The SEC Advisory Committee on Market Information, which has been meeting over the past year to build a consensus and recommend possible changes on market data regulation to the SEC, has issued its final report highlighting several significant proposed changes to the market data industry. The report recommends that price transparency and consolidated market information should continue as core elements of the U.S. securities markets. It revealed that a majority of the Advisory Committee favored the retention of the Display Rule requiring vendors and broker-dealers to provide a consolidated display of last sale transaction reports and quotations from all reporting stock market centers. It also advises that market centers should be permitted to distribute additional market information such as limit order books free from mandatory consolidation requirements, permitting such information to be customized for users or not distributed at all.
In terms of competition, the majority of the Committee also recommended that the SEC should permit a new system of competing consolidators where each market center would be allowed to sell its market information to any number of competing consolidators, which then would sell to the vendors and subscribers. This would change the current consolidator model in which the Consolidated Tape Association (CTA) alone receives and disseminates market information from all reporting market centers for distribution. However, this recommendation is based on the Commission being satisfied that specific technological and economic issues have been effectively addressed in any proposal for a competing consolidator.
The report also took note that a minority of the Advisory Committee members do not believe that the economic benefits of implementing a new model outweigh the technological and economic risks of a new competing consolidator model. The Committee also generally agreed that in the case that the Commission does not choose to adopt the competing consolidator model, it should adopt specific improvements to the existing model. These improvements include selecting the single information processor by competitive bidding and broadening the governance through a non-voting advisory committee.
On the market data fees front, the Committee rejected the proposal in the SEC December 1999 Concept Release for SEC review of market information fees under a cost based standard. The report also recommends that the Commission continue to review relevant plans and fees under the existing standards. Recommendations for the options world included majority support for the development of a consolidated display of the best bid and offer quotations from any options exchange and permission for competing consolidators to evolve. The report is available on the SEC Web site at www.sec.gov/divisions/marketreg/marketinfo/finalreport.htm.