On July 25, the Committee submitted a comment letter to the Securities and Exchange Commission (the “SEC”) regarding the proposed rule change filing by the Financial Industry Regulatory Authority, Inc. (“FINRA”). FINRA’s proposal would establish a new issue reference service for corporate bonds and charge associated fees (“Bond Data Service Proposal”).
Under the Bond Data Service Proposal, FINRA seeks to amend Rule 6760 with respect to new issues of corporate debt securities to require bond underwriters to report additional attributes of the security to FINRA prior to the first transaction in the security. Under the proposal, FINRA would also begin selling this data back to market participants at a FINRA-prescribed fee, up to $6,000 per month if the data is retransmitted or repackaged for dissemination. FINRA states that these fees would be calculated on a cost-plus-margin basis.
The Committee recommended that the SEC not approve the proposed rule change. The Committee is concerned that FINRA did not offer cost data in support of its assertion that the proposed fees are fair and reasonable as required by the Exchange Act. Without this information, neither the SEC nor the public is in any position to determine whether the proposed fees are consistent with the Exchange Act. The Committee has long supported the provision of cost data for similar services in the equity markets, and has previously communicated our view that the U.S. stock exchanges that provide critical equity market data services should be required to disclose the underlying cost of providing stock market data to enable the SEC and public to determine whether fees are appropriate and consistent with the requirements of the Exchange Act.
The Committee’s letter can be found here.