main stock clearinghouse?
IIAC said that in such a merger, regulators would have to oversee pricing of services such as trading, listing and clearing in "any corporate restructuring that results in further consolidation of the stock exchanges and ATSs in Canada."
In other words, the industry association, which represents the four brokerages that are so far part of Maple Group's effort to take control of TMX, is arguing regulators need to be careful with the high market share in clearing, listings and and trading that would result from Maple's success.