As previously covered, there are currently three NMS plans governing the dissemination by the exchanges of trading information in NMS stocks. They are the (i) Consolidated Tape Association Plan, (ii) Consolidated Quotation Plan and (iii) Joint SRO Plan for Nasdaq-Listed Securities.
Under the proposed Order, market participants would be required to submit a "single, new equity data plan" (a/k/a the "New Consolidated Data Plan") in which all of the exchanges would participate. A governance committee for the new plan would be formed, and one-third of the governance committee votes would be held by entities other than the exchanges.
The SEC's proposed Order would (i) enforce current disclosure policies in connection with any conflicts of interest present in the current governance structure of the existing NMS plans, and (ii) create a policy on the confidential treatment of any data or information in connection with the operating committee in order to increase transparency.
The NYSE urged the SEC to make several improvements to the proposal by:
- expanding securities information processors ("SIPs") content to (i) design products intended for modern use cases, (ii) make public protected quotes for "shares" rather than "lots," (iii) require both round lot reform and odd lot quotes to SIPs, and (iv) add auction imbalance information;
- modifying the delivery of SIPs to (i) consolidate each major data center to improve geographic latency and (ii) allow for competing consolidators of SIP data by replacing the Regulation NMS requirement for a "single" processor; and
- enhancing SIP governance by (i) implementing the structure approved in the NMS Plan for the Consolidated Audit Trail and replacing the current decision requirements (including unanimity), (ii) clarifying the standard for "fair and reasonable" fees, and (iii) making several revisions to the Revenue Allocation Rule.
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