Last week the SEC made the biggest updates to its market data policies since the 1970s. Below I'll do my best to summarize the major changes & impacts of "NMS 2.0" on investors. A thread:
Show this thread
The core value of equity market data is the ability to see a stock's limit order book. While everyone sees price, not everyone sees the limit orders "resting" above or below the price, ready to be executed if the market moves their way.pic.twitter.com/Bux9pMWX7C
-
-
Institutions use this "depth of book" data to time trades. If resting buy orders outweigh resting sell orders, the stock is probably moving higher in the immediate term & vice versa.
Show this thread -
With NMS 1.0, only prices were streamed on public data feeds & you had to pay huge fees to see depth of book data. With the SEC's new rules, depth of book data for the 5 prices above & below the market price will now be sent through the public data feed.pic.twitter.com/EziipHgjyz
Show this thread -
The 2nd big change with NMS 2.0 is the introduction of "competing consolidators". With NMS 1.0, exchanges were required to send basic data through a lower cost public feed. The premium data could still be sold through proprietary feeds at high cost.pic.twitter.com/SBJit62JRq
Show this thread -
With NMS 2.0, exchanges will now be forced to send data to a middle man - the competing consolidator - at a price the SEC sets. The introduction of competition should *in theory* lower costs and improve quality of public data.pic.twitter.com/m2haF6hS8D
Show this thread -
We're already seeing competing consolidators pop up to prepare to challenge the legacy exchanges. Below announcement from MIAX in November 2020: https://www.prnewswire.com/ae/news-releases/miami-international-holdings-announces-that-it-is-evaluating-registration-as-a-competing-consolidator-830208417.html …pic.twitter.com/JOUnPXoiVk
Show this thread -
While I believe we're moving in the right direction, the system is still EXTREMELY complex and vulnerable to loopholes. The original SEC proposal is a whopping 898 pages: https://www.sec.gov/rules/final/2020/34-90610.pdf …
Show this thread -
I acknowledge I'm still working to fully understand the changes, but the above is my impression so far. What's missing? What else changed that's important/impactful? More sources: https://www.wsj.com/articles/sec-approves-plan-to-bring-more-detailed-stock-market-data-to-public-11607532641 …https://www.findknowdo.com/news/12/10/2020/sec-introduces-competition-nms-data-collection-consolidation-and-delivery?utm_source=Newsletter&utm_medium=Email&utm_campaign=Cabinet+Newsletter …
Show this thread
End of conversation
New conversation -
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.