Industry Associations and SROs Comment on Market Data Fees

Industry associations and self-regulatory organizations, including particularly those operating markets, provided feedback on the SEC's proposed amendments to Regulation NMS which will expand the content of NMS market data and modernize market data infrastructure.

As previously covered, the proposed amendments would (i) expand NMS market data; (ii) update Regulation NMS "for the collection, consolidation, and dissemination of information with respect to quotations for and transactions in [NMS] stocks"; and (iii) amend all exchange-specific data elements under NMS Rule 603(b).

The following summaries reference comment letters submitted by (i) the Investment Company Institute ("ICI"), (ii) the Securities Industry and Financial Markets Association ("SIFMA"), (iii) the Financial Industry Regulatory Authority ("FINRA"), (iv) NASDAQ and (v) the NYSE. A full set of comment letters is available on the SEC website. In addition to comments from industry participants, it is notable that the DOJ Antitrust Division commended the SEC for its attention to issues of market competition, saying that the proposal would enhance competition by lowering the barriers to entry through less expensive and more detailed data.

ICI

The ICI advised the SEC to use the same "reasonable relation to cost" standard for assessing NMS core data fees when it reviews the exchanges' fees to competing consolidators and self-aggregators for underlying data. Additionally, the ICI noted that the SEC could facilitate its ability to apply the same "reasonable relation to cost" method by adopting the proposed removal of the "effective-upon-filing exception for NMS plan fee amendments."

SIFMA

SIFMA urged the SEC to adopt the market data infrastructure changes under the proposal and consider additional changes to the definition of "protected bid or protected offer" under NMS Rule 611 ("Order protection rule") and NMS Rule 610 ("Access to quotations") in a different proposal. According to SIFMA, additional industry discussion is necessary regarding the definition due to "significant best execution concerns" that the current proposal does not address.

FINRA

FINRA expressed concern that some of the proposal's provisions would increase complexity and costs pertaining to:

• multiple connections;

• the competing consolidator model;

• multiple sources of consolidated market data;

• best execution of broker-dealers' investor orders;

• transition of calculations to listing markets;

• latency issues between competing consolidators and self-aggregators;

• the exclusion of over-the-counter equity (OTCE) Data; and

• the collection of SIP data under the Consolidated Audit Trail NMS Plan.

NASDAQ

NASDAQ stated that the proposal would "jeopardize" the current success of the NMS at an already volatile time. According to the NASDAQ, the SEC:

• attempted to hide the "magnitude of the proposed rule" by describing it in terms of market data, rather than an overhaul of the NMS;

• failed to consider the impact of the proposal on issuers, small broker-dealers and the options market; and

• rejected "reasonable requests" for a 60-day comment period extension.

NYSE

The NYSE requested an additional 60 days comment period to help any commenters impacted by the COVID-19 pandemic. Additionally, the NYSE criticized the proposal for failing to explain how the SEC will handle, or how market participants should handle, the interaction between the proposal and the SEC's January order, directing exchanges and FINRA to provide a new plan concerning consolidated equity market data.