Non-display fees

[kmiklas]

How will you pay the staff? insurances ? servers ? offices ? 1$ per contract or whatever the price is on futures will barely cover your servers and maybe a little bit of technology, but you still have to build robust software, regulatory cost etc... etc...

All the same challenges that Joshua Levine faced when he built Island. Read the book "Dark Pools."

There is a real market force at work here: a generation of people who were brought up with laptops and phones. They know how to write code, and are not afraid to use their skill to gain an edge by writing algorithms to analyze market data.

Exchanges can dam the flow with non-display fees and other devices, but the demand is there. The innovation cannot be suppressed.

I even question why we are pricing in pennies. Even a novice programmer knows that a floating point number (say a C++ double) can hold 10 significant figures. Why can't I pay a price of 31.2374866492 per share of CSCO? This penny pricing reminds me of 8th's pricing that we saw not too long ago.

The truth of the matter is that exchanges have again fallen behind technology; perhaps more importantly, have fallen behind the Information Generation.

 

[Shreddog]

This is no joke. Individual automated traders are seeing their monthly costs go from 500-2K/month to 10-20K/month. Small traders cannot absorb this price increase. Forcing out market participants can't be what the SEC envisioned, yet here we are. The SIP should essentially be free, it is a public utility, not NYSE's private piggy bank. Between NYSE greed and SEC incompetence we are going to end up in a market where only the most elite firms are still in business, cementing their monopoly.

My biggest hope is NYSE starts coming after IB's API users. Then, maybe, it will get people's attention.

Robert, is NYSE coming after all Sterling users only at your firm or across all firms?

 

[Robert Morse]

NYSE audited all PTS owned products including Lightspeed Trader API and Sterling TRader API. They explained their new definition of non-display to clarify it.

https://www.ctaplan.com/publicdocs/ctaplan/notifications/trader-update/CTA Non Display Use FAQ.pdf

Q: What is non-display use?
A: Non-display use of real-time Market Data means accessing, processing or consuming Market Data, whether delivered via direct and/or redistributor data feeds, for a purpose other than in support of data recipient’s display or further internal or external redistribution.
Q: Who is required to complete a non-display declaration?
A: Every customer who is receiving a datafeed is required to complete a non-display declaration for their use of that data feed.

We asked for an extension until all APIs as being pushed to do this, and they said no. They expect everyone to comply. I don't know what the communication will be from Sterling to uses outside our firm. We were told that this will be the norm very soon. That is all I know. I think it is unfair that a firm with 50 traders will pay the same as one trader. I think it is unfair that a trading firm with $5B in capital will get charged the same as a guy with $50K that uses it to load a spreadsheet to monitor statistics vs HFT.

 

[kmiklas]

In my mind, "non-display" means "no API." An Application Programmer Interface (API) is, by definition, not for display, but for processing with code that is not displayed to the screen.

This is crushing to smaller investors.

What I am uncertain about is the intention of these fees. Are they intentionally trying to eliminate smaller, API-using, algo-writing investors; or, is the target of the fees some other entity (HFT firms?), and they're being misapplied to smaller investors.

 

[lspdtrdr]

This just put me out of business if I can't find some way to adapt.

I trade at Lightspeed, and if I continue to use what I use now, I'm looking at +20k/mo just in data fees. This is literally just for NBBO/trades and Nyse Imbalances. (The OP wasn't counting "Access Fees", which they levy ON TOP of non-display fees to the tune of +50%).

By the way, I use maybe 100 symbols at a time? What a scam.

Robert, if these fees are at the "firm" level, what about creating an entity for API users? Very vanilla: no overrides, no additional leverage, etc. What do you think?

 

[algonoise]

Echo the general sentiment here. There is a disturbing trend of exchanges seeking to squeeze more revenue out of data and connectivity fees. This hurts all algo traders, but is particularly damning to small and mid-sized traders, who face greater margin compression. I don't think there is an ulterior motive to the price gouging. It's simple, they are short-sighted and greedy and want to keep squeezing algo trader revenues because they know that as a whole these traders can and will begrudgingly tolerate price increases.

 

[terr]

This applies only to "professionals" AFAIU from the docs supplied. Can one be a non-professional "algo trader"?

Again, AFAIU this is the definition of "professional" (from IB):

• Is registered or qualified with: the Securities and Exchange Commission, the Commodities Futures Trading Commission, any state securities agency, any securities exchange or association, or any commodities or futures contract market or association.
  
• Is engaged as an "investment advisor" as that term is defined in Section 201(11) of the Investment Advisor's Act of 1940 (whether or not registered or qualified under that Act).
  
• Is employed by a bank or another organization that is exempt from registration under Federal and/or state securities laws to perform functions that would require him or her to be so registered or qualified if he or she were to perform such functions for an organization not so exempt.
  
  Non-Professional - is any natural person and cannot be a corporation, trust, organization, institution or partnership account.
  
  

Seems like most individual algo traders would be "non-professionals" and the fees would not apply?

Scottrade's explanation of professional vs non-professional is as follows:

Typically, a user is considered Professional if any of the following criteria is met:

• You use market data for business purposes.
• You are registered or qualified with FINRA, the CFTC and/or the SEC.
• You are located within or outside of the United States and you perform any job functions similar to those that would require you to be registered with FINRA, the CFTC and/or the SEC.
• You trade on behalf of others for your personal benefit, provide investment advice and/or are engaged as an asset manager.

Again, seems like individuals who are algo trading for themselves are non-professionals according to this.

 

[Joan]

where does it say that it only applies to professionals?

I'm certainly not a professional and I have been warned about these fees if I want to use the Lightspeed API for the NYSE

 

[lspdtrdr]

This applies only to "professionals" AFAIU from the docs supplied.

The docs you supplied are for market data fee assessments for display pricing.

There is no professional/non-professional designation for non-display. The exchanges were very careful to leave that out.

According to NYSE, any subscriber, firm or individual, using data to make trading decisions via API, is apparently liable for the fee. Whether that person has a $5k IB account automating their investments, or is Virtu.

They're being very aggressive, and I don't think the SEC would agree with how they're applying this. Maybe some letters are in order.

 

[oversea]

In my experience, at least with futures exchanges, non-professionals do not categorically get a free pass on non-display data fees.

Although I have seen, but being a non-professional and depending on what you're doing with the data, does afford you some leeway with the exchange, that they may waive the fees. Naturally, it probably also depends on who is doing the asking and to whom.

More importantly, as it applies to the OP, if you'd be satisfied with IQFeed (and you're intending to trade with the data, and on the markets/instruments that you're receiving data for), I wouldn't be so concerned. I have a hard time believing you are the intended 'target' of these non-display fees (or this fresh interest in enforcing them). I don't think you have to be terribly worried about all of the sudden being charged $6k/month along with your ≈ $100-200 IQFeed/MD subscription, anytime in the near future.