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Tim Quast
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July 31, 2003

Schwab, Bloomberg vs. Liquidity Quote

By Gregory Bresiger

Now Charles Schwab & Co. has joined with Bloomberg Tradebook in its petition against the Big Board's Liquidity Quote service.

Liquidity Quote, along with the NYSE's OpenBook product, is "discriminating" against individual investors. It is hurting them because they usually cannot afford these services, Schwab wrote in a brief to the Securities and Exchange Commission. The two services cost $600 a year, which is usually a big concern for individuals, Schwab said.

"This may not be a significant cost for highly active traders or market professionals. However, it is far too high a cost for retail investors to pay," according to the Schwab brief.

Schwab argues that these "excess market fees" can "distort competition and encourage manipulative market behavior." Schwab also charges that these services are part of a trend "in which markets attempt to leverage their monopolies to create new revenue streams for themselves."

"We believe that these data services all need to be reformed. They should not be profit centers for exchanges," W. Hardy Callcott, general counsel for Schwab, told Traders Magazine.

Callcott said these data services are "very profitable" for the NYSE, which he says the Big Board uses to pay for regulatory expenses.

And he said the NYSE should offer Nasdaq's non-professional fee service, which costs $5 a month.

But the NYSE, in its response to the Schwab brief, told the SEC that it had already considered these matters. Schwab officials, the Big Board said, is trying to "relitigate" issues that have already been decided.

"In deciding to approve Liquidity Quote," NYSE's lawyers write, "the Commission already considered the Schwab market structure concerns regarding the current market data system in relation to Schwab's retail customers."