After more than a decade of arguments between market-data providers and the consumers of that market data finally came to a head last week. The US Securities and Exchange Commission voted three-to-two to propose a new rule that would direct the self-regulatory organizations to submit a new National Market Systems Plan regarding consolidated equity market data.
In short, the proposed rule seeks to consolidate the Consolidated Tape Association’s Tapes A & B with Nasdaq’s Tape C while opening the plan’s governance to non-SRO entities.
SEC Chairman Jay Clayton and Brett Redfearn, director of the SEC’s Division of Trading & Markets, deserve kudos for getting the regulatory ball rolling on the much-needed reform and modernization. However, it is doubtful that the equities market will see the New Consolidated Data Plan before the end of the decade.
As Commissioners Robert Jackson and Allison Herren Lee noted in their dissenting votes on the Division of Trading & Market’s proposal, it will be a long, drawn-out process steered by those whose conflicts-of-interest precipitated the need for the change in the first place.
The SROs have an economic interest to delay the new plan as long as possible, but modernizing the consolidated tapes is not a light lift for the industry: There is more involved than adding names to email-distribution and datacenter-access lists. It is an opportunity to include new data, such as odd lot, as well as future-proof the consolidated tape for at least the next decade or two.
Not taking into account possible litigation and advances in processing power and network throughput that could incur additional delays for the new plan’s development, the industry could face a timeline similar to the unfinished Consolidated Audit Trail.
One could imagine something like this:
- January 14, 2020: The SEC’s proposed rule appears in the Federal Register, which begins a 45-day comment period.
- February 28, 2020: The New Consolidated Data Plan’s initial comment period ends, but the SEC extends the comment period for another 45 days to address industry concerns.
- April 13, 2020: The plan’s second comment period ends.
- June 2020: The SEC approves the new rule.
- November 3, 2020: The US holds its presidential election.
- February 2021: The Administration nominates, and the US Senate confirms candidates to replace Commissioners Robert Jackson and Hester Pierce.
- May 4, 2021: SEC Chairman Jay Clayton’s term expires.
- June 2021: Administration nominates, and US Senate confirms a candidate to replace Jay Clayton as SEC Chair.
- June 2021: The SROs form the Securities Information Processor Advisory Group.
- May 2022: The SIP Advisory Group publish its vendor-selection plan for the New Consolidated Data Plan.
- July 8, 2022: Commissioner Allison Heren Lee’s term expires.
- November 2022: The SIP Advisory Group issues a cost study for the New Consolidated Data Plan.
- December 2022: The SIP Advisory Group publishes a shortlist of prospective vendors to manage the SIP migration.
- February 2023: The SIP Advisory Group submits its draft of the New Consolidated Data Plan to the SEC.
- March 2023: The SEC returns the draft to the SIP Advisory Group to be re-worked.
- September 11, 2023:, Commissioner Elad Roisman’s term expires.
- November 2023: The Administration nominates, and the US Senate confirms candidates to replace Commissioners Allison Heren Lee and Elad Roisman.
- January 2024: The SIP Advisory Group re-submits its draft of the New Consolidated Data Plan.
- May 2024 SEC approves plans.
- November 5, 2024: The US holds its presidential election.
- May 2025: The SIP Advisory Group selects a vendor.
- February 2026: Administration nominates, and Senate confirms the replacements for the replacements of Commissioners Robert Jacks and Hester Pierce.
- May 2026: The SIP Advisory Group requests a deadline extension.
- January 2027: Administration nominates, and Senate confirms a candidate to replace the replacement of Jay Clayton as SEC Chair.
- November 7, 2028: The US holds its presidential election.
- March 2029: Administration nominates, and Senate confirms the replacements for the replacements of Commissioners Allison Heren Lee and Elad Roisman.
- May 2029: The SROs launch The New Consolidated Data Plan.
Throughout the process, there are three presidential and five Congressional elections that will have unknown effects on the Commission and its staffing. Future SEC Chairs could be in favor of such changes, cool to the idea, or forced to put it on a back burner as the Commission deals with the latest financial crisis.
It will be a long slog for the SROs, market-data consumers, and the Commission to adopt The New Consolidated Data Plan, but a journey of a thousand miles begins with a single step.
