Unlisted Trading Privileges (UTP)

The UTP Plan operates under the regulatory framework established by the Unlisted Trading Privileges Act of 1994, which codified the right of Nasdaq-listed and OTC securities to be traded on other exchanges without requiring a separate listing process. Similar to the CTA Plan for NYSE-listed securities, the UTP Plan enables multiple exchanges to trade the same security, fostering competition that often results in better prices and tighter spreads. It's one of two Securities Information Processors (SIPs) designated by the SEC to aggregate and distribute US equities data.

Since its establishment, SIPs have consolidated trade and quote data from all SEC-registered exchanges and trading venues. Exchanges that trade Nasdaq-listed securities are required to send their data to a central processor, which creates the Nasdaq UTP Quote Data Feed (UQDF) and Nasdaq UTP Trade Data Feed (UTDF). These data streams are then disseminated globally, providing a standardized view of Nasdaq-listed equities across markets.

Before SIPs, market participants didn't have a centralized source for trade and quote information, making it difficult to identify the best available prices across venues. SIPs were designed to:

• Calculate the best bid and offer prices across exchanges, later formalized as the National Best Bid and Offer (NBBO) under Regulation NMS in 2005.
• Support critical regulatory mechanisms, such as market-wide circuit breakers and, more recently, Limit-Up Limit-Down (LULD) price bands introduced in 2013.

However, as exchanges began offering faster and more detailed proprietary feeds, the limitations of SIPs became increasingly apparent. To address these challenges, the SEC has approved a competing consolidator model, which aims to modernize market data infrastructure by introducing competition into the role traditionally filled by SIPs.

For example, Databento's US Equities service enables users to calculate a more precise NBBO than SIP data by aggregating proprietary feeds from 15 exchanges and 30 ATSes. These feeds offer significantly greater granularity, including order-level data and speed advantages critical for latency-sensitive strategies. Despite these advancements, SIPs are likely to remain a baseline option for market participants requiring only top-of-book data or more cost-effective solutions.