Online brokerages are crying foul after the nation's largest stock exchange has doubled the price it charges them for real time quotes.
The fee hike--imposed by the New York Stock Exchange from a half-cent to a penny per quote--is applied only to Net brokers such as E*Trade and Ameritrade. The increase, which still must be approved by the Securities and Exchange Commission, will not apply to full-service brokers.
"Obviously, we're not happy about it because it makes it hard for us to provide to our customers information that is important in making investing decisions," says Hardy Callcott, deputy general counsel at Charles Schwab, another online broker that will have to pay more if the increase is approved. "Especially with the markets being so volatile, customers really want the real time quotes, [and] under the current pricing structure, that's prohibitively expensive."
Representatives from the New York Stock Exchange did not return a phone call by press time.
Hardy contends that a 1975 law passed by Congress set up a consolidated organization for providing stock quotes that comprised all stock associations and the National Association of Securities Dealers. In effect, he said, the law established a monopoly that was required to make quotes available to investors and could charge only "fair and reasonable" prices for doing so.
"Since they do have this congressionally-established monopoly, they cannot charge whatever they want," Callcott says. "They've got to meet the standard in the statute."
While Schwab is leading the fight against the rate hike, other online brokerages also are expected to oppose the measure. Callcott said that, with the proliferation brokerage services on the Net, the NYSE is unfairly targeting online brokerages as a new source of revenue. Representatives from E*Trade did not return a phone call by press time.
The SEC is responsible for deciding if the hike in fact meets the criteria spelled out in the 1975 law, and is expected to rule on the issue after taking public comment. A spokesman for the agency declined to comment for this story.