The Nasdaq Stock Market LLC v. SEC, No. 21-1100 (D.C. Cir. 2022)Annotate this Case
In 2005, the Securities and Exchange Commission adopted “Regulation NMS” to promote the availability of market data to investors and other market participants. Regulation NMS allowed for investors to obtain "core data" from a centralized securities-information processor, which receives certain data, compiles it, and then transmits it to subscribers. However, to receive additional data, market participants must subscribe to the exchanges’ own proprietary data feeds. This generates significant revenue for the exchanges.
Due to changes in the securities market since 2005, the proprietary data feeds have become "vastly more useful." As a result, the Commission determined, there was an information asymmetry in the marketplace for securities data — those market participants relying on the core data feed were at a significant informational disadvantage to participants that could afford to subscribe to the exchanges’ comprehensive
proprietary products. In response, the SEC adopted the Market Data Infrastructure Rule in 2020, which promotes the development of new data distribution methods. Various exchanges challenged the Market Data Infrastructure Rule, claiming it was arbitrary and capricious.
The D.C. Circuit denied the exchanges' petitions, noting that the Market Data Infrastructure Rule promotes the Commission’s stated goals and is grounded in the record. The court also held that the rule was warranted, given changes in the securities market.