
[Federal Register: March 18, 2009 (Volume 74, Number 51)]
[Notices]               
[Page 11621-11622]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18mr09-94]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59552; File No. SR-CTA/CQ-2008-05]

 
Consolidated Tape Association; Order Approving the Thirteenth 
Substantive Amendment to the Second Restatement of the Consolidated 
Tape Association Plan and the Ninth Substantive Amendment to the 
Restated Consolidated Quotation Plan

March 10, 2009.

I. Introduction

    On December 15, 2008, the Consolidated Tape Association (``CTA'') 
Plan and Consolidated Quotation (``CQ'') Plan participants 
(``Participants'') \1\ filed with the Securities and Exchange 
Commission (``Commission'') pursuant to Rule 608 \2\ under the 
Securities Exchange Act of 1934 (``Act'') \3\ a proposal to amend the 
CTA and CQ Plans (collectively, the ``Plans'') \4\ to provide that the 
Participants will pay the Network A Administrator a fixed annual fee 
(``Annual Fixed Payment'') in exchange for its performance of Network A 
administrator functions under the Plans. The proposed Amendments were 
published for comment in the Federal Register on January 21, 2008.\5\ 
No comment letters were received in response to the Notice. This order 
approves the Amendments.
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    \1\ Each Participant executed the proposed amendment. The 
Participants are the American Stock Exchange LLC (n/k/a NYSE 
Alternext U.S. LLC); Boston Stock Exchange, Inc. (n/k/a NASDAQ OMX 
BX, Inc.); Chicago Board Options Exchange, Incorporated; Chicago 
Stock Exchange, Inc.; Financial Industry Regulatory Authority, Inc., 
International Securities Exchange, LLC; The NASDAQ Stock Market LLC 
(``Nasdaq''); National Stock Exchange, Inc.; New York Stock Exchange 
LLC (``NYSE''); NYSE Arca, Inc.; and Philadelphia Stock Exchange, 
Inc. (n/k/a NASDAQ OMX PHLX, Inc.).
    \2\ 17 CFR 240.608.
    \3\ 15 U.S.C. 78k-1.
    \4\ See Securities Exchange Act Release Nos. 10787 (May 10, 
1974), 39 FR 17799 (order approving CTA Plan); 15009 (July 28, 
1978), 43 FR 34851 (August 7, 1978) (order temporarily approving CQ 
Plan); and 16518 (January 22, 1980), 45 FR 6521 (order permanently 
approving CQ Plan). The most recent restatement of both Plans was in 
1995. The CTA Plan, pursuant to which markets collect and 
disseminate last sale price information for non-NASDAQ listed 
securities, is a ``transaction reporting plan'' under Rule 601 under 
the Act, 17 CFR 242.601, and a ``national market system plan'' under 
Rule 608 under the Act, 17 CFR 242.608. The CQ Plan, pursuant to 
which markets collect and disseminate bid/ask quotation information 
for listed securities, is a ``national market system plan'' under 
Rule 608 under the Act, 17 CFR 242.608.
    \5\ See Securities Exchange Act Release No. 59230 (January 12, 
2008), 74 FR 3659 (``Notice'').

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[[Page 11622]]

II. Description of the Proposal

    Section XII (``Financial Matters'') of the CTA Plan and Section IX 
(``Financial Matters'') of the CQ Plan each provide that a network's 
Operating Expenses are to be deducted from the network's Gross Income 
before determining the amounts that the network's administrator will 
distribute to the Participants. Both Section XII(c)(i) (``Determination 
of Operating Expenses'') of the CTA Plan and Section IX(c)(i) 
(``Determination of Operating Expenses'') of the CQ Plan currently 
provide that a network's Operating Expenses include all costs and 
expenses that the network's administrator incurs in ``collecting, 
processing and making available Network A market data.'' The Network A 
Administrator stated that accounting for operating costs, especially 
the allocation of organization overhead costs to the Network A 
Administrator function, is administratively burdensome. And as a 
result, the Network A Participants have proposed to replace their 
payment to the Network A Administrator of Operating Expenses with an 
Annual Fixed Payment. In the case of NYSE as the CTA and CQ Network A 
Administrator, the Participants proposed that ``Operating Expenses'' 
for any calendar year equal: (1) The Annual Fixed Payment for that 
year; plus (2) ``Extraordinary Expenses.'' Extraordinary Expenses would 
include that portion of legal and audit expenses and marketing and 
consulting fees that are outside of the ordinary and customary 
functions that a network administrator performs.\6\
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    \6\ The Commission notes that the Transmittal Letter 
accompanying the proposed Amendments included language not voted on 
by the Participants and thus not included in the proposed 
Amendments: ``Network A Administrator will not incur any 
extraordinary expense on behalf of the Network A Participants unless 
the Network A Participants determine by majority vote to approve the 
incurrence of that extraordinary expense.'' This language is not 
part of the proposed Amendments that the Commission is approving 
today.
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    For calendar year 2008, the Network A Participants voted to set the 
Annual Fixed Payment at $6,000,000 to compensate the Network A 
Administrator for its Network A administrative services during 2008 
under both the CTA and CQ Plans. For each subsequent calendar year the 
Annual Fixed Payment shall increase (but not decrease) by the 
percentage increase (if any) in the annual cost-of-living adjustment 
(``COLA'') that the U.S. Social Security Administration applies to the 
Supplemental Security Income for the calendar year preceding that 
subsequent year, subject to a maximum annual increase of five 
percent.\7\
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    \7\ See Notice, supra note 5 at 3660 for a more detailed 
description of how the fee will be assessed
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Discussion

    After careful review, the Commission finds that the Amendments to 
the Plans are consistent with the requirements of the Act and the rules 
and regulations thereunder,\8\ and, in particular, Section 11A(a)(1) of 
the Act \9\ and Rule 608 thereunder \10\ in that they are necessary or 
appropriate in the public interest, for the protection of investors and 
the maintenance of fair and orderly markets, to remove impediments to, 
and perfect the mechanisms of, a national market system. The Commission 
believes that permitting the Network A Administrator to assess a flat 
fee should increase the efficiency of the administration of the 
Plans.\11\ Additionally, the Commission notes that every two years the 
Network A Administrator is required to provide a report detailing any 
significant changes to the administrative expenses during the preceding 
two years to enable the Participants to review and determine by 
majority vote whether to continue the Annual Fixed Payment at its then 
current level.
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    \8\ The Commission has considered the proposed amendments' 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
    \9\ 15 U.S.C. 78k-1(a)(1).
    \10\ 17 CFR 240.608.
    \11\ The Commission notes that Nasdaq similarly receives a fixed 
fee for its performance of administrative functions under 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 
Unlisted Trading Privileges Basis.''
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IV. Conclusion

    It is therefore ordered, pursuant to Section 11A of the Act,\12\ 
and Rule 608 thereunder,\13\ that the proposed amendments to the CTA 
and CQ Plans (SR-CTA/CQ-2008-05) are approved.
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    \12\ 15 U.S.C. 78k-1.
    \13\ 17 CFR 240.608.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(27).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-5767 Filed 3-17-09; 8:45 am]

BILLING CODE 8011-01-P
