[Federal Register Volume 85, Number 118 (Thursday, June 18, 2020)]
[Notices]
[Pages 36921-36923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-13127]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 89066/June 12, 2020; File No. 4-757]


 Securities Exchange Act of 1934; Order Denying Stay; In the 
Matter of Order Directing the Exchanges and the Financial Industry 
Regulatory Authority To Submit a New National Market System Plan 
Regarding Consolidated Equity Market Data

    On June 1, 2020, Nasdaq Stock Market LLC, Nasdaq BX, Inc., and 
Nasdaq PHLX LLC filed a petition in the U.S. Court of Appeals for the 
District of Columbia Circuit seeking review of the Commission's Order 
Directing the Exchanges and the Financial Industry Regulatory Authority 
to Submit a New National Market System (``NMS'') Plan Regarding 
Consolidated Equity Market Data (the ``Governance Order''), which was 
approved by the Commission on May 6, 2020 and later published in the 
Federal Register. See 85 FR 28702 (May 13, 2020). On June 3, 2020, 
petitioners filed with the Commission a motion to stay the effect of 
the Governance Order pending final resolution of their petition for 
review.
    Pursuant to Section 25(c)(2) of the Securities Exchange Act of 1934 
(``Exchange Act'') and Section 705 of the Administrative Procedure Act, 
the Commission has discretion to stay its order directing the self-
regulatory organizations (``SROs'') to jointly develop, and file with 
the Commission by August 11, 2020, a single New Consolidated Data Plan 
that replaces the three current Equity Data Plans if it finds that 
``justice so requires.'' 15 U.S.C. 78y(c)(2); 5 U.S.C. 705. The 
Commission has determined, however, that petitioners have not met their 
burden to demonstrate that the extraordinary remedy of a stay of the 
Commission's Governance Order is warranted. Petitioners have not 
established sufficient irreparable harm, petitioners' legal challenges 
to the Order lack merit, and the public interest would be served by the 
SROs complying with the requirements of the Order.
    1. The Commission finds that petitioners' stay request overstates 
the harm that will result from their compliance with the Governance 
Order. Petitioners assert that, in the absence of a stay, they ``will 
incur immediate and significant upfront costs in drafting the New 
Consolidated Data Plan, seeking Commission approval of the plan, and, 
if approved, implementing the plan.'' Stay Mot. 16. But the Governance 
Order does not establish a New Consolidated Data Plan. It requires the 
SROs to file a

[[Page 36922]]

proposed plan with the Commission. Pursuant to Regulation NMS Rule 608, 
the New Consolidated Data Plan submitted in response to the Governance 
Order ``will itself be published for public comment prior to any 
Commission decision to disapprove or to approve the plan with any 
changes or subject to any conditions the Commission deems necessary or 
appropriate after considering public comment.'' 85 FR at 28705; see 17 
CFR 242.608. Through that process, interested parties will still be 
able to comment on the proposed plan, and the Commission will review 
the plan and may make changes or add conditions before issuing a 
subsequent order approving or disapproving a new plan. Petitioners thus 
err by claiming that they will incur significant upfront costs in 
implementing a plan if the Governance Order is not stayed.
    Similarly, petitioners wrongly assert that there would be any 
actions taken pursuant to a New Consolidated Data Plan that would have 
to be unwound in the absence of a stay. Stay Mot. 16-17. As the 
Governance Order makes clear, the current Equity Data Plans will remain 
in place until a New Consolidated Data Plan has been approved by the 
Commission and implemented. See 17 CFR 242.608(b)(1); 85 FR at 28705, 
28728. The proposed plan, moreover, must include provisions for the 
orderly transition of functions and responsibilities from the three 
existing Equity Data Plans. Id. at 28729. And any approval order will 
be subject to judicial review at that time.
    Petitioners also overstate the harm from compliance with the 
Governance Order itself, including drafting the New Consolidated Data 
Plan and seeking Commission approval. For example, the SROs will be 
able to use their extensive expertise and experience in NMS plan 
operation to efficiently formulate the specific terms and provisions of 
the proposed New Consolidated Data Plan. 85 FR at 28711. The Commission 
anticipates that proposal costs will be further reduced because most of 
the detailed provisions relating to the operation of the existing 
Equity Data Plans could be imported into the New Consolidated Data Plan 
without substantial effort or great cost. Id. And to the extent 
governance provisions in the New Consolidated Data Plan would differ 
from those in the existing Equity Data Plans, the Governance Order 
prescribes the content of these provisions, further reducing the costs 
of preparing the new plan. Id. at 28729. We therefore do not believe 
that any harm resulting from compliance with the Governance Order 
warrants a stay.
    2. Petitioners have not shown a likelihood of success on the 
merits. Exchange Act Section 11A permits the Commission ``to authorize 
or require'' SROs ``to act jointly'' with respect to ``matters as to 
which they share authority under this chapter in planning, developing, 
operating, or regulating a national market system.'' 15 U.S.C. 78k-
1(a)(3)(B). Rule 608 likewise provides that ``[a]ny two or more self-
regulatory organizations, acting jointly, may file a national market 
system plan'' and that ``[s]elf-regulatory organizations are authorized 
to act jointly in'' ``[p]lanning, developing, and operating any 
national market subsystem or facility contemplated by a national market 
system plan,'' ``[p]reparing and filing a national market system 
plan,'' and ``[i]mplementing or administering an effective national 
market system plan.'' 17 CFR 242.608(a). In petitioners' view, the 
statutory and regulatory references to ``acting jointly'' mean that 
SROs--and only SROs--may have voting power on an NMS operating 
committee.
    The Commission has already considered and rejected that argument. 
In the Governance Order, the Commission determined that granting non-
SROs voting power is consistent with Section 11A and Rule 608(a). 
Despite petitioners' challenge, nothing in the text of either Section 
11A or Rule 608(a) demonstrates that ``acting jointly'' means ``acting 
jointly and exclusively.'' Rather, paragraph (2) of Section 11A(a) 
contains a broad grant of authority to the Commission, directing it 
``to use its authority'' under the Exchange Act ``to facilitate the 
establishment of a national market system for securities'' in 
accordance with certain broad congressional findings and objectives. 15 
U.S.C. 78k-1(a)(2). Paragraph (3) then references the Commission's 
ability to authorize or require SROs to act jointly, and nothing in the 
text or structure of paragraph (3) undermines the Commission's grant of 
authority in paragraph (2) or compels the conclusion that joint SRO 
action must mean exclusive SRO action. The Commission's grant of 
authority to SROs in Rule 608(a)(3) likewise authorizes SROs to act 
jointly but, in doing so, does not by implication limit the 
Commission's authority to set forth a governance structure that 
includes non-SROs with some measure of voting power on an NMS plan 
operating committee. Rather, as the Governance Order notes, both 
Section 11A and Rule 608 are silent as to the participation of non-SROs 
in the operation of the plan. 85 FR at 28715. The Governance Order's 
allocation of voting power to non-SROs is thus consistent with Section 
11A and Rule 608(a).
    The Governance Order does not discount the important role SROs play 
in plan governance. But it balances that role against the need for, 
among other things, more viewpoints on plan operating committees. The 
Commission has determined that ``the distribution of voting power'' 
described in the Governance Order ``appropriately strikes th[e] 
balance'' between broader representation and the SROs' statutory and 
regulatory responsibilities, ``by providing for meaningful input from a 
broad range of stakeholders while also ensuring that the SROs retain 
sufficient voting power to act jointly on behalf of the plan pursuant 
to their regulatory responsibilities.'' 85 FR at 28722.
    Petitioners' other challenges presented in their stay motion were 
already rejected in the Governance Order.
    3. The Governance Order serves a strong public interest. The 
governance model for the Equity Data Plans was established in 1970s. 
Since then, critical developments in the equities markets--including 
the heightening of an inherent conflict of interest between the for-
profit and regulatory roles of the exchanges and the concentration of 
voting power in the Equity Data Plans among a few large exchange 
groups--have demonstrated the need for an updated governance model. The 
public interest will be served by the enhanced decisionmaking and 
innovation in the provision of equity market data that will result from 
the governance changes outlined in the Governance Order. And the 
governance of the consolidated data feeds can be improved by 
consolidating the three existing, separate Equity Data Plans into a 
single New Consolidated Data Plan that will reduce existing 
redundancies, inefficiencies, and inconsistencies between and among the 
Equity Data Plans. See 85 FR at 28711; Proposed Order, 85 FR 2164, 
2166-74 (Jan. 14, 2020). Moreover, as the Order explains, 
``[a]ddressing the issues with the current governance structure of the 
Equity Data Plans discussed in this Order is a key step in responding 
to broader concerns about the consolidated data feeds.'' 85 FR at 28702 
& n.11. Any further delay in taking this first step toward establishing 
a new governance structure will impede the achievement of these 
benefits.
    Accordingly, it is ordered, pursuant to Section 25(c)(2) of the 
Exchange Act and Section 705 of the Administrative Procedure Act that 
petitioners' motions for a stay be denied.


[[Page 36923]]


    By the Commission.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2020-13127 Filed 6-17-20; 8:45 am]
BILLING CODE 8011-01-P


