
[Federal Register Volume 80, Number 145 (Wednesday, July 29, 2015)]
[Notices]
[Pages 45252-45254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18392]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75504; File No. SR-CTA/CQ-2015-01]


Consolidated Tape Association; Order Approving the Twenty Second 
Substantive Amendment to the Second Restatement of the CTA Plan and 
Sixteenth Substantive Amendment to the Restated CQ Plan

July 22, 2015.

I. Introduction

    On April 27, 2015, the Consolidated Tape Association (``CTA'') Plan 
and Consolidated Quotation (``CQ'') Plan participants (collectively the 
``Participants'') \1\ filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') pursuant to Section 11A of the Securities 
Exchange Act of 1934 (``Act''),\2\ and Rule 608 thereunder,\3\ a 
proposal to amend the Second Restatement of the CTA Plan and Restated 
CQ Plan (collectively, the ``Plans'').\4\The proposals represent the 
22nd Substantive Amendment to the CTA Plan and 16th Substantive 
Amendment to the CQ Plan (collectively ``the Amendments''), and reflect 
changes unanimously adopted by the Participants. The Amendments would 
require the Participants to include timestamps in the trade-report and 
bid-and-offer information that they report to the Plans' processor. The 
proposed Amendments were published for comment in the Federal Register 
on

[[Page 45253]]

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 
Amendments to the Plans.
---------------------------------------------------------------------------

    \1\ The Participants are: BATS Exchange, Inc. (``BATS''), BATS-Y 
Exchange, Inc. (``BATS-Y''), Chicago Board Options Exchange, Inc. 
(``CBOE''), EDGA Exchange, Inc. (``EDGA''), EDGX Exchange, Inc. 
(``EDGX''), Financial Industry Regulatory Authority, Inc. 
(``FINRA''), International Securities Exchange, LLC (``ISE''), 
NASDAQ OMX BX, Inc. (``Nasdaq BX''), NASDAQ OMX PHLX, Inc. (``Nasdaq 
PSX''), Nasdaq Stock Market LLC (``Nasdaq''), National Stock 
Exchange (``NSX''), New York Stock Exchange LLC (``NYSE''), NYSE MKT 
LLC (``NYSE MKT''), and NYSE Arca, Inc. (``NYSE Arca'').
    \2\ 15 U.S.C. 78k-1.
    \3\ 17 CFR 242.608.
    \4\ See Securities Exchange Act Release Nos. 10787 (May 10, 
1974), 39 FR 17799 (May 20, 1974) (declaring the CTA Plan 
effective); 15009 (July 28, 1978), 43 FR 34851 (August 7, 1978) 
(temporarily authorizing the CQ Plan); and 16518 (January 22, 1980), 
45 FR 6521 (January 28, 1980) (permanently authorizing the 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. 74909 (May 8, 2015), 
80 FR 27764 (``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 UTP Plan.
    \7\ See Letter from Emily Kasparov, Chairman, CTA Plan Operating 
Committee to Brent J. Fields, Secretary, Commission, dated July 17, 
2015 (``Response Letter'').
---------------------------------------------------------------------------

II. Description of the Proposal

    Currently, Section VI(c) of the CTA Plan requires transaction 
reports that the Participants submit to the Processor to include the 
stock symbol, the number of shares, and the price of the transaction. 
Section VI(a) of the CQ Plan provides that each bid and offer that a 
Participant reports to the Processor under the CQ Plan must include the 
bid or offer's quotation size or aggregate quotation size.
    The Amendments propose to require Participants to include in 
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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

III. Summary of Comment Letter and Participants' Response

    The Commission received one comment letter on the proposed 
Amendments and a response to that comment letter from the Participants. 
The commenter supports the proposed Amendments, but suggested 
clarifications to certain aspects of the Amendments.
    First, in order to ensure that sourcing and reporting of timestamp 
data would be consistent across exchanges, the commenter recommended 
that the Amendments 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 Amendments 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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    Next, the commenter stated that the proposed Amendments 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 Amendments 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 Amendments' 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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 elgibility 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\

[[Page 45254]]

In addition, the Participants noted that this suggestion is outside the 
scope of the Amendments.\23\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

    After careful review and consideration of the proposed Amendments, 
the comment letter, and the Response Letter, the Commission finds that 
the proposed Amendments to the Plans are 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 CTA and CQ Plans' 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.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 11A of the Act,\28\ 
and the rules thereunder, that the proposed Amendments to the CTA Plan 
and CQ Plan (File No. SR-CTA/CQ-2015-01) are approved.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78k-1.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(27).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-18392 Filed 7-28-15; 8:45 am]
BILLING CODE 8011-01-P


