U.S. exchanges win court appeal on SEC market data order

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The ruling was a win for large exchange groups like Intercontinental Exchange (NYSE:ICE) Inc’s NYSE, and Nasdaq Inc, which had challenged the SEC’s order.

Real-time consolidated equity market data, such as the best bids and offers available in the market, are a regulatory must-have for brokers when trading stocks, in part so they can show they executed their customers’ orders at the best prices available.

In 2020, after more than a decade of complaints by brokers claiming exchanges were conflicted in their roll of providing core market data while also selling similar proprietary market data products, the SEC approved an order governing the collection and dissemination of core market data.

That order directed the exchanges and the Financial Industry Regulatory Authority, which are self-regulatory organizations (SROs), to draft a new plan for the dissemination of public equity market data that, among other things, would give non-SROs one-third of the votes on the plan’s operating committee.

Nasdaq, NYSE and Cboe Global Markets (NYSE:CBOE), which together run 12 of the 16 U.S. stock exchanges, challenged both the governance plan and the order for a new national market system (NMS) plan.

In May, a three-judge panel on the U.S. Circuit Court of Appeals for the District of Columbia sided with the SEC and upheld the governance plan.

But on Tuesday, that appeals court sided with the exchanges and vacated the NMS plan, saying the SEC stepped outside its authority in giving non-SROs voting power on the plan’s operating committee.

The SEC, the NYSE and Nasdaq were not immediately available for comment.