Direct Edge Announces Fees, Rebates for Attributed Quote Feed

Jersey City, NJ-based stock exchange operator Direct Edge will on Friday, Feb. 1 begin charging fees for a feed of price quotes that includes attribution data about which firm has posted a quote, allowing market makers to advertise their liquidity in certain securities, and allowing traders to pick the execution venue on which to focus their trading based on the quality of displayed liquidity, in addition to factors such as quantity and best price.

Direct Edge introduced the attributed version of its datafeed last September, which includes the market participant ID details of firms that have opted-in to the exchange's attribution feed program. Bryan Harkins, chief operating officer of Direct Edge, says that although attribution largely disappeared as the advent of fast, anonymous, electronic marketplaces replaced the need for brokers to advertise inventory or a banking relationship with a specific issuer of securities, the increased fragmentation among new electronic markets means attribution is going through a renaissance as traders seek ways to gain increased transparency and better understand where liquidity is available.

In fact, attribution benefits market makers by allowing them to advertise liquidity, benefits Direct Edge by increasing and demonstrating the quality of its liquidity, and benefits trading firms that need to fulfill execution quality requirements on behalf of their clients, Harkins says.

"We feel there are reasons why our members would want to attribute their quotes, besides just market makers who want to advertise liquidity, their relationship with an issuer, or that they can offer liquidity in a small name," Harkins says. "If the market is fragmented, how do traders decide where to execute? Traders like to trade on a market where they think they can find complementary liquidity... [so] combining high-quality liquidity with an attributed feed becomes very valuable to traders."

The specific value that Direct Edge will place on the feed is $2,500 per month for internal distributors (i.e. firms who use the data internally to support their own trading or analysis) and $5,000 per month for external distributors (firms who also distribute the data to third parties, or vendors who broadcast it in an uncontrolled manner --- i.e. as a feed that is not constrained to specific devices).

To allay industry concerns about the rising cost of exchange data -- and to encourage market makers and other trading participants to attribute their quotes -- Direct Edge has created an incentive program that divides 25 percent of revenues generated from sales of the feed between those participants who agree to attribute their quotes, based on the volume of trades executed against their attributed orders.

"If our members help us build a data product, we will share that revenue," Harkins says. "We package and sell the data, but our data is only as good as the data they provide. So, just as we provide rebates for trading, now we are doing the same for data -- the more you attribute and execute, the more you earn, and ... the more Direct Edge earns."