NYSE, Nasdaq sue SEC over new market data infrastructure rule

Three U.S. stock exchange giants have sued the U.S. Securities and Exchange Commission over its recent rule to beef up critical market data feeds.

Nasdaq Inc., the New York Stock Exchange and Cboe Global Markets Inc. recently filed petitions for the U.S. Court of Appeals for the District of Columbia Circuit to review the regulator's market data infrastructure rule, according to court records.

Passed unanimously in December 2020, the SEC's rule was intended to address long-standing concerns among banks and broker/dealers that the consolidated equity trading feeds that power ticker tapes across Wall Street do not hold weight up against the richer and pricier proprietary data feeds sold by Nasdaq, the Intercontinental Exchange Inc.-owned NYSE and Cboe.

The rule requires the exchanges to report a more robust set of trading information such as some depth-of-book data into the consolidated feeds that are disseminated by what are known as the securities information processors, or SIPs. It also opened the door for more competition in who can run their own versions of the consolidated feeds. A committee of the exchanges and the Financial Industry Regulatory Authority currently operate the SIPs.

Nasdaq, NYSE and Cboe extensively lobbied against the rule as the SEC deliberated its merits.

In a July 2020 comment letter, Nasdaq lambasted the SEC for pushing through such a sweeping rule change in the heart of a pandemic, while calling the proposed changes "radical."

"The record is paper thin, it reveals profound disagreements among stakeholders, it lacks data-driven analysis, and it omits from consideration viable alternative proposals," Nasdaq wrote.