Time was, brokers called their trading desk or went to the Quotron to get timely stock quotes. Up-to-the-minute quotes were so rare that individual investors often made a day of it by watching the electronic ticker tape in the lobby of their local brokerage.
Today, however, it's a different story. With the explosion of computer networks and telecommunications, more financial information is available than ever before. But even though the cost of real-time quotes and other services might be dropping, some independent reps and financial advisers spend more for financial information today, especially if they work in a one- or two-person office.
One reason costs are high is that a broker who needs up-to-the-second quote information often wants to see option quotes as well, plus news, charts and services that can generate nice reports.
In fact, most reps interviewed for this story say they pay at least $300 a month for a basic package of real-time stock quotes, access to Dow Jones news and other information-and that doesn't include the cost of a special telephone line, satellite dish or other data-delivery service.
Reuters America says its services begin at $95 a month for basic information, including real-time quotes delivered by Reuters Quotron. Additional services can boost that price beyond $200 a month.
"We run the gamut," says Wendy Zajack, manager of media relations for New York-based Reuters. "It's kind of like you name it, it goes up from there."
To get Reuters information, however, brokers need a high-speed connection, such as an ISDN line, which transmits data at more than 100 kilobytes per second. An ISDN line can cost several hundred dollars to install, plus monthly fees of $75 or more and a special modem, which can add another $300 to $400.
Nor does the price include exchange fees, which differ from exchange to exchange. The minimum monthly exchange fees for real-time quotes from the New York, American and Nasdaq stock exchanges is $160.85 a month for one user, but volume discounts are available.
"The prices of the exchange fees do vary," says Vince Chiera, executive vice president and director of sales at Boca Raton, Fla.-based Corporate Securities Group, which has 90 offices and 450 independent reps nationwide. "No one, including myself, can give you those numbers because firms such as ours get extended multiple discounts."
Meanwhile, access to real-time prices on commodities, options and other securities incurs additional fees levied by the Chicago Board of Trade, the Commodities Exchange Center and other markets.
All this means independent brokers can easily spend more for real-time quotes than they do for office space.
Roger Stromberg, a Missoula, Mont., rep with Corporate Securities Group, says his last monthly bill for his back-office link included about $120 in fees for the three major U.S. stock exchanges and $25 for access to option prices.
Of course, brokers and financial planners who deal mostly with mutual funds and outside money managers don't need an elaborate quote and information service. "I do managed money, so there's not a great need for that," says Brad Welch, a broker with Investment Management & Research in Tampa, Fla. "In 90% of the cases, a 15-minute delay is fine."
Delayed quotes are free and are easily available via the Internet and other sources. The good news for brokers who want lots of real-time information is that better technology, increased competition and the booming financial services industry mean costs are dropping as much as 20% a year.
"You make up for it by making your service available to more people," says Jim Marvin, vice president of sales for ADP Financial Information Services in Jersey City, N.J.
Some quote vendors provide access to information via the Internet, which saves money on data lines. Data Broadcasting Corp. of San Mateo, Calif., offers a continually updated real-time quote service called StockEdge for as little as $79 a month. Meanwhile, PC Quote in Chicago offers real-time information over the Net beginning at $75 a month for a basic service. Neither price includes exchange fees.
To some, however, the idea of charging for real-time quotes is a bad idea. It hinders markets and hurts investors because it limits access to the best information available. After all, the exchanges are selling information created by orders placed by investors in quasi-public markets-and they're already paying commissions to do that. Charging for stock quotes is akin to charging car shoppers just to see the price of a new automobile, some say.
"It's like a store charging an entrance fee," says Alex Goor, president of Datek Securities of Iselin, N.J. Datek, an on-line retail brokerage, charges a paltry $9.99 a trade, offers free real-time quotes and plans to offer free Level II Nasdaq quotes-a service that can cost an additional $30 a month to a broker.
"Our belief is that quotes should be free," Goor says. "No one should look to make money off quotes because they're just putting up a barrier to information."
If it's true, as hackers say, that information wants to be free, how come brokers pay so much to get real-time stock quotes and other financial information?
One reason: The fees charged by various exchanges. The Consolidated Tape Association (CTA) is a group of stock exchanges that consolidate market data and sell real-time quote information to vendors such as ADP, Data Broadcasting and ILX Systems.
CTA is part of the National Market System (NMS), created by the SEC and Congress in the 1970s to improve market efficiency. The NMS also includes the Intermarket Trading System (ITS), a computer network linking stock exchanges so everyone gets the same quotes.
The exchanges, of course, look to the CTA as a way to make some money. But for brokers and other financial professionals, the fees add up to an extra cost of doing business.
Nasdaq charges financial professionals $20 a month for each computer terminal linked to a real-time feed. For that, brokers get the best bid and offer prices on National Market and SmallCap stocks, and from each market maker in OTC Bulletin Board stocks. They also get money market and mutual fund prices after the close and last-trade prices for National Market and SmallCap issues. For $50 a month, a broker can get all this plus what amounts to Level II Nasdaq quotes, which list the bid and ask prices from all market makers in National Market and SmallCap stocks.
The NYSE charges $127.25 a month for one hookup for real-time quotes. That monthly rate drops as low as $18.75 a month for a firm with 10,000 or more display devices-a clear advantage for the larger dealers. Meanwhile, individual investors (i.e., non-professionals) pay $4.25 a month for the same service. The AMEX charges $13.60 a month for professionals and $3.25 for non-professionals.
So, a broker who wants real-time quotes from the NYSE, AMEX and Nasdaq (including Level II quotes), pays $190.85 a month in exchange fees in a one-computer office. Information from commodities, options and other exchanges-not to mention access to Treasury and bond prices-can add even more to a broker's monthly information bill.
None of the exchange fees, of course, include the cost of getting information from a service such as Data Broadcasting or PC Quote. PC Quote 6.0, for example, costs $250 a month, or $2,500 a year, for real-time stock quotes from major stock exchanges, news and other services plus access to Nasdaq Level II prices. If a broker has a satellite link or high-speed data line, that boosts the price even more from some vendors, although PC Quote delivers its service via the Internet.
The SEC reviews exchange fees. "We do have to approve them," says Robert Colby, the SEC's deputy director in the division of market regulation. "But the standards under which we have to approve them are reasonableness as opposed to trying to decide who should pay what."
The SEC also is supposed to make sure the fees don't discriminate against some brokers or firms in favor of others, and that they allow for reasonable access to market information, Colby says.
But questioning the fees apparently isn't a priority for the full commission; fee schedules are approved by agency staff.