Notice2024-01369
Joint Industry Plan; Notice of Filing of a National Market System Plan Regarding Consolidated Equity Market Data
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
January 25, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 17 (Thursday, January 25, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 17 (Thursday, January 25, 2024)]
[Notices]
[Pages 5002-5029]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-01369]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99403; File No. 4-757]
Joint Industry Plan; Notice of Filing of a National Market System
Plan Regarding Consolidated Equity Market Data
I. Introduction
Pursuant to section 11A of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 608 of Regulation National Market System
(``NMS'') thereunder,\2\ notice is hereby given that on October 23,
2023, Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA
Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe Exchange, Inc.,
Investors Exchange LLC, Long Term Stock Exchange, Inc., MEMX LLC, MIAX
PEARL, LLC, Nasdaq BX, Inc., Nasdaq ISE, LLC, Nasdaq PHLX LLC, Nasdaq
Stock Market LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE
Arca, Inc., NYSE Chicago, Inc., NYSE National, Inc., and Financial
Industry Regulatory Authority, Inc. (``FINRA'') (collectively, the
``SROs'' or ``Participants'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') a proposed new single national
market system plan governing the public dissemination of real-time
consolidated equity market data for national market system (``NMS'')
stocks (the ``CT Plan'' or ``Plan'').\3\ The Commission is publishing
this notice to solicit comments on the proposed CT Plan from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78k-1.
\2\ 17 CFR 242.608.
\3\ See Letter from James P. Dombach, Davis Wright Tremaine LLP,
to Vanessa Countryman, Secretary, Commission (Oct. 23, 2023)
(``Transmittal Letter''). See also Attachment A (Limited Liability
Company Agreement of CT Plan LLC).
---------------------------------------------------------------------------
[[Page 5003]]
II. Description of the CT Plan
The SROs have filed the proposed CT Plan pursuant to the
Commission's September 1, 2023, Amended Order Directing the Exchange
and the Financial Industry Regulatory Authority, Inc., To File a
National Market System Plan Regarding Consolidated Equity Market
Data.\4\ Set forth below in Section II.A is the statement of the
purpose of the new NMS plan regarding consolidated equity market data,
along with information pursuant to Rules 608(a)(4) and (5) under the
Act,\5\ as prepared and submitted by the SROs to the Commission.\6\
---------------------------------------------------------------------------
\4\ Securities Exchange Act Release No. 98271 (Sept. 1, 2023),
88 FR 61630 (Sept. 7, 2023) (File No. 4-757) (``Amended Order'').
\5\ See 17 CFR 242.608(a)(4) and (a)(5).
\6\ See Transmittal Letter, supra note 3. The statement of the
purpose of the proposed CT Plan and the information required by
Rules 608(a)(4) and (5) are reproduced verbatim from the Transmittal
Letter; cross-references have been revised to conform with the
footnote sequencing of this notice. Additionally, the Transmittal
Letter states: ``Certain of the SROs (including Cboe Exchange, Inc.,
and its affiliated exchanges) have joined in this submission solely
to satisfy the requirements of the Amended Order. Nothing in this
submission should be construed as an agreement by any particular SRO
with any analysis or conclusions set forth in the Amended Order, the
prior Commission orders cited in the Amended Order, or the CT Plan.
An SRO may submit public comments regarding the Plan, including
comments objecting to the provisions in the Plan, challenging the
legality of the Plan, or proposing modifications to the Plan.'' Id.
at n.1.
---------------------------------------------------------------------------
A. Statement of Purpose
On September 1, 2023, the Commission ordered the SROs to act
jointly in developing and filing with the Commission by October 23,
2023, a proposed new single NMS plan to govern the public dissemination
of real-time consolidated equity market data for NMS stocks.\7\ The
SROs are filing the proposed Plan, as directed in the Amended Order.
Following the implementation timelines discussed in Section A.3 below,
the Plan would replace (1) the Consolidated Tape Association Plan
(``CTA Plan''), (2) the Consolidated Quotation Plan (``CQ Plan''), and
(3) the Joint Self-Regulatory Organization Plan Governing the
Collection, Consolidation, and Dissemination of Quotation and
Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privileges Basis (``UTP Plan''). The
SROs propose that the Plan be in the form of a limited liability
company agreement for a new company, CT Plan LLC (the ``Company''),
with each SRO being a ``Member'' of the Company.
---------------------------------------------------------------------------
\7\ See Amended Order, supra note 4.
---------------------------------------------------------------------------
In addition to the provisions required by the Amended Order, the
SROs have included the following additional provisions.
The SROs have included in Section 5.3 that the Operating Committee
does not need to establish Processor Selection Procedures if the
Operating Committee initially selects the CQ Plan and CTA Plan's
processor and the UTP Plan's processor to provide the same services to
the Company that are currently provided under the CQ Plan, CTA Plan,
and UTP Plan. Because the focus of the Amended Order is the selection
of a new independent Administrator rather than new Processors, the SROs
believe it is reasonable for the Operating Committee to have the option
of continuing with the current processors without having to go through
an extensive procedure for selecting the processors. The SROs believe
that this option also allows for quicker implementation of the Plan by
allowing the Operating Committee to focus on the selection of the new
Administrator.
Additionally, at the request of SEC Staff, the SROs have included a
provision in Section 7.1 that, in the event of a Regulatory Halt and
the relevant Processor is unable to disseminate notice of the
Regulatory Halt, notice of the Regulatory Halt may be made via an
alternate Processor, if available.
2. Governing or Constituent Documents
Not applicable.
3. Implementation of Plan
As set forth in the proposed Plan, and because the Members have
already formed the Company as a limited liability company pursuant to
the Delaware Limited Liability Company Act by filing a certificate of
formation (the ``Certificate'') with the Delaware Secretary of State,
the SROs propose that the Plan will become effective on the date (the
``Effective Date'') when approved by the Commission pursuant to Rule
608 of Regulation NMS as an NMS plan.
The SROs propose that the Plan would become operative after the
steps set forth in Exhibit F of the proposed Plan are completed.
Generally, the SROs believe there are six workstreams associated with
the implementation of the Plan:
(1) Setting up the Plan's governance;
(2) Developing Plan fees, policies, and data subscriber agreements;
(3) Selecting the new Administrator;
(4) Contract negotiations with the new Administrator;
(5) Administrator setup; and
(6) Retirement of the CTA Plan, CQ Plan, and UTP Plan.
Within Exhibit F, the SROs have included the various steps
comprising each workstream along with the timelines for completing each
step. As identified in Exhibit F, some of the steps can be performed in
parallel, and others have dependencies that need to be completed before
they can begin. For example, a new Administrator cannot begin to set up
operations until after the process to select such Administrator has
been completed and the Plan has negotiated and executed a contract and
related service level agreement with the selected Administrator.
Likewise, the SROs believe that the fees and the policies of the
proposed Plan--which cannot be determined until both an Operating
Committee and Advisory Committee are convened--will drive the scope of
the services that an Administrator will need to provide, which could
impact the RFP responses of prospective bidders to become the
Administrator. For example, if the Operating Committee decides to use a
direct bill model, which is currently used by the CQ Plan and CTA Plan,
the scope of the work of the Administrator would be materially
different than if the Operating Committee determines to proceed with an
indirect bill model, which is currently used by the UTP Plan. Other
aspects of the potential fees and policies of the proposed Plan, such
as whether there will be differences in professional and non-
professional device fees, whether to provide an option to charge fees
based on use of quote meter, or whether the current non-display use
reporting will continue, will likewise have a material impact on the
scope of services that the Administrator would be required to provide.
While the SROs will work expeditiously to complete the various
steps outlined in Exhibit F, the timelines in Exhibit F are estimates
based on the experience of the SROs and the current administrators. As
a result, it is possible that the steps may take shorter or longer than
estimated. Consequently, as set forth in Section 14.1, in the event a
workstream listed in Exhibit F takes shorter or, due to factors outside
the Operating Committee's reasonable control, takes longer than
expected, the timelines for contingent steps shall be adjusted
accordingly to account for such change. In such instances, the
Operating Committee will include the adjustment in its written progress
report to the Commission in accordance with Section 14.2. The SROs
believe that such an approach is reasonable since although the
timelines
[[Page 5004]]
contained in Exhibit F are based on the SROs' and current
administrators' experience, the ability to shorten or, in certain
circumstances, lengthen the timeline reflected in Exhibit F is
necessary due to factors outside the Operating Committee's reasonable
control.
For example, the proposed timeline for the Request for Proposal
(``RFP'') process to select a new Administrator does not take into
account the potential need for additional rounds of communications from
bidders. It is not unusual in an RFP bidding process to have multiple
rounds of communications from bidders. For example, the OPRA RFP
process in 2019 was projected to take four months and ended up taking
14 months to provide time for the bidders to respond to questions from
the OPRA Plan.
Additionally, the SROs have budgeted four months for negotiations
with the selected administrator to execute a contract. While the SROs
recognize that the key terms of the services to be provided will be
part of the RFP process, the actual contract negotiations cannot begin
until an administrator is selected. The SROs note that it took
approximately ten months to negotiate a new contract with the UTP
Processor following the 2014 RFP process. While the new Operating
Committee will be committed to negotiate in good faith, the SROs cannot
anticipate all possible outcomes when negotiating at arms-length with a
third party. Such negotiations could be more streamlined than
anticipated and take shorter than estimated or could be protracted due
to disagreements between the Operating Committee and the new
Administrator as to terms that might not be covered in the RFP process.
Further, the SROs have set what they consider to be an aggressive
timeline for the Administrator to set up operations. Assuming the new
Administrator commits to such a timeline (which will be one of the
elements of the RFP), the SROs note that there are dependencies outside
of the control of either the Operating Committee and the new
Administrator. Specifically, all vendors will need to be onboarded to
the new Administrator before the new CT Plan can begin operations. The
SROs note that when the UTP Plan repapered its customers, the process
took over twelve months. Currently, there are over 600 vendors that
take CQ/CTA and UTP data, and all those vendors would need to be
onboarded so that there will be no disruption in service of
consolidated data. If all 600+ vendors quickly complete the onboarding
process, the onboarding process could take shorter than estimated;
however, a few vendors delaying their onboarding could extend the
entire process if a material number of data subscribers would be
impacted.
The above examples are non-exhaustive, and the SROs are unable to
predict all issues that might arise in the implementation process. As a
result, the SROs have included the ability to shorten or lengthen the
timelines set forth in Exhibit F. In order to lengthen the timelines,
the SROs have included a requirement that any decision to lengthen the
timeline must be made by an affirmative vote of the Operating Committee
pursuant to Section 4.3(b) and must be based on a reasonable
determination that the timeline needs to be extended. Additionally, as
stated above, the Operating Committee will include the adjustment in
its written progress report to the Commission in accordance with
Section 14.2.
4. Development and Implementation Phases
Until the Operative Date, the SROs will continue to operate
pursuant to the CQ Plan, CTA Plan, and UTP Plan with respect to the
public dissemination of real-time consolidated equity market data for
NMS stocks rather than the Plan.
5. Analysis of Impact on Competition
The SROs believe the proposed Plan complies with the Amended Order.
The proposed Plan incorporates the existing substantive provisions of
the CTA Plan, CQ Plan and UTP Plan, which have been approved by the
Commission, together with the governance modifications required by the
Commission's Amended Order.
6. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, Plan
Not applicable.
7. Approval of Amendment of the Plan
Not applicable.
8. Terms and Conditions of Access
The Plan provides that any entity registered as a national
securities exchange or national securities association under the
Exchange Act may become a Member by: (i) providing written notice to
the Company, (ii) executing a joinder to the Plan, at which time
Exhibit A of the Plan shall be amended to reflect the addition of such
exchange or association as a Member, (iii) paying a Membership Fee to
the Company, and (iv) executing a joinder to any other agreements to
which all of the other Members have been made party in connection with
being a Member.
9. Method of Determination and Imposition, and Amount of Fees and
Charges
Not applicable.
10. Method and Frequency of Processor Evaluation
Not applicable
11. Dispute Resolution
The Plan does not include provisions regarding resolution of
disputes between or among the Members.
III. Solicitation of Comments
The Commission seeks comment on the proposed CT Plan. Interested
persons are invited to submit written data, views, and comments
concerning the foregoing, including whether the proposal is consistent
with the Act and the rules thereunder, as well as with the Amended
Order. In addition to the specific questions set forth below, the
Commission asks commenters to consider generally whether the proposed
CT Plan is appropriately structured, and whether its provisions are
appropriately drafted, to support the ``prompt, accurate, reliable, and
fair collection, processing, distribution, and publication of
information with respect to quotations for and transactions in such
securities and the fairness and usefulness of the form and content of
such information.'' \8\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78k-1(c)(1)(B).
---------------------------------------------------------------------------
Accordingly, the Commission requests comments on matters including,
but not limited to, the following:
1. Whether the proposed CT Plan is consistent with the Amended
Order;
2. Whether, consistent with Rule 608 of Regulation NMS, the terms
of the proposed CT Plan 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; \9\
---------------------------------------------------------------------------
\9\ See 17 CFR 242.608(b)(2)
---------------------------------------------------------------------------
3. Whether modifications to the proposed CT Plan, or conditions to
its approval, would be required to make the proposed plan 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; \10\
---------------------------------------------------------------------------
\10\ See id.
---------------------------------------------------------------------------
[[Page 5005]]
4. Whether the proposed CT Plan 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''; \11\
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------
5. Whether, consistent with the purposes of section 11A(c)(1)(B) of
the Act,\12\ the proposed CT Plan is appropriately structured, and
whether its provisions are appropriately drafted, to support the
prompt, accurate, reliable, and fair collection, processing,
distribution, and publication of information with respect to quotations
for and transactions in NMS stocks, and the fairness and usefulness of
the form and content of such information; and
---------------------------------------------------------------------------
\12\ See 15 U.S.C. 78k-1(c)(1)(B).
---------------------------------------------------------------------------
6. Whether the proposed timeline for implementation of the proposed
CT Plan 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.
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#e193948d84cc828e8c8c848f9592a1928482cf868e97"><span class="__cf_email__" data-cfemail="b7c5c2dbd29ad4d8dadad2d9c3c4f7c4d2d499d0d8c1">[email protected]</span></a>. Please include
File Number 4-757 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 Number 4-757. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>). Copies of
the submission, all written statements with respect to the proposed CT
Plan that are filed with the Commission, and all written communications
relating to the proposed CT Plan between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for website
viewing and printing in the Commission's Public Reference Room, 100 F
Street NE, Washington, DC 20549, on official business days between the
hours of 10 a.m. and 3 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. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to File Number 4-757 and should be submitted on or before
February 26, 2024.
By the Commission.
Dated: January 19, 2024.
Sherry R. Haywood,
Assistant Secretary.
Attachment A
LIMITED LIABILITY COMPANY AGREEMENT
OF
CT PLAN LLC
a Delaware limited liability company
(1) This LIMITED LIABILITY COMPANY AGREEMENT (this ``Agreement'')
dated as of the [<bullet>] day of [<bullet>], [<bullet>] is made and
entered into by and among the parties identified in Exhibit A, as
Exhibit A may be amended from time to time (the ``Members''), which are
the members of CT Plan LLC, a Delaware limited liability company (the
``Company''). The Members shall constitute the ``members'' (as that
term is defined in the Delaware Act) of the Company.
RECITALS
(a) On September 1, 2023, the Commission ordered the Members to act
jointly in developing and filing with the Commission by October 23,
2023, a proposed new single national market system (``NMS'') plan to
govern the public dissemination of real-time consolidated equity market
data for NMS stocks. See Amended Order Directing the Exchanges and the
Financial Industry Regulatory Authority to Submit a New National Market
System Plan Regarding Consolidated Equity Market Data, Release No. 34-
98271 (September 1, 2023), 88 FR 61630 (Sept. 7, 2023) (File No. 4-757)
(the ``Amended Order''). This Agreement is being filed with the
Commission, as directed in the Amended Order.
(b) As the Members have already formed the Company as a limited
liability company pursuant to the Delaware Act by filing a certificate
of formation (the ``Certificate'') with the Delaware Secretary of
State, this Agreement will become effective on the date (the
``Effective Date'') when approved by the Commission pursuant to Rule
608 of Regulation NMS as an NMS plan governing the public dissemination
of real-time consolidated market data for Eligible Securities.
(c) It is understood and agreed that, in performing their
obligations and duties under this Agreement, the Members are performing
and discharging functions and responsibilities related to the operation
of the national market system for and on behalf of the Members in their
capacities as self-regulatory organizations, as required under the
section 11A of the Exchange Act, and pursuant to Rule 603(b) of
Regulation NMS thereunder. It is further understood and agreed that
this Agreement and the operations of the Company shall be subject to
ongoing oversight by the Commission. No provision of this Agreement
shall be construed to limit or diminish the obligations and duties of
the Members as self-regulatory organizations under the federal
securities laws and the regulations thereunder.
Article I.
DEFINITIONS
Section 1.1 Definitions.
As used throughout this Agreement and the Exhibits:
(1) ``Administrator'' means the Person selected by the Company to
perform the administrative functions described in this Agreement
pursuant to the Administrative Services Agreement. The Person selected
as the Administrator will not be owned or controlled by a corporate
entity that, either directly or via another subsidiary, offers for sale
its own proprietary market data product for NMS stocks.
(2) ``Affiliate'' means, as to any Person, any other Person that,
directly or indirectly, Controls, is Controlled by, or is under common
Control with such Person. Affiliate or Affiliated, when used as an
adjective, shall have a correlative meaning.
(3) ``Agent''means, for purposes of Exhibit C, agents of the
Operating Committee, a Member, the Administrator, and the Processors,
including, but not limited to, attorneys,
[[Page 5006]]
auditors, advisors, accountants, contractors or subcontractors.
(4) ``Applicable Law'' means all applicable provisions of (a)
constitutions, treaties, statutes, laws (including the common law),
rules, regulations, decrees, ordinances, codes, proclamations,
declarations or orders of any Governmental Authority; (b) any consents
or approvals of any Governmental Authority; and (c) any orders,
decisions, advisory or interpretative opinions, injunctions, judgments,
awards, decrees of, or agreements with, any Governmental Authority.
(5) ``Best Bid and Offer'' has the meaning ascribed to the term
``best bid and best offer'' by Rule 600(b)(8) of Regulation NMS.
(6) ``Capital Contributions'' means any cash, cash equivalents, or
other property that a Member contributes to the Company with respect to
its Membership Interest.
(7) ``Chair'' shall mean the individual elected pursuant to Section
4.4(e).
(8) ``Code'' means the Internal Revenue Code of 1986, as amended.
(9) ``Commission'' or ``SEC'' means the U.S. Securities and
Exchange Commission.
(10) ``Company Indemnified Party'' means a Person, and any other
Person of whom such Person is the legal representative, that is or was
a Member or an SRO Voting Representative.
(11) ``Confidential Information'' means, except to the extent
covered by the definitions for Restricted Information, Highly
Confidential Information, or Public Information: (i) any non-public
data or information designated as Confidential by the Operating
Committee pursuant to Section 4.3; (ii) any document generated by a
Member and designated by that Member as Confidential; and (iii) the
individual views and statements of Covered Persons and SEC staff
disclosed during a meeting of the Operating Committee or any
subcommittees thereunder.
(12) ``Control'' means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such Person, whether through the
ownership of voting securities (or other ownership interest), by
contract or otherwise.
(13) ``Covered Persons'' means representatives of the Members
(including the SRO Voting Representative, alternate Voting
Representative, and Member Observers), members of the Advisory
Committee, SRO Applicants, SRO Applicant Observers, the Administrator,
and the Processors; Affiliates, employees, and Agents of the Operating
Committee, a Member, the Administrator, and the Processors; and any
third parties invited to attend meetings of the Operating Committee or
subcommittees. Covered Persons do not include staff of the SEC.
(14) ``CQ Plan'' means the Restated CQ Plan.
(15) ``CT Feeds'' means the CT Quote Data Feed(s) and the CT Trade
Data Feed(s).
(16) ``CT Quote Data Feed(s)'' means the service(s) that provides
Vendors and Subscribers with (i) National Best Bids and Offers and
their sizes and the Members' identifiers providing the National Best
Bids and Offers; (ii) each Member's Best Bids and Offers and their
sizes and the Member's identifier; and (iii) in the case of FINRA, the
identifier of the FINRA Participant(s) that constitute(s) FINRA's Best
Bids and Offers, in each case for Eligible Securities.
(17) ``CT Trade Data Feed(s)'' means the service(s) that provides
Vendors and Subscribers with Transaction Reports for Eligible
Securities.
(18) ``CTA Plan'' means the Second Restatement of the CTA Plan.
(19) ``Current'' means, with respect to Transaction Reports or
Quotation Information, such Transaction Reports or Quotation
Information during the fifteen (15) minute period immediately following
the initial transmission thereof by the Processors.
(20) ``Delaware Act'' means the Delaware Limited Liability Company
Act, Title 6, Chapter 18, Sec. Sec. 18-101, et seq., and any successor
statute, as amended.
(21) ``Distribution'' means a distribution to the Members of
revenues of the Company under this Agreement pursuant to Section 8.3
and Exhibit D of the Agreement.
(22) ``Eligible Security'' means (i) any equity security, as
defined in section 3(a)(11) of the Exchange Act, or (ii) a security
that trades like an equity security, in each case that is listed on a
national securities exchange.
(23) ``ET'' means Eastern Time.
(24) ``Exchange Act'' means the Securities Exchange Act of 1934, as
amended.
(25) ``Executive Session'' means a meeting of the Operating
Committee pursuant to Section 4.4(g), which includes SRO Voting
Representatives, Member Observers, SEC Staff, and other persons as
deemed appropriate by a majority vote of the SRO Voting
Representatives.
(26) ``Extraordinary Market Activity'' means a disruption or
malfunction of any electronic quotation, communication, reporting, or
execution system operated by, or linked to, the Processors or a Trading
Center or a member of such Trading Center that has a severe and
continuing negative impact, on a market-wide basis, on quoting, order,
or trading activity or on the availability of market information
necessary to maintain a fair and orderly market. For purposes of this
definition, a severe and continuing negative impact on quoting, order,
or trading activity includes (i) a series of quotes, orders, or
transactions at prices substantially unrelated to the current market
for the security or securities; (ii) duplicative or erroneous quoting,
order, trade reporting, or other related message traffic between one or
more Trading Centers or their members; or (iii) the unavailability of
quoting, order, transaction information, or regulatory messages for a
sustained period.
(27) ``Fees'' means fees charged to Vendors and Subscribers for
Transaction Reports and Quotation Information in Eligible Securities.
(28) ``Final Decision of the Operating Committee'' means an action
or inaction of the Operating Committee as a result of the vote of the
Operating Committee, but will not include the individual votes of a
Voting Representative.
(29) ``FINRA'' means the Financial Industry Regulatory Authority,
Inc.
(30) ``FINRA Participant'' means a FINRA member that utilizes the
facilities of FINRA pursuant to applicable FINRA rules.
(31) ``Fiscal Year'' means the fiscal year of the Company adopted
pursuant to Section 10.1(a) of this Agreement.
(32) ``GAAP'' means United States generally accepted accounting
principles in effect from time to time, consistently applied.
(33) ``Governmental Authority'' means (a) the U.S. federal
government or government of any state of the U.S., (b) any
instrumentality or agency of any such government, (c) any other
individual, entity or organization authorized by law to perform any
executive, legislative, judicial, regulatory, administrative, military
or police functions of any such government, or (d) any
intergovernmental organization of U.S. entities, but ``Governmental
Authority'' excludes any self-regulatory organization registered with
the Commission.
(34) ``Highly Confidential Information'' means any highly sensitive
Member-specific, customer-specific, individual-specific, or otherwise
sensitive information relating to the Operating Committee, Members,
Vendors, Subscribers, or customers that
[[Page 5007]]
is not otherwise Restricted Information. Highly Confidential
Information includes: the Company's contract negotiations with the
Processors or Administrator; personnel matters that affect the
employees of SROs or the Company; information concerning the
intellectual property of Members or customers; and any document subject
to the Attorney-Client Privilege, Work Product Doctrine, or any other
applicable privilege or immunity.
(35) ``Limit Up Limit Down'' means the Plan to Address
Extraordinary Market Volatility pursuant to Rule 608 of Regulation NMS
under the Exchange Act.
(36) ``Losses'' means losses, judgments, penalties (including
excise and similar taxes and punitive damages), fines, settlements, and
reasonable expenses (including reasonable attorneys' fees) actually
incurred by such Company Indemnified Party as a Party to a Proceeding.
(37) ``Market'' means (i) in respect of FINRA or a national
securities association, the facilities through which FINRA Participants
display quotations and report transactions in Eligible Securities to
FINRA and (ii) in respect of each national securities exchange, the
marketplace for Eligible Securities that such exchange operates.
(38) ``Market-Wide Circuit Breaker'' means a halt in trading in all
stocks in all Markets under the rules of a Primary Listing Market.
(39) ``Material SIP Latency'' means a delay of quotation or last
sale price information in one or more securities between the time data
is received by the Processors and the time the Processors disseminate
the data, which delay the Primary Listing Market determines, in
consultation with, and in accordance with, publicly disclosed
guidelines established by the Operating Committee, to be (a) material
and (b) unlikely to be resolved in the near future.
(40) ``Member Observer'' means any employee of a Member or any
attorney to a Member (other than a Voting Representative) that a Member
determines is necessary in connection with such Member's compliance
with its obligations under Rule 608(c) of Regulation NMS to attend
Operating Committee and subcommittee meetings, provided that the
designation of the Member Observer is consistent with the prohibition
in Section 4.11(b)(i).
(41) ``Membership Fee'' means the fee to be paid by a new Member
pursuant to Section 3.2.
(42) ``Membership Interest'' means an interest in the Company owned
by a Member.
(43) ``Nasdaq'' means The Nasdaq Stock Market LLC.
(44) ``National Best Bid and Offer'' has the meaning ascribed to
the term ``national best bid and national best offer'' by Rule
600(b)(43) of Regulation NMS.
(45) ``National securities association'' means a securities
association that is registered under section 15A of the Exchange Act.
(46) ``National securities exchange'' means a securities exchange
that is registered under section 6 of the Exchange Act.
(47) ``Network A Security'' means an Eligible Security for which
NYSE is the Primary Listing Market.
(48) ``Network B Security'' means an Eligible Security for which a
national securities exchange other than NYSE or Nasdaq is the Primary
Listing Market.
(49) ``Network C Security'' means an Eligible Security for which
Nasdaq is the Primary Listing Market.
(50) ``Non-Affiliated SRO'' means a Member that is not affiliated
with any other Member.
(51) ``NYSE'' means the New York Stock Exchange LLC.
(52) ``Officer'' means each individual designated as an officer of
the Company pursuant to Section 4.8.
(53) ``Operating Committee'' means the committee established under
Article IV of this Agreement, each member of which shall be deemed a
``manager'' (as defined in the Delaware Act) and shall be referred to
herein as a Voting Representative.
(54) ``Operational Halt'' means a halt in trading in one or more
securities only on a Member's Market declared by such Member and is not
a Regulatory Halt.
(55) ``Operative Date'' means the date that (i) the Members
conduct, through the Company, the Processor and Administrator functions
related to the public dissemination of real-time consolidated equity
market data for Eligible Securities required by the Commission to be
performed by the Members under the Exchange Act and (ii) the CQ Plan,
CTA Plan, and UTP Plan cease their operations.
(56) ``Party to a Proceeding'' means a Company Indemnified Party
that is, was, or is threatened to be made, a party to a Proceeding, or
is involved in a Proceeding, by reason of the fact that such Company
Indemnified Party is or was a Member, or an SRO Voting Representative.
(57) ``PDP'' means a Member or non-Member's proprietary market data
product that includes Transaction Reports and Quotation Information
data in Eligible Securities from a Member's Market or a Trading Center,
and if from a Member, is filed with the Commission.
(58) ``Person'' means an individual, corporation, partnership,
joint venture, limited liability company, Governmental Authority,
unincorporated organization, trust, association, or other entity.
(59) ``Primary Listing Market'' means the national securities
exchange on which an Eligible Security is listed. If an Eligible
Security is listed on more than one national securities exchange,
Primary Listing Market means the exchange on which the security has
been listed the longest.
(60) ``Proceeding'' means any threatened, pending or completed
suit, proceeding, or other action, whether civil, criminal,
administrative, or arbitrative, or any appeal in such action or any
inquiry or investigation that could lead to such an action.
(61) ``Processor(s)'' means the entity(ies) selected by the Company
to perform the processing functions described in this Agreement and
pursuant to the Processor Services Agreement(s), including the
operation of the System.
(62) ``Public Information'' means: (i) any information that is not
either Restricted Information or Highly Confidential Information or
that has not been designated as Confidential Information; (ii) any
Confidential Information that has been approved by the Operating
Committee for release to the public; (iii) the duly approved minutes of
the Operating Committee with detail sufficient to inform the public on
matters under discussion and the views expressed thereon (without
attribution); (iv) Vendor, Subscriber and performance metrics; (v)
Processor transmission metrics; and (vi) any information that is
otherwise publicly available, except for information made public as a
result of a violation of the Company's Confidentiality Policy or
Applicable Law. Public Information includes, but is not limited to, any
topic discussed during a meeting of the Operating Committee, an outcome
of a topic discussed, or a Final Decision of the Operating Committee.
(63) ``Regulatory Halt'' means a halt declared by the Primary
Listing Market in trading in one or more securities on all Trading
Centers for regulatory purposes, including for the dissemination of
material news, news pending, suspensions, or where otherwise necessary
to maintain a fair and orderly market. A Regulatory Halt includes a
trading pause triggered by Limit Up Limit Down, a halt based on
Extraordinary Market Activity, a trading
[[Page 5008]]
halt triggered by a Market-Wide Circuit Breaker, and a SIP Halt.
(64) ``Restricted Information'' means highly sensitive customer-
specific financial information, customer-specific audit information,
other customer financial information, and personal identifiable
information.
(65) ``Quotation Information'' means all bids, offers, displayed
quotation sizes, market center identifiers and, in the case of FINRA,
the identifier of the FINRA Participant that entered the quotation, all
withdrawals, and all other information pertaining to quotations in
Eligible Securities required to be collected and made available to the
Processors pursuant to this Agreement.
(66) ``Regular Trading Hours'' has the meaning provided in Rule
600(b)(68) of Regulation NMS. Regular Trading Hours can end earlier
than 4:00 p.m. ET in the case of an early scheduled close.
(67) ``Retail Representative'' means an individual who (1)
represents the interests of retail investors, (2) has experience
working with or on behalf of retail investors, (3) has the requisite
background and professional experience to understand the interests of
retail investors, the work of the Operating Committee of the Company,
and the role of market data in the U.S. equity market, and (4) is not
affiliated with a Member or broker-dealer.
(68) ``Self-regulatory organization'' or ``SRO'' has the meaning
provided in section 3(a)(26) of the Exchange Act.
(69) ``SIP Halt'' means a Regulatory Halt to trading in one or more
securities that a Primary Listing Market declares in the event of a SIP
Outage or Material SIP Latency.
(70) ``SIP Halt Resume Time'' means the time that the Primary
Listing Market determines as the end of a SIP Halt.
(71) ``SIP Outage'' means a situation in which a Processor has
ceased, or anticipates being unable, to provide updated and/or accurate
quotation or last sale price information in one or more securities for
a material period that exceeds the time thresholds for an orderly
failover to backup facilities established by mutual agreement among the
Processors, the Primary Listing Market for the affected securities, and
the Operating Committee unless the Primary Listing Market, in
consultation with the affected Processor and the Operating Committee,
determines that resumption of accurate data is expected in the near
future.
(72) ``SRO Applicant'' means (1) any Person that is not a Member
and for which the Commission has published a Form 1 to be registered as
a national securities exchange or national securities association to
operate a Market, or (2) a national securities exchange that is not a
Member and for which the Commission has published a proposed rules
change to operate a Market.
(73) ``SRO Group'' means a group of Members that are Affiliates.
(74) ``Subscriber'' means a Person that receives Current
Transaction Reports or Quotation Information from the Processors or a
Vendor and that itself is not a Vendor.
(75) ``System'' means all data processing equipment, software,
communications facilities, and other technology and facilities,
utilized by the Company or the Processors in connection with the
collection, consolidation, and dissemination of Transaction Reports,
Quotation Information, and other information concerning Eligible
Securities.
(76) ``Taxes'' means taxes, levies, imposts, charges, and duties
(including withholding tax, stamp, and transaction duties) imposed by
any taxing authority together with any related interest, penalties,
fines, and expenses in connection with them.
(77) ``Trading Center'' has the same meaning as that term is
defined in Rule 600(b)(82) of Regulation NMS.
(78) ``Transaction Reports'' means reports required to be collected
and made available pursuant to this Agreement containing the stock
symbol, price, and size of the transaction executed, the Market in
which the transaction was executed, and related information, including
a buy/sell/cross indicator, trade modifiers, and any other required
information reflecting completed transactions in Eligible Securities.
(79) ``Transfer'' means to directly sell, transfer, assign, pledge,
encumber, hypothecate, or similarly dispose of, either voluntarily or
involuntarily, by operation of law or otherwise, or to enter into any
contract, option, or other arrangement or understanding with respect to
the sale, transfer, assignment, pledge, encumbrance, hypothecation, or
similar disposition of any Membership Interests owned by a Person or
any interest (including a beneficial interest) in any Membership
Interests owned by a Person. ``Transfer'' when used as a noun shall
have a correlative meaning.
(80) ``UTP Plan'' means the Joint Self-Regulatory Organization Plan
Governing the Collection, Consolidation and Dissemination of Quotation
and Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privileges Basis.
(81) ``Vendor'' means a Person that the Administrator has approved
to re-distribute Current Transaction Reports or Quotation Information
to the Person's employees or to others.
(82) ``Voting Representative'' means an individual designated by
each SRO Group and each Non-Affiliated SRO pursuant to Section 4.2(a)
to vote on behalf of such SRO Group or such Non-Affiliated SRO.
Section 1.2 Interpretation.
For purposes of this Agreement: (a) the words ``include,''
``includes,'' and ``including'' shall be deemed to be followed by the
words ``without limitation''; (b) the word ``or'' is not exclusive; and
(c) the words ``herein,'' ``hereof,'' ``hereby,'' ``hereto,'' and
``hereunder'' refer to this Agreement as a whole. The definitions given
for any defined terms in this Agreement shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine,
feminine, and neuter forms. Unless the context otherwise requires,
references herein: (x) to Articles, Sections, and Exhibits mean the
Articles and Sections of, and Exhibits attached to, this Agreement; (y)
to an agreement, instrument, or other document mean such agreement,
instrument, or other document as amended, supplemented, and modified
from time to time to the extent permitted by the provisions thereof;
and (z) to a statute mean such statute as amended from time to time and
includes any successor legislation thereto and any rules and
regulations promulgated thereunder. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting an instrument or causing any
instrument to be drafted. The Exhibits referred to herein shall be
construed with, and as an integral part of, this Agreement to the same
extent as if they were set forth verbatim herein.
Article II.
ORGANIZATION
Section 2.1 Formation.
(a) The Members formed the Company as a limited liability company
on [<bullet>], [<bullet>] pursuant to the Delaware Act by filing a
certificate of formation (the ``Certificate'') with the Delaware
Secretary of State.
(b) This Agreement shall constitute the ``limited liability company
agreement'' (as that term is used in the Delaware Act) of the Company.
The rights, powers, duties, obligations, and liabilities of the Members
shall be determined pursuant to the Delaware Act and this Agreement. To
the extent
[[Page 5009]]
that the rights, powers, duties, obligations, and liabilities of any
Member are different by reason of any provision of this Agreement than
they would be under the Delaware Act in the absence of such provision,
this Agreement shall, to the extent permitted by the Delaware Act,
control.
Section 2.2 Name.
The name of the Company is ``CT Plan LLC'' and all Company business
shall be conducted in that name or such other name or names as the
Operating Committee may designate; provided, that the name shall always
contain the words ``Limited Liability Company'' or the abbreviation
``L.L.C.'' or the designation ``LLC.''
Section 2.3 Registered Office; Registered Agent; Principal Office;
Other Offices.
(a) The registered office of the Company required by the Delaware
Act to be maintained in the State of Delaware shall be the office of
the initial registered agent named in the Certificate or such other
office (which need not be a place of business of the Company) as the
Operating Committee may designate from time to time in the manner
provided by the Delaware Act and Applicable Law.
(b) The registered agent for service of process of the Company in
the State of Delaware shall be the initial registered agent named in
the Certificate or such other Person or Persons as the Operating
Committee may designate from time to time in the manner provided by the
Delaware Act and Applicable Law.
(c) The principal office of the Company shall be located at such
place as the Operating Committee may designate from time to time, which
need not be in the State of Delaware, and the Company shall maintain
its books and records there. The Company shall give prompt notice to
each of the Members of any change to the principal office of the
Company.
(d) The Company may have such other offices as the Operating
Committee may designate from time to time.
Section 2.4 Purpose; Powers.
(a) The purposes of the Company are to engage in the following
activities on behalf of the Members:
(i) the collection, consolidation, and dissemination of Transaction
Reports, Quotation Information, and such other information concerning
Eligible Securities as the Members shall agree as provided herein;
(ii) contracting for the distribution of such information;
(iii) contracting for and maintaining facilities to support any
activities permitted in this Agreement and guidelines adopted
hereunder, including the operation and administration of the System;
(iv) providing for those other matters set forth in this Agreement
and in all guidelines adopted hereunder;
(v) operating the System to comply with Applicable Laws; and
(vi) engaging in any other business or activity that now or
hereafter may be necessary, incidental, proper, advisable, or
convenient to accomplish any of the foregoing purposes and that is not
prohibited by the Delaware Act, the Exchange Act, or other Applicable
Law.
(b) The Company shall have all the powers necessary or convenient
to carry out the purposes for which it is formed, including the powers
granted by the Delaware Act.
(c) It is expressly understood that each Member shall be
responsible for the collection of Transaction Reports and Quotation
Information within its Market and that nothing in this Agreement shall
be deemed to govern or apply to the manner in which each Member does
so.
Section 2.5 Term.
The term of the Company commenced as of the date the Certificate
was filed with the Secretary of State of the State of Delaware, and
shall continue in existence perpetually until the Company is dissolved
in accordance with the provisions of the Certificate or this Agreement.
Notwithstanding the foregoing, this Agreement shall not become
effective until the Effective Date.
Section 2.6 No State-Law Partnership.
The Members intend that the Company not be a partnership (including
a limited partnership) or joint venture, and that no Member be a
partner or joint venturer of any other Member by virtue of this
Agreement for any purposes other than as set forth in Sections 10.2 and
10.3, and neither this Agreement nor any other document entered into by
the Company or any Member relating to the subject matter of this
Agreement shall be construed to suggest otherwise.
Article III.
MEMBERSHIP
Section 3.1 Members.
The Members of the Company shall consist of the Persons identified
in Exhibit A, as updated from time to time to reflect the admission of
new Members pursuant to this Agreement.
Section 3.2 New Members.
(a) Any national securities association or national securities
exchange whose market, facilities, or members, as applicable, trades
Eligible Securities may become a Member by (i) providing written notice
to the Company, (ii) executing a joinder to this Agreement, at which
time Exhibit A shall be amended to reflect the addition of such
association or exchange as a Member, (iii) paying a Membership Fee to
the Company as determined pursuant to Section 3.2(b), and (iv)
executing a joinder to any other agreements to which all of the other
Members have been made party in connection with being a Member.
Membership Fees paid shall be added to the general revenues of the
Company.
(b) The Membership Fee shall be based upon the following factors:
(i) the portion of costs previously paid by the Company (or by the
Members prior to the formation of the Company) for the development,
expansion, and maintenance of the System which, under GAAP, would have
been treated as capital expenditures and would have been amortized over
the five years preceding the admission of the new Member (and for this
purpose all such capital expenditures shall be deemed to have a five-
year amortizable life); and
(ii) an assessment of costs incurred and to be incurred by the
Company for modifying the System or any part thereof to accommodate the
new Member, which are not otherwise required to be paid or reimbursed
by the new Member.
(c) Participants of the CQ Plan, CTA Plan, and UTP Plan will not be
required to pay the Membership Fee.
Section 3.3 Transfer of Membership Interests.
Except as set forth in Section 3.4, a Member shall not have the
right to Transfer (whether in whole or in part) its Membership Interest
in the Company.
Section 3.4 Withdrawal from Membership.
(a) Any Member may voluntarily withdraw from the Company at any
time on not less than 30 days' prior written notice (the ``Withdrawal
Date''), by (i) providing such notice of such withdrawal to the
Company, (ii) causing the Company to file with the Commission an
amendment to effectuate the withdrawal and (iii) Transferring such
Member's Membership Interest to the Company.
(b) A Member shall automatically be withdrawn from the Company upon
[[Page 5010]]
such Member no longer being a registered national securities
association or registered national securities exchange. Such Member's
Membership Interest will automatically transfer to the Company. The
Company shall file with the Commission an amendment to effectuate the
withdrawal.
(c) A withdrawal of a Member shall not be effective until approved
by the Commission after filing an amendment to the Agreement in
accordance with Section 13.5.
(d) From and after the Withdrawal Date of such Member:
(i) Such Member shall remain liable for any obligations under this
Agreement of such Member (including indemnification obligations)
arising prior to the Withdrawal Date (but such Member shall have no
further obligations under this Agreement or to any of the other Members
arising after the Withdrawal Date);
(ii) Such Member shall be entitled to receive a portion of the Net
Distributable Operating Income (if any) in accordance with Exhibit D
attributable to the period prior to the Withdrawal Date of such Member;
(iii) Such Member shall cease to have the right to have its
Transaction Reports, Quotation Information, or other information
disseminated over the System; and
(iv) Profits and losses of the Company shall cease to be allocated
to the Capital Account of such Member.
Section 3.5 Member Bankruptcy.
In the event a Member becomes subject to one or more of the events
of bankruptcy enumerated in Section 18-304 of the Delaware Act, that
event by itself shall not cause a withdrawal of such Member from the
Company so long as such Member continues to be a national securities
association or national securities exchange.
Section 3.6 Undertaking by All Members.
Following the Operative Date, each Member shall be required,
pursuant to Rule 608(c) of Regulation NMS, to comply with the
provisions hereof and enforce compliance by its members with the
provisions hereof.
Section 3.7 Obligations and Liability of Members.
(a) Except as otherwise provided in this Agreement or Applicable
Law, no Member shall be obligated to contribute capital or make loans
to the Company.
(b) Except as provided in this Agreement or Applicable Law, no
Member shall have any liability whatsoever in its capacity as a Member,
whether to the Company, to any of the Members, to the creditors of the
Company or to any other Person, for the debts, liabilities, commitments
or any other obligations of the Company or for any losses of the
Company. Notwithstanding the foregoing, to the extent that amounts have
not been paid to the Processors or Administrator under the terms of the
Processor Services Agreements and Administrative Services Agreement,
respectively, or this Agreement, as and when due, (i) each Member shall
be obligated to return to the Company its pro rata share of any moneys
distributed to such Member in the one year period prior to such default
in payment (such pro rata share to be based upon such Member's
proportionate receipt of the aggregate distributions made to all
Members in such one year period) until an aggregate amount equal to the
amount of any such defaulted payments has been re-contributed to the
Company and (ii) the Company shall promptly pay such amount to the
Processors or Administrator, as applicable.
(c) In accordance with the Delaware Act, a member of a limited
liability company may, under certain circumstances, be required to
return amounts previously distributed to such member. It is the intent
of the Members that no distribution to any Member pursuant to this
Agreement shall be deemed a return of money or other property paid or
distributed in violation of the Delaware Act. The payment of any such
money or distribution of any such property to a Member shall be deemed
to be a compromise within the meaning of the Delaware Act, and the
Member receiving any such money or property shall not be required to
return any such money or property to any Person; provided, however,
that a Member shall be required to return to the Company any money or
property distributed to it in clear and manifest accounting or similar
error or as otherwise provided in Section 3.7(b). However, if any court
of competent jurisdiction holds that, notwithstanding the provisions of
this Agreement, any Member is obligated to make any such payment, such
obligation shall be the obligation of such Member and not of the
Operating Committee.
(d) No Member (unless duly authorized by the Operating Committee)
has the authority or power to represent, act for, sign for or bind the
Company or to make any expenditure on behalf of the Company; provided,
however, that the Tax Matters Partner may represent, act for, sign for
or bind the Company as permitted under Sections 10.2 and 10.3 of this
Agreement.
(e) To the fullest extent permitted by law, no Member shall, in its
capacity as a Member, owe any duty (fiduciary or otherwise) to the
Company or to any other Member other than the duties expressly set
forth in this Agreement.
Article IV.
MANAGEMENT OF THE COMPANY
Section 4.1 Operating Committee.
(f) Except for situations in which the approval of the Members is
required by this Agreement, the Company shall be managed by the
Operating Committee. Unless otherwise expressly provided to the
contrary in this Agreement, no Member shall have authority to act for,
or to assume any obligation or responsibility on behalf of, the
Company, without the prior approval of the Operating Committee. Without
limiting the generality of the foregoing and except as otherwise
expressly provided in this Agreement, the Operating Committee shall
have full and complete discretion to manage and control the business
and affairs of the Company, to make all decisions affecting the
business and affairs of the Company, and to take all such actions as it
deems necessary or appropriate to accomplish the purposes of the
Company, including the following:
(i) proposing amendments to this Agreement or implementing other
policies and procedures as necessary to ensure prompt, accurate,
reliable, and fair collection, processing, distribution, and
publication of information with respect to Transaction Reports and
Quotation Information in Eligible Securities and the fairness and
usefulness of the form and content of that information;
(ii) selecting, overseeing, specifying the role and
responsibilities of, and evaluating the performance of, the
Administrator, the Processors, an auditor, and other professional
service providers, provided that any expenditures for professional
services that are paid for from the Company's revenues must be for
activities consistent with the terms of this Agreement and must be
authorized by the Operating Committee;
(iii) developing and maintaining fair and reasonable Fees and
consistent terms for the distribution, transmission, and aggregation of
Transaction Reports and Quotation Information in Eligible Securities;
(iv) reviewing the performance of the Processors and ensuring the
public reporting of Processors' performance and other metrics and
information about the Processors;
[[Page 5011]]
(v) assessing the marketplace for equity market data products and
ensuring that the CT Feeds are priced in a manner that is fair and
reasonable, and designed to ensure the widespread availability of CT
Feeds data to investors and market participants;
(vi) designing a fair and reasonable revenue allocation formula for
allocating plan revenues to be applied by the Administrator, and
overseeing, reviewing, and revising that formula as needed;
(vii) interpreting the Agreement and its provisions; and
(viii) carrying out such other specific responsibilities as
provided under this Agreement.
(g) The Operating Committee may delegate all or part of its
administrative functions under this Agreement, excluding those
administrative functions to be performed by the Administrator pursuant
to Section 6.1, to a subcommittee, to one or more of the Members, or to
other Persons (including the Administrator), and any Person to which
administrative functions are so delegated shall perform the same as
agent for the Company, in the name of the Company. For the avoidance of
doubt, no delegation to a subcommittee shall contravene Section 4.3 and
no subcommittee shall take actions requiring approval of the Operating
Committee pursuant to Section 4.3 unless such approval shall have been
obtained. Any authority delegated hereunder is subject to the
provisions of Section 4.3 hereof.
(h) It is expressly agreed and understood that neither the Company
nor the Operating Committee shall have authority in any respect of any
Member's proprietary systems. Neither the Company nor the Operating
Committee shall have any authority over the collection and
dissemination of quotation or transaction information in Eligible
Securities in any Member's Market, or, in the case of FINRA, from FINRA
Participants.
Section 4.2 Composition and Selection of Operating Committee.
(a) Voting Representatives. The Operating Committee shall include
one Voting Representative designated by each SRO Group and each Non-
Affiliated SRO to vote on behalf of such SRO Group or such Non-
Affiliated SRO. Each SRO Group and each Non-Affiliated SRO may
designate an alternate individual or individuals who shall be
authorized to vote on behalf of such SRO Group or such Non-Affiliated
SRO, respectively, in the absence of the designated Voting
Representative.
(b) An SRO Applicant will be permitted to appoint one individual to
attend (subject to Section 4.4(i)) regularly scheduled Operating
Committee meetings in the capacity of a non-voting observer (each, an
``SRO Applicant Observer''). Each SRO Applicant may designate an
alternate individual or individuals who shall be authorized to act as
the SRO Applicant Observer on behalf of the SRO Applicant in the
absence of the designated SRO Applicant Observer. If the SRO
Applicant's Form 1 petition or Section 19(b)(1) filing is withdrawn,
returned, or is otherwise not actively pending with the Commission for
any reason, then the SRO Applicant will no longer be eligible to have
an SRO Applicant Observer attend Operating Committee meetings.
(c) Notwithstanding anything to the contrary herein, (i) a national
securities exchange that has ceased operations as a Market (or has yet
to commence operation as a Market) and that is a Non-Affiliated SRO
will not be permitted to designate a Voting Representative and (ii) an
SRO Group in which all national securities exchanges have ceased
operations as a Market (or have yet to commence operation as a Market)
will not be permitted to designate a Voting Representative. Such SRO
Group or Non-Affiliated SRO may attend the Operating Committee as an
observer but may not attend the Executive Session of the Operating
Committee. In the event such an SRO Group or Non-Affiliated SRO does
not commence operation as a Market for six months after first attending
an Operating Committee meeting, such SRO Group or Non-Affiliated SRO
may no longer attend the Operating Committee until it commences/re-
commences operation as a Market.
Section 4.3 Action of Operating Committee.
(a) Each Voting Representative shall be authorized to cast one vote
on behalf of the SRO Group or Non-Affiliated SRO that he or she
represents, provided, however, that each Voting Representative
representing an SRO Group or Non-Affiliated SRO whose combined market
center(s) have consolidated equity market share of more than fifteen
(15) percent during four of the six calendar months preceding an
Operating Committee vote shall be authorized to cast two votes. For
purposes of this Section 4.3(a), ``consolidated equity market share''
means the average daily dollar equity trading volume of Eligible
Securities of an SRO Group or Non-Affiliated SRO as a percentage of the
average daily dollar equity trading volume of all of the SRO Groups and
Non-Affiliated SROs, as reported under this Agreement or under the CQ,
CTA, and UTP Plans. For the avoidance of doubt, FINRA shall not be
considered to operate a market center within the meaning of this
Section 4.3(a) solely by virtue of facilitating quoting on the FINRA
Alternative Display Facility or trade reporting of Eligible Securities
through the FINRA/Nasdaq Trade Reporting Facility Carteret, the FINRA/
Nasdaq Trade Reporting Facility Chicago, the FINRA/NYSE Trade Reporting
Facility, or any other trade reporting facility that FINRA may operate
from time to time in affiliation with a registered national securities
exchange to provide a mechanism for FINRA Participants to report
transactions in Eligible Securities effected otherwise than on an
exchange.
(b) All actions of the Operating Committee will require an
affirmative vote of not less than (2/3rd) two-thirds of all votes
allocated in the manner described in Section 4.3(a) to Voting
Representatives who are eligible to vote on such action.
(c) Notwithstanding Section 4.3(b), the following actions will
require only a majority vote of the Operating Committee:
(i) the selection of members of the Advisory Committee pursuant to
Section 4.7;
(ii) the decision to enter Executive Session pursuant to Section
4.4(g), except for matters considered pursuant to Section 4.4(g)(i)(E);
(iii) the decision to discuss a matter in a legal subcommittee
pursuant to Section 4.8(d); and
(iv) decisions concerning the operation of the Company as an LLC as
specified in Section 10.3 and Section 11.2.
Section 4.4 Meetings of the Operating Committee.
(a) Subject to Section 4.4(g), meetings of the Operating Committee
may be attended by each Voting Representative, Member Observers, SRO
Applicant Observers, Advisory Committee members, SEC staff, and other
persons as deemed appropriate by the Operating Committee. Meetings
shall be held at such times and locations as shall from time to time be
determined by the Operating Committee. Member Observers shall be
entitled to attend and participate in any discussion at any such
meeting, unless attendance or participation would be inconsistent with
the provisions of Section 4.11(b), but shall not be entitled to vote on
any matter.
[[Page 5012]]
(b) Special meetings of the Operating Committee may be called by
the Chair on at least 24 hours' notice to each Voting Representative
and all persons eligible to attend Operating Committee meetings.
(c) Any action requiring a vote can be taken at a meeting only if a
quorum of all Voting Representatives is present. A quorum is equal to
the minimum votes necessary to obtain approval under Section 4.3(b),
i.e., Voting Representatives reflecting 2/3rd of Operating Committee
votes eligible to vote on such action.
(i) Any Voting Representative recused from voting on a particular
action (i) mandatorily pursuant to Section 4.10(b) or (ii) upon a
Voting Representative's voluntary recusal, shall not be considered in
the numerator or denominator of the calculations in paragraph (c) for
determining whether a quorum is present.
(ii) A Voting Representative is considered present at a meeting
only if such Voting Representative is either in physical attendance at
the meeting or participating by conference telephone or other
electronic means that enables each Voting Representative to hear and be
heard by all others present at the meeting.
(d) A summary of any action sought to be resolved at a meeting
shall be sent to each Voting Representative entitled to vote on such
matter at least one week prior to the meeting via electronic mail,
portal notification, or regular U.S. or private mail (or if one week is
not practicable, then with as much time as may be reasonably
practicable under the circumstances); provided, however, that this
requirement to provide a summary of any action prior to a meeting may
be waived by the vote of the percentage of the Committee required to
vote on any particular matter, under Section 4.3 above.
(e) Beginning with the first quarterly meeting of the Operating
Committee following the Operative Date, the Chair of the Operating
Committee shall be elected for a one-year term from the constituent
Voting Representatives (and an election for the Chair shall be held
every year). Subject to the requirements of Section 4.3 hereof, the
Chair shall have the authority to enter into contracts on behalf of the
Company and otherwise bind the Company, but only as directed by the
Operating Committee. The Chair shall designate a Person to act as
Secretary to record the minutes of each meeting. The location of
meetings shall be in a location capable of holding the number of
attendees of such meetings, or such other locations as may from time to
time be determined by the Operating Committee.
(i) To elect a Chair, the Operating Committee will elicit
nominations for those individuals to be considered for Chair.
(ii) In the event that no nominated Person is elected by an
affirmative vote of the Operating Committee pursuant to Section 4.3,
the Person(s) with the lowest number of votes will be eliminated from
consideration. The Operating Committee will repeat this process until a
Person is elected by affirmative vote of the Operating Committee
pursuant to Section 4.3. In the event two candidates remain and neither
is elected by an affirmative vote of the Operating Committee pursuant
to Section 4.3, the Person receiving the most votes from Voting
Representatives will be elected.
(f) Meetings may be held by conference telephone or other
electronic means that enables each Voting Representative to hear and be
heard by all others present at the meeting.
(g) Voting Representatives, Member Observers, SEC Staff, and other
persons as deemed appropriate by a majority vote of the Voting
Representatives may meet in Executive Session of the Operating
Committee to discuss an item of business that falls within the topics
identified in subsection (i) below and for which it is appropriate to
exclude the Advisory Committee. A request to create an Executive
Session must be included on the written agenda for an Operating
Committee meeting, along with the clearly stated rationale as to why
such item to be discussed would be appropriate for Executive Session.
The creation of an Executive Session will be by a majority vote of
Voting Representatives with votes allocated pursuant to Section
4.3(a)(1). The Executive Session shall only discuss the topic for which
it was created and shall be disbanded upon fully discussing the topic.
(i) Items for discussion within an Executive Session should be
limited to the following topics as:
(A) Any topic that requires discussion of Highly Confidential
Information;
(B) Vendor or Subscriber Audit Findings;
(C) Litigation matters;
(D) Responses to regulators with respect to inquiries,
examinations, or findings; and
(E) Other discrete matters approved by the Operating Committee.
(ii) The mere fact that a topic is controversial or a matter of
dispute does not, by itself, make a topic appropriate for Executive
Session. The minutes for an Executive Session shall include the reason
for including any item in Executive Session.
(iii) Requests to discuss a topic in Executive Session must be
included on the written agenda for the Operating Committee meeting,
along with the clearly stated rationale for each topic as to why such
discussion is appropriate for Executive Session. Such rationale may be
that the topic to be discussed falls within the list provided in
subparagraph (g)(i).
Section 4.5 Certain Transactions.
The fact that a Member or any of its Affiliates is directly or
indirectly interested in or connected with any Person employed by the
Company to render or perform a service, or from which or to whom the
Company may buy or sell any property, shall not prohibit the Company
from employing or dealing with such Person.
Section 4.6 Company Opportunities.
(a) Each Member, its Affiliates, and each of their respective
equity holders, controlling persons and employees may have business
interests and engage in business activities in addition to those
relating to the Company. Neither the Company nor any Member shall have
any rights by virtue of this Agreement in any business ventures of any
such Person.
(b) Each Member expressly acknowledges that (i) the other Members
are permitted to have, and may presently or in the future have,
investments or other business relationships with Persons engaged in the
business of the Company other than through the Company (an ``Other
Business''), (ii) the other Members have and may develop strategic
relationships with businesses that are and may be competitive or
complementary with the Company, (iii) the other Members shall not be
obligated to recommend or take any action that prefers the interests of
the Company or any Member over its own interests, (iv) none of the
other Members will be prohibited by virtue of their ownership of equity
in the Company or service on the Operating Committee (or body
performing similar duties) from pursuing and engaging in any such
activities, (v) none of the other Members will be obligated to inform
or present to the Company any such opportunity, relationship, or
investment, (vi) such Member will not acquire or be entitled to any
interest or participation in any Other Business as a result of the
participation therein of any of the other Members, and (vii) the
involvement of another Member in any Other Business in and of itself
will not constitute a conflict of interest by such
[[Page 5013]]
Person with respect to the Company or any of the Members.
Section 4.7 Advisory Committee.
(a) Formation. Notwithstanding any other provision of this Plan, an
Advisory Committee to the Plan shall be formed and shall function in
accordance with the provisions set forth in this section.
(b) Composition. Members of the Advisory Committee shall be
selected for two year terms as follows:
(i) Operating Committee Selections. By affirmative vote of a
majority of the Members entitled to vote, the Operating Committee shall
select at least one representative from each of the following
categories to be members of the Advisory Committee: (A) an
institutional investor; (B) a broker-dealer with a predominantly retail
investor customer base; (C) a broker-dealer with a predominantly
institutional investor customer base; (D) a securities market data
vendor that is not affiliated or associated with a Member, broker-
dealer, or investment adviser with third-party clients; (E) an issuer
of NMS stock that is not affiliated or associated with a Member,
broker-dealer, or investment adviser with third-party clients; and (F)
a Retail Representative. The Operating Committee shall not select any
person employed by or affiliated with any Member or its affiliates or
facilities.
(ii) Member Selections. Each Member shall have the right to select
one member of the Advisory Committee. A Member shall not select any
person employed by or affiliated with any Member or its affiliates or
facilities.
(c) Function. Members of the Advisory Committee shall have the
right to submit their views to the Operating Committee on Plan matters,
prior to a decision by the Operating Committee on such matters. Such
matters shall include, but not be limited to, any new or modified
product, fee, contract, or pilot program that is offered or used
pursuant to the Plan.
(d) Not Members of the Company. For the sake of clarity, members of
the Advisory Committee are not Members of the Company.
Section 4.8 Subcommittees.
(a) Subject to Section 4.1, the Operating Committee shall have the
power and right, but not the obligation, to create and disband
subcommittees of the Operating Committee and to determine the duties,
responsibilities, powers, and composition of such subcommittees.
Subcommittee chairs will be selected by the Operating Committee from
Voting Representatives. Notwithstanding the foregoing, the Operating
Committee may not delegate to a subcommittee those administrative
functions to be performed by the Administrator.
(b) Except as provided in Section 4.8(d), the Secretary or designee
shall prepare minutes of all subcommittee meetings and such minutes
will be made available to the Operating Committee and members of the
Advisory Committee.
(c) Voting Representatives, the Advisory Committee, Member
Observers, SEC Staff, and other persons as deemed appropriate by the
Operating Committee may attend meetings of any subcommittees.
(d) Notwithstanding paragraph (c), Voting Representatives, Member
Observers, and other persons as deemed appropriate by majority vote of
the Voting Representatives may meet in a subcommittee to discuss an
item that exclusively affects the Members with respect to: (1)
litigation matters or responses to regulators with respect to
inquiries, examinations, or findings; and (2) other discrete legal
matters approved by the Operating Committee. The Secretary shall
prepare the minutes of such subcommittee's meetings, and such minutes
shall include, (i) attendance at the meeting; (ii) the subject matter
of each item discussed; (iii) sufficient non-privileged information to
identify the rationale for referring the matter to the legal
subcommittee, and (iv) the privilege or privileges claimed with respect
to that item. Such minutes will be made available only to the Voting
Representatives, Member Observers, and other persons deemed appropriate
by a majority vote of the Operating Committee.
Section 4.9 Officers.
(a) Except as provided in Section 4.4(e), the Operating Committee
may (but need not), from time to time, designate and appoint one or
more persons as an Officer of the Company. Other than the Chair, no
Officer need be a Voting Representative. Any Officers so designated
shall have such authority and perform such duties as the Operating
Committee may, from time to time, delegate to them. Any such delegation
may be revoked at any time by the Operating Committee. The Operating
Committee may assign titles to particular Officers. Each Officer shall
hold office until such Officer's successor shall be duly designated or
until such Officer's death, resignation, or removal as provided in this
Agreement. Any number of offices may be held by the same individual.
Officers shall not be entitled to receive salary or other compensation,
unless approved by the Operating Committee.
(b) Any Officer may resign at any time. Such resignation shall be
made in writing and shall take effect at the time specified in the
notice, or if no time be specified, at the time of its receipt by the
Operating Committee. The acceptance of a resignation shall not be
necessary to make it effective.
(c) Any Officer may be removed at any time upon the majority vote
of the Members.
Section 4.10 Commission Access to Information and Records.
Nothing in this Agreement shall be interpreted to limit or impede
the rights of the Commission or SEC staff to access information and
records of the Company or any of the Members (including their
employees) pursuant to U.S. federal securities laws and the rules and
regulations promulgated thereunder.
Section 4.11 Disclosure of Potential Conflicts of Interest; Recusal.
(a) Disclosure Requirements. The Members (including any Member
Observers), the Processors, the Administrator, and each service
provider or subcontractor engaged in Company business (including the
audit of Subscribers' data usage) that has access to Restricted or
Highly Confidential information (for purposes of this section,
``Disclosing Parties'') shall complete the applicable questionnaire to
provide the required disclosures set forth in subsection (c) below to
disclose all material facts necessary to identify potential conflicts
of interest. The Operating Committee, a Member, Processors, or
Administrator may not use a service provider or subcontractor on
Company business unless that service provider or subcontractor has
agreed in writing to provide the disclosures required by this section
and has submitted completed disclosures to the Administrator prior to
starting work. If state laws, rules, or regulations, or applicable
professional ethics rules or standards of conduct, would act to
restrict or prohibit a Disclosing Party from making any particular
required disclosure, a Disclosing Party shall refer to such law, rule,
regulation, or professional ethics rule or standard and include in
response to that disclosure the basis for its inability to provide a
complete response. This does not relieve the Disclosing Party from
disclosing any information it is not restricted from providing.
(i) A potential conflict of interest may exist when personal,
business, financial,
[[Page 5014]]
or employment relationships could be perceived by a reasonable
objective observer to affect the ability of a person to be impartial.
(ii) Updates to Disclosures. Following a material change in the
information disclosed pursuant to Section 4.11(a), a Disclosing Party
shall promptly update its disclosures. Additionally, a Disclosing Party
shall update annually any inaccurate information prior to the Operating
Committee's first quarterly meeting of a calendar year.
(iii) Public Dissemination of Disclosures. The Disclosing Parties
shall provide the Administrator with its disclosures and any required
updates. The Administrator shall ensure that the disclosures are
promptly posted to the Company's website.
(iv) The Company will arrange for Disclosing Parties that are not
Members or members of the Advisory Committee to comply with the
required disclosures and recusals under this Section 4.11 and Exhibit B
in their respective agreements with either the Company, a Member, the
Administrator, or the Processors.
(b) Recusal.
(i) A Disclosing Party that is a Member may not appoint as its
Voting Representative, alternate Voting Representative, or a Member
Observer a person that is responsible for or involved with the
procurement for, or development, modeling, pricing, licensing
(including all functions related to monitoring or ensuring a
subscriber's compliance with the terms of the license contained in its
data subscription agreement and all functions relating to the auditing
of subscriber data usage and payment), or sale of PDP offered to
customers of the CT Feeds if the person has a financial interest
(including compensation) that is tied directly to the Disclosing
Party's market data business or the procurement of market data and if
that compensation would cause a reasonable objective observer to expect
the compensation to affect the impartiality of the representative.
(ii) A Disclosing Party (including its representative(s),
employees, and agents) will be recused from participating in Company
activities if it has not submitted a required disclosure form or the
Operating Committee votes that its disclosure form is materially
deficient. The recusal will be in effect until the Disclosing Party
submits a sufficiently complete disclosure form to the Administrator.
(iii) A Disclosing Party, including its representative(s), and its
Affiliates and their representative(s), are recused from voting on
matters in which it or its Affiliate (i) is seeking a position or
contract with the Company or (ii) have a position or contract with the
Company and whose performance is being evaluated by the Company.
(iv) All recusals, including a person's determination of whether to
voluntarily recuse himself or herself, shall be reflected in the
meeting minutes.
(c) Required Disclosures. As part of the disclosure regime, the
Members, the Processors, the Administrator, members of the Advisory
Committee, and service providers and subcontractors must respond to
questions that are tailored to elicit responses that disclose the
potential conflicts of interest as set forth in Exhibit B.
Section 4.12 Confidentiality Policy.
All Covered Persons are subject to the Confidentiality Policy set
forth in Exhibit C to the Plan. The Company will arrange for Covered
Persons that are not Voting Representatives, Member Observers, or
members of the Advisory Committee to comply with the Confidentiality
Policy under their respective agreements with either the Company, a
Member, the Administrator, or the Processors.
Article V.
THE PROCESSORS; INFORMATION; INDEMNIFICATION
Section 5.1 General Functions of the Processors.
Subject to the general direction of the Operating Committee, as
more fully set forth in the agreement to be entered into between the
Company and the Processors (the ``Processor Services Agreements''), the
Company shall require the Processors to perform certain processing
functions on behalf of the Company. Among other things, the Company
shall require the Processors to collect from the Members, and
consolidate and disseminate to Vendors and Subscribers, Transaction
Reports and Quotation Information in Eligible Securities in a manner
designed to assure the prompt, accurate, and reliable collection,
processing, and dissemination of information with respect to all
Eligible Securities in a fair and non-discriminatory manner.
Section 5.2 Evaluation of the Processors.
The Processors' performance of their functions under the Processor
Services Agreements shall be subject to review at any time as
determined by a vote of the Operating Committee pursuant to Section
4.3; provided, however, that a review shall be conducted at least once
every two calendar years but not more frequently than once each
calendar year (unless the Processors have materially defaulted in their
obligations under the Processor Services Agreements and such default
has not been cured within the applicable cure period set forth in the
Processor Services Agreements, in which event such limitation shall not
apply). The Operating Committee may review the Processors at staggered
intervals.
Section 5.3 Process for Selecting New Processors.
(a) No later than upon the termination or withdrawal of a Processor
or the expiration of a Processor Services Agreement with a Processor,
the Operating Committee shall establish procedures for selecting a new
Processor (the ``Processor Selection Procedures''). The Operating
Committee, as part of the process of establishing Processor Selection
Procedures, may solicit and consider the timely comment of any entity
affected by the operation of this Agreement. The Operating Committee
will not need to establish Processor Selection Procedures if the
Operating Committee initially selects the CQ Plan and CTA Plan's
processor and the UTP Plan's processor to provide the same services to
the Company that are currently provided under the CQ Plan, CTA Plan,
and UTP Plan.
(b) The Processor Selection Procedures shall be established by the
affirmative vote of the Operating Committee pursuant to Section 4.3,
and shall set forth, at a minimum:
(i) the entity that will:
(A) draft the Operating Committee's request for proposal for bids
on a new Processor;
(B) assist the Operating Committee in evaluating bids for the new
Processor; and
(C) otherwise provide assistance and guidance to the Operating
Committee in the selection process;
(ii) the minimum technical and operational requirements to be
fulfilled by the Processor;
(iii) the criteria to be considered in selecting the Processor; and
(iv) the entities (other than Voting Representatives) that are
eligible to comment on the selection of the Processor.
Section 5.4 Transmission of Information to Processors by Members.
(a) Quotation Information.
(i) Each Member shall, during the time it is open for trading, be
responsible for promptly collecting and transmitting to the Processors
accurate Quotation Information in Eligible Securities through any means
set forth in the Processor Services Agreements to
[[Page 5015]]
ensure that the Company complies with its obligations under the
Processor Services Agreements.
(ii) Quotation Information shall include:
(A) identification of the Eligible Security, using the Listing
Market's symbol;
(B) the price bid and offered, together with size;
(C) for FINRA, the FINRA Participant along with the FINRA
Participant's market participant identification or Member from which
the quotation emanates;
(D) appropriate timestamps;
(E) identification of quotations that are not firm; and
(F) through appropriate codes and messages, withdrawals and similar
matters.
(iii) In addition, Quotation Information shall include:
(A) in the case of a national securities exchange, the reporting
Member's matching engine publication timestamp; or
(B) in the case of FINRA, the quotation publication timestamp that
FINRA's bidding or offering member reports to FINRA's quotation
facility in accordance with FINRA rules. In addition, if FINRA's
quotation facility provides a proprietary feed of its quotation
information, then the quotation facility shall also furnish the
Processors with the time of the quotation as published on the quotation
facility's proprietary feed. FINRA shall convert any quotation times
reported to it to nanoseconds and shall furnish such times to the
Processors in nanoseconds since Epoch.
(h) Transaction Reports.
(i) Each Member shall, during the time it is open for trading, be
responsible for promptly transmitting to the Processor Transaction
Reports in Eligible Securities executed in its Market by means set
forth in the Processor Services Agreements.
(ii) Transaction Reports shall include:
(A) identification of the Eligible Security, using the Listing
Market's symbol;
(B) the number of shares in the transaction;
(C) the price at which the shares were purchased or sold;
(D) the buy/sell/cross indicator;
(E) appropriate timestamps;
(F) the Market of execution; and
(G) through appropriate codes and messages, late or out-of-sequence
trades, corrections, and similar matters.
(iii) In addition, Transaction Reports shall include the time of
the transaction as identified in the Member's matching engine
publication timestamp. However, in the case of FINRA, the time of the
transaction shall be the time of execution that a FINRA member reports
to a FINRA trade reporting facility in accordance with FINRA rules. In
addition, if the FINRA trade reporting facility provides a proprietary
feed of trades reported by the trade reporting facility to the
Processor, then the FINRA trade reporting facility shall also furnish
the Processors with the time of the transmission as published on the
facility's proprietary feed. The FINRA trade reporting facility shall
convert times that its members report to it to nanoseconds and shall
furnish such times to the Processors in nanoseconds since Epoch.
(iv) Each Member shall (a) transmit all Transaction Reports in
Eligible Securities to the Processors as soon as practicable, but not
later than 10 seconds, after the time of execution, (b) establish and
maintain collection and reporting procedures and facilities reasonably
designed to comply with this requirement, and (c) designate as ``late''
any last sale price not collected and reported in accordance with the
above-referenced procedures or as to which the Member has knowledge
that the time interval after the time of execution is significantly
greater than the time period referred to above. The Members shall seek
to reduce the time period for reporting last sale prices to the
Processors as conditions warrant.
(v) The following types of transactions are not required to be
reported to the Processors pursuant to this Agreement:
(A) transactions that are part of a primary distribution by an
issuer or of a registered secondary distribution or of an unregistered
secondary distribution;
(B) transactions made in reliance on section 4(a)(2) of the
Securities Act of 1933;
(C) transactions in which the buyer and the seller have agreed to
trade at a price unrelated to the current market for the security
(e.g., to enable the seller to make a gift);
(D) the acquisition of securities by a broker-dealer as principal
in anticipation of making an immediate exchange distribution or
exchange offering on an exchange;
(E) purchases of securities pursuant to a tender offer;
(F) purchases or sales of securities effected upon the exercise of
an option pursuant to the terms thereof or the exercise of any other
right to acquire securities at a pre-established consideration
unrelated to the current market; and
(G) transfers of securities that are expressly excluded from trade
reporting under FINRA rules.
(c) The following symbols shall be used to denote the applicable
Member:
------------------------------------------------------------------------
Code Member
------------------------------------------------------------------------
A................................... NYSE American LLC.
B................................... Nasdaq BX, Inc.
C................................... NYSE National, Inc.
D................................... Financial Industry Regulatory
Authority, Inc.
H................................... MIAX Pearl Exchange, LLC.
I................................... Nasdaq ISE, LLC.
J................................... Cboe EDGA Exchange, Inc.
K................................... Cboe EDGX Exchange, Inc.
L................................... Long-Term Stock Exchange Inc.
M................................... NYSE Chicago, Inc.
N................................... New York Stock Exchange LLC.
P................................... NYSE Arca, Inc.
Q................................... The Nasdaq Stock Market LLC.
U................................... MEMX LLC.
V................................... Investors Exchange LLC.
W................................... Cboe Exchange, Inc.
X................................... Nasdaq PHLX LLC.
Y................................... Cboe BYX Exchange, Inc.
Z................................... Cboe BZX Exchange, Inc.
------------------------------------------------------------------------
(d) Indemnification.
(i) Each Member agrees, severally and not jointly, to indemnify and
hold harmless and defend the Company, each other Member, the
Processors, the Administrator, the Operating Committee, and each of
their respective directors, officers, employees, agents, and Affiliates
(each, an ``Member Indemnified Party'') from and against any and all
loss, liability, claim, damage, and expense whatsoever incurred or
threatened against such Member Indemnified Party as a result of a
system error or disruption at such Member's Market affecting any
Transaction Reports, Quotation Information, or other information
reported to the Processors by such Member and disseminated by the
Processors to Vendors and Subscribers. This indemnity shall be in
addition to any liability that the indemnifying Member may otherwise
have.
(ii) Promptly after receipt by a Member Indemnified Party of notice
of the commencement of any action, such Member Indemnified Party will,
if it intends to make a claim in respect thereof against an
indemnifying Member, notify the indemnifying Member in writing of the
commencement thereof; provided, however, that the failure to so notify
the indemnifying Member will only relieve the indemnifying Member from
any liability which it may have to any Member Indemnified Party to the
extent such indemnifying Member is actually prejudiced by such failure.
In case any such action is brought against any Member Indemnified Party
and it
[[Page 5016]]
promptly notifies an indemnifying Member of the commencement thereof,
the indemnifying Member will be entitled to participate in, and, to the
extent that it elects (jointly with any other indemnifying Member
similarly notified), to assume and control the defense thereof with
counsel chosen by it. After notice from the indemnifying Member of its
election to assume the defense thereof, the indemnifying Member will
not be liable to such Indemnified Party for any legal or other expenses
subsequently incurred by such Member Indemnified Party in connection
with the defense thereof but the Member Indemnified Party may, at its
own expense, participate in such defense by counsel chosen by it
without, however, impairing the indemnifying Member's control of the
defense. If the indemnifying Member has assumed the defense in
accordance with the terms hereof, the indemnifying Member may enter
into a settlement or consent to any judgment without the prior written
consent of the Member Indemnified Party if (i) such settlement or
judgment involves monetary damages only, all of which will be fully
paid by the indemnifying Member and without admission of fault or
culpability on behalf of any Member Indemnified Party, and (ii) a term
of the settlement or judgment is that the Person or Persons asserting
such claim unconditionally and irrevocably release all Member
Indemnified Parties from all liability with respect to such claim;
otherwise, the consent of the Member Indemnified Party shall be
required in order to enter into any settlement of, or consent to the
entry of a judgment with respect to, any claim (which consent shall not
be unreasonably withheld, delayed, or conditioned).
Section 5.5 Operational Issues.
(a) Each Member shall be responsible for collecting and validating
quotes and last sale reports within its own system prior to
transmitting this data to the Processors.
(b) Each Member may utilize a dedicated Member line into the
Processors to transmit Transaction Reports and Quotation Information to
the Processors.
(c) Whenever a Member determines that a level of trading activity
or other unusual market conditions prevent it from collecting and
transmitting Transaction Reports or Quotation Information to the
Processor, or where a trading halt or suspension in an Eligible
Security is in effect in its Market, the Member shall promptly notify
the Processors of such condition or event and shall resume collecting
and transmitting Transaction Reports and Quotation Information to it as
soon as the condition or event is terminated. In the event of a system
malfunction resulting in the inability of a Member or its members to
transmit Transaction Reports or Quotation Information to the
Processors, the Member shall promptly notify the Processors of such
event or condition. Upon receiving such notification, the Processors
shall take appropriate action, including either closing the quotation
or purging the system of the affected quotations.
Article VI.
THE ADMINISTRATOR
Section 6.1 General Functions of the Administrator.
Subject to the general direction of the Operating Committee, as
more fully set forth in the agreement entered into between the Company
and the Administrator (the ``Administrative Services Agreement''), the
Administrator shall perform administrative functions on behalf of the
Company including recordkeeping; administering Vendor and Subscriber
contracts; administering Fees, including billing, collection, and
auditing of Vendors and Subscribers; administering Distributions; tax
functions of the Company; the preparation of the Company's audited
financial reports; and support of Company governance.
Section 6.2 Independence of the Administrator.
The Administrator may not be owned or controlled by a corporate
entity that, either directly or via another subsidiary, offers for sale
its own PDP.
Section 6.3 Evaluation of the Administrator.
The Administrator's performance of its functions under the
Administrative Services Agreement shall be subject to review at any
time as determined by an affirmative vote of the Operating Committee
pursuant to Section 4.3; provided, however, that a review shall be
conducted at least once every two calendar years but not more
frequently than once each calendar year (unless the Administrator has
materially defaulted in its obligations under the Administrative
Services Agreement and such default has not been cured within the
applicable cure period set forth in the Administrative Services
Agreement, in which event such limitation shall not apply). The
Operating Committee shall appoint a subcommittee or other Persons to
conduct the review. The Company shall require the reviewer to provide
the Operating Committee with a written report of its findings and to
make recommendations (if necessary), including with respect to the
continuing operation of the Administrator. The Administrator shall be
required to assist and participate in such review. The Operating
Committee shall notify the Commission of any recommendations it may
approve as a result of the review of the Administrator and shall supply
the Commission with a copy of any reports that may be prepared in
connection therewith.
Section 6.4 Process for Selecting New Administrator.
Prior to the Operative Date, upon the termination or withdrawal of
the Administrator, or upon the expiration of the Administrative
Services Agreement, the Operating Committee shall establish procedures
for selecting a new Administrator (the ``Administrator Selection
Procedures''). The Operating Committee, as part of the process of
establishing Administrator Selection Procedures, may solicit and
consider the timely comment of any entity affected by the operation of
this Agreement. The Administrator Selection Procedures shall be
established by the Operating Committee pursuant to Section 4.3, and
shall set forth, at a minimum:
(a) the entity that will:
(i) draft the Operating Committee's request for proposal for bids
on a new Administrator;
(ii) assist the Operating Committee in evaluating bids for the new
Administrator; and
(iii) otherwise provide assistance and guidance to the Operating
Committee in the selection process.
(b) the minimum technical and operational requirements to be
fulfilled by the Administrator;
(c) the criteria to be considered in selecting the Administrator;
and
(d) the entities (other than Voting Representatives) that are
eligible to comment on the selection of the Administrator.
Article VII.
REGULATORY MATTERS
Section 7.1 Regulatory and Operational Halts.
(a) Operational Halts. A Member shall notify the Processors if it
has concerns about its ability to collect and transmit quotes, orders,
or last sale prices, or where it has declared an Operational Halt or
suspension of trading in one or more Eligible Securities, pursuant to
the procedures adopted by the Operating Committee.
(b) Regulatory Halts.
(i) The Primary Listing Market may declare a Regulatory Halt in
trading for
[[Page 5017]]
any security for which it is the Primary Listing Market:
(A) as provided for in the rules of the Primary Listing Market;
(B) if it determines there is a SIP Outage, Material SIP Latency,
or Extraordinary Market Activity; or
(C) in the event of national, regional, or localized disruption
that necessitates a Regulatory Halt to maintain a fair and orderly
market.
(ii) In making a determination to declare a Regulatory Halt under
subparagraph (b)(i), the Primary Listing Market will consider the
totality of information available concerning the severity of the issue,
its likely duration, and potential impact on Member Firms and other
market participants and will make a good-faith determination that the
criteria of subparagraph (b)(i) have been satisfied and that a
Regulatory Halt is appropriate. The Primary Listing Market will
consult, if feasible, with the affected Trading Center(s), the other
Members, or the Processors, as applicable, regarding the scope of the
issue and what steps are being taken to address the issue. Once a
Regulatory Halt under subparagraph (b)(i) has been declared, the
Primary Listing Market will continue to evaluate the circumstances to
determine when trading may resume in accordance with the rules of the
Primary Listing Market.
(c) Initiating a Regulatory Halt.
(i) The start time of a Regulatory Halt is when the Primary Listing
Market declares the halt, regardless of whether an issue with
communications impacts the dissemination of the notice.
(ii) If a Processor is unable to disseminate notice of a Regulatory
Halt or the Primary Listing Market is not open for trading, the Primary
Listing Market will take reasonable steps to provide notice of a
Regulatory Halt, which shall include both the type and start time of
the Regulatory Halt, by dissemination through:
(A) PDP;
(B) posting on a publicly-available Member website;
(C) system status messages; or
(D) a notification via an alternate Processor, if available.
(iii) Except in exigent circumstances, the Primary Listing Market
will not declare a Regulatory Halt retroactive to a time earlier than
the notice of such halt.
(iv) Resumption of Trading After Regulatory Halts Other Than SIP
Halts. The Primary Listing Market will declare a resumption of trading
when it makes a good-faith determination that trading may resume in a
fair and orderly manner and in accordance with its rules.
(v) For a Regulatory Halt that is initiated by another Member that
is a Primary Listing Market, a Member may resume trading after the
Member receives notification from the Primary Listing Market that the
Regulatory Halt has been terminated.
(d) Resumption of Trading After SIP Halt.
(i) The Primary Listing Market will determine the SIP Halt Resume
Time. In making such determination, the Primary Listing Market will
make a good-faith determination and consider the totality of
information to determine whether resuming trading would promote a fair
and orderly market, including input from the Processors, the other
Members, or the operator of the system in question (as well as any
Trading Center(s) to which such system is linked), regarding
operational readiness to resume trading. The Primary Listing Market
retains discretion to delay the SIP Halt Resume Time if it believes
trading will not resume in a fair and orderly manner.
(ii) The Primary Listing Market will terminate a SIP Halt with a
notification that specifies a SIP Halt Resume Time. The Primary Listing
Market shall provide a minimum notice of a SIP Halt Resume Time, as
specified by the rules of the Primary Listing Market, during which
period market participants may enter quotes and orders in the affected
securities. During Regular Trading Hours, the last SIP Halt Resume Time
before the end of Regular Trading Hours shall be an amount of time as
specified by the rules of the Primary Listing Market. The Primary
Listing Market may stagger the SIP Halt Resume Times for multiple
symbols in order to reopen in a fair and orderly manner.
(iii) During Regular Trading Hours, if the Primary Listing Market
does not open a security within the amount of time as specified by the
rules of the Primary Listing Market after the SIP Halt Resume Time, a
Member may resume trading in that security. Outside Regular Trading
Hours, a Member may resume trading immediately after the SIP Halt
Resume Time.
(e) Member to Halt Trading During Regulatory Halt. A Member will
halt trading for any security traded on its Market if the Primary
Listing Market declares a Regulatory Halt for the security.
(f) Communications. Whenever, in the exercise of its regulatory
functions, the Primary Listing Market for an Eligible Security
determines it is appropriate to initiate a Regulatory Halt, the Primary
Listing Market will notify all other Members and the affected
Processors of such Regulatory Halt as well as provide notice that a
Regulatory Halt has been lifted using such protocols and other
emergency procedures as may be mutually agreed to between the Members
and the Primary Listing Market. The affected Processors shall
disseminate to Members notice of the Regulatory Halt (as well as notice
of the lifting of a Regulatory Halt) (i) through the CT Feeds or (ii)
any other means the affected Processors, in its sole discretion,
considers appropriate. Each Member shall be required to continuously
monitor these communication protocols established by the Operating
Committee and the Processors during market hours, and the failure of a
Member to do so shall not prevent the Primary Listing Market from
initiating a Regulatory Halt in accordance with the procedures
specified herein.
Section 7.2 Hours of Operation of the System.
(a) Quotation Information shall be entered, as applicable, by
Members as to all Eligible Securities in which they make a market
during Regular Trading Hours on all days the Processors are in
operation. Transaction Reports shall be entered for executions that
occur from 9:30 a.m. until 4:00:00 p.m. ET by Members as to all
Eligible Securities in which they execute transactions during Regular
Trading Hours on all days the Processors are in operation.
(b) Members that execute transactions in Eligible Securities
outside of Regular Trading Hours, shall report such transactions as
follows:
(i) transactions in Eligible Securities executed from 4:00 a.m. up
to 9:30:00 a.m. ET (or as otherwise designated by a Member as an
execution occurring outside of Regular Trading Hours) and after 4:00:00
p.m. until 8:00 p.m. ET, shall be designated with an appropriate
indicator to denote their execution outside normal market hours;
(ii) transactions in Eligible Securities executed after 8:00 p.m.
and before 12:00 a.m. (midnight) shall be reported to the Processors
between the hours of 4:00 a.m. and 8:00 p.m. ET on the next business
day (T+1), and shall be designated ``as/of'' trades to denote their
execution on a prior day, and be accompanied by the time of execution;
(iii) transactions in Eligible Securities executed between 12:00
a.m. (midnight) and 4:00 a.m. ET shall be transmitted to the Processors
between 4:00 a.m. and 9:30 a.m. ET, on trade date, shall be designated
with an appropriate indicator to denote their execution outside normal
market hours, and shall be accompanied by the time of execution; and
[[Page 5018]]
(iv) transactions reported pursuant to this Section 7.3 shall be
included in the calculation of total trade volume for purposes of
determining Net Distributable Operating Revenue, but shall not be
included in the calculation of the daily high, low, or last sale.
(c) Late trades shall be reported in accordance with the rules of
the Member in whose Market the transaction occurred and can be reported
between the hours of 4:00 a.m. and 8:00 p.m. ET.
(d) The Processors shall collect, process and disseminate Quotation
Information in Eligible Securities at other times between 4:00 a.m. and
9:30 a.m. ET, and after 4:00 p.m. ET, when any Member or FINRA
Participant is open for trading, until 8:00 p.m. ET (the ``Additional
Period''); provided, however, that the National Best Bid and Offer
quotation will not be disseminated before 4:00 a.m. or after 8:00 p.m.
ET. Members that enter Quotation Information or submit Transaction
Reports to the Processors during the Additional Period shall do so for
all Eligible Securities in which they enter quotations.
Article VIII.
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
Section 8.1 Capital Accounts.
(a) A separate capital account (``Capital Account'') shall be
established by the Company and maintained by the Administrator for each
Member in accordance with section 704(b) of the Code and Treasury
Regulation section 1.704-1(b)(2)(iv). There shall be credited to each
Member's Capital Account (i) the Capital Contributions (at fair market
value in the case of contributed property) made by such Member (which
shall be deemed to be zero for the initial Members), (ii) allocations
of Company profits and gain (or items thereof) to such Member pursuant
to Section 9.2 and (iii) any recaptured tax credits, or portion
thereof, to the extent such increase to the tax basis of a Member's
interest in the Company may be allowed pursuant to the Code. Each
Member's Capital Account shall be decreased by (x) the amount of
distributions (at fair market value in the case of property distributed
in kind) to such Member, (y) allocations of Company losses to such
Member (including expenditures which can neither by capitalized nor
deducted for tax purposes, organization and syndication expenses not
subject to amortization and loss on sale or disposition of the
Company's assets, whether or not disallowed under sections 267 or 707
of the Code) pursuant to Section 9.2 and (z) any tax credits, or
portion thereof, as may be required to be charged to the tax basis of a
Membership Interest pursuant to the Code. Capital Accounts shall not be
adjusted to reflect a Member's share of liabilities under section 752
of the Code.
(b) The fair market value of contributed, distributed, or revalued
property shall be agreed to by the Operating Committee or, if there is
no such agreement, by an appraisal.
(c) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended
to comply with Treasury Regulation section 1.704-1(b) promulgated under
section 704(b) of the Code, and shall be interpreted and applied in a
manner consistent with such Treasury Regulations.
Section 8.2 Additional Capital Contributions.
Except with the approval of the Operating Committee or as otherwise
provided in this Section 8.2, no Member shall be obligated or permitted
to make any additional contribution to the capital of the Company. The
Members agree to make additional Capital Contributions from time to
time as appropriate in respect of reasonable administrative and other
reasonable expenses of the Company.
Section 8.3 Distributions.
Except as set forth in this Section 8.3 and Section 11.2, and
subject to the provisions of Section 13.1, Distributions shall be made
to the Members at the times and in the aggregate amounts set forth in
Exhibit D. Notwithstanding any provisions to the contrary contained in
this Agreement, the Company shall not make a Distribution to a Member
on account of its interest in the Company if such Distribution would
violate Section 18-607 of the Delaware Act or other Applicable Law.
Distributions may be made in cash or, if determined by the Operating
Committee, in-kind. The Operating Committee may reserve amounts for
anticipated expenses or contingent liabilities of the Company. In the
event that additional Capital Contributions are called for, and any
Member fails to provide the full amount of such additional Capital
Contributions as set forth in the relevant resolution of the Operating
Committee, any Distributions to be made to such defaulting Member shall
be reduced by the amount of any required but unpaid Capital
Contribution due from such Member.
Article IX.
ALLOCATIONS
Section 9.1 Calculation of Profits and Losses.
To the fullest extent permitted by Applicable Law, the profits and
losses of the Company shall be determined for each fiscal year in a
manner consistent with GAAP.
Section 9.2 Allocation of Profits and Losses.
(a) Except as otherwise set forth in this Section 9.2, for Capital
Account purposes, all items of income, gain, loss, and deduction shall
be allocated among the Members in accordance with Exhibit D.
(b) For federal, state and local income tax purposes, items of
income, gain, loss, deduction, and credit shall be allocated to the
Members in accordance with the allocations of the corresponding items
for Capital Account purposes under this Section 9.2, except that items
with respect to which there is a difference between tax and book basis
will be allocated in accordance with Section 704(c) of the Code, the
Treasury Regulations thereunder and Treasury Regulations Section 1.704-
1(b)(4)(i).
(c) Notwithstanding any provision set forth in this Section 9.2, no
item of deduction or loss shall be allocated to a Member to the extent
the allocation would cause a negative balance in such Member's Capital
Account (after taking into account the adjustments, allocations and
distributions described in Treasury Regulations Sections 1.704-
1(b)(2)(ii)(d)(4), (5) and (6)) that exceeds the amount that such
Member would be required to reimburse the Company pursuant to this
Agreement or Applicable Law.
(d) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6), items of the Company's
income and gain shall be specially allocated to such Member in an
amount and manner sufficient to eliminate as quickly as possible any
deficit balance in its Capital Account created by such adjustments,
allocations or distributions in excess of that permitted under Section
9.2(c). Any special allocations of items of income or gain pursuant to
this Section 9.2(d) shall be taken into account in computing subsequent
allocations pursuant to this Section 9.2 so that the net amount of any
items so allocated and all other items allocated to each Member
pursuant to this Section 9.2 shall, to the extent possible, be equal to
the net
[[Page 5019]]
amount that would have been allocated to each such Member pursuant to
the provisions of this Section 9.2 if such unexpected adjustments,
allocations or distributions had not occurred.
Article X.
RECORDS AND ACCOUNTING; REPORTS
Section 10.1 Accounting.
(a) The Operating Committee shall maintain a system of accounting
which enables the Company to produce accounting records and information
substantially consistent with GAAP. The Fiscal Year of the Company
shall be the calendar year unless Applicable Law requires a different
Fiscal Year.
(b) All matters concerning accounting procedures shall be
determined by the Operating Committee.
Section 10.2 Tax Status; Returns.
(a) It is the intent of this Company and the Members that this
Company shall be treated as a partnership for federal, state and local
income tax purposes. Neither the Company nor any Member shall make an
election for the Company to be classified as other than a partnership
pursuant to Treasury Regulations Section 301.7701-3 or otherwise.
(b) The Company shall cause federal, state, and local income tax
returns for the Company to be prepared and timely filed with the
appropriate authorities and shall arrange for the timely delivery to
the Members of such information as is necessary for such Members to
prepare their federal, state and local tax returns. All tax returns
shall be prepared in a manner consistent with the Distributions made in
accordance with Exhibit D.
Section 10.3 Partnership Representative.
(a) The Operating Committee shall appoint an entity as the
``Partnership Representative'' of the Company for purposes of Section
6223 of the Code and the Treasury Regulations promulgated thereunder,
and all federal, state, and local Tax audits and litigation shall be
conducted under the direction of the Partnership Representative.
(b) The Partnership Representative shall use reasonable efforts to
inform each Member of all significant matters that may come to its
attention by giving notice thereof and to forward to each Member copies
of all significant written communications it may receive in such
capacity. The Partnership Representative shall consult with the Members
before taking any material actions with respect to tax matters,
including actions relating to (i) an IRS examination of the Company
commenced under Section 6231(a) of the Code, (ii) a request for
administrative adjustment filed by the Company under Section 6227 of
the Code, (iii) the filing of a petition for readjustment under Section
6234 of the Code with respect to a final notice of partnership
adjustment, (iv) the appeal of an adverse judicial decision, and (v)
the compromise, settlement, or dismissal of any such proceedings.
(c) The Partnership Representative shall not compromise or settle
any tax audit or litigation affecting the Members without the approval
of a majority of Members. Any material proposed action, inaction, or
election to be taken by the Partnership Representative, including the
election under Section 6226(a)(1) of the Code, shall require the prior
approval of a majority of Members.
Article XI.
DISSOLUTION AND TERMINATION
Section 11.1 Dissolution of Company.
The Company shall dissolve, and its assets and business shall be
wound up, upon the occurrence of any of the following events:
(a) Unanimous written consent of the Members to dissolve the
Company;
(b) The sale or other disposition of all or substantially all the
Company's assets outside the ordinary course of business;
(c) An event which makes it unlawful or impossible for the Company
business to be continued;
(d) The withdrawal of one or more Members such that there is only
one remaining Member; or
(e) The entry of a decree of judicial dissolution under Sec. 18-
802 of the Delaware Act.
Section 11.2 Liquidation and Distribution.
Following the occurrence of an event described in Section 11.1, the
Members shall appoint a liquidating trustee who shall wind up the
affairs of the Company by (i) selling its assets in an orderly manner
(so as to avoid the loss normally associated with forced sales), and
(ii) applying and distributing the proceeds of such sale, together with
other funds held by the Company: (a) first, to the payment of all debts
and liabilities of the Company; (b) second, to the establishments of
any reserves reasonably necessary to provide for any contingent
recourse liabilities and obligations; (c) third, to the Members in
accordance with Exhibit D; and (d) fourth, to the Members as determined
by a majority of Members.
Section 11.3 Termination.
Each of the Members shall be furnished with a statement prepared by
the independent accountants retained on behalf of the Company, which
shall set forth the assets and liabilities of the Company as of the
date of the final distribution of Company's assets under Section 11.2
and the net profit or net loss for the fiscal period ending on such
date. Upon compliance with the distribution plan set forth in Section
11.2, the Members shall cease to be such, and the liquidating trustee
shall execute, acknowledge, and cause to be filed a certificate of
cancellation of the Company. Upon completion of the dissolution,
winding up, liquidation, and distribution of the liquidation proceeds,
the Company shall terminate.
Article XII.
EXCULPATION AND INDEMNIFICATION
Section 12.1 Exculpation.
Each Member, by and for itself, each of its Affiliates and each of
its and their respective equity holders, directors, officers,
controlling persons, partners, employees, successors and assigns,
hereby acknowledges and agrees that it is the intent of the Company and
each Member that the liability of each Member and each individual
currently or formerly serving as an SRO Voting Representative (each, an
``Exculpated Party'') be limited to the maximum extent permitted by
Applicable Law or as otherwise expressly provided herein. In accordance
with the foregoing, the Members hereby acknowledge and agree that:
(a) To the maximum extent permitted by Applicable Law or as
otherwise expressly provided herein, no present or former Exculpated
Party or any of such Exculpated Party's Affiliates, heirs, successors,
assigns, agents or representatives shall be liable to the Company or
any Member for any loss suffered in connection with a breach of any
fiduciary duty, errors in judgment or other acts or omissions by such
Exculpated Party; provided, however, that this provision shall not
eliminate or limit the liability of such Exculpated Party for (i) acts
or omissions which involve gross negligence, willful misconduct or a
knowing violation of law, or (ii) as provided in Section 5.4(d) hereof,
losses resulting from such Exculpated Party's Transaction Reports,
Quotation Information or other information reported to the Processors
by such Exculpated Party (collectively ``Non-Exculpated Items''). Any
Exculpated Party may consult with counsel and accountants in respect of
[[Page 5020]]
Company affairs, and provided such Person acts in good faith reliance
upon the advice or opinion of such counsel or accountants, such Person
shall not be liable for any loss suffered in reliance thereon.
(b) Notwithstanding anything to the contrary contained herein,
whenever in this Agreement or any other agreement contemplated herein
or otherwise, an Exculpated Party is permitted or required to take any
action or to make a decision in its ``sole discretion'' or
``discretion'' or that it deems ``necessary,'' or ``necessary or
appropriate'' or under a grant of similar authority or latitude, the
Exculpated Party may, insofar as Applicable Law permits, make such
decision in its sole discretion (regardless of whether there is a
reference to ``sole discretion'' or ``discretion''). The Exculpated
Party (i) shall be entitled to consider such interests and factors as
it desires (including its own interests), (ii) shall have no duty or
obligation (fiduciary or otherwise) to give any consideration to any
interest of or factors affecting the Company or the Members, and (iii)
shall not be subject to any other or different standards imposed by
this Agreement, or any other agreement contemplated hereby, under any
Applicable Law or in equity.
Section 12.2 Right to Indemnification.
(a) Subject to the limitations and conditions provided in this
Article XII and to the fullest extent permitted by Applicable Law, the
Company shall indemnify each Company Indemnified Party for Losses as a
result of the Company Indemnified Party being a Party to a Proceeding.
Notwithstanding the foregoing, no such indemnification shall be
available in the event the Company is a claimant against the Company
Indemnified Party.
(b) Indemnification under this Article XII shall continue as to a
Company Indemnified Party who has ceased to serve in the capacity that
initially entitled such Company Indemnified Party to indemnity
hereunder; provided, however, that the Company shall not be obligated
to indemnify a Company Indemnified Party for the Company Indemnified
Party's Non-Exculpated Items.
(c) The rights granted pursuant to this Article XII shall be deemed
contract rights, and no amendment, modification, or repeal of this
Article XII shall have the effect of limiting or denying any such
rights with respect to actions taken or Proceedings arising prior to
any amendment, modification, or repeal. It is expressly acknowledged
that the indemnification provided in this Article XII could involve
indemnification for negligence or under theories of strict liability.
(d) The Company shall be the primary obligor in respect of any
Company Indemnified Party's claim for indemnification, for advancement
of expenses, or for providing insurance, subject to this Article XII.
The obligation, if any, of any Member or its Affiliates to indemnify,
to advance expenses to, or provide insurance for any Company
Indemnified Party shall be secondary to the obligations of the Company
under this Article XII (and the Company's insurance providers shall
have no right to contribution or subrogation with respect to the
insurance plans of such Member or its Affiliates).
Section 12.3 Advance Payment.
Reasonable expenses incurred by a Company Indemnified Party who is
a named defendant or respondent to a Proceeding shall be paid by the
Company in advance of the final disposition of the Proceeding upon
receipt of an undertaking by or on behalf of such Company Indemnified
Party to repay such amount if it shall ultimately be determined that he
or she is not entitled to be indemnified by the Company.
Section 12.4 Appearance as a Witness.
Notwithstanding any other provision of this Article XII, the
Company shall pay or reimburse reasonable out-of-pocket expenses
incurred by a Company Indemnified Party in connection with his
appearance as a witness or other participation in a Proceeding at a
time when he is not a named defendant or respondent in the Proceeding.
Section 12.5 Nonexclusivity of Rights.
The right to indemnification and the advancement and payment of
expenses conferred in this Article XII shall not be exclusive of any
other right which any Company Indemnified Person may have or hereafter
acquire under any law (common or statutory), provision of the
Certificate or this Agreement or otherwise.
Article XIII.
MISCELLANEOUS
Section 13.1 Expenses.
The Company shall pay all current expenses, including any Taxes
payable by the Company, whether for its own account or otherwise
required by law (including any costs of complying with applicable tax
obligations), third-party service provider fees, and all administrative
and processing expenses and fees, as well as any other amounts owing to
the Processors under the Processor Services Agreements, to the
Administrator under the Administrative Services Agreement, or to the
Processors, Administrator, or FINRA under Exhibit D to this Agreement,
before any allocations may be made to the Members. Appropriate
reserves, as unanimously determined by the Members, may be charged to
the Capital Account of the Members for (i) contingent liabilities, if
any, as of the date any such contingent liabilities become known to the
Operating Committee, or (ii) amounts needed to pay the Company's
operating expenses, including administrative and processing expenses
and fees, before any allocations are made to the Member. Each Member
shall bear the cost of implementation of any technical enhancements to
the System made at its request and solely for its use, subject to
reapportionment should any other Member subsequently make use of the
enhancement, or the development thereof.
Section 13.2 Entire Agreement.
Upon the Operative Date, this Agreement supersedes the CQ Plan, the
CTA Plan, and the UTP Plan and all other prior agreements among the
Members with respect to the subject matter hereof. This instrument
contains the entire agreement with respect to such subject matter.
Section 13.3 Notices and Addresses.
Unless otherwise specified herein, all notices, consents,
approvals, reports, designations, requests, waivers, elections, and
other communications (collectively, ``Notices'') authorized or required
to be given pursuant to this Agreement shall be in writing and may be
delivered by certified or registered mail, postage prepaid, by hand, by
any private overnight courier service, or notification through the
Company's web portal. Such Notices shall be mailed or delivered to the
Members at the addresses set forth on Exhibit A or such other address
as a Member may notify the other Members of in writing. Any Notices to
be sent to the Company shall be delivered to the principal place of
business of the Company or at such other address as the Operating
Committee may specify in a notice sent to all of the Members. Notices
shall be effective (i) if mailed, on the date three days after the date
of mailing, (ii) if hand delivered or delivered by private courier, on
the date of delivery, or (iii) if sent by through the Company's web
portal, on the date sent; provided, however, that notices of a change
of
[[Page 5021]]
address shall be effective only upon receipt.
Section 13.4 Governing Law.
This Agreement shall be governed by and construed in accordance
with the Delaware Act and internal laws and decisions of the State of
Delaware, without regard to the conflicts of laws principles thereof;
provided, however, that the rights and obligations of the Members, the
Processors and the Administrator, and of Vendors, Subscribers, and
other Persons contracting with the Company in respect of the matters
covered by this Agreement, shall at all times also be subject to any
applicable provisions of the Exchange Act and any rules and regulations
promulgated thereunder. For the avoidance of doubt, nothing in this
Agreement waives any protection or limitation of liability afforded any
of the Members or any of their Affiliates by common law, including the
doctrines of self-regulatory organization immunity and federal
preemption.
Section 13.5 Amendments.
(a) Except as this Agreement otherwise provides, this Agreement may
be modified from time to time when authorized by the Operating
Committee pursuant to Section 4.3, subject to the approval of the
Commission or when such modification otherwise becomes effective
pursuant to section 11A of the Exchange Act and Rule 608 of Regulation
NMS.
(b) In the case of a Ministerial Amendment, the Chair of the
Company's Operating Committee may modify this Agreement by submitting
to the Commission an appropriate amendment that sets forth the
modification; provided, however, that 48-hours advance notice of the
amendment to the Operating Committee in writing is required. Such an
amendment shall become effective upon filing with the Commission in
accordance with section 11A of the Exchange Act and Rule 608 of
Regulation NMS.
(c) ``Ministerial Amendment'' means an amendment to this Agreement
that pertains solely to any one or more of the following:
(i) admitting a new Member to the Company;
(ii) changing the name or address of a Member;
(iii) incorporating a change that the Commission has implemented by
rule and that requires no conforming language to the text of this
Agreement;
(iv) incorporating a change (A) that the Commission has implemented
by rule, (B) that requires conforming language to the text of this
Agreement, and (C) whose conforming language to the text of this
Agreement has been approved by the affirmative vote of the Operating
Committee pursuant to Section 4.3;
(v) incorporating a change (A) that a Governmental Authority
requires relating to the governance or operation of an LLC, (B) that
requires conforming language to the text of this Agreement, and (C)
whose conforming language to the text of this Agreement has been
approved by the affirmative vote of the Operating Committee pursuant to
Section 4.3 or upon approval by a majority of Members pursuant to
Section 13.5(b), as applicable; or
(vi) incorporating a purely technical change, such as correcting an
error or an inaccurate reference to a statutory provision, or removing
language that has become obsolete.
Section 13.6 Successors.
This Agreement shall be binding upon and inure to the benefit of
the Members and their respective legal representatives and successors.
Section 13.7 Limitation on Rights of Others.
None of the provisions of this Agreement shall be for the benefit
of or enforceable by any creditor of the Company. Furthermore, except
as provided in Section 3.7(b), the Members shall not have any duty or
obligation to any creditor of the Company to make any contribution to
the Company or to issue any call for capital pursuant to this
Agreement. Nothing in this Agreement shall be deemed to create any
legal or equitable right, remedy or claim in any Person not a party
hereto (other than any Person indemnified under Article XII).
Section 13.8 Counterparts.
This Agreement may be executed by the Members in any number of
counterparts, no one of which need contain the signature of all
Members. As many such counterparts as shall together contain all such
signatures shall constitute one and the same instrument.
Section 13.9 Headings.
The section and other headings contained in this Agreement are for
reference purposes only and shall not be deemed to be a part of this
Agreement or to affect the meaning or interpretation of any provisions
of this Agreement.
Section 13.10 Validity and Severability.
If any provision of this Agreement shall be held invalid or
unenforceable, that shall not affect the validity or enforceability of
any other provisions of this Agreement, all of which shall remain in
full force and effect.
Section 13.11 Statutory References.
Each reference in this Agreement to a particular statute or
regulation, or a provision thereof, shall be deemed to refer to such
statute or regulation, or provision thereof, or to any similar or
superseding statute or regulation, or provision thereof, as is from
time to time in effect.
Section 13.12 Modifications to be in Writing.
This Agreement constitutes the entire understanding of the parties
hereto with respect to the subject matter hereof, and no amendment,
modification or alteration shall be binding unless the same is in
writing and adopted in accordance with the provisions of Section 13.5.
Article XIV.
IMPLEMENTATION
Section 14.1 Implementation Timeline.
The steps to implement the Plan and timelines for completing these
various steps are set forth in Exhibit F. The timeline shall begin when
the Plan is approved by the Commission, and such approval is published
on the Commission's website. The steps to implement the Plan have been
organized into multiple workstreams, some of which can be performed in
parallel, and others have dependencies that need to be completed before
they can begin. In the Exhibit F, the Company has identified such
dependencies, some of which are outside the control of the Operating
Committee. In the event a workstream listed in Exhibit F takes shorter
or, due to factors outside the Operating Committee's reasonable
control, takes longer than expected, the timelines for contingent steps
shall be adjusted accordingly to account for such change. Any
lengthening of the timeline must be made by an affirmative vote of the
Operating Committee pursuant to Section 4.3(b) and must be based on a
reasonable determination that the timeline needs to be extended. In
such instances, the Operating Committee will include the adjustment in
its written progress report to the Commission in accordance with
Section 14.2.
[[Page 5022]]
Section 14.2 Written Progress Reports to Commission.
(a) Beginning three months after the formation of the Operating
Committee and continuing every three months until the Operative Date,
the Operating Committee will provide written progress reports to the
Commission every three months.
(b) The written progress reports will contain the actions
undertaken to date by the Operating Committee and a detailed
description of the progress made toward completing each of the steps
listed in Exhibit F. The Operating Committee will make such progress
reports available on the CQ Plan and CTA Plan's and UTP Plan's
websites, and on the Plan's website, when available after the selection
of the Administrator.
Section 14.3 Transition From CQ Plan, CTA Plan, and UTP Plan.
(a) Until the Operative Date, the Members will continue to operate
pursuant to the CQ Plan, CTA Plan, and UTP Plan with respect to the
public dissemination of real-time consolidated equity market data for
Eligible Securities rather than this Agreement.
(b) As of the Operative Date, the Members shall conduct, through
the Company, the Processor and Administrator functions related to the
public dissemination of real-time consolidated equity market data for
Eligible Securities required by the Commission to be performed by the
Members under the Exchange Act. The Members shall file an amendment to
the CQ Plan, CTA Plan, and UTP Plan to cease their operation as of the
Operative Date.
IN WITNESS WHEREOF, the undersigned Members have executed this
Agreement as of the day and year first above written.
EXHIBIT A
Members of CT Plan LLC
Member Name and Address
Cboe BYX Exchange, Inc., 400 South LaSalle Street, Chicago,
Illinois 60605.
Cboe BZX Exchange, Inc., 400 South LaSalle Street, Chicago,
Illinois 60605.
Cboe EDGA Exchange, Inc., 400 South LaSalle Street, Chicago,
Illinois 60605.
Cboe EDGX Exchange, Inc., 400 South LaSalle Street, Chicago,
Illinois 60605.
Cboe Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois
60605.
Financial Industry Regulatory Authority, Inc., 1700 K Street, NW,
Washington, DC 20006.
Investors Exchange LLC, 3 World Trade Center 58th Floor, New York,
New York 10007.
Long-Term Stock Exchange, Inc., 101 Greenwich Street, 15th Floor,
New York, New York 10014.
MEMX LLC, 382 NE 191st Street, Suite 92178, Miami, FL 33179.
MIAX PEARL, LLC, 7 Roszel Road, Suite 1A, Princeton, New Jersey
08540.
Nasdaq BX, Inc., One Liberty Plaza, 165 Broadway, New York, New
York 10006.
Nasdaq ISE, LLC, One Liberty Plaza, 165 Broadway, New York, New
York 10006.
Nasdaq PHLX LLC, FMC Tower, Level 8, 2929 Walnut Street,
Philadelphia, Pennsylvania 19104.
The Nasdaq Stock Market LLC, One Liberty Plaza, 165 Broadway, New
York, NY 10006.
New York Stock Exchange LLC, 11 Wall Street, New York, New York
10005.
NYSE American LLC, 11 Wall Street, New York, New York 10005.
NYSE Arca, Inc., 11 Wall Street, New York, New York 10005.
NYSE Chicago, Inc., 11 Wall Street, New York, New York 10005.
NYSE National, Inc., 11 Wall Street, New York, NY 10005.
EXHIBIT B
Disclosures
(a) The Members must respond to the following questions and
instructions:
(i) Is the Member for profit or not-for-profit? If the Member is
for profit, is it publicly or privately owned? If privately owned, list
any owner with an interest of 5% or more of the Member, where to the
Member's knowledge, such owner, or any affiliate controlling,
controlled by, or under common control with the owner, subscribes,
directly or through a third-party vendor, to CT Feeds and/or Member
PDP.
(ii) Does the Member offer PDP? If yes, list each product, describe
its content, and provide a link to where fees for each product are
disclosed.
(iii) Provide the names of the Voting Representative, any alternate
Voting Representatives designated by the Member, and any Member
Observers. Also provide a narrative description of such persons' roles
within the Member organization, including the title of each individual
as well as any direct responsibilities related to the development,
dissemination, sales, or marketing of the Member's PDP, and the nature
of those responsibilities sufficient for the public to identify the
nature of any potential conflict of interest that could be perceived by
a reasonable objective observer as having an effect on the operation of
the Company. If such persons work in or with the Member's PDP business,
describe such persons' roles and describe how that business and such
persons' Company responsibilities impacts their compensation. In
addition, describe how such persons' responsibilities with the PDP
business may present a conflict of interest with their responsibilities
to the Company.
(iv) Does the Member, its Voting Representative, its alternate
Voting Representative, or its Member Observers or any affiliate have
additional relationships or material economic interests that could be
perceived by a reasonable objective observer to present a potential
conflict of interest with their responsibilities to the Company? If so,
provide a detailed narrative discussion of all material facts necessary
to identify the potential conflicts of interest and the effects they
may have on the Company.
(b) The Processors must respond to the following questions and
instructions:
(i) Is the Processor an affiliate of or affiliated with any Member?
If yes, disclose the Member(s) and describe the nature of the
affiliation. Include an entity-level organizational chart depicting the
Processor and its affiliates.
(ii) Provide a narrative description of the functions directly
performed by senior staff, the manager employed by the Processor to
provide Processor services to the Company, and the staff that reports
to that manager.
(iii) Does the Processor provide any services for any Member's PDP,
other NMS Plans, or creation of consolidated equity data information
for its own use? If Yes, disclose the services the Processor performs
and identify which NMS Plans. Does the Processor have any profit or
loss responsibility for a Member's PDP or any other professional
involvement with persons the Processor knows are engaged in a Member's
PDP business? If so, describe.
(iv) List the policies and procedures established to safeguard
Restricted Information, Highly Confidential Information, and
Confidential Information that is applicable to the Processor.
(v) Does the Processor, or its representatives, have additional
relationships or material economic interests that could be perceived by
a reasonable objective observer to present a potential conflict of
interest with the representatives' responsibilities to the Company? If
so, provide a detailed narrative discussion of all material facts
necessary to identify the potential conflicts of interest and the
effects they may have on the Company.
[[Page 5023]]
(c) The Administrator must respond to the following questions and
instructions:
(i) Provide a narrative description of the functions directly
performed by senior staff, the administrative services manager, and the
staff that reports to that manager.
(ii) Does the Administrator provide any services for any Member's
PDP? If yes, what services? Does the Administrator have any profit or
loss responsibility, or licensing responsibility, for a Member's PDP or
any other professional involvement with persons the Administrator knows
are engaged in the Member's PDP business? If so, describe.
(iii) List the policies and procedures established to safeguard
Restricted Information, Highly Confidential Information, and
Confidential Information that is applicable to the Administrator.
(iv) Does the Administrator, or its representatives, have
additional relationships or material economic interests that could be
perceived by a reasonable objective observer to present a potential
conflict of interest with the representatives' responsibilities to the
Company? If so, provide a detailed narrative discussion of all material
facts necessary to identify the potential conflicts of interest and the
effects they may have on the Company.
(d) The members of the Advisory Committee must respond to the
following questions and instructions:
(i) Provide the member of the Advisory Committee's title and a
brief description of the member of the Advisory Committee's role within
the firm as well as any direct responsibilities related to the
procurement of PDP or CT Feeds or the development, dissemination,
sales, or marketing of PDP, and the nature of those responsibilities
sufficient for the public to identify the nature of any potential
conflict of interest that could be perceived by a reasonable objective
observer as having an effect on the operation of the Company. If such
representatives work in or with their employer's market data business,
describe such member of the Advisory Committee's roles and describe how
that business impacts their compensation. In addition, describe how
such representatives' responsibilities with the market data business
may present a conflict of interest with their responsibilities to the
Company.
(ii) Does the member of the Advisory Committee have
responsibilities related to the firm's use or procurement of market
data?
(iii) Does the member of the Advisory Committee have
responsibilities related to the firm's trading or brokerage services?
(iv) Does the member of the Advisory Committee's firm use the CT
Feeds? Does the member of the Advisory Committee's firm use a Member's
PDP?
(v) Does the member of the Advisory Committee's firm offer PDP? If
yes, list each product, described its content, and provide information
about the fees for each product.
(vi) Does the member of the Advisory Committee's firm have an
ownership interest of 5% or more in one or more Members? If yes, list
the Member(s).
(vii) Does the member of the Advisory Committee actively
participate in any litigation against the CQ Plan, CTA Plan, UTP Plan,
or the Company?
(viii) Does the member of the Advisory Committee or the member of
the Advisory Committee's firm have additional relationships or material
economic interests that could be perceived by a reasonable objective
observer to present a potential conflict of interest with their
responsibilities to the Company. If so, provide a detailed narrative
discussion of all material facts necessary to identify the potential
conflicts of interest and the effects they may have on the Company.
(e) Each service provider or subcontractor that has agreed in
writing to provide required disclosures and be treated as a Disclosing
Party shall respond to the following questions and instructions:
(i) Is the service provider or subcontractor affiliated with a
Member, Processor, Administrator, or employer of a member of the
Advisory Committee? If yes, disclose with whom the person is affiliated
and describe the nature of the affiliation.
(ii) If the service provider's or subcontractor's compensation is
on a commission basis or is tied to specific metrics, provide a
detailed narrative summary of how compensation is determined for
performing work on behalf of the Company.
(iii) Is the service provider or subcontractor subject to policies
and procedures (including information barriers) concerning the
protection of confidential information that includes affiliates? If so,
describe. If not, explain their absence.
(iv) Does the service provider or subcontractor, or its
representative, have additional relationships or material economic
interests that could be perceived by a reasonable objective observer to
present a potential conflict of interest with its responsibilities to
the Company? If so, provide a detailed narrative discussion of all
material facts necessary to identify the potential conflicts of
interest and the effects they may have on the Company.
(f) The responses to these questions will be posted on the
Company's website. If a Disclosing Party has any material changes in
its responses, the Disclosing Party must promptly update its
disclosures. Additionally, the Disclosing Parties must update the
disclosures on an annual basis to reflect any changes. This annual
update must be made before the first quarterly session meeting of each
calendar year, which is generally held in mid-February.
EXHIBIT C
Confidentiality Policy
(a) Purpose and Scope.
(i) The purpose of this Confidentiality Policy is to provide
guidance to the Operating Committee, and all subcommittees thereof,
regarding the confidentiality of any data or information (in physical
or electronic form) generated by, accessed by, or transmitted to the
Operating Committee or any subcommittee, as well as discussions
occurring at a meeting of the Operating Committee or any subcommittee.
(ii) This Policy applies to all Covered Persons. All Covered
Persons must adhere to the principles set out in this Policy and all
Covered Persons that are natural persons may not receive Company data
and information until they affirm in writing that they have read this
Policy and undertake to abide by its terms.
(iii) Covered Persons may not disclose Restricted, Highly
Confidential, or Confidential information except as consistent with
this Policy and directed by the Operating Committee.
(iv) The Administrator and Processors will establish written
confidential information policies that provide for the protection of
information under their control and the control of their Agents,
including policies and procedures that provide systemic controls for
classifying, declassifying, redacting, aggregating, anonymizing, and
safeguarding information, that is in addition to, and not less than,
the protection afforded herein. Such policies will be reviewed and
approved by the Operating Committee pursuant to Section 4.3, publicly
posted, and made available to the Operating Committee for review and
approval every two years thereafter or when changes are made, whichever
is sooner.
(v) Information will be classified solely based on its content.
[[Page 5024]]
(b) Procedures.
(i) General
(A) The Administrator and Processors will be the custodians of all
documents discussed by the Operating Committee and will be responsible
for maintaining the classification of such documents pursuant to this
Policy.
(B) The Administrator may, under delegated authority, designate
documents as Restricted, Highly Confidential, or Confidential, which
will be determinative unless altered by an affirmative vote of the
Operating Committee pursuant to Section 4.3.
(C) The Administrator will ensure that all Restricted, Highly
Confidential, or Confidential documents are properly labeled and, if
applicable, electronically safeguarded.
(D) All contracts between the Company and its Agents shall require
Company information to be treated as Confidential Information that may
not be disclosed to third parties, except as necessary to effect the
terms of the contract or as required by law, and shall incorporate the
terms of this Policy, or terms that are substantially equivalent or
more restrictive, into the contract.
(ii) Procedures Concerning Restricted Information
(A) Disclosure of Restricted Information
(1) Except as provided below, Covered Persons in possession of
Restricted Information are prohibited from disclosing it to others.
(2) Covered Persons in possession of Restricted Information are
prohibited from disclosing it to others, including Agents, except where
authorized to do so by the Operating Committee. Any authorization to
disclose Restricted Information must identify the Covered Persons or
third party authorized to receive the Restricted Information, and such
disclosure must be in furtherance of the interests of the plan. Any
authorization must be granted on a case-by-case basis, unless the
Operating Committee grants standing approval to allow disclosure of
specified recurring information to identified Covered Persons. Any
Covered Person or third party receiving or having access to Restricted
Information pursuant to this subparagraph must segregate such
information, retain it in confidence, and use it only in a manner
consistent with the terms of this Policy.
(3) Covered Persons may disclose Restricted Information to the
staff of the SEC or as otherwise required by Applicable Law, or to
other Covered Persons as expressly provided for by this Policy.
(B) If the Administrator determines that it is appropriate to share
a customer's financial information with the Operating Committee or a
subcommittee thereof, the Administrator will first anonymize the
information by redacting the customer's name and any other information
that may lead to the identification of the customer.
(C) The Administrator may disclose the identity of a customer that
is the subject of Restricted Information in Executive Session only if
the Administrator determines in good faith that it is necessary to
disclose the customer's identity in order to obtain input or feedback
from the Operating Committee or a subcommittee thereof about a matter
of importance to the Company. In such an event, the Administrator will
change the designation of the information at issue from ``Restricted
Information'' to ``Highly Confidential Information,'' and its use will
be governed by the procedures for Highly Confidential Information in
subparagraph (iii) below.
(iii) Procedures Concerning Highly Confidential Information
(A) Disclosure of Highly Confidential Information:
(1) Highly Confidential Information may be disclosed in Executive
Session of the Operating Committee or to the subcommittee established
pursuant to Section 4.7(c). Covered Persons in possession of Highly
Confidential Information are prohibited from disclosing it to others,
including Agents, except as provided below. This prohibition does not
apply to disclosures to the staff of the SEC or as otherwise required
by law (such as those required to receive the information to ensure the
Member complies with its regulatory obligations).
(2) An SRO Voting Representative may disclose certain Highly
Confidential Information to officers or employees of a Member who have
direct or supervisory responsibility for the Member's participation in
the Plan, or with agents for the Member supporting the Member's
participation in the Plan, provided that such information may not be
used in the procurement for, or development, modeling, pricing,
licensing, or sale of, PDP. The types of Highly Confidential
Information permitted to be shared under this subparagraph shall
consist of (i) the Plan's contract negotiations with the Processor(s)
or Administrator; (ii) communications with, and work product of,
counsel to the Plan; and (iii) information concerning personnel matters
that affect the employees of the Member or of the Plan. Any Covered
Person receiving or having access to Restricted Information pursuant to
this subparagraph must segregate such information, retain it in
confidence, and use it only in a manner consistent with the terms of
this Policy. Any SRO Voting Representative who discloses Highly
Confidential Information pursuant to this subparagraph shall maintain a
log documenting each instance of such disclosure, including the
information shared, the persons receiving the information, and the date
the information was shared.
(3) Highly Confidential Information may be disclosed to the staff
of the SEC, unless it is protected by the Attorney-Client Privilege or
the Work Product Doctrine. Any disclosure of Highly Confidential
Information to the staff of the SEC will be accompanied by a FOIA
Confidential Treatment request.
(4) Highly Confidential Information may be disclosed, as required
by Applicable Law.
(5) The Operating Committee may authorize the disclosure of
specified Highly Confidential Information to identified third parties
that are acting as Agents. Any authorization must be granted on a case-
by-case basis, unless the Operating Committee grants standing approval
to allow disclosure of specified recurring information to identified
Covered Persons. Any Covered Person or third party receiving or having
access to Highly Confidential Information pursuant to this subparagraph
must segregate such information, retain it in confidence, and use it
only in a manner consistent with the terms of this Policy.
(5) Apart from the foregoing, the Operating Committee has no power
to authorize any other disclosure of Highly Confidential Information.
(B) In the event that a Covered Person is determined by an
affirmative vote of the Operating Committee pursuant to this Policy to
have disclosed Highly Confidential Information, the Operating Committee
will determine the appropriate remedy for the breach based on the facts
and circumstances of the event. For an SRO Voting Representative or
Member Observer, remedies include a letter of complaint submitted to
the SEC, which may be made public by the Operating Committee. For a
member of the Advisory Committee, remedies include removal of that
member of the Advisory Committee.
(iv) Procedures Concerning Confidential Information
(A) Confidential Information may be disclosed during a meeting of
the Operating Committee or any subcommittee thereof. Additionally, a
Covered Person may disclose
[[Page 5025]]
Confidential Information to other persons who need to receive such
information to fulfill their responsibilities to the Plan, including
oversight of the Plan. The recipient must segregate the information,
retain it in confidence, and use it only in a manner consistent with
the terms of this policy. A Covered Person also may disclose
Confidential Information to the staff of the SEC, as authorized by the
Operating Committee as described below, or as may be otherwise required
by law.
(B) The Operating Committee may authorize the disclosure of
Confidential Information by an affirmative vote of the Operating
Committee pursuant to Section 4.3. Any authorization must be granted on
a case-by-case basis, unless the Operating Committee grants standing
approval to allow disclosure of specified recurring information to
identified Covered Persons. Any Covered Person or third party receiving
or having access to Confidential Information pursuant to this
subparagraph must segregate such information, retain it in confidence,
and use it only in a manner consistent with the terms of this Policy.
Notwithstanding the foregoing, the Operating Committee will not
authorize the disclosure of Confidential Information that is generated
by a Member or member of the Advisory Committee and designated by such
Member or member of the Advisory Committee as Confidential, unless such
Member or member of the Advisory Committee consents to the disclosure.
(C) Members of the Advisory Committee may be authorized by the
Operating Committee to disclose particular Confidential Information
only in furtherance of the interests of the Company, to enable them to
consult with industry representatives or technical experts, provided
that the members of the Advisory Committee take any steps requested by
the Operating Committee to prevent further dissemination of that
Confidential Information, including providing the individual(s)
consulted with a copy of this Policy and requesting that person to
maintain the confidentiality of such information in a manner consistent
with this policy.
(D) A Covered Person that is a representative of a Member may be
authorized by the Operating Committee to disclose particular
Confidential Information to other employees or agents of the Member or
its affiliates only in furtherance of the interests of the Company as
needed for such Covered Person to perform his or her function on behalf
of the Company. A copy of this Policy will be made available to
recipients of such information who are employees or agents of a Member
or its affiliates that are not Covered Persons, who will be required to
abide by this Confidentiality Policy.
(E) A Covered Person may disclose their own individual views and
statements that may otherwise be considered Confidential Information
without obtaining authorization of the Operating Committee, provided
that in so disclosing, the Covered Person is not disclosing the views
or statements of any other Covered Person or Member that are considered
Confidential Information.
(F) A person that has reason to believe that Confidential
Information has been disclosed by another without the authorization of
the Operating Committee or otherwise in a manner inconsistent with this
Policy may report such potential unauthorized disclosure to the Chair
of the Operating Committee. In addition, a Covered Person that
discloses Confidential Information without the authorization of the
Operating Committee will report such disclosure to the Chair of the
Operating Committee. Such self-reported unauthorized disclosure of
Confidential Information will be recorded in the minutes of the meeting
of the Operating Committee and will contain: (a) the name(s) of the
person(s) who disclosed such Confidential Information, and (b) a
description of the Confidential Information disclosed. The name(s) of
the person(s) who disclosed such Confidential Information will also be
recorded in any publicly available summaries of Operating Committee
minutes.
EXHIBIT D
Distributions
Cost Allocation and Revenue Sharing
(a) Payments. In accordance with Paragraph (l) of this Exhibit D,
each Member will receive an annual payment (if any) for each calendar
year that is equal to the sum of the Member's Trading Shares and
Quoting Shares (each as defined below), in each Eligible Security for
such calendar year. In the event that total Net Distributable Operating
Income (as defined below) is negative for a given calendar year, each
Member will receive an annual bill for such calendar year to be
determined according to the same formula (described in this paragraph)
for determining annual payments to the Members. Unless otherwise stated
in this agreement, a year shall run from January 1st to December 31st
and quarters shall end on March 31st, June 30th, September 30th, and
December 31st. The Company shall cause the Administrator to provide the
Members with written estimates of each Member's percentage of total
volume within five business days of the end of each calendar month.
(b) Security Income Allocation. The ``Security Income Allocation''
for an Eligible Security shall be determined by multiplying (i) the Net
Distributable Operating Income under this Agreement for the calendar
year by (ii) the Volume Percentage for such Eligible Security (the
``Initial Allocation''), and then adding or subtracting any amounts
specified in the reallocation set forth below.
(c) Volume Percentage. The ``Volume Percentage'' for an Eligible
Security shall be determined by dividing (A) the square root of the
dollar volume of Transaction Reports disseminated by the Processors in
such Eligible Security during the calendar year by (B) the sum of the
square roots of the dollar volume of Transaction Reports disseminated
by the Processors in each Eligible Security during the calendar year.
(d) Cap on Net Distributable Operating Income. If the Initial
Allocation of Net Distributable Operating Income in accordance with the
Volume Percentage of an Eligible Security equals an amount greater than
$4.00 multiplied by the total number of qualified Transaction Reports
in such Eligible Security during the calendar year, the excess amount
shall be subtracted from the Initial Allocation for such Eligible
Security and reallocated among all Eligible Securities in direct
proportion to the dollar volume of Transaction Reports disseminated by
the Processors in Eligible Securities during the calendar year. A
Transaction Report with a dollar volume of $5,000 or more shall
constitute one qualified Transaction Report. A Transaction Report with
a dollar volume of less than $5,000 shall constitute a fraction of a
qualified Transaction Report that equals the dollar volume of the
Transaction Report divided by $5,000.
(e) Trading Share. The ``Trading Share'' of a Member in an Eligible
Security shall be determined by multiplying (i) an amount equal to
fifty percent of the Security Income Allocation for the Eligible
Security by (ii) the Member's Trade Rating in the Eligible Security.
(f) Trade Rating. A Member's ``Trade Rating'' in an Eligible
Security shall be determined by taking the average of (A) the Member's
percentage of the total dollar volume of Transaction Reports
disseminated by the Processors in the
[[Page 5026]]
Eligible Security during the calendar year, and (B) the Member's
percentage of the total number of qualified Transaction Reports
disseminated by the Processors in the Eligible Security during the
calendar year.
(g) Quoting Share. The ``Quoting Share'' of a Member in an Eligible
Security shall be determined by multiplying (A) an amount equal to
fifty percent of the Security Income Allocation for the Eligible
Security by (B) the Member's Quote Rating in the Eligible Security.
(h) Quote Rating. A Member's ``Quote Rating'' in an Eligible
Security shall be determined by dividing (A) the sum of the Quote
Credits earned by the Member in such Eligible Security during the
calendar year by (B) the sum of the Quote Credits earned by all Members
in such Eligible Security during the calendar year.
(i) Quote Credits. A Member shall earn one ``Quote Credit'' for
each second of time (with a minimum of one full second) multiplied by
dollar value of size that an automated best bid (offer) transmitted by
the Member to the Processors during regular trading hours is equal to
the price of the National Best Bid and Offer in the Eligible Security
and does not lock or cross a previously displayed ``automated
quotation'' (as defined under Rule 600 of Regulation NMS). The dollar
value of size of a quote shall be determined by multiplying the price
of a quote by its size.
(j) Net Distributable Operating Income. The ``Net Distributable
Operating Income'' for any particular calendar year shall mean:
(i) all cash revenues, funds and proceeds received by the Company
during such calendar year (other than Capital Contributions by the
Members or amounts paid pursuant to Section 3.7(b) of this Agreement),
including all revenues from (A) the CT Feeds, which includes the
dissemination of information with respect to Eligible Securities to
foreign marketplaces, and (B) FINRA quotation data and last sale
information for securities classified as OTC Equity Securities under
FINRA's Rule 6400 Series (the ``FINRA OTC Data'') ((A) and (B)
collectively, the ``Data Feeds''), and (C) any Membership Fees; less
(ii) 6.25% of the revenue received by the Company during such
calendar year attributable to the segment of the Data Feeds reflecting
the dissemination of information with respect to Network C Securities
and FINRA OTC Data (but, for the avoidance of doubt, not including
revenue attributable to the segment of the Data Feeds reflecting the
dissemination of information with respect to Network A Securities and
Network B Securities), which amount shall be paid to FINRA as
compensation for the FINRA OTC Data; \1\ less
---------------------------------------------------------------------------
\1\ All costs associated with collecting, consolidating,
validating, generating, and disseminating the FINRA OTC Data are
borne directly by FINRA and not the Company and the Members.
---------------------------------------------------------------------------
(iii) reasonable working capital reserves and reasonable reserves
for contingencies for such calendar year, as determined by the
Operating Committee, and all costs and expenses of the Company during
such calendar year, including:
(A) all amounts payable during such calendar year to the
Administrator pursuant to the Administrative Services Agreement or this
Agreement;
(B) all amounts payable during such calendar year to the Processors
pursuant to the Processor Services Agreements or this Agreement; and
(C) all amounts payable during such calendar year to third-party
service providers engaged by or on behalf of the Company.
(k) Initial Eligibility. At the time a Member implements a
Processor-approved electronic interface with the Processors, the Member
will become eligible to receive revenue.
(l) Quarterly Distributions. The Company shall cause the
Administrator to provide Members with written estimates of each
Member's quarterly Net Distributable Operating Income within 45
calendar days of the end of the quarter, and estimated quarterly
payments or billings shall be made on the basis of such estimates. All
quarterly payments or billings shall be made to each eligible Member
within 45 days following the end of each calendar quarter in which the
Member is eligible to receive revenue; provided, that each quarterly
payment or billing shall be reconciled against a Member's cumulative
year-to-date payment or billing received to date and adjusted
accordingly; further, provided, that the total of such estimated
payments or billings shall be reconciled at the end of each calendar
year and, if necessary, adjusted by March 31st of the following year.
Interest shall be included in quarterly payments and in adjusted
payments made on March 31st of the following year. Such interest shall
accrue monthly during the period in which revenue was earned and not
yet paid and will be based on the 90-day Treasury bill rate in effect
at the end of the quarter in which the payment is made. Monthly
interest shall start accruing 45 days following the month in which it
is earned and accrue until the date on which the payment is made.
(m) Itemized Statements. In conjunction with calculating estimated
quarterly and reconciled annual payments under this Exhibit D, the
Company shall cause the Administrator to submit to the Members a
quarterly itemized statement setting forth the basis upon which Net
Distributable Operating Income was calculated. Such Net Distributable
Operating Income shall be adjusted annually based solely on the
quarterly itemized statement audited pursuant to the annual audit. The
Company shall cause the Administrator to pay or bill Members for the
audit adjustments within thirty days of completion of the annual audit.
Upon the affirmative vote of Voting Representatives pursuant to Section
4.3, the Company shall cause the Administrator to engage an independent
auditor to audit the Administrator's costs or other calculation(s).
EXHIBIT E
Fees
[To be determined by the Operating Committee under this Agreement]
BILLING CODE 8011-01-P
[[Page 5027]]
[GRAPHIC] [TIFF OMITTED] TN25JA24.000
[[Page 5028]]
[GRAPHIC] [TIFF OMITTED] TN25JA24.001
[[Page 5029]]
[GRAPHIC] [TIFF OMITTED] TN25JA24.002
[FR Doc. 2024-01369 Filed 1-24-24; 8:45 am]
BILLING CODE 8011-01-C
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on January 25, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.