Washington D.C., Feb. 14, 2020 — The Securities and Exchange Commission today proposed to modernize the infrastructure for the collection, consolidation, and dissemination of market data for exchange-listed national market system (NMS) stocks. The proposal would update and expand the content of NMS market data to better meet the diverse needs of investors in today’s equity markets. The Commission has not significantly updated the rules that govern the content and dissemination of NMS market data since their initial implementation in the late 1970s. The proposal would also seek to introduce competitive forces into this core component of the national market system for the first time. The introduction of and competition among these new data consolidators could, in turn, allow all market participants, including investors, to access and benefit from the expanded content of NMS market data.
“Today’s proposal is part of our larger initiative to modernize our equity market regulatory structure to address significant changes in our trading markets. In particular, today’s proposals are designed to improve data quality and data access for all market participants,” said Chairman Jay Clayton. “Both the content of NMS market data and the technologies used to collect, consolidate, and disseminate that data have lagged meaningfully behind proprietary data products and systems offered by the exchanges. By expanding the content of this data and introducing competitive forces into the market, the proposals would enhance transparency and ensure that improved NMS market data is available on terms that are accessible to a wide variety of participants in today’s markets.”
In 1975, one of Congress’s principal objectives for the national market system was to assure the availability of information with respect to quotations and transactions in securities. Currently, the national securities exchanges and the Financial Industry Regulatory Authority (collectively, the SROs) act jointly under three NMS plans (the Equity Data Plans) to collect, consolidate and disseminate information for NMS stocks. For each NMS stock, the SROs are required to provide specified market data (the NMS market data) to exclusive securities information processors (SIPs). The SIPs then consolidate that information and make it available to the public. Today’s proposal is designed to improve the NMS market data infrastructure by reducing the current disparity in content and latency between NMS market data and the proprietary data products that some of the individual exchanges sell directly to market participants. The proposal would replace the “exclusive SIP” model with a decentralized model of “competing consolidators.”
This proposal is the latest initiative in the Commission’s ongoing efforts to modernize the national market system to better fit the needs of investors—both retail and institutional—and other market participants, including our exchange listed, public companies. For example, in October 2019, the Commission published a proposal designed to improve the procedure for public comment and Commission review of proposed fee changes by NMS plans. In January 2020, the Commission published a proposed order designed to address conflicts of interest in the governance of the NMS plans and to expand the opportunity of investors and other non-SROs to participate in NMS plan governance. Today’s proposal would build upon and complement the Commission’s proposed governance order by seeking to modernize NMS market data from both a content and access perspective, including by introducing competitive forces to key components of the system for the first time.