Joint Industry Plan; Notice of Filing of the Forty-Fourth Amendment to the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis, 2202-2207 [2020-00357]
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Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Notices
that, at a minimum, uses an appropriate
method for measuring credit exposure
that accounts for relevant product risk
factors and portfolio effects across
products. NSCC is proposing to enhance
the Bond Haircut because NSCC
believes that the proposed methodology
would help provide NSCC with a more
effective measure of the credit exposure
presented by municipal bonds. In
particular, as described above, NSCC
believes that the enhancements would
result in a more effective measure of the
tenor, sector and higher yield risks
presented by municipal bonds that are
rated BBB+ or lower, or are not rated.
Therefore, NSCC believes the proposed
change is consistent with Rule 17Ad–
22(e)(6)(v) under the Act.34
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III. Date of Effectiveness of the Advance
Notice, and Timing for Commission
Action
The proposed change may be
implemented if the Commission does
not object to the proposed change
within 60 days of the later of (i) the date
that the proposed change was filed with
the Commission or (ii) the date that any
additional information requested by the
Commission is received. The clearing
agency shall not implement the
proposed change if the Commission has
any objection to the proposed change.
The Commission may extend the
period for review by an additional 60
days if the proposed change raises novel
or complex issues, subject to the
Commission providing the clearing
agency with prompt written notice of
the extension. A proposed change may
be implemented in less than 60 days
from the date the advance notice is
filed, or the date further information
requested by the Commission is
received, if the Commission notifies the
clearing agency in writing that it does
not object to the proposed change and
authorizes the clearing agency to
implement the proposed change on an
earlier date, subject to any conditions
imposed by the Commission.
The clearing agency shall post notice
on its website of proposed changes that
are implemented.
The proposal shall not take effect
until all regulatory actions required
with respect to the proposal are
completed.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the Advance Notice
is consistent with the Clearing
Supervision Act. Comments may be
34 17
submitted by any of the following
methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–87908; File No. S7–24–89]
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NSCC–2019–801 on the subject line.
Joint Industry Plan; Notice of Filing of
the Forty-Fourth Amendment to the
Joint Self-Regulatory Organization
Plan Governing the Collection,
Consolidation and Dissemination of
Quotation and Transaction Information
for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading
Privileges Basis
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–NSCC–2019–801. 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 website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the Advance Notice that
are filed with the Commission, and all
written communications relating to the
Advance Notice 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 website 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 NSCC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–NSCC–
2019–801 and should be submitted on
or before January 29, 2020.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020–00366 Filed 1–13–20; 8:45 am]
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January 8, 2020.
I. Introduction
Pursuant to Section 11A of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 608 of Regulation
National Market System (‘‘NMS’’)
thereunder,2 notice is hereby given that
on July 5, 2019,3 the Joint SelfRegulatory Organization Plan Governing
the Collection, Consolidation and
Dissemination of Quotation and
Transaction Information for NasdaqListed Securities Traded on Exchanges
on an Unlisted Trading Privileges Basis
(‘‘Nasdaq/UTP Plan’’ or ‘‘Plan’’) 4
participants (‘‘Participants’’) 5 filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
a proposal to amend the Nasdaq/UTP
Plan. The amendment represents the
44th amendment to the Nasdaq/UTP
Plan (‘‘Amendment’’). As described in
the Amendment, the Participants
propose to make mandatory a conflicts
1 15
U.S.C. 78k–1.
CFR 242.608.
3 See Letter from Robert Books, Chair, Nasdaq/
UTP Plan Operating Committee, to Vanessa
Countryman, Secretary, Commission, dated July 3,
2019 (‘‘Transmittal Letter’’).
4 The Plan governs the collection, processing, and
dissemination on a consolidated basis of quotation
information and transaction reports in Eligible
Securities for its Participants. This consolidated
information informs investors of the current
quotation and recent trade prices of Nasdaq
securities. It enables investors to ascertain from one
data source the current prices in all the markets
trading Nasdaq securities. The Plan serves as the
required transaction reporting plan for its
Participants, which is a prerequisite for their
trading Eligible Securities. See Securities Exchange
Act Release No. 55647 (April 19, 2007), 72 FR
20891 (April 26, 2007).
5 The Participants are the national securities
association and national securities exchanges that
submit trades and quotes to the Plan and include:
Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc.,
Cboe EDGA Exchange, Inc., Cboe EDGX Exchange,
Inc., Cboe Exchange, Inc., NYSE Chicago, Inc.,
Financial Industry Regulatory Authority, Inc., The
Investors’ Exchange LLC, Long-Term Stock
Exchange, Inc., Nasdaq BX, Inc., Nasdaq ISE, LLC,
Nasdaq PHLX, Inc., The Nasdaq Stock Market LLC,
New York Stock Exchange LLC, NYSE American
LLC, NYSE Arca, Inc., and NYSE National, Inc.
(each a ‘‘Participant’’ and collectively, the
‘‘Participants’’). Participants are also members of
the Plan’s Operating Committee.
2 17
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of interest disclosure regime that
currently is voluntary. Under the
current practice, which the Amendment
would make mandatory, the
Participants,6 the Processor,7 the
Administrator,8 and the members of the
Advisory Committee 9 (collectively, the
‘‘Disclosing Parties’’) 10 provide
responses to a set of questions designed
to provide transparency regarding
potential conflicts of interest of such
parties. Each of the Disclosing Parties’
responses are then made publicly
available on the Plan’s website.11 The
Participants state that they believe that
publicly providing these responses
increases transparency and confidence
in the governance of the Plan.12
The proposed Amendment has been
filed by the Participants pursuant to
Rule 608(b)(2) under Regulation NMS.13
The Commission is publishing this
notice to solicit comments from
interested persons on the proposed
Amendment.
The Commission notes that,
contemporaneously with the issuance of
this notice, it has issued a notice of
proposed order (‘‘Governance
Notice’’) 14 soliciting public comment
on a proposed order that would direct
the national securities exchanges and
the Financial Industry Regulatory
Authority, Inc. (collectively, ‘‘SROs’’) to
act jointly in developing and filing with
the Commission a proposed new single
national market system plan, which will
replace the existing national market
system plans that govern the public
dissemination of real-time, consolidated
equity market data for national market
system stocks (‘‘Equity Data Plans’’).
The Commission stated in the
Governance Notice its view that, among
other concerns,
conflicts of interest are inherent to the Equity
Data Plans’ current governance structure
6 See
Id.
‘‘Processor’’ is charged with collecting,
processing and preparing for distribution or
publication all Plan information. The Processor for
the Nasdaq/UTP Plan is Nasdaq Stock Market LLC
(‘‘Nasdaq’’).
8 The ‘‘Administrator’’ is charged with
administering the Plans to include data feed
approval, customer communications, contract
management, and related functions. The
Administrator of the Nasdaq/UTP Plan is Nasdaq.
9 ‘‘Advisory Committee members’’ are individuals
who represent particular types of financial services
firms or actors in the securities market, or who were
selected by Plan participants to be on the Advisory
Committee.
10 Information about the Processor,
Administrator, and Advisory Committee members
is available at https://www.utpplan.com/
governance.
11 See https://www.utpplan.com/governance.
12 See Transmittal Letter at 1.
13 17 CFR 242.608(b)(2).
14 See Securities Exchange Act Release No. 87906
(January 8, 2020).
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because some exchange Participants have a
dual role as both an SRO jointly responsible
for the operation of the Equity Data Plans and
part of a publicly held company that offers
proprietary data products. Moreover, an SRO
representative on the operating committee
may have direct responsibility for some or all
of an exchange’s proprietary data business.15
The Governance Notice solicits public
comment on a proposed order that
would direct the SROs to include
provisions in the New Data Plan (as
defined in the Governance Notice)
addressing several issues arising from
the current governance structure of the
Plan, and the proposed order discusses
the Commission’s view that the new
data plan should include a
comprehensive conflicts of interest
policy.
In addition, contemporaneously with
the publication of notice of the
Amendment set forth below, the
Commission also is publishing a
separate proposed amendment from the
Nasdaq/UTP Plan concerning a
confidentiality policy.
II. Text of the Amendment
Set forth below is the entirety of the
Amendment submission that the
Participants prepared and filed with the
Commission, which includes a
statement of the purpose and summary
of the Amendment, along with the
information required by Rules 608(a)
and 601(a) under the Act.16
A. Statement of the Purpose of the
Amendment
1. Background
With Exchanges permitted to offer
both proprietary market data products
and also acting as Participants in
running the public market data stream,
potential conflicts of interest are
inherent in the structure developed
under Regulation NMS. There may be
instances in which representatives from
the Participants and Advisory
Committee members have
responsibilities with respect to both
proprietary data and Securities
Information Processor (‘‘SIP’’) data.
Drawing on the expertise of persons
with such overlapping responsibilities
may give rise to potential conflicts of
interest, and to address such potential
conflicts of interest, the Participants
adopted a voluntary conflicts disclosure
regime.
After discussion among the
Participants and the Advisory
Committee at several meetings of the
Plan’s Operating Committee, the
Participants believe that a disclosure
15 Id.
at A–66 to A–67 (footnotes omitted).
17 CFR 242.608(a)(4) and (a)(5).
16 See
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regime is a pragmatic step to address
potential conflicts of interest.
As noted below, the Disclosing Parties
have voluntarily provided responses to
the disclosure regime questions. The
responses are available on the Plan’s
website. The purpose of the
Amendment is to make the disclosures
a requirement on a going forward basis
instead of relying on voluntary
disclosures.
Required Disclosures
As part of the disclosure regime, the
Participants propose that the
Participants, the Processors, the
Administrators, and members of the
Advisory Committee respond to
questions that are tailored to elicit
responses that disclose the potential
conflicts of interest.
The Participants propose that the
Participants respond to the following
questions and instructions:
• Is the Participant’s firm for profit or
not-for-profit? If the Participant’s firm is
for profit, is it publicly or privately
owned? If privately owned, list any
owner with an interest of 5% or more
of the Participant, where to the
Participant’s knowledge, such owner, or
any affiliate controlling, controlled by,
or under common control with the
owner, subscribes, directly or through a
third-party vendor, to SIP and/or
exchange Proprietary Market Data
products.
• Does the Participant firm offer realtime proprietary equity market data that
is filed with the SEC (‘‘Proprietary
Market Data’’)? If yes, does the firm
charge a fee for such offerings?
• Provide the names of the
representative and any alternative
representatives designated by the
Participant who are authorized under
the Plans to vote on behalf of the
Participant. Also provide a narrative
description of the representatives’ roles
within the Participant organization,
including the title of each individual as
well as any direct responsibilities
related to the development,
dissemination, sales, or marketing of the
Participant’s Proprietary Market Data,
and the nature of those responsibilities.
The Participants propose that the
Processors respond to the following
questions and instructions:
• Is the Processor an affiliate of or
affiliated with any Participant? If yes,
disclose the Participant(s)?
• Provide a narrative description of
the functions directly performed by the
manager employed by the Processor to
provide Processor services to the Plans
and the staff that reports to that manager
(collectively, the ‘‘Plan Processor’’).
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• Does the Plan Processor provide
any services for any Participant’s
Proprietary Market Data products or
other Plans? If yes, disclose the services
the Plan Processor performs and
identify which Plans. Does the Plan
Processor have any profit or loss
responsibility for a Participant’s
Proprietary Market Data products?
• List the policies and procedures
established to safeguard confidential
Plan information that is applicable to
the Plan Processor.
The Participants propose that the
Administrators respond to the following
questions and instructions:
• Is the Administrator an affiliate of
or affiliated with any Participant? If yes,
which Participant?
• Provide a narrative description of
the functions directly performed by
administrative services manager and the
staff that reports to that manager
(collectively, the ‘‘Plan Administrator’’).
• Does the Plan Administrator
provide any services for any
Participant’s Proprietary Market Data
products? If yes, what services? Does the
Plan Administrator have any profit or
loss responsibility for a Participant’s
Proprietary Market Data products?
• List the policies and procedures
established to safeguard confidential
Plan information that is applicable to
the Plan Administrator.
The Participants propose that the
Members of the Advisory Committee
respond to the following questions and
instructions:
• Provide the Advisor’s title and a
brief description of the Advisor’s role
within the firm.
• Does the Advisor have
responsibilities related to the firm’s use
or procurement of market data?
• Does the Advisor have
responsibilities related to the firm’s
trading or brokerage services?
• Does the Advisor’s firm use the SIP?
Does the Advisor’s firm use exchange
Proprietary Market Data products?
• Does the Advisor’s firm have an
ownership interest of 5% or more in one
or more Participants? If yes, list the
Participant(s).
• Does the Advisor actively
participate in any litigation against the
Plans?
The Participants will post the
responses to these questions on the
Plan’s website. If a Disclosing Party has
any material changes in its responses,
the Disclosing Party must promptly
update its disclosures. Additionally, the
Disclosing Parties will update the
disclosures on an annual basis to reflect
any changes. This annual update must
be made before the first quarterly
session meeting of each calendar year,
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which is generally held in midFebruary.
B. Governing or Constituent Documents
Not applicable.
C. Implementation of Amendment
Each of the Participants has approved
the amendments in accordance with
Section IV.C of the Nasdaq/UTP Plan.
The Participants also received and
incorporated feedback from the
Advisory Committee in preparing the
disclosure requirements.
D. Development and Implementation
Phases
The Disclosing Parties have
voluntarily completed, and the
Participants have posted, responses to
the questions outlined above on the
Plan’s website. The purpose of the
amendment, going forward, is to make
the disclosures a requirement rather
than relying on voluntary disclosures.
E. Analysis of Impact on Competition
The Participants believe that the
proposed amendments do not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Participants, together with the other
Disclosing Parties, have determined to
implement the disclosure regime
described herein. The Participants
believe that adopting this disclosure
regime is an important step in
addressing the potential conflicts of
interest.
The disclosure regime should increase
transparency in the governance of the
public market data stream, and
consequently, increase confidence in
the proper functioning of the Operating
Committee.
F. Written Understanding or Agreements
Relating to Interpretation of, or
Participation in, Plan
Not applicable.
G. Approval by Sponsors in Accordance
With Plan
Section IV.C.1 of the Nasdaq/UTP
Plan requires the Participants to
unanimously approve the amendment
proposed herein. They so approved it.
H. Description of Operation of Facility
Contemplated by the Proposed
Amendment
Not applicable.
I. Terms and Conditions of Access
Not applicable.
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J. Method of Determination and
Imposition, and Amount of, Fees and
Charges
Not applicable.
K. Method and Frequency of Processor
Evaluation
Not applicable.
L. Dispute Resolution
Not applicable.
III. Regulation NMS Rule 601(a)
A. Equity Securities for Which
Transaction Reports Shall Be Required
by the Plan
Not applicable.
B. Reporting Requirements
Not applicable.
C. Manner of Collecting, Processing,
Sequencing, Making Available and
Disseminating Last Sale Information
Not applicable.
D. Manner of Consolidation
Not applicable.
E. Standards and Methods Ensuring
Promptness, Accuracy and
Completeness of Transaction Reports
Not applicable.
F. Rules and Procedures Addressed to
Fraudulent or Manipulative
Dissemination
Not applicable.
G. Terms of Access to Transaction
Reports
Not applicable.
H. Identification of Marketplace of
Execution
Not applicable.
IV. Solicitation of Comments
The Commission seeks comments on
the Amendment. Interested persons are
invited to submit written data, views,
and comments concerning the foregoing,
including whether the Amendment is
consistent with the Act and the rules
thereunder. Among other things, the
Commission asks commenters to
consider whether the Amendment to the
current Plan addresses the concerns
outlined in the Governance Notice or
whether they should be further
enhanced regarding conflicts of interest
in national market system plan
governance. Accordingly, the
Commission requests comments on
matters including, but not limited to,
the following:
Proposed Disclosure
1. The text of the Amendment, set
forth above, states that: ‘‘With
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Exchanges permitted to offer both
proprietary market data products and
also acting as Participants in running
the public market data stream, potential
conflicts of interest are inherent in the
structure developed under Regulation
NMS.’’ The Amendment further notes
that ‘‘[t]here may be instances in which
representatives from the Participants
and Advisory Committee members have
responsibilities with respect to both
proprietary data and [SIP] data’’ and
that ‘‘such overlapping responsibilities
may give rise to potential conflicts of
interest.’’ Do commenters believe the
proposed Amendment adequately
addresses those potential conflicts?
Please provide sufficient detail to
support your views, including, to the
extent available, actual or possible
examples.
2. If commenters do not believe that
the proposed Amendment adequately
addresses the potential conflicts of
interest arising from the Plan’s current
governance structure, is that because
commenters believe the Amendment is
inadequate in any particular way? Or is
it because commenters believe that the
potential conflicts of interest have not
been characterized accurately? If so, in
what ways do commenters believe the
Amendment fails to describe the current
environment and potential conflicts of
interest?
3. In their filing, the Participants state
that the proposed questions in the
disclosure document are tailored to
elicit information relevant to assess the
extent of an individual’s potential
conflict of interests with the Plan. Do
commenters believe that the questions
for Participants, Processors,
Administrators, and members of the
Advisory Committee are sufficient to
elicit information to provide insight into
all potential conflicts? Will public
availability of the responses increase
transparency and confidence in the
governance of the Plan? Do commenters
believe the proposed disclosures are
sufficient or should enhanced
disclosures be required? If so, what
additional items of disclosure should be
required and why? Do commenters
believe that additional disclosures
should be required for the
representatives and alternative
representatives of a Participant,
Processor, Administrator, or member of
the Advisory Committee?
4. In their filing, the Participants state
that a disclosure-based regime is a
pragmatic step to address potential
conflicts of interests. Do commenters
agree or disagree with that statement?
Do commenters believe that a
disclosure-based regime is sufficient to
address the potential conflicts that
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Participants, Processors, Administrators,
and members of the Advisory
Committee may face in their roles
within the Plan?
5. Do commenters think any other
types of persons should be required to
provide disclosures, such as services
providers to the Administrator that
provide audit, accounting, or other
professional services? As an example, if
auditing services are outsourced to a
Participant’s employer or an affiliate
that also is offering proprietary data
products to SIP customers and/or
conducting audits for those products,
should that entity also be required to
disclose its conflicts and otherwise be
subject to the terms of the conflicts of
interest policy, even if it is neither the
Administrator nor Processor?
6. Do commenters believe that an
alternative approach could better
identify and address conflicts of
interests among Participants, Processors,
Administrators, and the Advisory
Committee, as well as auditors? For
example, should a disclosure regime be
supplemented with certain prohibited
conduct or procedural requirements,
such as a prohibition on a Participant
voting when that Participant has direct
business responsibilities related to
producing, selling, or managing
competing data products? If you believe
an alternative approach is appropriate,
please provide details on any such
alternative approach. Do commenters
regard the Plan’s ability to identify and
protect the confidentiality of
competitive information as an important
component to the Plan’s ability to
manage conflicts of interest? If so, how
do commenters regard the interaction
between this proposed Amendment and
the separate proposed Plan amendment
to govern treatment of confidential
information noted above?
7. Do commenters believe that the
proposed disclosure questions for each
party are sufficient to identify the
specific relationships that may give rise
to a conflict under the Plan and related
information? Separately, do commenters
believe that the proposed questions
effectively require all material facts
necessary to not only identify the nature
of the conflict, but also the effect it may
have on the Plan? Should the
Amendment require more disclosure of
such potential effects or greater details
with respect to the disclosures that are
made?
8. Do commenters believe that the
Plan should require additional public
disclosures of any personal, business, or
financial interests, and any employment
or other commercial relationships that
could materially affect the ability of a
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party to be impartial regarding actions
of the Plan?
9. The Participants propose to
continue to post the conflicts of interest
disclosures for each party on the Plan’s
website. Do commenters believe that
doing so provides sufficient public
notice of potential conflicts? If not, in
what other manner should the
disclosures be made public? For
example, should Participants be
required to acknowledge potential
conflicts when discussing specific
matters at Operating Committee
meetings or subcommittee meetings that
present a conflict? Should a complete
set of the disclosures be included in the
materials for each Plan meeting? Is the
timing clear with respect to the
requirement that a Disclosing Party
‘‘promptly’’ update its disclosures, or
should the Amendment be more
specific? What do commenters consider
sufficiently prompt? Within one week?
Within 30 days? Some other timeframe?
10. As proposed, the Amendment
states that disclosures will be made and
updated annually or upon any material
change. Do commenters believe that
these intervals are sufficient, or should
updates be required more frequently
such as in advance of scheduled Plan
meetings? What constitutes a ‘‘material’’
change that should require the filing of
an amended disclosure? Please explain.
Proposed Disclosure for Participants
1. Do commenters believe that any
individual representing a Participant
that is directly involved in the
management, development, pricing, or
sale of proprietary data products offered
to SIP customers should participate in
discussions and related Plan votes
regarding the pricing of SIP data
products? If so, how do commenters
believe Participants should address the
conflicts their representatives may face
in their dual role of pricing and
developing SIP data products as well as
their own proprietary data products?
2. Do commenters believe that a
Participant should be recused from
voting when it or an affiliate is
competing for a contract to serve as a
Processor for the Plan? Why or why not?
Are there any other scenarios that
present conflicts that should result in a
Participant being recused from voting?
3. Do commenters believe recusal on
certain Plan action when a potential
conflict is present is an appropriate
mechanism to address conflicts? If so,
under what circumstances? If
applicable, do commenters believe that
recusal should be mandatory or should
it be voluntary? Why or why not?
4. Do commenters believe that
Operating Committee members should
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be permitted to raise the issue of a
potential conflict of interest of another
Participant for discussion before the
Operating Committee, even if the
Participant did not itself disclose the
potential conflict? Do commenters
believe that the Operating Committee
should have the ability to take action in
response to disclosed or undisclosed
conflicts, such as requiring the
Participant to recuse itself from a certain
discussion or vote on a particular
matter? If so, how should the Operating
Committee take such action? Should the
Participants vote on recusal or should
the Participants seek input from the
Advisory Committee? Why or why not?
Proposed Disclosures for Processors
1. Do commenters believe that the
proposed disclosure questions for the
Processor are sufficient to identify the
specific circumstances in which a
Participant is both voting on an
Operating Committee and competing to
act as Processor for the Plan? Do
commenters believe that the disclosure
questions are tailored to the role that the
Processor performs and the fact that the
Processor is present at Plan meetings
but do not vote on Plan matters, or
should different or additional disclosure
be required for the Processor?
Separately, do commenters believe that
the proposed Processor questions
effectively require all material facts
necessary to not only identify the nature
of the potential conflict, but also the
effect it may have on the Plan? Should
the Amendment require more disclosure
of such potential effects? Should the
Amendment elaborate on what ‘‘profit
or loss responsibility for a Participant’s
Proprietary Market Data products’’
means in the context of the required
disclosures? Alternatively, do
commenters believe that the Plan’s
separately-proposed confidentiality
proposal would address some of the
potential effects of conflicts of interests
if approved?
2. Do commenters have concerns
about affiliations between a Plan’s
Processor and a Participant? If so, do
commenters believe the conflicts of
interest disclosure is sufficient to
address those concerns? Should the
Amendment require a description of the
nature of the affiliation?
3. Do commenters believe that a
Participant or its affiliate that is
competing for a contract to serve as a
Processor for the Plan should participate
in discussions and related Plan votes
regarding the selection of the Processor
for the Plan? If so, how do commenters
believe Participants should address the
conflicts they face in their dual role of
competing to serve as a Processor while
VerDate Sep<11>2014
18:41 Jan 13, 2020
Jkt 250001
serving as a Participant that participates
in the discussion of, and ultimately
votes on, selection of the Processor?
Proposed Disclosures for the
Administrator
1. Do commenters believe that the
proposed disclosure questions for the
Administrator are sufficient to identify
the specific interests and employment,
commercial or other relationships that
may give rise to a conflict under the
Plan? Separately, do commenters
believe that the proposed Administrator
questions effectively require all material
facts necessary to not only identify the
nature of the conflict, but also the effect
it may have on the Plan? Should the
Amendment require more disclosure of
such potential effects or greater details
with respect to the disclosures that are
made?
2. To the extent that the
Administrator enlists assistance from an
auditor or any other professional
services subcontractor for any of the
Plan(s), and the subcontractor is
affiliated with an entity that is involved
in the development, pricing, or sale of
proprietary data products offered to SIP
customers, or is subject to any other
conflict, should all of the disclosures
and conflicts policies referenced above
also be applicable to them? Or do
commenters believe that concerns
arising from potential conflicts of
interest would be more appropriately
addressed for a subcontractor if the
subcontractor could attest that it is
sufficiently walled-off from the
proprietary data business of its affiliate?
Proposed Disclosures for Members of the
Advisory Committee
1. Do commenters believe that the
proposed disclosure questions for
Advisory Committee members are
sufficient to identify the specific
interests and employment, commercial,
or other relationships that may give rise
to a conflict under the Plan? Separately,
do commenters believe that the
proposed Advisory Committee
members’ questions effectively require
all material facts necessary to not only
identify the nature of the conflict, but
also the effect it may have on the Plan?
Should the Amendment require more
disclosure of such potential effects or
greater details with respect to the
disclosures that are made? Should the
Amendment require Members of the
Advisory Committee to identify
affiliations with any Disclosing Party,
and clarify that both direct and indirect
ownership interests in a Participant are
subject to disclosure? Is it clear what
‘‘actively participate in any litigation
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
against the Plans’’ means, or should the
Amendment require additional detail?
2. Do commenters believe that the
Plan should require additional public
disclosures of any personal, business,
commercial, or financial interests, and
any employment relationships that
could materially affect the ability of the
Advisory Committee Member to
participate impartially in discussing
actions of the Plan?
3. Do commenters believe that
Advisory Committee members that
purchase SIP data products should
participate in discussions regarding the
pricing of SIP data products? If so, how
do commenters believe Advisory
Committee members should address
that potential conflict?
Participant Statement Regarding
Competition
1. The Participants state in their filing
that the Amendment does not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Do
commenters believe that the
Amendment to the Plan imposes any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act? Please
explain.
2. What effect might the Amendment
have on competition, if any? Please
explain. How would any effect on
competition from the proposal benefit or
harm the national market system and/or
various market participants? Please
describe and explain how, if at all,
aspects of the national market system or
different market participants would be
affected. Please support any response
with data, if possible.
Comments may be submitted by any
of the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number S7–
24–89 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number File Number S7–24–89. 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
website (https://www.sec.gov/rules/
E:\FR\FM\14JAN1.SGM
14JAN1
Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Notices
sro.shtml). Copies of the submission, all
written statements with respect to the
proposed Amendment that are filed
with the Commission, and all written
communications relating to the
proposed Amendment between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website 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 website
viewing and printing at the principal
office of the Plan. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions.
You should submit only information
that you wish to make available
publicly. All submissions should refer
to File Number S7–24–89 and should be
submitted on or before February 4, 2020.
By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020–00357 Filed 1–13–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87909; File No. SR–CTA/
CQ–2019–04]
Consolidated Tape Association; Notice
of Filing of the Thirty-Third
Substantive Amendment to the Second
Restatement of the CTA Plan and
Twenty-Fourth Substantive
Amendment to the Restated CQ Plan
January 8, 2020.
lotter on DSKBCFDHB2PROD with NOTICES
I. Introduction
Pursuant to Section 11A of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 608 of Regulation
National Market System (‘‘NMS’’)
thereunder,2 notice is hereby given that
on November 25, 2019,3 the
Consolidated Tape Association Plan
(‘‘CTA Plan’’) participants
(‘‘Participants’’) 4 filed with the
1 15
U.S.C 78k–1(a)(3).
CFR 242.608.
3 See Letter from Robert Books, Chairman,
Operating Committee, CTA/CQ Plans, to Vanessa
Countryman, Secretary, Commission, dated
November 19, 2019 (‘‘Transmittal Letter’’).
4 The Participants are the national securities
association and national securities exchanges that
submit trades and quotes to the Plans and include:
2 17
VerDate Sep<11>2014
18:41 Jan 13, 2020
Jkt 250001
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) a proposal to
amend the Second Restatement of the
CTA Plan and the Restated Consolidated
Quotation Plan (‘‘CQ Plan’’) (each a
‘‘Plan’’ and together with the CTA Plan,
the ‘‘Plans’’).5 These amendments
represent the Thirty-Third Substantive
Amendment to the CTA Plan and
Twenty-Fourth Substantive Amendment
to the CQ Plan (‘‘Amendments’’). As
described in the Amendments, the
Participants propose to adopt a
confidentiality policy to provide
guidelines for the Operating Committee
and the Advisory Committee of the
Plans, and all subcommittees thereof,
regarding the confidentiality of any data
or information generated, accessed, or
transmitted to the Operating Committee,
as well as discussions occurring at a
meeting of the Operating Committee or
any subcommittee. According to the
Participants, the confidentiality policy
is designed broadly to (i) protect against
any potential misuse of confidential
information, which includes, but is not
limited to, protecting confidential
information obtained or generated by
the Administrator and Processor in
connection with the operation of the
Plans as well as (ii) to allow the
Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc.,
Cboe EDGA Exchange, Inc., Cboe EDGX Exchange,
Inc., Cboe Exchange, Inc., Financial Industry
Regulatory Authority, Inc., The Investors’ Exchange
LLC, Long-Term Stock Exchange, Inc., Nasdaq BX,
Inc., Nasdaq ISE, LLC, Nasdaq PHLX, Inc., The
Nasdaq Stock Market LLC, New York Stock
Exchange LLC, NYSE American LLC, NYSE Arca,
Inc., NYSE Chicago, Inc., and NYSE National, Inc.
(each a ‘‘Participant’’ and collectively, the
‘‘Participants’’). Participants also are members of
the Plans’ Operating Committees. Other parties
include the ‘‘Processor,’’ who is charged with
collecting, processing and preparing for distribution
or publication all Plan information. The
‘‘Administrator’’ is charged with administering the
Plan to include data feed approval, customer
communications, contract management, and related
functions. The ‘‘Advisory Committee members’’ are
individuals who represent particular types of
financial services firms or actors in the securities
market, and who were selected by Plan participants
to be on the Advisory Committee. A list of the
Processor, Administrator, and Advisory Committee
members is available at https://www.ctaplan.com/
governance.
5 See Securities Exchange Act Release Nos. 10787
(May 10, 1974), 39 FR 17799 (May 20, 1974)
(declaring the CTA Plan effective); 15009 (July 28,
1978), 43 FR 34851 (August 7, 1978) (temporarily
authorizing the CQ Plan); and 16518 (January 22,
1980), 45 FR 6521 (January 28, 1980) (permanently
authorizing the CQ Plan). The most recent
restatement of both Plans was in 1995. The CTA
Plan, pursuant to which markets collect and
disseminate last sale price information for nonNASDAQ listed securities, is a ‘‘transaction
reporting plan’’ under Rule 601 under the Act, 17
CFR 242.601, and a ‘‘national market system plan’’
under Rule 608 under the Act, 17 CFR 242.608. The
CQ Plan, pursuant to which markets collect and
disseminate bid/ask quotation information for listed
securities, is a ‘‘national market system plan’’ under
Rule 608 under the Act, 17 CFR 242.608.
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
2207
Operating Committee to disclose
confidential information to the Advisory
Committee to obtain its input without
concern that such confidential
information may be shared beyond the
Advisory Committee. The Participants
believe that the proposed Amendments
will allow for more sharing of
information with the Advisory
Committee regarding the operation of
the Plans and elicit more input by the
Advisory Committee on Plan matters
that might otherwise be deemed
confidential.6
The proposed Amendments have been
filed by the Participants pursuant to
Rule 608(b)(2) under Regulation NMS.7
The Commission is publishing this
notice to solicit comments from
interested persons on the proposed
Amendments.
The Commission notes that,
contemporaneously with the issuance of
this notice, it has issued a notice of
proposed order (‘‘Governance Notice’’) 8
soliciting public comment on a
proposed order that would direct the
national securities exchanges and the
Financial Industry Regulatory
Authority, Inc. (collectively, ‘‘SROs’’) to
act jointly in developing and filing with
the Commission a proposed new single
national market system plan, which will
replace the existing national market
system plans that govern the public
dissemination of real-time, consolidated
equity market data for national market
system stocks (‘‘Equity Data Plans’’).
The Commission stated in the
Governance Notice its view that, among
other concerns,
[i]n the operation of the Equity Data Plans,
Participants and Participant representatives
have been privy to confidential and
proprietary information of substantial
commercial or competitive value, including,
among other things, information about core
data usage, the [securities information
processors’ or] SIPs’ customer lists, financial
information, and subscriber audit results.
However, the terms of the Equity Data Plans
do not address commercial use of
confidential or proprietary information by
the Participants.9
The Governance Notice solicits public
comment on a proposed order that
would direct the SROs to include
provisions in the New Data Plan (as
defined in the Governance Notice)
addressing several issues arising from
the current governance structure of the
Plans, and discusses the Commission’s
view that the new data plan should
6 See
Transmittal Letter at 1.
CFR 242.608(b)(2).
8 See Securities Exchange Act Release No. 87906
(January 8, 2020).
9 Id. at A–67 (footnotes omitted).
7 17
E:\FR\FM\14JAN1.SGM
14JAN1
]]>Agencies
[Federal Register Volume 85, Number 9 (Tuesday, January 14, 2020)]
[Notices]
[Pages 2202-2207]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00357]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87908; File No. S7-24-89]
Joint Industry Plan; Notice of Filing of the Forty-Fourth
Amendment to the Joint Self-Regulatory Organization Plan Governing the
Collection, Consolidation and Dissemination of Quotation and
Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privileges Basis
January 8, 2020.
I. Introduction
Pursuant to Section 11A of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 608 of Regulation National Market System
(``NMS'') thereunder,\2\ notice is hereby given that on July 5,
2019,\3\ the Joint Self-Regulatory Organization Plan Governing the
Collection, Consolidation and Dissemination of Quotation and
Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privileges Basis (``Nasdaq/UTP Plan''
or ``Plan'') \4\ participants (``Participants'') \5\ filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') a
proposal to amend the Nasdaq/UTP Plan. The amendment represents the
44th amendment to the Nasdaq/UTP Plan (``Amendment''). As described in
the Amendment, the Participants propose to make mandatory a conflicts
[[Page 2203]]
of interest disclosure regime that currently is voluntary. Under the
current practice, which the Amendment would make mandatory, the
Participants,\6\ the Processor,\7\ the Administrator,\8\ and the
members of the Advisory Committee \9\ (collectively, the ``Disclosing
Parties'') \10\ provide responses to a set of questions designed to
provide transparency regarding potential conflicts of interest of such
parties. Each of the Disclosing Parties' responses are then made
publicly available on the Plan's website.\11\ The Participants state
that they believe that publicly providing these responses increases
transparency and confidence in the governance of the Plan.\12\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78k-1.
\2\ 17 CFR 242.608.
\3\ See Letter from Robert Books, Chair, Nasdaq/UTP Plan
Operating Committee, to Vanessa Countryman, Secretary, Commission,
dated July 3, 2019 (``Transmittal Letter'').
\4\ The Plan governs the collection, processing, and
dissemination on a consolidated basis of quotation information and
transaction reports in Eligible Securities for its Participants.
This consolidated information informs investors of the current
quotation and recent trade prices of Nasdaq securities. It enables
investors to ascertain from one data source the current prices in
all the markets trading Nasdaq securities. The Plan serves as the
required transaction reporting plan for its Participants, which is a
prerequisite for their trading Eligible Securities. See Securities
Exchange Act Release No. 55647 (April 19, 2007), 72 FR 20891 (April
26, 2007).
\5\ The Participants are the national securities association and
national securities exchanges that submit trades and quotes to the
Plan and include: Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc.,
Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe Exchange,
Inc., NYSE Chicago, Inc., Financial Industry Regulatory Authority,
Inc., The Investors' Exchange LLC, Long-Term Stock Exchange, Inc.,
Nasdaq BX, Inc., Nasdaq ISE, LLC, Nasdaq PHLX, Inc., The Nasdaq
Stock Market LLC, New York Stock Exchange LLC, NYSE American LLC,
NYSE Arca, Inc., and NYSE National, Inc. (each a ``Participant'' and
collectively, the ``Participants''). Participants are also members
of the Plan's Operating Committee.
\6\ See Id.
\7\ The ``Processor'' is charged with collecting, processing and
preparing for distribution or publication all Plan information. The
Processor for the Nasdaq/UTP Plan is Nasdaq Stock Market LLC
(``Nasdaq'').
\8\ The ``Administrator'' is charged with administering the
Plans to include data feed approval, customer communications,
contract management, and related functions. The Administrator of the
Nasdaq/UTP Plan is Nasdaq.
\9\ ``Advisory Committee members'' are individuals who represent
particular types of financial services firms or actors in the
securities market, or who were selected by Plan participants to be
on the Advisory Committee.
\10\ Information about the Processor, Administrator, and
Advisory Committee members is available at https://www.utpplan.com/governance.
\11\ See https://www.utpplan.com/governance.
\12\ See Transmittal Letter at 1.
---------------------------------------------------------------------------
The proposed Amendment has been filed by the Participants pursuant
to Rule 608(b)(2) under Regulation NMS.\13\ The Commission is
publishing this notice to solicit comments from interested persons on
the proposed Amendment.
---------------------------------------------------------------------------
\13\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------
The Commission notes that, contemporaneously with the issuance of
this notice, it has issued a notice of proposed order (``Governance
Notice'') \14\ soliciting public comment on a proposed order that would
direct the national securities exchanges and the Financial Industry
Regulatory Authority, Inc. (collectively, ``SROs'') to act jointly in
developing and filing with the Commission a proposed new single
national market system plan, which will replace the existing national
market system plans that govern the public dissemination of real-time,
consolidated equity market data for national market system stocks
(``Equity Data Plans''). The Commission stated in the Governance Notice
its view that, among other concerns,
---------------------------------------------------------------------------
\14\ See Securities Exchange Act Release No. 87906 (January 8,
2020).
conflicts of interest are inherent to the Equity Data Plans' current
governance structure because some exchange Participants have a dual
role as both an SRO jointly responsible for the operation of the
Equity Data Plans and part of a publicly held company that offers
proprietary data products. Moreover, an SRO representative on the
operating committee may have direct responsibility for some or all
of an exchange's proprietary data business.\15\
---------------------------------------------------------------------------
\15\ Id. at A-66 to A-67 (footnotes omitted).
The Governance Notice solicits public comment on a proposed order
that would direct the SROs to include provisions in the New Data Plan
(as defined in the Governance Notice) addressing several issues arising
from the current governance structure of the Plan, and the proposed
order discusses the Commission's view that the new data plan should
include a comprehensive conflicts of interest policy.
In addition, contemporaneously with the publication of notice of
the Amendment set forth below, the Commission also is publishing a
separate proposed amendment from the Nasdaq/UTP Plan concerning a
confidentiality policy.
II. Text of the Amendment
Set forth below is the entirety of the Amendment submission that
the Participants prepared and filed with the Commission, which includes
a statement of the purpose and summary of the Amendment, along with the
information required by Rules 608(a) and 601(a) under the Act.\16\
---------------------------------------------------------------------------
\16\ See 17 CFR 242.608(a)(4) and (a)(5).
---------------------------------------------------------------------------
A. Statement of the Purpose of the Amendment
1. Background
With Exchanges permitted to offer both proprietary market data
products and also acting as Participants in running the public market
data stream, potential conflicts of interest are inherent in the
structure developed under Regulation NMS. There may be instances in
which representatives from the Participants and Advisory Committee
members have responsibilities with respect to both proprietary data and
Securities Information Processor (``SIP'') data. Drawing on the
expertise of persons with such overlapping responsibilities may give
rise to potential conflicts of interest, and to address such potential
conflicts of interest, the Participants adopted a voluntary conflicts
disclosure regime.
After discussion among the Participants and the Advisory Committee
at several meetings of the Plan's Operating Committee, the Participants
believe that a disclosure regime is a pragmatic step to address
potential conflicts of interest.
As noted below, the Disclosing Parties have voluntarily provided
responses to the disclosure regime questions. The responses are
available on the Plan's website. The purpose of the Amendment is to
make the disclosures a requirement on a going forward basis instead of
relying on voluntary disclosures.
Required Disclosures
As part of the disclosure regime, the Participants propose that the
Participants, the Processors, the Administrators, and members of the
Advisory Committee respond to questions that are tailored to elicit
responses that disclose the potential conflicts of interest.
The Participants propose that the Participants respond to the
following questions and instructions:
Is the Participant's firm for profit or not-for-profit? If
the Participant's firm is for profit, is it publicly or privately
owned? If privately owned, list any owner with an interest of 5% or
more of the Participant, where to the Participant's knowledge, such
owner, or any affiliate controlling, controlled by, or under common
control with the owner, subscribes, directly or through a third-party
vendor, to SIP and/or exchange Proprietary Market Data products.
Does the Participant firm offer real-time proprietary
equity market data that is filed with the SEC (``Proprietary Market
Data'')? If yes, does the firm charge a fee for such offerings?
Provide the names of the representative and any
alternative representatives designated by the Participant who are
authorized under the Plans to vote on behalf of the Participant. Also
provide a narrative description of the representatives' roles within
the Participant organization, including the title of each individual as
well as any direct responsibilities related to the development,
dissemination, sales, or marketing of the Participant's Proprietary
Market Data, and the nature of those responsibilities.
The Participants propose that the Processors respond to the
following questions and instructions:
Is the Processor an affiliate of or affiliated with any
Participant? If yes, disclose the Participant(s)?
Provide a narrative description of the functions directly
performed by the manager employed by the Processor to provide Processor
services to the Plans and the staff that reports to that manager
(collectively, the ``Plan Processor'').
[[Page 2204]]
Does the Plan Processor provide any services for any
Participant's Proprietary Market Data products or other Plans? If yes,
disclose the services the Plan Processor performs and identify which
Plans. Does the Plan Processor have any profit or loss responsibility
for a Participant's Proprietary Market Data products?
List the policies and procedures established to safeguard
confidential Plan information that is applicable to the Plan Processor.
The Participants propose that the Administrators respond to the
following questions and instructions:
Is the Administrator an affiliate of or affiliated with
any Participant? If yes, which Participant?
Provide a narrative description of the functions directly
performed by administrative services manager and the staff that reports
to that manager (collectively, the ``Plan Administrator'').
Does the Plan Administrator provide any services for any
Participant's Proprietary Market Data products? If yes, what services?
Does the Plan Administrator have any profit or loss responsibility for
a Participant's Proprietary Market Data products?
List the policies and procedures established to safeguard
confidential Plan information that is applicable to the Plan
Administrator.
The Participants propose that the Members of the Advisory Committee
respond to the following questions and instructions:
Provide the Advisor's title and a brief description of the
Advisor's role within the firm.
Does the Advisor have responsibilities related to the
firm's use or procurement of market data?
Does the Advisor have responsibilities related to the
firm's trading or brokerage services?
Does the Advisor's firm use the SIP? Does the Advisor's
firm use exchange Proprietary Market Data products?
Does the Advisor's firm have an ownership interest of 5%
or more in one or more Participants? If yes, list the Participant(s).
Does the Advisor actively participate in any litigation
against the Plans?
The Participants will post the responses to these questions on the
Plan's website. If a Disclosing Party has any material changes in its
responses, the Disclosing Party must promptly update its disclosures.
Additionally, the Disclosing Parties will update the disclosures on an
annual basis to reflect any changes. This annual update must be made
before the first quarterly session meeting of each calendar year, which
is generally held in mid-February.
B. Governing or Constituent Documents
Not applicable.
C. Implementation of Amendment
Each of the Participants has approved the amendments in accordance
with Section IV.C of the Nasdaq/UTP Plan. The Participants also
received and incorporated feedback from the Advisory Committee in
preparing the disclosure requirements.
D. Development and Implementation Phases
The Disclosing Parties have voluntarily completed, and the
Participants have posted, responses to the questions outlined above on
the Plan's website. The purpose of the amendment, going forward, is to
make the disclosures a requirement rather than relying on voluntary
disclosures.
E. Analysis of Impact on Competition
The Participants believe that the proposed amendments do not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Participants, together with
the other Disclosing Parties, have determined to implement the
disclosure regime described herein. The Participants believe that
adopting this disclosure regime is an important step in addressing the
potential conflicts of interest.
The disclosure regime should increase transparency in the
governance of the public market data stream, and consequently, increase
confidence in the proper functioning of the Operating Committee.
F. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, Plan
Not applicable.
G. Approval by Sponsors in Accordance With Plan
Section IV.C.1 of the Nasdaq/UTP Plan requires the Participants to
unanimously approve the amendment proposed herein. They so approved it.
H. Description of Operation of Facility Contemplated by the Proposed
Amendment
Not applicable.
I. Terms and Conditions of Access
Not applicable.
J. Method of Determination and Imposition, and Amount of, Fees and
Charges
Not applicable.
K. Method and Frequency of Processor Evaluation
Not applicable.
L. Dispute Resolution
Not applicable.
III. Regulation NMS Rule 601(a)
A. Equity Securities for Which Transaction Reports Shall Be Required by
the Plan
Not applicable.
B. Reporting Requirements
Not applicable.
C. Manner of Collecting, Processing, Sequencing, Making Available and
Disseminating Last Sale Information
Not applicable.
D. Manner of Consolidation
Not applicable.
E. Standards and Methods Ensuring Promptness, Accuracy and Completeness
of Transaction Reports
Not applicable.
F. Rules and Procedures Addressed to Fraudulent or Manipulative
Dissemination
Not applicable.
G. Terms of Access to Transaction Reports
Not applicable.
H. Identification of Marketplace of Execution
Not applicable.
IV. Solicitation of Comments
The Commission seeks comments on the Amendment. Interested persons
are invited to submit written data, views, and comments concerning the
foregoing, including whether the Amendment is consistent with the Act
and the rules thereunder. Among other things, the Commission asks
commenters to consider whether the Amendment to the current Plan
addresses the concerns outlined in the Governance Notice or whether
they should be further enhanced regarding conflicts of interest in
national market system plan governance. Accordingly, the Commission
requests comments on matters including, but not limited to, the
following:
Proposed Disclosure
1. The text of the Amendment, set forth above, states that: ``With
[[Page 2205]]
Exchanges permitted to offer both proprietary market data products and
also acting as Participants in running the public market data stream,
potential conflicts of interest are inherent in the structure developed
under Regulation NMS.'' The Amendment further notes that ``[t]here may
be instances in which representatives from the Participants and
Advisory Committee members have responsibilities with respect to both
proprietary data and [SIP] data'' and that ``such overlapping
responsibilities may give rise to potential conflicts of interest.'' Do
commenters believe the proposed Amendment adequately addresses those
potential conflicts? Please provide sufficient detail to support your
views, including, to the extent available, actual or possible examples.
2. If commenters do not believe that the proposed Amendment
adequately addresses the potential conflicts of interest arising from
the Plan's current governance structure, is that because commenters
believe the Amendment is inadequate in any particular way? Or is it
because commenters believe that the potential conflicts of interest
have not been characterized accurately? If so, in what ways do
commenters believe the Amendment fails to describe the current
environment and potential conflicts of interest?
3. In their filing, the Participants state that the proposed
questions in the disclosure document are tailored to elicit information
relevant to assess the extent of an individual's potential conflict of
interests with the Plan. Do commenters believe that the questions for
Participants, Processors, Administrators, and members of the Advisory
Committee are sufficient to elicit information to provide insight into
all potential conflicts? Will public availability of the responses
increase transparency and confidence in the governance of the Plan? Do
commenters believe the proposed disclosures are sufficient or should
enhanced disclosures be required? If so, what additional items of
disclosure should be required and why? Do commenters believe that
additional disclosures should be required for the representatives and
alternative representatives of a Participant, Processor, Administrator,
or member of the Advisory Committee?
4. In their filing, the Participants state that a disclosure-based
regime is a pragmatic step to address potential conflicts of interests.
Do commenters agree or disagree with that statement? Do commenters
believe that a disclosure-based regime is sufficient to address the
potential conflicts that Participants, Processors, Administrators, and
members of the Advisory Committee may face in their roles within the
Plan?
5. Do commenters think any other types of persons should be
required to provide disclosures, such as services providers to the
Administrator that provide audit, accounting, or other professional
services? As an example, if auditing services are outsourced to a
Participant's employer or an affiliate that also is offering
proprietary data products to SIP customers and/or conducting audits for
those products, should that entity also be required to disclose its
conflicts and otherwise be subject to the terms of the conflicts of
interest policy, even if it is neither the Administrator nor Processor?
6. Do commenters believe that an alternative approach could better
identify and address conflicts of interests among Participants,
Processors, Administrators, and the Advisory Committee, as well as
auditors? For example, should a disclosure regime be supplemented with
certain prohibited conduct or procedural requirements, such as a
prohibition on a Participant voting when that Participant has direct
business responsibilities related to producing, selling, or managing
competing data products? If you believe an alternative approach is
appropriate, please provide details on any such alternative approach.
Do commenters regard the Plan's ability to identify and protect the
confidentiality of competitive information as an important component to
the Plan's ability to manage conflicts of interest? If so, how do
commenters regard the interaction between this proposed Amendment and
the separate proposed Plan amendment to govern treatment of
confidential information noted above?
7. Do commenters believe that the proposed disclosure questions for
each party are sufficient to identify the specific relationships that
may give rise to a conflict under the Plan and related information?
Separately, do commenters believe that the proposed questions
effectively require all material facts necessary to not only identify
the nature of the conflict, but also the effect it may have on the
Plan? Should the Amendment require more disclosure of such potential
effects or greater details with respect to the disclosures that are
made?
8. Do commenters believe that the Plan should require additional
public disclosures of any personal, business, or financial interests,
and any employment or other commercial relationships that could
materially affect the ability of a party to be impartial regarding
actions of the Plan?
9. The Participants propose to continue to post the conflicts of
interest disclosures for each party on the Plan's website. Do
commenters believe that doing so provides sufficient public notice of
potential conflicts? If not, in what other manner should the
disclosures be made public? For example, should Participants be
required to acknowledge potential conflicts when discussing specific
matters at Operating Committee meetings or subcommittee meetings that
present a conflict? Should a complete set of the disclosures be
included in the materials for each Plan meeting? Is the timing clear
with respect to the requirement that a Disclosing Party ``promptly''
update its disclosures, or should the Amendment be more specific? What
do commenters consider sufficiently prompt? Within one week? Within 30
days? Some other timeframe?
10. As proposed, the Amendment states that disclosures will be made
and updated annually or upon any material change. Do commenters believe
that these intervals are sufficient, or should updates be required more
frequently such as in advance of scheduled Plan meetings? What
constitutes a ``material'' change that should require the filing of an
amended disclosure? Please explain.
Proposed Disclosure for Participants
1. Do commenters believe that any individual representing a
Participant that is directly involved in the management, development,
pricing, or sale of proprietary data products offered to SIP customers
should participate in discussions and related Plan votes regarding the
pricing of SIP data products? If so, how do commenters believe
Participants should address the conflicts their representatives may
face in their dual role of pricing and developing SIP data products as
well as their own proprietary data products?
2. Do commenters believe that a Participant should be recused from
voting when it or an affiliate is competing for a contract to serve as
a Processor for the Plan? Why or why not? Are there any other scenarios
that present conflicts that should result in a Participant being
recused from voting?
3. Do commenters believe recusal on certain Plan action when a
potential conflict is present is an appropriate mechanism to address
conflicts? If so, under what circumstances? If applicable, do
commenters believe that recusal should be mandatory or should it be
voluntary? Why or why not?
4. Do commenters believe that Operating Committee members should
[[Page 2206]]
be permitted to raise the issue of a potential conflict of interest of
another Participant for discussion before the Operating Committee, even
if the Participant did not itself disclose the potential conflict? Do
commenters believe that the Operating Committee should have the ability
to take action in response to disclosed or undisclosed conflicts, such
as requiring the Participant to recuse itself from a certain discussion
or vote on a particular matter? If so, how should the Operating
Committee take such action? Should the Participants vote on recusal or
should the Participants seek input from the Advisory Committee? Why or
why not?
Proposed Disclosures for Processors
1. Do commenters believe that the proposed disclosure questions for
the Processor are sufficient to identify the specific circumstances in
which a Participant is both voting on an Operating Committee and
competing to act as Processor for the Plan? Do commenters believe that
the disclosure questions are tailored to the role that the Processor
performs and the fact that the Processor is present at Plan meetings
but do not vote on Plan matters, or should different or additional
disclosure be required for the Processor? Separately, do commenters
believe that the proposed Processor questions effectively require all
material facts necessary to not only identify the nature of the
potential conflict, but also the effect it may have on the Plan? Should
the Amendment require more disclosure of such potential effects? Should
the Amendment elaborate on what ``profit or loss responsibility for a
Participant's Proprietary Market Data products'' means in the context
of the required disclosures? Alternatively, do commenters believe that
the Plan's separately-proposed confidentiality proposal would address
some of the potential effects of conflicts of interests if approved?
2. Do commenters have concerns about affiliations between a Plan's
Processor and a Participant? If so, do commenters believe the conflicts
of interest disclosure is sufficient to address those concerns? Should
the Amendment require a description of the nature of the affiliation?
3. Do commenters believe that a Participant or its affiliate that
is competing for a contract to serve as a Processor for the Plan should
participate in discussions and related Plan votes regarding the
selection of the Processor for the Plan? If so, how do commenters
believe Participants should address the conflicts they face in their
dual role of competing to serve as a Processor while serving as a
Participant that participates in the discussion of, and ultimately
votes on, selection of the Processor?
Proposed Disclosures for the Administrator
1. Do commenters believe that the proposed disclosure questions for
the Administrator are sufficient to identify the specific interests and
employment, commercial or other relationships that may give rise to a
conflict under the Plan? Separately, do commenters believe that the
proposed Administrator questions effectively require all material facts
necessary to not only identify the nature of the conflict, but also the
effect it may have on the Plan? Should the Amendment require more
disclosure of such potential effects or greater details with respect to
the disclosures that are made?
2. To the extent that the Administrator enlists assistance from an
auditor or any other professional services subcontractor for any of the
Plan(s), and the subcontractor is affiliated with an entity that is
involved in the development, pricing, or sale of proprietary data
products offered to SIP customers, or is subject to any other conflict,
should all of the disclosures and conflicts policies referenced above
also be applicable to them? Or do commenters believe that concerns
arising from potential conflicts of interest would be more
appropriately addressed for a subcontractor if the subcontractor could
attest that it is sufficiently walled-off from the proprietary data
business of its affiliate?
Proposed Disclosures for Members of the Advisory Committee
1. Do commenters believe that the proposed disclosure questions for
Advisory Committee members are sufficient to identify the specific
interests and employment, commercial, or other relationships that may
give rise to a conflict under the Plan? Separately, do commenters
believe that the proposed Advisory Committee members' questions
effectively require all material facts necessary to not only identify
the nature of the conflict, but also the effect it may have on the
Plan? Should the Amendment require more disclosure of such potential
effects or greater details with respect to the disclosures that are
made? Should the Amendment require Members of the Advisory Committee to
identify affiliations with any Disclosing Party, and clarify that both
direct and indirect ownership interests in a Participant are subject to
disclosure? Is it clear what ``actively participate in any litigation
against the Plans'' means, or should the Amendment require additional
detail?
2. Do commenters believe that the Plan should require additional
public disclosures of any personal, business, commercial, or financial
interests, and any employment relationships that could materially
affect the ability of the Advisory Committee Member to participate
impartially in discussing actions of the Plan?
3. Do commenters believe that Advisory Committee members that
purchase SIP data products should participate in discussions regarding
the pricing of SIP data products? If so, how do commenters believe
Advisory Committee members should address that potential conflict?
Participant Statement Regarding Competition
1. The Participants state in their filing that the Amendment does
not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Do commenters
believe that the Amendment to the Plan imposes any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act? Please explain.
2. What effect might the Amendment have on competition, if any?
Please explain. How would any effect on competition from the proposal
benefit or harm the national market system and/or various market
participants? Please describe and explain how, if at all, aspects of
the national market system or different market participants would be
affected. Please support any response with data, if possible.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number S7-24-89 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number File Number S7-24-89. 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 website (https://www.sec.gov/rules/
[[Page 2207]]
sro.shtml). Copies of the submission, all written statements with
respect to the proposed Amendment that are filed with the Commission,
and all written communications relating to the proposed Amendment
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for website 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 website
viewing and printing at the principal office of the Plan. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions.
You should submit only information that you wish to make available
publicly. All submissions should refer to File Number S7-24-89 and
should be submitted on or before February 4, 2020.
By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-00357 Filed 1-13-20; 8:45 am]
BILLING CODE 8011-01-P
