SEC Directs Equity Exchanges and Financial Industry Regulatory Authority to Improve Governance of Market Data Plans

“Today’s action reflects careful analysis and deliberation on modernizing and improving access to equity market data and, as a result, our equity market structure more generally,” said SEC Chairman Jay Clayton. “Today’s Commission action is based on extensive input from a broad range of investors and market participants and reflects the commitment of the women and men of the SEC to fairness in our markets and the interests of investors.”

Millions of Main Street investors, whether individually or collectively through mutual funds or pension funds, have invested their savings in equity securities. The consolidated equity market data produced pursuant to NMS plans is a critical component of the national market system through which these investments are priced and traded. Recent market developments have given rise to concerns about whether, as currently structured, the existing NMS plans for equity market data continue to fulfil their regulatory purpose to ensure the availability of information with respect to quotations for and transactions in securities. Today’s order addresses conflicts of interest inherent in the current governance structure of the existing equity data plans and is designed to improve the efficiency of NMS plan operations and the responsiveness of the plan to the concerns of non-SRO market participants.

The order follows a Notice of Proposed Order issued on Jan. 8, 2020, that was followed by an extended comment period. Under the order, the participants must submit a new NMS plan that will be published for public notice and comment before the Commission takes action. Until the Commission approves a new NMS plan, the current NMS plans will continue to govern. The Commission also approved amendments to the existing NMS plans, submitted by the participants and modified by the Commission, designed to address conflicts of interest and the protection of confidential information.

This order is a part of a broader, ongoing Commission effort to modernize the U.S. national market system to better meet the needs of investors—both retail and institutional—and other market participants.  For example, in October 2019, the Commission published a proposal to improve the procedure for public comment and Commission review of proposed fee changes by NMS plans. In February 2020, the Commission published a proposal to modernize the infrastructure for the collection, consolidation, and dissemination of NMS market data to better meet the diverse needs of investors in today’s equity markets. Today’s order marks a further significant step in this modernization effort by requiring a new governance framework for the collection and dissemination of equity market data, as outlined by the Chairman in March 2019.