Consolidated Tape Association; Order Disapproving the Thirty-Seventh Substantive Amendment to the Second Restatement of the CTA Plan and the Twenty-Eighth Substantive Amendment to the Restated CQ Plan, 58560-58571 [2022-20830]

Download as PDF 58560 Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices should be submitted on or before October 18, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–20814 Filed 9–26–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–95850; File No. SR–CTA/ CQ–2021–02] Consolidated Tape Association; Order Disapproving the Thirty-Seventh Substantive Amendment to the Second Restatement of the CTA Plan and the Twenty-Eighth Substantive Amendment to the Restated CQ Plan September 21, 2022. I. Introduction On November 5, 2021,1 the Participants 2 in the Second Restatement of the Consolidated Tape Association (‘‘CTA’’) Plan and the Restated Consolidated Quotation (‘‘CQ’’) Plan (collectively ‘‘CTA/CQ Plans’’ or ‘‘Plans’’) 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 Amendments’’) to amend the Plans to 17 17 CFR 200.30–3(a)(12). Letter from Robert Books, Chair, CTA/CQ Plans 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 CTA Plan, pursuant to which markets collect and disseminate last-sale price information for non-Nasdaq-listed securities, is a ‘‘transaction reporting plan’’ under Rule 601 of Regulation NMS, 17 CFR 242.601, and a ‘‘national market system plan’’ under Rule 608 of Regulation NMS, 17 CFR 242.608. The CQ Plan, pursuant to which markets collect and disseminate bid/ask quotation information for non-Nasdaq-listed securities, is a ‘‘national market system plan’’ under Rule 608 of Regulation NMS, 17 CFR 242.608. See Securities Exchange Act Release Nos. 10787 (May 10, 1974), 39 FR 17799 (May 20, 1974) (declaring the CTA Plan effective); 15009 (July 28, 1978), 43 FR 34851 (Aug. 7, 1978) (temporarily authorizing the CQ Plan); and 16518 (Jan. 22, 1980), 45 FR 6521 (Jan. 28, 1980) (permanently authorizing the CQ Plan). 4 15 U.S.C. 78k–1. 5 17 CFR 242.608. jspears on DSK121TN23PROD with NOTICES 1 See VerDate Sep<11>2014 17:51 Sep 26, 2022 Jkt 256001 implement the non-fee-related aspects of the Commission’s Market Data Infrastructure Rules (‘‘MDI Rules’’).6 The Proposed Amendments were published for comment in the Federal Register on November 29, 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 Amendments or to approve the Proposed Amendments 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 Amendments to July 27, 2022,11 and on July 21, 2022, the Commission further extended the period within which to conclude proceedings regarding the Proposed Amendments to September 25, 2022.12 This order disapproves the Proposed Amendments.13 6 The ‘‘MDI Rules’’ as used in this Order, and as relevant to the Proposed Amendments, 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. 93615 (Nov. 19, 2021), 86 FR 67800 (Nov. 29, 2021) (‘‘Notice’’). Comments received in response to the Notice are available at https://www.sec.gov/ comments/sr-ctacq-2021-02/srctacq202102.htm. 8 17 CFR 242.608(b)(2)(i). 9 See Securities Exchange Act Release No. 94310 (Feb. 24, 2022), 87 FR 11748 (Mar. 2, 2022) (‘‘OIP’’). Comments received in response to the OIP are available at https://www.sec.gov/comments/srctacq-2021-02/srctacq202102.htm. 10 See 17 CFR 242.608(b)(2)(i). 11 See Securities Exchange Act Release No. 94951 (May 19, 2022), 87 FR 31920 (May 25, 2022). 12 See Securities Exchange Act Release No. 95345 (July 21, 2022), 87 FR 45136 (July 27, 2022). 13 The Participants have filed a similar 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 (‘‘UTP Plan’’), which the Commission is also disapproving. See Securities Exchange Act Release No. 95848 (Sept. 21, 2022). 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 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 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 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 Amendments’’). The Commission is, by separate orders, also disapproving the Proposed Fee Amendments. See Securities Exchange Act Release Nos. 95849 (Sept. 21, 2022) (File No. S7–24–89); 95851 (Sept. 21, 2022) (File No. SR–CTA/CQ–2021– 03). 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. E:\FR\FM\27SEN1.SGM 27SEN1 Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices 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 Amendments were filed by the Participants pursuant to this requirement.20 As explained below, however, the Proposed Amendments do not comply with Rule 614(e)(1) because they do not conform the Plans 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 jspears on DSK121TN23PROD with NOTICES 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 Amendments 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 Amendments. 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)). VerDate Sep<11>2014 17:51 Sep 26, 2022 Jkt 256001 Rule 614(e), the Proposed Amendments: (1) amend the Plans to reflect that they will disseminate consolidated market data to competing consolidators and self-aggregators, even though the Plans will not be disseminating any consolidated market data; 21 (2) fail to amend the CTA Plan to require the individual Participants to disseminate data necessary to generate consolidated market data to competing consolidators and self-aggregators; 22 (3) fail to distinguish competing consolidators from vendors and subscribers; 23 (4) fail to amend the Plans to reflect that the Processors will no longer have the responsibility to disseminate regulatory halt notices once the decentralized consolidation model has been implemented; 24 (5) fail to include requirements for the Participants to timestamp every element of data necessary to generate consolidated market data; 25 and (6) fail to amend the Plans to remove references to a single processor.26 Because the Proposed Amendments are inconsistent with the MDI Rules, specifically Rule 614(e), the Commission must disapprove the Proposed Amendments under Rule 608(b)(2) of Regulation NMS because it cannot find that they are 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.27 III. Summary of the Proposed Amendments The Participants propose to amend the Plans to comply with Rule 614(e) of 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 17 CFR 242.603(b). See also MDI Rules Release, supra note 6, 86 FR at 18653. 23 17 CFR 242.600(b)(16) (defining ‘‘competing consolidators’’). See, e.g., MDI Rules Release, supra note 6, 86 FR at 18664–65 (discussing why market data vendors would not be required to register as competing consolidators under the decentralized consolidation model). 24 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). 25 17 CFR 242.614(e)(2). 26 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). 27 17 CFR 242.608(b)(2). PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 58561 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).28 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 Plans by the Proposed Amendments.29 28 17 CFR 242.614(e). full text of the Proposed Amendments appears as Attachments A and B to the Notice. See Notice, supra note 7, 86 FR at 67802–29. 29 The E:\FR\FM\27SEN1.SGM 27SEN1 58562 Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices CTA Plan Proposed Amendments Preface Under the Proposed Amendments, the CTA 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.’’ Section I.—Definitions The Proposed Amendments add, as Section I.(x), a definition of ‘‘Primary Listing Exchange,’’ which means ‘‘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.’’ Section IV.—Administration of the CTA Plan The Proposed Amendments add new Section IV.(e), Plan website Disclosures, requiring CTA to publish on the CTA Plan’s website the Primary Listing Exchange for each Eligible Security, and, on a monthly basis, the consolidated market data gross revenues for Eligible Securities as specified by Tape A and Tape B securities. The Participants explain that this addition is intended to comply with Rule 614(e)(4) and Rule 614(e)(5)(i) and (iii).30 jspears on DSK121TN23PROD with NOTICES Section V.—The Processor and Competing Consolidators The Proposed Amendments amend the title of Section V. to include competing consolidators, such that it is now titled ‘‘The Processor and Competing Consolidators,’’ and to add new Section V.(f), Evaluation of Competing Consolidators, to require the Operating Committee to assess the performance of competing consolidators on an annual basis and to submit an annual report to the Commission containing that assessment. The Proposed Amendments require 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).31 In addition, the Proposed Amendments require 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).32 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.33 The Proposed Amendments add the following monthly performance metrics to this section: (i) Capacity statistics, including system tested capacity, system output capacity, total transaction capacity, and total transaction peak capacity; (ii) 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; (iii) System availability statistics, including system up-time percentage and cumulative amount of outage time; (iv) Network delay statistics, including quote and trade zero window size events, quote and trade retransmit events, and quote and trade message total; and (v) Latency statistics, including distribution statistics up to the 99.99th percentile, for the following: (A) When a Participant sends an inbound message to a competing consolidator and when the competing consolidator receives the inbound message; (B) 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 (C) 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 V. to define the monthly performance metrics in accordance with Rule 614(d)(5).34 Section VI.—Consolidated Tape The Proposed Amendments amend Section VI.(c), Reporting Format and Technical Specifications, to include a reference to competing consolidators and self-aggregators such that last sale price information relating to a completed transaction in an Eligible Security reported to competing consolidators and self-aggregators by any Participant or other reporting party shall be in the format required in Section VI.(c). In addition, the Proposed Amendments amend Section VI.(c) to delete from the required format the time of the transaction (reported in microseconds) as identified in the Participant’s matching engine publication timestamp, and to replace it with the time the last sale price information was generated by the CFR 242.614(d)(5). id. 34 See Notice, supra note 7, 86 FR at 67800. Participant (reported in microseconds). Furthermore, the Proposed Amendments amend Section VI.(c) to add to the required format, with respect to reports to competing consolidators and self-aggregators, the time the Participant made the last sale price information available to competing consolidators and self-aggregators (reported in microseconds). The Participants explain that the proposed references to competing consolidators and self-aggregators and the proposed requirement to report in microseconds the time that a Participant made the last sale price information available to competing consolidators and selfaggregators are intended to comply with Rule 614(e)(1) and (2).35 With respect to FINRA, the Proposed Amendments amend a statement in Section VI.(c) that the time of the transaction shall be the time of execution that a FINRA member reports to a FINRA trade reporting facility in accordance with FINRA rules. The Proposed Amendments amend this statement to state that the time the last sale price information was generated by a Participant shall be the time that a FINRA member reports to a FINRA trade reporting facility in accordance with FINRA rules. The Proposed Amendments also add references to competing consolidators and selfaggregators such 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 selfaggregators—the FINRA trade reporting facility shall also furnish the Processor, competing consolidators, and selfaggregators with the time of the transmission as published on the facility’s proprietary feed. The Proposed Amendments also delete Section VI.(g), ITS Transactions, which concerns last sale prices reflecting ITS transactions. The Participants explain that they are proposing to remove this provision because the ITS is obsolete.36 Section VIII. Collection and Reporting of Last Sale Data The Proposed Amendments amend Section VIII.(a), Responsibility of Exchange Participants, to remove a list of exchange participants and the requirement that each collect and report to the Processor all last sale price information to be reported to it relating to transactions in Eligible Securities taking place on its floor. The Proposed Amendments amend this statement to 32 17 30 See id. at 67800. 31 See id. VerDate Sep<11>2014 17:51 Sep 26, 2022 33 See Jkt 256001 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 35 See 36 See E:\FR\FM\27SEN1.SGM id. id. 27SEN1 Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices jspears on DSK121TN23PROD with NOTICES state that each Participant agrees to collect and report to the Processor all last sale price information to be reported by it relating to transactions in Eligible Securities. The Proposed Amendments also add to the CTA Plan a statement that ‘‘[e]ach Participant further agrees to collect and report to Competing Consolidators and Self-Aggregators all last sale price information to be reported to it related to transactions in Eligible Securities 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 Eligible Securities to any person.’’ 37 In addition, the Proposed Amendments amend Section VIII.(b), FINRA Responsibility, to add references to competing consolidators and self-aggregators such that the provision states: ‘‘The FINRA shall develop and adopt rules governing the reporting of last sale price information to be reported by its members to both the Processor for inclusion on the consolidated tape and to Competing Consolidators and SelfAggregators. Such rules shall . . . (ii) be designed to avoid duplicate reporting of transactions on the consolidated tape or to Competing Consolidators and Self Aggregator. . . .’’ The Participants explain that these additions are designed to comply with Rule 614(e)(1).38 Finally, the Proposed Amendments delete Section VIII.(c), Description of Reporting Procedures, which states that each Participant and each other reporting party has prepared and submitted to CTA and the Commission a description of the procedures by which it collects and reports to the Processor last sale price information reported by it pursuant to the CTA Plan. The Participants explain that this provision is no longer relevant under the MDI Rules.39 Section IX.—Receipt and Use of CTA Information In Sections IX.(a), Requirements for Receipt and Use of Information, (b), Approvals of Redisseminators and Terminations of Approvals, and (c), Subscriber Terminations, the Proposed Amendments replace several references to ‘‘each CTA network’s information,’’ ‘‘a CTA network’s information,’’ ‘‘that 37 The Proposed Amendments also delete the following statement from Section VIII.(a): ‘‘CTA shall seek to reduce the time period for reporting last sale prices to the Processor as conditions warrant.’’ 38 See Notice, supra note 7, 86 FR at 67801. 39 See id. VerDate Sep<11>2014 17:51 Sep 26, 2022 Jkt 256001 CTA network’s information,’’ and ‘‘that CTA network’s last sale price information’’ with the term ‘‘consolidated market data.’’ The Proposed Amendments also amend Section IX.(a) to include references to competing consolidators and self-aggregators. Proposed Section IX.(a) states that, ‘‘[p]ursuant to fair and reasonable terms and conditions, each CTA network’s administrator shall provide for: (i) the dissemination of consolidated market data on terms that are not unreasonably discriminatory to Competing Consolidators, SelfAggregators, vendors, newspapers, Participants, Participant members and member organizations, and other persons over that network’s ticker and over the high speed line; and (ii) the use of consolidated market data by Competing Consolidators, SelfAggregators, vendors, subscribers, newspapers, Participants, Participant members and member organizations and other persons.’’ Additionally, the section now states that each CTA network’s Participants will determine the terms and conditions applying in respect of a particular manner of receipt or use of consolidated market data, including whether the manner of receipt or use will require recipients or users to enter into agreements with the CTA network’s administrator, and that these determinations will be made in a reasonably uniform manner to subject all parties that receive or use consolidated market data in a particular manner to terms and conditions that are substantially similar. In addition, the Proposed Amendments amend Section IX.(a) to state that the Participants expect their CTA network’s administrator to require the following parties to enter into agreements with the CTA network administrator: (i) any party that receives a CTA network’s information by means of a direct computer-to-computer interface with the Processor or competing consolidator; (ii) any competing consolidator or selfaggregator that receives last sale transaction information directly from a Participant for the purpose of creating consolidated market data; (iii) vendors and other parties that redisseminate consolidated market data to others; and (iv) persons that use consolidated market data for such purposes as that CTA network’s administrator may from time to time identify. The Participants explain that the proposed revisions to Section IX.(a) are intended to make clear that the current market data contracts regarding the receipt of market data will be applicable to competing consolidators and self- PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 58563 aggregators.40 The Participants state that the change is consistent with Rule 614(e)(1) and is necessary because competing consolidators and selfaggregators would be receiving and using consolidated market data and should be subject to the same contracts applicable to vendors and subscribers.41 The Proposed Amendments amend Section XI.(b), Approvals of Redisseminators and Terminations of Approvals, to state that all vendors and other parties that redisseminate consolidated market data (‘‘data redisseminators’’) shall be required to be approved by a CTA network’s administrator. Additionally, the Proposed Amendments amend Section XI.(c), Subscriber Terminations, to state that a CTA network’s administrator may determine that circumstances warrant directing a data redisseminator to cease providing consolidated market data to a subscriber, and that the CTA network’s Participants may direct the data redisseminator to cease providing consolidated market data to the subscriber if a majority of those Participants determine that (i) such action is necessary or appropriate in the public interest or for the protection of investors, or (ii) the subscriber has breached any agreement required by the CTA network’s administrator pursuant to Section IX. Section XI.—Operational Matters The Proposed Amendments delete from Section XI.(a), Regulatory and Operational Halts, the definition of ‘‘Primary Listing Market’’ in Section XI.(a)(i)(H) and the definition of ‘‘Trading Center’’ in Section XI.(a)(i)(N). The Proposed Amendments add a reference to competing consolidators and self-aggregators to Section XI.(a)(ii), Operational Halts, to state that a Participant shall notify competing consolidators and self-aggregators if it has concerns about its ability to collect and transmit quotes, orders, or last sale prices, or where the Participant has declared an Operational Halt or suspension of trading in one or more Eligible Securities, pursuant to the procedures adopted by the Operating Committee. In addition, the Proposed Amendments add a reference to competing consolidators and selfaggregators to Section XI.(a)(viii), Communications, to require a Primary Listing Exchange for an Eligible Security to notify competing consolidators and self-aggregators if it determines to initiate a Regulatory Halt. 40 See 41 See E:\FR\FM\27SEN1.SGM id. id. 27SEN1 58564 Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices The Proposed Amendments also replace references to ‘‘Primary Listing Market’’ with ‘‘Primary Listing Exchange’’ throughout Section XI. The Participants state that their revisions to Section XI to include references to notifying competing consolidators and self-aggregators in connection with Regulatory and Operational Halts are consistent with Rule 614(e)(1) and would ensure that competing consolidators and selfaggregators are notified of information related to Regulatory and Operational Halts and that competing consolidators can disseminate this information to their customers.42 CQ Plan Proposed Amendments Preface Under the Proposed Amendments, the CQ 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.’’ Section I.—Definitions The Proposed Amendments define ‘‘Primary Listing Exchange’’ in Section I.(v) 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 Proposed Amendments amend the definition of ‘‘Quotation Information’’ in Section I.(x) (formerly, Section I.(w)) to change a reference to ‘‘consolidated BBO’’ to ‘‘NBBO,’’ such that Quotation Information now means, among other things, ‘‘(iii) each NBBO contained in the foregoing information and any identifier associated therewith. . . .’’ jspears on DSK121TN23PROD with NOTICES Section IV.—Administration of this CQ Plan The Proposed Amendments add new Section IV.(d), Plan website Disclosures, requiring the Operating Committee to publish on the CQ Plan’s website the Primary Listing Exchange for each Eligible Security and, on a monthly basis, the consolidated market data gross revenues for Eligible Securities as specified by Tape A and Tape B securities. The Participants explain that this addition is intended to comply with Rule 614(e)(4) and Rule 614(e)(5)(i) and (iii).43 Section V.—The Processor and Competing Consolidators The Proposed Amendments amend the title of Section V. to include competing consolidators, such that it is now titled ‘‘The Processor and Competing Consolidators,’’ and to add new Section V.(f), Evaluation of Competing Consolidators, to require the Operating Committee to assess the performance of competing consolidators on an annual basis and to submit an annual report to the Commission containing the assessment. The Proposed Amendments require 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).44 In addition, the Proposed Amendments require 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).45 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.46 The Proposed Amendments add the following monthly performance metrics to this section: (i) Capacity statistics, including system tested capacity, system output capacity, total transaction capacity, and total transaction peak capacity; (ii) 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; (iii) System availability statistics, including system up-time percentage and cumulative amount of outage time; (iv) Network delay statistics, including quote and trade zero window size events, quote and trade retransmit events, and quote and trade message total; and (v) Latency statistics, including distribution statistics up to the 99.99th percentile, for the following: (A) When a Participant sends an inbound message to a competing consolidator and when the competing consolidator receives the inbound message; (B) 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 (C) When a Participant sends an inbound message to a competing consolidator and when the competing consolidator sends the 44 See Notice, supra note 7, 86 FR at 67801. CFR 242.614(d)(5). 46 See id. 42 See id. 43 See id. VerDate Sep<11>2014 45 17 17:51 Sep 26, 2022 Jkt 256001 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 corresponding consolidated message to a customer of the competing consolidator. Section VI.—Collection and Reporting of Quotation Information The Proposed Amendments amend Section VI.(a), Responsibilities of Participants, to state, ‘‘Each Participant agrees to collect, and furnish to the Processor in a format acceptable to the Operating Committee, all quotation information required to be made available by such Participant by Rules [sic] 602(b)(1) of Regulation NMS. Each Participant further agrees to collect and report to Competing Consolidators and Self Aggregators all quotation information required to be made available by such Participant by Rule 603(b) of Regulation NMS, including all data necessary to generated consolidated market data.’’ 47 In addition, under the Proposed Amendments, Section VI.(a) states that each bid and offer with respect to an Eligible Security furnished to the Processor, competing consolidators, and self-aggregators by any Participant pursuant to the Plan would be accompanied by (i) the information required by Rules 602(b)(1) or 603(b) of Regulation NMS, as applicable, and (ii) the time of the bid or offer as identified by: (A) in the case of a national securities exchange, the reporting Participant’s matching engine publication timestamp (reported in microseconds); or (B) in the case of a national securities association, the quotation publication timestamp that the association’s bidding or offering member reports to the association’s quotation facility in accordance with FINRA rules. Each bid and offer with respect to an Eligible Security furnished to competing consolidators and selfaggregators by any Participant must be 47 Notice, supra note 7, 86 FR at 67801. The Participants state that they propose to amend Sections VIII.(a) and (b) of the CQ Plan to add the requirement that each Participant agrees to collect and report to competing consolidators and selfaggregators all quotation information 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 Eligible Securities to any person. While the Participants refer to Sections VIII.(a) and (b) of the CQ Plan here, this section reference seems to be an error, and the Participants likely intended to refer instead to Section VI.(a) and (b), as the requirement being discussed is only present in Section VI.(b) of the CQ Plan as it is proposed to be amended. Separately, the amendment to Section VI.(a) lacks the requirement that Participants report quotation 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 Eligible Securities to any person. See id. at 67823. E:\FR\FM\27SEN1.SGM 27SEN1 jspears on DSK121TN23PROD with NOTICES Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices accompanied by the time (reported in microseconds) the Participant made the bid and offer available to competing consolidators and self-aggregators. With respect to national securities associations, under the Proposed Amendments, if a national securities association quotation facility provides a proprietary feed of its quotation information, then the quotation facility shall also furnish the Processor, competing consolidators, and selfaggregators with the time of the quotation as published on the quotation facility’s proprietary feed, and the national securities association 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. Additionally, Section VI.(a), as proposed to be amended, states, ‘‘Each bid and offer with respect to an Eligible Security made by a broker or dealer otherwise than on the floor of an exchange and furnished to the Processor, Competing Consolidators, and Self-Aggregators by any Participant which is a national securities association shall, at the time furnished, be accompanied by an appropriate symbol designated by the Operating Committee identifying such broker or dealer as required by paragraph (b)(i) of the Rule.’’ The Proposed Amendments also amend Section VI.(b), Timeliness of Reporting, to add the following requirement: ‘‘Each Participant further agrees to furnish quotation information, and changes in any such information, to the Competing Consolidator[s] 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 Participants explain that this addition is designed to comply with the requirements of Rule 614(e)(1). In addition, the Proposed Amendments would amend Section VI.(c), High Speed Line and Market Identifiers, to remove a reference to an ‘‘ITS/CAES BBO’’ as excepted from the requirement that each bid or offer with respect to an Eligible Security furnished to the processor by a Participant that is a national securities association shall be accompanied by the symbol identifying the broker or dealer who was reported to the Processor as having made such bid or offer otherwise than on the floor of an exchange. The Participants explain that they propose to remove this VerDate Sep<11>2014 17:51 Sep 26, 2022 Jkt 256001 reference because references to ITS/ CAES are outdated.48 The Proposed Amendments also amend Section VI.(e), Unusual Market Conditions, to include references to competing consolidators and selfaggregators and to remove a reference to Rule 602(b)(1) 49 and replace it with a reference to Rules 601(b)(1) and 603(b) of Regulation NMS. The Proposed Amendments also remove a reference to vendors in Section VI.(e). Finally, the Proposed Amendments delete Section VI.(f), Description of Reporting Procedures, which requires each Participant and each other reporting party to prepare and submit to the Operating Committee and the Processor a description of the procedures by which it intends to comply with its obligations under the CQ Plan. The Participants explain that the provisions of Section VI.(f) are no longer relevant.50 Section VII.—Receipt and Use of Quotation Information In Sections VII.(a), Requirements for Receipt and Use of Information, (b), Approvals of Redisseminators and Terminations of Approvals, and (c), Subscriber Terminations, the Proposed Amendments replace several references to a ‘‘CQ network’s quotation information’’ with the term ‘‘consolidated market data.’’ The Proposed Amendments would also amend Section VII.(a) to include references to competing consolidators and self-aggregators such that, pursuant to fair and reasonable terms and conditions, each network’s administrator shall provide for: (i) the dissemination of each CQ network’s quotation information on terms that are not unreasonably discriminatory to competing consolidators and selfaggregators; and (ii) the use of that CQ network’s quotation information by competing consolidators and selfaggregators. In addition, the Proposed Amendments would amend Section VII.(a) to state that the Participants in both CQ networks expect that their network’s administrator will require the following parties to enter into agreements with the network’s administrator: (i) any party that receives consolidated market data by means of a direct computer-to-computer interface with the Processor or competing consolidators; (ii) any competing consolidator or self-aggregator that receives quotation information directly Notice, supra note 7, 86 FR at 67801. id. at 67824. 50 See id. at 67801. from a Participant for the purpose of creating consolidated market data; (iii) vendors and other parties that redisseminate consolidated market data; and (iv) persons that use consolidated market data for such purposes as the CQ network’s administrator may from time to time identify. The Participants explain that the proposed revisions intend to make clear that the current market data contracts regarding the receipt of market data will be applicable to competing consolidators and self-aggregators.51 The Participants state that the change is consistent with Rule 614(e)(1) and is necessary, stating that competing consolidators and self-aggregators would be receiving and using consolidated market data and should be subject to the same contracts applicable to vendors and subscribers.52 The Proposed Amendments would also amend Section VII.(b), Approvals of Redisseminators and Terminations of Approvals, to state that all vendors of and other parties that redisseminate consolidated market data (‘‘data redisseminators’’) shall be required to be approved by a CTA network’s administrator. Additionally, the Proposed Amendments amend Section XI.(c), Subscriber Terminations, to state that a network’s administrator may determine that circumstances warrant directing a data redisseminator to cease providing consolidated market data to a subscriber, and that the CQ network’s Participants may direct the data redisseminator to cease providing consolidated market data to the subscriber if a majority of those Participants determine that (i) such action is necessary or appropriate in the public interest or for the protection of investors, or (ii) the subscriber has breached any agreement required by the CTA network’s administrator pursuant to Section VII. 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 48 See 49 See PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 58565 51 See 52 See E:\FR\FM\27SEN1.SGM id. id. 27SEN1 58566 Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices mechanisms of, a national market system, or otherwise in furtherance of the purposes of the Act.53 The Commission shall disapprove a national market system plan or proposed amendment if it does not make such a finding.54 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.55 For the reasons discussed below, the Commission does not find that the Participants have met their burden to demonstrate that the Proposed Amendments are consistent with the Act.56 Specifically, the Commission does not find that the Participants have demonstrated that the Proposed Amendments are consistent with either Rule 614(e) of Regulation NMS or Rule 608 of Regulation NMS. The Proposed Amendments clearly do not comply with the requirements of the MDI Rules.57 Accordingly, the Commission cannot make a finding that the Proposed Amendments are 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.58 B. The Requirements of the MDI Rules Regarding the Proposed Amendments 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.59 The MDI Rules Release provides for an ‘‘initial parallel operation period’’ of 180 days 53 17 CFR 242.608(b)(2). jspears on DSK121TN23PROD with NOTICES 54 Id. 55 17 CFR 201.700(b)(3)(ii). CFR 201.700(b)(3). 57 As discussed below, the Proposed Amendments do 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). 58 17 CFR 242.608(b)(2). 59 See MDI Rules Release, supra note 6, 86 FR at 18637. 56 17 VerDate Sep<11>2014 17:51 Sep 26, 2022 Jkt 256001 during which the existing exclusive SIPs for the Equity Data Plans would operate in parallel with the competing consolidators,60 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.61 Pursuant to Rule 614(e)(1) of Regulation NMS, and as discussed in the MDI Rules Release, the Participants to the Plans were required to file an amendment to conform the Plans 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.62 C. Whether the Proposed Amendments Are Consistent With Rule 614(e)(1) of Regulation NMS 1. Consistency With the Decentralized Consolidation Model Two commenters recommend disapproval of the Proposed Amendments because the amendments do not properly conform the Plans to the MDI Rules in that the amendments fail to accurately reflect the decentralized consolidation model.63 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.’’ 64 The commenter also states that the Proposed Amendments did not include any revisions to the exhibits, stating that Exhibit A to the current 60 See id. at 18700. at 18701. 62 See id. at 18700–01. 63 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’’). 64 MayStreet Letter II, supra note 63, at 2. 61 Id. PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 version of the CTA Plan (‘‘Restated Articles of Association of Consolidated Tape Association’’) ‘‘does not reflect the shifting purpose of the Plan to provide underlying content for the creation of consolidated market data,’’ 65 and argues that the Proposed Amendments must ‘‘[a]cknowledge that the Plan is no longer responsible for the creation, distribution and pricing of consolidated market data.’’ 66 This commenter further argues that ‘‘[t]he language of the Plan Amendments that states that competing consolidators and self-aggregators will be receiving and using consolidated market data is inconsistent with their role in actually generating consolidated market data based on the receipt of NMS information,’’ 67 and reiterates that only competing consolidators would externally distribute and charge for consolidated market data and that the Plans would only be selling underlying content.68 This commenter also disagrees with what it describes as the Proposed Amendments’ treatment of competing consolidators as vendors.69 The commenter states that ‘‘[s]ubjecting competing consolidators to the same fees and contractual requirements as data vendors and subscribers that receive consolidated market data from the exclusive SIP fails to recognize that competing consolidators are SIPs and not similarly situated to today’s data vendors.’’ 70 The commenter further states that competing consolidators will take on added risk and expense, ‘‘including the costs associated with generating consolidated market data, disclosing operational and performance metrics, registering with the SEC, and ongoing compliance with Rule 614.’’ 71 Another commenter also argues that the Proposed Amendments’ treatment of competing consolidators as market data vendors contravenes the MDI Rules.72 This commenter argues that the 65 Id. 66 Id. at 8. at 4–5. 67 MayStreet Letter I, supra note 63, at 5. MayStreet Letter II, supra note 63, at 4–5. 69 See MayStreet Letter I, supra note 63, at 2, 4– 5 (explaining that competing consolidators are generating and distributing consolidated market data for the first time, unlike vendors who redistribute consolidated market data). 70 MayStreet Letter I, supra note 63, at 3–4; see id. at 1 (stating that competing consolidators should be treated as the replacements to the exclusive SIPs to meet the requirements of the MDI Rules). 71 Id. at 5. 72 See SIFMA Letter I, supra note 63, at 8. See also id. at 4–5; 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, at 2–3 (Apr. 27, 2022) (‘‘SIFMA Letter II’’). 68 See E:\FR\FM\27SEN1.SGM 27SEN1 Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices Commission’s MDI Rules replace the exclusive SIPs with competing consolidators and that competing consolidators should therefore be ‘‘treated in the same manner as the exclusive SIPs are today.’’ 73 This commenter states that the Participants are, through the Proposed Amendments, ‘‘acting in an unreasonably discriminatory manner, effectively disregarding these Exchange Act mandates in addition to the Commission’s directive in the Infrastructure Rule.’’ 74 One commenter argues that the sections of the Plans that discuss vendors’ and subscribers’ contractual relationships with the Plans should be ‘‘removed or significantly altered to reflect that the Plans no longer have 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.’’ 75 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 Plans.76 The commenter also states that contracts applicable to vendors would be inappropriate for competing consolidators because, unlike vendors, competing consolidators would be receiving data underlying consolidated market data from the exchanges, not consolidated market data from the exclusive SIPs.77 This commenter also objects to the continued references to subscribers and vendors in the Plans 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.’’ 78 One commenter objects to the retention of the concept of a single processor in the Proposed Amendments.79 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 73 SIFMA Letter I, supra note 63, at 8. at 8. 75 MayStreet Letter I, supra note 63, at 3. 76 Id. at 3. See also MayStreet Letter II, supra note 63 at 9 (arguing that, since the Plans would only be selling underlying content to competing consolidators and self-aggregators, vendor and subscriber agreements should not be required). 77 See MayStreet Letter I, supra note 63, at 5. 78 Id. at 3. 79 See SIFMA Letter I, supra note 63, at 8. jspears on DSK121TN23PROD with NOTICES 74 Id. VerDate Sep<11>2014 17:51 Sep 26, 2022 Jkt 256001 period.’’ 80 This commenter requests clarification of how the CTA and CQ Plans will operate during the parallel operation period, such as the inclusion in the Plans of objective criteria for ending the parallel period and the addition of a section devoted to competing consolidators and selfaggregators to help distinguish between their obligations and the obligations of the exclusive SIPs during the parallel period.81 The commenter recommends that the Proposed Amendments 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 commenter also suggests specific modifications to CTA Plan Sections V. and VI. to make clear that the functions of the Processor apply only during the parallel operation period and to embed in the body of the Plans the contractual terms regarding the provision of capacity forecasts to competing consolidators, data correction requirements, and indemnification (of competing consolidators from Participants) from CQ Plan Exhibit A and CTA Plan Exhibit B.82 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.83 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 Amendments) until the submission of a further amendment after the parallel 80 MayStreet Letter II, supra note 63, at 8. id. at 7–8. 82 See id. 83 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’’). 81 See PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 58567 operation period is consistent with the MDI Rules Release.84 The Commission agrees with the commenters who argue that the Proposed Amendments do not properly conform the Plans 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,85 and competing consolidators and self-aggregators will then generate consolidated market data, rather than receive consolidated market data from the Plans.86 The Participants, however, propose to amend the Plans to provide for the dissemination of consolidated data to competing consolidators and self-aggregators.87 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,88 calculate and 84 See id. at 1–2. 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). 86 See Rule 614(d)(1)–(3). 17 CFR 242.614(d)(1)– (3). 87 The Participants propose to amend the CTA Plan to require the CTA network administrator to provide for the dissemination of consolidated market data to competing consolidators and selfaggregators and to provide for the use of that consolidated market data by competing consolidators and self-aggregators. See Notice, supra note 7, 86 FR at 67811 (CTA Plan Proposed Amendment at Section IX.(a)). The Participants also propose to amend the CQ Plan to require each network’s administrator to provide for the dissemination of each CQ network’s consolidated quotation information on terms that are not unreasonably discriminatory to competing consolidators and self-aggregators, and to provide for the use of that CQ network’s consolidated quotation information by competing consolidators and self-aggregators. See id. at 67824 (CQ Plan Proposed Amendment at Section VII.(a)). See also Consolidated Quotation System, Multicast Output Binary Specification, 8 (Jan. 26. 2021), available at https://www.ctaplan.com/publicdocs/ctaplan/CQS_ Pillar_Output_Specification.pdf. The Participants also state that, for both the CTA Plan and the CQ Plan, competing consolidators and self-aggregators will be receiving and using consolidated market data. See Notice, supra note 7, 86 FR at 67801 (describing the Proposed Amendments). 88 See Rule 614(d)(1), 17 CFR 242.614(d)(1). 85 See E:\FR\FM\27SEN1.SGM 27SEN1 58568 Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices generate a consolidated market data product,89 and make the consolidated market data product available to subscribers.90 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.91 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.’’ 92 Accordingly, the Plans’ 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.93 Therefore, the Proposed Amendments impermissibly provide for the dissemination by the Plans 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. Second, while Rule 603(b) requires national securities exchanges and associations on which an NMS stock is traded to make available to all competing consolidators and selfaggregators their information with respect to quotations for and transactions in NMS stocks, including all data necessary to generate consolidated market data,94 the Proposed Amendments do not add this requirement to the CTA Plan. Instead, the Proposed Amendments add to the CTA Plan a requirement that each 89 See Rule 614(d)(2), 17 CFR 242.614(d)(2). 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). 91 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. 92 17 CFR 242.603(b). 93 See MDI Rules Release, supra note 6, 86 FR at 18604, 18681. 94 17 CFR 242.603(b). jspears on DSK121TN23PROD with NOTICES 90 See VerDate Sep<11>2014 17:51 Sep 26, 2022 Jkt 256001 Participant agrees to collect and report to competing consolidators and selfaggregators all ‘‘last sale price information’’—not all data necessary to generate consolidated market data.95 Last sale price information is but one component of ‘‘core data’’ adopted by the MDI Rules, and core data is itself only one component of consolidated market data.96 Rule 603(b) requires the Participants to make available all data necessary to generate consolidated market data to competing consolidators and self-aggregators,97 not just last sale price information. Third, under the Proposed Amendments, the Plans would treat competing consolidators in the same manner as vendors and subscribers with respect to market data contracts.98 Under Rule 600(b)(16), a competing consolidator is, by definition, either a SIP required to register under Rule 614 or an SRO.99 The Participants, however, would apply current market data contracts for vendors and subscribers to competing consolidators and selfaggregators,100 arguing that this ‘‘is necessary since the Competing Consolidators and Self-Aggregators will [sic] receiving and using consolidated market data, and any such party should be subject to the same contracts applicable to vendors and subscribers.’’ 101 The Commission agrees with the commenters who argue that applying contract provisions for vendors and subscribers to competing consolidators 95 See Notice, supra note 7, 86 FR at 67810 (CTA Plan Proposed Amendment at Section VIII.(a)). As discussed above, Rule 600(b)(19) 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 organizationspecific 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). 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). 96 See id. 97 17 CFR 242.603(b). 98 See SIFMA Letter I, supra note 63, at 4–5, 8; SIFMA Letter II, supra note 72, at 2–3; MayStreet Letter I, supra note 63, at 2, 4–5. 99 17 CFR 242.600(b)(16). 100 See Notice, supra note 7, 86 FR at 67811–12 (CTA Plan Proposed Amendment at Section IX.; id. at 67824–25 (CQ Plan Proposed Amendment at Section VII.). 101 Notice, supra note 7, 86 FR at 67801. PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 is inconsistent with the MDI Rules,102 because unlike vendors and subscribers, competing consolidators will not receive consolidated market data from the Plans. Instead, as replacements for the exclusive SIPs, competing consolidators will generate consolidated market data themselves and disseminate it to subscribers. In the MDI Rules Release, the Commission clearly distinguished competing consolidators from vendors. For example, the Commission explained that only entities that receive information with respect to quotations for and transactions in NMS stocks directly from an SRO pursuant to an effective national market systems plan and that generate consolidated market data products for dissemination must register as competing consolidators.103 By comparison, the Commission stated, ‘‘[a] market data vendor that purchases proprietary data feeds from an SRO or SROs, or that purchases data from a competing consolidator, and aggregates and disseminates such data to its customers, will not be required to register as a competing consolidator,’’ 104 but ‘‘vendors that do not register as competing consolidators would not be permitted to purchase the NMS information necessary to generate consolidated market data from the SROs at prices established by an effective national market system plan.’’ 105 Fourth, the Proposed Amendments are 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).106 102 See SIFMA Letter I, supra note 63, at 4–5, 8; MayStreet Letter I, supra note 63, at 2, 4–5. See also SIFMA Letter II, supra note 72, at 2–3 (objecting to the Proposed Fee Amendments because they propose to charge redistribution fees to competing consolidators like market data vendors). 103 See MDI Rules Release, supra note 6, 86 FR at 18665. 104 Id. 105 Id. 106 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 E:\FR\FM\27SEN1.SGM 27SEN1 Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices jspears on DSK121TN23PROD with NOTICES The Proposed Amendments, however, do not reflect this requirement with respect to regulatory data. For example, the Proposed Amendments fail to amend the CTA and CQ Plans to reflect that the Processors will no longer have the responsibility to disseminate regulatory halt notices once the decentralized consolidation model has been implemented. The Proposed Amendments also do 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.107 While the Proposed Amendment to the CTA Plan requires that a Participant that reports last sale price information to competing consolidators and self-aggregators timestamp in microseconds the time the Participant generated the last sale price information and made the last sale price information available to those entities,108 this proposed timestamp provision does not satisfy the requirements of Rule 614(e)(2), because it applies only to last sale price information, not to ‘‘all information with respect to quotations for and transactions in NMS stocks that is necessary to generate consolidated market data’’ as required under the rule. And while the Proposed Amendment to the CQ Plan amends the section governing the collection and reporting 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 available to competing consolidators and self-aggregators,109 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.’’ 110 ‘‘consolidated market data,’’ as defined in Rule 600(b)(19). See supra note 85. 107 17 CFR 242.614(e)(2). 108 See Notice, supra note 7, 86 FR at 67808 (CTA Plan Proposed Amendment at Section VI.(c)). 109 See id. at 67823 (CQ Plan Proposed Amendment at Section VI.(a)). 110 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, VerDate Sep<11>2014 17:51 Sep 26, 2022 Jkt 256001 Additionally, the Proposed Amendment to the CQ Plan states that each bid and offer furnished to competing consolidators and self-aggregators shall be accompanied by the information required by Rule 602(b)(1) or Rule 603(b),111 but it 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). And finally, the Commission disagrees with the Participants’ statement that the continued references to the role of the Processor in the Plans, as amended by the Proposed Amendments, comply with the MDI Rules Release’s implementation schedule for parallel operation of the exclusive SIPs and the competing consolidators.112 Rule 614(e)(1) requires the Participants to amend the Plans 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 Plans to reflect the decentralized consolidation model.113 However, the Proposed Amendments are not consistent with the decentralized consolidation model and do 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 Plans ‘‘to effectuate a cessation of the operations of the exclusive SIPs,’’ 114 the current Proposed Amendments were required to conform the Plans 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, which, as discussed above, they have failed to do. Moreover, the failure of the Participants to explain in 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. 111 See Notice, supra note 7, 86 FR at 67823 (CQ Plan Proposed Amendment at Section VI.(a)). 112 See McGonigle Letter, supra note 83, at 1–2. See also MDI Rules Release, supra note 6, 86 FR at 18700–01 (discussing the parallel operation implementation schedule). 113 17 CFR 242.614(e)(1). 114 MDI Rules Release, supra note 6, 86 FR at 18701. PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 58569 the Proposed Amendments how the Plans 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.115 Because the Proposed Amendments clearly do not comply with the plain terms of the MDI Rules 116 and are 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 Amendments are 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.117 2. Technical Comments One commenter criticizes the failure of the Proposed Amendments to incorporate the definitions of the MDI Rules.118 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.’’ 119 Specifically, this commenter suggests that the Proposed Amendments add definitions of the following terms: competing consolidator, self-aggregator, consolidated market data, content 115 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). 116 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). 117 See 17 CFR 242.608(b)(2). 118 See MayStreet Letter II, supra note 63, at 5. This commenter also recommends that the Commission issue guidance to the Participants to aid in revising the Proposed Amendments. 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 Plans. 119 Id. at 5. E:\FR\FM\27SEN1.SGM 27SEN1 58570 Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices 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 Plans.120 This commenter also suggests updating the existing definitions of Processor, System, and Consolidated Quotation System, and clarifying the existing definitions of Subscriber, Vendor, and the CQ Network’s Quotation Information to reflect the decentralized consolidation model.121 This commenter also describes several other technical criticisms of the Proposed Amendments. The commenter states that the Proposed Amendments should have removed the addition of a new SRO participant from the Plans’ ministerial amendment list,122 arguing that competing consolidators and selfaggregators would need more time to update their systems to handle the new Participant’s data.123 The commenter also states that the Proposed Amendments need to support the timestamps required by the MDI Rules to the microsecond,124 and that validation procedures to be used by competing consolidators need to be added to the Plans to describe the Participants’ and the competing consolidator’s obligations.125 The commenter further suggests that the Plans’ capacity planning process needs to apply to competing consolidators and self-aggregators so that these entities can meet SRO-expected capacity requirements.126 Finally, the commenter states that the Plans’ conflict of interest and confidentiality provisions need to apply to competing consolidators since they will be replacing the exclusive SIPs.127 The Commission agrees with the commenter that the failure to include the definitions established by the MDI Rules contributes to ambiguity within the Plans. In lieu of incorporating the MDI Rules’ definitions, the Proposed Amendments add a statement to each Plan that ‘‘[t]erms used in this plan have the same meaning as the terms defined 120 See id. at 5–6. id. at 6. 122 A ‘‘ministerial amendment’’ permits an amendment to the Plans that is submitted by the Chairman of the CTA Plan and the Chairman of the CQ Operating Committee with less than 48 hours’ advance notice to the Participants. See Notice, supra note 7, 86 FR at 67805 (CTA Plan Proposed Amendment at Section IV.(b)); id. at 67820 (CQ Plan Proposed Amendment at Section IV.(c)). 123 See MayStreet Letter II, supra note 63, at 6– 7. 124 See id. at 5. 125 See MayStreet Letter I, supra note 63, at 4; MayStreet Letter II, supra note 63, at 8. 126 See MayStreet Letter II, supra note 63, at 10. 127 See id. at 7. jspears on DSK121TN23PROD with NOTICES 121 See VerDate Sep<11>2014 17:51 Sep 26, 2022 Jkt 256001 in Rule 600(b) under the Act.’’ 128 This creates ambiguity because the Proposed Amendments use the terms adopted by the MDI Rules but do not include definitions of those terms, so their applicability and the obligations they create are unclear or are not reflected in the Proposed Amendments. For example, the Proposed Amendment to the CQ Plan adds a requirement for the collection and reporting 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.’’ 129 However, the Proposed Amendments do not define ‘‘consolidated market data’’ or even the data necessary to generate it. The Plans thus fail 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,130 regulatory data, and administrative data) in accordance with the definition of ‘‘consolidated market data’’ in Rule 600(b)(19) 131 and Rule 603(b).132 The absence of that definition in the Plans, especially in light of the instances described above in which the Proposed Amendments have failed to reflect the full scope of data required to be made available to competing consolidators and self-aggregators,133 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 Plans 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 Plans, there is thus no requirement in the language of the Plans for the Participants to timestamp the data components that constitute consolidated market data,134 such as the 128 Notice, supra note 7, 86 FR at 67802 (CTA Plan Proposed Amendment at Preface); id. at 67818 (CQ Plan Proposed Amendment at Preface). 129 Notice, supra note 7, 86 FR at 67823 (CQ Plan Proposed Amendment at Section VI.(a)). 130 See supra note 95 (defining ‘‘core data’’). 131 See id. (defining ‘‘consolidated market data’’). 132 17 CFR 242.603(b). As noted above, the CTA Plan Proposed Amendment does not add a requirement for the Participants to collect and report to competing consolidators and selfaggregators all data necessary to generate consolidated market data. See supra notes 94–97 and accompanying text. 133 See supra notes 94–97 and accompanying text. 134 See supra note 95 (defining ‘‘consolidated market data’’). PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 elements of core data 135 (another definition established by the MDI Rules that the Proposed Amendments failed to include in the Plans), which include auction information, odd-lot information, and depth of book data. This is another instance in which the absence of definitions in the Plans 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).136 The Proposed Amendments, however, do not add the definition of ‘‘regulatory data’’ to the Plans. Therefore, there is no unambiguous requirement in the Plans that the primary listing exchanges perform these functions. Further, the CTA Plan Proposed Amendment would require that the CTA network enter into agreements with vendors and other parties that redisseminate consolidated market data to others,137 without including the definition of ‘‘consolidated market data.’’ Also, as stated by a commenter,138 the MDI Rules define a competing consolidator as a securities information processor, but the Proposed Amendments fail to add the definition of ‘‘competing consolidator’’ the Plans. The Proposed Amendments also fail to treat competing consolidators as securities information processors, instead treating them, incorrectly, as vendors and subscribers.139 The failure to incorporate into the Plans the full text of the definitions established by the MDI Rules thus increases the likelihood of ambiguity. 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 Amendments are 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 135 See id. (defining ‘‘core data’’). supra note 106 (defining ‘‘regulatory data’’). Regulatory data is one element of ‘‘consolidated market data,’’ as defined in Rule 600(b)(19). See supra note 95. 137 See Notice, supra note 7, 86 FR at 67811 (CTA Plan Proposed Amendment at Section IX.(a)). 138 See supra note 119. 139 See supra notes 98–105 and accompanying text. See also supra note 23. 136 See E:\FR\FM\27SEN1.SGM 27SEN1 Federal Register / Vol. 87, No. 186 / Tuesday, September 27, 2022 / Notices 608(b)(2) thereunder, that the Proposed Amendments (File No. SR–CTA/CQ– 2021–02) be, and hereby are, disapproved. By the Commission. J. Matthew DeLesDernier, Deputy Secretary. II. Description of the Proposed Rule Change, as Modified by Amendment No. 1 [FR Doc. 2022–20830 Filed 9–26–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–95854; File No. SR–MRX– 2022–10] Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Its Rules Relating to Single-Leg and Complex Orders in Connection With a Technology Migration September 21, 2022. I. Introduction On July 25, 2022, Nasdaq MRX, LLC (‘‘MRX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend its rules relating to single-leg and Complex Orders in connection with a technology migration. The proposed rule change was published for comment in the Federal Register on July 29, 2022.3 The Commission received no comments regarding the proposal. On September 8, 2022, pursuant to Section 19(b)(2) of the Act,4 the Commission extended the time for Commission action on the proposal until October 27, 2022.5 On September 9, 2022, MRX filed Amendment No. 1 to the proposal, which replaces and supersedes the original filing in its entirety.6 The 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 95363 (July 25, 2022), 87 FR 45814 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 95704 (September 8, 2022), 87 FR 56457 (September 14, 2022). 6 Amendment No. 1 modifies the original proposal to (1) amend MRX Options 3, Sections 7, 11, 12, and 13 to add a paragraph at the beginning of each of the rules indicating that certain orders that require stock-tied functionality will be implemented at a later date as part of the technology migration; (2) add references to the ‘‘internal BBO’’ to the Qualified Contingent Cross and Complex Qualified Contingent Cross provisions in MRX Options 3, Sections 12(c) and (d), and to the proposed Complex Preferenced Order provisions in MRX Options 3, Section 14(b)(19), to jspears on DSK121TN23PROD with NOTICES 2 17 VerDate Sep<11>2014 17:51 Sep 26, 2022 Jkt 256001 Commission is publishing this notice to solicit comment on Amendment No. 1 to the proposed rule change from interested persons and is approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. 1. Purpose In connection with a technology migration to an enhanced Nasdaq, Inc. (‘‘Nasdaq’’) functionality which will result in higher performance, scalability, and more robust architecture, the Exchange intends to adopt certain trading functionality currently utilized at Nasdaq affiliate exchanges. Also, the Exchange intends to remove certain functionality. Specifically, the following sections would be amended: Options 3, Section 7, Types of Orders and Order and Quote Protocols, Options 3, Section 10, Priority of Quotes and Orders; Options 3, Section 11, Auction Mechanisms; Options 3, Section 12, Crossing Orders, Options 3, Section 13, Price Improvement Mechanisms for Crossing Transactions; Options 3, Section 14, Complex Orders; and Options 3, Section 16, Complex Risk Protections. Each change will be described below. Legging Order The Exchange proposes to amend Options 3, Section 7(k)(1) to add a provision which states that a Legging Order 7 will not be generated during a Posting Period, as described in detail below, in progress on the same side in the series pursuant to Options 3, Section 15 regarding Acceptable Trade Range (‘‘ATR’’). A Legging Order would not be generated because it would no longer be at the Exchange’s displayed best bid or conform with the concept of re-pricing at an ‘‘internal BBO,’’ as provided in MRX Options 3, Section 5(c) and (d); (3) amend MRX Options 3, Section 13(d)(4) to replace an incorrect reference to the ‘‘Crossing Transaction’’ with a reference to the ‘‘exposure period;’’ and (4) replace references to File No. SR–MRX–2022–5P with references to File No. SR–MRX–2022–16, to reflect the immediate effectiveness of File No. SR–MRX–2022–16. See Securities Exchange Act Release No. 95807 (September 16, 2022) (File No. SR–MRX–2022–16) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend Certain Rules in Connection With a Technology Migration to Enhanced Nasdaq Functionality) (‘‘SR–MRX–2022– 16’’). Amendment No. 1 is available at https:// www.sec.gov/comments/sr-mrx-2022-10/ srmrx202210-20138852-308557.pdf. 7 A Legging Order is a limit order on the regular limit order book that represents one side of a Complex Options Order that is to buy or sell an equal quantity of two options series resting on the Exchange’s Complex Order Book. See Options 3, Section 7(k). PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 58571 offer, therefore, generating a Legging Order during a Posting Period in progress, on the same side in the series, would lead to its immediate removal, making it superfluous to have been generated. ATR is a risk protection, that sets dynamic boundaries within which quotes and orders may trade.8 It is designed to guard the System 9 from experiencing dramatic price swings by preventing the immediate execution of quotes and orders beyond the thresholds set by this risk protection. The Exchange recently amended ATR to adopt an iterative process wherein an order/quote that reaches its ATR boundary is paused for a brief period of time to allow more liquidity to be collected, before the order/quote is automatically re-priced and a new ATR is calculated.10 Specifically, SR–MRX–2022–16 amended current Options 3, Section 15(a)(2)(A)(iii) to adopt an iterative process wherein an order or quote reaches the outer limit of the ATR (‘‘Threshold Price’’) without being fully executed, it will be posted at the Threshold Price for a brief period, not to exceed one second (‘‘Posting Period’’), to allow the market to refresh and determine whether or not more liquidity will become available (on the Exchange or any other exchange if the order is designated as routable) within the posted price of the order or quote before moving on to a new Threshold Price. With this change, upon posting, either the current Threshold Price of the order/quote or an updated NBB for buy orders/quotes or the NBO for sell orders/quotes (whichever is higher for a buy order/quote or lower for a sell order/quote) would become the reference price for calculating a new ATR. If the order/quote remains unexecuted after the Posting Period, a new ATR will be calculated and the 8 See Options 3, Section 15(a)(2)(A). term ‘‘System’’ means the electronic system operated by the Exchange that receives and disseminates quotes, executes orders and reports transactions. See MRX Options 1, Section 1(a)(49). 10 See SR–MRX–2022–16. SR–MRX–2022–16 proposed an iterative process for ATR wherein the Exchange will attempt to execute interest that exceeds the outer limit of the ATR for a brief period of time while that interest is automatically re-priced as described herein. The Exchange also updated the reference price definition to provide that upon receipt of a new order or quote, the reference price will now be the better of the NBB or internal best bid for sell orders/quotes and the better of the NBO or internal best offer for buy orders/quotes or the last price at which the order/quote is posted, whichever is higher for a buy order/quote or lower for a sell order/quote. The additions of ‘‘internal BBO’’ were consistent with the re-pricing of orders. SR–MRX–2022–16 is effective, but not yet operative. SR–MRX–2022–16 would be implemented as part of the same technology migration as the changes proposed herein. 9 The E:\FR\FM\27SEN1.SGM 27SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 87, Number 186 (Tuesday, September 27, 2022)]
[Notices]
[Pages 58560-58571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20830]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95850; File No. SR-CTA/CQ-2021-02]


Consolidated Tape Association; Order Disapproving the Thirty-
Seventh Substantive Amendment to the Second Restatement of the CTA Plan 
and the Twenty-Eighth Substantive Amendment to the Restated CQ Plan

September 21, 2022.

I. Introduction

    On November 5, 2021,\1\ the Participants \2\ in the Second 
Restatement of the Consolidated Tape Association (``CTA'') Plan and the 
Restated Consolidated Quotation (``CQ'') Plan (collectively ``CTA/CQ 
Plans'' or ``Plans'') \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 
Amendments'') to amend the Plans to implement the non-fee-related 
aspects of the Commission's Market Data Infrastructure Rules (``MDI 
Rules'').\6\ The Proposed Amendments were published for comment in the 
Federal Register on November 29, 2021.\7\
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    \1\ See Letter from Robert Books, Chair, CTA/CQ Plans 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 CTA Plan, pursuant to which markets collect and 
disseminate last-sale price information for non-Nasdaq-listed 
securities, is a ``transaction reporting plan'' under Rule 601 of 
Regulation NMS, 17 CFR 242.601, and a ``national market system 
plan'' under Rule 608 of Regulation NMS, 17 CFR 242.608. The CQ 
Plan, pursuant to which markets collect and disseminate bid/ask 
quotation information for non-Nasdaq-listed securities, is a 
``national market system plan'' under Rule 608 of Regulation NMS, 17 
CFR 242.608. See Securities Exchange Act Release Nos. 10787 (May 10, 
1974), 39 FR 17799 (May 20, 1974) (declaring the CTA Plan 
effective); 15009 (July 28, 1978), 43 FR 34851 (Aug. 7, 1978) 
(temporarily authorizing the CQ Plan); and 16518 (Jan. 22, 1980), 45 
FR 6521 (Jan. 28, 1980) (permanently authorizing the CQ Plan).
    \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 Amendments, 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. 93615 (Nov. 19, 
2021), 86 FR 67800 (Nov. 29, 2021) (``Notice''). Comments received 
in response to the Notice are available at https://www.sec.gov/comments/sr-ctacq-2021-02/srctacq202102.htm.
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    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 Amendments or to approve 
the Proposed Amendments 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 Amendments to July 27, 
2022,\11\ and on July 21, 2022, the Commission further extended the 
period within which to conclude proceedings regarding the Proposed 
Amendments to September 25, 2022.\12\
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    \8\ 17 CFR 242.608(b)(2)(i).
    \9\ See Securities Exchange Act Release No. 94310 (Feb. 24, 
2022), 87 FR 11748 (Mar. 2, 2022) (``OIP''). Comments received in 
response to the OIP are available at https://www.sec.gov/comments/sr-ctacq-2021-02/srctacq202102.htm.
    \10\ See 17 CFR 242.608(b)(2)(i).
    \11\ See Securities Exchange Act Release No. 94951 (May 19, 
2022), 87 FR 31920 (May 25, 2022).
    \12\ See Securities Exchange Act Release No. 95345 (July 21, 
2022), 87 FR 45136 (July 27, 2022).
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    This order disapproves the Proposed Amendments.\13\
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    \13\ The Participants have filed a similar 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 (``UTP Plan''), which the 
Commission is also disapproving. See Securities Exchange Act Release 
No. 95848 (Sept. 21, 2022). 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 Nos. 95849 (Sept. 21, 2022) 
(File No. S7-24-89); 95851 (Sept. 21, 2022) (File No. SR-CTA/CQ-
2021-03).
---------------------------------------------------------------------------

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

[[Page 58561]]

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 Amendments were 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 Amendments 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 
Amendments. 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 Amendments do not comply 
with Rule 614(e)(1) because they do not conform the Plans 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 Amendments: (1) amend the Plans to reflect that they will 
disseminate consolidated market data to competing consolidators and 
self-aggregators, even though the Plans will not be disseminating any 
consolidated market data; \21\ (2) fail to amend the CTA Plan to 
require the individual Participants to disseminate data necessary to 
generate consolidated market data to competing consolidators and self-
aggregators; \22\ (3) fail to distinguish competing consolidators from 
vendors and subscribers; \23\ (4) fail to amend the Plans to reflect 
that the Processors will no longer have the responsibility to 
disseminate regulatory halt notices once the decentralized 
consolidation model has been implemented; \24\ (5) fail to include 
requirements for the Participants to timestamp every element of data 
necessary to generate consolidated market data; \25\ and (6) fail to 
amend the Plans to remove references to a single processor.\26\
---------------------------------------------------------------------------

    \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\ 17 CFR 242.603(b). See also MDI Rules Release, supra note 
6, 86 FR at 18653.
    \23\ 17 CFR 242.600(b)(16) (defining ``competing 
consolidators''). See, e.g., MDI Rules Release, supra note 6, 86 FR 
at 18664-65 (discussing why market data vendors would not be 
required to register as competing consolidators under the 
decentralized consolidation model).
    \24\ 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).
    \25\ 17 CFR 242.614(e)(2).
    \26\ 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 Amendments are inconsistent with the MDI 
Rules, specifically Rule 614(e), the Commission must disapprove the 
Proposed Amendments under Rule 608(b)(2) of Regulation NMS because it 
cannot find that they are 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.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

III. Summary of the Proposed Amendments

    The Participants propose to amend the Plans 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).\28\
---------------------------------------------------------------------------

    \28\ 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 Plans by the Proposed Amendments.\29\
---------------------------------------------------------------------------

    \29\ The full text of the Proposed Amendments appears as 
Attachments A and B to the Notice. See Notice, supra note 7, 86 FR 
at 67802-29.

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[[Page 58562]]

CTA Plan Proposed Amendments

Preface
    Under the Proposed Amendments, the CTA 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.''
Section I.--Definitions
    The Proposed Amendments add, as Section I.(x), a definition of 
``Primary Listing Exchange,'' which means ``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.''
Section IV.--Administration of the CTA Plan
    The Proposed Amendments add new Section IV.(e), Plan website 
Disclosures, requiring CTA to publish on the CTA Plan's website the 
Primary Listing Exchange for each Eligible Security, and, on a monthly 
basis, the consolidated market data gross revenues for Eligible 
Securities as specified by Tape A and Tape B securities. The 
Participants explain that this addition is intended to comply with Rule 
614(e)(4) and Rule 614(e)(5)(i) and (iii).\30\
---------------------------------------------------------------------------

    \30\ See id. at 67800.
---------------------------------------------------------------------------

Section V.--The Processor and Competing Consolidators
    The Proposed Amendments amend the title of Section V. to include 
competing consolidators, such that it is now titled ``The Processor and 
Competing Consolidators,'' and to add new Section V.(f), Evaluation of 
Competing Consolidators, to require the Operating Committee to assess 
the performance of competing consolidators on an annual basis and to 
submit an annual report to the Commission containing that assessment. 
The Proposed Amendments require 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).\31\
---------------------------------------------------------------------------

    \31\ See id.
---------------------------------------------------------------------------

    In addition, the Proposed Amendments require 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).\32\ 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.\33\ The 
Proposed Amendments add the following monthly performance metrics to 
this section:
---------------------------------------------------------------------------

    \32\ 17 CFR 242.614(d)(5).
    \33\ See id.

    (i) Capacity statistics, including system tested capacity, 
system output capacity, total transaction capacity, and total 
transaction peak capacity;
    (ii) 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;
    (iii) System availability statistics, including system up-time 
percentage and cumulative amount of outage time;
    (iv) Network delay statistics, including quote and trade zero 
window size events, quote and trade retransmit events, and quote and 
trade message total; and
    (v) Latency statistics, including distribution statistics up to 
the 99.99th percentile, for the following:
    (A) When a Participant sends an inbound message to a competing 
consolidator and when the competing consolidator receives the 
inbound message;
    (B) 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
    (C) 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 
V. to define the monthly performance metrics in accordance with Rule 
614(d)(5).\34\
---------------------------------------------------------------------------

    \34\ See Notice, supra note 7, 86 FR at 67800.
---------------------------------------------------------------------------

Section VI.--Consolidated Tape
    The Proposed Amendments amend Section VI.(c), Reporting Format and 
Technical Specifications, to include a reference to competing 
consolidators and self-aggregators such that last sale price 
information relating to a completed transaction in an Eligible Security 
reported to competing consolidators and self-aggregators by any 
Participant or other reporting party shall be in the format required in 
Section VI.(c).
    In addition, the Proposed Amendments amend Section VI.(c) to delete 
from the required format the time of the transaction (reported in 
microseconds) as identified in the Participant's matching engine 
publication timestamp, and to replace it with the time the last sale 
price information was generated by the Participant (reported in 
microseconds). Furthermore, the Proposed Amendments amend Section 
VI.(c) to add to the required format, with respect to reports to 
competing consolidators and self-aggregators, the time the Participant 
made the last sale price information available to competing 
consolidators and self-aggregators (reported in microseconds). The 
Participants explain that the proposed references to competing 
consolidators and self-aggregators and the proposed requirement to 
report in microseconds the time that a Participant made the last sale 
price information available to competing consolidators and self-
aggregators are intended to comply with Rule 614(e)(1) and (2).\35\
---------------------------------------------------------------------------

    \35\ See id.
---------------------------------------------------------------------------

    With respect to FINRA, the Proposed Amendments amend a statement in 
Section VI.(c) that the time of the transaction shall be the time of 
execution that a FINRA member reports to a FINRA trade reporting 
facility in accordance with FINRA rules. The Proposed Amendments amend 
this statement to state that the time the last sale price information 
was generated by a Participant shall be the time that a FINRA member 
reports to a FINRA trade reporting facility in accordance with FINRA 
rules. The Proposed Amendments also add references to competing 
consolidators and self-aggregators such 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--the FINRA trade reporting facility shall also 
furnish the Processor, competing consolidators, and self-aggregators 
with the time of the transmission as published on the facility's 
proprietary feed.
    The Proposed Amendments also delete Section VI.(g), ITS 
Transactions, which concerns last sale prices reflecting ITS 
transactions. The Participants explain that they are proposing to 
remove this provision because the ITS is obsolete.\36\
---------------------------------------------------------------------------

    \36\ See id.
---------------------------------------------------------------------------

Section VIII. Collection and Reporting of Last Sale Data
    The Proposed Amendments amend Section VIII.(a), Responsibility of 
Exchange Participants, to remove a list of exchange participants and 
the requirement that each collect and report to the Processor all last 
sale price information to be reported to it relating to transactions in 
Eligible Securities taking place on its floor. The Proposed Amendments 
amend this statement to

[[Page 58563]]

state that each Participant agrees to collect and report to the 
Processor all last sale price information to be reported by it relating 
to transactions in Eligible Securities.
    The Proposed Amendments also add to the CTA Plan a statement that 
``[e]ach Participant further agrees to collect and report to Competing 
Consolidators and Self-Aggregators all last sale price information to 
be reported to it related to transactions in Eligible Securities 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 Eligible 
Securities to any person.'' \37\ In addition, the Proposed Amendments 
amend Section VIII.(b), FINRA Responsibility, to add references to 
competing consolidators and self-aggregators such that the provision 
states: ``The FINRA shall develop and adopt rules governing the 
reporting of last sale price information to be reported by its members 
to both the Processor for inclusion on the consolidated tape and to 
Competing Consolidators and Self-Aggregators. Such rules shall . . . 
(ii) be designed to avoid duplicate reporting of transactions on the 
consolidated tape or to Competing Consolidators and Self Aggregator. . 
. .'' The Participants explain that these additions are designed to 
comply with Rule 614(e)(1).\38\
---------------------------------------------------------------------------

    \37\ The Proposed Amendments also delete the following statement 
from Section VIII.(a): ``CTA shall seek to reduce the time period 
for reporting last sale prices to the Processor as conditions 
warrant.''
    \38\ See Notice, supra note 7, 86 FR at 67801.
---------------------------------------------------------------------------

    Finally, the Proposed Amendments delete Section VIII.(c), 
Description of Reporting Procedures, which states that each Participant 
and each other reporting party has prepared and submitted to CTA and 
the Commission a description of the procedures by which it collects and 
reports to the Processor last sale price information reported by it 
pursuant to the CTA Plan. The Participants explain that this provision 
is no longer relevant under the MDI Rules.\39\
---------------------------------------------------------------------------

    \39\ See id.
---------------------------------------------------------------------------

Section IX.--Receipt and Use of CTA Information
    In Sections IX.(a), Requirements for Receipt and Use of 
Information, (b), Approvals of Redisseminators and Terminations of 
Approvals, and (c), Subscriber Terminations, the Proposed Amendments 
replace several references to ``each CTA network's information,'' ``a 
CTA network's information,'' ``that CTA network's information,'' and 
``that CTA network's last sale price information'' with the term 
``consolidated market data.''
    The Proposed Amendments also amend Section IX.(a) to include 
references to competing consolidators and self-aggregators. Proposed 
Section IX.(a) states that, ``[p]ursuant to fair and reasonable terms 
and conditions, each CTA network's administrator shall provide for: (i) 
the dissemination of consolidated market data on terms that are not 
unreasonably discriminatory to Competing Consolidators, Self-
Aggregators, vendors, newspapers, Participants, Participant members and 
member organizations, and other persons over that network's ticker and 
over the high speed line; and (ii) the use of consolidated market data 
by Competing Consolidators, Self-Aggregators, vendors, subscribers, 
newspapers, Participants, Participant members and member organizations 
and other persons.'' Additionally, the section now states that each CTA 
network's Participants will determine the terms and conditions applying 
in respect of a particular manner of receipt or use of consolidated 
market data, including whether the manner of receipt or use will 
require recipients or users to enter into agreements with the CTA 
network's administrator, and that these determinations will be made in 
a reasonably uniform manner to subject all parties that receive or use 
consolidated market data in a particular manner to terms and conditions 
that are substantially similar.
    In addition, the Proposed Amendments amend Section IX.(a) to state 
that the Participants expect their CTA network's administrator to 
require the following parties to enter into agreements with the CTA 
network administrator: (i) any party that receives a CTA network's 
information by means of a direct computer-to-computer interface with 
the Processor or competing consolidator; (ii) any competing 
consolidator or self-aggregator that receives last sale transaction 
information directly from a Participant for the purpose of creating 
consolidated market data; (iii) vendors and other parties that 
redisseminate consolidated market data to others; and (iv) persons that 
use consolidated market data for such purposes as that CTA network's 
administrator may from time to time identify.
    The Participants explain that the proposed revisions to Section 
IX.(a) are intended to make clear that the current market data 
contracts regarding the receipt of market data will be applicable to 
competing consolidators and self-aggregators.\40\ The Participants 
state that the change is consistent with Rule 614(e)(1) and is 
necessary because competing consolidators and self-aggregators would be 
receiving and using consolidated market data and should be subject to 
the same contracts applicable to vendors and subscribers.\41\
---------------------------------------------------------------------------

    \40\ See id.
    \41\ See id.
---------------------------------------------------------------------------

    The Proposed Amendments amend Section XI.(b), Approvals of 
Redisseminators and Terminations of Approvals, to state that all 
vendors and other parties that redisseminate consolidated market data 
(``data redisseminators'') shall be required to be approved by a CTA 
network's administrator. Additionally, the Proposed Amendments amend 
Section XI.(c), Subscriber Terminations, to state that a CTA network's 
administrator may determine that circumstances warrant directing a data 
redisseminator to cease providing consolidated market data to a 
subscriber, and that the CTA network's Participants may direct the data 
redisseminator to cease providing consolidated market data to the 
subscriber if a majority of those Participants determine that (i) such 
action is necessary or appropriate in the public interest or for the 
protection of investors, or (ii) the subscriber has breached any 
agreement required by the CTA network's administrator pursuant to 
Section IX.
Section XI.--Operational Matters
    The Proposed Amendments delete from Section XI.(a), Regulatory and 
Operational Halts, the definition of ``Primary Listing Market'' in 
Section XI.(a)(i)(H) and the definition of ``Trading Center'' in 
Section XI.(a)(i)(N).
    The Proposed Amendments add a reference to competing consolidators 
and self-aggregators to Section XI.(a)(ii), Operational Halts, to state 
that a Participant shall notify competing consolidators and self-
aggregators if it has concerns about its ability to collect and 
transmit quotes, orders, or last sale prices, or where the Participant 
has declared an Operational Halt or suspension of trading in one or 
more Eligible Securities, pursuant to the procedures adopted by the 
Operating Committee. In addition, the Proposed Amendments add a 
reference to competing consolidators and self-aggregators to Section 
XI.(a)(viii), Communications, to require a Primary Listing Exchange for 
an Eligible Security to notify competing consolidators and self-
aggregators if it determines to initiate a Regulatory Halt.

[[Page 58564]]

    The Proposed Amendments also replace references to ``Primary 
Listing Market'' with ``Primary Listing Exchange'' throughout Section 
XI.
    The Participants state that their revisions to Section XI to 
include references to notifying competing consolidators and self-
aggregators in connection with Regulatory and Operational Halts 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.
---------------------------------------------------------------------------

CQ Plan Proposed Amendments

Preface
    Under the Proposed Amendments, the CQ 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.''
Section I.--Definitions
    The Proposed Amendments define ``Primary Listing Exchange'' in 
Section I.(v) 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 Proposed Amendments amend the definition of ``Quotation 
Information'' in Section I.(x) (formerly, Section I.(w)) to change a 
reference to ``consolidated BBO'' to ``NBBO,'' such that Quotation 
Information now means, among other things, ``(iii) each NBBO contained 
in the foregoing information and any identifier associated therewith. . 
. .''
Section IV.--Administration of this CQ Plan
    The Proposed Amendments add new Section IV.(d), Plan website 
Disclosures, requiring the Operating Committee to publish on the CQ 
Plan's website the Primary Listing Exchange for each Eligible Security 
and, on a monthly basis, the consolidated market data gross revenues 
for Eligible Securities as specified by Tape A and Tape B securities. 
The Participants explain that this addition is intended to comply with 
Rule 614(e)(4) and Rule 614(e)(5)(i) and (iii).\43\
---------------------------------------------------------------------------

    \43\ See id.
---------------------------------------------------------------------------

Section V.--The Processor and Competing Consolidators
    The Proposed Amendments amend the title of Section V. to include 
competing consolidators, such that it is now titled ``The Processor and 
Competing Consolidators,'' and to add new Section V.(f), Evaluation of 
Competing Consolidators, to require the Operating Committee to assess 
the performance of competing consolidators on an annual basis and to 
submit an annual report to the Commission containing the assessment. 
The Proposed Amendments require 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).\44\
---------------------------------------------------------------------------

    \44\ See Notice, supra note 7, 86 FR at 67801.
---------------------------------------------------------------------------

    In addition, the Proposed Amendments require 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).\45\ 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.\46\ The 
Proposed Amendments add the following monthly performance metrics to 
this section:
---------------------------------------------------------------------------

    \45\ 17 CFR 242.614(d)(5).
    \46\ See id.

    (i) Capacity statistics, including system tested capacity, 
system output capacity, total transaction capacity, and total 
transaction peak capacity;
    (ii) 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;
    (iii) System availability statistics, including system up-time 
percentage and cumulative amount of outage time;
    (iv) Network delay statistics, including quote and trade zero 
window size events, quote and trade retransmit events, and quote and 
trade message total; and
    (v) Latency statistics, including distribution statistics up to 
the 99.99th percentile, for the following:
    (A) When a Participant sends an inbound message to a competing 
consolidator and when the competing consolidator receives the 
inbound message;
    (B) 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
    (C) 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.

Section VI.--Collection and Reporting of Quotation Information
    The Proposed Amendments amend Section VI.(a), Responsibilities of 
Participants, to state, ``Each Participant agrees to collect, and 
furnish to the Processor in a format acceptable to the Operating 
Committee, all quotation information required to be made available by 
such Participant by Rules [sic] 602(b)(1) of Regulation NMS. Each 
Participant further agrees to collect and report to Competing 
Consolidators and Self Aggregators all quotation information required 
to be made available by such Participant by Rule 603(b) of Regulation 
NMS, including all data necessary to generated consolidated market 
data.'' \47\
---------------------------------------------------------------------------

    \47\ Notice, supra note 7, 86 FR at 67801. The Participants 
state that they propose to amend Sections VIII.(a) and (b) of the CQ 
Plan to add the requirement that each Participant agrees to collect 
and report to competing consolidators and self-aggregators all 
quotation information 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 Eligible Securities to any 
person. While the Participants refer to Sections VIII.(a) and (b) of 
the CQ Plan here, this section reference seems to be an error, and 
the Participants likely intended to refer instead to Section VI.(a) 
and (b), as the requirement being discussed is only present in 
Section VI.(b) of the CQ Plan as it is proposed to be amended. 
Separately, the amendment to Section VI.(a) lacks the requirement 
that Participants report quotation 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 Eligible Securities to any 
person. See id. at 67823.
---------------------------------------------------------------------------

    In addition, under the Proposed Amendments, Section VI.(a) states 
that each bid and offer with respect to an Eligible Security furnished 
to the Processor, competing consolidators, and self-aggregators by any 
Participant pursuant to the Plan would be accompanied by (i) the 
information required by Rules 602(b)(1) or 603(b) of Regulation NMS, as 
applicable, and (ii) the time of the bid or offer as identified by: (A) 
in the case of a national securities exchange, the reporting 
Participant's matching engine publication timestamp (reported in 
microseconds); or (B) in the case of a national securities association, 
the quotation publication timestamp that the association's bidding or 
offering member reports to the association's quotation facility in 
accordance with FINRA rules. Each bid and offer with respect to an 
Eligible Security furnished to competing consolidators and self-
aggregators by any Participant must be

[[Page 58565]]

accompanied by the time (reported in microseconds) the Participant made 
the bid and offer available to competing consolidators and self-
aggregators.
    With respect to national securities associations, under the 
Proposed Amendments, if a national securities association 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 the 
national securities association 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. Additionally, Section VI.(a), as proposed 
to be amended, states, ``Each bid and offer with respect to an Eligible 
Security made by a broker or dealer otherwise than on the floor of an 
exchange and furnished to the Processor, Competing Consolidators, and 
Self-Aggregators by any Participant which is a national securities 
association shall, at the time furnished, be accompanied by an 
appropriate symbol designated by the Operating Committee identifying 
such broker or dealer as required by paragraph (b)(i) of the Rule.''
    The Proposed Amendments also amend Section VI.(b), Timeliness of 
Reporting, to add the following requirement: ``Each Participant further 
agrees to furnish quotation information, and changes in any such 
information, to the Competing Consolidator[s] 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 Participants explain that this addition is 
designed to comply with the requirements of Rule 614(e)(1).
    In addition, the Proposed Amendments would amend Section VI.(c), 
High Speed Line and Market Identifiers, to remove a reference to an 
``ITS/CAES BBO'' as excepted from the requirement that each bid or 
offer with respect to an Eligible Security furnished to the processor 
by a Participant that is a national securities association shall be 
accompanied by the symbol identifying the broker or dealer who was 
reported to the Processor as having made such bid or offer otherwise 
than on the floor of an exchange. The Participants explain that they 
propose to remove this reference because references to ITS/CAES are 
outdated.\48\
---------------------------------------------------------------------------

    \48\ See Notice, supra note 7, 86 FR at 67801.
---------------------------------------------------------------------------

    The Proposed Amendments also amend Section VI.(e), Unusual Market 
Conditions, to include references to competing consolidators and self-
aggregators and to remove a reference to Rule 602(b)(1) \49\ and 
replace it with a reference to Rules 601(b)(1) and 603(b) of Regulation 
NMS. The Proposed Amendments also remove a reference to vendors in 
Section VI.(e).
---------------------------------------------------------------------------

    \49\ See id. at 67824.
---------------------------------------------------------------------------

    Finally, the Proposed Amendments delete Section VI.(f), Description 
of Reporting Procedures, which requires each Participant and each other 
reporting party to prepare and submit to the Operating Committee and 
the Processor a description of the procedures by which it intends to 
comply with its obligations under the CQ Plan. The Participants explain 
that the provisions of Section VI.(f) are no longer relevant.\50\
---------------------------------------------------------------------------

    \50\ See id. at 67801.
---------------------------------------------------------------------------

Section VII.--Receipt and Use of Quotation Information
    In Sections VII.(a), Requirements for Receipt and Use of 
Information, (b), Approvals of Redisseminators and Terminations of 
Approvals, and (c), Subscriber Terminations, the Proposed Amendments 
replace several references to a ``CQ network's quotation information'' 
with the term ``consolidated market data.''
    The Proposed Amendments would also amend Section VII.(a) to include 
references to competing consolidators and self-aggregators such that, 
pursuant to fair and reasonable terms and conditions, each network's 
administrator shall provide for: (i) the dissemination of each CQ 
network's quotation information on terms that are not unreasonably 
discriminatory to competing consolidators and self-aggregators; and 
(ii) the use of that CQ network's quotation information by competing 
consolidators and self-aggregators.
    In addition, the Proposed Amendments would amend Section VII.(a) to 
state that the Participants in both CQ networks expect that their 
network's administrator will require the following parties to enter 
into agreements with the network's administrator: (i) any party that 
receives consolidated market data by means of a direct computer-to-
computer interface with the Processor or competing consolidators; (ii) 
any competing consolidator or self-aggregator that receives quotation 
information directly from a Participant for the purpose of creating 
consolidated market data; (iii) vendors and other parties that 
redisseminate consolidated market data; and (iv) persons that use 
consolidated market data for such purposes as the CQ network's 
administrator may from time to time identify.
    The Participants explain that the proposed revisions intend to make 
clear that the current market data contracts regarding the receipt of 
market data will be applicable to competing consolidators and self-
aggregators.\51\ The Participants state that the change is consistent 
with Rule 614(e)(1) and is necessary, stating that competing 
consolidators and self-aggregators would be receiving and using 
consolidated market data and should be subject to the same contracts 
applicable to vendors and subscribers.\52\
---------------------------------------------------------------------------

    \51\ See id.
    \52\ See id.
---------------------------------------------------------------------------

    The Proposed Amendments would also amend Section VII.(b), Approvals 
of Redisseminators and Terminations of Approvals, to state that all 
vendors of and other parties that redisseminate consolidated market 
data (``data redisseminators'') shall be required to be approved by a 
CTA network's administrator. Additionally, the Proposed Amendments 
amend Section XI.(c), Subscriber Terminations, to state that a 
network's administrator may determine that circumstances warrant 
directing a data redisseminator to cease providing consolidated market 
data to a subscriber, and that the CQ network's Participants may direct 
the data redisseminator to cease providing consolidated market data to 
the subscriber if a majority of those Participants determine that (i) 
such action is necessary or appropriate in the public interest or for 
the protection of investors, or (ii) the subscriber has breached any 
agreement required by the CTA network's administrator pursuant to 
Section VII.

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

[[Page 58566]]

mechanisms of, a national market system, or otherwise in furtherance of 
the purposes of the Act.\53\ The Commission shall disapprove a national 
market system plan or proposed amendment if it does not make such a 
finding.\54\ Furthermore, Rule 700(b)(3)(ii) of the Commission's Rules 
of Practice states:
---------------------------------------------------------------------------

    \53\ 17 CFR 242.608(b)(2).
    \54\ 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.\55\
---------------------------------------------------------------------------

    \55\ 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 
Amendments are consistent with the Act.\56\ Specifically, the 
Commission does not find that the Participants have demonstrated that 
the Proposed Amendments are consistent with either Rule 614(e) of 
Regulation NMS or Rule 608 of Regulation NMS. The Proposed Amendments 
clearly do not comply with the requirements of the MDI Rules.\57\ 
Accordingly, the Commission cannot make a finding that the Proposed 
Amendments are 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.\58\
---------------------------------------------------------------------------

    \56\ 17 CFR 201.700(b)(3).
    \57\ As discussed below, the Proposed Amendments do 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).
    \58\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

B. The Requirements of the MDI Rules Regarding the Proposed Amendments

    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.\59\ 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,\60\ and further provides for the transition from the 
initial parallel operation period to the retirement of the exclusive 
SIPs for equity market data:
---------------------------------------------------------------------------

    \59\ See MDI Rules Release, supra note 6, 86 FR at 18637.
    \60\ 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.\61\
---------------------------------------------------------------------------

    \61\ Id. at 18701.

    Pursuant to Rule 614(e)(1) of Regulation NMS, and as discussed in 
the MDI Rules Release, the Participants to the Plans were required to 
file an amendment to conform the Plans 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.\62\
---------------------------------------------------------------------------

    \62\ See id. at 18700-01.
---------------------------------------------------------------------------

C. Whether the Proposed Amendments Are Consistent With Rule 614(e)(1) 
of Regulation NMS

1. Consistency With the Decentralized Consolidation Model

    Two commenters recommend disapproval of the Proposed Amendments 
because the amendments do not properly conform the Plans to the MDI 
Rules in that the amendments fail to accurately reflect the 
decentralized consolidation model.\63\ 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.'' \64\ The commenter 
also states that the Proposed Amendments did not include any revisions 
to the exhibits, stating that Exhibit A to the current version of the 
CTA Plan (``Restated Articles of Association of Consolidated Tape 
Association'') ``does not reflect the shifting purpose of the Plan to 
provide underlying content for the creation of consolidated market 
data,'' \65\ and argues that the Proposed Amendments must 
``[a]cknowledge that the Plan is no longer responsible for the 
creation, distribution and pricing of consolidated market data.'' \66\
---------------------------------------------------------------------------

    \63\ 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'').
    \64\ MayStreet Letter II, supra note 63, at 2.
    \65\ Id. at 8.
    \66\ Id. at 4-5.
---------------------------------------------------------------------------

    This commenter further argues that ``[t]he language of the Plan 
Amendments that states that competing consolidators and self-
aggregators will be receiving and using consolidated market data is 
inconsistent with their role in actually generating consolidated market 
data based on the receipt of NMS information,'' \67\ and reiterates 
that only competing consolidators would externally distribute and 
charge for consolidated market data and that the Plans would only be 
selling underlying content.\68\ This commenter also disagrees with what 
it describes as the Proposed Amendments' treatment of competing 
consolidators as vendors.\69\ The commenter states that ``[s]ubjecting 
competing consolidators to the same fees and contractual requirements 
as data vendors and subscribers that receive consolidated market data 
from the exclusive SIP fails to recognize that competing consolidators 
are SIPs and not similarly situated to today's data vendors.'' \70\ The 
commenter further states that competing consolidators will take on 
added risk and expense, ``including the costs associated with 
generating consolidated market data, disclosing operational and 
performance metrics, registering with the SEC, and ongoing compliance 
with Rule 614.'' \71\
---------------------------------------------------------------------------

    \67\ MayStreet Letter I, supra note 63, at 5.
    \68\ See MayStreet Letter II, supra note 63, at 4-5.
    \69\ See MayStreet Letter I, supra note 63, at 2, 4-5 
(explaining that competing consolidators are generating and 
distributing consolidated market data for the first time, unlike 
vendors who redistribute consolidated market data).
    \70\ MayStreet Letter I, supra note 63, at 3-4; see id. at 1 
(stating that competing consolidators should be treated as the 
replacements to the exclusive SIPs to meet the requirements of the 
MDI Rules).
    \71\ Id. at 5.
---------------------------------------------------------------------------

    Another commenter also argues that the Proposed Amendments' 
treatment of competing consolidators as market data vendors contravenes 
the MDI Rules.\72\ This commenter argues that the

[[Page 58567]]

Commission's MDI Rules replace the exclusive SIPs with competing 
consolidators and that competing consolidators should therefore be 
``treated in the same manner as the exclusive SIPs are today.'' \73\ 
This commenter states that the Participants are, through the Proposed 
Amendments, ``acting in an unreasonably discriminatory manner, 
effectively disregarding these Exchange Act mandates in addition to the 
Commission's directive in the Infrastructure Rule.'' \74\
---------------------------------------------------------------------------

    \72\ See SIFMA Letter I, supra note 63, at 8. See also id. at 4-
5; 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, at 2-3 (Apr. 27, 2022) (``SIFMA Letter II'').
    \73\ SIFMA Letter I, supra note 63, at 8.
    \74\ Id. at 8.
---------------------------------------------------------------------------

    One commenter argues that the sections of the Plans that discuss 
vendors' and subscribers' contractual relationships with the Plans 
should be ``removed or significantly altered to reflect that the Plans 
no longer have 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.'' \75\ 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 Plans.\76\ The commenter also states that contracts 
applicable to vendors would be inappropriate for competing 
consolidators because, unlike vendors, competing consolidators would be 
receiving data underlying consolidated market data from the exchanges, 
not consolidated market data from the exclusive SIPs.\77\ This 
commenter also objects to the continued references to subscribers and 
vendors in the Plans 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.'' \78\
---------------------------------------------------------------------------

    \75\ MayStreet Letter I, supra note 63, at 3.
    \76\ Id. at 3. See also MayStreet Letter II, supra note 63 at 9 
(arguing that, since the Plans would only be selling underlying 
content to competing consolidators and self-aggregators, vendor and 
subscriber agreements should not be required).
    \77\ See MayStreet Letter I, supra note 63, at 5.
    \78\ Id. at 3.
---------------------------------------------------------------------------

    One commenter objects to the retention of the concept of a single 
processor in the Proposed Amendments.\79\ 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.'' \80\ This commenter requests clarification of how the CTA and 
CQ Plans will operate during the parallel operation period, such as the 
inclusion in the Plans of objective criteria for ending the parallel 
period and the addition of a section devoted to competing consolidators 
and self-aggregators to help distinguish between their obligations and 
the obligations of the exclusive SIPs during the parallel period.\81\ 
The commenter recommends that the Proposed Amendments 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. The commenter 
also suggests specific modifications to CTA Plan Sections V. and VI. to 
make clear that the functions of the Processor apply only during the 
parallel operation period and to embed in the body of the Plans the 
contractual terms regarding the provision of capacity forecasts to 
competing consolidators, data correction requirements, and 
indemnification (of competing consolidators from Participants) from CQ 
Plan Exhibit A and CTA Plan Exhibit B.\82\
---------------------------------------------------------------------------

    \79\ See SIFMA Letter I, supra note 63, at 8.
    \80\ MayStreet Letter II, supra note 63, at 8.
    \81\ See id. at 7-8.
    \82\ See id.
---------------------------------------------------------------------------

    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.\83\
---------------------------------------------------------------------------

    \83\ 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 Amendments) until the submission of a further amendment after 
the parallel operation period is consistent with the MDI Rules 
Release.\84\
---------------------------------------------------------------------------

    \84\ See id. at 1-2.
---------------------------------------------------------------------------

    The Commission agrees with the commenters who argue that the 
Proposed Amendments do not properly conform the Plans 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,\85\ and competing consolidators and self-aggregators will then 
generate consolidated market data, rather than receive consolidated 
market data from the Plans.\86\ The Participants, however, propose to 
amend the Plans to provide for the dissemination of consolidated data 
to competing consolidators and self-aggregators.\87\ This is not 
consistent with the decentralized consolidation model.
---------------------------------------------------------------------------

    \85\ 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).
    \86\ See Rule 614(d)(1)-(3). 17 CFR 242.614(d)(1)-(3).
    \87\ The Participants propose to amend the CTA Plan to require 
the CTA network administrator to provide for the dissemination of 
consolidated market data to competing consolidators and self-
aggregators and to provide for the use of that consolidated market 
data by competing consolidators and self-aggregators. See Notice, 
supra note 7, 86 FR at 67811 (CTA Plan Proposed Amendment at Section 
IX.(a)). The Participants also propose to amend the CQ Plan to 
require each network's administrator to provide for the 
dissemination of each CQ network's consolidated quotation 
information on terms that are not unreasonably discriminatory to 
competing consolidators and self-aggregators, and to provide for the 
use of that CQ network's consolidated quotation information by 
competing consolidators and self-aggregators. See id. at 67824 (CQ 
Plan Proposed Amendment at Section VII.(a)). See also Consolidated 
Quotation System, Multicast Output Binary Specification, 8 (Jan. 26. 
2021), available at https://www.ctaplan.com/publicdocs/ctaplan/CQS_Pillar_Output_Specification.pdf. The Participants also state 
that, for both the CTA Plan and the CQ Plan, competing consolidators 
and self-aggregators will be receiving and using consolidated market 
data. See Notice, supra note 7, 86 FR at 67801 (describing the 
Proposed Amendments).
---------------------------------------------------------------------------

    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,\88\ calculate 
and

[[Page 58568]]

generate a consolidated market data product,\89\ and make the 
consolidated market data product available to subscribers.\90\ 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.\91\ 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.'' \92\ Accordingly, the Plans' 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.\93\ Therefore, the Proposed 
Amendments impermissibly provide for the dissemination by the Plans 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.
---------------------------------------------------------------------------

    \88\ See Rule 614(d)(1), 17 CFR 242.614(d)(1).
    \89\ See Rule 614(d)(2), 17 CFR 242.614(d)(2).
    \90\ 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).
    \91\ 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.
    \92\ 17 CFR 242.603(b).
    \93\ See MDI Rules Release, supra note 6, 86 FR at 18604, 18681.
---------------------------------------------------------------------------

    Second, while Rule 603(b) requires national securities exchanges 
and associations on which an NMS stock is traded to make available to 
all competing consolidators and self-aggregators their information with 
respect to quotations for and transactions in NMS stocks, including all 
data necessary to generate consolidated market data,\94\ the Proposed 
Amendments do not add this requirement to the CTA Plan. Instead, the 
Proposed Amendments add to the CTA Plan a requirement that each 
Participant agrees to collect and report to competing consolidators and 
self-aggregators all ``last sale price information''--not all data 
necessary to generate consolidated market data.\95\ Last sale price 
information is but one component of ``core data'' adopted by the MDI 
Rules, and core data is itself only one component of consolidated 
market data.\96\ Rule 603(b) requires the Participants to make 
available all data necessary to generate consolidated market data to 
competing consolidators and self-aggregators,\97\ not just last sale 
price information.
---------------------------------------------------------------------------

    \94\ 17 CFR 242.603(b).
    \95\ See Notice, supra note 7, 86 FR at 67810 (CTA Plan Proposed 
Amendment at Section VIII.(a)). As discussed above, Rule 600(b)(19) 
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). 
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).
    \96\ See id.
    \97\ 17 CFR 242.603(b).
---------------------------------------------------------------------------

    Third, under the Proposed Amendments, the Plans would treat 
competing consolidators in the same manner as vendors and subscribers 
with respect to market data contracts.\98\ Under Rule 600(b)(16), a 
competing consolidator is, by definition, either a SIP required to 
register under Rule 614 or an SRO.\99\ The Participants, however, would 
apply current market data contracts for vendors and subscribers to 
competing consolidators and self-aggregators,\100\ arguing that this 
``is necessary since the Competing Consolidators and Self-Aggregators 
will [sic] receiving and using consolidated market data, and any such 
party should be subject to the same contracts applicable to vendors and 
subscribers.'' \101\
---------------------------------------------------------------------------

    \98\ See SIFMA Letter I, supra note 63, at 4-5, 8; SIFMA Letter 
II, supra note 72, at 2-3; MayStreet Letter I, supra note 63, at 2, 
4-5.
    \99\ 17 CFR 242.600(b)(16).
    \100\ See Notice, supra note 7, 86 FR at 67811-12 (CTA Plan 
Proposed Amendment at Section IX.; id. at 67824-25 (CQ Plan Proposed 
Amendment at Section VII.).
    \101\ Notice, supra note 7, 86 FR at 67801.
---------------------------------------------------------------------------

    The Commission agrees with the commenters who argue that applying 
contract provisions for vendors and subscribers to competing 
consolidators is inconsistent with the MDI Rules,\102\ because unlike 
vendors and subscribers, competing consolidators will not receive 
consolidated market data from the Plans. Instead, as replacements for 
the exclusive SIPs, competing consolidators will generate consolidated 
market data themselves and disseminate it to subscribers. In the MDI 
Rules Release, the Commission clearly distinguished competing 
consolidators from vendors. For example, the Commission explained that 
only entities that receive information with respect to quotations for 
and transactions in NMS stocks directly from an SRO pursuant to an 
effective national market systems plan and that generate consolidated 
market data products for dissemination must register as competing 
consolidators.\103\ By comparison, the Commission stated, ``[a] market 
data vendor that purchases proprietary data feeds from an SRO or SROs, 
or that purchases data from a competing consolidator, and aggregates 
and disseminates such data to its customers, will not be required to 
register as a competing consolidator,'' \104\ but ``vendors that do not 
register as competing consolidators would not be permitted to purchase 
the NMS information necessary to generate consolidated market data from 
the SROs at prices established by an effective national market system 
plan.'' \105\
---------------------------------------------------------------------------

    \102\ See SIFMA Letter I, supra note 63, at 4-5, 8; MayStreet 
Letter I, supra note 63, at 2, 4-5. See also SIFMA Letter II, supra 
note 72, at 2-3 (objecting to the Proposed Fee Amendments because 
they propose to charge redistribution fees to competing 
consolidators like market data vendors).
    \103\ See MDI Rules Release, supra note 6, 86 FR at 18665.
    \104\ Id.
    \105\ Id.
---------------------------------------------------------------------------

    Fourth, the Proposed Amendments are 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).\106\

[[Page 58569]]

The Proposed Amendments, however, do not reflect this requirement with 
respect to regulatory data. For example, the Proposed Amendments fail 
to amend the CTA and CQ Plans to reflect that the Processors will no 
longer have the responsibility to disseminate regulatory halt notices 
once the decentralized consolidation model has been implemented.
---------------------------------------------------------------------------

    \106\ 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 85.
---------------------------------------------------------------------------

    The Proposed Amendments also do 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.\107\ While the Proposed Amendment to the CTA Plan 
requires that a Participant that reports last sale price information to 
competing consolidators and self-aggregators timestamp in microseconds 
the time the Participant generated the last sale price information and 
made the last sale price information available to those entities,\108\ 
this proposed timestamp provision does not satisfy the requirements of 
Rule 614(e)(2), because it applies only to last sale price information, 
not to ``all information with respect to quotations for and 
transactions in NMS stocks that is necessary to generate consolidated 
market data'' as required under the rule. And while the Proposed 
Amendment to the CQ Plan amends the section governing the collection 
and reporting 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 available to competing consolidators and self-aggregators,\109\ 
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.'' \110\ Additionally, 
the Proposed Amendment to the CQ Plan states that each bid and offer 
furnished to competing consolidators and self-aggregators shall be 
accompanied by the information required by Rule 602(b)(1) or Rule 
603(b),\111\ but it 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).
---------------------------------------------------------------------------

    \107\ 17 CFR 242.614(e)(2).
    \108\ See Notice, supra note 7, 86 FR at 67808 (CTA Plan 
Proposed Amendment at Section VI.(c)).
    \109\ See id. at 67823 (CQ Plan Proposed Amendment at Section 
VI.(a)).
    \110\ 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.
    \111\ See Notice, supra note 7, 86 FR at 67823 (CQ Plan Proposed 
Amendment at Section VI.(a)).
---------------------------------------------------------------------------

    And finally, the Commission disagrees with the Participants' 
statement that the continued references to the role of the Processor in 
the Plans, as amended by the Proposed Amendments, comply with the MDI 
Rules Release's implementation schedule for parallel operation of the 
exclusive SIPs and the competing consolidators.\112\ Rule 614(e)(1) 
requires the Participants to amend the Plans 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 Plans to reflect the decentralized consolidation model.\113\ 
However, the Proposed Amendments are not consistent with the 
decentralized consolidation model and do not conform to the fact that a 
single processor will no longer be in operation once the decentralized 
consolidation model has been fully implemented.
---------------------------------------------------------------------------

    \112\ See McGonigle Letter, supra note 83, at 1-2. See also MDI 
Rules Release, supra note 6, 86 FR at 18700-01 (discussing the 
parallel operation implementation schedule).
    \113\ 17 CFR 242.614(e)(1).
---------------------------------------------------------------------------

    And while the MDI Rules Release contemplates the filing of a second 
amendment by the Plans ``to effectuate a cessation of the operations of 
the exclusive SIPs,'' \114\ the current Proposed Amendments were 
required to conform the Plans 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 Amendments how the Plans 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.\115\
---------------------------------------------------------------------------

    \114\ MDI Rules Release, supra note 6, 86 FR at 18701.
    \115\ 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).
---------------------------------------------------------------------------

    Because the Proposed Amendments clearly do not comply with the 
plain terms of the MDI Rules \116\ and are 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 
Amendments are 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.\117\
---------------------------------------------------------------------------

    \116\ 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).
    \117\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

2. Technical Comments

    One commenter criticizes the failure of the Proposed Amendments to 
incorporate the definitions of the MDI Rules.\118\ 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.'' \119\ Specifically, 
this commenter suggests that the Proposed Amendments add definitions of 
the following terms: competing consolidator, self-aggregator, 
consolidated market data, content

[[Page 58570]]

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 Plans.\120\ This commenter 
also suggests updating the existing definitions of Processor, System, 
and Consolidated Quotation System, and clarifying the existing 
definitions of Subscriber, Vendor, and the CQ Network's Quotation 
Information to reflect the decentralized consolidation model.\121\
---------------------------------------------------------------------------

    \118\ See MayStreet Letter II, supra note 63, at 5. This 
commenter also recommends that the Commission issue guidance to the 
Participants to aid in revising the Proposed Amendments. 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 Plans.
    \119\ Id. at 5.
    \120\ See id. at 5-6.
    \121\ See id. at 6.
---------------------------------------------------------------------------

    This commenter also describes several other technical criticisms of 
the Proposed Amendments. The commenter states that the Proposed 
Amendments should have removed the addition of a new SRO participant 
from the Plans' ministerial amendment list,\122\ arguing that competing 
consolidators and self-aggregators would need more time to update their 
systems to handle the new Participant's data.\123\ The commenter also 
states that the Proposed Amendments need to support the timestamps 
required by the MDI Rules to the microsecond,\124\ and that validation 
procedures to be used by competing consolidators need to be added to 
the Plans to describe the Participants' and the competing 
consolidator's obligations.\125\ The commenter further suggests that 
the Plans' capacity planning process needs to apply to competing 
consolidators and self-aggregators so that these entities can meet SRO-
expected capacity requirements.\126\ Finally, the commenter states that 
the Plans' conflict of interest and confidentiality provisions need to 
apply to competing consolidators since they will be replacing the 
exclusive SIPs.\127\
---------------------------------------------------------------------------

    \122\ A ``ministerial amendment'' permits an amendment to the 
Plans that is submitted by the Chairman of the CTA Plan and the 
Chairman of the CQ Operating Committee with less than 48 hours' 
advance notice to the Participants. See Notice, supra note 7, 86 FR 
at 67805 (CTA Plan Proposed Amendment at Section IV.(b)); id. at 
67820 (CQ Plan Proposed Amendment at Section IV.(c)).
    \123\ See MayStreet Letter II, supra note 63, at 6-7.
    \124\ See id. at 5.
    \125\ See MayStreet Letter I, supra note 63, at 4; MayStreet 
Letter II, supra note 63, at 8.
    \126\ See MayStreet Letter II, supra note 63, at 10.
    \127\ See id. at 7.
---------------------------------------------------------------------------

    The Commission agrees with the commenter that the failure to 
include the definitions established by the MDI Rules contributes to 
ambiguity within the Plans. In lieu of incorporating the MDI Rules' 
definitions, the Proposed Amendments add a statement to each Plan that 
``[t]erms used in this plan have the same meaning as the terms defined 
in Rule 600(b) under the Act.'' \128\ This creates ambiguity because 
the Proposed Amendments use the terms adopted by the MDI Rules but do 
not include definitions of those terms, so their applicability and the 
obligations they create are unclear or are not reflected in the 
Proposed Amendments. For example, the Proposed Amendment to the CQ Plan 
adds a requirement for the collection and reporting 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.'' \129\ However, 
the Proposed Amendments do not define ``consolidated market data'' or 
even the data necessary to generate it. The Plans thus fail 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,\130\ regulatory data, and administrative 
data) in accordance with the definition of ``consolidated market data'' 
in Rule 600(b)(19) \131\ and Rule 603(b).\132\ The absence of that 
definition in the Plans, especially in light of the instances described 
above in which the Proposed Amendments have failed to reflect the full 
scope of data required to be made available to competing consolidators 
and self-aggregators,\133\ would lead to ambiguity about the 
Participants' obligations with respect to consolidated market data.
---------------------------------------------------------------------------

    \128\ Notice, supra note 7, 86 FR at 67802 (CTA Plan Proposed 
Amendment at Preface); id. at 67818 (CQ Plan Proposed Amendment at 
Preface).
    \129\ Notice, supra note 7, 86 FR at 67823 (CQ Plan Proposed 
Amendment at Section VI.(a)).
    \130\ See supra note 95 (defining ``core data'').
    \131\ See id. (defining ``consolidated market data'').
    \132\ 17 CFR 242.603(b). As noted above, the CTA Plan Proposed 
Amendment does not add a requirement for the Participants to collect 
and report to competing consolidators and self-aggregators all data 
necessary to generate consolidated market data. See supra notes 94-
97 and accompanying text.
    \133\ See supra notes 94-97 and accompanying text.
---------------------------------------------------------------------------

    Relatedly, Rule 614(e)(2) requires the Participants to amend the 
Plans 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 Plans, there is thus no requirement 
in the language of the Plans for the Participants to timestamp the data 
components that constitute consolidated market data,\134\ such as the 
elements of core data \135\ (another definition established by the MDI 
Rules that the Proposed Amendments failed to include in the Plans), 
which include auction information, odd-lot information, and depth of 
book data. This is another instance in which the absence of definitions 
in the Plans would lead to ambiguity about the Participants' 
obligations with respect to consolidated market data.
---------------------------------------------------------------------------

    \134\ See supra note 95 (defining ``consolidated market data'').
    \135\ See id. (defining ``core 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).\136\ The Proposed Amendments, however, do not add 
the definition of ``regulatory data'' to the Plans. Therefore, there is 
no unambiguous requirement in the Plans that the primary listing 
exchanges perform these functions.
---------------------------------------------------------------------------

    \136\ See supra note 106 (defining ``regulatory data''). 
Regulatory data is one element of ``consolidated market data,'' as 
defined in Rule 600(b)(19). See supra note 95.
---------------------------------------------------------------------------

    Further, the CTA Plan Proposed Amendment would require that the CTA 
network enter into agreements with vendors and other parties that 
redisseminate consolidated market data to others,\137\ without 
including the definition of ``consolidated market data.'' Also, as 
stated by a commenter,\138\ the MDI Rules define a competing 
consolidator as a securities information processor, but the Proposed 
Amendments fail to add the definition of ``competing consolidator'' the 
Plans. The Proposed Amendments also fail to treat competing 
consolidators as securities information processors, instead treating 
them, incorrectly, as vendors and subscribers.\139\ The failure to 
incorporate into the Plans the full text of the definitions established 
by the MDI Rules thus increases the likelihood of ambiguity.
---------------------------------------------------------------------------

    \137\ See Notice, supra note 7, 86 FR at 67811 (CTA Plan 
Proposed Amendment at Section IX.(a)).
    \138\ See supra note 119.
    \139\ See supra notes 98-105 and accompanying text. See also 
supra note 23.
---------------------------------------------------------------------------

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 Amendments are 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

[[Page 58571]]

608(b)(2) thereunder, that the Proposed Amendments (File No. SR-CTA/CQ-
2021-02) be, and hereby are, disapproved.

    By the Commission.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20830 Filed 9-26-22; 8:45 am]
BILLING CODE 8011-01-P

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