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Roundtable on Market Data and Market Access

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Roundtable on Market Data and Market Access Page 1 THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION ROUNDTABLE ON MARKET DATA PRODUCTS, MARKET ACCESS SERVICES, AND THEIR ASSOCIATED FEES Thursday, October 25, 2018 10:30 a.m. U.S. Securities and Exchange Commission 100 F Street, NE Washington, D.C. Page 2 Page 4 1 PARTICIPANTS: 1 C O N T E N T S 2 2 PAGE 3 Jay Clayton, Chairman 3 Opening Remarks 5 4 Kara Stein, Commissioner 4 5 Robert Jackson, Jr., Commissioner 5 Panel One - Overview of Current Landscape 6 Elad Roisman, Commissioner 6 for Market Data Products and Market Access 7 Hester Peirce, Commissioner 7 Services 24 8 Brett Redfearn 8 9 John Roeser 9 Panel Two - SIP Core Data Products and Exchange 10 Mark Donohue 10 Top-Of-Book Data Products 104 11 David Shillman 11 12 Dan Gray 12 Panel Three - Exchange Depth-Of-Book Data 13 Hans Heidle 13 Products and Market Access Services 176 14 14 15 Panel One 15 Closing Remarks 240 16 Doug Cifu 16 17 Chris Concannon 17 18 Stacey Cunningham 18 19 Brad Katsuyama 19 20 Mehmet Kinak 20 21 Hal Scott 21 22 Tom Wittman 22 23 23 24 24 25 25 Page 3 Page 5 1 PARTICIPANTS(CONT.): 1 P R O C E E D I N G S 2 Panel Two 2 MR. REDFEARN: Good morning. Welcome to the 3 Oliver Albers 3 Securities and Exchange Commission Staff's Roundtable on 4 Matt Billings 4 Market Data and Market Access. I'm Brett Redfearn, 5 Michael Blaugrund 5 Director of the Division of Trading and Markets and I 6 Jeff Brown 6 will be moderating the first panel today. 7 Simon Emrich 7 We very much appreciate the willingness of such 8 Adam Inzirillo 8 a thoughtful and diverse representation of market 9 Mark Skalabrin 9 participants to join us here today so that, together, we 10 10 can address the important and challenging set of issues. 11 11 I am confident that the discussions we will have over 12 Panel Three 12 the next two days will allow us all to consider, in a 13 James Brooks 13 rigorous and comprehensive way, how we might bring 14 Michael Friedman 14 greater transparency and clarity to our critical market 15 Chris Isaacson 15 data and connectivity infrastructure. 16 Vlad Khandros 16 I also want to introduce my colleagues and 17 Jamil Nazarali 17 panel moderators here with me. David Shillman and John 18 Ronan Ryan 18 Roeser, Associate Directors in the Office of Market 19 Joseph Wald 19 Supervision; Dan Gray, Senior Special Counsel, also in 20 20 the Office of Market Supervision; Mark Donohue, Senior 21 21 Policy Adviser in the Office of Analytics and Research; 22 22 and Hans Heidle from the Division of Economic and Risk 23 23 Analysis. 24 24 I would also like to thank my staff in the 25 25 Division of Trading and Markets for putting this all 2 (Pages 2 to 5) Page 6 Page 8 1 together, especially Arisa Kettig. 1 ago. Technology and communications at the time were not 2 So now I would like to welcome Chairman Clayton 2 as fast or as data rich as they are today. In the 1970s, 3 and Commissioners Stein, Jackson, Peirce and Roisman, our 3 mainframes were at the nexus of information processing. 4 panelists and our audience members who are here in person 4 And a state-of-the-art mainframe took up an entire room 5 or tuning in remotely. 5 and could store only a small portion of the data stored 6 So with that, I would like to begin by asking 6 on my smartphone. And that mainframe was also 1,000 7 Chairman Clayton to make his opening remarks. Chairman 7 times slower and it cost 10 times more. As technology 8 Clayton. 8 has developed over the last 40 years, so too has the 9 CHAIRMAN CLAYTON: Thank you, Brett. Good 9 market's use of data. Today, our major financial 10 morning, everyone. 10 institutions are, in effect, tech companies. 11 I want to thank the Division of Trading and 11 The issue before us today is has securities 12 Markets for organizing this Roundtable on Market Data and 12 market regulation kept up or do we need to adapt it to 13 Market Access. This roundtable is an important step in 13 better work in a computerized marketplace? 14 what will be a broad and open-minded review of a set of 14 To understand where we are today, I think we 15 issues that people have been raising for some time. I am 15 need to understand why the current regulatory system was 16 delighted at the level of participation we have. We have 16 enacted in the first place. At the time the central 17 very broad and diverse perspectives, including those of 17 market system was created, the Commission was concerned 18 investors, exchanges, brokers and other market 18 that, quote, there is no way that an investor can be 19 participants. And the caliber and experience of our 19 certain the investment process is working for him or her 20 panelists is really all we could ask for, so I thank you 20 all the time, end of quote. The solution was to create a 21 all for being here. 21 communications and regulatory system that would, quote, 22 I want to actually be quite brief here. It's 22 give the investor's order constant protection and 23 funny, when people say my remarks are going to be brief, 23 representation in all markets at the same time, end of 24 then everyone is thinking, oh, my God, I can't believe 24 quote. 25 how long this is going on. I know there are diverse 25 In authorizing the creation of such a system, Page 7 Page 9 1 views. I know these views are emotionally held. 1 Congress had two goals. The first was the centralization 2 I encourage you to state your views with vigor 2 of all buying and selling interests. The second was the 3 -- excuse me -- maybe not that much vigor -- 3 protection of the priority of public orders, so that each 4 (Laughter.) 4 investor would receive the best possible execution of his 5 CHAIRMAN CLAYTON: -- state with vigor and 5 or her order, regardless of where in the system it 6 support. But I also ask all participants to think about 6 originated. In other words, the goals were to update the 7 what will best serve our Main Street investors who are in 7 market system to reflect the realities of increased data. 8 the market for the long term. 8 As then-Chairman Bradford Cook said, the public investor 9 As I have often said, and I am speaking for 9 is, quote, looking at a goldfish bowl while really living 10 myself, not the Commission or any of my colleagues, if 10 in the middle of an aquarium, end of quote. While I 11 you want to appeal to me, explain to me why what you want 11 would say today, the public investor is looking at an 12 is in the interests of people who are in the market for 12 aquarium, when we are really living in an ocean. 13 the long term. 13 Have our rules withstood the test of time? 14 I look forward to an insightful and 14 Have we achieved Congress's goals? Were there any 15 constructive discussion. Thank you. 15 unintended consequences? I'm interested in hearing 16 MR. REDFEARN: Thank you, Chairman. 16 everyone's thoughts on these issues. And I am also 17 Commissioner Stein. 17 interested in hearing everyone's thoughts on other issues 18 COMMISSIONER STEIN: I also want to welcome 18 related to market data. 19 everyone to today's roundtable. And I want to thank the 19 Does market data need to be nearly 20 Chairman, and join the Chairman in thanking the Staff for 20 instantaneous to be relevant? What system should we 21 organizing it. 21 develop to ensure today's investors receive the best 22 I think my remarks are medium length, given 22 possible execution of their order? And how much should 23 Jay's length. But I was just going to briefly frame some 23 that system cost and who should pay for it? And what 24 of the issues. 24 incentives should be in place to ensure that market data 25 The central market system was born 40 years 25 is relevant and reliable? 3 (Pages 6 to 9) Page 10 Page 12 1 Sometimes we defer these simple but difficult 1 of data on the exchanges are a key element of the market 2 questions. And that often means that new issues or 2 data story. 3 conflicts may arise. For example, the NMS planned 3 A competitive market won't permit you to charge 4 governance committees oversee the National Market System. 4 much more than it costs a product to be produced. But I 5 But can they be inherently conflicted because they work 5 can tell you it's an area where we have little to no 6 for the exchanges? 6 information. So one of the things I hope to learn about 7 So I encourage you all to tackle these simple 7 today and what I want to see going forward is real 8 but difficult questions and I look forward to the 8 transparency and disclosure into how much it costs to 9 discussion.
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