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Okay okay so first of all the dc appeals court ruled the SEC acted outside its authority when it proposed a pilot program limiting the general system exchanges use for fees for trades, which includes offering rebates to persuade people to use their venues
The court ruled general rulemaking authority of the SEC didn’t extend to doing an experiment to collect data for a *possible* regulation changing the fee for trade structure allowed under law for exchanges
The reason this matters is that it basically has a broader impact for certain pilot programs that I’m not completely sure of how widely it extends. But it also limits how the U.S.’s financial regulator for securities can limit fees investors must pay to execute trades.
The opinion doesn’t solve one of the fundamental problems the SEC was trying to address though. broker-dealers face a complicated set of incentives when rebate and fee structures come into play and they're trading client money.
That’s bc they balance pursuing “the best execution of their customers’ orders while facing potentially conflicting economic incentives to avoid fees or earn rebates — both of which typically are not passed through the broker-dealer to its customers,” appeals court explained.
But the SEC didn’t weigh in on this issue and instead instituted the pilot program. In the process, the court ruled, the SEC failed to adequately explain what problems would be addressed by the changes.
