Bloomberg just got slammed for exploiting a trading data loophole

First Bloomberg took a shot at the New York Stock Exchange. Now it’s facing return fire.

The financial data giant last week filed a letter with the Securities and Exchange Commission, complaining about changes to the fee schedule for some trading data.

The changes were a result of a “clarification” filed by the Consolidated Tape Association. NYSE is the CTA plan administrator, and Bloomberg’s letter focused in on the exchange group, a company it has been at loggerheads with for years.

In response, the chairman of the CTA plan operating committee has sent a letter to the Securities and Exchange Commission stating that Bloomberg had been exploiting a loophole to gain a competitive advantage.

The clarification relates to what’s called “top of book” data, which is considered essential for trading, and Bloomberg’s Server Application Program Interface (SAPI).

The “top of book” data has two fee schedules, one for display use (think of a human trader looking at it on a screen) and non-display use (think of data being piped into a trading algorithm). According to Bloomberg, NYSE sent it a letter on March 27 stating that the SAPI would now be considered a Non-Display Use, and that as a result costs would go up significantly. That was at the root of Bloomberg’s complaint.

Emily Kasparov, the chairman of the CTA plan operating committee and the Associate General Counsel at Chicago Stock Exchange, is firing back.
In a letter to the Securities and Exchange Commission, Kasparov said that Bloomberg had, in simple terms, been taking advantage of a loophole. She said:

“At its core, the Proposed Clarification is designed to halt a practice whereby a subset of vendors are mischaracterizing their customers’ usage and creating artificial loopholes for Non-Display Use and access fees in an attempt to obtain a competitive advantage over other vendors.


“Comment letters from SIFMA and Bloomberg highlight the improper pricing advantage that Bloomberg and certain other vendors gain by arguing that delivery of data via the Bloomberg SAPI should not be subject to the access fee, and depending on their customers’ use, the Non-Display Use fees.”


“As Bloomberg admitted, the Bloomberg SAPI allows data recipients to “view and download market data” and “run server-based applications on the market data.” As such, those data recipients making use of the Bloomberg SAPI are getting functionally the same product as those purchasing a data feed from another vendor or directly from CTA, but at a fraction of the cost. ”

The letter from the CTA plan follows an earlier admission from Thomson Reuters, which competes with Bloomberg. It said that it “fully supports” the amendment, saying it was a “clarification that is critically needed in order to level the playing field in the United States for equity exchange data.” It added:

“Thomson Reuters believes that fees for US equity market data are not currently being applied. In an even manner, benefiting some clients over others. This Amendment clarifies how the fees should be applied and should allow the administrators of the exchange data to apply the fees equally so that all clients pay the same price for the same service. Without this clarification, the industry will continue to operate in an inequitable way.”

This one could drag on for a while.

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