I’m celebrating a landmark birthday soon, and I’ve been interested in buying myself an automatic watch. The appeal for me is that, often, designers leave little “windows” on the dial through which you can see the internal mechanisms. Looking at the initiative by the Securities and Exchange Commission (SEC) to modernize how public market data is sent out to consumers reminds me of peering through those little windows: You can see the moving parts, but not necessarily how the whole assemblage works together.
There are lots of moving parts in the SEC’s rethinking of the National Market System (NMS). The first, the so-called “infrastructure rule,” became effective on June 8, kicking off the implementation of a system where vendors—called “competing consolidators”—will take raw data from exchanges, consolidate it, and disseminate it to consumers. These competing consolidators are supposed to replace the two Securities Information Processors (Sips). The idea is that their offerings will be differentiated, bringing competition and innovation to the market, and democratizing access to market data.
Another moving part is the CT Plan, which the SEC ordered the self-regulatory organizations (mainly the large exchanges) to draft, and approved on August 6. The exclusive Sips are currently run by three plans and two operating committees; the CT Plan consolidates those three into one plan, which takes the form of a limited liability company run by one operating committee (which has not yet been formed). The CT Plan will not, as the former plans did, operate the exclusive Sips, but rather the market data system generally.
The SROs have argued since the beginning of this process that these two pieces—the infrastructure rule and the CT Plan—were so intertwined and dependent on one another that the SEC should consider them as one piece of rulemaking. The SEC, however, insisted that while they are related and tackle the same concerns, they are nonetheless independent of one another: It never mattered to the timelines of one how the other was progressing. However, even observers who support the SEC’s initiative say they’re still confused about how these two aspects work together.
“It’s still unclear when and how the market data infrastructure rule will intersect with the CT Plan,” says Manisha Kimmel, chief policy officer at market data infrastructure provider MayStreet, and who worked at the SEC for two years before joining MayStreet. “There still needs to be a plan that covers the exclusive Sips, even under the infrastructure rule, given that the exclusive Sips will operate in parallel with the competing consolidators.”
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