D.C. Circuit finds challenge to SEC market data plan premature

REUTERS/Andrew Kelly
  • U.S. exchanges cannot challenge regulator's preliminary steps to overhaul market data system
  • Court had no jurisdiction because SEC action not final

(Reuters) - A federal appeals court on Tuesday said it was too early for U.S. stock exchanges to challenge a Securities and Exchange Commission proposal to give market participants a greater say in how market data is published.

The U.S. Court of Appeals for the District of Columbia Circuit said that the SEC's call for the exchanges to propose ways to share decision-making power with other stakeholders, including investors, was not a final action that could be reviewed by the court.

"Modern stock exchanges transmit data about trades and prices at lightning-fast speeds. But as this case demonstrates, the administrative process demands considerably more patience," Circuit Judge David Tatel wrote for a three-judge panel.

Register now for FREE unlimited access to Reuters.com

Representatives for the New York Stock Exchange, exchanges run by Cboe Global Markets Inc and the SEC did not immediately reply to requests for comment. A spokesperson for Nasdaq Stock Market LLC declined to comment.

The court dismissed the exchanges' challenge to steps the SEC took last year towards adopting a plan to streamline the dissemination of trading data.

The agency has said the new plan would increase transparency and address inefficiencies, conflicts of interest and other issues around the dissemination of real-time, consolidated stock market data, which is currently governed by three separate plans.

The exchanges had argued in the petition that federal law does not give the SEC authority to change the plan's governance structure and give non-exchange actors a say in how the system operates.

Tatel and Circuit Judges Judith Rogers and Raymond Randolph said in Tuesday's decision that the court does not have jurisdiction to review the SEC's tentative actions.

The exchanges can re-file their challenge once the SEC takes final action.

The case is one of multiple legal challenges the exchanges have mounted to parts of the SEC plan.

In another consolidated petition, the exchanges had argued the SEC had engaged in "stealth rulemaking" when it added confidentiality and conflict-of-interest provisions in May 2020 orders without seeking public comment.

At oral arguments in May, judges on the court expressed doubt that the petition was filed on time. The case is pending.

The case is the Nasdaq Nasdaq Stock Market LLC v. SEC, U.S. Circuit Court of Appeals for the District of Columbia, No. 20-1181, 21-1050.

For NYSE: Paul Mishkin of Davis Polk & Wardwell

For Nasdaq: Thomas Hungar, Amir Tayrani and Joshua Wesneski of Gibson, Dunn & Crutcher

For CBOE: Paul Greenwalt and Michael Molzberger of Schiff Hardin

For the SEC: Tracey Hardin, Michael Conley, and Martin Totaro

Read more:

U.S. SEC orders new governance plan for stock market data

D.C. Circuit scrutinizes exchanges' challenge to market data overhaul

Nasdaq, New York Stock Exchange sue SEC over planned overhaul of public data feeds

Register now for FREE unlimited access to Reuters.com

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com