Equity exchanges and the Financial Industry Regulatory Authority must come up with a single new national market system for producing public consolidated market data and new governance for it, the SEC said Wednesday.
SEC commissioners voted unanimously to finalize a proposed revamping of the current system, in which "core data" — the best quoted prices and most recent trades in NMS stocks — are collected, processed and publicly disseminated by three separate equity data plans, and the exchanges as self-regulatory organizations have governance authority.
That has led to "inefficiencies and conflicts between (exchanges') commercial interests and their regulatory obligations," said Brett Redfearn, director of the SEC's division of trading and markets, before the vote.
Citing "significant conflicts and potential conflicts" between exchanges' proprietary data offerings and the consolidated market data they are required to produce as self-regulatory organizations, SEC Chairman Jay Clayton said at the virtual commission meeting that the changes will be fairer for market participants and "drive significant efficiencies" by replacing the three existing NMS data plans with one.
"The time for investor- and market-focused action has arrived," Mr. Clayton said.
The governance changes include allocating one-third voting power to non-SRO members of the new plan's operating committee and limiting exchanges to a single vote regardless of the number of exchanges they offer.
The order gives exchanges and FINRA 90 days to submit the new plan and governance changes, which will then be available for public comment before final SEC approval.
Cboe Global Markets said in an emailed statement that it was "extremely disappointed" in the decision and that the SEC failed to consider the market impact. It also said it was "improper and unfair" for the SEC to require refiling of approved securities information processor fees, and inappropriate to push through the changes while a related market data infrastructure proposal is still going through the comment process. "Indeed, we question why such transformative and risky changes are a priority at this time," Cboe said.
