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CT Plan Fee Filing: A Chance for Market Data Reform

  • The CT Plan’s upcoming fee filing provides the SEC with an opportunity to re-engage on its previous efforts to improve the state of consolidated equity market data.
  • To comply with Exchange Act fee standards, CT Plan fees must be reasonably related to the costs of collecting, consolidating, and disseminating consolidated equity market data.
  • CT Plan policies and data subscriber agreements should be easy to understand, implement, and use.
  • The SEC should reevaluate the Competing Consolidator/Self-Aggregator model it adopted in the MDI Rule.

The CT Plan, the newly established single national market system (“NMS”) plan that will be  responsible for collecting, consolidating, and disseminating consolidated equity market data beginning in early 2027, is due to submit its first fee filing to the SEC for approval this November.1 This fee filing will be the first opportunity for the SEC and the public to evaluate the fees the new CT Plan is proposing to charge subscribers and vendors for the purchase of consolidated equity market data, which is a key component in the efficient and effective functioning of the U.S. equity market.

SIFMA recently submitted a comment letter to the SEC encouraging it to closely scrutinize the CT Plan’s fee filing—including by requiring the CT Plan to demonstrate that its proposed fees are reasonably related to the costs of providing the data—to ensure the fees comply with statutory requirements that such fees be fair, reasonable, and not unreasonably discriminatory.

Consolidated Equity Market Data Has Been Slow to Improve

Investor access to timely, reliable, and accurate consolidated equity market data at a reasonable cost is a cornerstone of the U.S. equity markets, and the transparency provided by wide dissemination of this data has contributed greatly to the U.S. equity markets’ success and growth over many years.  As the SEC stated in its 2020 CT Plan Governance Order,

Congress charged the Commission with ensuring the prompt, accurate, reliable, and fair collection, processing, distribution, and publication of information with respect to quotations for and transactions in such securities and the fairness and usefulness of the form and content of such information.  In furtherance of this responsibility, the Commission must help ensure that certain “core data” is widely available for reasonable fees.  The Commission has also recognized that investors must have this core data to participate in the U.S. equity markets. ((Release No. 34-88827 (May 6, 2020), 85 FR 28702, 28705 (May 13, 2020). ))

Despite the SEC’s recognition that broad access to reasonably priced consolidated equity market data is vital to the success of the equity markets, the current consolidated equity data feeds have not kept pace with changes in the marketplace as the exchanges have focused their efforts on enhancing the content and speed of their individual proprietary market data feeds, which are available to market participants for separate fees.  At the same time they sell to market participants individual proprietary data feeds and low-latency connectivity to those feeds, exchanges, as the Equity Data Plan Participants, receive significant revenues from consolidated equity market data because many broker-dealers feel they need to subscribe and pay for consolidated market data feeds based on regulatory obligations.2 These factors point to the conflict the exchanges face as operators of the Equity Data Plans, as they have an incentive to avoid enhancing the speed, content, and quality of consolidated equity market data in a manner that might permit competition—now or in the future—with the exchanges’ proprietary data products.

Prior SEC Attempts to Improve Consolidated Equity Market Data Have Stalled, But it’s a New Day

Through rulemaking initiatives over the years, including by ordering the exchanges to consolidate the Equity Data Plans into the single CT Plan and unanimously adopting the MDI Rule,3 the SEC has attempted to address the conflicts of interests exchanges face in operating the Equity Data Plans by requiring that they improve the governance, administration, and content of consolidated equity market data.  However, the SEC’s efforts have stalled due to exchange-led litigation and other delays.

Implementation of the single CT Plan brings renewed opportunity for the SEC to meaningfully improve investor access to high quality consolidated equity market data for a reasonable cost.  The November fee filing is a significant step in the process of improving equity market data for all investors.

The CT Plan’s Fee Filing Must be Consistent With Statutory Requirements for Such Fees to be Fair, Reasonable, and Not Unreasonably Discriminatory

We urge the SEC to ensure the CT Plan’s upcoming fee filing provides the SEC, and the public, with the transparency necessary to evaluate whether the proposed fees are consistent with standards under the Exchange Act requiring that fees for consolidated equity market data are fair, reasonable, and not unreasonably discriminatory.  Since the SEC adopted Regulation NMS in 2005, it has recognized that for consolidated equity market data fees to comply with Exchange Act fee standards, the fees must be reasonably related to the costs of collecting, consolidating, and disseminating the data.  Therefore, without transparent cost information, the CT Plan will be unable to demonstrate that its proposed fees for the distribution of consolidated equity market data are consistent with these Exchange Act requirements, and the SEC will be unable to approve the filing, which would lead to additional delays in implementing the single CT Plan.  Further delays in improving the distribution of consolidated equity market data are unacceptable and should be avoided through a clear and transparent fee filing.

Current Equity Data Plan Costs Do Not Appear to be Reasonably Related to Expenses

Currently, the Equity Data Plans do not provide any public information about costs, so there is no evidence that the current fees the Plans charge for consolidated equity market data meet Exchange Act standards.  The Equity Data Plans disclose the Net Income—the amount of revenues left over after deducting operating expenses—they distribute each calendar year to the exchanges.4 But there is no transparency regarding the total annual operating costs the Equity Data Plans incur to disseminate consolidated equity market data.  Therefore, the public does not know if the current fee levels are reasonably related to the Equity Data Plans’ costs of collecting, consolidating, and disseminating the data.

In a 2020 order, the SEC stated that “total revenue for the three Equity Data Plans totaled more than $430 million in 2017, based on their audited financial statements.”5 Of this total revenue—which is generated through fees charged to subscribers and vendors—the Equity Data Plans distributed approximately $387 million in Net Income to the Plan Participants in 2017.  Piecing this information together indicates that the Equity Data Plans spent approximately $43 million (just 11% of the total Net Income) to collect, consolidate, and disseminate consolidated equity market data in 2017.  By any measure, this level of operating costs was not reasonably related to the level of Net Income the Equity Data Plans distributed in 2017.  Without transparency into the Plans’ operating costs and expenses, the public can only assume this type of disparity between costs and fees has been ongoing over the past eight-plus years, as the SEC has not had the opportunity to review and affirmatively approve in a public order any fee filing by the Equity Data Plans since prior to October 2014.

The CT Plan should not be permitted to continue charging the same fees for consolidated equity market data as the three separate Equity Data Plans.  Rather, the CT Plan’s fee filing must show that its fees are reasonably related to the costs for the CT Plan to collect, consolidate, and distribute the data.

CT Plan Policies and Data Subscriber Agreements Should be Easy to Understand, Implement, and Use

In addition to fee levels, SIFMA urges the SEC to closely scrutinize the CT Plan’s proposed policies that will govern fees and associated data subscriber agreements.  The Equity Data Plans’ policies on market data use are complex and burdensome, particularly regarding reporting requirements, fee structures, administrative overhead, and the requirement to continually audit data usage.  The SEC should ensure the CT Plan’s policies are simple to understand, implement, and use.  For example, the SEC should encourage the CT Plan to create a simpler fee structure, allow for broader redistribution rights, and reduce reporting requirements and overhead obligations.

Revisiting the Viability of Competing Consolidators and Self-Aggregators

SIFMA has long supported introducing competition into the market for consolidated equity market data.  As discussed above, the current exchanges that control the Equity Data Plans—and the Equity Data Plans’ associated fees and revenues—are insulated from competition with regard to consolidated equity market data and are conflicted through the simultaneous sale of their proprietary data products.  As a result, exchanges have little incentive to reduce costs or make investments to improve the Equity Data Plans.  One of the ways the SEC sought to address this conflict is through the adoption of the Competing Consolidator/Self-Aggregator model in the MDI Rule for the dissemination of consolidated equity market data, which is designed to allow multiple consolidators (or individual firms) to purchase raw market data from the exchanges and consolidate it themselves rather than having to buy it from the current single sources.  However, we are concerned that the Competing Consolidator/Self-Aggregator model may not be able to introduce the competition the SEC was seeking.

Therefore, we recommend that the SEC reexamine the decentralized distribution model it outlined in the MDI Rule and either set a date certain by which the CT Plan Operating Committee must propose a fee amendment for the sale of data to Competing Consolidators and Self-Aggregators or chart a different path forward.  Currently, there is no timeline for the CT Plan to propose fees for the data that Competing Consolidators would purchase.  To advance this process, the SEC should provide the CT Plan with a short-term deadline by which it must file a plan amendment detailing the fees it would charge for the data and its rationale for its proposed fee levels, fee models, and fee policies.  This plan amendment would provide the SEC and the public a better understanding of the fees Competing Consolidators and Self-Aggregators would have to pay for data and whether the decentralized model, as currently constructed, would work in practice or require modifications.

We encourage the SEC to closely scrutinize the CT Plan’s filing this November to establish equity market data fees and policies as this is a critical point in the ongoing process of improving the state of consolidated equity market data, which allows for the transparency that is the hallmark of the U.S. equity markets.

Authors

Joe Corcoran is Managing Director and Associate General Counsel in SIFMA’s Capital Markets Group. 

Gerald O’Hara is Vice President and Assistant General Counsel in SIFMA’s Capital Markets Group

Footnotes

  1. In April 2027, the single CT Plan is scheduled to replace the current structure for disseminating consolidated equity market data, where stocks are assigned to one of three separate NMS Plans (CTA Plan, CQ Plan, or UTP Plan, together the “Equity Data Plans”) depending on the listing market for the stock.  See Release No. 34-101672, (Nov. 20, 2024), 89 FR 94924 (Nov. 29, 2024). [↩]
  2. For example, the Vendor Display Rule (Rule 603 of Regulation NMS) generally requires broker-dealers to provide a consolidated display of market data for NMS stocks for which they provide quotation information to customers. [↩]
  3. Release No. 34-90610 (Dec. 9, 2020), 86 FR 18596 (Apr. 9, 2021). [↩]
  4. Net Income is a defined term in the Equity Data Plans.  See, e.g., CTA Plan, Section XII(a)(v) (as of June 3, 2021).  SIFMA notes that the equivalent securities information processer that disseminates last sale reports and quotations in the options market, the Options Price Reporting Authority (“OPRA”), does not publicly disclose any financial information. [↩]
  5. Release No. 34-87906 (Jan. 8, 2020), 85 FR 2164, 2179, at n. 190 (Jan. 14, 2020). [↩]

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