06.08.2020

Court Ruling on Market Data Assessed

On Friday, the U.S. Court of Appeals ruled in favor of the exchanges’ appeal against the SEC and the Securities Industry and Financial Markets Association (SIFMA), specifically over SEC actions brought against the exchanges regarding broad U.S. cash equities and options market data and market access fee filings. In this note, KBW’s Kyle Voigt examines the implications of this ruling. The aforementioned SEC actions were made in October 2018, which the exchanges subsequently appealed. Below are top-line thoughts pulled directly from the report, which can be viewed in full here: Court of Appeals Rules in Favor of Exchanges in Lawsuit Regarding Market Data and Access Fee Filings.
  • Bottom Line: Voigt believes this decision by the U.S. Court of Appeals was expected by the investment community. Regardless, at the minimum, it eliminates the tail risk of the exchanges (ICE, CBOE and NDAQ) having to re-justify and potentially roll back some of +400 prior fee filings dating back to 2013. With respect to pricing changes moving forward, Voigt doesn’t believe the ruling from Friday will necessarily make it any easier for the exchanges to implement future fee increases. Additionally, he believes the SEC will still attempt to push forward with reforms to SIP governance and broader cash equities market data infrastructure. The Transaction Fee pilot has also been appealed by the exchanges, and Voigt awaits a decision on this matter, but he doesn’t view this as material of a risk as the aforementioned market data reform topics.
  • Background. In October 2018, the SEC ruled in favor of SIFMA in a longstanding dispute with the exchanges, specifically rolling back pricing increases on NYSE (ICE) and NDAQ depth-of-book data products, while also remanding over 400 fee filings made related to U.S. cash equities and options market data and market access (connectivity and access fees) that would have been required to be re-justified (CBOE, ICE, NDAQ). The exchanges subsequently filed an appeal against these actions, which was what was ruled upon by the U.S. Court of Appeals on Friday.
  • Court of Appeals Ruling in Favor of the Exchanges. On Friday, the U.S. Court of Appeals ruled in favor of the exchanges’ (CBOE, ICE, NDAQ) appeal of SEC actions made in October 2018 mentioned above. Voigt had expected a 1H20 ruling on the matter, so the timing is not a surprise. The ruling essentially eliminates some tail risk of the exchanges having to roll back previously implemented market data and market access fees (dating back to 2013) that would have been required to be re-justified if the SEC actions were ruled to be lawful.

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