CTA Answers Vendor Concerns In Letter To Sec

The Consolidated Tape Association last week sent a lengthy memorandum to the Securities and Exchange Commission responding to the 12 comment letters that largely opposed the association's proposal to introduce a standard vendor contract form to replace diverse contracts the CTA writes with individual vendors (IMD, Jan. 22). The CTA, which administers the communications systems that report trade information, includes the New York, American, Boston, Cincinnati, Midwest, Pacific and Philadelphia stock exchanges.

Market data vendors, especially those that distribute delayed quotes, worry that the new form signals that the CTA plans to increase charges for delayed stock prices. The new contract doesn't define delayed data, while the old one described it as information that is 15 minutes old. Companies that sent comment letters to the SEC include Charles Schwab & Co., Fidelity Investments Inc. and Dow Jones & Co.

The CTA's letter to the SEC includes two sections -- one on "inapposite issues," those dealing with the vendors' worries about delayed data; and one about the benefits of the proposed consolidated form in a changing market environment.

"We have told the SEC they have sound reason to approve our [proposed] contract," says Tom Haley, CTA chairman. "Contrary to what's been stated by our contractors, we haven't introduced fees for delays. The new contract form is a substitute for prior agreements," he insists.

The letter to the SEC, signed by Haley, points out that most of the comment letters sent to the commission don't even address the substitution of a new form for the old contracts. Instead, Haley writes in the letter, the organizations that commented "are using the filing to pursue their own agendas before the Commission."

As an example of such an agenda, Haley cites the issue of delayed data, noting that the commentators "in recent years have developed significant economic stakes in delayed data dissemination by exploiting the gap in our pricing between real-time and delayed data." In the past, Haley has argued that discounts for delayed stock quotes are unfairly subsidized by real-time quote users.

Haley also writes that "we have not" determined to impose additional delayed service charges or to extend the delay period. But he notes that "even if we had...our existing agreements give us just as much right to do so as does the [proposed] Consolidated Form." What's more, he points out, the CTA would have to propose such changes to the SEC, something it hasn't done.

Haley further argues that the commentators have used the CTA proposal to change its form as an opportunity "to re-open discussion on long-standing contract provisions that thrust at the commercial and economic heart of the types of services they provide." He cites delayed price services as an example, calling such comments "peculiar" in the context of a new contract.

However, Haley writes that it is "our growing belief that the industry should de-emphasize delayed prices because real- time data has become so readily available and because it provides such a superior basis for making investment decisions."

Haley also addresses the commentators' concerns with the new form's "acknowledgement of our proprietary interests," noting that those "who would leap to the ramparts to defend their ownership of day-old data bases and to protect their copyright in day-old news articles find it unreasonable to acknowledge that our right to recover for our efforts in collecting, consolidating and making available market data extends beyond the 15th minute."

In the second section of the letter, Haley argues that stock trading, demand for data and number of vendors have grown dramatically in the past two decades. He says the proposed contract is another way the CTA is trying to keep pace with these changes.