Supporting Statement (3235-0802 Final Rule)

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
Amendments to Regulation NMS: Minimum Pricing Increments, Access Fees, and
Transparency of Better Priced Orders
3235-0802
Adopted Amendments
This submission is being made pursuant to the Paperwork Reduction Act of 1995, 44
U.S.C. Section 3501 et seq (“PRA”).
A. JUSTIFICATION
1.

Necessity of Information Collection

Section 11A of the Securities Exchange Act of 1934 (“Exchange Act”)1 directs the
Securities and Exchange Commission (“Commission”) to facilitate the establishment of a
national market system in accordance with specified Congressional findings. In furtherance of
this direction, the Commission adopted Regulation National Market System (“Regulation NMS”)
in 2005,2 which was designed to achieve the objectives of Section 11A of efficient, competitive,
fair, and orderly markets.3
As the national market system has evolved, the Commission has amended several aspects
of Regulation NMS to address and reflect changes in the markets. Most recently, in 2020, the
Commission adopted rules to update and modernize the equity market infrastructure responsible
for the collection, consolidation, and dissemination of equity market data in the national market
system by expanding the content of, and establishing a decentralized consolidation model for,
NMS market data (“MDI Rules”).4
On September 18, 2024, the Commission adopted amendments5 that:


establish a second minimum pricing increment, also known as tick size, of $0.005 under
Rule 612 of Regulation NMS for the quoting of certain NMS stocks, which are stocks
listed on a national securities exchange, regardless of trading venue;

1

15 U.S.C. 78k-1.

2

Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005).

3

15 U.S.C. 78k-1(a).

4

Securities Exchange Act Release No. 90610 (Dec. 9, 2020), 86 FR 18596 (Apr. 9, 2021) (“MDI Adopting
Release”).

5

See Securities Exchange Act Release No. 101070, (Sept. 18, 2024), 89 FR 81620 (October 8, 2024)
(“Adopting Release"). See also Securities Exchange Act Release No. 96494 (Dec. 14, 2022), 87 FR 80266
(Dec. 29, 2022) (“Proposing Release”).



reduce the access fee caps under Rule 610 of Regulation NMS and require national
securities exchanges to make the amounts of all fees and rebates determinable at the time
of execution; and



accelerate the implementation of the round lot and odd-lot information definitions
adopted in 2020 under the MDI Rules and add information about the best odd-lot order to
the definition of odd-lot information.6

The amendments related to the MDI Rules amend Rule 603(b) of Regulation NMS to
require the existing exclusive securities information processors (“exclusive SIPs”) to collect,
consolidate, and disseminate odd-lot information, including the best odd-lot orders to buy and
sell. The exclusive SIPs are required to disseminate indicators of the applicable round lot size
and minimum pricing increment for each NMS stock, both of which would be provided to the
exclusive SIPs by the primary listing exchange.
The Commission believes that the transition plan for implementing the MDI Rules should
be modified so that the benefits of the round lot and the odd-lot information definitions are made
available to investors and other market participants sooner. Earlier implementation accelerates
the transparency benefits of these definitions by making information about better priced interest
available in the market more widely available on a faster timetable. In addition, the
identification and dissemination of the price, size, and market of the best odd-lot orders enhances
the ability of market participants to make effective trading and order routing decisions using
NMS data, facilitate better execution, and provide a useful metric against which investors could
assess the execution quality of their orders.
Certain provisions of the amendments related to the MDI Rules impose “collection of
information” requirements within the meaning of the Paperwork Reduction of 1995 (“PRA”).
2.

Purpose and Use of the Information Collection

The information collected under the amendments related to the MDI Rules is required to
be consolidated and disseminated by the exclusive SIPs to market participants who would use
this information for trading NMS stocks. Widespread availability of odd-lot information
promotes fair and efficient markets and facilitates the ability of brokers and dealers to trade more
effectively and to provide best execution to their customers. The round lot and minimum pricing
increment indicators to be disseminated by the exclusive SIPs provide market participants with
information about the parameters for trading in a particular NMS stock.
3.

Consideration Given to Information Technology

The amendments related to the MDI Rules permit the exclusive SIPs to use information
technology to comply with the requirements. The Commission anticipates the use of information
technology by the exclusive SIPs to collect, consolidate, and disseminate odd-lot information and
to disseminate the round lot and minimum pricing increment indicators, including the addition of
6

An odd-lot order is an order for the purchase or sale of an NMS stock in an amount less than a round lot.

2

new hardware, network infrastructure, and bandwidth to facilitate the collection, consolidation,
and dissemination of this information. The Commission believes that improvements in data
processing technology may also reduce the burdens that result from the amendments.
4.

Duplication

The amendments will not result in, or require the collection of, duplicate information that
is otherwise available in a similar form. While many national securities exchanges publish their
own market data via proprietary data feeds for a fee, the proprietary data feeds do not provide the
exact information in a consolidated manner as required by the amendments.
5.

Effect on Small Entities

The Commission believes that the requirement that the exclusive SIPs collect,
consolidate, and disseminate odd-lot information and disseminate indicators of the applicable
round lot size and minimum pricing increment for each NMS stock would not affect small
entities. Neither of the two exclusive SIPs meet the criteria for a “small business” or “small
organization” when used with reference to a securities information processor.7
6.

Consequences of Not Conducting Collection

As discussed above, the acceleration of the round lot and odd-lot information definitions
is designed to make information about the best priced orders available in the market more widely
available on a faster timetable. Without the collection of information, the exclusive SIPs would
not be required to disseminate this information, and investors and other market participants will
not be able to use it to trade NMS stocks in a more informed and effective manner, obtain better
executions, or assess the execution quality of their orders.
7.

Inconsistencies with Guideline in 5 CFR 1320.5(d)(2)

There are no special circumstances. This collection is consistent with the guidelines in 5
CFR 1320.5(d)(2).
8.

Consultations Outside the Agency

The Commission previously issued a release soliciting public comment on the new
collection of information requirements and associated paperwork burdens.8 The Commission
considered comments received from industry groups, investors, and other market participants
and responded to such comments in the Adopting Release, in accordance with 5 CFR 1320.11(f).
In addition, the Commission and staff participate in ongoing dialogue with representatives of
various market participants through public conferences, meetings, and informal exchanges.

7

See Adopting Release, supra note 5, at 81772. See also 17 CFR 240.0-10(g); Securities Exchange Act
Release No. 61595 (Feb. 26, 2010), 75 FR 11232, 11320 (Mar. 10, 2010) (determining that the exclusive
SIPs are not small entities for purposes of the Regulatory Flexibility Act).

8

See Proposing Release, supra note 5.

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9.

Payment or Gift

No payment or gift is provided to respondents.
10.

Confidentiality

The exclusive SIPs will make odd-lot information and indicators of the applicable round
lot and minimum pricing increment indicators publicly available to subscribers through their data
feeds, and therefore this information will not be confidential. Accordingly, no assurances of
confidentiality are necessary.
11.

Sensitive Questions

No information of a sensitive nature will be required under the collection of information.
12.

Burden of Information Collection

As noted above, the amendments establish new collections of information. The
Commission anticipates that the respondents will incur the following third-party disclosure
burdens.
Name of
Information
Collection

Type of
Burden

A
Number of
Entities
Impacted

B
Annual
Responses
per Entity

Summary of Approximate Hourly Burdens
C
D
E
F
Initial
Initial Burden
Ongoing
Annual
Burden per
Annualized
Burden per
Burden per
Entity per
per Entity per
Entity per
Entity per
Response
Response
Response
Response
C/3

Odd-Lot
Information
Acceleration

Third
Party

2

1

440

G
Total Annual
Burden per
Entity

H
Total
Industry
Burden

F*B

G*A

278.67

557.34

Small
Business
Entities
Affected

D+E

146.67

132

278.67

0

The respondents to this collection of information will be the two exclusive SIPs. The two
exclusive SIPs will have to modify their systems to collect, consolidate, and disseminate odd-lot
information and to disseminate the round lot and minimum pricing increment indicators. These
modifications involve the addition of new hardware, network infrastructure, and bandwidth, as
well as programming and development costs.
The Commission estimates that each exclusive SIP would incur an initial, one-time
burden of 440 hours to modify its systems to collect, calculate, consolidate and disseminate oddlot information and to disseminate the round-lot and minimum pricing increment indicators.9

9

The Commission based these estimates on 10% of the initial burden hour estimates for each exclusive SIP
to become a competing consolidator provided in the MDI Rules to account for the fact that the amendments
do not require the exclusive SIPs to calculate and disseminate full consolidated market data (e.g., depth of
book data or auction information) as defined in the MDI Rules. See MDI Adopting Release, supra note 4,
at 18712-13.

4

The Commission estimates that each exclusive SIP would incur 132 ongoing, annual burden
hours to operate and maintain these systems.10 This would result in an estimated annual
burden of 278.67 hours per respondent and 557.34 hours annually in the aggregate.11
13.

Costs to Respondents

The Commission believes that respondents will incur costs in connection with the new
information collection. The Commission anticipates that the respondents will incur the
following initial and annual cost burdens.
Name of
Information
Collection

Type of
Burden

A
Number of
Entities
Impacted

B
Annual
Responses
per Entity

C
Initial Cost
per Entity
per
Response

Summary of Dollar Costs
D
E
Initial Cost
Ongoing
Annualized
Cost per
per Entity per
Entity per
Response
Response

F
Annual Cost
per Entity per
Response

G
Total Annual
Cost per
Entity

H
Total
Industry
Cost

D+E

F*B

G*A

$261,225

$261,225

$522,450

Small
Business
Entities
Affected

C/3
Odd-Lot
Information
Acceleration

Third
Party

2

1

$412,500

$137,500

$123,725

0

The Commission estimates an initial cost of $412,500 to purchase the necessary
technology to effect the modifications necessary to collect, consolidate, and disseminate odd-lot
information and to disseminate the round lot and minimum pricing increment indicators and
ongoing, annual external costs of $123,725 to operate and maintain these systems. This would
result in an estimated annual cost of $261,225 per respondent12 and an estimated annual
cost for the industry of $522,450.
14.

Cost to Federal Government

The Federal government would not incur costs in connection with the collection of this
information.
15.

Changes in Burden

There is a reduction in both the cost and the hour burden that is the result of annualizing
the initial hour and cost burdens.
16.

Information Collection Planned to Statistical Purposes

Not applicable. The information collection is not planned for statistical purposes.
10

The Commission based these estimates on 10% of the ongoing, annual burden hour estimates provided in
the MDI Rules for each exclusive SIP competing consolidator to operate and maintain its systems to
comply with Rules 614(d)(1) through (4) to account for the fact that the amendments do not require the
exclusive SIPs to calculate and disseminate full consolidated market data (e.g., depth of book data or
auction information) as defined in the MDI Rules. See MDI Adopting Release, supra note 4, at 18712-13.

11

146.67 (initial one-time burden, annualized over the three-year period) + 132 (ongoing burden) = 278.67
hours.

12

$137,500 (initial, one-time cost, annualized over the three-year period) + $123,725 (ongoing cost) =
$261,225.

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17.

OMB Expiration Date Display Approval

The Commission is not seeking approval to not display the OMB approval expiration
date.
18.

Exceptions to Certification for Paperwork Reduction Act Submission

This collection complies with the requirements in 5 CFR 1320.9.
B. COLLECTION OF INFORMATION EMPLOYING STATISTICAL
METHODS
This collection does not involve statistical methods.

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