Summary
The D.C. Circuit held that Section 19(d) of the Securities Exchange Act of 1934 does not permit challenges to generally-applicable fee rules for market data, such as depth-of-book data fees, because the provision is limited to actions targeting specific individuals or entities. The court vacated the SEC's order finding the fees unreasonable, reasoning that the text and structure of the Exchange Act—including notice and remedy provisions—are incompatible with reviewing universally applied fee rules under Section 19(d). The decision clarifies that aggrieved parties may instead seek review through Section 19(c) rulemaking petitions or, if the SEC suspends a fee rule, through Section 19(b) proceedings.
Topics
Practice areas
Questions Presented
- Whether the Commission erred in concluding that a generally-applicable fee rule may be challenged as a limitation on access to services under Section 19(d) of the Exchange Act.
Holdings
- Section 19(d) is not available as a means to challenge generally-applicable fee rules; for a fee rule to be challengeable under Section 19(d), it must be targeted at specific individuals or entities.
Key quotations
“Today, we hold that Section 19(d) is not available as a means to challenge the reasonableness of generally-applicable fee rules.”
“for a fee rule to be challengeable under Section 19(d), it must, at a minimum, be targeted at specific individuals or entities.”
“Section 19(d) does not evince an intent by Congress to allow challenges to generally-applicable fee rules.”
Factual background
The Exchanges (Nasdaq and NYSE Arca) are national securities exchanges that charge fees for depth-of-book data. Two industry groups challenged the fees. After NetCoalition I and II, SIFMA brought a challenge under Section 19(d) of the Exchange Act, alleging the fees are an unreasonable limitation on access to services. The SEC reversed an ALJ decision upholding the fees, finding them unreasonable.
Procedural history
This is the third time in a long-running dispute over fees for depth-of-book data. Previously, in NetCoalition I, the court upheld the SEC's market-based test. In NetCoalition II, the court held it lacked jurisdiction to review the Commission's decision not to suspend the fee rule within 60 days, but noted that a challenge under Section 19(d) might be available. SIFMA then filed a Section 19(d) complaint, and the SEC reversed an ALJ decision favoring the exchanges. The exchanges now petition for review.
Remand instructions
Remand for proceedings consistent with this opinion.