
[Federal Register Volume 80, Number 145 (Wednesday, July 29, 2015)]
[Notices]
[Pages 45254-45256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18393]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75505; File No. S7-24-89]


Joint Industry Plan; Order Approving Amendment No. 35 to the 
Joint Self-Regulatory Organization Plan Governing the Collection, 
Consolidation and Dissemination of Quotation and Transaction 
Information for Nasdaq-Listed Securities Traded on Exchanges on an 
Unlisted Trading Privileges Basis Submitted by the BATS Exchange, Inc., 
BATS Y-Exchange, Inc., Chicago Board Options Exchange, Incorporated, 
Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., 
Financial Industry Regulatory Authority, Inc., International Securities 
Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, Nasdaq Stock 
Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, 
NYSE MKT LLC, and NYSE Arca, Inc.

July 22, 2015.

I. Introduction

    On April 27, 2015, the operating committee (``Operating Committee'' 
or ``Committee'') \1\ of the Joint Self-Regulatory Organization Plan 
Governing the Collection, Consolidation, and Dissemination of Quotation 
and Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges on an Unlisted Trading Privileges Basis (``Nasdaq/UTP Plan'' 
or ``Plan'') filed with the Securities and Exchange Commission 
(``Commission'') pursuant to Section 11A of the Securities Exchange Act 
of 1934 (``Act''),\2\ and Rule 608 thereunder,\3\ a proposal to amend 
the Nasdaq/UTP Plan.\4\ The

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proposal represents the 35th Amendment to the Plan (the ``Amendment''), 
and reflects changes unanimously adopted by the Participants. The 
Amendment requires the Participants to include timestamps in the trade-
report and bid-and-offer information that they report to the Plan's 
processor. The proposed Amendment was published for comment in the 
Federal Register on May 14, 2015.\5\ The Commission received one 
comment letter in response to the Notice.\6\ On July 17, 2015, the 
Participants to the Plan responded to the comment letter.\7\ This order 
approves the proposed Amendment to the Plan.
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    \1\ The Plan Participants (collectively the ``Participants'') 
are the: BATS Exchange, Inc.; BATS Y-Exchange, Inc.; Chicago Board 
Options Exchange, Incorporated; Chicago Stock Exchange, Inc.; EDGA 
Exchange, Inc.; EDGX Exchange, Inc.; Financial Industry Regulatory 
Authority, Inc. (``FINRA''); International Securities Exchange LLC; 
NASDAQ OMX BX, Inc.; NASDAQ OMX PHLX LLC; Nasdaq Stock Market LLC; 
National Stock Exchange, Inc.; New York Stock Exchange LLC; NYSE MKT 
LLC; and NYSE Arca, Inc.
    \2\ 15 U.S.C. 78k-1.
    \3\ 17 CFR 240.608.
    \4\ The Plan governs the collection, processing, and 
dissemination on a consolidated basis of quotation information and 
transaction reports in Eligible 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 Eligible Securities. See 
Securities Exchange Act Release No. 55647 (April 19, 2007) 72 FR 
20891 (April 26, 2007).
    \5\ See Securities Exchange Act Release No. 74910 (May 8, 2015), 
80 FR 27713 (``Notice'').
    \6\ See Letter from Theodore R. Lazo, Managing Director and 
Associate Director, SIFMA, to Brent J. Fields, Secretary, 
Commission, dated June 5, 2015 (``SIFMA Letter'') commenting on this 
proposal as well as the parallel amendment to the CTA and CQ Plans.
    \7\ See Letter from Emily Kasparov, Chairman, CTA Plan Operating 
Committee to Brent J. Fields, Secretary, Commission, dated July 17, 
2015 (``Response Letter'').
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II. Description of the Proposal

    Currently, Section VIII of the UTP Plan (Transmission of 
Information to Processor by Participants) requires transaction reports 
that the Participants to submit to the Processor to include (1) the 
identification of the security, (2) the price bid and offered, together 
with size, (3) the FINRA Participant along with the FINRA 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.
    Section VIII also requires each Participant to promptly collect and 
transmit to the Processor trade reports executed in its market that 
include (1) identification of the security, (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.
    The Amendment proposes to require Participants to include in 
quotation information and trade reports to the Processor the time of 
the trade or the quotation. In the case of a Participant that is a 
national securities exchange, the time of the transaction or quotation 
is to be reported in microseconds as identified in the Participant's 
matching engine publication timestamp. In the case of FINRA, the time 
of a transaction will be the time of execution that a FINRA member 
reports to a FINRA trade reporting facility and the time of a bid or 
offer will be the quotation publication timestamp that the bidding or 
offering member reports to the FINRA quotation facility, all in 
accordance with FINRA rules.\8\ In addition, if a FINRA trade reporting 
facility or quotation facility provides a proprietary feed of trades or 
quotes reported by the facility to the Processor, then the FINRA 
facility must also furnish the Processor with the time of the 
transmission as published on the facility's proprietary feed.
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    \8\ If a FINRA member reports to it in seconds or milliseconds, 
FINRA must convert the times to microseconds and must furnish the 
Processor the reports in microseconds.
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III. Summary of Comment Letter and Participants' Response

    The Commission received one comment letter on the proposed 
Amendment and a response to that comment letter from the Participants. 
The commenter supports the proposed Amendment, but suggested 
clarifications to certain aspects of the Amendment.
    First, in order to ensure that sourcing and reporting of timestamp 
data would be consistent across exchanges, the commenter recommended 
that the Amendment provide a clearer definition of ``matching engine 
publication timestamp.'' \9\ The commenter stated that the term 
``matching engine publication timestamp'' is not defined in the Plans 
or in the proposal, and is not a commonly understood term.\10\ The 
commenter suggested that the transaction time to be reported to the 
Securities Information Processors (``SIPs'') should be the timestamp 
applied when the trade is executed in the exchange's matching engine, 
and the quotation time should be the timestamp applied when the 
quotation is added to the exchange's order book.\11\ The commenter 
further stated that the timestamp reported by the exchange should 
reflect the actual underlying matching engine event, and not any 
internal processing that may occur at the exchange before submission to 
the SIPs.\12\ In response to the comment that the ``matching engine 
publication timestamps'' be more clearly defined, the Participants 
stated that the purpose of the Amendment is to respond to the 
Commission's request to provide information allowing market 
participants to compare proprietary data feed latency to consolidated 
data feed latency.\13\ The Participants noted that they devoted 
considerable effort and resources to expedite this timestamp initiative 
at Chair White's request. The Participants use the proposed term of 
``matching engine publication timestamps'' to connote the timestamp 
published by each Participant's matching engine. The Participants 
believe that the proposal will provide transparency that will enable 
market participants to compare the latency between the proprietary data 
feed and the consolidated data feed, which the Participants believe the 
industry will find most useful.\14\
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    \9\ See SIFMA Letter at 3.
    \10\ Id.
    \11\ Id.
    \12\ Id.
    \13\ See Response Letter at 2-3.
    \14\ See Response Letter 3-4.
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    Next, the commenter stated that the proposed Amendment should 
provide clarity on the timestamp information that FINRA would be 
required to provide to the SIPs.\15\ As proposed, any FINRA proprietary 
data feed of trades or quotes reported by the FINRA trade reporting 
facility (``TRF'') to the SIPs would be required to furnish the SIPs 
with the time of the transmission as published on the proprietary 
feeds. The commenter suggested that the Amendment should require the 
FINRA TRF or quotation facility to provide to the SIPs the timestamp 
when the trade or quote was processed by the FINRA facility regardless 
of whether the facility offers a proprietary feed.\16\ In response, the 
Participants stated that additional timestamps for non-proprietary 
FINRA feeds would not provide meaningful information to market 
participants because they would not enable a market participant to 
compare the time that a Participant transmits information via a 
proprietary feed to the time the SIP transmits the same 
information.\17\ Additionally, the Participants stated that FINRA TRFs 
or quotation facilities should not include intermediate processing 
timestamps because such additional timestamps go beyond the scope of 
the Amendment's objectives and that requiring these additions would be 
costly and time consuming.\18\ The Participants noted that additional 
timestamps would delay the rollout of the timestamp initiative 
considerably, impose a significant cost on the industry, require 
specialized equipment, add significant bandwidth requirements, and 
result in an array of timestamps that would likely lead to confusion 
within the industry.\19\
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    \15\ See SIFMA Letter at 1, 3.
    \16\ See SIFMA Letter at 3.
    \17\ See Response Letter at 3.
    \18\ See Response Letter at 3-4.
    \19\ Id.

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    Additionally, the commenter believes that the SIPs should be 
responsible for market-wide determinations of whether a trade is 
reported out of sequence and not last sale eligible.\20\ The commenter 
suggested that the SIPs should make market-wide determinations if 
transactions are out of sequence by comparing the incoming 
transaction's execution time against the execution time of the most 
recent transaction that was last sale eligible and published. The 
Participants stated that the Participants have historically determined 
last sale eligibility and out of sequence reporting pursuant to their 
own rules \21\ and believe that such determinations should continue to 
be made by the Participants consistent with their respective rules.\22\ 
In addition, the Participants noted that this suggestion is outside the 
scope of the Amendment.\23\
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    \20\ See SIFMA Letter at 3.
    \21\ See Response Letter at 4.
    \22\ The commenter also called for change in the governance 
structure of NMS plans which it states is ineffective and opaque, 
suggesting that governing bodies of NMS plans should include 
representatives from broker-dealers, asset managers, and the public, 
with each of these groups having voting power on the plans' 
operating committees. See SIFMA Letter at 4. The Participants noted 
that the Plans held numerous meetings to fashion the timestamp tools 
including meetings among the Participants and Plan subcommittees, 
Commission staff, and also involved consultation with industry 
representatives from the Plan's Advisory Committees. See Response 
Letter at 2.
    \23\ See Response Letter at 4.
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IV. Discussion and Commission Findings

    After careful review and consideration of the proposed Amendment, 
the comment letter, and the Response Letter, the Commission finds that 
the proposed Amendment to the Plan is consistent with the requirements 
of the Act and the rules and regulations thereunder,\24\ and, in 
particular, Section 11A(a)(1) of the Act \25\ and Rule 608 thereunder 
\26\ 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. While supporting the timestamp Amendments, the 
commenter raised three issues regarding the proposal--the need to 
define the term ``matching engine publication timestamp'' more clearly, 
the need for additional timestamps, and a preference that the SIPs 
determine whether a trade is reported out of sequence and not last sale 
eligible. The commenter also believes that there is a need to reform 
SIP governance. The Participants responded to the commenter's concerns, 
as discussed above, indicating why they believe that the proposal 
adequately addresses the issue it was meant to address--providing 
additional information so that interested persons will be able to 
measure the latency between the consolidated data feeds and industry 
proprietary data feeds. The Participants stated that including 
additional timestamps would delay implementation of the proposal, add 
costs, and could be confusing. The Participants also indicated that 
they continue to believe they should decide, consistent with their 
rules, whether trades are reported out of sequence and not last sale 
eligible. The Commission agrees with the Participants' response to the 
issues raised by the comment letter.
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    \24\ The Commission has considered the proposed Amendment's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
    \25\ 15 U.S.C. 78k-1(a)(1).
    \26\ 17 CFR 240.608.
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    The proposal is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\27\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations and transactions in securities. These goals are furthered by 
the proposed changes requiring that Participants add timestamps to 
their trade and quotation reports as this will add transparency 
regarding the latencies between the Nasdaq/UTP Plan's consolidated data 
feeds and industry proprietary feeds. Users of the consolidated feeds 
will be better able to monitor the latency of those feeds and to assess 
whether such feeds meet their trading and other requirements.
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    \27\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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V. Conclusion

    It is therefore ordered, pursuant to Section 11A of the Act,\28\ 
the rules thereunder, that the proposed Amendment to Nasdaq/UTP Plan 
(File No. S7-24-89) is approved.
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    \28\ 15 U.S.C. 78k-1.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(27).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-18393 Filed 7-28-15; 8:45 am]
BILLING CODE 8011-01-P


