The Securities and Exchange Commission (SEC) is directing the equity exchanges and the Financial Industry Regulatory Authority (FINRA) to file a new national market system (NMS) plan.
This new plan would replace the three existing national market system plans that govern the public dissemination of real-time, consolidated equity market data for national market system stocks.
The consolidated stock market data produced through NMS plans is a critical component of the national market system through which equity investments are priced and traded. Developments in technology and changes in the equity markets have heightened the inherent conflicts of interest between the equity exchanges’ responsibilities in their oversight of existing NMS plans and their interests in maximizing the viability of the proprietary data products they sell.
This conflict has raised concerns about whether the existing NMS plans for equity market data continue to fulfill their regulatory purpose to ensure the availability of information with respect to quotations for and transactions in securities.
This order by the SEC addresses conflicts of interest inherent in the current governance structure of the existing equity data plans. Further, it is designed to improve the efficiency of NMS plan operations and the responsiveness of the plan to the concerns of market participants.
Under the order, the participants must submit a new NMS plan that will be published for public notice and comment. Until such a new NMS plan is effective, the current NMS plans will continue to govern the provision of consolidated equity market data.
The order follows a May 6, 2020, SEC order that was reviewed by the D.C. Circuit and, among other things, was upheld with respect to the commission’s requirements that the new plan allocate votes by exchange group and provide for an independent administrator.