

[Federal Register: April 26, 2007 (Volume 72, Number 80)]
[Notices]               
[Page 20891-20901]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26ap07-97]                         


[[Page 20891]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55647; File No. S7-24-89]

 
Joint Industry Plan; Order Granting Permanent Approval of the 
Reporting Plan for Nasdaq-Listed Securities Traded on Exchanges on an 
Unlisted Trading Privilege Basis, Submitted by the American Stock 
Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Stock 
Exchange, Inc., the Chicago Board Options Exchange, Inc., the 
International Securities Exchange, LLC, the National Association of 
Securities Dealers, Inc., the National Stock Exchange, Inc., the Nasdaq 
Stock Market LLC, NYSE Arca, Inc., and the Philadelphia Stock Exchange, 
Inc

April 19, 2007.

I. Introduction and Description

    On December 12, 2006, NYSE Arca, Inc. (``NYSEArca''), on behalf of 
itself and the American Stock Exchange LLC (``Amex''), the Boston Stock 
Exchange, Inc. (``BSE''), the Chicago Stock Exchange, Inc. (``CHX''), 
the Chicago Board Options Exchange, Inc. (``CBOE''), the International 
Securities Exchange, LLC (``ISE''), the National Association of 
Securities Dealers, Inc. (``NASD''), the National Stock Exchange, Inc. 
(``NSX''), the Nasdaq Stock Market LLC (``Nasdaq''), and the 
Philadelphia Stock Exchange, Inc. (``Phlx'') (hereinafter referred to 
collectively as ``Participants''),\1\ as members of the Operating 
Committee of the Plan submitted to the Securities and Exchange 
Commission (``Commission'') a request to extend the operation of the 
Plan, along with a request for permanent approval of the Plan 
(``Request'').\2\ On December 20, 2006, the Commission published notice 
of the Request for comment and simultaneously granted summary 
effectiveness to the request to extend the operation of the Plan on a 
temporary basis.\3\ The Commission received one comment letter in 
response to the publication of the notice.\4\
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    \1\ NYSEArca is the chair of the operating committee 
(``Operating Committee'' or ``Committee'') for 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 
Privilege (``UTP'') Basis (``Nasdaq UTP Plan'' or ``Plan''). The New 
York Stock Exchange was added as a Plan participant after the 
request to extend the operation of the Plan was submitted to the 
Commission. See Securities Exchange Act Release No. 55192 (January 
29, 2007), 72 FR 5456 (February 6, 2007).
    \2\ See letter from Bridget M. Farrell, Chairman, OTC/UTP 
Operating Committee, to Nancy M. Morris, Secretary, Commission, 
dated December 12, 2006.
    \3\ See Securities Exchange Act Release No. 54988, 71 FR 78240 
(December 28, 2006).
    \4\ See email correspondence from Gene L. Finn to Nancy Morris, 
Secretary, Commission, dated January 22, 2007. In his letter, Mr. 
Finn raises concerns with respect to non-professional access fees. 
However, the Plan does not address such fees. Consequently, the 
Commission is not addressing it in this order.
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    The Nasdaq UTP Plan governs the collection, processing, and 
dissemination on a consolidated basis of quotation and last sale 
information for Nasdaq-listed securities for each of its Participants. 
This consolidated information informs investors of the current 
quotation and recent trade prices of Nasdaq securities. It enables 
investors to ascertain from one data source the current prices in all 
the markets trading Nasdaq securities. The Plan serves as the required 
transaction reporting plan for its Participants, which is a 
prerequisite for their trading Nasdaq securities.\5\
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    \5\ See Securities Exchange Act Release No. 52886 (December 5, 
2005), 70 FR 74059 (December 14, 2005).
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    This order approves, pursuant to Rule 608(b)(4) under the 
Securities Exchange Act of 1934 (``Act''),\6\ the Plan, as modified by 
all changes previously made, on a permanent basis.\7\
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    \6\ 17 CFR 242.608(b)(4).
    \7\ The complete text of the Plan is attached as Exhibit A.
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II. Background

    The Plan was approved on a pilot basis in 1990.\8\ It did not 
become operational until 1993.\9\ At that time, the Participants were 
the Amex, the BSE, the CHX,\10\ the Phlx, and the NASD. The BSE joined 
the Plan as a limited participant so that it could continue to trade 
securities that were listed on the BSE and also traded on Nasdaq. 
Nasdaq was operated by the NASD, and Nasdaq securities were traded in 
the over-the-counter (``OTC'') market. The Plan contained the essential 
elements of a transaction reporting plan. The pilot, as approved, 
provided that each exchange requesting UTP would be permitted to trade, 
on an unlisted basis, up to 100 OTC securities designated as NMS 
Securities.\11\ The Commission approved the Plan on a pilot basis with 
the expectation that the Participants would conclude their financial 
negotiations and evaluate the effects of the pilot program and report 
their findings to the Commission.
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    \8\ See Securities Exchange Act Release No. 28146, 55 FR 27917 
(July 6, 1990) (``Original Order'').
    \9\ Before the Plan became operational, the CHX entered into an 
interim transaction reporting plan with the NASD. For a more 
detailed history, See Securities Exchange Act Release No. 34371 
(July 13, 1994), 59 FR 37103 (July 20, 1994).
    \10\ At that time, the CHX was known as the Midwest Stock 
Exchange.
    \11\ See Original Order.
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    In 1996, the Plan Participants agreed on a revenue sharing formula 
and amended the Plan to reflect their agreement.\12\ The CSE joined the 
Plan in 1999, and the PCX joined the Plan in 2000.\13\ In 2001 the BSE 
became a Participant, and the Amex rejoined the Plan. In addition, the 
revenue sharing formula was amended, and a process was established for 
selecting a new Securities Information Processor (``SIP'').\14\ Over 
time, as the Commission observed no adverse effects in connection with 
trading Nasdaq securities on exchanges, it expanded the number of 
securities. The Commission later extended UTP to all Nasdaq National 
Market securities and Nasdaq Small Cap securities.\15\
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    \12\ See Securities Exchange Act Release No. 37772 (October 1, 
1996), 66 FR 59273 (October 9, 1996).
    \13\ See Securities Exchange Act Release Nos. 42269 (December 
23, 1999), 65 FR 51878 (January 6, 2000) and 43165 (August 16, 
2000); 65 FR 51878 (August 25, 2000). The PCX is now known as NYSE 
Arca.
    \14\ In the Commission's order approving Nasdaq's SuperMontage 
system, the Commission set out conditions with respect to the 
selection of a SIP for the Plan. See Securities Exchange Act Release 
No. 43863 (January 19, 2001), 66 FR 8020 (January 26, 2001).
    \15\ See Securities Exchange Act Release No. 45081 (November 19, 
2001) 66 FR 59273 (November 27, 2001) (approving the 12th Amendment 
to the Plan which made substantial changes to the Plan, including 
eliminating the category of limited participant).
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    The Plan now includes all the markets that trade equity 
securities.\16\ It has been amended numerous times to address issues 
presented by the addition of participants and changes in the markets. 
The Plan now includes Advisory Committee members, as specified in 
Regulation NMS, and also includes an access provision that parallels 
the requirement in Regulation NMS.\17\ At

[[Page 20892]]

this time, the provisions of the UTP Plan conform to the requirements 
of Regulation NMS and are consistent with the objectives set forth in 
Section 11A of the Act.\18\
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    \16\ The Plan Participants are: Amex, BSE, CBOE, CHX, ISE, NASD, 
Nasdaq, NSX, NYSE, NYSE Arca, and Phlx. See Securities Exchange Act 
Release No. 55192 (January 29, 2007), 72 FR 5456 (February 6, 2007). 
Amendment 14 added CBOE as a Participant and changed the name of the 
CSE to reflect its new name, the NSX. See Securities Exchange Act 
Release No. 51304 (March 2, 2005), 70 FR 12507 (March 14, 2005). 
Amendment 16 added the ISE as a Participant. See Securities Exchange 
Act Release No. 53131 (January 17, 2006), 71 FR 3896 (January 24, 
2006). Amendment 19 added the NYSE as a Participant. See Securities 
Exchange Act Release No. 55192 (January 29, 2007), 72 FR 5456 
(February 6, 2007).
    \17\ In essence, the Plan permits Participants to provide access 
consistent with Regulation NMS. If they are not able to provide such 
access, they can continue to provide telephone access until the 
access provision of Regulation NMS is effective. See Securities 
Exchange Act Release No. 54936 (December 14, 2006), 71 FR 76381 
(December 20, 2006). See also Securities Exchange Act Release No. 
55160, 72 FR 4203 (January 30, 2007) (extension of compliance dates 
for Rules 610 and 611 of Regulation NMS).
    \18\ The allocation of market data revenue will be governed by 
Regulation NMS.
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    Before Nasdaq separated from the NASD and registered as a national 
securities exchange, trading in Nasdaq stocks occurred in the OTC 
market. As such, the Commission had to approve the extension of 
unlisted trading privileges to Nasdaq securities before an exchange was 
able to trade them.\19\ Now that Nasdaq is an exchange, the securities 
listed on Nasdaq are exchange listed securities, which entitles other 
exchanges to trade the securities without a separate Commission order 
conferring unlisted trading privileges.\20\
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    \19\ See Section 12(f) of the Act.
    \20\ See 15 U.S.C. 781.
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    The Plan is the joint transaction reporting plan for Nasdaq-listed 
securities; several of the exemptions that were needed when the plan 
was first approved are no longer necessary. At the outset, the Plan 
Participants needed exemptive relief from Rule 11Ac1-2 under the Act 
regarding calculation of the best bid and offer (``BBO''), as well as 
an exemption for BSE from the provision of Rule 11Aa3-1 under the Act 
that required transaction reporting plans to include market identifiers 
for transaction reports and last sale data. Once the BSE became a full 
participant and the method of calculation of the BBO by the Plan's SIP 
was converted from price/time/size to price/size/time methodology, 
neither exemption was necessary.\21\ Similarly, after Nasdaq became 
registered as a national securities exchange with respect to Nasdaq-
listed securities, Plan Participants no longer needed an exemption from 
Rule 11Aa3-2 regarding the dissemination of multiple BBOs from a single 
Plan Participant.\22\
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    \21\ See Securities Exchange Act Release Nos. 45081 (November 
19, 2001), 66 FR 59273 (November 27, 2001) and 46729 (October 25, 
2002), 67 FR 66685 (November 1, 2002).
    \22\ See Section VI.C.1 of the Plan.
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III. Findings

    The Commission finds that approving the Plan on a permanent basis 
is consistent with the requirements of the Act and the rules and 
regulations thereunder, and, in particular, Section 11A(a)(1) \23\ of 
the Act and Rules 601 and 608, thereunder.\24\ Section 11A of the Act 
directs the Commission to facilitate the development of a national 
market system for securities, ``having due regard for the public 
interest, the protection of investors, and the maintenance of fair and 
orderly markets,'' and cites as an objective of that system the ``fair 
competition * * * between exchange markets and markets other than 
exchange markets.'' \25\ When the Commission first approved the Plan on 
a pilot basis, it found that the Plan ``should enhance market 
efficiency and fair competition, avoid investor confusion, and 
facilitate surveillance of concurrent exchange and OTC trading.'' \26\ 
The Participants have been trading Nasdaq securities since 1993 with 
the Plan as their transaction reporting plan. The Commission believes 
that the Plan has enhanced market efficiency and promoted competition 
between markets trading Nasdaq securities.
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    \23\ 15 U.S.C. 78k-1(a)(1).
    \24\ 17 CFR 242.601 and 17 CFR 242.608.
    \25\ 15 U.S.C. 78k-1(a).
    \26\ See Original Order.
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    The Commission finds that granting permanent approval of the Plan 
furthers the goals described above. The Commission believes that the 
Plan is a critical component of the national market system and, as 
such, should be approved on a permanent basis.

IV. Conclusion

    It is therefore ordered, pursuant to Section 11A of the Act \27\ 
and paragraph (b)(4) of Rule 608 thereunder,\28\ that the Plan, as 
modified by all changes made to date, be, and hereby is, approved on a 
permanent basis.
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    \27\ 15 U.S.C. 78k-1.
    \28\ 17 CFR 242.608(b)(4).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(27).
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Florence E. Harmon,
Deputy Secretary.

Exhibit A--Nasdaq UTP Plan

Amended and Restated Plan

    The undersigned registered national securities association and 
national securities exchanges (collectively referred to as the 
``Participants''), have jointly developed and hereby enter into this 
Nasdaq Unlisted Trading Privileges Plan (``Nasdaq UTP Plan'' or 
``Plan'').

I. Participants

    The Participants include the following:

A. Participants

    1. American Stock Exchange LLC, 86 Trinity Place, New York, New 
York 10006.
    2. Boston Stock Exchange, 100 Franklin Street, Boston, 
Massachusetts 02110.
    3. Chicago Stock Exchange, 440 South LaSalle Street, Chicago, 
Illinois 60605.
    4. Chicago Board Options Exchange, Inc., 400 South LaSalle Street, 
26th Floor, Chicago, Illinois 60605.
    5. International Securities Exchange, LLC, 60 Broad Street, New 
York, New York 10004.
    6. National Association of Securities Dealers, Inc., 1735 K Street, 
NW., Washington, DC 20006.
    7. National Stock Exchange, Inc., 440 South LaSalle Street, 26th 
Floor, Chicago, Illinois 60605.
    8. New York Stock Exchange LLC, 11 Wall Street, New York, New York, 
10005.
    9. NYSE Arca, Inc., 100 South Wacker Drive, Suite 1800, Chicago, IL 
60606.
    10. Philadelphia Stock Exchange, 1900 Market Street, Philadelphia, 
Pennsylvania 19103.
    11. The Nasdaq Stock Market LLC, 1 Liberty Plaza, 165 Broadway, New 
York, NY 10006.

B. Additional Participants

    Any other national securities association or national securities 
exchange, in whose market Eligible Securities become traded, may become 
a Participant, provided that said organization executes a copy of this 
Plan and pays its share of development costs as specified in Section 
XIII.

II. Purpose of Plan

    The purpose of this Plan is to provide for the collection, 
consolidation and dissemination of Quotation Information and 
Transaction Reports in Eligible Securities from the Participants in a 
manner consistent with the Exchange Act.
    It is expressly understood that each Participant shall be 
responsible for the collection of Quotation Information and Transaction 
Reports within its market and that nothing in this Plan shall be deemed 
to govern or apply to the manner in which each Participant does so.

III. Definitions

    A. ``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 Processor.
    B. ``Eligible Security'' means any Nasdaq Global Market or Nasdaq 
Capital Market security, as defined in NASDAQ Rule 4200. Eligible 
Securities under this Nasdaq UTP Plan shall not include any security 
that is defined as an ``Eligible Security'' within Section VII of the 
Consolidated Tape Association Plan.

[[Page 20893]]

    A security shall cease to be an Eligible Security for purposes of 
this Plan if: (i) The security does not substantially meet the 
requirements from time to time in effect for continued listing on 
Nasdaq, and thus is suspended from trading; or (ii) the security has 
been suspended from trading because the issuer thereof is in 
liquidation, bankruptcy or other similar type proceedings. The 
determination as to whether a security substantially meets the criteria 
of the definition of Eligible Security shall be made by the exchange on 
which such security is listed provided, however, that if such security 
is listed on more than one exchange, then such determination shall be 
made by the exchange on which, the greatest number of the transactions 
in such security were effected during the previous twelve-month period.
    C. ``Commission'' and ``SEC'' shall mean the U.S. Securities and 
Exchange Commission.
    D. ``Exchange Act'' means the Securities Exchange Act of 1934.
    E. ``Market'' shall mean (i) when used with respect to Quotation 
Information, the NASD in the case of an NASD Participant, or the 
Participant on whose floor or through whose facilities the quotation 
was disseminated; and (ii) when used with respect to Transaction 
Reports, the Participant through whose facilities the transaction took 
place or is reported, or the Participant to whose facilities the order 
was sent for execution.
    F. ``NASD'' means the National Association of Securities Dealers, 
Inc.
    G. ``NASD Participant'' means an NASD member that is registered as 
a market maker or an electronic communications network or otherwise 
utilizes the facilities of the NASD pursuant to applicable NASD rules.
    H. `` Transaction Reporting System'' means the System provided for 
in the Transaction Reporting Plan filed with and approved by the 
Commission pursuant to SEC Rule 11Aa3-1, subsequently re-designated as 
Rule 601 of Regulation NMS, governing the reporting of transactions in 
Nasdaq securities.
    I. ``UTP Quote Data Feed'' means the service that provides 
Subscribers with the National Best Bid and Offer quotations, size and 
market center identifier, as well as the Best Bid and Offer quotations, 
size and market center identifier from each individual Participant in 
Eligible Securities and, in the case of NASD, the NASD Participant(s) 
that constitute NASD's Best Bid and Offer quotations.
    J. ``Nasdaq System'' means the automated quotation system operated 
by Nasdaq.
    K. ``UTP Trade Data Feed'' means the service that provides Vendors 
and Subscribers with Transaction Reports.
    L. ``Nasdaq Security'' or ``Nasdaq-listed Security'' means any 
security listed on the Nasdaq Global Market or Nasdaq Capital Market.
    M. ``News Service'' means a person that receives Transaction 
Reports or Quotation Information provided by the Systems or provided by 
a Vendor, on a Current basis, in connection with such person's business 
of furnishing such information to newspapers, radio and television 
stations and other news media, for publication at least fifteen (15) 
minutes following the time when the information first has been 
published by the Processor.
    N. ``OTC Montage Data Feed'' means the data stream of information 
that provides Vendors and Subscribers with quotations and sizes from 
each NASD Participant.
    O. ``Participant'' means a registered national securities exchange 
or national securities association that is a signatory to this Plan.
    P. ``Plan'' means this Nasdaq UTP Plan, as from time to time 
amended according to its provisions, governing the collection, 
consolidation and dissemination of Quotation Information and 
Transaction Reports in Eligible Securities.
    Q. ``Processor'' means the entity selected by the Participants to 
perform the processing functions set forth in the Plan.
    R. ``Quotation Information'' means all bids, offers, displayed 
quotation sizes, the market center identifiers and, in the case of 
NASD, the NASD Participant that entered the quotation, withdrawals and 
other information pertaining to quotations in Eligible Securities 
required to be collected and made available to the Processor pursuant 
to this Plan.
    S. ``Regulatory Halt'' means a trade suspension or halt called for 
the purpose of dissemination of material news, as described at Section 
X hereof or that is called for where there are regulatory problems 
relating to an Eligible Security that should be clarified before 
trading therein is permitted to continue, including a trading halt for 
extraordinary market activity due to system misuse or malfunction under 
Section X.E.1. of the Plan (``Extraordinary Market Regulatory Halt'').
    T. ``Subscriber'' means a person that receives Current Quotation 
Information or Transaction Reports provided by the Processor or 
provided by a Vendor, for its own use or for distribution on a non-
Current basis, other than in connection with its activities as a 
Vendor.
    U. ``Transaction Reports'' means reports required to be collected 
and made available pursuant to this Plan 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 and trade modifiers, reflecting completed 
transactions in Eligible Securities.
    V. ``Upon Effectiveness of the Plan'' means July 12, 1993, the date 
on which the Participants commenced publication of Quotation 
Information and Transaction Reports on Eligible Securities as 
contemplated by this Plan.
    W. ``Vendor'' means a person that receives Current Quotation 
Information or Transaction Reports provided by the Processor or 
provided by a Vendor, in connection with such person's business of 
distributing, publishing, or otherwise furnishing such information on a 
Current basis to Subscribers, News Services or other Vendors.

IV. Administration of Plan

A. Operating Committee: Composition

    The Plan shall be administered by the Participants through an 
operating committee (``Operating Committee''), which shall be composed 
of one representative designated by each Participant. Each Participant 
may designate an alternate representative or representatives who shall 
be authorized to act on behalf of the Participant in the absence of the 
designated representative. Within the areas of its responsibilities and 
authority, decisions made or actions taken by the Operating Committee, 
directly or by duly delegated individuals, committees as may be 
established from time to time, or others, shall be binding upon each 
Participant, without prejudice to the rights of any Participant to seek 
redress from the SEC pursuant to Rule 608 of Regulation NMS under the 
Exchange Act or in any other appropriate forum.
    An Electronic Communications Network, Alternative Trading System, 
Broker-Dealer or other securities organization (``Organization'') which 
is not a Participant, but has an actively pending Form 1 Application on 
file with the Commission to become a national securities exchange, will 
be permitted to appoint one representative and one alternate 
representative to attend regularly scheduled Operating Committee 
meetings in the capacity of an observer/advisor. If the Organization's 
Form 1 petition is

[[Page 20894]]

withdrawn, returned, or is otherwise not actively pending with the 
Commission for any reason, then the Organization will no longer be 
eligible to be represented in the Operating Committee meetings. The 
Operating Committee shall have the discretion, in limited instances, to 
deviate from this policy if, as indicated by majority vote, the 
Operating Committee agrees that circumstances so warrant.
    Nothing in this section or elsewhere within the Plan shall 
authorize any person or organization other than Participants and their 
representatives to participate on the Operating Committee in any manner 
other than as an advisor or observer, or in any Executive Session of 
the Operating Committee.

B. Operating Committee: Authority

    The Operating Committee shall be responsible for:
    1. Overseeing the consolidation of Quotation Information and 
Transaction Reports in Eligible Securities from the Participants for 
dissemination to Vendors, Subscribers, News Services and others in 
accordance with the provisions of the Plan;
    2. Periodically evaluating the Processor;
    3. Setting the level of fees to be paid by Vendors, Subscribers, 
News Services or others for services relating to Quotation Information 
or Transaction Reports in Eligible Securities, and taking action in 
respect thereto in accordance with the provisions of the Plan;
    4. Determining matters involving the interpretation of the 
provisions of the Plan;
    5. Determining matters relating to the Plan's provisions for cost 
allocation and revenue-sharing; and
    6. Carrying out such other specific responsibilities as provided 
under the Plan.

C. Operating Committee: Voting

    Each Participant shall have one vote on all matters considered by 
the Operating Committee.
    1. The affirmative and unanimous vote of all Participants entitled 
to vote shall be necessary to constitute the action of the Operating 
Committee with respect to:
    a. Amendments to the Plan;
    b. Amendments to contracts between the Processor and Vendors, 
Subscribers, News Services and others receiving Quotation Information 
and Transaction Reports in Eligible Securities;
    c. Replacement of the Processor, except for termination for cause, 
which shall be governed by Section V(B) hereof;
    d. Reductions in existing fees relating to Quotation Information 
and Transaction Reports in Eligible Securities;
    e. Except as provided under Section IV(C)(3) hereof, requests for 
system changes; and
    f. All other matters not specifically addressed by the Plan.
    2. With respect to the establishment of new fees or increases in 
existing fees relating to Quotation Information and Transaction Reports 
in Eligible Securities, the affirmative vote of two-thirds of the 
Participants entitled to vote shall be necessary to constitute the 
action of the Operating Committee.
    3. The affirmative vote of a majority of the Participants entitled 
to vote shall be necessary to constitute the action of the Operating 
Committee with respect to:
    a. Requests for system changes reasonably related to the function 
of the Processor as defined under the Plan. All other requests for 
system changes shall be governed by Section IV(C)(1)(e) hereof;
    b. Interpretive matters and decisions of the Operating Committee 
arising under, or specifically required to be taken by, the provisions 
of the Plan as written;
    c. Interpretive matters arising under Rules 601 and 602 of 
Regulation NMS; and
    d. Denials of access (other than for breach of contract, which 
shall be handled by the Processor).
    4. It is expressly agreed and understood that neither this Plan nor 
the Operating Committee shall have authority in any respect over any 
Participant's proprietary systems. Nor shall the Plan or the Operating 
Committee have any authority over the collection and dissemination of 
quotation or transaction information in Eligible Securities in any 
Participant's marketplace, or, in the case of the NASD, from NASD 
Participants.

D. Operating Committee: Meetings

    Regular meetings of the Operating Committee may be attended by each 
Participant's designated representative and/or its alternate 
representative(s), and may be attended by one or more other 
representatives of the parties. Meetings shall be held at such times 
and locations as shall from time to time be determined by the Operating 
Committee.
    Quorum: Any action requiring a vote only can be taken at a meeting 
in which a quorum of all Participants is present. For actions requiring 
a simple majority vote of all Participants, a quorum of greater than 
50% of all Participants entitled to vote must be present at the meeting 
before such a vote may be taken. For actions requiring a \2/3\rd 
majority vote of all Participants, a quorum of at least \2/3\rd of all 
Participants entitled to vote must be present at the meeting before 
such a vote may be taken. For actions requiring a unanimous vote of all 
Participants, a quorum of all Participants entitled to vote must be 
present at the meeting before such a vote may be taken.
    A Participant is considered present at a meeting only if a 
Participant's designated representative or alternate representative(s) 
is either in physical attendance at the meeting or is participating by 
conference telephone, or other acceptable electronic means.
    Any action sought to be resolved at a meeting must be sent to each 
Participant entitled to vote on such matter at least one week prior to 
the meeting via electronic mail, regular U.S. or private mail, or 
facsimile transmission, provided however that this requirement may be 
waived by the vote of the percentage of the Committee required to vote 
on any particular matter, under Section C above.
    Any action may be taken without a meeting if a consent in writing, 
setting forth the action so taken, is sent to and signed by all 
Participant representatives entitled to vote with respect to the 
subject matter thereof. All the approvals evidencing the consent shall 
be delivered to the Chairman of the Operating Committee to be filed in 
the Operating Committee records. The action taken shall be effective 
when the minimum number of Participants entitled to vote have approved 
the action, unless the consent specifies a different effective date.
    The Chairman of the Operating Committee shall be elected annually 
by and from among the Participants by a majority vote of all 
Participants entitled to vote. The Chairman shall designate a person to 
act as Secretary to record the minutes of each meeting. The location of 
meetings shall be rotated among the locations of the principal offices 
of the Participants, or such other locations as may from time to time 
be determined by the Operating Committee. Meetings may be held by 
conference telephone and action may be taken without a meeting if the 
representatives of all Participants entitled to vote consent thereto in 
writing or other means the Operating Committee deems acceptable.

E. 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

[[Page 20895]]

with the provisions set forth in this section.
    (b) Composition. Members of the Advisory Committee shall be 
selected for two-year terms as follows:
    (1) Operating Committee Selections. By affirmative vote of a 
majority of the Participants 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: (i) A broker-dealer 
with a substantial retail investor customer base, (ii) a broker-dealer 
with a substantial institutional investor customer base, (iii) an 
alternative trade system, (iv) a data vendor, and (v) an investor.
    (2) Participant Selections. Each Participant shall have the right 
to select one member of the Advisory Committee. A Participant shall not 
select any person employed by or affiliated with any participant 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) Meetings and Information. Members of the Advisory Committee 
shall have the right to attend all meetings of the Operating Committee 
and to receive any information concerning Plan matters that is 
distributed to the Operating Committee; provided, however, that the 
Operating Committee may meet in executive session if, by affirmative 
vote of a majority of the Participants entitled to vote, the Operating 
Committee determines that an item of Plan business requires 
confidential treatment.

V. Selection and Evaluation of the Processor

A. Generally

    The Processor's performance of its functions under the Plan shall 
be subject to review by the Operating Committee at least every two 
years, or from time to time upon the request of any two Participants 
but not more frequently than once each year. Based on this review, the 
Operating Committee may choose to make a recommendation to the 
Participants with respect to the continuing operation of the Processor. 
The Operating Committee shall notify the SEC of any recommendations the 
Operating Committee shall make pursuant to the Operating Committee's 
review of the Processor and shall supply the Commission with a copy of 
any reports that may be prepared in connection therewith.

B. Termination of the Processor for Cause

    If the Operating Committee determines that the Processor has failed 
to perform its functions in a reasonably acceptable manner in 
accordance with the provisions of the Plan or that its reimbursable 
expenses have become excessive and are not justified on a cost basis, 
the Processor may be terminated at such time as may be determined by a 
majority vote of the Operating Committee.

C. Factors To Be Considered in Termination for Cause

    Among the factors to be considered in evaluating whether the 
Processor has performed its functions in a reasonably acceptable manner 
in accordance with the provisions of the Plan shall be the 
reasonableness of its response to requests from Participants for 
technological changes or enhancements pursuant to Section IV(C)(3) 
hereof. The reasonableness of the Processor's response to such requests 
shall be evaluated by the Operating Committee in terms of the cost to 
the Processor of purchasing the same service from a third party and 
integrating such service into the Processor's existing systems and 
operations as well as the extent to which the requested change would 
adversely impact the then current technical (as opposed to business or 
competitive) operations of the Processor.

D. Processor's Right to Appeal Termination for Cause

    The Processor shall have the right to appeal to the SEC a 
determination of the Operating Committee terminating the Processor for 
cause and no action shall become final until the SEC has ruled on the 
matter and all legal appeals of right therefrom have been exhausted.

E. Process for Selecting New Processor

    At any time following effectiveness of the Plan, but no later than 
upon the termination of the Processor, whether for cause pursuant to 
Section IV(C)(1)(c) or V(B) of the Plan or upon the Processor's 
resignation, the Operating Committee shall establish procedures for 
selecting a new Processor (the ``Selection Procedures''). The Operating 
Committee, as part of the process of establishing Selection Procedures, 
may solicit and consider the timely comment of any entity affected by 
the operation of this Plan. The Selection Procedures shall be 
established by a two-thirds majority vote of the Plan Participants, and 
shall set forth, at a minimum:
    1. 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.
    2. The minimum technical and operational requirements to be 
fulfilled by the Processor;
    3. The criteria to be considered in selecting the Processor; and
    4. The entities (other than Plan Participants) that are eligible to 
comment on the selection of the Processor.
    Nothing in this provision shall be interpreted as limiting 
Participants' rights under Section IV or Section V of the Plan or other 
Commission order.

VI. Functions of the Processor

A. Generally

    The Processor shall collect from the Participants, and consolidate 
and disseminate to Vendors, Subscribers and News Services, Quotation 
Information and Transaction Reports 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. The 
Processor shall commence operations upon the Processor's notification 
to the Participants that it is ready and able to commence such 
operations.

B. Collection and Consolidation of Information

    For as long as Nasdaq is the Processor, the Processor shall be 
capable of receiving Quotation Information and Transaction Reports in 
Eligible Securities from Participants by the Plan-approved, Processor-
sponsored interface, and shall consolidate and disseminate such 
information via the UTP Quote Data Feed, the UTP Trade Data Feed, and 
the OTC Montage Data Feed to Vendors, Subscribers and News Services. 
For so long as Nasdaq is not registered as a national securities 
exchange and for so long as Nasdaq is the Processor, the Processor 
shall also collect, consolidate, and disseminate the quotation 
information contained in NQDS. For so long as Nasdaq is not registered 
as a national securities exchange and after Nasdaq is no longer the 
Processor for other SIP datafeeds, either Nasdaq or a third party will 
act

[[Page 20896]]

as the Processor to collect, consolidate, and disseminate the quotation 
information contained in NQDS.

C. Dissemination of Information

    The Processor shall disseminate consolidated Quotation Information 
and Transaction Reports in Eligible Securities via the UTP Quote Data 
Feed, the UTP Trade Data Feed, and the OTC Montage Data Feed to 
authorized Vendors, Subscribers and News Services in a fair and non-
discriminatory manner. The Processor shall specifically be permitted to 
enter into agreements with Vendors, Subscribers and News Services for 
the dissemination of quotation or transaction information on Eligible 
Securities to foreign (non-U.S.) marketplaces or in foreign countries.
    The Processor shall, in such instance, disseminate consolidated 
quotation or transaction information on Eligible Securities from all 
Participants.
    Nothing herein shall be construed so as to prohibit or restrict in 
any way the right of any Participant to distribute quotation, 
transaction or other information with respect to Eligible Securities 
quoted on or traded in its marketplace to a marketplace outside the 
United States solely for the purpose of supporting an intermarket 
linkage, or to distribute information within its own marketplace 
concerning Eligible Securities in accordance with its own format. If a 
Participant requests, the Processor shall make information about 
Eligible Securities in the Participant's marketplace available to a 
foreign marketplace on behalf of the requesting Participant, in which 
event the cost shall be borne by that Participant.
1. Best Bid and Offer
    The Processor shall disseminate on the UTP Quote Data Feed the best 
bid and offer information supplied by each Participant, including the 
NASD Participant(s) that constitute NASD's single Best Bid and Offer 
quotations, and shall also calculate and disseminate on the UTP Quote 
Data Feed a national best bid and asked quotation with size based upon 
Quotation Information for Eligible Securities received from 
Participants. The Processor shall not calculate the best bid and offer 
for any individual Participant, including the NASD.
    The Participant responsible for each side of the best bid and asked 
quotation making up the national best bid and offer shall be identified 
by an appropriate symbol. If the quotations of more than one 
Participant shall be the same best price, the largest displayed size 
among those shall be deemed to be the best. If the quotations of more 
than one Participant are the same best price and best displayed size, 
the earliest among those measured by the time reported shall be deemed 
to be the best. A reduction of only bid size and/or ask size will not 
change the time priority of a Participant's quote for the purposes of 
determining time reported, whereas an increase of the bid size and/or 
ask size will result in a new time reported. The consolidated size 
shall be the size of the Participant that is at the best.
    If the best bid/best offer results in a locked or crossed 
quotation, the Processor shall forward that locked or crossed quote on 
the appropriate output lines (i.e., a crossed quote of bid 12, ask 
11.87 shall be disseminated). The Processor shall normally cease the 
calculation of the best bid/best offer after 6:30 p.m., Eastern Time.
2. Quotation Data Streams
    The Processor shall disseminate on the UTP Quote Data Feed a data 
stream of all Quotation Information regarding Eligible Securities 
received from Participants. Each quotation shall be designated with a 
symbol identifying the Participant from which the quotation emanates 
and, in the case of NASD, the NASD Participant(s) that constitute 
NASD's Best Bid and Offer quotations. In addition, the Processor shall 
separately distribute on the OTC Montage Data Feed the Quotation 
Information regarding Eligible Securities from all NASD Participants 
from which quotations emanate. The Processor shall separately 
distribute NQDS for so long as Nasdaq is not registered as a national 
securities exchange and for so long as Nasdaq is the Processor. For so 
long as Nasdaq is not registered as a national securities exchange and 
after Nasdaq is no longer the Processor for other SIP datafeeds, either 
Nasdaq or a third party will act as the Processor to collect, 
consolidate, and disseminate the quotation information contained in 
NQDS.
3. Transaction Reports
    The Processor shall disseminate on the UTP Trade Data Feed a data 
stream of all Transaction Reports in Eligible Securities received from 
Participants. Each transaction report shall be designated with a symbol 
identifying the Participant in whose Market the transaction took place.

D. Closing Reports

    At the conclusion of each trading day, the Processor shall 
disseminate a ``closing price'' for each Eligible Security. Such 
``closing price'' shall be the price of the last Transaction Report in 
such security received prior to dissemination. The Processor shall also 
tabulate and disseminate at the conclusion of each trading day the 
aggregate volume reflected by all Transaction Reports in Eligible 
Securities reported by the Participants.

E. Statistics

    The Processor shall maintain quarterly, semi-annual and annual 
transaction and volume statistical counts. The Processor shall, at cost 
to the user Participant(s), make such statistics available in a form 
agreed upon by the Operating Committee, such as a secure website.

VII. Administrative Functions of the Processor

    Subject to the general direction of the Operating Committee, the 
Processor shall be responsible for carrying out all administrative 
functions necessary to the operation and maintenance of the 
consolidated information collection and dissemination system provided 
for in this Plan, including, but not limited to, record keeping, 
billing, contract administration, and the preparation of financial 
reports.

VIII. Transmission of Information to Processor by Participants

A. Quotation Information

    Each Participant shall, during the time it is open for trading be 
responsible promptly to collect and transmit to the Processor accurate 
Quotation Information in Eligible Securities through any means 
prescribed herein.
    Quotation Information shall include:
    1. Identification of the Eligible Security, using the Nasdaq 
Symbol;
    2. The price bid and offered, together with size;
    3. The NASD Participant along with the NASD Participant's market 
participant identification or Participant from which the quotation 
emanates;
    4. Identification of quotations that are not firm; and
    5. Through appropriate codes and messages, withdrawals and similar 
matters.

B. Transaction Reports

    Each Participant shall, during the time it is open for trading, be 
responsible promptly to collect and transmit to the Processor 
Transaction Reports in Eligible Securities executed in its Market by 
means prescribed herein. With respect to orders sent by one Participant 
Market to another Participant Market for execution, each Participant 
shall adopt procedures governing the reporting of transactions in 
Eligible Securities specifying that the transaction will be reported by 
the

[[Page 20897]]

Participant whose member sold the security. This provision shall apply 
only to transactions between Plan Participants.
    Transaction Reports shall include:
    1. Identification of the Eligible Security, using the Nasdaq 
Symbol;
    2. The number of shares in the transaction;
    3. The price at which the shares were purchased or sold;
    4. The buy/sell/cross indicator;
    5. The Market of execution; and
    6. Through appropriate codes and messages, late or out-of-sequence 
trades, corrections and similar matters.
    All such Transaction Reports shall be transmitted to the Processor 
within 90 seconds after the time of execution of the transaction. 
Transaction Reports transmitted beyond the 90-second period shall be 
designated as ``late'' by the appropriate code or message.
    The following types of transactions are not required to be reported 
to the Processor pursuant to the Plan:
    1. Transactions that are part of a primary distribution by an 
issuer or of a registered secondary distribution or of an unregistered 
secondary distribution;
    2. Transactions made in reliance on Section 4(2) of the Securities 
Act of 1933;
    3. 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;
    4. Odd-lot transactions;
    5. The acquisition of securities by a broker-dealer as principal in 
anticipation of making an immediate exchange distribution or exchange 
offering on an exchange;
    6. Purchases of securities pursuant to a tender offer; and
    7. 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.

C. Symbols for Market Identification for Quotation Information and 
Transaction Reports

    The following symbols shall be used to denote the marketplaces:

------------------------------------------------------------------------
               Code                             Participant
------------------------------------------------------------------------
A................................  American Stock Exchange LLC.
B................................  Boston Stock Exchange, Inc.
W................................  Chicago Board Options Exchange, Inc.
M................................  Chicago Stock Exchange, Inc.
I................................  International Securities Exchange,
                                    LLC.
D................................  NASD.
Q................................  Nasdaq Stock Market LLC.
C................................  National Stock Exchange, Inc.
N................................  New York Stock Exchange LLC.
P................................  NYSE Arca, Inc.
X................................  Philadelphia Stock Exchange, Inc.
------------------------------------------------------------------------

    D. Whenever a Participant determines that a level of trading 
activity or other unusual market conditions prevent it from collecting 
and transmitting Quotation Information or Transaction Reports to the 
Processor, or where a trading halt or suspension in an Eligible 
Security is in effect in its Market, the Participant shall promptly 
notify the Processor of such condition or event and shall resume 
collecting and transmitting Quotation Information and Transaction 
Reports to it as soon as the condition or event is terminated. In the 
event of a system malfunction resulting in the inability of a 
Participant or its members to transmit Quotation Information or 
Transaction Reports to the Processor, the Participant shall promptly 
notify the Processor of such event or condition. Upon receiving such 
notification, the Processor shall take appropriate action, including 
either closing the quotation or purging the system of the affected 
quotations.

IX. Market Access

    Consistent with the state of electronic technology and pursuant to 
the requirements of Rule 610 of Regulation NMS, a Participant that 
operates an SRO trading facility shall provide for fair and efficient 
order execution access to quotations in each Eligible Security 
displayed through its trading facility. In the case of a Participant 
that operates an SRO display-only quotation facility, trading centers 
posting quotations through such SRO display-only quotation facility 
must provide for fair and efficient order execution access to 
quotations in each Eligible Security displayed through the SRO display-
only quotation facility. A Participant that operates an SRO trading 
facility may elect to allow such access to its quotations through the 
utilization of private electronic linkages between the Participant and 
other trading centers. In the case of a Participant that operates an 
SRO display-only quotation facility, trading centers posting quotations 
through such SRO display-only quotation facility may elect to allow 
such access to their quotations through the utilization of private 
electronic linkages between the trading center and SRO trading 
facilities of Plan Participants and/or other trading centers.
    In accordance with Regulation NMS, a Participant shall not impose, 
or permit to be imposed, any fee or fees for the execution of an order 
against a protected quotation of the Participant or of a trading center 
posting quotes through a Participant's SRO display-only quotation 
facility in an Eligible Security or against any other quotation 
displayed by the Participant in an Eligible Security that is the 
Participant's displayed best bid or offer for that Eligible Security, 
where such fee or fees exceed the limits provided for in Rule 610(c) of 
Regulation NMS. As required under Regulation NMS, the terms of access 
to a Participant's quotations or of a trading center posting quotes 
through a Participant's SRO display-only quotation facility in an 
Eligible Security may not be unfairly discriminatory so as to prevent 
or inhibit any person from obtaining efficient access to such displayed 
quotations through a member of the Participant or a subscriber of a 
trading center.
    If quotations in an Eligible Security are displayed by a 
Participant that operates an SRO trading facility (or are displayed by 
a trading center that posts quotations through an SRO display-only 
quotation facility) that complies with the fair and efficient access 
requirements of Regulation NMS (an ``NMS Compliant Facility''), 
including prior to the compliance date of such access requirements, 
that Participant (or trading center posting quotes through an SRO 
display-only quotation facility) shall no longer be required to permit 
each NASD market participant to have direct telephone access to the 
specialist, trading post, market maker and supervisory center in such 
Eligible Security that trades on that NMS Compliant Facility. For 
quotations in Eligible Securities that are displayed by a Participant 
that operates an SRO trading facility that is not an NMS Compliant 
Facility, such telephone access requirement will continue to be 
applicable to the Participant.

X. Regulatory Halts

    A. Whenever, in the exercise of its regulatory functions, the 
Listing Market for an Eligible Security determines that a Regulatory 
Halt is appropriate pursuant to Section III.S, the Listing Market will 
notify all other Participants pursuant to Section X.E and all other 
Participants shall also halt or suspend trading in that security until 
notification that the halt or suspension is no longer in effect. The 
Listing Market shall immediately notify the Processor of such 
Regulatory Halt as well as notice of the lifting of a Regulatory Halt. 
The Processor, in turn, shall disseminate to

[[Page 20898]]

Participants notice of the Regulatory Halt (as well as notice of the 
lifting of a regulatory halt) through the UTP Quote Data Feed. This 
notice shall serve as official notice of a regulatory halt for purposes 
of the Plan only, and shall not substitute or otherwise supplant notice 
that a Participant may recognize or require under its own rules. 
Nothing in this provision shall be read so as to supplant or be 
inconsistent with a Participant's own rules on trade halts, which rules 
apply to the Participant's own members. The Processor will reject any 
quotation information or transaction reports received from any 
Participant on an Eligible Security that has a Regulatory Halt in 
effect.
    B. Whenever the Listing Market determines that an adequate 
publication or dissemination of information has occurred so as to 
permit the termination of the Regulatory Halt then in effect, the 
Listing Market shall promptly notify the Processor and each of the 
other Participants that conducts trading in such security pursuant to 
Section X.F. Except in extraordinary circumstances, adequate 
publication or dissemination shall be presumed by the Listing Market to 
have occurred upon the expiration of one hour after initial publication 
in a national news dissemination service of the information that gave 
rise to the Regulatory Halt.
    C. Except in the case of a Regulatory Halt, the Processor shall not 
cease the dissemination of quotation or transaction information 
regarding any Eligible Security. In particular, it shall not cease 
dissemination of such information because of a delayed opening, 
imbalance of orders or other market-related problems involving such 
security. During a regulatory halt, the Processor shall collect and 
disseminate Transaction Information but shall cease collection and 
dissemination of all Quotation Information.
    D. For purposes of this Section X, ``Listing Market'' for an 
Eligible Security means the Participant's Market on which the Eligible 
Security is listed. If an Eligible Security is dually listed, Listing 
Market shall mean the Participant's Market on which the Eligible 
Security is listed that also has the highest number of the average of 
the reported transactions and reported share volume for the preceding 
12-month period. The Listing Market for dually-listed Eligible 
Securities shall be determined at the beginning of each calendar 
quarter.
    E. For purposes of coordinating trading halts in Eligible 
Securities, all Participants are required to utilize the national 
market system communication media (``Hoot-n-Holler'') to verbally 
provide real-time information to all Participants. Each Participant 
shall be required to continuously monitor the Hoot-n-Holler system 
during market hours, and the failure of a Participant to do so at any 
time shall not prevent the Listing Market from initiating a Regulatory 
Halt in accordance with the procedures specified herein.
    1. The following procedures shall be followed when one or more 
Participants experiences extraordinary market activity in an Eligible 
Security that is believed to be caused by the misuse or malfunction of 
systems operated by or linked to one or more Participants.
    a. The Participant(s) experiencing the extraordinary market 
activity or any Participant that becomes aware of extraordinary market 
activity will immediately use best efforts to notify all Participants 
of the extraordinary market activity utilizing the Hoot-n-Holler 
system.
    b. The Listing Market will use best efforts to determine whether 
there is material news regarding the Eligible Security. If the Listing 
Market determines that there is non-disclosed material news, it will 
immediately call a Regulatory Halt pursuant to Section X.E.2.
    c. Each Participant(s) will use best efforts to determine whether 
one of its systems, or the system of a direct or indirect participant 
in its market, is responsible for the extraordinary market activity.
    d. If a Participant determines the potential source of 
extraordinary market activity pursuant to Section X.1.c., the 
Participant will use best efforts to determine whether removing the 
quotations of one or more direct or indirect market participants or 
barring one or more direct or indirect market participants from 
entering orders will resolve the extraordinary market activity. 
Accordingly, the Participant will prevent the quotations from one or 
more direct or indirect market participants in the affected Eligible 
Securities from being transmitted to the Processor.
    e. If the procedures described in Section X.E.1.a.-d. do not 
rectify the situation, the Participant(s) experiencing extraordinary 
market activity will cease transmitting all quotations in the affected 
Eligible Securities to the Processor.
    f. If the procedures described in Section X.E.1.a-e do not rectify 
the situation within five minutes of the first notification through the 
Hoot-n-Holler system, or if Participants agree to call a halt sooner 
through unanimous approval among those Participants actively trading 
impacted Eligible Securities, the Listing Market may determine based on 
the facts and circumstances, including available input from 
Participants, to declare an Extraordinary Market Regulatory Halt in the 
affected Eligible Securities. Simultaneously with the notification of 
the Processor to suspend the dissemination of quotations across all 
Participants, the Listing Market must verbally notify all Participants 
of the trading halt utilizing the Hoot-n-Holler system.
    g. Absent any evidence of system misuse or malfunction, best 
efforts will be used to ensure that trading is not halted across all 
Participants.
    2. If the Listing Market declares a Regulatory Halt in 
circumstances other than pursuant to Section X.E.1.f., the Listing 
Market must, simultaneously with the notification of the Processor to 
suspend the dissemination of quotations across all Participants, 
verbally notify all Participants of the trading halt utilizing the 
Hoot-n-Holler system.
    F. If the Listing Market declares a Regulatory Halt, trading will 
resume according to the following procedures:
    1. Within 15 minutes of the declaration of the halt, all 
Participants will make best efforts to indicate via the Hoot-n-Holler 
their intentions with respect to canceling or modifying transactions.
    2. All Participants will disseminate to their members information 
regarding the canceled or modified transactions as promptly as 
possible, and in any event prior to the resumption of trading.
    3. After all Participants have met the requirements of Section 
X.F.1-2, the Listing Market will notify the Participants utilizing the 
Hoot-n-Holler and the Processor when trading may resume. Upon receiving 
this information, Participants may commence trading pursuant to Section 
X.A.

XI. Hours of Operation

    A. Quotation Information may be entered by Participants as to all 
Eligible Securities in which they make a market between 9:30 a.m. and 4 
p.m. Eastern Time (``ET'') on all days the Processor is in operation. 
Transaction Reports shall be entered between 9:30 a.m. and 4:01:30 p.m. 
ET by Participants as to all Eligible Securities in which they execute 
transactions between 9:30 a.m. and 4 p.m. ET on all days the Processor 
is in operation.
    B. Participants that execute transactions in Eligible Securities 
outside the hours of 9:30 a.m. ET and 4 p.m., ET, shall be required to 
report such transactions as follows:

[[Page 20899]]

    (i) Transactions in Eligible Securities executed between 4 a.m. and 
9:29:59 a.m. ET and between 4:00:01 and 8 p.m. ET, shall be designated 
as ``.T'' trades to denote their execution outside normal market hours;
    (ii) Transactions in Eligible Securities executed after 8 p.m. and 
before 12 a.m. (midnight) shall be reported to the Processor between 
the hours of 4 a.m. and 8 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 a.m. 
(midnight) and 4 a.m. ET shall be transmitted to the Processor between 
4 a.m. and 9:30 a.m. ET, on trade date, shall be designated as ``.T'' 
trades to denote their execution outside normal market hours, and shall 
be accompanied by the time of execution;
    (iv) Transactions reported pursuant to this provision of the Plan 
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 Participant in whose Market the transaction occurred and can be 
reported between the hours of 4 a.m. and 8 p.m.
    D. The Processor shall collect, process and disseminate Quotation 
Information in Eligible Securities at other times between 4 a.m. and 
9:30 a.m. ET, and after 4 p.m. ET, when any Participant or Nasdaq 
market participant is open for trading, until 8 p.m. ET (the 
``Additional Period''); provided, however, that the best bid and offer 
quotation will not be disseminated before 4 a.m. or after 8 p.m. ET. 
Participants that enter Quotation Information or submit Transaction 
Reports to the Processor during the Additional Period shall do so for 
all Eligible Securities in which they enter quotations.

XII. Undertaking by All Participants

    The filing with and approval by the Commission of this Plan shall 
obligate each Participant to enforce compliance by its members with the 
provisions thereof. In all other respects not inconsistent herewith, 
the rules of each Participant shall apply to the actions of its members 
in effecting, reporting, honoring and settling transactions executed 
through its facilities, and the entry, maintenance and firmness of 
quotations to ensure that such occurs in a manner consistent with just 
and equitable principles of trade.

XIII. Financial Matters

A. Development Costs

    Any Participant becoming a signatory to this Plan after June 26, 
1990, shall, as a condition to becoming a Participant, pay to the other 
Plan Participants a proportionate share of the aggregate development 
costs previously paid by Plan Participants to the Processor, which 
aggregate development costs totaled $439,530, with the result that each 
Participant's share of all development costs is the same.
    Each Participant shall bear the cost of implementation of any 
technical enhancements to the Nasdaq system made at its request and 
solely for its use, subject to reapportionment should any other 
Participant subsequently make use of the enhancement, or the 
development thereof.

B. Cost Allocation and Revenue Sharing

    The provisions governing cost allocation and revenue sharing among 
the Participants are set forth in Exhibit 1 to the Plan.

C. Maintenance of Financial Records

    The Processor shall maintain records of revenues generated and 
development and operating expenditures incurred in connection with the 
Plan. In addition, the Processor shall provide the Participants with: 
(a) A statement of financial and operational condition on a quarterly 
basis; and (b) an audited statement of financial and operational 
condition on an annual basis.

XIV. Indemnification

    Each Participant agrees, severally and not jointly, to indemnify 
and hold harmless each other Participant, Nasdaq, and each of its 
directors, officers, employees and agents (including the Operating 
Committee and its employees and agents) from and against any and all 
loss, liability, claim, damage and expense whatsoever incurred or 
threatened against such persons as a result of any Transaction Reports, 
Quotation Information or other information reported to the Processor by 
such Participant and disseminated by the Processor to Vendors. This 
indemnity agreement shall be in addition to any liability that the 
indemnifying Participant may otherwise have.
    Promptly after receipt by an indemnified Participant of notice of 
the commencement of any action, such indemnified Participant will, if a 
claim in respect thereof is to be made against an indemnifying 
Participant, notify the indemnifying Participant in writing of the 
commencement thereof; but the omission to so notify the indemnifying 
Participant will not relieve the indemnifying Participant from any 
liability which it may have to any indemnified Participant. In case any 
such action is brought against any indemnified Participant and it 
promptly notifies an indemnifying Participant of the commencement 
thereof, the indemnifying Participant will be entitled to participate 
in, and, to the extent that it may wish, jointly with any other 
indemnifying Participant similarly notified, to assume and control the 
defense thereof with counsel chosen by it. After notice from the 
indemnifying Participant of its election to assume the defense thereof, 
the indemnifying Participant will not be liable to such indemnified 
Participant for any legal or other expenses subsequently incurred by 
such indemnified Participant in connection with the defense thereof but 
the indemnified Participant may, at its own expense, participate in 
such defense by counsel chosen by it without, however, impairing the 
indemnifying Participant's control of the defense. The indemnifying 
Participant may negotiate a compromise or settlement of any such 
action, provided that such compromise or settlement does not require a 
contribution by the indemnified Participant.

XV. Withdrawal

    Any Participant may withdraw from the Plan at any time on not less 
than 30 days prior written notice to each of the other Participants. 
Any Participant withdrawing from the Plan shall remain liable for, and 
shall pay upon demand, any fees for equipment or services being 
provided to such Participant pursuant to the contract executed by it or 
an agreement or schedule of fees covering such then in effect.
    A withdrawing Participant shall also remain liable for its 
proportionate share, without any right of recovery, of administrative 
and operating expenses, including start-up costs and other sums for 
which it may be responsible pursuant to Section XIV hereof. Except as 
aforesaid, a withdrawing Participant shall have no further obligation 
under the Plan or to any of the other Participants with respect to the 
period following the effectiveness of its withdrawal.

XVI. Modifications to Plan

    The Plan may be modified from time to time when authorized by the 
agreement of all of the Participants, subject to the approval of the 
SEC or which otherwise becomes effective

[[Page 20900]]

pursuant to Section 11A of the Act and Rule 608 of Regulation NMS.

XVII. Applicability of Securities Exchange Act of 1934

    The rights and obligations of the Participants and of Vendors, News 
Services, Subscribers and other persons contracting with Participant in 
respect of the matters covered by the Plan shall at all times be 
subject to any applicable provisions of the Act, as amended, and any 
rules and regulations promulgated thereunder.

XVIII. Operational Issues

    A. Each Participant shall be responsible for collecting and 
validating quotes and last sale reports within their own system prior 
to transmitting this data to the Processor.
    B. Each Participant may utilize a dedicated Participant line into 
the Processor to transmit trade and quote information in Eligible 
Securities to the Processor. The Processor shall accept from Exchange 
Participants input for only those issues that are deemed Eligible 
Securities.
    C. The Processor shall consolidate trade and quote information from 
each Participant and disseminate this information on the Processor's 
existing vendor lines.
    D. The Processor shall perform gross validation processing for 
quotes and last sale messages in addition to the collection and 
dissemination functions, as follows:
    1. Basic Message Validation
    (a) The Processor may validate format for each type of message, and 
reject non-conforming messages.
    (b) Input must be for an Eligible Security.
    2. Logging Function--The Processor shall return all Participant 
input messages that do not pass the validation checks (described above) 
to the inputting Participant, on the entering Participant line, with an 
appropriate reject notation. For all accepted Participant input 
messages (i.e., those that pass the validation check), the information 
shall be retained in the Processor system.

XIX. Headings

    The section and other headings contained in this Plan are for 
reference purposes only and shall not be deemed to be a part of this 
Plan or to affect the meaning or interpretation of any provisions of 
this Plan.

XX. Counterparts

    This Plan may be executed by the Participants in any number of 
counterparts, no one of which need contain the signature of all 
Participants. As many such counterparts as shall together contain all 
such signatures shall constitute one and the same instrument.

XXI. Depth of Book Display

    The Operating Committee has determined that the entity that 
succeeds Nasdaq as the Processor should have the ability to collect, 
consolidate, and disseminate quotations at multiple price levels beyond 
the best bid and best offer from any Participant that voluntarily 
chooses to submit such quotations while determining that no Participant 
shall be required to submit such information. The Operating Committee 
has further determined that the costs of developing, collecting, 
processing, and disseminating such depth of book data shall be borne 
exclusively by those Participants that choose to submit this 
information to the Processor, by whatever allocation those Participants 
may choose among themselves. The Operating Committee has determined 
further that the primary purpose of the Processor is the collection, 
processing and dissemination of best bid, best offer and last sale 
information (``core data''), and as such, the Participants will adopt 
procedures to ensure that such functionality in no way hinders the 
collecting, processing and dissemination of this core data.
    Therefore, implementing the depth of book display functionality 
will require a plan amendment that addresses all pertinent issues, 
including:
    (1) Procedures for ensuring that the fully-loaded cost of the 
collection, processing, and dissemination of depth-of-book information 
will be tracked and invoiced directly to those Plan Participants that 
voluntarily choose to send that data, voluntarily, to the Processor, 
allocating in whatever manner those Participants might agree; and
    (2) Necessary safeguards the Processor will take to ensure that its 
processing of depth-of-book data will not impede or hamper, in any way, 
its core Processor functionality of collecting, consolidating, and 
disseminating National Best Bid and Offer data, exchange best bid and 
offer data, and consolidated last sale data.
    Upon approval of a Plan amendment implementing depth of book 
display, this article of the Plan shall be automatically deleted.
    In witness whereof, this Plan has been executed as of the -------- 
day of --------, 200----, by each of the Signatories hereto.

American Stock Exchange LLC
By:
Boston Stock Exchange, Inc.

By:
Chicago Stock Exchange, Inc.

By:
Chicago Board Options Exchange, Inc.

By:
International Securities Exchange, LLC

By:
NASD

By:
National Stock Exchange, Inc.

By:
New York Stock Exchange LLC

By:
NYSE Arca, Inc.

By:
Philadelphia Stock Exchange, Inc.

By:
The Nasdaq Stock Market LLC

Exhibit 1

    1. Each Participant eligible to receive revenue under the Plan will 
receive an annual payment for each calendar year to be determined by 
multiplying (i) that Participant's percentage of total volume in Nasdaq 
securities reported to the Processor for that calendar year by (ii) the 
total distributable net operating income (as defined below) for that 
calendar year. In the event that total distributable net operating 
income is negative, each Participant eligible to receive revenue under 
the Plan will receive an annual bill for each calendar year to be 
determined according to the same formula (described in this paragraph) 
for determining annual payments to eligible Participants.
    2. A Participant's percentage of total volume in Nasdaq securities 
will be calculated by taking the average of (i) the Participant's 
percentage of total trades in Nasdaq securities reported to the 
Processor for the year and (ii) the Participant's percentage of total 
share volume in Nasdaq securities reported to the Processor for the 
year (trade/volume average). For any given year, a Participant's 
percentage of total trades shall be calculated by dividing the total 
number of trades that that Participant reports to the Processor for 
that year by the total number of trades in Nasdaq securities reported 
to the Processor for the year. A Participant's total share volume shall 
be calculated by multiplying the total number of trades in Nasdaq 
securities in that year that that Participant reports to the Processor 
by the number of shares for each such trade. Unless otherwise stated in 
this agreement, a year shall run from January 1 to December 31 and 
quarters shall end on March 31, June 30, September 30, and December 31. 
Processor shall

[[Page 20901]]

endeavor to provide Participants with written estimates of each 
Participant's percentage of total volume within five business days of 
month end.
    3. For purposes of this Exhibit 1, net distributable operating 
income for any particular calendar year shall be calculated by adding 
all revenues from the UTP Quote Data Feed, the UTP Trade Data Feed, and 
the OTC Montage Data Feed including revenues from the dissemination of 
information respecting Eligible Securities to foreign marketplaces 
(collectively, ``the Data Feeds''), and subtracting from such revenues 
the costs incurred by the Processor, set forth below, in collecting, 
consolidating, validating, generating, and disseminating the Data 
Feeds. These costs include, but are not limited to, the following:
    a. The Processor costs directly attributable to creating OTC 
Montage Data Feed, including:
    1. Cost of collecting Participant quotes into the Processor's quote 
engine;
    2. Cost of processing quotes and creating OTC Montage Data Feed 
messages within the Processor's quote engine;
    3. Cost of the Processor's communication management subsystem that 
distributes OTC Montage Data Feed to the market data vendor network for 
further distribution.
    b. The costs directly attributable to creating the UTP Quote Data 
Feed, including:
    1. The costs of collecting each Participant's best bid, best offer, 
and aggregate volume into the Processor's quote engine and, in the case 
of NASD, the costs of identifying the NASD Participant(s) that 
constitute NASD's Best Bid and Offer quotations;
    2. Cost of calculating the national best bid and offer price within 
the Processor's quote engine;
    3. Cost of creating the UTP Quote Data Feed message within the 
Processor's quote engine;
    4. Cost of the Processor's communication management subsystem that 
distributes the UTP Quote Data Feed to the market data vendors' 
networks for further distribution.
    c. The costs directly attributable to creating the UTP Trade Data 
Feed, including:
    1. The costs of collecting each Participant's last sale and volume 
amount into the Processor's quote engine
    2. Cost of determining the appropriate last sale price and volume 
amount within the Processor's trade engine;
    3. Cost of utilizing the Processor's trade engine to distribute the 
UTP Trade Data Feed for distribution to the market data vendors.
    4. Cost of the Processor's communication management subsystem that 
distributes the UTP Trade Data Feed to the market data vendors' 
networks for further distribution.
    d. The additional costs that are shared across all Data Feeds, 
including:
    1. Telecommunication Operations costs of supporting the Participant 
lines into the Processor's facilities;
    2. Telecommunications Operations costs of supporting the external 
market data vendor network;
    3. Data Products account management and auditing function with the 
market data vendors;
    4. Market Operations costs to support symbol maintenance, and other 
data integrity issues;
    5. Overhead costs, including management support of the Processor, 
Human Resources, Finance, Legal, and Administrative Services.
    e. Processor costs excluded from the calculation of net 
distributable operating income include trade execution costs for 
transactions executed using a Nasdaq service and trade report 
collection costs reported through a Nasdaq service, as such services 
are market functions for which Participants electing to use such 
services pay market rate.
    f. For the purposes of this provision, the following definitions 
shall apply:
    1. ``Quote engine'' shall mean the Nasdaq's NT or Tandem system 
that is operated by Nasdaq to collect quotation information for 
Eligible Securities;
    2. ``Trade engine'' shall mean the Nasdaq Tandem system that is 
operated by Nasdaq for the purpose of collecting last sale information 
in Eligible Securities.
    3. At the time a Participant implements a Processor-approved 
electronic interface with the Processor, the Participant will become 
eligible to receive revenue.
    4. Processor shall endeavor to provide Participants with written 
estimates of each Participant'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 Participant within 45 days following the end of each calendar 
quarter in which the Participant is eligible to receive revenue, 
provided that each quarterly payment or billing shall be reconciled 
against a Participant's cumulative year-to-date payment or billing 
received to date and adjusted accordingly, and 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.
    In conjunction with calculating estimated quarterly and reconciled 
annual payments under this Exhibit 1, the Processor shall submit to the 
Participants a quarterly itemized statement setting forth the basis 
upon which net operating income was calculated, including a quarterly 
itemized statement of the Processor costs set forth in Paragraph 3 of 
this Exhibit. Such Processor costs and Plan revenues shall be adjusted 
annually based solely on the Processor's quarterly itemized statement 
audited pursuant to Processor's annual audit. Processor shall pay or 
bill Participants for the audit adjustments within thirty days of 
completion of the annual audit. By majority vote of the Operating 
Committee, the Processor shall engage an independent auditor to audit 
the Processor's costs or other calculation(s), the cost of which audit 
shall be shared equally by all Participants. The Processor agrees to 
cooperate fully in providing the information necessary to complete such 
audit.

 [FR Doc. E7-7953 Filed 4-25-07; 8:45 am]

BILLING CODE 8010-01-P
