The Sensitivity of Trading to the Cost of Information
29 Pages Posted: 14 Mar 2020
Date Written: November 10, 2019
This study examines the impact of changes in data feed pricing schedules on the price discovery between competing venues, as espoused by Cespa & Foucault (2014). We utilize three exogenous events stemming from a staggered increase in the data feed price that transpired on the Chicago Mercantile Exchange and observe a decrease in the efficiency of price discovery following increases in the acquisition costs of exchange’s data feeds, in line with the theory. Our results indicate that the regulators need to closely monitor any increases in data fees since these not only redistribute income from the traders to the exchanges but also affect the quality of the market via price discovery, one of the market’s most important functions.
Keywords: Exchange, pricing schedules, trade
JEL Classification: G10, G14, G15
Suggested Citation: Suggested Citation