Appeals Court Upholds SEC Rule on Exchange Fee Caps
The U.S. Court of Appeals for the D.C. Circuit denied a petition for review of an SEC rule that lowers exchange access fee caps and adjusts tick sizes under Regulation NMS.
The decision leaves in place 2024 amendments to Regulation NMS, which capped access fees at $0.001 per share for stocks priced at or above $1.00 and at 0.1% of the quotation price for stocks priced below $1.00, while also adjusting minimum tick sizes. A group of national securities exchanges had petitioned the courts to vacate the rule, arguing that the SEC exceeded its statutory authority and acted arbitrarily and capriciously.
According to the appellate decision, the Court rejected both claims. On the statutory authority argument, the Court held that Section 11A of the Exchange Act grants the SEC broad discretion to regulate the national market system and adopt rules promoting fair competition and efficient execution—authority that extends to establishing uniform, industry-wide standards such as access-fee caps. The Court also dismissed arguments that Section 19's procedures for reviewing individual exchange rules limit the SEC’s broader policymaking authority, highlighting that Section 19's savings clause expressly preserves the agency’s general rulemaking power.
On the claim that the rule was arbitrary and capricious, the Court found that the SEC's rulemaking was supported by substantial evidence and reasoned analysis. The Court concluded that the agency considered extensive data, public comments, and potential market effects and provided a rational explanation for its policy choices. Upholding the rule, the Court said, advances the Exchange Act’s objectives of competition, efficiency, and investor protection, and reflects a permissible exercise of the Commission’s regulatory judgment.
SEC Chair Paul Atkins cautioned that uncertainty from the litigation could still affect implementation. He said he directed staff to assess whether extending or adjusting compliance deadlines for the new access fee and pricing increment rules would help ensure an orderly transition.