US securities regulators last week affirmed the importance of "consolidated" quotes and stock prices, a reminder that brokers must provide clients the most complete view of the market and that any subset is not enough. The letter from the US Securities and Exchange Commission to exchange operator BATS Global Markets Inc, which sought relief from potential enforcement actions, may put a dent in a lucrative data feed from Nasdaq OMX Group Inc. BATS was hoping to tap the market for similar products.
The SEC also may have provided insight into a long-pending court case in Washington involving Nasdaq and an affiliate of the New York Stock Exchange, a unit of Intercontinental Exchange Inc. The SEC letter emphasised the relevance of the "national best bid or offer," or NBBO, when retail investors gauge both execution quality and the market for small trades. "Particularly for retail investors, the NBBO continues to retain a great deal of value," the letter said.
At issue is the new BATS One data feed, which aggregates last sale prices and best bids and offers from the four BATS exchanges. It represents about 20 percent of daily US stock market volume, and 99.79 percent of the time, its quotes vary less than 1 percent from the NBBO quotation, BATS says. That claim, which echoes marketing for rival products Nasdaq Basic and NYSE BQT, does not meet regulatory requirements even if a broker only uses BATS One as a guide for the market while executing orders using consolidated data from all US stock exchanges, as required, the SEC said. BATS, the SEC, Nasdaq and the Financial Industry Regulatory Authority, which oversees brokers, declined to comment.
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