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Jared Dillian
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Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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December 1, 2000

Big Board to Exit Tape System?

By William Hoffman

The New York Stock Exchange is taking steps to pull out of the Consolidated Tape Association (CTA) and Consolidated Quotation System (CQS).

The NYSE didn't say what steps it was taking when it raised the issue during a meeting of the SEC's market information advisory committee in October.

One industry executive who was at the meeting said afterwards that "the current system has to be corrected."

"It's not clear yet whether it has to be scrapped," added Bernard Madoff, chairman of Bernard L. Madoff Investment Securities, who represented both his firm and the Securities Industry Association at the advisory committee meeting.

SEC Relationship

The CTA and CQS govern last sale and quotation information, respectively, for securities listed on the NYSE and the American Stock Exchange, and for certain other securities. The CTA and CQS are sanctioned by the SEC, though the agency does not govern or routinely oversee their activities.

The changes in the relationship between the CTA and the NYSE would have to be approved by the Securities and Exchange Commission.

NYSE representatives and their exchange counterparts at Nasdaq, as well as the options exchanges, will have the opportunity to present specific objections and proposed alternatives during a follow-up meeting of the SEC's advisory committee this month.

Joel Seligman, chairman of the SEC advisory committee, said industry participants - such as the NYSE - that want to end mandatory consolidation under the CTA, propose allowing every participant to sell data to independent vendors at market prices.

That's the way data dissemination works in many other industries, Seligman acknowledged. However, it's very different from the way the securities industry has distributed market data until now.

More Specifics

Madoff said accountability is at the heart of the matter. He said the industry wants more details on how the revenue taken in from CTA is spent.

"We know from speaking to the [self-regulatory organizations] that get the revenue that the majority is supposed to be used for regulatory budgets and the operations of exchanges," he added.

Seligman said perhaps more important than tracking how CTA money is spent and on what, is deciding whether to keep the current mandatory structure or adopt a more fluid, free-market model. He also noted that the NYSE's enthusiasm for scrapping the CTA does not appear to be shared by other exchanges.

Thus, all eyes were on the industry's presentations to the advisory committee this month.

"We owe it to everybody to make a more thorough evaluation of the old system," Madoff said.

Seligman, who is also dean at the Washington University School of Law, in St. Louis, said, "This is one of those areas where I really believe you tend to do things better when you see things in writing, when you have time to mull."