The Securities and Exchange Commission (SEC) is directing U.S. stock exchanges to jointly develop a new national market system (NMS) plan to replace the three existing NMS plans.
The NMS plans govern the public dissemination of real-time, consolidated stock market data so the public has ready access to a "comprehensive, accurate, and reliable source of information for the prices and volume of any NMS stock at any time during the day."
However, the SEC has new concerns about whether the existing structure continues to "ensure the availability of information with respect to quotations for and transactions in securities." It also says having three separate NMS plans creates inefficiencies.
In its order, dated May 6, the SEC said, "developments in technology and changes in the equities markets have heightened an inherent conflict of interest between the participants' [exchanges] collective responsibilities in overseeing the Equity Data Plans and their individual interests in maximizing the viability of proprietary data products that they sell to market participants."
Thus, the SEC is directing the exchanges to come up with a single consolidated plan. "Today's action reflects careful analysis and deliberation on modernizing and improving access to equity market data and, as a result, our equity market structure more generally," SEC Chairman Jay Clayton said.
The new NMS plan will be open for public comment before the SEC votes on it. Until then, the current plans will remain in place.
The Securities Industry and Financial Markets Association, which represents the securities industry, called it "a positive initial step which addresses current conflicts of interests for exchanges."
The Equity Markets Association, which represents the exchanges, says the action does little to help investors. "The SEC should not unnecessarily be adding to market risk by introducing eccentric governance changes during times of great volatility," officials said.