Stock Exchanges Don't Grasp The Value Of Free Real-Time Quotes

from the missing-the-point dept

Although the financial industry has been resistant to change, there's no question that the internet has greatly expanded retail participation in the stock market. Cheap commissions and the proliferation of free data have lead to a major boost in trading activity. Meanwhile, just the data itself, served up on sites like Yahoo Finance, brings in money for the exchanges. Now a group of companies that have financial sites, including Yahoo and Google are complaining to the SEC about the fees that the major exchanges are charging. Already, some sites have stopped delivering real-time data, which carries a higher premium. Obviously, the exchanges can charge whatever they want, and there isn't a whole lot that the financial sites can do. It's unlikely that the SEC will step in, as it's probably not much of a priority. But it doesn't make much business sense for the exchanges to charge so much for the data that sites are dropping coverage. There's a lot more money to be made on the trading side, which is propelled by all the free data. Once again, companies have problems realizing that some of their products have more promotional value than direct sales value.
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  • identicon
    Mike S., 14 Nov 2006 @ 9:44am

    Not so fast...

    I'm usually right there with you guys on most things you report, but on this I must part ways with TD.

    If anything, the barrier to entry for the random schmo on the street should be higher, not lower, when it comes to stock exchanges. Making it expensive to trade (and all the tools that aid in that) keeps people who simply react and don't plan or think from entering the market to begin with. The kind of people who need to be meddling around with this stuff are the same people who do this for a living. Most of us just aren't smart enough -- note I said smart, not intelligent.

    There should be a risk above and beyond the cost of simply buying and selling stock that makes a person really think about moving their money around an exchange. Without it you get a bunch of moron daytraders who stare at a ticker tape waiting for their symbol to arrive. God forbid that when it does it has dropped even a bit because without outside incentive to 'stay the course' for a bit that moron and all his friends are going to sell. And THAT hurts everyone.

    Charge what you want, NYSE. Keep me out. I don't know what I'm doing and shouldn't be mucking around with other people's money.

    If you don't think idiotic daytraders have any effect on the market look at the last bubble and think again. I know that normal investment brokers had a big part as well, but they, I would contend, have at least learned a small lesson. People are stupid, and only less so with training.

    -Mike

    reply to this | link to this | view in chronology ]

    • identicon
      comboman, 14 Nov 2006 @ 9:51am

      Re: Not so fast...

      Making it expensive to trade (and all the tools that aid in that) keeps people who simply react and don't plan or think from entering the market to begin with.

      Yeah, because everyone knows that people with extra money to throw around are way smarter than those who don't.

      reply to this | link to this | view in chronology ]

      • identicon
        Mike S., 14 Nov 2006 @ 9:56am

        Re: Re: Not so fast...

        Your completely valid (and wonderfully snarky) point doesn't invalidate mine. If it turns out that moronic *rich* people are now ruining the market, raise the entry fee some more.

        reply to this | link to this | view in chronology ]

        • identicon
          comboman, 14 Nov 2006 @ 12:01pm

          Re: Re: Re: Not so fast...

          Your completely valid (and wonderfully snarky) point doesn't invalidate mine. If it turns out that moronic *rich* people are now ruining the market, raise the entry fee some more.

          You lost me. Rich people are morons but really, really rich people aren't? Raising the cost of trading limits it to people who have money, not people who understand the market. The morons are self-limiting, since eventually they'll lose everything on a bad trade. If you really want to keep the morons out then have an IQ test. There's already too many things in this country that are limited to the rich.

          reply to this | link to this | view in chronology ]

          • identicon
            Mike S., 14 Nov 2006 @ 1:52pm

            Re: Re: Re: Re: Not so fast...

            It's not about the wealth of those that can still afford it, but about the sheer number. A small handful of idiots has a far smaller effect on the exchange than a large handful. Idiots come in all tax brackets -- there are just less of them in the higher ones because there are less people (smart or otherwise) in those brackets.

            Raise the rates until the number of people who can afford to participate is tolerable to the system. That's what I'm saying.

            reply to this | link to this | view in chronology ]

    • identicon
      Mike S., 14 Nov 2006 @ 10:01am

      Re: Not so fast...

      Oh... I forgot to make the whole point.

      Promotional value only counts when the service provider needs the promotion. The stock exchanges really don't. It's not like music where you can legitimately argue that the music itsself is a promotion for the tours and merchandise. Promotion of this kind would serve to hurt the NYSE, IMHO.

      If you have insight into what GOOD effect this 'promotional value' could serve up to the exchanges, please elaborate.

      reply to this | link to this | view in chronology ]

      • identicon
        Andy, 14 Nov 2006 @ 11:20am

        Re: Re: Not so fast...

        i'm with mike s. on this one. the stock market shouldn't be treated as a roulette or craps table with "investors" waiting for the moment to cash out.

        waiting for the right time to sell isn't "investing"... it's gambling. i would have no problem with people "paying the stupid tax" (gambling) if they didn't feel it was necessary to sue the casino (company) if they lost. for an example, see the "king of torts," bill lerach's latest class-action lawsuit against dell computers. for what? a shareholder lost $2500 and claims the company misled him.

        misled? that shareholder has access to the company's filings just like anyone else (hence, PUBLIC company) and i'm sure there are other people who are down a bit because of the hit dell has taken, but they're not suing... because they're investors and not gamblers. you can't sue a casino because you put it all on double zero.

        investors buy, knowing that they're purchasing equity in a company and may need to ride out some storms. gamblers sell, making life difficult for the companies that will never be able to satisfy them. beware of the companies that do satisfy gamblers.

        the exchanges, on the other hand, should try their best to keep gamblers unsatisfied as they only contribute to the exchanges' volatility. streaming ticker symbols are not necessary when you know how to buy equity... they're only necessary when you want to make or lose a quick buck.

        reply to this | link to this | view in chronology ]

      • identicon
        kweeket, 14 Nov 2006 @ 11:29am

        Re: Re: Not so fast...

        There should be a risk above and beyond the cost of simply buying and selling stock that makes a person really think about moving their money around an exchange

        Actually, everytime you buy or sell stocks, you pay a fee to your stockbroker for the privilege - typically around $20 or more. There are also administrative costs that you pay just to retain the services of the stockbroker.

        This is where the "promotional" part comes in: the more people trade stocks, the more fees that the stockbrokers collect. It's in their best interest to try to get people to trade as much as possible. Providing real-time stock tickers encourages frequent trading.

        reply to this | link to this | view in chronology ]

    • identicon
      kBlerk, 14 Nov 2006 @ 12:53pm

      Re: Not so fast...

      ...all his friends are going to sell. And THAT hurts everyone.

      Unless you buy when the morons drop the share price to below its "true" (whatever that is) value. Then it's really quite nice, and sure doesn't hurt.

      reply to this | link to this | view in chronology ]

  • identicon
    comboman, 14 Nov 2006 @ 9:48am

    How can exchanges charge for data?

    How can exchanges charge for data? It's just data and can't be copyrighted. Next Major League Baseball will be claiming that they own baseball stats.

    reply to this | link to this | view in chronology ]

    • identicon
      Mike S., 14 Nov 2006 @ 9:54am

      Re: How can exchanges charge for data?

      If yahoo wants to send someone to the NYSE and have him/her sit with a laptop and try to type as fast as they can to achieve 'real time' then your analogy would hold.

      Unfortunately, this is more like complaining that MLB charges too much for direct video feeds to other networks and sports reporters DURING the game. That's the analogy that works here, and it's completely different -- in favor of the exchange (and MLB).

      reply to this | link to this | view in chronology ]

  • identicon
    hexjones, 14 Nov 2006 @ 10:14am

    I used to work on the website of a financial exchange. We really really wanted to offer free realtime quotes or even a scrolling ticker but couldn't because of regulations. Maybe there is more to the story than stodgy exchanges not seeing value.

    reply to this | link to this | view in chronology ]

  • identicon
    Xiera, 14 Nov 2006 @ 10:19am

    This is fine...

    Stock exchanges increase prices for information, information providers stop providing information due to costs, people can't get the information, people stop trading on the stock exchanges. Seems like something that should fix itself.

    reply to this | link to this | view in chronology ]

  • identicon
    Louis, 14 Nov 2006 @ 11:47am

    No fast so...

    Yeah, sorry Joe, I´m with Mike S. on this one too. Maybe if you came up with a rebuttle...?

    reply to this | link to this | view in chronology ]

  • identicon
    Nathan, 14 Nov 2006 @ 11:55am

    I'm solidly with Joe on this

    Free markets should be just that. The penalty for not knowing what you're doing is you lose your money. Stay out if you don't want to lose everything.

    The silly little secret is that most financial players *ARE* gamblers. They have hunches and they play their hunches. There are no mathmatical formulas to follow. There are no guarentees. They look at the current P/E and income and in their minds they think "yeah, over the next couple years, I think this is going to go somewhere."

    Sounds like a gamble to me.

    The other little secret is that unless you're buying in MASSIVE quantities, you're probably losing a ton to the middlemen. Yahoo and it's sort cut a lot of those middle men out. Overall that's good for the market. It means you and I can be more educated and get taken for a ride less often.

    Most people advocating for more regulation do so because it's in *their* financial best interest to keep others out of the market.

    As a wise man once said "it's hard to beat even your dumbest competitor in a commodity market." The key to investing is knowledge. Market access is key.

    reply to this | link to this | view in chronology ]

    • identicon
      Mike S., 14 Nov 2006 @ 2:02pm

      Re: I'm solidly with Joe on this

      Here's how investing in the market is different from gambling.

      If you and 50 thousand of your friends, plus me, go to Vegas and all pony up our entire life savings on the roulette table my bet is STILL only affected by my bet. I give a rat's ass what you and your horde of friends bet on. Black, red, zero, whatever. It doesn't matter. The odds of me winning don't change at all. Not even a little.

      The market isn't like that. When you and your friends invest in the same stock that I invest in and then ALL pull out because of one statement made by your friend in Boise who works for the company -- that DOES affect my odds of winning. Alot.

      Taking out the middlemen is always good when the product isn't harmed by the increased demand. That's not good here. If there is a way to make the product more efficient, I'm all for it. I'm not for making it so cheap that everyone can do it. Some people have no business investing. Plain and simple.

      reply to this | link to this | view in chronology ]

      • identicon
        Nathan, 14 Nov 2006 @ 2:58pm

        Re: Re: I'm solidly with Joe on this

        But it seems like you're investing just looking for a gain in the market value of the stock? That seems like speculating or gamlbing to me. And the odds at the Casino are often defined by what those around you do. Maybe not hand by hand like poker, but the house establishes rules based on the probability that you and your fellow bettors will do something. If everyone suddenly changes behavior, you can bet casinos would start changing the rules.

        If you're investing because you believe in the fundamentals of the company and that they will return value to you, the random movement of cattle shouldn't bother you because in the end, you'll fair much better than people who try and time the market.

        If you're just hoping to ride the stock from point a to point b, then yeah, get the dummies out so they don't botch up your attempt to make a buck.

        Maybe it's not a good plan, but it smacks of a lot of the same arguements as "only the educated should vote because other wise the dumb people will screw up the country." It may be true, but I don't want to impose restrictions at the polls either.

        reply to this | link to this | view in chronology ]

  • identicon
    E!, 14 Nov 2006 @ 11:56am

    It's MY money, chump

    The way I see it, it's MY money. I should be able to spend it where I please.
    Sorry if I hurt your fragile trader ego by competing with you.
    BTW, folks, trading in the stock market IS gambling. Plain...and simple. Your "investigation" of a company simply establishes your "odds" of making a profit. No different from investigating your odds at a crap table.
    In other words, speculation = gambling.
    Time to saddle off that high horse...

    reply to this | link to this | view in chronology ]

    • identicon
      Andy, 14 Nov 2006 @ 1:56pm

      Re: It's MY money, chump

      i'm not saying you can't trade your money on an exchange if you're not a broker.

      i'm saying that there's no incentive for an exchange to make it easier for "gamblers" to trade stock. they can raise barriers to entry all they want without breaking any rules, if that makes them happy.

      if you don't like it, cash out. i'm sure the exchanges will eventually beat a path to gamblers' doors to have poorly invested money lavished on them again. or not. find out.

      reply to this | link to this | view in chronology ]

  • identicon
    Nathan, 14 Nov 2006 @ 3:01pm

    a second thought

    If you are actually a savy investor, I want every gambler and idiot on the market possible. Their losses will be my gains. When they drive up demand for something that shouldn't be that high, it's time to take advantage of the market. If there is value to be had cheaply because everyone is looking elsewhere? I'm all about. Bring on the sheep. It's time for some fleecing.

    reply to this | link to this | view in chronology ]

  • identicon
    Andy, 14 Nov 2006 @ 3:34pm

    losing track...

    this has turned into a question of investor disenfranchisement, which it isn't. the question is whether there's any value in the exchanges maintaining or removing real-time streaming stock quotes.

    if they want to take them down, they haven't eliminated day-traders ability to buy stock and they've moved stock further from the realm of impulse buying. if they maintain the streaming quotes, apparently they feel the day-trading (in particular the "gambler") market is a market they want strongly.

    reply to this | link to this | view in chronology ]

  • identicon
    Thomas Fields, 27 Aug 2007 @ 6:41pm

    I trade with my money.
    I maintain an 87% win rate.
    I became rather successful at it in 3 years.
    And I *WANT* all of those investors in the market that don't know what they're doing.
    It's so much easier to think like an idiot, then a genius.
    If 3 million people push a stock down because CNN said something, and they don
    t undrestand fundementals, then bonus, my buy just went on sale.

    I don't want the market run by the elite, why the hell would I want THEM as my competition??

    Mike S. to me just sounds like a guy who would get riled up if he goes to a black tie party and there's a guy wearing flip flops, and a tee-shirt there.

    The market is predatory. And I for one like not being the smallest fish. Remember the old saying, "If you won that day, someone else lost." I want there to always be a 'someone else', and NOT have it be me.
    Which means I have a very "come one, come all" mentality to the market.

    I may not be able to take advantage of Warren Buffet.
    But I can figure out what's in the head of 100,000 rednecks. :)

    reply to this | link to this | view in chronology ]


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