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December 1, 2002

Will SEC Move on Market Data? Agency Hints That New Pricing Model Is on the Way

By Gregory Bresiger

Harvey Pitt, still the chairman of the Securities and Exchange Commission, has raised questions about fees for market data.

At the SEC hearing in New York on market structure, an NYSE specialist told Pitt that fees -17 percent of the Big Board's revenue stream - have been unchanged for some 70 years. But Pitt wondered if that was a reasonable pricing method. He said one way of approaching the problem is to determine production costs and then add in a reasonable rate of return.

"Presumptively, if the costs were being set that way," Pitt said, "it would be highly unusual, if it came out to be 17 percent of total self-regulatory costs over 70 years, which suggests that costs are being set some other way."

Pitt said some people who pay the fees wonder how they are set and whether the costs of self-regulation can be recovered tying them to market data. "It's not just a question of what they're funding, but how they are set," Pitt said. Pitt asked why market data should be regarded as different than other financial information that a public issuer is required to file with the SEC. He also noted that IBM supplies corporate data to the investing public for free.

Pitt's statements, which may indicate that the SEC is ready to act on the sensitive issue of fees, was prompted by comments by Robert Murphy, chief executive at LaBranche & Co, a New York Stock Exchange specialist firm.