[14044]
October 11, 2001
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 38-01
SEC RULES COMMITTEE No. 80-01
RE: ADVISORY COMMITTEE ON MARKET INFORMATION ISSUES REPORT
As we previously informed you, in July 2000, the Securities and Exchange Commission
established a federal advisory committee to examine issues in connection with the public
availability of market data in the equities and options markets.1 The Advisory Committee on
Market Information was asked to address, among other things, the benefits of price
transparency and consolidated market information; the best model for collecting and
distributing market information; and how prices for market data should be determined. The
attached Advisory Committee final report was recently submitted to the Commission. 2 The
report’s significant recommendations are summarized below.
The Advisory Committee report supports the continuation of price transparency and
consolidated market information as “core elements of the U.S. securities markets.” The report
recommends a new “competing consolidators” model for consolidating and distributing market
information, under which each market center would be allowed to sell its market data
separately to any number of competing consolidators, who in turn would consolidate the data
and distribute it to vendors and end-users. In addition, the report recommends a “less
regulatory approach to this aspect of the National Market System.”
The report notes that a minority of the Advisory Committee does not believe that the
economic benefits of implementing a new competing consolidators model would outweigh the
technological and economic risks of doing so, and therefore supports the current “single
consolidator” model. Yet another minority of the Advisory Committee “would favor the
competing consolidators model if, but only if, the SEC rule requiring the dissemination of best
quote and last sale data in a consolidated format were eliminated.” In the event the
Commission retains the single consolidator model, the report recommends a number of
improvements, including subjecting the consolidator function to competitive bidding,
1 See Memorandum to Equity Markets Advisory Committee No. 41-00 and SEC Rules Committee No. 100-00, dated
July 26, 2000.
2 Report of the Adviosry Committee on Market Information: A Blueprint for Responsible Change, September 14, 2001.
2
broadening participation in plan governance through a non-voting advisory committee, and
encouraging industry efforts to streamline plan administration.
The Advisory Committee report does not recommend any specific changes to the way
the SEC reviews market information fees, and “opposes the SEC relying on a cost-based
standard, such as that discussed in the SEC’s December 1999 Concept Release,3 in assessing
these fees.” The report does suggest that the Commission consider several issues in this area,
including those relating to enhancement of the transparency of the fee-setting process, the
regulatory requirements for fee filings, market data pilot programs, and for-profit market
centers.
Regarding the options markets, the report notes that because of systems capacity
limitations in these markets, the Advisory Committee had “serious concerns with the idea of
commencing quoting in penny increments at this time.” The report recommends that the
options markets should begin producing a consolidated best bid and offer as soon as effective
access to, or linkage among, the options markets is established. The report also recommends
that “the competing consolidators model should be permitted in the options markets,” although
the Advisory Committee recognizes that the technological considerations may be more complex
than in the equity markets.
Doretha VanSlyke Zornada
Assistant Counsel
Attachment (in .pdf format)
3 See Memorandum to Equity Markets Advisory Committee No. 1-00 and SEC Rules Committee No. 3-00, dated
January 7, 2000 (transmitting 1999 Concept Release).