Notice2026-19043
Joint Industry Plan; Order Approving the Third Amendment to the National Market System Plan Regarding Consolidated Equity Market Data To Revise the Revenue Allocation Formula
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Published
September 17, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 179 (Thursday, September 17, 2026)</title>
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[Federal Register Volume 91, Number 179 (Thursday, September 17, 2026)]
[Notices]
[Pages 58944-58946]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-19043]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-106349; File No. 4-757]
Joint Industry Plan; Order Approving the Third Amendment to the
National Market System Plan Regarding Consolidated Equity Market Data
To Revise the Revenue Allocation Formula
September 14, 2026.
I. Introduction
On June 2, 2026, the Operating Committee \1\ of the Limited
Liability Company Agreement of the CT Plan LLC (``CT Plan'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission''),
pursuant to section 11A of the Securities Exchange Act of 1934
(``Exchange Act'') \2\ and Rule 608 of Regulation National Market
System (``Regulation NMS'') thereunder,\3\ a proposal \4\ to revise the
allocation of net revenues under the CT Plan among Members
(``Amendment'').\5\ The Amendment, which represents the Third Amendment
to the CT Plan, was published for comment in the Federal Register on
June 17, 2026.\6\ The Commission received comment on the Amendment and
a response from the Operating Committee.\7\ This order approves the
Amendment.
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\1\ See CT Plan Art. IV, sec. 4.1.
\2\ 15 U.S.C. 78k-1(a)(3).
\3\ 17 CFR 242.608.
\4\ See Letter from Jeff Kimsey, CT Plan Operating Committee
Chair, dated June 1, 2026. Pursuant to section 4.3(b) of the CT
Plan, certain actions of the Operating Committee require an
affirmative vote of not less than two-thirds of all votes eligible
to vote on a matter. Long Term Stock Exchange, Inc. (``LTSE'') did
not join in the submission of the proposal. See Securities Exchange
Act Release No. 105680 (June 12, 2026), 91 FR 36633 at n.4 (June 17,
2026) (``Notice'').
\5\ The Members are: 24X National Exchange LLC, Cboe BYX
Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc.,
Cboe EDGX Exchange, Inc., Cboe Exchange, Inc., Financial Industry
Regulatory Authority, Inc. (``FINRA''), Investors Exchange LLC,
LTSE, MEMX LLC, MIAX PEARL, LLC, Nasdaq Texas, LLC, Nasdaq ISE, LLC,
Nasdaq PHLX LLC, The Nasdaq Stock Market LLC, New York Stock
Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE National,
Inc., NYSE Texas, Inc. (``NYSE Texas''), and Texas Stock Exchange
LLC.
\6\ See Notice, supra note 4.
\7\ Comments received can be found on the Commission's website
at: <a href="https://www.sec.gov/comments/4-757/4-757.htm">https://www.sec.gov/comments/4-757/4-757.htm</a>.
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II. Background
Exhibit D to the CT Plan provides for the allocation of net
revenues received under the CT Plan among the Members. Generally,
revenue is allocated through a two-step process that involves first,
allocating revenue to individual securities and second, allocating such
revenue to Members based on their respective quoting and trading
activity in such individual securities.\8\ Under the CT Plan, the
Operating Committee has ``full and complete discretion,'' subject to
any required approval by its Members \9\ and the requirements of Rule
608 of Regulation NMS,\10\ to, among other things, take all such
actions as it deems necessary or appropriate to accomplish the purposes
of the CT Plan, including ``designing a fair and reasonable revenue
allocation formula for allocating plan revenues'' and overseeing,
reviewing, and revising that formula as needed,\11\ as well as
proposing amendments to the CT Plan.\12\ The Amendment would impose a
limit, or ``cap,'' on the ratio of revenue distributed to each
individual Member that is attributable to its quoting activity compared
to revenue such Member receives for trading activity.
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\8\ See Exhibit D of the CT Plan.
\9\ See supra note 4.
\10\ 17 CFR 242.608.
\11\ See section 4.1(a)(vi) of the CT Plan.
\12\ See section 4.1(a)(i) of the CT Plan.
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1. Purpose of Amendment
According to the Operating Committee, Members have observed a
distinct pattern on some markets of quoting and trading activity,
characterized by frequent or continuous quoting at the national best
bid and offer (``NBBO'')--often in size and in high-priced securities--
accompanied by relatively little increase in the level of trading
activity on those venues.\13\ The Operating Committee stated that this
resulted in extreme distortions in how quote-based revenues were
allocated among the Members, compared to trade-based revenues.\14\ For
example, according to the Operating Committee, LTSE's quote-to-trade
ratio for 2024 was approximately 107:1 on Tape A, 70:1 on Tape B, and
88:1 on Tape C.\15\ In addition, according to the Operating Committee,
NYSE Chicago, Inc. (now NYSE Texas) also exhibited quote-to-trade
ratios significantly higher than historical norms, often exceeding
20:1, in Tapes A and C beginning in 2021 and ending in 2024.\16\ By
comparison, according to the Operating Committee, from 2018 through the
present, Members typically have maintained quote-to-trade ratios
substantially less than 5:1 and allocations in excess of that ratio
have historically occurred only under exceptional circumstances, such
as the temporary distortions in quoting and trading related to the
entry of new exchanges with low absolute trading and quoting
volume.\17\ The Operating Committee stated that the observed quoting
activity undermined the Commission's objectives in adopting the revenue
allocation formula in Regulation NMS and warranted a change to the CT
Plan's revenue allocation formula to ensure those objectives are
met.\18\ According to the Operating Committee, when quoting activity
ceases to bear a meaningful relationship to trading, it becomes ``less
useful for price discovery and more likely to be associated with
activity that distorts market data[.]'' \19\
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\13\ See Notice, supra note 4 at 36634. The Operating Committee
also stated that ``much of the quoting activity responsible for high
quote-to-trade ratios has involved quoting in relatively inactively
traded securities.'' See Notice, supra note 4 at 36634 n.10.
\14\ See Notice, supra note 4 at 36634.
\15\ See Notice, supra note 4 at 36634.
\16\ See Notice, supra note 4 at 36634.
\17\ See Notice, supra note 4 at 36634.
\18\ See Notice, supra note 4 at 36634 (stating that ``[i]n
revising the formula, the Commission determined that it should
provide some allocation of revenue for quotations that contribute
meaningfully to the consolidated data stream''); see also Securities
Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 at 37561-
37566 (June 29, 2005) (``Regulation NMS Adopting Release'')
(discussing the new revenue allocation formula).
\19\ See Notice, supra note 4 at 36634.
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2. Description of Proposed Amendment
In the Amendment, the Operating Committee proposed to implement a
ratio cap on the quote-to-trade revenue ratio. Specifically, under the
Amendment, the amount of quote-related revenue received by a Member
would be adjusted if it exceeded its allocated trading revenue by a
ratio of more than five-to-one.\20\ The Amendment would apply the ratio
cap to each periodic distribution of CT Plan revenue to Members. As
proposed, the amount of quoting revenue that exceeds the five-to-one
ratio that would be otherwise payable to the Member would be
redistributed to all other Members, including FINRA (to which the ratio
cap does not apply).\21\ The allocation of the excess to such other
Members would be based on each Member's share of distributable quote
revenue in relation to all quote revenue distributable to all such
other Members. Furthermore, if the redistribution of revenue would
cause a Member to exceed the 5:1 ratio, the excess revenue above the
ratio would be
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further redistributed in the same way to other Members that have not
exceed the ratio cap.\22\ The Amendment also included a de minimis
exception for Members with very low total quoting and trading activity,
to recognize that such entities may temporarily exceed the 5:1 ratio
due to statistical volatility without materially affecting revenue
distribution.\23\ As proposed, the de minimis exception would not apply
the ratio cap where a Member's total payment based on quoting activity
does not exceed $50,000 during a calendar year.\24\
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\20\ See proposed section (a)(ii) of Exhibit D of the CT Plan
and Notice, supra note 4 at 36635. According to the Operating
Committee, the 5:1 threshold is based on an analysis of historical
data from 2018 to 2024. The Operating Committee stated that during
that time, excluding the 25 out of 318 distributions when the ratio
cap would have been breached by various exchanges, the average
quote-to-trade ratio would have been as follows: Tape A: 1.79, Tape
B: 1.86; and Tape C 1.82. See Notice, supra note 4 at 36635.
\21\ See proposed section (a)(ii) of Exhibit D of the CT Plan
and Notice, supra note 4 at 36635.
\22\ See proposed section (a)(ii) of Exhibit D of the CT Plan
and Notice, supra note 4 at 36635.
\23\ See proposed section (a)(ii) of Exhibit D of the CT Plan
and Notice, supra note 4 at 36635. The Operating Committee stated
that in 3 of the 25 times that the proposed ratio cap would have
been exceeded between 2018 and 2024, one exchange that exceeded the
ratio cap would have been eligible for receiving quote revenue under
the de minimis exception. See Notice, supra note 4 at 36635.
\24\ See proposed section (a)(ii) of Exhibit D of the CT Plan
and Notice, supra note 4 at 36635. According to the Operating
Committee, the de minimis exception was selected based on reviewing
data for new exchanges and ensuring that those new exchanges would
not be affected by the ratio cap during their launch. See Notice,
supra note 4 at 36635.
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III. Discussion and Commission Findings
After careful consideration, the Commission is approving the
Amendment. Rule 608 of Regulation NMS authorizes two or more self-
regulatory organizations, acting jointly, to file with the Commission a
proposed amendment to an effective national market system plan, and
Rule 608 provides that the Commission shall approve an amendment to an
effective national market system plan if it finds that the amendment is
necessary or appropriate in the public interest, for the protection of
investors and the maintenance of fair and orderly markets, to remove
impediments to, and perfect the mechanisms of, a national market
system, or otherwise in furtherance of the purposes of the Exchange
Act.\25\ For the reasons discussed below, the Commission concludes that
the Amendment is 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 mechanism of a national market system,
or is otherwise in furtherance of the purposes of the Exchange Act
consistent with Rule 608(b)(2) of Regulation NMS.\26\
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\25\ See 17 CFR 242.608(a)(1) and 17 CFR 242.608(b)(2).
\26\ See 17 CFR 242.608(b)(2). The Commission stated when it
adopted Regulation NMS and the revenue allocation formula that ``the
language added to the Plans by the Allocation Amendment can be
adjusted in the future pursuant to the normal process of Commission-
approved amendments.'' See Regulation NMS Adopting Release, supra
note 18 at 37561-62.
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The Commission received comment letters on the Amendment. While one
commenter ``generally agree[s] with the Third Amendment as a corrective
measure,'' the commenter stated that ``it does not go far enough and
does not remedy the structural deficiencies in the current [revenue
allocation] formula,'' \27\ which it stated contributes to excessive
exchange proliferation by ``permitting exchanges to earn meaningful
market data revenues without making commensurate contributions to
trading activity, liquidity, or price discovery[.]'' \28\ According to
this commenter, the Amendment only addresses a ``narrow set of outlier
outcomes'' and would continue to ``systematically award quote revenue
at nearly double the rate of trade revenue even for exchanges operating
well within the proposed cap.'' \29\ Instead, the commenter made
several recommendations, including (i) reducing overall CT Plan costs
to ensure the CT Plan recovers ``only those costs reasonably necessary
to administer and operate'' the CT Plan,\30\ (ii) increasing the
weighting assigned to trade executions since executions ``provide the
strongest evidence of price discovery[,]'' \31\ (iii) limiting quote
credits, if the Commission determines that quotations should continue
to receive credit under the revenue allocation formula, to NBBO setting
quotations that result in executions to reward quotations that both
introduce new pricing information to the marketplace and demonstrate
that information's value through actual trading activity,\32\ and (iv)
establishing a minimum participation threshold as a prerequisite to
sharing revenues.\33\ One commenter stated that ``[m]aking more
fundamental changes to the formula requires a thoughtful approach
because it will impact exchange and market participant behavior.'' \34\
This commenter also provided data on 2025 and first quarter of 2026
revenue allocations and showed that three exchanges in 2025 and two
exchanges in the first quarter of 2026 would have been impacted by the
proposed quote-to-trade ratio of 5:1.\35\
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\27\ See Letter from Joanna Mallers, Secretary, PTG, dated July
8, 2026 (``PTG Letter'') at 1.
\28\ PTG Letter at 1-2; see also Letter from Katie Kolchin, CFA,
Managing Director, Head of Equity & Options Market Structure and
Gerald O-Hara, Vice President & Assistant General Counsel, The
Securities Industry and Financial Markets Association, dated July
22, 2026 (``SIFMA Letter'') at 2.
\29\ PTG Letter at 2; see also SIFMA Letter at 1.
\30\ PTG Letter at 3; see also SIFMA Letter at 4-5.
\31\ PTG Letter at 3; see also SIFMA Letter at 3-4. According to
one commenter, the current formula fails to distinguish between
``quotations that establish the NBBO and facilitate trading,
quotations that join an existing NBBO, and quotations that never
result in executions at all.'' PTG Letter at 2.
\32\ PTG Letter at 3-4.
\33\ PTG Letter at 4. See also SIFMA Letter at 1 (stating that
the commenter plans to address, among other things, the revenue
allocation formula ``more broadly in our response to the Rule 611
Proposal'') and Letter from William R. Harts, Chief Executive
Officer, LTSE, dated July 8, 2026, at 6 (``LTSE Letter'') (stating
that if the Commission decides to revisit the revenue allocation
formula, it should conduct a comprehensive re-examination). The
Commission recently proposed to rescind Rule 611 of Regulation NMS
and stated in that release that ``[s]ome have criticized the
formula's quoting component, which they argued has contributed to
the creation of new exchanges and subsidizes exchanges that quote
but rarely trade, thus providing minimal value to market
participants.'' See Notice, supra note 4 at 36636. In this regard,
the Commission requested comment on whether, and to what extent,
revisions should be made to the revenue allocation formula. See
Notice, supra note 4 at 36636. The comment period for the proposal
to rescind Rule 611 was open until August 17, 2026. See Securities
Exchange Release No. 105655 (June 11, 2026), 91 FR 36656 (June 17,
2026) (``Rule 611 Proposal''). For the reasons discussed herein, the
Commission is approving the Amendment. However, the Commission will
continue to consider all comments on whether, and to what extent,
additional revisions should be made to the revenue allocation
formula. Moreover, the Operating Committee has committed to
overseeing a broader review of the revenue allocation formula. See
Letter from Jeff Kimsey, CT Plan Operating Committee Chair, dated
August 23, 2026 (``Response Letter'') at 3.
\34\ SIFMA Letter at 1.
\35\ SIFMA Letter at 2-3.
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Another commenter stated that the Commission should disapprove the
Amendment.\36\ The commenter stated that the current revenue allocation
formula ``reflects Commission-approved goals designed to remunerate
contributions to price discovery'' \37\ and that there is no data that
shows the existence of any deficiencies.\38\ The commenter stated that
the Amendment is ``unsupported and controversial.'' \39\ The commenter
also stated that the current revenue allocation formula has been in
place for over 20 years and rewards exchanges that contribute to price
discovery by displaying high-quality quotations at the NBBO.\40\ The
commenter further stated that there are other legitimate reasons as to
why quoting activity may not have a
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``meaningful relationship'' to trading, including other venues quickly
matching the NBBO; smart order routers prioritizing exchanges with
historical liquidity; routers prioritizing venues with the largest
displayed size; firms seeking to lower their costs by reaching certain
exchange volume tiers; and competition from the over-the-counter market
and other exchanges.\41\ The commenter stated that the Amendment would
create distorted incentives and potentially anti-competitive outcomes
because exchanges with low quote-to-trade ratios would be less
incentivized to encourage aggressive quoting that contributes to price
discovery.\42\
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\36\ LTSE Letter at 2. This commenter submitted a subsequent
comment letter to ``supplement the record'' by attaching the comment
letter it submitted on the Rule 611 Proposal. See Letter from Maliz
Beams, Interim Chief Executive Officer, LTSE, dated August 28, 2026.
\37\ LTSE Letter at 1.
\38\ LTSE Letter at 1-2, 6.
\39\ LTSE Letter at 2.
\40\ LTSE Letter at 6.
\41\ LTSE Letter at 4-5.
\42\ LTSE Letter at 6.
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In response to the foregoing, the Operating Committee stated that
the Amendment ``represents a measured and beneficial refinement to the
existing allocation framework, directed at a specific issue[.]'' \43\
According to the Operating Committee, the Amendment addresses a
discrete concern ``that in certain circumstances, quote activity may
generate revenue allocations that are disproportionate to trading
activity and disconnected from meaningful market contribution.'' \44\
Accordingly, the Operating Committee stated that future consideration
of broader reforms to the allocation formula should not delay approval
of the Amendment, which is an ``incremental, practical correction to a
discrete problem.'' \45\ Further, approval of the Amendment would ``not
prevent the SEC or the Operating Committee from reviewing the remaining
aspects of the formula at a future date.'' \46\ The Operating Committee
represented that the it remained ``committed to overseeing a broader
review of the . . . formula, especially in light of broader market
reforms being considered by the SEC.'' \47\
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\43\ Response Letter at 1.
\44\ Response Letter at 1.
\45\ Response Letter at 2-3.
\46\ Response Letter at 1.
\47\ Response Letter at 3.
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As to one commenter stating that there may be other legitimate
reasons as to why quoting activity may not have a meaningful
relationship to trading,\48\ the Operating Committee stated that this
commenter had ``not presented data demonstrating that an exchange
subject to the cap provides the type of market contribution'' suggested
by the commenter.\49\ Further, the Operating Committee stated that
``Members typically have maintained quote-to-trade ratios substantially
less than 5:1, and allocations in excess of that ratio have
historically occurred only under exceptional circumstances,'' \50\ such
as the entry of new exchanges, and that the commenter had ``not
provided data demonstrating that the temporary distortions are
associated with what it considers to be meaningful quote-only
participation.'' \51\ The Operating Committee also stated that the
Amendment ``continues to recognize quote-based contribution by
preserving quote-related allocation. It simply limits the extent to
which quote-based allocation may outpace trade-based allocation.'' \52\
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\48\ See supra note 41 and accompanying text.
\49\ Response Letter at 2.
\50\ Response Letter at 2.
\51\ Response Letter at 2.
\52\ Response Letter at 2.
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As described above, the Operating Committee proposed a discrete
change to how payments would be allocated to Members under the revenue
allocation formula, which formula remains unchanged, to address quoting
activities that are outside of historic quote-to-trade ratios that the
Operating Committee estimates as substantially less than 5:1.\53\ The
Operating Committee provided data to support the Amendment that showed
quote-to-trade ratios on certain exchanges that were outside of
historical norms, in one case in excess of 100:1.\54\ While one
commenter stated that there may have been legitimate reasons for that
elevated quoting activity,\55\ it is not clear that these reasons
explain the prolonged and recurring quoting activity that significantly
exceeded other Members' historical norms.\56\ Further, there is no
evidence, at this time, to suggest that the Amendment would result in
exchanges being less incentivized to display aggressive quotes.
However, as described above, the Commission and the Operating Committee
will continue to monitor any issues that may arise and consider whether
and to what extent additional revisions should be made to the revenue
allocation formula.\57\
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\53\ See supra notes 15-17 and accompanying text.
\54\ See Notice, supra note 4 at 36634; see also SIFMA Letter at
3.
\55\ See supra note 41 and accompanying text.
\56\ See Notice, supra note 4 at 36634.
\57\ See supra note 33.
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The Commission finds that the Amendment is appropriate in the
public interest, for the protection of investors and the maintenance of
fair and orderly markets because it is a narrowly designed revision to
payments pursuant to the revenue allocation formula, while including a
de minimis exception applied to Members with very low total quoting and
trading activity.\58\ Specifically, the Amendment is narrow in scope,
as it is designed to revise the payment of quotation revenue to Members
only in specific occurrences of quoting activity that are outside of
historical norms. Providing a de minimis exception also recognizes that
Members may temporarily exceed the 5:1 ratio due to statistical
volatility without materially affecting revenue distribution, such as
can happen to new exchanges during their launch. Moreover, the
exclusion of FINRA from the 5:1 ratio is appropriate given the unique
nature of FINRA's trade reporting facilities.\59\ Consequently, the
Commission finds that the Operating Committee's adjustments to payments
under the revenue allocation formula to address these quoting
activities are reasonable and fulfill its obligations of ``designing a
fair and reasonable revenue allocation formula . . . and overseeing,
reviewing and revising that formula as needed.'' \60\
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\58\ See supra notes 23 and 24.
\59\ See Notice, supra note 4. Pursuant to FINRA Rule 6110,
FINRA members are required to report transactions in NMS stocks
effected ``otherwise than on or through a national securities
exchange to FINRA.'' See FINRA Rule 6110(a). FINRA also provides an
Alternative Display Facility (``ADF'') that provides members with a
facility for the display of quotations, the reporting of trades, and
the comparisons of trades. Currently, there are no active quoting
ADF members. See <a href="https://www.finra.org/filing-reporting/alternative-display-facililty-adf">https://www.finra.org/filing-reporting/alternative-display-facililty-adf</a>.
\60\ See CT Plan, Art. IV, section 4.1(a)(vi).
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IV. Conclusion
For the reasons discussed above, the Commission finds that the
Amendment is consistent with the requirements of section 11A of the
Exchange Act,\61\ and Rule 608 thereunder.\62\ Specifically, the
Commission finds that the Amendment is 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
mechanism of, a national market system, or otherwise in furtherance of
the purposes of the Exchange Act.
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\61\ 15 U.S.C. 78k-1.
\62\ 17 CFR 242.608.
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It is therefore ordered, that pursuant to section 11A of the
Exchange Act,\63\ and Rule 608(b)(2) thereunder,\64\ the Amendment
(File No. 4-757) is approved.
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\63\ 15 U.S.C. 78k-1.
\64\ 17 CFR 242.608(b)(2).
By the Commission.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2026-19043 Filed 9-16-26; 8:45 am]
BILLING CODE 8011-01-P
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