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Notice of Proposed Order Regarding the Creation of a New Consolidated Market Data Plan for Equity Market Data

Jan. 8, 2020

Thank you to the Division of Trading Markets and the Office of General Counsel, as well as others throughout the building who worked on this proposed order.  I particularly appreciate the fact that today’s recommendation takes the form of a proposed—rather than a final—order.  

Issues related to market data inspire passionate debate—we got a taste of it at the roundtable on market data in October 2018, and I expect we might get another taste in the comment file on this proposal.  As controversial as market data issues are, there is general agreement that the status quo is imperfect.  As one reflection of that sentiment, the exchanges already have taken some positive steps to make the consolidated data feeds faster and more reliable.  This proposal is intended to explore whether governance changes might further advance these efforts. 

Given the difficulty of market data issues generally and the complexity of NMS plan governance more specifically, the diversity of viewpoints should help us to develop a better final order.  As we have heard this morning, the order, as proposed, includes some very specific prescriptions for what the governance of the consolidated data feed should look like.  For example, we do not have infallible insight into how to allocate votes, what thresholds are appropriate for various actions, or what constraints should govern decisions about what expenditures should be covered by plan revenue.  I look forward to hearing whether commenters think we got these and other prescriptive elements of the proposed order right.  The point of making the proposed changes is to ensure that the new consolidated data plan works better than the status quo.  Commenters will help us figure out whether our proposed approach will achieve that objective.

Regardless of whether this order were being proposed or adopted, I would be looking down the road at potential additional reforms, reforms that rely on governance by market forces.  When it adopted Regulation NMS in 2005, the Commission expressed ambivalence about the best approach to regulating the provision of market data and deferred consideration of fundamental questions about market data.  The Commission, fearing the possible effects of a more fundamental change in the way market data was delivered to market participants, expressed confidence that “the current model . . . benefits investors, particularly retail investors, by helping them to assess quoted prices at the time they place an order and to evaluate the best execution of their orders against such prices by obtaining data from a single source that is highly reliable and comprehensive.”[1]  We are here today because such confidence in the status quo—a status quo that relied on a monopoly rather than market forces to provide the data—was not warranted.

As dissenting Commissioners Glassman and Atkins noted at the time, “By entrenching the single consolidator model, the majority grants a monopoly for the consolidation of market data, which erects another barrier to encouraging competitive solutions for market data consolidation.”[2]  Although I support publication of this proposal to explore possible better approaches to governance of these data plans, I encourage the staff to explore ways to get to the root of the problem by allowing more competition into this space. Looking to the discipline that competition imposes is likely to be far more effective in addressing concerns about high costs and inadequate service than the government micromanagement that has become a hallmark of this space. 

I support the recommendation and look forward to spirited comment, which will help us shape the final order.


[1] Regulation NMS, Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37504 (June 29, 2005).

[2] Id. at 37643 (dissenting statement of Commissioners Cynthia A. Glassman and Paul S. Atkins).

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