Court: Dodd-Frank 'ousts us from jurisdiction' over market fee rules

The Dodd-Frank financial reform law, the U.S. Court of Appeals for the District of Columbia said, bars them from ruling on the issue.

The groups, NetCoalition and the Securities Industry and Financial Markets Association (SIFMA), petitioned the SEC to force the New York Stock Exchange and Nasdaq Stock Market to reduce the amount they charged for market data, but the agency refused to step in.

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Ultimately, Dodd-Frank “ousts us of jurisdiction,” Judge Karen L. Henderson wrote in the court’s 22-page decision.

The two trade groups include tech giants Google, Yahoo, BlackRock, E-Trade Financial Group and Goldman Sachs.

Prior to the Wall Street overhaul, the Securities Exchange Act of 1934 required regulators to approve any market data fee rules before they became effective, submitting them to a public notice and comment period.

While the SEC still has the authority to scrutinize or suspend rules created by the self-regulated exchanges, the 2010 Dodd-Frank law says the fee determinations are effective upon being sent to the SEC.

The regulator did not take a position on the specific market data fee rules in question but maintained the court no longer had authority over the process.

In 2010, before Dodd-Frank became law, NetCoalition won a similar case before the court. But that was during a time when the SEC had exclusive review over the fees before they became active.

“Under [the Administrative Procedure Act], agency inaction is subject to judicial review only if it is discrete and [the] agency was mandated to act,” Henderson wrote in a footnote of the decision. “A statute authorizing the review of agency inaction while withholding review of agency action would be an odd duck indeed.”

The case is a defeat for Eugene Scalia, a prominent adversary of SEC rules who argued the case for the trade groups. Scalia, the son of Supreme Court Justice Antonin Scalia, won a trio of cases that lampooned the agency’s lack of cost-benefit analysis when crafting regulations.