The last 15 years on Wall Street stand as a monument to technological innovation, data analysis and accelerated performance. But despite the size of their balance sheets, these advances were not initially brought forth by household Wall Street names of the time. Instead, the rise of electronic trading that has helped democratize market access and bring greater transparency and public participation to the capital markets was fueled by smaller, more nimble, lesser known firms.

However, now many of these entrepreneurs and new players are being harmed by the same technology we helped create — market data and exchange access costs that have risen exorbitantly. On Oct. 26, I will be outlining this problem and potential solutions at a roundtable discussion at the Securities and Exchange Commission.

Smaller innovative firms play an important role in the capital markets by providing new approaches and engaging new technologies. Much like trading, compliance technology was developed in parallel, and firms like mine have produced high performance compliance and risk software that helps strengthen the broker-client relationship and protect market integrity. And like other providers in the financial industry, access to capital markets and timely data is paramount.

We launched our firm a year into the financial crisis and as a small business owner I realize firsthand the challenges of growing a business in the ever-competitive universe of financial services and technology, where innovations such as automation of the markets have disrupted old brick and mortar businesses. The crisis brought new opportunities and requirements to the capital markets.

It’s become accepted fact that technology today – and the innovation behind it – has largely leveled the playing field for investors of all sizes. Large investors have witnessed vastly lower spreads and smaller investors can buy any stock they want right from their mobile phone for just a few dollars in just a fraction of a second. This type of trading required a more technological approach to compliance within the broker/dealer community to meet these accelerated needs.

But market data fees have exploded and is wrapped in a varied set of convoluted and ever-changing rules. By some estimates fees have risen anywhere from 250 percent to 300 percent over the past five years. It affects all investors of all sizes and serves to constrict the resources that allow firms to innovate on behalf of the investment community. As a percentage of costs, these fees hit smaller firms hard. Maybe even harder than the big firms – though large institutions such as Citadel, Vanguard and Morgan Stanley are certainly getting a massive bill each and every month from the exchanges (as they have been rightfully quick to publicly complain about).

The mechanics are that when brokers buy or sell stocks, they need to know the best and most recent price to buy or sell a security. The catch is that there are two exchange data feeds for this, one public and one private. The private feeds are faster and a must have for most trading firms. Fees charged to brokers have skyrocketed even though brokers have no place else to turn for the data. Compliance systems also make use of such data for reference pricing but to a lesser extent than those engaged in trading. However faster more accessible data can only improve the compliance function.

Understand that for trading firms, data is the raw material that allows them to have a commercial offering that contributes to the level playing field. Data is to trading what crude oil is to gasoline – without it you have no product. This is the same for compliance, the importance of data analysis is only increasing, it requires automated tools to keep pace and this means additional costs. Convoluted exchange pricing schemes with no alternatives only provide economic barriers to competition, innovation, overall firm compliance and the overall safety of our markets.

Now lest you are not compelled to feel sorry for anyone who works on Wall Street, the scariest impact of these data fees might be on Main Street, for it is an economic certainty that as the price of raw material increases, so does the cost of the end-product. If the price of crude goes up, you can be sure the price of gas at the pump will increase and trading stocks is no different. So for the buyside institutions that trade tens of millions of shares – such as public and corporate pension retirement plans, university endowments and college savings plans, these exchange data fees exact a significant cost on these institutions through these increasing costs.

As much as anyone, I appreciate the valuable role that America’s equities exchanges play in the national market system, the numerous benefits provided by lit exchanges — including transparency, efficient trade execution, and in providing investor confidence. I am just a single voice but I have run a small business long enough (and seen too many others go out of business in a hail of data fees) to know the exchange data fee issue is something the Securities and Exchange Commission needs to fix for everyone in the investment ecosystem, large and small. This is an important issue we must get right. The exchanges will tell you that it is a free market and any attempt by the SEC to modulate these fees is price fixing by the government. But free market forces and unfettered competition in market data does not exist and just like during a natural disaster (in this case a national disaster), the government steps in to ensure fair prices to avoid price gouging.

Anthony J. Masso is president and CEO of Succession Systems in New York City, a global provider of compliance, trading risk management, and market access solutions.

October 29, 2015
New York

We are excited to announce the launch of our new corporate web site.

Our goal was to provide visitors with an easier way to learn about our products and the customized solutions we offer our clients. The redesigned web site has an entirely new look and feel. It is interactive, modern and mobile-friendly.

The media section will report the latest updates in the market access surveillance industry and feature the company’s recent announcements and informational articles.

“Our web site has always been an important way for us to share information about our platform, services and initiatives,” said Amy Lyubitska, CIO of Succession Systems. “The new website has a clean layout and simplified navigation to ensure improved communication and engagement with our site visitors.”

We hope that you enjoy the updated web site and find it to be a valuable resource.


Succession Systems is a global provider of compliance, trading risk management, and market access solutions. Risk management controls can be deployed across multiple asset classes in North America and Europe. The solution allows firms to view and consolidate the trading activity across third-party and proprietary systems. TripleCHECK™ offers fully automated pre-trade validation, real-time trade surveillance and post-trade compliance reporting solutions, as well as a comprehensive set of tools to detect and prevent the occurrence of market abuse and manipulation practices, such as layering and spoofing. For more information please contact us at [email protected].

To improve risk controls, different systems across the industry need to start working together.

Last month, the DTCC announced a real-time limit monitoring system to alert brokers if they approach pre-set capital limits.Could this help to standardize risk limit notifications across all participants? And, can we connect the spine to the hands and the feet of the industry?Masso_Anthony-Succession_Systems

Obligations to Inform Counterparties
But before we start to dive connecting the spine to the brain, shouldn’t every participant have an obligation in real time to inform their trading partner of impending risk limits? How should we communicate and integrate these messages and third party checks? Don’t say a phone call or an email. It’s not good enough.

Integration at the Message Level
No participant can ‘fly on its own’ and neither can a broker’s risk system operate without third party inputs.Yet, imagine this interconnected world where every exchange, CCP and broker implements different methods to communicate risk parameters?

In a highly connected and high-speed industry, all participants need to integrate at a message level. APIs, use of extended FIX message formats and risk limit notification standards are needed for us to evolve the ‘risk nervous system’ of the industry.

DTCC Limit Notifications
The announcement by the DTCC to offer a real-time Limit Monitoring Tool is an important advancement for real-time risk management.The tool generates intraday alerts of impending capital breaches by member brokers.
The ability to track the clearing broker’s position is a result of the new real-time trade submission requirement. Approved by the SEC in June (PDF), it will be fully mandated in February 2014 when it is expected to capture 97% of member executions in real time.The technology behind this capability is the NSCC Universal Trade Capture (UTC) platform.

Need to feed a variety of ‘Risk Brains’
However the DTCC only receives executions notices. The post-trade tools can never replace a broker’s pre-trade and real-time risk obligations.But, the DTCC limit alert can make the broker’s system more robust.
When integrated with the broker’s market access risk system, the DTCC alerts provide these benefits:

1.) Independent ‘back up’ alert: The SEC clearly states that brokers avoid a ‘single point of failure’ for market access risk controls.
The DTCC notification provides an ‘independent’ risk calculation and a ‘back up’ to a broker’s internal system.
This can also be a check between the broker, the exchange and the DTCC systems.

2.) Intraday escalation procedures: This tool prompts the clearing brokers to establish intra-day supervisory and escalation procedures -for the aggregate of the firm.
What will they do when they get an alert? What trading do they limit and how?

3.) Firm-wide limits: Although this does not include a notional value for open order exposure (which is mandated by Market Access 15c3-5 Rule), this will be an important
data point to establish aggregated broker limits over time. It prompts brokers to build and maintain an intraday file of limits, changes and incidents,
for the aggregate firm.

4.) Establish a limit notification format: As the DTCC evolves the messaging scheme and the use of FIX formats to communicate limit breaches,
this could lead the industry toward a more automated and standardized approach to communicate impending risk limits.

UTC: The Spine
Ultimately the real jewel for the industry is the UTC platform. It is the ‘spine’ upon which many real-time studies can be conducted.
Going forward, if the settlement messages incorporate the LEI identifier, intraday surveillance across brokers could be possible.
Eventually, we may see the UTC do some heavy lifting for FINRA’s consolidated audit trail and it may take a more active role in a broker’s trade surveillance
programs as well.

Connect the Collective Brain to the Hands and Feet
As the industry implements more sophisticated trading risk checks, we need to simultaneously create a ‘nervous system’ to integrate and connect
these tools across participants. It’s time the industry connects the spine to the collective brain, as well as to the ‘hands and feet’ of the market.
It is a challenge we all need to tackle to keep our markets the most transparent, robust and liquid markets in the world.

About The Author:
Anthony Masso, CEO Succession Systems Anthony Masso is founder and president of Succession Systems LLC, provider of market access controls and risk systems.
Masso has more than 15 years experience in the securities industry, previously holding positions as a trader, general counsel and CEO of a broker/dealer catering to electronic and high frequency trading.