Planned Member-Owned Exchange To Lower Data Costs

Wall Street titans seek to create members-only stock exchange.

Some of the biggest firms on Wall Street have joined forces to create a members-owned exchange designed to simplify stock trading, lower the cost of shares and put an end to rapidly rising charges for crucial market data from the New York Stock Exchange (NYSE), Nasdaq and Chicago Board Options Exchange Global Markets, which are all publicly traded companies.

The Members Exchange, or MEMX, seeks to “increase competition, improve operational transparency, further reduce fixed costs and simplify the execution of equity trading in the US,” according to a statement from the founders. The group includes banks Morgan Stanley, UBS and Bank of America; as well as retail brokers TD Ameritrade and E*Trade Financial; and automated trading firms Citadel Securities and Virtu Financial. It also includes Charles Schwab, which is both a bank and a broker; and Fidelity Investments, an asset manager.

The new exchange is still selecting its management and is not expected to begin operating until next year, since it likely will take that long to win approval from the Securities and Exchange Commission (SEC).

The Securities Industry and Financial Markets Association, an industry trade group, complained last year that its members were paying up to 2,916% more than they paid in 2010 for the same data. Access to fast and accurate trading data is a necessity in today’s electronic markets. Last October, the SEC ruled against NYSE and Nasdaq in a dispute over data fees. The exchanges are appealing that decision in federal court.

MEMX does not plan to compete with existing exchanges in the business of listing stocks. The new exchange raised $70 million in its initial funding round.

“As a founding member of MEMX, we look forward to being part of an initiative we believe will transform markets for the better,” Steve Quirk, EVP of trading at TD Ameritrade, said in a January press release. “All types of investors could benefit from this simplified investing experience that will foster competition and promote practices that put the needs of investors first.”