Joint Industry Plan; Order Disapproving the Fifty-First Amendment to the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis, 58544-58552 [2022-20827]
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58544
Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices
Section II identifies the docket
number(s) associated with each Postal
Service request, the title of each Postal
Service request, the request’s acceptance
date, and the authority cited by the
Postal Service for each request. For each
request, the Commission appoints an
officer of the Commission to represent
the interests of the general public in the
proceeding, pursuant to 39 U.S.C. 505
(Public Representative). Section II also
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s website (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3011.301.1
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern market dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3030, and 39
CFR part 3040, subpart B. For request(s)
that the Postal Service states concern
competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3035, and
39 CFR part 3040, subpart B. Comment
deadline(s) for each request appear in
section II.
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II. Docketed Proceeding(s)
1. Docket No(s).: MC2022–129 and
CP2022–133; Filing Title: USPS Request
to Add Priority Mail Express, Priority
Mail & First-Class Package Service
Contract 79 to Competitive Product List
and Notice of Filing Materials Under
Seal; Filing Acceptance Date: September
21, 2022; Filing Authority: 39 U.S.C.
3642, 39 CFR 3040.130 through
3040.135, and 39 CFR 3035.105; Public
Representative: Christopher C. Mohr;
Comments Due: September 29, 2022.
2. Docket No(s).: MC2022–130 and
CP2022–134; Filing Title: USPS Request
to Add Priority Mail Express, Priority
Mail, First-Class Package Service &
Parcel Select Contract 42 to Competitive
Product List and Notice of Filing
Materials Under Seal; Filing Acceptance
Date: September 21, 2022; Filing
Authority: 39 U.S.C. 3642, 39 CFR
3040.130 through 3040.135, and 39 CFR
3035.105; Public Representative:
1 See Docket No. RM2018–3, Order Adopting
Final Rules Relating to Non-Public Information,
June 27, 2018, Attachment A at 19–22 (Order No.
4679).
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Jennaca D. Upperman; Comments Due:
September 29, 2022.
3. Docket No(s).: MC2022–131 and
CP2022–135; Filing Title: USPS Request
to Add Priority Mail Express, Priority
Mail, First-Class Package Service &
Parcel Select Contract 43 to Competitive
Product List and Notice of Filing
Materials Under Seal; Filing Acceptance
Date: September 21, 2022; Filing
Authority: 39 U.S.C. 3642, 39 CFR
3040.130 through 3040.135, and 39 CFR
3035.105; Public Representative:
Kenneth R. Moller; Comments Due:
September 29, 2022.
4. Docket No(s).: MC2022–132 and
CP2022–136; Filing Title: USPS Request
to Add Priority Mail Express, Priority
Mail, First-Class Package Service &
Parcel Select Contract 44 to Competitive
Product List and Notice of Filing
Materials Under Seal; Filing Acceptance
Date: September 21, 2022; Filing
Authority: 39 U.S.C. 3642, 39 CFR
3040.130 through 3040.135, and 39 CFR
3035.105; Public Representative:
Gregory S. Stanton; Comments Due:
September 29, 2022.
This Notice will be published in the
Federal Register.
Erica A. Barker,
Secretary.
[FR Doc. 2022–20891 Filed 9–26–22; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95848; File No. S7–24–89]
Joint Industry Plan; Order
Disapproving the Fifty-First
Amendment to the Joint SelfRegulatory Organization Plan
Governing the Collection,
Consolidation and Dissemination of
Quotation and Transaction Information
for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading
Privileges Basis
September 21, 2022.
I. Introduction
On November 5, 2021,1 the
Participants 2 in the Joint Self1 See Letter from Robert Books, Chair, UTP
Operating Committee, to Vanessa Countryman,
Secretary, Commission (Nov. 5, 2021).
2 The ‘‘Participants’’ are: Cboe BYX Exchange,
Inc.; Cboe BZX Exchange, Inc.; Cboe EDGA
Exchange, Inc.; Cboe EDGX Exchange, Inc.; Cboe
Exchange, Inc.; Financial Industry Regulatory
Authority, Inc.; Investors Exchange LLC; Long-Term
Stock Exchange, Inc.; MEMX LLC; MIAX PEARL,
LLC; Nasdaq BX, Inc.; Nasdaq ISE, LLC; Nasdaq
PHLX LLC; The Nasdaq Stock Market LLC; New
York Stock Exchange LLC; NYSE American LLC;
NYSE Arca, Inc.; NYSE Chicago, Inc.; and NYSE
National, Inc.
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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
(‘‘UTP Plan’’ or ‘‘Plan’’) 3 filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
11A of the Securities Exchange Act of
1934 (‘‘Act’’) 4 and Rule 608 of
Regulation National Market System
(‘‘NMS’’) thereunder,5 a proposal (the
‘‘Proposed Amendment’’) to amend the
UTP Plan to implement the non-feerelated aspects of the Commission’s
Market Data Infrastructure Rules (‘‘MDI
Rules’’).6 The Proposed Amendment
was published for comment in the
Federal Register on November 26,
2021.7
On February 24, 2022, the
Commission instituted proceedings
pursuant to Rule 608(b)(2)(i) of
Regulation NMS,8 to determine whether
to approve or disapprove the Proposed
Amendment or to approve the Proposed
Amendment with any changes or
subject to any conditions the
Commission deems necessary or
appropriate after considering public
comment.9 On May 19, 2022, pursuant
to Rule 608(b)(2)(i) of Regulation
NMS,10 the Commission extended the
period within which to conclude
proceedings regarding the Proposed
3 The Plan governs the collection, processing, and
dissemination on a consolidated basis of quotation
information and transaction reports in Eligible
Securities for its Participants. The Plan serves as the
required transaction reporting plan for its
Participants, which is a prerequisite for their
trading Eligible Securities. See Securities Exchange
Act Release No. 55647 (Apr. 19, 2007), 72 FR 20891
(Apr. 26, 2007).
4 15 U.S.C. 78k–1.
5 17 CFR 242.608.
6 The ‘‘MDI Rules’’ as used in this Order, and as
relevant to the Proposed Amendment, are Rules
600, 603, and 614 of Regulation NMS. 17 CFR
242.600, 603, 614. See also Securities Exchange Act
Release No. 90610 (Dec. 9, 2020), 86 FR 18596 (Apr.
9, 2021) (File No. S7–03–20) (‘‘MDI Rules Release’’);
Securities Exchange Act Release No. 90610A (May
24, 2021), 86 FR 29195 (June 1, 2021) (File No. S7–
03–20) (technical correction to MDI Rules Release).
Several exchanges filed petitions for review
challenging the MDI Rules Release in the U.S. Court
of Appeals for the District of Columbia Circuit,
which were denied on May 24, 2022. See The
Nasdaq Stock Market LLC, et al. v. SEC, No. 21–
1100 (D.C. Cir. May 24, 2022).
7 See Securities Exchange Act Release No. 93620
(Nov. 19, 2021), 86 FR 67541 (Nov. 26, 2021)
(‘‘Notice’’). Comments received in response to the
Notice are available at https://www.sec.gov/
comments/s7-24-89/s72489.htm.
8 17 CFR 242.608(b)(2)(i).
9 See Securities Exchange Act Release No. 94308
(Feb. 24, 2022), 87 FR 11755 (Mar. 2, 2022) (‘‘OIP’’).
Comments received in response to the OIP are
available at https://www.sec.gov/comments/s7-2489/s72489.htm.
10 See 17 CFR 242.608(b)(2)(i).
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Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices
Amendment to July 24, 2022,11 and on
July 21, 2022, the Commission further
extended the period within which to
conclude proceedings regarding the
Proposed Amendment to September 22,
2022.12
This order disapproves the Proposed
Amendment.13
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II. Overview
Pursuant to Regulation NMS and the
Equity Data Plans,14 the national
securities exchange and national
securities associations (‘‘self-regulatory
organizations’’ or ‘‘SROs’’) must provide
certain information with respect to
quotations for and transactions in NMS
stocks (‘‘NMS information’’) to an
exclusive plan securities information
processor (‘‘exclusive SIP’’), which
consolidates the NMS information and
makes it available to market participants
on the consolidated tapes. The purpose
of the Equity Data Plans is to facilitate
the collection and dissemination of SIP
data so that the public has ready access
to a ‘‘comprehensive, accurate, and
reliable source of information for the
prices and volume of any NMS stock at
any time during the trading day.’’ 15
Because the infrastructure for the
collection, consolidation, and
dissemination of this data had not been
significantly updated since its initial
implementation in the 1970s, the
Commission adopted amendments to
Regulation NMS that increase the
11 See Securities Exchange Act Release No. 94954
(May 19, 2022), 87 FR 31922 (May 25, 2022).
12 See Securities Exchange Act Release No. 95347
(July 21, 2022), 87 FR 45142 (July 27, 2022).
13 The Participants have filed similar
amendments to the Second Restatement of the
Consolidated Tape Association (‘‘CTA’’) Plan and
the Restated Consolidated Quotation (‘‘CQ’’) Plan,
which the Commission is also disapproving. See
Securities Exchange Act Release No. 95850 (Sept.
21, 2022) (File No. SR–CTA/CQ–2021–02).
Separately, certain Participants have also filed
amendments to implement the fee-related aspects of
the MDI Rules. See Securities Exchange Act Release
Nos. 93625 (Nov. 19, 2021), 86 FR 67517 (Nov. 26,
2021) (File No. SR–CTA/CQ–2021–03), and 93618
(Nov. 19, 2021), 86 FR 67562 (Nov. 26, 2021) (File
No. S7–24–89) (together, the ‘‘Proposed Fee
Amendments’’). The Commission is, by separate
orders, also disapproving the Proposed Fee
Amendments. See Securities Exchange Act Release
No. 95851 (Sept. 21, 2022) (File No. SR–CTA/CQ–
2021–03), and 95849 (Sept. 21, 2022) (File No. S7–
24–89).
14 The three effective national market system
plans that govern the collection, consolidation,
processing, and dissemination of certain NMS
information are: (1) the CTA Plan; (2) the CQ Plan;
and (3) the UTP Plan (collectively, the ‘‘Equity Data
Plans’’). Each of the Equity Data Plans is an
effective national market system plan under 17 CFR
242.608 (Rule 608) of Regulation NMS. See also
Securities Exchange Act Release No. 28146 (June
26, 1990), 55 FR 27917 (July 6, 1990) (order
approving UTP Plan).
15 Concept Release on Equity Market Structure,
Securities Exchange Act Release No. 61358 (Jan. 14,
2010), 75 FR 3593 (Jan. 21, 2010).
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content of NMS information and amend
the manner in which such NMS
information is collected, consolidated,
and disseminated by the Equity Data
Plans.16 In the MDI Rules Release, the
Commission stated, ‘‘[t]he widespread
availability of timely market
information promotes fair and efficient
markets and facilitates the ability of
brokers and dealers to provide best
execution to their customers.’’ 17
The MDI Rules increase the content of
NMS information and modify the
manner in which NMS information is
collected, consolidated, and
disseminated. Significantly, under the
MDI Rules, the Commission required
the introduction of a competitive
decentralized consolidation model
under which competing consolidators
and self-aggregators will replace the
exclusive SIPs that collect, consolidate,
and disseminate equity market data
under the Equity Data Plans.18 Although
the exclusive SIPs will no longer
disseminate consolidated information
for an individual NMS stock, the Equity
Data Plans will continue to play an
important role—they will develop and
propose fees for the data content
underlying consolidated market data,
collect and allocate revenues collected
for this data, develop the monthly
performance metrics for competing
consolidators, and provide an annual
assessment of competing consolidator
performance.
Rule 614(e) of Regulation NMS
requires the participants of the effective
national market system plan(s) for NMS
stocks to file an amendment pursuant to
Rule 608 of Regulation NMS to conform
the plan(s) to the decentralized
consolidation model.19 Specifically,
Rule 614(e)(1) directs the participants to
file an amendment to conform the
plan(s) to reflect the provision of
information with respect to quotations
for and transactions in NMS stocks that
is necessary to generate consolidated
market data by the SROs to competing
consolidators and self-aggregators. The
Proposed Amendment was filed by the
Participants pursuant to this
requirement.20
16 See
MDI Rules Release, supra note 6.
at 18599.
18 See id. at 18637 (‘‘The Commission is adopting
a decentralized consolidation model in which
competing consolidators, rather than the exclusive
SIPs, will collect, consolidate, and disseminate
consolidated market data.’’).
19 17 CFR 242.614(e). See also MDI Rules Release,
supra note 6, 86 FR at 18680–81.
20 The Participants have filed the Proposed
Amendment under the Equity Data Plans. See supra
note 14. While the Commission issued an order on
August 6, 2020, approving, as modified, a new
national market system plan regarding equity
market data—the CT Plan—to replace the existing
17 Id.
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58545
As explained below, however, the
Proposed Amendment does not comply
with Rule 614(e)(1) because it does not
conform the Plan to reflect the provision
of information with respect to
quotations for and transactions in NMS
stocks that is necessary to generate
consolidated market data by the SROs to
competing consolidators and selfaggregators. For example, inconsistent
with the decentralized consolidation
model and with the requirements of
Rule 614(e), the Proposed Amendment:
(1) amends the Plan to reflect that it will
disseminate consolidated market data to
competing consolidators and selfaggregators, even though the Plan will
not be disseminating any consolidated
market data; 21 (2) fails to amend the
Plan to reflect that the Processor will no
longer have the responsibility to
disseminate regulatory halt notices once
the decentralized consolidation model
has been implemented; 22 (3) fails to
include requirements for the
Participants to timestamp every element
of data necessary to generate
consolidated market data; 23 and (4) fails
to amend the Plan to remove references
to a single processor.24
Because the Proposed Amendment is
inconsistent with the MDI Rules,
specifically Rule 614(e), the
Commission must disapprove the
Proposed Amendment under Rule
608(b)(2) of Regulation NMS because it
cannot find that it is necessary or
appropriate in the public interest, for
the protection of investors and the
maintenance of fair and orderly markets,
to remove impediments to, and perfect
Equity Data Plans, that order was stayed on October
13, 2021, see The Nasdaq Stock Market, et al. LLC
v. Securities and Exchange Commission, No. 21–
1167 (D.C. Cir. Oct. 13, 2021), which was before the
Participants filed the Proposed Amendment. The
Commission’s order approving the CT Plan was
subsequently vacated. See The Nasdaq Stock
Market LLC, et al. v. Securities and Exchange
Commission, Nos. 21–1167, 21–1168, 21–1169 (D.C.
Cir., July 5, 2022) (vacating Securities Exchange Act
Release No. 92586 (Aug. 6, 2021), 86 FR 44142
(Aug. 11, 2021) (Order Approving, as Modified, a
National Market System Plan Regarding
Consolidated Market Data)).
21 17 CFR 242.603(b). See also MDI Rules Release,
supra note 6, 86 FR at 18653 (‘‘[T]hese changes to
Rule 603(b) are appropriate to establish the
decentralized consolidation model.’’).
22 See, e.g., MDI Rules Release, supra note 6, 86
FR at 18633–35 (discussing the provision of
‘‘regulatory data’’ by the primary listing exchange
for an NMS stock to competing consolidators and
self-aggregators under the decentralized
consolidation model).
23 17 CFR 242.614(e)(2).
24 The MDI Rules Release amended Rule 603(b) to
remove the requirement that ‘‘all consolidated
information for an individual NMS stock [be
disseminated] through a single plan processor.’’ See
MDI Rules Release, supra note 6, 86 FR at 18652–
53. See also supra note 21; MDI Rules Release,
supra note 6, 86 FR at 18701 (discussing the
retirement of the exclusive SIPs).
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Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices
the mechanisms of, a national market
system, or otherwise in furtherance of
the purposes of the Act.25
The following is a summary of the
changes proposed to be made to the
Plan by the Proposed Amendment.27
III. Summary of the Proposed
Amendment
Section III. Definitions
Under the Proposed Amendment, the
Plan would include the following new
provision: ‘‘Terms used in this plan
have the same meaning as the terms are
defined in Rule 600(b) under the Act.’’
The Proposed Amendment amends
the definitions of ‘‘News Service,’’
‘‘Subscriber,’’ and ‘‘Vendor’’ to add
competing consolidators as a source of
Transaction Reports and Quotation
Information.
The Proposed Amendment defines
‘‘Primary Listing Exchange,’’ to mean
‘‘the national securities exchange on
which an Eligible Security is listed.’’
The proposed definition further states,
‘‘[i]f an Eligible Security is listed on
more than one national securities
exchange, Primary Listing Exchange
means the exchange on which the
security has been listed the longest.’’
The Participants explain that this
definition is being added to comply
with the requirements of the MDI Rules
and to replace the definition of ‘‘Listing
Market.’’ 28
The Proposed Amendment amends
the definition of ‘‘Quotation
Information’’ to define it as ‘‘all
information with respect to quotations
for Eligible Securities required to be
collected and made available to the
Processor, Competing Consolidators,
and Self-Aggregators pursuant to this
Plan, including all data necessary to
generate consolidated market data.’’
Similarly, the Proposed Amendment
amends the definition of ‘‘Transaction
Reports’’ to mean ‘‘all information with
respect to transactions in Eligible
Securities required to be collected and
made available to the Processor,
Competing Consolidators, and SelfAggregators pursuant to this Plan,
including all data necessary to generate
consolidated market data.’’ The
Participants explain that these
amendments are intended to track the
MDI Rules more closely.29
The Participants propose to amend
the Plan to comply with Rule 614(e) of
the MDI Rules. Under Rule 614(e),
participants to the effective national
market system plan(s) for NMS stocks
were required to file by November 5,
2021, an amendment with the
Commission that includes each of the
requirements of Rule 614(e)(1)–(5).26
Specifically, Rule 614(e)(1) requires
the amendment to conform the effective
national market system plan(s) for NMS
stocks to reflect that, under the
decentralized consolidation model, the
national securities exchange and
national securities association
participants will provide to competing
consolidators and self-aggregators the
information, with respect to quotations
for and transactions in NMS stocks, that
is necessary to generate consolidated
market data.
Rule 614(e)(2) requires the
amendment to include the application
of timestamps by the national securities
exchange and national securities
association participants on all
information with respect to quotations
for and transactions in NMS stocks that
is necessary to generate consolidated
market data, including the time that
such information was generated as
applicable by the national securities
exchange or national securities
association and the time the national
securities exchange or national
securities association made such
information available to competing
consolidators and self-aggregators.
Rule 614(e)(3) requires the
amendment to include assessments of
competing consolidator performance,
including speed, reliability, and cost of
data provision and the provision of an
annual report of such assessment to the
Commission.
Rule 614(e)(4) requires the
amendment to include the development,
maintenance, and publication of a list
that identifies the primary listing
exchange for each NMS stock.
Rule 614(e)(5) requires the
amendment to include the calculation
and publication on a monthly basis of
consolidated market data gross revenues
for NMS stocks as specified by (i) listed
on the NYSE; (ii) listed on Nasdaq; and
(iii) listed on exchanges other than
NYSE or Nasdaq.
25 17
26 17
CFR 242.608(b)(2).
CFR 242.614(e).
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Section IV. Administration of Plan
The Proposed Amendment amends
Section IV.B., Operating Committee:
Authority, to add references to
competing consolidators and selfaggregators. Specifically, the Proposed
27 The full text of the Proposed Amendment
appears as Attachment A to the Notice. See Notice,
supra note 7, 86 FR at 67543–55.
28 See id. at 67541. The Proposed Amendment
deletes a definition of ‘‘Primary Listing Market’’
from former Section X. (Section XI., as proposed),
Regulatory and Operational Halts.
29 See id.
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Amendment states that the Operating
Committee shall be responsible for
overseeing the consolidation 30 of
Quotation Information and Transaction
Reports in Eligible Securities from the
Participants for dissemination to
competing consolidators and selfaggregators, among other entities; that
the Operating Committee shall be
responsible for periodically evaluating
the Processor and competing
consolidators; and that the Operating
Committee shall be responsible for
setting the level of fees to be paid by
competing consolidators and selfaggregators, among other entities, for
services relating to Quotation
Information or Transaction Reports in
Eligible Securities, and for taking action
in respect thereto in accordance with
the Plan.
The Proposed Amendment also
amends Section IV.B. to require the
Operating Committee to publish on the
Plan’s website the Primary Listing
Exchange for each Eligible Security and
to calculate and publish, on a monthly
basis, consolidated market data gross
revenues for Eligible Securities. The
Participants explain that these
amendments are intended to comply
with Rule 614(e)(4) and Rule
614(e)(5)(ii).31
Section VII. Administrative Functions
The Proposed Amendment amends
this section by deleting references to the
Processor. Additionally, under the
Proposed Amendment, the
Administrator, not the Processor, shall
be responsible for carrying out all
administrative functions necessary to
the operation and maintenance of the
consolidated information collection and
dissemination system provided for in
the Plan. The Participants explain that
the Administrative Functions described
in the section are more appropriately
ascribed to the Administrator.32
Section VIII. Evaluation of Competing
Consolidators
The Proposed Amendment adds new
Section VIII to require the Operating
Committee to assess the performance of
competing consolidators and to submit
an annual report to the Commission
30 Under the decentralized consolidation model,
the Operating Committee would no longer oversee
the consolidation of data by the Processor, but
rather the provision of data underlying consolidated
market data to competing consolidators and selfaggregators. See Rule 603(b), 17 CFR 242.603(b);
Rule 614(e)(1), 17 CFR 242.614(e)(1). See also MDI
Rules Release, supra note 6, 86 FR at 18682.
31 See Notice, supra note 7, 86 FR at 67541.
32 See id.
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containing the assessment.33 The
Proposed Amendment requires this
annual report to include an analysis
with respect to competing consolidators’
speed, reliability, and cost of data
provision. The Participants explain that
these changes are intended to comply
with the requirements of Rule
614(e)(3).34
In addition, the Proposed Amendment
requires the Operating Committee, in
conducting the analysis, to review the
monthly performance metrics to be
published by competing consolidators
pursuant to Rule 614(d)(5).35 Rule
614(d)(5) requires competing
consolidators to publish on their
websites monthly performance metrics
as defined by the effective national
market system plan(s) for NMS stocks.36
The Proposed Amendment adds the
following monthly performance metrics
to this section:
A. Capacity statistics, including system
tested capacity, system output capacity, total
transaction capacity, and total transaction
peak capacity;
B. Message rate and total statistics,
including peak output rates on the following
bases: 1-millisecond, 10-millisecond, 100millisecond, 500-millisecond, 1-second, and
5-second;
C. System availability statistics, including
system up-time percentage and cumulative
amount of outage time;
D. Network delay statistics, including
quote and trade zero window size events,
quote and trade retransmit events, and quote
and trade message total; and
E. Latency statistics, including distribution
statistics up to the 99.99th percentile, for the
following:
1. When a Participant sends an inbound
message to a competing consolidator and
when the competing consolidator receives
the inbound message;
2. When the competing consolidator
receives the inbound message and when the
competing consolidator sends the
corresponding consolidated message to a
customer of the competing consolidator; and
3. When a Participant sends an inbound
message to a competing consolidator and
when the competing consolidator sends the
corresponding consolidated message to a
customer of the competing consolidator.
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The Participants explain that they
have proposed to amend Section VIII to
define the monthly performance metrics
in accordance with Rule 614(d)(5).37
33 As a result of this addition, the Proposed
Amendment renumbers the remaining sections of
the Plan.
34 See Notice, supra note 7, 86 FR at 67541.
35 17 CFR 242.614(d)(5).
36 See id.
37 See Notice, supra note 7, 86 FR at 67541–42.
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Section IX. (Previously Section VIII.),
Transmission of Information to
Processor, Competing Consolidators,
and Self-Aggregators by Participants
The Proposed Amendment amends
Section IX.A., Quotation Information, to
add the requirement that each
Participant collect and transmit to
competing consolidators and selfaggregators all quotation information
required to be made available by such
Participant by Rule 603(b) of Regulation
NMS,38 including all data necessary to
generate consolidated market data.
Additionally, the Proposed Amendment
requires each Participant to make
available quotation information, and
changes in any such information, to
competing consolidators and selfaggregators in the same manner and
using the same methods, including all
methods of access and the same format,
as such Participant makes available any
information with respect to quotations
for and transactions in NMS stocks to
any person.
In addition, under the Proposed
Amendment, each bid and offer with
respect to an Eligible Security furnished
to competing consolidators and selfaggregators by any Participant pursuant
to the Plan would be accompanied by
the time (reported in microseconds) the
Participant made such bid and offer
available to Competing Consolidators
and Self Aggregators. With respect to
FINRA, the Proposed Amendment states
that if FINRA’s quotation facility
provides a proprietary feed of its
quotation information, then the
quotation facility shall also furnish the
Processor, competing consolidators, and
self-aggregators with the time of the
quotation as published on the quotation
facility’s proprietary feed, and that
FINRA shall convert any quotation
times reported to it in seconds or
milliseconds to microseconds and shall
furnish such times to the Processor,
competing consolidators, and selfaggregators in microseconds.
Similarly, the Proposed Amendment
amends Section IX.B., Transaction
Reports, to require each Participant to
make available Transaction Reports to
competing consolidators and selfaggregators in the same manner and
using the same methods, including all
methods of access and the same format,
as such Participant makes available any
information with respect to quotations
for and transactions in NMS stocks to
any person.
The Proposed Amendment also
amends Section IX.B. to require
Transaction Reports to competing
38 17
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58547
consolidators and self-aggregators to
include the time (in microseconds) that
the Participant made such information
available to competing consolidators
and self-aggregators. With respect to
FINRA, the Proposed Amendment states
that if FINRA’s trade reporting facility
provides a proprietary feed of trades
reported by the trade reporting facility
to the Processor, competing
consolidators and self-aggregators, then
the FINRA trade reporting facility shall
also furnish the Processor with the time
of the transmission as published on the
facility’s proprietary feed. Additionally,
the Proposed Amendment requires
FINRA to convert times that its
members report to it in seconds or
milliseconds to microseconds and to
furnish such times to the Processor,
Competing Consolidators, and SelfAggregators in microseconds. The
Participants state that the amendments
to Sections IX.A. and IX.B. are designed
to comply with the requirements of Rule
614(e)(1) and (2).39
The Proposed Amendment also
deletes the following statement from
Section IX.B.: ‘‘The Participants shall
seek to reduce the time period for
reporting last sale prices to the
Processor as conditions warrant.’’
In addition, Section IX.B. currently
includes a list of types of transactions
that are not required to be reported to
the Processor pursuant to the Plan. The
Proposed Amendment adds competing
consolidators and self-aggregators as
entities to which these types of
transactions are not required to be
reported.
Finally, the Proposed Amendment
amends Section IX.D. to include
references to competing consolidators
and self-aggregators. Section IX.D., as
amended would read: ‘‘Whenever a
Participant determines that a level of
trading activity or other unusual market
conditions prevent it from collecting
and transmitting Quotation Information
or Transaction Reports to the Processor,
Competing Consolidators, and SelfAggregators, or where a trading halt or
suspension in an Eligible Security is in
effect in its Market, the Participant shall
promptly notify the Processor,
Competing Consolidators, and SelfAggregators of such condition or event
and shall resume collecting and
transmitting Quotation Information and
39 Notice, supra note 7, 86 FR at 67542. The
Participants state that the Proposed Amendment
amends Section IX.B., Transaction Reports, to add
the requirement that each Participant agrees to
collect and transmit to competing consolidators and
self-aggregators all transaction reports required to
be made available pursuant to Rule 603(b) of
Regulation NMS; however, the Proposed
Amendment does not actually propose to make this
change to the text of the Plan. See id. at 67550.
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Transaction Reports to it as soon as the
condition or event is terminated. In the
event of a system malfunction resulting
in the inability of a Participant or its
members to transmit Quotation
Information or Transaction Reports to
the Processor, Competing Consolidators,
and Self-Aggregators, the Participant
shall promptly notify the Processor,
Competing Consolidators, and SelfAggregators of such event or condition.
Upon receiving such notification, the
Processor shall take appropriate action,
including either closing the quotation or
purging the system of the affected
quotations.’’
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Section XI. (Previously Section X.),
Regulatory and Operational Halts
The Proposed Amendment revises
this section to delete the definition of
‘‘Primary Listing Market’’ from Section
XI.A., Definitions for Purposes of
Section XI. The Proposed Amendment
also replaces references to ‘‘Primary
Listing Market’’ with ‘‘Primary Listing
Exchange’’ throughout Section XI.40 The
Participants state that this change would
align the text of the Plan with
terminology in the MDI Rules.41
The Proposed Amendment amends
Section XI.B., Operational Halts, to state
that competing consolidators and selfaggregators shall be notified by a
Participant if that Participant has
concerns about its ability to collect and
transmit Quotation Information or
Transaction Reports, 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. Similarly, the Proposed
Amendment amends Section XI.H.,
Communications, to state that if a
Primary Listing Exchange for an Eligible
Security determines it appropriate to
initiate a Regulatory Halt, it will notify
competing consolidators and selfaggregators 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 Operating Committee
and the Primary Listing Exchange. The
Participants state that these changes are
consistent with Rule 614(e)(1) and
would ensure that competing
consolidators and self-aggregators are
notified of information related to
Regulatory and Operational Halts and
that competing consolidators can
40 The Proposed Amendment does not replace a
reference to Primary Listing Market in the
definition of ‘‘Regulatory Halt’’ in this section.
41 See Notice, supra note 7, 86 FR at 67542.
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disseminate this information to their
customers.42
Section XII. (Previously Section XI.),
Hours of Operation
The Proposed Amendment amends
Section XII.B.(ii) and (iii) to add
references to competing consolidators
and self-aggregators. Specifically, with
respect to the reporting obligations of
Participants, proposed Section
XII.B.(ii)provides that transactions in
Eligible Securities executed after 8:00
p.m. and before 12:00 a.m. (midnight)
shall be reported to the Processor,
competing consolidators, and selfaggregators 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.
And proposed Section XII.B.(iii)
provides that transactions in Eligible
Securities executed between 12:00 a.m.
(midnight) and 4:00 a.m. ET shall be
transmitted to the Processor, competing
consolidators, and self-aggregators
between 4:00 a.m. and 9:30 a.m. ET, on
trade date, shall be designated as ‘‘.T’’
trades to denote their execution outside
normal market hours, and shall be
accompanied by the time of execution.
The Proposed Amendment also
amends Section XII.D. to require
Participants that enter Quotation
Information or submit Transaction
Reports to competing consolidators and
self-aggregators between 4:00 a.m. and
9:30 a.m. ET, and after 4:00 p.m. ET
until 8:00 p.m. ET, to do so for all
Eligible Securities in which they enter
quotations.
Section XIV. (Previously Section XIII.),
Financial Matters
The Proposed Amendment amends
Section XIV.C., Maintenance of
Financial Records, by replacing
references to the Processor with
references to the Administrator. The
Participants explain that the
responsibilities described in that section
are more appropriately ascribed to the
Administrator.43
Section XV. (Previously Section XIV.),
Indemnification
The Proposed Amendment amends
this section to add references to
Competing Consolidators and SelfAggregators and to remove a reference to
Vendors as a recipient of Transaction
Reports, Quotation Information, or other
information disseminated by the
Processor. Specifically, the first
42 See
43 See
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id.
id.
Frm 00076
paragraph in this section now states:
‘‘Each Participant agrees, severally and
not jointly, to indemnify and hold
harmless each other Participant,
Nasdaq, and each of its directors,
officers, employees and agents
(including the Operating Committee and
its employees and agents) from and
against any and all loss, liability, claim,
damage and expense whatsoever
incurred or threatened against such
persons as a result of any Transaction
Reports, Quotation Information or other
information reported to the Processor,
Competing Consolidators, and SelfAggregators by such Participant and
disseminated by the Processor,
Competing Consolidators, and SelfAggregators. This indemnity agreement
shall be in addition to any liability that
the indemnifying Participant may
otherwise have.’’
Section XVIII. (Previously Section
XVII.), Applicability of Securities
Exchange Act of 1934
The Proposed Amendment amends
this section to include Competing
Consolidators and Self-Aggregators as
subject to any applicable provisions of
the Act, as amended, and any rules and
regulations promulgated thereunder.
Section XIX. (Previously Section XVIII.),
Operational Issues
The Proposed Amendment amends
Section XIX.A. to include references to
Competing Consolidators and SelfAggregators to require each Participant
to collect and validate quotes and last
sale reports within its own system prior
to transmitting this data to Competing
Consolidators and Self-Aggregators.
Section XXI. Depth of Book Display
The Proposed Amendment deletes
this section. The Participants explain
that this provision is obsolete given the
MDI Rules.44
IV. Discussion
A. The Applicable Standard of Review
Under Rule 608(b)(2) of Regulation
NMS, the Commission shall approve a
national market system plan or
proposed amendment to an effective
national market system plan, with such
changes or subject to such conditions as
the Commission may deem necessary or
appropriate, if it finds that the plan or
amendment is necessary or appropriate
in the public interest, for the protection
of investors and the maintenance of fair
and orderly markets, to remove
impediments to, and perfect the
mechanisms of, a national market
system, or otherwise in furtherance of
44 See
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the purposes of the Act.45 The
Commission shall disapprove a national
market system plan or proposed
amendment if it does not make such a
finding.46 Furthermore, Rule
700(b)(3)(ii) of the Commission’s Rules
of Practice states:
The burden to demonstrate that a NMS
plan filing is consistent with the Exchange
Act and the rules and regulations issued
thereunder that are applicable to NMS plans
is on the plan participants that filed the NMS
plan filing. Any failure of the plan
participants that filed the NMS plan filing to
provide such detail and specificity may
result in the Commission not having a
sufficient basis to make an affirmative
finding that an NMS plan filing is consistent
with the Exchange Act and the rules and
regulations issued thereunder that are
applicable to NMS plans.47
For the reasons discussed below, the
Commission does not find that the
Participants have met their burden to
demonstrate that the Proposed
Amendment is consistent with the
Act.48 Specifically, the Commission
does not find that the Participants have
demonstrated that the Proposed
Amendment is consistent with either
Rule 614(e) of Regulation NMS or Rule
608 of Regulation NMS. The Proposed
Amendment clearly does not comply
with the requirements of the MDI
Rules.49 Accordingly, the Commission
cannot make a finding that the Proposed
Amendment is necessary or appropriate
in the public interest, for the protection
of investors and the maintenance of fair
and orderly markets, to remove
impediments to, and perfect the
mechanisms of, a national market
system, or otherwise in furtherance of
the purposes of the Act.50
B. The Requirements of the MDI Rules
Regarding the Proposed Amendment
As adopted by the Commission, the
MDI Rules implement a decentralized
consolidation model in which
competing consolidators would replace
the exclusive plan processors of the
Equity Data Plans as the entities
responsible for disseminating
consolidated market data.51 The MDI
Rules Release provides for an ‘‘initial
parallel operation period’’ of 180 days
during which the existing exclusive
SIPs for the Equity Data Plans would
45 17
CFR 242.608(b)(2).
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46 Id.
47 17
CFR 201.700(b)(3)(ii).
CFR 201.700(b)(3).
49 As discussed below, the Proposed Amendment
does not comply with MDI Rules 603(b), 614(e)(1),
and 614(e)(2). 17 CFR 242.603(b), 17 CFR
242.614(e)(1), 17 CFR 242.614(e)(2).
50 17 CFR 242.608(b)(2).
51 See MDI Rules Release, supra note 6, 86 FR at
18637.
48 17
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operate in parallel with the competing
consolidators,52 and further provides for
the transition from the initial parallel
operation period to the retirement of the
exclusive SIPs for equity market data:
Within 90 days of the end of the initial
parallel operation period, the Operating
Committee will make a recommendation to
the Commission as to whether the exclusive
SIPs should be decommissioned. The
Commission will consider an effective
national market system plan amendment to
effectuate a cessation of the operations of the
exclusive SIPs and, if consistent with the
requirements of Rule 608 and the Exchange
Act, approve such an amendment.53
Pursuant to Rule 614(e)(1) of
Regulation NMS, and as discussed in
the MDI Rules Release, the Participants
to the Plan were required to file an
amendment to conform the Plan to
reflect the provision of information with
respect to quotations for and
transactions in NMS stocks that is
necessary to generate consolidated
market data by the national securities
exchange and national securities
association participants to competing
consolidators and self-aggregators.54
C. Whether the Proposed Amendment Is
Consistent With Rule 614(e)(1) of
Regulation NMS
1. Consistency With the Decentralized
Consolidation Model
Two commenters recommend
disapproval of the Proposed
Amendment because the amendment
does not properly conform the Plan to
the MDI Rules in that the amendments
fail to accurately reflect the
decentralized consolidation model.55
One commenter states, ‘‘[t]he MDI rule
represents a fundamental shift to a
decentralized consolidation model. The
Plan amendments need to reflect that
throughout the body and exhibits of the
Plans.’’ 56 The commenter also argues
that the Proposed Amendment must
‘‘[a]cknowledge that the Plan is no
longer responsible for the creation,
52 See
id. at 18700.
at 18701.
54 See id. at 18700–01.
55 See Letter from Patrick Flannery, Chief
Executive Officer, MayStreet, Inc., to Vanessa
Countryman, Secretary, Commission (Dec. 17, 2021)
(‘‘MayStreet Letter I’’); Letter from Manisha
Kimmel, Chief Policy Officer, MayStreet, Inc., to
Vanessa Countryman, Secretary, Commission (Mar.
23, 2022) (‘‘MayStreet Letter II’’); Letter from Ellen
Greene, Managing Director, Equity and Options
Market Structure, and William C. Thum, Managing
Director and Associate General Counsel, Asset
Management Group, Securities Industry and
Financial Markets Association, to Vanessa
Countryman, Secretary, Commission (Dec. 17, 2021)
(‘‘SIFMA Letter I’’).
56 MayStreet Letter II, supra note 55, at 2.
53 Id.
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58549
distribution and pricing of consolidated
market data.’’ 57
The commenter states, ‘‘[d]espite the
fact that competing consolidators
generate consolidated market data, the
Nasdaq/UTP Plan as amended at IV(B)
states that consolidated data is
disseminated to competing
consolidators.’’ 58 The commenter
reiterates that only competing
consolidators would externally
distribute and charge for consolidated
market data and that the Plan would
only be selling underlying content.59
The commenter also argues that the
sections of the Plan that discuss
vendors’ and subscribers’ contractual
relationships with the Plan should be
‘‘removed or significantly altered to
reflect that the Plan no longer has
agreements with vendors and end users
and instead have agreements with the
competing consolidators and selfaggregators related specifically to the
cost of content underlying core market
data.’’ 60 This commenter states that
‘‘the relationship between competing
consolidators and their customers
should not include a contractual
relationship with the plan’’ because
vendors would be receiving
consolidated market data from
competing consolidators rather than
from the Plan.61
This commenter also objects to the
continued references to subscribers and
vendors in the Plan as recipients of data
from the Processor, arguing that under
the decentralized consolidation model,
‘‘only competing consolidators would
sell consolidated market data to vendors
and subscribers.’’ 62
One commenter objects to the
retention of the concept of a single
processor in the Proposed
Amendment.63 Another commenter also
states that ‘‘it is worth noting that the
Plans do not reflect the decentralized
consolidation model nor do they
acknowledge the parallel period.’’ 64
This commenter requests clarification of
how the Plan will operate during the
parallel operation period, such as the
inclusion in the Plan of objective
criteria for ending the parallel period
and the addition of a section devoted to
competing consolidators and self57 Id.
at 4–5.
58 MayStreet
Letter I, supra note 55, at 4, n.5.
MayStreet Letter II, supra note 55, at 4–5.
60 See MayStreet Letter I, supra note 55, at 3.
61 Id. See also MayStreet Letter II, supra note 54,
at 9 (arguing that, since the Plan would only be
selling underlying content to competing
consolidators and self-aggregators, vendor and
subscriber agreements should not be required).
62 MayStreet Letter I, supra note 55, at 3.
63 See SIFMA Letter I, supra note 55, at 8.
64 MayStreet Letter II, supra note 55, at 8.
59 See
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aggregators to help distinguish between
their obligations and the obligations of
the exclusive SIPs during the parallel
period.65 The commenter recommends
that the Proposed Amendment clarify
that all content underlying consolidated
market data will be provided to
competing consolidators and selfaggregators, and provide validation
procedures to be followed by competing
consolidators.
The Participants submitted a
comment letter in which they argue that
maintaining the exclusive SIPs through
the parallel operation period is
consistent with the MDI Rules Release,
stating:
[P]ursuant to the phased transition period
set forth in the MDI Rules Release, the Plans
must operate a parallel operation period
during which the decentralized consolidation
model introduced by the MDI Rules will run
in parallel to the existing exclusive SIP
model. . . . After completion of the parallel
operation period, the Plans are required to
submit an amendment to effectuate a
cessation of the operations of the exclusive
SIPs, which would include removing
references of the exclusive SIPs from the text
of the Plans.66
The Participants also maintain that
the exclusive SIPs will continue to
provide market data under the current
Equity Data Plans during the parallel
operation period and that the inclusion
of the exclusive SIPs in the Equity Data
Plans (as provided for in the Proposed
Amendment) until the submission of a
further amendment after the parallel
operation period is consistent with the
MDI Rules Release.67
The Commission agrees with the
commenters who argue that the
Proposed Amendment does not properly
conform the Plan to the decentralized
consolidation model. First, under the
MDI Rules, the SROs are required to
make available to competing
consolidators and self-aggregators the
data necessary to generate consolidated
market data,68 and competing
consolidators and self-aggregators will
then generate consolidated market data,
65 See
id. at 7–8.
from James P. Dombach, Counsel for
CTA, CQ, and UTP Plans, McGonigle, P.C., to
Vanessa Countryman, Secretary, Commission, at 2
(Mar. 25, 2022) (‘‘McGonigle Letter’’).
67 See id. at 1–2.
68 See Rule 603(b), 17 CFR 242.603(b). See also
Rule 600(b)(19), which defines ‘‘consolidated
market data’’ as the following data, consolidated
across all national securities exchanges and
national securities associations: (i) Core data; (ii)
Regulatory data; (iii) Administrative data; (iv) Selfregulatory organization-specific program data; and
(v) Additional regulatory, administrative, or selfregulatory organization-specific program data
elements defined as such pursuant to the effective
national market system plan or plans required
under § 242.603(b). See 17 CFR 242.600(b)(19).
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rather than receive consolidated market
data from the Plan.69 The Participants,
however, propose to amend the UTP
Plan to give the Operating Committee
the authority to oversee the
consolidation of Quotation Information
and Transaction Reports from the
Participants to competing consolidators
and self-aggregators.70 This is not
consistent with the decentralized
consolidation model.
Specifically, Rule 614(d) provides that
competing consolidators shall collect
any information with respect to
quotations for and transactions in NMS
stocks as provided in Rule 603(b) that is
necessary to create a consolidated
market data product from each national
securities exchange and national
securities association,71 calculate and
generate a consolidated market data
product,72 and make the consolidated
market data product available to
subscribers.73 Self-aggregators will
receive information with respect to
quotations for and transactions in NMS
stocks, including all data necessary to
generate consolidated market data, and
generate consolidated market data solely
for their internal use.74 Additionally,
pursuant to Rule 603(b), the Participants
shall make available to all competing
consolidators and self-aggregators ‘‘all
data necessary to generate consolidated
market data.’’ 75 Accordingly, the Plan’s
modified role under the decentralized
consolidation model will be to develop
and file with the Commission the fees
associated with the underlying data, to
collect and allocate revenues for that
data, to develop monthly performance
metrics for competing consolidators,
and to provide an annual assessment of
competing consolidator performance.76
Therefore, the Proposed Amendment
impermissibly provides for the
dissemination by the Plan of
consolidated market data to competing
69 See
Rule 614(d)(1)–(3). 17 CFR 242.614(d)(1)–
(3).
70 See Notice, supra note 7, 86 FR at 67545 (UTP
Plan Proposed Amendment at Section IV.B.).
71 See Rule 614(d)(1), 17 CFR 242.614(d)(1).
72 See Rule 614(d)(2), 17 CFR 242.614(d)(2).
73 See Rule 614(d)(3), 17 CFR 242.614(d)(3). The
MDI Rules also define ‘‘competing consolidator’’ as
a securities information processor required to be
registered pursuant to § 242.614 (Rule 614) or a
national securities exchange or national securities
association that receives information with respect to
quotations for and transactions in NMS stocks and
generates a consolidated market data product for
dissemination to any person. See 17 CFR
242.600(b)(16).
74 The definition of ‘‘self-aggregator’’ was added
by the MDI Rules. See 17 CFR 242.600(b)(83). A
self-aggregator may make consolidated market data
available to its affiliates that are registered with the
Commission for their internal use. Id.
75 17 CFR 242.603(b).
76 See MDI Rules Release, supra note 6, 86 FR at
18604, 18681.
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consolidators and self-aggregators,
which is inconsistent with Rule 603(b),
which requires the Participants to make
available the data necessary to generate
consolidated market data to competing
consolidators and self-aggregators so
that, pursuant to Rule 614(d), those
entities can generate consolidated
market data themselves.
Second, the Proposed Amendment is
inconsistent in certain other ways with
the decentralized consolidation model
provided for in the MDI Rules. Under
the decentralized consolidation model,
the primary listing exchanges will be
required to collect, calculate, and make
available regulatory data, which
includes information relating to
regulatory halts, to competing
consolidators and self-aggregators in
accordance with the definition of
‘‘regulatory data’’ in Rule 600(b)(78).77
The Proposed Amendment, however,
does not reflect this requirement with
respect to regulatory data. For example,
the Proposed Amendment fails to
amend the Plan to reflect that the
Processor will no longer have the
responsibility to disseminate regulatory
halt notices once the decentralized
consolidation model has been
implemented.
The Proposed Amendment also does
not include requirements for the
Participants to timestamp every element
of data necessary to generate
consolidated market data. Rule 614(e)(2)
requires the application of timestamps
by the Participants on all information
with respect to quotations for and
transactions in NMS stocks that is
necessary to generate consolidated
market data, including the time that
such information was generated by the
Participant and the time the Participant
made such information available to
competing consolidators and selfaggregators.78 While the Proposed
Amendment amends the UTP Plan’s
section governing the transmission of
Quotation Information to require any
Participant that furnishes bids and
offers to competing consolidators and
self-aggregators to timestamp the time
the Participant made such bid and offer
77 17 CFR 242.600(b)(78) defines ‘‘Regulatory
Data’’ as, among other things: (A) Information
regarding Short Sale Circuit Breakers pursuant to
§ 242.201; (B) Information regarding Price Bands
required pursuant to the Plan to Address
Extraordinary Market Volatility . . . (C) Information
relating to regulatory halts or trading pauses (news
dissemination/pending, LULD, Market-Wide Circuit
Breakers) and reopenings or resumptions; (D) The
official opening and closing prices of the primary
listing exchange; and (E) An indicator of the
applicable round lot size. See 17 CFR
242.600(b)(78)(i). Regulatory data is one element of
‘‘consolidated market data,’’ as defined in Rule
600(b)(19). See supra note 68.
78 17 CFR 242.614(e)(2).
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available to competing consolidators
and self-aggregators,79 this proposed
timestamp provision does not apply to
‘‘all information with respect to
quotations for and transactions in NMS
stocks that is necessary to generate
consolidated market data.’’ 80
Additionally, the Proposed Amendment
does not specifically require that each
Participant timestamp the data
necessary to generate consolidated
market data upon generation and upon
the time it is made available to
competing consolidators and selfaggregators, as required by Rule
614(e)(2).
And finally, the Commission
disagrees with the Participants’
statement that the continued references
to the role of the Processor in the Plan,
as amended by the Proposed
Amendment, comply with the MDI
Rules Release’s implementation
schedule for parallel operation of the
exclusive SIP and the competing
consolidators.81 Rule 614(e)(1) requires
the Participants to amend the Plan to
reflect the provision of information with
respect to quotations for and
transactions in NMS stocks that is
necessary to generate consolidated
market data by the SROs to competing
consolidators and self-aggregators, i.e.,
to conform the Plan to reflect the
decentralized consolidation model.82
However, the Proposed Amendment is
not consistent with the decentralized
consolidation model and does not
conform to the fact that a single
processor will no longer be in operation
once the decentralized consolidation
model has been fully implemented.
And while the MDI Rules Release
contemplates the filing of a second
amendment by the Plan ‘‘to effectuate a
cessation of the operations of the
exclusive SIPs,’’ 83 the current Proposed
Amendment was required to conform
the Plan to reflect the provision of
information with respect to quotations
for and transactions in NMS stocks that
is necessary to generate consolidated
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79 See
Notice, supra note 7, 86 FR at 67550 (UTP
Plan Proposed Amendment at Section IX.A.).
80 In the MDI Rules Release, the Commission
stated, ‘‘[s]pecifically, the timestamps applied by
the SROs must be to the individual components of
data content underlying consolidated market data,
i.e., all of the individual components of data
content underlying core data, regulatory data,
administrative data, self-regulatory organizationspecific program data, and additional elements
defined as ‘consolidated market data.’’’ MDI Rules
Release, supra note 6, 86 FR at 18688.
81 See McGonigle Letter, supra note 66, at 1–2.
See also MDI Rules Release, supra note 6, 86 FR
at 18700–01 (discussing the parallel operation
implementation schedule).
82 17 CFR 242.614(e)(1).
83 MDI Rules Release, supra note 6, 86 FR at
18701.
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17:51 Sep 26, 2022
Jkt 256001
market data by the SROs to competing
consolidators and self-aggregators,
which, as discussed above, they have
failed to do. Moreover, the failure of the
Participants to explain in the Proposed
Amendment how the Plan will function
under the fully implemented
decentralized consolidation model upon
cessation of the exclusive SIPs not only
denies market participants the
opportunity to comment on those
proposed provisions now, but it
increases the uncertainty that firms face
in determining whether to become
competing consolidators or selfaggregators during the initial parallel
operation period, thus hampering the
implementation of the decentralized
consolidation model required by the
MDI Rules.84
Because the Proposed Amendment
clearly does not comply with the plain
terms of the MDI Rules 85 and is thus
inconsistent with the requirements of
Rule 614(e)(1), the Commission also
does not find that the Participants have
met their burden to demonstrate that the
Proposed Amendment is consistent with
Rule 608 as necessary or appropriate in
the public interest, for the protection of
investors and the maintenance of fair
and orderly markets, to remove
impediments to, and perfect the
mechanisms of, a national market
system, or otherwise in furtherance of
the purposes of the Act.86
2. Technical Comments
One commenter criticizes the failure
of the Proposed Amendment to
incorporate the definitions of the MDI
Rules.87 This commenter states, ‘‘[t]he
definitions in each of the Plans should
be updated to reflect the decentralized
consolidation model. It is insufficient to
simply refer to Rule 600(b), in large part
because there seems to be confusion
within the Plans as to the role of
competing consolidators, selfaggregators, the exclusive SIPs and
vendors.’’ 88 Specifically, this
84 See id. at 18699–700 (discussing the ‘‘first
wave’’ registration period for competing
consolidators, to begin on the date the Commission
approves the amendments to the effective national
market system plan(s) required under Rule 614(e)
including the fees for the SRO data content
necessary to generate consolidated market data).
85 Specifically, Rules 603(b), 614(e)(1) and (e)(2).
17 CFR 242.603(b), 17 CFR 242.614(e)(1), 17 CFR
242.614(e)(2).
86 See 17 CFR 242.608(b)(2).
87 See MayStreet Letter II, supra note 55, at 5.
This commenter also recommends that the
Commission issue guidance to the Participants to
aid in revising the Proposed Amendment. See id.
at 4. The discussion and findings in this Order, in
addition to the MDI Rules Release and the MDI
Rules themselves, provide sufficient guidance to the
Participants in amending the Plan.
88 Id. at 5.
PO 00000
Frm 00079
Fmt 4703
Sfmt 4703
58551
commenter suggests that the Proposed
Amendment add definitions of the
following terms: competing
consolidator, self-aggregator,
consolidated market data, content
underlying consolidated market data,
initial parallel period, and parallel
period, as well as a definition of the
content that would be disseminated by
the exclusive SIP to the Plan.89 This
commenter also suggests updating the
existing definition of Processor, and
clarifying the existing definitions of
Subscriber and Vendor to reflect the
decentralized consolidation model.90
This commenter also describes several
other technical criticisms of the
Proposed Amendment. The commenter
states that the Proposed Amendment
should have removed the addition of a
new SRO participant from the Plan’s
ministerial amendment list,91 arguing
that competing consolidators and selfaggregators would need more time to
update their systems to handle the new
Participant’s data.92 The commenter
also states that the Proposed
Amendment needs to support the
timestamps required by the MDI Rules
to the microsecond,93 and that
validation procedures to be used by
competing consolidators need to be
added to the Plan to describe the
Participants’ and the competing
consolidator’s obligations.94 The
commenter further suggests that the
Plan’s capacity planning process needs
to apply to competing consolidators and
self-aggregators so that these entities can
meet SRO-expected capacity
requirements.95 Finally, the commenter
states that the Plan’s conflict of interest
and confidentiality provisions need to
apply to competing consolidators since
they will be replacing the exclusive
SIPs.96
The Commission agrees with the
commenter that the failure to include
the definitions established by the MDI
Rules contributes to ambiguity within
the Plan. In lieu of incorporating the
MDI Rules’ definitions, the Proposed
Amendment adds a statement that
‘‘[t]erms used in this plan have the same
meaning as the terms defined in Rule
89 See
id. at 5–6.
id. at 6.
91 A ‘‘ministerial amendment’’ permits an
amendment to the Plan that is submitted by the
Chairman of the UTP Plan Operating Committee to
the Commission with less than 48 hours advance
notice to the Participants. See Notice, supra note 7,
86 FR at 67554 (Proposed Amendment at Section
XVII.).
92 See MayStreet Letter II, supra note 55, at 6–7.
93 See id. at 5.
94 See MayStreet Letter I, supra note 55, at 4;
MayStreet Letter II, supra note 55, at 8.
95 See MayStreet Letter II, supra note 55, at 10.
96 See id. at 7.
90 See
E:\FR\FM\27SEN1.SGM
27SEN1
58552
Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices
600(b) under the Act.’’ 97 This creates
ambiguity because the Proposed
Amendment uses terms adopted by the
MDI Rules but does not include
definitions of those terms, so their
applicability and the obligations they
create are unclear or are not reflected in
the Proposed Amendment. For example,
the Proposed Amendment adds a
requirement for the collection and
transmission of Quotation Information,
stating that each Participant agrees to
collect and transmit to competing
consolidators and self-aggregators ‘‘all
data necessary to generated [sic]
consolidated market data.’’ 98 However,
the Proposed Amendment does not
define ‘‘consolidated market data’’ or
even the data necessary to generate it.
The Plan thus fails to include an express
requirement for the Participants to
disseminate to competing consolidators
and self-aggregators all of the elements
of consolidated market data (e.g., core
data,99 regulatory data, and
administrative data) in accordance with
the definition of ‘‘consolidated market
data’’ in Rule 600(b)(19) 100 and Rule
603(b).101 The absence of that definition
in the Plan would lead to ambiguity
about the Participants’ obligations with
respect to consolidated market data.
Relatedly, Rule 614(e)(2) requires the
Participants to amend the Plan to apply
timestamps to all information with
respect to quotations for and
transactions in NMS stocks that is
necessary to generate consolidated
market data. However, because there is
no definition of ‘‘consolidated market
data’’ in the Plan, there is thus no
requirement in the language of the Plan
for the Participants to timestamp the
data components that constitute
consolidated market data,102 such as the
elements of core data 103 (another
definition established by the MDI Rules
that the Proposed Amendment failed to
include in the Plan), which include
auction information, odd-lot
information, and depth of book data.
This is another instance in which the
jspears on DSK121TN23PROD with NOTICES
97 See
Notice, supra note 7, 86 FR at 67543
(Proposed Amendment at Section III.).
98 Id. at 67549 (Proposed Amendment at Section
IX.A.).
99 Rule 600(b)(21) defines ‘‘core data’’ as (i) The
following information with respect to quotations
for, and transactions in, NMS stocks: (A) Quotation
sizes; (B) Aggregate quotation sizes; (C) Best bid and
best offer; (D) National best bid and national best
offer; (E) Protected bid and protected offer; (F)
Transaction reports; (G) Last sale data; (H) Odd-lot
information; (I) Depth of book data; and (J) Auction
information. See 17 CFR 242.600(b)(21).
100 See supra note 68 (defining ‘‘consolidated
market data’’).
101 17 CFR 242.603(b).
102 See supra note 68 (defining ‘‘consolidated
market data’’).
103 See supra note 99 (defining ‘‘core data’’).
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17:51 Sep 26, 2022
Jkt 256001
absence of definitions in the Plan would
lead to ambiguity about the Participants’
obligations with respect to consolidated
market data.
In addition, as discussed above, under
the MDI Rules, the primary listing
exchanges are required to collect,
calculate, and make available regulatory
data to competing consolidators and
self-aggregators in accordance with the
definition of ‘‘regulatory data’’ in Rule
600(b)(78)(i).104 The Proposed
Amendment, however, does not add the
definition of ‘‘regulatory data’’ to the
Plan. Therefore, there is no
unambiguous requirement in the Plan
that the primary listing exchanges
perform these functions.
V. Conclusion
For the reasons set forth above, the
Commission finds, pursuant to Section
11A of the Act, and Rule 608(b)(2)
thereunder, that the Proposed
Amendment is inconsistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
an NMS plan amendment.
It is therefore ordered, pursuant to
Section 11A of the Act, and Rule
608(b)(2) thereunder, that the Proposed
Amendment (File No. S7–24–89) be,
and hereby is, disapproved.
By the Commission.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–20827 Filed 9–26–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–95853; File No. SR–
NYSEARCA–2022–61]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To List and Trade the
Shares of the Breakwave Tanker
Shipping ETF
September 21, 2022.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 13, 2022, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
104 See supra note 77 (defining ‘‘regulatory data’’).
Regulatory data is one element of ‘‘consolidated
market data,’’ as defined in Rule 600(b)(19). See
supra note 68.
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
Items I, II, and III below, which Items
have been prepared by the selfregulatory 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 to list and
trade the shares of the following under
NYSE Arca Rule 8.200–E, Commentary
.02 (‘‘Trust Issued Receipts’’):
Breakwave Tanker Shipping ETF. The
proposed 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
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade shares (‘‘Shares’’) of the following
under NYSE Arca Rule 8.200–E,
Commentary .02, which governs the
listing and trading of Trust Issued
Receipts: Breakwave Tanker Shipping
ETF (the ‘‘Fund’’).4
The Fund will be a series of ETF
Managers Group Commodity Trust I (the
‘‘Trust’’).5 The Fund and the Trust will
4 Commentary .02 to NYSE Arca Rule 8.200–E
applies to Trust Issued Receipts that invest in
‘‘Financial Instruments.’’ The term ‘‘Financial
Instruments,’’ as defined in Commentary .02(b)(4) to
NYSE Arca Rule 8.200–E, means any combination
of investments, including cash; securities; options
on securities and indices; futures contracts; options
on futures contracts; forward contracts; equity caps,
collars, and floors; and swap agreements.
5 On July 1, 2022, the Trust submitted to the
Commission on a confidential basis its draft
registration statement on Form S–1 (the
‘‘Registration Statement’’) under the Securities Act
of 1933 (15 U.S.C. 77a) (‘‘Securities Act’’). The
initial confidential submission and all amendments
thereto shall be publicly filed not later than 15 days
before (i) the date on which the Trust commences
a road show for the Fund, or (ii) the requested
E:\FR\FM\27SEN1.SGM
27SEN1
]]>Agencies
[Federal Register Volume 87, Number 186 (Tuesday, September 27, 2022)]
[Notices]
[Pages 58544-58552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20827]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95848; File No. S7-24-89]
Joint Industry Plan; Order Disapproving the Fifty-First Amendment
to the Joint Self-Regulatory Organization Plan Governing the
Collection, Consolidation and Dissemination of Quotation and
Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privileges Basis
September 21, 2022.
I. Introduction
On November 5, 2021,\1\ the Participants \2\ in 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'' or ``Plan'') \3\ filed with the Securities and
Exchange Commission (``Commission''), pursuant to Section 11A of the
Securities Exchange Act of 1934 (``Act'') \4\ and Rule 608 of
Regulation National Market System (``NMS'') thereunder,\5\ a proposal
(the ``Proposed Amendment'') to amend the UTP Plan to implement the
non-fee-related aspects of the Commission's Market Data Infrastructure
Rules (``MDI Rules'').\6\ The Proposed Amendment was published for
comment in the Federal Register on November 26, 2021.\7\
---------------------------------------------------------------------------
\1\ See Letter from Robert Books, Chair, UTP Operating
Committee, to Vanessa Countryman, Secretary, Commission (Nov. 5,
2021).
\2\ The ``Participants'' are: Cboe BYX Exchange, Inc.; Cboe BZX
Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.;
Cboe Exchange, Inc.; Financial Industry Regulatory Authority, Inc.;
Investors Exchange LLC; Long-Term Stock Exchange, Inc.; MEMX LLC;
MIAX PEARL, LLC; Nasdaq BX, Inc.; Nasdaq ISE, LLC; Nasdaq PHLX LLC;
The Nasdaq Stock Market LLC; New York Stock Exchange LLC; NYSE
American LLC; NYSE Arca, Inc.; NYSE Chicago, Inc.; and NYSE
National, Inc.
\3\ The Plan governs the collection, processing, and
dissemination on a consolidated basis of quotation information and
transaction reports in Eligible Securities for its Participants. The
Plan serves as the required transaction reporting plan for its
Participants, which is a prerequisite for their trading Eligible
Securities. See Securities Exchange Act Release No. 55647 (Apr. 19,
2007), 72 FR 20891 (Apr. 26, 2007).
\4\ 15 U.S.C. 78k-1.
\5\ 17 CFR 242.608.
\6\ The ``MDI Rules'' as used in this Order, and as relevant to
the Proposed Amendment, are Rules 600, 603, and 614 of Regulation
NMS. 17 CFR 242.600, 603, 614. See also Securities Exchange Act
Release No. 90610 (Dec. 9, 2020), 86 FR 18596 (Apr. 9, 2021) (File
No. S7-03-20) (``MDI Rules Release''); Securities Exchange Act
Release No. 90610A (May 24, 2021), 86 FR 29195 (June 1, 2021) (File
No. S7-03-20) (technical correction to MDI Rules Release). Several
exchanges filed petitions for review challenging the MDI Rules
Release in the U.S. Court of Appeals for the District of Columbia
Circuit, which were denied on May 24, 2022. See The Nasdaq Stock
Market LLC, et al. v. SEC, No. 21-1100 (D.C. Cir. May 24, 2022).
\7\ See Securities Exchange Act Release No. 93620 (Nov. 19,
2021), 86 FR 67541 (Nov. 26, 2021) (``Notice''). Comments received
in response to the Notice are available at https://www.sec.gov/comments/s7-24-89/s72489.htm.
---------------------------------------------------------------------------
On February 24, 2022, the Commission instituted proceedings
pursuant to Rule 608(b)(2)(i) of Regulation NMS,\8\ to determine
whether to approve or disapprove the Proposed Amendment or to approve
the Proposed Amendment with any changes or subject to any conditions
the Commission deems necessary or appropriate after considering public
comment.\9\ On May 19, 2022, pursuant to Rule 608(b)(2)(i) of
Regulation NMS,\10\ the Commission extended the period within which to
conclude proceedings regarding the Proposed
[[Page 58545]]
Amendment to July 24, 2022,\11\ and on July 21, 2022, the Commission
further extended the period within which to conclude proceedings
regarding the Proposed Amendment to September 22, 2022.\12\
---------------------------------------------------------------------------
\8\ 17 CFR 242.608(b)(2)(i).
\9\ See Securities Exchange Act Release No. 94308 (Feb. 24,
2022), 87 FR 11755 (Mar. 2, 2022) (``OIP''). Comments received in
response to the OIP are available at https://www.sec.gov/comments/s7-24-89/s72489.htm.
\10\ See 17 CFR 242.608(b)(2)(i).
\11\ See Securities Exchange Act Release No. 94954 (May 19,
2022), 87 FR 31922 (May 25, 2022).
\12\ See Securities Exchange Act Release No. 95347 (July 21,
2022), 87 FR 45142 (July 27, 2022).
---------------------------------------------------------------------------
This order disapproves the Proposed Amendment.\13\
---------------------------------------------------------------------------
\13\ The Participants have filed similar amendments to the
Second Restatement of the Consolidated Tape Association (``CTA'')
Plan and the Restated Consolidated Quotation (``CQ'') Plan, which
the Commission is also disapproving. See Securities Exchange Act
Release No. 95850 (Sept. 21, 2022) (File No. SR-CTA/CQ-2021-02).
Separately, certain Participants have also filed amendments to
implement the fee-related aspects of the MDI Rules. See Securities
Exchange Act Release Nos. 93625 (Nov. 19, 2021), 86 FR 67517 (Nov.
26, 2021) (File No. SR-CTA/CQ-2021-03), and 93618 (Nov. 19, 2021),
86 FR 67562 (Nov. 26, 2021) (File No. S7-24-89) (together, the
``Proposed Fee Amendments''). The Commission is, by separate orders,
also disapproving the Proposed Fee Amendments. See Securities
Exchange Act Release No. 95851 (Sept. 21, 2022) (File No. SR-CTA/CQ-
2021-03), and 95849 (Sept. 21, 2022) (File No. S7-24-89).
---------------------------------------------------------------------------
II. Overview
Pursuant to Regulation NMS and the Equity Data Plans,\14\ the
national securities exchange and national securities associations
(``self-regulatory organizations'' or ``SROs'') must provide certain
information with respect to quotations for and transactions in NMS
stocks (``NMS information'') to an exclusive plan securities
information processor (``exclusive SIP''), which consolidates the NMS
information and makes it available to market participants on the
consolidated tapes. The purpose of the Equity Data Plans is to
facilitate the collection and dissemination of SIP data so that the
public has ready access to a ``comprehensive, accurate, and reliable
source of information for the prices and volume of any NMS stock at any
time during the trading day.'' \15\ Because the infrastructure for the
collection, consolidation, and dissemination of this data had not been
significantly updated since its initial implementation in the 1970s,
the Commission adopted amendments to Regulation NMS that increase the
content of NMS information and amend the manner in which such NMS
information is collected, consolidated, and disseminated by the Equity
Data Plans.\16\ In the MDI Rules Release, the Commission stated,
``[t]he widespread availability of timely market information promotes
fair and efficient markets and facilitates the ability of brokers and
dealers to provide best execution to their customers.'' \17\
---------------------------------------------------------------------------
\14\ The three effective national market system plans that
govern the collection, consolidation, processing, and dissemination
of certain NMS information are: (1) the CTA Plan; (2) the CQ Plan;
and (3) the UTP Plan (collectively, the ``Equity Data Plans''). Each
of the Equity Data Plans is an effective national market system plan
under 17 CFR 242.608 (Rule 608) of Regulation NMS. See also
Securities Exchange Act Release No. 28146 (June 26, 1990), 55 FR
27917 (July 6, 1990) (order approving UTP Plan).
\15\ Concept Release on Equity Market Structure, Securities
Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3593 (Jan. 21,
2010).
\16\ See MDI Rules Release, supra note 6.
\17\ Id. at 18599.
---------------------------------------------------------------------------
The MDI Rules increase the content of NMS information and modify
the manner in which NMS information is collected, consolidated, and
disseminated. Significantly, under the MDI Rules, the Commission
required the introduction of a competitive decentralized consolidation
model under which competing consolidators and self-aggregators will
replace the exclusive SIPs that collect, consolidate, and disseminate
equity market data under the Equity Data Plans.\18\ Although the
exclusive SIPs will no longer disseminate consolidated information for
an individual NMS stock, the Equity Data Plans will continue to play an
important role--they will develop and propose fees for the data content
underlying consolidated market data, collect and allocate revenues
collected for this data, develop the monthly performance metrics for
competing consolidators, and provide an annual assessment of competing
consolidator performance.
---------------------------------------------------------------------------
\18\ See id. at 18637 (``The Commission is adopting a
decentralized consolidation model in which competing consolidators,
rather than the exclusive SIPs, will collect, consolidate, and
disseminate consolidated market data.'').
---------------------------------------------------------------------------
Rule 614(e) of Regulation NMS requires the participants of the
effective national market system plan(s) for NMS stocks to file an
amendment pursuant to Rule 608 of Regulation NMS to conform the plan(s)
to the decentralized consolidation model.\19\ Specifically, Rule
614(e)(1) directs the participants to file an amendment to conform the
plan(s) to reflect the provision of information with respect to
quotations for and transactions in NMS stocks that is necessary to
generate consolidated market data by the SROs to competing
consolidators and self-aggregators. The Proposed Amendment was filed by
the Participants pursuant to this requirement.\20\
---------------------------------------------------------------------------
\19\ 17 CFR 242.614(e). See also MDI Rules Release, supra note
6, 86 FR at 18680-81.
\20\ The Participants have filed the Proposed Amendment under
the Equity Data Plans. See supra note 14. While the Commission
issued an order on August 6, 2020, approving, as modified, a new
national market system plan regarding equity market data--the CT
Plan--to replace the existing Equity Data Plans, that order was
stayed on October 13, 2021, see The Nasdaq Stock Market, et al. LLC
v. Securities and Exchange Commission, No. 21-1167 (D.C. Cir. Oct.
13, 2021), which was before the Participants filed the Proposed
Amendment. The Commission's order approving the CT Plan was
subsequently vacated. See The Nasdaq Stock Market LLC, et al. v.
Securities and Exchange Commission, Nos. 21-1167, 21-1168, 21-1169
(D.C. Cir., July 5, 2022) (vacating Securities Exchange Act Release
No. 92586 (Aug. 6, 2021), 86 FR 44142 (Aug. 11, 2021) (Order
Approving, as Modified, a National Market System Plan Regarding
Consolidated Market Data)).
---------------------------------------------------------------------------
As explained below, however, the Proposed Amendment does not comply
with Rule 614(e)(1) because it does not conform the Plan to reflect the
provision of information with respect to quotations for and
transactions in NMS stocks that is necessary to generate consolidated
market data by the SROs to competing consolidators and self-
aggregators. For example, inconsistent with the decentralized
consolidation model and with the requirements of Rule 614(e), the
Proposed Amendment: (1) amends the Plan to reflect that it will
disseminate consolidated market data to competing consolidators and
self-aggregators, even though the Plan will not be disseminating any
consolidated market data; \21\ (2) fails to amend the Plan to reflect
that the Processor will no longer have the responsibility to
disseminate regulatory halt notices once the decentralized
consolidation model has been implemented; \22\ (3) fails to include
requirements for the Participants to timestamp every element of data
necessary to generate consolidated market data; \23\ and (4) fails to
amend the Plan to remove references to a single processor.\24\
---------------------------------------------------------------------------
\21\ 17 CFR 242.603(b). See also MDI Rules Release, supra note
6, 86 FR at 18653 (``[T]hese changes to Rule 603(b) are appropriate
to establish the decentralized consolidation model.'').
\22\ See, e.g., MDI Rules Release, supra note 6, 86 FR at 18633-
35 (discussing the provision of ``regulatory data'' by the primary
listing exchange for an NMS stock to competing consolidators and
self-aggregators under the decentralized consolidation model).
\23\ 17 CFR 242.614(e)(2).
\24\ The MDI Rules Release amended Rule 603(b) to remove the
requirement that ``all consolidated information for an individual
NMS stock [be disseminated] through a single plan processor.'' See
MDI Rules Release, supra note 6, 86 FR at 18652-53. See also supra
note 21; MDI Rules Release, supra note 6, 86 FR at 18701 (discussing
the retirement of the exclusive SIPs).
---------------------------------------------------------------------------
Because the Proposed Amendment is inconsistent with the MDI Rules,
specifically Rule 614(e), the Commission must disapprove the Proposed
Amendment under Rule 608(b)(2) of Regulation NMS because it cannot find
that it is necessary or appropriate in the public interest, for the
protection of investors and the maintenance of fair and orderly
markets, to remove impediments to, and perfect
[[Page 58546]]
the mechanisms of, a national market system, or otherwise in
furtherance of the purposes of the Act.\25\
---------------------------------------------------------------------------
\25\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------
III. Summary of the Proposed Amendment
The Participants propose to amend the Plan to comply with Rule
614(e) of the MDI Rules. Under Rule 614(e), participants to the
effective national market system plan(s) for NMS stocks were required
to file by November 5, 2021, an amendment with the Commission that
includes each of the requirements of Rule 614(e)(1)-(5).\26\
---------------------------------------------------------------------------
\26\ 17 CFR 242.614(e).
---------------------------------------------------------------------------
Specifically, Rule 614(e)(1) requires the amendment to conform the
effective national market system plan(s) for NMS stocks to reflect
that, under the decentralized consolidation model, the national
securities exchange and national securities association participants
will provide to competing consolidators and self-aggregators the
information, with respect to quotations for and transactions in NMS
stocks, that is necessary to generate consolidated market data.
Rule 614(e)(2) requires the amendment to include the application of
timestamps by the national securities exchange and national securities
association participants on all information with respect to quotations
for and transactions in NMS stocks that is necessary to generate
consolidated market data, including the time that such information was
generated as applicable by the national securities exchange or national
securities association and the time the national securities exchange or
national securities association made such information available to
competing consolidators and self-aggregators.
Rule 614(e)(3) requires the amendment to include assessments of
competing consolidator performance, including speed, reliability, and
cost of data provision and the provision of an annual report of such
assessment to the Commission.
Rule 614(e)(4) requires the amendment to include the development,
maintenance, and publication of a list that identifies the primary
listing exchange for each NMS stock.
Rule 614(e)(5) requires the amendment to include the calculation
and publication on a monthly basis of consolidated market data gross
revenues for NMS stocks as specified by (i) listed on the NYSE; (ii)
listed on Nasdaq; and (iii) listed on exchanges other than NYSE or
Nasdaq.
The following is a summary of the changes proposed to be made to
the Plan by the Proposed Amendment.\27\
---------------------------------------------------------------------------
\27\ The full text of the Proposed Amendment appears as
Attachment A to the Notice. See Notice, supra note 7, 86 FR at
67543-55.
---------------------------------------------------------------------------
Section III. Definitions
Under the Proposed Amendment, the Plan would include the following
new provision: ``Terms used in this plan have the same meaning as the
terms are defined in Rule 600(b) under the Act.''
The Proposed Amendment amends the definitions of ``News Service,''
``Subscriber,'' and ``Vendor'' to add competing consolidators as a
source of Transaction Reports and Quotation Information.
The Proposed Amendment defines ``Primary Listing Exchange,'' to
mean ``the national securities exchange on which an Eligible Security
is listed.'' The proposed definition further states, ``[i]f an Eligible
Security is listed on more than one national securities exchange,
Primary Listing Exchange means the exchange on which the security has
been listed the longest.'' The Participants explain that this
definition is being added to comply with the requirements of the MDI
Rules and to replace the definition of ``Listing Market.'' \28\
---------------------------------------------------------------------------
\28\ See id. at 67541. The Proposed Amendment deletes a
definition of ``Primary Listing Market'' from former Section X.
(Section XI., as proposed), Regulatory and Operational Halts.
---------------------------------------------------------------------------
The Proposed Amendment amends the definition of ``Quotation
Information'' to define it as ``all information with respect to
quotations for Eligible Securities required to be collected and made
available to the Processor, Competing Consolidators, and Self-
Aggregators pursuant to this Plan, including all data necessary to
generate consolidated market data.'' Similarly, the Proposed Amendment
amends the definition of ``Transaction Reports'' to mean ``all
information with respect to transactions in Eligible Securities
required to be collected and made available to the Processor, Competing
Consolidators, and Self-Aggregators pursuant to this Plan, including
all data necessary to generate consolidated market data.'' The
Participants explain that these amendments are intended to track the
MDI Rules more closely.\29\
---------------------------------------------------------------------------
\29\ See id.
---------------------------------------------------------------------------
Section IV. Administration of Plan
The Proposed Amendment amends Section IV.B., Operating Committee:
Authority, to add references to competing consolidators and self-
aggregators. Specifically, the Proposed Amendment states that the
Operating Committee shall be responsible for overseeing the
consolidation \30\ of Quotation Information and Transaction Reports in
Eligible Securities from the Participants for dissemination to
competing consolidators and self-aggregators, among other entities;
that the Operating Committee shall be responsible for periodically
evaluating the Processor and competing consolidators; and that the
Operating Committee shall be responsible for setting the level of fees
to be paid by competing consolidators and self-aggregators, among other
entities, for services relating to Quotation Information or Transaction
Reports in Eligible Securities, and for taking action in respect
thereto in accordance with the Plan.
---------------------------------------------------------------------------
\30\ Under the decentralized consolidation model, the Operating
Committee would no longer oversee the consolidation of data by the
Processor, but rather the provision of data underlying consolidated
market data to competing consolidators and self-aggregators. See
Rule 603(b), 17 CFR 242.603(b); Rule 614(e)(1), 17 CFR
242.614(e)(1). See also MDI Rules Release, supra note 6, 86 FR at
18682.
---------------------------------------------------------------------------
The Proposed Amendment also amends Section IV.B. to require the
Operating Committee to publish on the Plan's website the Primary
Listing Exchange for each Eligible Security and to calculate and
publish, on a monthly basis, consolidated market data gross revenues
for Eligible Securities. The Participants explain that these amendments
are intended to comply with Rule 614(e)(4) and Rule 614(e)(5)(ii).\31\
---------------------------------------------------------------------------
\31\ See Notice, supra note 7, 86 FR at 67541.
---------------------------------------------------------------------------
Section VII. Administrative Functions
The Proposed Amendment amends this section by deleting references
to the Processor. Additionally, under the Proposed Amendment, the
Administrator, not the Processor, shall be responsible for carrying out
all administrative functions necessary to the operation and maintenance
of the consolidated information collection and dissemination system
provided for in the Plan. The Participants explain that the
Administrative Functions described in the section are more
appropriately ascribed to the Administrator.\32\
---------------------------------------------------------------------------
\32\ See id.
---------------------------------------------------------------------------
Section VIII. Evaluation of Competing Consolidators
The Proposed Amendment adds new Section VIII to require the
Operating Committee to assess the performance of competing
consolidators and to submit an annual report to the Commission
[[Page 58547]]
containing the assessment.\33\ The Proposed Amendment requires this
annual report to include an analysis with respect to competing
consolidators' speed, reliability, and cost of data provision. The
Participants explain that these changes are intended to comply with the
requirements of Rule 614(e)(3).\34\
---------------------------------------------------------------------------
\33\ As a result of this addition, the Proposed Amendment
renumbers the remaining sections of the Plan.
\34\ See Notice, supra note 7, 86 FR at 67541.
---------------------------------------------------------------------------
In addition, the Proposed Amendment requires the Operating
Committee, in conducting the analysis, to review the monthly
performance metrics to be published by competing consolidators pursuant
to Rule 614(d)(5).\35\ Rule 614(d)(5) requires competing consolidators
to publish on their websites monthly performance metrics as defined by
the effective national market system plan(s) for NMS stocks.\36\ The
Proposed Amendment adds the following monthly performance metrics to
this section:
---------------------------------------------------------------------------
\35\ 17 CFR 242.614(d)(5).
\36\ See id.
A. Capacity statistics, including system tested capacity, system
output capacity, total transaction capacity, and total transaction
peak capacity;
B. Message rate and total statistics, including peak output
rates on the following bases: 1-millisecond, 10-millisecond, 100-
millisecond, 500-millisecond, 1-second, and 5-second;
C. System availability statistics, including system up-time
percentage and cumulative amount of outage time;
D. Network delay statistics, including quote and trade zero
window size events, quote and trade retransmit events, and quote and
trade message total; and
E. Latency statistics, including distribution statistics up to
the 99.99th percentile, for the following:
1. When a Participant sends an inbound message to a competing
consolidator and when the competing consolidator receives the
inbound message;
2. When the competing consolidator receives the inbound message
and when the competing consolidator sends the corresponding
consolidated message to a customer of the competing consolidator;
and
3. When a Participant sends an inbound message to a competing
consolidator and when the competing consolidator sends the
corresponding consolidated message to a customer of the competing
consolidator.
The Participants explain that they have proposed to amend Section
VIII to define the monthly performance metrics in accordance with Rule
614(d)(5).\37\
---------------------------------------------------------------------------
\37\ See Notice, supra note 7, 86 FR at 67541-42.
---------------------------------------------------------------------------
Section IX. (Previously Section VIII.), Transmission of Information to
Processor, Competing Consolidators, and Self-Aggregators by
Participants
The Proposed Amendment amends Section IX.A., Quotation Information,
to add the requirement that each Participant collect and transmit to
competing consolidators and self-aggregators all quotation information
required to be made available by such Participant by Rule 603(b) of
Regulation NMS,\38\ including all data necessary to generate
consolidated market data. Additionally, the Proposed Amendment requires
each Participant to make available quotation information, and changes
in any such information, to competing consolidators and self-
aggregators in the same manner and using the same methods, including
all methods of access and the same format, as such Participant makes
available any information with respect to quotations for and
transactions in NMS stocks to any person.
---------------------------------------------------------------------------
\38\ 17 CFR 242.603(b).
---------------------------------------------------------------------------
In addition, under the Proposed Amendment, each bid and offer with
respect to an Eligible Security furnished to competing consolidators
and self-aggregators by any Participant pursuant to the Plan would be
accompanied by the time (reported in microseconds) the Participant made
such bid and offer available to Competing Consolidators and Self
Aggregators. With respect to FINRA, the Proposed Amendment states that
if FINRA's quotation facility provides a proprietary feed of its
quotation information, then the quotation facility shall also furnish
the Processor, competing consolidators, and self-aggregators with the
time of the quotation as published on the quotation facility's
proprietary feed, and that FINRA shall convert any quotation times
reported to it in seconds or milliseconds to microseconds and shall
furnish such times to the Processor, competing consolidators, and self-
aggregators in microseconds.
Similarly, the Proposed Amendment amends Section IX.B., Transaction
Reports, to require each Participant to make available Transaction
Reports to competing consolidators and self-aggregators in the same
manner and using the same methods, including all methods of access and
the same format, as such Participant makes available any information
with respect to quotations for and transactions in NMS stocks to any
person.
The Proposed Amendment also amends Section IX.B. to require
Transaction Reports to competing consolidators and self-aggregators to
include the time (in microseconds) that the Participant made such
information available to competing consolidators and self-aggregators.
With respect to FINRA, the Proposed Amendment states that if FINRA's
trade reporting facility provides a proprietary feed of trades reported
by the trade reporting facility to the Processor, competing
consolidators and self-aggregators, then the FINRA trade reporting
facility shall also furnish the Processor with the time of the
transmission as published on the facility's proprietary feed.
Additionally, the Proposed Amendment requires FINRA to convert times
that its members report to it in seconds or milliseconds to
microseconds and to furnish such times to the Processor, Competing
Consolidators, and Self-Aggregators in microseconds. The Participants
state that the amendments to Sections IX.A. and IX.B. are designed to
comply with the requirements of Rule 614(e)(1) and (2).\39\
---------------------------------------------------------------------------
\39\ Notice, supra note 7, 86 FR at 67542. The Participants
state that the Proposed Amendment amends Section IX.B., Transaction
Reports, to add the requirement that each Participant agrees to
collect and transmit to competing consolidators and self-aggregators
all transaction reports required to be made available pursuant to
Rule 603(b) of Regulation NMS; however, the Proposed Amendment does
not actually propose to make this change to the text of the Plan.
See id. at 67550.
---------------------------------------------------------------------------
The Proposed Amendment also deletes the following statement from
Section IX.B.: ``The Participants shall seek to reduce the time period
for reporting last sale prices to the Processor as conditions
warrant.''
In addition, Section IX.B. currently includes a list of types of
transactions that are not required to be reported to the Processor
pursuant to the Plan. The Proposed Amendment adds competing
consolidators and self-aggregators as entities to which these types of
transactions are not required to be reported.
Finally, the Proposed Amendment amends Section IX.D. to include
references to competing consolidators and self-aggregators. Section
IX.D., as amended would read: ``Whenever a Participant determines that
a level of trading activity or other unusual market conditions prevent
it from collecting and transmitting Quotation Information or
Transaction Reports to the Processor, Competing Consolidators, and
Self-Aggregators, or where a trading halt or suspension in an Eligible
Security is in effect in its Market, the Participant shall promptly
notify the Processor, Competing Consolidators, and Self-Aggregators of
such condition or event and shall resume collecting and transmitting
Quotation Information and
[[Page 58548]]
Transaction Reports to it as soon as the condition or event is
terminated. In the event of a system malfunction resulting in the
inability of a Participant or its members to transmit Quotation
Information or Transaction Reports to the Processor, Competing
Consolidators, and Self-Aggregators, the Participant shall promptly
notify the Processor, Competing Consolidators, and Self-Aggregators of
such event or condition. Upon receiving such notification, the
Processor shall take appropriate action, including either closing the
quotation or purging the system of the affected quotations.''
Section XI. (Previously Section X.), Regulatory and Operational Halts
The Proposed Amendment revises this section to delete the
definition of ``Primary Listing Market'' from Section XI.A.,
Definitions for Purposes of Section XI. The Proposed Amendment also
replaces references to ``Primary Listing Market'' with ``Primary
Listing Exchange'' throughout Section XI.\40\ The Participants state
that this change would align the text of the Plan with terminology in
the MDI Rules.\41\
---------------------------------------------------------------------------
\40\ The Proposed Amendment does not replace a reference to
Primary Listing Market in the definition of ``Regulatory Halt'' in
this section.
\41\ See Notice, supra note 7, 86 FR at 67542.
---------------------------------------------------------------------------
The Proposed Amendment amends Section XI.B., Operational Halts, to
state that competing consolidators and self-aggregators shall be
notified by a Participant if that Participant has concerns about its
ability to collect and transmit Quotation Information or Transaction
Reports, 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. Similarly, the Proposed Amendment
amends Section XI.H., Communications, to state that if a Primary
Listing Exchange for an Eligible Security determines it appropriate to
initiate a Regulatory Halt, it will notify competing consolidators and
self-aggregators 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 Operating
Committee and the Primary Listing Exchange. The Participants state that
these changes are consistent with Rule 614(e)(1) and would ensure that
competing consolidators and self-aggregators are notified of
information related to Regulatory and Operational Halts and that
competing consolidators can disseminate this information to their
customers.\42\
---------------------------------------------------------------------------
\42\ See id.
---------------------------------------------------------------------------
Section XII. (Previously Section XI.), Hours of Operation
The Proposed Amendment amends Section XII.B.(ii) and (iii) to add
references to competing consolidators and self-aggregators.
Specifically, with respect to the reporting obligations of
Participants, proposed Section XII.B.(ii)provides that transactions in
Eligible Securities executed after 8:00 p.m. and before 12:00 a.m.
(midnight) shall be reported to the Processor, competing consolidators,
and self-aggregators 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. And proposed Section XII.B.(iii) provides that
transactions in Eligible Securities executed between 12:00 a.m.
(midnight) and 4:00 a.m. ET shall be transmitted to the Processor,
competing consolidators, and self-aggregators between 4:00 a.m. and
9:30 a.m. ET, on trade date, shall be designated as ``.T'' trades to
denote their execution outside normal market hours, and shall be
accompanied by the time of execution.
The Proposed Amendment also amends Section XII.D. to require
Participants that enter Quotation Information or submit Transaction
Reports to competing consolidators and self-aggregators between 4:00
a.m. and 9:30 a.m. ET, and after 4:00 p.m. ET until 8:00 p.m. ET, to do
so for all Eligible Securities in which they enter quotations.
Section XIV. (Previously Section XIII.), Financial Matters
The Proposed Amendment amends Section XIV.C., Maintenance of
Financial Records, by replacing references to the Processor with
references to the Administrator. The Participants explain that the
responsibilities described in that section are more appropriately
ascribed to the Administrator.\43\
---------------------------------------------------------------------------
\43\ See id.
---------------------------------------------------------------------------
Section XV. (Previously Section XIV.), Indemnification
The Proposed Amendment amends this section to add references to
Competing Consolidators and Self-Aggregators and to remove a reference
to Vendors as a recipient of Transaction Reports, Quotation
Information, or other information disseminated by the Processor.
Specifically, the first paragraph in this section now states: ``Each
Participant agrees, severally and not jointly, to indemnify and hold
harmless each other Participant, Nasdaq, and each of its directors,
officers, employees and agents (including the Operating Committee and
its employees and agents) from and against any and all loss, liability,
claim, damage and expense whatsoever incurred or threatened against
such persons as a result of any Transaction Reports, Quotation
Information or other information reported to the Processor, Competing
Consolidators, and Self-Aggregators by such Participant and
disseminated by the Processor, Competing Consolidators, and Self-
Aggregators. This indemnity agreement shall be in addition to any
liability that the indemnifying Participant may otherwise have.''
Section XVIII. (Previously Section XVII.), Applicability of Securities
Exchange Act of 1934
The Proposed Amendment amends this section to include Competing
Consolidators and Self-Aggregators as subject to any applicable
provisions of the Act, as amended, and any rules and regulations
promulgated thereunder.
Section XIX. (Previously Section XVIII.), Operational Issues
The Proposed Amendment amends Section XIX.A. to include references
to Competing Consolidators and Self-Aggregators to require each
Participant to collect and validate quotes and last sale reports within
its own system prior to transmitting this data to Competing
Consolidators and Self-Aggregators.
Section XXI. Depth of Book Display
The Proposed Amendment deletes this section. The Participants
explain that this provision is obsolete given the MDI Rules.\44\
---------------------------------------------------------------------------
\44\ See id.
---------------------------------------------------------------------------
IV. Discussion
A. The Applicable Standard of Review
Under Rule 608(b)(2) of Regulation NMS, the Commission shall
approve a national market system plan or proposed amendment to an
effective national market system plan, with such changes or subject to
such conditions as the Commission may deem necessary or appropriate, if
it finds that the plan or amendment is necessary or appropriate in the
public interest, for the protection of investors and the maintenance of
fair and orderly markets, to remove impediments to, and perfect the
mechanisms of, a national market system, or otherwise in furtherance of
[[Page 58549]]
the purposes of the Act.\45\ The Commission shall disapprove a national
market system plan or proposed amendment if it does not make such a
finding.\46\ Furthermore, Rule 700(b)(3)(ii) of the Commission's Rules
of Practice states:
---------------------------------------------------------------------------
\45\ 17 CFR 242.608(b)(2).
\46\ Id.
The burden to demonstrate that a NMS plan filing is consistent
with the Exchange Act and the rules and regulations issued
thereunder that are applicable to NMS plans is on the plan
participants that filed the NMS plan filing. Any failure of the plan
participants that filed the NMS plan filing to provide such detail
and specificity may result in the Commission not having a sufficient
basis to make an affirmative finding that an NMS plan filing is
consistent with the Exchange Act and the rules and regulations
issued thereunder that are applicable to NMS plans.\47\
---------------------------------------------------------------------------
\47\ 17 CFR 201.700(b)(3)(ii).
For the reasons discussed below, the Commission does not find that
the Participants have met their burden to demonstrate that the Proposed
Amendment is consistent with the Act.\48\ Specifically, the Commission
does not find that the Participants have demonstrated that the Proposed
Amendment is consistent with either Rule 614(e) of Regulation NMS or
Rule 608 of Regulation NMS. The Proposed Amendment clearly does not
comply with the requirements of the MDI Rules.\49\ Accordingly, the
Commission cannot make a finding that the Proposed Amendment is
necessary or appropriate in the public interest, for the protection of
investors and the maintenance of fair and orderly markets, to remove
impediments to, and perfect the mechanisms of, a national market
system, or otherwise in furtherance of the purposes of the Act.\50\
---------------------------------------------------------------------------
\48\ 17 CFR 201.700(b)(3).
\49\ As discussed below, the Proposed Amendment does not comply
with MDI Rules 603(b), 614(e)(1), and 614(e)(2). 17 CFR 242.603(b),
17 CFR 242.614(e)(1), 17 CFR 242.614(e)(2).
\50\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------
B. The Requirements of the MDI Rules Regarding the Proposed Amendment
As adopted by the Commission, the MDI Rules implement a
decentralized consolidation model in which competing consolidators
would replace the exclusive plan processors of the Equity Data Plans as
the entities responsible for disseminating consolidated market
data.\51\ The MDI Rules Release provides for an ``initial parallel
operation period'' of 180 days during which the existing exclusive SIPs
for the Equity Data Plans would operate in parallel with the competing
consolidators,\52\ and further provides for the transition from the
initial parallel operation period to the retirement of the exclusive
SIPs for equity market data:
---------------------------------------------------------------------------
\51\ See MDI Rules Release, supra note 6, 86 FR at 18637.
\52\ See id. at 18700.
Within 90 days of the end of the initial parallel operation
period, the Operating Committee will make a recommendation to the
Commission as to whether the exclusive SIPs should be
decommissioned. The Commission will consider an effective national
market system plan amendment to effectuate a cessation of the
operations of the exclusive SIPs and, if consistent with the
requirements of Rule 608 and the Exchange Act, approve such an
amendment.\53\
---------------------------------------------------------------------------
\53\ Id. at 18701.
Pursuant to Rule 614(e)(1) of Regulation NMS, and as discussed in
the MDI Rules Release, the Participants to the Plan were required to
file an amendment to conform the Plan to reflect the provision of
information with respect to quotations for and transactions in NMS
stocks that is necessary to generate consolidated market data by the
national securities exchange and national securities association
participants to competing consolidators and self-aggregators.\54\
---------------------------------------------------------------------------
\54\ See id. at 18700-01.
---------------------------------------------------------------------------
C. Whether the Proposed Amendment Is Consistent With Rule 614(e)(1) of
Regulation NMS
1. Consistency With the Decentralized Consolidation Model
Two commenters recommend disapproval of the Proposed Amendment
because the amendment does not properly conform the Plan to the MDI
Rules in that the amendments fail to accurately reflect the
decentralized consolidation model.\55\ One commenter states, ``[t]he
MDI rule represents a fundamental shift to a decentralized
consolidation model. The Plan amendments need to reflect that
throughout the body and exhibits of the Plans.'' \56\ The commenter
also argues that the Proposed Amendment must ``[a]cknowledge that the
Plan is no longer responsible for the creation, distribution and
pricing of consolidated market data.'' \57\
---------------------------------------------------------------------------
\55\ See Letter from Patrick Flannery, Chief Executive Officer,
MayStreet, Inc., to Vanessa Countryman, Secretary, Commission (Dec.
17, 2021) (``MayStreet Letter I''); Letter from Manisha Kimmel,
Chief Policy Officer, MayStreet, Inc., to Vanessa Countryman,
Secretary, Commission (Mar. 23, 2022) (``MayStreet Letter II'');
Letter from Ellen Greene, Managing Director, Equity and Options
Market Structure, and William C. Thum, Managing Director and
Associate General Counsel, Asset Management Group, Securities
Industry and Financial Markets Association, to Vanessa Countryman,
Secretary, Commission (Dec. 17, 2021) (``SIFMA Letter I'').
\56\ MayStreet Letter II, supra note 55, at 2.
\57\ Id. at 4-5.
---------------------------------------------------------------------------
The commenter states, ``[d]espite the fact that competing
consolidators generate consolidated market data, the Nasdaq/UTP Plan as
amended at IV(B) states that consolidated data is disseminated to
competing consolidators.'' \58\ The commenter reiterates that only
competing consolidators would externally distribute and charge for
consolidated market data and that the Plan would only be selling
underlying content.\59\
---------------------------------------------------------------------------
\58\ MayStreet Letter I, supra note 55, at 4, n.5.
\59\ See MayStreet Letter II, supra note 55, at 4-5.
---------------------------------------------------------------------------
The commenter also argues that the sections of the Plan that
discuss vendors' and subscribers' contractual relationships with the
Plan should be ``removed or significantly altered to reflect that the
Plan no longer has agreements with vendors and end users and instead
have agreements with the competing consolidators and self-aggregators
related specifically to the cost of content underlying core market
data.'' \60\ This commenter states that ``the relationship between
competing consolidators and their customers should not include a
contractual relationship with the plan'' because vendors would be
receiving consolidated market data from competing consolidators rather
than from the Plan.\61\
---------------------------------------------------------------------------
\60\ See MayStreet Letter I, supra note 55, at 3.
\61\ Id. See also MayStreet Letter II, supra note 54, at 9
(arguing that, since the Plan would only be selling underlying
content to competing consolidators and self-aggregators, vendor and
subscriber agreements should not be required).
---------------------------------------------------------------------------
This commenter also objects to the continued references to
subscribers and vendors in the Plan as recipients of data from the
Processor, arguing that under the decentralized consolidation model,
``only competing consolidators would sell consolidated market data to
vendors and subscribers.'' \62\
---------------------------------------------------------------------------
\62\ MayStreet Letter I, supra note 55, at 3.
---------------------------------------------------------------------------
One commenter objects to the retention of the concept of a single
processor in the Proposed Amendment.\63\ Another commenter also states
that ``it is worth noting that the Plans do not reflect the
decentralized consolidation model nor do they acknowledge the parallel
period.'' \64\ This commenter requests clarification of how the Plan
will operate during the parallel operation period, such as the
inclusion in the Plan of objective criteria for ending the parallel
period and the addition of a section devoted to competing consolidators
and self-
[[Page 58550]]
aggregators to help distinguish between their obligations and the
obligations of the exclusive SIPs during the parallel period.\65\ The
commenter recommends that the Proposed Amendment clarify that all
content underlying consolidated market data will be provided to
competing consolidators and self-aggregators, and provide validation
procedures to be followed by competing consolidators.
---------------------------------------------------------------------------
\63\ See SIFMA Letter I, supra note 55, at 8.
\64\ MayStreet Letter II, supra note 55, at 8.
\65\ See id. at 7-8.
---------------------------------------------------------------------------
The Participants submitted a comment letter in which they argue
that maintaining the exclusive SIPs through the parallel operation
period is consistent with the MDI Rules Release, stating:
[P]ursuant to the phased transition period set forth in the MDI
Rules Release, the Plans must operate a parallel operation period
during which the decentralized consolidation model introduced by the
MDI Rules will run in parallel to the existing exclusive SIP model.
. . . After completion of the parallel operation period, the Plans
are required to submit an amendment to effectuate a cessation of the
operations of the exclusive SIPs, which would include removing
references of the exclusive SIPs from the text of the Plans.\66\
---------------------------------------------------------------------------
\66\ Letter from James P. Dombach, Counsel for CTA, CQ, and UTP
Plans, McGonigle, P.C., to Vanessa Countryman, Secretary,
Commission, at 2 (Mar. 25, 2022) (``McGonigle Letter'').
The Participants also maintain that the exclusive SIPs will
continue to provide market data under the current Equity Data Plans
during the parallel operation period and that the inclusion of the
exclusive SIPs in the Equity Data Plans (as provided for in the
Proposed Amendment) until the submission of a further amendment after
the parallel operation period is consistent with the MDI Rules
Release.\67\
---------------------------------------------------------------------------
\67\ See id. at 1-2.
---------------------------------------------------------------------------
The Commission agrees with the commenters who argue that the
Proposed Amendment does not properly conform the Plan to the
decentralized consolidation model. First, under the MDI Rules, the SROs
are required to make available to competing consolidators and self-
aggregators the data necessary to generate consolidated market
data,\68\ and competing consolidators and self-aggregators will then
generate consolidated market data, rather than receive consolidated
market data from the Plan.\69\ The Participants, however, propose to
amend the UTP Plan to give the Operating Committee the authority to
oversee the consolidation of Quotation Information and Transaction
Reports from the Participants to competing consolidators and self-
aggregators.\70\ This is not consistent with the decentralized
consolidation model.
---------------------------------------------------------------------------
\68\ See Rule 603(b), 17 CFR 242.603(b). See also Rule
600(b)(19), which defines ``consolidated market data'' as the
following data, consolidated across all national securities
exchanges and national securities associations: (i) Core data; (ii)
Regulatory data; (iii) Administrative data; (iv) Self-regulatory
organization-specific program data; and (v) Additional regulatory,
administrative, or self-regulatory organization-specific program
data elements defined as such pursuant to the effective national
market system plan or plans required under Sec. 242.603(b). See 17
CFR 242.600(b)(19).
\69\ See Rule 614(d)(1)-(3). 17 CFR 242.614(d)(1)-(3).
\70\ See Notice, supra note 7, 86 FR at 67545 (UTP Plan Proposed
Amendment at Section IV.B.).
---------------------------------------------------------------------------
Specifically, Rule 614(d) provides that competing consolidators
shall collect any information with respect to quotations for and
transactions in NMS stocks as provided in Rule 603(b) that is necessary
to create a consolidated market data product from each national
securities exchange and national securities association,\71\ calculate
and generate a consolidated market data product,\72\ and make the
consolidated market data product available to subscribers.\73\ Self-
aggregators will receive information with respect to quotations for and
transactions in NMS stocks, including all data necessary to generate
consolidated market data, and generate consolidated market data solely
for their internal use.\74\ Additionally, pursuant to Rule 603(b), the
Participants shall make available to all competing consolidators and
self-aggregators ``all data necessary to generate consolidated market
data.'' \75\ Accordingly, the Plan's modified role under the
decentralized consolidation model will be to develop and file with the
Commission the fees associated with the underlying data, to collect and
allocate revenues for that data, to develop monthly performance metrics
for competing consolidators, and to provide an annual assessment of
competing consolidator performance.\76\ Therefore, the Proposed
Amendment impermissibly provides for the dissemination by the Plan of
consolidated market data to competing consolidators and self-
aggregators, which is inconsistent with Rule 603(b), which requires the
Participants to make available the data necessary to generate
consolidated market data to competing consolidators and self-
aggregators so that, pursuant to Rule 614(d), those entities can
generate consolidated market data themselves.
---------------------------------------------------------------------------
\71\ See Rule 614(d)(1), 17 CFR 242.614(d)(1).
\72\ See Rule 614(d)(2), 17 CFR 242.614(d)(2).
\73\ See Rule 614(d)(3), 17 CFR 242.614(d)(3). The MDI Rules
also define ``competing consolidator'' as a securities information
processor required to be registered pursuant to Sec. 242.614 (Rule
614) or a national securities exchange or national securities
association that receives information with respect to quotations for
and transactions in NMS stocks and generates a consolidated market
data product for dissemination to any person. See 17 CFR
242.600(b)(16).
\74\ The definition of ``self-aggregator'' was added by the MDI
Rules. See 17 CFR 242.600(b)(83). A self-aggregator may make
consolidated market data available to its affiliates that are
registered with the Commission for their internal use. Id.
\75\ 17 CFR 242.603(b).
\76\ See MDI Rules Release, supra note 6, 86 FR at 18604, 18681.
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Second, the Proposed Amendment is inconsistent in certain other
ways with the decentralized consolidation model provided for in the MDI
Rules. Under the decentralized consolidation model, the primary listing
exchanges will be required to collect, calculate, and make available
regulatory data, which includes information relating to regulatory
halts, to competing consolidators and self-aggregators in accordance
with the definition of ``regulatory data'' in Rule 600(b)(78).\77\ The
Proposed Amendment, however, does not reflect this requirement with
respect to regulatory data. For example, the Proposed Amendment fails
to amend the Plan to reflect that the Processor will no longer have the
responsibility to disseminate regulatory halt notices once the
decentralized consolidation model has been implemented.
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\77\ 17 CFR 242.600(b)(78) defines ``Regulatory Data'' as, among
other things: (A) Information regarding Short Sale Circuit Breakers
pursuant to Sec. 242.201; (B) Information regarding Price Bands
required pursuant to the Plan to Address Extraordinary Market
Volatility . . . (C) Information relating to regulatory halts or
trading pauses (news dissemination/pending, LULD, Market-Wide
Circuit Breakers) and reopenings or resumptions; (D) The official
opening and closing prices of the primary listing exchange; and (E)
An indicator of the applicable round lot size. See 17 CFR
242.600(b)(78)(i). Regulatory data is one element of ``consolidated
market data,'' as defined in Rule 600(b)(19). See supra note 68.
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The Proposed Amendment also does not include requirements for the
Participants to timestamp every element of data necessary to generate
consolidated market data. Rule 614(e)(2) requires the application of
timestamps by the Participants on all information with respect to
quotations for and transactions in NMS stocks that is necessary to
generate consolidated market data, including the time that such
information was generated by the Participant and the time the
Participant made such information available to competing consolidators
and self-aggregators.\78\ While the Proposed Amendment amends the UTP
Plan's section governing the transmission of Quotation Information to
require any Participant that furnishes bids and offers to competing
consolidators and self-aggregators to timestamp the time the
Participant made such bid and offer
[[Page 58551]]
available to competing consolidators and self-aggregators,\79\ this
proposed timestamp provision does not apply to ``all information with
respect to quotations for and transactions in NMS stocks that is
necessary to generate consolidated market data.'' \80\ Additionally,
the Proposed Amendment does not specifically require that each
Participant timestamp the data necessary to generate consolidated
market data upon generation and upon the time it is made available to
competing consolidators and self-aggregators, as required by Rule
614(e)(2).
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\78\ 17 CFR 242.614(e)(2).
\79\ See Notice, supra note 7, 86 FR at 67550 (UTP Plan Proposed
Amendment at Section IX.A.).
\80\ In the MDI Rules Release, the Commission stated,
``[s]pecifically, the timestamps applied by the SROs must be to the
individual components of data content underlying consolidated market
data, i.e., all of the individual components of data content
underlying core data, regulatory data, administrative data, self-
regulatory organization-specific program data, and additional
elements defined as `consolidated market data.''' MDI Rules Release,
supra note 6, 86 FR at 18688.
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And finally, the Commission disagrees with the Participants'
statement that the continued references to the role of the Processor in
the Plan, as amended by the Proposed Amendment, comply with the MDI
Rules Release's implementation schedule for parallel operation of the
exclusive SIP and the competing consolidators.\81\ Rule 614(e)(1)
requires the Participants to amend the Plan to reflect the provision of
information with respect to quotations for and transactions in NMS
stocks that is necessary to generate consolidated market data by the
SROs to competing consolidators and self-aggregators, i.e., to conform
the Plan to reflect the decentralized consolidation model.\82\ However,
the Proposed Amendment is not consistent with the decentralized
consolidation model and does not conform to the fact that a single
processor will no longer be in operation once the decentralized
consolidation model has been fully implemented.
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\81\ See McGonigle Letter, supra note 66, at 1-2. See also MDI
Rules Release, supra note 6, 86 FR at 18700-01 (discussing the
parallel operation implementation schedule).
\82\ 17 CFR 242.614(e)(1).
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And while the MDI Rules Release contemplates the filing of a second
amendment by the Plan ``to effectuate a cessation of the operations of
the exclusive SIPs,'' \83\ the current Proposed Amendment was required
to conform the Plan to reflect the provision of information with
respect to quotations for and transactions in NMS stocks that is
necessary to generate consolidated market data by the SROs to competing
consolidators and self-aggregators, which, as discussed above, they
have failed to do. Moreover, the failure of the Participants to explain
in the Proposed Amendment how the Plan will function under the fully
implemented decentralized consolidation model upon cessation of the
exclusive SIPs not only denies market participants the opportunity to
comment on those proposed provisions now, but it increases the
uncertainty that firms face in determining whether to become competing
consolidators or self-aggregators during the initial parallel operation
period, thus hampering the implementation of the decentralized
consolidation model required by the MDI Rules.\84\
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\83\ MDI Rules Release, supra note 6, 86 FR at 18701.
\84\ See id. at 18699-700 (discussing the ``first wave''
registration period for competing consolidators, to begin on the
date the Commission approves the amendments to the effective
national market system plan(s) required under Rule 614(e) including
the fees for the SRO data content necessary to generate consolidated
market data).
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Because the Proposed Amendment clearly does not comply with the
plain terms of the MDI Rules \85\ and is thus inconsistent with the
requirements of Rule 614(e)(1), the Commission also does not find that
the Participants have met their burden to demonstrate that the Proposed
Amendment is consistent with Rule 608 as necessary or appropriate in
the public interest, for the protection of investors and the
maintenance of fair and orderly markets, to remove impediments to, and
perfect the mechanisms of, a national market system, or otherwise in
furtherance of the purposes of the Act.\86\
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\85\ Specifically, Rules 603(b), 614(e)(1) and (e)(2). 17 CFR
242.603(b), 17 CFR 242.614(e)(1), 17 CFR 242.614(e)(2).
\86\ See 17 CFR 242.608(b)(2).
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2. Technical Comments
One commenter criticizes the failure of the Proposed Amendment to
incorporate the definitions of the MDI Rules.\87\ This commenter
states, ``[t]he definitions in each of the Plans should be updated to
reflect the decentralized consolidation model. It is insufficient to
simply refer to Rule 600(b), in large part because there seems to be
confusion within the Plans as to the role of competing consolidators,
self-aggregators, the exclusive SIPs and vendors.'' \88\ Specifically,
this commenter suggests that the Proposed Amendment add definitions of
the following terms: competing consolidator, self-aggregator,
consolidated market data, content underlying consolidated market data,
initial parallel period, and parallel period, as well as a definition
of the content that would be disseminated by the exclusive SIP to the
Plan.\89\ This commenter also suggests updating the existing definition
of Processor, and clarifying the existing definitions of Subscriber and
Vendor to reflect the decentralized consolidation model.\90\
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\87\ See MayStreet Letter II, supra note 55, at 5. This
commenter also recommends that the Commission issue guidance to the
Participants to aid in revising the Proposed Amendment. See id. at
4. The discussion and findings in this Order, in addition to the MDI
Rules Release and the MDI Rules themselves, provide sufficient
guidance to the Participants in amending the Plan.
\88\ Id. at 5.
\89\ See id. at 5-6.
\90\ See id. at 6.
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This commenter also describes several other technical criticisms of
the Proposed Amendment. The commenter states that the Proposed
Amendment should have removed the addition of a new SRO participant
from the Plan's ministerial amendment list,\91\ arguing that competing
consolidators and self-aggregators would need more time to update their
systems to handle the new Participant's data.\92\ The commenter also
states that the Proposed Amendment needs to support the timestamps
required by the MDI Rules to the microsecond,\93\ and that validation
procedures to be used by competing consolidators need to be added to
the Plan to describe the Participants' and the competing consolidator's
obligations.\94\ The commenter further suggests that the Plan's
capacity planning process needs to apply to competing consolidators and
self-aggregators so that these entities can meet SRO-expected capacity
requirements.\95\ Finally, the commenter states that the Plan's
conflict of interest and confidentiality provisions need to apply to
competing consolidators since they will be replacing the exclusive
SIPs.\96\
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\91\ A ``ministerial amendment'' permits an amendment to the
Plan that is submitted by the Chairman of the UTP Plan Operating
Committee to the Commission with less than 48 hours advance notice
to the Participants. See Notice, supra note 7, 86 FR at 67554
(Proposed Amendment at Section XVII.).
\92\ See MayStreet Letter II, supra note 55, at 6-7.
\93\ See id. at 5.
\94\ See MayStreet Letter I, supra note 55, at 4; MayStreet
Letter II, supra note 55, at 8.
\95\ See MayStreet Letter II, supra note 55, at 10.
\96\ See id. at 7.
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The Commission agrees with the commenter that the failure to
include the definitions established by the MDI Rules contributes to
ambiguity within the Plan. In lieu of incorporating the MDI Rules'
definitions, the Proposed Amendment adds a statement that ``[t]erms
used in this plan have the same meaning as the terms defined in Rule
[[Page 58552]]
600(b) under the Act.'' \97\ This creates ambiguity because the
Proposed Amendment uses terms adopted by the MDI Rules but does not
include definitions of those terms, so their applicability and the
obligations they create are unclear or are not reflected in the
Proposed Amendment. For example, the Proposed Amendment adds a
requirement for the collection and transmission of Quotation
Information, stating that each Participant agrees to collect and
transmit to competing consolidators and self-aggregators ``all data
necessary to generated [sic] consolidated market data.'' \98\ However,
the Proposed Amendment does not define ``consolidated market data'' or
even the data necessary to generate it. The Plan thus fails to include
an express requirement for the Participants to disseminate to competing
consolidators and self-aggregators all of the elements of consolidated
market data (e.g., core data,\99\ regulatory data, and administrative
data) in accordance with the definition of ``consolidated market data''
in Rule 600(b)(19) \100\ and Rule 603(b).\101\ The absence of that
definition in the Plan would lead to ambiguity about the Participants'
obligations with respect to consolidated market data.
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\97\ See Notice, supra note 7, 86 FR at 67543 (Proposed
Amendment at Section III.).
\98\ Id. at 67549 (Proposed Amendment at Section IX.A.).
\99\ Rule 600(b)(21) defines ``core data'' as (i) The following
information with respect to quotations for, and transactions in, NMS
stocks: (A) Quotation sizes; (B) Aggregate quotation sizes; (C) Best
bid and best offer; (D) National best bid and national best offer;
(E) Protected bid and protected offer; (F) Transaction reports; (G)
Last sale data; (H) Odd-lot information; (I) Depth of book data; and
(J) Auction information. See 17 CFR 242.600(b)(21).
\100\ See supra note 68 (defining ``consolidated market data'').
\101\ 17 CFR 242.603(b).
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Relatedly, Rule 614(e)(2) requires the Participants to amend the
Plan to apply timestamps to all information with respect to quotations
for and transactions in NMS stocks that is necessary to generate
consolidated market data. However, because there is no definition of
``consolidated market data'' in the Plan, there is thus no requirement
in the language of the Plan for the Participants to timestamp the data
components that constitute consolidated market data,\102\ such as the
elements of core data \103\ (another definition established by the MDI
Rules that the Proposed Amendment failed to include in the Plan), which
include auction information, odd-lot information, and depth of book
data. This is another instance in which the absence of definitions in
the Plan would lead to ambiguity about the Participants' obligations
with respect to consolidated market data.
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\102\ See supra note 68 (defining ``consolidated market data'').
\103\ See supra note 99 (defining ``core data'').
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In addition, as discussed above, under the MDI Rules, the primary
listing exchanges are required to collect, calculate, and make
available regulatory data to competing consolidators and self-
aggregators in accordance with the definition of ``regulatory data'' in
Rule 600(b)(78)(i).\104\ The Proposed Amendment, however, does not add
the definition of ``regulatory data'' to the Plan. Therefore, there is
no unambiguous requirement in the Plan that the primary listing
exchanges perform these functions.
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\104\ See supra note 77 (defining ``regulatory data'').
Regulatory data is one element of ``consolidated market data,'' as
defined in Rule 600(b)(19). See supra note 68.
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V. Conclusion
For the reasons set forth above, the Commission finds, pursuant to
Section 11A of the Act, and Rule 608(b)(2) thereunder, that the
Proposed Amendment is inconsistent with the requirements of the Act and
the rules and regulations thereunder applicable to an NMS plan
amendment.
It is therefore ordered, pursuant to Section 11A of the Act, and
Rule 608(b)(2) thereunder, that the Proposed Amendment (File No. S7-24-
89) be, and hereby is, disapproved.
By the Commission.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20827 Filed 9-26-22; 8:45 am]
BILLING CODE 8011-01-P
