Rules from the Securities and Exchange Commission aimed at modernizing market data infrastructure are being challenged by U.S. stock exchanges in a federal appeals court in Washington.
In December, the SEC finalized the rules requiring exchanges to provide expanded public access to market data for national market system stocks that they list.
In response, Nasdaq, the New York Stock Exchange and Cboe Global Markets on Feb. 5 sued in the U.S. Court of Appeals for the District of Columbia Circuit to stop the rules so they can be reviewed.
According to the court petitions posted Tuesday, the exchanges want the new rules to be declared unlawful and to have the SEC permanently barred from implementing or enforcing them, on the grounds that they are "arbitrary, capricious" and do not "promote efficiency, competition, and capital formation."
In an emailed statement, Nasdaq said, it "believes the SEC exceeded its authority by adopting an ill-considered remake of market structure. The Reg NMS II plan would make equity markets overly complex and increase hidden costs for investors."
SEC commissioners voted unanimously to issue the new rules, saying that the market data system has not been significantly updated since first implemented more than 40 years ago and has lagged behind technologies and data content for the proprietary data products that exchanges offer. The changes were designed to increase competition and transparency and improve data quality and data access for all market participants, SEC Chairman Jay Clayton said at the time.
Nasdaq said in a July 22 letter to the SEC that after the comment period on the rule changes ended, "the concerns expressed by issuers, broker-dealers, academics, and exchanges continue to echo: the rule-making process that is occurring in the midst of the COVID-19 pandemic is hasty, if not reckless, and the radical revisions to the National Market System that the Commission proposes are unsubstantiated."
