I’ve been receiving endless inquiries regarding the new data fee charges levied by the ICE exchange, so I felt compelled to address the issue publicly to ensure the trading community understands the situation.
Roughly a year after the Chicago Mercantile Exchange Group, better known as the CME Group, implemented their controversial data fee policy, the Intercontinental Exchange (ICE) is rolling out their own set of hefty fees levied on commodity traders. Before we talk about the magnitude and implications of the new ICE data fee policy, we must first identify which markets are traded on the exchange. The ICE exchange, bought out the New York Board of Trade (NYBOT) in 2007 in which they acquired the rights to futures and options written against soft commodities such as cocoa, coffee, cotton, orange juice (frozen concentrate), and sugar.
Throughout the 1980s and 1990s, the trading floor of the NYBOT was a vibrant arena filled with active trading pits. In fact, it was featured in the 1983 movie Trading Places starring Dan Aykroyd and Eddie Murphy who, in the movie, thwarted plans of two rich brothers (the Dukes) to corner the frozen concentrate orange juice market. Yet, electronic trading has eliminated the open outcry pits that the NYBOT once housed. The change was inevitable but the ICE exchange was extremely proactive in speeding up the process of moving trading operations to the “screen”.
In addition to the better known softs complex, ICE also offer trading in some currency contracts, but with the exception of the moderately liquid U.S. Dollar Index, they tend to suffer from a lack of liquidity. Two relatively popular contract traded on the ICE futures exchange is the Russell 2000 and Brent oil futures trade on the European branch of the ICE exchange.
New Data Fee policy beginning April 1st, 2016
As of April 1st, 2016 the ICE exchange will charge each trader, broker, risk manager, or market watcher, $110 per month for access to live market data per exchange. This fee will be levied to each user, each platform, and per each ICE exchange. For instance, a trader accessing live ICE U.S. data while trading in the softs, who also subscribes to ICE Europe data for trading in Brent oil, would be subject to a bill of $220 per month. If the same trader wished to have access to a mobile platform, depending on the arrangement and platform chosen, he would most likely have to pay another $220 for such access. You’ve probably done the math in your head; this equates to $440 per month!
Prior to this change in data fee policy, most brokerage firms, specifically Futures Commission Merchants (FCMs), were picking up the cost of providing its clients with access to live market price data for ICE exchanges. Technically, they could continue to do so but at $110 per user, it would single handedly put most brokers out of business and simply isn’t an option anymore. Brokers must pass the cost levied by the ICE exchange on to their customers.
How this differs from the CME’s Data Fee Policy
As of January 1st, 2015, the Chicago Mercantile Exchange began charging all market participants for access to real-time price data. However, where the CME policy differs from ICE is it distinguishes professional traders from non-professional traders. Those deemed to be professional traders face rather steep data fee charges. CME data fees are charged at a rate of $85 per month, per user, per platform, per exchange operated by the CME (CME, CBOT, COMEX, and NYMEX); thus, a professional trader opting to receive real-time data on all four exchanges is subject to the $340 monthly tally. If the same trader wishes to utilize a second platform, he must pay another $340 per month for access to all CME Group exchanges.
Yet, non-professional traders, which includes the majority of those reading this article, pay a more reasonable $3 to $15 per month, per user, per platform. The CME’s data fees are a negligible burden to retail traders. On the other hand, the ICE policy which treats all market participants the same and is proposing to charge unfathomable data costs to the average retail trader, is likely closing the door to their products for most retail traders. $110 per month, or more, might be a deal breaker to the majority of small speculators.
Is there a way around the ICE Data Fees?
If the goal is to view live price data on ICE traded futures and options, there is no way of getting around the fee. Yet, there are a few ways platform vendors and brokers are helping clients interested in trading these products. For starters, many trading platforms and brokers will be offering delayed price data to ICE traders. This is obviously an inconvenience in that the trader will always be making decisions based on late information, but it will save the encumbrance of $110 per month. Brokers that are not technologically capable of delayed data, will give traders the option to simply not receive price information on ICE traded products. In a nutshell, only traders that opt to receive live price data from ICE will be charged the fee. In some rare instances, clients will be automatically subscribed to the data, so if you are unsure of how your particular trading platform works, be sure to check with your broker.
Keep in mind these fees will apply to anybody accessing real-time price data on any ICE exchange product regardless of the broker or platform chosen. Further, these fees are charged by the exchange; despite the fact that brokerage firms are collecting and expediting the data fees to the exchange, they do not benefit in the fees being charged in any way.
What does this mean for Traders and the Industry
We won’t know the full effect of the data fee policy for several months, or even years. Nonetheless, there will be consequences to retail traders, the ICE exchange, and the industry as a whole. I can’t imagine very many retail traders paying $110 per month for a data subscription fee; particularly because ICE products are such a small part of most commodity trader’s portfolios. Accordingly, I suspect most retail traders will simply stop trading ICE products, causing trading volume to decline significantly. This leaves the door open for competing exchanges, such as the CME to either buy out the ICE operations, individual products, or lobby the CFTC (Commodity Futures Trading Commission) to list competing contracts in attempt to steal market share.
With that said, the ICE exchange might have come to the conclusion that because they make the lion share of their revenue from commercial hedgers and large institutional traders, it isn’t worth their resources to accommodate individual, small, traders. In this case, they will probably get what they are looking for.
Carley Garner is the Senior Strategist for DeCarley Trading, a division of Zaner, where she also works as a broker. She authors widely distributed e-newsletters; for your free subscription visit www.DeCarleyTrading.com. Her books, "A Trader's First Book on Commodities," "Currency Trading in the FOREX and Futures Markets," and "Commodity Options," were published by FT Press.