Competition and Exchange Data Fees

33 Pages Posted: 2 Nov 2020 Last revised: 8 Jan 2021

See all articles by Jonathan Brogaard

Jonathan Brogaard

University of Utah - David Eccles School of Business

James Brugler

University of Melbourne - Department of Finance

Dominik Rösch

State University of New York at Buffalo - School of Management; Erasmus University - Rotterdam School of Management

Date Written: January 7, 2021

Abstract

Exchanges are monopolist suppliers of their own order book data. We examine three events where exchanges begin charging a fee for order book data for the first time. The introduction of data fees leads to an economically significant fall in that exchange's market volume. The fall is caused by having less time at the NBBO and less intermarket sweep orders routed to the treated exchange.
Consistently, Rule 606 data indicates a drop in limit and market orders routed to the treated exchange. The change in trader composition leads to a decrease in information on the treated exchange. The results are consistent with informed trader's order routing strategies being the most responsive to data fees.

Keywords: Data Fees, Exchange Competition

JEL Classification: G12, G14

Suggested Citation

Brogaard, Jonathan and Brugler, James and Rösch, Dominik, Competition and Exchange Data Fees (January 7, 2021). Available at SSRN: https://ssrn.com/abstract=3703431 or http://dx.doi.org/10.2139/ssrn.3703431

Jonathan Brogaard

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

HOME PAGE: http://www.jonathanbrogaard.com

James Brugler (Contact Author)

University of Melbourne - Department of Finance ( email )

Faculty of Business and Economics
Parkville, Victoria 3010 3010
Australia

Dominik Rösch

State University of New York at Buffalo - School of Management ( email )

Jacobs Management Center
Buffalo, NY 14222
United States

HOME PAGE: http://dominikroesch.com

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

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