The Securities and Exchange Commission adopted rules Wednesday aimed at modernizing collection and dissemination of market data for national market system stocks listed by exchanges.
The new Regulation NMS rules "are designed to increase competition and transparency, which will improve data quality and data access for all market participants," SEC Chairman Jay Clayton said before the vote to approve the rules.
The market data infrastructure has not been significantly updated since it was first implemented more than 40 years ago and has lagged behind the technologies and data content of proprietary data products that exchanges offer, SEC officials said.
"Democratizing market data has the potential to promote fair and efficient markets and reduce information asymmetries between market participants who currently rely on such data," said Lev Bagramian, senior securities policy adviser at watchdog group Better Markets. Injecting more competition "would serve as a countervailing check on the rampant increase of the cost of proprietary data" and better serve investors, some of whom have been driven to less regulated trading venues, he said.
Tyler Gellasch, executive director of Healthy Markets Association, a market structure watchdog group whose members include many pension funds, said the reforms aimed at making the public equity markets operate less costly and more usefully are welcome, but are likely to add complexity for market participants and risks to investors.
"Rather than simply requiring more data to be published and reducing the disparity between the private data and public data streams, the SEC is creating an elaborate competition but then isn't setting up any guardrails to make sure the competition actually helps investors," Mr. Gellasch said in an email.
"The public market data stream currently doesn't provide investors or the public with essential market information in real time at a reasonable cost, as it was originally intended, and it's likely that even if these reforms are implemented, it still won't," said Mr. Gellasch. "Odd lots are a huge part of the markets today, and continuing to largely ignore them for best execution purposes would be a huge disservice to investors."
