The Securities and Exchanges Commission is aiming to revamp the way public data is disseminated in U.S. equity markets.
A rule proposed Feb. 14 would update and expand the content of National Market System data and establish a "decentralized consolidation model" under which competing consolidators would collect, consolidate and disseminate certain NMS information, according to an SEC fact sheet.
Currently, exchanges are required to provide specified market data, which the SEC refers to as NMS market data, to exclusive securities information processors, known as SIPs. The SIPs then consolidate that information and make it available to the public, the SEC fact sheet said.
The SEC proposal would reduce "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" and would replace the "exclusive SIP" model with a decentralized model of "competing consolidators," the SEC said.
"The SIPs have not kept pace with these proprietary data products, either in terms of content or speed," SEC Commissioner Allison Herren Lee said in a statement. "Thus, many market participants find that they must pay for the more expensive proprietary data feeds in order to ensure they can operate effectively and competitively in our equity markets."
The SEC said it has not significantly updated the rules that govern the content and dissemination of NMS market data since their initial implementation in the late 1970s.
"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," SEC Chairman Jay Clayton said in a news release. "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."
Also of note, public data feeds would be expanded to include more information on best bid and offer prices. Currently, the public sees those prices in 100-share lots sizes, no matter the share price. Under the proposal, share prices between $50.01-$100 would be quoted in lots of 20, while shares between $100.01-$500 would be quoted in lots of 10, shares between $500.01-$1,000 in lots of two, and shares more than $1,000 in lots of one.
The proposal, which was unanimously approved by SEC commissioners, will have a 60-day comment period.
"The commission has taken great strides to account for the views expressed by the sell side, buy side, exchanges and others, especially the robust input from the industry over the last year and a half," SEC Commissioner Elad. L. Roisman said in a statement. "Always constructive, even if sometimes critical, your voices have helped us get to this point. I look forward to seeing a robust comment file for this proposal and reading the diverse views expressed in those letters."
