Business As Usual

For all the talk of increasing transparency and a new, fresh approach to market structure and SROs, the SEC has just approved FINRA’s filing to charge between $12k-$18k for machine-readable access to FINRA’s ATS volume data. This is in direct contravention to President Obama’s May 9, 2013, Executive Order, titled “Making Open and Machine Readable the New Default for Government Information,” which stated: “Openness in government strengthens our democracy, promotes the delivery of efficient and effective services to the public, and contributes to economic growth. As one vital benefit of open government, making information resources easy to find, accessible, and usable can fuel entrepreneurship, innovation, and scientific discovery that improves Americans' lives and contributes significantly to job creation.”

Executive Orders have the rule of law, and this particular one specifically applies to agencies. While FINRA’s response at an in-person meeting was, “Well, we’re not an agency,” such a fine legal distinction is lost on those of us with common sense who understand that Self-Regulatory Organizations are extensions of a regulatory agency.

While the cost of access is egregiously high (and justified by FINRA in comparison to private firms, an apples-to-oranges comparison that SIFMA also found to be absurd), there’s a deeper issue here. KOR’s comment letter arguing against this filing pointed out that FINRA will provide access to the data to academics and reporters (not the public) as non-professionals, meaning that they will not be able to publish any derived data that they generate. FINRA’s response to this point was to say that it will provide, on an ad-hoc basis, access to these parties with separate legal agreements each time they want data.

Surely FINRA is missing what is important here? The regulator clearly does not understand the principles of open access to data, the benefits that can be realized, and the subjectivity and conflicts that naturally arise with a gatekeeper to that data.

It seems FINRA is going above and beyond to attempt to obstruct easy access to this data in a machine-readable format. Here was an opportunity for FINRA to step up and provide a level of transparency that the industry desperately needs, and it failed us. Here was an opportunity for the SEC to step up and show that talk of transparency is more than just talk; that it is taking real action. Yet it once again has failed to make substantive changes to its approach to market structure.

This entire issue may seem small, but it’s much more important than it may appear on the surface. Regulators need to fundamentally change how they approach access to data. We have a data crisis in US financial markets; academic and public research is crippled, and yet we are just getting Business as Usual from the regulators. We don’t need more talk from the SEC and FINRA, more speeches and more hearings; we need action.

If the SEC and FINRA won’t act in the industry’s best interests, the industry has to rise to the challenge. The Healthy Markets Initiative is our proposal for doing so, but in the meantime other ATSs can follow LiquidnetKCG and IEX’s lead and make the machine-readable data available to the public directly.