D.C. Circuit Upholds SEC's Market Data Infrastructure Rule

The U.S. Court of Appeals for the District of Columbia upheld a final rule promulgated by the SEC which would amend Regulation NMS to expand the content of NMS market data that would be generally available to the public.

The petitioners, who were various securities exchanges, challenged the rule, stating it was arbitrary, capricious and contrary to the goals and policies of the Exchange Act. The petitioners argued that the amended rule rests largely on speculation and would exacerbate, not reduce, information asymmetries in the data market. Further, they maintained that the marketplace for data products could only succeed if competing consolidators were able to offer different data products. They also expressed concern that the SEC merely guessed at whether consolidators would be able to do so, since the fees to obtain the exchanges' raw data have not yet been set and may end up being a significant barrier to entry.

The Court ruled that the SEC acted within its authority when it evaluated the amendment's anticipated benefits against the potential detriments to the affected exchanges and their revenues, and it determined that the amendments were neither arbitrary nor capricious.