SEC Proposes Improvements to Governance of Market Data Access

The SEC is seeking comment on a proposal to modernize the governance of National Market System (NMS) plans that produce public stock market data and disseminate trade and quote data from trading venues. “Today’s proposed order is designed to address issues regarding the dissemination of market data that affect the efficiency and fairness of our markets,” said SEC Chairman Jay Clayton.” The current market data access system has long been criticized. Consolidated public data feeds, which were approved by the SEC at various times from the 70s to the 90s, are jointly operated by the stock exchanges and Finra and are viewed as slower and less content-rich than proprietary products developed in the last two decades and that are sold directly to market participants. Many of these proprietary products are priced higher than the consolidated market data streams, according to Clayton. The proposed order would direct the stock exchanges and Finra to file with the SEC a new plan designed to increase transparency and address conflicts of interest and other issues presented by the current governance structure, the SEC wrote. According to the Wall Street Journal, if the proposal is approved brokerage and trading firms would have a stronger role in how data feeds are run. Such a scenario might result in improved content and lower prices for data, which could benefit investors. The WSJ wrote, however, that the SEC proposal could also cut into the revenues of data providers like NYSE and ICE. Commissioner Robert Jackson asserted that the fact that exchanges both operate public data feeds and profit from selling superior private ones presents a conflict of interest and that the SEC’s proposal does not go far enough. “Rather than give investors a real say over the data that drives our markets, today’s release merely invites for-profit exchanges to draft their own rules on these questions. Because that approach has failed investors before, and there’s no reason to expect it to succeed now, I respectfully dissent.”