SEC Acts on Market Data Rebate Programs

On July 2, 2002, the Securities and Exchange Commission abrogated proposals by several markets to extend rebates of market data revenues to market participants. Under Commission rules, if the markets re-file these proposals, the Commission would publish notices in the Federal Register and the public would be invited to comment on them.

The Commission is concerned that the availability of large market data revenue rebates in certain markets may be creating incentives for traders to engage in transactions with no economic purpose other than to receive market data fees. The Commission believes that such trades may be distorting the actual volume of trading in these securities. Moreover, the Commission is concerned that the structure and size of market data revenue rebates may be distorting the reporting of trades, and that these rebate programs may reduce the regulatory resources of the markets and reallocate the funding of regulation among participants.

This action today will allow the Commission to consider the effects of market data revenues and the underlying issues presented by the manner in which market data is collected and distributed and the amount that vendors are charged for this information.

Specifically, the Commission abrogated rules filed by the National Association of Securities Dealers (File Numbers NASD 2002-61 and 2002-68), the Cincinnati Stock Exchange (File Number CSE 2002-06) and the Pacific Exchange (File Number PCX 2002-37).