Joint Industry Plan; Notice of Filing of a National Market System Plan Regarding Consolidated Equity Market Data., 64565-64595 [2020-22467]
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Federal Register / Vol. 85, No. 198 / Tuesday, October 13, 2020 / Notices
issues raised by the proposal. Institution
of proceedings does not indicate that the
Commission has reached any
conclusions with respect to any of the
issues involved. Rather, as described
below, the Commission seeks and
encourages interested persons to
provide comments on the proposed rule
change.
Pursuant to Section 19(b)(2)(B) of the
Act,17 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
additional analysis of the proposal’s
consistency with Section 6(b)(5) of the
Act, which requires, among other
things, that the rules of a national
securities exchange be ‘‘designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade,’’ and ‘‘to
protect investors and the public
interest.’’ 18
IV. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
proposal. In particular, the Commission
invites the written views of interested
persons concerning whether the
proposed rule change, as modified by
Amendment No. 1, is consistent with
Section 6(b)(5) or any other provision of
the Act, or the rules and regulations
thereunder. Although there do not
appear to be any issues relevant to
approval or disapproval that would be
facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4, any request for an
opportunity to make an oral
presentation.19
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposed rule change, as modified by
Amendment No. 1, should be approved
or disapproved by November 3, 2020.
Any person who wishes to file a rebuttal
17 Id.
18 15
U.S.C. 78f(b)(5).
19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Public Law
94–29 (June 4, 1975), grants the Commission
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
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19 Section
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to any other person’s submission must
file that rebuttal by November 17, 2020.
The Commission asks that
commenters address the sufficiency of
the Exchange’s statements in support of
the proposal, which are set forth in the
Notice, in addition to any other
comments they may wish to submit
about the proposed rule change. In this
regard, the Commission seeks
commenters’ views regarding whether
the Exchange’s proposal to list and trade
the Shares, which seek to provide daily
investment results that correspond to
200% of the return of an index designed
to measure the daily performance of a
theoretical portfolio of first- and secondmonth VIX Futures Contracts, is
adequately designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, and to protect
investors and the public interest, and is
consistent with the maintenance of a
fair and orderly market under the Act.
The Commission also seeks
commenters’ views regarding whether
the Exchange has adequately described
the potential impact of sudden
fluctuations in market volatility on the
Index and on the Fund’s operation and
performance for the Commission to
make a determination under Section
6(b)(5) of the Act. In particular, the
Commission seeks comment regarding
the Fund’s operation during periods
with large percentage increases in
volatility, and the potential market
impact of the Fund’s daily rebalance.
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 SR–
CboeBZX–2020–053 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 SR–CboeBZX–2020–053. 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 proposed rule
change that are filed with the
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64565
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 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 the Exchange. 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–CboeBZX–2020–053 and
should be submitted by November 3,
2020. Rebuttal comments should be
submitted by November 17, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–22639 Filed 10–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90096; File No. 4–757]
Joint Industry Plan; Notice of Filing of
a National Market System Plan
Regarding Consolidated Equity Market
Data.
October 6, 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 August 11, 2020, Cboe BYX
Exchange, Inc., Cboe BZX Exchange,
Inc., Cboe EDGA Exchange, Inc., Cboe
EDGX Exchange, Inc., Cboe Exchange,
Inc., Investors Exchange LLC, Long
Term Stock Exchange, Inc., MEMX LLC,
Nasdaq BX, Inc., Nasdaq ISE, LLC,
Nasdaq PHLX LLC, Nasdaq Stock
Market LLC, New York Stock Exchange
LLC, NYSE American LLC, NYSE Arca,
Inc., NYSE Chicago, Inc., NYSE
20 17
CFR 200.30–3(a)(57).
15 U.S.C. 78k–1.
2 17 CFR 242.608.
1
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Federal Register / Vol. 85, No. 198 / Tuesday, October 13, 2020 / Notices
National, Inc., and Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
(collectively, the ‘‘SROs’’ or
‘‘Participants’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) a proposed new single
national market system plan governing
the public dissemination of real-time
consolidated equity market data for
national market system (‘‘NMS’’) stocks
(the ‘‘CT Plan’’).3 The Commission is
publishing this notice to solicit
comments on the proposed CT Plan
from interested persons.
II. Description of the CT Plan
Set forth in this Section II is the
statement of the purpose of the National
Market System Plan Regarding
Consolidated Equity Market Data, along
with information pursuant to Rules
608(a)(4) and (5) under the Act,4 as
prepared and submitted by the SROs to
the Commission.5
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A. Statement of Purpose
On May 6, 2020, the Commission
ordered the SROs to act jointly in
developing and filing with the
Commission by August 11, 2020, a
proposed new single NMS plan to
govern the public dissemination of realtime consolidated equity market data for
NMS stocks.6 The SROs are filing the
proposed Plan, as directed in the
Order.7 Following the Operative Date
(as defined and described in Section A.3
3 See Letter from James P. Dombach and Howard
L. Kramer, Murphy & McGonigle, P.C., to Vanessa
Countryman, Secretary, Commission (Aug. 11,
2020) (‘‘Transmittal Letter’’). See also Attachment A
(Limited Liability Agreement of CT Plan LLC).
4 See 17 CFR 242.608(a)(4) and (a)(5).
5 See Transmittal Letter, supra note 3. The
statement of the purpose of the proposed CT Plan
and the information required by Rule 608(a)(4) and
(5) are reproduced verbatim from the Transmittal
Letter; cross-references have been revised to
conform with the footnote sequencing of this notice.
6 See Order Directing the Exchanges and the
Financial Industry Regulatory Authority to Submit
a New National Market System Plan Regarding
Consolidated Equity Market Data, Release No. 34–
88827 (May 6, 2020), 85 FR 28702 (May 13, 2020)
(File No. 4–757) (the ‘‘Order’’).
7 As the Commission is aware, some of the SROs
have challenged the Order in the D.C. Circuit.
Those SROs (the ‘‘Petitioners’’) have joined in this
submission, including the statement that the Plan
complies with the Order, solely to satisfy the
requirements of the Order and Rule 608. Nothing
in this submission should be construed as an
agreement by Petitioners with any analysis or
conclusions set forth in the Order or as a concession
by Petitioners regarding the Order’s legality.
Petitioners reserve all rights in connection with
their pending challenge of the Order.
The provisions reflected in the Plan do not
necessarily reflect each SRO’s views related to
governing and operating the consolidation and
dissemination of equity market data. Further, while
each SRO believes that the proposed Plan is
compliant with the Order, one or more SROs intend
to submit public comments regarding the proposed
Plan.
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below), the Plan would replace (1) the
Consolidated Tape Association Plan
(‘‘CTA Plan’’), (2) the Consolidated
Quotation Plan (‘‘CQ Plan’’), and (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 (‘‘UTP Plan’’). The
SROs propose that the Plan be in the
form of a limited liability company
(‘‘LLC’’) agreement for a new company,
CT Plan LLC (the ‘‘Company’’), with
each SRO being a ‘‘Member’’ of the
Company.
While the Order requires Operating
Committee approval for actions other
than the selection of Non-SRO Voting
Representatives and the decision to
enter executive session, because the
Plan would be in the form of an LLC
agreement for the Company, the SROs
propose that certain provisions of the
Plan concerning solely the operation of
the Company as an LLC, and unrelated
to consolidation and distribution of
equity market data, will require a
majority vote of the Members as
opposed to the augmented majority vote
of the Operating Committee. In
particular, the SROs propose the
following actions be subject to a
majority vote of the Members: (1) The
selection of Officers of the Company
(other than the Chair and Secretary), if
needed, and (2) certain decisions
concerning the operation of the
Company as an LLC and approval of
amendments to LLC-related provisions
of the Plan, including provisions related
to indemnification, dissolution of the
Company, and tax-related matters.
Neither of these topics would affect the
consolidation and distribution of equity
market data, and therefore, the SROs
believe that the Members should have
the sole authority to make decisions
related to these topics (with
Commission approval where necessary).
2. Governing or Constituent Documents
Not applicable.
3. Implementation of Plan
As set forth in the proposed Plan, the
SROs propose that the Plan would
become effective after (1) it is approved
by the Commission pursuant to Rule
608 of Regulation NMS and (2) the
Company has been formed by filing a
certificate of formation with the
Delaware Secretary of State. The SROs
propose that the Plan would become
operative on the first day of the month
that is at least 90 days after the last of
the following have occurred (the
‘‘Operative Date’’): (a) The SRO Voting
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Representatives and Non-SRO Voting
Representatives of the Operating
Committee have been determined; (b)
fees for market data disseminated
pursuant to the Plan have been
established by the Operating Committee,
are effective as an amendment to the
Plan pursuant to Rule 608 of Regulation
NMS, and are ready to be implemented
on the Operative Date; (c) the Company
has entered into an agreement with the
necessary Processor(s); (d) the Company
has entered into an agreement with an
Administrator selected pursuant to
Section 6.3 of the Plan and such
Administrator has completed the
transition from prior Administrators
under the CQ Plan, CTA Plan, and UTP
Plan such that it is able to provide
services under the Administrative
Services Agreement, including that (1)
new contracts between the Company
and Vendors and the Company and
Subscribers have been finalized such
that all Vendors and Subscribers under
the CQ Plan, CTA Plan, and UTP Plan
are ready to transition to such new
contracts by the Operative Date, (2) the
Administrator has in place a system to
administer distributions, and (3) the
Administrator has in place a system to
administer fees; and (e) the Operating
Committee and, if applicable, the
Commission has approved all policies
and procedures that are necessary or
appropriate for the operation of the
Company.
4. Development and Implementation
Phases
Until the Operative Date, the
Members will continue to operate
pursuant to the CQ Plan, CTA Plan, and
UTP Plan with respect to the public
dissemination of real-time consolidated
equity market data for NMS stocks
rather than the Plan.
5. Analysis of Impact on Competition
The SROs believe the proposed Plan
complies with the Order. The proposed
Plan incorporates the existing
substantive provisions of the CTA Plan,
CQ Plan and UTP Plan, which have
been approved by the Commission,
together with the governance
modifications required by the
Commission’s Order.
6. Written Understanding or Agreements
Relating to Interpretation of, or
Participation in, Plan
Not applicable.
7. Approval of Amendment of the Plan
Not applicable.
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8. Terms and Conditions of Access
The Plan provides that any entity
registered as a national securities
exchange or national securities
association under the Exchange Act may
become a Member by: (i) Providing
written notice to the Company, (ii)
executing a joinder to the Plan, at which
time Exhibit A of the Plan shall be
amended to reflect the addition of such
exchange or association as a Member,
(iii) paying a Membership Fee to the
Company, and (iv) executing a joinder
to any other agreements to which all of
the other Members have been made
party in connection with being a
Member.
9. Method of Determination and
Imposition, and Amount of Fees and
Charges
Not applicable.
10. Method and Frequency of Processor
Evaluation
Not applicable.8
11. Dispute Resolution
The Plan does not include provisions
regarding resolution of disputes
between or among the Members.
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III. Solicitation of Comments
The Commission seeks comment on
the proposed CT Plan. Interested
persons are invited to submit written
data, views, and comments concerning
the foregoing, including whether the
proposal is consistent with the Act and
the rules thereunder, as well as with the
Order. In addition to the specific
questions set forth below, the
Commission asks commenters to
consider generally whether the
proposed CT Plan is appropriately
structured, and whether its provisions
are appropriately drafted, to support the
‘‘prompt, accurate, reliable, and fair
collection, processing, distribution, and
publication of information with respect
to quotations for and transactions in
such securities and the fairness and
usefulness of the form and content of
such information.’’ 9
Accordingly, the Commission
requests comments on matters
including, but not limited to, the
following:
Effective and Operative Dates
1. Paragraph (b) of the Recitals of the
proposed CT Plan provides that the CT
Plan will not become effective
8 The Commission notes that Article V, Section
5.2 of the proposed CT Plan governs the evaluation
of processor performance. See also infra Question
37.
9 See Order, supra note 6, 85 FR at 28703 (citing
15 U.S.C. 78k–1(c)(1)(B)).
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(‘‘Effective Date’’) until the later of two
things occurs: (1) The proposed
Agreement has been approved by the
Commission, and (2) the Members have
formed the CT Plan as an LLC pursuant
to the Delaware Act by filing a
certificate of formation (the
‘‘Certificate’’) with the Delaware
Secretary of State. Do commenters
believe that the timing provisions set
forth in the Recitals could result in an
undue delay of the effectiveness of the
CT Plan? Do commenters believe that
the CT Plan should require that the
Certificate be filed within a certain
period of time following Commission
action, if any, on the CT Plan? Would
10 days be an appropriate period of time
for filing the Certificate? If not, what
time period do commenters believe
would be appropriate?
2. Paragraph (c) of the Recitals of the
proposed CT Plan provides that,
following the Effective Date, the CT Plan
will not become operative as an NMS
Plan that governs the dissemination of
real-time consolidated equity market
data until the first day of the month that
is at least 90 days after the last of five
specified actions has occurred (the
‘‘Operative Date’’). Do commenters agree
that the completion of all five specified
actions is necessary prior to the
Operative Date? Should the CT Plan set
deadlines for some or all of the specified
actions? Should the CT Plan require that
the Operating Committee provide
periodic updates as to the status of
implementation of the specified actions?
If so, should these updates be made
public? Should the CT Plan include
deadlines requiring that the Operating
Committee be constituted within a set
time if the Commission approves the CT
Plan? Should the CT Plan explicitly
specify that constituting the Operating
Committee must be the first action
undertaken by the CT Plan after the
Effective Date? Should the Operating
Committee be required within set times
to establish fees, enter into contracts
with an Administrator and Processor(s),
and approve or file with the
Commission, as applicable, all ‘‘policies
and procedures that are necessary or
appropriate for the operation of the
Company’’? What policies and
procedures do commenters believe are
necessary or appropriate for the
operation of the CT Plan? Should the CT
Plan specify which policies and
procedures are necessary or
appropriate? Is the proposed 90-day
period appropriate and reasonable, or
should it be longer or shorter?
Plan Structure as an LLC Agreement
3. The Commission requests comment
generally on the distinctions drawn in
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64567
the proposed CT Plan between actions
that are governed by the Operating
Committee, which includes Non-SRO
Voting Representatives as required by
the Order,10 and other specified actions
that are governed solely by the SROs as
the ‘‘Members’’ of the LLC. Does the
proposed CT Plan appropriately draw
these distinctions in a way that supports
the purpose of the CT Plan, consistent
with the Order? 11 Do commenters
believe that these distinctions will
result in a significant and inappropriate
dilution of Non-SRO Voting
Representatives’ influence on CT Plan
matters that are relevant to the operation
of the CT Plan as an NMS plan for the
collection, processing, and
dissemination of equity market data?
What revisions to the plan provisions, if
any, do commenters believe would be
appropriate to ensure that the
distinctions drawn in the CT Plan
between matters to be decided by the
Operating Committee and matters to be
decided solely by the SROs do not
inappropriately dilute the Non-SRO
Voting Representatives’ participation
and influence on the Operating
Committee?
Definitions
4. Article I, Section 1.1(p) of the
proposed CT Plan defines the term ‘‘CT
Feeds’’ as the CT Quote Data Feed(s)
and the CT Trade Data Feed(s). Do
commenters believe that this definition
makes sufficiently clear that three
tapes—Tape A, Tape B, and Tape C—
would remain under the CT Plan as
proposed?
5. Article I, Section 1.1(n) of the
proposed CT Plan defines the term
‘‘Covered Persons’’ as representatives of
the Members, the Non-SRO Voting
Representatives, SRO Applicants, the
Administrator, and the Processors;
affiliates, employees, and Agents of the
Operating Committee, a Member, the
Administrator, and the Processors; any
third parties invited to attend meetings
of the Operating Committee or
subcommittees; and the employers of
Non-SRO Voting Representatives.
Covered Persons do not include staff of
the Commission. The Commission
requests comment on the proposed
definition. Should other types of
representatives be specified in the
proposed definition? For example,
should the proposed definition
specifically include Member Observers,
as defined in Article I, Section 1.1(oo)
of the proposed CT Plan?
6. Article I, Section 1.1(bb) of the
proposed CT Plan defines ‘‘Fees’’ as fees
10
11
See id. at 28730.
See id. at 28703.
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charged to vendors and subscribers for
Transaction Reports and Quotation
Information in Eligible Securities, as
defined in the CT Plan. The
Commission requests comment on this
definition. Does it accurately reflect all
of the types of information currently
made available from the existing NMS
plans for equity market data and other
types of fees that the CT Plan may
charge to subscribers?
7. Article I, Section 1.1(oo) of the
proposed CT Plan defines the term
‘‘Member Observer’’ to mean any
individual, other than a Voting
Representative, that a Member, in its
sole discretion, determines is necessary
in connection with such Member’s
compliance with its obligations under
Rule 608(c) of Regulation NMS to attend
Operating Committee and subcommittee
meetings. What are commenters’ views
on whether an SRO would reasonably
find it necessary to select a Member
Observer to comply with its obligations
under Rule 608(c) of Regulation NMS?
Under what circumstances, if any,
would the representation of an SRO on
the Operating Committee by its selected
SRO Voting Representative be an
insufficient means for the SRO to fulfill
its obligations under Rule 608 of
Regulation NMS? Should persons who
hold certain positions within an SRO be
prohibited from serving as Member
Observers? For example, should a
person who has direct responsibility for
the management, marketing, sale, or
development of proprietary equity data
products offered separately be permitted
to serve as a Member Observer? If
Member Observers are necessary,
should only persons who perform
certain roles within an SRO (e.g., legal
or compliance personnel) be able to
serve as Member Observers? Should the
CT Plan limit the number of Member
Observers that each SRO would be
permitted to name or the frequency with
which the person serving as a Member
Observer can be changed? If so, how?
8. Article I, Section 1.1(kkk) of the
proposed CT Plan defines ‘‘Public
Information’’ to include, among other
things, any information that is not either
Restricted Information or Highly
Confidential Information or that has not
been designated as Confidential
Information, and the duly approved
minutes of the Operating Committee.
The Commission requests comment on
the proposed definition of Public
Information. Should other types of
information be included in the proposed
definition? For example, should the
proposed definition include minutes of
the meetings of any subcommittees of
the Operating Committee?
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Organization and Membership of LLC
9. Do commenters believe that the
organizational, governance, and
managerial structure outlined in
Articles II, III, and IV of the proposed
CT Plan are in the public interest?
10. Do commenters believe that the
organizational, governance, and
managerial structure set forth in the
proposed CT Plan—including the
limitation of membership in the LLC to
SROs and the prescribed role and
responsibilities of the Operating
Committee—is consistent with the
purposes of the CT Plan with respect to
the dissemination of equity market data
and the statutory mandate of ensuring
the ‘‘prompt, accurate, reliable and fair
collection, processing, distribution, and
publication of information with respect
to quotations for and transactions in
such securities and the fairness and
usefulness of the form and content of
such information’’? 12 If not, what
changes to the organizational,
governance, and managerial terms of the
proposed CT Plan do commenters
believe should be made to be consistent
with the purposes of the CT Plan?
11. Article III, Section 3.7 of the
proposed CT Plan describes the
obligations and liabilities of the SROs as
Members of the LLC, including among
other things, a provision that SROs shall
have no liability for the debt, liabilities,
commitments, or any other obligations
of the CT Plan or for any losses of the
CT Plan. Given the role and public
purpose of the CT Plan as part of the
national market system, do commenters
believe that the provisions set forth in
Section 3.7 are consistent with the
SROs’ obligations to, and purposes of,
the CT Plan?
12. Article III, Section 3.7(e) of the
proposed CT Plan states, ‘‘[t]o the fullest
extent permitted by law, no Member
shall, in its capacity as a Member, owe
any duty (fiduciary or otherwise) to the
Company or to any other Member other
than the duties expressly set forth in
this Agreement.’’ The Commission
requests comment on the limitations
proposed in this provision and the
potential impact to the CT Plan’s
responsibilities for the collection,
processing, and dissemination of equity
market data.
13. Do commenters believe that the
proposed CT Plan includes all of the
necessary provisions for an LLC
agreement to function appropriately as
an NMS plan? If not, please describe the
additional provisions that should be
included in the CT Plan.
12 See
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id. (citing 15 U.S.C. 78k–1(c)(1)(B)).
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Responsibilities of the Operating
Committee
14. Article IV, Section 4.1(a) of the
proposed CT Plan states that the
responsibilities of the Operating
Committee include ‘‘interpreting the
Agreement and its provisions.’’ Do
commenters believe it is appropriate for
the Operating Committee to develop its
own interpretation of the meaning of the
CT Plan and its provisions? Should all
interpretations of the CT Plan be
required to be in writing? Should all
interpretations of the CT Plan be
required to be made publicly available
for comment before being adopted or
taking effect? Should all interpretations
of the CT Plan be submitted in writing
to the Commission or to Commission
staff before being adopted or taking
effect? Should the CT Plan include
policies and procedures to distinguish
operational interpretations of the CT
Plan from amendments required to be
submitted to the Commission under
Rule 608 of Regulation NMS?
15. Article IV, Section 4.1(b) of the
proposed CT Plan proposes to allow the
Operating Committee to delegate
‘‘administrative functions’’ to a
subcommittee or to one or more of the
Members (i.e., SROs) or to one or more
Non-SRO Voting Representatives or to
another person, such as the
Administrator. Thus, the Operating
Committee would be empowered to
delegate an administrative function only
to SROs, or only to Non-SRO Voting
Representatives. Should the CT Plan
specify the ‘‘administrative functions’’
that would be covered by this
provision? Do commenters believe the
CT Plan should permit the Operating
Committee to delegate ‘‘administrative
functions’’ to a subcommittee consisting
only of SROs? Do commenters have
concerns that, under this proposed
provision, an SRO-only subcommittee
could discuss the details of an
administrative matter without input
from Non-SRO Voting Representatives?
Do commenters believe the CT Plan
should permit the Operating Committee
to delegate ‘‘administrative functions’’
to a subcommittee consisting only of
Non-SRO Voting Representatives?
Section 4.1(b) also provides that a
subcommittee cannot take any actions
that require approval of the Operating
Committee. Does the limitation that a
subcommittee cannot take actions that
require Operating Committee approval
mitigate concerns about the delegation
of ‘‘administrative functions’’? What, if
any, actions could a subcommittee take
without approval of the Operating
Committee pursuant to Section 4.3?
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Composition and Selection of Operating
Committee
16. Article IV, Section 4.2(b) of the
proposed CT Plan discusses Non-SRO
Voting Representatives, including term
limits, the selection process for the
initial Non-SRO Voting Representatives,
and the nomination and election
process for Non-SRO Voting
Representative replacements. Do
commenters believe that the proposed
process—including public notice
requesting nominations, listing
nominated individuals, and soliciting
and discussing any public comments
received—is fair and transparent? Do
commenters believe that the CT Plan
should be required to use any means
beyond publication on its website to
seek interested, qualified candidates to
be nominated and for public comment
to be solicited? If so, which means? Do
commenters believe that a Non-SRO
Voting Representative should be
permitted, in addition to nominating
himself or herself, to nominate other
persons to serve as a Non-SRO Voting
Representative? If so, should that be
explicitly stated in the CT Plan?
17. With respect to Article IV, Section
4.2(b), do commenters believe that the
CT Plan should prescribe specified
periods of time for the nomination of,
initial selection of, and selection of
replacement Non-SRO Voting
Representatives? Does the absence of
such requirements provide needed
flexibility to the selection process?
Alternatively, could the absence of
specified deadlines result in
unnecessary delays in the initial
formation of the Operating Committee
or hinder non-SRO representation? If so,
what amount of time do commenters
believe would be appropriate for
achieving each phase of the selection
process? For example, would 30 days be
an appropriate time frame for each of
the specified periods—nomination,
initial selection, and selection of
replacements for Non-SRO Voting
Representatives?
18. Article IV, Section 4.2(b) provides
that Non-SRO Voting Representatives
shall serve for two-year terms for a
maximum of two terms total, whether
consecutive or non-consecutive. Is the
proposed maximum of two terms an
appropriate limit on the number of
terms a Non-SRO Voting Representative
may serve on the Operating Committee?
Should the limit on the number of terms
be increased or decreased? Should it be
eliminated? Do commenters believe that
similar term limits should apply to SRO
Voting Representatives? What are
commenters’ views on whether a
lifetime limitation on service that
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applies only to Non-SRO Voting
Representatives would support the
meaningful and informed participation
of Non-SRO Voting Representatives on
the Operating Committee? Do
commenters believe there is a
sufficiently large pool of qualified and
informed persons able to serve as NonSRO Voting Representatives to sustain a
diversity of views on the Operating
Committee over time if the proposed
term limits were adopted?
Action of Operating Committee
19. Article IV, Section 4.3(c) of the
proposed CT Plan delineates several
circumstances, in addition to those
described in the Order—which are the
selection of Non-SRO Voting
Representatives and the decision to
enter Executive Session—in which an
augmented majority vote of the
Operating Committee would not be
required. The Commission requests
comment on each of the proposed CT
Plan provisions that would permit
action by a majority vote of the SROs.
Specifically, do commenters believe that
the CT Plan should include additional
details on the proposed provisions with
respect to: (i) The operation of the CT
Plan as an LLC, (ii) modifications to
LLC-related provisions of the proposed
CT Plan,13 and (iii) the selection
(including appointment and removal) of
Officers of the CT Plan, other than the
Chair? Would permitting action by the
SROs alone with respect to these
elements of CT Plan operation be
consistent with providing a meaningful
role to non-SROs in the governance of
the collection, processing, and
dissemination of equity market data?
Should an augmented majority vote of
the Operating Committee be required for
any or all aspects of the operation of the
CT Plan as an LLC? If so, which ones?
Meetings of the Operating Committee
20. Article IV, Section 4.4(g) of the
proposed CT Plan would permit
Member Observers to attend Executive
Sessions of the Operating Committee.
Do commenters believe that permitting
Member Observers to attend Executive
Sessions is necessary? If so, under what
circumstances do commenters believe
Member Observers should attend?
Should the CT Plan limit the ability of
some or all Member Observers to attend
Executive Session, Operating
Committee, or subcommittee meetings?
If so, under what circumstances should
such attendance be limited and to what
subset, if any, of Member Observers
should such limitations apply?
13 See
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21. Article IV, Section 4.4(g) of the
proposed CT Plan provides that items
for discussion within an Executive
Session should be limited to those ‘‘for
which it is appropriate to exclude NonSRO Voting Representatives,’’ identified
as: (i) Any topic that requires discussion
of Highly Confidential Information; (ii)
vendor or subscriber audit findings; and
(iii) litigation matters. The proposed CT
Plan further provides that the above
items are ‘‘not dispositive of all matters
that may by their nature require
discussion in an Executive Session.’’
The Commission requests comment on
the specified items proposed in the CT
Plan as appropriate topics for Executive
Session. Do commenters agree, for
example, that any topic that requires
discussion of Highly Confidential
Information should not be considered
by the full Operating Committee? Do
commenters believe that there are
sufficient mechanisms in place under
the CT Plan to ensure that the use of
Executive Session is appropriate? If not,
what mechanisms should be added?
Should the list of permissible topics for
Executive Session be delineated more
specifically in the CT Plan? What, if
any, additional permissible topics
should be included? What, if any, topics
should be specifically excluded? Would
the proposed provision that the topics
identified in the CT Plan are ‘‘not
dispositive of all matters that may by
their nature require discussion in an
Executive Session’’ allow the SROs
excessive discretion to limit or prevent
the participation of Non-SRO Voting
Representatives in certain CT Plan
matters? Should the CT Plan specify a
limited set of categories of items that
could be discussed in Executive
Session? If so, what categories should be
included, and what level of detail
regarding these categories would be
appropriate?
Certain Transactions
22. Article IV, Section 4.5 of the
proposed CT Plan provides that the CT
Plan is not prohibited from employing
or dealing with persons in which an
SRO or any of its affiliates has a
connection or a direct or indirect
interest. What relevant CT Plan
employment relationships or business
dealings do commenters believe might
be covered by this provision? Are there
specific types of employment
relationships or business dealings that
should be prohibited? Are there specific
types of employment relationships or
business dealings that should be
permitted? If the CT Plan permits such
employment relationships or business
dealings, should it also require the
relevant SROs to maintain information
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barriers between themselves and the
affiliates or persons that have
employment relationships or business
dealings with the CT Plan? If so, what
type of information barrier would be
appropriate? In commenters’ views,
could Section 4.5 permit conflicts of
interest that should be disclosed under
the conflicts of interest policy? If so,
what modifications to that policy, if
any, should be made? Do commenters
think that any additional disclosure,
recusal, or voting procedures should be
required before the CT Plan employs or
deals with persons in which an SRO or
any of its affiliates has a direct or
indirect interest or a connection?
Company Opportunities
23. Article IV, Section 4.6 of the
proposed CT Plan permits the SROs to
engage in business activities outside of
the business activities of the CT Plan,
including through investments or
business relationships with other
persons engaged in market data services
or through strategic relationships with
businesses that are or may be
competitive with the CT Plan. What
specific types of business activities
would be covered by this provision?
Would any of these business activities
create a conflict of interest with an
SRO’s obligations with respect to the CT
Plan under the federal securities laws,
rules, and regulations? Are any potential
conflicts of interest sufficiently
mitigated by the conflicts of interest
policy? If not, how should the CT Plan
address such conflicts of interest?
24. Section 4.6(b) provides that none
of the SROs shall be obligated to
recommend or take any action that
prefers the interest of the CT Plan or any
other Member over its own interests,
and it also provides that none of the
SROs will be obligated to inform or
present to the CT Plan any opportunity,
relationship, or investment. This
provision defines investments or other
business relationships with persons
engaged in the business of the CT Plan
other than through the CT Plan as
‘‘Other Business.’’ What specific types
of opportunities, relationships, or
investments would be covered by this
provision? Would any of these
opportunities, relationships, or
investments create a conflict of interest
with an SRO’s obligations with respect
to the CT Plan under the federal
securities laws, rules, and regulations?
Exhibit B of the proposed CT Plan
provides a list of questions and
instructions tailored to elicit responses
that disclose potential conflicts of
interest. In response to these questions,
would the SROs be required to disclose
certain opportunities, relationships, or
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investments? Would these disclosures
sufficiently mitigate any conflicts of
interest? If not, how should the CT Plan
address such conflicts of interest?
Should the CT Plan require that an
SRO’s representatives (SRO Voting
Representative or Member Observer, as
applicable) be recused from discussion
of, or voting on, matters relating to
opportunities, relationships, or
investments when the SRO’s interests
may be in conflict with the goals of the
CT Plan?
25. Do commenters believe that
Section 4.6(b) could be interpreted in a
manner that could result in the SROs
acting inconsistently with their
obligations under the federal securities
laws, rules, and regulations? Could this
language result in an SRO voting against
needed improvements to the provision
of consolidated equity market data? Do
commenters have other concerns with
the proposed provision? If so, how
could such concerns be mitigated?
Subcommittees
26. Article IV, Section 4.7(a) of the
proposed CT Plan provides that
subcommittee chairs will be selected by
the Chair from SRO Voting
Representatives or Member Observers
with input from the Operating
Committee. What are commenters’
views on whether Non-SRO Voting
Representatives should be unable to
serve as a subcommittee chair? What are
commenters’ views on whether Member
Observers should be permitted to serve
as a subcommittee chair? Do
commenters believe that the CT Plan
should permit Non-SRO Voting
Representatives to serve as chair, cochair, or vice-chair of any
subcommittees of the Operating
Committee? Should subcommittees of
the Operating Committee be required to
have the same relative balance of
membership between SRO Voting
Representatives and Non-SRO Voting
Representatives as the Operating
Committee itself? Should Member
Observers be permitted to participate in
subcommittee deliberations?
27. Section 4.7(c) provides that SRO
Voting Representatives, Member
Observers, and other persons as deemed
appropriate by the SRO Voting
Representatives may meet in a
subcommittee to discuss an item subject
to attorney-client privilege of the CT
Plan or that is attorney work product of
the CT Plan. What are commenters’
views on the scope of the ‘‘other
persons’’ who may be deemed
appropriate by the SRO Voting
Representatives to discuss an item
subject to attorney-client privilege of the
CT Plan or that is attorney work product
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of the CT Plan? Should there be any
limitations? If so, what limitations
would be appropriate?
Officers
28. Article IV, Section 4.8 of the
proposed CT Plan provides that in
addition to the Chair and the Secretary
of the CT Plan, the SROs, as Members
of the CT Plan, may designate other
Officers of the CT Plan, with such
authority as the SROs may, from time to
time, delegate to them. Section 4.8
further provides that the SROs may
remove any CT Plan Officer by majority
vote. What are commenters’ views on
these provisions? Do commenters think
it is appropriate that decisions relating
to Officers and duties may be made
solely by the SROs? Do commenters
believe that the positions and duties of
any Officers should be specified in the
CT Plan? Should there be limitations on
eligibility to serve as an Officer of the
CT Plan? For example, should SRO
Voting Representatives or Member
Observers be eligible to serve as Officers
of the CT Plan? Should Non-SRO Voting
Representatives be restricted from
serving as Officers of the CT Plan? Do
commenters believe the CT Plan should
specify considerations for removal of an
Officer?
29. Section 4.8(a) of the proposed CT
Plan provides that each Officer shall
hold office until such Officer’s
successor shall be duly designated or
until such Officer’s death, resignation,
or removal. Do commenters believe that
term limits should apply to any specific
or to all Officers of the CT Plan? What
are commenters’ views on the impact to
the CT Plan if such term limits were
adopted?
Disclosure of Potential Conflicts of
Interest; Recusal
30. Article IV, Section 4.10 of the
proposed CT Plan sets forth provisions
for recusals and for the disclosure of
conflicts of interest and provides that
the Members, the Processors, the
Administrator, the Non-SRO Voting
Representatives, and each service
provider or subcontractor engaged in CT
Plan business that has access to
Restricted or Highly Confidential
Information shall be subject to Section
4.10 and Exhibit B to the CT Plan.
Exhibit B to the CT Plan provides a list
of questions and instructions tailored to
elicit responses that disclose potential
conflicts of interest. Do commenters
believe that Member Observers should
be expressly subject to Section 4.10 and
Exhibit B? If so, do commenters believe
that the same disclosure requirements
and recusal provisions that apply to
Members and other identified persons
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would sufficiently mitigate any conflicts
of interest faced by Member Observers?
If not, what additional disclosures or
recusal provisions do commenters
believe would be appropriate? Do
commenters believe that Officers of the
CT Plan should be expressly subject to
Section 4.10 and Exhibit B? If so, do
commenters believe that the same
disclosure requirements and recusal
provisions that apply to Members and
other identified persons would
sufficiently mitigate any conflicts of
interest faced by Officers? If not, what
additional disclosures or recusal
provisions do commenters believe
would be appropriate?
31. Article IV, Section 4.6 of the
proposed CT Plan addresses the ability
of SROs to engage in certain business
activities outside of the business
activities of the CT Plan. Do
commenters believe that the disclosure
requirements under Section 4.10 and
Exhibit B elicit sufficient relevant
information to mitigate conflicts of
interest that may result from such
business activities? If not, how should
the SROs update the conflicts of interest
policy of the CT Plan to address this?
32. Article IV, Section 4.10(d) of the
proposed CT Plan provides that, if the
Commission’s approval of the conflicts
of interest policies filed by the CQ Plan,
the CTA Plan, or UTP Plan is stayed or
overturned (for example, by a court), the
requirements of Section 4.10 and
Exhibit B of the CT Plan shall not apply.
What are commenters’ views on
whether such a provision is necessary or
appropriate for the CT Plan? Do
commenters believe that the CT Plan
should, at a minimum, contain
provisions for addressing conflicts of
interest that are not subject to
elimination, or provisions specifying
that the CT Plan must be amended to
include a new policy with respect to
conflicts of interest before the existing
policy can be removed?
Confidentiality Policy
33. Article IV, Section 4.11(a) of the
proposed CT Plan states that the SROs
and the Non-SRO Voting
Representatives are subject to the
Confidentiality Policy set forth in
Exhibit C to the CT Plan. Do
commenters believe that Section 4.10(a)
should be modified to expressly apply
to Member Observers? Do commenters
believe that the definition of Member
Observer should be more narrowly
tailored to limit the individuals within
an SRO that have access to Highly
Confidential or Confidential
Information? Should Member Observers
be prohibited from receiving Restricted
or Highly Confidential Information, or
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be excluded from being present when
such information is discussed? Should
Member Observers be required to
demonstrate a legitimate or
particularized need for specific
Restricted or Highly Confidential
Information before being granted access?
Are there other confidentiality
provisions that should expressly apply
to Member Observers?
34. Article IV, Section 4.11(b) of the
proposed CT Plan provides that, if the
Commission’s approval of the
confidentiality policies filed by the CQ
Plan, the CTA Plan, or UTP Plan is
stayed or overturned (for example, by a
court), the requirements of Section 4.11
and Exhibit C of the CT Plan shall not
apply. What are commenters’ views on
whether such a provision is necessary or
appropriate for the CT Plan? Do
commenters believe that the CT Plan
should, at a minimum, contain
provisions for identifying and protecting
confidential information that are not
subject to elimination, or provisions
specifying that the CT Plan must be
amended to include a new policy with
respect to confidential information
before the existing policy can be
removed?
Processor Functions and
Responsibilities
35. Article V, Section 5.1 of the
proposed CT Plan specifies the general
functions of the Processors, as more
fully set forth in an agreement to be
entered between the CT Plan and the
Processors (the ‘‘Processor Services
Agreements’’). Do commenters believe
this approach is appropriate? Do
commenters believe that further details
on the terms and responsibilities of the
Processors should be specified in the
body of the CT Plan? If so, what
additional types of terms and
responsibilities of the Processors should
be specified in the CT Plan? For
example, should the CT Plan specify the
factors to be considered for termination
of the Processors?
36. Article V, Section 5.1 of the
proposed CT Plan requires, among other
things, that the CT Plan require the
Processors to collect from the SROs, and
consolidate and disseminate to vendors
and subscribers, Transaction Reports
and Quotation Information in Eligible
Securities in a manner designed to
assure the prompt, accurate, and reliable
collection, processing, and
dissemination of information with
respect to all Eligible Securities in a fair
and non-discriminatory manner. Do
commenters believe that the terms of the
CT Plan should also require the
Processors to ensure the ‘‘fairness and
usefulness of the form and content of
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64571
such information,’’ consistent with
Section 11A(c)(1)(B) of the Act? 14
37. Article V, Section 5.2 of the
proposed CT Plan provides that the
Processors’ performance shall be subject
to review at any time as determined by
a vote of Operating Committee,
provided that a review shall be
conducted at least once every two
calendar years but not more frequently
than once each calendar year unless
there is a material default that has not
been cured within the specified
applicable cure period. What are
commenters’ views on the proposed
frequency of reviews of the Processors?
The proposed CT Plan does not specify
the criteria under which the Processors
will be evaluated. Do commenters
believe that further detail should be
specified in the CT Plan regarding the
Operating Committee’s review of the
performance of the Processors under the
Processor Services Agreements? For
example, should the CT Plan specify
certain performance metrics to be used
in reviewing the performance of the
Processors, and if so, are there particular
metrics that should be used? Do
commenters believe that the CT Plan
should specify a maximum cure period
for material defaults by Processors
under the Processor Services
Agreements? If so, what period would
be appropriate? Should the Commission
also be notified and supplied with a
copy of any reports regarding any
recommendations the Operating
Committee may approve as a result of
the review of the Processors?
38. Article V, Section 5.3 of the
proposed CT Plan provides that the
Operating Committee shall establish
procedures for selecting Processors and
that these procedures shall at a
minimum set forth (a) the entity that
will draft the request for proposal, assist
the Operating Committee in evaluating
bids, and otherwise provide assistance
to the Operating Committee; (b) the
minimum technical and operational
requirements to be fulfilled by the
Processor; (c) the criteria to be
considered in selecting the Processor;
and (d) the entities (other than Voting
Representatives) that are eligible to
comment on the selection of the
Processor (collectively, the ‘‘Processor
Selection Procedures’’). Do commenters
believe that the Processor Selection
Procedures should set forth any terms in
addition to those set forth in Article V,
Section 5.3(b)? For example, should the
Processor Selection Procedures specify a
maximum time period to select a new
Processor? Additionally, do commenters
believe that the Processor Selection
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Procedures should require that a
subcommittee of disinterested members
of the Operating Committee—those not
affiliated with a person seeking to act as
the Processor—vote and select a new
Processor? Should a subcommittee of
disinterested members be required to
evaluate the proposals and make a
recommendation to the Operating
Committee? Should the CT Plan
specifically provide that Non-SRO
Voting Representatives should be
eligible to comment on the selection of
a new Processor? Should the CT Plan
specifically provide that any other
persons should be eligible to comment
on the selection of a new Processor? If
so, which persons and why?
39. Should the CT Plan specify in
detail the minimum performance
standards applicable to the Processor?
For example, should the CT Plan set
minimum standards for the timely
dissemination of information,
bandwidth, or other metrics? If so, what
minimum standards would be
appropriate?
Administrator Functions and
Responsibilities
40. Article VI, Section 6.1 of the
proposed CT Plan specifies the general
functions of the Administrator, as more
fully set forth in an agreement to be
entered between the CT Plan and the
Administrator (the ‘‘Administrator
Services Agreement’’). Do commenters
believe this approach is appropriate? Do
commenters believe that further details
on the terms and responsibilities of the
Administrator should be specified in the
body of the CT Plan? If so, what
additional types of terms and
responsibilities of the Administrator
should be specified in the CT Plan?
41. Article VI, Section 6.1 of the
proposed CT Plan specifies that the
Administrator should perform
administrative functions on behalf of
the CT Plan, including the preparation
of the CT Plan’s audited financial
reports. Do commenters believe that the
Administrator’s duties with respect to
the preparation of financial reports
should also include unaudited reports?
42. Article VI, Section 6.2 of the
proposed CT Plan provides for the
evaluation of the Administrator,
specifying that the Administrator shall
be subject to review at any time as
determined by the Operating
Committee, provided that the
Administrator shall be subject to review
at least every two years and not more
frequently than once each calendar year,
and that the Operating Committee shall
appoint a subcommittee or other
persons to conduct the review. What are
commenters’ views on the appropriate
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scope of ‘‘other persons’’ who may
participate in conducting the review?
What are commenters’ views on the
proposed frequency of reviews of the
Administrator? The proposed CT Plan
does not specify the criteria under
which the Administrator will be
evaluated. Do commenters believe that
such criteria should be specified in the
CT Plan regarding the CT Plan’s review
of the performance of the Administrator
under the Administrator Services
Agreement? If so, what types of
performance metrics used in the review
should be specified in the CT Plan?
Should the Administrator evaluation
process be conducted by an
independent third party? Should the CT
Plan specify the terms for the
termination and removal of the
Administrator? If so, what terms or
criteria should be specified? Do
commenters believe that the CT Plan
should specify a maximum cure period
for material defaults by the
Administrator under the Administrator
Services Agreement? If so, what period
would be appropriate?
43. Article VI, Section 6.3 of the
proposed CT Plan describes the process
for selecting a new Administrator. Do
commenters believe that the
Administrator Selection Procedures
should set forth any additional terms
other than those set forth in Article VI,
Section 6.3? For example, should the
Administrator Selection Procedures
specify a maximum time period to select
a new Administrator?
44. Article VI, Section 6.3 of the
proposed CT Plan provides that the
Operating Committee may solicit and
consider, as part of the process of
establishing Administrator Selection
Procedures, the timely comment of any
entity affected by the operation of the
CT Plan. Article VI, Section 6.3(d)
provides that the Administrator
Selection Procedures should specify
certain entities (other than Voting
Representatives) that should be eligible
to comment on the selection of a new
Administrator. Do commenters believe
that this requirement is appropriate? Do
commenters believe that the entities
selected by the Operating Committee
should be specified in the CT Plan
rather than the Administrator Selection
Procedures? If so, what types of entities
should be eligible or ineligible to
comment on the selection of a new
Administrator? Do commenters believe
there may be circumstances in which
these two provisions might come into
conflict—i.e., that the Administrator
Selection Procedures might fail to
include, as an entity eligible to
comment, an entity that is affected by
the operation of the CT Plan? Do
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commenters believe that the provisions
of the CT Plan should be revised to
prevent such an occurrence?
45. Should the CT Plan specify in
detail the minimum performance
standards applicable to the
Administrator? If so, what minimum
standards would be appropriate?
Regulatory and Operational Halts
46. Article VII, Section 7.1 of the
proposed CT Plan describes the SROs’
responsibilities relating to regulatory
and operational trading halts, including
when a Primary Listing Exchange may
declare a trading halt, the process for
initiating a trading halt, and the process
for reopening following a halt. What are
commenters’ views on these provisions?
Are the proposed provisions describing
the circumstances in which a Primary
Listing Market may declare or terminate
a market-wide halt in trading in its
listed stocks consistent with the
maintenance of fair, orderly, and
efficient markets? If not, how should
these provisions be modified?
Capital Contributions; Capital
Accounts; Allocations
47. Articles VIII and IX of the
proposed CT Plan govern the use of
capital accounts under the CT Plan,
including contributions to and
distributions from such accounts, and
allocations to the SROs. What are
commenters’ views regarding these
provisions? Would these provisions
serve to prohibit unreasonable
discrimination with regard to the
allocation of capital contributions,
distributions, and profits and losses
among the SROs? If not, how should
these provisions be modified?
Dissolution and Termination of the CT
Plan LLC
48. Article XI of the proposed CT Plan
provides the terms for the dissolution
and termination of the LLC as
determined by the SROs. Do
commenters believe that the dissolution
and termination of the LLC should
require consideration by or the consent
of the Non-SRO Voting Representatives?
Exculpation and Indemnification
49. Article XII of the proposed CT
Plan includes provisions governing the
exculpation and indemnification of
certain parties involved in the operation
of the CT Plan. Do commenters believe
that these provisions cover the
appropriate parties? If not, how should
these provisions be modified? For
example, should the proposed
exculpation and indemnification
provisions also cover Non-SRO Voting
Representatives?
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50. Article XII, Section 12.1(b) of the
proposed CT Plan sets forth the rights
and responsibilities of an Exculpated
Party. Do commenters believe that these
rights and responsibilities are consistent
with the obligations of SROs with
respect to the operation of an NMS
plan? If not, how should these
provisions be modified?
Governing Law
51. Article XIII, Section 13.4 of the
proposed CT Plan sets forth the
governing law of the CT Plan and states
that the rights and obligations of the
SROs, the Processors and the
Administrator, vendors, subscribers,
and other persons contracting with the
CT Plan in respect of the matters
covered by the CT Plan should at all
times also be subject to any applicable
provisions of the Act and any rules and
regulations promulgated thereunder. Do
commenters believe that any of the
other provisions of the proposed CT
Plan are potentially inconsistent with
Section 13.4? If so, how should the
proposed CT Plan be modified?
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Amendments
52. Article XIII, Section 13.5 of the
proposed CT Plan governs amendments
to the CT Plan. Section 13.5(b) provides
that Articles IX (Allocations), X
(Records and Accounting; Reports), XI
(Dissolution and Termination), and XII
(Exculpation and Indemnification) may
be modified upon approval by a
majority of Members; provided,
however, that Operating Committee
approval will be required for
modifications to the allocation of all
items of income, gain, loss, and
deduction. Do commenters believe that
amendments to Articles IX through XII
of the CT Plan should be subject to the
approval only of SROs? Do commenters
believe that Non-SRO Voting
Representatives should also have voting
rights with respect to the approval of
amendments to Articles IX through XII
of the CT Plan?
53. Article XIII, Section 13.5(d) of the
proposed CT Plan describes the types of
amendments that would be defined as a
Ministerial Amendment to the CT Plan
and, therefore, could be submitted to the
Commission by the Chair of the
Operating Committee upon 48 hours’
advanced notice to the Operating
Committee.15 Do commenters believe
15 A Ministerial Amendment is defined in Section
13.5(d) of the proposed CT Plan as one that pertains
solely to: (i) Admitting a new Member to the
Company; (2) changing the name or address of a
Member; (3) incorporating a change that the
Commission has implemented by rule and that
requires no conforming language to the text of this
Agreement; (4) incorporating a change (A) that the
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that the definition of Ministerial
Amendments is appropriate? Are there
specific types of amendments that
should be included in or excluded from
the definition of Ministerial
Amendments?
Distributions—Exhibit D
54. Paragraph (j) of Exhibit D to the
proposed CT Plan provides the
definition of the term Net Distributable
Operating Income. Do commenters
believe that this definition provides
sufficient and appropriate detail for the
CT Plan to calculate the Net
Distributable Operating Income? Do
commenters believe that further details
would be appropriate or necessary for
the CT Plan to determine the Net
Distributable Operating Income?
Analysis of Impact on Competition
55. In their analysis of the impact of
the proposed CT Plan on competition,
the SROs state that the proposed CT
Plan complies with the Order and that
the CT Plan ‘‘incorporates the existing
substantive provisions of the CTA Plan,
CQ Plan, and UTP Plan, which have
been approved by the Commission,
together with the governance provisions
required by the Commission’s Order.’’ 16
What effect, if any, do commenters
believe the specific terms of the
proposed CT Plan as submitted by the
SROs would have on competition?
56. Paragraph (c) of the Recitals of the
proposed CT Plan specify a number of
steps to be undertaken before the CT
Plan becomes operational as the NMS
plan responsible for the dissemination
of equity market data, but do not
include specified time periods in which
these actions must be commenced or
completed.17 What effect, if any, do
commenters believe the lack of such
time periods or deadlines would have
on competition?
57. Article IV, Section 4.2(b) of the
proposed CT Plan provides that NonSRO Voting Representatives shall serve
for two-year terms for a maximum of
Commission has implemented by rule, (B) that
requires conforming language to the text of this
Agreement, and (C) whose conforming language to
the text of this Agreement has been approved by the
affirmative vote of the Operating Committee
pursuant to Section 4.3; (5) incorporating a change
(A) that a Governmental Authority requires relating
to the governance or operation of an LLC, (B) that
requires conforming language to the text of this
Agreement, and (C) whose conforming language to
the text of this Agreement has been approved by the
affirmative vote of the Operating Committee
pursuant to Section 4.3 or upon approval by a
majority of Members pursuant to Section 13.5(b), as
applicable; or (6) incorporating a purely technical
change, such as correcting an error or an inaccurate
reference to a statutory provision, or removing
language that has become obsolete.
16 See supra Section II.A.5.
17 See supra Section II.A.3.
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64573
two terms total, whether consecutive or
non-consecutive, but places no similar
limitations on the terms of SRO Voting
Representatives. What effect, if any, do
commenters believe this limitation on
Non-SRO Voting Representatives would
have on competition?
58. Article I, Section 1.1(oo) of the
proposed CT Plan would allow SROs to
select Member Observers, and Article
IV, Section 4.4(g) of the proposed CT
Plan would permit Member Observers to
attend general and Executive Session
meetings of the CT Plan. What effect, if
any, do commenters believe the ability
of the SROs to select Member Observers,
who would have access to Confidential
Information and Highly Confidential
Information, would have on
competition?
59. Article IV, Section 4.6(b) of the
proposed CT Plan provides that none of
the SROs shall be obligated to
recommend or take any action that
prefers the interest of the CT Plan or any
other Member over its own interests. Do
commenters believe that this provision
would facilitate competition in the
provision of equity market data? Do
commenters believe that this provision
would hinder competition in the
provision of equity market data?
60. Article XII, Section 12.1(b) of the
proposed CT Plan provides that
whenever a Member or an SRO Voting
Representative (defined as an
‘‘Exculpated Party’’) is permitted or
required to take any action or to make
a decision in its ‘‘sole discretion’’ or
‘‘discretion’’ or that it deems
‘‘necessary,’’ or ‘‘necessary or
appropriate’’ or under a grant of similar
authority or latitude, the Exculpated
Party may, insofar as Applicable Law
permits, make such decision in its sole
discretion (regardless of whether there
is a reference to ‘‘sole discretion’’ or
‘‘discretion’’). The Exculpated Party (i)
shall be entitled to consider such
interests and factors as it desires
(including its own interests), (ii) shall
have no duty or obligation (fiduciary or
otherwise) to give any consideration to
any interest of or factors affecting the
Company or the Members, and (iii) shall
not be subject to any other or different
standards imposed by this Agreement,
or any other agreement contemplated
hereby, under any Applicable Law or in
equity. What effect, if any, do
commenters believe these provisions
would have on competition?
61. Do commenters believe that there
is data that is relevant to an analysis of
the effect on competition of the
proposed CT Plan as submitted by the
SROs? Commenters are encouraged to
provide any such data they possess or
to which they have access.
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Dispute Resolution
62. The Transmittal Letter states that
the proposed CT Plan does not include
provisions regarding resolution of
disputes between or among the
Members.18 Do commenters believe that
the CT Plan should include dispute
resolution provisions? If so, should
those provisions be general dispute
resolution provisions, or should they be
limited to specific types of disputes?
*
*
*
*
*
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 4–
757 on the subject line.
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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 4–757. 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/sro.shtml).
Copies of the submission, all written
statements with respect to the proposed
CT Plan that are filed with the
Commission, and all written
communications relating to the
proposed CT 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 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
Participants’ principal offices. 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 4–757 and should be
18 See
supra Section II.A.11.
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submitted on or before November 12,
2020.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
Attachment A
LIMITED LIABILITY COMPANY
AGREEMENT OF CT PLAN LLC a
Delaware limited liability company
This LIMITED LIABILITY COMPANY
AGREEMENT (this ‘‘Agreement’’) dated
as of the [•] day of [•], [•] is made and
entered into by and among the parties
identified in Exhibit A, as Exhibit A may
be amended from time to time (the
‘‘Members’’), which are the members of
CT Plan LLC, a Delaware limited
liability company (the ‘‘Company’’). The
Members shall constitute the
‘‘members’’ (as that term is defined in
the Delaware Act) of the Company.
Recitals
(a) On May 6, 2020, the Commission
ordered the Members to act jointly in
developing and filing with the
Commission by August 11, 2020, a
proposed new single national market
system (‘‘NMS’’) plan to govern the
public dissemination of real-time
consolidated equity market data for
NMS stocks. See Order Directing the
Exchanges and the Financial Industry
Regulatory Authority to Submit a New
National Market System Plan Regarding
Consolidated Equity Market Data,
Release No. 34–88827 (May 6, 2020), 85
FR 28702 (May 13, 2020) (File No. 4–
757) (the ‘‘Order’’). This Agreement is
being filed with the Commission, as
directed in the Order.
(b) This Agreement will become
effective after the last of the following
has occurred (the ‘‘Effective Date’’):
(i) this Agreement is approved by the
Commission pursuant to Rule 608 of
Regulation NMS as an NMS plan
governing the public dissemination of
real-time consolidated market data for
Eligible Securities; and
(ii) the Members have formed the
Company as a limited liability company
pursuant to the Delaware Act by filing
a certificate of formation (the
‘‘Certificate’’) with the Delaware
Secretary of State.
(c) Following the Effective Date, this
Agreement will become operative as an
NMS Plan that governs the public
dissemination of real-time consolidated
equity market data for Eligible
Securities on the first day of the month
that is at least 90 days after the last of
the following have occurred (the
‘‘Operative Date’’):
(i) the SRO Voting Representatives
and Non-SRO Voting Representatives of
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the Operating Committee have been
determined pursuant to Section 4.2 of
the Agreement;
(ii) Fees have been established by the
Operating Committee, are effective as an
amendment to this Agreement pursuant
to Rule 608 of Regulation NMS, and are
ready to be implemented on the
Operative Date;
(iii) the Company has entered into an
agreement with the Processors currently
performing under the CQ Plan, CTA
Plan, and UTP Plan;
(iv) the Company has entered into an
agreement with an Administrator
selected pursuant to Section 6.3 and
such Administrator has completed the
transition from prior Administrators
under the CQ Plan, CTA Plan, and UTP
Plan such that it is able to provide
services under the Administrative
Services Agreement, as determined by
the Operating Committee pursuant to
Section 4.3, including that (1) new
contracts between the Company and
Vendors and the Company and
Subscribers have been finalized such
that all Vendors and Subscribers under
the CQ Plan, CTA Plan, and UTP Plan
are ready to transition to such new
contracts by the Operative Date, (2) the
Administrator has in place a system to
administer Distributions, and (3) the
Administrator has in place a system to
administer Fees; and
(v) the Operating Committee and, if
applicable, the Commission have
approved all policies and procedures
that are necessary or appropriate for the
operation of the Company.
(d) Until the Operative Date, the
Members will continue to operate
pursuant to the CQ Plan, CTA Plan, and
UTP Plan with respect to the public
dissemination of real-time consolidated
equity market data for Eligible
Securities rather than this Agreement.
(e) As of the Operative Date, the
Members shall conduct, through the
Company, the Processor and
Administrator functions related to the
public dissemination of real-time
consolidated equity market data for
Eligible Securities required by the
Commission to be performed by the
Members under the Exchange Act.
(f) It is understood and agreed that, in
performing their obligations and duties
under this Agreement, the Members are
performing and discharging functions
and responsibilities related to the
operation of the national market system
for and on behalf of the Members in
their capacities as self-regulatory
organizations, as required under the
Section 11A of the Exchange Act, and
pursuant to Rule 603(b) of Regulation
NMS thereunder. It is further
understood and agreed that this
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Agreement and the operations of the
Company shall be subject to ongoing
oversight by the Commission.
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Article I. Definitions
Section 1.1 Definitions
As used throughout this Agreement
and the Exhibits:
(a) ‘‘Administrator’’ means the Person
selected by the Company to perform the
administrative functions described in
this Agreement pursuant to the
Administrative Services Agreement.
(b) ‘‘Advisory Committee Member’’
means an individual selected pursuant
to Section III(e)(ii)(A) of the CTA Plan
and Section IV(E)(b)(i) of the UTP Plan
to be a member of the Advisory
Committees of the CTA Plan and UTP
Plan.
(c) ‘‘Affiliate’’ means, as to any
Person, any other Person that, directly
or indirectly, Controls, is Controlled by,
or is under common Control with such
Person. Affiliate or Affiliated, when
used as an adjective, shall have a
correlative meaning.
(d) ‘‘Agent’’ means, for purposes of
Exhibit C, agents of the Operating
Committee, a Member, the
Administrator, and the Processors,
including, but not limited to, attorneys,
auditors, advisors, accountants,
contractors or subcontractors.
(e) ‘‘Applicable Law’’ means all
applicable provisions of (a)
constitutions, treaties, statutes, laws
(including the common law), rules,
regulations, decrees, ordinances, codes,
proclamations, declarations or orders of
any Governmental Authority; (b) any
consents or approvals of any
Governmental Authority; and (c) any
orders, decisions, advisory or
interpretative opinions, injunctions,
judgments, awards, decrees of, or
agreements with, any Governmental
Authority.
(f) ‘‘Best Bid and Offer’’ has the
meaning ascribed to the term ‘‘best bid
and best offer’’ by Rule 600(b)(8) of
Regulation NMS.
(g) ‘‘Capital Contributions’’ means any
cash, cash equivalents, or other property
that a Member contributes to the
Company with respect to its
Membership Interest.
(h) ‘‘Chair’’ shall mean the individual
elected pursuant to Section 4.4(e).
(i) ‘‘Code’’ means the Internal
Revenue Code of 1986, as amended.
(j) ‘‘Commission’’ or ‘‘SEC’’ means the
U.S. Securities and Exchange
Commission.
(k) ‘‘Company Indemnified Party’’
means a Person, and any other Person
of whom such Person is the legal
representative, that is or was a Member
or an SRO Voting Representative.
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(l) ‘‘Confidential Information’’ means,
except to the extent covered by the
definitions for Restricted Information,
Highly Confidential Information, or
Public Information: (i) Any non-public
data or information designated as
Confidential by the Operating
Committee pursuant to Section 4.3; (ii)
any document generated by a Member
or Non-SRO Voting Representative and
designated by that Member or Non-SRO
Voting Representative as Confidential;
and (iii) the individual views and
statements of Covered Persons and SEC
staff disclosed during a meeting of the
Operating Committee or any
subcommittees thereunder.
(m) ‘‘Control’’ means, with respect to
any Person, the possession, directly or
indirectly, of the power to direct or
cause the direction of the management
and policies of such Person, whether
through the ownership of voting
securities (or other ownership interest),
by contract or otherwise.
(n) ‘‘Covered Persons’’ means
representatives of the Members, the
Non-SRO Voting Representatives, SRO
Applicants, the Administrator, and the
Processors; affiliates, employees, and
Agents of the Operating Committee, a
Member, the Administrator, and the
Processors; any third parties invited to
attend meetings of the Operating
Committee or subcommittees; and the
employers of Non-SRO Voting
Representatives. Covered Persons do not
include staff of the SEC.
(o) ‘‘CQ Plan’’ means the Restated CQ
Plan.
(p) ‘‘CT Feeds’’ means the CT Quote
Data Feed(s) and the CT Trade Data
Feed(s).
(q) ‘‘CT Quote Data Feed(s)’’ means
the service(s) that provides Vendors and
Subscribers with (i) National Best Bids
and Offers and their sizes and the
Members’ identifiers providing the
National Best Bids and Offers; (ii) each
Member’s Best Bids and Offers and their
sizes and the Member’s identifier; and
(iii) in the case of FINRA, the identifier
of the FINRA Participant(s) that
constitute(s) FINRA’s Best Bids and
Offers, in each case for Eligible
Securities.
(r) ‘‘CT Trade Data Feed(s)’’ means
the service(s) that provides Vendors and
Subscribers with Transaction Reports
for Eligible Securities.
(s) ‘‘CTA Plan’’ means the Second
Restatement of the CTA Plan.
(t) ‘‘Current’’ means, with respect to
Transaction Reports or Quotation
Information, such Transaction Reports
or Quotation Information during the
fifteen (15) minute period immediately
following the initial transmission
thereof by the Processors.
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64575
(u) ‘‘Delaware Act’’ means the
Delaware Limited Liability Company
Act, Title 6, Chapter 18, §§ 18–101, et
seq., and any successor statute, as
amended.
(v) ‘‘Distribution’’ means a
distribution to the Members of revenues
of the Company under this Agreement
pursuant to Section 8.3 and Exhibit D of
the Agreement.
(w) ‘‘Eligible Security’’ means (i) any
equity security, as defined in Section
3(a)(11) of the Exchange Act, or (ii) a
security that trades like an equity
security, in each case that is listed on a
national securities exchange.
(x) ‘‘ET’’ means Eastern Time.
(y) ‘‘Exchange Act’’ means the
Securities Exchange Act of 1934, as
amended.
(z) ‘‘Executive Session’’ means a
meeting of the Operating Committee
pursuant to Section 4.4(g), which
includes SRO Voting Representatives,
Member Observers, SEC Staff, and other
persons as deemed appropriate by the
SRO Voting Representatives.
(aa) ‘‘Extraordinary Market Activity’’
means a disruption or malfunction of
any electronic quotation,
communication, reporting, or execution
system operated by, or linked to, the
Processors or a Trading Center or a
member of such Trading Center that has
a severe and continuing negative
impact, on a market-wide basis, on
quoting, order, or trading activity or on
the availability of market information
necessary to maintain a fair and orderly
market. For purposes of this definition,
a severe and continuing negative impact
on quoting, order, or trading activity
includes (i) a series of quotes, orders, or
transactions at prices substantially
unrelated to the current market for the
security or securities; (ii) duplicative or
erroneous quoting, order, trade
reporting, or other related message
traffic between one or more Trading
Centers or their members; or (iii) the
unavailability of quoting, order,
transaction information, or regulatory
messages for a sustained period.
(bb) ‘‘Fees’’ means fees charged to
Vendors and Subscribers for
Transaction Reports and Quotation
Information in Eligible Securities.
(cc) ‘‘Final Decision of the Operating
Committee’’ means an action or inaction
of the Operating Committee as a result
of the vote of the Operating Committee,
but will not include the individual votes
of a Voting Representative.
(dd) ‘‘FINRA’’ means the Financial
Industry Regulatory Authority, Inc.
(ee) ‘‘FINRA Participant’’ means a
FINRA member that utilizes the
facilities of FINRA pursuant to
applicable FINRA rules.
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(ff) ‘‘Fiscal Year’’ means the fiscal
year of the Company adopted pursuant
to Section 10.1(a) of this Agreement.
(gg) ‘‘GAAP’’ means United States
generally accepted accounting
principles in effect from time to time,
consistently applied.
(hh) ‘‘Governmental Authority’’
means (a) the U.S. federal government
or government of any state of the U.S.,
(b) any instrumentality or agency of any
such government, (c) any other
individual, entity or organization
authorized by law to perform any
executive, legislative, judicial,
regulatory, administrative, military or
police functions of any such
government, or (d) any
intergovernmental organization of U.S.
entities, but ‘‘Governmental Authority’’
excludes any self-regulatory
organization registered with the
Commission.
(ii) ‘‘Highly Confidential Information’’
means any highly sensitive Memberspecific, customer-specific, individualspecific, or otherwise sensitive
information relating to the Operating
Committee, Members, Vendors,
Subscribers, or customers that is not
otherwise Restricted Information.
Highly Confidential Information
includes: The Company’s contract
negotiations with the Processors or
Administrator; personnel matters;
information concerning the intellectual
property of Members or customers; and
any document subject to the AttorneyClient Privilege or Work Product
Doctrine.
(jj) ‘‘Limit Up Limit Down’’ means the
Plan to Address Extraordinary Market
Volatility pursuant to Rule 608 of
Regulation NMS under the Exchange
Act.
(kk) ‘‘Losses’’ means losses,
judgments, penalties (including excise
and similar taxes and punitive
damages), fines, settlements, and
reasonable expenses (including
reasonable attorneys’ fees) actually
incurred by such Company Indemnified
Party as a Party to a Proceeding.
(ll) ‘‘Market’’ means (i) in respect of
FINRA or a national securities
association, the facilities through which
FINRA Participants display quotations
and report transactions in Eligible
Securities to FINRA and (ii) in respect
of each national securities exchange, the
marketplace for Eligible Securities that
such exchange operates.
(mm) ‘‘Market-Wide Circuit Breaker’’
means a halt in trading in all stocks in
all Markets under the rules of a Primary
Listing Market.
(nn) ‘‘Material SIP Latency’’ means a
delay of quotation or last sale price
information in one or more securities
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between the time data is received by the
Processors and the time the Processors
disseminate the data, which delay the
Primary Listing Market determines, in
consultation with, and in accordance
with, publicly disclosed guidelines
established by the Operating Committee,
to be (a) material and (b) unlikely to be
resolved in the near future.
(oo) ‘‘Member Observer’’ means any
individual, other than a Voting
Representative, that a Member, in its
sole discretion, determines is necessary
in connection with such Member’s
compliance with its obligations under
Rule 608(c) of Regulation NMS to attend
Operating Committee and subcommittee
meetings.
(pp) ‘‘Membership Fee’’ means the fee
to be paid by a new Member pursuant
to Section 3.2.
(qq) ‘‘Membership Interest’’ means an
interest in the Company owned by a
Member.
(rr) ‘‘Nasdaq’’ means The Nasdaq
Stock Market LLC.
(ss) ‘‘National Best Bid and Offer’’ has
the meaning ascribed to the term
‘‘national best bid and national best
offer’’ by Rule 600(b)(43) of Regulation
NMS.
(tt) ‘‘National securities association’’
means a securities association that is
registered under Section 15A of the
Exchange Act.
(uu) ‘‘National securities exchange’’
means a securities exchange that is
registered under Section 6 of the
Exchange Act.
(vv) ‘‘Network A Security’’ means an
Eligible Security for which NYSE is the
Primary Listing Market.
(ww) ‘‘Network B Security’’ means an
Eligible Security for which a national
securities exchange other than NYSE or
Nasdaq is the Primary Listing Market.
(xx) ‘‘Network C Security’’ means an
Eligible Security for which Nasdaq is
the Primary Listing Market.
(yy) ‘‘Non-Affiliated SRO’’ means a
Member that is not affiliated with any
other Member.
(zz) ‘‘Non-SRO Voting
Representative’’ means an individual
selected pursuant to Section 4.2(b) to
serve on the Operating Committee.
(aaa) ‘‘NYSE’’ means the New York
Stock Exchange LLC.
(bbb) ‘‘Officer’’ means each individual
designated as an officer of the Company
pursuant to Section 4.8.
(ccc) ‘‘Operating Committee’’ means
the committee established under Article
IV of this Agreement, each member of
which shall be deemed a ‘‘manager’’ (as
defined in the Delaware Act) and shall
be referred to herein as a Voting
Representative.
(ddd) ‘‘Operational Halt’’ means a
halt in trading in one or more securities
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only on a Member’s Market declared by
such Member and is not a Regulatory
Halt.
(eee) ‘‘Party to a Proceeding’’ means a
Company Indemnified Party that is,
was, or is threatened to be made, a party
to a Proceeding, or is involved in a
Proceeding, by reason of the fact that
such Company Indemnified Party is or
was a Member and/or an SRO Voting
Representative.
(fff) ‘‘PDP’’ means a Member or nonMember’s proprietary market data
product that includes Transaction
Reports and Quotation Information data
in Eligible Securities from a Member’s
Market or a Trading Center, and if from
a Member, is filed with the Commission.
(ggg) ‘‘Person’’ means an individual,
corporation, partnership, joint venture,
limited liability company,
Governmental Authority,
unincorporated organization, trust,
association, or other entity.
(hhh) ‘‘Primary Listing Market’’ means
the national securities exchange on
which an Eligible Security is listed. If an
Eligible Security is listed on more than
one national securities exchange,
Primary Listing Market means the
exchange on which the security has
been listed the longest.
(iii) ‘‘Proceeding’’ means any
threatened, pending or completed suit,
proceeding, or other action, whether
civil, criminal, administrative, or
arbitrative, or any appeal in such action
or any inquiry or investigation that
could lead to such an action.
(jjj) ‘‘Processor(s)’’ means the
entity(ies) selected by the Company to
perform the processing functions
described in this Agreement and
pursuant to the Processor Services
Agreement(s), including the operation of
the System.
(kkk) ‘‘Public Information’’ means: (i)
Any information that is not either
Restricted Information or Highly
Confidential Information or that has not
been designated as Confidential
Information; (ii) any Confidential
Information that has been approved by
the Operating Committee for release to
the public; (iii) the duly approved
minutes of the Operating Committee
with detail sufficient to inform the
public on matters under discussion and
the views expressed thereon (without
attribution); (iv) Vendor, Subscriber and
performance metrics; (v) Processor
transmission metrics; and (vi) any
information that is otherwise publicly
available, except for information made
public as a result of a violation of the
Company’s Confidentiality Policy or
Applicable Law. Public Information
includes, but is not limited to, any topic
discussed during a meeting of the
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Operating Committee, an outcome of a
topic discussed, or a Final Decision of
the Operating Committee.
(lll) ‘‘Regulatory Halt’’ means a halt
declared by the Primary Listing Market
in trading in one or more securities on
all Trading Centers for regulatory
purposes, including for the
dissemination of material news, news
pending, suspensions, or where
otherwise necessary to maintain a fair
and orderly market. A Regulatory Halt
includes a trading pause triggered by
Limit Up Limit Down, a halt based on
Extraordinary Market Activity, a trading
halt triggered by a Market-Wide Circuit
Breaker, and a SIP Halt.
(mmm) ‘‘Restricted Information’’
means highly sensitive customerspecific financial information,
customer-specific audit information,
other customer financial information,
and personal identifiable information.
(nnn) ‘‘Quotation Information’’ means
all bids, offers, displayed quotation
sizes, market center identifiers and, in
the case of FINRA, the identifier of the
FINRA Participant that entered the
quotation, all withdrawals, and all other
information pertaining to quotations in
Eligible Securities required to be
collected and made available to the
Processors pursuant to this Agreement.
(ooo) ‘‘Regular Trading Hours’’ has
the meaning provided in Rule 600(b)(68)
of Regulation NMS. Regular Trading
Hours can end earlier than 4:00 p.m. ET
in the case of an early scheduled close.
(ppp) ‘‘Retail Representative’’ means
an individual who (1) represents the
interests of retail investors, (2) has
experience working with or on behalf of
retail investors, (3) has the requisite
background and professional experience
to understand the interests of retail
investors, the work of the Operating
Committee of the Company, and the role
of market data in the U.S. equity market,
and (4) is not affiliated with a Member
or broker-dealer.
(qqq) ‘‘Self-regulatory organization’’
or ‘‘SRO’’ has the meaning provided in
Section 3(a)(26) of the Exchange Act.
(rrr) ‘‘SIP Halt’’ means a Regulatory
Halt to trading in one or more securities
that a Primary Listing Market declares
in the event of a SIP Outage or Material
SIP Latency.
(sss) ‘‘SIP Halt Resume Time’’ means
the time that the Primary Listing Market
determines as the end of a SIP Halt.
(ttt) ‘‘SIP Outage’’ means a situation
in which a Processor has ceased, or
anticipates being unable, to provide
updated and/or accurate quotation or
last sale price information in one or
more securities for a material period
that exceeds the time thresholds for an
orderly failover to backup facilities
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established by mutual agreement among
the Processors, the Primary Listing
Market for the affected securities, and
the Operating Committee unless the
Primary Listing Market, in consultation
with the affected Processor and the
Operating Committee, determines that
resumption of accurate data is expected
in the near future.
(uuu) ‘‘SRO Applicant’’ means (1) any
Person that is not a Member and for
which the Commission has published a
Form 1 to be registered as a national
securities exchange or national
securities association to operate a
Market, or (2) a national securities
exchange that is not a Member and for
which the Commission has published a
proposed rules change to operate a
Market.
(vvv) ‘‘SRO Group’’ means a group of
Members that are Affiliates.
(www) ‘‘SRO Voting Representative’’
means an individual designated by each
SRO Group and each Non-Affiliated
SRO pursuant to Section 4.2(a) to vote
on behalf of such SRO Group or such
Non-Affiliated SRO.
(xxx) ‘‘Subscriber’’ means a Person
that receives Current Transaction
Reports or Quotation Information from
the Processors or a Vendor and that
itself is not a Vendor.
(yyy) ‘‘System’’ means all data
processing equipment, software,
communications facilities, and other
technology and facilities, utilized by the
Company or the Processors in
connection with the collection,
consolidation, and dissemination of
Transaction Reports, Quotation
Information, and other information
concerning Eligible Securities.
(zzz) ‘‘Taxes’’ means taxes, levies,
imposts, charges, and duties (including
withholding tax, stamp, and transaction
duties) imposed by any taxing authority
together with any related interest,
penalties, fines, and expenses in
connection with them.
(aaaa) ‘‘Trading Center’’ has the same
meaning as that term is defined in Rule
600(b)(82) of Regulation NMS.
(bbbb) ‘‘Transaction Reports’’ means
reports required to be collected and
made available pursuant to this
Agreement containing the stock symbol,
price, and size of the transaction
executed, the Market in which the
transaction was executed, and related
information, including a buy/sell/cross
indicator, trade modifiers, and any other
required information reflecting
completed transactions in Eligible
Securities.
(cccc) ‘‘Transfer’’ means to directly
sell, transfer, assign, pledge, encumber,
hypothecate, or similarly dispose of,
either voluntarily or involuntarily, by
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operation of law or otherwise, or to
enter into any contract, option, or other
arrangement or understanding with
respect to the sale, transfer, assignment,
pledge, encumbrance, hypothecation, or
similar disposition of any Membership
Interests owned by a Person or any
interest (including a beneficial interest)
in any Membership Interests owned by
a Person. ‘‘Transfer’’ when used as a
noun shall have a correlative meaning.
(dddd) ‘‘UTP Plan’’ means the Joint
Self-Regulatory Organization Plan
Governing the Collection, Consolidation
and Dissemination of Quotation and
Transaction Information for NasdaqListed Securities Traded on Exchanges
on an Unlisted Trading Privileges Basis.
(eeee) ‘‘Vendor’’ means a Person that
the Administrator has approved to redistribute Current Transaction Reports
or Quotation Information to the Person’s
employees or to others.
(ffff) ‘‘Voting Representative’’ means
an SRO Voting Representative or a NonSRO Voting Representative.
Section 1.2
Interpretation
For purposes of this Agreement: (a)
The words ‘‘include,’’ ‘‘includes,’’ and
‘‘including’’ shall be deemed to be
followed by the words ‘‘without
limitation’’; (b) the word ‘‘or’’ is not
exclusive; and (c) the words ‘‘herein,’’
‘‘hereof,’’ ‘‘hereby,’’ ‘‘hereto,’’ and
‘‘hereunder’’ refer to this Agreement as
a whole. The definitions given for any
defined terms in this Agreement shall
apply equally to both the singular and
plural forms of the terms defined.
Whenever the context may require, any
pronoun shall include the
corresponding masculine, feminine, and
neuter forms. Unless the context
otherwise requires, references herein:
(x) to Articles, Sections, and Exhibits
mean the Articles and Sections of, and
Exhibits attached to, this Agreement; (y)
to an agreement, instrument, or other
document mean such agreement,
instrument, or other document as
amended, supplemented, and modified
from time to time to the extent
permitted by the provisions thereof; and
(z) to a statute mean such statute as
amended from time to time and
includes any successor legislation
thereto and any rules and regulations
promulgated thereunder. This
Agreement shall be construed without
regard to any presumption or rule
requiring construction or interpretation
against the party drafting an instrument
or causing any instrument to be drafted.
The Exhibits referred to herein shall be
construed with, and as an integral part
of, this Agreement to the same extent as
if they were set forth verbatim herein.
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Article II. Organization
Section 2.1 Formation
(a) The Members formed the Company
as a limited liability company on [•], [•]
pursuant to the Delaware Act by filing
a certificate of formation (the
‘‘Certificate’’) with the Delaware
Secretary of State.
(b) This Agreement shall constitute
the ‘‘limited liability company
agreement’’ (as that term is used in the
Delaware Act) of the Company. The
rights, powers, duties, obligations, and
liabilities of the Members shall be
determined pursuant to the Delaware
Act and this Agreement. To the extent
that the rights, powers, duties,
obligations, and liabilities of any
Member are different by reason of any
provision of this Agreement than they
would be under the Delaware Act in the
absence of such provision, this
Agreement shall, to the extent permitted
by the Delaware Act, control.
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Section 2.2 Name
The name of the Company is ‘‘CT Plan
LLC’’ and all Company business shall be
conducted in that name or such other
name or names as the Operating
Committee may designate; provided,
that the name shall always contain the
words ‘‘Limited Liability Company’’ or
the abbreviation ‘‘L.L.C.’’ or the
designation ‘‘LLC.’’
Section 2.3 Registered Office;
Registered Agent; Principal Office;
Other Offices
(a) The registered office of the
Company required by the Delaware Act
to be maintained in the State of
Delaware shall be the office of the initial
registered agent named in the Certificate
or such other office (which need not be
a place of business of the Company) as
the Operating Committee may designate
from time to time in the manner
provided by the Delaware Act and
Applicable Law.
(b) The registered agent for service of
process of the Company in the State of
Delaware shall be the initial registered
agent named in the Certificate or such
other Person or Persons as the Operating
Committee may designate from time to
time in the manner provided by the
Delaware Act and Applicable Law.
(c) The principal office of the
Company shall be located at such place
as the Operating Committee may
designate from time to time, which need
not be in the State of Delaware, and the
Company shall maintain its books and
records there. The Company shall give
prompt notice to each of the Members
of any change to the principal office of
the Company.
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(d) The Company may have such
other offices as the Operating
Committee may designate from time to
time.
Section 2.4 Purpose; Powers
(a) The purposes of the Company are
to engage in the following activities on
behalf of the Members:
(i) The collection, consolidation, and
dissemination of Transaction Reports,
Quotation Information, and such other
information concerning Eligible
Securities as the Members shall agree as
provided herein;
(ii) contracting for the distribution of
such information;
(iii) contracting for and maintaining
facilities to support any activities
permitted in this Agreement and
guidelines adopted hereunder,
including the operation and
administration of the System;
(iv) providing for those other matters
set forth in this Agreement and in all
guidelines adopted hereunder;
(v) operating the System to comply
with Applicable Laws; and
(vi) engaging in any other business or
activity that now or hereafter may be
necessary, incidental, proper, advisable,
or convenient to accomplish any of the
foregoing purposes and that is not
prohibited by the Delaware Act, the
Exchange Act, or other Applicable Law.
(b) The Company shall have all the
powers necessary or convenient to carry
out the purposes for which it is formed,
including the powers granted by the
Delaware Act.
(c) It is expressly understood that
each Member shall be responsible for
the collection of Transaction Reports
and Quotation Information within its
Market and that nothing in this
Agreement shall be deemed to govern or
apply to the manner in which each
Member does so.
Section 2.5
Term
The term of the Company commenced
as of the date the Certificate was filed
with the Secretary of State of the State
of Delaware, and shall continue in
existence perpetually until the
Company is dissolved in accordance
with the provisions of the Certificate or
this Agreement. Notwithstanding the
foregoing, this Agreement shall not
become effective until the Effective
Date.
Section 2.6
No State-Law Partnership
The Members intend that the
Company not be a partnership
(including a limited partnership) or
joint venture, and that no Member be a
partner or joint venturer of any other
Member by virtue of this Agreement for
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any purposes other than as set forth in
Sections 10.2 and 10.3, and neither this
Agreement nor any other document
entered into by the Company or any
Member relating to the subject matter of
this Agreement shall be construed to
suggest otherwise.
Article III. Membership
Section 3.1 Members
The Members of the Company shall
consist of the Persons identified in
Exhibit A, as updated from time to time
to reflect the admission of new Members
pursuant to this Agreement.
Section 3.2 New Members
(a) Any national securities association
or national securities exchange whose
market, facilities, or members, as
applicable, trades Eligible Securities
may become a Member by (i) providing
written notice to the Company, (ii)
executing a joinder to this Agreement, at
which time Exhibit A shall be amended
to reflect the addition of such
association or exchange as a Member,
(iii) paying a Membership Fee to the
Company as determined pursuant to
Section 3.2(b), and (iv) executing a
joinder to any other agreements to
which all of the other Members have
been made party in connection with
being a Member. Membership Fees paid
shall be added to the general revenues
of the Company.
(b) The Membership Fee shall be
based upon the following factors:
(i) The portion of costs previously
paid by the Company (or by the
Members prior to the formation of the
Company) for the development,
expansion, and maintenance of the
System which, under GAAP, would
have been treated as capital
expenditures and would have been
amortized over the five years preceding
the admission of the new Member (and
for this purpose all such capital
expenditures shall be deemed to have a
five-year amortizable life); and
(ii) an assessment of costs incurred
and to be incurred by the Company for
modifying the System or any part
thereof to accommodate the new
Member, which are not otherwise
required to be paid or reimbursed by the
new Member.
(a) Participants of the CQ Plan, CTA
Plan, and UTP Plan are not be required
to pay the Membership Fee.
Section 3.3 Transfer of Membership
Interests
Except as set forth in Section 3.4, a
Member shall not have the right to
Transfer (whether in whole or in part)
its Membership Interest in the
Company.
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Section 3.4 Withdrawal From
Membership
(a) Any Member may voluntarily
withdraw from the Company at any time
on not less than 30 days’ prior written
notice (the ‘‘Withdrawal Date’’), by (i)
providing such notice of such
withdrawal to the Company, (ii) causing
the Company to file with the
Commission an amendment to
effectuate the withdrawal and (iii)
Transferring such Member’s
Membership Interest to the Company.
(b) A Member shall automatically be
withdrawn from the Company upon
such Member no longer being a
registered national securities association
or registered national securities
exchange. Such Member’s Membership
Interest will automatically transfer to
the Company. The Company shall file
with the Commission an amendment to
effectuate the withdrawal.
(c) A withdrawal of a Member shall
not be effective until approved by the
Commission after filing an amendment
to the Agreement in accordance with
Section 13.5.
(d) From and after the Withdrawal
Date of such Member:
(i) Such Member shall remain liable
for any obligations under this
Agreement of such Member (including
indemnification obligations) arising
prior to the Withdrawal Date (but such
Member shall have no further
obligations under this Agreement or to
any of the other Members arising after
the Withdrawal Date);
(ii) Such Member shall be entitled to
receive a portion of the Net
Distributable Operating Income (if any)
in accordance with Exhibit D
attributable to the period prior to the
Withdrawal Date of such Member;
(iii) Such Member shall cease to have
the right to have its Transaction Reports,
Quotation Information, or other
information disseminated over the
System; and
(iv) Profits and losses of the Company
shall cease to be allocated to the Capital
Account of such Member.
Section 3.5 Member Bankruptcy
In the event a Member becomes
subject to one or more of the events of
bankruptcy enumerated in Section 18–
304 of the Delaware Act, that event by
itself shall not cause a withdrawal of
such Member from the Company so long
as such Member continues to be a
national securities association or
national securities exchange.
Section 3.6 Undertaking by All
Members
Following the Operative Date, each
Member shall be required, pursuant to
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Rule 608(c), to comply with the
provisions hereof and enforce
compliance by its members with the
provisions hereof.
Section 3.7 Obligations and Liability of
Members
(a) Except as otherwise provided in
this Agreement or Applicable Law, no
Member shall be obligated to contribute
capital or make loans to the Company.
(b) Except as provided in this
Agreement or Applicable Law, no
Member shall have any liability
whatsoever in its capacity as a Member,
whether to the Company, to any of the
Members, to the creditors of the
Company or to any other Person, for the
debts, liabilities, commitments or any
other obligations of the Company or for
any losses of the Company.
Notwithstanding the foregoing, to the
extent that amounts have not been paid
to the Processors or Administrator
under the terms of the Processor
Services Agreements and
Administrative Services Agreement,
respectively, or this Agreement, as and
when due, (i) each Member shall be
obligated to return to the Company its
pro rata share of any moneys distributed
to such Member in the one year period
prior to such default in payment (such
pro rata share to be based upon such
Member’s proportionate receipt of the
aggregate distributions made to all
Members in such one year period) until
an aggregate amount equal to the
amount of any such defaulted payments
has been re-contributed to the Company
and (ii) the Company shall promptly
pay such amount to the Processors or
Administrator, as applicable.
(c) In accordance with the Delaware
Act, a member of a limited liability
company may, under certain
circumstances, be required to return
amounts previously distributed to such
member. It is the intent of the Members
that no distribution to any Member
pursuant to this Agreement shall be
deemed a return of money or other
property paid or distributed in violation
of the Delaware Act. The payment of
any such money or distribution of any
such property to a Member shall be
deemed to be a compromise within the
meaning of the Delaware Act, and the
Member receiving any such money or
property shall not be required to return
any such money or property to any
Person; provided, however, that a
Member shall be required to return to
the Company any money or property
distributed to it in clear and manifest
accounting or similar error or as
otherwise provided in Section 3.7(b).
However, if any court of competent
jurisdiction holds that, notwithstanding
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the provisions of this Agreement, any
Member is obligated to make any such
payment, such obligation shall be the
obligation of such Member and not of
the Operating Committee.
(d) No Member (unless duly
authorized by the Operating Committee)
has the authority or power to represent,
act for, sign for or bind the Company or
to make any expenditure on behalf of
the Company; provided, however, that
the Tax Matters Partner may represent,
act for, sign for or bind the Company as
permitted under Sections 10.2 and 10.3
of this Agreement.
(e) To the fullest extent permitted by
law, no Member shall, in its capacity as
a Member, owe any duty (fiduciary or
otherwise) to the Company or to any
other Member other than the duties
expressly set forth in this Agreement.
Article IV. Management of the
Company
Section 4.1
Operating Committee
(a) Except for situations in which the
approval of the Members is required by
this Agreement, the Company shall be
managed by the Operating Committee.
Unless otherwise expressly provided to
the contrary in this Agreement, no
Member shall have authority to act for,
or to assume any obligation or
responsibility on behalf of, the
Company, without the prior approval of
the Operating Committee. Without
limiting the generality of the foregoing
and except as otherwise expressly
provided in this Agreement, the
Operating Committee shall have full and
complete discretion to manage and
control the business and affairs of the
Company, to make all decisions
affecting the business and affairs of the
Company, and to take all such actions
as it deems necessary or appropriate to
accomplish the purposes of the
Company, including the following:
(i) Proposing amendments to this
Agreement or implementing other
policies and procedures as necessary to
ensure prompt, accurate, reliable, and
fair collection, processing, distribution,
and publication of information with
respect to Transaction Reports and
Quotation Information in Eligible
Securities and the fairness and
usefulness of the form and content of
that information;
(ii) selecting, overseeing, specifying
the role and responsibilities of, and
evaluating the performance of, the
Administrator, the Processors, an
auditor, and other professional service
providers, provided that any
expenditures for professional services
that are paid for from the Company’s
revenues must be for activities
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consistent with the terms of this
Agreement and must be authorized by
the Operating Committee;
(iii) developing and maintaining fair
and reasonable Fees and consistent
terms for the distribution, transmission,
and aggregation of core data;
(iv) reviewing the performance of the
Processors and ensuring the public
reporting of Processors’ performance
and other metrics and information about
the Processors;
(v) assessing the marketplace for
equity market data products and
ensuring that the CT Feeds are priced in
a manner that is fair and reasonable, and
designed to ensure the widespread
availability of CT Feeds data to
investors and market participants;
(vi) designing a fair and reasonable
revenue allocation formula for
allocating plan revenues to be applied
by the Administrator, and overseeing,
reviewing, and revising that formula as
needed;
(vii) interpreting the Agreement and
its provisions; and
(viii) carrying out such other specific
responsibilities as provided under this
Agreement.
(b) The Operating Committee may
delegate all or part of its administrative
functions under this Agreement to a
subcommittee, to one or more of the
Members, to one or more Non-SRO
Voting Representatives, or to other
Persons (including the Administrator),
and any Person to which administrative
functions are so delegated shall perform
the same as agent for the Company, in
the name of the Company. For the
avoidance of doubt, no delegation to a
subcommittee shall contravene Section
4.3 and no subcommittee shall take
actions requiring approval of the
Operating Committee pursuant to
Section 4.3 unless such approval shall
have been obtained. Any authority
delegated hereunder is subject to the
provisions of Section 4.3 hereof.
(c) It is expressly agreed and
understood that neither the Company
nor the Operating Committee shall have
authority in any respect of any
Member’s proprietary systems. Neither
the Company nor the Operating
Committee shall have any authority over
the collection and dissemination of
quotation or transaction information in
Eligible Securities in any Member’s
Market, or, in the case of FINRA, from
FINRA Participants.
Section 4.2 Composition and Selection
of Operating Committee
(a) SRO Voting Representatives. The
Operating Committee shall include one
SRO Voting Representative designated
by each SRO Group and each Non-
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Affiliated SRO to vote on behalf of such
SRO Group or such Non-Affiliated SRO.
Each SRO Group and each NonAffiliated SRO may designate an
alternate individual or individuals who
shall be authorized to vote on behalf of
such SRO Group or such Non-Affiliated
SRO, respectively, in the absence of the
designated SRO Voting Representative.
(b) Non-SRO Voting Representatives.
The Operating Committee shall include
one Non-SRO Voting Representative
from each of the following categories:
(A) An institutional investor; (B) a
broker-dealer with a predominantly
retail investor customer base; (C) a
broker-dealer with a predominantly
institutional investor customer base; (D)
a securities market data vendor that is
not affiliated or associated with a
Member, broker-dealer, or investment
adviser with third-party clients; (E) an
issuer of NMS stock that is not affiliated
or associated with a Member, brokerdealer, or investment adviser with thirdparty clients; and (F) a Retail
Representative. Non-SRO Voting
Representatives shall serve for two-year
terms for a maximum of two terms total,
whether consecutive or nonconsecutive. Non-SRO Voting
Representatives will be selected
pursuant to the following procedures:
(i) The initial Non-SRO Voting
Representative for each category shall be
selected by a majority vote of the
Advisory Committee Members. The
Advisory Committee Members shall
follow the procedure set forth in
subparagraph (b)(v) below.
(ii) Although the Non-SRO Voting
Representatives will be selected at the
same time, the Non-SRO Voting
Representatives’ terms will be staggered
to allow for continuity of representation.
The Non-SRO Voting Representatives’
terms will begin in accordance with the
following timeline after the Effective
Date of the Agreement:
(A) Issuer Representative: First
Quarterly Operating Committee Meeting
after Effective Date;
(B) Retail Representative: First
Quarterly Operating Committee Meeting
after Effective Date;
(C) Institutional investor: First
Quarterly Operating Committee Meeting
after Effective Date
(D) Securities market data vendor:
Third Quarterly Operating Committee
Meeting after Effective Date;
(E) Broker-dealer with a
predominantly retail investor customer
base: Third Quarterly Operating
Committee Meeting after Effective Date;
and
(F) Broker-dealer with a
predominantly institutional investor
customer base: Third Quarterly
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Operating Committee Meeting Effective
Date.
(iii) Although certain Non-SRO Voting
Representatives’ official, two-year terms
will not begin until the Third Quarterly
Operating Committee Meeting after the
Effective Date, such Non-SRO Voting
Representatives will temporarily serve
as a Non-SRO Voting Representative as
of their selection. Such Non-SRO Voting
Representatives may still be selected for
another two-year term.
(iv) After the expiration of a Non-SRO
Voting Representative’s term, an
individual will be selected by a majority
of the then-serving Non-SRO Voting
Representatives to fill the position.
(v) Procedure for Nominating and
Electing Non-SRO Voting
Representatives.
(A) At least two months prior to the
expiring term of a Non-SRO Voting
Representative, the Operating
Committee shall post a notice on its
website requesting nominations from
the public for the upcoming open
position. Members may submit
individuals for consideration during the
nomination process, and the Non-SRO
Voting Representative may nominate
themselves as long as they have not
served the maximum number of terms.
(B) At least one month prior to the
expiring term of a Non-SRO Voting
Representative, the Non-SRO Voting
Representatives shall review the
nominated individuals to confirm, by a
majority vote, the nominated
individuals that meet the requirements
of the category up for election.
(C) Within a week of the Non-SRO
Voting Representatives finalizing the list
of eligible individuals, the Operating
Committee shall post a notice on the
Company website listing the individuals
nominated for the open position and
requesting comment from the public.
After the Non-SRO Voting
Representatives screen comments for
appropriateness, the public comments
will be posted on the Company’s
website. Prior to electing an individual
from the list of nominations, the NonSRO Voting Representatives will
consider and discuss the public
comments.
(D) The Non-SRO Voting
Representatives whose terms are
expiring may vote in the election for an
open position; provided, however, that a
Non-SRO Voting Representative may
not vote in the election for an open
position for which they are nominated.
(E) In the event that no nominated
individual receives a majority of votes,
the individual(s) with the lowest
number of votes will be eliminated from
consideration. The Non-SRO Voting
Representatives will repeat this process
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until an individual receives a majority
of votes. In the event two candidates
remain, the Person receiving the most
votes will be elected.
(vi) A Non-SRO Voting Representative
may resign from the Operating
Committee by tendering their
resignation to the Chair of the Operating
Committee. In the event a Non-SRO
Voting Representative leaves his or her
employment or changes his or her
duties within the firm to a position
unrelated to the category he or she
represents before the expiration of his or
her term, the Non-SRO Voting
Representative shall tender his or her
resignation to the Chair of the Operating
Committee or be removed upon an
affirmative vote of the Operating
Committee pursuant to Section 4.3.
(vii) In the event a Non-SRO Voting
Representative resigns or is removed
from the Operating Committee, the
Operating Committee shall, as soon as
practicable, follow the procedure set
forth in subparagraph (b)(v). The
individual selected shall serve out the
remaining term of the resigning NonSRO Voting Representative and, if the
remaining term after selection is less
than one year, such individual will
automatically serve an additional twoyear term. If the remaining term after
selection is greater than one year, the
Operating Committee shall follow the
procedure set forth in subparagraph
(b)(v) at the end of the term. Under
either circumstance, such individual
may be elected for one additional twoyear term before reaching the term limit.
(viii) Each Non-SRO Voting
Representative will agree in writing to
comply with the requirements of
Section 4.10 and Exhibit B thereto and
the Confidentiality Policy set forth in
Exhibit C.
(c) An SRO Applicant will be
permitted to appoint one individual to
attend (subject to Section 4.4(i))
regularly scheduled Operating
Committee meetings in the capacity of
a non-voting observer (each, an ‘‘SRO
Applicant Observer’’). Each SRO
Applicant may designate an alternate
individual or individuals who shall be
authorized to act as the SRO Applicant
Observer on behalf of the SRO
Applicant in the absence of the
designated SRO Applicant Observer. If
the SRO Applicant’s Form 1 petition or
Section 19(b)(1) filing is withdrawn,
returned, or is otherwise not actively
pending with the Commission for any
reason, then the SRO Applicant will no
longer be eligible to have an SRO
Applicant Observer attend Operating
Committee meetings.
(d) Notwithstanding anything to the
contrary herein, (i) a national securities
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exchange that has ceased operations as
a Market (or has yet to commence
operation as a Market) and that is a NonAffiliated SRO will not be permitted to
designate an SRO Voting Representative
and (ii) an SRO Group in which all
national securities exchanges have
ceased operations as a Market (or have
yet to commence operation as a Market)
will not be permitted to designate an
SRO Voting Representative. Such SRO
Group or Non-Affiliated SRO may
attend the Operating Committee as an
observer but may not attend the
Executive Session of the Operating
Committee. In the event such an SRO
Group or Non-Affiliated SRO does not
commence operation as a Market for six
months after first attending an
Operating Committee meeting, such
SRO Group or Non-Affiliated SRO may
no longer attend the Operating
Committee until it commences/recommences operation as a Market.
Section 4.3 Action of Operating
Committee
(a) The SRO Voting Representatives
and Non-SRO Voting Representatives
shall be allocated votes as follows:
(i) Each SRO Voting Representative
shall be authorized to cast one vote on
behalf of the SRO Group or NonAffiliated SRO that he or she represents,
provided, however, that each SRO
Voting Representative representing an
SRO Group or Non-Affiliated SRO
whose combined market center(s) have
consolidated equity market share of
more than fifteen (15) percent during
four of the six calendar months
preceding an Operating Committee vote
shall be authorized to cast two votes.
For purposes of this Section 4.3(a)(i),
‘‘consolidated equity market share’’
means the average daily dollar equity
trading volume of Eligible Securities of
an SRO Group or Non-Affiliated SRO as
a percentage of the average daily dollar
equity trading volume of all of the SRO
Groups and Non-Affiliated SROs, as
reported under this Agreement. For the
avoidance of doubt, FINRA shall not be
considered to operate a market center
within the meaning of this Section
4.3(a)(i) solely by virtue of facilitating
trade reporting of Eligible Securities
through the FINRA/Nasdaq Trade
Reporting Facility Carteret, the FINRA/
Nasdaq Trade Reporting Facility
Chicago, the FINRA/NYSE Trade
Reporting Facility, or any other trade
reporting facility that FINRA may
operate from time to time in affiliation
with a registered national securities
exchange to provide a mechanism for
FINRA Participants to report
transactions in Eligible Securities
effected otherwise than on an exchange.
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64581
(ii) With respect to any action on
which the Non-SRO Voting
Representatives may vote, the aggregate
number of votes attributed to the NonSRO Voting Representatives eligible to
vote on such action shall at all times
equal one half of the aggregate number
of votes attributed to the votes of the
SRO Voting Representatives who are
eligible to vote on such action, and the
number of Non-SRO Voting
Representative votes shall increase or
decrease as necessary to maintain the
ratio between votes attributed to the
SRO Voting Representatives and votes
attributed to the Non-SRO Voting
Representatives. Votes attributed to
Non-SRO Voting Representatives will be
allocated equally among Non-SRO
Voting Representatives eligible to vote,
in fractional shares if necessary.
(b) All actions of the Operating
Committee will require an augmented
majority vote consisting of the
affirmative vote of not less than (2/3rd)
two-thirds of all votes allocated in the
manner described in Section 4.3(a) to
Voting Representatives who are eligible
to vote on such action, combined with
a majority (greater than (50) fifty percent
of the votes) of all votes allocated in the
manner described in Section 4.3(a) to
SRO Voting Representatives who are
eligible to vote on such action.
(c) Notwithstanding Section 4.3(b),
the following actions will not require an
augmented majority vote of the
Operating Committee:
(i) the selection of Non-SRO Voting
Representatives pursuant to Section
4.2(b);
(ii) the decision to enter Executive
Session pursuant to Section 4.4(g);
(iii) decisions concerning the
operation of the Company as an LLC as
specified in Section 10.3 and Section
11.2;
(iv) modifications to LLC-related
provisions of the Agreement pursuant to
Section 13.5(b); and
(v) the selection of Officers of the
Company, other than the Chair,
pursuant to Section 4.8.
Section 4.4 Meetings of the Operating
Committee
(a) Subject to Section 4.4(g), meetings
of the Operating Committee may be
attended by each Voting Representative,
Member Observers, SRO Applicant
Observers, SEC staff, and other persons
as deemed appropriate by the Operating
Committee. Meetings shall be held at
such times and locations as shall from
time to time be determined by the
Operating Committee. Member
Observers shall be entitled to receive
notice of all meetings of the Company
and to attend and participate in any
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discussion at any such meeting, but
shall not be entitled to vote on any
matter.
(b) Special meetings of the Operating
Committee may be called by the Chair
on at least 24 hours’ notice to each
Voting Representative and all persons
eligible to attend Operating Committee
meetings.
(c) Any action requiring a vote can be
taken at a meeting only if a quorum of
all Voting Representatives is present. A
quorum is equal to the minimum votes
necessary to obtain approval under
Section 4.3(b), i.e., Voting
Representatives reflecting 2/3rd of
Operating Committee votes eligible to
vote on such action and SRO Voting
Representatives reflecting 50% of SRO
Voting Representative votes eligible to
vote on such action.
(i) Any Voting Representative recused
from voting on a particular action (i)
mandatorily pursuant to Section 4.10(b)
or (ii) upon a Voting Representative’s
voluntary recusal, shall not be
considered in the numerator or
denominator of the calculations in
paragraph (c) for determining whether a
quorum is present.
(ii) A Voting Representative is
considered present at a meeting only if
such Voting Representative is either in
physical attendance at the meeting or
participating by conference telephone or
other electronic means that enables each
Voting Representative to hear and be
heard by all others present at the
meeting.
(d) A summary of any action sought
to be resolved at a meeting shall be sent
to each Voting Representative entitled to
vote on such matter at least one week
prior to the meeting via electronic mail,
portal notification, or regular U.S. or
private mail (or if one week is not
practicable, then with as much time as
may be reasonably practicable under the
circumstances); provided, however, that
this requirement to provide a summary
of any action prior to a meeting may be
waived by the vote of the percentage of
the Committee required to vote on any
particular matter, under Section 4.3
above.
(e) Beginning with the first quarterly
meeting of the Operating Committee
following the Operative Date, the Chair
of the Operating Committee shall be
elected for a one-year term from the
constituent SRO Voting Representatives
(and an election for the Chair shall be
held every year). Subject to the
requirements of Section 4.3 hereof, the
Chair shall have the authority to enter
into contracts on behalf of the Company
and otherwise bind the Company, but
only as directed by the Operating
Committee. The Chair shall designate a
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Person to act as Secretary to record the
minutes of each meeting. The location
of meetings shall be in a location
capable of holding the number of
attendees of such meetings, or such
other locations as may from time to time
be determined by the Operating
Committee.
(i) To elect a Chair, the Operating
Committee will elicit nominations for
those individuals to be considered for
Chair.
(ii) In the event that no nominated
Person is elected by an affirmative vote
of the Operating Committee pursuant to
Section 4.3, the Person(s) with the
lowest number of votes will be
eliminated from consideration. The
Operating Committee will repeat this
process until a Person is elected by
affirmative vote of the Operating
Committee pursuant to Section 4.3. In
the event two candidates remain and
neither is elected by an affirmative vote
of the Operating Committee pursuant to
Section 4.3, the Person receiving the
most votes from SRO Voting
Representatives will be elected.
(f) Meetings may be held by
conference telephone or other electronic
means that enables each Voting
Representative to hear and be heard by
all others present at the meeting.
(g) Notwithstanding any other
provision of this Agreement, SRO
Voting Representatives, Member
Observers, SEC Staff, and other persons
as deemed appropriate by the SRO
Voting Representatives may meet in
Executive Session of the Operating
Committee to discuss an item of
business for which it is appropriate to
exclude Non-SRO Voting
Representatives. A request to create an
Executive Session must be included on
the written agenda for an Operating
Committee meeting, along with the
clearly stated rationale as to why such
item to be discussed would be
appropriate for Executive Session. The
creation of an Executive Session will be
by a majority vote of SRO Voting
Representatives with votes allocated
pursuant to Section 4.3(a)(1). The
Executive Session shall only discuss the
topic for which it was created and shall
be disbanded upon fully discussing the
topic.
(i) Items for discussion within an
Executive Session should be limited to
such topics as:
(A) Any topic that requires discussion
of Highly Confidential Information;
(B) Vendor or Subscriber Audit
Findings; and
(C) Litigation matters.
(ii) The list provided in subparagraph
(i) is not dispositive of all matters that
may by their nature require discussion
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in an Executive Session. The mere fact
that a topic is controversial or a matter
of dispute does not, by itself, make a
topic appropriate for Executive Session.
The minutes for an Executive Session
shall include the reason for including
any item in Executive Session.
(iii) Requests to discuss a topic in
Executive Session must be included on
the written agenda for the Operating
Committee meeting, along with the
clearly stated rationale for each topic as
to why such discussion is appropriate
for Executive Session. Such rationale
may be that the topic to be discussed
falls within the list provided in
subparagraph (g)(i).
(iv) Any action that requires a vote in
Executive Session will require a
majority of the votes allocated in the
manner described in Section 4.3(a) to
SRO Voting Representatives eligible to
vote on such action.
Section 4.5 Certain Transactions
The fact that a Member or any of its
Affiliates is directly or indirectly
interested in or connected with any
Person employed by the Company to
render or perform a service, or from
which or to whom the Company may
buy or sell any property, shall not
prohibit the Company from employing
or dealing with such Person.
Section 4.6 Company Opportunities
(a) Each Member, its Affiliates, and
each of their respective equity holders,
controlling persons and employees may
have business interests and engage in
business activities in addition to those
relating to the Company. Neither the
Company nor any Member shall have
any rights by virtue of this Agreement
in any business ventures of any such
Person.
(b) Each Member expressly
acknowledges that (i) the other Members
are permitted to have, and may
presently or in the future have,
investments or other business
relationships with Persons engaged in
the business of the Company other than
through the Company (an ‘‘Other
Business’’), (ii) the other Members have
and may develop strategic relationships
with businesses that are and may be
competitive or complementary with the
Company, (iii) the other Members shall
not be obligated to recommend or take
any action that prefers the interests of
the Company or any Member over its
own interests, (iv) none of the other
Members will be prohibited by virtue of
their ownership of equity in the
Company or service on the Operating
Committee (or body performing similar
duties) from pursuing and engaging in
any such activities, (v) none of the other
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Members will be obligated to inform or
present to the Company any such
opportunity, relationship, or
investment, (vi) such Member will not
acquire or be entitled to any interest or
participation in any Other Business as a
result of the participation therein of any
of the other Members, and (vii) the
involvement of another Member in any
Other Business in and of itself will not
constitute a conflict of interest by such
Person with respect to the Company or
any of the Members.
other compensation, unless approved by
the Members by a majority vote.
(b) Any Officer may resign at any
time. Such resignation shall be made in
writing and shall take effect at the time
specified in the notice, or if no time be
specified, at the time of its receipt by
the Members. The acceptance of a
resignation shall not be necessary to
make it effective.
(c) Any Officer may be removed at
any time upon the majority vote of the
Members.
Section 4.7
Section 4.9 Commission Access to
Information
Nothing in this Agreement shall be
interpreted to limit or impede the rights
of the Commission to access information
of the Company or any of the Members
(including their employees) pursuant to
U.S. federal securities laws and the
rules and regulations promulgated
thereunder.
Subcommittees
(a) Subject to Section 4.1, the
Operating Committee shall have the
power and right, but not the obligation,
to create and disband subcommittees of
the Operating Committee and to
determine the duties, responsibilities,
powers, and composition of such
subcommittees. Subcommittee chairs
will be selected by the Chair of the
Operating Committee from SRO Voting
Representatives or Member Observers
with input from the Operating
Committee.
(b) SRO Voting Representatives, NonSRO Voting Representatives, Member
Observers, SEC Staff, and other persons
as deemed appropriate by the Operating
Committee may attend meetings of any
subcommittees.
(c) Notwithstanding paragraph (b),
SRO Voting Representatives, Member
Observers, and other persons as deemed
appropriate by the SRO Voting
Representatives may meet in a
subcommittee to discuss an item subject
to the attorney-client privilege of the
Company or that is attorney work
product of the Company.
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Section 4.8
Officers
(a) In addition to the Chair and
Secretary, the Members may (but need
not), from time to time, designate and
appoint one or more persons as an
Officer of the Company by a majority
vote of the Members. Other than the
Chair, no Officer need be a Voting
Representative. Any Officers so
designated shall have such authority
and perform such duties as the Members
may, from time to time, delegate to
them. Any such delegation may be
revoked at any time by a majority vote
of the Members in their sole discretion.
The Members may assign titles to
particular Officers. Each Officer shall
hold office until such Officer’s
successor shall be duly designated or
until such Officer’s death, resignation,
or removal as provided in this
Agreement. Any number of offices may
be held by the same individual. Officers
shall not be entitled to receive salary or
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Section 4.10 Disclosure of Potential
Conflicts of Interest; Recusal
(a) Disclosure Requirements. The
Members, the Processors, the
Administrator, the Non-SRO Voting
Representatives, and each service
provider or subcontractor engaged in
Company business (including the audit
of Subscribers’ data usage) that has
access to Restricted or Highly
Confidential information (for purposes
of this section, ‘‘Disclosing Parties’’)
shall complete the applicable
questionnaire to provide the required
disclosures set forth below to disclose
all material facts necessary to identify
potential conflicts of interest. The
Operating Committee, a Member,
Processors, or Administrator may not
use a service provider or subcontractor
on Company business unless that
service provider or subcontractor has
agreed in writing to provide the
disclosures required by this section and
has submitted completed disclosures to
the Administrator prior to starting work.
If state laws, rules, or regulations, or
applicable professional ethics rules or
standards of conduct, would act to
restrict or prohibit a Disclosing Party
from making any particular required
disclosure, a Disclosing Party shall refer
to such law, rule, regulation, or
professional ethics rule or standard and
include in response to that disclosure
the basis for its inability to provide a
complete response. This does not
relieve the Disclosing Party from
disclosing any information it is not
restricted from providing.
(i) A potential conflict of interest may
exist when personal, business, financial,
or employment relationships could be
perceived by a reasonable objective
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64583
observer to affect the ability of a person
to be impartial.
(ii) Updates to Disclosures. Following
a material change in the information
disclosed pursuant to Section 4.10(a), a
Disclosing Party shall promptly update
its disclosures. Additionally, a
Disclosing Party shall update annually
any inaccurate information prior to the
Operating Committee’s first quarterly
meeting of a calendar year.
(iii) Public Dissemination of
Disclosures. The Disclosing Parties shall
provide the Administrator with its
disclosures and any required updates.
The Administrator shall ensure that the
disclosures are promptly posted to the
Company’s website.
(iv) The Company will arrange for
Disclosing Parties that are not Members
or Non-SRO Voting Representatives to
comply with the required disclosures
and recusals under this Section 4.10 and
Exhibit B in their respective agreements
with either the Company, a Member, the
Administrator, or the Processors.
(b) Recusal.
(i) A Disclosing Party may not appoint
as its Voting Representative a person
that is responsible for or involved with
the procurement for, or development,
modeling, pricing, licensing, or sale of
PDP offered to customers of the CT
Feeds if the person has a financial
interest (including compensation) that is
tied directly to the Disclosing Party’s
market data business or the
procurement of market data and if that
compensation would cause a reasonable
objective observer to expect the
compensation to affect the impartiality
of the representative.
(ii) A Disclosing Party (including its
representative(s), employees, and
agents) will be recused from
participating in Company activities if it
has not submitted a required disclosure
form or the Operating Committee votes
that its disclosure form is materially
deficient. The recusal will be in effect
until the Disclosing Party submits a
sufficiently complete disclosure form to
the Administrator.
(iii) A Disclosing Party, including its
representative(s), and its Affiliates and
their representative(s), are recused from
voting on matters in which it or its
Affiliate (i) is seeking a position or
contract with the Company or (ii) have
a position or contract with the Company
and whose performance is being
evaluated by the Company.
(iv) All recusals, including a person’s
determination of whether to voluntarily
recuse himself or herself, shall be
reflected in the meeting minutes.
(c) Required Disclosures. As part of
the disclosure regime, the Members, the
Processors, the Administrator, Non-SRO
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Voting Representatives, and service
providers and subcontractors must
respond to questions that are tailored to
elicit responses that disclose the
potential conflicts of interest as set forth
in Exhibit B.
(d) If the Commission’s approval
order of the conflicts of interest policies
filed by the CQ Plan, CTA Plan, or UTP
Plan is stayed or overturned by a
Governmental Authority, the
requirements of this Section 4.10 and
Exhibit B shall not apply.
Section 4.11
Confidentiality Policy
(a) The Members and Non-SRO Voting
Representatives are subject to the
Confidentiality Policy set forth in
Exhibit C to the Plan. The Company will
arrange for Covered Persons that are not
Members or Non-SRO Voting
Representatives to comply with the
Confidentiality Policy under their
respective agreements with either the
Company, a Member, the Administrator,
or the Processors.
(b) If the Commission’s approval order
of the confidentiality policy filed by the
CQ Plan, CTA Plan, or UTP Plan is
stayed or overturned by a Governmental
Authority, the requirements of this
Section 4.11 and Exhibit C shall not
apply.
Article V. The Processors; Information;
Indemnification
Section 5.1
Processors
General Functions of the
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Subject to the general direction of the
Operating Committee, as more fully set
forth in the agreement to be entered into
between the Company and the
Processors (the ‘‘Processor Services
Agreements’’), the Company shall
require the Processors to perform certain
processing functions on behalf of the
Company. Among other things, the
Company shall require the Processors to
collect from the Members, and
consolidate and disseminate to Vendors
and Subscribers, Transaction Reports
and Quotation Information in Eligible
Securities in a manner designed to
assure the prompt, accurate, and reliable
collection, processing, and
dissemination of information with
respect to all Eligible Securities in a fair
and non-discriminatory manner.
Section 5.2
Processors
Evaluation of the
The Processors’ performance of their
functions under the Processor Services
Agreements shall be subject to review at
any time as determined by a vote of the
Operating Committee pursuant to
Section 4.3; provided, however, that a
review shall be conducted at least once
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every two calendar years but not more
frequently than once each calendar year
(unless the Processors have materially
defaulted in their obligations under the
Processor Services Agreements and such
default has not been cured within the
applicable cure period set forth in the
Processor Services Agreements, in
which event such limitation shall not
apply). The Operating Committee may
review the Processors at staggered
intervals.
Section 5.3
Processors
Process for Selecting New
(a) No later than upon the termination
or withdrawal of a Processor or the
expiration of a Processor Services
Agreement with a Processor, the
Operating Committee shall establish
procedures for selecting a new Processor
(the ‘‘Processor Selection Procedures’’).
The Operating Committee, as part of the
process of establishing Processor
Selection Procedures, may solicit and
consider the timely comment of any
entity affected by the operation of this
Agreement.
(b) The Processor Selection
Procedures shall be established by the
affirmative vote of the Operating
Committee pursuant to Section 4.3, and
shall set forth, at a minimum:
(i) The entity that will:
(A) Draft the Operating Committee’s
request for proposal for bids on a new
Processor;
(B) assist the Operating Committee in
evaluating bids for the new Processor;
and
(C) otherwise provide assistance and
guidance to the Operating Committee in
the selection process;
(ii) the minimum technical and
operational requirements to be fulfilled
by the Processor;
(iii) the criteria to be considered in
selecting the Processor; and
(iv) the entities (other than Voting
Representatives) that are eligible to
comment on the selection of the
Processor.
Section 5.4 Transmission of
Information to Processors by Members
(a) Quotation Information.
(i) Each Member shall, during the
time it is open for trading, be
responsible for promptly collecting and
transmitting to the Processors accurate
Quotation Information in Eligible
Securities through any means set forth
in the Processor Services Agreements to
ensure that the Company complies with
its obligations under the Processor
Services Agreements.
(ii) Quotation Information shall
include:
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(A) Identification of the Eligible
Security, using the Listing Market’s
symbol;
(B) the price bid and offered, together
with size;
(C) for FINRA, the FINRA Participant
along with the FINRA Participant’s
market participant identification or
Member from which the quotation
emanates;
(D) appropriate timestamps;
(E) identification of quotations that
are not firm; and
(F) through appropriate codes and
messages, withdrawals and similar
matters.
(iii) In addition, Quotation
Information shall include:
(A) In the case of a national securities
exchange, the reporting Participant’s
matching engine publication timestamp;
or
(B) in the case of FINRA, the
quotation publication timestamp that
FINRA’s bidding or offering member
reports to FINRA’s quotation facility in
accordance with FINRA rules. In
addition, if FINRA’s quotation facility
provides a proprietary feed of its
quotation information, then the
quotation facility shall also furnish the
Processors with the time of the
quotation as published on the quotation
facility’s proprietary feed. FINRA shall
convert any quotation times reported to
it to nanoseconds and shall furnish such
times to the Processors in nanoseconds
since Epoch.
(b) Transaction Reports.
(i) Each Member shall, during the
time it is open for trading, be
responsible for promptly transmitting to
the Processor Transaction Reports in
Eligible Securities executed in its
Market by means set forth in the
Processor Services Agreements.
(ii) Transaction Reports shall include:
(A) Identification of the Eligible
Security, using the Listing Market’s
symbol;
(B) the number of shares in the
transaction;
(C) the price at which the shares were
purchased or sold;
(D) the buy/sell/cross indicator;
(E) appropriate timestamps;
(F) the Market of execution; and
(G) through appropriate codes and
messages, late or out-of-sequence trades,
corrections, and similar matters.
(iii) In addition, Transaction Reports
shall include the time of the transaction
as identified in the Participant’s
matching engine publication timestamp.
However, in the case of FINRA, the time
of the transaction shall be the time of
execution that a FINRA member reports
to a FINRA trade reporting facility in
accordance with FINRA rules. In
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addition, if the FINRA trade reporting
facility provides a proprietary feed of
trades reported by the trade reporting
facility to the Processor, then the FINRA
trade reporting facility shall also furnish
the Processors with the time of the
transmission as published on the
facility’s proprietary feed. The FINRA
trade reporting facility shall convert
times that its members report to it to
nanoseconds and shall furnish such
times to the Processors in nanoseconds
since Epoch.
(iv) Each Member shall (a) transmit all
Transaction Reports in Eligible
Securities to the Processors as soon as
practicable, but not later than 10
seconds, after the time of execution, (b)
establish and maintain collection and
reporting procedures and facilities
reasonably designed to comply with this
requirement, and (c) designate as ‘‘late’’
any last sale price not collected and
reported in accordance with the abovereferenced procedures or as to which
the Member has knowledge that the
time interval after the time of execution
is significantly greater than the time
period referred to above. The Members
shall seek to reduce the time period for
reporting last sale prices to the
Processors as conditions warrant.
(v) The following types of transactions
are not required to be reported to the
Processors pursuant to this Agreement:
(A) Transactions that are part of a
primary distribution by an issuer or of
a registered secondary distribution or of
an unregistered secondary distribution;
(B) transactions made in reliance on
Section 4(a)(2) of the Securities Act of
1933;
(C) transactions in which the buyer
and the seller have agreed to trade at a
price unrelated to the current market for
the security (e.g., to enable the seller to
make a gift);
(D) the acquisition of securities by a
broker-dealer as principal in
anticipation of making an immediate
exchange distribution or exchange
offering on an exchange;
(E) purchases of securities pursuant to
a tender offer;
(F) purchases or sales of securities
effected upon the exercise of an option
pursuant to the terms thereof or the
exercise of any other right to acquire
securities at a pre-established
consideration unrelated to the current
market; and
(G) transfers of securities that are
expressly excluded from trade reporting
under FINRA rules.
(c) The following symbols shall be
used to denote the applicable Member:
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Code
Member
A .......
Z .......
Y .......
B .......
W ......
M ......
J .......
K .......
I ........
V .......
D ......
NYSE American LLC.
Cboe BZX Exchange, Inc.
Cboe BYX Exchange, Inc.
Nasdaq BX, Inc.
Cboe Exchange, Inc.
NYSE Chicago, Inc.
Cboe EDGA Exchange, Inc.
Cboe EDGX Exchange, Inc.
Nasdaq ISE, LLC.
Investors’ Exchange LLC.
Financial Industry Regulatory Authority, Inc.
The Nasdaq Stock Market LLC.
NYSE National, Inc.
New York Stock Exchange LLC.
NYSE Arca, Inc.
Nasdaq PHLX LLC.
Long-Term Stock Exchange Inc.
MEMX LLC.
Q ......
C ......
N ......
P .......
X .......
L .......
U ......
(d) Indemnification.
(i) Each Member agrees, severally and
not jointly, to indemnify and hold
harmless and defend the Company, each
other Member, the Processors, the
Administrator, the Operating
Committee, and each of their respective
directors, officers, employees, agents,
and Affiliates (each, an ‘‘Member
Indemnified Party’’) from and against
any and all loss, liability, claim,
damage, and expense whatsoever
incurred or threatened against such
Member Indemnified Party as a result of
a system error or disruption at such
Member’s Market affecting any
Transaction Reports, Quotation
Information, or other information
reported to the Processors by such
Member and disseminated by the
Processors to Vendors and Subscribers.
This indemnity shall be in addition to
any liability that the indemnifying
Member may otherwise have.
(ii) Promptly after receipt by a
Member Indemnified Party of notice of
the commencement of any action, such
Member Indemnified Party will, if it
intends to make a claim in respect
thereof against an indemnifying
Member, notify the indemnifying
Member in writing of the
commencement thereof; provided,
however, that the failure to so notify the
indemnifying Member will only relieve
the indemnifying Member from any
liability which it may have to any
Member Indemnified Party to the extent
such indemnifying Member is actually
prejudiced by such failure. In case any
such action is brought against any
Member Indemnified Party and it
promptly notifies an indemnifying
Member of the commencement thereof,
the indemnifying Member will be
entitled to participate in, and, to the
extent that it elects (jointly with any
other indemnifying Member similarly
notified), to assume and control the
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64585
defense thereof with counsel chosen by
it. After notice from the indemnifying
Member of its election to assume the
defense thereof, the indemnifying
Member will not be liable to such
Indemnified Party for any legal or other
expenses subsequently incurred by such
Member Indemnified Party in
connection with the defense thereof but
the Member Indemnified Party may, at
its own expense, participate in such
defense by counsel chosen by it
without, however, impairing the
indemnifying Member’s control of the
defense. If the indemnifying Member
has assumed the defense in accordance
with the terms hereof, the indemnifying
Member may enter into a settlement or
consent to any judgment without the
prior written consent of the Member
Indemnified Party if (i) such settlement
or judgment involves monetary damages
only, all of which will be fully paid by
the indemnifying Member and without
admission of fault or culpability on
behalf of any Member Indemnified
Party, and (ii) a term of the settlement
or judgment is that the Person or
Persons asserting such claim
unconditionally and irrevocably release
all Member Indemnified Parties from all
liability with respect to such claim;
otherwise, the consent of the Member
Indemnified Party shall be required in
order to enter into any settlement of, or
consent to the entry of a judgment with
respect to, any claim (which consent
shall not be unreasonably withheld,
delayed, or conditioned).
Section 5.5 Operational Issues
(a) Each Member shall be responsible
for collecting and validating quotes and
last sale reports within its own system
prior to transmitting this data to the
Processors.
(b) Each Member may utilize a
dedicated Member line into the
Processors to transmit Transaction
Reports and Quotation Information to
the Processors.
(c) Whenever a Member determines
that a level of trading activity or other
unusual market conditions prevent it
from collecting and transmitting
Transaction Reports or Quotation
Information to the Processor, or where
a trading halt or suspension in an
Eligible Security is in effect in its
Market, the Member shall promptly
notify the Processors of such condition
or event and shall resume collecting and
transmitting Transaction Reports and
Quotation Information to it as soon as
the condition or event is terminated. In
the event of a system malfunction
resulting in the inability of a Member or
its members to transmit Transaction
Reports or Quotation Information to the
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Processors, the Member shall promptly
notify the Processors of such event or
condition. Upon receiving such
notification, the Processors shall take
appropriate action, including either
closing the quotation or purging the
system of the affected quotations.
Article VI. The Administrator
Section 6.1 General Functions of the
Administrator
Subject to the general direction of the
Operating Committee, as more fully set
forth in the agreement entered into
between the Company and the
Administrator (the ‘‘Administrative
Services Agreement’’), the
Administrator shall perform
administrative functions on behalf of
the Company including recordkeeping;
administering Vendor and Subscriber
contracts; administering Fees, including
billing, collection, and auditing of
Vendors and Subscribers; administering
Distributions; tax functions of the
Company; and the preparation of the
Company’s audited financial reports.
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Section 6.2 Evaluation of the
Administrator
The Administrator’s performance of
its functions under the Administrative
Services Agreement shall be subject to
review at any time as determined by an
affirmative vote of the Operating
Committee pursuant to Section 4.3;
provided, however, that a review shall
be conducted at least once every two
calendar years but not more frequently
than once each calendar year (unless the
Administrator has materially defaulted
in its obligations under the
Administrative Services Agreement and
such default has not been cured within
the applicable cure period set forth in
the Administrative Services Agreement,
in which event such limitation shall not
apply). The Operating Committee shall
appoint a subcommittee or other
Persons to conduct the review. The
Company shall require the reviewer to
provide the Operating Committee with a
written report of its findings and to
make recommendations (if necessary),
including with respect to the continuing
operation of the Administrator. The
Administrator shall be required to assist
and participate in such review. The
Operating Committee shall notify the
Commission of any recommendations it
may approve as a result of the review of
the Administrator and shall supply the
Commission with a copy of any reports
that may be prepared in connection
therewith.
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Section 6.3 Process for Selecting New
Administrator
Prior to the Operative Date, upon the
termination or withdrawal of the
Administrator, or upon the expiration of
the Administrative Services Agreement,
the Operating Committee shall establish
procedures for selecting a new
Administrator (the ‘‘Administrator
Selection Procedures’’). The
Administrator selected by the Operating
Committee may not be owned or
controlled by a corporate entity that,
either directly or via another subsidiary,
offers for sale its own PDP. The
Operating Committee, as part of the
process of establishing Administrator
Selection Procedures, may solicit and
consider the timely comment of any
entity affected by the operation of this
Agreement. The Administrator Selection
Procedures shall be established by the
Voting Representatives pursuant to
Section 4.3, and shall set forth, at a
minimum:
(a) The entity that will:
(i) Draft the Operating Committee’s
request for proposal for bids on a new
Administrator;
(ii) assist the Operating Committee in
evaluating bids for the new
Administrator; and
(iii) otherwise provide assistance and
guidance to the Operating Committee in
the selection process.
(b) the minimum technical and
operational requirements to be fulfilled
by the Administrator;
(c) the criteria to be considered in
selecting the Administrator; and
(d) the entities (other than Voting
Representatives) that are eligible to
comment on the selection of the
Administrator.
Article VII. Regulatory Matters
Section 7.1 Regulatory and
Operational Halts
(a) Operational Halts. A Member shall
notify the Processors if it has concerns
about its ability to collect and transmit
quotes, orders, or last sale prices, or
where it has declared an Operational
Halt or suspension of trading in one or
more Eligible Securities, pursuant to the
procedures adopted by the Operating
Committee.
(b) Regulatory Halts.
(i) The Primary Listing Market may
declare a Regulatory Halt in trading for
any security for which it is the Primary
Listing Market:
(A) As provided for in the rules of the
Primary Listing Market;
(B) if it determines there is a SIP
Outage, Material SIP Latency, or
Extraordinary Market Activity; or
(C) in the event of national, regional,
or localized disruption that necessitates
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a Regulatory Halt to maintain a fair and
orderly market.
(ii) In making a determination to
declare a Regulatory Halt under
subparagraph (b)(i), the Primary Listing
Market will consider the totality of
information available concerning the
severity of the issue, its likely duration,
and potential impact on Member Firms
and other market participants and will
make a good-faith determination that
the criteria of subparagraph (b)(i) have
been satisfied and that a Regulatory Halt
is appropriate. The Primary Listing
Market will consult, if feasible, with the
affected Trading Center(s), the other
Members, or the Processors, as
applicable, regarding the scope of the
issue and what steps are being taken to
address the issue. Once a Regulatory
Halt under subparagraph (b)(i) has been
declared, the Primary Listing Market
will continue to evaluate the
circumstances to determine when
trading may resume in accordance with
the rules of the Primary Listing Market.
(c) Initiating a Regulatory Halt.
(i) The start time of a Regulatory Halt
is when the Primary Listing Market
declares the halt, regardless of whether
an issue with communications impacts
the dissemination of the notice.
(ii) If a Processor is unable to
disseminate notice of a Regulatory Halt
or the Primary Listing Market is not
open for trading, the Primary Listing
Market will take reasonable steps to
provide notice of a Regulatory Halt,
which shall include both the type and
start time of the Regulatory Halt, by
dissemination through:
(A) PDP;
(B) posting on a publicly-available
Member website; or
(C) system status messages.
(iii) Except in exigent circumstances,
the Primary Listing Market will not
declare a Regulatory Halt retroactive to
a time earlier than the notice of such
halt.
(iv) Resumption of Trading After
Regulatory Halts Other Than SIP Halts.
The Primary Listing Market will declare
a resumption of trading when it makes
a good-faith determination that trading
may resume in a fair and orderly
manner and in accordance with its
rules.
(v) For a Regulatory Halt that is
initiated by another Member that is a
Primary Listing Market, a Member may
resume trading after the Member
receives notification from the Primary
Listing Market that the Regulatory Halt
has been terminated.
(d) Resumption of Trading After SIP
Halt.
(i) The Primary Listing Market will
determine the SIP Halt Resume Time. In
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making such determination, the Primary
Listing Market will make a good-faith
determination and consider the totality
of information to determine whether
resuming trading would promote a fair
and orderly market, including input
from the Processors, the other Members,
or the operator of the system in question
(as well as any Trading Center(s) to
which such system is linked), regarding
operational readiness to resume trading.
The Primary Listing Market retains
discretion to delay the SIP Halt Resume
Time if it believes trading will not
resume in a fair and orderly manner.
(ii) The Primary Listing Market will
terminate a SIP Halt with a notification
that specifies a SIP Halt Resume Time.
The Primary Listing Market shall
provide a minimum notice of a SIP Halt
Resume Time, as specified by the rules
of the Primary Listing Market, during
which period market participants may
enter quotes and orders in the affected
securities. During Regular Trading
Hours, the last SIP Halt Resume Time
before the end of Regular Trading Hours
shall be an amount of time as specified
by the rules of the Primary Listing
Market. The Primary Listing Market may
stagger the SIP Halt Resume Times for
multiple symbols in order to reopen in
a fair and orderly manner.
(iii) During Regular Trading Hours, if
the Primary Listing Market does not
open a security within the amount of
time as specified by the rules of the
Primary Listing Market after the SIP
Halt Resume Time, a Member may
resume trading in that security. Outside
Regular Trading Hours, a Member may
resume trading immediately after the
SIP Halt Resume Time.
(e) Member to Halt Trading During
Regulatory Halt. A Member will halt
trading for any security traded on its
Market if the Primary Listing Market
declares a Regulatory Halt for the
security.
(f) Communications. Whenever, in the
exercise of its regulatory functions, the
Primary Listing Market for an Eligible
Security determines it is appropriate to
initiate a Regulatory Halt, the Primary
Listing Market will notify all other
Members and the affected Processors of
such Regulatory Halt as well as provide
notice that a Regulatory Halt has been
lifted using such protocols and other
emergency procedures as may be
mutually agreed to between the
Members and the Primary Listing
Market. The affected Processors shall
disseminate to Members notice of the
Regulatory Halt (as well as notice of the
lifting of a Regulatory Halt) (i) through
the CT Feeds or (ii) any other means the
affected Processors, in its sole
discretion, considers appropriate. Each
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Member shall be required to
continuously monitor these
communication protocols established by
the Operating Committee and the
Processors during market hours, and the
failure of a Member to do so shall not
prevent the Primary Listing Market from
initiating a Regulatory Halt in
accordance with the procedures
specified herein.
Section 7.2 Hours of Operation of the
System
(a) Quotation Information shall be
entered, as applicable, by Members as to
all Eligible Securities in which they
make a market during Regular Trading
Hours on all days the Processors are in
operation. Transaction Reports shall be
entered between 9:30 a.m. and 4:00:10
p.m. ET by Members as to all Eligible
Securities in which they execute
transactions during Regular Trading
Hours on all days the Processors are in
operation.
(b) Members that execute transactions
in Eligible Securities outside of Regular
Trading Hours, shall report such
transactions as follows:
(i) Transactions in Eligible Securities
executed between 4:00 a.m. and 9:29:59
a.m. ET and between 4:00:01 p.m. and
8:00 p.m. ET, shall be designated with
an appropriate indicator to denote their
execution outside normal market hours;
(ii) transactions in Eligible Securities
executed after 8:00 p.m. and before
12:00 a.m. (midnight) shall be reported
to the Processors between the hours of
4:00 a.m. and 8:00 p.m. ET on the next
business day (T+1), and shall be
designated ‘‘as/of’’ trades to denote their
execution on a prior day, and be
accompanied by the time of execution;
(iii) transactions in Eligible Securities
executed between 12:00 a.m. (midnight)
and 4:00 a.m. ET shall be transmitted to
the Processors between 4:00 a.m. and
9:30 a.m. ET, on trade date, shall be
designated with an appropriate
indicator to denote their execution
outside normal market hours, and shall
be accompanied by the time of
execution; and
(iv) transactions reported pursuant to
this Section 7.3 shall be included in the
calculation of total trade volume for
purposes of determining Net
Distributable Operating Revenue, but
shall not be included in the calculation
of the daily high, low, or last sale.
(c) Late trades shall be reported in
accordance with the rules of the
Member in whose Market the
transaction occurred and can be
reported between the hours of 4:00 a.m.
and 8:00 p.m. ET.
(d) The Processors shall collect,
process and disseminate Quotation
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64587
Information in Eligible Securities at
other times between 4:00 a.m. and 9:30
a.m. ET, and after 4:00 p.m. ET, when
any Member or FINRA Participant is
open for trading, until 8:00 p.m. ET (the
‘‘Additional Period’’); provided,
however, that the National Best Bid and
Offer quotation will not be disseminated
before 4:00 a.m. or after 8:00 p.m. ET.
Members that enter Quotation
Information or submit Transaction
Reports to the Processors during the
Additional Period shall do so for all
Eligible Securities in which they enter
quotations.
Article VIII. Capital Contributions;
Capital Accounts
Section 8.1 Capital Accounts
(a) A separate capital account
(‘‘Capital Account’’) shall be established
and maintained by the Company for
each Member in accordance with
section 704(b) of the Code and Treasury
Regulation section 1.704–1 (b)(2)(iv).
There shall be credited to each
Member’s Capital Account (i) the
Capital Contributions (at fair market
value in the case of contributed
property) made by such Member (which
shall be deemed to be zero for the initial
Members), (ii) allocations of Company
profits and gain (or items thereof) to
such Member pursuant to Section 10.2
and (iii) any recaptured tax credits, or
portion thereof, to the extent such
increase to the tax basis of a Member’s
interest in the Company may be allowed
pursuant to the Code. Each Member’s
Capital Account shall be decreased by
(x) the amount of distributions (at fair
market value in the case of property
distributed in kind) to such Member, (y)
allocations of Company losses to such
Member (including expenditures which
can neither by capitalized nor deducted
for tax purposes, organization and
syndication expenses not subject to
amortization and loss on sale or
disposition of the Company’s assets,
whether or not disallowed under
sections 267 or 707 of the Code)
pursuant to Section 10.2 and (z) any tax
credits, or portion thereof, as may be
required to be charged to the tax basis
of a Membership Interest pursuant to
the Code. Capital Accounts shall not be
adjusted to reflect a Member’s share of
liabilities under section 752 of the Code.
(b) The fair market value of
contributed, distributed, or revalued
property shall be agreed to by the
Operating Committee or, if there is no
such agreement, by an appraisal.
(c) The foregoing provisions and the
other provisions of this Agreement
relating to the maintenance of Capital
Accounts are intended to comply with
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Treasury Regulation section 1.704–1(b)
promulgated under section 704(b) of the
Code, and shall be interpreted and
applied in a manner consistent with
such Treasury Regulations.
Section 8.2 Additional Capital
Contributions
Except with the approval of the
Operating Committee or as otherwise
provided in this Section 8.2, no Member
shall be obligated or permitted to make
any additional contribution to the
capital of the Company. The Members
agree to make additional Capital
Contributions from time to time as
appropriate in respect of reasonable
administrative and other reasonable
expenses of the Company.
Section 8.3
Distributions
Except as set forth in this Section 8.3
and Section 11.2, and subject to the
provisions of Section 13.1, Distributions
shall be made to the Members at the
times and in the aggregate amounts set
forth in Exhibit D. Notwithstanding any
provisions to the contrary contained in
this Agreement, the Company shall not
make a Distribution to a Member on
account of its interest in the Company
if such Distribution would violate
Section 18–607 of the Delaware Act or
other Applicable Law. Distributions
may be made in cash or, if determined
by the Operating Committee, in-kind.
The Operating Committee may reserve
amounts for anticipated expenses or
contingent liabilities of the Company. In
the event that additional Capital
Contributions are called for, and any
Member fails to provide the full amount
of such additional Capital Contributions
as set forth in the relevant resolution of
the Operating Committee, any
Distributions to be made to such
defaulting Member shall be reduced by
the amount of any required but unpaid
Capital Contribution due from such
Member.
Article IX. Allocations
Section 9.1
Losses
Calculation of Profits and
khammond on DSKJM1Z7X2PROD with NOTICES
To the fullest extent permitted by
Applicable Law, the profits and losses
of the Company shall be determined for
each fiscal year in a manner consistent
with GAAP.
Section 9.2
Losses
Allocation of Profits and
(a) Except as otherwise set forth in
this Section 9.2, for Capital Account
purposes, all items of income, gain, loss,
and deduction shall be allocated among
the Members in accordance with Exhibit
D.
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(b) For federal, state and local income
tax purposes, items of income, gain,
loss, deduction, and credit shall be
allocated to the Members in accordance
with the allocations of the
corresponding items for Capital Account
purposes under this Section 9.2, except
that items with respect to which there
is a difference between tax and book
basis will be allocated in accordance
with Section 704(c) of the Code, the
Treasury Regulations thereunder and
Treasury Regulations Section 1.704–
1(b)(4)(i).
(c) Notwithstanding any provision set
forth in this Section 9.2, no item of
deduction or loss shall be allocated to
a Member to the extent the allocation
would cause a negative balance in such
Member’s Capital Account (after taking
into account the adjustments,
allocations and distributions described
in Treasury Regulations Sections 1.704–
1(b)(2)(ii)(d)(4), (5) and (6)) that exceeds
the amount that such Member would be
required to reimburse the Company
pursuant to this Agreement or
Applicable Law.
(d) In the event any Member
unexpectedly receives any adjustments,
allocations, or distributions described in
Treasury Regulations Sections 1.704–
1(b)(2)(ii)(d)(4), (5) and (6), items of the
Company’s income and gain shall be
specially allocated to such Member in
an amount and manner sufficient to
eliminate as quickly as possible any
deficit balance in its Capital Account
created by such adjustments, allocations
or distributions in excess of that
permitted under Section 10.2(c). Any
special allocations of items of income or
gain pursuant to this Section 10.2(d)
shall be taken into account in
computing subsequent allocations
pursuant to this Section 10.2 so that the
net amount of any items so allocated
and all other items allocated to each
Member pursuant to this Section 10.2
shall, to the extent possible, be equal to
the net amount that would have been
allocated to each such Member pursuant
to the provisions of this Section 10.2 if
such unexpected adjustments,
allocations or distributions had not
occurred.
Article X. Records and Accounting;
Reports
Section 10.1 Accounting
(a) The Operating Committee shall
maintain a system of accounting which
enables the Company to produce
accounting records and information
substantially consistent with GAAP.
The Fiscal Year of the Company shall be
the calendar year unless Applicable Law
requires a different Fiscal Year.
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(b) All matters concerning accounting
procedures shall be determined by the
Operating Committee.
Section 10.2 Tax Status; Returns
(a) It is the intent of this Company
and the Members that this Company
shall be treated as a partnership for
federal, state and local income tax
purposes. Neither the Company nor any
Member shall make an election for the
Company to be classified as other than
a partnership pursuant to Treasury
Regulations Section 301.7701–3 or
otherwise.
(b) The Company shall cause federal,
state, and local income tax returns for
the Company to be prepared and timely
filed with the appropriate authorities
and shall arrange for the timely delivery
to the Members of such information as
is necessary for such Members to
prepare their federal, state and local tax
returns. All tax returns shall be
prepared in a manner consistent with
the Distributions made in accordance
with Exhibit D.
Section 10.3 Partnership
Representative
(a) The Operating Committee shall
appoint an entity as the ‘‘Partnership
Representative’’ of the Company for
purposes of Section 6223 of the Code
and the Treasury Regulations
promulgated thereunder, and all federal,
state, and local Tax audits and litigation
shall be conducted under the direction
of the Partnership Representative.
(b) The Partnership Representative
shall use reasonable efforts to inform
each Member of all significant matters
that may come to its attention by giving
notice thereof and to forward to each
Member copies of all significant written
communications it may receive in such
capacity. The Partnership
Representative shall consult with the
Members before taking any material
actions with respect to tax matters,
including actions relating to (i) an IRS
examination of the Company
commenced under Section 6231(a) of
the Code, (ii) a request for
administrative adjustment filed by the
Company under Section 6227 of the
Code, (iii) the filing of a petition for
readjustment under Section 6234 of the
Code with respect to a final notice of
partnership adjustment, (iv) the appeal
of an adverse judicial decision, and (v)
the compromise, settlement, or
dismissal of any such proceedings.
(c) The Partnership Representative
shall not compromise or settle any tax
audit or litigation affecting the Members
without the approval of a majority of
Members. Any material proposed
action, inaction, or election to be taken
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by the Partnership Representative,
including the election under Section
6226(a)(1) of the Code, shall require the
prior approval of a majority of Members.
Article XI. Dissolution and Termination
Section 11.1
Dissolution of Company
The Company shall dissolve, and its
assets and business shall be wound up,
upon the occurrence of any of the
following events:
(a) Unanimous written consent of the
Members to dissolve the Company;
(b) The sale or other disposition of all
or substantially all the Company’s assets
outside the ordinary course of business;
(c) An event which makes it unlawful
or impossible for the Company business
to be continued;
(d) The withdrawal of one or more
Members such that there is only one
remaining Member; or
(e) The entry of a decree of judicial
dissolution under § 18–802 of the
Delaware Act.
Section 11.2
Distribution
Liquidation and
Following the occurrence of an event
described in Section 11.1, the Members
shall appoint a liquidating trustee who
shall wind up the affairs of the
Company by (i) selling its assets in an
orderly manner (so as to avoid the loss
normally associated with forced sales),
and (ii) applying and distributing the
proceeds of such sale, together with
other funds held by the Company: (a)
First, to the payment of all debts and
liabilities of the Company; (b) second, to
the establishments of any reserves
reasonably necessary to provide for any
contingent recourse liabilities and
obligations; (c) third, to the Members in
accordance with Exhibit D; and (d)
fourth, to the Members as determined by
a majority of Members.
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Section 11.3
Termination
Each of the Members shall be
furnished with a statement prepared by
the independent accountants retained
on behalf of the Company, which shall
set forth the assets and liabilities of the
Company as of the date of the final
distribution of Company’s assets under
Section 10.2 and the net profit or net
loss for the fiscal period ending on such
date. Upon compliance with the
distribution plan set forth in Section
10.2, the Members shall cease to be
such, and the liquidating trustee shall
execute, acknowledge, and cause to be
filed a certificate of cancellation of the
Company. Upon completion of the
dissolution, winding up, liquidation,
and distribution of the liquidation
proceeds, the Company shall terminate.
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Article XII. Exculpation and
Indemnification
Section 12.1 Exculpation
Each Member, by and for itself, each
of its Affiliates and each of its and their
respective equity holders, directors,
officers, controlling persons, partners,
employees, successors and assigns,
hereby acknowledges and agrees that it
is the intent of the Company and each
Member that the liability of each
Member and each individual currently
or formerly serving as an SRO Voting
Representative (each, an ‘‘Exculpated
Party’’) be limited to the maximum
extent permitted by Applicable Law or
as otherwise expressly provided herein.
In accordance with the foregoing, the
Members hereby acknowledge and agree
that:
(a) To the maximum extent permitted
by Applicable Law or as otherwise
expressly provided herein, no present or
former Exculpated Party or any of such
Exculpated Party’s Affiliates, heirs,
successors, assigns, agents or
representatives shall be liable to the
Company or any Member for any loss
suffered in connection with a breach of
any fiduciary duty, errors in judgment
or other acts or omissions by such
Exculpated Party; provided, however,
that this provision shall not eliminate or
limit the liability of such Exculpated
Party for (i) acts or omissions which
involve gross negligence, willful
misconduct or a knowing violation of
law, or (ii) as provided in Section 5.4(d)
hereof, losses resulting from such
Exculpated Party’s Transaction Reports,
Quotation Information or other
information reported to the Processors
by such Exculpated Party (collectively
‘‘Non-Exculpated Items’’). Any
Exculpated Party may consult with
counsel and accountants in respect of
Company affairs, and provided such
Person acts in good faith reliance upon
the advice or opinion of such counsel or
accountants, such Person shall not be
liable for any loss suffered in reliance
thereon.
(b) Notwithstanding anything to the
contrary contained herein, whenever in
this Agreement or any other agreement
contemplated herein or otherwise, an
Exculpated Party is permitted or
required to take any action or to make
a decision in its ‘‘sole discretion’’ or
‘‘discretion’’ or that it deems
‘‘necessary,’’ or ‘‘necessary or
appropriate’’ or under a grant of similar
authority or latitude, the Exculpated
Party may, insofar as Applicable Law
permits, make such decision in its sole
discretion (regardless of whether there
is a reference to ‘‘sole discretion’’ or
‘‘discretion’’). The Exculpated Party (i)
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64589
shall be entitled to consider such
interests and factors as it desires
(including its own interests), (ii) shall
have no duty or obligation (fiduciary or
otherwise) to give any consideration to
any interest of or factors affecting the
Company or the Members, and (iii) shall
not be subject to any other or different
standards imposed by this Agreement,
or any other agreement contemplated
hereby, under any Applicable Law or in
equity.
Section 12.2
Right to Indemnification
(a) Subject to the limitations and
conditions provided in this Article XII
and to the fullest extent permitted by
Applicable Law, the Company shall
indemnify each Company Indemnified
Party for Losses as a result of the
Company Indemnified Party being a
Party to a Proceeding. Notwithstanding
the foregoing, no such indemnification
shall be available in the event the
Company is a claimant against the
Company Indemnified Party.
(b) Indemnification under this Article
XII shall continue as to a Company
Indemnified Party who has ceased to
serve in the capacity that initially
entitled such Company Indemnified
Party to indemnity hereunder; provided,
however, that the Company shall not be
obligated to indemnify a Company
Indemnified Party for the Company
Indemnified Party’s Non-Exculpated
Items.
(c) The rights granted pursuant to this
Article XII shall be deemed contract
rights, and no amendment,
modification, or repeal of this Article
XII shall have the effect of limiting or
denying any such rights with respect to
actions taken or Proceedings arising
prior to any amendment, modification,
or repeal. It is expressly acknowledged
that the indemnification provided in
this Article XII could involve
indemnification for negligence or under
theories of strict liability.
(d) The Company shall be the primary
obligor in respect of any Company
Indemnified Party’s claim for
indemnification, for advancement of
expenses, or for providing insurance,
subject to this Article XII. The
obligation, if any, of any Member or its
Affiliates to indemnify, to advance
expenses to, or provide insurance for
any Company Indemnified Party shall
be secondary to the obligations of the
Company under this Article XII (and the
Company’s insurance providers shall
have no right to contribution or
subrogation with respect to the
insurance plans of such Member or its
Affiliates).
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Section 12.3 Advance Payment
Reasonable expenses incurred by a
Company Indemnified Party who is a
named defendant or respondent to a
Proceeding shall be paid by the
Company in advance of the final
disposition of the Proceeding upon
receipt of an undertaking by or on
behalf of such Company Indemnified
Party to repay such amount if it shall
ultimately be determined that he or she
is not entitled to be indemnified by the
Company.
Section 12.4 Appearance as a Witness
Notwithstanding any other provision
of this Article XII, the Company shall
pay or reimburse reasonable out-ofpocket expenses incurred by a Company
Indemnified Party in connection with
his appearance as a witness or other
participation in a Proceeding at a time
when he is not a named defendant or
respondent in the Proceeding.
Section 12.5 Nonexclusivity of Rights
The right to indemnification and the
advancement and payment of expenses
conferred in this Article XII shall not be
exclusive of any other right which any
Company Indemnified Person may have
or hereafter acquire under any law
(common or statutory), provision of the
Certificate or this Agreement or
otherwise.
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Article XIII. Miscellaneous
Section 13.1 Expenses
The Company shall pay all current
expenses, including any Taxes payable
by the Company, whether for its own
account or otherwise required by law
(including any costs of complying with
applicable tax obligations), third-party
service provider fees, and all
administrative and processing expenses
and fees, as well as any other amounts
owing to the Processors under the
Processor Services Agreements, to the
Administrator under the Administrative
Services Agreement, or to the
Processors, Administrator, or FINRA
under Exhibit D to this Agreement,
before any allocations may be made to
the Members. Appropriate reserves, as
unanimously determined by the
Members, may be charged to the Capital
Account of the Members for (i)
contingent liabilities, if any, as of the
date any such contingent liabilities
become known to the Operating
Committee, or (ii) amounts needed to
pay the Company’s operating expenses,
including administrative and processing
expenses and fees, before any
allocations are made to the Member.
Each Member shall bear the cost of
implementation of any technical
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enhancements to the System made at its
request and solely for its use, subject to
reapportionment should any other
Member subsequently make use of the
enhancement, or the development
thereof.
Section 13.2 Entire Agreement
Upon the Operative Date, this
Agreement supersedes the CQ Plan, the
CTA Plan, and the UTP Plan and all
other prior agreements among the
Members with respect to the subject
matter hereof. This instrument contains
the entire agreement with respect to
such subject matter.
Section 13.3 Notices and Addresses
Unless otherwise specified herein, all
notices, consents, approvals, reports,
designations, requests, waivers,
elections, and other communications
(collectively, ‘‘Notices’’) authorized or
required to be given pursuant to this
Agreement shall be in writing and may
be delivered by certified or registered
mail, postage prepaid, by hand, by any
private overnight courier service, or
notification through the Company’s web
portal. Such Notices shall be mailed or
delivered to the Members at the
addresses set forth on Exhibit A or such
other address as a Member may notify
the other Members of in writing. Any
Notices to be sent to the Company shall
be delivered to the principal place of
business of the Company or at such
other address as the Operating
Committee may specify in a notice sent
to all of the Members. Notices shall be
effective (i) if mailed, on the date three
days after the date of mailing, (ii) if
hand delivered or delivered by private
courier, on the date of delivery, or (iii)
if sent by through the Company’s web
portal, on the date sent; provided,
however, that notices of a change of
address shall be effective only upon
receipt.
Section 13.4 Governing Law
This Agreement shall be governed by
and construed in accordance with the
Delaware Act and internal laws and
decisions of the State of Delaware,
without regard to the conflicts of laws
principles thereof; provided, however,
that the rights and obligations of the
Members, the Processors and the
Administrator, and of Vendors,
Subscribers, and other Persons
contracting with the Company in
respect of the matters covered by this
Agreement, shall at all times also be
subject to any applicable provisions of
the Exchange Act and any rules and
regulations promulgated thereunder. For
the avoidance of doubt, nothing in this
Agreement waives any protection or
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limitation of liability afforded any of the
Members or any of their Affiliates by
common law, including the doctrines of
self-regulatory organization immunity
and federal preemption.
Section 13.5 Amendments
(a) Except as this Agreement
otherwise provides, this Agreement may
be modified from time to time when
authorized by the Operating Committee
pursuant to Section 4.3, subject to the
approval of the Commission or when
such modification otherwise becomes
effective pursuant to Section 11A of the
Exchange Act and Rule 608 of
Regulation NMS.
(b) Notwithstanding Section 13.5(a),
Articles IX, X, XI, and XII may be
modified upon approval by a majority of
Members; provided, however, that
Operating Committee approval pursuant
to Section 4.3 will be required for
modifications to the allocation of all
items of income, gain, loss, and
deduction in accordance with Exhibit D.
(c) In the case of a Ministerial
Amendment, the Chair of the
Company’s Operating Committee may
modify this Agreement by submitting to
the Commission an appropriate
amendment that sets forth the
modification; provided, however, that
48-hours advance notice of the
amendment to the Operating Committee
is required. Such an amendment shall
become effective upon filing with the
Commission in accordance with Section
11A of the Exchange Act and Rule 608
of Regulation NMS.
(d) ‘‘Ministerial Amendment’’ means
an amendment to this Agreement that
pertains solely to any one or more of the
following:
(i) admitting a new Member to the
Company;
(ii) changing the name or address of
a Member;
(iii) incorporating a change that the
Commission has implemented by rule
and that requires no conforming
language to the text of this Agreement;
(iv) incorporating a change (A) that
the Commission has implemented by
rule, (B) that requires conforming
language to the text of this Agreement,
and (C) whose conforming language to
the text of this Agreement has been
approved by the affirmative vote of the
Operating Committee pursuant to
Section 4.3;
(v) incorporating a change (A) that a
Governmental Authority requires
relating to the governance or operation
of an LLC, (B) that requires conforming
language to the text of this Agreement,
and (C) whose conforming language to
the text of this Agreement has been
approved by the affirmative vote of the
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Operating Committee pursuant to
Section 4.3 or upon approval by a
majority of Members pursuant to
Section 13.5(b), as applicable; or
(vi) incorporating a purely technical
change, such as correcting an error or an
inaccurate reference to a statutory
provision, or removing language that
has become obsolete.
Section 13.6
Successors
This Agreement shall be binding upon
and inure to the benefit of the Members
and their respective legal
representatives and successors.
Section 13.7
Others
Limitation on Rights of
None of the provisions of this
Agreement shall be for the benefit of or
enforceable by any creditor of the
Company. Furthermore, except as
provided in Section 3.7(b), the Members
shall not have any duty or obligation to
any creditor of the Company to make
any contribution to the Company or to
issue any call for capital pursuant to
this Agreement. Nothing in this
Agreement shall be deemed to create
any legal or equitable right, remedy or
claim in any Person not a party hereto
(other than any Person indemnified
under Article XII).
Section 13.8 Counterparts
This Agreement may be executed by
the Members in any number of
counterparts, no one of which need
contain the signature of all Members. As
many such counterparts as shall
together contain all such signatures
shall constitute one and the same
instrument.
Section 13.9 Headings
The section and other headings
contained in this Agreement are for
reference purposes only and shall not be
deemed to be a part of this Agreement
or to affect the meaning or interpretation
of any provisions of this Agreement.
Section 13.10 Validity and Severability
If any provision of this Agreement
shall be held invalid or unenforceable,
that shall not affect the validity or
enforceability of any other provisions of
this Agreement, all of which shall
remain in full force and effect.
Section 13.11
64591
Statutory References
Each reference in this Agreement to a
particular statute or regulation, or a
provision thereof, shall be deemed to
refer to such statute or regulation, or
provision thereof, or to any similar or
superseding statute or regulation, or
provision thereof, as is from time to
time in effect.
Section 13.12
Writing
Modifications To Be in
This Agreement constitutes the entire
understanding of the parties hereto with
respect to the subject matter hereof, and
no amendment, modification or
alteration shall be binding unless the
same is in writing and adopted in
accordance with the provisions of
Section 13.5.
[Signature Pages Follow]
In witness whereof, the undersigned
Members have executed this Agreement
as of the day and year first above
written.
Exhibit A
MEMBERS OF CT PLAN LLC
Member name and address
Cboe BYX Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois 60605.
Cboe BZX Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois 60605.
Cboe EDGA Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois 60605.
Cboe EDGX Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois 60605.
Cboe Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois 60605.
Financial Industry Regulatory Authority, Inc., 1735 K Street NW, Washington, DC 20006.
Investors’ Exchange LLC, 3 World Trade Center 58th Floor, New York, New York 10007.
Long-Term Stock Exchange, Inc., 300 Montgomery St., Ste. 790, San Francisco, CA 94104.
MEMX LLC, 111 Town Square Place, Suite 520, Jersey City, New Jersey 07310.
Nasdaq BX, Inc., One Liberty Plaza, 165 Broadway, New York, New York 10006.
Nasdaq ISE, LLC, One Liberty Plaza, 165 Broadway, New York, New York 10006.
Nasdaq PHLX LLC, FMC Tower, Level 8, 2929 Walnut Street, Philadelphia, Pennsylvania 19104.
The Nasdaq Stock Market LLC, One Liberty Plaza, 165 Broadway, New York, NY 10006.
New York Stock Exchange LLC, 11 Wall Street, New York, New York 10005.
NYSE American LLC, 11 Wall Street, New York, New York 10005.
NYSE Arca, Inc., 11 Wall Street, New York, New York 10005.
NYSE Chicago, Inc., 11 Wall Street, New York, New York 10005.
NYSE National, Inc., 11 Wall Street, New York, NY 10005.
Exhibit B
khammond on DSKJM1Z7X2PROD with NOTICES
Disclosures
(a) The Members must respond to the
following questions and instructions:
(i) Is the Member for profit or not-forprofit? If the Member is for profit, is it
publicly or privately owned? If privately
owned, list any owner with an interest
of 5% or more of the Member, where to
the Member’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 CT Feeds and/or
Member PDP.
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(ii) Does the Member offer PDP? If yes,
list each product, describe its content,
and provide a link to where fees for
each product are disclosed.
(iii) Provide the names of the Voting
Representative and any alternate Voting
Representatives designated by the
Member. Also provide a narrative
description of such representatives’
roles within the Member organization,
including the title of each individual as
well as any direct responsibilities
related to the development,
dissemination, sales, or marketing of the
Member’s PDP, and the nature of those
responsibilities sufficient for the public
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to identify the nature of any potential
conflict of interest that could be
perceived by a reasonable objective
observer as having an effect on the
operation of the Company. If such
representatives work in or with the
Member’s PDP business, describe such
representatives’ roles and describe how
that business and such representatives’
Company responsibilities impacts their
compensation. In addition, describe
how such representatives’
responsibilities with the PDP business
may present a conflict of interest with
their responsibilities to the Company.
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(iv) Does the Member, its Voting
Representative, or its alternate Voting
Representative, or any affiliate have
additional relationships or material
economic interests that could be
perceived by a reasonable objective
observer to present a potential conflict
of interest with their responsibilities to
the Company? If so, provide a detailed
narrative discussion of all material facts
necessary to identify the potential
conflicts of interest and the effects they
may have on the Company.
(b) The Processors must respond to
the following questions and
instructions:
(i) Is the Processor an affiliate of or
affiliated with any Member? If yes,
disclose the Member(s) and describe the
nature of the affiliation. Include an
entity-level organizational chart
depicting the Processor and its affiliates.
(ii) Provide a narrative description of
the functions directly performed by
senior staff, the manager employed by
the Processor to provide Processor
services to the Company, and the staff
that reports to that manager.
(iii) Does the Processor provide any
services for any Member’s PDP, other
NMS Plans, or creation of consolidated
equity data information for its own use?
If Yes, disclose the services the
Processor performs and identify which
NMS Plans. Does the Processor have any
profit or loss responsibility for a
Member’s PDP or any other professional
involvement with persons the Processor
knows are engaged in a Member’s PDP
business? If so, describe.
(iv) List the policies and procedures
established to safeguard Restricted
Information, Highly Confidential
Information, and Confidential
Information that is applicable to the
Processor.
(v) Does the Processor, or its
representatives, have additional
relationships or material economic
interests that could be perceived by a
reasonable objective observer to present
a potential conflict of interest with the
representatives’ responsibilities to the
Company? If so, provide a detailed
narrative discussion of all material facts
necessary to identify the potential
conflicts of interest and the effects they
may have on the Company.
(c) The Administrator must respond
to the following questions and
instructions:
(i) Provide a narrative description of
the functions directly performed by
senior staff, the administrative services
manager, and the staff that reports to
that manager.
(ii) Does the Administrator provide
any services for any Member’s PDP? If
yes, what services? Does the
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Administrator have any profit or loss
responsibility, or licensing
responsibility, for a Member’s PDP or
any other professional involvement with
persons the Administrator knows are
engaged in the Member’s PDP business?
If so, describe.
(iii) List the policies and procedures
established to safeguard Restricted
Information, Highly Confidential
Information, and Confidential
Information that is applicable to the
Administrator.
(iv) Does the Administrator, or its
representatives, have additional
relationships or material economic
interests that could be perceived by a
reasonable objective observer to present
a potential conflict of interest with the
representatives’ responsibilities to the
Company? If so, provide a detailed
narrative discussion of all material facts
necessary to identify the potential
conflicts of interest and the effects they
may have on the Company.
(d) The Non-SRO Voting
Representatives must respond to the
following questions and instructions:
(i) Provide the Non-SRO Voting
Representative’s title and a brief
description of the Non-SRO Voting
Representative’s role within the firm as
well as any direct responsibilities
related to the procurement of PDP or CT
Feeds or the development,
dissemination, sales, or marketing of
PDP, and the nature of those
responsibilities sufficient for the public
to identify the nature of any potential
conflict of interest that could be
perceived by a reasonable objective
observer as having an effect on the
operation of the Company. If such
representatives work in or with their
employer’s market data business,
describe such Non-SRO Voting
Representative’s roles and describe how
that business impacts their
compensation. In addition, describe
how such representatives’
responsibilities with the market data
business may present a conflict of
interest with their responsibilities to the
Company.
(ii) Does the Non-SRO Voting
Representative have responsibilities
related to the firm’s use or procurement
of market data?
(iii) Does the Non-SRO Voting
Representative have responsibilities
related to the firm’s trading or brokerage
services?
(iv) Does the Non-SRO Voting
Representative’s firm use the CT Feeds?
Does the Non-SRO Voting
Representative’s firm use a Member’s
PDP?
(v) Does the Non-SRO Voting
Representative’s firm offer PDP? If yes,
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list each product, described its content,
and provide information about the fees
for each product.
(vi) Does the Non-SRO Voting
Representative’s firm have an
ownership interest of 5% or more in one
or more Members? If yes, list the
Member(s).
(vii) Does the Non-SRO Voting
Representative actively participate in
any litigation against the CQ Plan, CTA
Plan, UTP Plan, or the Company?
(viii) Does the Non-SRO Voting
Representative or the Non-SRO Voting
Representative’s firm have additional
relationships or material economic
interests that could be perceived by a
reasonable objective observer to present
a potential conflict of interest with their
responsibilities to the Company. If so,
provide a detailed narrative discussion
of all material facts necessary to identify
the potential conflicts of interest and the
effects they may have on the Company.
(e) Each service provider or
subcontractor that has agreed in writing
to provide required disclosures and be
treated as a Disclosing Party shall
respond to the following questions and
instructions:
(i) Is the service provider or
subcontractor affiliated with a Member,
Processor, Administrator, or employer
of a Non-SRO Voting Representative? If
yes, disclose with whom the person is
affiliated and describe the nature of the
affiliation.
(ii) If the service provider’s or
subcontractor’s compensation is on a
commission basis or is tied to specific
metrics, provide a detailed narrative
summary of how compensation is
determined for performing work on
behalf of the Company.
(iii) Is the service provider or
subcontractor subject to policies and
procedures (including information
barriers) concerning the protection of
confidential information that includes
affiliates? If so, describe. If not, explain
their absence.
(iv) Does the service provider or
subcontractor, or its representative, have
additional relationships or material
economic interests that could be
perceived by a reasonable objective
observer to present a potential conflict
of interest with its responsibilities to the
Company? If so, provide a detailed
narrative discussion of all material facts
necessary to identify the potential
conflicts of interest and the effects they
may have on the Company.
(f) The responses to these questions
will be posted on the Company’s
website. If a Disclosing Party has any
material changes in its responses, the
Disclosing Party must promptly update
its disclosures. Additionally, the
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Disclosing Parties must 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 midFebruary.
Exhibit C
khammond on DSKJM1Z7X2PROD with NOTICES
Confidentiality Policy
(a) Purpose and Scope.
(i) The purpose of this Confidentiality
Policy is to provide guidance to the
Operating Committee, and all
subcommittees thereof, regarding the
confidentiality of any data or
information (in physical or electronic
form) generated by, accessed by, or
transmitted to the Operating Committee
or any subcommittee, as well as
discussions occurring at a meeting of
the Operating Committee or any
subcommittee.
(ii) This Policy applies to all Covered
Persons. All Covered Persons must
adhere to the principles set out in this
Policy and all Covered Persons that are
natural persons may not receive
Company data and information until
they affirm in writing that they have
read this Policy and undertake to abide
by its terms.
(iii) Covered Persons may not disclose
Restricted, Highly Confidential, or
Confidential information except as
consistent with this Policy and directed
by the Operating Committee.
(iv) The Administrator and Processors
will establish written confidential
information policies that provide for the
protection of information under their
control and the control of their Agents,
including policies and procedures that
provide systemic controls for
classifying, declassifying, redacting,
aggregating, anonymizing, and
safeguarding information, that is in
addition to, and not less than, the
protection afforded herein. Such
policies will be reviewed and approved
by the Operating Committee pursuant to
Section 4.3, publicly posted, and made
available to the Operating Committee for
review and approval every two years
thereafter or when changes are made,
whichever is sooner.
(v) Information will be classified
solely based on its content.
(b) Procedures.
(i) General.
(A) The Administrator and Processors
will be the custodians of all documents
discussed by the Operating Committee
and will be responsible for maintaining
the classification of such documents
pursuant to this Policy.
(B) The Administrator may, under
delegated authority, designate
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18:52 Oct 09, 2020
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documents as Restricted, Highly
Confidential, or Confidential, which
will be determinative unless altered by
an affirmative vote of the Operating
Committee pursuant to Section 4.3.
(C) The Administrator will ensure that
all Restricted, Highly Confidential, or
Confidential documents are properly
labeled and, if applicable, electronically
safeguarded.
(D) All contracts between the
Company and its Agents shall require
Company information to be treated as
Confidential Information that may not
be disclosed to third parties, except as
necessary to effect the terms of the
contract or as required by law, and shall
incorporate the terms of this Policy, or
terms that are substantially equivalent
or more restrictive, into the contract.
(ii) Procedures Concerning Restricted
Information. Except as provided below,
Covered Persons in possession of
Restricted Information are prohibited
from disclosing it to others, including
Agents. This prohibition does not apply
to disclosures to the staff of the SEC or
as otherwise required by Applicable
Law, or to other Covered Persons as
expressly provided for by this Policy.
Restricted Information will be kept in
confidence by the Administrator and
Processors and will not be disclosed to
the Operating Committee or any
subcommittee thereof, or during
Executive Session, except as follows:
(A) If the Administrator determines
that it is appropriate to share a
customer’s financial information with
the Operating Committee or a
subcommittee thereof, the
Administrator will first anonymize the
information by redacting the customer’s
name and any other information that
may lead to the identification of the
customer.
(B) The Administrator may disclose
the identity of a customer that is the
subject of Restricted Information in
Executive Session only if the
Administrator determines in good faith
that it is necessary to disclose the
customer’s identity in order to obtain
input or feedback from the Operating
Committee or a subcommittee thereof
about a matter of importance to the
Company. In such an event, the
Administrator will change the
designation of the information at issue
from ‘‘Restricted Information’’ to
‘‘Highly Confidential Information,’’ and
its use will be governed by the
procedures for Highly Confidential
Information in subparagraph (iii) below.
(iii) Procedures Concerning Highly
Confidential Information.
(A) Disclosure of Highly Confidential
Information:
PO 00000
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64593
(1) Highly Confidential Information
may be disclosed in Executive Session
of the Operating Committee or to the
subcommittee established pursuant to
Section 4.7(c). Covered Persons in
possession of Highly Confidential
Information are prohibited from
disclosing it to others, including Agents,
except to other Covered Persons who
need the Highly Confidential
Information to fulfill their
responsibilities to the Company. This
prohibition does not apply to
disclosures to the staff of the SEC or as
otherwise required by law (such as
those required to receive the
information to ensure the Member
complies with its regulatory
obligations), or to other Covered Persons
authorized to receive it.
(2) Highly Confidential Information
may be disclosed to the staff of the SEC,
unless it is protected by the AttorneyClient Privilege or the Work Product
Doctrine. Any disclosure of Highly
Confidential Information to the staff of
the SEC will be accompanied by a FOIA
Confidential Treatment request.
(3) Apart from the foregoing, the
Operating Committee has no power to
authorize any other disclosure of Highly
Confidential Information.
(B) In the event that a Covered Person
is determined by an affirmative vote of
the Operating Committee pursuant to
this Policy to have disclosed Highly
Confidential Information, the Operating
Committee will determine the
appropriate remedy for the breach based
on the facts and circumstances of the
event. For an SRO Voting
Representative or Member Observer,
remedies include a letter of complaint
submitted to the SEC, which may be
made public by the Operating
Committee. For a Non-SRO Voting
Representative, remedies include
removal of that Non-SRO Voting
Representative.
(iv) Procedures Concerning
Confidential Information.
(A) Confidential Information may be
disclosed during a meeting of the
Operating Committee or any
subcommittee thereof. Additionally, a
Covered Person may disclose
Confidential Information to other
persons to allow such other persons to
fulfill their responsibilities to the
Company. A Covered Person also may
disclose Confidential Information to the
staff of the SEC, as authorized by the
Operating Committee as described
below, or as may be otherwise required
by law.
(B) The Operating Committee may
authorize the disclosure of Confidential
Information by an affirmative vote of the
Operating Committee pursuant to
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Section 4.3. Notwithstanding the
foregoing, the Operating Committee will
not authorize the disclosure of
Confidential Information that is
generated by a Member or Non-SRO
Voting Representative and designated
by such Member or Non-SRO Voting
Representative as Confidential, unless
such Member or Non-SRO Voting
Representative consents to the
disclosure.
(C) Non-SRO Voting Representatives
may be authorized by the Operating
Committee to disclose particular
Confidential Information only in
furtherance of the interests of the
Company, to enable them to consult
with industry representatives or
technical experts, provided that the
Non-SRO Voting Representatives take
any steps requested by the Operating
Committee to prevent further
dissemination of that Confidential
Information, including providing the
individual(s) consulted with a copy of
this Policy and requesting that person to
maintain the confidentiality of such
information in a manner consistent with
this policy.
(D) A Covered Person that is a
representative of a Member may be
authorized by the Operating Committee
to disclose particular Confidential
Information to other employees or
agents of the Member or its affiliates
only in furtherance of the interests of
the Company as needed for such
Covered Person to perform his or her
function on behalf of the Company. A
copy of this Policy will be made
available to recipients of such
information who are employees or
agents of a Member or its affiliates that
are not Covered Persons, who will be
required to abide by this Confidentiality
Policy.
(E) A Covered Person may disclose
their own individual views and
statements that may otherwise be
considered Confidential Information
without obtaining authorization of the
Operating Committee, provided that in
so disclosing, the Covered Person is not
disclosing the views or statements of
any other Covered Person or Member
that are considered Confidential
Information.
(F) A person that has reason to believe
that Confidential Information has been
disclosed by another without the
authorization of the Operating
Committee or otherwise in a manner
inconsistent with this Policy may report
such potential unauthorized disclosure
to the Chair of the Operating Committee.
In addition, a Covered Person that
discloses Confidential Information
without the authorization of the
Operating Committee will report such
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18:52 Oct 09, 2020
Jkt 253001
disclosure to the Chair of the Operating
Committee. Such self-reported
unauthorized disclosure of Confidential
Information will be recorded in the
minutes of the meeting of the Operating
Committee and will contain: (a) The
name(s) of the person(s) who disclosed
such Confidential Information, and (b) a
description of the Confidential
Information disclosed. The name(s) of
the person(s) who disclosed such
Confidential Information will also be
recorded in any publicly available
summaries of Operating Committee
minutes.
Exhibit D
Distributions
Cost Allocation and Revenue Sharing
(a) Payments. In accordance with
Paragraph (l) of this Exhibit D, each
Member will receive an annual payment
(if any) for each calendar year that is
equal to the sum of the Member’s
Trading Shares and Quoting Shares
(each as defined below), in each Eligible
Security for such calendar year. In the
event that total Net Distributable
Operating Income (as defined below) is
negative for a given calendar year, each
Member will receive an annual bill for
such calendar year to be determined
according to the same formula
(described in this paragraph) for
determining annual payments to the
Members. Unless otherwise stated in
this agreement, a year shall run from
January 1st to December 31st and
quarters shall end on March 31st, June
30th, September 30th, and December
31st. The Company shall cause the
Administrator to provide the Members
with written estimates of each Member’s
percentage of total volume within five
business days of the end of each
calendar month.
(b) Security Income Allocation. The
‘‘Security Income Allocation’’ for an
Eligible Security shall be determined by
multiplying (i) the Net Distributable
Operating Income under this Agreement
for the calendar year by (ii) the Volume
Percentage for such Eligible Security
(the ‘‘Initial Allocation’’), and then
adding or subtracting any amounts
specified in the reallocation set forth
below.
(c) Volume Percentage. The ‘‘Volume
Percentage’’ for an Eligible Security
shall be determined by dividing (A) the
square root of the dollar volume of
Transaction Reports disseminated by
the Processors in such Eligible Security
during the calendar year by (B) the sum
of the square roots of the dollar volume
of Transaction Reports disseminated by
the Processors in each Eligible Security
during the calendar year.
PO 00000
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Sfmt 4703
(d) Cap on Net Distributable
Operating Income. If the Initial
Allocation of Net Distributable
Operating Income in accordance with
the Volume Percentage of an Eligible
Security equals an amount greater than
$4.00 multiplied by the total number of
qualified Transaction Reports in such
Eligible Security during the calendar
year, the excess amount shall be
subtracted from the Initial Allocation for
such Eligible Security and reallocated
among all Eligible Securities in direct
proportion to the dollar volume of
Transaction Reports disseminated by
the Processors in Eligible Securities
during the calendar year. A Transaction
Report with a dollar volume of $5,000
or more shall constitute one qualified
Transaction Report. A Transaction
Report with a dollar volume of less than
$5,000 shall constitute a fraction of a
qualified Transaction Report that equals
the dollar volume of the Transaction
Report divided by $5,000.
(e) Trading Share. The ‘‘Trading
Share’’ of a Member in an Eligible
Security shall be determined by
multiplying (i) an amount equal to fifty
percent of the Security Income
Allocation for the Eligible Security by
(ii) the Member’s Trade Rating in the
Eligible Security.
(f) Trade Rating. A Member’s ‘‘Trade
Rating’’ in an Eligible Security shall be
determined by taking the average of (A)
the Member’s percentage of the total
dollar volume of Transaction Reports
disseminated by the Processors in the
Eligible Security during the calendar
year, and (B) the Member’s percentage
of the total number of qualified
Transaction Reports disseminated by
the Processors in the Eligible Security
during the calendar year.
(g) Quoting Share. The ‘‘Quoting
Share’’ of a Member in an Eligible
Security shall be determined by
multiplying (A) an amount equal to fifty
percent of the Security Income
Allocation for the Eligible Security by
(B) the Member’s Quote Rating in the
Eligible Security.
(h) Quote Rating. A Member’s ‘‘Quote
Rating’’ in an Eligible Security shall be
determined by dividing (A) the sum of
the Quote Credits earned by the Member
in such Eligible Security during the
calendar year by (B) the sum of the
Quote Credits earned by all Members in
such Eligible Security during the
calendar year.
(i) Quote Credits. A Member shall
earn one ‘‘Quote Credit’’ for each second
of time (with a minimum of one full
second) multiplied by dollar value of
size that an automated best bid (offer)
transmitted by the Member to the
Processors during regular trading hours
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is equal to the price of the National Best
Bid and Offer in the Eligible Security
and does not lock or cross a previously
displayed ‘‘automated quotation’’ (as
defined under Rule 600 of Regulation
NMS). The dollar value of size of a
quote shall be determined by
multiplying the price of a quote by its
size.
(j) Net Distributable Operating
Income. The ‘‘Net Distributable
Operating Income’’ for any particular
calendar year shall mean:
(i) All cash revenues, funds and
proceeds received by the Company
during such calendar year (other than
Capital Contributions by the Members
or amounts paid pursuant to Section
3.7(b) of this Agreement), including all
revenues from (A) the CT Feeds, which
includes the dissemination of
information with respect to Eligible
Securities to foreign marketplaces, and
(B) FINRA quotation data and last sale
information for securities classified as
OTC Equity Securities under FINRA’s
Rule 6400 Series (the ‘‘FINRA OTC
Data’’) ((A) and (B) collectively, the
‘‘Data Feeds’’), and (C) any Membership
Fees; less
(ii) 6.25% of the revenue received by
the Company during such calendar year
attributable to the segment of the Data
Feeds reflecting the dissemination of
information with respect to Network C
Securities and FINRA OTC Data (but, for
the avoidance of doubt, not including
revenue attributable to the segment of
the Data Feeds reflecting the
dissemination of information with
respect to Network A Securities and
Network B Securities), which amount
shall be paid to FINRA as compensation
for the FINRA OTC Data; 1 less
(iii) reasonable working capital
reserves and reasonable reserves for
contingencies for such calendar year, as
determined by the Operating
Committee, and all costs and expenses
of the Company during such calendar
year, including:
(A) All amounts payable during such
calendar year to the Administrator
pursuant to the Administrative Services
Agreement or this Agreement;
(B) all amounts payable during such
calendar year to the Processors pursuant
to the Processor Services Agreements or
this Agreement; and
(C) all amounts payable during such
calendar year to third-party service
providers engaged by or on behalf of the
Company.
1All costs associated with collecting,
consolidating, validating, generating, and
disseminating the FINRA OTC Data are borne
directly by FINRA and not the Company and the
Members.
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18:52 Oct 09, 2020
Jkt 253001
(k) Initial Eligibility. At the time a
Member implements a Processorapproved electronic interface with the
Processors, the Member will become
eligible to receive revenue.
(l) Quarterly Distributions. The
Company shall cause the Administrator
to provide Members with written
estimates of each Member’s quarterly
Net Distributable Operating Income
within 45 calendar days of the end of
the quarter, and estimated quarterly
payments or billings shall be made on
the basis of such estimates. All quarterly
payments or billings shall be made to
each eligible Member within 45 days
following the end of each calendar
quarter in which the Member is eligible
to receive revenue; provided, that each
quarterly payment or billing shall be
reconciled against a Member’s
cumulative year-to-date payment or
billing received to date and adjusted
accordingly; further, provided, that the
total of such estimated payments or
billings shall be reconciled at the end of
each calendar year and, if necessary,
adjusted by March 31st of the following
year. Interest shall be included in
quarterly payments and in adjusted
payments made on March 31st of the
following year. Such interest shall
accrue monthly during the period in
which revenue was earned and not yet
paid and will be based on the 90-day
Treasury bill rate in effect at the end of
the quarter in which the payment is
made. Monthly interest shall start
accruing 45 days following the month in
which it is earned and accrue until the
date on which the payment is made.
(m) Itemized Statements. In
conjunction with calculating estimated
quarterly and reconciled annual
payments under this Exhibit D, the
Company shall cause the Administrator
to submit to the Members a quarterly
itemized statement setting forth the
basis upon which Net Distributable
Operating Income was calculated. Such
Net Distributable Operating Income
shall be adjusted annually based solely
on the quarterly itemized statement
audited pursuant to the annual audit.
The Company shall cause the
Administrator to pay or bill Members
for the audit adjustments within thirty
days of completion of the annual audit.
Upon the affirmative vote of Voting
Representatives pursuant to Section 4.3,
the Company shall cause the
Administrator to engage an independent
auditor to audit the Administrator’s
costs or other calculation(s).
PO 00000
Frm 00155
Fmt 4703
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64595
Exhibit E
Fees
[To be determined by the Operating
Committee under this Agreement]
[FR Doc. 2020–22467 Filed 10–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90115; File No. SR–
NYSEAMER–2020–71]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Adopt Temporary
Commentary .10 Under NYSE
American Rule 2.1210
October 7, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on
September 25, 2020, NYSE American
LLC (‘‘NYSE American’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. 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 proposes a rule change
to adopt temporary Commentary .10
(Temporary Extension of the Limited
Period for Registered Persons to
Function as Principals) under NYSE
American Rule 2.1210 (Registration
Requirements) applicable to member
organizations, Equity Trading Permit
(‘‘ETP’’) Holders and American Trading
Permit (‘‘ATP’’) Holders. The proposed
rule change is available on the
Exchange’s website at www.nyse.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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Agencies
[Federal Register Volume 85, Number 198 (Tuesday, October 13, 2020)]
[Notices]
[Pages 64565-64595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22467]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90096; File No. 4-757]
Joint Industry Plan; Notice of Filing of a National Market System
Plan Regarding Consolidated Equity Market Data.
October 6, 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 August 11,
2020, Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA
Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe Exchange, Inc.,
Investors Exchange LLC, Long Term Stock Exchange, Inc., MEMX LLC,
Nasdaq BX, Inc., Nasdaq ISE, LLC, Nasdaq PHLX LLC, Nasdaq Stock Market
LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc.,
NYSE Chicago, Inc., NYSE
[[Page 64566]]
National, Inc., and Financial Industry Regulatory Authority, Inc.
(``FINRA'') (collectively, the ``SROs'' or ``Participants'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') a
proposed new single national market system plan governing the public
dissemination of real-time consolidated equity market data for national
market system (``NMS'') stocks (the ``CT Plan'').\3\ The Commission is
publishing this notice to solicit comments on the proposed CT Plan from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78k-1.
\2\ 17 CFR 242.608.
\3\ See Letter from James P. Dombach and Howard L. Kramer,
Murphy & McGonigle, P.C., to Vanessa Countryman, Secretary,
Commission (Aug. 11, 2020) (``Transmittal Letter''). See also
Attachment A (Limited Liability Agreement of CT Plan LLC).
---------------------------------------------------------------------------
II. Description of the CT Plan
Set forth in this Section II is the statement of the purpose of the
National Market System Plan Regarding Consolidated Equity Market Data,
along with information pursuant to Rules 608(a)(4) and (5) under the
Act,\4\ as prepared and submitted by the SROs to the Commission.\5\
---------------------------------------------------------------------------
\4\ See 17 CFR 242.608(a)(4) and (a)(5).
\5\ See Transmittal Letter, supra note 3. The statement of the
purpose of the proposed CT Plan and the information required by Rule
608(a)(4) and (5) are reproduced verbatim from the Transmittal
Letter; cross-references have been revised to conform with the
footnote sequencing of this notice.
---------------------------------------------------------------------------
A. Statement of Purpose
On May 6, 2020, the Commission ordered the SROs to act jointly in
developing and filing with the Commission by August 11, 2020, a
proposed new single NMS plan to govern the public dissemination of
real-time consolidated equity market data for NMS stocks.\6\ The SROs
are filing the proposed Plan, as directed in the Order.\7\ Following
the Operative Date (as defined and described in Section A.3 below), the
Plan would replace (1) the Consolidated Tape Association Plan (``CTA
Plan''), (2) the Consolidated Quotation Plan (``CQ Plan''), and (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 (``UTP Plan''). The SROs propose that
the Plan be in the form of a limited liability company (``LLC'')
agreement for a new company, CT Plan LLC (the ``Company''), with each
SRO being a ``Member'' of the Company.
---------------------------------------------------------------------------
\6\ See Order Directing the Exchanges and the Financial Industry
Regulatory Authority to Submit a New National Market System Plan
Regarding Consolidated Equity Market Data, Release No. 34-88827 (May
6, 2020), 85 FR 28702 (May 13, 2020) (File No. 4-757) (the
``Order'').
\7\ As the Commission is aware, some of the SROs have challenged
the Order in the D.C. Circuit. Those SROs (the ``Petitioners'') have
joined in this submission, including the statement that the Plan
complies with the Order, solely to satisfy the requirements of the
Order and Rule 608. Nothing in this submission should be construed
as an agreement by Petitioners with any analysis or conclusions set
forth in the Order or as a concession by Petitioners regarding the
Order's legality. Petitioners reserve all rights in connection with
their pending challenge of the Order.
The provisions reflected in the Plan do not necessarily reflect
each SRO's views related to governing and operating the
consolidation and dissemination of equity market data. Further,
while each SRO believes that the proposed Plan is compliant with the
Order, one or more SROs intend to submit public comments regarding
the proposed Plan.
---------------------------------------------------------------------------
While the Order requires Operating Committee approval for actions
other than the selection of Non-SRO Voting Representatives and the
decision to enter executive session, because the Plan would be in the
form of an LLC agreement for the Company, the SROs propose that certain
provisions of the Plan concerning solely the operation of the Company
as an LLC, and unrelated to consolidation and distribution of equity
market data, will require a majority vote of the Members as opposed to
the augmented majority vote of the Operating Committee. In particular,
the SROs propose the following actions be subject to a majority vote of
the Members: (1) The selection of Officers of the Company (other than
the Chair and Secretary), if needed, and (2) certain decisions
concerning the operation of the Company as an LLC and approval of
amendments to LLC-related provisions of the Plan, including provisions
related to indemnification, dissolution of the Company, and tax-related
matters. Neither of these topics would affect the consolidation and
distribution of equity market data, and therefore, the SROs believe
that the Members should have the sole authority to make decisions
related to these topics (with Commission approval where necessary).
2. Governing or Constituent Documents
Not applicable.
3. Implementation of Plan
As set forth in the proposed Plan, the SROs propose that the Plan
would become effective after (1) it is approved by the Commission
pursuant to Rule 608 of Regulation NMS and (2) the Company has been
formed by filing a certificate of formation with the Delaware Secretary
of State. The SROs propose that the Plan would become operative on the
first day of the month that is at least 90 days after the last of the
following have occurred (the ``Operative Date''): (a) The SRO Voting
Representatives and Non-SRO Voting Representatives of the Operating
Committee have been determined; (b) fees for market data disseminated
pursuant to the Plan have been established by the Operating Committee,
are effective as an amendment to the Plan pursuant to Rule 608 of
Regulation NMS, and are ready to be implemented on the Operative Date;
(c) the Company has entered into an agreement with the necessary
Processor(s); (d) the Company has entered into an agreement with an
Administrator selected pursuant to Section 6.3 of the Plan and such
Administrator has completed the transition from prior Administrators
under the CQ Plan, CTA Plan, and UTP Plan such that it is able to
provide services under the Administrative Services Agreement, including
that (1) new contracts between the Company and Vendors and the Company
and Subscribers have been finalized such that all Vendors and
Subscribers under the CQ Plan, CTA Plan, and UTP Plan are ready to
transition to such new contracts by the Operative Date, (2) the
Administrator has in place a system to administer distributions, and
(3) the Administrator has in place a system to administer fees; and (e)
the Operating Committee and, if applicable, the Commission has approved
all policies and procedures that are necessary or appropriate for the
operation of the Company.
4. Development and Implementation Phases
Until the Operative Date, the Members will continue to operate
pursuant to the CQ Plan, CTA Plan, and UTP Plan with respect to the
public dissemination of real-time consolidated equity market data for
NMS stocks rather than the Plan.
5. Analysis of Impact on Competition
The SROs believe the proposed Plan complies with the Order. The
proposed Plan incorporates the existing substantive provisions of the
CTA Plan, CQ Plan and UTP Plan, which have been approved by the
Commission, together with the governance modifications required by the
Commission's Order.
6. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, Plan
Not applicable.
7. Approval of Amendment of the Plan
Not applicable.
[[Page 64567]]
8. Terms and Conditions of Access
The Plan provides that any entity registered as a national
securities exchange or national securities association under the
Exchange Act may become a Member by: (i) Providing written notice to
the Company, (ii) executing a joinder to the Plan, at which time
Exhibit A of the Plan shall be amended to reflect the addition of such
exchange or association as a Member, (iii) paying a Membership Fee to
the Company, and (iv) executing a joinder to any other agreements to
which all of the other Members have been made party in connection with
being a Member.
9. Method of Determination and Imposition, and Amount of Fees and
Charges
Not applicable.
10. Method and Frequency of Processor Evaluation
Not applicable.\8\
---------------------------------------------------------------------------
\8\ The Commission notes that Article V, Section 5.2 of the
proposed CT Plan governs the evaluation of processor performance.
See also infra Question 37.
---------------------------------------------------------------------------
11. Dispute Resolution
The Plan does not include provisions regarding resolution of
disputes between or among the Members.
III. Solicitation of Comments
The Commission seeks comment on the proposed CT Plan. Interested
persons are invited to submit written data, views, and comments
concerning the foregoing, including whether the proposal is consistent
with the Act and the rules thereunder, as well as with the Order. In
addition to the specific questions set forth below, the Commission asks
commenters to consider generally whether the proposed CT Plan is
appropriately structured, and whether its provisions are appropriately
drafted, to support the ``prompt, accurate, reliable, and fair
collection, processing, distribution, and publication of information
with respect to quotations for and transactions in such securities and
the fairness and usefulness of the form and content of such
information.'' \9\
---------------------------------------------------------------------------
\9\ See Order, supra note 6, 85 FR at 28703 (citing 15 U.S.C.
78k-1(c)(1)(B)).
---------------------------------------------------------------------------
Accordingly, the Commission requests comments on matters including,
but not limited to, the following:
Effective and Operative Dates
1. Paragraph (b) of the Recitals of the proposed CT Plan provides
that the CT Plan will not become effective (``Effective Date'') until
the later of two things occurs: (1) The proposed Agreement has been
approved by the Commission, and (2) the Members have formed the CT Plan
as an LLC pursuant to the Delaware Act by filing a certificate of
formation (the ``Certificate'') with the Delaware Secretary of State.
Do commenters believe that the timing provisions set forth in the
Recitals could result in an undue delay of the effectiveness of the CT
Plan? Do commenters believe that the CT Plan should require that the
Certificate be filed within a certain period of time following
Commission action, if any, on the CT Plan? Would 10 days be an
appropriate period of time for filing the Certificate? If not, what
time period do commenters believe would be appropriate?
2. Paragraph (c) of the Recitals of the proposed CT Plan provides
that, following the Effective Date, the CT Plan will not become
operative as an NMS Plan that governs the dissemination of real-time
consolidated equity market data until the first day of the month that
is at least 90 days after the last of five specified actions has
occurred (the ``Operative Date''). Do commenters agree that the
completion of all five specified actions is necessary prior to the
Operative Date? Should the CT Plan set deadlines for some or all of the
specified actions? Should the CT Plan require that the Operating
Committee provide periodic updates as to the status of implementation
of the specified actions? If so, should these updates be made public?
Should the CT Plan include deadlines requiring that the Operating
Committee be constituted within a set time if the Commission approves
the CT Plan? Should the CT Plan explicitly specify that constituting
the Operating Committee must be the first action undertaken by the CT
Plan after the Effective Date? Should the Operating Committee be
required within set times to establish fees, enter into contracts with
an Administrator and Processor(s), and approve or file with the
Commission, as applicable, all ``policies and procedures that are
necessary or appropriate for the operation of the Company''? What
policies and procedures do commenters believe are necessary or
appropriate for the operation of the CT Plan? Should the CT Plan
specify which policies and procedures are necessary or appropriate? Is
the proposed 90-day period appropriate and reasonable, or should it be
longer or shorter?
Plan Structure as an LLC Agreement
3. The Commission requests comment generally on the distinctions
drawn in the proposed CT Plan between actions that are governed by the
Operating Committee, which includes Non-SRO Voting Representatives as
required by the Order,\10\ and other specified actions that are
governed solely by the SROs as the ``Members'' of the LLC. Does the
proposed CT Plan appropriately draw these distinctions in a way that
supports the purpose of the CT Plan, consistent with the Order? \11\ Do
commenters believe that these distinctions will result in a significant
and inappropriate dilution of Non-SRO Voting Representatives' influence
on CT Plan matters that are relevant to the operation of the CT Plan as
an NMS plan for the collection, processing, and dissemination of equity
market data? What revisions to the plan provisions, if any, do
commenters believe would be appropriate to ensure that the distinctions
drawn in the CT Plan between matters to be decided by the Operating
Committee and matters to be decided solely by the SROs do not
inappropriately dilute the Non-SRO Voting Representatives'
participation and influence on the Operating Committee?
---------------------------------------------------------------------------
\10\ See id. at 28730.
\11\ See id. at 28703.
---------------------------------------------------------------------------
Definitions
4. Article I, Section 1.1(p) of the proposed CT Plan defines the
term ``CT Feeds'' as the CT Quote Data Feed(s) and the CT Trade Data
Feed(s). Do commenters believe that this definition makes sufficiently
clear that three tapes--Tape A, Tape B, and Tape C--would remain under
the CT Plan as proposed?
5. Article I, Section 1.1(n) of the proposed CT Plan defines the
term ``Covered Persons'' as representatives of the Members, the Non-SRO
Voting Representatives, SRO Applicants, the Administrator, and the
Processors; affiliates, employees, and Agents of the Operating
Committee, a Member, the Administrator, and the Processors; any third
parties invited to attend meetings of the Operating Committee or
subcommittees; and the employers of Non-SRO Voting Representatives.
Covered Persons do not include staff of the Commission. The Commission
requests comment on the proposed definition. Should other types of
representatives be specified in the proposed definition? For example,
should the proposed definition specifically include Member Observers,
as defined in Article I, Section 1.1(oo) of the proposed CT Plan?
6. Article I, Section 1.1(bb) of the proposed CT Plan defines
``Fees'' as fees
[[Page 64568]]
charged to vendors and subscribers for Transaction Reports and
Quotation Information in Eligible Securities, as defined in the CT
Plan. The Commission requests comment on this definition. Does it
accurately reflect all of the types of information currently made
available from the existing NMS plans for equity market data and other
types of fees that the CT Plan may charge to subscribers?
7. Article I, Section 1.1(oo) of the proposed CT Plan defines the
term ``Member Observer'' to mean any individual, other than a Voting
Representative, that a Member, in its sole discretion, determines is
necessary in connection with such Member's compliance with its
obligations under Rule 608(c) of Regulation NMS to attend Operating
Committee and subcommittee meetings. What are commenters' views on
whether an SRO would reasonably find it necessary to select a Member
Observer to comply with its obligations under Rule 608(c) of Regulation
NMS? Under what circumstances, if any, would the representation of an
SRO on the Operating Committee by its selected SRO Voting
Representative be an insufficient means for the SRO to fulfill its
obligations under Rule 608 of Regulation NMS? Should persons who hold
certain positions within an SRO be prohibited from serving as Member
Observers? For example, should a person who has direct responsibility
for the management, marketing, sale, or development of proprietary
equity data products offered separately be permitted to serve as a
Member Observer? If Member Observers are necessary, should only persons
who perform certain roles within an SRO (e.g., legal or compliance
personnel) be able to serve as Member Observers? Should the CT Plan
limit the number of Member Observers that each SRO would be permitted
to name or the frequency with which the person serving as a Member
Observer can be changed? If so, how?
8. Article I, Section 1.1(kkk) of the proposed CT Plan defines
``Public Information'' to include, among other things, any information
that is not either Restricted Information or Highly Confidential
Information or that has not been designated as Confidential
Information, and the duly approved minutes of the Operating Committee.
The Commission requests comment on the proposed definition of Public
Information. Should other types of information be included in the
proposed definition? For example, should the proposed definition
include minutes of the meetings of any subcommittees of the Operating
Committee?
Organization and Membership of LLC
9. Do commenters believe that the organizational, governance, and
managerial structure outlined in Articles II, III, and IV of the
proposed CT Plan are in the public interest?
10. Do commenters believe that the organizational, governance, and
managerial structure set forth in the proposed CT Plan--including the
limitation of membership in the LLC to SROs and the prescribed role and
responsibilities of the Operating Committee--is consistent with the
purposes of the CT Plan with respect to the dissemination of equity
market data and the statutory mandate of ensuring the ``prompt,
accurate, reliable and fair collection, processing, distribution, and
publication of information with respect to quotations for and
transactions in such securities and the fairness and usefulness of the
form and content of such information''? \12\ If not, what changes to
the organizational, governance, and managerial terms of the proposed CT
Plan do commenters believe should be made to be consistent with the
purposes of the CT Plan?
---------------------------------------------------------------------------
\12\ See id. (citing 15 U.S.C. 78k-1(c)(1)(B)).
---------------------------------------------------------------------------
11. Article III, Section 3.7 of the proposed CT Plan describes the
obligations and liabilities of the SROs as Members of the LLC,
including among other things, a provision that SROs shall have no
liability for the debt, liabilities, commitments, or any other
obligations of the CT Plan or for any losses of the CT Plan. Given the
role and public purpose of the CT Plan as part of the national market
system, do commenters believe that the provisions set forth in Section
3.7 are consistent with the SROs' obligations to, and purposes of, the
CT Plan?
12. Article III, Section 3.7(e) of the proposed CT Plan states,
``[t]o the fullest extent permitted by law, no Member shall, in its
capacity as a Member, owe any duty (fiduciary or otherwise) to the
Company or to any other Member other than the duties expressly set
forth in this Agreement.'' The Commission requests comment on the
limitations proposed in this provision and the potential impact to the
CT Plan's responsibilities for the collection, processing, and
dissemination of equity market data.
13. Do commenters believe that the proposed CT Plan includes all of
the necessary provisions for an LLC agreement to function appropriately
as an NMS plan? If not, please describe the additional provisions that
should be included in the CT Plan.
Responsibilities of the Operating Committee
14. Article IV, Section 4.1(a) of the proposed CT Plan states that
the responsibilities of the Operating Committee include ``interpreting
the Agreement and its provisions.'' Do commenters believe it is
appropriate for the Operating Committee to develop its own
interpretation of the meaning of the CT Plan and its provisions? Should
all interpretations of the CT Plan be required to be in writing? Should
all interpretations of the CT Plan be required to be made publicly
available for comment before being adopted or taking effect? Should all
interpretations of the CT Plan be submitted in writing to the
Commission or to Commission staff before being adopted or taking
effect? Should the CT Plan include policies and procedures to
distinguish operational interpretations of the CT Plan from amendments
required to be submitted to the Commission under Rule 608 of Regulation
NMS?
15. Article IV, Section 4.1(b) of the proposed CT Plan proposes to
allow the Operating Committee to delegate ``administrative functions''
to a subcommittee or to one or more of the Members (i.e., SROs) or to
one or more Non-SRO Voting Representatives or to another person, such
as the Administrator. Thus, the Operating Committee would be empowered
to delegate an administrative function only to SROs, or only to Non-SRO
Voting Representatives. Should the CT Plan specify the ``administrative
functions'' that would be covered by this provision? Do commenters
believe the CT Plan should permit the Operating Committee to delegate
``administrative functions'' to a subcommittee consisting only of SROs?
Do commenters have concerns that, under this proposed provision, an
SRO-only subcommittee could discuss the details of an administrative
matter without input from Non-SRO Voting Representatives? Do commenters
believe the CT Plan should permit the Operating Committee to delegate
``administrative functions'' to a subcommittee consisting only of Non-
SRO Voting Representatives? Section 4.1(b) also provides that a
subcommittee cannot take any actions that require approval of the
Operating Committee. Does the limitation that a subcommittee cannot
take actions that require Operating Committee approval mitigate
concerns about the delegation of ``administrative functions''? What, if
any, actions could a subcommittee take without approval of the
Operating Committee pursuant to Section 4.3?
[[Page 64569]]
Composition and Selection of Operating Committee
16. Article IV, Section 4.2(b) of the proposed CT Plan discusses
Non-SRO Voting Representatives, including term limits, the selection
process for the initial Non-SRO Voting Representatives, and the
nomination and election process for Non-SRO Voting Representative
replacements. Do commenters believe that the proposed process--
including public notice requesting nominations, listing nominated
individuals, and soliciting and discussing any public comments
received--is fair and transparent? Do commenters believe that the CT
Plan should be required to use any means beyond publication on its
website to seek interested, qualified candidates to be nominated and
for public comment to be solicited? If so, which means? Do commenters
believe that a Non-SRO Voting Representative should be permitted, in
addition to nominating himself or herself, to nominate other persons to
serve as a Non-SRO Voting Representative? If so, should that be
explicitly stated in the CT Plan?
17. With respect to Article IV, Section 4.2(b), do commenters
believe that the CT Plan should prescribe specified periods of time for
the nomination of, initial selection of, and selection of replacement
Non-SRO Voting Representatives? Does the absence of such requirements
provide needed flexibility to the selection process? Alternatively,
could the absence of specified deadlines result in unnecessary delays
in the initial formation of the Operating Committee or hinder non-SRO
representation? If so, what amount of time do commenters believe would
be appropriate for achieving each phase of the selection process? For
example, would 30 days be an appropriate time frame for each of the
specified periods--nomination, initial selection, and selection of
replacements for Non-SRO Voting Representatives?
18. Article IV, Section 4.2(b) provides that Non-SRO Voting
Representatives shall serve for two-year terms for a maximum of two
terms total, whether consecutive or non-consecutive. Is the proposed
maximum of two terms an appropriate limit on the number of terms a Non-
SRO Voting Representative may serve on the Operating Committee? Should
the limit on the number of terms be increased or decreased? Should it
be eliminated? Do commenters believe that similar term limits should
apply to SRO Voting Representatives? What are commenters' views on
whether a lifetime limitation on service that applies only to Non-SRO
Voting Representatives would support the meaningful and informed
participation of Non-SRO Voting Representatives on the Operating
Committee? Do commenters believe there is a sufficiently large pool of
qualified and informed persons able to serve as Non-SRO Voting
Representatives to sustain a diversity of views on the Operating
Committee over time if the proposed term limits were adopted?
Action of Operating Committee
19. Article IV, Section 4.3(c) of the proposed CT Plan delineates
several circumstances, in addition to those described in the Order--
which are the selection of Non-SRO Voting Representatives and the
decision to enter Executive Session--in which an augmented majority
vote of the Operating Committee would not be required. The Commission
requests comment on each of the proposed CT Plan provisions that would
permit action by a majority vote of the SROs. Specifically, do
commenters believe that the CT Plan should include additional details
on the proposed provisions with respect to: (i) The operation of the CT
Plan as an LLC, (ii) modifications to LLC-related provisions of the
proposed CT Plan,\13\ and (iii) the selection (including appointment
and removal) of Officers of the CT Plan, other than the Chair? Would
permitting action by the SROs alone with respect to these elements of
CT Plan operation be consistent with providing a meaningful role to
non-SROs in the governance of the collection, processing, and
dissemination of equity market data? Should an augmented majority vote
of the Operating Committee be required for any or all aspects of the
operation of the CT Plan as an LLC? If so, which ones?
---------------------------------------------------------------------------
\13\ See infra Questions 51-52.
---------------------------------------------------------------------------
Meetings of the Operating Committee
20. Article IV, Section 4.4(g) of the proposed CT Plan would permit
Member Observers to attend Executive Sessions of the Operating
Committee. Do commenters believe that permitting Member Observers to
attend Executive Sessions is necessary? If so, under what circumstances
do commenters believe Member Observers should attend? Should the CT
Plan limit the ability of some or all Member Observers to attend
Executive Session, Operating Committee, or subcommittee meetings? If
so, under what circumstances should such attendance be limited and to
what subset, if any, of Member Observers should such limitations apply?
21. Article IV, Section 4.4(g) of the proposed CT Plan provides
that items for discussion within an Executive Session should be limited
to those ``for which it is appropriate to exclude Non-SRO Voting
Representatives,'' identified as: (i) Any topic that requires
discussion of Highly Confidential Information; (ii) vendor or
subscriber audit findings; and (iii) litigation matters. The proposed
CT Plan further provides that the above items are ``not dispositive of
all matters that may by their nature require discussion in an Executive
Session.'' The Commission requests comment on the specified items
proposed in the CT Plan as appropriate topics for Executive Session. Do
commenters agree, for example, that any topic that requires discussion
of Highly Confidential Information should not be considered by the full
Operating Committee? Do commenters believe that there are sufficient
mechanisms in place under the CT Plan to ensure that the use of
Executive Session is appropriate? If not, what mechanisms should be
added? Should the list of permissible topics for Executive Session be
delineated more specifically in the CT Plan? What, if any, additional
permissible topics should be included? What, if any, topics should be
specifically excluded? Would the proposed provision that the topics
identified in the CT Plan are ``not dispositive of all matters that may
by their nature require discussion in an Executive Session'' allow the
SROs excessive discretion to limit or prevent the participation of Non-
SRO Voting Representatives in certain CT Plan matters? Should the CT
Plan specify a limited set of categories of items that could be
discussed in Executive Session? If so, what categories should be
included, and what level of detail regarding these categories would be
appropriate?
Certain Transactions
22. Article IV, Section 4.5 of the proposed CT Plan provides that
the CT Plan is not prohibited from employing or dealing with persons in
which an SRO or any of its affiliates has a connection or a direct or
indirect interest. What relevant CT Plan employment relationships or
business dealings do commenters believe might be covered by this
provision? Are there specific types of employment relationships or
business dealings that should be prohibited? Are there specific types
of employment relationships or business dealings that should be
permitted? If the CT Plan permits such employment relationships or
business dealings, should it also require the relevant SROs to maintain
information
[[Page 64570]]
barriers between themselves and the affiliates or persons that have
employment relationships or business dealings with the CT Plan? If so,
what type of information barrier would be appropriate? In commenters'
views, could Section 4.5 permit conflicts of interest that should be
disclosed under the conflicts of interest policy? If so, what
modifications to that policy, if any, should be made? Do commenters
think that any additional disclosure, recusal, or voting procedures
should be required before the CT Plan employs or deals with persons in
which an SRO or any of its affiliates has a direct or indirect interest
or a connection?
Company Opportunities
23. Article IV, Section 4.6 of the proposed CT Plan permits the
SROs to engage in business activities outside of the business
activities of the CT Plan, including through investments or business
relationships with other persons engaged in market data services or
through strategic relationships with businesses that are or may be
competitive with the CT Plan. What specific types of business
activities would be covered by this provision? Would any of these
business activities create a conflict of interest with an SRO's
obligations with respect to the CT Plan under the federal securities
laws, rules, and regulations? Are any potential conflicts of interest
sufficiently mitigated by the conflicts of interest policy? If not, how
should the CT Plan address such conflicts of interest?
24. Section 4.6(b) provides that none of the SROs shall be
obligated to recommend or take any action that prefers the interest of
the CT Plan or any other Member over its own interests, and it also
provides that none of the SROs will be obligated to inform or present
to the CT Plan any opportunity, relationship, or investment. This
provision defines investments or other business relationships with
persons engaged in the business of the CT Plan other than through the
CT Plan as ``Other Business.'' What specific types of opportunities,
relationships, or investments would be covered by this provision? Would
any of these opportunities, relationships, or investments create a
conflict of interest with an SRO's obligations with respect to the CT
Plan under the federal securities laws, rules, and regulations? Exhibit
B of the proposed CT Plan provides a list of questions and instructions
tailored to elicit responses that disclose potential conflicts of
interest. In response to these questions, would the SROs be required to
disclose certain opportunities, relationships, or investments? Would
these disclosures sufficiently mitigate any conflicts of interest? If
not, how should the CT Plan address such conflicts of interest? Should
the CT Plan require that an SRO's representatives (SRO Voting
Representative or Member Observer, as applicable) be recused from
discussion of, or voting on, matters relating to opportunities,
relationships, or investments when the SRO's interests may be in
conflict with the goals of the CT Plan?
25. Do commenters believe that Section 4.6(b) could be interpreted
in a manner that could result in the SROs acting inconsistently with
their obligations under the federal securities laws, rules, and
regulations? Could this language result in an SRO voting against needed
improvements to the provision of consolidated equity market data? Do
commenters have other concerns with the proposed provision? If so, how
could such concerns be mitigated?
Subcommittees
26. Article IV, Section 4.7(a) of the proposed CT Plan provides
that subcommittee chairs will be selected by the Chair from SRO Voting
Representatives or Member Observers with input from the Operating
Committee. What are commenters' views on whether Non-SRO Voting
Representatives should be unable to serve as a subcommittee chair? What
are commenters' views on whether Member Observers should be permitted
to serve as a subcommittee chair? Do commenters believe that the CT
Plan should permit Non-SRO Voting Representatives to serve as chair,
co-chair, or vice-chair of any subcommittees of the Operating
Committee? Should subcommittees of the Operating Committee be required
to have the same relative balance of membership between SRO Voting
Representatives and Non-SRO Voting Representatives as the Operating
Committee itself? Should Member Observers be permitted to participate
in subcommittee deliberations?
27. Section 4.7(c) provides that SRO Voting Representatives, Member
Observers, and other persons as deemed appropriate by the SRO Voting
Representatives may meet in a subcommittee to discuss an item subject
to attorney-client privilege of the CT Plan or that is attorney work
product of the CT Plan. What are commenters' views on the scope of the
``other persons'' who may be deemed appropriate by the SRO Voting
Representatives to discuss an item subject to attorney-client privilege
of the CT Plan or that is attorney work product of the CT Plan? Should
there be any limitations? If so, what limitations would be appropriate?
Officers
28. Article IV, Section 4.8 of the proposed CT Plan provides that
in addition to the Chair and the Secretary of the CT Plan, the SROs, as
Members of the CT Plan, may designate other Officers of the CT Plan,
with such authority as the SROs may, from time to time, delegate to
them. Section 4.8 further provides that the SROs may remove any CT Plan
Officer by majority vote. What are commenters' views on these
provisions? Do commenters think it is appropriate that decisions
relating to Officers and duties may be made solely by the SROs? Do
commenters believe that the positions and duties of any Officers should
be specified in the CT Plan? Should there be limitations on eligibility
to serve as an Officer of the CT Plan? For example, should SRO Voting
Representatives or Member Observers be eligible to serve as Officers of
the CT Plan? Should Non-SRO Voting Representatives be restricted from
serving as Officers of the CT Plan? Do commenters believe the CT Plan
should specify considerations for removal of an Officer?
29. Section 4.8(a) of the proposed CT Plan provides that each
Officer shall hold office until such Officer's successor shall be duly
designated or until such Officer's death, resignation, or removal. Do
commenters believe that term limits should apply to any specific or to
all Officers of the CT Plan? What are commenters' views on the impact
to the CT Plan if such term limits were adopted?
Disclosure of Potential Conflicts of Interest; Recusal
30. Article IV, Section 4.10 of the proposed CT Plan sets forth
provisions for recusals and for the disclosure of conflicts of interest
and provides that the Members, the Processors, the Administrator, the
Non-SRO Voting Representatives, and each service provider or
subcontractor engaged in CT Plan business that has access to Restricted
or Highly Confidential Information shall be subject to Section 4.10 and
Exhibit B to the CT Plan. Exhibit B to the CT Plan provides a list of
questions and instructions tailored to elicit responses that disclose
potential conflicts of interest. Do commenters believe that Member
Observers should be expressly subject to Section 4.10 and Exhibit B? If
so, do commenters believe that the same disclosure requirements and
recusal provisions that apply to Members and other identified persons
[[Page 64571]]
would sufficiently mitigate any conflicts of interest faced by Member
Observers? If not, what additional disclosures or recusal provisions do
commenters believe would be appropriate? Do commenters believe that
Officers of the CT Plan should be expressly subject to Section 4.10 and
Exhibit B? If so, do commenters believe that the same disclosure
requirements and recusal provisions that apply to Members and other
identified persons would sufficiently mitigate any conflicts of
interest faced by Officers? If not, what additional disclosures or
recusal provisions do commenters believe would be appropriate?
31. Article IV, Section 4.6 of the proposed CT Plan addresses the
ability of SROs to engage in certain business activities outside of the
business activities of the CT Plan. Do commenters believe that the
disclosure requirements under Section 4.10 and Exhibit B elicit
sufficient relevant information to mitigate conflicts of interest that
may result from such business activities? If not, how should the SROs
update the conflicts of interest policy of the CT Plan to address this?
32. Article IV, Section 4.10(d) of the proposed CT Plan provides
that, if the Commission's approval of the conflicts of interest
policies filed by the CQ Plan, the CTA Plan, or UTP Plan is stayed or
overturned (for example, by a court), the requirements of Section 4.10
and Exhibit B of the CT Plan shall not apply. What are commenters'
views on whether such a provision is necessary or appropriate for the
CT Plan? Do commenters believe that the CT Plan should, at a minimum,
contain provisions for addressing conflicts of interest that are not
subject to elimination, or provisions specifying that the CT Plan must
be amended to include a new policy with respect to conflicts of
interest before the existing policy can be removed?
Confidentiality Policy
33. Article IV, Section 4.11(a) of the proposed CT Plan states that
the SROs and the Non-SRO Voting Representatives are subject to the
Confidentiality Policy set forth in Exhibit C to the CT Plan. Do
commenters believe that Section 4.10(a) should be modified to expressly
apply to Member Observers? Do commenters believe that the definition of
Member Observer should be more narrowly tailored to limit the
individuals within an SRO that have access to Highly Confidential or
Confidential Information? Should Member Observers be prohibited from
receiving Restricted or Highly Confidential Information, or be excluded
from being present when such information is discussed? Should Member
Observers be required to demonstrate a legitimate or particularized
need for specific Restricted or Highly Confidential Information before
being granted access? Are there other confidentiality provisions that
should expressly apply to Member Observers?
34. Article IV, Section 4.11(b) of the proposed CT Plan provides
that, if the Commission's approval of the confidentiality policies
filed by the CQ Plan, the CTA Plan, or UTP Plan is stayed or overturned
(for example, by a court), the requirements of Section 4.11 and Exhibit
C of the CT Plan shall not apply. What are commenters' views on whether
such a provision is necessary or appropriate for the CT Plan? Do
commenters believe that the CT Plan should, at a minimum, contain
provisions for identifying and protecting confidential information that
are not subject to elimination, or provisions specifying that the CT
Plan must be amended to include a new policy with respect to
confidential information before the existing policy can be removed?
Processor Functions and Responsibilities
35. Article V, Section 5.1 of the proposed CT Plan specifies the
general functions of the Processors, as more fully set forth in an
agreement to be entered between the CT Plan and the Processors (the
``Processor Services Agreements''). Do commenters believe this approach
is appropriate? Do commenters believe that further details on the terms
and responsibilities of the Processors should be specified in the body
of the CT Plan? If so, what additional types of terms and
responsibilities of the Processors should be specified in the CT Plan?
For example, should the CT Plan specify the factors to be considered
for termination of the Processors?
36. Article V, Section 5.1 of the proposed CT Plan requires, among
other things, that the CT Plan require the Processors to collect from
the SROs, and consolidate and disseminate to vendors and subscribers,
Transaction Reports and Quotation Information in Eligible Securities in
a manner designed to assure the prompt, accurate, and reliable
collection, processing, and dissemination of information with respect
to all Eligible Securities in a fair and non-discriminatory manner. Do
commenters believe that the terms of the CT Plan should also require
the Processors to ensure the ``fairness and usefulness of the form and
content of such information,'' consistent with Section 11A(c)(1)(B) of
the Act? \14\
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\14\ 15 U.S.C. 78k-1(c)(1)(B).
---------------------------------------------------------------------------
37. Article V, Section 5.2 of the proposed CT Plan provides that
the Processors' performance shall be subject to review at any time as
determined by a vote of Operating Committee, provided that a review
shall be conducted at least once every two calendar years but not more
frequently than once each calendar year unless there is a material
default that has not been cured within the specified applicable cure
period. What are commenters' views on the proposed frequency of reviews
of the Processors? The proposed CT Plan does not specify the criteria
under which the Processors will be evaluated. Do commenters believe
that further detail should be specified in the CT Plan regarding the
Operating Committee's review of the performance of the Processors under
the Processor Services Agreements? For example, should the CT Plan
specify certain performance metrics to be used in reviewing the
performance of the Processors, and if so, are there particular metrics
that should be used? Do commenters believe that the CT Plan should
specify a maximum cure period for material defaults by Processors under
the Processor Services Agreements? If so, what period would be
appropriate? Should the Commission also be notified and supplied with a
copy of any reports regarding any recommendations the Operating
Committee may approve as a result of the review of the Processors?
38. Article V, Section 5.3 of the proposed CT Plan provides that
the Operating Committee shall establish procedures for selecting
Processors and that these procedures shall at a minimum set forth (a)
the entity that will draft the request for proposal, assist the
Operating Committee in evaluating bids, and otherwise provide
assistance to the Operating Committee; (b) the minimum technical and
operational requirements to be fulfilled by the Processor; (c) the
criteria to be considered in selecting the Processor; and (d) the
entities (other than Voting Representatives) that are eligible to
comment on the selection of the Processor (collectively, the
``Processor Selection Procedures''). Do commenters believe that the
Processor Selection Procedures should set forth any terms in addition
to those set forth in Article V, Section 5.3(b)? For example, should
the Processor Selection Procedures specify a maximum time period to
select a new Processor? Additionally, do commenters believe that the
Processor Selection
[[Page 64572]]
Procedures should require that a subcommittee of disinterested members
of the Operating Committee--those not affiliated with a person seeking
to act as the Processor--vote and select a new Processor? Should a
subcommittee of disinterested members be required to evaluate the
proposals and make a recommendation to the Operating Committee? Should
the CT Plan specifically provide that Non-SRO Voting Representatives
should be eligible to comment on the selection of a new Processor?
Should the CT Plan specifically provide that any other persons should
be eligible to comment on the selection of a new Processor? If so,
which persons and why?
39. Should the CT Plan specify in detail the minimum performance
standards applicable to the Processor? For example, should the CT Plan
set minimum standards for the timely dissemination of information,
bandwidth, or other metrics? If so, what minimum standards would be
appropriate?
Administrator Functions and Responsibilities
40. Article VI, Section 6.1 of the proposed CT Plan specifies the
general functions of the Administrator, as more fully set forth in an
agreement to be entered between the CT Plan and the Administrator (the
``Administrator Services Agreement''). Do commenters believe this
approach is appropriate? Do commenters believe that further details on
the terms and responsibilities of the Administrator should be specified
in the body of the CT Plan? If so, what additional types of terms and
responsibilities of the Administrator should be specified in the CT
Plan?
41. Article VI, Section 6.1 of the proposed CT Plan specifies that
the Administrator should perform administrative functions on behalf of
the CT Plan, including the preparation of the CT Plan's audited
financial reports. Do commenters believe that the Administrator's
duties with respect to the preparation of financial reports should also
include unaudited reports?
42. Article VI, Section 6.2 of the proposed CT Plan provides for
the evaluation of the Administrator, specifying that the Administrator
shall be subject to review at any time as determined by the Operating
Committee, provided that the Administrator shall be subject to review
at least every two years and not more frequently than once each
calendar year, and that the Operating Committee shall appoint a
subcommittee or other persons to conduct the review. What are
commenters' views on the appropriate scope of ``other persons'' who may
participate in conducting the review? What are commenters' views on the
proposed frequency of reviews of the Administrator? The proposed CT
Plan does not specify the criteria under which the Administrator will
be evaluated. Do commenters believe that such criteria should be
specified in the CT Plan regarding the CT Plan's review of the
performance of the Administrator under the Administrator Services
Agreement? If so, what types of performance metrics used in the review
should be specified in the CT Plan? Should the Administrator evaluation
process be conducted by an independent third party? Should the CT Plan
specify the terms for the termination and removal of the Administrator?
If so, what terms or criteria should be specified? Do commenters
believe that the CT Plan should specify a maximum cure period for
material defaults by the Administrator under the Administrator Services
Agreement? If so, what period would be appropriate?
43. Article VI, Section 6.3 of the proposed CT Plan describes the
process for selecting a new Administrator. Do commenters believe that
the Administrator Selection Procedures should set forth any additional
terms other than those set forth in Article VI, Section 6.3? For
example, should the Administrator Selection Procedures specify a
maximum time period to select a new Administrator?
44. Article VI, Section 6.3 of the proposed CT Plan provides that
the Operating Committee may solicit and consider, as part of the
process of establishing Administrator Selection Procedures, the timely
comment of any entity affected by the operation of the CT Plan. Article
VI, Section 6.3(d) provides that the Administrator Selection Procedures
should specify certain entities (other than Voting Representatives)
that should be eligible to comment on the selection of a new
Administrator. Do commenters believe that this requirement is
appropriate? Do commenters believe that the entities selected by the
Operating Committee should be specified in the CT Plan rather than the
Administrator Selection Procedures? If so, what types of entities
should be eligible or ineligible to comment on the selection of a new
Administrator? Do commenters believe there may be circumstances in
which these two provisions might come into conflict--i.e., that the
Administrator Selection Procedures might fail to include, as an entity
eligible to comment, an entity that is affected by the operation of the
CT Plan? Do commenters believe that the provisions of the CT Plan
should be revised to prevent such an occurrence?
45. Should the CT Plan specify in detail the minimum performance
standards applicable to the Administrator? If so, what minimum
standards would be appropriate?
Regulatory and Operational Halts
46. Article VII, Section 7.1 of the proposed CT Plan describes the
SROs' responsibilities relating to regulatory and operational trading
halts, including when a Primary Listing Exchange may declare a trading
halt, the process for initiating a trading halt, and the process for
reopening following a halt. What are commenters' views on these
provisions? Are the proposed provisions describing the circumstances in
which a Primary Listing Market may declare or terminate a market-wide
halt in trading in its listed stocks consistent with the maintenance of
fair, orderly, and efficient markets? If not, how should these
provisions be modified?
Capital Contributions; Capital Accounts; Allocations
47. Articles VIII and IX of the proposed CT Plan govern the use of
capital accounts under the CT Plan, including contributions to and
distributions from such accounts, and allocations to the SROs. What are
commenters' views regarding these provisions? Would these provisions
serve to prohibit unreasonable discrimination with regard to the
allocation of capital contributions, distributions, and profits and
losses among the SROs? If not, how should these provisions be modified?
Dissolution and Termination of the CT Plan LLC
48. Article XI of the proposed CT Plan provides the terms for the
dissolution and termination of the LLC as determined by the SROs. Do
commenters believe that the dissolution and termination of the LLC
should require consideration by or the consent of the Non-SRO Voting
Representatives?
Exculpation and Indemnification
49. Article XII of the proposed CT Plan includes provisions
governing the exculpation and indemnification of certain parties
involved in the operation of the CT Plan. Do commenters believe that
these provisions cover the appropriate parties? If not, how should
these provisions be modified? For example, should the proposed
exculpation and indemnification provisions also cover Non-SRO Voting
Representatives?
[[Page 64573]]
50. Article XII, Section 12.1(b) of the proposed CT Plan sets forth
the rights and responsibilities of an Exculpated Party. Do commenters
believe that these rights and responsibilities are consistent with the
obligations of SROs with respect to the operation of an NMS plan? If
not, how should these provisions be modified?
Governing Law
51. Article XIII, Section 13.4 of the proposed CT Plan sets forth
the governing law of the CT Plan and states that the rights and
obligations of the SROs, the Processors and the Administrator, vendors,
subscribers, and other persons contracting with the CT Plan in respect
of the matters covered by the CT Plan should at all times also be
subject to any applicable provisions of the Act and any rules and
regulations promulgated thereunder. Do commenters believe that any of
the other provisions of the proposed CT Plan are potentially
inconsistent with Section 13.4? If so, how should the proposed CT Plan
be modified?
Amendments
52. Article XIII, Section 13.5 of the proposed CT Plan governs
amendments to the CT Plan. Section 13.5(b) provides that Articles IX
(Allocations), X (Records and Accounting; Reports), XI (Dissolution and
Termination), and XII (Exculpation and Indemnification) may be modified
upon approval by a majority of Members; provided, however, that
Operating Committee approval will be required for modifications to the
allocation of all items of income, gain, loss, and deduction. Do
commenters believe that amendments to Articles IX through XII of the CT
Plan should be subject to the approval only of SROs? Do commenters
believe that Non-SRO Voting Representatives should also have voting
rights with respect to the approval of amendments to Articles IX
through XII of the CT Plan?
53. Article XIII, Section 13.5(d) of the proposed CT Plan describes
the types of amendments that would be defined as a Ministerial
Amendment to the CT Plan and, therefore, could be submitted to the
Commission by the Chair of the Operating Committee upon 48 hours'
advanced notice to the Operating Committee.\15\ Do commenters believe
that the definition of Ministerial Amendments is appropriate? Are there
specific types of amendments that should be included in or excluded
from the definition of Ministerial Amendments?
---------------------------------------------------------------------------
\15\ A Ministerial Amendment is defined in Section 13.5(d) of
the proposed CT Plan as one that pertains solely to: (i) Admitting a
new Member to the Company; (2) changing the name or address of a
Member; (3) incorporating a change that the Commission has
implemented by rule and that requires no conforming language to the
text of this Agreement; (4) incorporating a change (A) that the
Commission has implemented by rule, (B) that requires conforming
language to the text of this Agreement, and (C) whose conforming
language to the text of this Agreement has been approved by the
affirmative vote of the Operating Committee pursuant to Section 4.3;
(5) incorporating a change (A) that a Governmental Authority
requires relating to the governance or operation of an LLC, (B) that
requires conforming language to the text of this Agreement, and (C)
whose conforming language to the text of this Agreement has been
approved by the affirmative vote of the Operating Committee pursuant
to Section 4.3 or upon approval by a majority of Members pursuant to
Section 13.5(b), as applicable; or (6) incorporating a purely
technical change, such as correcting an error or an inaccurate
reference to a statutory provision, or removing language that has
become obsolete.
---------------------------------------------------------------------------
Distributions--Exhibit D
54. Paragraph (j) of Exhibit D to the proposed CT Plan provides the
definition of the term Net Distributable Operating Income. Do
commenters believe that this definition provides sufficient and
appropriate detail for the CT Plan to calculate the Net Distributable
Operating Income? Do commenters believe that further details would be
appropriate or necessary for the CT Plan to determine the Net
Distributable Operating Income?
Analysis of Impact on Competition
55. In their analysis of the impact of the proposed CT Plan on
competition, the SROs state that the proposed CT Plan complies with the
Order and that the CT Plan ``incorporates the existing substantive
provisions of the CTA Plan, CQ Plan, and UTP Plan, which have been
approved by the Commission, together with the governance provisions
required by the Commission's Order.'' \16\ What effect, if any, do
commenters believe the specific terms of the proposed CT Plan as
submitted by the SROs would have on competition?
---------------------------------------------------------------------------
\16\ See supra Section II.A.5.
---------------------------------------------------------------------------
56. Paragraph (c) of the Recitals of the proposed CT Plan specify a
number of steps to be undertaken before the CT Plan becomes operational
as the NMS plan responsible for the dissemination of equity market
data, but do not include specified time periods in which these actions
must be commenced or completed.\17\ What effect, if any, do commenters
believe the lack of such time periods or deadlines would have on
competition?
---------------------------------------------------------------------------
\17\ See supra Section II.A.3.
---------------------------------------------------------------------------
57. Article IV, Section 4.2(b) of the proposed CT Plan provides
that Non-SRO Voting Representatives shall serve for two-year terms for
a maximum of two terms total, whether consecutive or non-consecutive,
but places no similar limitations on the terms of SRO Voting
Representatives. What effect, if any, do commenters believe this
limitation on Non-SRO Voting Representatives would have on competition?
58. Article I, Section 1.1(oo) of the proposed CT Plan would allow
SROs to select Member Observers, and Article IV, Section 4.4(g) of the
proposed CT Plan would permit Member Observers to attend general and
Executive Session meetings of the CT Plan. What effect, if any, do
commenters believe the ability of the SROs to select Member Observers,
who would have access to Confidential Information and Highly
Confidential Information, would have on competition?
59. Article IV, Section 4.6(b) of the proposed CT Plan provides
that none of the SROs shall be obligated to recommend or take any
action that prefers the interest of the CT Plan or any other Member
over its own interests. Do commenters believe that this provision would
facilitate competition in the provision of equity market data? Do
commenters believe that this provision would hinder competition in the
provision of equity market data?
60. Article XII, Section 12.1(b) of the proposed CT Plan provides
that whenever a Member or an SRO Voting Representative (defined as an
``Exculpated Party'') is permitted or required to take any action or to
make a decision in its ``sole discretion'' or ``discretion'' or that it
deems ``necessary,'' or ``necessary or appropriate'' or under a grant
of similar authority or latitude, the Exculpated Party may, insofar as
Applicable Law permits, make such decision in its sole discretion
(regardless of whether there is a reference to ``sole discretion'' or
``discretion''). The Exculpated Party (i) shall be entitled to consider
such interests and factors as it desires (including its own interests),
(ii) shall have no duty or obligation (fiduciary or otherwise) to give
any consideration to any interest of or factors affecting the Company
or the Members, and (iii) shall not be subject to any other or
different standards imposed by this Agreement, or any other agreement
contemplated hereby, under any Applicable Law or in equity. What
effect, if any, do commenters believe these provisions would have on
competition?
61. Do commenters believe that there is data that is relevant to an
analysis of the effect on competition of the proposed CT Plan as
submitted by the SROs? Commenters are encouraged to provide any such
data they possess or to which they have access.
[[Page 64574]]
Dispute Resolution
62. The Transmittal Letter states that the proposed CT Plan does
not include provisions regarding resolution of disputes between or
among the Members.\18\ Do commenters believe that the CT Plan should
include dispute resolution provisions? If so, should those provisions
be general dispute resolution provisions, or should they be limited to
specific types of disputes?
---------------------------------------------------------------------------
\18\ See supra Section II.A.11.
---------------------------------------------------------------------------
* * * * *
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 4-757 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 4-757. 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/sro.shtml). Copies of
the submission, all written statements with respect to the proposed CT
Plan that are filed with the Commission, and all written communications
relating to the proposed CT 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 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 Participants' principal
offices. 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 4-757 and should be submitted
on or before November 12, 2020.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
Attachment A
LIMITED LIABILITY COMPANY AGREEMENT OF CT PLAN LLC a Delaware limited
liability company
This LIMITED LIABILITY COMPANY AGREEMENT (this ``Agreement'') dated
as of the [] day of [], [] is made and entered
into by and among the parties identified in Exhibit A, as Exhibit A may
be amended from time to time (the ``Members''), which are the members
of CT Plan LLC, a Delaware limited liability company (the ``Company'').
The Members shall constitute the ``members'' (as that term is defined
in the Delaware Act) of the Company.
Recitals
(a) On May 6, 2020, the Commission ordered the Members to act
jointly in developing and filing with the Commission by August 11,
2020, a proposed new single national market system (``NMS'') plan to
govern the public dissemination of real-time consolidated equity market
data for NMS stocks. See Order Directing the Exchanges and the
Financial Industry Regulatory Authority to Submit a New National Market
System Plan Regarding Consolidated Equity Market Data, Release No. 34-
88827 (May 6, 2020), 85 FR 28702 (May 13, 2020) (File No. 4-757) (the
``Order''). This Agreement is being filed with the Commission, as
directed in the Order.
(b) This Agreement will become effective after the last of the
following has occurred (the ``Effective Date''):
(i) this Agreement is approved by the Commission pursuant to Rule
608 of Regulation NMS as an NMS plan governing the public dissemination
of real-time consolidated market data for Eligible Securities; and
(ii) the Members have formed the Company as a limited liability
company pursuant to the Delaware Act by filing a certificate of
formation (the ``Certificate'') with the Delaware Secretary of State.
(c) Following the Effective Date, this Agreement will become
operative as an NMS Plan that governs the public dissemination of real-
time consolidated equity market data for Eligible Securities on the
first day of the month that is at least 90 days after the last of the
following have occurred (the ``Operative Date''):
(i) the SRO Voting Representatives and Non-SRO Voting
Representatives of the Operating Committee have been determined
pursuant to Section 4.2 of the Agreement;
(ii) Fees have been established by the Operating Committee, are
effective as an amendment to this Agreement pursuant to Rule 608 of
Regulation NMS, and are ready to be implemented on the Operative Date;
(iii) the Company has entered into an agreement with the Processors
currently performing under the CQ Plan, CTA Plan, and UTP Plan;
(iv) the Company has entered into an agreement with an
Administrator selected pursuant to Section 6.3 and such Administrator
has completed the transition from prior Administrators under the CQ
Plan, CTA Plan, and UTP Plan such that it is able to provide services
under the Administrative Services Agreement, as determined by the
Operating Committee pursuant to Section 4.3, including that (1) new
contracts between the Company and Vendors and the Company and
Subscribers have been finalized such that all Vendors and Subscribers
under the CQ Plan, CTA Plan, and UTP Plan are ready to transition to
such new contracts by the Operative Date, (2) the Administrator has in
place a system to administer Distributions, and (3) the Administrator
has in place a system to administer Fees; and
(v) the Operating Committee and, if applicable, the Commission have
approved all policies and procedures that are necessary or appropriate
for the operation of the Company.
(d) Until the Operative Date, the Members will continue to operate
pursuant to the CQ Plan, CTA Plan, and UTP Plan with respect to the
public dissemination of real-time consolidated equity market data for
Eligible Securities rather than this Agreement.
(e) As of the Operative Date, the Members shall conduct, through
the Company, the Processor and Administrator functions related to the
public dissemination of real-time consolidated equity market data for
Eligible Securities required by the Commission to be performed by the
Members under the Exchange Act.
(f) It is understood and agreed that, in performing their
obligations and duties under this Agreement, the Members are performing
and discharging functions and responsibilities related to the operation
of the national market system for and on behalf of the Members in their
capacities as self-regulatory organizations, as required under the
Section 11A of the Exchange Act, and pursuant to Rule 603(b) of
Regulation NMS thereunder. It is further understood and agreed that
this
[[Page 64575]]
Agreement and the operations of the Company shall be subject to ongoing
oversight by the Commission.
Article I. Definitions
Section 1.1 Definitions
As used throughout this Agreement and the Exhibits:
(a) ``Administrator'' means the Person selected by the Company to
perform the administrative functions described in this Agreement
pursuant to the Administrative Services Agreement.
(b) ``Advisory Committee Member'' means an individual selected
pursuant to Section III(e)(ii)(A) of the CTA Plan and Section
IV(E)(b)(i) of the UTP Plan to be a member of the Advisory Committees
of the CTA Plan and UTP Plan.
(c) ``Affiliate'' means, as to any Person, any other Person that,
directly or indirectly, Controls, is Controlled by, or is under common
Control with such Person. Affiliate or Affiliated, when used as an
adjective, shall have a correlative meaning.
(d) ``Agent'' means, for purposes of Exhibit C, agents of the
Operating Committee, a Member, the Administrator, and the Processors,
including, but not limited to, attorneys, auditors, advisors,
accountants, contractors or subcontractors.
(e) ``Applicable Law'' means all applicable provisions of (a)
constitutions, treaties, statutes, laws (including the common law),
rules, regulations, decrees, ordinances, codes, proclamations,
declarations or orders of any Governmental Authority; (b) any consents
or approvals of any Governmental Authority; and (c) any orders,
decisions, advisory or interpretative opinions, injunctions, judgments,
awards, decrees of, or agreements with, any Governmental Authority.
(f) ``Best Bid and Offer'' has the meaning ascribed to the term
``best bid and best offer'' by Rule 600(b)(8) of Regulation NMS.
(g) ``Capital Contributions'' means any cash, cash equivalents, or
other property that a Member contributes to the Company with respect to
its Membership Interest.
(h) ``Chair'' shall mean the individual elected pursuant to Section
4.4(e).
(i) ``Code'' means the Internal Revenue Code of 1986, as amended.
(j) ``Commission'' or ``SEC'' means the U.S. Securities and
Exchange Commission.
(k) ``Company Indemnified Party'' means a Person, and any other
Person of whom such Person is the legal representative, that is or was
a Member or an SRO Voting Representative.
(l) ``Confidential Information'' means, except to the extent
covered by the definitions for Restricted Information, Highly
Confidential Information, or Public Information: (i) Any non-public
data or information designated as Confidential by the Operating
Committee pursuant to Section 4.3; (ii) any document generated by a
Member or Non-SRO Voting Representative and designated by that Member
or Non-SRO Voting Representative as Confidential; and (iii) the
individual views and statements of Covered Persons and SEC staff
disclosed during a meeting of the Operating Committee or any
subcommittees thereunder.
(m) ``Control'' means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such Person, whether through the
ownership of voting securities (or other ownership interest), by
contract or otherwise.
(n) ``Covered Persons'' means representatives of the Members, the
Non-SRO Voting Representatives, SRO Applicants, the Administrator, and
the Processors; affiliates, employees, and Agents of the Operating
Committee, a Member, the Administrator, and the Processors; any third
parties invited to attend meetings of the Operating Committee or
subcommittees; and the employers of Non-SRO Voting Representatives.
Covered Persons do not include staff of the SEC.
(o) ``CQ Plan'' means the Restated CQ Plan.
(p) ``CT Feeds'' means the CT Quote Data Feed(s) and the CT Trade
Data Feed(s).
(q) ``CT Quote Data Feed(s)'' means the service(s) that provides
Vendors and Subscribers with (i) National Best Bids and Offers and
their sizes and the Members' identifiers providing the National Best
Bids and Offers; (ii) each Member's Best Bids and Offers and their
sizes and the Member's identifier; and (iii) in the case of FINRA, the
identifier of the FINRA Participant(s) that constitute(s) FINRA's Best
Bids and Offers, in each case for Eligible Securities.
(r) ``CT Trade Data Feed(s)'' means the service(s) that provides
Vendors and Subscribers with Transaction Reports for Eligible
Securities.
(s) ``CTA Plan'' means the Second Restatement of the CTA Plan.
(t) ``Current'' means, with respect to Transaction Reports or
Quotation Information, such Transaction Reports or Quotation
Information during the fifteen (15) minute period immediately following
the initial transmission thereof by the Processors.
(u) ``Delaware Act'' means the Delaware Limited Liability Company
Act, Title 6, Chapter 18, Sec. Sec. 18-101, et seq., and any successor
statute, as amended.
(v) ``Distribution'' means a distribution to the Members of
revenues of the Company under this Agreement pursuant to Section 8.3
and Exhibit D of the Agreement.
(w) ``Eligible Security'' means (i) any equity security, as defined
in Section 3(a)(11) of the Exchange Act, or (ii) a security that trades
like an equity security, in each case that is listed on a national
securities exchange.
(x) ``ET'' means Eastern Time.
(y) ``Exchange Act'' means the Securities Exchange Act of 1934, as
amended.
(z) ``Executive Session'' means a meeting of the Operating
Committee pursuant to Section 4.4(g), which includes SRO Voting
Representatives, Member Observers, SEC Staff, and other persons as
deemed appropriate by the SRO Voting Representatives.
(aa) ``Extraordinary Market Activity'' means a disruption or
malfunction of any electronic quotation, communication, reporting, or
execution system operated by, or linked to, the Processors or a Trading
Center or a member of such Trading Center that has a severe and
continuing negative impact, on a market-wide basis, on quoting, order,
or trading activity or on the availability of market information
necessary to maintain a fair and orderly market. For purposes of this
definition, a severe and continuing negative impact on quoting, order,
or trading activity includes (i) a series of quotes, orders, or
transactions at prices substantially unrelated to the current market
for the security or securities; (ii) duplicative or erroneous quoting,
order, trade reporting, or other related message traffic between one or
more Trading Centers or their members; or (iii) the unavailability of
quoting, order, transaction information, or regulatory messages for a
sustained period.
(bb) ``Fees'' means fees charged to Vendors and Subscribers for
Transaction Reports and Quotation Information in Eligible Securities.
(cc) ``Final Decision of the Operating Committee'' means an action
or inaction of the Operating Committee as a result of the vote of the
Operating Committee, but will not include the individual votes of a
Voting Representative.
(dd) ``FINRA'' means the Financial Industry Regulatory Authority,
Inc.
(ee) ``FINRA Participant'' means a FINRA member that utilizes the
facilities of FINRA pursuant to applicable FINRA rules.
[[Page 64576]]
(ff) ``Fiscal Year'' means the fiscal year of the Company adopted
pursuant to Section 10.1(a) of this Agreement.
(gg) ``GAAP'' means United States generally accepted accounting
principles in effect from time to time, consistently applied.
(hh) ``Governmental Authority'' means (a) the U.S. federal
government or government of any state of the U.S., (b) any
instrumentality or agency of any such government, (c) any other
individual, entity or organization authorized by law to perform any
executive, legislative, judicial, regulatory, administrative, military
or police functions of any such government, or (d) any
intergovernmental organization of U.S. entities, but ``Governmental
Authority'' excludes any self-regulatory organization registered with
the Commission.
(ii) ``Highly Confidential Information'' means any highly sensitive
Member-specific, customer-specific, individual-specific, or otherwise
sensitive information relating to the Operating Committee, Members,
Vendors, Subscribers, or customers that is not otherwise Restricted
Information. Highly Confidential Information includes: The Company's
contract negotiations with the Processors or Administrator; personnel
matters; information concerning the intellectual property of Members or
customers; and any document subject to the Attorney-Client Privilege or
Work Product Doctrine.
(jj) ``Limit Up Limit Down'' means the Plan to Address
Extraordinary Market Volatility pursuant to Rule 608 of Regulation NMS
under the Exchange Act.
(kk) ``Losses'' means losses, judgments, penalties (including
excise and similar taxes and punitive damages), fines, settlements, and
reasonable expenses (including reasonable attorneys' fees) actually
incurred by such Company Indemnified Party as a Party to a Proceeding.
(ll) ``Market'' means (i) in respect of FINRA or a national
securities association, the facilities through which FINRA Participants
display quotations and report transactions in Eligible Securities to
FINRA and (ii) in respect of each national securities exchange, the
marketplace for Eligible Securities that such exchange operates.
(mm) ``Market-Wide Circuit Breaker'' means a halt in trading in all
stocks in all Markets under the rules of a Primary Listing Market.
(nn) ``Material SIP Latency'' means a delay of quotation or last
sale price information in one or more securities between the time data
is received by the Processors and the time the Processors disseminate
the data, which delay the Primary Listing Market determines, in
consultation with, and in accordance with, publicly disclosed
guidelines established by the Operating Committee, to be (a) material
and (b) unlikely to be resolved in the near future.
(oo) ``Member Observer'' means any individual, other than a Voting
Representative, that a Member, in its sole discretion, determines is
necessary in connection with such Member's compliance with its
obligations under Rule 608(c) of Regulation NMS to attend Operating
Committee and subcommittee meetings.
(pp) ``Membership Fee'' means the fee to be paid by a new Member
pursuant to Section 3.2.
(qq) ``Membership Interest'' means an interest in the Company owned
by a Member.
(rr) ``Nasdaq'' means The Nasdaq Stock Market LLC.
(ss) ``National Best Bid and Offer'' has the meaning ascribed to
the term ``national best bid and national best offer'' by Rule
600(b)(43) of Regulation NMS.
(tt) ``National securities association'' means a securities
association that is registered under Section 15A of the Exchange Act.
(uu) ``National securities exchange'' means a securities exchange
that is registered under Section 6 of the Exchange Act.
(vv) ``Network A Security'' means an Eligible Security for which
NYSE is the Primary Listing Market.
(ww) ``Network B Security'' means an Eligible Security for which a
national securities exchange other than NYSE or Nasdaq is the Primary
Listing Market.
(xx) ``Network C Security'' means an Eligible Security for which
Nasdaq is the Primary Listing Market.
(yy) ``Non-Affiliated SRO'' means a Member that is not affiliated
with any other Member.
(zz) ``Non-SRO Voting Representative'' means an individual selected
pursuant to Section 4.2(b) to serve on the Operating Committee.
(aaa) ``NYSE'' means the New York Stock Exchange LLC.
(bbb) ``Officer'' means each individual designated as an officer of
the Company pursuant to Section 4.8.
(ccc) ``Operating Committee'' means the committee established under
Article IV of this Agreement, each member of which shall be deemed a
``manager'' (as defined in the Delaware Act) and shall be referred to
herein as a Voting Representative.
(ddd) ``Operational Halt'' means a halt in trading in one or more
securities only on a Member's Market declared by such Member and is not
a Regulatory Halt.
(eee) ``Party to a Proceeding'' means a Company Indemnified Party
that is, was, or is threatened to be made, a party to a Proceeding, or
is involved in a Proceeding, by reason of the fact that such Company
Indemnified Party is or was a Member and/or an SRO Voting
Representative.
(fff) ``PDP'' means a Member or non-Member's proprietary market
data product that includes Transaction Reports and Quotation
Information data in Eligible Securities from a Member's Market or a
Trading Center, and if from a Member, is filed with the Commission.
(ggg) ``Person'' means an individual, corporation, partnership,
joint venture, limited liability company, Governmental Authority,
unincorporated organization, trust, association, or other entity.
(hhh) ``Primary Listing Market'' means the national securities
exchange on which an Eligible Security is listed. If an Eligible
Security is listed on more than one national securities exchange,
Primary Listing Market means the exchange on which the security has
been listed the longest.
(iii) ``Proceeding'' means any threatened, pending or completed
suit, proceeding, or other action, whether civil, criminal,
administrative, or arbitrative, or any appeal in such action or any
inquiry or investigation that could lead to such an action.
(jjj) ``Processor(s)'' means the entity(ies) selected by the
Company to perform the processing functions described in this Agreement
and pursuant to the Processor Services Agreement(s), including the
operation of the System.
(kkk) ``Public Information'' means: (i) Any information that is not
either Restricted Information or Highly Confidential Information or
that has not been designated as Confidential Information; (ii) any
Confidential Information that has been approved by the Operating
Committee for release to the public; (iii) the duly approved minutes of
the Operating Committee with detail sufficient to inform the public on
matters under discussion and the views expressed thereon (without
attribution); (iv) Vendor, Subscriber and performance metrics; (v)
Processor transmission metrics; and (vi) any information that is
otherwise publicly available, except for information made public as a
result of a violation of the Company's Confidentiality Policy or
Applicable Law. Public Information includes, but is not limited to, any
topic discussed during a meeting of the
[[Page 64577]]
Operating Committee, an outcome of a topic discussed, or a Final
Decision of the Operating Committee.
(lll) ``Regulatory Halt'' means a halt declared by the Primary
Listing Market in trading in one or more securities on all Trading
Centers for regulatory purposes, including for the dissemination of
material news, news pending, suspensions, or where otherwise necessary
to maintain a fair and orderly market. A Regulatory Halt includes a
trading pause triggered by Limit Up Limit Down, a halt based on
Extraordinary Market Activity, a trading halt triggered by a Market-
Wide Circuit Breaker, and a SIP Halt.
(mmm) ``Restricted Information'' means highly sensitive customer-
specific financial information, customer-specific audit information,
other customer financial information, and personal identifiable
information.
(nnn) ``Quotation Information'' means all bids, offers, displayed
quotation sizes, market center identifiers and, in the case of FINRA,
the identifier of the FINRA Participant that entered the quotation, all
withdrawals, and all other information pertaining to quotations in
Eligible Securities required to be collected and made available to the
Processors pursuant to this Agreement.
(ooo) ``Regular Trading Hours'' has the meaning provided in Rule
600(b)(68) of Regulation NMS. Regular Trading Hours can end earlier
than 4:00 p.m. ET in the case of an early scheduled close.
(ppp) ``Retail Representative'' means an individual who (1)
represents the interests of retail investors, (2) has experience
working with or on behalf of retail investors, (3) has the requisite
background and professional experience to understand the interests of
retail investors, the work of the Operating Committee of the Company,
and the role of market data in the U.S. equity market, and (4) is not
affiliated with a Member or broker-dealer.
(qqq) ``Self-regulatory organization'' or ``SRO'' has the meaning
provided in Section 3(a)(26) of the Exchange Act.
(rrr) ``SIP Halt'' means a Regulatory Halt to trading in one or
more securities that a Primary Listing Market declares in the event of
a SIP Outage or Material SIP Latency.
(sss) ``SIP Halt Resume Time'' means the time that the Primary
Listing Market determines as the end of a SIP Halt.
(ttt) ``SIP Outage'' means a situation in which a Processor has
ceased, or anticipates being unable, to provide updated and/or accurate
quotation or last sale price information in one or more securities for
a material period that exceeds the time thresholds for an orderly
failover to backup facilities established by mutual agreement among the
Processors, the Primary Listing Market for the affected securities, and
the Operating Committee unless the Primary Listing Market, in
consultation with the affected Processor and the Operating Committee,
determines that resumption of accurate data is expected in the near
future.
(uuu) ``SRO Applicant'' means (1) any Person that is not a Member
and for which the Commission has published a Form 1 to be registered as
a national securities exchange or national securities association to
operate a Market, or (2) a national securities exchange that is not a
Member and for which the Commission has published a proposed rules
change to operate a Market.
(vvv) ``SRO Group'' means a group of Members that are Affiliates.
(www) ``SRO Voting Representative'' means an individual designated
by each SRO Group and each Non-Affiliated SRO pursuant to Section
4.2(a) to vote on behalf of such SRO Group or such Non-Affiliated SRO.
(xxx) ``Subscriber'' means a Person that receives Current
Transaction Reports or Quotation Information from the Processors or a
Vendor and that itself is not a Vendor.
(yyy) ``System'' means all data processing equipment, software,
communications facilities, and other technology and facilities,
utilized by the Company or the Processors in connection with the
collection, consolidation, and dissemination of Transaction Reports,
Quotation Information, and other information concerning Eligible
Securities.
(zzz) ``Taxes'' means taxes, levies, imposts, charges, and duties
(including withholding tax, stamp, and transaction duties) imposed by
any taxing authority together with any related interest, penalties,
fines, and expenses in connection with them.
(aaaa) ``Trading Center'' has the same meaning as that term is
defined in Rule 600(b)(82) of Regulation NMS.
(bbbb) ``Transaction Reports'' means reports required to be
collected and made available pursuant to this Agreement containing the
stock symbol, price, and size of the transaction executed, the Market
in which the transaction was executed, and related information,
including a buy/sell/cross indicator, trade modifiers, and any other
required information reflecting completed transactions in Eligible
Securities.
(cccc) ``Transfer'' means to directly sell, transfer, assign,
pledge, encumber, hypothecate, or similarly dispose of, either
voluntarily or involuntarily, by operation of law or otherwise, or to
enter into any contract, option, or other arrangement or understanding
with respect to the sale, transfer, assignment, pledge, encumbrance,
hypothecation, or similar disposition of any Membership Interests owned
by a Person or any interest (including a beneficial interest) in any
Membership Interests owned by a Person. ``Transfer'' when used as a
noun shall have a correlative meaning.
(dddd) ``UTP Plan'' means 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.
(eeee) ``Vendor'' means a Person that the Administrator has
approved to re-distribute Current Transaction Reports or Quotation
Information to the Person's employees or to others.
(ffff) ``Voting Representative'' means an SRO Voting Representative
or a Non-SRO Voting Representative.
Section 1.2 Interpretation
For purposes of this Agreement: (a) The words ``include,''
``includes,'' and ``including'' shall be deemed to be followed by the
words ``without limitation''; (b) the word ``or'' is not exclusive; and
(c) the words ``herein,'' ``hereof,'' ``hereby,'' ``hereto,'' and
``hereunder'' refer to this Agreement as a whole. The definitions given
for any defined terms in this Agreement shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine,
feminine, and neuter forms. Unless the context otherwise requires,
references herein: (x) to Articles, Sections, and Exhibits mean the
Articles and Sections of, and Exhibits attached to, this Agreement; (y)
to an agreement, instrument, or other document mean such agreement,
instrument, or other document as amended, supplemented, and modified
from time to time to the extent permitted by the provisions thereof;
and (z) to a statute mean such statute as amended from time to time and
includes any successor legislation thereto and any rules and
regulations promulgated thereunder. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting an instrument or causing any
instrument to be drafted. The Exhibits referred to herein shall be
construed with, and as an integral part of, this Agreement to the same
extent as if they were set forth verbatim herein.
[[Page 64578]]
Article II. Organization
Section 2.1 Formation
(a) The Members formed the Company as a limited liability company
on [], [] pursuant to the Delaware Act by filing a
certificate of formation (the ``Certificate'') with the Delaware
Secretary of State.
(b) This Agreement shall constitute the ``limited liability company
agreement'' (as that term is used in the Delaware Act) of the Company.
The rights, powers, duties, obligations, and liabilities of the Members
shall be determined pursuant to the Delaware Act and this Agreement. To
the extent that the rights, powers, duties, obligations, and
liabilities of any Member are different by reason of any provision of
this Agreement than they would be under the Delaware Act in the absence
of such provision, this Agreement shall, to the extent permitted by the
Delaware Act, control.
Section 2.2 Name
The name of the Company is ``CT Plan LLC'' and all Company business
shall be conducted in that name or such other name or names as the
Operating Committee may designate; provided, that the name shall always
contain the words ``Limited Liability Company'' or the abbreviation
``L.L.C.'' or the designation ``LLC.''
Section 2.3 Registered Office; Registered Agent; Principal Office;
Other Offices
(a) The registered office of the Company required by the Delaware
Act to be maintained in the State of Delaware shall be the office of
the initial registered agent named in the Certificate or such other
office (which need not be a place of business of the Company) as the
Operating Committee may designate from time to time in the manner
provided by the Delaware Act and Applicable Law.
(b) The registered agent for service of process of the Company in
the State of Delaware shall be the initial registered agent named in
the Certificate or such other Person or Persons as the Operating
Committee may designate from time to time in the manner provided by the
Delaware Act and Applicable Law.
(c) The principal office of the Company shall be located at such
place as the Operating Committee may designate from time to time, which
need not be in the State of Delaware, and the Company shall maintain
its books and records there. The Company shall give prompt notice to
each of the Members of any change to the principal office of the
Company.
(d) The Company may have such other offices as the Operating
Committee may designate from time to time.
Section 2.4 Purpose; Powers
(a) The purposes of the Company are to engage in the following
activities on behalf of the Members:
(i) The collection, consolidation, and dissemination of Transaction
Reports, Quotation Information, and such other information concerning
Eligible Securities as the Members shall agree as provided herein;
(ii) contracting for the distribution of such information;
(iii) contracting for and maintaining facilities to support any
activities permitted in this Agreement and guidelines adopted
hereunder, including the operation and administration of the System;
(iv) providing for those other matters set forth in this Agreement
and in all guidelines adopted hereunder;
(v) operating the System to comply with Applicable Laws; and
(vi) engaging in any other business or activity that now or
hereafter may be necessary, incidental, proper, advisable, or
convenient to accomplish any of the foregoing purposes and that is not
prohibited by the Delaware Act, the Exchange Act, or other Applicable
Law.
(b) The Company shall have all the powers necessary or convenient
to carry out the purposes for which it is formed, including the powers
granted by the Delaware Act.
(c) It is expressly understood that each Member shall be
responsible for the collection of Transaction Reports and Quotation
Information within its Market and that nothing in this Agreement shall
be deemed to govern or apply to the manner in which each Member does
so.
Section 2.5 Term
The term of the Company commenced as of the date the Certificate
was filed with the Secretary of State of the State of Delaware, and
shall continue in existence perpetually until the Company is dissolved
in accordance with the provisions of the Certificate or this Agreement.
Notwithstanding the foregoing, this Agreement shall not become
effective until the Effective Date.
Section 2.6 No State-Law Partnership
The Members intend that the Company not be a partnership (including
a limited partnership) or joint venture, and that no Member be a
partner or joint venturer of any other Member by virtue of this
Agreement for any purposes other than as set forth in Sections 10.2 and
10.3, and neither this Agreement nor any other document entered into by
the Company or any Member relating to the subject matter of this
Agreement shall be construed to suggest otherwise.
Article III. Membership
Section 3.1 Members
The Members of the Company shall consist of the Persons identified
in Exhibit A, as updated from time to time to reflect the admission of
new Members pursuant to this Agreement.
Section 3.2 New Members
(a) Any national securities association or national securities
exchange whose market, facilities, or members, as applicable, trades
Eligible Securities may become a Member by (i) providing written notice
to the Company, (ii) executing a joinder to this Agreement, at which
time Exhibit A shall be amended to reflect the addition of such
association or exchange as a Member, (iii) paying a Membership Fee to
the Company as determined pursuant to Section 3.2(b), and (iv)
executing a joinder to any other agreements to which all of the other
Members have been made party in connection with being a Member.
Membership Fees paid shall be added to the general revenues of the
Company.
(b) The Membership Fee shall be based upon the following factors:
(i) The portion of costs previously paid by the Company (or by the
Members prior to the formation of the Company) for the development,
expansion, and maintenance of the System which, under GAAP, would have
been treated as capital expenditures and would have been amortized over
the five years preceding the admission of the new Member (and for this
purpose all such capital expenditures shall be deemed to have a five-
year amortizable life); and
(ii) an assessment of costs incurred and to be incurred by the
Company for modifying the System or any part thereof to accommodate the
new Member, which are not otherwise required to be paid or reimbursed
by the new Member.
(a) Participants of the CQ Plan, CTA Plan, and UTP Plan are not be
required to pay the Membership Fee.
Section 3.3 Transfer of Membership Interests
Except as set forth in Section 3.4, a Member shall not have the
right to Transfer (whether in whole or in part) its Membership Interest
in the Company.
[[Page 64579]]
Section 3.4 Withdrawal From Membership
(a) Any Member may voluntarily withdraw from the Company at any
time on not less than 30 days' prior written notice (the ``Withdrawal
Date''), by (i) providing such notice of such withdrawal to the
Company, (ii) causing the Company to file with the Commission an
amendment to effectuate the withdrawal and (iii) Transferring such
Member's Membership Interest to the Company.
(b) A Member shall automatically be withdrawn from the Company upon
such Member no longer being a registered national securities
association or registered national securities exchange. Such Member's
Membership Interest will automatically transfer to the Company. The
Company shall file with the Commission an amendment to effectuate the
withdrawal.
(c) A withdrawal of a Member shall not be effective until approved
by the Commission after filing an amendment to the Agreement in
accordance with Section 13.5.
(d) From and after the Withdrawal Date of such Member:
(i) Such Member shall remain liable for any obligations under this
Agreement of such Member (including indemnification obligations)
arising prior to the Withdrawal Date (but such Member shall have no
further obligations under this Agreement or to any of the other Members
arising after the Withdrawal Date);
(ii) Such Member shall be entitled to receive a portion of the Net
Distributable Operating Income (if any) in accordance with Exhibit D
attributable to the period prior to the Withdrawal Date of such Member;
(iii) Such Member shall cease to have the right to have its
Transaction Reports, Quotation Information, or other information
disseminated over the System; and
(iv) Profits and losses of the Company shall cease to be allocated
to the Capital Account of such Member.
Section 3.5 Member Bankruptcy
In the event a Member becomes subject to one or more of the events
of bankruptcy enumerated in Section 18-304 of the Delaware Act, that
event by itself shall not cause a withdrawal of such Member from the
Company so long as such Member continues to be a national securities
association or national securities exchange.
Section 3.6 Undertaking by All Members
Following the Operative Date, each Member shall be required,
pursuant to Rule 608(c), to comply with the provisions hereof and
enforce compliance by its members with the provisions hereof.
Section 3.7 Obligations and Liability of Members
(a) Except as otherwise provided in this Agreement or Applicable
Law, no Member shall be obligated to contribute capital or make loans
to the Company.
(b) Except as provided in this Agreement or Applicable Law, no
Member shall have any liability whatsoever in its capacity as a Member,
whether to the Company, to any of the Members, to the creditors of the
Company or to any other Person, for the debts, liabilities, commitments
or any other obligations of the Company or for any losses of the
Company. Notwithstanding the foregoing, to the extent that amounts have
not been paid to the Processors or Administrator under the terms of the
Processor Services Agreements and Administrative Services Agreement,
respectively, or this Agreement, as and when due, (i) each Member shall
be obligated to return to the Company its pro rata share of any moneys
distributed to such Member in the one year period prior to such default
in payment (such pro rata share to be based upon such Member's
proportionate receipt of the aggregate distributions made to all
Members in such one year period) until an aggregate amount equal to the
amount of any such defaulted payments has been re-contributed to the
Company and (ii) the Company shall promptly pay such amount to the
Processors or Administrator, as applicable.
(c) In accordance with the Delaware Act, a member of a limited
liability company may, under certain circumstances, be required to
return amounts previously distributed to such member. It is the intent
of the Members that no distribution to any Member pursuant to this
Agreement shall be deemed a return of money or other property paid or
distributed in violation of the Delaware Act. The payment of any such
money or distribution of any such property to a Member shall be deemed
to be a compromise within the meaning of the Delaware Act, and the
Member receiving any such money or property shall not be required to
return any such money or property to any Person; provided, however,
that a Member shall be required to return to the Company any money or
property distributed to it in clear and manifest accounting or similar
error or as otherwise provided in Section 3.7(b). However, if any court
of competent jurisdiction holds that, notwithstanding the provisions of
this Agreement, any Member is obligated to make any such payment, such
obligation shall be the obligation of such Member and not of the
Operating Committee.
(d) No Member (unless duly authorized by the Operating Committee)
has the authority or power to represent, act for, sign for or bind the
Company or to make any expenditure on behalf of the Company; provided,
however, that the Tax Matters Partner may represent, act for, sign for
or bind the Company as permitted under Sections 10.2 and 10.3 of this
Agreement.
(e) To the fullest extent permitted by law, no Member shall, in its
capacity as a Member, owe any duty (fiduciary or otherwise) to the
Company or to any other Member other than the duties expressly set
forth in this Agreement.
Article IV. Management of the Company
Section 4.1 Operating Committee
(a) Except for situations in which the approval of the Members is
required by this Agreement, the Company shall be managed by the
Operating Committee. Unless otherwise expressly provided to the
contrary in this Agreement, no Member shall have authority to act for,
or to assume any obligation or responsibility on behalf of, the
Company, without the prior approval of the Operating Committee. Without
limiting the generality of the foregoing and except as otherwise
expressly provided in this Agreement, the Operating Committee shall
have full and complete discretion to manage and control the business
and affairs of the Company, to make all decisions affecting the
business and affairs of the Company, and to take all such actions as it
deems necessary or appropriate to accomplish the purposes of the
Company, including the following:
(i) Proposing amendments to this Agreement or implementing other
policies and procedures as necessary to ensure prompt, accurate,
reliable, and fair collection, processing, distribution, and
publication of information with respect to Transaction Reports and
Quotation Information in Eligible Securities and the fairness and
usefulness of the form and content of that information;
(ii) selecting, overseeing, specifying the role and
responsibilities of, and evaluating the performance of, the
Administrator, the Processors, an auditor, and other professional
service providers, provided that any expenditures for professional
services that are paid for from the Company's revenues must be for
activities
[[Page 64580]]
consistent with the terms of this Agreement and must be authorized by
the Operating Committee;
(iii) developing and maintaining fair and reasonable Fees and
consistent terms for the distribution, transmission, and aggregation of
core data;
(iv) reviewing the performance of the Processors and ensuring the
public reporting of Processors' performance and other metrics and
information about the Processors;
(v) assessing the marketplace for equity market data products and
ensuring that the CT Feeds are priced in a manner that is fair and
reasonable, and designed to ensure the widespread availability of CT
Feeds data to investors and market participants;
(vi) designing a fair and reasonable revenue allocation formula for
allocating plan revenues to be applied by the Administrator, and
overseeing, reviewing, and revising that formula as needed;
(vii) interpreting the Agreement and its provisions; and
(viii) carrying out such other specific responsibilities as
provided under this Agreement.
(b) The Operating Committee may delegate all or part of its
administrative functions under this Agreement to a subcommittee, to one
or more of the Members, to one or more Non-SRO Voting Representatives,
or to other Persons (including the Administrator), and any Person to
which administrative functions are so delegated shall perform the same
as agent for the Company, in the name of the Company. For the avoidance
of doubt, no delegation to a subcommittee shall contravene Section 4.3
and no subcommittee shall take actions requiring approval of the
Operating Committee pursuant to Section 4.3 unless such approval shall
have been obtained. Any authority delegated hereunder is subject to the
provisions of Section 4.3 hereof.
(c) It is expressly agreed and understood that neither the Company
nor the Operating Committee shall have authority in any respect of any
Member's proprietary systems. Neither the Company nor the Operating
Committee shall have any authority over the collection and
dissemination of quotation or transaction information in Eligible
Securities in any Member's Market, or, in the case of FINRA, from FINRA
Participants.
Section 4.2 Composition and Selection of Operating Committee
(a) SRO Voting Representatives. The Operating Committee shall
include one SRO Voting Representative designated by each SRO Group and
each Non-Affiliated SRO to vote on behalf of such SRO Group or such
Non-Affiliated SRO. Each SRO Group and each Non-Affiliated SRO may
designate an alternate individual or individuals who shall be
authorized to vote on behalf of such SRO Group or such Non-Affiliated
SRO, respectively, in the absence of the designated SRO Voting
Representative.
(b) Non-SRO Voting Representatives. The Operating Committee shall
include one Non-SRO Voting Representative from each of the following
categories: (A) An institutional investor; (B) a broker-dealer with a
predominantly retail investor customer base; (C) a broker-dealer with a
predominantly institutional investor customer base; (D) a securities
market data vendor that is not affiliated or associated with a Member,
broker-dealer, or investment adviser with third-party clients; (E) an
issuer of NMS stock that is not affiliated or associated with a Member,
broker-dealer, or investment adviser with third-party clients; and (F)
a Retail Representative. Non-SRO Voting Representatives shall serve for
two-year terms for a maximum of two terms total, whether consecutive or
non-consecutive. Non-SRO Voting Representatives will be selected
pursuant to the following procedures:
(i) The initial Non-SRO Voting Representative for each category
shall be selected by a majority vote of the Advisory Committee Members.
The Advisory Committee Members shall follow the procedure set forth in
subparagraph (b)(v) below.
(ii) Although the Non-SRO Voting Representatives will be selected
at the same time, the Non-SRO Voting Representatives' terms will be
staggered to allow for continuity of representation. The Non-SRO Voting
Representatives' terms will begin in accordance with the following
timeline after the Effective Date of the Agreement:
(A) Issuer Representative: First Quarterly Operating Committee
Meeting after Effective Date;
(B) Retail Representative: First Quarterly Operating Committee
Meeting after Effective Date;
(C) Institutional investor: First Quarterly Operating Committee
Meeting after Effective Date
(D) Securities market data vendor: Third Quarterly Operating
Committee Meeting after Effective Date;
(E) Broker-dealer with a predominantly retail investor customer
base: Third Quarterly Operating Committee Meeting after Effective Date;
and
(F) Broker-dealer with a predominantly institutional investor
customer base: Third Quarterly Operating Committee Meeting Effective
Date.
(iii) Although certain Non-SRO Voting Representatives' official,
two-year terms will not begin until the Third Quarterly Operating
Committee Meeting after the Effective Date, such Non-SRO Voting
Representatives will temporarily serve as a Non-SRO Voting
Representative as of their selection. Such Non-SRO Voting
Representatives may still be selected for another two-year term.
(iv) After the expiration of a Non-SRO Voting Representative's
term, an individual will be selected by a majority of the then-serving
Non-SRO Voting Representatives to fill the position.
(v) Procedure for Nominating and Electing Non-SRO Voting
Representatives.
(A) At least two months prior to the expiring term of a Non-SRO
Voting Representative, the Operating Committee shall post a notice on
its website requesting nominations from the public for the upcoming
open position. Members may submit individuals for consideration during
the nomination process, and the Non-SRO Voting Representative may
nominate themselves as long as they have not served the maximum number
of terms.
(B) At least one month prior to the expiring term of a Non-SRO
Voting Representative, the Non-SRO Voting Representatives shall review
the nominated individuals to confirm, by a majority vote, the nominated
individuals that meet the requirements of the category up for election.
(C) Within a week of the Non-SRO Voting Representatives finalizing
the list of eligible individuals, the Operating Committee shall post a
notice on the Company website listing the individuals nominated for the
open position and requesting comment from the public. After the Non-SRO
Voting Representatives screen comments for appropriateness, the public
comments will be posted on the Company's website. Prior to electing an
individual from the list of nominations, the Non-SRO Voting
Representatives will consider and discuss the public comments.
(D) The Non-SRO Voting Representatives whose terms are expiring may
vote in the election for an open position; provided, however, that a
Non-SRO Voting Representative may not vote in the election for an open
position for which they are nominated.
(E) In the event that no nominated individual receives a majority
of votes, the individual(s) with the lowest number of votes will be
eliminated from consideration. The Non-SRO Voting Representatives will
repeat this process
[[Page 64581]]
until an individual receives a majority of votes. In the event two
candidates remain, the Person receiving the most votes will be elected.
(vi) A Non-SRO Voting Representative may resign from the Operating
Committee by tendering their resignation to the Chair of the Operating
Committee. In the event a Non-SRO Voting Representative leaves his or
her employment or changes his or her duties within the firm to a
position unrelated to the category he or she represents before the
expiration of his or her term, the Non-SRO Voting Representative shall
tender his or her resignation to the Chair of the Operating Committee
or be removed upon an affirmative vote of the Operating Committee
pursuant to Section 4.3.
(vii) In the event a Non-SRO Voting Representative resigns or is
removed from the Operating Committee, the Operating Committee shall, as
soon as practicable, follow the procedure set forth in subparagraph
(b)(v). The individual selected shall serve out the remaining term of
the resigning Non-SRO Voting Representative and, if the remaining term
after selection is less than one year, such individual will
automatically serve an additional two-year term. If the remaining term
after selection is greater than one year, the Operating Committee shall
follow the procedure set forth in subparagraph (b)(v) at the end of the
term. Under either circumstance, such individual may be elected for one
additional two-year term before reaching the term limit.
(viii) Each Non-SRO Voting Representative will agree in writing to
comply with the requirements of Section 4.10 and Exhibit B thereto and
the Confidentiality Policy set forth in Exhibit C.
(c) An SRO Applicant will be permitted to appoint one individual to
attend (subject to Section 4.4(i)) regularly scheduled Operating
Committee meetings in the capacity of a non-voting observer (each, an
``SRO Applicant Observer''). Each SRO Applicant may designate an
alternate individual or individuals who shall be authorized to act as
the SRO Applicant Observer on behalf of the SRO Applicant in the
absence of the designated SRO Applicant Observer. If the SRO
Applicant's Form 1 petition or Section 19(b)(1) filing is withdrawn,
returned, or is otherwise not actively pending with the Commission for
any reason, then the SRO Applicant will no longer be eligible to have
an SRO Applicant Observer attend Operating Committee meetings.
(d) Notwithstanding anything to the contrary herein, (i) a national
securities exchange that has ceased operations as a Market (or has yet
to commence operation as a Market) and that is a Non-Affiliated SRO
will not be permitted to designate an SRO Voting Representative and
(ii) an SRO Group in which all national securities exchanges have
ceased operations as a Market (or have yet to commence operation as a
Market) will not be permitted to designate an SRO Voting
Representative. Such SRO Group or Non-Affiliated SRO may attend the
Operating Committee as an observer but may not attend the Executive
Session of the Operating Committee. In the event such an SRO Group or
Non-Affiliated SRO does not commence operation as a Market for six
months after first attending an Operating Committee meeting, such SRO
Group or Non-Affiliated SRO may no longer attend the Operating
Committee until it commences/re-commences operation as a Market.
Section 4.3 Action of Operating Committee
(a) The SRO Voting Representatives and Non-SRO Voting
Representatives shall be allocated votes as follows:
(i) Each SRO Voting Representative shall be authorized to cast one
vote on behalf of the SRO Group or Non-Affiliated SRO that he or she
represents, provided, however, that each SRO Voting Representative
representing an SRO Group or Non-Affiliated SRO whose combined market
center(s) have consolidated equity market share of more than fifteen
(15) percent during four of the six calendar months preceding an
Operating Committee vote shall be authorized to cast two votes. For
purposes of this Section 4.3(a)(i), ``consolidated equity market
share'' means the average daily dollar equity trading volume of
Eligible Securities of an SRO Group or Non-Affiliated SRO as a
percentage of the average daily dollar equity trading volume of all of
the SRO Groups and Non-Affiliated SROs, as reported under this
Agreement. For the avoidance of doubt, FINRA shall not be considered to
operate a market center within the meaning of this Section 4.3(a)(i)
solely by virtue of facilitating trade reporting of Eligible Securities
through the FINRA/Nasdaq Trade Reporting Facility Carteret, the FINRA/
Nasdaq Trade Reporting Facility Chicago, the FINRA/NYSE Trade Reporting
Facility, or any other trade reporting facility that FINRA may operate
from time to time in affiliation with a registered national securities
exchange to provide a mechanism for FINRA Participants to report
transactions in Eligible Securities effected otherwise than on an
exchange.
(ii) With respect to any action on which the Non-SRO Voting
Representatives may vote, the aggregate number of votes attributed to
the Non-SRO Voting Representatives eligible to vote on such action
shall at all times equal one half of the aggregate number of votes
attributed to the votes of the SRO Voting Representatives who are
eligible to vote on such action, and the number of Non-SRO Voting
Representative votes shall increase or decrease as necessary to
maintain the ratio between votes attributed to the SRO Voting
Representatives and votes attributed to the Non-SRO Voting
Representatives. Votes attributed to Non-SRO Voting Representatives
will be allocated equally among Non-SRO Voting Representatives eligible
to vote, in fractional shares if necessary.
(b) All actions of the Operating Committee will require an
augmented majority vote consisting of the affirmative vote of not less
than (2/3rd) two-thirds of all votes allocated in the manner described
in Section 4.3(a) to Voting Representatives who are eligible to vote on
such action, combined with a majority (greater than (50) fifty percent
of the votes) of all votes allocated in the manner described in Section
4.3(a) to SRO Voting Representatives who are eligible to vote on such
action.
(c) Notwithstanding Section 4.3(b), the following actions will not
require an augmented majority vote of the Operating Committee:
(i) the selection of Non-SRO Voting Representatives pursuant to
Section 4.2(b);
(ii) the decision to enter Executive Session pursuant to Section
4.4(g);
(iii) decisions concerning the operation of the Company as an LLC
as specified in Section 10.3 and Section 11.2;
(iv) modifications to LLC-related provisions of the Agreement
pursuant to Section 13.5(b); and
(v) the selection of Officers of the Company, other than the Chair,
pursuant to Section 4.8.
Section 4.4 Meetings of the Operating Committee
(a) Subject to Section 4.4(g), meetings of the Operating Committee
may be attended by each Voting Representative, Member Observers, SRO
Applicant Observers, SEC staff, and other persons as deemed appropriate
by the Operating Committee. Meetings shall be held at such times and
locations as shall from time to time be determined by the Operating
Committee. Member Observers shall be entitled to receive notice of all
meetings of the Company and to attend and participate in any
[[Page 64582]]
discussion at any such meeting, but shall not be entitled to vote on
any matter.
(b) Special meetings of the Operating Committee may be called by
the Chair on at least 24 hours' notice to each Voting Representative
and all persons eligible to attend Operating Committee meetings.
(c) Any action requiring a vote can be taken at a meeting only if a
quorum of all Voting Representatives is present. A quorum is equal to
the minimum votes necessary to obtain approval under Section 4.3(b),
i.e., Voting Representatives reflecting 2/3rd of Operating Committee
votes eligible to vote on such action and SRO Voting Representatives
reflecting 50% of SRO Voting Representative votes eligible to vote on
such action.
(i) Any Voting Representative recused from voting on a particular
action (i) mandatorily pursuant to Section 4.10(b) or (ii) upon a
Voting Representative's voluntary recusal, shall not be considered in
the numerator or denominator of the calculations in paragraph (c) for
determining whether a quorum is present.
(ii) A Voting Representative is considered present at a meeting
only if such Voting Representative is either in physical attendance at
the meeting or participating by conference telephone or other
electronic means that enables each Voting Representative to hear and be
heard by all others present at the meeting.
(d) A summary of any action sought to be resolved at a meeting
shall be sent to each Voting Representative entitled to vote on such
matter at least one week prior to the meeting via electronic mail,
portal notification, or regular U.S. or private mail (or if one week is
not practicable, then with as much time as may be reasonably
practicable under the circumstances); provided, however, that this
requirement to provide a summary of any action prior to a meeting may
be waived by the vote of the percentage of the Committee required to
vote on any particular matter, under Section 4.3 above.
(e) Beginning with the first quarterly meeting of the Operating
Committee following the Operative Date, the Chair of the Operating
Committee shall be elected for a one-year term from the constituent SRO
Voting Representatives (and an election for the Chair shall be held
every year). Subject to the requirements of Section 4.3 hereof, the
Chair shall have the authority to enter into contracts on behalf of the
Company and otherwise bind the Company, but only as directed by the
Operating Committee. The Chair shall designate a Person to act as
Secretary to record the minutes of each meeting. The location of
meetings shall be in a location capable of holding the number of
attendees of such meetings, or such other locations as may from time to
time be determined by the Operating Committee.
(i) To elect a Chair, the Operating Committee will elicit
nominations for those individuals to be considered for Chair.
(ii) In the event that no nominated Person is elected by an
affirmative vote of the Operating Committee pursuant to Section 4.3,
the Person(s) with the lowest number of votes will be eliminated from
consideration. The Operating Committee will repeat this process until a
Person is elected by affirmative vote of the Operating Committee
pursuant to Section 4.3. In the event two candidates remain and neither
is elected by an affirmative vote of the Operating Committee pursuant
to Section 4.3, the Person receiving the most votes from SRO Voting
Representatives will be elected.
(f) Meetings may be held by conference telephone or other
electronic means that enables each Voting Representative to hear and be
heard by all others present at the meeting.
(g) Notwithstanding any other provision of this Agreement, SRO
Voting Representatives, Member Observers, SEC Staff, and other persons
as deemed appropriate by the SRO Voting Representatives may meet in
Executive Session of the Operating Committee to discuss an item of
business for which it is appropriate to exclude Non-SRO Voting
Representatives. A request to create an Executive Session must be
included on the written agenda for an Operating Committee meeting,
along with the clearly stated rationale as to why such item to be
discussed would be appropriate for Executive Session. The creation of
an Executive Session will be by a majority vote of SRO Voting
Representatives with votes allocated pursuant to Section 4.3(a)(1). The
Executive Session shall only discuss the topic for which it was created
and shall be disbanded upon fully discussing the topic.
(i) Items for discussion within an Executive Session should be
limited to such topics as:
(A) Any topic that requires discussion of Highly Confidential
Information;
(B) Vendor or Subscriber Audit Findings; and
(C) Litigation matters.
(ii) The list provided in subparagraph (i) is not dispositive of
all matters that may by their nature require discussion in an Executive
Session. The mere fact that a topic is controversial or a matter of
dispute does not, by itself, make a topic appropriate for Executive
Session. The minutes for an Executive Session shall include the reason
for including any item in Executive Session.
(iii) Requests to discuss a topic in Executive Session must be
included on the written agenda for the Operating Committee meeting,
along with the clearly stated rationale for each topic as to why such
discussion is appropriate for Executive Session. Such rationale may be
that the topic to be discussed falls within the list provided in
subparagraph (g)(i).
(iv) Any action that requires a vote in Executive Session will
require a majority of the votes allocated in the manner described in
Section 4.3(a) to SRO Voting Representatives eligible to vote on such
action.
Section 4.5 Certain Transactions
The fact that a Member or any of its Affiliates is directly or
indirectly interested in or connected with any Person employed by the
Company to render or perform a service, or from which or to whom the
Company may buy or sell any property, shall not prohibit the Company
from employing or dealing with such Person.
Section 4.6 Company Opportunities
(a) Each Member, its Affiliates, and each of their respective
equity holders, controlling persons and employees may have business
interests and engage in business activities in addition to those
relating to the Company. Neither the Company nor any Member shall have
any rights by virtue of this Agreement in any business ventures of any
such Person.
(b) Each Member expressly acknowledges that (i) the other Members
are permitted to have, and may presently or in the future have,
investments or other business relationships with Persons engaged in the
business of the Company other than through the Company (an ``Other
Business''), (ii) the other Members have and may develop strategic
relationships with businesses that are and may be competitive or
complementary with the Company, (iii) the other Members shall not be
obligated to recommend or take any action that prefers the interests of
the Company or any Member over its own interests, (iv) none of the
other Members will be prohibited by virtue of their ownership of equity
in the Company or service on the Operating Committee (or body
performing similar duties) from pursuing and engaging in any such
activities, (v) none of the other
[[Page 64583]]
Members will be obligated to inform or present to the Company any such
opportunity, relationship, or investment, (vi) such Member will not
acquire or be entitled to any interest or participation in any Other
Business as a result of the participation therein of any of the other
Members, and (vii) the involvement of another Member in any Other
Business in and of itself will not constitute a conflict of interest by
such Person with respect to the Company or any of the Members.
Section 4.7 Subcommittees
(a) Subject to Section 4.1, the Operating Committee shall have the
power and right, but not the obligation, to create and disband
subcommittees of the Operating Committee and to determine the duties,
responsibilities, powers, and composition of such subcommittees.
Subcommittee chairs will be selected by the Chair of the Operating
Committee from SRO Voting Representatives or Member Observers with
input from the Operating Committee.
(b) SRO Voting Representatives, Non-SRO Voting Representatives,
Member Observers, SEC Staff, and other persons as deemed appropriate by
the Operating Committee may attend meetings of any subcommittees.
(c) Notwithstanding paragraph (b), SRO Voting Representatives,
Member Observers, and other persons as deemed appropriate by the SRO
Voting Representatives may meet in a subcommittee to discuss an item
subject to the attorney-client privilege of the Company or that is
attorney work product of the Company.
Section 4.8 Officers
(a) In addition to the Chair and Secretary, the Members may (but
need not), from time to time, designate and appoint one or more persons
as an Officer of the Company by a majority vote of the Members. Other
than the Chair, no Officer need be a Voting Representative. Any
Officers so designated shall have such authority and perform such
duties as the Members may, from time to time, delegate to them. Any
such delegation may be revoked at any time by a majority vote of the
Members in their sole discretion. The Members may assign titles to
particular Officers. Each Officer shall hold office until such
Officer's successor shall be duly designated or until such Officer's
death, resignation, or removal as provided in this Agreement. Any
number of offices may be held by the same individual. Officers shall
not be entitled to receive salary or other compensation, unless
approved by the Members by a majority vote.
(b) Any Officer may resign at any time. Such resignation shall be
made in writing and shall take effect at the time specified in the
notice, or if no time be specified, at the time of its receipt by the
Members. The acceptance of a resignation shall not be necessary to make
it effective.
(c) Any Officer may be removed at any time upon the majority vote
of the Members.
Section 4.9 Commission Access to Information
Nothing in this Agreement shall be interpreted to limit or impede
the rights of the Commission to access information of the Company or
any of the Members (including their employees) pursuant to U.S. federal
securities laws and the rules and regulations promulgated thereunder.
Section 4.10 Disclosure of Potential Conflicts of Interest; Recusal
(a) Disclosure Requirements. The Members, the Processors, the
Administrator, the Non-SRO Voting Representatives, and each service
provider or subcontractor engaged in Company business (including the
audit of Subscribers' data usage) that has access to Restricted or
Highly Confidential information (for purposes of this section,
``Disclosing Parties'') shall complete the applicable questionnaire to
provide the required disclosures set forth below to disclose all
material facts necessary to identify potential conflicts of interest.
The Operating Committee, a Member, Processors, or Administrator may not
use a service provider or subcontractor on Company business unless that
service provider or subcontractor has agreed in writing to provide the
disclosures required by this section and has submitted completed
disclosures to the Administrator prior to starting work. If state laws,
rules, or regulations, or applicable professional ethics rules or
standards of conduct, would act to restrict or prohibit a Disclosing
Party from making any particular required disclosure, a Disclosing
Party shall refer to such law, rule, regulation, or professional ethics
rule or standard and include in response to that disclosure the basis
for its inability to provide a complete response. This does not relieve
the Disclosing Party from disclosing any information it is not
restricted from providing.
(i) A potential conflict of interest may exist when personal,
business, financial, or employment relationships could be perceived by
a reasonable objective observer to affect the ability of a person to be
impartial.
(ii) Updates to Disclosures. Following a material change in the
information disclosed pursuant to Section 4.10(a), a Disclosing Party
shall promptly update its disclosures. Additionally, a Disclosing Party
shall update annually any inaccurate information prior to the Operating
Committee's first quarterly meeting of a calendar year.
(iii) Public Dissemination of Disclosures. The Disclosing Parties
shall provide the Administrator with its disclosures and any required
updates. The Administrator shall ensure that the disclosures are
promptly posted to the Company's website.
(iv) The Company will arrange for Disclosing Parties that are not
Members or Non-SRO Voting Representatives to comply with the required
disclosures and recusals under this Section 4.10 and Exhibit B in their
respective agreements with either the Company, a Member, the
Administrator, or the Processors.
(b) Recusal.
(i) A Disclosing Party may not appoint as its Voting Representative
a person that is responsible for or involved with the procurement for,
or development, modeling, pricing, licensing, or sale of PDP offered to
customers of the CT Feeds if the person has a financial interest
(including compensation) that is tied directly to the Disclosing
Party's market data business or the procurement of market data and if
that compensation would cause a reasonable objective observer to expect
the compensation to affect the impartiality of the representative.
(ii) A Disclosing Party (including its representative(s),
employees, and agents) will be recused from participating in Company
activities if it has not submitted a required disclosure form or the
Operating Committee votes that its disclosure form is materially
deficient. The recusal will be in effect until the Disclosing Party
submits a sufficiently complete disclosure form to the Administrator.
(iii) A Disclosing Party, including its representative(s), and its
Affiliates and their representative(s), are recused from voting on
matters in which it or its Affiliate (i) is seeking a position or
contract with the Company or (ii) have a position or contract with the
Company and whose performance is being evaluated by the Company.
(iv) All recusals, including a person's determination of whether to
voluntarily recuse himself or herself, shall be reflected in the
meeting minutes.
(c) Required Disclosures. As part of the disclosure regime, the
Members, the Processors, the Administrator, Non-SRO
[[Page 64584]]
Voting Representatives, and service providers and subcontractors must
respond to questions that are tailored to elicit responses that
disclose the potential conflicts of interest as set forth in Exhibit B.
(d) If the Commission's approval order of the conflicts of interest
policies filed by the CQ Plan, CTA Plan, or UTP Plan is stayed or
overturned by a Governmental Authority, the requirements of this
Section 4.10 and Exhibit B shall not apply.
Section 4.11 Confidentiality Policy
(a) The Members and Non-SRO Voting Representatives are subject to
the Confidentiality Policy set forth in Exhibit C to the Plan. The
Company will arrange for Covered Persons that are not Members or Non-
SRO Voting Representatives to comply with the Confidentiality Policy
under their respective agreements with either the Company, a Member,
the Administrator, or the Processors.
(b) If the Commission's approval order of the confidentiality
policy filed by the CQ Plan, CTA Plan, or UTP Plan is stayed or
overturned by a Governmental Authority, the requirements of this
Section 4.11 and Exhibit C shall not apply.
Article V. The Processors; Information; Indemnification
Section 5.1 General Functions of the Processors
Subject to the general direction of the Operating Committee, as
more fully set forth in the agreement to be entered into between the
Company and the Processors (the ``Processor Services Agreements''), the
Company shall require the Processors to perform certain processing
functions on behalf of the Company. Among other things, the Company
shall require the Processors to collect from the Members, and
consolidate and disseminate to Vendors and Subscribers, Transaction
Reports and Quotation Information in Eligible Securities in a manner
designed to assure the prompt, accurate, and reliable collection,
processing, and dissemination of information with respect to all
Eligible Securities in a fair and non-discriminatory manner.
Section 5.2 Evaluation of the Processors
The Processors' performance of their functions under the Processor
Services Agreements shall be subject to review at any time as
determined by a vote of the Operating Committee pursuant to Section
4.3; provided, however, that a review shall be conducted at least once
every two calendar years but not more frequently than once each
calendar year (unless the Processors have materially defaulted in their
obligations under the Processor Services Agreements and such default
has not been cured within the applicable cure period set forth in the
Processor Services Agreements, in which event such limitation shall not
apply). The Operating Committee may review the Processors at staggered
intervals.
Section 5.3 Process for Selecting New Processors
(a) No later than upon the termination or withdrawal of a Processor
or the expiration of a Processor Services Agreement with a Processor,
the Operating Committee shall establish procedures for selecting a new
Processor (the ``Processor Selection Procedures''). The Operating
Committee, as part of the process of establishing Processor Selection
Procedures, may solicit and consider the timely comment of any entity
affected by the operation of this Agreement.
(b) The Processor Selection Procedures shall be established by the
affirmative vote of the Operating Committee pursuant to Section 4.3,
and shall set forth, at a minimum:
(i) The entity that will:
(A) Draft the Operating Committee's request for proposal for bids
on a new Processor;
(B) assist the Operating Committee in evaluating bids for the new
Processor; and
(C) otherwise provide assistance and guidance to the Operating
Committee in the selection process;
(ii) the minimum technical and operational requirements to be
fulfilled by the Processor;
(iii) the criteria to be considered in selecting the Processor; and
(iv) the entities (other than Voting Representatives) that are
eligible to comment on the selection of the Processor.
Section 5.4 Transmission of Information to Processors by Members
(a) Quotation Information.
(i) Each Member shall, during the time it is open for trading, be
responsible for promptly collecting and transmitting to the Processors
accurate Quotation Information in Eligible Securities through any means
set forth in the Processor Services Agreements to ensure that the
Company complies with its obligations under the Processor Services
Agreements.
(ii) Quotation Information shall include:
(A) Identification of the Eligible Security, using the Listing
Market's symbol;
(B) the price bid and offered, together with size;
(C) for FINRA, the FINRA Participant along with the FINRA
Participant's market participant identification or Member from which
the quotation emanates;
(D) appropriate timestamps;
(E) identification of quotations that are not firm; and
(F) through appropriate codes and messages, withdrawals and similar
matters.
(iii) In addition, Quotation Information shall include:
(A) In the case of a national securities exchange, the reporting
Participant's matching engine publication timestamp; or
(B) in the case of FINRA, the quotation publication timestamp that
FINRA's bidding or offering member reports to FINRA's quotation
facility in accordance with FINRA rules. In addition, if FINRA's
quotation facility provides a proprietary feed of its quotation
information, then the quotation facility shall also furnish the
Processors with the time of the quotation as published on the quotation
facility's proprietary feed. FINRA shall convert any quotation times
reported to it to nanoseconds and shall furnish such times to the
Processors in nanoseconds since Epoch.
(b) Transaction Reports.
(i) Each Member shall, during the time it is open for trading, be
responsible for promptly transmitting to the Processor Transaction
Reports in Eligible Securities executed in its Market by means set
forth in the Processor Services Agreements.
(ii) Transaction Reports shall include:
(A) Identification of the Eligible Security, using the Listing
Market's symbol;
(B) the number of shares in the transaction;
(C) the price at which the shares were purchased or sold;
(D) the buy/sell/cross indicator;
(E) appropriate timestamps;
(F) the Market of execution; and
(G) through appropriate codes and messages, late or out-of-sequence
trades, corrections, and similar matters.
(iii) In addition, Transaction Reports shall include the time of
the transaction as identified in the Participant's matching engine
publication timestamp. However, in the case of FINRA, the time of the
transaction shall be the time of execution that a FINRA member reports
to a FINRA trade reporting facility in accordance with FINRA rules. In
[[Page 64585]]
addition, if the FINRA trade reporting facility provides a proprietary
feed of trades reported by the trade reporting facility to the
Processor, then the FINRA trade reporting facility shall also furnish
the Processors with the time of the transmission as published on the
facility's proprietary feed. The FINRA trade reporting facility shall
convert times that its members report to it to nanoseconds and shall
furnish such times to the Processors in nanoseconds since Epoch.
(iv) Each Member shall (a) transmit all Transaction Reports in
Eligible Securities to the Processors as soon as practicable, but not
later than 10 seconds, after the time of execution, (b) establish and
maintain collection and reporting procedures and facilities reasonably
designed to comply with this requirement, and (c) designate as ``late''
any last sale price not collected and reported in accordance with the
above-referenced procedures or as to which the Member has knowledge
that the time interval after the time of execution is significantly
greater than the time period referred to above. The Members shall seek
to reduce the time period for reporting last sale prices to the
Processors as conditions warrant.
(v) The following types of transactions are not required to be
reported to the Processors pursuant to this Agreement:
(A) Transactions that are part of a primary distribution by an
issuer or of a registered secondary distribution or of an unregistered
secondary distribution;
(B) transactions made in reliance on Section 4(a)(2) of the
Securities Act of 1933;
(C) transactions in which the buyer and the seller have agreed to
trade at a price unrelated to the current market for the security
(e.g., to enable the seller to make a gift);
(D) the acquisition of securities by a broker-dealer as principal
in anticipation of making an immediate exchange distribution or
exchange offering on an exchange;
(E) purchases of securities pursuant to a tender offer;
(F) purchases or sales of securities effected upon the exercise of
an option pursuant to the terms thereof or the exercise of any other
right to acquire securities at a pre-established consideration
unrelated to the current market; and
(G) transfers of securities that are expressly excluded from trade
reporting under FINRA rules.
(c) The following symbols shall be used to denote the applicable
Member:
------------------------------------------------------------------------
Code Member
------------------------------------------------------------------------
A.................................... NYSE American LLC.
Z.................................... Cboe BZX Exchange, Inc.
Y.................................... Cboe BYX Exchange, Inc.
B.................................... Nasdaq BX, Inc.
W.................................... Cboe Exchange, Inc.
M.................................... NYSE Chicago, Inc.
J.................................... Cboe EDGA Exchange, Inc.
K.................................... Cboe EDGX Exchange, Inc.
I.................................... Nasdaq ISE, LLC.
V.................................... Investors' Exchange LLC.
D.................................... Financial Industry Regulatory
Authority, Inc.
Q.................................... The Nasdaq Stock Market LLC.
C.................................... NYSE National, Inc.
N.................................... New York Stock Exchange LLC.
P.................................... NYSE Arca, Inc.
X.................................... Nasdaq PHLX LLC.
L.................................... Long-Term Stock Exchange Inc.
U.................................... MEMX LLC.
------------------------------------------------------------------------
(d) Indemnification.
(i) Each Member agrees, severally and not jointly, to indemnify and
hold harmless and defend the Company, each other Member, the
Processors, the Administrator, the Operating Committee, and each of
their respective directors, officers, employees, agents, and Affiliates
(each, an ``Member Indemnified Party'') from and against any and all
loss, liability, claim, damage, and expense whatsoever incurred or
threatened against such Member Indemnified Party as a result of a
system error or disruption at such Member's Market affecting any
Transaction Reports, Quotation Information, or other information
reported to the Processors by such Member and disseminated by the
Processors to Vendors and Subscribers. This indemnity shall be in
addition to any liability that the indemnifying Member may otherwise
have.
(ii) Promptly after receipt by a Member Indemnified Party of notice
of the commencement of any action, such Member Indemnified Party will,
if it intends to make a claim in respect thereof against an
indemnifying Member, notify the indemnifying Member in writing of the
commencement thereof; provided, however, that the failure to so notify
the indemnifying Member will only relieve the indemnifying Member from
any liability which it may have to any Member Indemnified Party to the
extent such indemnifying Member is actually prejudiced by such failure.
In case any such action is brought against any Member Indemnified Party
and it promptly notifies an indemnifying Member of the commencement
thereof, the indemnifying Member will be entitled to participate in,
and, to the extent that it elects (jointly with any other indemnifying
Member similarly notified), to assume and control the defense thereof
with counsel chosen by it. After notice from the indemnifying Member of
its election to assume the defense thereof, the indemnifying Member
will not be liable to such Indemnified Party for any legal or other
expenses subsequently incurred by such Member Indemnified Party in
connection with the defense thereof but the Member Indemnified Party
may, at its own expense, participate in such defense by counsel chosen
by it without, however, impairing the indemnifying Member's control of
the defense. If the indemnifying Member has assumed the defense in
accordance with the terms hereof, the indemnifying Member may enter
into a settlement or consent to any judgment without the prior written
consent of the Member Indemnified Party if (i) such settlement or
judgment involves monetary damages only, all of which will be fully
paid by the indemnifying Member and without admission of fault or
culpability on behalf of any Member Indemnified Party, and (ii) a term
of the settlement or judgment is that the Person or Persons asserting
such claim unconditionally and irrevocably release all Member
Indemnified Parties from all liability with respect to such claim;
otherwise, the consent of the Member Indemnified Party shall be
required in order to enter into any settlement of, or consent to the
entry of a judgment with respect to, any claim (which consent shall not
be unreasonably withheld, delayed, or conditioned).
Section 5.5 Operational Issues
(a) Each Member shall be responsible for collecting and validating
quotes and last sale reports within its own system prior to
transmitting this data to the Processors.
(b) Each Member may utilize a dedicated Member line into the
Processors to transmit Transaction Reports and Quotation Information to
the Processors.
(c) Whenever a Member determines that a level of trading activity
or other unusual market conditions prevent it from collecting and
transmitting Transaction Reports or Quotation Information to the
Processor, or where a trading halt or suspension in an Eligible
Security is in effect in its Market, the Member shall promptly notify
the Processors of such condition or event and shall resume collecting
and transmitting Transaction Reports and Quotation Information to it as
soon as the condition or event is terminated. In the event of a system
malfunction resulting in the inability of a Member or its members to
transmit Transaction Reports or Quotation Information to the
[[Page 64586]]
Processors, the Member shall promptly notify the Processors of such
event or condition. Upon receiving such notification, the Processors
shall take appropriate action, including either closing the quotation
or purging the system of the affected quotations.
Article VI. The Administrator
Section 6.1 General Functions of the Administrator
Subject to the general direction of the Operating Committee, as
more fully set forth in the agreement entered into between the Company
and the Administrator (the ``Administrative Services Agreement''), the
Administrator shall perform administrative functions on behalf of the
Company including recordkeeping; administering Vendor and Subscriber
contracts; administering Fees, including billing, collection, and
auditing of Vendors and Subscribers; administering Distributions; tax
functions of the Company; and the preparation of the Company's audited
financial reports.
Section 6.2 Evaluation of the Administrator
The Administrator's performance of its functions under the
Administrative Services Agreement shall be subject to review at any
time as determined by an affirmative vote of the Operating Committee
pursuant to Section 4.3; provided, however, that a review shall be
conducted at least once every two calendar years but not more
frequently than once each calendar year (unless the Administrator has
materially defaulted in its obligations under the Administrative
Services Agreement and such default has not been cured within the
applicable cure period set forth in the Administrative Services
Agreement, in which event such limitation shall not apply). The
Operating Committee shall appoint a subcommittee or other Persons to
conduct the review. The Company shall require the reviewer to provide
the Operating Committee with a written report of its findings and to
make recommendations (if necessary), including with respect to the
continuing operation of the Administrator. The Administrator shall be
required to assist and participate in such review. The Operating
Committee shall notify the Commission of any recommendations it may
approve as a result of the review of the Administrator and shall supply
the Commission with a copy of any reports that may be prepared in
connection therewith.
Section 6.3 Process for Selecting New Administrator
Prior to the Operative Date, upon the termination or withdrawal of
the Administrator, or upon the expiration of the Administrative
Services Agreement, the Operating Committee shall establish procedures
for selecting a new Administrator (the ``Administrator Selection
Procedures''). The Administrator selected by the Operating Committee
may not be owned or controlled by a corporate entity that, either
directly or via another subsidiary, offers for sale its own PDP. The
Operating Committee, as part of the process of establishing
Administrator Selection Procedures, may solicit and consider the timely
comment of any entity affected by the operation of this Agreement. The
Administrator Selection Procedures shall be established by the Voting
Representatives pursuant to Section 4.3, and shall set forth, at a
minimum:
(a) The entity that will:
(i) Draft the Operating Committee's request for proposal for bids
on a new Administrator;
(ii) assist the Operating Committee in evaluating bids for the new
Administrator; and
(iii) otherwise provide assistance and guidance to the Operating
Committee in the selection process.
(b) the minimum technical and operational requirements to be
fulfilled by the Administrator;
(c) the criteria to be considered in selecting the Administrator;
and
(d) the entities (other than Voting Representatives) that are
eligible to comment on the selection of the Administrator.
Article VII. Regulatory Matters
Section 7.1 Regulatory and Operational Halts
(a) Operational Halts. A Member shall notify the Processors if it
has concerns about its ability to collect and transmit quotes, orders,
or last sale prices, or where it has declared an Operational Halt or
suspension of trading in one or more Eligible Securities, pursuant to
the procedures adopted by the Operating Committee.
(b) Regulatory Halts.
(i) The Primary Listing Market may declare a Regulatory Halt in
trading for any security for which it is the Primary Listing Market:
(A) As provided for in the rules of the Primary Listing Market;
(B) if it determines there is a SIP Outage, Material SIP Latency,
or Extraordinary Market Activity; or
(C) in the event of national, regional, or localized disruption
that necessitates a Regulatory Halt to maintain a fair and orderly
market.
(ii) In making a determination to declare a Regulatory Halt under
subparagraph (b)(i), the Primary Listing Market will consider the
totality of information available concerning the severity of the issue,
its likely duration, and potential impact on Member Firms and other
market participants and will make a good-faith determination that the
criteria of subparagraph (b)(i) have been satisfied and that a
Regulatory Halt is appropriate. The Primary Listing Market will
consult, if feasible, with the affected Trading Center(s), the other
Members, or the Processors, as applicable, regarding the scope of the
issue and what steps are being taken to address the issue. Once a
Regulatory Halt under subparagraph (b)(i) has been declared, the
Primary Listing Market will continue to evaluate the circumstances to
determine when trading may resume in accordance with the rules of the
Primary Listing Market.
(c) Initiating a Regulatory Halt.
(i) The start time of a Regulatory Halt is when the Primary Listing
Market declares the halt, regardless of whether an issue with
communications impacts the dissemination of the notice.
(ii) If a Processor is unable to disseminate notice of a Regulatory
Halt or the Primary Listing Market is not open for trading, the Primary
Listing Market will take reasonable steps to provide notice of a
Regulatory Halt, which shall include both the type and start time of
the Regulatory Halt, by dissemination through:
(A) PDP;
(B) posting on a publicly-available Member website; or
(C) system status messages.
(iii) Except in exigent circumstances, the Primary Listing Market
will not declare a Regulatory Halt retroactive to a time earlier than
the notice of such halt.
(iv) Resumption of Trading After Regulatory Halts Other Than SIP
Halts. The Primary Listing Market will declare a resumption of trading
when it makes a good-faith determination that trading may resume in a
fair and orderly manner and in accordance with its rules.
(v) For a Regulatory Halt that is initiated by another Member that
is a Primary Listing Market, a Member may resume trading after the
Member receives notification from the Primary Listing Market that the
Regulatory Halt has been terminated.
(d) Resumption of Trading After SIP Halt.
(i) The Primary Listing Market will determine the SIP Halt Resume
Time. In
[[Page 64587]]
making such determination, the Primary Listing Market will make a good-
faith determination and consider the totality of information to
determine whether resuming trading would promote a fair and orderly
market, including input from the Processors, the other Members, or the
operator of the system in question (as well as any Trading Center(s) to
which such system is linked), regarding operational readiness to resume
trading. The Primary Listing Market retains discretion to delay the SIP
Halt Resume Time if it believes trading will not resume in a fair and
orderly manner.
(ii) The Primary Listing Market will terminate a SIP Halt with a
notification that specifies a SIP Halt Resume Time. The Primary Listing
Market shall provide a minimum notice of a SIP Halt Resume Time, as
specified by the rules of the Primary Listing Market, during which
period market participants may enter quotes and orders in the affected
securities. During Regular Trading Hours, the last SIP Halt Resume Time
before the end of Regular Trading Hours shall be an amount of time as
specified by the rules of the Primary Listing Market. The Primary
Listing Market may stagger the SIP Halt Resume Times for multiple
symbols in order to reopen in a fair and orderly manner.
(iii) During Regular Trading Hours, if the Primary Listing Market
does not open a security within the amount of time as specified by the
rules of the Primary Listing Market after the SIP Halt Resume Time, a
Member may resume trading in that security. Outside Regular Trading
Hours, a Member may resume trading immediately after the SIP Halt
Resume Time.
(e) Member to Halt Trading During Regulatory Halt. A Member will
halt trading for any security traded on its Market if the Primary
Listing Market declares a Regulatory Halt for the security.
(f) Communications. Whenever, in the exercise of its regulatory
functions, the Primary Listing Market for an Eligible Security
determines it is appropriate to initiate a Regulatory Halt, the Primary
Listing Market will notify all other Members and the affected
Processors of such Regulatory Halt as well as provide notice that a
Regulatory Halt has been lifted using such protocols and other
emergency procedures as may be mutually agreed to between the Members
and the Primary Listing Market. The affected Processors shall
disseminate to Members notice of the Regulatory Halt (as well as notice
of the lifting of a Regulatory Halt) (i) through the CT Feeds or (ii)
any other means the affected Processors, in its sole discretion,
considers appropriate. Each Member shall be required to continuously
monitor these communication protocols established by the Operating
Committee and the Processors during market hours, and the failure of a
Member to do so shall not prevent the Primary Listing Market from
initiating a Regulatory Halt in accordance with the procedures
specified herein.
Section 7.2 Hours of Operation of the System
(a) Quotation Information shall be entered, as applicable, by
Members as to all Eligible Securities in which they make a market
during Regular Trading Hours on all days the Processors are in
operation. Transaction Reports shall be entered between 9:30 a.m. and
4:00:10 p.m. ET by Members as to all Eligible Securities in which they
execute transactions during Regular Trading Hours on all days the
Processors are in operation.
(b) Members that execute transactions in Eligible Securities
outside of Regular Trading Hours, shall report such transactions as
follows:
(i) Transactions in Eligible Securities executed between 4:00 a.m.
and 9:29:59 a.m. ET and between 4:00:01 p.m. and 8:00 p.m. ET, shall be
designated with an appropriate indicator to denote their execution
outside normal market hours;
(ii) transactions in Eligible Securities executed after 8:00 p.m.
and before 12:00 a.m. (midnight) shall be reported to the Processors
between the hours of 4:00 a.m. and 8:00 p.m. ET on the next business
day (T+1), and shall be designated ``as/of'' trades to denote their
execution on a prior day, and be accompanied by the time of execution;
(iii) transactions in Eligible Securities executed between 12:00
a.m. (midnight) and 4:00 a.m. ET shall be transmitted to the Processors
between 4:00 a.m. and 9:30 a.m. ET, on trade date, shall be designated
with an appropriate indicator to denote their execution outside normal
market hours, and shall be accompanied by the time of execution; and
(iv) transactions reported pursuant to this Section 7.3 shall be
included in the calculation of total trade volume for purposes of
determining Net Distributable Operating Revenue, but shall not be
included in the calculation of the daily high, low, or last sale.
(c) Late trades shall be reported in accordance with the rules of
the Member in whose Market the transaction occurred and can be reported
between the hours of 4:00 a.m. and 8:00 p.m. ET.
(d) The Processors shall collect, process and disseminate Quotation
Information in Eligible Securities at other times between 4:00 a.m. and
9:30 a.m. ET, and after 4:00 p.m. ET, when any Member or FINRA
Participant is open for trading, until 8:00 p.m. ET (the ``Additional
Period''); provided, however, that the National Best Bid and Offer
quotation will not be disseminated before 4:00 a.m. or after 8:00 p.m.
ET. Members that enter Quotation Information or submit Transaction
Reports to the Processors during the Additional Period shall do so for
all Eligible Securities in which they enter quotations.
Article VIII. Capital Contributions; Capital Accounts
Section 8.1 Capital Accounts
(a) A separate capital account (``Capital Account'') shall be
established and maintained by the Company for each Member in accordance
with section 704(b) of the Code and Treasury Regulation section 1.704-1
(b)(2)(iv). There shall be credited to each Member's Capital Account
(i) the Capital Contributions (at fair market value in the case of
contributed property) made by such Member (which shall be deemed to be
zero for the initial Members), (ii) allocations of Company profits and
gain (or items thereof) to such Member pursuant to Section 10.2 and
(iii) any recaptured tax credits, or portion thereof, to the extent
such increase to the tax basis of a Member's interest in the Company
may be allowed pursuant to the Code. Each Member's Capital Account
shall be decreased by (x) the amount of distributions (at fair market
value in the case of property distributed in kind) to such Member, (y)
allocations of Company losses to such Member (including expenditures
which can neither by capitalized nor deducted for tax purposes,
organization and syndication expenses not subject to amortization and
loss on sale or disposition of the Company's assets, whether or not
disallowed under sections 267 or 707 of the Code) pursuant to Section
10.2 and (z) any tax credits, or portion thereof, as may be required to
be charged to the tax basis of a Membership Interest pursuant to the
Code. Capital Accounts shall not be adjusted to reflect a Member's
share of liabilities under section 752 of the Code.
(b) The fair market value of contributed, distributed, or revalued
property shall be agreed to by the Operating Committee or, if there is
no such agreement, by an appraisal.
(c) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended
to comply with
[[Page 64588]]
Treasury Regulation section 1.704-1(b) promulgated under section 704(b)
of the Code, and shall be interpreted and applied in a manner
consistent with such Treasury Regulations.
Section 8.2 Additional Capital Contributions
Except with the approval of the Operating Committee or as otherwise
provided in this Section 8.2, no Member shall be obligated or permitted
to make any additional contribution to the capital of the Company. The
Members agree to make additional Capital Contributions from time to
time as appropriate in respect of reasonable administrative and other
reasonable expenses of the Company.
Section 8.3 Distributions
Except as set forth in this Section 8.3 and Section 11.2, and
subject to the provisions of Section 13.1, Distributions shall be made
to the Members at the times and in the aggregate amounts set forth in
Exhibit D. Notwithstanding any provisions to the contrary contained in
this Agreement, the Company shall not make a Distribution to a Member
on account of its interest in the Company if such Distribution would
violate Section 18-607 of the Delaware Act or other Applicable Law.
Distributions may be made in cash or, if determined by the Operating
Committee, in-kind. The Operating Committee may reserve amounts for
anticipated expenses or contingent liabilities of the Company. In the
event that additional Capital Contributions are called for, and any
Member fails to provide the full amount of such additional Capital
Contributions as set forth in the relevant resolution of the Operating
Committee, any Distributions to be made to such defaulting Member shall
be reduced by the amount of any required but unpaid Capital
Contribution due from such Member.
Article IX. Allocations
Section 9.1 Calculation of Profits and Losses
To the fullest extent permitted by Applicable Law, the profits and
losses of the Company shall be determined for each fiscal year in a
manner consistent with GAAP.
Section 9.2 Allocation of Profits and Losses
(a) Except as otherwise set forth in this Section 9.2, for Capital
Account purposes, all items of income, gain, loss, and deduction shall
be allocated among the Members in accordance with Exhibit D.
(b) For federal, state and local income tax purposes, items of
income, gain, loss, deduction, and credit shall be allocated to the
Members in accordance with the allocations of the corresponding items
for Capital Account purposes under this Section 9.2, except that items
with respect to which there is a difference between tax and book basis
will be allocated in accordance with Section 704(c) of the Code, the
Treasury Regulations thereunder and Treasury Regulations Section 1.704-
1(b)(4)(i).
(c) Notwithstanding any provision set forth in this Section 9.2, no
item of deduction or loss shall be allocated to a Member to the extent
the allocation would cause a negative balance in such Member's Capital
Account (after taking into account the adjustments, allocations and
distributions described in Treasury Regulations Sections 1.704-
1(b)(2)(ii)(d)(4), (5) and (6)) that exceeds the amount that such
Member would be required to reimburse the Company pursuant to this
Agreement or Applicable Law.
(d) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6), items of the Company's
income and gain shall be specially allocated to such Member in an
amount and manner sufficient to eliminate as quickly as possible any
deficit balance in its Capital Account created by such adjustments,
allocations or distributions in excess of that permitted under Section
10.2(c). Any special allocations of items of income or gain pursuant to
this Section 10.2(d) shall be taken into account in computing
subsequent allocations pursuant to this Section 10.2 so that the net
amount of any items so allocated and all other items allocated to each
Member pursuant to this Section 10.2 shall, to the extent possible, be
equal to the net amount that would have been allocated to each such
Member pursuant to the provisions of this Section 10.2 if such
unexpected adjustments, allocations or distributions had not occurred.
Article X. Records and Accounting; Reports
Section 10.1 Accounting
(a) The Operating Committee shall maintain a system of accounting
which enables the Company to produce accounting records and information
substantially consistent with GAAP. The Fiscal Year of the Company
shall be the calendar year unless Applicable Law requires a different
Fiscal Year.
(b) All matters concerning accounting procedures shall be
determined by the Operating Committee.
Section 10.2 Tax Status; Returns
(a) It is the intent of this Company and the Members that this
Company shall be treated as a partnership for federal, state and local
income tax purposes. Neither the Company nor any Member shall make an
election for the Company to be classified as other than a partnership
pursuant to Treasury Regulations Section 301.7701-3 or otherwise.
(b) The Company shall cause federal, state, and local income tax
returns for the Company to be prepared and timely filed with the
appropriate authorities and shall arrange for the timely delivery to
the Members of such information as is necessary for such Members to
prepare their federal, state and local tax returns. All tax returns
shall be prepared in a manner consistent with the Distributions made in
accordance with Exhibit D.
Section 10.3 Partnership Representative
(a) The Operating Committee shall appoint an entity as the
``Partnership Representative'' of the Company for purposes of Section
6223 of the Code and the Treasury Regulations promulgated thereunder,
and all federal, state, and local Tax audits and litigation shall be
conducted under the direction of the Partnership Representative.
(b) The Partnership Representative shall use reasonable efforts to
inform each Member of all significant matters that may come to its
attention by giving notice thereof and to forward to each Member copies
of all significant written communications it may receive in such
capacity. The Partnership Representative shall consult with the Members
before taking any material actions with respect to tax matters,
including actions relating to (i) an IRS examination of the Company
commenced under Section 6231(a) of the Code, (ii) a request for
administrative adjustment filed by the Company under Section 6227 of
the Code, (iii) the filing of a petition for readjustment under Section
6234 of the Code with respect to a final notice of partnership
adjustment, (iv) the appeal of an adverse judicial decision, and (v)
the compromise, settlement, or dismissal of any such proceedings.
(c) The Partnership Representative shall not compromise or settle
any tax audit or litigation affecting the Members without the approval
of a majority of Members. Any material proposed action, inaction, or
election to be taken
[[Page 64589]]
by the Partnership Representative, including the election under Section
6226(a)(1) of the Code, shall require the prior approval of a majority
of Members.
Article XI. Dissolution and Termination
Section 11.1 Dissolution of Company
The Company shall dissolve, and its assets and business shall be
wound up, upon the occurrence of any of the following events:
(a) Unanimous written consent of the Members to dissolve the
Company;
(b) The sale or other disposition of all or substantially all the
Company's assets outside the ordinary course of business;
(c) An event which makes it unlawful or impossible for the Company
business to be continued;
(d) The withdrawal of one or more Members such that there is only
one remaining Member; or
(e) The entry of a decree of judicial dissolution under Sec. 18-
802 of the Delaware Act.
Section 11.2 Liquidation and Distribution
Following the occurrence of an event described in Section 11.1, the
Members shall appoint a liquidating trustee who shall wind up the
affairs of the Company by (i) selling its assets in an orderly manner
(so as to avoid the loss normally associated with forced sales), and
(ii) applying and distributing the proceeds of such sale, together with
other funds held by the Company: (a) First, to the payment of all debts
and liabilities of the Company; (b) second, to the establishments of
any reserves reasonably necessary to provide for any contingent
recourse liabilities and obligations; (c) third, to the Members in
accordance with Exhibit D; and (d) fourth, to the Members as determined
by a majority of Members.
Section 11.3 Termination
Each of the Members shall be furnished with a statement prepared by
the independent accountants retained on behalf of the Company, which
shall set forth the assets and liabilities of the Company as of the
date of the final distribution of Company's assets under Section 10.2
and the net profit or net loss for the fiscal period ending on such
date. Upon compliance with the distribution plan set forth in Section
10.2, the Members shall cease to be such, and the liquidating trustee
shall execute, acknowledge, and cause to be filed a certificate of
cancellation of the Company. Upon completion of the dissolution,
winding up, liquidation, and distribution of the liquidation proceeds,
the Company shall terminate.
Article XII. Exculpation and Indemnification
Section 12.1 Exculpation
Each Member, by and for itself, each of its Affiliates and each of
its and their respective equity holders, directors, officers,
controlling persons, partners, employees, successors and assigns,
hereby acknowledges and agrees that it is the intent of the Company and
each Member that the liability of each Member and each individual
currently or formerly serving as an SRO Voting Representative (each, an
``Exculpated Party'') be limited to the maximum extent permitted by
Applicable Law or as otherwise expressly provided herein. In accordance
with the foregoing, the Members hereby acknowledge and agree that:
(a) To the maximum extent permitted by Applicable Law or as
otherwise expressly provided herein, no present or former Exculpated
Party or any of such Exculpated Party's Affiliates, heirs, successors,
assigns, agents or representatives shall be liable to the Company or
any Member for any loss suffered in connection with a breach of any
fiduciary duty, errors in judgment or other acts or omissions by such
Exculpated Party; provided, however, that this provision shall not
eliminate or limit the liability of such Exculpated Party for (i) acts
or omissions which involve gross negligence, willful misconduct or a
knowing violation of law, or (ii) as provided in Section 5.4(d) hereof,
losses resulting from such Exculpated Party's Transaction Reports,
Quotation Information or other information reported to the Processors
by such Exculpated Party (collectively ``Non-Exculpated Items''). Any
Exculpated Party may consult with counsel and accountants in respect of
Company affairs, and provided such Person acts in good faith reliance
upon the advice or opinion of such counsel or accountants, such Person
shall not be liable for any loss suffered in reliance thereon.
(b) Notwithstanding anything to the contrary contained herein,
whenever in this Agreement or any other agreement contemplated herein
or otherwise, an Exculpated Party is permitted or required to take any
action or to make a decision in its ``sole discretion'' or
``discretion'' or that it deems ``necessary,'' or ``necessary or
appropriate'' or under a grant of similar authority or latitude, the
Exculpated Party may, insofar as Applicable Law permits, make such
decision in its sole discretion (regardless of whether there is a
reference to ``sole discretion'' or ``discretion''). The Exculpated
Party (i) shall be entitled to consider such interests and factors as
it desires (including its own interests), (ii) shall have no duty or
obligation (fiduciary or otherwise) to give any consideration to any
interest of or factors affecting the Company or the Members, and (iii)
shall not be subject to any other or different standards imposed by
this Agreement, or any other agreement contemplated hereby, under any
Applicable Law or in equity.
Section 12.2 Right to Indemnification
(a) Subject to the limitations and conditions provided in this
Article XII and to the fullest extent permitted by Applicable Law, the
Company shall indemnify each Company Indemnified Party for Losses as a
result of the Company Indemnified Party being a Party to a Proceeding.
Notwithstanding the foregoing, no such indemnification shall be
available in the event the Company is a claimant against the Company
Indemnified Party.
(b) Indemnification under this Article XII shall continue as to a
Company Indemnified Party who has ceased to serve in the capacity that
initially entitled such Company Indemnified Party to indemnity
hereunder; provided, however, that the Company shall not be obligated
to indemnify a Company Indemnified Party for the Company Indemnified
Party's Non-Exculpated Items.
(c) The rights granted pursuant to this Article XII shall be deemed
contract rights, and no amendment, modification, or repeal of this
Article XII shall have the effect of limiting or denying any such
rights with respect to actions taken or Proceedings arising prior to
any amendment, modification, or repeal. It is expressly acknowledged
that the indemnification provided in this Article XII could involve
indemnification for negligence or under theories of strict liability.
(d) The Company shall be the primary obligor in respect of any
Company Indemnified Party's claim for indemnification, for advancement
of expenses, or for providing insurance, subject to this Article XII.
The obligation, if any, of any Member or its Affiliates to indemnify,
to advance expenses to, or provide insurance for any Company
Indemnified Party shall be secondary to the obligations of the Company
under this Article XII (and the Company's insurance providers shall
have no right to contribution or subrogation with respect to the
insurance plans of such Member or its Affiliates).
[[Page 64590]]
Section 12.3 Advance Payment
Reasonable expenses incurred by a Company Indemnified Party who is
a named defendant or respondent to a Proceeding shall be paid by the
Company in advance of the final disposition of the Proceeding upon
receipt of an undertaking by or on behalf of such Company Indemnified
Party to repay such amount if it shall ultimately be determined that he
or she is not entitled to be indemnified by the Company.
Section 12.4 Appearance as a Witness
Notwithstanding any other provision of this Article XII, the
Company shall pay or reimburse reasonable out-of-pocket expenses
incurred by a Company Indemnified Party in connection with his
appearance as a witness or other participation in a Proceeding at a
time when he is not a named defendant or respondent in the Proceeding.
Section 12.5 Nonexclusivity of Rights
The right to indemnification and the advancement and payment of
expenses conferred in this Article XII shall not be exclusive of any
other right which any Company Indemnified Person may have or hereafter
acquire under any law (common or statutory), provision of the
Certificate or this Agreement or otherwise.
Article XIII. Miscellaneous
Section 13.1 Expenses
The Company shall pay all current expenses, including any Taxes
payable by the Company, whether for its own account or otherwise
required by law (including any costs of complying with applicable tax
obligations), third-party service provider fees, and all administrative
and processing expenses and fees, as well as any other amounts owing to
the Processors under the Processor Services Agreements, to the
Administrator under the Administrative Services Agreement, or to the
Processors, Administrator, or FINRA under Exhibit D to this Agreement,
before any allocations may be made to the Members. Appropriate
reserves, as unanimously determined by the Members, may be charged to
the Capital Account of the Members for (i) contingent liabilities, if
any, as of the date any such contingent liabilities become known to the
Operating Committee, or (ii) amounts needed to pay the Company's
operating expenses, including administrative and processing expenses
and fees, before any allocations are made to the Member. Each Member
shall bear the cost of implementation of any technical enhancements to
the System made at its request and solely for its use, subject to
reapportionment should any other Member subsequently make use of the
enhancement, or the development thereof.
Section 13.2 Entire Agreement
Upon the Operative Date, this Agreement supersedes the CQ Plan, the
CTA Plan, and the UTP Plan and all other prior agreements among the
Members with respect to the subject matter hereof. This instrument
contains the entire agreement with respect to such subject matter.
Section 13.3 Notices and Addresses
Unless otherwise specified herein, all notices, consents,
approvals, reports, designations, requests, waivers, elections, and
other communications (collectively, ``Notices'') authorized or required
to be given pursuant to this Agreement shall be in writing and may be
delivered by certified or registered mail, postage prepaid, by hand, by
any private overnight courier service, or notification through the
Company's web portal. Such Notices shall be mailed or delivered to the
Members at the addresses set forth on Exhibit A or such other address
as a Member may notify the other Members of in writing. Any Notices to
be sent to the Company shall be delivered to the principal place of
business of the Company or at such other address as the Operating
Committee may specify in a notice sent to all of the Members. Notices
shall be effective (i) if mailed, on the date three days after the date
of mailing, (ii) if hand delivered or delivered by private courier, on
the date of delivery, or (iii) if sent by through the Company's web
portal, on the date sent; provided, however, that notices of a change
of address shall be effective only upon receipt.
Section 13.4 Governing Law
This Agreement shall be governed by and construed in accordance
with the Delaware Act and internal laws and decisions of the State of
Delaware, without regard to the conflicts of laws principles thereof;
provided, however, that the rights and obligations of the Members, the
Processors and the Administrator, and of Vendors, Subscribers, and
other Persons contracting with the Company in respect of the matters
covered by this Agreement, shall at all times also be subject to any
applicable provisions of the Exchange Act and any rules and regulations
promulgated thereunder. For the avoidance of doubt, nothing in this
Agreement waives any protection or limitation of liability afforded any
of the Members or any of their Affiliates by common law, including the
doctrines of self-regulatory organization immunity and federal
preemption.
Section 13.5 Amendments
(a) Except as this Agreement otherwise provides, this Agreement may
be modified from time to time when authorized by the Operating
Committee pursuant to Section 4.3, subject to the approval of the
Commission or when such modification otherwise becomes effective
pursuant to Section 11A of the Exchange Act and Rule 608 of Regulation
NMS.
(b) Notwithstanding Section 13.5(a), Articles IX, X, XI, and XII
may be modified upon approval by a majority of Members; provided,
however, that Operating Committee approval pursuant to Section 4.3 will
be required for modifications to the allocation of all items of income,
gain, loss, and deduction in accordance with Exhibit D.
(c) In the case of a Ministerial Amendment, the Chair of the
Company's Operating Committee may modify this Agreement by submitting
to the Commission an appropriate amendment that sets forth the
modification; provided, however, that 48-hours advance notice of the
amendment to the Operating Committee is required. Such an amendment
shall become effective upon filing with the Commission in accordance
with Section 11A of the Exchange Act and Rule 608 of Regulation NMS.
(d) ``Ministerial Amendment'' means an amendment to this Agreement
that pertains solely to any one or more of the following:
(i) admitting a new Member to the Company;
(ii) changing the name or address of a Member;
(iii) incorporating a change that the Commission has implemented by
rule and that requires no conforming language to the text of this
Agreement;
(iv) incorporating a change (A) that the Commission has implemented
by rule, (B) that requires conforming language to the text of this
Agreement, and (C) whose conforming language to the text of this
Agreement has been approved by the affirmative vote of the Operating
Committee pursuant to Section 4.3;
(v) incorporating a change (A) that a Governmental Authority
requires relating to the governance or operation of an LLC, (B) that
requires conforming language to the text of this Agreement, and (C)
whose conforming language to the text of this Agreement has been
approved by the affirmative vote of the
[[Page 64591]]
Operating Committee pursuant to Section 4.3 or upon approval by a
majority of Members pursuant to Section 13.5(b), as applicable; or
(vi) incorporating a purely technical change, such as correcting an
error or an inaccurate reference to a statutory provision, or removing
language that has become obsolete.
Section 13.6 Successors
This Agreement shall be binding upon and inure to the benefit of
the Members and their respective legal representatives and successors.
Section 13.7 Limitation on Rights of Others
None of the provisions of this Agreement shall be for the benefit
of or enforceable by any creditor of the Company. Furthermore, except
as provided in Section 3.7(b), the Members shall not have any duty or
obligation to any creditor of the Company to make any contribution to
the Company or to issue any call for capital pursuant to this
Agreement. Nothing in this Agreement shall be deemed to create any
legal or equitable right, remedy or claim in any Person not a party
hereto (other than any Person indemnified under Article XII).
Section 13.8 Counterparts
This Agreement may be executed by the Members in any number of
counterparts, no one of which need contain the signature of all
Members. As many such counterparts as shall together contain all such
signatures shall constitute one and the same instrument.
Section 13.9 Headings
The section and other headings contained in this Agreement are for
reference purposes only and shall not be deemed to be a part of this
Agreement or to affect the meaning or interpretation of any provisions
of this Agreement.
Section 13.10 Validity and Severability
If any provision of this Agreement shall be held invalid or
unenforceable, that shall not affect the validity or enforceability of
any other provisions of this Agreement, all of which shall remain in
full force and effect.
Section 13.11 Statutory References
Each reference in this Agreement to a particular statute or
regulation, or a provision thereof, shall be deemed to refer to such
statute or regulation, or provision thereof, or to any similar or
superseding statute or regulation, or provision thereof, as is from
time to time in effect.
Section 13.12 Modifications To Be in Writing
This Agreement constitutes the entire understanding of the parties
hereto with respect to the subject matter hereof, and no amendment,
modification or alteration shall be binding unless the same is in
writing and adopted in accordance with the provisions of Section 13.5.
[Signature Pages Follow]
In witness whereof, the undersigned Members have executed this
Agreement as of the day and year first above written.
Exhibit A
Members of CT Plan LLC
------------------------------------------------------------------------
Member name and address
-------------------------------------------------------------------------
Cboe BYX Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois
60605.
Cboe BZX Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois
60605.
Cboe EDGA Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois
60605.
Cboe EDGX Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois
60605.
Cboe Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois 60605.
Financial Industry Regulatory Authority, Inc., 1735 K Street NW,
Washington, DC 20006.
Investors' Exchange LLC, 3 World Trade Center 58th Floor, New York, New
York 10007.
Long-Term Stock Exchange, Inc., 300 Montgomery St., Ste. 790, San
Francisco, CA 94104.
MEMX LLC, 111 Town Square Place, Suite 520, Jersey City, New Jersey
07310.
Nasdaq BX, Inc., One Liberty Plaza, 165 Broadway, New York, New York
10006.
Nasdaq ISE, LLC, One Liberty Plaza, 165 Broadway, New York, New York
10006.
Nasdaq PHLX LLC, FMC Tower, Level 8, 2929 Walnut Street, Philadelphia,
Pennsylvania 19104.
The Nasdaq Stock Market LLC, One Liberty Plaza, 165 Broadway, New York,
NY 10006.
New York Stock Exchange LLC, 11 Wall Street, New York, New York 10005.
NYSE American LLC, 11 Wall Street, New York, New York 10005.
NYSE Arca, Inc., 11 Wall Street, New York, New York 10005.
NYSE Chicago, Inc., 11 Wall Street, New York, New York 10005.
NYSE National, Inc., 11 Wall Street, New York, NY 10005.
------------------------------------------------------------------------
Exhibit B
Disclosures
(a) The Members must respond to the following questions and
instructions:
(i) Is the Member for profit or not-for-profit? If the Member is
for profit, is it publicly or privately owned? If privately owned, list
any owner with an interest of 5% or more of the Member, where to the
Member'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 CT Feeds and/or Member
PDP.
(ii) Does the Member offer PDP? If yes, list each product, describe
its content, and provide a link to where fees for each product are
disclosed.
(iii) Provide the names of the Voting Representative and any
alternate Voting Representatives designated by the Member. Also provide
a narrative description of such representatives' roles within the
Member organization, including the title of each individual as well as
any direct responsibilities related to the development, dissemination,
sales, or marketing of the Member's PDP, and the nature of those
responsibilities sufficient for the public to identify the nature of
any potential conflict of interest that could be perceived by a
reasonable objective observer as having an effect on the operation of
the Company. If such representatives work in or with the Member's PDP
business, describe such representatives' roles and describe how that
business and such representatives' Company responsibilities impacts
their compensation. In addition, describe how such representatives'
responsibilities with the PDP business may present a conflict of
interest with their responsibilities to the Company.
[[Page 64592]]
(iv) Does the Member, its Voting Representative, or its alternate
Voting Representative, or any affiliate have additional relationships
or material economic interests that could be perceived by a reasonable
objective observer to present a potential conflict of interest with
their responsibilities to the Company? If so, provide a detailed
narrative discussion of all material facts necessary to identify the
potential conflicts of interest and the effects they may have on the
Company.
(b) The Processors must respond to the following questions and
instructions:
(i) Is the Processor an affiliate of or affiliated with any Member?
If yes, disclose the Member(s) and describe the nature of the
affiliation. Include an entity-level organizational chart depicting the
Processor and its affiliates.
(ii) Provide a narrative description of the functions directly
performed by senior staff, the manager employed by the Processor to
provide Processor services to the Company, and the staff that reports
to that manager.
(iii) Does the Processor provide any services for any Member's PDP,
other NMS Plans, or creation of consolidated equity data information
for its own use? If Yes, disclose the services the Processor performs
and identify which NMS Plans. Does the Processor have any profit or
loss responsibility for a Member's PDP or any other professional
involvement with persons the Processor knows are engaged in a Member's
PDP business? If so, describe.
(iv) List the policies and procedures established to safeguard
Restricted Information, Highly Confidential Information, and
Confidential Information that is applicable to the Processor.
(v) Does the Processor, or its representatives, have additional
relationships or material economic interests that could be perceived by
a reasonable objective observer to present a potential conflict of
interest with the representatives' responsibilities to the Company? If
so, provide a detailed narrative discussion of all material facts
necessary to identify the potential conflicts of interest and the
effects they may have on the Company.
(c) The Administrator must respond to the following questions and
instructions:
(i) Provide a narrative description of the functions directly
performed by senior staff, the administrative services manager, and the
staff that reports to that manager.
(ii) Does the Administrator provide any services for any Member's
PDP? If yes, what services? Does the Administrator have any profit or
loss responsibility, or licensing responsibility, for a Member's PDP or
any other professional involvement with persons the Administrator knows
are engaged in the Member's PDP business? If so, describe.
(iii) List the policies and procedures established to safeguard
Restricted Information, Highly Confidential Information, and
Confidential Information that is applicable to the Administrator.
(iv) Does the Administrator, or its representatives, have
additional relationships or material economic interests that could be
perceived by a reasonable objective observer to present a potential
conflict of interest with the representatives' responsibilities to the
Company? If so, provide a detailed narrative discussion of all material
facts necessary to identify the potential conflicts of interest and the
effects they may have on the Company.
(d) The Non-SRO Voting Representatives must respond to the
following questions and instructions:
(i) Provide the Non-SRO Voting Representative's title and a brief
description of the Non-SRO Voting Representative's role within the firm
as well as any direct responsibilities related to the procurement of
PDP or CT Feeds or the development, dissemination, sales, or marketing
of PDP, and the nature of those responsibilities sufficient for the
public to identify the nature of any potential conflict of interest
that could be perceived by a reasonable objective observer as having an
effect on the operation of the Company. If such representatives work in
or with their employer's market data business, describe such Non-SRO
Voting Representative's roles and describe how that business impacts
their compensation. In addition, describe how such representatives'
responsibilities with the market data business may present a conflict
of interest with their responsibilities to the Company.
(ii) Does the Non-SRO Voting Representative have responsibilities
related to the firm's use or procurement of market data?
(iii) Does the Non-SRO Voting Representative have responsibilities
related to the firm's trading or brokerage services?
(iv) Does the Non-SRO Voting Representative's firm use the CT
Feeds? Does the Non-SRO Voting Representative's firm use a Member's
PDP?
(v) Does the Non-SRO Voting Representative's firm offer PDP? If
yes, list each product, described its content, and provide information
about the fees for each product.
(vi) Does the Non-SRO Voting Representative's firm have an
ownership interest of 5% or more in one or more Members? If yes, list
the Member(s).
(vii) Does the Non-SRO Voting Representative actively participate
in any litigation against the CQ Plan, CTA Plan, UTP Plan, or the
Company?
(viii) Does the Non-SRO Voting Representative or the Non-SRO Voting
Representative's firm have additional relationships or material
economic interests that could be perceived by a reasonable objective
observer to present a potential conflict of interest with their
responsibilities to the Company. If so, provide a detailed narrative
discussion of all material facts necessary to identify the potential
conflicts of interest and the effects they may have on the Company.
(e) Each service provider or subcontractor that has agreed in
writing to provide required disclosures and be treated as a Disclosing
Party shall respond to the following questions and instructions:
(i) Is the service provider or subcontractor affiliated with a
Member, Processor, Administrator, or employer of a Non-SRO Voting
Representative? If yes, disclose with whom the person is affiliated and
describe the nature of the affiliation.
(ii) If the service provider's or subcontractor's compensation is
on a commission basis or is tied to specific metrics, provide a
detailed narrative summary of how compensation is determined for
performing work on behalf of the Company.
(iii) Is the service provider or subcontractor subject to policies
and procedures (including information barriers) concerning the
protection of confidential information that includes affiliates? If so,
describe. If not, explain their absence.
(iv) Does the service provider or subcontractor, or its
representative, have additional relationships or material economic
interests that could be perceived by a reasonable objective observer to
present a potential conflict of interest with its responsibilities to
the Company? If so, provide a detailed narrative discussion of all
material facts necessary to identify the potential conflicts of
interest and the effects they may have on the Company.
(f) The responses to these questions will be posted on the
Company's website. If a Disclosing Party has any material changes in
its responses, the Disclosing Party must promptly update its
disclosures. Additionally, the
[[Page 64593]]
Disclosing Parties must 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.
Exhibit C
Confidentiality Policy
(a) Purpose and Scope.
(i) The purpose of this Confidentiality Policy is to provide
guidance to the Operating Committee, and all subcommittees thereof,
regarding the confidentiality of any data or information (in physical
or electronic form) generated by, accessed by, or transmitted to the
Operating Committee or any subcommittee, as well as discussions
occurring at a meeting of the Operating Committee or any subcommittee.
(ii) This Policy applies to all Covered Persons. All Covered
Persons must adhere to the principles set out in this Policy and all
Covered Persons that are natural persons may not receive Company data
and information until they affirm in writing that they have read this
Policy and undertake to abide by its terms.
(iii) Covered Persons may not disclose Restricted, Highly
Confidential, or Confidential information except as consistent with
this Policy and directed by the Operating Committee.
(iv) The Administrator and Processors will establish written
confidential information policies that provide for the protection of
information under their control and the control of their Agents,
including policies and procedures that provide systemic controls for
classifying, declassifying, redacting, aggregating, anonymizing, and
safeguarding information, that is in addition to, and not less than,
the protection afforded herein. Such policies will be reviewed and
approved by the Operating Committee pursuant to Section 4.3, publicly
posted, and made available to the Operating Committee for review and
approval every two years thereafter or when changes are made, whichever
is sooner.
(v) Information will be classified solely based on its content.
(b) Procedures.
(i) General.
(A) The Administrator and Processors will be the custodians of all
documents discussed by the Operating Committee and will be responsible
for maintaining the classification of such documents pursuant to this
Policy.
(B) The Administrator may, under delegated authority, designate
documents as Restricted, Highly Confidential, or Confidential, which
will be determinative unless altered by an affirmative vote of the
Operating Committee pursuant to Section 4.3.
(C) The Administrator will ensure that all Restricted, Highly
Confidential, or Confidential documents are properly labeled and, if
applicable, electronically safeguarded.
(D) All contracts between the Company and its Agents shall require
Company information to be treated as Confidential Information that may
not be disclosed to third parties, except as necessary to effect the
terms of the contract or as required by law, and shall incorporate the
terms of this Policy, or terms that are substantially equivalent or
more restrictive, into the contract.
(ii) Procedures Concerning Restricted Information. Except as
provided below, Covered Persons in possession of Restricted Information
are prohibited from disclosing it to others, including Agents. This
prohibition does not apply to disclosures to the staff of the SEC or as
otherwise required by Applicable Law, or to other Covered Persons as
expressly provided for by this Policy. Restricted Information will be
kept in confidence by the Administrator and Processors and will not be
disclosed to the Operating Committee or any subcommittee thereof, or
during Executive Session, except as follows:
(A) If the Administrator determines that it is appropriate to share
a customer's financial information with the Operating Committee or a
subcommittee thereof, the Administrator will first anonymize the
information by redacting the customer's name and any other information
that may lead to the identification of the customer.
(B) The Administrator may disclose the identity of a customer that
is the subject of Restricted Information in Executive Session only if
the Administrator determines in good faith that it is necessary to
disclose the customer's identity in order to obtain input or feedback
from the Operating Committee or a subcommittee thereof about a matter
of importance to the Company. In such an event, the Administrator will
change the designation of the information at issue from ``Restricted
Information'' to ``Highly Confidential Information,'' and its use will
be governed by the procedures for Highly Confidential Information in
subparagraph (iii) below.
(iii) Procedures Concerning Highly Confidential Information.
(A) Disclosure of Highly Confidential Information:
(1) Highly Confidential Information may be disclosed in Executive
Session of the Operating Committee or to the subcommittee established
pursuant to Section 4.7(c). Covered Persons in possession of Highly
Confidential Information are prohibited from disclosing it to others,
including Agents, except to other Covered Persons who need the Highly
Confidential Information to fulfill their responsibilities to the
Company. This prohibition does not apply to disclosures to the staff of
the SEC or as otherwise required by law (such as those required to
receive the information to ensure the Member complies with its
regulatory obligations), or to other Covered Persons authorized to
receive it.
(2) Highly Confidential Information may be disclosed to the staff
of the SEC, unless it is protected by the Attorney-Client Privilege or
the Work Product Doctrine. Any disclosure of Highly Confidential
Information to the staff of the SEC will be accompanied by a FOIA
Confidential Treatment request.
(3) Apart from the foregoing, the Operating Committee has no power
to authorize any other disclosure of Highly Confidential Information.
(B) In the event that a Covered Person is determined by an
affirmative vote of the Operating Committee pursuant to this Policy to
have disclosed Highly Confidential Information, the Operating Committee
will determine the appropriate remedy for the breach based on the facts
and circumstances of the event. For an SRO Voting Representative or
Member Observer, remedies include a letter of complaint submitted to
the SEC, which may be made public by the Operating Committee. For a
Non-SRO Voting Representative, remedies include removal of that Non-SRO
Voting Representative.
(iv) Procedures Concerning Confidential Information.
(A) Confidential Information may be disclosed during a meeting of
the Operating Committee or any subcommittee thereof. Additionally, a
Covered Person may disclose Confidential Information to other persons
to allow such other persons to fulfill their responsibilities to the
Company. A Covered Person also may disclose Confidential Information to
the staff of the SEC, as authorized by the Operating Committee as
described below, or as may be otherwise required by law.
(B) The Operating Committee may authorize the disclosure of
Confidential Information by an affirmative vote of the Operating
Committee pursuant to
[[Page 64594]]
Section 4.3. Notwithstanding the foregoing, the Operating Committee
will not authorize the disclosure of Confidential Information that is
generated by a Member or Non-SRO Voting Representative and designated
by such Member or Non-SRO Voting Representative as Confidential, unless
such Member or Non-SRO Voting Representative consents to the
disclosure.
(C) Non-SRO Voting Representatives may be authorized by the
Operating Committee to disclose particular Confidential Information
only in furtherance of the interests of the Company, to enable them to
consult with industry representatives or technical experts, provided
that the Non-SRO Voting Representatives take any steps requested by the
Operating Committee to prevent further dissemination of that
Confidential Information, including providing the individual(s)
consulted with a copy of this Policy and requesting that person to
maintain the confidentiality of such information in a manner consistent
with this policy.
(D) A Covered Person that is a representative of a Member may be
authorized by the Operating Committee to disclose particular
Confidential Information to other employees or agents of the Member or
its affiliates only in furtherance of the interests of the Company as
needed for such Covered Person to perform his or her function on behalf
of the Company. A copy of this Policy will be made available to
recipients of such information who are employees or agents of a Member
or its affiliates that are not Covered Persons, who will be required to
abide by this Confidentiality Policy.
(E) A Covered Person may disclose their own individual views and
statements that may otherwise be considered Confidential Information
without obtaining authorization of the Operating Committee, provided
that in so disclosing, the Covered Person is not disclosing the views
or statements of any other Covered Person or Member that are considered
Confidential Information.
(F) A person that has reason to believe that Confidential
Information has been disclosed by another without the authorization of
the Operating Committee or otherwise in a manner inconsistent with this
Policy may report such potential unauthorized disclosure to the Chair
of the Operating Committee. In addition, a Covered Person that
discloses Confidential Information without the authorization of the
Operating Committee will report such disclosure to the Chair of the
Operating Committee. Such self-reported unauthorized disclosure of
Confidential Information will be recorded in the minutes of the meeting
of the Operating Committee and will contain: (a) The name(s) of the
person(s) who disclosed such Confidential Information, and (b) a
description of the Confidential Information disclosed. The name(s) of
the person(s) who disclosed such Confidential Information will also be
recorded in any publicly available summaries of Operating Committee
minutes.
Exhibit D
Distributions
Cost Allocation and Revenue Sharing
(a) Payments. In accordance with Paragraph (l) of this Exhibit D,
each Member will receive an annual payment (if any) for each calendar
year that is equal to the sum of the Member's Trading Shares and
Quoting Shares (each as defined below), in each Eligible Security for
such calendar year. In the event that total Net Distributable Operating
Income (as defined below) is negative for a given calendar year, each
Member will receive an annual bill for such calendar year to be
determined according to the same formula (described in this paragraph)
for determining annual payments to the Members. Unless otherwise stated
in this agreement, a year shall run from January 1st to December 31st
and quarters shall end on March 31st, June 30th, September 30th, and
December 31st. The Company shall cause the Administrator to provide the
Members with written estimates of each Member's percentage of total
volume within five business days of the end of each calendar month.
(b) Security Income Allocation. The ``Security Income Allocation''
for an Eligible Security shall be determined by multiplying (i) the Net
Distributable Operating Income under this Agreement for the calendar
year by (ii) the Volume Percentage for such Eligible Security (the
``Initial Allocation''), and then adding or subtracting any amounts
specified in the reallocation set forth below.
(c) Volume Percentage. The ``Volume Percentage'' for an Eligible
Security shall be determined by dividing (A) the square root of the
dollar volume of Transaction Reports disseminated by the Processors in
such Eligible Security during the calendar year by (B) the sum of the
square roots of the dollar volume of Transaction Reports disseminated
by the Processors in each Eligible Security during the calendar year.
(d) Cap on Net Distributable Operating Income. If the Initial
Allocation of Net Distributable Operating Income in accordance with the
Volume Percentage of an Eligible Security equals an amount greater than
$4.00 multiplied by the total number of qualified Transaction Reports
in such Eligible Security during the calendar year, the excess amount
shall be subtracted from the Initial Allocation for such Eligible
Security and reallocated among all Eligible Securities in direct
proportion to the dollar volume of Transaction Reports disseminated by
the Processors in Eligible Securities during the calendar year. A
Transaction Report with a dollar volume of $5,000 or more shall
constitute one qualified Transaction Report. A Transaction Report with
a dollar volume of less than $5,000 shall constitute a fraction of a
qualified Transaction Report that equals the dollar volume of the
Transaction Report divided by $5,000.
(e) Trading Share. The ``Trading Share'' of a Member in an Eligible
Security shall be determined by multiplying (i) an amount equal to
fifty percent of the Security Income Allocation for the Eligible
Security by (ii) the Member's Trade Rating in the Eligible Security.
(f) Trade Rating. A Member's ``Trade Rating'' in an Eligible
Security shall be determined by taking the average of (A) the Member's
percentage of the total dollar volume of Transaction Reports
disseminated by the Processors in the Eligible Security during the
calendar year, and (B) the Member's percentage of the total number of
qualified Transaction Reports disseminated by the Processors in the
Eligible Security during the calendar year.
(g) Quoting Share. The ``Quoting Share'' of a Member in an Eligible
Security shall be determined by multiplying (A) an amount equal to
fifty percent of the Security Income Allocation for the Eligible
Security by (B) the Member's Quote Rating in the Eligible Security.
(h) Quote Rating. A Member's ``Quote Rating'' in an Eligible
Security shall be determined by dividing (A) the sum of the Quote
Credits earned by the Member in such Eligible Security during the
calendar year by (B) the sum of the Quote Credits earned by all Members
in such Eligible Security during the calendar year.
(i) Quote Credits. A Member shall earn one ``Quote Credit'' for
each second of time (with a minimum of one full second) multiplied by
dollar value of size that an automated best bid (offer) transmitted by
the Member to the Processors during regular trading hours
[[Page 64595]]
is equal to the price of the National Best Bid and Offer in the
Eligible Security and does not lock or cross a previously displayed
``automated quotation'' (as defined under Rule 600 of Regulation NMS).
The dollar value of size of a quote shall be determined by multiplying
the price of a quote by its size.
(j) Net Distributable Operating Income. The ``Net Distributable
Operating Income'' for any particular calendar year shall mean:
(i) All cash revenues, funds and proceeds received by the Company
during such calendar year (other than Capital Contributions by the
Members or amounts paid pursuant to Section 3.7(b) of this Agreement),
including all revenues from (A) the CT Feeds, which includes the
dissemination of information with respect to Eligible Securities to
foreign marketplaces, and (B) FINRA quotation data and last sale
information for securities classified as OTC Equity Securities under
FINRA's Rule 6400 Series (the ``FINRA OTC Data'') ((A) and (B)
collectively, the ``Data Feeds''), and (C) any Membership Fees; less
(ii) 6.25% of the revenue received by the Company during such
calendar year attributable to the segment of the Data Feeds reflecting
the dissemination of information with respect to Network C Securities
and FINRA OTC Data (but, for the avoidance of doubt, not including
revenue attributable to the segment of the Data Feeds reflecting the
dissemination of information with respect to Network A Securities and
Network B Securities), which amount shall be paid to FINRA as
compensation for the FINRA OTC Data; \1\ less
---------------------------------------------------------------------------
\1\All costs associated with collecting, consolidating,
validating, generating, and disseminating the FINRA OTC Data are
borne directly by FINRA and not the Company and the Members.
---------------------------------------------------------------------------
(iii) reasonable working capital reserves and reasonable reserves
for contingencies for such calendar year, as determined by the
Operating Committee, and all costs and expenses of the Company during
such calendar year, including:
(A) All amounts payable during such calendar year to the
Administrator pursuant to the Administrative Services Agreement or this
Agreement;
(B) all amounts payable during such calendar year to the Processors
pursuant to the Processor Services Agreements or this Agreement; and
(C) all amounts payable during such calendar year to third-party
service providers engaged by or on behalf of the Company.
(k) Initial Eligibility. At the time a Member implements a
Processor-approved electronic interface with the Processors, the Member
will become eligible to receive revenue.
(l) Quarterly Distributions. The Company shall cause the
Administrator to provide Members with written estimates of each
Member's quarterly Net Distributable Operating Income within 45
calendar days of the end of the quarter, and estimated quarterly
payments or billings shall be made on the basis of such estimates. All
quarterly payments or billings shall be made to each eligible Member
within 45 days following the end of each calendar quarter in which the
Member is eligible to receive revenue; provided, that each quarterly
payment or billing shall be reconciled against a Member's cumulative
year-to-date payment or billing received to date and adjusted
accordingly; further, provided, that the total of such estimated
payments or billings shall be reconciled at the end of each calendar
year and, if necessary, adjusted by March 31st of the following year.
Interest shall be included in quarterly payments and in adjusted
payments made on March 31st of the following year. Such interest shall
accrue monthly during the period in which revenue was earned and not
yet paid and will be based on the 90-day Treasury bill rate in effect
at the end of the quarter in which the payment is made. Monthly
interest shall start accruing 45 days following the month in which it
is earned and accrue until the date on which the payment is made.
(m) Itemized Statements. In conjunction with calculating estimated
quarterly and reconciled annual payments under this Exhibit D, the
Company shall cause the Administrator to submit to the Members a
quarterly itemized statement setting forth the basis upon which Net
Distributable Operating Income was calculated. Such Net Distributable
Operating Income shall be adjusted annually based solely on the
quarterly itemized statement audited pursuant to the annual audit. The
Company shall cause the Administrator to pay or bill Members for the
audit adjustments within thirty days of completion of the annual audit.
Upon the affirmative vote of Voting Representatives pursuant to Section
4.3, the Company shall cause the Administrator to engage an independent
auditor to audit the Administrator's costs or other calculation(s).
Exhibit E
Fees
[To be determined by the Operating Committee under this Agreement]
[FR Doc. 2020-22467 Filed 10-9-20; 8:45 am]
BILLING CODE 8011-01-P