D.C. Circuit Upholds SEC Tick Size/Fee-Cap Rule, but Its Future Remains Uncertain

On October 14, 2025, the U.S. Court of Appeals for the D.C. Circuit denied a petition for review seeking to invalidate the SEC’s 2024 amendments to Rules 610 and 612 of Regulation NMS. These amendments lowered the maximum fee that national securities exchanges may charge for executing against a quotation and reduced the minimum trading increment (tick size) for most exchange-listed securities. The court upheld the SEC’s authority under the Securities Exchange Act of 1934 (Exchange Act) to impose a uniform, industrywide fee cap and rejected arguments that the rule was arbitrary or capricious or exceeded the SEC’s statutory authority.ⁱ

Following the decision, SEC Chairman Paul Atkins indicated that compliance timelines for the rule amendments are likely to be revisited.ⁱⁱ

I. Implications for Market Participants

• Market structure implications — The ruling allows the SEC’s changes to proceed, reducing the minimum tick size for roughly 70% of listed securities from $0.01 to $0.005 and the cap for access fees from $0.03 to $0.01 per 100 shares. If these amendments are implemented, exchanges, broker-dealers, and other trading platforms will need to assess the effects on order-routing strategies, transaction-cost modeling, and liquidity incentives.
• Implementation remains uncertain — Although the court’s decision upholds the SEC’s authority, it remains unclear whether the SEC will ultimately implement these amendments as adopted or delay their implementation to reconsider the original rulemaking in a subsequent proposal. The SEC appears poised to revisit, and potentially eliminate, Rule 611 — the Order Protection Rule (OPR) — as indicated by Chair Atkins’ prior dissent from the Regulation NMS adopting release and the SEC’s recent roundtable discussion on rescinding the rule.ⁱⁱⁱ Because the OPR requires routing to an exchange’s protected quotations in certain circumstances, the access-fee cap was designed to prevent an exchange from charging excessive fees (e.g., $10) for accessing a protected quotation. If the OPR is rescinded, the rationale for maintaining capped access fees would likely disappear.
• Judicial affirmation of broad SEC authority — Departing from its prior decision striking down the access-fee cap pilot program, the D.C. Circuit confirmed that Section 11A of the Exchange Act grants the SEC wide discretion to regulate the structure of the national market system, including through industrywide fee caps and tick-size requirements. The court viewed the rule as a reasonable exercise of the SEC’s mandate to ensure “fair and efficient” markets and “price transparency.”
• Deference to agency expertise after Loper Bright — Despite the Supreme Court’s recent curtailment of Chevron deference in Loper Bright v. Raimondo,^iv the court emphasized that agencies retain latitude to make predictive policy judgments and line-drawing decisions when grounded in technical expertise and reasoned explanation. While the D.C. Circuit no longer defers to the SEC’s interpretation of the Exchange Act itself, the court upheld the SEC’s delegated authority under the Exchange Act to facilitate the establishment of a national market system.

II. Background on the Adopted Rules and Exchanges’ Challenge
As discussed in Sidley’s Update “SEC Adopts Rules Modifying Minimum Pricing Increments, Access Fee Caps, and Order Transparency,” the 2024 amendments to Regulation NMS sought to modernize market structure by narrowing tick sizes and reducing access-fee limits. The SEC concluded that smaller ticks would promote tighter spreads and greater price competition, while lower fee caps would improve transparency and mitigate potential distortions in quoted prices.

A coalition of national securities exchanges petitioned the D.C. Circuit for review of the adopted rules, arguing that the SEC exceeded its statutory authority and acted arbitrarily and capriciously. The petitioners contended that fee regulation falls outside the scope of Section 11A and must instead be addressed on an exchange-by-exchange basis under Section 19 of the Exchange Act. They also claimed the SEC’s decision lacked sufficient empirical support and failed to justify lowering the cap to 10 mils.

III. The Court’s Findings

The D.C. Circuit rejected both lines of argument from the exchanges. The court held that Sections 11A and 23 confer “broad, discretionary authority” for the SEC to adopt rules promoting the fairness and efficiency of the national market system. A uniform access-fee cap, the court explained, directly supports these statutory goals by aligning displayed prices with true transaction costs and preventing exchanges from charging excessive fees where order-routing obligations leave market participants with no practical alternative.

The court also found the rulemaking neither arbitrary nor capricious. The SEC had reasonably analyzed market data, considered competing economic theories, and explained its choice of a 10-mil cap as a balance between reducing distortions and preserving exchange revenue. In doing so, the SEC made permissible predictive judgments about market behavior that warranted deference to its technical expertise.