On Tuesday, the U.S. Securities and Exchange Commission proposed an amendment to a national market system plan (NMS plan) for modification of the fees charging method (Proposed Fee Change) followed by the national exchange operators. Reportedly, it was a move aimed to improve transparency as it would make it harder for exchange houses to compete on price to drive revenue growth.
The SEC proposed that operators must file applications to change the fee structure of their existing services. Since they are dependent on market data and are connected with other exchanges, they must seek industry feedback before any reforms can be implemented.
Presently, under the current rules, fee proposals lodged by the exchanges houses, are effective instantly upon submission to the SEC. The National Market System plan governs them. The SEC always accepts comments on a proposal within 50 days, tailing its publication in the Federal Register, ensuring that the retail investors receive the best price possible. NMS also prevents deals being administered at below-standard-prices, to bid and offer prices presented at other trading platforms.
With the new proposal in effect, the reforms would only be effective after submission to the Commission. It will be followed by the publication of the proposal for public comment and issuance of a formal order from the Commission after the completion of the public comment period.
The Chairman of SEC, Jay Clayton, stated:
“The fees charged by NMS plans affect a wide variety of investors and market participants. This rulemaking will help ensure that NMS plan fee changes benefit from review and comment by investors and market participants before those fees can be charged.”
In May, the SEC declared that the securities exchanges must do a better job at defining and justifying their fees when they make a filing, or else the contents will be suspended for review.
The recent proposal, which would undergo public consultation before adoption, comes after years of conflict over what various brokers and investors regard as ‘towering costs for services fundamental for trading,’ but they are also major revenue drivers for most of the exchange operators.