The Sensitivity of Trading to the Cost of Information

29 Pages Posted: 14 Mar 2020

See all articles by Alex Frino

Alex Frino

University of Wollongong

Ognjen Kovacevic

Macquarie University

Vito Mollica

Macquarie Graduate School of Management; Capital Markets CRC Limited (CMCRC); Macquarie University, Macquarie Business School

Robert I. Webb

University of Virginia - McIntire School of Commerce

Date Written: November 10, 2019

Abstract

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

Frino, Alex and Kovacevic, Ognjen and Mollica, Vito and Webb, Robert I., The Sensitivity of Trading to the Cost of Information (November 10, 2019). Available at SSRN: https://ssrn.com/abstract=3540624 or http://dx.doi.org/10.2139/ssrn.3540624

Alex Frino (Contact Author)

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Ognjen Kovacevic

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia
416232607 (Phone)

Vito Mollica

Macquarie Graduate School of Management ( email )

Capital Markets CRC Limited (CMCRC) ( email )

Level 3, 55 Harrington Street
Sydney, 2000
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Robert I. Webb

University of Virginia - McIntire School of Commerce ( email )

Rouss and Robertson Halls 125 Ruppel Lane
Charlottesville, VA 22903
United States
(434) 924-7570 (Phone)

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