DC Circ. Decision Reaffirms SEC Authority Post-Loper Bright

On Oct. 14, the U.S. Court of Appeals for the District of Columbia Circuit denied a petition for review seeking to invalidate the U.S. Securities and Exchange Commission'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, or tick size, for most exchange-listed securities.

In Cboe Global Markets Inc. v. SEC, the court upheld the SEC's authority under the Securities 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. Following the decision, the SEC extended the compliance timelines for implementation of the rule amendments.

This article outlines the background and substance of the tick size and fee cap amendments to Regulation NMS, the D.C. Circuit's reasoning in upholding the SEC's authority, and the broader implications of the decision for market participants and future rulemaking. In short, the court's decision reinforces the D.C. Circuit's deference to SEC expertise in market structure regulation even after the U.S. Supreme Court's 2024 decision in Loper Bright Enterprises v. Raimondo, but the ultimate implementation of at least the access fee cap remains uncertain given the current SEC's interest in other changes to Regulation NMS — and in particular the elimination of the order protection rule.