Joint Industry Plan; Notice of Filing and Immediate Effectiveness of Amendment No. 14 to the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis, Submitted by the Pacific Exchange, Inc., the National Association of Securities Dealers, Inc., the American Stock Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Stock Exchange, Inc., the Cincinnati Stock Exchange, Inc., and the Philadelphia Stock Exchange, Inc., 12507-12517 [05-4946]

Download as PDF Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices organizations (as defined by the Act), including national securities exchanges and national securities associations. Ten respondents file an average total of twelve responses per year, which corresponds to an estimated annual response burden of 553 hours. Compliance with Rule 11Aa3–2 is required to obtain or retain the benefits provided to those SROs who, acting jointly, shall sponsor a NMS Plan. Information received in response to Rule 11Aa3–2 shall not be kept confidential; the information collected is public information. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Written comments regarding the above information should be directed to the following persons: (a) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an e-mail to: David_Rostker@omb.eop.gov; and (b) R. Corey Booth, Director / Chief Information Officer, Office of Information Technology, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. Comments must be submitted to the Office of Management and Budget within 30 days of this notice. Dated: March 1, 2005. Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–1060 Filed 3–11–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549. Regulation D sets forth rules governing the limited offer and sale of securities without Securities Act registration. Those relying on Regulation D must file Form D. The purpose of the Form D notice is to collect empirical data, which provides a continuing basis for action by the Commission either in terms of amending existing rules and regulations or proposing new ones. In addition, the form allows the Commission to elicit information necessary to assess the effectiveness of Regulation D and Section 4(6) as capital-raising devices. Form D information is required to obtain or retain benefits under Regulation D. Approximately 17,500 issuers file Form D. We estimate that it takes 4 hours to prepare Form D for a total burden of 70,000 hours. We estimate that 25% of the total burden hours (17,500 reporting burden hours) is prepared by the company. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Written comments regarding the above information should be directed to the following persons: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503 or send an email to David_Rostker@omb.eop.gov; and (ii) R. Corey Booth, Director/Chief Information Officer, Office Information Technology, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. Comments must be submitted to OMB within 30 days of this notice. Dated: March 7, 2005. Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–1061 Filed 3–11–05; 8:45 am] Jkt 205001 [Release No. 34–51304; File No. S7–24–89] Joint Industry Plan; Notice of Filing and Immediate Effectiveness of Amendment No. 14 to the Joint SelfRegulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis, Submitted by the Pacific Exchange, Inc., the National Association of Securities Dealers, Inc., the American Stock Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Stock Exchange, Inc., the Cincinnati Stock Exchange, Inc., and the Philadelphia Stock Exchange, Inc. March 2, 2005. I. Introduction Pursuant to Rule 11Aa3–2 1 and Rule 11Aa3–1 2 under the Securities Exchange Act of 1934 (‘‘Act’’), notice is hereby given that on February 17, 2005, the Pacific Exchange, Inc. (‘‘PCX’’) on behalf of itself and the National Association of Securities Dealers, Inc. (‘‘NASD’’), the American Stock Exchange LLC (‘‘Amex’’), the Boston Stock Exchange, Inc. (‘‘BSE’’), the Chicago Stock Exchange, Inc. (‘‘CHX’’), the Cincinnati Stock Exchange, Inc. (‘‘CSE’’),3 and the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’) (hereinafter referred to collectively as ‘‘Participants’’),4 as members of the operating committee (‘‘Operating Committee’’ or ‘‘Committee’’) of the Plan submitted to the Securities and Exchange Commission (‘‘Commission’’) a proposal to amend the Plan. The proposal represents the fourteenth amendment (‘‘Amendment No. 14’’) made to the Plan and reflects several changes unanimously adopted by the Committee. The Commission is publishing this notice of filing and immediate effectiveness to solicit 1 17 CFR 240.11Aa3–2. CFR 240.11Aa3–1. 3 The Commission notes that the CSE changed its name to the National Stock Exchange, Inc. See Securities Exchange Act Release No. 48774 (November 12, 2003), 68 FR 65332 (November 19, 2003) (File No. SR–CSE–2003–12). 4 PCX and its subsidiary the Archipelago Exchange were elected co-chairs of the operating committee (‘‘Operating Committee’’ or ‘‘Committee’’) for the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privilege Basis (‘‘Nasdaq UTP Plan’’ or ‘‘Plan’’) by the Participants. 2 17 Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget a request for extension of the previously approved collection of information discussed below. 15:31 Mar 11, 2005 SECURITIES AND EXCHANGE COMMISSION BILLING CODE 8010–01–P Extension: Form D and Regulation D, OMB Control No. 3235–0076, SEC File No. 270–72. VerDate jul<14>2003 12507 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 E:\FR\FM\14MRN1.SGM 14MRN1 12508 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices comments from interested persons on Amendment No. 14. II. Background The Plan governs the collection, consolidation, and dissemination of quotation and transaction information for the Nasdaq Stock Market, Inc. (‘‘Nasdaq’’) National Market (‘‘NNM’’) and Nasdaq SmallCap securities listed on Nasdaq or traded on an exchange pursuant to unlisted trading privileges (‘‘UTP’’).5 The Plan provides for the collection from Plan Participants and the consolidation and dissemination to vendors, subscribers, and others of quotation and transaction information in ‘‘eligible securities.’’ 6 The Commission originally approved the Plan on a pilot basis on June 26, 1990.7 The parties did not begin trading until July 12, 1993; accordingly, the pilot period commenced on July 12, 1993. The Plan was most recently extended on December 21, 2004.8 III. Description and Purpose of the Amendment The complete text of the Plan, as amended, is attached as Exhibit A. The following is a summary of the changes to the Plan prepared by the Participants. A. Section I.A. of the Plan provides for the list of Plan Participants. Amendment No. 14 adds the Chicago Board Options Exchange (‘‘CBOE’’) and the New York Stock Exchange (‘‘NYSE’’) as new Participants to the Plan. In addition, CSE’s name is modified to reflect their new name, National Stock Exchange (‘‘NSX’’). Lastly, the PCX address has been updated. B. Amendment 14 corrects a crossreference to Section XIV contained in Section I.B. by replacing it with a reference to Section XIII (relating to the 5 Section 12 of the Act generally requires an exchange to trade only those securities that the exchange lists, except that Section 12(f) of the Act permits UTP under certain circumstances. For example, Section 12(f) of the Act, among other things, permits exchanges to trade certain securities that are traded over-the-counter (‘‘OTC/UTP’’), but only pursuant to a Commission order or rule. For a more complete discussion of the Section 12(f) requirement, see Securities Exchange Act Release No. 36481 (November 13, 1995), 60 FR 58119 (November 24, 1995). 6 The Plan defines ‘‘Eligible Securities’’ as any Nasdaq National Market or Nasdaq SmallCap security, as defined in NASD Rule 4200, (i) as to which unlisted trading privileges have been granted to a national securities exchange pursuant to Section 12(f) of the Act or which become eligible for such trading pursuant to order of the Commission, or (ii) which is also listed on a national securities exchange. 7 See Securities Exchange Act Release No. 28146, 55 FR 27917 (July 6, 1990). 8 See Securities Exchange Act Release No. 50855 (December 14, 2004), 69 FR 76499 (December 21, 2004). VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 development costs owed by new Participants).9 C. Amendment 14 modifies Section III.Z. by removing the reference to Nasdaq Participant and moving it to new Section III.AA. as a separate definition. D. Amendment 14 modifies Section IV.C.4. to reflect previously approved language from Amendment 13A that was not incorporated into a recently published version of the Plan.10 E. Section VIII.C. provides for the Participant market identifiers for quotation and transaction report information. Amendment No. 14 adds ‘‘W’’ as the identifier for the CBOE and ‘‘N’’ for NYSE. Further, the reference to the CSE has been changed to NSX. F. Amendment 14 modifies Section XI. to reflect that the Processor will be available to accept and disseminate quotes and transaction reports as early as 4 a.m. Eastern Time. Currently the Plan states that quotations and transaction reports may be entered and disseminated as of 8 a.m. Eastern Time. Amendment No. 14 modifies the opening hours to 4 a.m.11 G. Amendment 14 modifies Section 3.a.1. to Exhibit 1 to the Plan to reflect previously approved language from Amendment 13A that was not incorporated into the most recent version of the Plan.12 According the Participants, Nasdaq as Processor will implement the new Processor hours in its next release. CBOE and NYSE may commence quoting and trading in Nasdaq-listed securities with the effectiveness of Amendment No. 14, once they complete the necessary development and implementation work. IV. Date of Effectiveness of the Amendment The Commission has determined that the changes set forth in Amendment 14 are technical in nature, and thus have become effective upon filing with the Commission.13 At any time within 60 9 Section XIII of the Plan specifies that a condition to becoming a Participant is to pay a proportionate share of $439,530 which are the aggregate development costs previously paid by Plan Participants to the Processor. 10 See Securities Exchange Act Release No. 49711 (May 14, 2004), 69 FR 29339, (May 21, 2004) (‘‘Amendment No. 13A Approval Order’’). 11 PCX/ArcaEx has submitted a proposal to the Commission to begin quoting and trading at 4:00 a.m. Eastern Time. See Securities Exchange Act Release No. 50756 (November 30, 2004), 69 FR 70489, (December 6, 2004) (approving File No. SR– PCX–2004–83). To disseminate quotes and trades as of 4:00 a.m., PCX/ArcaEx requested that the Operating Committee and Nasdaq, as Plan Processor, modify the operating hours of the Processor. 12 See 13A Approval Order, supra note 10. 13 17 CFR 240.11Aa3–2(c)(3)(iii). PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 days of the filing of any such amendment, the Commission may summarily abrogate the amendment and require that such amendment be refiled in accordance with paragraph (b)(1) of Rule 11Aa3–2 under the Act 14 and reviewed in accordance with paragraph (c)(2) of Rule 11Aa3–2 under the Act,15 if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or the maintenance of fair and orderly markets, to remove impediments to, and perfect mechanisms of, a national market system or otherwise in furtherance of the purposes of the Act.16 V. Solicitation of Comments The Commission seeks general comments on Amendment No. 14. Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the Plan amendment is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number S7–24–89 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549–0609. All comment letters should refer to File No. S7–24–89. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the Plan amendment that are filed with the Commission, and all written communications relating to the Plan amendment between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room. The text of the Plan is being 14 17 CFR 240.11Aa3–2(b)(1). CFR 240.11Aa3–2(c)(2). 16 See 17 CFR 240.11Aa3–2(c)(3)(iii). 15 17 E:\FR\FM\14MRN1.SGM 14MRN1 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices published as Exhibit A to this proposal. Copies of the proposal will also be available for inspection and copying at the office of the Secretary of the Committee, currently located at Pacific Exchange, Inc. and Archipelago Exchange L.L.C., 100 South Wacker Drive, Suite 2000, Chicago, IL 60606. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. S7– 24–89 and should be submitted on or before April 4, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.17 Margaret H. McFarland, Deputy Secretary. Exhibit A—Amendment No. 14; Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for NasdaqListed Securities Traded on Exchanges on an Unlisted Trading Privilege Basis The undersigned registered national securities association and national securities exchanges (collectively referred to as the ‘‘Participants’’), have jointly developed and hereby enter into this Nasdaq Unlisted Trading Privileges Plan (‘‘Nasdaq UTP Plan’’ or ‘‘Plan’’). I. Participants The Participants include the following: A. Participants 1. American Stock Exchange LLC, 86 Trinity Place, New York, New York 10006. 2. Boston Stock Exchange, 100 Franklin Street, Boston, Massachusetts 02110. 3. Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605. 4. Chicago Board Options Exchange, Inc., 400 South LaSalle Street, 26th Floor, Chicago, Illinois 60605. 5. National Association of Securities, Dealers, Inc., 1735 K Street, NW., Washington, DC 20006. 6. National Stock Exchange, 440 South LaSalle Street, 26th Floor, Chicago, Illinois 60605. 7. New York Stock Exchange, Inc., 11 Wall Street, New York, New York 10005. 8. Pacific Exchange, Inc., 115 Sansome Street, San Francisco, CA 94104. 9. Philadelphia Stock Exchange, 1900 Market Street, Philadelphia, Pennsylvania 19103. B. Additional Participants Any other national securities association or national securities exchange, in whose market Eligible Securities become traded, may become a Participant, provided that said organization executes a copy of this Plan and 17 17 CFR 200.30–3(a)(27). VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 pays its share of development costs as specified in Section XIII. II. Purpose of Plan The purpose of this Plan is to provide for the collection, consolidation and dissemination of Quotation Information and Transaction Reports in Eligible Securities from the Participants in a manner consistent with the Exchange Act. It is expressly understood that each Participant shall be responsible for the collection of Quotation Information and Transaction Reports within its market and that nothing in this Plan shall be deemed to govern or apply to the manner in which each Participant does so. III. Definitions A. ‘‘Current’’ means, with respect to Transaction Reports or Quotation Information, such Transaction Reports or Quotation Information during the fifteen (15) minute period immediately following the initial transmission thereof by the Processor. B. ‘‘Eligible Security’’ means any Nasdaq National Market or Nasdaq SmallCap security, as defined in NASD Rule 4200: (i) as to which unlisted trading privileges have been granted to a national securities exchange pursuant to Section 12(f) of the Exchange Act or which become eligible for such trading pursuant to order of the Securities and Exchange Commission; or (ii) which also is listed on a national securities exchange. C. ‘‘Commission’’ and ‘‘SEC’’ shall mean the U.S. Securities and Exchange Commission. D. ‘‘Exchange Act’’ means the Securities Exchange Act of 1934. E. ‘‘Market’’ shall mean (i) when used with respect to Quotation Information, the NASD in the case of a Nasdaq market maker or a Nasdaq-registered electronic communications network/alternative trading system (hereafter collectively referred to as ‘‘Nasdaq market participants’’) acting in such capacity, or the Participant on whose floor or through whose facilities the quotation was disseminated; and (ii) when used with respect to Transaction Reports, the Participant through whose facilities the transaction took place or was reported, or the Participant to whose facilities the order was sent for execution. F. ‘‘NASD’’ means the National Association of Securities Dealers Inc. G. ‘‘NASD Participant’’ means an NASD member that is registered as a market maker or an electronic communications network or otherwise utilizes the facilities of the NASD pursuant to applicable NASD rules. H. ‘‘NASD Transaction Reporting System’’ means the System provided for in the NASD’s Transaction Reporting Plan filed with and approved by the Commission pursuant to SEC Rule11Aa3–1, governing the reporting of transactions in Nasdaq securities. I. ‘‘UTP Quote Data Feed’’ means the service that provides Subscribers with the National Best Bid and Offer quotations, size and market center identifier, as well as the Best Bid and Offer quotations, size and market center identifier from each individual Participant in Eligible Securities. PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 12509 J. ‘‘Nasdaq Level 2 Service’’ means the Nasdaq service that provides Subscribers with query capability with respect to quotations and sizes in securities included in the Nasdaq System, best bid and asked quotations, and Transaction Reports. K. ‘‘Nasdaq Level 3 Service’’ means the Nasdaq service that provides Nasdaq market participants with input and query capability with respect to quotations and sizes in securities included in the Nasdaq System, best bid and asked quotations, and Transaction Reports. L. ‘‘Nasdaq System’’ means the automated quotation system operated by Nasdaq. M. ‘‘UTP Trade Data Feed’’ means the service that provides Vendors and Subscribers with Transaction Reports. N. ‘‘Nasdaq Security’’ or ‘‘Nasdaq-listed Security’’ means any security listed on the Nasdaq National Market or Nasdaq SmallCap Market. O. ‘‘News Service’’ means a person that receives Transaction Reports or Quotation Information provided by the Systems or provided by a Vendor, on a Current basis, in connection with such person’s business of furnishing such information to newspapers, radio and television stations and other news media, for publication at least fifteen (15) minutes following the time when the information first has been published by the Processor. P. ‘‘OTC Montage Data Feed ‘‘means the data stream of information that provides Vendors and Subscribers with quotations and sizes from all Participants and Nasdaq market participants. Q. ‘‘Participant’’ means a registered national securities exchange or national securities association that is a signatory to this Plan. R. ‘‘Plan’’ means this Nasdaq UTP Plan, as from time to time amended according to its provisions, governing the collection, consolidation and dissemination of Quotation Information and Transaction Reports in Eligible Securities. S. ‘‘Processor’’ means the entity selected by the Participants to perform the processing functions set forth in the Plan. T. ‘‘Quotation Information’’ means all bids, offers, displayed quotation sizes, the market center identifiers and, in the case of NASD and Nasdaq, the NASD and Nasdaq market participant that entered the quotation, withdrawals and other information pertaining to quotations in Eligible Securities required to be collected and made available to the Processor pursuant to this Plan. U. ‘‘Regulatory Halt’’ means a trade suspension or halt called for the purpose of dissemination of material news, as described at Section X hereof or that is called for where there are regulatory problems relating to an Eligible Security that should be clarified before trading therein is permitted to continue, including a trading halt for extraordinary market activity due to system misuse or malfunction under Section X.E.1. of the Plan (‘‘Extraordinary Market Regulatory Halt’’). V. ‘‘Subscriber’’ means a person that receives Current Quotation Information or Transaction Reports provided by the Processor or provided by a Vendor, for its E:\FR\FM\14MRN1.SGM 14MRN1 12510 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices own use or for distribution on a non-Current basis, other than in connection with its activities as a Vendor. W. ‘‘Transaction Reports’’ means reports required to be collected and made available pursuant to this Plan containing the stock symbol, price, and size of the transaction executed, the Market in which the transaction was executed, and related information, including a buy/sell/cross indicator and trade modifiers, reflecting completed transactions in Eligible Securities. X. ‘‘Upon Effectiveness of the Plan’’ means July 12, 1993, the date on which the Participants commenced publication of Quotation Information and Transaction Reports on Eligible Securities as contemplated by this Plan. Y. ‘‘Vendor’’ means a person that receives Current Quotation Information or Transaction Reports provided by the Processor or provided by a Vendor, in connection with such person’s business of distributing, publishing, or otherwise furnishing such information on a Current basis to Subscribers, News Services or other Vendors. Z. ‘‘NQDS’’ means the data stream of information that provides Vendors and Subscribers with the best quotations and sizes from each Nasdaq Participant. AA. ‘‘Nasdaq Participant’’ means an entity that is registered as a market maker or an electronic communications network in Nasdaq or otherwise utilizes the facilities of The Nasdaq Stock Market pursuant to applicable NASD rules but does not include an NASD Participant as defined in Section III.G. of this Plan. IV. Administration of Plan A. Operating Committee: Composition The Plan shall be administered by the Participants through an operating committee (‘‘Operating Committee’’), which shall be composed of one representative designated by each Participant. Each Participant may designate an alternate representative or representatives who shall be authorized to act on behalf of the Participant in the absence of the designated representative. Within the areas of its responsibilities and authority, decisions made or actions taken by the Operating Committee, directly or by duly delegated individuals, committees as may be established from time to time, or others, shall be binding upon each Participant, without prejudice to the rights of any Participant to seek redress from the SEC pursuant to Rule 11Aa3–2 under the Exchange Act or in any other appropriate forum. An Electronic Communications Network, Alternative Trading System, Broker-Dealer or other securities organization (‘‘Organization’’) which is not a Participant, but has an actively pending Form 1 Application on file with the Commission to become a national securities exchange, will be permitted to appoint one representative and one alternate representative to attend regularly scheduled Operating Committee meetings in the capacity of an observer/ advisor. If the Organization’s Form 1 petition is withdrawn, returned, or is otherwise not actively pending with the Commission for any reason, then the Organization will no VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 longer be eligible to be represented in the Operating Committee meetings. The Operating Committee shall have the discretion, in limited instances, to deviate from this policy if, as indicated by majority vote, the Operating Committee agrees that circumstances so warrant. Nothing in this section or elsewhere within the Plan shall authorize any person or organization other than Participants and their representatives to participate on the Operating Committee in any manner other than as an advisor or observer, or in any Executive Session of the Operating Committee. B. Operating Committee: Authority The Operating Committee shall be responsible for: 1. Overseeing the consolidation of Quotation Information and Transaction Reports in Eligible Securities from the Participants for dissemination to Vendors, Subscribers, News Services and others in accordance with the provisions of the Plan; 2. Periodically evaluating the Processor; 3. Setting the level of fees to be paid by Vendors, Subscribers, News Services or others for services relating to Quotation Information or Transaction Reports in Eligible Securities, and taking action in respect thereto in accordance with the provisions of the Plan; 4. Determining matters involving the interpretation of the provisions of the Plan; 5. Determining matters relating to the Plan’s provisions for cost allocation and revenue-sharing; and 6. Carrying out such other specific responsibilities as provided under the Plan. C. Operating Committee: Voting Each Participant shall have one vote on all matters considered by the Operating Committee. 1. The affirmative and unanimous vote of all Participants entitled to vote shall be necessary to constitute the action of the Operating Committee with respect to: a. Amendments to the Plan; b. Amendments to contracts between the Processor and Vendors, Subscribers, News Services and others receiving Quotation Information and Transaction Reports in Eligible Securities; c. Replacement of the Processor, except for termination for cause, which shall be governed by Section V(B) hereof; d. Reductions in existing fees relating to Quotation Information and Transaction Reports in Eligible Securities; and e. Except as provided under Section IV(C)(3) hereof, requests for system changes; and f. All other matters not specifically addressed by the Plan. 2. With respect to the establishment of new fees or increases in existing fees relating to Quotation Information and Transaction Reports in Eligible Securities, the affirmative vote of two-thirds of the Participants entitled to vote shall be necessary to constitute the action of the Operating Committee. 3. The affirmative vote of a majority of the Participants entitled to vote shall be necessary to constitute the action of the Operating Committee with respect to: PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 a. Requests for system changes reasonably related to the function of the Processor as defined under the Plan. All other requests for system changes shall be governed by Section IV(C)(1)(e) hereof. b. Interpretive matters and decisions of the Operating Committee arising under, or specifically required to be taken by, the provisions of the Plan as written; c. Interpretive matters arising under Exchange Act Rules 11Aa3–1 and 11Ac1–1; and d. Denials of access (other than for breach of contract, which shall be handled by the Processor), 4. It is expressly agreed and understood that neither this Plan nor the Operating Committee shall have authority in any respect over any Participant’s proprietary systems. Nor shall the Plan or the Operating Committee have any authority over the collection and dissemination of quotation or transaction information in Eligible Securities in any Participant’s marketplace, or, in the case of the NASD, from NASD Participants. D. Operating Committee: Meetings Regular meetings of the Operating Committee may be attended by each Participant’s designated representative and/ or its alternate representative(s), and may be attended by one or more other representatives of the parties. Meetings shall be held at such times and locations as shall from time to time be determined by the Operating Committee. Quorum: Any action requiring a vote only can be taken at a meeting in which a quorum of all Participants is present. For actions requiring a simple majority vote of all Participants, a quorum of greater than 50% of all Participants entitled to vote must be present at the meeting before such a vote may be taken. For actions requiring a 2⁄3 majority vote of all Participants, a quorum of at least 2⁄3 of all Participants entitled to vote must be present at the meeting before such a vote may be taken. For actions requiring a unanimous vote of all Participants, a quorum of all Participants entitled to vote must be present at the meeting before such a vote may be taken. A Participant is considered present at a meeting only if a Participant’s designated representative or alternate representative(s) is either in physical attendance at the meeting or is participating by conference telephone, or other acceptable electronic means. Any action sought to be resolved at a meeting must be sent to each Participant entitled to vote on such matter at least one week prior to the meeting via electronic mail, regular U.S. or private mail, or facsimile transmission, provided however that this requirement may be waived by the vote of the percentage of the Committee required to vote on any particular matter, under Section C above. Any action may be taken without a meeting if a consent in writing, setting forth the action so taken, is sent to and signed by all Participant representatives entitled to vote with respect to the subject matter thereof. All the approvals evidencing the consent shall be delivered to the Chairman of the Operating Committee to be filed in the Operating E:\FR\FM\14MRN1.SGM 14MRN1 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices Committee records. The action taken shall be effective when the minimum number of Participants entitled to vote have approved the action, unless the consent specifies a different effective date. The Chairman of the Operating Committee shall be elected annually by and from among the Participants by a majority vote of all Participants entitled to vote. The Chairman shall designate a person to act as Secretary to record the minutes of each meeting. The location of meetings shall be rotated among the locations of the principal offices of the Participants, or such other locations as may from time to time be determined by the Operating Committee. Meetings may be held by conference telephone and action may be taken without a meeting if the representatives of all Participants entitled to vote consent thereto in writing or other means the Operating Committee deems acceptable. E. Advisory Committee 1. Composition a. Each Plan Participant may designate three representatives to participate in the Advisory Committee. The representatives shall each be an employee of a member of that Participant, a professor or other academic involved in the scholarly study of the securities industry, or an expert in one or more areas of the securities industry. b. Each representative shall serve a oneyear term on the Advisory Committee. 2. Authority The Advisory Committee shall have the opportunity to: a. Meet twice yearly, each meeting to occur one day prior to a meeting of the Operating Committee. b. Discuss any matter related to the operation of the Plan. c. Present written comments or inquiries to the Operating Committee regarding matters related to the operation of the Plan. d. Respond to written inquiries from the Operating Committee seeking comment from the Advisory Committee on matters related to the operation of the Plan. V. Selection and Evaluation of the Processor A. Generally The Processor’s performance of its functions under the Plan shall be subject to review by the Operating Committee at least every two years, or from time to time upon the request of any two Participants but not more frequently than once each year. Based on this review, the Operating Committee may choose to make a recommendation to the Participants with respect to the continuing operation of the Processor. The Operating Committee shall notify the SEC of any recommendations the Operating Committee shall make pursuant to the Operating Committee’s review of the Processor and shall supply the Commission with a copy of any reports that may be prepared in connection therewith. B. Termination of the Processor for Cause If the Operating Committee determines that the Processor has failed to perform its functions in a reasonably acceptable manner in accordance with the provisions of the Plan VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 or that its reimbursable expenses have become excessive and are not justified on a cost basis, the Processor may be terminated at such time as may be determined by a majority vote of the Operating Committee. C. Factors To Be Considered in Termination for Cause Among the factors to be considered in evaluating whether the Processor has performed its functions in a reasonably acceptable manner in accordance with the provisions of the Plan shall be the reasonableness of its response to requests from Participants for technological changes or enhancements pursuant to Section IV(C)(3) hereof. The reasonableness of the Processor’s response to such requests shall be evaluated by the Operating Committee in terms of the cost to the Processor of purchasing the same service from a third party and integrating such service into the Processor’s existing systems and operations as well as the extent to which the requested change would adversely impact the then current technical (as opposed to business or competitive) operations of the Processor. D. Processor’s Right to Appeal Termination for Cause The Processor shall have the right to appeal to the SEC a determination of the Operating Committee terminating the Processor for cause and no action shall become final until the SEC has ruled on the matter and all legal appeals of right therefrom have been exhausted. E. Process for Selecting New Processor At any time following effectiveness of the Plan, but no later than upon the termination of the Processor, whether for cause pursuant to Section IV(C)(1)(c) or V(B) of the Plan or upon the Processor’s resignation, the Operating Committee shall establish procedures for selecting a new Processor (the ‘‘Selection Procedures’’). The Operating Committee, as part of the process of establishing Selection Procedures, may solicit and consider the timely comment of any entity affected by the operation of this Plan. The Selection Procedures shall be established by a two-thirds majority vote of the Plan Participants, and shall set forth, at a minimum: 1. The entity that will: (a) Draft the Operating Committee’s request for proposal for bids on a new processor; (b) Assist the Operating Committee in evaluating bids for the new processor; and (c) Otherwise provide assistance and guidance to the Operating Committee in the selection process. 2. The minimum technical and operational requirements to be fulfilled by the Processor; 3. The criteria to be considered in selecting the Processor; and 4. The entities (other than Plan Participants) that are eligible to comment on the selection of the Processor. Nothing in this provision shall be interpreted as limiting Participants’ rights under Section IV or Section V of the Plan or other Commission order. PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 12511 VI. Functions of the Processor A. Generally The Processor shall collect from the Participants, and consolidate and disseminate to Vendors, Subscribers and News Services, Quotation Information and Transaction Reports in Eligible Securities in a manner designed to assure the prompt, accurate and reliable collection, processing and dissemination of information with respect to all Eligible Securities in a fair and non-discriminatory manner. The Processor shall commence operations upon the Processor’s notification to the Participants that it is ready and able to commence such operations. B. Collection and Consolidation of Information For as long as Nasdaq is the Processor, the Processor shall be capable of receiving Quotation Information and Transaction Reports in Eligible Securities from Participants by the Plan-approved, Processor sponsored interface, and shall consolidate and disseminate such information via the UTP Quote Data Feed, the UTP Trade Data Feed, and the OTC Montage Data Feed to Vendors, Subscribers and News Services. For so long as Nasdaq is not registered as a national securities exchange and for so long as Nasdaq is the Processor, the Processor shall also collect, consolidate, and disseminate the quotation information contained in NQDS. For so long as Nasdaq is not registered as a national securities exchange and after Nasdaq is no longer the Processor for other SIP datafeeds, either Nasdaq or a third party will act as the Processor to collect, consolidate, and disseminate the quotation information contained in NQDS. C. Dissemination of Information The Processor shall disseminate consolidated Quotation Information and Transaction Reports in Eligible Securities via the UTP Quote Data Feed, the UTP Trade Data Feed, and the OTC Montage Data Feed to authorized Vendors, Subscribers and News Services in a fair and non-discriminatory manner. The Processor shall specifically be permitted to enter into agreements with Vendors, Subscribers and News Services for the dissemination of quotation or transaction information on Eligible Securities to foreign (non-U.S.) marketplaces or in foreign countries. The Processor shall, in such instance, disseminate consolidated quotation or transaction information on Eligible Securities from all Participants. Nothing herein shall be construed so as to prohibit or restrict in any way the right of any Participant to distribute quotation, transaction or other information with respect to Eligible Securities quoted on or traded in its marketplace to a marketplace outside the United States solely for the purpose of supporting an intermarket linkage, or to distribute information within its own marketplace concerning Eligible Securities in accordance with its own format. If a Participant requests, the Processor shall make information about Eligible Securities in the Participant’s marketplace available to a E:\FR\FM\14MRN1.SGM 14MRN1 12512 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices foreign marketplace on behalf of the requesting Participant, in which event the cost shall be borne by that Participant. 1. Best Bid and Offer The Processor shall disseminate on the UTP Quote Data Feed the best bid and offer information supplied by each Participant, including the Nasdaq market participants, and shall also calculate and disseminate on the UTP Quote Data Feed a national best bid and asked quotation with size based upon Quotation Information for Eligible Securities received from Participants. The Processor shall not calculate the best bid and offer for any individual Participant, including the NASD. The Participant responsible for each side of the best bid and asked quotation making up the national best bid and offer shall be identified by an appropriate symbol. If the quotations of more than one Participant shall be the same best price, the largest displayed size among those shall be deemed to be the best. If the quotations of more than one Participant are the same best price and best displayed size, the earliest among those measured by the time reported shall be deemed to be the best. A reduction of only bid size and/or ask size will not change the time priority of a Participant’s quote for the purposes of determining time reported, whereas an increase of the bid size and/or ask size will result in a new time reported. The consolidated size shall be the size of the Participant that is at the best. If the best bid/best offer results in a locked or crossed quotation, the Processor shall forward that locked or crossed quote on the appropriate output lines (i.e., a crossed quote of bid 12, ask 11.87 shall be disseminated). The Processor shall normally cease the calculation of the best bid/best offer after 6:30 p.m., Eastern Time. 2. Eligible Securities a. Number of Eligible Securities—If the Commission by order expands the number of Eligible Securities beyond 1,000, the number of Eligible Securities that Participants may trade shall be phased in (added) according to the schedule set out below: (i) At the end of the first calendar quarter following the Commission’s order expanding the number of Eligible Securities beyond 1,000 but in no case before September 30, 2001, Participants may commence trading 500 additional securities; (ii) At the end of each of the four calendar quarters following the date established under provision VI.C(2)(a)(i) of the Plan, Participants may commence trading an additional 500 securities, and at the end of the fifth calendar quarter following the date established under provision VI.C(2)(a)(i) of the Plan, Participants shall be permitted to trade all Eligible Securities. (iii) In no case shall the number of Eligible Securities exceed the number of securities that the Commission deems are eligible for trading pursuant to this Plan. (iv) After each of the aforementioned phase in periods (i.e., calendar quarters), the Processor shall evaluate its performance to determine whether it is prudent, in light of system capacity and any other operational factors, to continue to add additional VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 securities pursuant to the phase in schedule. If the Processor determines, in light of system capacity and any other operational factors, that it is not prudent to continue to expand the number of Eligible Securities, the Processor upon notice to the Participants immediately may suspend the phase-in schedule and delay the expansion of the number of Eligible Securities that may be traded under the Plan. The Processor shall commence adding securities pursuant to a revised phase-in schedule, when the Processor determines it is prudent to do so, in light of system capacity and any other operational factors. (v) This provision shall not apply to The Nasdaq Stock Market, Inc., or Nasdaq market participants acting in such capacity, nor shall it apply to any Participant that does not engage in auto-quoting, as described in paragraph VI.C.(2)(b) below. b. Limitation on Auto-Quoting—Except as provided in sub-paragraph VI.C(2)(c) of this Plan, Participants shall be prohibited from the practice of ‘‘auto-quoting.’’ ‘‘Autoquoting’’ means the practice of tracking, by automated means, the changes to the best bid or best ask quotation and responding by generating another quote change to keep that Participant away from the best bid or ask quotation, but for purposes of this Plan, shall not include: (i) An update that is in response to an execution in the security by that Participant; (ii) An update that requires a physical entry; (iii) An update that is to reflect the receipt, execution, or cancellation of a customer limit order; or (iv) The practice of automatically generating quote changes at a rate of less than 35% of all price changes to the national best bid or ask quotation. The Processor shall calculate this rate using quoting activity during the preceding calendar month. c. Applicability of Auto-Quoting Limitation—The Limitation on Auto-Quoting contained in subparagraph VI.C(2)(b) of this Plan shall only apply if the Processor deems it necessary to maintain adequate capacity for the normal and efficient operation of the Processor and the Processor provides at least 30 calendar days notice to the Participants and the basis thereof of such determination. The Processor shall lift the limitation on auto-quoting when the Processor determines it is prudent to do so, in light of system capacity and any other operational factors. Additionally, the Limitation on AutoQuoting set forth in subparagraph VI.C(2)(b) of this Plan will not apply to a Participant whose aggregated quoting activity in eligible Nasdaq securities does not exceed 1% of the total quotation traffic across all Nasdaq securities by all Nasdaq market participants and Exchange Participants. The Processor shall calculate this rate using quoting activity during the preceding calendar month. d. Obligations of Participants Regarding Capacity—Each Participant shall exercise due diligence to promote quotation generation practices that mitigate quotation traffic so as to ensure prudential excess capacity within the Processor. The Operating Committee shall periodically review the performance of Participants and take such PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 action as necessary to maintain prudential excess capacity. e. Procedures for Ensuring Acceptable Quote Generation Practices—The following procedures shall apply if, in accordance with Section VI.C.2(c) of the Plan, the Processor determines that a capacity concern exists. (i) On a monthly basis, each Participant shall provide the Processor with a good faith estimate of the Participant’s previous month’s daily average number of quote updates to permit the Processor to determine compliance with the auto-quoting limitation referenced in Section VI.C.2.(b) of the Plan. (ii) If the Processor determines, from the Participant’s data or otherwise, that the Participant has not complied with the limitations of Section VI.C.2.(b), the Processor shall give the Participant written notice of such condition. The Participant shall have 30 calendar days after receipt of the written notice to remedy the condition. (iii) If, after the aforementioned 30-day period has expired, the condition has not been remedied to the reasonable satisfaction of the Processor, then the Processor shall submit to the Operating Committee a written request for relief together with supporting documentation evidencing the alleged condition (i.e., failure to comply with the limitations of Section VI.C.2.(b)) and quantifying the impact of the violation on overall capacity of the Processor. The Processor’s request for relief shall be limited to such remedial action (including but not limited to the termination of service to the subject Participant) as is necessary to modify the subject Participant’s quote generation practices on a prospective basis, for such period as is necessary to resolve the condition that gave rise to the Processor’s request for relief. The Participant shall have 15 calendar days to respond in writing to the Processor’s request for relief. (iv) The Operating Committee, following written notice to the Participant and the Processor, shall conduct a hearing within five (5) business days after expiration of the 15day response period to determine whether to grant or deny the Processor’s claim for remedial action. At the hearing, the Operating Committee may consider, among other information, the request of the Processor, the response (if any) of the Participant and any other evidence (written or oral) that is presented at the hearing. At the conclusion of the hearing, the Operating Committee shall grant or deny the Processor’s request. An affirmative vote of two-thirds of the Operating Committee members entitled to vote (excluding the subject Participant) shall be required for any decision of the Operating Committee. The decision of the Operating Committee shall be final and therefore reviewable by the Commission; provided, however, that any decision of the Operating Committee shall not become effective until five business days after the date of the decision. f. Limitation on Applicability of Rule—The phase-in schedule contained in of VI.C(2)(a) and the Limitation on Auto-Quoting contained in VI.C(2)(c) shall not apply: (i) To any Participant upon the designation and the operation of a new Processor; and (ii) To a Participant for the number of securities that the Participant quoted as of E:\FR\FM\14MRN1.SGM 14MRN1 12513 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices May 1, 2001; provided, however the exemption contained herein shall expire a year from the end-date of the phase-in schedule contained in VI.C(2)(a). 3. Quotation Data Streams The Processor shall disseminate on the UTP Quote Data Feed a data stream of all Quotation Information regarding Eligible Securities received from Participants. Each quotation shall be designated with a symbol identifying the Participant from which the quotation emanates. Quotation Information from individual NASD Participants will not be disseminated on the UTP Quote Data Feed. The Processor shall separately distribute on the OTC Montage Data Feed the Quotation Information regarding Eligible Securities from all NASD Participants from which quotations emanate. The Processor shall separately distribute NQDS for so long as Nasdaq is not registered as a national securities exchange and for so long as Nasdaq is the Processor. For so long as Nasdaq is not registered as a national securities exchange and after Nasdaq is no longer the Processor for other SIP datafeeds, either Nasdaq or a third party will act as the Processor to collect, consolidate, and disseminate the quotation information contained in NQDS. 4. Transaction Reports The Processor shall disseminate on the UTP Trade Data Feed a data stream of all Transaction Reports in Eligible Securities received from Participants. Each transaction report shall be designated with a symbol identifying the Participant in whose Market the transaction took place. D. Closing Reports At the conclusion of each trading day, the Processor shall disseminate a ‘‘closing price’’ for each Eligible Security. Such ‘‘closing price’’ shall be the price of the last Transaction Report in such security received prior to dissemination. The Processor shall also tabulate and disseminate at the conclusion of each trading day the aggregate volume reflected by all Transaction Reports in Eligible Securities reported by the Participants. E. Statistics The Processor shall maintain quarterly, semi-annual and annual transaction and volume statistical counts. The Processor shall, at cost to the user Participant(s), make such statistics available in a form agreed upon by the Operating Committee, such as a secure website. VII. Administrative Functions of the Processor Subject to the general direction of the Operating Committee, the Processor shall be responsible for carrying out all administrative functions necessary to the operation and maintenance of the consolidated information collection and dissemination system provided for in this Plan, including, but not limited to, record keeping, billing, contract administration, and the preparation of financial reports. VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 VIII. Transmission of Information to Processor by Participants A. Quotation Information Each Participant shall, during the time it is open for trading be responsible promptly to collect and transmit to the Processor accurate Quotation information in Eligible Securities through any means prescribed herein. Quotation Information shall include: 1. Identification of the Eligible Security, using the Nasdaq Symbol; 2. The price bid and offered, together with size; 3. The Nasdaq market participant or Participant from which the quotation emanates; 4. Identification of quotations that are not firm; and 5. Through appropriate codes and messages, withdrawals and similar matters. B. Transaction Reports Each Participant shall, during the time it is open for trading, be responsible promptly to collect and transmit to the Processor Transaction Reports in Eligible Securities executed in its Market by means prescribed herein. With respect to orders sent by one Participant Market to another Participant Market for execution, each Participant shall adopt procedures governing the reporting of transactions in Eligible Securities specifying that the transaction will be reported by the Participant whose member sold the security. This provision shall apply only to transactions between Plan Participants. Transaction Reports shall include: 1. Identification of the Eligible Security, using the Nasdaq Symbol; 2. The number of shares in the transaction; 3. The price at which the shares were purchased or sold; 4. The buy/sell/cross indicator; 5. The Market of execution; and, 6. Through appropriate codes and messages, late or out-of-sequence trades, corrections and similar matters. All such Transaction Reports shall be transmitted to the Processor within 90 seconds after the time of execution of the transaction. Transaction Reports transmitted beyond the 90-second period shall be designated as ‘‘late’’ by the appropriate code or message. The following types of transactions are not required to be reported to the Processor pursuant to the Plan: 1. Transactions that are part of a primary distribution by an issuer or of a registered secondary distribution or of an unregistered secondary distribution; 2. Transactions made in reliance on Section 4(2) of the Securities Act of 1933; 3. Transactions in which the buyer and the seller have agreed to trade at a price unrelated to the Current Market for the security, e.g., to enable the seller to make a gift; 4. Odd-lot transactions; 5. The acquisition of securities by a brokerdealer as principal in anticipation of making an immediate exchange distribution or exchange offering on an exchange; 6. Purchases of securities pursuant to a tender offer; and PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 7. Purchases or sales of securities effected upon the exercise of an option pursuant to the terms thereof or the exercise of any other right to acquire securities at a pre-established consideration unrelated to the Current Market. C. Symbols for Market Identification for Quotation Information and Transaction Reports The following symbols shall be used to denote the marketplaces: Code Participant A ..... B ..... W .... American Stock Exchange. Boston Stock Exchange. Chicago Board Options Exchange, Inc. Cincinnati Stock Exchange. Chicago Stock Exchange. NASD. Nasdaq. National Stock Exchange. New York Stock Exchange, Inc. Pacific Exchange. Philadelphia Stock Exchange. C M D Q C N P X ..... ..... ..... ..... ..... ..... ..... ..... D. Whenever a Participant determines that a level of trading activity or other unusual market conditions prevent it from collecting and transmitting Quotation Information or Transaction Reports to the Processor, or where a trading halt or suspension in an Eligible Security is in effect in its Market, the Participant shall promptly notify the Processor of such condition or event and shall resume collecting and transmitting Quotation Information and Transaction Reports to it as soon as the condition or event is terminated. In the event of a system malfunction resulting in the inability of a Participant or its members to transmit Quotation Information or Transaction Reports to the Processor, the Participant shall promptly notify the Processor of such event or condition. Upon receiving such notification, the Processor shall take appropriate action, including either closing the quotation or purging the system of the affected quotations. IX. Market Access A. Each Participant shall permit each Nasdaq market participant, acting in its capacity as such, direct telephone access to the specialist, trading post, and supervisory center in each Eligible Security in which such Nasdaq market participant is registered as a market maker or electronic communications network/alternative trading system with Nasdaq. Such access shall include appropriate procedures or requirements by each Participant or employee to assure the timely response to communications received through telephonic access. No Participant shall permit the imposition of any access or execution fee, or any other fee or charge, with respect to transactions in Eligible Securities effected with Nasdaq market participants which are communicated to the floor by telephone pursuant to the provisions of this Plan. A Participant shall be free to charge for other types of access to its floor or facilities. B. The NASD shall assure that each Participant, and its members shall have E:\FR\FM\14MRN1.SGM 14MRN1 12514 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices direct telephone access to the trading desk of each Nasdaq market participant in each Eligible Security in which the Participant displays quotations, and to the Nasdaq Supervisory Center. Such access shall include appropriate procedures or requirements to assure the timely response of each Nasdaq market participant to communications received through telephone access. Neither the NASD nor any Nasdaq market participant shall impose any access or execution fee, or any other fee or charge, with respect to transactions in Eligible Securities effected with a member of a Participant which are communicated by telephone pursuant to the provisions of this Plan. X. Regulatory Halts A. For purposes of this Section X, ‘‘Participant’’ shall include the Nasdaq Stock Market. Whenever, in the exercise of its regulatory functions, the Listing Market for an Eligible Security determines that a Regulatory Halt is appropriate pursuant to Section III.T, the Listing Market will notify all other Participants pursuant to Section X.E and all other Participants shall also halt or suspend trading in that security until notification that the halt or suspension is no longer in effect. The Listing Market shall immediately notify the Processor of such Regulatory Halt as well as notice of the lifting of a Regulatory Halt. The Processor, in turn, shall disseminate to Participants notice of the Regulatory Halt (as well as notice of the lifting of a regulatory halt) through the UTP Quote Data Feed. This notice shall serve as official notice of a regulatory halt for purposes of the Plan only, and shall not substitute or otherwise supplant notice that a Participant may recognize or require under its own rules. Nothing in this provision shall be read so as to supplant or be inconsistent with a Participant’s own rules on trade halts, which rules apply to the Participant’s own members. The Processor will reject any quotation information or transaction reports received from any Participant on an Eligible Security that has a Regulatory Halt in effect. B. Whenever the Listing Market determines that an adequate publication or dissemination of information has occurred so as to permit the termination of the Regulatory Halt then in effect, the Listing Market shall promptly notify the Processor and each of the other Participants that conducts trading in such security pursuant to Section X.F. Except in extraordinary circumstances, adequate publication or dissemination shall be presumed by the Listing Market to have occurred upon the expiration of one hour after initial publication in a national news dissemination service of the information that gave rise to the Regulatory Halt. C. Except in the case of a Regulatory Halt, the Processor shall not cease the dissemination of quotation or transaction information regarding any Eligible Security. In particular, it shall not cease dissemination of such information because of a delayed opening, imbalance of orders or other marketrelated problems involving such security. During a regulatory halt, the Processor shall collect and disseminate Transaction Information but shall cease collection and dissemination of all Quotation Information. VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 D. For purposes of this Section X, ‘‘Listing Market’’ for an Eligible Security means the Participant’s Market on which the Eligible Security is listed. If an Eligible Security is dually listed, Listing Market shall mean the Participant’s Market on which the Eligible Security is listed that also has the highest number of the average of the reported transactions and reported share volume for the preceding 12-month period. The Listing Market for dually-listed Eligible Securities shall be determined at the beginning of each calendar quarter. E. For purposes of coordinating trading halts in Eligible Securities, all Participants are required to utilize the national market system communication media (‘‘Hoot-nHoller’’) to verbally provide real-time information to all Participants. Each Participant shall be required to continuously monitor the Hoot-n-Holler system during market hours, and the failure of a Participant to do so at any time shall not prevent the Listing Market from initiating a Regulatory Halt in accordance with the procedures specified herein. 1. The following procedures shall be followed when one or more Participants experiences extraordinary market activity in an Eligible Security that is believed to be caused by the misuse or malfunction of systems operated by or linked to one or more Participants. a. The Participant(s) experiencing the extraordinary market activity or any Participant that becomes aware of extraordinary market activity will immediately use best efforts to notify all Participants of the extraordinary market activity utilizing the Hoot-n-Holler system. b. The Listing Market will use best efforts to determine whether there is material news regarding the Eligible Security. If the Listing Market determines that there is nondisclosed material news, it will immediately call a Regulatory Halt pursuant to Section X.E.2. c. Each Participant(s) will use best efforts to determine whether one of its systems, or the system of a direct or indirect participant in its market, is responsible for the extraordinary market activity. d. If a Participant determines the potential source of extraordinary market activity pursuant to Section X.1.c., the Participant will use best efforts to determine whether removing the quotations of one or more direct or indirect market participants or barring one or more direct or indirect market participants from entering orders will resolve the extraordinary market activity. Accordingly, the Participant will prevent the quotations from one or more direct or indirect market participants in the affected Eligible Securities from being transmitted to the Processor. e. If the procedures described in Section X.E.1.a.–d. do not rectify the situation, the Participant(s) experiencing extraordinary market activity will cease transmitting all quotations in the affected Eligible Securities to the Processor. f. If the procedures described in Section X.E.1.a–e do not rectify the situation within five minutes of the first notification through the Hoot-n-Holler system, or if Participants PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 agree to call a halt sooner through unanimous approval among those Participants actively trading impacted Eligible Securities, the Listing Market may determine based on the facts and circumstances, including available input from Participants, to declare an Extraordinary Market Regulatory Halt in the affected Eligible Securities. Simultaneously with the notification of the Processor to suspend the dissemination of quotations across all Participants, the Listing Market must verbally notify all Participants of the trading halt utilizing the Hoot-n-Holler system. g. Absent any evidence of system misuse or malfunction, best efforts will be used to ensure that trading is not halted across all Participants. 2. If the Listing Market declares a Regulatory Halt in circumstances other than pursuant to Section X.E.1.f., the Listing Market must, simultaneously with the notification of the Processor to suspend the dissemination of quotations across all Participants, verbally notify all Participants of the trading halt utilizing the Hoot-n-Holler system. F. If the Listing Market declares a Regulatory Halt, trading will resume according to the following procedures: 1. Within 15 minutes of the declaration of the halt, all Participants will make best efforts to indicate via the Hoot-n-Holler their intentions with respect to canceling or modifying transactions. 2. All Participants will disseminate to their members information regarding the canceled or modified transactions as promptly as possible, and in any event prior to the resumption of trading. 3. After all Participants have met the requirements of Section X.F.1–2, the Listing Market will notify the Participants utilizing the Hoot-n-Holler and the Processor when trading may resume. Upon receiving this information, Participants may commence trading pursuant to Section X.A. XI. Hours of Operation A. Quotation Information may be entered by Participants as to all Eligible Securities in which they make a market between 9:30 a.m. and 4 p.m. Eastern Time (‘‘ET’’) on all days the Processor is in operation. Transaction Reports shall be entered between 9:30 a.m. and 4:01:30 p.m. ET by Participants as to all Eligible Securities in which they execute transactions between 9:30 a.m. and 4 p.m. ET on all days the Processor is in operation. B. Participants that execute transactions in Eligible Securities outside the hours of 9:30 a.m. ET and 4 p.m., ET, shall be required to report such transactions as follows: (i) Transactions in Eligible Securities executed between 4 a.m. and 9:29:59 a.m. ET and between 4:00:01 and 6:30 p.m. ET, shall be designated as ‘‘.T’’ trades to denote their execution outside normal market hours; (ii) Transactions in Eligible Securities executed after 6:30 p.m. and before 12 a.m. (midnight) shall be reported to the Processor between the hours of 4 a.m. and 6:30 p.m. ET on the next business day (T+1), and shall be designated ‘‘as/of’’ trades to denote their execution on a prior day, and be accompanied by the time of execution; E:\FR\FM\14MRN1.SGM 14MRN1 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices (iii) Transactions in Eligible Securities executed between 12 a.m. (midnight) and 4 a.m. ET shall be transmitted to the Processor between 4 a.m. and 9:30 a.m. ET, on trade date, shall be designated as ‘‘.T’’ trades to denote their execution outside normal market hours, and shall be accompanied by the time of execution; (iv) Transactions reported pursuant to this provision of the Plan shall be included in the calculation of total trade volume for purposes of determining net distributable operating revenue, but shall not be included in the calculation of the daily high, low, or last sale. C. Late trades shall be reported in accordance with the rules of the Participant in whose Market the transaction occurred and can be reported between the hours of 4 a.m. and 6:30 p.m. D. The Processor shall collect, process and disseminate Quotation Information in Eligible Securities at other times between 4 a.m. and 9:30 a.m. ET, and after 4 p.m. ET, when any Participant or Nasdaq market participant is open for trading, until 6:30 p.m. ET (the ‘‘Additional Period’’); provided, however, that the best bid and offer quotation will not be disseminated before 4 a.m. or after 6:30 p.m. ET. Participants that enter Quotation Information or submit Transaction Reports to the Processor during the Additional Period shall do so for all Eligible Securities in which they enter quotations. XII. Undertaking by All Participants The filing with and approval by the Commission of this Plan shall obligate each Participant to enforce compliance by its members with the provisions thereof. In all other respects not inconsistent herewith, the rules of each Participant shall apply to the actions of its members in effecting, reporting, honoring and settling transactions executed through its facilities, and the entry, maintenance and firmness of quotations to ensure that such occurs in a manner consistent with just and equitable principles of trade. XIII. Financial Matters A. Development Costs Any Participant becoming a signatory to this Plan after June 26, 1990, shall, as a condition to becoming a Participant, pay to the other Plan Participants a proportionate share of the aggregate development costs previously paid by Plan Participants to the Processor, which aggregate development costs totaled $439,530, with the result that each Participant’s share of all development costs is the same. Each Participant shall bear the cost of implementation of any technical enhancements to the Nasdaq system made at its request and solely for its use, subject to reapportionment should any other Participant subsequently make use of the enhancement, or the development thereof. B. Cost Allocation and Revenue Sharing The provisions governing cost allocation and revenue sharing among the Participants are set forth in Exhibit 1 to the Plan. C. Maintenance of Financial Records The Processor shall maintain records of revenues generated and development and VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 operating expenditures incurred in connection with the Plan. In addition, the Processor shall provide the Participants with: (a) a statement of financial and operational condition on a quarterly basis; and (b) an audited statement of financial and operational condition on an annual basis. XIV. Indemnification Each Participant agrees, severally and not jointly, to indemnify and hold harmless each other Participant, Nasdaq, and each of its directors, officers, employees and agents (including the Operating Committee and its employees and agents) from and against any and all loss, liability, claim, damage and expense whatsoever incurred or threatened against such persons as a result of any Transaction Reports, Quotation Information or other information reported to the Processor by such Participant and disseminated by the Processor to Vendors. This indemnity agreement shall be in addition to any liability that the indemnifying Participant may otherwise have. Promptly after receipt by an indemnified Participant of notice of the commencement of any action, such indemnified Participant will, if a claim in respect thereof is to be made against an indemnifying Participant, notify the indemnifying Participant in writing of the commencement thereof; but the omission to so notify the indemnifying Participant will not relieve the indemnifying Participant from any liability which it may have to any indemnified Participant. In case any such action is brought against any indemnified Participant and it promptly notifies an indemnifying Participant of the commencement thereof, the indemnifying Participant will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying Participant similarly notified, to assume and control the defense thereof with counsel chosen by it. After notice from the indemnifying Participant of its election to assume the defense thereof, the indemnifying Participant will not be liable to such indemnified Participant for any legal or other expenses subsequently incurred by such indemnified Participant in connection with the defense thereof but the indemnified Participant may, at its own expense, participate in such defense by counsel chosen by it without, however, impairing the indemnifying Participant’s control of the defense. The indemnifying Participant may negotiate a compromise or settlement of any such action, provided that such compromise or settlement does not require a contribution by the indemnified Participant. XV. Withdrawal Any Participant may withdraw from the Plan at any time on not less than 30 days prior written notice to each of the other Participants. Any Participant withdrawing from the Plan shall remain liable for, and shall pay upon demand, any fees for equipment or services being provided to such Participant pursuant to the contract executed by it or an agreement or schedule of fees covering such then in effect. A withdrawing Participant shall also remain liable for its proportionate share, PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 12515 without any right of recovery, of administrative and operating expenses, including start-up costs and other sums for which it may be responsible pursuant to Section XIV hereof. Except as aforesaid, a withdrawing Participant shall have no further obligation under the Plan or to any of the other Participants with respect to the period following the effectiveness of its withdrawal. XVI. Modifications to Plan The Plan may be modified from time to time when authorized by the agreement of all of the Participants, subject to the approval of the SEC. XVII. Applicability of Securities Exchange Act of 1934 The rights and obligations of the Participants and of Vendors, News Services, Subscribers and other persons contracting with Participant in respect of the matters covered by the Plan shall at all times be subject to any applicable provisions of the Act, as amended, and any rules and regulations promulgated thereunder. XVIII. Operational Issues A. Each Exchange Participant shall be responsible for collecting and validating quotes and last sale reports within their own system prior to transmitting this data to the Processor. B. Each Exchange Participant may utilize a dedicated Participant line into the Processor to transmit trade and quote information in Eligible Securities to the Processor. The Processor shall accept from Exchange Participants input for only those issues that are deemed Eligible Securities. C. The Processor shall consolidate trade and quote information from each Participant and disseminate this information on the Nasdaq existing vendor lines. D. The Processor shall perform gross validation processing for quotes and last sale messages in addition to the collection and dissemination functions, as follows: 1. Basic Message Validation (a) The Processor may validate format for each type of message, and reject nonconforming messages. (b) Input must be for an Eligible Security. 2. Logging Function—The Processor shall return all Participant input messages that do not pass the validation checks (described above) to the inputting Participant, on the entering Participant line, with an appropriate reject notation. For all accepted Participant input messages (i.e., those that pass the validation check), the information shall be retained in the Processor system. XIX. Headings The section and other headings contained in this Plan are for reference purposes only and shall not be deemed to be a part of this Plan or to affect the meaning or interpretation of any provisions of this Plan. XX. Counterparts This Plan may be executed by the Participants in any number of counterparts, no one of which need contain the signature of all Participants. As many such counterparts as shall together contain all E:\FR\FM\14MRN1.SGM 14MRN1 12516 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices such signatures shall constitute one and the same instrument. Pacific Exchange, Inc. XXI. Depth of Book Display The Operating Committee has determined that the entity that succeeds Nasdaq as the Processor should have the ability to collect, consolidate, and disseminate quotations at multiple price levels beyond the best bid and best offer from any Participant that voluntarily chooses to submit such quotations while determining that no Participant shall be required to submit such information. The Operating Committee has further determined that the costs of developing, collecting, processing, and disseminating such depth of book data shall be borne exclusively by those Participants that choose to submit this information to the Processor, by whatever allocation those Participants may choose among themselves. The Operating Committee has determined further that the primary purpose of the Processor is the collection, processing and dissemination of best bid, best offer and last sale information (‘‘core data’’), and as such, the Participants will adopt procedures to ensure that such functionality in no way hinders the collecting, processing and dissemination of this core data. Therefore, implementing the depth of book display functionality will require a plan amendment that addresses all pertinent issues, including: (1) Procedures for ensuring that the fullyloaded cost of the collection, processing, and dissemination of depth-of-book information will be tracked and invoiced directly to those Plan Participants that voluntarily choose to send that data, voluntarily, to the Processor, allocating in whatever manner those Participants might agree; and (2) Necessary safeguards the Processor will take to ensure that its processing of depth-ofbook data will not impede or hamper, in any way, its core Processor functionality of collecting, consolidating, and disseminating National Best Bid and Offer data, exchange best bid and offer data, and consolidated last sale data. Upon approval of a Plan amendment implementing depth of book display, this article of the Plan shall be automatically deleted. IN WITNESS WHEREOF, this Plan has been executed as of the __ day of __, 200_, by each of the Signatories hereto. American Stock Exchange LLC By: lllllllllllllllllll Boston Stock Exchange, Inc. By: lllllllllllllllllll Chicago Stock Exchange, Inc. By: lllllllllllllllllll Chicago Board Options Exchange, Inc. By: lllllllllllllllllll National Association of Securities Dealers, Inc. By: lllllllllllllllllll National Stock Exchange By: lllllllllllllllllll New York Stock Exchange, Inc. By: lllllllllllllllllll Philadelphia Stock Exchange, Inc. VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 By: lllllllllllllllllll By: lllllllllllllllllll Exhibit 1 1. Each Participant eligible to receive revenue under the Plan will receive an annual payment for each calendar year to be determined by multiplying (i) that Participant’s percentage of total volume in Nasdaq securities reported to the Processor and disseminated to Vendors for that calendar year by (ii) the total distributable net operating income (as defined below) for that calendar year provided, however, that for the implementation year (as defined in Paragraph 4 below), a Participant’s payment shall be multiplied by the number of months during the implementation year the interface was in operation divided by twelve. In the event that total distributable net operating income is negative, each Participant eligible to receive revenue under the Plan will receive an annual bill for each calendar year to be determined according to the same formula (described in this paragraph) for determining annual payments to eligible Participants. 2. A Participant’s percentage of total volume in Nasdaq securities will be calculated by taking the average of (i) the Participant’s percentage of total trades in Nasdaq securities reported to the Processor and disseminated to Vendors for the year and (ii) the Participant’s percentage of total share volume in Nasdaq securities reported to the Processor and disseminated to Vendors for the year (trade/volume average). For any given year, a Participant’s percentage of total trades shall be calculated by dividing the total number of trades that that Participant reports to the Processor as the selling party for that year by the total number of trades in Nasdaq securities reported to the Processor and disseminated to Vendors for the year. A Participant’s total share volume shall be calculated by multiplying the total number of trades in Nasdaq securities in that year that that Participant reports to the Processor as the selling party multiplied by the number of shares for each such trade. Unless otherwise stated in this agreement, a year shall run from January 1 to December 31. 3. For purposes of this Exhibit 1, net distributable operating income for any particular calendar year shall be calculated by adding all revenues from the UTP Quote Data Feed, the UTP Trade Data Feed, the OTC Montage Data Feed, and NQDS, including revenues from the dissemination of information among Eligible Securities to foreign marketplaces (collectively, ‘‘the Data Feeds’’), and subtracting from such revenues the costs incurred by the Processor, set forth below, in collecting, consolidating, validating, generating, and disseminating the Data Feeds. These costs include, but are not limited to, the following: a. The Processor costs directly attributable to creating OTC Montage Data Feed and NQDS, including: 1. Cost of collecting Participant quotes into the Processor’s quote engine; PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 2. Cost of processing quotes and creating OTC Montage Data Feed and NQDS messages within the Processor’s quote engine; 3. Cost of the Processor’s communication management subsystem that distributes OTC Montage Data Feed and NQDS to the market data vendor network for further distribution. b. The costs directly attributable to creating the UTP Quote Data Feed, including: 1. Cost of calculating the national best bid and offer price within the Processor’s quote engine; 2. Cost of creating the UTP Quote Data Feed message within the Processor’s quote engine; 3. Cost of the Processor’s communication management subsystem that distributes the UTP Quote Data Feed to the market data vendors’ networks for further distribution. c. The costs directly attributable to creating the UTP Trade Data Feed, including: 1. Cost of determining the appropriate last sale price and volume amount within the Processor’s trade engine; 2. Cost of utilizing the Processor’s trade engine to distribute the UTP Trade Data Feed for distribution to the market data vendors. d. The additional costs that are shared across all Data Feeds, including: 1. Telecommunication Operations costs of supporting the Participant lines into the Processor’s facilities; 2. Telecommunications Operations costs of supporting the external market data vendor network; 3. Data Products account management and auditing function with the market data vendors; 4. Market Operations costs to support symbol maintenance, and other data integrity issues; 5. Overhead costs, including management support of the Processor, Human Resources, Finance, Legal, and Administrative Services. e. Processor costs excluded from the calculation of net distributable operating income include trade execution costs for transactions executed using a Nasdaq service and trade report collection costs reported through a Nasdaq service, as such services are market functions for which Participants electing to use such services pay market rate. f. For the purposes of this provision, the following definitions shall apply: 1. ‘‘Quote engine’’ shall mean the Nasdaq’s UNISYS system that is operated by Nasdaq to collect quotation information for Eligible Securities; 2. ‘‘Trade engine’’ shall mean the Nasdaq Tandem system that is operated by Nasdaq for the purpose of collecting last sale information in Eligible Securities. 4. At the time a Participant implements a computer-to-computer-interface or other Processor-approved electronic interface with the Processor, the Participant will become eligible to receive revenue for the year in which the interface is implemented (implementation year). 5. From the date a Participant is eligible to receive revenue (implementation date) until December 31 of the implementation year, Nasdaq shall pay the Participant a pro rata amount of its payment or bill the Participant for a pro rata amount of its losses for the implementation year (as calculated in E:\FR\FM\14MRN1.SGM 14MRN1 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices Paragraph 1 above). This calculation and resultant payment (or bill) will be made (or due) within ninety (90) days after the twelfth month following the implementation date. For the calendar year subsequent to the implementation year, and continuing thereafter, the calculation of the Participant’s annual payment or loss will be performed and the payment made or bill delivered by March 31 of the following year. Estimated quarterly payments or billings shall be made to each eligible Participant within 45 days following the end of each calendar quarter in which the Participant is eligible to receive revenue, provided that the total of such estimated payments or billings shall be reconciled at the end of each calendar year and, if necessary, adjusted by March 31st of the following year. Interest shall be included in quarterly payments and in adjusted payments made on March 31st of the following year. Such interest shall accrue monthly during the period in which revenue was earned and not yet paid and will be based on the 90-day Treasury bill rate in effect at the end of the quarter in which the payment is made. Interest shall not accrue during the period of up to 45 days between the end of each calendar quarter and the date on which an estimated quarterly payment or billing is made. In conjunction with calculating estimated quarterly and reconciled annual payments under this Exhibit 1, the Processor shall submit to the Participants an itemized statement setting forth the basis upon which net operating income was calculated, including an itemized statement of the Processor costs set forth in Paragraph 3 of this Exhibit. Such Processor costs shall be reconciled annually based solely on the Processor’s audited annual financial information. By majority vote of the Operating Committee, the Processor shall engage an independent auditor to audit the Processor’s costs or other calculation(s), the cost of which audit shall be shared equally by all Participants. The Processor agrees to cooperate fully in providing the information necessary to complete such audit. [FR Doc. 05–4946 Filed 3–11–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51328/File No. S7–12–01] Order Extending Temporary Exemption of Banks, Savings Associations, and Savings Banks From the Definition of ‘‘Broker’’ Under Section 3(a)(4) of the Securities Exchange Act of 1934 March 8, 2005. I. Background The Gramm-Leach-Bliley Act (‘‘GLBA’’) repealed the blanket exception of banks from the definitions of ‘‘broker’’ and ‘‘dealer’’ under the Securities Exchange Act of 1934 VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 (‘‘Exchange Act’’) 1 and replaced it with functional exceptions incorporated in amended definitions of ‘‘broker’’ and ‘‘dealer.’’ Under the GLBA, banks that engage in securities activities either must conduct those activities through a registered broker-dealer or ensure that their securities activities fit within the terms of a functional exception to the amended definitions of ‘‘broker’’ and ‘‘dealer.’’ The GLBA provided that the amended definitions of ‘‘broker’’ and ‘‘dealer’’ were to become effective May 12, 2001. On May 11, 2001, the Securities and Exchange Commission (‘‘Commission’’) issued interim final rules (‘‘Interim Rules’’) to define certain terms used in, and grant additional exemptions from, the amended definitions of ‘‘broker’’ and ‘‘dealer.’’ 2 Among other things, the Interim Rules extended the exceptions and exemptions granted to banks under the GLBA and Interim Rules to savings associations and savings banks. They also included a temporary exemption that gave banks time to come into full compliance with the more narrowlytailored exceptions from broker-dealer registration.3 To further accommodate the banking industry’s continuing compliance concerns, the Commission delayed the effective date of the bank ‘‘broker’’ and ‘‘dealer’’ rules through a series of orders that, among other things, ultimately extended the temporary exemption from the definition of ‘‘broker’’ to March 31, 2005.4 In June 2004, the Commission proposed Regulation B, which would revise and replace the Interim Rules.5 The comment period for Regulation B defined in Exchange Act sections 3(a)(4) and 3(a)(5) [15 U.S.C. 78c(a)(4) and 78c(a)(5)]. 2 See Definition of Terms in and Specific Exemptions for Banks, Savings Associations, and Savings Banks Under Sections 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934, Exchange Act Release No. 44291 (May 11, 2001), 66 FR 27760 (May 18, 2001). 3 17 CFR 240.15a–7. 4 See Exchange Act Release No. 44570 (July 18, 2001); Exchange Act Release No. 45897 (May 8, 2002); Exchange Act Release No. 46751 (Oct. 30, 2002); Exchange Act Release No. 47649 (April 8, 2003); and Exchange Act Release No. 50618 (Nov. 1, 2004) (extending the exemption from the definition of ‘‘broker’’ until March 31, 2005). During this time, the Commission also extended the temporary exemption from the definition of ‘‘dealer’’ to September 30, 2003. See Exchange Act Release No. 47366 (Feb. 13, 2003). On February 13, 2003, the Commission adopted amendments to certain parts of the Interim Rules that define terms used in the dealer exceptions, as well as certain dealer exemptions (‘‘Dealer Release’’), see Exchange Act Release No. 47364 (Feb. 13, 2003), 68 FR 8686 (Feb. 24, 2003). Therefore, this order is limited to an extension of the temporary exemption from the definition of ‘‘broker.’’ 5 Exchange Act Release No. 49879 (June 17, 2004), 69 FR 39682 (June 30, 2004). PO 00000 1 As Frm 00080 Fmt 4703 Sfmt 4703 12517 expired on September 1, 2004,6 and the Commission has received over 120 comments on the proposal, including comments from the banking industry, banking regulators, and members of Congress. II. Extension of Temporary Exemption from Definition of ‘‘Broker’’ The Commission is carefully considering comments to determine what final action should be taken with regard to the Regulation B proposal. The Commission anticipates that this review process will not be completed before the exemption from the Interim Rules relating to the definition of ‘‘broker’’ expires on March 31, 2005.7 Therefore, the Commission finds that extending the temporary exemption for banks, savings associations, and savings banks from the definition of ‘‘broker’’ is necessary and appropriate in the public interest, and is consistent with the protection of investors. The Commission believes that extending the exemption from the definition of ‘‘broker’’ until September 30, 2005, will prevent banks and other financial institutions from unnecessarily incurring costs to comply with the statutory scheme based on the current Interim Rules and will give the Commission time to consider fully comments received on Regulation B and take any final action on the proposal as necessary, including consideration of any modification necessary to the proposed compliance date. III. Conclusion Accordingly, pursuant to section 36 of the Exchange Act,8 it is hereby ordered that banks, savings associations, and savings banks are exempt from the definition of the term ‘‘broker’’ under the Exchange Act until September 30, 2005. By the Commission. Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–1059 Filed 3–11–05; 8:45 am] BILLING CODE 8010–01–P 6 See Exchange Act Release No. 50056 (July 22, 2004) 69 FR 44988 (July 28, 2004) (extending comment period on Regulation B until September 1, 2004). 7 In the Interim Rules, the Commission adopted Exchange Act Rule 15a–7, 17 CFR 240.15a–7, which, as proposed to be amended, would provide banks and other financial institutions until January 1, 2006, to begin complying with the GLBA. In proposing Regulation B, the Commission proposed Rule 781 as a re-designation of Rule 15a–7. See 17 CFR 242.781. 8 15 U.S.C. 78mm. E:\FR\FM\14MRN1.SGM 14MRN1

Agencies

[Federal Register Volume 70, Number 48 (Monday, March 14, 2005)]
[Notices]
[Pages 12507-12517]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-4946]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51304; File No. S7-24-89]


Joint Industry Plan; Notice of Filing and Immediate Effectiveness 
of Amendment No. 14 to the Joint Self-Regulatory Organization Plan 
Governing the Collection, Consolidation and Dissemination of Quotation 
and Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges on an Unlisted Trading Privileges Basis, Submitted by the 
Pacific Exchange, Inc., the National Association of Securities Dealers, 
Inc., the American Stock Exchange LLC, the Boston Stock Exchange, Inc., 
the Chicago Stock Exchange, Inc., the Cincinnati Stock Exchange, Inc., 
and the Philadelphia Stock Exchange, Inc.

March 2, 2005.

I. Introduction

    Pursuant to Rule 11Aa3-2 \1\ and Rule 11Aa3-1 \2\ under the 
Securities Exchange Act of 1934 (``Act''), notice is hereby given that 
on February 17, 2005, the Pacific Exchange, Inc. (``PCX'') on behalf of 
itself and the National Association of Securities Dealers, Inc. 
(``NASD''), the American Stock Exchange LLC (``Amex''), the Boston 
Stock Exchange, Inc. (``BSE''), the Chicago Stock Exchange, Inc. 
(``CHX''), the Cincinnati Stock Exchange, Inc. (``CSE''),\3\ and the 
Philadelphia Stock Exchange, Inc. (``Phlx'') (hereinafter referred to 
collectively as ``Participants''),\4\ as members of the operating 
committee (``Operating Committee'' or ``Committee'') of the Plan 
submitted to the Securities and Exchange Commission (``Commission'') a 
proposal to amend the Plan. The proposal represents the fourteenth 
amendment (``Amendment No. 14'') made to the Plan and reflects several 
changes unanimously adopted by the Committee. The Commission is 
publishing this notice of filing and immediate effectiveness to solicit

[[Page 12508]]

comments from interested persons on Amendment No. 14.
---------------------------------------------------------------------------

    \1\ 17 CFR 240.11Aa3-2.
    \2\ 17 CFR 240.11Aa3-1.
    \3\ The Commission notes that the CSE changed its name to the 
National Stock Exchange, Inc. See Securities Exchange Act Release 
No. 48774 (November 12, 2003), 68 FR 65332 (November 19, 2003) (File 
No. SR-CSE-2003-12).
    \4\ PCX and its subsidiary the Archipelago Exchange were elected 
co-chairs of the operating committee (``Operating Committee'' or 
``Committee'') for the Joint Self-Regulatory Organization Plan 
Governing the Collection, Consolidation and Dissemination of 
Quotation and Transaction Information for Nasdaq-Listed Securities 
Traded on Exchanges on an Unlisted Trading Privilege Basis (``Nasdaq 
UTP Plan'' or ``Plan'') by the Participants.
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II. Background

    The Plan governs the collection, consolidation, and dissemination 
of quotation and transaction information for the Nasdaq Stock Market, 
Inc. (``Nasdaq'') National Market (``NNM'') and Nasdaq SmallCap 
securities listed on Nasdaq or traded on an exchange pursuant to 
unlisted trading privileges (``UTP'').\5\ The Plan provides for the 
collection from Plan Participants and the consolidation and 
dissemination to vendors, subscribers, and others of quotation and 
transaction information in ``eligible securities.'' \6\
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    \5\ Section 12 of the Act generally requires an exchange to 
trade only those securities that the exchange lists, except that 
Section 12(f) of the Act permits UTP under certain circumstances. 
For example, Section 12(f) of the Act, among other things, permits 
exchanges to trade certain securities that are traded over-the-
counter (``OTC/UTP''), but only pursuant to a Commission order or 
rule. For a more complete discussion of the Section 12(f) 
requirement, see Securities Exchange Act Release No. 36481 (November 
13, 1995), 60 FR 58119 (November 24, 1995).
    \6\ The Plan defines ``Eligible Securities'' as any Nasdaq 
National Market or Nasdaq SmallCap security, as defined in NASD Rule 
4200, (i) as to which unlisted trading privileges have been granted 
to a national securities exchange pursuant to Section 12(f) of the 
Act or which become eligible for such trading pursuant to order of 
the Commission, or (ii) which is also listed on a national 
securities exchange.
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    The Commission originally approved the Plan on a pilot basis on 
June 26, 1990.\7\ The parties did not begin trading until July 12, 
1993; accordingly, the pilot period commenced on July 12, 1993. The 
Plan was most recently extended on December 21, 2004.\8\
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    \7\ See Securities Exchange Act Release No. 28146, 55 FR 27917 
(July 6, 1990).
    \8\ See Securities Exchange Act Release No. 50855 (December 14, 
2004), 69 FR 76499 (December 21, 2004).
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III. Description and Purpose of the Amendment

    The complete text of the Plan, as amended, is attached as Exhibit 
A. The following is a summary of the changes to the Plan prepared by 
the Participants.
    A. Section I.A. of the Plan provides for the list of Plan 
Participants. Amendment No. 14 adds the Chicago Board Options Exchange 
(``CBOE'') and the New York Stock Exchange (``NYSE'') as new 
Participants to the Plan. In addition, CSE's name is modified to 
reflect their new name, National Stock Exchange (``NSX''). Lastly, the 
PCX address has been updated.
    B. Amendment 14 corrects a cross-reference to Section XIV contained 
in Section I.B. by replacing it with a reference to Section XIII 
(relating to the development costs owed by new Participants).\9\
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    \9\ Section XIII of the Plan specifies that a condition to 
becoming a Participant is to pay a proportionate share of $439,530 
which are the aggregate development costs previously paid by Plan 
Participants to the Processor.
---------------------------------------------------------------------------

    C. Amendment 14 modifies Section III.Z. by removing the reference 
to Nasdaq Participant and moving it to new Section III.AA. as a 
separate definition.
    D. Amendment 14 modifies Section IV.C.4. to reflect previously 
approved language from Amendment 13A that was not incorporated into a 
recently published version of the Plan.\10\
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 49711 (May 14, 
2004), 69 FR 29339, (May 21, 2004) (``Amendment No. 13A Approval 
Order'').
---------------------------------------------------------------------------

    E. Section VIII.C. provides for the Participant market identifiers 
for quotation and transaction report information. Amendment No. 14 adds 
``W'' as the identifier for the CBOE and ``N'' for NYSE. Further, the 
reference to the CSE has been changed to NSX.
    F. Amendment 14 modifies Section XI. to reflect that the Processor 
will be available to accept and disseminate quotes and transaction 
reports as early as 4 a.m. Eastern Time. Currently the Plan states that 
quotations and transaction reports may be entered and disseminated as 
of 8 a.m. Eastern Time. Amendment No. 14 modifies the opening hours to 
4 a.m.\11\
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    \11\ PCX/ArcaEx has submitted a proposal to the Commission to 
begin quoting and trading at 4:00 a.m. Eastern Time. See Securities 
Exchange Act Release No. 50756 (November 30, 2004), 69 FR 70489, 
(December 6, 2004) (approving File No. SR-PCX-2004-83). To 
disseminate quotes and trades as of 4:00 a.m., PCX/ArcaEx requested 
that the Operating Committee and Nasdaq, as Plan Processor, modify 
the operating hours of the Processor.
---------------------------------------------------------------------------

    G. Amendment 14 modifies Section 3.a.1. to Exhibit 1 to the Plan to 
reflect previously approved language from Amendment 13A that was not 
incorporated into the most recent version of the Plan.\12\
---------------------------------------------------------------------------

    \12\ See 13A Approval Order, supra note 10.
---------------------------------------------------------------------------

    According the Participants, Nasdaq as Processor will implement the 
new Processor hours in its next release. CBOE and NYSE may commence 
quoting and trading in Nasdaq-listed securities with the effectiveness 
of Amendment No. 14, once they complete the necessary development and 
implementation work.

IV. Date of Effectiveness of the Amendment

    The Commission has determined that the changes set forth in 
Amendment 14 are technical in nature, and thus have become effective 
upon filing with the Commission.\13\ At any time within 60 days of the 
filing of any such amendment, the Commission may summarily abrogate the 
amendment and require that such amendment be refiled in accordance with 
paragraph (b)(1) of Rule 11Aa3-2 under the Act \14\ and reviewed in 
accordance with paragraph (c)(2) of Rule 11Aa3-2 under the Act,\15\ if 
it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
the maintenance of fair and orderly markets, to remove impediments to, 
and perfect mechanisms of, a national market system or otherwise in 
furtherance of the purposes of the Act.\16\
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    \13\ 17 CFR 240.11Aa3-2(c)(3)(iii).
    \14\ 17 CFR 240.11Aa3-2(b)(1).
    \15\ 17 CFR 240.11Aa3-2(c)(2).
    \16\ See 17 CFR 240.11Aa3-2(c)(3)(iii).
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V. Solicitation of Comments

    The Commission seeks general comments on Amendment No. 14. 
Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the Plan 
amendment is consistent with the Act. Comments may be submitted by any 
of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number S7-24-89 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609. All comment letters should refer to File No. 
S7-24-89. This file number should be included on the subject line if e-
mail is used. To help the Commission process and review your comments 
more efficiently, please use only one method. The Commission will post 
all comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the Plan amendment that are 
filed with the Commission, and all written communications relating to 
the Plan amendment between the Commission and any person, other than 
those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room. The text of the Plan 
is being

[[Page 12509]]

published as Exhibit A to this proposal. Copies of the proposal will 
also be available for inspection and copying at the office of the 
Secretary of the Committee, currently located at Pacific Exchange, Inc. 
and Archipelago Exchange L.L.C., 100 South Wacker Drive, Suite 2000, 
Chicago, IL 60606. All comments received will be posted without change; 
the Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File No. S7-24-89 
and should be submitted on or before April 4, 2005.
    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(27).

Margaret H. McFarland,
Deputy Secretary.

Exhibit A--Amendment No. 14; Joint Self-Regulatory Organization Plan 
Governing the Collection, Consolidation and Dissemination of Quotation 
and Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges on an Unlisted Trading Privilege Basis

    The undersigned registered national securities association and 
national securities exchanges (collectively referred to as the 
``Participants''), have jointly developed and hereby enter into this 
Nasdaq Unlisted Trading Privileges Plan (``Nasdaq UTP Plan'' or 
``Plan'').

I. Participants

    The Participants include the following:

A. Participants

1. American Stock Exchange LLC, 86 Trinity Place, New York, New York 
10006.
2. Boston Stock Exchange, 100 Franklin Street, Boston, Massachusetts 
02110.
3. Chicago Stock Exchange, 440 South LaSalle Street, Chicago, 
Illinois 60605.
4. Chicago Board Options Exchange, Inc., 400 South LaSalle Street, 
26th Floor, Chicago, Illinois 60605.
5. National Association of Securities, Dealers, Inc., 1735 K Street, 
NW., Washington, DC 20006.
6. National Stock Exchange, 440 South LaSalle Street, 26th Floor, 
Chicago, Illinois 60605.
7. New York Stock Exchange, Inc., 11 Wall Street, New York, New York 
10005.
8. Pacific Exchange, Inc., 115 Sansome Street, San Francisco, CA 
94104.
9. Philadelphia Stock Exchange, 1900 Market Street, Philadelphia, 
Pennsylvania 19103.

B. Additional Participants

    Any other national securities association or national securities 
exchange, in whose market Eligible Securities become traded, may 
become a Participant, provided that said organization executes a 
copy of this Plan and pays its share of development costs as 
specified in Section XIII.

II. Purpose of Plan

    The purpose of this Plan is to provide for the collection, 
consolidation and dissemination of Quotation Information and 
Transaction Reports in Eligible Securities from the Participants in 
a manner consistent with the Exchange Act.
    It is expressly understood that each Participant shall be 
responsible for the collection of Quotation Information and 
Transaction Reports within its market and that nothing in this Plan 
shall be deemed to govern or apply to the manner in which each 
Participant does so.

III. Definitions

    A. ``Current'' means, with respect to Transaction Reports or 
Quotation Information, such Transaction Reports or Quotation 
Information during the fifteen (15) minute period immediately 
following the initial transmission thereof by the Processor.
    B. ``Eligible Security'' means any Nasdaq National Market or 
Nasdaq SmallCap security, as defined in NASD Rule 4200: (i) as to 
which unlisted trading privileges have been granted to a national 
securities exchange pursuant to Section 12(f) of the Exchange Act or 
which become eligible for such trading pursuant to order of the 
Securities and Exchange Commission; or (ii) which also is listed on 
a national securities exchange.
    C. ``Commission'' and ``SEC'' shall mean the U.S. Securities and 
Exchange Commission.
    D. ``Exchange Act'' means the Securities Exchange Act of 1934.
    E. ``Market'' shall mean (i) when used with respect to Quotation 
Information, the NASD in the case of a Nasdaq market maker or a 
Nasdaq-registered electronic communications network/alternative 
trading system (hereafter collectively referred to as ``Nasdaq 
market participants'') acting in such capacity, or the Participant 
on whose floor or through whose facilities the quotation was 
disseminated; and (ii) when used with respect to Transaction 
Reports, the Participant through whose facilities the transaction 
took place or was reported, or the Participant to whose facilities 
the order was sent for execution.
    F. ``NASD'' means the National Association of Securities Dealers 
Inc.
    G. ``NASD Participant'' means an NASD member that is registered 
as a market maker or an electronic communications network or 
otherwise utilizes the facilities of the NASD pursuant to applicable 
NASD rules.
    H. ``NASD Transaction Reporting System'' means the System 
provided for in the NASD's Transaction Reporting Plan filed with and 
approved by the Commission pursuant to SEC Rule11Aa3-1, governing 
the reporting of transactions in Nasdaq securities.
    I. ``UTP Quote Data Feed'' means the service that provides 
Subscribers with the National Best Bid and Offer quotations, size 
and market center identifier, as well as the Best Bid and Offer 
quotations, size and market center identifier from each individual 
Participant in Eligible Securities.
    J. ``Nasdaq Level 2 Service'' means the Nasdaq service that 
provides Subscribers with query capability with respect to 
quotations and sizes in securities included in the Nasdaq System, 
best bid and asked quotations, and Transaction Reports.
    K. ``Nasdaq Level 3 Service'' means the Nasdaq service that 
provides Nasdaq market participants with input and query capability 
with respect to quotations and sizes in securities included in the 
Nasdaq System, best bid and asked quotations, and Transaction 
Reports.
    L. ``Nasdaq System'' means the automated quotation system 
operated by Nasdaq.
    M. ``UTP Trade Data Feed'' means the service that provides 
Vendors and Subscribers with Transaction Reports.
    N. ``Nasdaq Security'' or ``Nasdaq-listed Security'' means any 
security listed on the Nasdaq National Market or Nasdaq SmallCap 
Market.
    O. ``News Service'' means a person that receives Transaction 
Reports or Quotation Information provided by the Systems or provided 
by a Vendor, on a Current basis, in connection with such person's 
business of furnishing such information to newspapers, radio and 
television stations and other news media, for publication at least 
fifteen (15) minutes following the time when the information first 
has been published by the Processor.
    P. ``OTC Montage Data Feed `` means the data stream of 
information that provides Vendors and Subscribers with quotations 
and sizes from all Participants and Nasdaq market participants.
    Q. ``Participant'' means a registered national securities 
exchange or national securities association that is a signatory to 
this Plan.
    R. ``Plan'' means this Nasdaq UTP Plan, as from time to time 
amended according to its provisions, governing the collection, 
consolidation and dissemination of Quotation Information and 
Transaction Reports in Eligible Securities.
    S. ``Processor'' means the entity selected by the Participants 
to perform the processing functions set forth in the Plan.
    T. ``Quotation Information'' means all bids, offers, displayed 
quotation sizes, the market center identifiers and, in the case of 
NASD and Nasdaq, the NASD and Nasdaq market participant that entered 
the quotation, withdrawals and other information pertaining to 
quotations in Eligible Securities required to be collected and made 
available to the Processor pursuant to this Plan.
    U. ``Regulatory Halt'' means a trade suspension or halt called 
for the purpose of dissemination of material news, as described at 
Section X hereof or that is called for where there are regulatory 
problems relating to an Eligible Security that should be clarified 
before trading therein is permitted to continue, including a trading 
halt for extraordinary market activity due to system misuse or 
malfunction under Section X.E.1. of the Plan (``Extraordinary Market 
Regulatory Halt'').
    V. ``Subscriber'' means a person that receives Current Quotation 
Information or Transaction Reports provided by the Processor or 
provided by a Vendor, for its

[[Page 12510]]

own use or for distribution on a non-Current basis, other than in 
connection with its activities as a Vendor.
    W. ``Transaction Reports'' means reports required to be 
collected and made available pursuant to this Plan containing the 
stock symbol, price, and size of the transaction executed, the 
Market in which the transaction was executed, and related 
information, including a buy/sell/cross indicator and trade 
modifiers, reflecting completed transactions in Eligible Securities.
    X. ``Upon Effectiveness of the Plan'' means July 12, 1993, the 
date on which the Participants commenced publication of Quotation 
Information and Transaction Reports on Eligible Securities as 
contemplated by this Plan.
    Y. ``Vendor'' means a person that receives Current Quotation 
Information or Transaction Reports provided by the Processor or 
provided by a Vendor, in connection with such person's business of 
distributing, publishing, or otherwise furnishing such information 
on a Current basis to Subscribers, News Services or other Vendors.
    Z. ``NQDS'' means the data stream of information that provides 
Vendors and Subscribers with the best quotations and sizes from each 
Nasdaq Participant.
    AA. ``Nasdaq Participant'' means an entity that is registered as 
a market maker or an electronic communications network in Nasdaq or 
otherwise utilizes the facilities of The Nasdaq Stock Market 
pursuant to applicable NASD rules but does not include an NASD 
Participant as defined in Section III.G. of this Plan.

IV. Administration of Plan

A. Operating Committee: Composition

    The Plan shall be administered by the Participants through an 
operating committee (``Operating Committee''), which shall be 
composed of one representative designated by each Participant. Each 
Participant may designate an alternate representative or 
representatives who shall be authorized to act on behalf of the 
Participant in the absence of the designated representative. Within 
the areas of its responsibilities and authority, decisions made or 
actions taken by the Operating Committee, directly or by duly 
delegated individuals, committees as may be established from time to 
time, or others, shall be binding upon each Participant, without 
prejudice to the rights of any Participant to seek redress from the 
SEC pursuant to Rule 11Aa3-2 under the Exchange Act or in any other 
appropriate forum.
    An Electronic Communications Network, Alternative Trading 
System, Broker-Dealer or other securities organization 
(``Organization'') which is not a Participant, but has an actively 
pending Form 1 Application on file with the Commission to become a 
national securities exchange, will be permitted to appoint one 
representative and one alternate representative to attend regularly 
scheduled Operating Committee meetings in the capacity of an 
observer/advisor. If the Organization's Form 1 petition is 
withdrawn, returned, or is otherwise not actively pending with the 
Commission for any reason, then the Organization will no longer be 
eligible to be represented in the Operating Committee meetings. The 
Operating Committee shall have the discretion, in limited instances, 
to deviate from this policy if, as indicated by majority vote, the 
Operating Committee agrees that circumstances so warrant.
    Nothing in this section or elsewhere within the Plan shall 
authorize any person or organization other than Participants and 
their representatives to participate on the Operating Committee in 
any manner other than as an advisor or observer, or in any Executive 
Session of the Operating Committee.

B. Operating Committee: Authority

    The Operating Committee shall be responsible for:
    1. Overseeing the consolidation of Quotation Information and 
Transaction Reports in Eligible Securities from the Participants for 
dissemination to Vendors, Subscribers, News Services and others in 
accordance with the provisions of the Plan;
    2. Periodically evaluating the Processor;
    3. Setting the level of fees to be paid by Vendors, Subscribers, 
News Services or others for services relating to Quotation 
Information or Transaction Reports in Eligible Securities, and 
taking action in respect thereto in accordance with the provisions 
of the Plan;
    4. Determining matters involving the interpretation of the 
provisions of the Plan;
    5. Determining matters relating to the Plan's provisions for 
cost allocation and revenue-sharing; and
    6. Carrying out such other specific responsibilities as provided 
under the Plan.

C. Operating Committee: Voting

    Each Participant shall have one vote on all matters considered 
by the Operating Committee.
    1. The affirmative and unanimous vote of all Participants 
entitled to vote shall be necessary to constitute the action of the 
Operating Committee with respect to:
    a. Amendments to the Plan;
    b. Amendments to contracts between the Processor and Vendors, 
Subscribers, News Services and others receiving Quotation 
Information and Transaction Reports in Eligible Securities;
    c. Replacement of the Processor, except for termination for 
cause, which shall be governed by Section V(B) hereof;
    d. Reductions in existing fees relating to Quotation Information 
and Transaction Reports in Eligible Securities; and
    e. Except as provided under Section IV(C)(3) hereof, requests 
for system changes; and
    f. All other matters not specifically addressed by the Plan.
    2. With respect to the establishment of new fees or increases in 
existing fees relating to Quotation Information and Transaction 
Reports in Eligible Securities, the affirmative vote of two-thirds 
of the Participants entitled to vote shall be necessary to 
constitute the action of the Operating Committee.
    3. The affirmative vote of a majority of the Participants 
entitled to vote shall be necessary to constitute the action of the 
Operating Committee with respect to:
    a. Requests for system changes reasonably related to the 
function of the Processor as defined under the Plan. All other 
requests for system changes shall be governed by Section IV(C)(1)(e) 
hereof.
    b. Interpretive matters and decisions of the Operating Committee 
arising under, or specifically required to be taken by, the 
provisions of the Plan as written;
    c. Interpretive matters arising under Exchange Act Rules 11Aa3-1 
and 11Ac1-1; and
    d. Denials of access (other than for breach of contract, which 
shall be handled by the Processor),
    4. It is expressly agreed and understood that neither this Plan 
nor the Operating Committee shall have authority in any respect over 
any Participant's proprietary systems. Nor shall the Plan or the 
Operating Committee have any authority over the collection and 
dissemination of quotation or transaction information in Eligible 
Securities in any Participant's marketplace, or, in the case of the 
NASD, from NASD Participants.

D. Operating Committee: Meetings

    Regular meetings of the Operating Committee may be attended by 
each Participant's designated representative and/or its alternate 
representative(s), and may be attended by one or more other 
representatives of the parties. Meetings shall be held at such times 
and locations as shall from time to time be determined by the 
Operating Committee.
    Quorum: Any action requiring a vote only can be taken at a 
meeting in which a quorum of all Participants is present. For 
actions requiring a simple majority vote of all Participants, a 
quorum of greater than 50% of all Participants entitled to vote must 
be present at the meeting before such a vote may be taken. For 
actions requiring a \2/3\ majority vote of all Participants, a 
quorum of at least \2/3\ of all Participants entitled to vote must 
be present at the meeting before such a vote may be taken. For 
actions requiring a unanimous vote of all Participants, a quorum of 
all Participants entitled to vote must be present at the meeting 
before such a vote may be taken.
    A Participant is considered present at a meeting only if a 
Participant's designated representative or alternate 
representative(s) is either in physical attendance at the meeting or 
is participating by conference telephone, or other acceptable 
electronic means.
    Any action sought to be resolved at a meeting must be sent to 
each Participant entitled to vote on such matter at least one week 
prior to the meeting via electronic mail, regular U.S. or private 
mail, or facsimile transmission, provided however that this 
requirement may be waived by the vote of the percentage of the 
Committee required to vote on any particular matter, under Section C 
above.
    Any action may be taken without a meeting if a consent in 
writing, setting forth the action so taken, is sent to and signed by 
all Participant representatives entitled to vote with respect to the 
subject matter thereof. All the approvals evidencing the consent 
shall be delivered to the Chairman of the Operating Committee to be 
filed in the Operating

[[Page 12511]]

Committee records. The action taken shall be effective when the 
minimum number of Participants entitled to vote have approved the 
action, unless the consent specifies a different effective date.
    The Chairman of the Operating Committee shall be elected 
annually by and from among the Participants by a majority vote of 
all Participants entitled to vote. The Chairman shall designate a 
person to act as Secretary to record the minutes of each meeting. 
The location of meetings shall be rotated among the locations of the 
principal offices of the Participants, or such other locations as 
may from time to time be determined by the Operating Committee. 
Meetings may be held by conference telephone and action may be taken 
without a meeting if the representatives of all Participants 
entitled to vote consent thereto in writing or other means the 
Operating Committee deems acceptable.

E. Advisory Committee

1. Composition

    a. Each Plan Participant may designate three representatives to 
participate in the Advisory Committee. The representatives shall 
each be an employee of a member of that Participant, a professor or 
other academic involved in the scholarly study of the securities 
industry, or an expert in one or more areas of the securities 
industry.
    b. Each representative shall serve a one-year term on the 
Advisory Committee.

2. Authority

    The Advisory Committee shall have the opportunity to:
    a. Meet twice yearly, each meeting to occur one day prior to a 
meeting of the Operating Committee.
    b. Discuss any matter related to the operation of the Plan.
    c. Present written comments or inquiries to the Operating 
Committee regarding matters related to the operation of the Plan.
    d. Respond to written inquiries from the Operating Committee 
seeking comment from the Advisory Committee on matters related to 
the operation of the Plan.

V. Selection and Evaluation of the Processor

A. Generally

    The Processor's performance of its functions under the Plan 
shall be subject to review by the Operating Committee at least every 
two years, or from time to time upon the request of any two 
Participants but not more frequently than once each year. Based on 
this review, the Operating Committee may choose to make a 
recommendation to the Participants with respect to the continuing 
operation of the Processor. The Operating Committee shall notify the 
SEC of any recommendations the Operating Committee shall make 
pursuant to the Operating Committee's review of the Processor and 
shall supply the Commission with a copy of any reports that may be 
prepared in connection therewith.

B. Termination of the Processor for Cause

    If the Operating Committee determines that the Processor has 
failed to perform its functions in a reasonably acceptable manner in 
accordance with the provisions of the Plan or that its reimbursable 
expenses have become excessive and are not justified on a cost 
basis, the Processor may be terminated at such time as may be 
determined by a majority vote of the Operating Committee.

C. Factors To Be Considered in Termination for Cause

    Among the factors to be considered in evaluating whether the 
Processor has performed its functions in a reasonably acceptable 
manner in accordance with the provisions of the Plan shall be the 
reasonableness of its response to requests from Participants for 
technological changes or enhancements pursuant to Section IV(C)(3) 
hereof. The reasonableness of the Processor's response to such 
requests shall be evaluated by the Operating Committee in terms of 
the cost to the Processor of purchasing the same service from a 
third party and integrating such service into the Processor's 
existing systems and operations as well as the extent to which the 
requested change would adversely impact the then current technical 
(as opposed to business or competitive) operations of the Processor.

D. Processor's Right to Appeal Termination for Cause

    The Processor shall have the right to appeal to the SEC a 
determination of the Operating Committee terminating the Processor 
for cause and no action shall become final until the SEC has ruled 
on the matter and all legal appeals of right therefrom have been 
exhausted.

E. Process for Selecting New Processor

    At any time following effectiveness of the Plan, but no later 
than upon the termination of the Processor, whether for cause 
pursuant to Section IV(C)(1)(c) or V(B) of the Plan or upon the 
Processor's resignation, the Operating Committee shall establish 
procedures for selecting a new Processor (the ``Selection 
Procedures''). The Operating Committee, as part of the process of 
establishing Selection Procedures, may solicit and consider the 
timely comment of any entity affected by the operation of this Plan. 
The Selection Procedures shall be established by a two-thirds 
majority vote of the Plan Participants, and shall set forth, at a 
minimum:
    1. The entity that will:
    (a) Draft the Operating Committee's request for proposal for 
bids on a new processor;
    (b) Assist the Operating Committee in evaluating bids for the 
new processor; and
    (c) Otherwise provide assistance and guidance to the Operating 
Committee in the selection process.
    2. The minimum technical and operational requirements to be 
fulfilled by the Processor;
    3. The criteria to be considered in selecting the Processor; and
    4. The entities (other than Plan Participants) that are eligible 
to comment on the selection of the Processor.
    Nothing in this provision shall be interpreted as limiting 
Participants' rights under Section IV or Section V of the Plan or 
other Commission order.

VI. Functions of the Processor

A. Generally

    The Processor shall collect from the Participants, and 
consolidate and disseminate to Vendors, Subscribers and News 
Services, Quotation Information and Transaction Reports in Eligible 
Securities in a manner designed to assure the prompt, accurate and 
reliable collection, processing and dissemination of information 
with respect to all Eligible Securities in a fair and non-
discriminatory manner. The Processor shall commence operations upon 
the Processor's notification to the Participants that it is ready 
and able to commence such operations.

B. Collection and Consolidation of Information

    For as long as Nasdaq is the Processor, the Processor shall be 
capable of receiving Quotation Information and Transaction Reports 
in Eligible Securities from Participants by the Plan-approved, 
Processor sponsored interface, and shall consolidate and disseminate 
such information via the UTP Quote Data Feed, the UTP Trade Data 
Feed, and the OTC Montage Data Feed to Vendors, Subscribers and News 
Services. For so long as Nasdaq is not registered as a national 
securities exchange and for so long as Nasdaq is the Processor, the 
Processor shall also collect, consolidate, and disseminate the 
quotation information contained in NQDS. For so long as Nasdaq is 
not registered as a national securities exchange and after Nasdaq is 
no longer the Processor for other SIP datafeeds, either Nasdaq or a 
third party will act as the Processor to collect, consolidate, and 
disseminate the quotation information contained in NQDS.

C. Dissemination of Information

    The Processor shall disseminate consolidated Quotation 
Information and Transaction Reports in Eligible Securities via the 
UTP Quote Data Feed, the UTP Trade Data Feed, and the OTC Montage 
Data Feed to authorized Vendors, Subscribers and News Services in a 
fair and non-discriminatory manner. The Processor shall specifically 
be permitted to enter into agreements with Vendors, Subscribers and 
News Services for the dissemination of quotation or transaction 
information on Eligible Securities to foreign (non-U.S.) 
marketplaces or in foreign countries.
    The Processor shall, in such instance, disseminate consolidated 
quotation or transaction information on Eligible Securities from all 
Participants.
    Nothing herein shall be construed so as to prohibit or restrict 
in any way the right of any Participant to distribute quotation, 
transaction or other information with respect to Eligible Securities 
quoted on or traded in its marketplace to a marketplace outside the 
United States solely for the purpose of supporting an intermarket 
linkage, or to distribute information within its own marketplace 
concerning Eligible Securities in accordance with its own format. If 
a Participant requests, the Processor shall make information about 
Eligible Securities in the Participant's marketplace available to a

[[Page 12512]]

foreign marketplace on behalf of the requesting Participant, in 
which event the cost shall be borne by that Participant.

1. Best Bid and Offer

    The Processor shall disseminate on the UTP Quote Data Feed the 
best bid and offer information supplied by each Participant, 
including the Nasdaq market participants, and shall also calculate 
and disseminate on the UTP Quote Data Feed a national best bid and 
asked quotation with size based upon Quotation Information for 
Eligible Securities received from Participants. The Processor shall 
not calculate the best bid and offer for any individual Participant, 
including the NASD.
    The Participant responsible for each side of the best bid and 
asked quotation making up the national best bid and offer shall be 
identified by an appropriate symbol. If the quotations of more than 
one Participant shall be the same best price, the largest displayed 
size among those shall be deemed to be the best. If the quotations 
of more than one Participant are the same best price and best 
displayed size, the earliest among those measured by the time 
reported shall be deemed to be the best. A reduction of only bid 
size and/or ask size will not change the time priority of a 
Participant's quote for the purposes of determining time reported, 
whereas an increase of the bid size and/or ask size will result in a 
new time reported. The consolidated size shall be the size of the 
Participant that is at the best.
    If the best bid/best offer results in a locked or crossed 
quotation, the Processor shall forward that locked or crossed quote 
on the appropriate output lines (i.e., a crossed quote of bid 12, 
ask 11.87 shall be disseminated). The Processor shall normally cease 
the calculation of the best bid/best offer after 6:30 p.m., Eastern 
Time.

2. Eligible Securities

    a. Number of Eligible Securities--If the Commission by order 
expands the number of Eligible Securities beyond 1,000, the number 
of Eligible Securities that Participants may trade shall be phased 
in (added) according to the schedule set out below:
    (i) At the end of the first calendar quarter following the 
Commission's order expanding the number of Eligible Securities 
beyond 1,000 but in no case before September 30, 2001, Participants 
may commence trading 500 additional securities;
    (ii) At the end of each of the four calendar quarters following 
the date established under provision VI.C(2)(a)(i) of the Plan, 
Participants may commence trading an additional 500 securities, and 
at the end of the fifth calendar quarter following the date 
established under provision VI.C(2)(a)(i) of the Plan, Participants 
shall be permitted to trade all Eligible Securities.
    (iii) In no case shall the number of Eligible Securities exceed 
the number of securities that the Commission deems are eligible for 
trading pursuant to this Plan.
    (iv) After each of the aforementioned phase in periods (i.e., 
calendar quarters), the Processor shall evaluate its performance to 
determine whether it is prudent, in light of system capacity and any 
other operational factors, to continue to add additional securities 
pursuant to the phase in schedule. If the Processor determines, in 
light of system capacity and any other operational factors, that it 
is not prudent to continue to expand the number of Eligible 
Securities, the Processor upon notice to the Participants 
immediately may suspend the phase-in schedule and delay the 
expansion of the number of Eligible Securities that may be traded 
under the Plan. The Processor shall commence adding securities 
pursuant to a revised phase-in schedule, when the Processor 
determines it is prudent to do so, in light of system capacity and 
any other operational factors.
    (v) This provision shall not apply to The Nasdaq Stock Market, 
Inc., or Nasdaq market participants acting in such capacity, nor 
shall it apply to any Participant that does not engage in auto-
quoting, as described in paragraph VI.C.(2)(b) below.
    b. Limitation on Auto-Quoting--Except as provided in sub-
paragraph VI.C(2)(c) of this Plan, Participants shall be prohibited 
from the practice of ``auto-quoting.'' ``Auto-quoting'' means the 
practice of tracking, by automated means, the changes to the best 
bid or best ask quotation and responding by generating another quote 
change to keep that Participant away from the best bid or ask 
quotation, but for purposes of this Plan, shall not include:
    (i) An update that is in response to an execution in the 
security by that Participant;
    (ii) An update that requires a physical entry;
    (iii) An update that is to reflect the receipt, execution, or 
cancellation of a customer limit order; or
    (iv) The practice of automatically generating quote changes at a 
rate of less than 35% of all price changes to the national best bid 
or ask quotation. The Processor shall calculate this rate using 
quoting activity during the preceding calendar month.
    c. Applicability of Auto-Quoting Limitation--The Limitation on 
Auto-Quoting contained in subparagraph VI.C(2)(b) of this Plan shall 
only apply if the Processor deems it necessary to maintain adequate 
capacity for the normal and efficient operation of the Processor and 
the Processor provides at least 30 calendar days notice to the 
Participants and the basis thereof of such determination. The 
Processor shall lift the limitation on auto-quoting when the 
Processor determines it is prudent to do so, in light of system 
capacity and any other operational factors. Additionally, the 
Limitation on Auto-Quoting set forth in subparagraph VI.C(2)(b) of 
this Plan will not apply to a Participant whose aggregated quoting 
activity in eligible Nasdaq securities does not exceed 1% of the 
total quotation traffic across all Nasdaq securities by all Nasdaq 
market participants and Exchange Participants. The Processor shall 
calculate this rate using quoting activity during the preceding 
calendar month.
    d. Obligations of Participants Regarding Capacity--Each 
Participant shall exercise due diligence to promote quotation 
generation practices that mitigate quotation traffic so as to ensure 
prudential excess capacity within the Processor. The Operating 
Committee shall periodically review the performance of Participants 
and take such action as necessary to maintain prudential excess 
capacity.
    e. Procedures for Ensuring Acceptable Quote Generation 
Practices--The following procedures shall apply if, in accordance 
with Section VI.C.2(c) of the Plan, the Processor determines that a 
capacity concern exists.
    (i) On a monthly basis, each Participant shall provide the 
Processor with a good faith estimate of the Participant's previous 
month's daily average number of quote updates to permit the 
Processor to determine compliance with the auto-quoting limitation 
referenced in Section VI.C.2.(b) of the Plan.
    (ii) If the Processor determines, from the Participant's data or 
otherwise, that the Participant has not complied with the 
limitations of Section VI.C.2.(b), the Processor shall give the 
Participant written notice of such condition. The Participant shall 
have 30 calendar days after receipt of the written notice to remedy 
the condition.
    (iii) If, after the aforementioned 30-day period has expired, 
the condition has not been remedied to the reasonable satisfaction 
of the Processor, then the Processor shall submit to the Operating 
Committee a written request for relief together with supporting 
documentation evidencing the alleged condition (i.e., failure to 
comply with the limitations of Section VI.C.2.(b)) and quantifying 
the impact of the violation on overall capacity of the Processor. 
The Processor's request for relief shall be limited to such remedial 
action (including but not limited to the termination of service to 
the subject Participant) as is necessary to modify the subject 
Participant's quote generation practices on a prospective basis, for 
such period as is necessary to resolve the condition that gave rise 
to the Processor's request for relief. The Participant shall have 15 
calendar days to respond in writing to the Processor's request for 
relief.
    (iv) The Operating Committee, following written notice to the 
Participant and the Processor, shall conduct a hearing within five 
(5) business days after expiration of the 15-day response period to 
determine whether to grant or deny the Processor's claim for 
remedial action. At the hearing, the Operating Committee may 
consider, among other information, the request of the Processor, the 
response (if any) of the Participant and any other evidence (written 
or oral) that is presented at the hearing. At the conclusion of the 
hearing, the Operating Committee shall grant or deny the Processor's 
request. An affirmative vote of two-thirds of the Operating 
Committee members entitled to vote (excluding the subject 
Participant) shall be required for any decision of the Operating 
Committee. The decision of the Operating Committee shall be final 
and therefore reviewable by the Commission; provided, however, that 
any decision of the Operating Committee shall not become effective 
until five business days after the date of the decision.
    f. Limitation on Applicability of Rule--The phase-in schedule 
contained in of VI.C(2)(a) and the Limitation on Auto-Quoting 
contained in VI.C(2)(c) shall not apply:
    (i) To any Participant upon the designation and the operation of 
a new Processor; and
    (ii) To a Participant for the number of securities that the 
Participant quoted as of

[[Page 12513]]

May 1, 2001; provided, however the exemption contained herein shall 
expire a year from the end-date of the phase-in schedule contained 
in VI.C(2)(a).

3. Quotation Data Streams

    The Processor shall disseminate on the UTP Quote Data Feed a 
data stream of all Quotation Information regarding Eligible 
Securities received from Participants. Each quotation shall be 
designated with a symbol identifying the Participant from which the 
quotation emanates. Quotation Information from individual NASD 
Participants will not be disseminated on the UTP Quote Data Feed. 
The Processor shall separately distribute on the OTC Montage Data 
Feed the Quotation Information regarding Eligible Securities from 
all NASD Participants from which quotations emanate. The Processor 
shall separately distribute NQDS for so long as Nasdaq is not 
registered as a national securities exchange and for so long as 
Nasdaq is the Processor. For so long as Nasdaq is not registered as 
a national securities exchange and after Nasdaq is no longer the 
Processor for other SIP datafeeds, either Nasdaq or a third party 
will act as the Processor to collect, consolidate, and disseminate 
the quotation information contained in NQDS.

4. Transaction Reports

    The Processor shall disseminate on the UTP Trade Data Feed a 
data stream of all Transaction Reports in Eligible Securities 
received from Participants. Each transaction report shall be 
designated with a symbol identifying the Participant in whose Market 
the transaction took place.

D. Closing Reports

    At the conclusion of each trading day, the Processor shall 
disseminate a ``closing price'' for each Eligible Security. Such 
``closing price'' shall be the price of the last Transaction Report 
in such security received prior to dissemination. The Processor 
shall also tabulate and disseminate at the conclusion of each 
trading day the aggregate volume reflected by all Transaction 
Reports in Eligible Securities reported by the Participants.

E. Statistics

    The Processor shall maintain quarterly, semi-annual and annual 
transaction and volume statistical counts. The Processor shall, at 
cost to the user Participant(s), make such statistics available in a 
form agreed upon by the Operating Committee, such as a secure 
website.

VII. Administrative Functions of the Processor

    Subject to the general direction of the Operating Committee, the 
Processor shall be responsible for carrying out all administrative 
functions necessary to the operation and maintenance of the 
consolidated information collection and dissemination system 
provided for in this Plan, including, but not limited to, record 
keeping, billing, contract administration, and the preparation of 
financial reports.

VIII. Transmission of Information to Processor by Participants

A. Quotation Information

    Each Participant shall, during the time it is open for trading 
be responsible promptly to collect and transmit to the Processor 
accurate Quotation information in Eligible Securities through any 
means prescribed herein.
    Quotation Information shall include:
    1. Identification of the Eligible Security, using the Nasdaq 
Symbol;
    2. The price bid and offered, together with size;
    3. The Nasdaq market participant or Participant from which the 
quotation emanates;
    4. Identification of quotations that are not firm; and
    5. Through appropriate codes and messages, withdrawals and 
similar matters.

B. Transaction Reports

    Each Participant shall, during the time it is open for trading, 
be responsible promptly to collect and transmit to the Processor 
Transaction Reports in Eligible Securities executed in its Market by 
means prescribed herein. With respect to orders sent by one 
Participant Market to another Participant Market for execution, each 
Participant shall adopt procedures governing the reporting of 
transactions in Eligible Securities specifying that the transaction 
will be reported by the Participant whose member sold the security. 
This provision shall apply only to transactions between Plan 
Participants.
    Transaction Reports shall include:
    1. Identification of the Eligible Security, using the Nasdaq 
Symbol;
    2. The number of shares in the transaction;
    3. The price at which the shares were purchased or sold;
    4. The buy/sell/cross indicator;
    5. The Market of execution; and,
    6. Through appropriate codes and messages, late or out-of-
sequence trades, corrections and similar matters.
    All such Transaction Reports shall be transmitted to the 
Processor within 90 seconds after the time of execution of the 
transaction. Transaction Reports transmitted beyond the 90-second 
period shall be designated as ``late'' by the appropriate code or 
message.
    The following types of transactions are not required to be 
reported to the Processor pursuant to the Plan:
    1. Transactions that are part of a primary distribution by an 
issuer or of a registered secondary distribution or of an 
unregistered secondary distribution;
    2. Transactions made in reliance on Section 4(2) of the 
Securities Act of 1933;
    3. Transactions in which the buyer and the seller have agreed to 
trade at a price unrelated to the Current Market for the security, 
e.g., to enable the seller to make a gift;
    4. Odd-lot transactions;
    5. The acquisition of securities by a broker-dealer as principal 
in anticipation of making an immediate exchange distribution or 
exchange offering on an exchange;
    6. Purchases of securities pursuant to a tender offer; and
    7. Purchases or sales of securities effected upon the exercise 
of an option pursuant to the terms thereof or the exercise of any 
other right to acquire securities at a pre-established consideration 
unrelated to the Current Market.

C. Symbols for Market Identification for Quotation Information and 
Transaction Reports

    The following symbols shall be used to denote the marketplaces:

------------------------------------------------------------------------
              Code                             Participant
------------------------------------------------------------------------
A..............................  American Stock Exchange.
B..............................  Boston Stock Exchange.
W..............................  Chicago Board Options Exchange, Inc.
C..............................  Cincinnati Stock Exchange.
M..............................  Chicago Stock Exchange.
D..............................  NASD.
Q..............................  Nasdaq.
C..............................  National Stock Exchange.
N..............................  New York Stock Exchange, Inc.
P..............................  Pacific Exchange.
X..............................  Philadelphia Stock Exchange.
------------------------------------------------------------------------

    D. Whenever a Participant determines that a level of trading 
activity or other unusual market conditions prevent it from 
collecting and transmitting Quotation Information or Transaction 
Reports to the Processor, or where a trading halt or suspension in 
an Eligible Security is in effect in its Market, the Participant 
shall promptly notify the Processor of such condition or event and 
shall resume collecting and transmitting Quotation Information and 
Transaction Reports to it as soon as the condition or event is 
terminated. In the event of a system malfunction resulting in the 
inability of a Participant or its members to transmit Quotation 
Information or Transaction Reports to the Processor, the Participant 
shall promptly notify the Processor of such event or condition. Upon 
receiving such notification, the Processor shall take appropriate 
action, including either closing the quotation or purging the system 
of the affected quotations.

IX. Market Access

    A. Each Participant shall permit each Nasdaq market participant, 
acting in its capacity as such, direct telephone access to the 
specialist, trading post, and supervisory center in each Eligible 
Security in which such Nasdaq market participant is registered as a 
market maker or electronic communications network/alternative 
trading system with Nasdaq. Such access shall include appropriate 
procedures or requirements by each Participant or employee to assure 
the timely response to communications received through telephonic 
access. No Participant shall permit the imposition of any access or 
execution fee, or any other fee or charge, with respect to 
transactions in Eligible Securities effected with Nasdaq market 
participants which are communicated to the floor by telephone 
pursuant to the provisions of this Plan. A Participant shall be free 
to charge for other types of access to its floor or facilities.
    B. The NASD shall assure that each Participant, and its members 
shall have

[[Page 12514]]

direct telephone access to the trading desk of each Nasdaq market 
participant in each Eligible Security in which the Participant 
displays quotations, and to the Nasdaq Supervisory Center. Such 
access shall include appropriate procedures or requirements to 
assure the timely response of each Nasdaq market participant to 
communications received through telephone access. Neither the NASD 
nor any Nasdaq market participant shall impose any access or 
execution fee, or any other fee or charge, with respect to 
transactions in Eligible Securities effected with a member of a 
Participant which are communicated by telephone pursuant to the 
provisions of this Plan.

X. Regulatory Halts

    A. For purposes of this Section X, ``Participant'' shall include 
the Nasdaq Stock Market. Whenever, in the exercise of its regulatory 
functions, the Listing Market for an Eligible Security determines 
that a Regulatory Halt is appropriate pursuant to Section III.T, the 
Listing Market will notify all other Participants pursuant to 
Section X.E and all other Participants shall also halt or suspend 
trading in that security until notification that the halt or 
suspension is no longer in effect. The Listing Market shall 
immediately notify the Processor of such Regulatory Halt as well as 
notice of the lifting of a Regulatory Halt. The Processor, in turn, 
shall disseminate to Participants notice of the Regulatory Halt (as 
well as notice of the lifting of a regulatory halt) through the UTP 
Quote Data Feed. This notice shall serve as official notice of a 
regulatory halt for purposes of the Plan only, and shall not 
substitute or otherwise supplant notice that a Participant may 
recognize or require under its own rules. Nothing in this provision 
shall be read so as to supplant or be inconsistent with a 
Participant's own rules on trade halts, which rules apply to the 
Participant's own members. The Processor will reject any quotation 
information or transaction reports received from any Participant on 
an Eligible Security that has a Regulatory Halt in effect.
    B. Whenever the Listing Market determines that an adequate 
publication or dissemination of information has occurred so as to 
permit the termination of the Regulatory Halt then in effect, the 
Listing Market shall promptly notify the Processor and each of the 
other Participants that conducts trading in such security pursuant 
to Section X.F. Except in extraordinary circumstances, adequate 
publication or dissemination shall be presumed by the Listing Market 
to have occurred upon the expiration of one hour after initial 
publication in a national news dissemination service of the 
information that gave rise to the Regulatory Halt.
    C. Except in the case of a Regulatory Halt, the Processor shall 
not cease the dissemination of quotation or transaction information 
regarding any Eligible Security. In particular, it shall not cease 
dissemination of such information because of a delayed opening, 
imbalance of orders or other market-related problems involving such 
security. During a regulatory halt, the Processor shall collect and 
disseminate Transaction Information but shall cease collection and 
dissemination of all Quotation Information.
    D. For purposes of this Section X, ``Listing Market'' for an 
Eligible Security means the Participant's Market on which the 
Eligible Security is listed. If an Eligible Security is dually 
listed, Listing Market shall mean the Participant's Market on which 
the Eligible Security is listed that also has the highest number of 
the average of the reported transactions and reported share volume 
for the preceding 12-month period. The Listing Market for dually-
listed Eligible Securities shall be determined at the beginning of 
each calendar quarter.
    E. For purposes of coordinating trading halts in Eligible 
Securities, all Participants are required to utilize the national 
market system communication media (``Hoot-n-Holler'') to verbally 
provide real-time information to all Participants. Each Participant 
shall be required to continuously monitor the Hoot-n-Holler system 
during market hours, and the failure of a Participant to do so at 
any time shall not prevent the Listing Market from initiating a 
Regulatory Halt in accordance with the procedures specified herein.
    1. The following procedures shall be followed when one or more 
Participants experiences extraordinary market activity in an 
Eligible Security that is believed to be caused by the misuse or 
malfunction of systems operated by or linked to one or more 
Participants.
    a. The Participant(s) experiencing the extraordinary market 
activity or any Participant that becomes aware of extraordinary 
market activity will immediately use best efforts to notify all 
Participants of the extraordinary market activity utilizing the 
Hoot-n-Holler system.
    b. The Listing Market will use best efforts to determine whether 
there is material news regarding the Eligible Security. If the 
Listing Market determines that there is non-disclosed material news, 
it will immediately call a Regulatory Halt pursuant to Section 
X.E.2.
    c. Each Participant(s) will use best efforts to determine 
whether one of its systems, or the system of a direct or indirect 
participant in its market, is responsible for the extraordinary 
market activity.
    d. If a Participant determines the potential source of 
extraordinary market activity pursuant to Section X.1.c., the 
Participant will use best efforts to determine whether removing the 
quotations of one or more direct or indirect market participants or 
barring one or more direct or indirect market participants from 
entering orders will resolve the extraordinary market activity. 
Accordingly, the Participant will prevent the quotations from one or 
more direct or indirect market participants in the affected Eligible 
Securities from being transmitted to the Processor.
    e. If the procedures described in Section X.E.1.a.-d. do not 
rectify the situation, the Participant(s) experiencing extraordinary 
market activity will cease transmitting all quotations in the 
affected Eligible Securities to the Processor.
    f. If the procedures described in Section X.E.1.a-e do not 
rectify the situation within five minutes of the first notification 
through the Hoot-n-Holler system, or if Participants agree to call a 
halt sooner through unanimous approval among those Participants 
actively trading impacted Eligible Securities, the Listing Market 
may determine based on the facts and circumstances, including 
available input from Participants, to declare an Extraordinary 
Market Regulatory Halt in the affected Eligible Securities. 
Simultaneously with the notification of the Processor to suspend the 
dissemination of quotations across all Participants, the Listing 
Market must verbally notify all Participants of the trading halt 
utilizing the Hoot-n-Holler system.
    g. Absent any evidence of system misuse or malfunction, best 
efforts will be used to ensure that trading is not halted across all 
Participants.
    2. If the Listing Market declares a Regulatory Halt in 
circumstances other than pursuant to Section X.E.1.f., the Listing 
Market must, simultaneously with the notification of the Processor 
to suspend the dissemination of quotations across all Participants, 
verbally notify all Participants of the trading halt utilizing the 
Hoot-n-Holler system.
    F. If the Listing Market declares a Regulatory Halt, trading 
will resume according to the following procedures:
    1. Within 15 minutes of the declaration of the halt, all 
Participants will make best efforts to indicate via the Hoot-n-
Holler their intentions with respect to canceling or modifying 
transactions.
    2. All Participants will disseminate to their members 
information regarding the canceled or modified transactions as 
promptly as possible, and in any event prior to the resumption of 
trading.
    3. After all Participants have met the requirements of Section 
X.F.1-2, the Listing Market will notify the Participants utilizing 
the Hoot-n-Holler and the Processor when trading may resume. Upon 
receiving this information, Participants may commence trading 
pursuant to Section X.A.

XI. Hours of Operation

    A. Quotation Information may be entered by Participants as to 
all Eligible Securities in which they make a market between 9:30 
a.m. and 4 p.m. Eastern Time (``ET'') on all days the Processor is 
in operation. Transaction Reports shall be entered between 9:30 a.m. 
and 4:01:30 p.m. ET by Participants as to all Eligible Securities in 
which they execute transactions between
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