How the NYSE and Nasdaq’s Battle with the SEC Over Market Data Could Affect Retail Investors


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Stock exchanges are stepping up their fight against the Securities and Exchange Commission and its attempt to reform the rules about what types of market data exchanges they should provide to the public and at what prices, and the outcome could have a huge impact on the trajectory. of federal securities. regulation for years and decades to come, experts say. Nasdaq Inc. NDAQ, -0.46%, International Continental Exchange ICE, -1.41% subsidiary of the New York Stock Exchange and CBOE Global Markets Inc. CBOE, -2.01% have sued the SEC for the The regulator’s plans to force exchanges to provide cheap access not only to the most attractive prices on offer to buy and sell shares, but also to data on offers to buy and sell shares at other prices, which can give traders an idea of ​​where the market is heading next.

Nasdaq and ICE did not respond to a request for comment, and CBOE declined to comment. “Even though this proposal is a bit about adjudication between titans, implicitly about whether exchanges win or not is how much power the SEC has to shape the stock market,” said Gabriel Rauterberg, a capital markets expert from Michigan Law. Market watch. Big market makers like Citadel Securities, Virtu Financial Inc. and Two Sigma Securities pay stock exchanges big fees to access comprehensive data on supply and demand for stocks, and with the proposed change, much of that would have to be sold for much low prices. The SEC’s plan, approved in December, would also allow third-party tech companies to apply to become competing packers of this data, in the hope that these new entrants can do so cheaper or with better service. quality. “By hastily approving this plan without seeking industry consensus, the SEC is recklessly pursuing an agenda that will make our markets less fair at precisely the time they are most needed to help fuel our economic recovery,” said the Equity Markets Association, a foreign exchange industry group, said in a statement at the time. However, a broad coalition of market participants supports the move, including retail brokers such as Charles Schwab Corp. SCHW, -1.01%, E-Trade and Fidelity Investments, who say the rule change would allow them to provide more granular market data. their customers, allowing retailers to better compete with professionals. “For decades, Schwab has challenged the notion that the slow, low-content data currently provided by market data monopolies is sufficient for the needs of investors,” said Jeffrey Brown, senior vice president of legislative and regulatory affairs at Charles Schwab, in a letter to the SEC last year. “The fastest and most content-rich data is available directly on exchanges, but sharing it with customers is cost prohibitive,” he added. “This leaves retail investors with lower market data than professional traders use.” Stock exchanges have increasingly turned to the courts to block the SEC’s rulemaking on market structures that they see as a threat to data revenues, which have become an increasingly important part of their business. Revenue from data service exchanges has risen 62% from 2014 to 2019, to $ 2.4 billion, according to an analysis by the Capital Markets Regulatory Committee, which is funded in part by large banks and administrators. of assets. Last summer, ICE and Nasdaq obtained a ruling in federal court to prevent the SEC from retroactively blocking data rate increases, but the decision did not speak to the SEC’s broader authority to establish the rules by which data they must be shared among all market participants. The outcome of this case could set further precedent, Rauterberg said. “The federal courts are potentially going to take a position on what the SEC’s role is in facilitating the stock market or creatively improving market outcomes for everyone involved.”