The role of administrator of the CT Plan—the blueprint for governance of the new market data system for US equities—could improve market data pricing and accessibility for consumers by easing burdensome licensing, billing and audit functions, vendors say. However, details of many crucial considerations for the role—what its duties will be, how exactly the system it will help to govern looks—are still murky, and will only become clear as implementation of the plan and its associated infrastructure rule is rolled out. Obscuring the path ahead even more is ongoing litigation brought by the large exchanges.

“Regardless of how things shake out, you will need an administrator that can handle complexity,” says Manisha Kimmel, chief policy officer at data infrastructure provider MayStreet. Prior to joining the company this past February, she was senior policy advisor for regulatory reporting at the US Securities and Exchange Commission from the start of 2019 through 2020.

In early 2020, the SEC put out two separate but related documents in an effort to modernize the public feeds of National Market System information. The SEC has long believed that the current NMS data processors—the two Securities Information Processors (Sips) that operate under three plans (UTP, CQ and CTA) and send out bid/ask quotes consolidated from trading venues to consumers—are old-fashioned. The idea of modernizing these feeds gained ground during the term of former chairman Jay Clayton and former director of the division of trading and markets Brett Redfearn, and an SEC document from 2020—the infrastructure rule—put forward a new system of rival Sips called “competing consolidators”, which will be run as private businesses in parallel with the current Sips.

The rule also expands the definition of core data distributed by the Sips to include odd lots and auctions. The SEC hopes this will encourage innovation, product differentiation and competitive pricing in the NMS, which it believes is dominated by the large exchanges, or self-regulatory organizations (SROs).

The other document from 2020 was an order to these SROs to create a governance plan for the new market data system. Known as the CT Plan, this was approved by the SEC on August 6 this year, firing the starting gun on an aggressive timeline aimed at getting the plan implemented within a year exactly. In short order, the SROs created the plan as a limited liability company; and in early October, the non-SRO voting members that sit on the committee to dilute the exchanges’ voting power were chosen. These non-SRO voters include Bill Conti of Goldman Sachs Market Data Services, Blackrock’s global head of electronic trading and market structure, Hubert de Jesus, and Tom Jordan, president and CEO of data and management consultancy Jordan & Jordan.

It is this operating committee that must now issue a request for proposal to choose the CT Plan administrator. The RFP process, however, may have to be put on hold until early next year. The SROs have been battling the SEC’s modernization efforts in court, and asked for the CT Plan to be stayed pending final rulings. The SEC denied their request in September, but in mid-October, judges ordered that the plan be stayed. Sources who have seen the court order say briefs in the case must be filed by mid-November, and proceedings will begin in two to three months’ time.

The stay is a victory for the SROs, but it’s no guarantee that they’ll win the final court case—it’s merely intended to prevent the rollout of changes that would be difficult to reverse should the SROs prevail. For now, though, the litigation complicates the CT Plan timetable and the infrastructure rule, and it’s something that aspiring administrators will be watching in the coming months.

Hats in the ring

But what does the administrator role entail? Judging by what’s in the CT Plan, the SEC envisions the administrator as performing on behalf of the LLC day-to-day business functions—tax and financial reports; administering market data contracts with vendors and subscribers; administering fees, including billing and audit; and what the SEC rather vaguely calls “recordkeeping”. The administrator must also be independent; it cannot be a company that sells proprietary market data.

The SEC said in approving the CT Plan that it “understands that a number of different types of entities, such as accounting firms, market data administration firms, or consulting firms, would be capable of serving as administrator to the CT Plan and providing the requisite billing, auditing and licensing services.”

Kimmel says the administrator role won’t exactly be an easy one. It involves contracting with competing consolidators and subscribers of the data, so it must handle administration at both the Sip and end-user levels, and there could be one or many Sips in this new world. But while not inconsequential, “for firms that are in this business, it’s pretty standard stuff,” she says.

“Our industry is niche, but there are obviously people who have experience in and around these market data contracts and have been in the market data space for a long time,” Kimmel says.

WatersTechnology spoke to two firms that have expressed interest in undertaking the RFP: licensing, sales, and e-commerce platform DataBP, and data and management consultancy Jordan & Jordan.

Mark Schaedel, strategy advisor to DataBP, says the vendor sees in the administrator role a big opportunity to accelerate its own mission.

“The community of exchanges we are working with is starting to work together on business model innovation opportunities, leveraging our platform to adopt best practice and more convention. The US tape administrator role has interesting potential to put many of these ideas into practice and improve the efficiency of the administrative processes that often frustrate market data users and vendors,” Schaedel says.

DataBP was established by a team that built the New York Stock Exchange platform that administers the consolidated tape and the exchange’s proprietary data business. The vendor supports global exchange groups with its e-commerce platform, and provides manager services to support clients’ market data administrator operations.

Schaedel says that whoever the administrator is, it could improve the market data experience for consumers by automating and applying modern technologies to enable the sharing of information between market data subscribers, vendors, service providers and the administrator. Market participants have long complained that the data licensing and audit processes are burdensome and consume time and resources; Schaedel says the administrator could mitigate this with regard to the Sips data by facilitating the sharing of the same records. It could use self-service tools and APIs to connect, communicate and standardize the information being exchanged, rather than having all parties rely on a web of emails, forms, files, spreadsheets, and even, he says, faxes.

DataBP already focuses on market data administration within exchanges, which is very different to how it is managed within consumers or even data vendors, Schaedel says. “The tape is really a retail pricing model operating by a wholesale distribution framework overseen by a consortium of contributors. It is quite a unique and nuanced business made more unique by the degree of regulatory oversight. Not everyone will be comfortable with these dynamics, but we have all grown up in this world so we feel like it is what we were meant to do.” 

Schaedel says some consolidated tape users would prefer an indirect billing model, like the one Nasdaq uses for UTP, which is less complicated to reconcile and manage. “But in some ways, the direct billing model that NYSE uses for Tape A and B better supports some of these correlations,” he adds. “Perhaps there is a way to streamline and get the best of both models.”

Barry Raskin, managing director at Jordan & Jordan, agrees there is a lot of scope for the administrator to modernize NMS data distribution. “Technology has changed. The software, the types of data crunching that needs to be done—this has all gone through major improvements over the years, if you think about what people are doing in big data and AI. We can start looking to build a better mousetrap now that we have the opportunity and the toolkit,” he says.

Raskin says Jordan & Jordan “checks all the boxes” for the administrator role: collective decades of experience in the market data industry, experience with software and market data reporting, as well as partnerships, and audit. The company has licensing experience, with staff attorneys who can sort through contract language, reporting requirements, and usage rights, he adds.

“We do Misu [multiple installations for single users], indirect bill and quote meter audits on behalf of clients, and we have relationships with the exchanges. We used to say, ‘We’re located in Hanover Square, we could walk to the exchanges.’ Obviously, we aren’t doing that right now, but the point is that we have worked very closely with these folks. And we have sat with every major broker-dealer,” Raskin says.

J&J also has experience leading RFPs that are analogous to the one that would select the CT Plan administrator. For example, in 2019, the Options Price Reporting Authority (Opra) began a tender process for a tech supplier to manage the Sip that consolidates and distributes options data, and Opra chose J&J to issue the RFP. The consultancy also managed the RFP for the UTP/Tape C Sip back in 2014.

“So we understand fundamentally what needs to be done and what will be asked of us. There is some complexity here—I don’t want to say this is a piece of cake! But we are strongly considering throwing our hat in the ring for the administrator role,” Raskin says.

J&J recently sold its market data reporting software to market data cost and inventory management software vendor TRG Screen. Sources WatersTechnology spoke to for this article said TRG Screen might also consider applying to become the CT Plan administrator. However, a spokesperson for the vendor says it does not consider this role to be its “sweet spot”.

Some sources believe the administrator role is more likely to go to a large accounting firm, while others say the specialist skills of a DataBP or a J&J would be a better fit. 

Schaedel says he isn’t sure who the SEC has in mind for the role that would have the knowledge, expertise and the independence to address its concerns around conflict of interest: “[Perhaps] a consulting or accounting firm that might bring the independence, and smart people who can figure out a target operating model and perhaps even implement it. But we wonder how much the new tape plans will need to evolve, given that the role will start with the existing Sips and evolve into a competing consolidator regime.”

Raskin is of the opinion that no matter who the administrator is, it will almost certainly have to partner to cover all the necessary duties.

“Finding a firm that touches all these bases is kind of tough, and whoever ends up as administrator will need to ensure they have the proper resources available,” he says. “For example, if we decide to bid and are chosen, we may need to bolster our staff with additional resources on top of our existing team. Other potential respondents may not have experience of reporting to exchanges, for instance: things like Misu and meter audits.”

Quick to pivot

Whoever winds up with the administrator role will have to adapt quickly to an evolving situation. For one thing, it’s still unclear what the new market data system will look like.

Kimmel says the existing two Sips—called the exclusive Sips—will continue to operate under the three plans until the CT Plan is fully operational, at which point they will come under the CT Plan and co-exist with the competing consolidators. The SROs must file their proposed fees for administering the exclusive Sips under the CT Plan by December. The SROs must also submit a plan amendment by November 5 detailing charges to competing consolidators for data.  

So, the potential administrator could know by December what fee structure it would be administering. How the CT Plan stay affects this timeline is not yet clear, however.

“This [uncertainty] currently makes it hard for the administrator to truly know what the scope of their responsibilities will be yet,” Kimmel says.

But she adds that developments like the November 5 amendment will provide more insight, and “we will start to understand how complicated or simple this will be compared to the existing world.” 

Schaedel says there are many questions surrounding the contract structure under the future Sips regime. “It’s still not clear from the CT Plan: will we maintain Tape A, B, and C [UTP, CQ, and CTA]? Or is it just one tape? Will the new elements of market depth and odd lots be offered discretely like trades and quotes are offered today, or will it be one package of products? And then do we have one contract for these tape products? And how will the transition to the new contract structure be managed?” he says.

It’s also not clear how the administrator will work with the operating committee. Schaedel, for example, says opportunities for the administrator lie in improving data policies, but it’s not clear what powers either the administrator or the operating committee will have in this regard.

“The new operating committee has a lot on its plate, so we’ll likely need to work through this as we go along. And there’s probably a diversity of thought that needs to be accounted for and accommodated,” he adds.

But the design of the CT Plan—one plan, one administrator—is a great basis for enabling change, Schaedel adds. “We could start to imagine what the possibilities are and make sure that the new administrator is flexible enough to evolve now that the governance changes will support change,” he says.