SEC approves 5:1 quote-to-trade cap on consolidated tape revenue, over LTSE's objection

The Securities and Exchange Commission approved a cap on how consolidated tape revenue is paid to exchanges on 14 September. Under the amendment, a venue’s revenue from quoting can be no more than five times its revenue from trading. The CT Plan’s operating committee filed the Third Amendment to the plan on 2 June. The Long Term Stock Exchange (LTSE) did not join the filing and asked the Commission to reject it.

The CT Plan governs consolidated equity market data. Its 21 members are national securities exchanges and FINRA. Net revenue is allocated in two steps: first to individual securities, then to members according to their quoting and trading activity in each security. The amendment does not change that formula. It caps what a member is paid under it.

The cap

• 5:1 ratio. If a member’s quote-related revenue exceeds its trade-related revenue by more than five to one, the excess is cut. The cap applies to each periodic distribution.
• Redistribution. The excess goes to all other members, including FINRA, in proportion to their share of quote revenue. FINRA is not subject to the cap. If redistribution pushes another member over 5:1, its excess is passed on in the same way.
• De minimis exception. The cap does not apply when a member’s total quote-based payment is $50,000 or less in a calendar year. This is meant to protect new and very small exchanges whose ratios can jump for statistical reasons.

The operating committee said the 5:1 threshold came from data for 2018 to 2024. Excluding the 25 of 318 distributions in that period when the cap would have been breached, the average ratios were 1.79 on Tape A, 1.86 on Tape B and 1.82 on Tape C.

The numbers behind it

The committee described quoting at the national best bid and offer that was frequent or continuous, often in size and in high-priced securities, with little extra trading. It said LTSE’s 2024 quote-to-trade ratio was about 107:1 on Tape A, 70:1 on Tape B and 88:1 on Tape C. It added that NYSE Chicago, now NYSE Texas, had ratios often above 20:1 on Tapes A and C from 2021 to 2024. Other members were described as typically well below 5:1. SIFMA’s comment letter said three exchanges in 2025 and two in the first quarter of 2026 would have been caught by the cap.

The objections

LTSE argued that the current formula “reflects Commission-approved goals designed to remunerate contributions to price discovery”. It called the amendment “unsupported and controversial”. It offered other reasons why quotes may not lead to trades: other venues quickly matching the NBBO, routers favouring venues with historical liquidity or larger displayed size, firms chasing volume tiers, and competition from off-exchange trading.

PTG, the principal trading firms’ association formerly known as the FIA Principal Traders Group, supported the cap “as a corrective measure” but said it “does not go far enough”. In its view, the formula would still award quote revenue at nearly double the rate of trade revenue, even for exchanges well inside the cap. PTG proposed cutting plan costs, giving more weight to executions, crediting only NBBO-setting quotes that lead to trades, and setting a minimum participation threshold.

The Commission said it was “not clear” that LTSE’s reasons explain “the prolonged and recurring quoting activity that significantly exceeded other Members’ historical norms”. It added that there was “no evidence, at this time” that the cap would discourage aggressive quoting. It described the change as “a narrowly designed revision to payments” and found it consistent with Section 11A and Rule 608. The operating committee said it remained committed to overseeing a broader review of the formula.

Why it matters

Analysis. For market practitioners, the cap targets a specific pattern: frequent, often large quotes at the NBBO that rarely trade but still earn SIP quote revenue. With a 5:1 limit, a venue’s data revenue is tied to the trading it attracts as well as the quotes it posts, which reduces the reward for quoting that does not lead to trades.

For brokers and trading firms, the visible effect may be in displayed liquidity. If some quotes were posted mainly for data credits, they may become less frequent at the venues affected, which could change NBBO size and routing tables at the margin. The cap does not settle the larger question. The Commission’s June proposal to rescind Rule 611, the order protection rule, also asked whether the revenue allocation formula should change. That comment period closed on 17 August, and the order says the Commission will keep considering those comments.

What we are watching

• Quote-to-trade ratios at the venues near the cap in the first distributions after approval.
• Whether the Commission or the operating committee proposes broader formula changes alongside any Rule 611 decision.

Added 1 Nov 2026 to the Market Structure section; dated to the event, not published at the time.

Sources

• Release No. 34-106349: Order approving the Third Amendment to the CT Plan to revise the revenue allocation formula (File No. 4-757), U.S. Securities and Exchange Commission, 14 Sep 2026
• Release No. 34-105680: Notice of filing of the Third Amendment to the CT Plan LLC Agreement, 91 FR 36633, Federal Register, 17 Jun 2026
• Release No. 34-105655: The Trade-Through Rule and Locked and Crossed Markets Provisions of Regulation NMS (proposal), 91 FR 36656, Federal Register, 17 Jun 2026
• PTG comment letter on the CT Plan Third Amendment (File No. 4-757), PTG, 8 Jul 2026