It’s an arcane, technical part of stock-trading, part of the hidden plumbing behind every click to buy or sell.

But for those who run, regulate and trade in U.S. equity markets, it’s become a battlefield.

At issue are rebates -- the payments that exchanges make to top traders and brokers for sending them their business. The point of contention is a two-year government pilot program -- a Securities and Exchange Commission experiment -- designed to determine whether rebates influence the locations where trades are made.

The dispute pits the New York Stock Exchange, Nasdaq Inc. and Cboe Global Markets Inc. -- which run the top U.S. marketplaces -- against the SEC, asset managers and pension funds such as the California Public Employees’ Retirement System. Money managers say rebates can create conflicts of interest. The agency wants to determine whether this is true, but exchanges say the study would needlessly disrupt markets. Personal attacks have been lobbed. Industry panels have devolved into mudslinging. Lawyers have been unleashed.

“Everyone’s suing each other,” said Spencer Mindlin, an analyst at Aite Group LLC. “It’s crazy.”

The tone is so heated that Mindlin used the tagline “an age of outrage” for a June conference in New York. Several speakers said the description was spot on.

Just about all participants agree that U.S. stock markets are the most efficient in the world. Their relative transparency means that when the SEC proposes changes to market rules, or exchanges request permission to alter their operations, the agency receives a deluge of feedback.

What’s different this time is the rancor.

The SEC program, approved in December, is called the Transaction Fee Pilot. The study would temporarily divide stocks into three groups: one would ban exchanges from offering rebates to brokers, another would cap fees at $0.001 a share and the last would be a control group. The aim is to figure out whether the fee structures are good or bad for the market, according to a filing. It’s now being held up in court.

‘Power Grab’

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