Davis Polk secured a victory for the New York Stock Exchange (“NYSE”) in an ongoing highly publicized dispute between the three largest U.S. stock-exchange groups and the Securities and Exchange Commission, relating to a recently-adopted final rule known as the Transaction Fee Pilot (“TFP”). Davis Polk petitioned the SEC on behalf of NYSE to delay implementation of the TFP pending resolution, and last week, the SEC granted the petition in substantial part.

          The TFP, if ultimately imposed, would restrict the amount of transaction fees and rebates that national securities exchanges may charge or offer to their broker-dealer members for transactions in particular securities. The SEC has repeatedly championed the TFP as an important mechanism for generating data that may assist in studying the effects, if any, of transaction fees and rebates on customer order flow. However, as explained in a recent WSJ op-ed by NYSE’s president, Stacey Cunningham, the TFP raises substantial concerns, including because it arbitrarily disadvantages certain issuers, favors off-exchange venues such as dark pools over public exchanges, and has not been tailored to address any specifically identified problem. Based on these and other concerns, NYSE and other major exchanges petitioned the D.C. Circuit to strike down the rule. Davis Polk represents NYSE in the lawsuit, which remains pending.

          In the NYSE SEC stay petition, Davis Polk argued that a stay was appropriate given the likelihood that NYSE would prevail on its court challenge and the irreparable harm that NYSE and other market participants would incur if the TFP were implemented. On March 27, the SEC granted the requested stay in substantial part, agreeing to delay implementing the TFP’s fee-and-rebate restrictions and data-publications requirements until after the D.C. Circuit decides the pending challenge.

          The Davis Polk litigation team includes partner Paul S. Mishkin and associates George L. Brandley, Daniel S. Magy and Brett J. Workman. The financial institutions team includes partner Annette L. Nazareth and counsel Zachary J. Zweihorn. Members of the Davis Polk team are based in the New York and Washington DC offices.

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