Rule 603 (Examples)
Rule 603 of Regulation NMS (National Market System) is a critical SEC regulation that governs the distribution of market data in U.S. securities markets. It establishes requirements for fair and non-discriminatory access to market data and sets standards for the transmission of quotation and transaction information.
Core requirements of Rule 603
Rule 603 establishes three fundamental requirements for market data distribution:
- Fair and reasonable terms - Market data must be distributed on terms that are fair and reasonable
- Non-discriminatory access - Data must be made available on a non-discriminatory basis
- Equal speed of access - Market centers must release data to the Securities Information Processor (SIP) and proprietary feeds simultaneously
Market data distribution under Rule 603
The rule creates a framework for two parallel market data distribution channels:
This dual-feed structure allows for both consolidated and direct market data access while maintaining regulatory oversight of the distribution process.
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Latency neutrality requirements
A key focus of Rule 603 is ensuring fair access in terms of data transmission speed. Exchanges must:
- Release data to proprietary feeds and SIP feeds simultaneously
- Implement technical solutions to prevent latency advantages
- Document and monitor data transmission timing
- Maintain records of compliance with timing requirements
Impact on market structure
Rule 603 has significantly influenced modern market structure:
- Enabled development of sophisticated market data feed handlers
- Supported growth of algorithmic trading
- Created framework for latency measurement and monitoring
- Established standards for market data entitlements
Relationship with other regulations
Rule 603 operates alongside other key market data regulations:
- Regulation NMS - Overall market structure framework
- Rule 611 - Order protection requirements
- Rule 612 - Sub-penny quoting restrictions
Compliance considerations
Market participants must implement specific measures to comply with Rule 603:
These compliance measures ensure fair and efficient market data distribution while maintaining market integrity.
Best practices for implementation
Organizations typically implement several key practices to ensure Rule 603 compliance:
- Regular timing analysis of data distribution systems
- Documentation of data access procedures
- Monitoring of transmission latencies
- Regular compliance reviews and audits
- Staff training on market data requirements
Through these practices, market participants can maintain compliance while providing efficient market data services to their clients.