What's in a price? Measuring the value of exchange data fees

This paper presents empirical estimates of the value of data-feeds from individual marketplaces in the trading of Canadian equities. These estimates are then contrasted with the actual fees charged by the marketplaces and an international comparison is made. We find that some marketplaces charge in excess of the 'fair' fee representing their contribution to price discovery. Further, we analyze how different metrics which are used by organizations such as the US Securities Information Processor can be manipulated to alter the distribution of revenues. The results of our analysis are useful not only to exchanges participating within a revenue sharing model, but also to regulators requiring a methodology by which to assess the value of the data sold by their national exchanges or when considering the imposition of a regulatory regime, and by market participants concerned about the fees they are charged for access to such data.