What Is National Market System Plan (NMSP)?

A national market system plan is a nationwide plan used for regulating multiple aspects of equity securities trading activity, trading disclosure, and execution. In general, a plan component will usually be centered around the selection and reservation of security symbols but can also encompass aspects of trading, clearing, and quote distribution. Collectively, multiple national market system plans usually help to form the framework for the  collection, processing, and distribution of quotation and transaction information for all equity stock exchanges.

Key Takeaways

  • A national market system plan is a nationwide plan used for the regulation of multiple aspects of equity securities trading activity.
  • Multiple plan components are typically established as a part of a national market system framework.
  • In the U.S., the national market system and national market system plans are a product of provisions legislated by Section 11A of the 1934 Securities Exchange Act.

Understanding National Market System Plan

In the U.S., the national market system and national market system plans are governed by Section 11A of the 1934 Securities Exchange Act. Section 11A includes amendments passed through in 1975, known as the Securities Acts Amendments of 1975. The actions of 1975 required the Securities Exchange Commission (SEC) to formally establish a national market system framework in the U.S. which later led to the enaction of Regulation NMS. The SEC’s Regulation NMS contains four comprehensive components that heavily rely on the NMS framework for full adherence.

Comprehensively, the foundation of the national market system in the U.S. consists of several national market system plan components. Three of the most notable individual plan components include the following:

  • The Intermarket Symbol Reservation Authority or ISRA Plan: ISRA was established to help improve the effectiveness and efficiency of the U.S. national market system overall. It also seeks to allow for and encourage fair competition among all participants. ISRA’s primary purpose is to manage a uniform system for selecting, reserving, and administrating equity security symbols for individual securities. Through the ISRA, securities are assigned a one- to five-character symbol which serves as their identifier for listing and trading activity. Equity market exchanges are required to utilize guidelines from the ISRA when determining and disseminating new security symbols for new issuances listed on their exchange.
  • Consolidated Tape System (CTS)/Consolidated Quotation System (CQS): The Consolidated Tape Association is the manager of the Consolidated Tape System and the Consolidated Quotation System. These two systems serve the financial markets through the processing of equity exchange trade and quote data respectively. All of the major, regulated U.S. equity exchanges are required to utilize the CTS and CQS, with leading participants including the New York Stock Exchange and NYSE American. Like nearly all U.S. national market system components, the CTS and CQS are also required by option market exchanges.
  • Over the Counter (OTC) and Unlisted Trading Privilege (UTP) Plan: The OTC/UTP Plan is somewhat of an alternative component, focusing on quote and trade processing for over the counter securities, also known as unlisted trading privilege securities. OTC/UTP exchanges have less stringent requirements for their security listings but are still subject to the overarching national market system framework in the U.S. Within the OTC/UTP Plan component, a designated UTP processor, known as the Securities Information Processor (SIP), consolidates and processes quote and trade data on OTC securities. The SIP is responsible for transaction processing and quote dissemination. UTP Plan data is often referred to as UTP Level 1 data or Tape C data.