Securities Information Processor
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A Securities Information Processor (SIP) is a centralized data consolidation and dissemination system for all U.S. exchanges and associations who trade and quote securities under the National Market System (NMS) plan.[1] The concept was created by Regulation National Market System (Reg. NMS) which was introduced by the Securities and Exchange Commission (SEC) in 2005.[2] Reg. NMS mandated that all trading centers provide their transaction and quotation information to be consolidated and disseminated by the SIPs on a regulated fee structure.[3][4]
The SIPs process and consolidate trade and quote data of each security that is transacted or quoted on an exchange into a single data feed.[5] The National Best Bid and Offer (NBBO) is an important data point for a security, representing the current highest quoted bid (the most someone is willing to pay to buy that security) and lowest quoted offer (the least someone is willing to accept to sell that security) across any of the exchanges in the U.S.[6] Reg. NMS imposed a duty on brokers to execute clients’ trades at the best available price, making the ability for them to access the up-to-date NBBO for a stock crucial for regulatory compliance.[7]
The current U.S. market data infrastructure consists of 2 exclusive SIPs, the Consolidated Tape Association (CTA) and the Unlisted Trading Privileges which each consolidate and disseminate a segment of the market based on listing exchange.[5] Revenue from the SIPs is allocated to each venue based on how much trading is done on that venue.[8] In 2021, the 2 exclusive SIPs reported over 440 million in revenue which was distributed to their participating exchanges.[9][10]
In 2020, the SEC proposed replacing the existing exclusive SIPs with multiple private providers known as Competing Consolidators to address "information asymmetries" in the market caused by the latency of the existing SIPs. [11]. In 2021, the SEC adopted the Market Data Infrastructure Rule[12], amending Reg. NMS. to include Competing Consolidators and setting out a timeline for sunsetting the existing exclusive SIPs.
References[edit]
- ↑ "National Market System Plans | FINRA.org". www.finra.org. Retrieved 2022-08-25.
- ↑ "Regulation NMS | FINRA.org". www.finra.org. Retrieved 2022-08-25.
- ↑ "Final Rule: Regulation NMS" (PDF). sec.gov. Retrieved 2022-08-25. Unknown parameter
|url-status=ignored (help) - ↑ "Nasdaq Sets the Record Straight About the SIP". www.nasdaq.com. Unknown parameter
|url-status=ignored (help) - ↑ 5.0 5.1 "What are the Securities Information Processors (SIPs)?". www.polygon.io. Retrieved 2022-08-25. Unknown parameter
|url-status=ignored (help) - ↑ "NMS Security Designation and Defintions". law.cornell.edu. Retrieved 2022-08-25.
- ↑ "Regulation NMS". www.investopedia.com. Retrieved 2022-08-25.
- ↑ "SIP Accounting 101". nasdaq.com. Retrieved 2023-02-06. Unknown parameter
|url-status=ignored (help) - ↑ "UTP Revenue Disclosure - Q4 2021" (PDF). utpplan.com. Retrieved 2022-08-25. Unknown parameter
|url-status=ignored (help) - ↑ "CTA Revenue Disclosure - Q4 2021" (PDF). ctaplan.com. Retrieved 2022-08-25. Unknown parameter
|url-status=ignored (help) - ↑ Jr, John D'Antona (2020-05-29). "The Reg NMS II Debate Begins". Traders Magazine. Retrieved 2023-02-06.
- ↑ "Federal Register :: Market Data Infrastructure". www.federalregister.gov. Retrieved 2023-02-06. Unknown parameter
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