Economics of the Stock Exchange Business: Proprietary Market Data

The price of proprietary market data, data with low latency and with complete depth of book, sold by exchanges has risen dramatically in the previous decade. In fact, in October, 2018, the SEC failed to approve a requests by NASDAQ and NYSE-ARCA to raise the price of their data. The paper conceptually analyzes the nature of the demand for proprietary data and concludes that, for a significant part of the market, data from different exchanges are complementary--buying NASDAQ proprietary data increases the usefulness of NYSE-ARCA data. As a consequence, we should not expect competition between the 13 exchanges to constrain prices. This is in contrast to net trading fees, which are driven by competition to reasonable levels.