Notice2022-04333
Joint Industry Plan; Order Instituting Proceedings To Determine Whether To Approve or Disapprove the Fifty-First Amendment to the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 2, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 41 (Wednesday, March 2, 2022)</title>
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[Federal Register Volume 87, Number 41 (Wednesday, March 2, 2022)]
[Notices]
[Pages 11755-11761]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-04333]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94308; File No. S7-24-89]
Joint Industry Plan; Order Instituting Proceedings To Determine
Whether To Approve or Disapprove the Fifty-First Amendment to the Joint
Self-Regulatory Organization Plan Governing the Collection,
Consolidation and Dissemination of Quotation and Transaction
Information for Nasdaq-Listed Securities Traded on Exchanges on an
Unlisted Trading Privileges Basis
February 24, 2022.
I. Introduction
On November 5, 2021,\1\ the Participants \2\ in the Joint Self-
Regulatory Organization Plan Governing the Collection, Consolidation
and Dissemination of Quotation and Transaction Information for Nasdaq-
Listed Securities Traded on Exchanges on an Unlisted Trading Privileges
Basis (``UTP Plan'' or ``Plan'') \3\ filed with the Securities and
Exchange Commission (``Commission''), pursuant to Section 11A of the
Securities Exchange Act of 1934 (``Act'') \4\ and Rule 608 of
Regulation National Market System (``NMS'') thereunder,\5\ a proposal
(the ``Proposed Amendment'') to amend the UTP Plan to implement the
non-fee-related aspects of the Commission's Market Data Infrastructure
Rules (``MDI Rules'').\6\ The Proposed Amendment was published for
comment in the Federal Register on November 26, 2021.\7\
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\1\ See Letter from Robert Books, Chair, UTP Operating
Committee, to Vanessa Countryman, Secretary, Commission (Nov. 5,
2021).
\2\ The Participants are: Cboe BYX Exchange, Inc., Cboe BZX
Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc.,
Cboe Exchange, Inc., Financial Industry Regulatory Authority, Inc.,
The Investors' Exchange LLC, Long-Term Stock Exchange, Inc., MEMX
LLC, MIAX PEARL, LLC, Nasdaq BX, Inc., Nasdaq ISE, LLC, Nasdaq PHLX,
Inc., The Nasdaq Stock Market LLC, New York Stock Exchange LLC, NYSE
American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE
National, Inc. (collectively, the ``Participants'').
\3\ The Plan governs the collection, processing, and
dissemination on a consolidated basis of quotation information and
transaction reports in Eligible Securities for its Participants. The
Plan serves as the required transaction reporting plan for its
Participants, which is a prerequisite for their trading Eligible
Securities. See Securities Exchange Act Release No. 55647 (Apr. 19,
2007), 72 FR 20891 (Apr. 26, 2007).
\4\ 15 U.S.C 78k-1.
\5\ 17 CFR 242.608.
\6\ See Securities Exchange Act Release No. 90610, 86 FR 18596
(Apr. 9, 2021) (File No. S7-03-20) (``MDI Rules Release'').
\7\ See Securities Exchange Act Release No. 93620 (Nov. 19,
2021), 86 FR 67541 (Nov. 26, 2021) (``Notice''). Comments received
in response to the Notice can be found on the Commission's website
at <a href="https://www.sec.gov/comments/s7-24-89/s72489.htm">https://www.sec.gov/comments/s7-24-89/s72489.htm</a>.
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[[Page 11756]]
This order institutes proceedings, under Rule 608(b)(2)(i) of
Regulation NMS,\8\ to determine whether to approve or disapprove the
Proposed Amendment or to approve the Proposed Amendment with any
changes or subject to any conditions the Commission deems necessary or
appropriate after considering public comment.
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\8\ 17 CFR 242.608(b)(2)(i).
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II. Summary of the Proposed Amendment \9\
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\9\ The full text of the Proposed Amendment appears as
Attachment A to the Notice. See Notice, supra note 7, 86 FR at
67543-55.
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The Participants propose to amend the Plan to comply with Rule 614
of the MDI Rules. Rule 614(e) requires participants to the effective
national market system plan(s) for NMS stocks to file by November 5,
2021, an amendment with the Commission that includes each of the
requirements of Rule 614(e)(1)-(5).\10\
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\10\ 17 CFR 242.614(e). The Participants have submitted a
separate amendment to implement the fee-related aspects of the MDI
Rules. See Securities Exchange Act Release No. 93618 (Nov. 19,
2021), 86 FR 67562 (Nov. 26, 2021) (File No. S7-24-89).
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Specifically, Rule 614(e)(1) requires the amendment to conform the
effective national market system plan(s) for NMS stocks 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.
Rule 614(e)(2) requires the amendment to include the application of
timestamps by the national securities exchange and national securities
association participants on all information with respect to quotations
for and transactions in NMS stocks that is necessary to generate
consolidated market data, including the time that such information was
generated as applicable by the national securities exchange or national
securities association and the time the national securities exchange or
national securities association made such information available to
competing consolidators and self-aggregators.
Rule 614(e)(3) requires the amendment to include assessments of
competing consolidator performance, including speed, reliability, and
cost of data provision and the provision of an annual report of such
assessment to the Commission.
Rule 614(e)(4) requires the amendment to include the development,
maintenance and publication of a list that identifies the primary
listing exchange for each NMS stock.
Rule 614(e)(5) requires the amendment to include the calculation
and publication on a monthly basis of consolidated market data gross
revenues for NMS stocks as specified by (i) listed on the NYSE; (ii)
listed on Nasdaq; and (iii) listed on exchanges other than NYSE or
Nasdaq.
The following is a summary of the changes proposed to be made to
the Plan by the Proposed Amendment.
Section III. Definitions
Under the Proposed Amendment, the Plan would include the following
new provision: ``Terms used in this plan have the same meaning as the
terms are defined in Rule 600(b) under the Act.''
The Proposed Amendment amends the definitions of ``News Service,''
``Subscriber,'' and ``Vendor'' to add competing consolidators as a
source of Transaction Reports and Quotation Information.
The Proposed Amendment adds 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.'' The Participants
explain that this definition is being added to comply with the
requirements of the MDI Rules and to replace the definition of
``Listing Market.'' \11\
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\11\ See Notice, supra note 7, 86 FR at 67541. The Commission
notes that the Proposed Amendment deletes a definition of ``Primary
Listing Market'' from former Section X. (Section XI., as proposed),
Regulatory and Operational Halts.
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The Proposed Amendment amends the definition of ``Quotation
Information'' to define it as ``all information with respect to
quotations for Eligible Securities required to be collected and made
available to the Processor, Competing Consolidators, and Self-
Aggregators pursuant to this Plan, including all data necessary to
generate consolidated market data.'' Similarly, the Proposed Amendment
amends the definition of ``Transaction Reports'' to mean ``all
information with respect to transactions in Eligible Securities
required to be collected and made available to the Processor, Competing
Consolidators, and Self-Aggregators pursuant to this Plan, including
all data necessary to generate consolidated market data.'' The
Participants explain that these amendments are intended to track the
MDI Rules more closely.\12\
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\12\ See Notice, supra note 7, 86 FR at 67541.
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Section IV. Administration of Plan
The Proposed Amendment amends Section IV.B., Operating Committee:
Authority, to add references to competing consolidators and self-
aggregators. Specifically, the Proposed Amendment states that the
Operating Committee shall be responsible for overseeing the
consolidation \13\ of Quotation Information and Transaction Reports in
Eligible Securities from the Participants for dissemination to
competing consolidators and self-aggregators, among other entities;
that the Operating Committee shall be responsible for periodically
evaluating the Processor and competing consolidators; and that the
Operating Committee shall be responsible for setting the level of fees
to be paid by competing consolidators and self-aggregators, among other
entities, for services relating to Quotation Information or Transaction
Reports in Eligible Securities, and for taking action in respect
thereto in accordance with the Plan.
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\13\ The Commission notes that under the decentralized
consolidation model, the Operating Committee would no longer oversee
the consolidation of data by the Processor, but rather the provision
of data underlying consolidated market data to competing
consolidators and self-aggregators. See Rule 603(b), 17 CFR
242.603(b); Rule 614(e)(1), 17 CFR 242.614(e)(1). See also MDI Rules
Release, supra note 6, 86 FR at 18682.
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The Proposed Amendment also amends Section IV.B. to require the
Operating Committee to publish on the Plan's website the Primary
Listing Exchange for each Eligible Security, and to calculate and
publish, on a monthly basis, consolidated market data gross revenues
for Eligible Securities. The Participants explain that these amendments
are intended to comply with Rule 614(e)(4) and Rule 614(e)(5)(ii).\14\
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\14\ See Notice, supra note 7, 86 FR at 67541.
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Section VII. Administrative Functions
The Proposed Amendment amends this section by deleting references
to the Processor. Additionally, under the Proposed Amendment, the
Administrator, not the Processor, shall be responsible for carrying out
all administrative functions necessary to the operation and maintenance
of the consolidated information collection and dissemination system
provided for in the Plan. The Participants explain that the
Administrative Functions described
[[Page 11757]]
in the section are more appropriately ascribed to the
Administrator.\15\
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\15\ See Notice, supra note 7, 86 FR at 67541.
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Section VIII. Evaluation of Competing Consolidators
The Proposed Amendment adds new Section VIII to require the
Operating Committee to assess the performance of competing
consolidators and to submit an annual report to the Commission
containing the assessment.\16\ The Proposed Amendment requires this
annual report to include an analysis with respect to competing
consolidators' speed, reliability, and cost of data provision. The
Participants explain that these changes are intended to comply with the
requirements of Rule 614(e)(3).\17\
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\16\ As a result of this addition, the Proposed Amendment
renumbers the remaining sections of the Plan.
\17\ See Notice, supra note 7, 86 FR at 67541.
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In addition, the Proposed Amendment requires the Operating
Committee, in conducting the analysis, to review the monthly
performance metrics to be published by competing consolidators pursuant
to Rule 614(d)(5).\18\ 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.\19\ The
Proposed Amendment adds the following monthly performance metrics to
this section:
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\18\ 17 CFR 242.614(d)(5).
\19\ Id.
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A. Capacity statistics, including system tested capacity, system
output capacity, total transaction capacity, and total transaction peak
capacity;
B. Message rate and total statistics, including peak output rates
on the following bases: 1-millisecond, 10-millisecond, 100-millisecond,
500-millisecond, 1-second, and 5-second;
C. System availability statistics, including system up-time
percentage and cumulative amount of outage time;
D. Network delay statistics, including quote and trade zero window
size events, quote and trade retransmit events, and quote and trade
message total; and
E. Latency statistics, including distribution statistics up to the
99.99th percentile, for the following:
1. When a Participant sends an inbound message to a competing
consolidator and when the competing consolidator receives the inbound
message;
2. When the competing consolidator receives the inbound message and
when the competing consolidator sends the corresponding consolidated
message to a customer of the competing consolidator; and
3. When a Participant sends an inbound message to a competing
consolidator and when the competing consolidator sends the
corresponding consolidated message to a customer of the competing
consolidator.
The Participants explain that they have proposed to amend Section
VIII to define the monthly performance metrics in accordance with Rule
614(d)(5).\20\
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\20\ See Notice, supra note 7, 86 FR at 67541-42.
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Section IX. (Previously Section VIII.) Transmission of Information to
Processor, Competing Consolidators, and Self-Aggregators by
Participants
The Proposed Amendment amends Section IX.A., Quotation Information,
to add the requirement that each Participant collect and transmit to
competing consolidators and self-aggregators all quotation information
required to be made available by such Participant by Rule 603(b) of
Regulation NMS,\21\ including all data necessary to generate
consolidated market data. Additionally, the Proposed Amendment requires
each Participant to make available quotation information, and changes
in any such information, to competing consolidators and self-
aggregators in the same manner and using the same methods, including
all methods of access and the same format, as such Participant makes
available any information with respect to quotations for and
transactions in NMS stocks to any person.
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\21\ 17 CFR 242.603(b).
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In addition, under the Proposed Amendment, each bid and offer with
respect to an Eligible Security furnished to competing consolidators
and self-aggregators by any Participant pursuant to the Plan would be
accompanied by the time (reported in microseconds) the Participant made
such bid and offer available to Competing Consolidators and Self
Aggregators. With respect to FINRA, the Proposed Amendment states that
if FINRA's quotation facility provides a proprietary feed of its
quotation information, then the quotation facility shall also furnish
the Processor, competing consolidators, and self-aggregators with the
time of the quotation as published on the quotation facility's
proprietary feed, and that FINRA shall convert any quotation times
reported to it in seconds or milliseconds to microseconds and shall
furnish such times to the Processor, competing consolidators, and self-
aggregators in microseconds.
Similarly, the Proposed Amendment amends Section IX.B., Transaction
Reports, to require each Participant to make available Transaction
Reports to competing consolidators and self-aggregators in the same
manner and using the same methods, including all methods of access and
the same format, as such Participant makes available any information
with respect to quotations for and transactions in NMS stocks to any
person.
The Proposed Amendment also amends Section IX.B. to require
Transaction Reports to competing consolidators and self-aggregators to
include the time (in microseconds) that the Participant made such
information available to competing consolidators and self-aggregators.
With respect to FINRA, the Proposed Amendment states that if FINRA's
trade reporting facility provides a proprietary feed of trades reported
by the trade reporting facility to the Processor, competing
consolidators and self-aggregators, then the FINRA trade reporting
facility shall also furnish the Processor with the time of the
transmission as published on the facility's proprietary feed.
Additionally, the Proposed Amendment requires FINRA to convert times
that its members report to it in seconds or milliseconds to
microseconds and to furnish such times to the Processor, Competing
Consolidators, and Self-Aggregators in microseconds. The Participants
state that the amendments to Sections IX.A. and IX.B. are designed to
comply with the requirements of Rule 614(e)(1) and (2).\22\
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\22\ See Notice, supra note 7, 86 FR at 67542. The Commission
notes that the Participants state that the Proposed Amendment amends
Section IX.B., Transaction Reports, to add the requirement that each
Participant agrees to collect and transmit to competing
consolidators and self-aggregators all transaction reports required
to be made available pursuant to Rule 603(b) of Regulation NMS;
however, the Proposed Amendment does not actually propose to make
this change to the text of the Plan. See Notice, supra note 7, 86 FR
at 67550. See also infra Section V, Commission's Solicitation of
Comments, Request for Comment #8.
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The Proposed Amendment also deletes the following statement from
Section IX.B.: ``The Participants shall seek to reduce the time period
for reporting last sale prices to the Processor as conditions
warrant.''
In addition, Section IX.B. currently includes a list of types of
transactions that are not required to be reported to the Processor
pursuant to the Plan. The Proposed Amendment adds competing
consolidators and self-aggregators as entities to which these types of
transactions are not required to be reported.
Finally, the Proposed Amendment amends Section IX.D. to include
references to competing consolidators
[[Page 11758]]
and self-aggregators. Section IX.D., as amended would read: ``Whenever
a Participant determines that a level of trading activity or other
unusual market conditions prevent it from collecting and transmitting
Quotation Information or Transaction Reports to the Processor,
Competing Consolidators, and Self-Aggregators, or where a trading halt
or suspension in an Eligible Security is in effect in its Market, the
Participant shall promptly notify the Processor, Competing
Consolidators, and Self-Aggregators of such condition or event and
shall resume collecting and transmitting Quotation Information and
Transaction Reports to it as soon as the condition or event is
terminated. In the event of a system malfunction resulting in the
inability of a Participant or its members to transmit Quotation
Information or Transaction Reports to the Processor, Competing
Consolidators, and Self-Aggregators, the Participant shall promptly
notify the Processor, Competing Consolidators, and Self-Aggregators of
such event or condition. Upon receiving such notification, the
Processor shall take appropriate action, including either closing the
quotation or purging the system of the affected quotations.''
Section XI. (Previously Section X.) Regulatory and Operational Halts
The Proposed Amendment revises this section to delete the
definition of ``Primary Listing Market'' from Section XI.A.,
Definitions for Purposes of Section XI. The Proposed Amendment also
replaces references to ``Primary Listing Market'' with ``Primary
Listing Exchange'' throughout Section XI.\23\ The Participants state
that this change would align the text of the Plan with terminology in
the MDI Rules.\24\
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\23\ The Commission notes that the Proposed Amendment does not
replace a reference to Primary Listing Market in the definition of
``Regulatory Halt'' in this section.
\24\ See Notice, supra note 7, 86 FR at 67542.
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The Proposed Amendment amends Section XI.B., Operational Halts, to
state that competing consolidators and self-aggregators shall be
notified by a Participant if that Participant has concerns about its
ability to collect and transmit Quotation Information or Transaction
Reports, or where it has declared an Operational Halt or suspension of
trading in one or more Eligible Securities, pursuant to the procedures
adopted by the Operating Committee. Similarly, the Proposed Amendment
amends Section XI.H., Communications, to state that if a Primary
Listing Exchange for an Eligible Security determines it appropriate to
initiate a Regulatory Halt, it will notify competing consolidators and
self-aggregators of such Regulatory Halt as well as provide notice that
a Regulatory Halt has been lifted using such protocols and other
emergency procedures as may be mutually agreed to between the Operating
Committee and the Primary Listing Exchange. The Participants state that
these changes are consistent with Rule 614(e)(1) and would ensure that
competing consolidators and self-aggregators are notified of
information related to Regulatory and Operational Halts and that
competing consolidators can disseminate this information to their
customers.\25\
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\25\ See id.
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Section XII. (Previously Section XI.) Hours of Operation
The Proposed Amendment amends Section XII.B.(ii) and (iii) to add
references to competing consolidators and self-aggregators.
Specifically, with respect to the reporting obligations of
Participants, proposed Section XII.B.(ii) provides that transactions in
Eligible Securities executed after 8:00 p.m. and before 12:00 a.m.
(midnight) shall be reported to the Processor, competing consolidators,
and self-aggregators between the hours of 4:00 a.m. and 8:00 p.m. ET on
the next business day (T+1), and shall be designated ``as/of'' trades
to denote their execution on a prior day, and be accompanied by the
time of execution. And proposed Section XII.B.(iii) provides that
transactions in Eligible Securities executed between 12:00 a.m.
(midnight) and 4:00 a.m. ET shall be transmitted to the Processor,
competing consolidators, and self-aggregators between 4:00 a.m. and
9:30 a.m. ET, on trade date, shall be designated as ``.T'' trades to
denote their execution outside normal market hours, and shall be
accompanied by the time of execution.
The Proposed Amendment also amends Section XII.D. to require
Participants that enter Quotation Information or submit Transaction
Reports to competing consolidators and self-aggregators between 4:00
a.m. and 9:30 a.m. ET, and after 4:00 p.m. ET until 8:00 p.m. ET, to do
so for all Eligible Securities in which they enter quotations.
Section XIV. (Previously Section XIII.) Financial Matters
The Proposed Amendment amends Section XIV.C., Maintenance of
Financial Records, by replacing references to the Processor with
references to the Administrator. The Participants explain that the
responsibilities described in that section are more appropriately
ascribed to the Administrator.\26\
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\26\ See Notice, supra note 7, 86 FR at 67542.
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Section XV. (Previously Section XIV.) Indemnification
The Proposed Amendment amends this section to add references to
Competing Consolidators and Self-Aggregators and to remove a reference
to Vendors as a recipient of Transaction Reports, Quotation
Information, or other information disseminated by the Processor.
Specifically, the first paragraph in this section now states: ``Each
Participant agrees, severally and not jointly, to indemnify and hold
harmless each other Participant, Nasdaq, and each of its directors,
officers, employees and agents (including the Operating Committee and
its employees and agents) from and against any and all loss, liability,
claim, damage and expense whatsoever incurred or threatened against
such persons as a result of any Transaction Reports, Quotation
Information or other information reported to the Processor, Competing
Consolidators, and Self-Aggregators by such Participant and
disseminated by the Processor, Competing Consolidators, and Self-
Aggregators. This indemnity agreement shall be in addition to any
liability that the indemnifying Participant may otherwise have.''
Section XVIII. (Previously Section XVII.) Applicability of Securities
Exchange Act of 1934
The Proposed Amendment amends this section to include Competing
Consolidators and Self-Aggregators as subject to any applicable
provisions of the Act, as amended, and any rules and regulations
promulgated thereunder.
Section XIX. (Previously Section XVIII.) Operational Issues
The Proposed Amendment amends Section XIX.A. to include references
to Competing Consolidators and Self-Aggregators to require each
Participant to collect and validate quotes and last sale reports within
its own system prior to transmitting this data to Competing
Consolidators and Self-Aggregators.
Section XXI. Depth of Book Display
The Proposed Amendment deletes this section. The Participants
explain that this provision is obsolete given the MDI Rules.\27\
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\27\ See Notice, supra note 7, 86 FR at 67542.
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[[Page 11759]]
III. Summary of Comments
In response to the Notice, the Commission received two comments on
the Proposed Amendment.\28\ Generally, both commenters oppose the
Proposed Amendment and recommend that the Commission disapprove it.\29\
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\28\ See Letters to Vanessa Countryman, Secretary, Commission,
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 (Dec. 17, 2021) (``SIFMA Letter'');
from Patrick Flannery, Chief Executive Officer, MayStreet, to
Vanessa Countryman, Secretary, Commission (Dec. 17, 2021)
(``MayStreet Letter'').
\29\ SIFMA Letter, supra note 28, at 1, 8; MayStreet Letter,
supra note 28, at 1. The Commission notes that the comment letters
submitted by these commenters address both the Proposed Amendment
and similar proposed amendments to the Second Restatement of the
Consolidated Tape Association (``CTA'') Plan and Restated
Consolidated Quotation (``CQ'') Plan (collectively ``CTA/CQ Plan'').
See Securities Exchange Act Release No. 93615 (Nov. 19, 2021), 86 FR
67800 (Nov. 29, 2021).
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Both commenters argue that the Proposed Amendment contains
provisions that would be irrelevant under the decentralized
consolidation model. Specifically, one commenter states that the
Proposed Amendment appears to continue to contain the concept of a
single processor in contravention of the MDI Rules Release.\30\ The
other commenter argues that under the MDI Rule, only competing
consolidators would sell consolidated market data to vendors and
subscribers. Therefore, this commenter does not believe the sections of
the Proposed Amendment that discuss vendors' and subscribers'
contractual relationships with the Plan are relevant.\31\ The commenter
recommends that these provisions be removed or altered to reflect that
the Plan no longer has agreements with vendors and end users and
instead will have agreements with competing consolidators and self-
aggregators related specifically to the cost of content underlying the
market data.\32\
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\30\ SIFMA Letter, supra note 28, at 8.
\31\ MayStreet Letter, supra note 28, at 3.
\32\ See id.
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Separately, one commenter argues that validation procedures between
competing consolidators and Participants should be similar to those
between the current Processor and the Participants.\33\ While this
commenter acknowledges that the validation process for competing
consolidators and Participants may differ from the current Processor
validation process, the commenter believes that establishing validation
procedures with the new competing consolidators that would be
consistent across SROs is a prudent measure for ensuring data
quality.\34\ Finally, the commenter also believes that the
Participants' description of services offered by the current plans for
equity market data have confused the underlying content of consolidated
market data and the consolidated market data itself.\35\
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\33\ See id. at 4.
\34\ See id.
\35\ See id. at 3.
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IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Amendment
The Commission is instituting proceedings pursuant to Rule
608(b)(2)(i) of Regulation NMS,\36\ and Rule 700 of the Commission's
Rules of Practice,\37\ to determine whether to approve or disapprove
the Proposed Amendment or to approve the Proposed Amendment with any
changes or subject to any conditions the Commission deems necessary or
appropriate after considering public comment. Institution of
proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved. Rather, the
Commission seeks and encourages interested persons to provide
additional comment on the Proposed Amendment to inform the Commission's
analysis.
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\36\ 17 CFR 242.608.
\37\ 17 CFR 201.700.
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Rule 608(b)(2) of Regulation NMS provides that the Commission
``shall approve a . . . proposed amendment to a national market system
plan, with such changes or subject to such conditions as the Commission
may deem necessary or appropriate, if it finds that such . . .
amendment is necessary or appropriate in the public interest, for the
protection of investors and the maintenance of fair and orderly
markets, to remove impediments to, and perfect the mechanisms of, a
national market system, or otherwise in furtherance of the purposes of
the Act.'' \38\ Rule 608(b)(2) further provides that the Commission
shall disapprove a proposed amendment if it does not make such a
finding.\39\ Pursuant to Rule 608(b)(2)(i) of Regulation NMS,\40\ the
Commission is providing notice of the grounds for disapproval under
consideration:
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\38\ See 17 CFR 242.608(b)(2).
\39\ See id.
\40\ 17 CFR 242.608(b)(2)(i). See also Commission Rule of
Practice 700(b)(2), 17 CFR 201.700(b)(2).
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<bullet> Whether the Proposed Amendment is consistent with the
Commission's MDI Rules as outlined in Rule 614(e); \41\
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\41\ See MDI Rules Release, supra note 10.
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<bullet> Whether, consistent with Rule 608 of Regulation NMS, the
Proposed Amendment is necessary or appropriate in the public interest,
for the protection of investors and the maintenance of fair and orderly
markets, to remove impediments to, and perfect the mechanisms of, a
national market system, or otherwise in furtherance of the purposes of
the Act; \42\
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\42\ See 17 CFR 242.608(b)(2).
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<bullet> Whether consistent with Rule 603(a) of Regulation NMS, the
Proposed Amendment provides for the distribution of information with
respect to quotations for and transactions in NMS stocks on terms that
are fair and reasonable and not unreasonably discriminatory;
<bullet> Whether modifications to the Proposed Amendment, or
conditions to its approval, would be required to make the Proposed
Amendment 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; \43\
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\43\ See id.
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<bullet> Whether the Proposed Amendment is consistent with
Congress's finding, in Section 11A(1)(C)(iii) of the Act, that it is in
the public interest and appropriate for the protection of investors and
the maintenance of fair and orderly markets to ensure ``the
availability to brokers, dealers, and investors of information with
respect to quotations for and transactions in securities;'' \44\ and
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\44\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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<bullet> Whether, consistent with the purposes of Section
11A(c)(1)(B) of the Act,\45\ the Proposed Amendment's provisions are
drafted to support the prompt, accurate, reliable, and fair collection,
processing, distribution, and publication of information with respect
to quotations for and transactions in NMS securities, and the fairness
and usefulness of the form and content of such information.
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\45\ See 15 U.S.C. 78k-1(c)(1)(B).
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Under the Commission's Rules of Practice, the ``burden to
demonstrate that a NMS plan filing is consistent with the Exchange Act
and the rules and regulations issued thereunder . . . is on the plan
participants that filed the NMS plan filing.'' \46\ The description of
the NMS plan filing, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an
[[Page 11760]]
affirmative Commission finding.\47\ 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 the NMS plan filing is consistent
with the Act and the applicable rules and regulations thereunder.\48\
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\46\ 17 CFR 201.700(b)(3)(ii).
\47\ See id.
\48\ Id.
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V. Commission's Solicitation of Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
consistent with Section 11A or any other provision of the Act, or the
rules and regulations thereunder. Although there do not appear to be
any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 608(b)(2)(i) of Regulation
NMS,\49\ any request for an opportunity to make an oral
presentation.\50\ The Commission asks that commenters address the
sufficiency and merit of the Participants' statements in support of the
Proposed Amendment,\51\ in addition to any other comments they may wish
to submit about the Proposed Amendment. In particular, the Commission
seeks comment on the following:
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\49\ 17 CFR 242.608(b)(2)(i).
\50\ Rule 700(c)(ii) of the Commission's Rules of Practice
provides that ``[t]he Commission, in its sole discretion, may
determine whether any issues relevant to approval or disapproval
would be facilitated by the opportunity for an oral presentation of
views.'' 17 CFR 201.700(c)(ii).
\51\ See Notice, supra note 7.
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1. What are commenters' views on whether the text of the Proposed
Amendment reflects 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. For example, do commenters believe
that Section III of the Plan (titled Definitions) appropriately defines
terms to accurately reflect the decentralized consolidation model
consistent with the MDI Rules Release? If not, what, if any,
modifications should be made to these definitions in the Proposed
Amendment? Additionally, do commenters believe that the Proposed
Amendment should be modified to explicitly incorporate certain terms
such as Consolidated Market Data, as defined in Rule 600(b)(19) into
the Plan? Similarly, Sections V and VI describe the selection and
evaluation and functions of the Processor, respectively. Do commenters
believe that modifying the Proposed Amendment to remove the role of the
Processor is necessary for the decentralized consolidation model
consistent with the MDI Rules Release?
2. What are commenters' views on whether the proposed revisions to
the definitions of Quotation Information and Transaction Reports in
Section III of the Proposed Amendment are appropriate?
3. What are commenters' views on whether the Proposed Amendment
includes 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. Specifically, do commenters believe that the
Proposed Amendment requires the Participants to timestamp all of the
data underlying Consolidated Market Data, as defined in Rule
600(b)(19), upon generation and upon provision to competing
consolidators and self-aggregators? If not, should the Proposed
Amendment be modified to include a requirement for such timestamping?
4. What are commenters' views on the proposed deletion of language
in Section IX of the Proposed Amendment stating, ``The Participants
shall seek to reduce the time period for reporting last sale prices to
the Processor as conditions warrant.'' Specifically, do commenters
believe that the Proposed Amendment should be modified to retain that
language, but replace the term ``Processor'' with ``Competing
Consolidators and Self-Aggregators''?
5. What are commenters' views on the revisions to the
indemnification provisions in Section XV of the Proposed Amendment?
Specifically, do commenters believe that the deletion of Vendors as a
recipient of Transaction Reports, Quotation Information, ``or other
information'' reported to and disseminated by the Processor, competing
consolidators and self-aggregators is appropriate?
6. What are commenters' views on whether the Proposed Amendment
sufficiently describes how the Plan will operate under the Initial
Parallel Operation Period when ``the decentralized consolidation model
will run in parallel to the existing exclusive SIP model.'' \52\
Specifically, Section D of the Proposed Amendment states that it will
be implemented to coincide with the phased implementation of the MDI
Rules as required by the Commission. Do commenters believe that the
Proposed Amendment should specify how the Participants will transition
from the current Plan to the initial parallel operation period and the
process after the initial parallel operation period?
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\52\ See MDI Rules Release, supra note 6, at Section III.H.2.,
86 FR at 18698-701.
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7. What are commenters' views on the proposed revisions to Section
IX.B. of the Proposed Amendment that state that if FINRA's trade
reporting facility provides a proprietary feed of trades reported by
the trade reporting facility to the Processor, competing consolidators
and self-aggregators, then the FINRA trade reporting facility shall
also furnish the Processor with the time of the transmission as
published on the facility's proprietary feed? Specifically, what are
commenters' views about these proposed revisions? Do commenters believe
that the Proposed Amendment should be modified to make competing
consolidators and self-aggregator recipients of the time of the
transmission from the FINRA trade reporting facility?
8. The description of the Proposed Amendment states that the
Proposed Amendment amends Section IX.B. to add the requirement that
each Participant agrees to collect and transmit to competing
consolidators and self-aggregators all transaction reports required to
be made available pursuant to Rule 603(b) of Regulation NMS. However,
the Proposed Amendment does not make this change to the text of the
Plan. Do commenters believe that the Proposed Amendment should be
modified to incorporate this revision into Section IX.B.?
9. What are commenters' views on the proposed revisions to Section
IX.D. of the Proposed Amendment? Do commenters believe that the
statement in the section that ``the Participant shall promptly notify
the Processor, Competing Consolidators, and Self-Aggregators of such
condition or event and shall resume collecting and transmitting
Quotation Information and
[[Page 11761]]
Transaction Reports to it as soon as the condition or event is
terminated'' should be modified to require the Participant to resume
collecting and transmitting Quotation Information and Transaction
Reports to competing consolidators and self-aggregators as soon as the
condition or event is terminated? Do commenters believe that the
statement in the section that ``[u]pon receiving such notification, the
Processor shall take appropriate action, including either closing the
quotation or purging the system of the affected quotations'' should be
modified to reference competing consolidators and self-aggregators?
10. Do commenters believe that the Proposed Amendment should be
modified to replace a reference to ``Primary Listing Market'' with
``Primary Listing Exchange'' in the definition of ``Regulatory Halt''
in Section XI.A.?
11. What are commenters' views on the Proposed Amendment in light
of the decentralized consolidation model with respect to (i) references
to the Processor and Subscribers; (ii) the dissemination of Regulatory
Halts; (iii) the authority of the Operating Committee under Section
IV.B. of the Plan with respect to competing consolidators, self-
aggregators, Vendors, Subscribers, News Services, and others; and (iv)
references to contracts with Vendors, Subscribers, News Services and
others. Do commenters believe that the Proposed Amendment should be
modified with respect to any of these provisions to conform to the
decentralized consolidation model required by the MDI Rules?
12. What are commenters' views on the following sections of the
Proposed Amendment in light of the decentralized consolidation model:
Administration of the Plan, Potential Conflicts of Interest, Selection
and Evaluation of the Processor, Functions of the Processor, Market
Access, Regulatory and Operational Halts, Hours of Operation, Financial
Matters, Indemnification, Applicability of Securities Exchange Act of
1934, and Operational Issues. Do commenters believe that the Proposed
Amendment should be modified with respect to any of these provisions to
conform to the decentralized consolidation model required by the MDI
Rules? If so, please describe how the Proposed Amendment should be
modified to conform the Plan to the decentralized consolidation model
required by the MDI Rules.
13. Do commenters have views about any other aspect of the Proposed
Amendment? Do commenters believe that the Proposed Amendment should be
modified in any other way to be consistent with the MDI Rules or the
MDI Rules Release?
Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by March 23, 2022. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by April 6,
2022. Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#f785829b92da94989a9a92998384b7849294d9909881"><span class="__cf_email__" data-cfemail="92e0e7fef7bff1fdfffff7fce6e1d2e1f7f1bcf5fde4">[email protected]</span></a>. Please include
File No. S7-24-89 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to: Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File No. S7-24-89. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the Participants' principal offices. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number File No. S7-24-89 and should be submitted
on or before March 23, 2022.
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\53\ 17 CFR 200.30-3(a)(85).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\53\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022-04333 Filed 3-1-22; 8:45 am]
BILLING CODE 8011-01-P
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