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SEC Market Data Plan Tossed by Court in Win for NYSE, Nasdaq (1)

July 5, 2022, 8:52 PMUpdated: July 5, 2022, 9:33 PM

A federal appeals court threw out an SEC order that would have given securities firms and others a greater say on management of public data feeds that provide crucial information on real-time stock prices.

The US Court of Appeals for the D.C. Circuit on Tuesday vacated a 2020 SEC order that would have reduced the control that exchanges like the New York Stock Exchange, Nasdaq Inc. and Cboe Global Markets Inc. have over the collection and dissemination of core market data.

The Securities and Exchange Commission moved to create a National Market System that would have required the exchanges and the Financial Industry Regulatory Authority, a self-regulatory organization, to consolidate their existing plans for public data feeds.

The SEC order would have added brokerages, traders and investment firms to the governance committee that votes to approve the data plan.

The SEC’s decision to include non-SRO representatives on the plan’s operating committee was “unreasonable” and unanchored from “any reasonable reading” of the Securities Exchange Act, the court said in Tuesday’s opinion .

“Further, because the non-SRO representation provision is not severable from the CT Plan Order, we vacate that Order in its entirety,” the court wrote.

The NYSE declined to comment. Representatives for the other two exchanges and the SEC didn’t immediately respond to requests for comment.

Meaningful Input

Three National Market System plans currently govern the collection and dissemination of core market data for equity securities. The SEC in May 2020 ordered the exchanges and the FINRA to develop a single plan to replace them.

It was part of an effort, the SEC said, to address an inherent conflict between the exchanges’ obligations to disseminate market data and their commercial interest in selling overlapping data products. It was viewed as a major step to curb power NYSE and Nasdaq have over market data.

Following the order, the self-regulatory organizations (SROs) submitted a plan, which the SEC approved in August 2020.

The Investment Company Institute, an investment industry trade group, said in court filings the current system leaves members of the investment community without meaningful input, among other things. The group urged the court to reject the exchanges’ challenge.

While the August 2020 order was vacated, the DC Circuit found certain aspects of the plan were permissible. This included a provision that would allocate votes held by the SROs according to their corporate affiliation.

The appeals court also said there was no merit to the exchanges’ argument that the SEC failed to consider the disadvantages of a requirement for an independent administrator of the plan.

Additionally, the DC Circuit left largely intact the initial governance order, which the court said was “no more than a call for a proposal.” It only severed parts calling for inclusion of non-SRO representation in the proposed plan.

Gibson, Dunn & Crutcher LLP represents the Nasdaq entities. ArentFox Schiff LLP represents the Cboe entities. Davis Polk & Wardwell LLP represents the NYSE entities.

The case is The Nasdaq Stock Market LLC, et al v. SEC, D.C. Cir., No. 21-1167, 7/5/22.

(Updated with additional reporting)

To contact the reporter on this story: Matthew Bultman in New York at

To contact the editor responsible for this story: Michael Ferullo at