Nasdaq and Cboe target recent SEC rule updating Reg NMS

Nasdaq and Cboe Global Markets have targeted the SEC’s recent rule enacting changes to its Regulation National Market System, as the firms contend the rule will hurt the U.S. equities market.

The rule, adopted in September, made a series of changes to Regulation National Market System, or Reg NMS, which the SEC first established in 2005. Those changes include allowing most stocks to be priced at half-penny increments; reducing the access fee caps for protected quotations of trading centers; increasing the transparency of exchange fees and rebates; and accelerating implementation of rules to make information publicly available about the market’s best priced, smaller-sized orders.

The firms filed a petition for review in a federal appeals court, according to a Cboe Global Markets spokesperson.

“Cboe is committed to advocating for targeted enhancements that advance the (U.S. equities) market and benefit all investors,” the spokesperson said in a statement. “However, we believe the SEC's recently adopted amendments to certain Reg NMS rules fall short of supporting these principles and will inhibit price discovery, leading us to file a petition for review with the D.C. Federal Court of Appeals.”

A Nasdaq spokesperson said the company specifically took issue with the rule’s reduction in access fee caps.

“Nasdaq has been consistent in our advocacy efforts to advance the liquidity, transparency and integrity of capital markets,” the spokesperson said in a statement. “We believe the commission’s rule, specifically as it relates to access fees, threatens to worsen outcomes for investors, listed companies and the U.S. equity markets.”

According to an SEC fact sheet on the rule, “for protected quotations and other best bids and offers in NMS stocks priced at $1.00 or more, the access fee cap will be $0.001 per share. For protected quotations and other best bids and offers in NMS stocks priced less than $1.00, the access fee cap will be 0.1 percent of the quotation price per share.”

“The commission undertakes rulemaking consistent with its authorities and laws governing the administrative process and will vigorously defend the final rules in court,” an SEC spokesperson said in a statement.