SEC Adopts Requirements to Ensure Public Notice, Comment, and Approval Prior to Effectiveness of NMS Plan Fees

The Securities and Exchange Commission today voted to rescind a rule exception that allowed a proposed national market system (NMS) plan fee amendment to become effective upon filing, prior to review and comment by investors and other market participants. The new procedures require public notice of any proposed NMS plan fee amendment, an opportunity for public comment, and Commission approval by order before a new or changed fee can be charged. The Commission also modified the procedures for review of all proposed NMS plans and plan amendments, including fee amendments, to specify timelines for Commission action for each step of the process, adding certainty to the process for NMS plan participants.

“NMS plan fees affect a wide variety of investors and market participants,” said Chairman Jay Clayton. “This rulemaking will enhance the efficiency and transparency of the process for assessing new NMS plan fees by ensuring that these fees benefit from review and public comment by interested parties, and evaluation by the Commission, before they can be charged.”

The fee exception contained in Rule 608(b)(3)(i) allowed a fee amendment to become effective immediately upon filing with the Commission, and an NMS plan could begin charging the new fee prior to an opportunity for public comment and without Commission action. Rescinding this provision provides investors and other market participants an opportunity to voice their views before they are charged a new or changed fee.  In addition, Rule 608 did not include specific timelines for public notice and Commission action on NMS plan proposals that are filed with the Commission. The modified procedures adopted today specify timelines for Commission action and will provide greater clarity to NMS plan participants and the public on when Commission action can be expected. These procedures are patterned on the statutory framework for rule filings by self-regulatory organizations under Section 19 of the Securities Exchange Act of 1934. The amended procedures also require email filing of NMS plans and plan amendments.

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FACT SHEET

Rescission of Effective-Upon-Filing Procedure for NMS Plan Fee Amendments and Adoption of New Procedures for Proposed New NMS Plans and NMS Plan Amendments

Aug.19, 2020

Rule 608(b)(3)(i) allowed an NMS plan fee amendment to become effective upon filing. This was an exception to the standard procedure, set forth in Rule 608(b)(1) and (2), pursuant to which a proposed NMS plan or NMS plan amendment could not become effective until after an opportunity for public notice and comment and Commission approval by order. The exception was available for NMS plans that charge or intend to charge fees. Currently, these NMS plans are the four plans that govern the collection, consolidation, and distribution of core market data to the public (Consolidated Tape Association, Consolidated Quotation, Nasdaq/Unlisted Trading Privileges, Options Price Reporting Association), and additionally the plan that governs the Consolidated Audit Trail.

As a result of the Commission’s rescission of Rule 608(b)(3)(i), investors and other market participants cannot be charged a new or changed NMS plan fee until after the fee amendment is published, after the public has an opportunity to comment, and after the Commission has approved the amendment. This amendment is intended to help ensure that NMS plan fees meet statutory requirements under the Exchange Act, including that they are fair and reasonable, before they go into effect.

The Commission also is modifying the procedures set forth in Rule 608(b)(1) and (2) that apply to proposed new NMS plans and plan amendments, including fee amendments. Amended Rule 608(b)(1) sets forth 90-day and 15-day timeframes for the Commission to send notice to the Federal Register of the filing of proposed NMS plans and plan amendments, respectively. Following notice publication, the Commission must approve, disapprove or institute proceedings on the filing. The period for Commission consideration may be extended up to 240 days from notice publication by Commission order or with plan participant consent, and may be further extended another 60 days (up to 300 days total from notice publication) by Commission order or with plan participant consent.

Lastly, the Commission has modified Rule 608(a)(1) to require plan participants to file by email any proposed NMS plan or plan amendment and other information required by Rule 608(a).

What’s Next?

The amendments will be effective 30 days after publication in the Federal Register.