U.S. Exchanges Win Market-Data Court Order

A group of U.S. securities exchange operators including Nasdaq, NYSE and Cboe Global Markets won a court ruling regarding the collection and dissemination of core market data.

On Tuesday, July 5, the US Court of Appeals for the D.C. Circuit turned down the 2020 U.S. Securities and Exchange Commission order that would have given securities firms and non-exchanges a greater say on management of public data feeds.

“These representatives would serve as voting members on the operating committee administering the CT Plan, collectively controlling one-third of the committee’s voting power,” according to the Order.

Equity market data is collected, consolidated and disseminated pursuant to NMS plans governed and operated by “self-regulatory organizations” (SROs), groups comprising, in large part, the major national securities exchanges for equity securities.

According to the Court, the SEC’s decision to include non-SRO representatives on the plan’s operating committee was unreasonable.

In 2020, the Commission issued two orders aimed at consolidating the existing NMS plans governing the dissemination of equity market data into a single, consolidated plan (CT Plan) and modifying the governance structure to increase efficiencies, mitigate conflicts of interest among the securities exchanges and facilitate greater involvement by non-exchange stakeholders.

Before 2021, Regulation NMS required each securities exchange to report its “core” market data for its NMS-traded securities to one of two centralized securities information processors (SIPs), which in turn consolidated and disseminated the core data to subscribers, including investors, broker-dealers and data vendors.

At present, three SRO-administered NMS plans, known as the Equity Data Plans, govern the collection, consolidation and dissemination of core market data.

The national exchanges challenged three provisions of the final, Commission-approved CT Plan: (1) the inclusion of representatives of non-SROs as voting members of the CT Plan’s operating committee; (2) the grouping of SROs based on corporate affiliation for voting; and (3) the requirement that the administrator of the CT Plan be “independent,” meaning independent of any SRO that sells equity market data products.

“We ultimately agree with petitioners as to their first challenge but reject their second and third challenges,” the Court said.