National market system (NMS)

Definition

The national market system (NMS) is a regulatory structure established by the U.S. Securities and Exchange Commission (SEC) to govern the trading of securities in the United States.

What is the national market system?

NMS aims to ensure fair and efficient markets by promoting competition, transparency, and investor protection across various trading venues.

NMS promotes the consolidation of market data from various trading venues into a centralized system known as the Consolidated Tape, ensuring that investors have access to comprehensive and timely information on security prices and trading activity.

Furthermore, NMS includes a set of SEC rules designed to modernize and enhance the U.S. equity markets. It includes provisions such as the order protection rule, the access rule, and requirements for best execution of customer orders by broker-dealers.

NMS also imposes transparency requirements on trading venues, including public disclosure of trading rules, execution procedures, and fees. This transparency helps investors make informed decisions and promotes confidence in the integrity of the markets.