Joint Industry Plan; BATS Exchange, Inc., BATS-Y Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Miami International Securities Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc. and Topaz Exchange, LLC; Notice of Filing of Proposed National Market System Plan Governing the Process of Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail, 69910-69918 [2013-27906]

Download as PDF 69910 Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change 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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. 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 Number SR–NYSE– 2013–73 and should be submitted on or before December 12, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–27903 Filed 11–20–13; 8:45 am] tkelley on DSK3SPTVN1PROD with NOTICES BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70892; File No. 4–668] Joint Industry Plan; BATS Exchange, Inc., BATS–Y Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Miami International Securities Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc. and Topaz Exchange, LLC; Notice of Filing of Proposed National Market System Plan Governing the Process of Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail November 15, 2013. I. Introduction Pursuant to Section 11A of the Securities Exchange Act of 1934 (‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule 608 thereunder (‘‘Rule 608’’),2 notice is hereby given that on September 3, 2013, BATS Exchange, Inc., BATS–Y Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Miami International Securities Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc., and Topaz Exchange, LLC (collectively, ‘‘SROs’’ or ‘‘Participants’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed National Market System (‘‘NMS’’) Plan Governing the Process of Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail (‘‘Plan’’). A copy of the Plan is attached as Exhibit A hereto. The Commission is publishing this notice to solicit comments on the Plan. II. Background On July 11, 2012, the Commission adopted Rule 613 under the Exchange 1 15 22 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 17:17 Nov 20, 2013 2 17 Jkt 232001 PO 00000 U.S.C. 78k–1. CFR 242.608. Frm 00097 Fmt 4703 Sfmt 4703 Act 3 to require the SROs to jointly submit an NMS plan (the ‘‘CAT NMS Plan’’) to create, implement, and maintain a consolidated order tracking system, or consolidated audit trail, with respect to the trading of NMS securities, that would capture customer and order event information for orders in NMS securities, across all markets, from the time of order inception through routing, cancellation, modification, or execution.4 Rule 613 outlines a broad framework for the creation, implementation, and maintenance of the consolidated audit trail, including the minimum elements the Commission believes are necessary for an effective consolidated audit trail.5 In instances where Rule 613 sets forth minimum requirements for the consolidated audit trail, the Rule provides flexibility to the SROs to draft the requirements of the CAT NMS Plan in a way that best achieves the objectives of the Rule.6 As described in more detail below, the SROs concluded that publication of a request for proposal was necessary to ensure that potential alternative solutions to creating the consolidated audit trail can be presented and considered by the SROs and that a detailed and meaningful cost/benefit analysis can be performed, both of which are required considerations to be addressed in the CAT NMS Plan. The SROs also decided, for the reasons set forth below, to file the Plan to govern how the SROs will proceed with formulating and submitting the CAT NMS Plan—and, as part of that process, how to review, evaluate, and narrow down the bids submitted in response to the request for proposal—and ultimately choosing the plan processor that would build, operate, and maintain the consolidated audit trail. III. Description of the Plan Set forth in this Section III is the statement of the purpose of the Plan, along with the information required by Rule 608(a)(4) and (5) under the Exchange Act,7 prepared and submitted by the SROs with the Plan to the Commission.8 A. Statement of Purpose Rule 613 requires the Participants to ‘‘jointly file . . . a national market system plan to govern the creation, 3 17 CFR 242.613. Exchange Act Release No. 67457 (July 18, 2012), 77 FR 45722 (August 1, 2012) (‘‘Adopting Release’’). 5 Id. at 45742. 6 Id. 7 See 17 CFR 242.608(a)(4) and (a)(5). 8 See Letter from the SROs, to Elizabeth Murphy, Secretary, Commission, dated August 23, 2013. 4 Securities E:\FR\FM\21NON1.SGM 21NON1 Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices implementation, and maintenance of a consolidated audit trail and central repository.’’ 9 The Plan being submitted for approval by the Participants governs the process of selecting a Plan Processor for the consolidated audit trail and developing the CAT NMS Plan. As adopted, Rule 613 ‘‘expand[ed] the set of solutions that could be considered by the SROs for creating, implementing, and maintaining a consolidated audit trail and [provided] the SROs with increased flexibility in how they choose to meet the requirements of the adopted Rule.’’ 10 As the Commission noted in the Adopting Release, because of this expanded solution set, ‘‘the adopted Rule now requires the [Participants] to provide much more information and analysis to the Commission as part of their [CAT NMS Plan] submission.’’ 11 Specifically, these requirements were incorporated into Rule 613 as a series of twelve ‘‘considerations’’ that the Participants must address in the CAT NMS Plan, including: • the specific details and features of the CAT NMS Plan; • the Participants’ analysis of the CAT NMS Plan’s costs and impact on competition, efficiency, and capital formation; • the process in developing the CAT NMS Plan; • information about the implementation of the CAT NMS Plan; and • milestones for the creation of the consolidated audit trail. As part of the discussion of these ‘‘considerations,’’ the Participants must include ‘‘cost estimates for the proposed solution, and a discussion of the costs and benefits of alternative [sic] solutions considered but not proposed.’’ 12 In addition, the Commission noted that Rule 613 requires that the [Participants]: (1) Provide an estimate of the costs associated with creating, implementing, and maintaining the consolidated audit trail under the terms of the [CAT NMS Plan] submitted to the Commission for tkelley on DSK3SPTVN1PROD with NOTICES 9 17 CFR 242.613(a)(1). Rule 613(a) requires that the Participants jointly file the CAT NMS Plan ‘‘on or before 270 days from the date of publication of the Adopting Release in the Federal Register.’’ The release adopting Rule 613 was published in the Federal Register on August 1, 2012. See Adopting Release, supra note 4. On March 7, 2013, the Commission provided a temporary exemption to the Participants to permit them to file the CAT NMS Plan by December 6, 2013. See Exchange Act Release No. 69060 (March 7, 2013), 78 FR 15771 (March 12, 2013) (‘‘Exemptive Order’’); see also Letter from Robert L.D. Colby, Chief Legal Officer, FINRA, to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, dated February 7, 2013 (‘‘Exemptive Letter’’). 10 Adopting Release, supra note 4 at 45725. 11 Id. See also id. at 45789. 12 Id. at 45789. VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 its consideration; (2) discuss the costs, benefits, and rationale for the choices made in developing the [CAT NMS Plan] submitted; and (3) provide their own analysis of the submitted [CAT NMS Plan’s] potential impact on competition, efficiency, and capital formation.13 The Commission stated that these detailed requirements are ‘‘intended to ensure that the Commission and the public have sufficiently detailed information to carefully consider all aspects of the [CAT NMS Plan] ultimately submitted by the [Participants].’’ 14 Indeed, the Commission expressed its expectation that ‘‘the [Participants] will seriously consider various options as they develop the [CAT NMS Plan] to be submitted to the Commission for its consideration.’’ 15 In light of the numerous specific requirements of Rule 613, on March 7, 2013, the Commission granted the Participants an extension of the time in which to file the CAT NMS Plan so that the Participants could ensure that all potential options for the consolidated audit trail could be considered. As noted in the Exemptive Letter, the Participants concluded that publication of a request for proposal (‘‘RFP’’) was necessary to ensure that potential alternative solutions to creating the consolidated audit trail can be presented and considered by the Participants and that a detailed and meaningful cost/benefit analysis can be performed, both of which are required considerations to be addressed in the CAT NMS Plan. The Participants published the RFP on February 26, 2013, and requested that any potential bidders notify the Participants of their intent to bid by March 5, 2013. Thirty-one firms submitted an intent to bid in response to the publication of the RFP; four of the firms were Participants or Affiliates of Participants.16 The Plan is intended to govern how the Participants will proceed with formulating and submitting the CAT NMS Plan—and, as part of that process, reviewing, evaluating, and narrowing down the Bids submitted in response to the RFP—and ultimately choosing the Plan Processor. Because of the important regulatory obligations that 13 Id. at 45726. at 45725. 15 Id. at 45725 and 45789. 16 Since that time, six firms—including one Participant and one Affiliate of a Participant—have formally notified the Participants that they will not submit Bids as primary bidders. A list of firms that submitted an intent to bid is located on the Participants’ Web site at catnmsplan.com. 14 Id. PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 69911 exist for each Participant with respect to the creation and operation of the consolidated audit trail, it is essential that each Participant contribute to the development of the CAT NMS Plan. The Participants recognize, however, that Participants or Affiliates of Participants may also be Bidders seeking to serve as the Plan Processor or may be included as part of a Bid. The Participants have sought to mitigate these potential conflicts of interest by including in the Plan multiple provisions, which are described below, designed to balance these competing factors. The Participants believe that the Plan achieves this balance by allowing all Participants to participate meaningfully in the process of creating the CAT NMS Plan and choosing the Plan Processor while imposing strict requirements to ensure that the participation is independent and that the process is fair and transparent. Section III of the Plan establishes the overall governance structure the Participants have chosen.17 Specifically, the Participants propose establishing an Operating Committee responsible for formulating, drafting, and filing with the Commission the CAT NMS Plan and for ensuring the Participants’ joint obligations under Rule 613 are met in a timely and efficient manner. As set forth in Section III(B) of the Plan, each Participant will select one individual and one substitute to serve on the Operating Committee; however, other representatives of each Participant are permitted to attend Operating Committee meetings. Section III of the Plan also establishes the procedures for the Operating Committee, including provisions regarding meetings, Participants’ voting rights, and voting requirements. Sections V and VI of the Plan 18 set forth the process for the Participants’ evaluation of Bids and the selection process for narrowing down the Bids and choosing the Plan Processor.19 17 Section I of the Plan sets forth the definitions used throughout the Plan. Section II of the Plan lists the Participants, as well as establishing the requirements to admit new Participants or to withdraw as a Participant. 18 Section IV of the Plan governs amendments to the Plan. In general, except with respect to the addition of new Participants, any change to the Plan requires a written amendment that sets forth the change, is executed by over two-thirds of the Participants, and is approved by the Commission pursuant to Rule 608 or otherwise becomes effective under Rule 608. 19 Initial steps in the evaluation and selection process will be performed pursuant to the Plan; the final two rounds of evaluation and voting, as well as the final selection of the Plan Processor, will be performed pursuant to the CAT NMS Plan. The sections of the CAT NMS Plan governing these final E:\FR\FM\21NON1.SGM Continued 21NON1 69912 Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices tkelley on DSK3SPTVN1PROD with NOTICES Pursuant to these Sections, the evaluation of Bids and selection of the Plan Processor will be performed by a Selection Committee composed of one senior officer from each Participant (referred to as the ‘‘Voting Senior Officer’’).20 Because of the potential conflicts of interest noted above, the Plan includes multiple requirements to increase the independence of the Voting Senior Officer who participates on the Selection Committee on behalf of a Bidding Participant.21 The criteria set forth in Section V(D) of the Plan include requirements concerning the Voting Senior Officer’s job responsibilities, decision-making authority, and reporting, and require that the Bidding Participant establish functional separation between its Plan responsibilities and its business/ commercial (including market operations) functions. In addition, the criteria prohibit any disclosure of information regarding the Bid to the Voting Senior Officer and prohibit the Voting Senior Officer from disclosing any non-public information gained in his or her role as such. These criteria are intended to insulate the Voting Senior Officer from any inside knowledge regarding the Bid (while also preventing any information about the evaluation process from being shared with staff preparing the Bidding Participant’s Bid) and to reduce any potential personal motivation that may exist that could two voting rounds are set forth in Sections VI(D) and (E) of the Plan and will be incorporated into the CAT NMS Plan. The Participants believe it is essential that the entire process be laid out in the Plan so that the Commission can consider and approve the entire evaluation and selection process, even though the final two voting rounds, including the selection of the Plan Processor, will not be conducted until after the approval of the CAT NMS Plan. 20 In the case of Affiliated Participants, one individual may be (but is not required to be) the Voting Senior Officer for more than one or all of the Affiliated Participants. 21 The Plan defines a ‘‘Bidding Participant’’ broadly to include any Participant that (1) submits a Bid; (2) is an Affiliate of an entity that submits a Bid; or (3) is included, or is an Affiliate of an entity that is included, as a Material Subcontractor as part of a Bid. A ‘‘Material Subcontractor’’ is ‘‘any entity that is known to the Participant to be included as part of a Bid as a vendor, subcontractor, service provider, or in any other similar capacity and, excluding products or services offered by the Participant to one or more Bidders on terms subject to a fee filing approved by the SEC, (1) is anticipated to derive 5% or more of its annual revenue in any given year from services provided in such capacity; or (2) accounts for 5% or more of the total estimated annual cost of the Bid for any given year.’’ The Plan provides that ‘‘[a]n entity will not be considered a ‘Material Subcontractor’ solely due to the entity providing services associated with any of the entity’s regulatory functions as a selfregulatory organization registered with the SEC.’’ VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 improperly influence a Voting Senior Officer’s decisions.22 Because of the integral role played by the Selection Committee, any action requiring a vote by the Selection Committee under the Plan can only be taken in a meeting in which all Participants entitled to vote are present. All votes taken by the Selection Committee are confidential and nonpublic, and a Participant’s individual votes will not be disclosed to other Participants or to the public. For this reason, the Plan provides that votes of the Selection Committee will be tabulated by an independent third party approved by the Operating Committee. Moreover, the Participants do not anticipate that aggregate votes or anonymized voting distribution numbers will be provided to the Participants following votes by the Selection Committee. The Plan divides the review and evaluation of Bids and selection of the Plan Processor into four separate stages. After Bids are received,23 Section VI(A) of the Plan provides that the Selection Committee will review all submitted Bids to determine which Bids are Qualified Bids (i.e., Bids that contain sufficient information to allow the Voting Senior Officers to meaningfully assess and evaluate the Bid).24 At this initial stage, if two-thirds or more of the Participants determine that a Bid does not meet the threshold for a Qualified Bid, the Bid will be eliminated from further consideration. The Participants believe this initial step will ensure that only those Bids meeting a minimum level of detail and sufficiency will move forward in the process, and insufficient Bids can be eliminated. Following the elimination of Bids that are not Qualified Bids, each Qualified Bidder will be provided the opportunity to present its Bid to the Selection Committee. After the Qualified Bidders have made their presentations, the Selection Committee will establish a 22 As described below, even with the independence criteria in place, the Plan also requires recusal from certain votes. 23 The Participants anticipate that Bids must be submitted four weeks after the Commission approves the Plan. 24 The Plan defines a Qualified Bid as ‘‘a Bid that is deemed by the Selection Committee to include sufficient information regarding the Bidder’s ability to provide the necessary capabilities to create, implement, and maintain a consolidated audit trail so that such Bid can be effectively evaluated by the Selection Committee.’’ The Plan provides that, ‘‘[w]hen evaluating whether a Bid is a Qualified Bid, each member of the Selection Committee shall consider whether the Bid adequately addresses the evaluation factors set forth in the RFP, and apply such weighting and priority to the factors as such member of the Selection Committee deems appropriate in his or her professional judgment.’’ PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 ‘‘shortlist’’ of Bids that will move on in the process. The Plan provides that, if there are six or fewer Qualified Bids submitted, all of those Bids will be selected as ‘‘Shortlisted Bids.’’ 25 If there are more than six but fewer than eleven Qualified Bids, the Selection Committee will choose five Shortlisted Bids, and if there are eleven or more Qualified Bids, the Selection Committee will choose 50% of the Qualified Bids as Shortlisted Bids.26 When voting to select the Shortlisted Bids from among the Qualified Bids, each Voting Senior Officer must rank his or her selections, and the points assigned to the rankings increase in single-point increments. Thus, for example, if five Shortlisted Bids are to be chosen, each Participant will vote for its top five choices in rank order, with the first choice being given five points, the second choice four points, the third choice three points, the fourth choice two points, and the fifth choice one point. The Participants considered numerous alternative voting procedures but determined that the proposed process appropriately balances the need to differentiate among Qualified Bids while also ensuring that each Qualified Bid receives due consideration for inclusion as a Shortlisted Bid since each Voting Senior Officer must select multiple Qualified Bids for inclusion as a Shortlisted Bid. Further, while the Participants believe that the independence indicia sufficiently address any potential conflicts of interest that may arise with respect to Bids with which a Participant is affiliated, the proposed process will further mitigate potential conflicts because each Voting Senior Officer must select multiple unaffiliated Qualified Bids. The Participants believe this step is appropriate both to ensure that Bidders submit a complete and thorough Bid initially and so that Qualified Bidders will know whether they have a realistic opportunity to be selected as the Plan Processor after the CAT NMS Plan is approved. To further reduce the impact of potential conflicts of interest in 25 In the Letter submitted by the SROs describing the Plan, the SROs state that the Plan provides that, if there are fewer than six Qualified Bids submitted, all of those bids will be selected as Shortlisted Bids. See supra note 8. The Commission notes, however, that Section IV(B)(2) of the Plan states, ‘‘If there are six or fewer Qualified Bids, all such Qualified Bids shall be Shortlisted Bids.’’ (emphasis added) 26 The Plan provides that, if there is an odd number of Qualified Bids, the number of Shortlisted Bids to be chosen will be rounded up to the next whole number (e.g., if there are thirteen Qualified Bids, seven Shortlisted Bids will be selected). In the event of a tie to select the Shortlisted Bids, all such tied Qualified Bids will be Shortlisted Bids. E:\FR\FM\21NON1.SGM 21NON1 tkelley on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices choosing Shortlisted Bids, the Plan also provides that at least two Non-SRO Bids must be included as Shortlisted Bids, provided there are two Non-SRO Bids that are Qualified Bids.27 If, following the vote, no Non-SRO Bids have been selected as Shortlisted Bids, the Plan requires that the two Non-SRO Bids receiving the highest cumulative votes be added as Shortlisted Bids. If, in this scenario, a single Non-SRO Bid was a Qualified Bid, that Non-SRO Bid would be added as a Shortlisted Bid. Following the selection of Shortlisted Bids, the Participants will identify the optimal proposed solution(s) for the consolidated audit trail for inclusion in the CAT NMS Plan for submission to the Commission. Following approval of the CAT NMS Plan by the Commission, the Selection Committee will determine, by majority vote, which Shortlisted Bidders will be provided the opportunity to revise their Bids in light of the provisions in the final, approved CAT NMS Plan. In making a decision whether to permit a Shortlisted Bidder to revise its Bid, the Selection Committee will consider the provisions in the CAT NMS Plan as well as the content of the Shortlisted Bidder’s initial Bid. To reduce potential conflicts of interest, the Plan also provides that if a Bid submitted by or including a Bidding Participant or an Affiliate of a Bidding Participant is a Shortlisted Bidder, that Bidding Participant will be recused from all votes regarding whether a Shortlisted Bidder will be permitted to revise its Bid. After any permitted revisions have been received, the Selection Committee will select the Plan Processor from the Shortlisted Bids in two rounds of voting where, subject to the recusal provision described below, each Participant has one vote. In the first round, each Participant will select a first and second choice, with the first choice receiving two points and the second choice receiving one point. The two Shortlisted Bids receiving the highest cumulative scores in the first round will advance to the second round.28 In the event of a tie, the tie will be broken by assigning one point per vote to the tied Shortlisted Bids, and the Shortlisted Bid with the most votes will advance. If this procedure fails to break the tie, a revote will be taken on the tied Bids with each vote receiving one point. If the tie persists, the Participants will identify 27 The Plan defines a ‘‘Non-SRO Bid’’ as ‘‘a Bid that does not include a Bidding Participant.’’ See supra note 21. 28 Each round of voting throughout the Plan is independent of other rounds. VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 areas for discussion, and revotes will be taken until the tie is broken. Once two Shortlisted Bids have been chosen, the Participants will vote for a single Shortlisted Bid from the final two to determine the Plan Processor. If one or both of the final Bids is submitted by or includes a Bidding Participant or an Affiliate of a Bidding Participant, the Bidding Participant must recuse itself from the final vote. In the event of a tie, a revote will be taken. If the tie persists, the Participants will identify areas for discussion and, following these discussions, revotes will be taken until the tie is broken. As set forth in Section VII of the Plan, following the selection of the Plan Processor, the Participants will file with the Commission a statement identifying the Plan Processor and including the information required by Rule 608. B. Governing or Constituent Documents Not applicable. C. Implementation of Plan The terms of the Plan will be operative immediately upon approval of the Plan by the Commission. The Participants have announced that Bids must be submitted four weeks after the Commission’s approval of the Plan. The Participants will begin reviewing and evaluating the Bids pursuant to Section VI of the Plan upon receipt of the Bids. The Participants anticipate that it will take seven months to evaluate the Bids and submit the CAT NMS Plan to the Commission pursuant to Sections VI(A) and (B) of the Plan.29 As noted above, upon approval of the CAT NMS Plan, the Plan will automatically terminate. The review of revised Shortlisted Bids and the selection of the Plan Processor will be undertaken as set forth in Sections VI(D) and (E) of the Plan as those sections are incorporated into the CAT NMS Plan. D. Development and Implementation Phases Not applicable. E. Analysis of Impact on Competition The Plan does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. The Participants do not believe that the Plan introduces terms that are unreasonably discriminatory for the purposes of Section 11A(c)(1)(D) of the Exchange 29 The Participants recognize that a seven-month timeframe is inconsistent with the current obligation to submit the CAT NMS Plan by December 6, 2013. The Participants anticipate filing an exemptive request with the Commission to extend the date. PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 69913 Act. As noted in Section A, the Participants are aware that potential conflicts of interest are raised because a Participant, or an affiliate of a Participant, may be both submitting a Bid (or participating in a Bid) and participating in the evaluation of Bids to select the Plan Processor. As described in Section A, the Plan includes multiple provisions designed to mitigate the potential impact of these conflicts by imposing restrictions on the Voting Senior Officer and by requiring the recusal of Bidding Participants for certain votes taken by the Selection Committee. In addition, the Plan requires that at least two Non-SRO Bids be Shortlisted Bids to ensure Non-SRO Bids are given full and fair consideration. F. Written Understanding or Agreements Relating to Interpretation of, or Participation in, Plan The Participants have no written understandings or agreements relating to interpretations of, or participation in, the Plan other than those set forth in the Plan itself. Section III(F)(2)(a) of the Plan provides that interpretations of the Plan require approval by a majority of Participants entitled to vote. Section II(B) of the Plan sets forth how any entity registered as a national securities exchange or national securities association under the Exchange Act may become a Participant. G. Approval of Amendment of the Plan Not applicable. H. Terms and Conditions of Access Each currently approved national securities exchange and national securities association subject to Rule 613(a)(1) is a Participant in the Plan. Section II(B) of the Plan provides that any entity approved by the Commission as a national securities exchange or national securities association under the Exchange Act after the effectiveness of the Plan shall become a Participant by satisfying each of the following requirements: (1) Effecting an amendment to the Plan by executing a copy of the Plan as then in effect (with the only change being the addition of the new Participant’s name in Section II of the Plan) and submitting such amendment to the Commission for approval; and (2) providing each thencurrent Participant with a copy of such executed Plan. I. Method of Determination and Imposition, and Amount of, Fees and Charges Not applicable. E:\FR\FM\21NON1.SGM 21NON1 69914 Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices arguments concerning the foregoing, including whether the Plan is consistent with the Act. Comments may be submitted by any of the following methods: J. Method and Frequency of Processor Evaluation Not applicable. K. Dispute Resolution The Plan does not include specific provisions regarding resolution of disputes between or among Participants. Section III(B) of the Plan provides for each Participant to designate an individual to represent the Participant as a member of an Operating Committee. Section III(A) of the Plan provides that the Operating Committee is responsible for: (1) Formulating, drafting, and filing with the Commission the CAT NMS Plan; and (2) ensuring the Participants’ obligations under Rule 613 are met in a timely and efficient manner. Within the areas of its responsibilities and authority as set forth in the Plan, decisions made or actions taken by the Operating Committee, directly or by duly delegated individuals or Subcommittees, shall be binding upon each Participant, without prejudice to the rights of any Participant to seek redress from the Commission pursuant to Rule 608 or in any other appropriate forum. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number 4– 668 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number 4–668. This file number should be included on the subject line if email 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 (http://www.sec.gov/rules/ sro.shtml)). Copies of the submission, all subsequent amendments, all written statements with respect to the Plan that are filed with the Commission, and all written communications relating to the Plan 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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the Participants’ principal offices. 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 Number 4–668 and should be submitted on or before December 23, 2013. By the Commission. Kevin O’Neill, Deputy Secretary. EXHIBIT A NATIONAL MARKET SYSTEM PLAN GOVERNING THE PROCESS OF SELECTING A PLAN PROCESSOR AND DEVELOPING A PLAN FOR THE CONSOLIDATED AUDIT TRAIL SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 608 OF REGULATION NMS UNDER THE SECURITIES EXCHANGE ACT OF 1934 TABLE OF CONTENTS Section Page Preamble .............................................................................................................................................................................................. I. Definitions ..................................................................................................................................................................................... II. Participants .................................................................................................................................................................................. III. Operating Committee ................................................................................................................................................................. IV. Plan Amendments ...................................................................................................................................................................... V. Selection Committee ................................................................................................................................................................... VI. RFP Bid Evaluation and Plan Processor Selection .................................................................................................................. VII. Implementation ......................................................................................................................................................................... VIII. Applicability of the Exchange Act .......................................................................................................................................... IX. Counterparts and Signatures ..................................................................................................................................................... Consolidated Audit Trail: Plan Processor Evaluation and Selection Plan I. Definitions tkelley on DSK3SPTVN1PROD with NOTICES Preamble This Plan governs the process of: (1) Evaluating and selecting a Plan Processor for the consolidated audit trail; and (2) developing a national market system plan pursuant to SEC Rule 613 to create, implement, and maintain a consolidated audit trail. This Plan will automatically terminate upon the SEC’s approval of the CAT NMS Plan. The Participants developed this Plan pursuant to Rule 608(a)(3) of Regulation NMS under the Exchange Act, which authorizes the Participants to act jointly in preparing, filing, and implementing national market system plans. VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 (A) An ‘‘Affiliate’’ of an entity means any entity controlling, controlled by, or under common control with such entity. (B) ‘‘Affiliated Participant’’ means any Participant controlling, controlled by, or under common control with another Participant. (C) ‘‘Bid’’ means a proposal submitted by a Bidder in response to the RFP. (D) ‘‘Bidder’’ means any entity, or any combination of separate entities, submitting a Bid. (E) ‘‘Bidding Participant’’ means a Participant that: (1) Submits a Bid; (2) is an Affiliate of an entity that submits a Bid; or (3) is included, or is an Affiliate of an entity that is included, as a Material Subcontractor as part of a Bid. PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 1 2 4 7 11 12 16 21 21 22 (F) ‘‘CAT NMS Plan’’ means the NMS Plan to be jointly submitted to the Commission by the Participants pursuant to paragraph (a)(1) of SEC Rule 613. (G) ‘‘Commission’’ or ‘‘SEC’’ means the United States Securities and Exchange Commission. (H) ‘‘Exchange Act’’ means the Securities Exchange Act of 1934, as amended. (I) ‘‘Material Contract’’ means any contract resulting in a total cost to all Participants of more than $1,000,000. (J) ‘‘Material Subcontractor’’ means any entity that is known to the Participant to be included as part of a Bid as a vendor, subcontractor, service provider, or in any other similar capacity and, excluding products or services offered by the Participant to one or more Bidders on terms subject to a fee filing approved by the SEC, E:\FR\FM\21NON1.SGM 21NON1 tkelley on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices (1) is anticipated to derive 5% or more of its annual revenue in any given year from services provided in such capacity; or (2) accounts for 5% or more of the total estimated annual cost of the Bid for any given year. An entity will not be considered a ‘‘Material Subcontractor’’ solely due to the entity providing services associated with any of the entity’s regulatory functions as a selfregulatory organization registered with the SEC. (K) ‘‘NMS Plan’’ shall have the same meaning as ‘‘[n]ational market system plan’’ provided in Rule 600(b)(43) of Regulation NMS under the Exchange Act. (L) ‘‘Non-SRO Bid’’ means a Bid that does not include a Bidding Participant. (M) ‘‘Operating Committee’’ shall have the meaning provided in Section III of the Plan. (N) ‘‘Participant’’ means a party to the Plan. (O) ‘‘Plan’’ means the plan set forth in this instrument, as amended from time to time in accordance with its provisions. (P) ‘‘Plan Processor’’ means the entity jointly selected by the Participants pursuant to SEC Rule 613, the Plan, and the CAT NMS Plan to perform the consolidated audit trail processing functions required by SEC Rule 613 and set forth in the RFP. (Q) ‘‘Qualified Bid’’ means a Bid that is deemed by the Selection Committee to include sufficient information regarding the Bidder’s ability to provide the necessary capabilities to create, implement, and maintain a consolidated audit trail so that such Bid can be effectively evaluated by the Selection Committee. When evaluating whether a Bid is a Qualified Bid, each member of the Selection Committee shall consider whether the Bid adequately addresses the evaluation factors set forth in the RFP, and apply such weighting and priority to the factors as such member of the Selection Committee deems appropriate in his or her professional judgment. The determination of whether a Bid is a Qualified Bid shall be determined pursuant to the process set forth in Section VI of the Plan. (R) ‘‘Qualified Bidder’’ means a Bidder that has submitted a Qualified Bid. (S) ‘‘RFP’’ means the ‘‘Consolidated Audit Trail National Market System Plan Request for Proposal’’ published by the Participants on February 26, 2013, as amended from time to time. (T) ‘‘Selection Committee’’ means the committee formed pursuant to Section V of the Plan. (U) ‘‘SEC Rule 608’’ means Rule 608 of Regulation NMS under the Exchange Act. (V) ‘‘SEC Rule 613’’ means Rule 613 of Regulation NMS under the Exchange Act. (W) ‘‘Shortlisted Bid’’ means a Bid submitted by a Qualified Bidder and selected as a Shortlisted Bid by the Selection Committee pursuant to Section VI(B) of the Plan. (X) ‘‘Shortlisted Bidder’’ means a Qualified Bidder that has submitted a Bid selected as a Shortlisted Bid. (Y) ‘‘Voting Senior Officer’’ means the senior officer of a Participant chosen to serve on the Selection Committee pursuant to Section V of the Plan. VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 II. Participants (A) List of Participants The Participants are as follows: (1) BATS Exchange, Inc. (2) BATS Y-Exchange, Inc. (3) BOX Options Exchange LLC (4) C2 Options Exchange, Incorporated (5) Chicago Board Options Exchange, Incorporated (6) Chicago Stock Exchange, Inc. (7) EDGA Exchange, Inc. (8) EDGX Exchange, Inc. (9) Financial Industry Regulatory Authority, Inc. (10) International Securities Exchange, LLC (11) Miami International Securities Exchange LLC (12) NASDAQ OMX BX, Inc. (13) NASDAQ OMX PHLX LLC (14) The Nasdaq Stock Market LLC (15) National Stock Exchange, Inc. (16) New York Stock Exchange LLC (17) NYSE MKT LLC (18) NYSE Arca, Inc. (19) Topaz Exchange, LLC (B) Admission of New Participants Any entity approved by the SEC as a national securities exchange or national securities association under the Exchange Act after the effectiveness of the Plan shall become a Participant by satisfying each of the following requirements: (1) effecting an amendment to the Plan by executing a copy of the Plan as then in effect (with the only change being the addition of the new Participant’s name in Section II of the Plan) and submitting such amendment to the SEC for approval; and (2) providing each thencurrent Participant with a copy of such executed Plan. The amendment shall be effective when it is approved by the SEC in accordance with SEC Rule 608 or otherwise becomes effective pursuant to SEC Rule 608. (C) Withdrawal of Participants (1) A Participant may withdraw from the Plan upon written notice to each of the other Participants of no less than 30 days. The written notice must include the legal basis for the Participant’s withdrawal from the Plan, including, if applicable, any required approvals or orders issued by the SEC. (2) Withdrawal of a Participant shall be effectuated by an amendment to the Plan, including, if applicable, approval of any such amendment by the SEC. (3) Notwithstanding a Participant’s withdrawal from the Plan, the Participant shall remain liable for, and shall pay upon demand: (a) its proportionate share of any costs, including those resulting from any Material Contracts, accrued or incurred before the effectiveness of the Participant’s withdrawal; (b) its proportionate share of any liabilities arising while the organization was a Participant that are based on actions jointly undertaken by the Participants pursuant to the Plan or in furtherance of the Participants’ obligations pursuant to SEC Rule 613; and (c) any costs incurred as a result of the Participant’s withdrawal from the Plan. (4) Except as aforesaid, a withdrawing Participant shall have no further obligation PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 69915 under the Plan or to any of the other Participants with respect to the period following the effectiveness of its withdrawal. III. Operating Committee (A) Authority The Operating Committee shall be responsible for: (1) formulating, drafting, and filing with the SEC the CAT NMS Plan; and (2) ensuring the Participants’ obligations under SEC Rule 613 are met in a timely and efficient manner. Within the areas of its responsibilities and authority as set forth in the Plan, decisions made or actions taken by the Operating Committee, directly or by duly delegated individuals or Subcommittees, shall be binding upon each Participant, without prejudice to the rights of any Participants to seek redress from the SEC pursuant to SEC Rule 608 or in any other appropriate forum. (B) Composition (1) Each Participant shall select from its staff one individual (the ‘‘primary representative’’) to represent the Participant as a member of the Operating Committee, together with a substitute(s) for such individual. In the case of Affiliated Participants, one individual may be the primary representative for all or some of the Affiliated Participants, and another individual may be the substitute for all or some of the Affiliated Participants. (2) Regular meetings of the Operating Committee may be attended by each Participant’s primary representative and its substitute(s), and may be attended by other representatives of the Participant. (3) Any organization that 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 primary representative and one alternate representative to attend regularly scheduled Operating Committee meetings in the capacity of a non-voting observer/advisor. If the organization’s Form 1 Application is withdrawn, returned, or 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. (4) 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. (C) Meetings (1) Quorum (a) Any action requiring a vote can only be taken at a meeting in which a quorum of all Participants is present. For actions requiring a 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 at least a two-thirds vote of all Participants, a quorum of at least two- E:\FR\FM\21NON1.SGM 21NON1 69916 Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices thirds of all Participants entitled to vote must be present at the meeting before such a vote may be taken. (b) For purposes of establishing a quorum, a Participant is considered present at a meeting only if a Participant’s primary representative or substitute is either in physical attendance at the meeting or is participating by conference telephone or other acceptable electronic means. (c) Any Participant recused from voting on a particular action pursuant to Paragraph (E) below shall not be considered to be ‘‘entitled to vote’’ for purposes of establishing whether a quorum is present for a vote to be taken on that action. (2) Frequency Meetings of the Operating Committee shall be held as needed at such times and locations as shall from time to time be determined by the Operating Committee. Meetings may be held by conference telephone or other acceptable electronic means if all Participants entitled to vote consent thereto in writing or by other means the Operating Committee deems acceptable. (3) Written Consent Any action may be taken without a meeting if a consent in writing, setting forth the action so taken, is sent to, via physical or electronic means, and agreed to by all Participants entitled to vote with respect to the subject matter thereof. 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. (4) Minutes Minutes of each meeting of the Operating Committee shall be taken. (5) Subcommittees In addition to the Selection Committee established pursuant to Section V of the Plan, the Operating Committee may establish any Subcommittees it deems necessary in fulfilling its obligations under the Plan. Membership on any Subcommittee is open to any Participant indicating a desire to participate. Minutes of each meeting of any Subcommittee shall be taken. tkelley on DSK3SPTVN1PROD with NOTICES (D) Voting Rights (1) Unless recused pursuant to Paragraph (E) below, each Participant shall have one vote on all matters considered by the Operating Committee. (2) Where one individual represents more than one Affiliated Participant, either as the primary representative or as a substitute, such individual will have the right to vote on behalf of each such Affiliated Participant. The substitute(s) may participate in deliberations of the Operating Committee and shall be considered a voting member thereof only in the absence of the primary representative. (E) Conflicts and Recusals A Participant may recuse itself from voting on any matter under consideration by the Operating Committee if the Participant determines that voting on such matter raises a conflict of interest. Except as provided in Sections V(B)(2) and V(B)(3) of the Plan, no VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 Participant is automatically recused from voting on any matter. (F) Voting Requirements (1) Supermajority Voting Requirements The following actions require approval by at least two-thirds of Participants entitled to vote: (a) Amendments to the Plan, other than amendments to add a new Participant; and (b) Material Contracts. (2) Majority Voting Requirements The following actions require approval by a majority of Participants entitled to vote: (a) Interpretations of the Plan; and (b) Any other matters not specified as requiring a supermajority vote. (G) Interpretations of Regulations Interpretative questions arising during the time for which the Plan is operative will be presented to the Operating Committee, which will determine whether to seek interpretive guidance from the Commission or other regulatory body and, if so, in what form. (H) Delegated Authority Within the areas of its responsibilities, the Operating Committee may delegate an individual or Subcommittee to make decisions or take action on behalf of the Operating Committee. Any decision made or action taken by such duly delegated individual or Subcommittee within the scope of such delegation shall be binding upon each Participant. IV. Plan Amendments (A) General Amendments Except with respect to the addition of new Participants, any proposed change in, addition to, or deletion from the Plan shall be effected by means of a written amendment to the Plan that: (1) sets forth the change, addition, or deletion; (2) is executed by over two-thirds of the Participants; and (3) is approved by the SEC pursuant to SEC Rule 608, or otherwise becomes effective under SEC Rule 608. (B) New Participants With respect to new Participants, an amendment to the Plan may be effected by the new national securities exchange or national securities association in accordance with Section II of the Plan. V. Selection Committee The Participants shall establish a Selection Committee in accordance with this Section V to: (1) evaluate and review Bids; and (2) select the Plan Processor. (A) Composition Each Participant shall select from its staff one senior officer (‘‘Voting Senior Officer’’) to represent the Participant as a member of a Selection Committee. In the case of Affiliated Participants, one individual may be (but is not required to be) the Voting Senior Officer for more than one or all of the Affiliated Participants. Where one individual serves as the Voting Senior Officer for more than one Affiliated Participant, such individual will have the right to vote on behalf of each such Affiliated Participant. PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 (B) Voting (1) Unless recused pursuant to Paragraph (2) or (3) below, each Participant shall have one vote on all matters considered by the Selection Committee. (2) No Bidding Participant shall vote on whether a Shortlisted Bidder will be permitted to revise its Bid pursuant to Section VI(D)(1) below if a Bid submitted by or including the Participant or an Affiliate of the Participant is a Shortlisted Bid. (3) No Bidding Participant shall vote in the second round set forth in Section VI(E)(4) below if a Bid submitted by or including the Participant or an Affiliate of the Participant is part of the second round. (4) All votes by the Selection Committee shall be confidential and non-public. All such votes will be tabulated by an independent third party approved by the Operating Committee, and a Participant’s individual votes will not be disclosed to other Participants or to the public. (C) Quorum (1) Any action requiring a vote by the Selection Committee can only be taken at a meeting in which all Participants entitled to vote are present. Meetings of the Selection Committee shall be held as needed at such times and locations as shall from time to time be determined by the Selection Committee. Meetings may be held by conference telephone or other acceptable electronic means if all Participants entitled to vote consent thereto in writing or by other means the Selection Committee deems acceptable. (2) For purposes of establishing a quorum, a Participant is considered present at a meeting only if the Participant’s Voting Senior Officer is either in physical attendance at the meeting or is participating by conference telephone or other acceptable electronic means. (3) Any Participant recused from voting on a particular action pursuant to Paragraph (B) above shall not be considered ‘‘entitled to vote’’ for purposes of establishing whether a quorum is present for a vote to be taken on that action. (D) Qualifications for Voting Senior Officer of Bidding Participants The following criteria must be met before a Voting Senior Officer is eligible to represent a Bidding Participant and serve on the Selection Committee: (1) the Voting Senior Officer is not responsible for the Bidding Participant’s market operations, and is responsible primarily for the Bidding Participant’s legal and/or regulatory functions, including functions related to the formulation and implementation of the Bidding Participant’s legal and/or regulatory program; (2) the Bidding Participant has established functional separation of its legal and/or regulatory functions from its market operations and other business or commercial objectives; (3) the Voting Senior Officer ultimately reports (including through the Bidding Participant’s CEO or Chief Legal Officer/ General Counsel) to an independent governing body that determines or oversees the Voting Senior Officer’s compensation, E:\FR\FM\21NON1.SGM 21NON1 Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices and the Voting Senior Officer does not receive any compensation (other than what is determined or overseen by the independent governing body) that is based on achieving business or commercial objectives; (4) the Voting Senior Officer does not have responsibility for any non-regulatory functions of the Bidding Participant, other than the legal aspects of the organization performed by the Chief Legal Officer/General Counsel or the Office of the General Counsel; (5) the ultimate decision making of the Voting Senior Officer position is tied to the regulatory effectiveness of the Bidding Participant, as opposed to other business or commercial objectives; (6) promotion or termination of the Voting Senior Officer is not based on achieving business or commercial objectives; (7) the Voting Senior Officer has no decision-making authority with respect to the development or formulation of the Bid submitted by or including the Participant or an Affiliate of the Participant; however, the staff assigned to developing and formulating such Bid may consult with the Voting Senior Officer, provided such staff members cannot share information concerning the Bid with the Voting Senior Officer; (8) the Voting Senior Officer does not report to any senior officers responsible for the development or formulation of the Bid submitted by or including the Participant or by an Affiliate of the Participant; however, joint reporting to the Bidding Participant’s CEO or similar executive officer by the Voting Senior Officer and senior staff developing and formulating such Bid is permissible, but the Bidding Participant’s CEO or similar executive officer cannot share information concerning such Bid with the Voting Senior Officer; (9) the compensation of the Voting Senior Officer is not separately tied to income earned if the Bid submitted by or including the Participant or an Affiliate of the Participant is selected; and (10) the Voting Senior Officer, any staff advising the Voting Senior Officer, and any similar executive officer or member of an independent governing body to which the Voting Senior Officer reports may not disclose to any person any non-public information gained during the review of Bids, presentation by Qualified Bidders, and selection process. Staff advising the Voting Senior Officer during the Bid review, presentation, and selection process may not include the staff, contractors, or subcontractors that are developing or formulating the Bid submitted by or including a Participant or an Affiliate of the Participant. tkelley on DSK3SPTVN1PROD with NOTICES VI. RFP Bid Evaluation and Plan Processor Selection (A) Initial Bid Review to Determine Qualified Bids (1) The Selection Committee shall review all Bids in accordance with the process developed by the Selection Committee. (2) After review, the Selection Committee shall vote on each Bid to determine whether such Bid is a Qualified Bid. A Bid that is deemed unqualified by at least a two-thirds vote of the Selection Committee will not be VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 deemed a Qualified Bid and will be eliminated individually from further consideration. (B) Selection of Shortlisted Bids (1) Each Qualified Bidder shall be given the opportunity to present its Bid to the Selection Committee. Following the presentations by Qualified Bidders, the Selection Committee shall review and evaluate the Qualified Bids to select the Shortlisted Bids in accordance with the process in this Paragraph (B). (2) If there are six or fewer Qualified Bids, all such Qualified Bids shall be Shortlisted Bids. (3) If there are more than six Qualified Bids but fewer than eleven Qualified Bids, the Selection Committee shall select five Qualified Bids as Shortlisted Bids, subject to the requirement in Paragraph (d) below. Each Voting Senior Officer shall select a first, second, third, fourth, and fifth choice from among the Qualified Bids. (a) A weighted score shall be assigned to each choice as follows: • First—5 points • Second—4 points • Third—3 points • Fourth—2 points • Fifth—1 point (b) The five Qualified Bids receiving the highest cumulative scores will be Shortlisted Bids. (c) In the event of a tie to select the five Shortlisted Bids, all such tied Qualified Bids will be Shortlisted Bids. (d) To the extent there are Non-SRO Bids that are Qualified Bids, the Shortlisted Bids selected pursuant to this Section VI(B)(3) must, if possible, include at least two NonSRO Bids. If, following the vote set forth in this Section VI(B)(3), no Non-SRO Bid was selected as a Shortlisted Bid, the two NonSRO Bids receiving the highest cumulative votes (or one Non-SRO Bid if a single NonSRO Bid is a Qualified Bid) shall be added as Shortlisted Bids. If one Non-SRO Bid was selected as a Shortlisted Bid, the Non-SRO Bid receiving the next highest cumulative vote shall be added as a Shortlisted Bid. (4) If there are eleven or more Qualified Bids, the Selection Committee shall select fifty percent of the Qualified Bids as Shortlisted Bids, subject to the requirement in Paragraph (d) below. If there is an odd number of Qualified Bids, the number of Shortlisted Bids chosen shall be rounded up to the next whole number (e.g., if there are thirteen Qualified Bids, then seven Shortlisted Bids will be selected). Each Voting Senior Officer shall select as many choices as Shortlisted Bids to be chosen. (a) A weighted score shall be assigned to each choice in single point increments as follows: • Last—1 point • Next-to-Last—2 points • Second-from-Last—3 points • Third-from-Last—4 points • Fourth-from-Last—5 points • Fifth-from-Last—6 points For each additional Shortlisted Bid that must be chosen, the points assigned will increase in single point increments. PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 69917 (b) The fifty percent of Qualified Bids (or, if there is an odd number of Qualified Bids, the next whole number above fifty percent of Qualified Bids) receiving the highest cumulative scores will be Shortlisted Bids. (c) In the event of a tie to select the Shortlisted Bids, all such tied Qualified Bids will be Shortlisted Bids. (d) To the extent there are Non-SRO Bids that are Qualified Bids, the Shortlisted Bids selected pursuant to this Section VI(B)(4) must, if possible, include at least two NonSRO Bids. If, following the vote set forth in this Section VI(B)(4), no Non-SRO Bid was selected as a Shortlisted Bid, the two NonSRO Bids receiving the highest cumulative votes (or one Non-SRO Bid if a single NonSRO Bid is a Qualified Bid) shall be added as Shortlisted Bids. If one Non-SRO Bid was selected as a Shortlisted Bid, the Non-SRO Bid receiving the next highest cumulative vote shall be added as a Shortlisted Bid. (C) Formulation of the CAT NMS Plan (1) The Selection Committee shall review the Shortlisted Bids to identify optimal proposed solutions for the consolidated audit trail and provide descriptions of such proposed solutions for inclusion in the CAT NMS Plan. This process may, but is not required to, include iterative discussions with Shortlisted Bidders to address any aspects of an optimal proposed solution that were not fully addressed in a particular Bid. (2) The Participants shall incorporate information on optimal proposed solutions in the CAT NMS Plan, including cost-benefit information as required by SEC Rule 613. (D) Review of Shortlisted Bids Under the CAT NMS Plan (1) Following approval of the CAT NMS Plan by the SEC, Shortlisted Bidders may be permitted to revise their Bids based on the provisions in the approved CAT NMS Plan, including further discussions if determined to be necessary by the Selection Committee. A Shortlisted Bidder will be permitted to revise its Bid only upon approval by a majority of the Selection Committee, subject to the recusal provision in Section V(B)(2) above, that revisions are necessary or appropriate in light of the content of the Shortlisted Bidder’s initial Bid and the provisions in the approved CAT NMS Plan. A Shortlisted Bidder may not revise its Bid unless approved to do so by the Selection Committee pursuant to this paragraph. (2) The Selection Committee shall review and evaluate all Shortlisted Bids, including any permitted revisions thereto submitted by Shortlisted Bidders. In performing the review and evaluation, the Selection Committee may consult with the Advisory Committee established pursuant to paragraph (b)(7) of SEC Rule 613. (E) Selection of Plan Processor Under the CAT NMS Plan (1) Under the CAT NMS Plan, there will be two rounds of voting by the Selection Committee to select the Plan Processor from among the Shortlisted Bidders. Each round shall be scored independently of prior rounds of voting, including the scoring to determine the Shortlisted Bids under Section VI(B) of the Plan. E:\FR\FM\21NON1.SGM 21NON1 69918 Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices (2) Each Participant shall have one vote in each round, except that no Bidding Participant shall be entitled to vote in the second round if the Participant’s Bid, a Bid submitted by an Affiliate of the Participant, or a Bid including the Participant or an Affiliate of the Participant is considered in the second round. Until the second round, Bidding Participants may vote for any Shortlisted Bid. (3) First Round Voting by the Selection Committee (a) In the first round of voting, each Voting Senior Officer shall select a first and second choice from among the Shortlisted Bids. (b) A weighted score shall be assigned to each choice as follows: • First—2 points • Second—1 point (c) The two Shortlisted Bids receiving the highest cumulative scores in the first round will advance to the second round. (d) In the event of a tie that would result in more than two Shortlisted Bids advancing to the second round, the tie will be broken by assigning one point per vote, with the Shortlisted Bid(s) receiving the highest number of votes advancing to the second round. If, at this point, the Shortlisted Bids remain tied, a revote will be taken with each vote receiving one point. If the revote results in a tie, the Participants shall identify areas for further discussion and, following any such discussion, voting will continue until two Shortlisted Bids are selected to advance to the second round. (4) Second Round Voting by the Selection Committee (a) In the second round of voting, each Voting Senior Officer, subject to the recusal provisions in Paragraph (E)(2) above, shall vote for one Shortlisted Bid. (b) The Shortlisted Bid receiving the most votes in the second round shall be selected, and the proposed entity included in the Shortlisted Bid to serve as the Plan Processor shall be selected as the Plan Processor. (c) In the event of a tie, a revote will be taken. If the revote results in a tie, the Participants shall identify areas for further discussions with the two Shortlisted Bidders. Following any such discussions, voting will continue until one Shortlisted Bid is selected. tkelley on DSK3SPTVN1PROD with NOTICES VII. Implementation Within two months after effectiveness of the CAT NMS Plan, the Participants will jointly select the winning Shortlisted Bid and the Plan Processor pursuant to the process set forth in Section VI of the Plan and as incorporated into the CAT NMS Plan. Following the selection of the Plan Processor, the Participants will file with the Commission a statement identifying the Plan Processor and including the information required by SEC Rule 608. IX. Counterparts and Signatures The Plan may be executed in any number of counterparts, no one of which need contain all signatures of all Participants, and as many of such counterparts as shall together contain all such signatures shall constitute one and the same instrument. IN WITNESS WHEREOF, this Plan has been executed as of the 23rd day of August 2013 by each of the parties hereto. BATS EXCHANGE, INC. BY: lllllllllllllllllll BATS Y–EXCHANGE, INC. BY: lllllllllllllllllll BOX OPTIONS EXCHANGE LLC BY: lllllllllllllllllll C2 OPTIONS EXCHANGE, INCORPORATED BY: lllllllllllllllllll CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED BY: lllllllllllllllllll CHICAGO STOCK EXCHANGE, INC. BY: lllllllllllllllllll EDGA EXCHANGE, INC. BY: lllllllllllllllllll EDGX EXCHANGE, INC. BY: lllllllllllllllllll FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. BY: lllllllllllllllllll INTERNATIONAL SECURITIES EXCHANGE, LLC BY: lllllllllllllllllll MIAMI INTERNATIONAL SECURITIES EXCHANGE, LLC BY: lllllllllllllllllll NASDAQ OMX BX, INC. BY: lllllllllllllllllll NASDAQ OMX PHLX LLC BY: lllllllllllllllllll THE NASDAQ STOCK MARKET LLC BY: lllllllllllllllllll NATIONAL STOCK EXCHANGE, INC. BY: lllllllllllllllllll NEW YORK STOCK EXCHANGE LLC BY: lllllllllllllllllll NYSE MKT LLC BY: lllllllllllllllllll NYSE ARCA, INC. BY: lllllllllllllllllll TOPAZ EXCHANGE, LLC BY: lllllllllllllllllll [FR Doc. 2013–27906 Filed 11–20–13; 8:45 am] BILLING CODE 8011–01–P VIII. Applicability of the Exchange Act The rights and obligations of the Participants in respect of the matters covered by the Plan shall at all times be subject to any applicable provisions of the Exchange Act, as amended, and any rules and regulations promulgated thereunder. VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 PO 00000 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70889; File No. SR–CBOE– 2013–108] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend Rule 53.23 Related to CBSX RMM Quoting Obligations November 15, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 8, 2013, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The ‘‘Exchange’’ or ‘‘CBOE’’ proposes to amend Rule 53.23 related to CBOE Stock Exchange, LLC (‘‘CBSX’’) Remote Market-Maker (‘‘RMM’’) quoting obligations. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) * * * * * Chicago Board Options Exchange, Incorporated Rules * * 1 15 2 17 Frm 00105 Fmt 4703 Sfmt 4703 * * * Rule 53.23 Obligations of CBSX Remote Market-Makers (a) No changes. (b) Securities Other than those to which Appointed. With respect to securities in which it does not hold an Appointment, a CBSX Remote Market-Maker should not engage in transactions for an account in which it has an interest which are disproportionate in relation to, or in derogation of, the performance of its obligations as specified in this Rule with respect to those securities to which it does hold an Appointment. [Whenever a CBSX Remote Market-Maker submits a two-sided quote in a security to which it is not appointed, it must fulfill the obligations established by this Rule for the rest of that trading session.] . . . Interpretations and Policies: E:\FR\FM\21NON1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 21NON1

Agencies

[Federal Register Volume 78, Number 225 (Thursday, November 21, 2013)]
[Notices]
[Pages 69910-69918]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27906]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70892; File No. 4-668]


Joint Industry Plan; BATS Exchange, Inc., BATS-Y Exchange, Inc., 
BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago 
Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., 
EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory 
Authority, Inc., International Securities Exchange, LLC, Miami 
International Securities Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX 
PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., 
New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc. and Topaz 
Exchange, LLC; Notice of Filing of Proposed National Market System Plan 
Governing the Process of Selecting a Plan Processor and Developing a 
Plan for the Consolidated Audit Trail

November 15, 2013.

I. Introduction

    Pursuant to Section 11A of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act'') \1\ and Rule 608 thereunder (``Rule 
608''),\2\ notice is hereby given that on September 3, 2013, BATS 
Exchange, Inc., BATS-Y Exchange, Inc., BOX Options Exchange LLC, C2 
Options Exchange, Incorporated, Chicago Board Options Exchange, 
Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX 
Exchange, Inc., Financial Industry Regulatory Authority, Inc., 
International Securities Exchange, LLC, Miami International Securities 
Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The NASDAQ 
Stock Market LLC, National Stock Exchange, Inc., New York Stock 
Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc., and Topaz Exchange, LLC 
(collectively, ``SROs'' or ``Participants'') filed with the Securities 
and Exchange Commission (``Commission'') the proposed National Market 
System (``NMS'') Plan Governing the Process of Selecting a Plan 
Processor and Developing a Plan for the Consolidated Audit Trail 
(``Plan''). A copy of the Plan is attached as Exhibit A hereto. The 
Commission is publishing this notice to solicit comments on the Plan.
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
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II. Background

    On July 11, 2012, the Commission adopted Rule 613 under the 
Exchange Act \3\ to require the SROs to jointly submit an NMS plan (the 
``CAT NMS Plan'') to create, implement, and maintain a consolidated 
order tracking system, or consolidated audit trail, with respect to the 
trading of NMS securities, that would capture customer and order event 
information for orders in NMS securities, across all markets, from the 
time of order inception through routing, cancellation, modification, or 
execution.\4\ Rule 613 outlines a broad framework for the creation, 
implementation, and maintenance of the consolidated audit trail, 
including the minimum elements the Commission believes are necessary 
for an effective consolidated audit trail.\5\ In instances where Rule 
613 sets forth minimum requirements for the consolidated audit trail, 
the Rule provides flexibility to the SROs to draft the requirements of 
the CAT NMS Plan in a way that best achieves the objectives of the 
Rule.\6\
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    \3\ 17 CFR 242.613.
    \4\ Securities Exchange Act Release No. 67457 (July 18, 2012), 
77 FR 45722 (August 1, 2012) (``Adopting Release'').
    \5\ Id. at 45742.
    \6\ Id.
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    As described in more detail below, the SROs concluded that 
publication of a request for proposal was necessary to ensure that 
potential alternative solutions to creating the consolidated audit 
trail can be presented and considered by the SROs and that a detailed 
and meaningful cost/benefit analysis can be performed, both of which 
are required considerations to be addressed in the CAT NMS Plan. The 
SROs also decided, for the reasons set forth below, to file the Plan to 
govern how the SROs will proceed with formulating and submitting the 
CAT NMS Plan--and, as part of that process, how to review, evaluate, 
and narrow down the bids submitted in response to the request for 
proposal--and ultimately choosing the plan processor that would build, 
operate, and maintain the consolidated audit trail.

III. Description of the Plan

    Set forth in this Section III is the statement of the purpose of 
the Plan, along with the information required by Rule 608(a)(4) and (5) 
under the Exchange Act,\7\ prepared and submitted by the SROs with the 
Plan to the Commission.\8\
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    \7\ See 17 CFR 242.608(a)(4) and (a)(5).
    \8\ See Letter from the SROs, to Elizabeth Murphy, Secretary, 
Commission, dated August 23, 2013.
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A. Statement of Purpose

    Rule 613 requires the Participants to ``jointly file . . . a 
national market system plan to govern the creation,

[[Page 69911]]

implementation, and maintenance of a consolidated audit trail and 
central repository.'' \9\ The Plan being submitted for approval by the 
Participants governs the process of selecting a Plan Processor for the 
consolidated audit trail and developing the CAT NMS Plan.
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    \9\ 17 CFR 242.613(a)(1). Rule 613(a) requires that the 
Participants jointly file the CAT NMS Plan ``on or before 270 days 
from the date of publication of the Adopting Release in the Federal 
Register.'' The release adopting Rule 613 was published in the 
Federal Register on August 1, 2012. See Adopting Release, supra note 
4. On March 7, 2013, the Commission provided a temporary exemption 
to the Participants to permit them to file the CAT NMS Plan by 
December 6, 2013. See Exchange Act Release No. 69060 (March 7, 
2013), 78 FR 15771 (March 12, 2013) (``Exemptive Order''); see also 
Letter from Robert L.D. Colby, Chief Legal Officer, FINRA, to 
Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 
dated February 7, 2013 (``Exemptive Letter'').
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    As adopted, Rule 613 ``expand[ed] the set of solutions that could 
be considered by the SROs for creating, implementing, and maintaining a 
consolidated audit trail and [provided] the SROs with increased 
flexibility in how they choose to meet the requirements of the adopted 
Rule.'' \10\ As the Commission noted in the Adopting Release, because 
of this expanded solution set, ``the adopted Rule now requires the 
[Participants] to provide much more information and analysis to the 
Commission as part of their [CAT NMS Plan] submission.'' \11\ 
Specifically, these requirements were incorporated into Rule 613 as a 
series of twelve ``considerations'' that the Participants must address 
in the CAT NMS Plan, including:
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    \10\ Adopting Release, supra note 4 at 45725.
    \11\ Id. See also id. at 45789.
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     the specific details and features of the CAT NMS Plan;
     the Participants' analysis of the CAT NMS Plan's costs and 
impact on competition, efficiency, and capital formation;
     the process in developing the CAT NMS Plan;
     information about the implementation of the CAT NMS Plan; 
and
     milestones for the creation of the consolidated audit 
trail.
    As part of the discussion of these ``considerations,'' the 
Participants must include ``cost estimates for the proposed solution, 
and a discussion of the costs and benefits of alternative [sic] 
solutions considered but not proposed.'' \12\ In addition, the 
Commission noted that Rule 613 requires that the [Participants]: (1) 
Provide an estimate of the costs associated with creating, 
implementing, and maintaining the consolidated audit trail under the 
terms of the [CAT NMS Plan] submitted to the Commission for its 
consideration; (2) discuss the costs, benefits, and rationale for the 
choices made in developing the [CAT NMS Plan] submitted; and (3) 
provide their own analysis of the submitted [CAT NMS Plan's] potential 
impact on competition, efficiency, and capital formation.\13\
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    \12\ Id. at 45789.
    \13\ Id. at 45726.
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    The Commission stated that these detailed requirements are 
``intended to ensure that the Commission and the public have 
sufficiently detailed information to carefully consider all aspects of 
the [CAT NMS Plan] ultimately submitted by the [Participants].'' \14\ 
Indeed, the Commission expressed its expectation that ``the 
[Participants] will seriously consider various options as they develop 
the [CAT NMS Plan] to be submitted to the Commission for its 
consideration.'' \15\
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    \14\ Id. at 45725.
    \15\ Id. at 45725 and 45789.
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    In light of the numerous specific requirements of Rule 613, on 
March 7, 2013, the Commission granted the Participants an extension of 
the time in which to file the CAT NMS Plan so that the Participants 
could ensure that all potential options for the consolidated audit 
trail could be considered. As noted in the Exemptive Letter, the 
Participants concluded that publication of a request for proposal 
(``RFP'') was necessary to ensure that potential alternative solutions 
to creating the consolidated audit trail can be presented and 
considered by the Participants and that a detailed and meaningful cost/
benefit analysis can be performed, both of which are required 
considerations to be addressed in the CAT NMS Plan.
    The Participants published the RFP on February 26, 2013, and 
requested that any potential bidders notify the Participants of their 
intent to bid by March 5, 2013. Thirty-one firms submitted an intent to 
bid in response to the publication of the RFP; four of the firms were 
Participants or Affiliates of Participants.\16\
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    \16\ Since that time, six firms--including one Participant and 
one Affiliate of a Participant--have formally notified the 
Participants that they will not submit Bids as primary bidders. A 
list of firms that submitted an intent to bid is located on the 
Participants' Web site at catnmsplan.com.
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    The Plan is intended to govern how the Participants will proceed 
with formulating and submitting the CAT NMS Plan--and, as part of that 
process, reviewing, evaluating, and narrowing down the Bids submitted 
in response to the RFP--and ultimately choosing the Plan Processor. 
Because of the important regulatory obligations that exist for each 
Participant with respect to the creation and operation of the 
consolidated audit trail, it is essential that each Participant 
contribute to the development of the CAT NMS Plan. The Participants 
recognize, however, that Participants or Affiliates of Participants may 
also be Bidders seeking to serve as the Plan Processor or may be 
included as part of a Bid. The Participants have sought to mitigate 
these potential conflicts of interest by including in the Plan multiple 
provisions, which are described below, designed to balance these 
competing factors. The Participants believe that the Plan achieves this 
balance by allowing all Participants to participate meaningfully in the 
process of creating the CAT NMS Plan and choosing the Plan Processor 
while imposing strict requirements to ensure that the participation is 
independent and that the process is fair and transparent.
    Section III of the Plan establishes the overall governance 
structure the Participants have chosen.\17\ Specifically, the 
Participants propose establishing an Operating Committee responsible 
for formulating, drafting, and filing with the Commission the CAT NMS 
Plan and for ensuring the Participants' joint obligations under Rule 
613 are met in a timely and efficient manner. As set forth in Section 
III(B) of the Plan, each Participant will select one individual and one 
substitute to serve on the Operating Committee; however, other 
representatives of each Participant are permitted to attend Operating 
Committee meetings. Section III of the Plan also establishes the 
procedures for the Operating Committee, including provisions regarding 
meetings, Participants' voting rights, and voting requirements.
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    \17\ Section I of the Plan sets forth the definitions used 
throughout the Plan. Section II of the Plan lists the Participants, 
as well as establishing the requirements to admit new Participants 
or to withdraw as a Participant.
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    Sections V and VI of the Plan \18\ set forth the process for the 
Participants' evaluation of Bids and the selection process for 
narrowing down the Bids and choosing the Plan Processor.\19\

[[Page 69912]]

Pursuant to these Sections, the evaluation of Bids and selection of the 
Plan Processor will be performed by a Selection Committee composed of 
one senior officer from each Participant (referred to as the ``Voting 
Senior Officer'').\20\ Because of the potential conflicts of interest 
noted above, the Plan includes multiple requirements to increase the 
independence of the Voting Senior Officer who participates on the 
Selection Committee on behalf of a Bidding Participant.\21\ The 
criteria set forth in Section V(D) of the Plan include requirements 
concerning the Voting Senior Officer's job responsibilities, decision-
making authority, and reporting, and require that the Bidding 
Participant establish functional separation between its Plan 
responsibilities and its business/commercial (including market 
operations) functions. In addition, the criteria prohibit any 
disclosure of information regarding the Bid to the Voting Senior 
Officer and prohibit the Voting Senior Officer from disclosing any non-
public information gained in his or her role as such. These criteria 
are intended to insulate the Voting Senior Officer from any inside 
knowledge regarding the Bid (while also preventing any information 
about the evaluation process from being shared with staff preparing the 
Bidding Participant's Bid) and to reduce any potential personal 
motivation that may exist that could improperly influence a Voting 
Senior Officer's decisions.\22\
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    \18\ Section IV of the Plan governs amendments to the Plan. In 
general, except with respect to the addition of new Participants, 
any change to the Plan requires a written amendment that sets forth 
the change, is executed by over two-thirds of the Participants, and 
is approved by the Commission pursuant to Rule 608 or otherwise 
becomes effective under Rule 608.
    \19\ Initial steps in the evaluation and selection process will 
be performed pursuant to the Plan; the final two rounds of 
evaluation and voting, as well as the final selection of the Plan 
Processor, will be performed pursuant to the CAT NMS Plan. The 
sections of the CAT NMS Plan governing these final two voting rounds 
are set forth in Sections VI(D) and (E) of the Plan and will be 
incorporated into the CAT NMS Plan. The Participants believe it is 
essential that the entire process be laid out in the Plan so that 
the Commission can consider and approve the entire evaluation and 
selection process, even though the final two voting rounds, 
including the selection of the Plan Processor, will not be conducted 
until after the approval of the CAT NMS Plan.
    \20\ In the case of Affiliated Participants, one individual may 
be (but is not required to be) the Voting Senior Officer for more 
than one or all of the Affiliated Participants.
    \21\ The Plan defines a ``Bidding Participant'' broadly to 
include any Participant that (1) submits a Bid; (2) is an Affiliate 
of an entity that submits a Bid; or (3) is included, or is an 
Affiliate of an entity that is included, as a Material Subcontractor 
as part of a Bid. A ``Material Subcontractor'' is ``any entity that 
is known to the Participant to be included as part of a Bid as a 
vendor, subcontractor, service provider, or in any other similar 
capacity and, excluding products or services offered by the 
Participant to one or more Bidders on terms subject to a fee filing 
approved by the SEC, (1) is anticipated to derive 5% or more of its 
annual revenue in any given year from services provided in such 
capacity; or (2) accounts for 5% or more of the total estimated 
annual cost of the Bid for any given year.'' The Plan provides that 
``[a]n entity will not be considered a `Material Subcontractor' 
solely due to the entity providing services associated with any of 
the entity's regulatory functions as a self-regulatory organization 
registered with the SEC.''
    \22\ As described below, even with the independence criteria in 
place, the Plan also requires recusal from certain votes.
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    Because of the integral role played by the Selection Committee, any 
action requiring a vote by the Selection Committee under the Plan can 
only be taken in a meeting in which all Participants entitled to vote 
are present. All votes taken by the Selection Committee are 
confidential and non-public, and a Participant's individual votes will 
not be disclosed to other Participants or to the public. For this 
reason, the Plan provides that votes of the Selection Committee will be 
tabulated by an independent third party approved by the Operating 
Committee. Moreover, the Participants do not anticipate that aggregate 
votes or anonymized voting distribution numbers will be provided to the 
Participants following votes by the Selection Committee.
    The Plan divides the review and evaluation of Bids and selection of 
the Plan Processor into four separate stages. After Bids are 
received,\23\ Section VI(A) of the Plan provides that the Selection 
Committee will review all submitted Bids to determine which Bids are 
Qualified Bids (i.e., Bids that contain sufficient information to allow 
the Voting Senior Officers to meaningfully assess and evaluate the 
Bid).\24\ At this initial stage, if two-thirds or more of the 
Participants determine that a Bid does not meet the threshold for a 
Qualified Bid, the Bid will be eliminated from further consideration. 
The Participants believe this initial step will ensure that only those 
Bids meeting a minimum level of detail and sufficiency will move 
forward in the process, and insufficient Bids can be eliminated.
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    \23\ The Participants anticipate that Bids must be submitted 
four weeks after the Commission approves the Plan.
    \24\ The Plan defines a Qualified Bid as ``a Bid that is deemed 
by the Selection Committee to include sufficient information 
regarding the Bidder's ability to provide the necessary capabilities 
to create, implement, and maintain a consolidated audit trail so 
that such Bid can be effectively evaluated by the Selection 
Committee.'' The Plan provides that, ``[w]hen evaluating whether a 
Bid is a Qualified Bid, each member of the Selection Committee shall 
consider whether the Bid adequately addresses the evaluation factors 
set forth in the RFP, and apply such weighting and priority to the 
factors as such member of the Selection Committee deems appropriate 
in his or her professional judgment.''
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    Following the elimination of Bids that are not Qualified Bids, each 
Qualified Bidder will be provided the opportunity to present its Bid to 
the Selection Committee. After the Qualified Bidders have made their 
presentations, the Selection Committee will establish a ``shortlist'' 
of Bids that will move on in the process. The Plan provides that, if 
there are six or fewer Qualified Bids submitted, all of those Bids will 
be selected as ``Shortlisted Bids.'' \25\ If there are more than six 
but fewer than eleven Qualified Bids, the Selection Committee will 
choose five Shortlisted Bids, and if there are eleven or more Qualified 
Bids, the Selection Committee will choose 50% of the Qualified Bids as 
Shortlisted Bids.\26\
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    \25\ In the Letter submitted by the SROs describing the Plan, 
the SROs state that the Plan provides that, if there are fewer than 
six Qualified Bids submitted, all of those bids will be selected as 
Shortlisted Bids. See supra note 8. The Commission notes, however, 
that Section IV(B)(2) of the Plan states, ``If there are six or 
fewer Qualified Bids, all such Qualified Bids shall be Shortlisted 
Bids.'' (emphasis added)
    \26\ The Plan provides that, if there is an odd number of 
Qualified Bids, the number of Shortlisted Bids to be chosen will be 
rounded up to the next whole number (e.g., if there are thirteen 
Qualified Bids, seven Shortlisted Bids will be selected). In the 
event of a tie to select the Shortlisted Bids, all such tied 
Qualified Bids will be Shortlisted Bids.
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    When voting to select the Shortlisted Bids from among the Qualified 
Bids, each Voting Senior Officer must rank his or her selections, and 
the points assigned to the rankings increase in single-point 
increments. Thus, for example, if five Shortlisted Bids are to be 
chosen, each Participant will vote for its top five choices in rank 
order, with the first choice being given five points, the second choice 
four points, the third choice three points, the fourth choice two 
points, and the fifth choice one point. The Participants considered 
numerous alternative voting procedures but determined that the proposed 
process appropriately balances the need to differentiate among 
Qualified Bids while also ensuring that each Qualified Bid receives due 
consideration for inclusion as a Shortlisted Bid since each Voting 
Senior Officer must select multiple Qualified Bids for inclusion as a 
Shortlisted Bid. Further, while the Participants believe that the 
independence indicia sufficiently address any potential conflicts of 
interest that may arise with respect to Bids with which a Participant 
is affiliated, the proposed process will further mitigate potential 
conflicts because each Voting Senior Officer must select multiple 
unaffiliated Qualified Bids. The Participants believe this step is 
appropriate both to ensure that Bidders submit a complete and thorough 
Bid initially and so that Qualified Bidders will know whether they have 
a realistic opportunity to be selected as the Plan Processor after the 
CAT NMS Plan is approved.
    To further reduce the impact of potential conflicts of interest in

[[Page 69913]]

choosing Shortlisted Bids, the Plan also provides that at least two 
Non-SRO Bids must be included as Shortlisted Bids, provided there are 
two Non-SRO Bids that are Qualified Bids.\27\ If, following the vote, 
no Non-SRO Bids have been selected as Shortlisted Bids, the Plan 
requires that the two Non-SRO Bids receiving the highest cumulative 
votes be added as Shortlisted Bids. If, in this scenario, a single Non-
SRO Bid was a Qualified Bid, that Non-SRO Bid would be added as a 
Shortlisted Bid.
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    \27\ The Plan defines a ``Non-SRO Bid'' as ``a Bid that does not 
include a Bidding Participant.'' See supra note 21.
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    Following the selection of Shortlisted Bids, the Participants will 
identify the optimal proposed solution(s) for the consolidated audit 
trail for inclusion in the CAT NMS Plan for submission to the 
Commission. Following approval of the CAT NMS Plan by the Commission, 
the Selection Committee will determine, by majority vote, which 
Shortlisted Bidders will be provided the opportunity to revise their 
Bids in light of the provisions in the final, approved CAT NMS Plan. In 
making a decision whether to permit a Shortlisted Bidder to revise its 
Bid, the Selection Committee will consider the provisions in the CAT 
NMS Plan as well as the content of the Shortlisted Bidder's initial 
Bid. To reduce potential conflicts of interest, the Plan also provides 
that if a Bid submitted by or including a Bidding Participant or an 
Affiliate of a Bidding Participant is a Shortlisted Bidder, that 
Bidding Participant will be recused from all votes regarding whether a 
Shortlisted Bidder will be permitted to revise its Bid.
    After any permitted revisions have been received, the Selection 
Committee will select the Plan Processor from the Shortlisted Bids in 
two rounds of voting where, subject to the recusal provision described 
below, each Participant has one vote. In the first round, each 
Participant will select a first and second choice, with the first 
choice receiving two points and the second choice receiving one point. 
The two Shortlisted Bids receiving the highest cumulative scores in the 
first round will advance to the second round.\28\ In the event of a 
tie, the tie will be broken by assigning one point per vote to the tied 
Shortlisted Bids, and the Shortlisted Bid with the most votes will 
advance. If this procedure fails to break the tie, a revote will be 
taken on the tied Bids with each vote receiving one point. If the tie 
persists, the Participants will identify areas for discussion, and 
revotes will be taken until the tie is broken.
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    \28\ Each round of voting throughout the Plan is independent of 
other rounds.
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    Once two Shortlisted Bids have been chosen, the Participants will 
vote for a single Shortlisted Bid from the final two to determine the 
Plan Processor. If one or both of the final Bids is submitted by or 
includes a Bidding Participant or an Affiliate of a Bidding 
Participant, the Bidding Participant must recuse itself from the final 
vote. In the event of a tie, a revote will be taken. If the tie 
persists, the Participants will identify areas for discussion and, 
following these discussions, revotes will be taken until the tie is 
broken. As set forth in Section VII of the Plan, following the 
selection of the Plan Processor, the Participants will file with the 
Commission a statement identifying the Plan Processor and including the 
information required by Rule 608.

B. Governing or Constituent Documents

    Not applicable.

C. Implementation of Plan

    The terms of the Plan will be operative immediately upon approval 
of the Plan by the Commission. The Participants have announced that 
Bids must be submitted four weeks after the Commission's approval of 
the Plan. The Participants will begin reviewing and evaluating the Bids 
pursuant to Section VI of the Plan upon receipt of the Bids.
    The Participants anticipate that it will take seven months to 
evaluate the Bids and submit the CAT NMS Plan to the Commission 
pursuant to Sections VI(A) and (B) of the Plan.\29\ As noted above, 
upon approval of the CAT NMS Plan, the Plan will automatically 
terminate. The review of revised Shortlisted Bids and the selection of 
the Plan Processor will be undertaken as set forth in Sections VI(D) 
and (E) of the Plan as those sections are incorporated into the CAT NMS 
Plan.
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    \29\ The Participants recognize that a seven-month timeframe is 
inconsistent with the current obligation to submit the CAT NMS Plan 
by December 6, 2013. The Participants anticipate filing an exemptive 
request with the Commission to extend the date.
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D. Development and Implementation Phases

    Not applicable.

E. Analysis of Impact on Competition

    The Plan does not impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Exchange 
Act. The Participants do not believe that the Plan introduces terms 
that are unreasonably discriminatory for the purposes of Section 
11A(c)(1)(D) of the Exchange Act. As noted in Section A, the 
Participants are aware that potential conflicts of interest are raised 
because a Participant, or an affiliate of a Participant, may be both 
submitting a Bid (or participating in a Bid) and participating in the 
evaluation of Bids to select the Plan Processor. As described in 
Section A, the Plan includes multiple provisions designed to mitigate 
the potential impact of these conflicts by imposing restrictions on the 
Voting Senior Officer and by requiring the recusal of Bidding 
Participants for certain votes taken by the Selection Committee. In 
addition, the Plan requires that at least two Non-SRO Bids be 
Shortlisted Bids to ensure Non-SRO Bids are given full and fair 
consideration.

F. Written Understanding or Agreements Relating to Interpretation of, 
or Participation in, Plan

    The Participants have no written understandings or agreements 
relating to interpretations of, or participation in, the Plan other 
than those set forth in the Plan itself. Section III(F)(2)(a) of the 
Plan provides that interpretations of the Plan require approval by a 
majority of Participants entitled to vote. Section II(B) of the Plan 
sets forth how any entity registered as a national securities exchange 
or national securities association under the Exchange Act may become a 
Participant.

G. Approval of Amendment of the Plan

    Not applicable.

H. Terms and Conditions of Access

    Each currently approved national securities exchange and national 
securities association subject to Rule 613(a)(1) is a Participant in 
the Plan. Section II(B) of the Plan provides that any entity approved 
by the Commission as a national securities exchange or national 
securities association under the Exchange Act after the effectiveness 
of the Plan shall become a Participant by satisfying each of the 
following requirements: (1) Effecting an amendment to the Plan by 
executing a copy of the Plan as then in effect (with the only change 
being the addition of the new Participant's name in Section II of the 
Plan) and submitting such amendment to the Commission for approval; and 
(2) providing each then-current Participant with a copy of such 
executed Plan.

I. Method of Determination and Imposition, and Amount of, Fees and 
Charges

    Not applicable.

[[Page 69914]]

J. Method and Frequency of Processor Evaluation

    Not applicable.

K. Dispute Resolution

    The Plan does not include specific provisions regarding resolution 
of disputes between or among Participants. Section III(B) of the Plan 
provides for each Participant to designate an individual to represent 
the Participant as a member of an Operating Committee. Section III(A) 
of the Plan provides that the Operating Committee is responsible for: 
(1) Formulating, drafting, and filing with the Commission the CAT NMS 
Plan; and (2) ensuring the Participants' obligations under Rule 613 are 
met in a timely and efficient manner. Within the areas of its 
responsibilities and authority as set forth in the Plan, decisions made 
or actions taken by the Operating Committee, directly or by duly 
delegated individuals or Subcommittees, shall be binding upon each 
Participant, without prejudice to the rights of any Participant to seek 
redress from the Commission pursuant to Rule 608 or in any other 
appropriate forum.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the Plan is 
consistent with the Act.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number 4-668 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number 4-668. This file number 
should be included on the subject line if email 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 (http://www.sec.gov/rules/sro.shtml)). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the Plan that are filed with the Commission, 
and all written communications relating to the Plan 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 Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
such filing also will be available for inspection and copying at the 
Participants' principal offices. 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 Number 4-668 and should be 
submitted on or before December 23, 2013.

    By the Commission.
Kevin O'Neill,
Deputy Secretary.

EXHIBIT A

NATIONAL MARKET SYSTEM PLAN GOVERNING THE PROCESS OF SELECTING A PLAN 
PROCESSOR AND DEVELOPING A PLAN FOR THE CONSOLIDATED AUDIT TRAIL 
SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 
608 OF REGULATION NMS UNDER THE SECURITIES EXCHANGE ACT OF 1934

                            Table of Contents
 
                         Section                               Page
 
Preamble................................................               1
I. Definitions..........................................               2
II. Participants........................................               4
III. Operating Committee................................               7
IV. Plan Amendments.....................................              11
V. Selection Committee..................................              12
VI. RFP Bid Evaluation and Plan Processor Selection.....              16
VII. Implementation.....................................              21
VIII. Applicability of the Exchange Act.................              21
IX. Counterparts and Signatures.........................              22
 

Consolidated Audit Trail: Plan Processor Evaluation and Selection Plan

Preamble

    This Plan governs the process of: (1) Evaluating and selecting a 
Plan Processor for the consolidated audit trail; and (2) developing 
a national market system plan pursuant to SEC Rule 613 to create, 
implement, and maintain a consolidated audit trail. This Plan will 
automatically terminate upon the SEC's approval of the CAT NMS Plan. 
The Participants developed this Plan pursuant to Rule 608(a)(3) of 
Regulation NMS under the Exchange Act, which authorizes the 
Participants to act jointly in preparing, filing, and implementing 
national market system plans.

I. Definitions

    (A) An ``Affiliate'' of an entity means any entity controlling, 
controlled by, or under common control with such entity.
    (B) ``Affiliated Participant'' means any Participant 
controlling, controlled by, or under common control with another 
Participant.
    (C) ``Bid'' means a proposal submitted by a Bidder in response 
to the RFP.
    (D) ``Bidder'' means any entity, or any combination of separate 
entities, submitting a Bid.
    (E) ``Bidding Participant'' means a Participant that: (1) 
Submits a Bid; (2) is an Affiliate of an entity that submits a Bid; 
or (3) is included, or is an Affiliate of an entity that is 
included, as a Material Subcontractor as part of a Bid.
    (F) ``CAT NMS Plan'' means the NMS Plan to be jointly submitted 
to the Commission by the Participants pursuant to paragraph (a)(1) 
of SEC Rule 613.
    (G) ``Commission'' or ``SEC'' means the United States Securities 
and Exchange Commission.
    (H) ``Exchange Act'' means the Securities Exchange Act of 1934, 
as amended.
    (I) ``Material Contract'' means any contract resulting in a 
total cost to all Participants of more than $1,000,000.
    (J) ``Material Subcontractor'' means any entity that is known to 
the Participant to be included as part of a Bid as a vendor, 
subcontractor, service provider, or in any other similar capacity 
and, excluding products or services offered by the Participant to 
one or more Bidders on terms subject to a fee filing approved by the 
SEC,

[[Page 69915]]

(1) is anticipated to derive 5% or more of its annual revenue in any 
given year from services provided in such capacity; or (2) accounts 
for 5% or more of the total estimated annual cost of the Bid for any 
given year. An entity will not be considered a ``Material 
Subcontractor'' solely due to the entity providing services 
associated with any of the entity's regulatory functions as a self-
regulatory organization registered with the SEC.
    (K) ``NMS Plan'' shall have the same meaning as ``[n]ational 
market system plan'' provided in Rule 600(b)(43) of Regulation NMS 
under the Exchange Act.
    (L) ``Non-SRO Bid'' means a Bid that does not include a Bidding 
Participant.
    (M) ``Operating Committee'' shall have the meaning provided in 
Section III of the Plan.
    (N) ``Participant'' means a party to the Plan.
    (O) ``Plan'' means the plan set forth in this instrument, as 
amended from time to time in accordance with its provisions.
    (P) ``Plan Processor'' means the entity jointly selected by the 
Participants pursuant to SEC Rule 613, the Plan, and the CAT NMS 
Plan to perform the consolidated audit trail processing functions 
required by SEC Rule 613 and set forth in the RFP.
    (Q) ``Qualified Bid'' means a Bid that is deemed by the 
Selection Committee to include sufficient information regarding the 
Bidder's ability to provide the necessary capabilities to create, 
implement, and maintain a consolidated audit trail so that such Bid 
can be effectively evaluated by the Selection Committee. When 
evaluating whether a Bid is a Qualified Bid, each member of the 
Selection Committee shall consider whether the Bid adequately 
addresses the evaluation factors set forth in the RFP, and apply 
such weighting and priority to the factors as such member of the 
Selection Committee deems appropriate in his or her professional 
judgment. The determination of whether a Bid is a Qualified Bid 
shall be determined pursuant to the process set forth in Section VI 
of the Plan.
    (R) ``Qualified Bidder'' means a Bidder that has submitted a 
Qualified Bid.
    (S) ``RFP'' means the ``Consolidated Audit Trail National Market 
System Plan Request for Proposal'' published by the Participants on 
February 26, 2013, as amended from time to time.
    (T) ``Selection Committee'' means the committee formed pursuant 
to Section V of the Plan.
    (U) ``SEC Rule 608'' means Rule 608 of Regulation NMS under the 
Exchange Act.
    (V) ``SEC Rule 613'' means Rule 613 of Regulation NMS under the 
Exchange Act.
    (W) ``Shortlisted Bid'' means a Bid submitted by a Qualified 
Bidder and selected as a Shortlisted Bid by the Selection Committee 
pursuant to Section VI(B) of the Plan.
    (X) ``Shortlisted Bidder'' means a Qualified Bidder that has 
submitted a Bid selected as a Shortlisted Bid.
    (Y) ``Voting Senior Officer'' means the senior officer of a 
Participant chosen to serve on the Selection Committee pursuant to 
Section V of the Plan.

II. Participants

(A) List of Participants

    The Participants are as follows:

(1) BATS Exchange, Inc.
(2) BATS Y-Exchange, Inc.
(3) BOX Options Exchange LLC
(4) C2 Options Exchange, Incorporated
(5) Chicago Board Options Exchange, Incorporated
(6) Chicago Stock Exchange, Inc.
(7) EDGA Exchange, Inc.
(8) EDGX Exchange, Inc.
(9) Financial Industry Regulatory Authority, Inc.
(10) International Securities Exchange, LLC
(11) Miami International Securities Exchange LLC
(12) NASDAQ OMX BX, Inc.
(13) NASDAQ OMX PHLX LLC
(14) The Nasdaq Stock Market LLC
(15) National Stock Exchange, Inc.
(16) New York Stock Exchange LLC
(17) NYSE MKT LLC
(18) NYSE Arca, Inc.
(19) Topaz Exchange, LLC

(B) Admission of New Participants

    Any entity approved by the SEC as a national securities exchange 
or national securities association under the Exchange Act after the 
effectiveness of the Plan shall become a Participant by satisfying 
each of the following requirements: (1) effecting an amendment to 
the Plan by executing a copy of the Plan as then in effect (with the 
only change being the addition of the new Participant's name in 
Section II of the Plan) and submitting such amendment to the SEC for 
approval; and (2) providing each then-current Participant with a 
copy of such executed Plan. The amendment shall be effective when it 
is approved by the SEC in accordance with SEC Rule 608 or otherwise 
becomes effective pursuant to SEC Rule 608.

(C) Withdrawal of Participants

    (1) A Participant may withdraw from the Plan upon written notice 
to each of the other Participants of no less than 30 days. The 
written notice must include the legal basis for the Participant's 
withdrawal from the Plan, including, if applicable, any required 
approvals or orders issued by the SEC.
    (2) Withdrawal of a Participant shall be effectuated by an 
amendment to the Plan, including, if applicable, approval of any 
such amendment by the SEC.
    (3) Notwithstanding a Participant's withdrawal from the Plan, 
the Participant shall remain liable for, and shall pay upon demand:
    (a) its proportionate share of any costs, including those 
resulting from any Material Contracts, accrued or incurred before 
the effectiveness of the Participant's withdrawal;
    (b) its proportionate share of any liabilities arising while the 
organization was a Participant that are based on actions jointly 
undertaken by the Participants pursuant to the Plan or in 
furtherance of the Participants' obligations pursuant to SEC Rule 
613; and
    (c) any costs incurred as a result of the Participant's 
withdrawal from the Plan.
    (4) 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.

III. Operating Committee

(A) Authority

    The Operating Committee shall be responsible for: (1) 
formulating, drafting, and filing with the SEC the CAT NMS Plan; and 
(2) ensuring the Participants' obligations under SEC Rule 613 are 
met in a timely and efficient manner. Within the areas of its 
responsibilities and authority as set forth in the Plan, decisions 
made or actions taken by the Operating Committee, directly or by 
duly delegated individuals or Subcommittees, shall be binding upon 
each Participant, without prejudice to the rights of any 
Participants to seek redress from the SEC pursuant to SEC Rule 608 
or in any other appropriate forum.

(B) Composition

    (1) Each Participant shall select from its staff one individual 
(the ``primary representative'') to represent the Participant as a 
member of the Operating Committee, together with a substitute(s) for 
such individual. In the case of Affiliated Participants, one 
individual may be the primary representative for all or some of the 
Affiliated Participants, and another individual may be the 
substitute for all or some of the Affiliated Participants.
    (2) Regular meetings of the Operating Committee may be attended 
by each Participant's primary representative and its substitute(s), 
and may be attended by other representatives of the Participant.
    (3) Any organization that 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 primary representative and one alternate representative to 
attend regularly scheduled Operating Committee meetings in the 
capacity of a non-voting observer/advisor. If the organization's 
Form 1 Application is withdrawn, returned, or 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.
    (4) 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.

(C) Meetings

(1) Quorum

    (a) Any action requiring a vote can only be taken at a meeting 
in which a quorum of all Participants is present. For actions 
requiring a 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 at 
least a two-thirds vote of all Participants, a quorum of at least 
two-

[[Page 69916]]

thirds of all Participants entitled to vote must be present at the 
meeting before such a vote may be taken.
    (b) For purposes of establishing a quorum, a Participant is 
considered present at a meeting only if a Participant's primary 
representative or substitute is either in physical attendance at the 
meeting or is participating by conference telephone or other 
acceptable electronic means.
    (c) Any Participant recused from voting on a particular action 
pursuant to Paragraph (E) below shall not be considered to be 
``entitled to vote'' for purposes of establishing whether a quorum 
is present for a vote to be taken on that action.

(2) Frequency

    Meetings of the Operating Committee shall be held as needed at 
such times and locations as shall from time to time be determined by 
the Operating Committee. Meetings may be held by conference 
telephone or other acceptable electronic means if all Participants 
entitled to vote consent thereto in writing or by other means the 
Operating Committee deems acceptable.

(3) Written Consent

    Any action may be taken without a meeting if a consent in 
writing, setting forth the action so taken, is sent to, via physical 
or electronic means, and agreed to by all Participants entitled to 
vote with respect to the subject matter thereof. 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.

(4) Minutes

    Minutes of each meeting of the Operating Committee shall be 
taken.

(5) Subcommittees

    In addition to the Selection Committee established pursuant to 
Section V of the Plan, the Operating Committee may establish any 
Subcommittees it deems necessary in fulfilling its obligations under 
the Plan. Membership on any Subcommittee is open to any Participant 
indicating a desire to participate. Minutes of each meeting of any 
Subcommittee shall be taken.

(D) Voting Rights

    (1) Unless recused pursuant to Paragraph (E) below, each 
Participant shall have one vote on all matters considered by the 
Operating Committee.
    (2) Where one individual represents more than one Affiliated 
Participant, either as the primary representative or as a 
substitute, such individual will have the right to vote on behalf of 
each such Affiliated Participant. The substitute(s) may participate 
in deliberations of the Operating Committee and shall be considered 
a voting member thereof only in the absence of the primary 
representative.

(E) Conflicts and Recusals

    A Participant may recuse itself from voting on any matter under 
consideration by the Operating Committee if the Participant 
determines that voting on such matter raises a conflict of interest. 
Except as provided in Sections V(B)(2) and V(B)(3) of the Plan, no 
Participant is automatically recused from voting on any matter.

(F) Voting Requirements

(1) Supermajority Voting Requirements

    The following actions require approval by at least two-thirds of 
Participants entitled to vote:
    (a) Amendments to the Plan, other than amendments to add a new 
Participant; and
    (b) Material Contracts.

(2) Majority Voting Requirements

    The following actions require approval by a majority of 
Participants entitled to vote:
    (a) Interpretations of the Plan; and
    (b) Any other matters not specified as requiring a supermajority 
vote.

(G) Interpretations of Regulations

    Interpretative questions arising during the time for which the 
Plan is operative will be presented to the Operating Committee, 
which will determine whether to seek interpretive guidance from the 
Commission or other regulatory body and, if so, in what form.

(H) Delegated Authority

    Within the areas of its responsibilities, the Operating 
Committee may delegate an individual or Subcommittee to make 
decisions or take action on behalf of the Operating Committee. Any 
decision made or action taken by such duly delegated individual or 
Subcommittee within the scope of such delegation shall be binding 
upon each Participant.

IV. Plan Amendments

(A) General Amendments

    Except with respect to the addition of new Participants, any 
proposed change in, addition to, or deletion from the Plan shall be 
effected by means of a written amendment to the Plan that: (1) sets 
forth the change, addition, or deletion; (2) is executed by over 
two-thirds of the Participants; and (3) is approved by the SEC 
pursuant to SEC Rule 608, or otherwise becomes effective under SEC 
Rule 608.

(B) New Participants

    With respect to new Participants, an amendment to the Plan may 
be effected by the new national securities exchange or national 
securities association in accordance with Section II of the Plan.

V. Selection Committee

    The Participants shall establish a Selection Committee in 
accordance with this Section V to: (1) evaluate and review Bids; and 
(2) select the Plan Processor.

(A) Composition

    Each Participant shall select from its staff one senior officer 
(``Voting Senior Officer'') to represent the Participant as a member 
of a Selection Committee. In the case of Affiliated Participants, 
one individual may be (but is not required to be) the Voting Senior 
Officer for more than one or all of the Affiliated Participants. 
Where one individual serves as the Voting Senior Officer for more 
than one Affiliated Participant, such individual will have the right 
to vote on behalf of each such Affiliated Participant.

(B) Voting

    (1) Unless recused pursuant to Paragraph (2) or (3) below, each 
Participant shall have one vote on all matters considered by the 
Selection Committee.
    (2) No Bidding Participant shall vote on whether a Shortlisted 
Bidder will be permitted to revise its Bid pursuant to Section 
VI(D)(1) below if a Bid submitted by or including the Participant or 
an Affiliate of the Participant is a Shortlisted Bid.
    (3) No Bidding Participant shall vote in the second round set 
forth in Section VI(E)(4) below if a Bid submitted by or including 
the Participant or an Affiliate of the Participant is part of the 
second round.
    (4) All votes by the Selection Committee shall be confidential 
and non-public. All such votes will be tabulated by an independent 
third party approved by the Operating Committee, and a Participant's 
individual votes will not be disclosed to other Participants or to 
the public.

(C) Quorum

    (1) Any action requiring a vote by the Selection Committee can 
only be taken at a meeting in which all Participants entitled to 
vote are present. Meetings of the Selection Committee shall be held 
as needed at such times and locations as shall from time to time be 
determined by the Selection Committee. Meetings may be held by 
conference telephone or other acceptable electronic means if all 
Participants entitled to vote consent thereto in writing or by other 
means the Selection Committee deems acceptable.
    (2) For purposes of establishing a quorum, a Participant is 
considered present at a meeting only if the Participant's Voting 
Senior Officer is either in physical attendance at the meeting or is 
participating by conference telephone or other acceptable electronic 
means.
    (3) Any Participant recused from voting on a particular action 
pursuant to Paragraph (B) above shall not be considered ``entitled 
to vote'' for purposes of establishing whether a quorum is present 
for a vote to be taken on that action.

(D) Qualifications for Voting Senior Officer of Bidding 
Participants

    The following criteria must be met before a Voting Senior 
Officer is eligible to represent a Bidding Participant and serve on 
the Selection Committee:
    (1) the Voting Senior Officer is not responsible for the Bidding 
Participant's market operations, and is responsible primarily for 
the Bidding Participant's legal and/or regulatory functions, 
including functions related to the formulation and implementation of 
the Bidding Participant's legal and/or regulatory program;
    (2) the Bidding Participant has established functional 
separation of its legal and/or regulatory functions from its market 
operations and other business or commercial objectives;
    (3) the Voting Senior Officer ultimately reports (including 
through the Bidding Participant's CEO or Chief Legal Officer/General 
Counsel) to an independent governing body that determines or 
oversees the Voting Senior Officer's compensation,

[[Page 69917]]

and the Voting Senior Officer does not receive any compensation 
(other than what is determined or overseen by the independent 
governing body) that is based on achieving business or commercial 
objectives;
    (4) the Voting Senior Officer does not have responsibility for 
any non-regulatory functions of the Bidding Participant, other than 
the legal aspects of the organization performed by the Chief Legal 
Officer/General Counsel or the Office of the General Counsel;
    (5) the ultimate decision making of the Voting Senior Officer 
position is tied to the regulatory effectiveness of the Bidding 
Participant, as opposed to other business or commercial objectives;
    (6) promotion or termination of the Voting Senior Officer is not 
based on achieving business or commercial objectives;
    (7) the Voting Senior Officer has no decision-making authority 
with respect to the development or formulation of the Bid submitted 
by or including the Participant or an Affiliate of the Participant; 
however, the staff assigned to developing and formulating such Bid 
may consult with the Voting Senior Officer, provided such staff 
members cannot share information concerning the Bid with the Voting 
Senior Officer;
    (8) the Voting Senior Officer does not report to any senior 
officers responsible for the development or formulation of the Bid 
submitted by or including the Participant or by an Affiliate of the 
Participant; however, joint reporting to the Bidding Participant's 
CEO or similar executive officer by the Voting Senior Officer and 
senior staff developing and formulating such Bid is permissible, but 
the Bidding Participant's CEO or similar executive officer cannot 
share information concerning such Bid with the Voting Senior 
Officer;
    (9) the compensation of the Voting Senior Officer is not 
separately tied to income earned if the Bid submitted by or 
including the Participant or an Affiliate of the Participant is 
selected; and
    (10) the Voting Senior Officer, any staff advising the Voting 
Senior Officer, and any similar executive officer or member of an 
independent governing body to which the Voting Senior Officer 
reports may not disclose to any person any non-public information 
gained during the review of Bids, presentation by Qualified Bidders, 
and selection process. Staff advising the Voting Senior Officer 
during the Bid review, presentation, and selection process may not 
include the staff, contractors, or subcontractors that are 
developing or formulating the Bid submitted by or including a 
Participant or an Affiliate of the Participant.

VI. RFP Bid Evaluation and Plan Processor Selection

(A) Initial Bid Review to Determine Qualified Bids

    (1) The Selection Committee shall review all Bids in accordance 
with the process developed by the Selection Committee.
    (2) After review, the Selection Committee shall vote on each Bid 
to determine whether such Bid is a Qualified Bid. A Bid that is 
deemed unqualified by at least a two-thirds vote of the Selection 
Committee will not be deemed a Qualified Bid and will be eliminated 
individually from further consideration.

(B) Selection of Shortlisted Bids

    (1) Each Qualified Bidder shall be given the opportunity to 
present its Bid to the Selection Committee. Following the 
presentations by Qualified Bidders, the Selection Committee shall 
review and evaluate the Qualified Bids to select the Shortlisted 
Bids in accordance with the process in this Paragraph (B).
    (2) If there are six or fewer Qualified Bids, all such Qualified 
Bids shall be Shortlisted Bids.
    (3) If there are more than six Qualified Bids but fewer than 
eleven Qualified Bids, the Selection Committee shall select five 
Qualified Bids as Shortlisted Bids, subject to the requirement in 
Paragraph (d) below. Each Voting Senior Officer shall select a 
first, second, third, fourth, and fifth choice from among the 
Qualified Bids.
    (a) A weighted score shall be assigned to each choice as 
follows:

 First--5 points
 Second--4 points
 Third--3 points
 Fourth--2 points
 Fifth--1 point

    (b) The five Qualified Bids receiving the highest cumulative 
scores will be Shortlisted Bids.
    (c) In the event of a tie to select the five Shortlisted Bids, 
all such tied Qualified Bids will be Shortlisted Bids.
    (d) To the extent there are Non-SRO Bids that are Qualified 
Bids, the Shortlisted Bids selected pursuant to this Section 
VI(B)(3) must, if possible, include at least two Non-SRO Bids. If, 
following the vote set forth in this Section VI(B)(3), no Non-SRO 
Bid was selected as a Shortlisted Bid, the two Non-SRO Bids 
receiving the highest cumulative votes (or one Non-SRO Bid if a 
single Non-SRO Bid is a Qualified Bid) shall be added as Shortlisted 
Bids. If one Non-SRO Bid was selected as a Shortlisted Bid, the Non-
SRO Bid receiving the next highest cumulative vote shall be added as 
a Shortlisted Bid.
    (4) If there are eleven or more Qualified Bids, the Selection 
Committee shall select fifty percent of the Qualified Bids as 
Shortlisted Bids, subject to the requirement in Paragraph (d) below. 
If there is an odd number of Qualified Bids, the number of 
Shortlisted Bids chosen shall be rounded up to the next whole number 
(e.g., if there are thirteen Qualified Bids, then seven Shortlisted 
Bids will be selected). Each Voting Senior Officer shall select as 
many choices as Shortlisted Bids to be chosen.
    (a) A weighted score shall be assigned to each choice in single 
point increments as follows:

 Last--1 point
 Next-to-Last--2 points
 Second-from-Last--3 points
 Third-from-Last--4 points
 Fourth-from-Last--5 points
 Fifth-from-Last--6 points

For each additional Shortlisted Bid that must be chosen, the points 
assigned will increase in single point increments.
    (b) The fifty percent of Qualified Bids (or, if there is an odd 
number of Qualified Bids, the next whole number above fifty percent 
of Qualified Bids) receiving the highest cumulative scores will be 
Shortlisted Bids.
    (c) In the event of a tie to select the Shortlisted Bids, all 
such tied Qualified Bids will be Shortlisted Bids.
    (d) To the extent there are Non-SRO Bids that are Qualified 
Bids, the Shortlisted Bids selected pursuant to this Section 
VI(B)(4) must, if possible, include at least two Non-SRO Bids. If, 
following the vote set forth in this Section VI(B)(4), no Non-SRO 
Bid was selected as a Shortlisted Bid, the two Non-SRO Bids 
receiving the highest cumulative votes (or one Non-SRO Bid if a 
single Non-SRO Bid is a Qualified Bid) shall be added as Shortlisted 
Bids. If one Non-SRO Bid was selected as a Shortlisted Bid, the Non-
SRO Bid receiving the next highest cumulative vote shall be added as 
a Shortlisted Bid.

(C) Formulation of the CAT NMS Plan

    (1) The Selection Committee shall review the Shortlisted Bids to 
identify optimal proposed solutions for the consolidated audit trail 
and provide descriptions of such proposed solutions for inclusion in 
the CAT NMS Plan. This process may, but is not required to, include 
iterative discussions with Shortlisted Bidders to address any 
aspects of an optimal proposed solution that were not fully 
addressed in a particular Bid.
    (2) The Participants shall incorporate information on optimal 
proposed solutions in the CAT NMS Plan, including cost-benefit 
information as required by SEC Rule 613.

(D) Review of Shortlisted Bids Under the CAT NMS Plan

    (1) Following approval of the CAT NMS Plan by the SEC, 
Shortlisted Bidders may be permitted to revise their Bids based on 
the provisions in the approved CAT NMS Plan, including further 
discussions if determined to be necessary by the Selection 
Committee. A Shortlisted Bidder will be permitted to revise its Bid 
only upon approval by a majority of the Selection Committee, subject 
to the recusal provision in Section V(B)(2) above, that revisions 
are necessary or appropriate in light of the content of the 
Shortlisted Bidder's initial Bid and the provisions in the approved 
CAT NMS Plan. A Shortlisted Bidder may not revise its Bid unless 
approved to do so by the Selection Committee pursuant to this 
paragraph.
    (2) The Selection Committee shall review and evaluate all 
Shortlisted Bids, including any permitted revisions thereto 
submitted by Shortlisted Bidders. In performing the review and 
evaluation, the Selection Committee may consult with the Advisory 
Committee established pursuant to paragraph (b)(7) of SEC Rule 613.

(E) Selection of Plan Processor Under the CAT NMS Plan

    (1) Under the CAT NMS Plan, there will be two rounds of voting 
by the Selection Committee to select the Plan Processor from among 
the Shortlisted Bidders. Each round shall be scored independently of 
prior rounds of voting, including the scoring to determine the 
Shortlisted Bids under Section VI(B) of the Plan.

[[Page 69918]]

    (2) Each Participant shall have one vote in each round, except 
that no Bidding Participant shall be entitled to vote in the second 
round if the Participant's Bid, a Bid submitted by an Affiliate of 
the Participant, or a Bid including the Participant or an Affiliate 
of the Participant is considered in the second round. Until the 
second round, Bidding Participants may vote for any Shortlisted Bid.
    (3) First Round Voting by the Selection Committee
    (a) In the first round of voting, each Voting Senior Officer 
shall select a first and second choice from among the Shortlisted 
Bids.
    (b) A weighted score shall be assigned to each choice as 
follows:

 First--2 points
 Second--1 point

    (c) The two Shortlisted Bids receiving the highest cumulative 
scores in the first round will advance to the second round.
    (d) In the event of a tie that would result in more than two 
Shortlisted Bids advancing to the second round, the tie will be 
broken by assigning one point per vote, with the Shortlisted Bid(s) 
receiving the highest number of votes advancing to the second round. 
If, at this point, the Shortlisted Bids remain tied, a revote will 
be taken with each vote receiving one point. If the revote results 
in a tie, the Participants shall identify areas for further 
discussion and, following any such discussion, voting will continue 
until two Shortlisted Bids are selected to advance to the second 
round.
    (4) Second Round Voting by the Selection Committee
    (a) In the second round of voting, each Voting Senior Officer, 
subject to the recusal provisions in Paragraph (E)(2) above, shall 
vote for one Shortlisted Bid.
    (b) The Shortlisted Bid receiving the most votes in the second 
round shall be selected, and the proposed entity included in the 
Shortlisted Bid to serve as the Plan Processor shall be selected as 
the Plan Processor.
    (c) In the event of a tie, a revote will be taken. If the revote 
results in a tie, the Participants shall identify areas for further 
discussions with the two Shortlisted Bidders. Following any such 
discussions, voting will continue until one Shortlisted Bid is 
selected.

VII. Implementation

    Within two months after effectiveness of the CAT NMS Plan, the 
Participants will jointly select the winning Shortlisted Bid and the 
Plan Processor pursuant to the process set forth in Section VI of 
the Plan and as incorporated into the CAT NMS Plan. Following the 
selection of the Plan Processor, the Participants will file with the 
Commission a statement identifying the Plan Processor and including 
the information required by SEC Rule 608.

VIII. Applicability of the Exchange Act

    The rights and obligations of the Participants in respect of the 
matters covered by the Plan shall at all times be subject to any 
applicable provisions of the Exchange Act, as amended, and any rules 
and regulations promulgated thereunder.

IX. Counterparts and Signatures

    The Plan may be executed in any number of counterparts, no one 
of which need contain all signatures of all Participants, and as 
many of such counterparts as shall together contain all such 
signatures shall constitute one and the same instrument.
    IN WITNESS WHEREOF, this Plan has been executed as of the 23rd 
day of August 2013 by each of the parties hereto.

BATS EXCHANGE, INC.

BY:--------------------------------------------------------------------

BATS Y-EXCHANGE, INC.

BY:--------------------------------------------------------------------

BOX OPTIONS EXCHANGE LLC

BY:--------------------------------------------------------------------

C2 OPTIONS EXCHANGE, INCORPORATED

BY:--------------------------------------------------------------------

CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED

BY:--------------------------------------------------------------------

CHICAGO STOCK EXCHANGE, INC.

BY:--------------------------------------------------------------------

EDGA EXCHANGE, INC.

BY:--------------------------------------------------------------------

EDGX EXCHANGE, INC.

BY:--------------------------------------------------------------------

FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC.

BY:--------------------------------------------------------------------

INTERNATIONAL SECURITIES EXCHANGE, LLC

BY:--------------------------------------------------------------------

MIAMI INTERNATIONAL SECURITIES EXCHANGE, LLC

BY:--------------------------------------------------------------------

NASDAQ OMX BX, INC.

BY:--------------------------------------------------------------------

NASDAQ OMX PHLX LLC

BY:--------------------------------------------------------------------

THE NASDAQ STOCK MARKET LLC

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NATIONAL STOCK EXCHANGE, INC.

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NEW YORK STOCK EXCHANGE LLC

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NYSE MKT LLC

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NYSE ARCA, INC.

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TOPAZ EXCHANGE, LLC

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[FR Doc. 2013-27906 Filed 11-20-13; 8:45 am]
BILLING CODE 8011-01-P