2014 Review: In US, Consolidated Tape Saga Comes Full Circle

The year started in dramatic fashion when Nasdaq OMX revealed that it had quit its role as operator of the Securities Information Processor (SIP) that collects data on Nasdaq-listed stocks, calculates a best bid and offer, and distributes the consolidated feed of quote and trade data to industry participants.

According to a source familiar with the situation, the UTP Committee that oversees the administration of the tape had been dragging its heels over approving recommendations made by Nasdaq in the third quarter of 2013 to improve the SIP’s operational resiliency, disaster recovery capabilities and governance, after Nasdaq suffered a SIP overload in August that forced it to halt trading in all stocks listed on the Nasdaq Stock Market and options traded on its NOM, BX and PHLX markets for three hours.

No doubt keen to address the bad press around the outage, as well as reassure its own trading members, Nasdaq made its recommendations to the UTP Committee, but was frustrated with the pace at which the changes were being approved. The tactic worked: in February, the UTP Operating Committee approved the exchange’s recommendations.

However, as Nasdaq had already declined to renew its contract past 2015, the UTP Committee was obliged to move ahead with a tender process to find a new SIP processor, though unsurprisingly, Nasdaq re-bid for the role. According to officials from Jordan and Jordan, the US consultancy managing the request-for-proposal process on behalf of the UTP Committee, the tender process would allow the committee to secure new and improved terms for the overall capacity and latency of the SIP.

Finally in November, after several rounds of voting, the UTP Operating Committee selected Nasdaq from 23 potential bidders as UTP processor and administrator. Under the new deal, Nasdaq will set up a subsidiary to manage its UTP-related activities, and will register as exclusive Securities Information Processor with the Securities and Exchange Commission.

Also this year, the Options Price Reporting Authority renewed its contract with the Securities Industry Automation Corp (SIAC), NYSE Euronext’s technology arm, to manage the SIP that collects data from US options exchanges, calculates a best bid and offer, and distributes OPRA’s consolidated feed of options trade and quote data. The OPRA Committee made its final decision to re-sign with SIAC on May 20 in a deal that will last until the end of 2021.

Meanwhile in October, the UTP Operating Committee and the Consolidated Tape Association (CTA) that oversees the collection and distribution of Tape A and B data on stocks listed on the New York Stock Exchange, NYSE Arca, NYSE MKT and other regional exchanges, introduced new non-display fees and higher per-quote fees for its consolidated tape, but reduced per-device rates.

The new fees for Tapes A and B were initially proposed in 2013, but had been declined after industry associations including the Security Traders Association of New York (STANY) wrote to the SEC to protest the changes.

Similarly, the UTP Plan was forced to postpone its 2013 fee hike for Tape C after the Securities Industry and Financial Markets Association (SIFMA) accused it of not following the correct consultation protocols for introducing new fees. With both of these battles seemingly resolved, the new fees are scheduled to come into effect on Jan. 1, 2015.