On September 1st, the SEC released an order that directs the equity exchanges and the Financial Industry Regulatory Authority (FINRA) (the participants) to file a new national market system plan (NMS plans). The order would replace the three current NMS plans that regulate the public dissemination of real-time, consolidated equity market data for national market system stocks.
In May 2020, the SEC issued an order directing the exchanges and the financial industry regulatory authority to submit a new national market system plan regarding consolidated equity market data. The order was reviewed by the DC Circuit and upheld regarding the SEC’s requirements that the new plan allocate votes by exchange group and provide for an independent administrator.
The new order addresses the following:
conflicts of interest inherent in the existing regulatory framework of the current equity data plans
efficacy of NMS plan operations and the responsiveness of the plan to the concerns of market participants that are not self-regulatory organizations
The consolidated equity market data produced under NMS plans is an important part of the national market system through which equity investments are priced and traded. Technological advances and evolving equity markets have intensified inherent conflicts of interest between the equity exchanges’ regulatory responsibilities concerning their oversight of existing NMS plans and their individual interests in boosting the viability of the proprietary data products they sell. These conflicts of interest have raised concerns about whether the current NMS plans for equity market data continue to fulfill their regulatory purpose to ensure the accessibility to data related to quotations for and transactions in securities.
The order also requires the participants to submit a new NMS plan that will be released for public notice and comment. The existing NMS plans will continue to regulate the provision of consolidated equity market data until a new, similar NMS plan is effective.