Market Data Fee
A market data fee is a charge levied by a stock exchange for access to its proprietary real-time quote and trade data, including depth-of-book information, direct data feeds, and co-location services that transmit market information faster than consolidated SIP feeds.
Market data fees have become one of the most contested topics in US equity market structure. US stock exchanges earn a substantial portion of their revenue not from transaction fees but from selling access to their proprietary data — the raw streams of order book updates, quote changes, and trade reports that exchanges generate as trading occurs on their platforms.
There are two tiers of market data. The consolidated SIP feeds, described under Regulation NMS, are available at regulated prices and provide the NBBO and last-sale information. Above this baseline, exchanges sell proprietary direct feeds — sometimes called Level 2 or depth-of-book data — which include the full order book, all quote levels, and latency that is significantly lower than the SIP. These proprietary feeds are priced at the exchange's discretion and can cost tens of thousands of dollars per month for institutional subscribers.
Critics, including major asset managers and broker-dealers, argue that exchange market data fees have risen dramatically since the fragmentation created by Regulation NMS gave exchanges market power over their own data. They contend that exchanges have a regulatory obligation to share data but face no competitive constraint on pricing that data, creating a de facto monopoly revenue stream.
Exchanges counter that their data feeds are the product of significant technology investment and that competitive alternatives — such as building proprietary trading systems to estimate order book state — exist for those who object to fees. They also note that consolidated SIP data is available at regulated prices for those who do not require the lowest latency.
The SEC's 2020 market data infrastructure rules attempted to address fee governance by restructuring the committees that set SIP fees, giving buy-side participants a formal vote. The rules also required expanded content in SIP feeds to narrow the gap between what is available in the consolidated tape and what is available in proprietary feeds.