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SEC Releases Final Regulation NMS Rules

Washington, DC, June 10, 2005 – The SEC has published the rules adopted under Regulation National Market System (NMS) and amendments to the joint industry plans for dissemination of market information.

Background
In April 2005, the SEC voted to adopt Regulation NMS, which contains four interrelated proposals designed to modernize the regulatory structure of the U.S. equity markets:

  • The "Order Protection Rule" requires trading centers to obtain the best price for investors by enforcing written policies and procedures reasonably designed to prevent the execution of trades at inferior prices displayed by other trading centers.
  • The "Access Rule" promotes fair and nondiscriminatory access to quotations through a private linkage approach; establishes a limit on access fees; and requires each national securities exchange and national securities association to enforce rules that prohibit their members from engaging in a pattern or practice of displaying quotations that lock or cross-automated quotations.
  • The "Sub-Penny Rule" prohibits market participants from accepting, ranking, or displaying orders or quotations in a pricing increment smaller than a penny.
  • The "Market Data Rules" update the requirements for consolidating, distributing, and displaying market information, as well as amendments to the joint industry plans for disseminating market information that modify the formulas for allocating plan revenues and broaden participation in plan governance.

The formal release outlining the Regulation NMS rules was released yesterday along with a dissenting opinion by two SEC Commissioners, who express concerns about Regulation NMS’ potential impact on competition and innovation.

ICI Position
The Institute commended the SEC on its adoption of Regulation NMS earlier this year, noting that such efforts to restructure the securities markets would benefits investors. In particular, ICI strongly supported the trade-through rule. “A uniform trade-through rule is an essential step in the development of a market structure that best serves all investors,” said ICI President Paul Schott Stevens.

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