Via Financial Times

The Securities and Exchange Commission has proposed a shake-up of US stock market rules intended to help level the playing field between high-frequency traders and other investors.

The US securities regulator on Friday called for changes to the way equity market data is collected and distributed to provide faster and more comprehensive information for investors who do not have access to expensive proprietary data streams.

The proposed changes would require stock exchanges to make new types of share data generally available, including information on the depth of demand to buy or sell particular stocks.

The proposal would also open the door to new entities to process that data, which the SEC said would spur competition and innovation.

Jay Clayton, the SEC chairman, said the updates to the rules were designed to “improve data quality and data access for all market participants”.

In a statement, he said: “By expanding the content of this data and introducing competitive forces into the market, the proposals would enhance transparency and ensure that improved . . . market data is available on terms that are accessible to a wide variety of participants in today’s markets.”

Mr Clayton, who has headed the SEC since 2017, called for a broad review of the US equity market rules in a speech last year. The regulations include provisions for data feeds accessible to all traders to facilitate smooth trading. Individual exchanges provide the data to securities information processors, or SIPs, who consolidate it and then give it to the public.

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The two existing SIP data feeds are generally considered less useful and slower than proprietary feeds used by high-speed traders, who can benefit from expensive transmission techniques such as the use of microwave towers to gain a split-second advantage.

The SEC’s proposals, which were approved in a 5-0 vote of commissioners and released late on Friday, call for a range of new types of information to be added to the mandated data feeds.

They would also replace the current SIP system with a “decentralised consolidation model” where exchanges would be required to open up their data centres to SEC-approved competitors who wanted to provide data feeds to the public.

The data would have to be made available on the same terms as any provider of expensive proprietary feeds, according to the SEC’s 600-page proposal. The planned rules will go through a 60-day comment period before a final vote.

Tyler Gellasch, executive director of Healthy Markets, a trade group comprised of the California pension fund Calpers and some asset managers, tentatively welcomed the proposals.

“This looks good for most market participants, but there remain a lot of unanswered questions and details that will need to be fleshed out before it will be clear whether this is truly the step forward we hope it is,” he said.