[Federal Register Volume 87, Number 186 (Tuesday, September 27, 2022)]
[Notices]
[Pages 58544-58552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20827]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95848; File No. S7-24-89]


Joint Industry Plan; Order Disapproving the Fifty-First Amendment 
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

September 21, 2022.

I. Introduction

    On November 5, 2021,\1\ the Participants \2\ in 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 (``UTP Plan'' or ``Plan'') \3\ filed with the Securities and 
Exchange Commission (``Commission''), pursuant to Section 11A of the 
Securities Exchange Act of 1934 (``Act'') \4\ and Rule 608 of 
Regulation National Market System (``NMS'') thereunder,\5\ a proposal 
(the ``Proposed Amendment'') to amend the UTP Plan to implement the 
non-fee-related aspects of the Commission's Market Data Infrastructure 
Rules (``MDI Rules'').\6\ The Proposed Amendment was published for 
comment in the Federal Register on November 26, 2021.\7\
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    \1\ See Letter from Robert Books, Chair, UTP Operating 
Committee, to Vanessa Countryman, Secretary, Commission (Nov. 5, 
2021).
    \2\ The ``Participants'' are: Cboe BYX Exchange, Inc.; Cboe BZX 
Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; 
Cboe Exchange, Inc.; Financial Industry Regulatory Authority, Inc.; 
Investors Exchange LLC; Long-Term Stock Exchange, Inc.; MEMX LLC; 
MIAX PEARL, LLC; Nasdaq BX, Inc.; Nasdaq ISE, LLC; Nasdaq PHLX LLC; 
The Nasdaq Stock Market LLC; New York Stock Exchange LLC; NYSE 
American LLC; NYSE Arca, Inc.; NYSE Chicago, Inc.; and NYSE 
National, Inc.
    \3\ The Plan governs the collection, processing, and 
dissemination on a consolidated basis of quotation information and 
transaction reports in Eligible Securities for its Participants. 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 (Apr. 19, 
2007), 72 FR 20891 (Apr. 26, 2007).
    \4\ 15 U.S.C. 78k-1.
    \5\ 17 CFR 242.608.
    \6\ The ``MDI Rules'' as used in this Order, and as relevant to 
the Proposed Amendment, are Rules 600, 603, and 614 of Regulation 
NMS. 17 CFR 242.600, 603, 614. See also Securities Exchange Act 
Release No. 90610 (Dec. 9, 2020), 86 FR 18596 (Apr. 9, 2021) (File 
No. S7-03-20) (``MDI Rules Release''); Securities Exchange Act 
Release No. 90610A (May 24, 2021), 86 FR 29195 (June 1, 2021) (File 
No. S7-03-20) (technical correction to MDI Rules Release). Several 
exchanges filed petitions for review challenging the MDI Rules 
Release in the U.S. Court of Appeals for the District of Columbia 
Circuit, which were denied on May 24, 2022. See The Nasdaq Stock 
Market LLC, et al. v. SEC, No. 21-1100 (D.C. Cir. May 24, 2022).
    \7\ See Securities Exchange Act Release No. 93620 (Nov. 19, 
2021), 86 FR 67541 (Nov. 26, 2021) (``Notice''). Comments received 
in response to the Notice are available at https://www.sec.gov/comments/s7-24-89/s72489.htm.
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    On February 24, 2022, the Commission instituted proceedings 
pursuant to Rule 608(b)(2)(i) of Regulation NMS,\8\ to determine 
whether to approve or disapprove the Proposed Amendment or to approve 
the Proposed Amendment with any changes or subject to any conditions 
the Commission deems necessary or appropriate after considering public 
comment.\9\ On May 19, 2022, pursuant to Rule 608(b)(2)(i) of 
Regulation NMS,\10\ the Commission extended the period within which to 
conclude proceedings regarding the Proposed

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Amendment to July 24, 2022,\11\ and on July 21, 2022, the Commission 
further extended the period within which to conclude proceedings 
regarding the Proposed Amendment to September 22, 2022.\12\
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    \8\ 17 CFR 242.608(b)(2)(i).
    \9\ See Securities Exchange Act Release No. 94308 (Feb. 24, 
2022), 87 FR 11755 (Mar. 2, 2022) (``OIP''). Comments received in 
response to the OIP are available at https://www.sec.gov/comments/s7-24-89/s72489.htm.
    \10\ See 17 CFR 242.608(b)(2)(i).
    \11\ See Securities Exchange Act Release No. 94954 (May 19, 
2022), 87 FR 31922 (May 25, 2022).
    \12\ See Securities Exchange Act Release No. 95347 (July 21, 
2022), 87 FR 45142 (July 27, 2022).
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    This order disapproves the Proposed Amendment.\13\
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    \13\ The Participants have filed similar amendments to the 
Second Restatement of the Consolidated Tape Association (``CTA'') 
Plan and the Restated Consolidated Quotation (``CQ'') Plan, which 
the Commission is also disapproving. See Securities Exchange Act 
Release No. 95850 (Sept. 21, 2022) (File No. SR-CTA/CQ-2021-02). 
Separately, certain Participants have also filed amendments to 
implement the fee-related aspects of the MDI Rules. See Securities 
Exchange Act Release Nos. 93625 (Nov. 19, 2021), 86 FR 67517 (Nov. 
26, 2021) (File No. SR-CTA/CQ-2021-03), and 93618 (Nov. 19, 2021), 
86 FR 67562 (Nov. 26, 2021) (File No. S7-24-89) (together, the 
``Proposed Fee Amendments''). The Commission is, by separate orders, 
also disapproving the Proposed Fee Amendments. See Securities 
Exchange Act Release No. 95851 (Sept. 21, 2022) (File No. SR-CTA/CQ-
2021-03), and 95849 (Sept. 21, 2022) (File No. S7-24-89).
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II. Overview

    Pursuant to Regulation NMS and the Equity Data Plans,\14\ the 
national securities exchange and national securities associations 
(``self-regulatory organizations'' or ``SROs'') must provide certain 
information with respect to quotations for and transactions in NMS 
stocks (``NMS information'') to an exclusive plan securities 
information processor (``exclusive SIP''), which consolidates the NMS 
information and makes it available to market participants on the 
consolidated tapes. The purpose of the Equity Data Plans is to 
facilitate the collection and dissemination of SIP data so that the 
public has ready access to a ``comprehensive, accurate, and reliable 
source of information for the prices and volume of any NMS stock at any 
time during the trading day.'' \15\ Because the infrastructure for the 
collection, consolidation, and dissemination of this data had not been 
significantly updated since its initial implementation in the 1970s, 
the Commission adopted amendments to Regulation NMS that increase the 
content of NMS information and amend the manner in which such NMS 
information is collected, consolidated, and disseminated by the Equity 
Data Plans.\16\ In the MDI Rules Release, the Commission stated, 
``[t]he widespread availability of timely market information promotes 
fair and efficient markets and facilitates the ability of brokers and 
dealers to provide best execution to their customers.'' \17\
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    \14\ The three effective national market system plans that 
govern the collection, consolidation, processing, and dissemination 
of certain NMS information are: (1) the CTA Plan; (2) the CQ Plan; 
and (3) the UTP Plan (collectively, the ``Equity Data Plans''). Each 
of the Equity Data Plans is an effective national market system plan 
under 17 CFR 242.608 (Rule 608) of Regulation NMS. See also 
Securities Exchange Act Release No. 28146 (June 26, 1990), 55 FR 
27917 (July 6, 1990) (order approving UTP Plan).
    \15\ Concept Release on Equity Market Structure, Securities 
Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3593 (Jan. 21, 
2010).
    \16\ See MDI Rules Release, supra note 6.
    \17\ Id. at 18599.
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    The MDI Rules increase the content of NMS information and modify 
the manner in which NMS information is collected, consolidated, and 
disseminated. Significantly, under the MDI Rules, the Commission 
required the introduction of a competitive decentralized consolidation 
model under which competing consolidators and self-aggregators will 
replace the exclusive SIPs that collect, consolidate, and disseminate 
equity market data under the Equity Data Plans.\18\ Although the 
exclusive SIPs will no longer disseminate consolidated information for 
an individual NMS stock, the Equity Data Plans will continue to play an 
important role--they will develop and propose fees for the data content 
underlying consolidated market data, collect and allocate revenues 
collected for this data, develop the monthly performance metrics for 
competing consolidators, and provide an annual assessment of competing 
consolidator performance.
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    \18\ See id. at 18637 (``The Commission is adopting a 
decentralized consolidation model in which competing consolidators, 
rather than the exclusive SIPs, will collect, consolidate, and 
disseminate consolidated market data.'').
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    Rule 614(e) of Regulation NMS requires the participants of the 
effective national market system plan(s) for NMS stocks to file an 
amendment pursuant to Rule 608 of Regulation NMS to conform the plan(s) 
to the decentralized consolidation model.\19\ Specifically, Rule 
614(e)(1) directs the participants to file an amendment to conform the 
plan(s) to reflect the provision of information with respect to 
quotations for and transactions in NMS stocks that is necessary to 
generate consolidated market data by the SROs to competing 
consolidators and self-aggregators. The Proposed Amendment was filed by 
the Participants pursuant to this requirement.\20\
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    \19\ 17 CFR 242.614(e). See also MDI Rules Release, supra note 
6, 86 FR at 18680-81.
    \20\ The Participants have filed the Proposed Amendment under 
the Equity Data Plans. See supra note 14. While the Commission 
issued an order on August 6, 2020, approving, as modified, a new 
national market system plan regarding equity market data--the CT 
Plan--to replace the existing Equity Data Plans, that order was 
stayed on October 13, 2021, see The Nasdaq Stock Market, et al. LLC 
v. Securities and Exchange Commission, No. 21-1167 (D.C. Cir. Oct. 
13, 2021), which was before the Participants filed the Proposed 
Amendment. The Commission's order approving the CT Plan was 
subsequently vacated. See The Nasdaq Stock Market LLC, et al. v. 
Securities and Exchange Commission, Nos. 21-1167, 21-1168, 21-1169 
(D.C. Cir., July 5, 2022) (vacating Securities Exchange Act Release 
No. 92586 (Aug. 6, 2021), 86 FR 44142 (Aug. 11, 2021) (Order 
Approving, as Modified, a National Market System Plan Regarding 
Consolidated Market Data)).
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    As explained below, however, the Proposed Amendment does not comply 
with Rule 614(e)(1) because it does not conform the Plan to reflect the 
provision of information with respect to quotations for and 
transactions in NMS stocks that is necessary to generate consolidated 
market data by the SROs to competing consolidators and self-
aggregators. For example, inconsistent with the decentralized 
consolidation model and with the requirements of Rule 614(e), the 
Proposed Amendment: (1) amends the Plan to reflect that it will 
disseminate consolidated market data to competing consolidators and 
self-aggregators, even though the Plan will not be disseminating any 
consolidated market data; \21\ (2) fails to amend the Plan to reflect 
that the Processor will no longer have the responsibility to 
disseminate regulatory halt notices once the decentralized 
consolidation model has been implemented; \22\ (3) fails to include 
requirements for the Participants to timestamp every element of data 
necessary to generate consolidated market data; \23\ and (4) fails to 
amend the Plan to remove references to a single processor.\24\
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    \21\ 17 CFR 242.603(b). See also MDI Rules Release, supra note 
6, 86 FR at 18653 (``[T]hese changes to Rule 603(b) are appropriate 
to establish the decentralized consolidation model.'').
    \22\ See, e.g., MDI Rules Release, supra note 6, 86 FR at 18633-
35 (discussing the provision of ``regulatory data'' by the primary 
listing exchange for an NMS stock to competing consolidators and 
self-aggregators under the decentralized consolidation model).
    \23\ 17 CFR 242.614(e)(2).
    \24\ The MDI Rules Release amended Rule 603(b) to remove the 
requirement that ``all consolidated information for an individual 
NMS stock [be disseminated] through a single plan processor.'' See 
MDI Rules Release, supra note 6, 86 FR at 18652-53. See also supra 
note 21; MDI Rules Release, supra note 6, 86 FR at 18701 (discussing 
the retirement of the exclusive SIPs).
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    Because the Proposed Amendment is inconsistent with the MDI Rules, 
specifically Rule 614(e), the Commission must disapprove the Proposed 
Amendment under Rule 608(b)(2) of Regulation NMS because it cannot find 
that it is 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

[[Page 58546]]

the mechanisms of, a national market system, or otherwise in 
furtherance of the purposes of the Act.\25\
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    \25\ 17 CFR 242.608(b)(2).
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III. Summary of the Proposed Amendment

    The Participants propose to amend the Plan to comply with Rule 
614(e) of the MDI Rules. Under Rule 614(e), participants to the 
effective national market system plan(s) for NMS stocks were required 
to file by November 5, 2021, an amendment with the Commission that 
includes each of the requirements of Rule 614(e)(1)-(5).\26\
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    \26\ 17 CFR 242.614(e).
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    Specifically, Rule 614(e)(1) requires the amendment to conform the 
effective national market system plan(s) for NMS stocks to reflect 
that, under the decentralized consolidation model, the national 
securities exchange and national securities association participants 
will provide to competing consolidators and self-aggregators the 
information, with respect to quotations for and transactions in NMS 
stocks, that is necessary to generate consolidated market data.
    Rule 614(e)(2) requires the amendment to include the application of 
timestamps by the national securities exchange and national securities 
association participants on all information with respect to quotations 
for and transactions in NMS stocks that is necessary to generate 
consolidated market data, including the time that such information was 
generated as applicable by the national securities exchange or national 
securities association and the time the national securities exchange or 
national securities association made such information available to 
competing consolidators and self-aggregators.
    Rule 614(e)(3) requires the amendment to include assessments of 
competing consolidator performance, including speed, reliability, and 
cost of data provision and the provision of an annual report of such 
assessment to the Commission.
    Rule 614(e)(4) requires the amendment to include the development, 
maintenance, and publication of a list that identifies the primary 
listing exchange for each NMS stock.
    Rule 614(e)(5) requires the amendment to include the calculation 
and publication on a monthly basis of consolidated market data gross 
revenues for NMS stocks as specified by (i) listed on the NYSE; (ii) 
listed on Nasdaq; and (iii) listed on exchanges other than NYSE or 
Nasdaq.
    The following is a summary of the changes proposed to be made to 
the Plan by the Proposed Amendment.\27\
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    \27\ The full text of the Proposed Amendment appears as 
Attachment A to the Notice. See Notice, supra note 7, 86 FR at 
67543-55.
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Section III. Definitions

    Under the Proposed Amendment, the Plan would include the following 
new provision: ``Terms used in this plan have the same meaning as the 
terms are defined in Rule 600(b) under the Act.''
    The Proposed Amendment amends the definitions of ``News Service,'' 
``Subscriber,'' and ``Vendor'' to add competing consolidators as a 
source of Transaction Reports and Quotation Information.
    The Proposed Amendment defines ``Primary Listing Exchange,'' to 
mean ``the national securities exchange on which an Eligible Security 
is listed.'' The proposed definition further states, ``[i]f an Eligible 
Security is listed on more than one national securities exchange, 
Primary Listing Exchange means the exchange on which the security has 
been listed the longest.'' The Participants explain that this 
definition is being added to comply with the requirements of the MDI 
Rules and to replace the definition of ``Listing Market.'' \28\
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    \28\ See id. at 67541. The Proposed Amendment deletes a 
definition of ``Primary Listing Market'' from former Section X. 
(Section XI., as proposed), Regulatory and Operational Halts.
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    The Proposed Amendment amends the definition of ``Quotation 
Information'' to define it as ``all information with respect to 
quotations for Eligible Securities required to be collected and made 
available to the Processor, Competing Consolidators, and Self-
Aggregators pursuant to this Plan, including all data necessary to 
generate consolidated market data.'' Similarly, the Proposed Amendment 
amends the definition of ``Transaction Reports'' to mean ``all 
information with respect to transactions in Eligible Securities 
required to be collected and made available to the Processor, Competing 
Consolidators, and Self-Aggregators pursuant to this Plan, including 
all data necessary to generate consolidated market data.'' The 
Participants explain that these amendments are intended to track the 
MDI Rules more closely.\29\
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    \29\ See id.
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Section IV. Administration of Plan

    The Proposed Amendment amends Section IV.B., Operating Committee: 
Authority, to add references to competing consolidators and self-
aggregators. Specifically, the Proposed Amendment states that the 
Operating Committee shall be responsible for overseeing the 
consolidation \30\ of Quotation Information and Transaction Reports in 
Eligible Securities from the Participants for dissemination to 
competing consolidators and self-aggregators, among other entities; 
that the Operating Committee shall be responsible for periodically 
evaluating the Processor and competing consolidators; and that the 
Operating Committee shall be responsible for setting the level of fees 
to be paid by competing consolidators and self-aggregators, among other 
entities, for services relating to Quotation Information or Transaction 
Reports in Eligible Securities, and for taking action in respect 
thereto in accordance with the Plan.
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    \30\ Under the decentralized consolidation model, the Operating 
Committee would no longer oversee the consolidation of data by the 
Processor, but rather the provision of data underlying consolidated 
market data to competing consolidators and self-aggregators. See 
Rule 603(b), 17 CFR 242.603(b); Rule 614(e)(1), 17 CFR 
242.614(e)(1). See also MDI Rules Release, supra note 6, 86 FR at 
18682.
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    The Proposed Amendment also amends Section IV.B. to require the 
Operating Committee to publish on the Plan's website the Primary 
Listing Exchange for each Eligible Security and to calculate and 
publish, on a monthly basis, consolidated market data gross revenues 
for Eligible Securities. The Participants explain that these amendments 
are intended to comply with Rule 614(e)(4) and Rule 614(e)(5)(ii).\31\
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    \31\ See Notice, supra note 7, 86 FR at 67541.
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Section VII. Administrative Functions

    The Proposed Amendment amends this section by deleting references 
to the Processor. Additionally, under the Proposed Amendment, the 
Administrator, not 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 the Plan. The Participants explain that the 
Administrative Functions described in the section are more 
appropriately ascribed to the Administrator.\32\
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    \32\ See id.
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Section VIII. Evaluation of Competing Consolidators

    The Proposed Amendment adds new Section VIII to require the 
Operating Committee to assess the performance of competing 
consolidators and to submit an annual report to the Commission

[[Page 58547]]

containing the assessment.\33\ The Proposed Amendment requires this 
annual report to include an analysis with respect to competing 
consolidators' speed, reliability, and cost of data provision. The 
Participants explain that these changes are intended to comply with the 
requirements of Rule 614(e)(3).\34\
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    \33\ As a result of this addition, the Proposed Amendment 
renumbers the remaining sections of the Plan.
    \34\ See Notice, supra note 7, 86 FR at 67541.
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    In addition, the Proposed Amendment requires the Operating 
Committee, in conducting the analysis, to review the monthly 
performance metrics to be published by competing consolidators pursuant 
to Rule 614(d)(5).\35\ Rule 614(d)(5) requires competing consolidators 
to publish on their websites monthly performance metrics as defined by 
the effective national market system plan(s) for NMS stocks.\36\ The 
Proposed Amendment adds the following monthly performance metrics to 
this section:
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    \35\ 17 CFR 242.614(d)(5).
    \36\ See id.

    A. Capacity statistics, including system tested capacity, system 
output capacity, total transaction capacity, and total transaction 
peak capacity;
    B. Message rate and total statistics, including peak output 
rates on the following bases: 1-millisecond, 10-millisecond, 100-
millisecond, 500-millisecond, 1-second, and 5-second;
    C. System availability statistics, including system up-time 
percentage and cumulative amount of outage time;
    D. Network delay statistics, including quote and trade zero 
window size events, quote and trade retransmit events, and quote and 
trade message total; and
    E. Latency statistics, including distribution statistics up to 
the 99.99th percentile, for the following:
    1. When a Participant sends an inbound message to a competing 
consolidator and when the competing consolidator receives the 
inbound message;
    2. When the competing consolidator receives the inbound message 
and when the competing consolidator sends the corresponding 
consolidated message to a customer of the competing consolidator; 
and
    3. When a Participant sends an inbound message to a competing 
consolidator and when the competing consolidator sends the 
corresponding consolidated message to a customer of the competing 
consolidator.

    The Participants explain that they have proposed to amend Section 
VIII to define the monthly performance metrics in accordance with Rule 
614(d)(5).\37\
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    \37\ See Notice, supra note 7, 86 FR at 67541-42.
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Section IX. (Previously Section VIII.), Transmission of Information to 
Processor, Competing Consolidators, and Self-Aggregators by 
Participants

    The Proposed Amendment amends Section IX.A., Quotation Information, 
to add the requirement that each Participant collect and transmit to 
competing consolidators and self-aggregators all quotation information 
required to be made available by such Participant by Rule 603(b) of 
Regulation NMS,\38\ including all data necessary to generate 
consolidated market data. Additionally, the Proposed Amendment requires 
each Participant to make available quotation information, and changes 
in any such information, to competing consolidators and self-
aggregators in the same manner and using the same methods, including 
all methods of access and the same format, as such Participant makes 
available any information with respect to quotations for and 
transactions in NMS stocks to any person.
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    \38\ 17 CFR 242.603(b).
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    In addition, under the Proposed Amendment, each bid and offer with 
respect to an Eligible Security furnished to competing consolidators 
and self-aggregators by any Participant pursuant to the Plan would be 
accompanied by the time (reported in microseconds) the Participant made 
such bid and offer available to Competing Consolidators and Self 
Aggregators. With respect to FINRA, the Proposed Amendment states that 
if FINRA's quotation facility provides a proprietary feed of its 
quotation information, then the quotation facility shall also furnish 
the Processor, competing consolidators, and self-aggregators with the 
time of the quotation as published on the quotation facility's 
proprietary feed, and that FINRA shall convert any quotation times 
reported to it in seconds or milliseconds to microseconds and shall 
furnish such times to the Processor, competing consolidators, and self-
aggregators in microseconds.
    Similarly, the Proposed Amendment amends Section IX.B., Transaction 
Reports, to require each Participant to make available Transaction 
Reports to competing consolidators and self-aggregators in the same 
manner and using the same methods, including all methods of access and 
the same format, as such Participant makes available any information 
with respect to quotations for and transactions in NMS stocks to any 
person.
    The Proposed Amendment also amends Section IX.B. to require 
Transaction Reports to competing consolidators and self-aggregators to 
include the time (in microseconds) that the Participant made such 
information available to competing consolidators and self-aggregators. 
With respect to FINRA, the Proposed Amendment states that if FINRA's 
trade reporting facility provides a proprietary feed of trades reported 
by the trade reporting facility to the Processor, competing 
consolidators and self-aggregators, then the FINRA trade reporting 
facility shall also furnish the Processor with the time of the 
transmission as published on the facility's proprietary feed. 
Additionally, the Proposed Amendment requires FINRA to convert times 
that its members report to it in seconds or milliseconds to 
microseconds and to furnish such times to the Processor, Competing 
Consolidators, and Self-Aggregators in microseconds. The Participants 
state that the amendments to Sections IX.A. and IX.B. are designed to 
comply with the requirements of Rule 614(e)(1) and (2).\39\
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    \39\ Notice, supra note 7, 86 FR at 67542. The Participants 
state that the Proposed Amendment amends Section IX.B., Transaction 
Reports, to add the requirement that each Participant agrees to 
collect and transmit to competing consolidators and self-aggregators 
all transaction reports required to be made available pursuant to 
Rule 603(b) of Regulation NMS; however, the Proposed Amendment does 
not actually propose to make this change to the text of the Plan. 
See id. at 67550.
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    The Proposed Amendment also deletes the following statement from 
Section IX.B.: ``The Participants shall seek to reduce the time period 
for reporting last sale prices to the Processor as conditions 
warrant.''
    In addition, Section IX.B. currently includes a list of types of 
transactions that are not required to be reported to the Processor 
pursuant to the Plan. The Proposed Amendment adds competing 
consolidators and self-aggregators as entities to which these types of 
transactions are not required to be reported.
    Finally, the Proposed Amendment amends Section IX.D. to include 
references to competing consolidators and self-aggregators. Section 
IX.D., as amended would read: ``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, Competing Consolidators, and 
Self-Aggregators, or where a trading halt or suspension in an Eligible 
Security is in effect in its Market, the Participant shall promptly 
notify the Processor, Competing Consolidators, and Self-Aggregators of 
such condition or event and shall resume collecting and transmitting 
Quotation Information and

[[Page 58548]]

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, Competing 
Consolidators, and Self-Aggregators, the Participant shall promptly 
notify the Processor, Competing Consolidators, and Self-Aggregators 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.''

Section XI. (Previously Section X.), Regulatory and Operational Halts

    The Proposed Amendment revises this section to delete the 
definition of ``Primary Listing Market'' from Section XI.A., 
Definitions for Purposes of Section XI. The Proposed Amendment also 
replaces references to ``Primary Listing Market'' with ``Primary 
Listing Exchange'' throughout Section XI.\40\ The Participants state 
that this change would align the text of the Plan with terminology in 
the MDI Rules.\41\
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    \40\ The Proposed Amendment does not replace a reference to 
Primary Listing Market in the definition of ``Regulatory Halt'' in 
this section.
    \41\ See Notice, supra note 7, 86 FR at 67542.
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    The Proposed Amendment amends Section XI.B., Operational Halts, to 
state that competing consolidators and self-aggregators shall be 
notified by a Participant if that Participant has concerns about its 
ability to collect and transmit Quotation Information or Transaction 
Reports, or where it has declared an Operational Halt or suspension of 
trading in one or more Eligible Securities, pursuant to the procedures 
adopted by the Operating Committee. Similarly, the Proposed Amendment 
amends Section XI.H., Communications, to state that if a Primary 
Listing Exchange for an Eligible Security determines it appropriate to 
initiate a Regulatory Halt, it will notify competing consolidators and 
self-aggregators of such Regulatory Halt as well as provide notice that 
a Regulatory Halt has been lifted using such protocols and other 
emergency procedures as may be mutually agreed to between the Operating 
Committee and the Primary Listing Exchange. The Participants state that 
these changes are consistent with Rule 614(e)(1) and would ensure that 
competing consolidators and self-aggregators are notified of 
information related to Regulatory and Operational Halts and that 
competing consolidators can disseminate this information to their 
customers.\42\
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    \42\ See id.
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Section XII. (Previously Section XI.), Hours of Operation

    The Proposed Amendment amends Section XII.B.(ii) and (iii) to add 
references to competing consolidators and self-aggregators. 
Specifically, with respect to the reporting obligations of 
Participants, proposed Section XII.B.(ii)provides that transactions in 
Eligible Securities executed after 8:00 p.m. and before 12:00 a.m. 
(midnight) shall be reported to the Processor, competing consolidators, 
and self-aggregators between the hours of 4:00 a.m. and 8:00 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. And proposed Section XII.B.(iii) provides that 
transactions in Eligible Securities executed between 12:00 a.m. 
(midnight) and 4:00 a.m. ET shall be transmitted to the Processor, 
competing consolidators, and self-aggregators between 4:00 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.
    The Proposed Amendment also amends Section XII.D. to require 
Participants that enter Quotation Information or submit Transaction 
Reports to competing consolidators and self-aggregators between 4:00 
a.m. and 9:30 a.m. ET, and after 4:00 p.m. ET until 8:00 p.m. ET, to do 
so for all Eligible Securities in which they enter quotations.

Section XIV. (Previously Section XIII.), Financial Matters

    The Proposed Amendment amends Section XIV.C., Maintenance of 
Financial Records, by replacing references to the Processor with 
references to the Administrator. The Participants explain that the 
responsibilities described in that section are more appropriately 
ascribed to the Administrator.\43\
---------------------------------------------------------------------------

    \43\ See id.
---------------------------------------------------------------------------

Section XV. (Previously Section XIV.), Indemnification

    The Proposed Amendment amends this section to add references to 
Competing Consolidators and Self-Aggregators and to remove a reference 
to Vendors as a recipient of Transaction Reports, Quotation 
Information, or other information disseminated by the Processor. 
Specifically, the first paragraph in this section now states: ``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, Competing 
Consolidators, and Self-Aggregators by such Participant and 
disseminated by the Processor, Competing Consolidators, and Self-
Aggregators. This indemnity agreement shall be in addition to any 
liability that the indemnifying Participant may otherwise have.''

Section XVIII. (Previously Section XVII.), Applicability of Securities 
Exchange Act of 1934

    The Proposed Amendment amends this section to include Competing 
Consolidators and Self-Aggregators as subject to any applicable 
provisions of the Act, as amended, and any rules and regulations 
promulgated thereunder.

Section XIX. (Previously Section XVIII.), Operational Issues

    The Proposed Amendment amends Section XIX.A. to include references 
to Competing Consolidators and Self-Aggregators to require each 
Participant to collect and validate quotes and last sale reports within 
its own system prior to transmitting this data to Competing 
Consolidators and Self-Aggregators.

Section XXI. Depth of Book Display

    The Proposed Amendment deletes this section. The Participants 
explain that this provision is obsolete given the MDI Rules.\44\
---------------------------------------------------------------------------

    \44\ See id.
---------------------------------------------------------------------------

IV. Discussion

A. The Applicable Standard of Review

    Under Rule 608(b)(2) of Regulation NMS, the Commission shall 
approve a national market system plan or proposed amendment to an 
effective national market system plan, with such changes or subject to 
such conditions as the Commission may deem necessary or appropriate, if 
it finds that the plan or amendment is 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, or otherwise in furtherance of

[[Page 58549]]

the purposes of the Act.\45\ The Commission shall disapprove a national 
market system plan or proposed amendment if it does not make such a 
finding.\46\ Furthermore, Rule 700(b)(3)(ii) of the Commission's Rules 
of Practice states:
---------------------------------------------------------------------------

    \45\ 17 CFR 242.608(b)(2).
    \46\ Id.

    The burden to demonstrate that a NMS plan filing is consistent 
with the Exchange Act and the rules and regulations issued 
thereunder that are applicable to NMS plans is on the plan 
participants that filed the NMS plan filing. Any failure of the plan 
participants that filed the NMS plan filing to provide such detail 
and specificity may result in the Commission not having a sufficient 
basis to make an affirmative finding that an NMS plan filing is 
consistent with the Exchange Act and the rules and regulations 
issued thereunder that are applicable to NMS plans.\47\
---------------------------------------------------------------------------

    \47\ 17 CFR 201.700(b)(3)(ii).

    For the reasons discussed below, the Commission does not find that 
the Participants have met their burden to demonstrate that the Proposed 
Amendment is consistent with the Act.\48\ Specifically, the Commission 
does not find that the Participants have demonstrated that the Proposed 
Amendment is consistent with either Rule 614(e) of Regulation NMS or 
Rule 608 of Regulation NMS. The Proposed Amendment clearly does not 
comply with the requirements of the MDI Rules.\49\ Accordingly, the 
Commission cannot make a finding that the Proposed Amendment is 
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, or otherwise in furtherance of the purposes of the Act.\50\
---------------------------------------------------------------------------

    \48\ 17 CFR 201.700(b)(3).
    \49\ As discussed below, the Proposed Amendment does not comply 
with MDI Rules 603(b), 614(e)(1), and 614(e)(2). 17 CFR 242.603(b), 
17 CFR 242.614(e)(1), 17 CFR 242.614(e)(2).
    \50\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

B. The Requirements of the MDI Rules Regarding the Proposed Amendment

    As adopted by the Commission, the MDI Rules implement a 
decentralized consolidation model in which competing consolidators 
would replace the exclusive plan processors of the Equity Data Plans as 
the entities responsible for disseminating consolidated market 
data.\51\ The MDI Rules Release provides for an ``initial parallel 
operation period'' of 180 days during which the existing exclusive SIPs 
for the Equity Data Plans would operate in parallel with the competing 
consolidators,\52\ and further provides for the transition from the 
initial parallel operation period to the retirement of the exclusive 
SIPs for equity market data:
---------------------------------------------------------------------------

    \51\ See MDI Rules Release, supra note 6, 86 FR at 18637.
    \52\ See id. at 18700.

    Within 90 days of the end of the initial parallel operation 
period, the Operating Committee will make a recommendation to the 
Commission as to whether the exclusive SIPs should be 
decommissioned. The Commission will consider an effective national 
market system plan amendment to effectuate a cessation of the 
operations of the exclusive SIPs and, if consistent with the 
requirements of Rule 608 and the Exchange Act, approve such an 
amendment.\53\
---------------------------------------------------------------------------

    \53\ Id. at 18701.

    Pursuant to Rule 614(e)(1) of Regulation NMS, and as discussed in 
the MDI Rules Release, the Participants to the Plan were required to 
file an amendment to conform the Plan to reflect the provision of 
information with respect to quotations for and transactions in NMS 
stocks that is necessary to generate consolidated market data by the 
national securities exchange and national securities association 
participants to competing consolidators and self-aggregators.\54\
---------------------------------------------------------------------------

    \54\ See id. at 18700-01.
---------------------------------------------------------------------------

C. Whether the Proposed Amendment Is Consistent With Rule 614(e)(1) of 
Regulation NMS

1. Consistency With the Decentralized Consolidation Model
    Two commenters recommend disapproval of the Proposed Amendment 
because the amendment does not properly conform the Plan to the MDI 
Rules in that the amendments fail to accurately reflect the 
decentralized consolidation model.\55\ One commenter states, ``[t]he 
MDI rule represents a fundamental shift to a decentralized 
consolidation model. The Plan amendments need to reflect that 
throughout the body and exhibits of the Plans.'' \56\ The commenter 
also argues that the Proposed Amendment must ``[a]cknowledge that the 
Plan is no longer responsible for the creation, distribution and 
pricing of consolidated market data.'' \57\
---------------------------------------------------------------------------

    \55\ See Letter from Patrick Flannery, Chief Executive Officer, 
MayStreet, Inc., to Vanessa Countryman, Secretary, Commission (Dec. 
17, 2021) (``MayStreet Letter I''); Letter from Manisha Kimmel, 
Chief Policy Officer, MayStreet, Inc., to Vanessa Countryman, 
Secretary, Commission (Mar. 23, 2022) (``MayStreet Letter II''); 
Letter from Ellen Greene, Managing Director, Equity and Options 
Market Structure, and William C. Thum, Managing Director and 
Associate General Counsel, Asset Management Group, Securities 
Industry and Financial Markets Association, to Vanessa Countryman, 
Secretary, Commission (Dec. 17, 2021) (``SIFMA Letter I'').
    \56\ MayStreet Letter II, supra note 55, at 2.
    \57\ Id. at 4-5.
---------------------------------------------------------------------------

    The commenter states, ``[d]espite the fact that competing 
consolidators generate consolidated market data, the Nasdaq/UTP Plan as 
amended at IV(B) states that consolidated data is disseminated to 
competing consolidators.'' \58\ The commenter reiterates that only 
competing consolidators would externally distribute and charge for 
consolidated market data and that the Plan would only be selling 
underlying content.\59\
---------------------------------------------------------------------------

    \58\ MayStreet Letter I, supra note 55, at 4, n.5.
    \59\ See MayStreet Letter II, supra note 55, at 4-5.
---------------------------------------------------------------------------

    The commenter also argues that the sections of the Plan that 
discuss vendors' and subscribers' contractual relationships with the 
Plan should be ``removed or significantly altered to reflect that the 
Plan no longer has agreements with vendors and end users and instead 
have agreements with the competing consolidators and self-aggregators 
related specifically to the cost of content underlying core market 
data.'' \60\ This commenter states that ``the relationship between 
competing consolidators and their customers should not include a 
contractual relationship with the plan'' because vendors would be 
receiving consolidated market data from competing consolidators rather 
than from the Plan.\61\
---------------------------------------------------------------------------

    \60\ See MayStreet Letter I, supra note 55, at 3.
    \61\ Id. See also MayStreet Letter II, supra note 54, at 9 
(arguing that, since the Plan would only be selling underlying 
content to competing consolidators and self-aggregators, vendor and 
subscriber agreements should not be required).
---------------------------------------------------------------------------

    This commenter also objects to the continued references to 
subscribers and vendors in the Plan as recipients of data from the 
Processor, arguing that under the decentralized consolidation model, 
``only competing consolidators would sell consolidated market data to 
vendors and subscribers.'' \62\
---------------------------------------------------------------------------

    \62\ MayStreet Letter I, supra note 55, at 3.
---------------------------------------------------------------------------

    One commenter objects to the retention of the concept of a single 
processor in the Proposed Amendment.\63\ Another commenter also states 
that ``it is worth noting that the Plans do not reflect the 
decentralized consolidation model nor do they acknowledge the parallel 
period.'' \64\ This commenter requests clarification of how the Plan 
will operate during the parallel operation period, such as the 
inclusion in the Plan of objective criteria for ending the parallel 
period and the addition of a section devoted to competing consolidators 
and self-

[[Page 58550]]

aggregators to help distinguish between their obligations and the 
obligations of the exclusive SIPs during the parallel period.\65\ The 
commenter recommends that the Proposed Amendment clarify that all 
content underlying consolidated market data will be provided to 
competing consolidators and self-aggregators, and provide validation 
procedures to be followed by competing consolidators.
---------------------------------------------------------------------------

    \63\ See SIFMA Letter I, supra note 55, at 8.
    \64\ MayStreet Letter II, supra note 55, at 8.
    \65\ See id. at 7-8.
---------------------------------------------------------------------------

    The Participants submitted a comment letter in which they argue 
that maintaining the exclusive SIPs through the parallel operation 
period is consistent with the MDI Rules Release, stating:

    [P]ursuant to the phased transition period set forth in the MDI 
Rules Release, the Plans must operate a parallel operation period 
during which the decentralized consolidation model introduced by the 
MDI Rules will run in parallel to the existing exclusive SIP model. 
. . . After completion of the parallel operation period, the Plans 
are required to submit an amendment to effectuate a cessation of the 
operations of the exclusive SIPs, which would include removing 
references of the exclusive SIPs from the text of the Plans.\66\
---------------------------------------------------------------------------

    \66\ Letter from James P. Dombach, Counsel for CTA, CQ, and UTP 
Plans, McGonigle, P.C., to Vanessa Countryman, Secretary, 
Commission, at 2 (Mar. 25, 2022) (``McGonigle Letter'').

    The Participants also maintain that the exclusive SIPs will 
continue to provide market data under the current Equity Data Plans 
during the parallel operation period and that the inclusion of the 
exclusive SIPs in the Equity Data Plans (as provided for in the 
Proposed Amendment) until the submission of a further amendment after 
the parallel operation period is consistent with the MDI Rules 
Release.\67\
---------------------------------------------------------------------------

    \67\ See id. at 1-2.
---------------------------------------------------------------------------

    The Commission agrees with the commenters who argue that the 
Proposed Amendment does not properly conform the Plan to the 
decentralized consolidation model. First, under the MDI Rules, the SROs 
are required to make available to competing consolidators and self-
aggregators the data necessary to generate consolidated market 
data,\68\ and competing consolidators and self-aggregators will then 
generate consolidated market data, rather than receive consolidated 
market data from the Plan.\69\ The Participants, however, propose to 
amend the UTP Plan to give the Operating Committee the authority to 
oversee the consolidation of Quotation Information and Transaction 
Reports from the Participants to competing consolidators and self-
aggregators.\70\ This is not consistent with the decentralized 
consolidation model.
---------------------------------------------------------------------------

    \68\ See Rule 603(b), 17 CFR 242.603(b). See also Rule 
600(b)(19), which defines ``consolidated market data'' as the 
following data, consolidated across all national securities 
exchanges and national securities associations: (i) Core data; (ii) 
Regulatory data; (iii) Administrative data; (iv) Self-regulatory 
organization-specific program data; and (v) Additional regulatory, 
administrative, or self-regulatory organization-specific program 
data elements defined as such pursuant to the effective national 
market system plan or plans required under Sec.  242.603(b). See 17 
CFR 242.600(b)(19).
    \69\ See Rule 614(d)(1)-(3). 17 CFR 242.614(d)(1)-(3).
    \70\ See Notice, supra note 7, 86 FR at 67545 (UTP Plan Proposed 
Amendment at Section IV.B.).
---------------------------------------------------------------------------

    Specifically, Rule 614(d) provides that competing consolidators 
shall collect any information with respect to quotations for and 
transactions in NMS stocks as provided in Rule 603(b) that is necessary 
to create a consolidated market data product from each national 
securities exchange and national securities association,\71\ calculate 
and generate a consolidated market data product,\72\ and make the 
consolidated market data product available to subscribers.\73\ Self-
aggregators will receive information with respect to quotations for and 
transactions in NMS stocks, including all data necessary to generate 
consolidated market data, and generate consolidated market data solely 
for their internal use.\74\ Additionally, pursuant to Rule 603(b), the 
Participants shall make available to all competing consolidators and 
self-aggregators ``all data necessary to generate consolidated market 
data.'' \75\ Accordingly, the Plan's modified role under the 
decentralized consolidation model will be to develop and file with the 
Commission the fees associated with the underlying data, to collect and 
allocate revenues for that data, to develop monthly performance metrics 
for competing consolidators, and to provide an annual assessment of 
competing consolidator performance.\76\ Therefore, the Proposed 
Amendment impermissibly provides for the dissemination by the Plan of 
consolidated market data to competing consolidators and self-
aggregators, which is inconsistent with Rule 603(b), which requires the 
Participants to make available the data necessary to generate 
consolidated market data to competing consolidators and self-
aggregators so that, pursuant to Rule 614(d), those entities can 
generate consolidated market data themselves.
---------------------------------------------------------------------------

    \71\ See Rule 614(d)(1), 17 CFR 242.614(d)(1).
    \72\ See Rule 614(d)(2), 17 CFR 242.614(d)(2).
    \73\ See Rule 614(d)(3), 17 CFR 242.614(d)(3). The MDI Rules 
also define ``competing consolidator'' as a securities information 
processor required to be registered pursuant to Sec.  242.614 (Rule 
614) or a national securities exchange or national securities 
association that receives information with respect to quotations for 
and transactions in NMS stocks and generates a consolidated market 
data product for dissemination to any person. See 17 CFR 
242.600(b)(16).
    \74\ The definition of ``self-aggregator'' was added by the MDI 
Rules. See 17 CFR 242.600(b)(83). A self-aggregator may make 
consolidated market data available to its affiliates that are 
registered with the Commission for their internal use. Id.
    \75\ 17 CFR 242.603(b).
    \76\ See MDI Rules Release, supra note 6, 86 FR at 18604, 18681.
---------------------------------------------------------------------------

    Second, the Proposed Amendment is inconsistent in certain other 
ways with the decentralized consolidation model provided for in the MDI 
Rules. Under the decentralized consolidation model, the primary listing 
exchanges will be required to collect, calculate, and make available 
regulatory data, which includes information relating to regulatory 
halts, to competing consolidators and self-aggregators in accordance 
with the definition of ``regulatory data'' in Rule 600(b)(78).\77\ The 
Proposed Amendment, however, does not reflect this requirement with 
respect to regulatory data. For example, the Proposed Amendment fails 
to amend the Plan to reflect that the Processor will no longer have the 
responsibility to disseminate regulatory halt notices once the 
decentralized consolidation model has been implemented.
---------------------------------------------------------------------------

    \77\ 17 CFR 242.600(b)(78) defines ``Regulatory Data'' as, among 
other things: (A) Information regarding Short Sale Circuit Breakers 
pursuant to Sec.  242.201; (B) Information regarding Price Bands 
required pursuant to the Plan to Address Extraordinary Market 
Volatility . . . (C) Information relating to regulatory halts or 
trading pauses (news dissemination/pending, LULD, Market-Wide 
Circuit Breakers) and reopenings or resumptions; (D) The official 
opening and closing prices of the primary listing exchange; and (E) 
An indicator of the applicable round lot size. See 17 CFR 
242.600(b)(78)(i). Regulatory data is one element of ``consolidated 
market data,'' as defined in Rule 600(b)(19). See supra note 68.
---------------------------------------------------------------------------

    The Proposed Amendment also does not include requirements for the 
Participants to timestamp every element of data necessary to generate 
consolidated market data. Rule 614(e)(2) requires the application of 
timestamps by the Participants on all information with respect to 
quotations for and transactions in NMS stocks that is necessary to 
generate consolidated market data, including the time that such 
information was generated by the Participant and the time the 
Participant made such information available to competing consolidators 
and self-aggregators.\78\ While the Proposed Amendment amends the UTP 
Plan's section governing the transmission of Quotation Information to 
require any Participant that furnishes bids and offers to competing 
consolidators and self-aggregators to timestamp the time the 
Participant made such bid and offer

[[Page 58551]]

available to competing consolidators and self-aggregators,\79\ this 
proposed timestamp provision does not apply to ``all information with 
respect to quotations for and transactions in NMS stocks that is 
necessary to generate consolidated market data.'' \80\ Additionally, 
the Proposed Amendment does not specifically require that each 
Participant timestamp the data necessary to generate consolidated 
market data upon generation and upon the time it is made available to 
competing consolidators and self-aggregators, as required by Rule 
614(e)(2).
---------------------------------------------------------------------------

    \78\ 17 CFR 242.614(e)(2).
    \79\ See Notice, supra note 7, 86 FR at 67550 (UTP Plan Proposed 
Amendment at Section IX.A.).
    \80\ In the MDI Rules Release, the Commission stated, 
``[s]pecifically, the timestamps applied by the SROs must be to the 
individual components of data content underlying consolidated market 
data, i.e., all of the individual components of data content 
underlying core data, regulatory data, administrative data, self-
regulatory organization-specific program data, and additional 
elements defined as `consolidated market data.''' MDI Rules Release, 
supra note 6, 86 FR at 18688.
---------------------------------------------------------------------------

    And finally, the Commission disagrees with the Participants' 
statement that the continued references to the role of the Processor in 
the Plan, as amended by the Proposed Amendment, comply with the MDI 
Rules Release's implementation schedule for parallel operation of the 
exclusive SIP and the competing consolidators.\81\ Rule 614(e)(1) 
requires the Participants to amend the Plan to reflect the provision of 
information with respect to quotations for and transactions in NMS 
stocks that is necessary to generate consolidated market data by the 
SROs to competing consolidators and self-aggregators, i.e., to conform 
the Plan to reflect the decentralized consolidation model.\82\ However, 
the Proposed Amendment is not consistent with the decentralized 
consolidation model and does not conform to the fact that a single 
processor will no longer be in operation once the decentralized 
consolidation model has been fully implemented.
---------------------------------------------------------------------------

    \81\ See McGonigle Letter, supra note 66, at 1-2. See also MDI 
Rules Release, supra note 6, 86 FR at 18700-01 (discussing the 
parallel operation implementation schedule).
    \82\ 17 CFR 242.614(e)(1).
---------------------------------------------------------------------------

    And while the MDI Rules Release contemplates the filing of a second 
amendment by the Plan ``to effectuate a cessation of the operations of 
the exclusive SIPs,'' \83\ the current Proposed Amendment was required 
to conform the Plan to reflect the provision of information with 
respect to quotations for and transactions in NMS stocks that is 
necessary to generate consolidated market data by the SROs to competing 
consolidators and self-aggregators, which, as discussed above, they 
have failed to do. Moreover, the failure of the Participants to explain 
in the Proposed Amendment how the Plan will function under the fully 
implemented decentralized consolidation model upon cessation of the 
exclusive SIPs not only denies market participants the opportunity to 
comment on those proposed provisions now, but it increases the 
uncertainty that firms face in determining whether to become competing 
consolidators or self-aggregators during the initial parallel operation 
period, thus hampering the implementation of the decentralized 
consolidation model required by the MDI Rules.\84\
---------------------------------------------------------------------------

    \83\ MDI Rules Release, supra note 6, 86 FR at 18701.
    \84\ See id. at 18699-700 (discussing the ``first wave'' 
registration period for competing consolidators, to begin on the 
date the Commission approves the amendments to the effective 
national market system plan(s) required under Rule 614(e) including 
the fees for the SRO data content necessary to generate consolidated 
market data).
---------------------------------------------------------------------------

    Because the Proposed Amendment clearly does not comply with the 
plain terms of the MDI Rules \85\ and is thus inconsistent with the 
requirements of Rule 614(e)(1), the Commission also does not find that 
the Participants have met their burden to demonstrate that the Proposed 
Amendment is consistent with Rule 608 as 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, or otherwise in 
furtherance of the purposes of the Act.\86\
---------------------------------------------------------------------------

    \85\ Specifically, Rules 603(b), 614(e)(1) and (e)(2). 17 CFR 
242.603(b), 17 CFR 242.614(e)(1), 17 CFR 242.614(e)(2).
    \86\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

2. Technical Comments
    One commenter criticizes the failure of the Proposed Amendment to 
incorporate the definitions of the MDI Rules.\87\ This commenter 
states, ``[t]he definitions in each of the Plans should be updated to 
reflect the decentralized consolidation model. It is insufficient to 
simply refer to Rule 600(b), in large part because there seems to be 
confusion within the Plans as to the role of competing consolidators, 
self-aggregators, the exclusive SIPs and vendors.'' \88\ Specifically, 
this commenter suggests that the Proposed Amendment add definitions of 
the following terms: competing consolidator, self-aggregator, 
consolidated market data, content underlying consolidated market data, 
initial parallel period, and parallel period, as well as a definition 
of the content that would be disseminated by the exclusive SIP to the 
Plan.\89\ This commenter also suggests updating the existing definition 
of Processor, and clarifying the existing definitions of Subscriber and 
Vendor to reflect the decentralized consolidation model.\90\
---------------------------------------------------------------------------

    \87\ See MayStreet Letter II, supra note 55, at 5. This 
commenter also recommends that the Commission issue guidance to the 
Participants to aid in revising the Proposed Amendment. See id. at 
4. The discussion and findings in this Order, in addition to the MDI 
Rules Release and the MDI Rules themselves, provide sufficient 
guidance to the Participants in amending the Plan.
    \88\ Id. at 5.
    \89\ See id. at 5-6.
    \90\ See id. at 6.
---------------------------------------------------------------------------

    This commenter also describes several other technical criticisms of 
the Proposed Amendment. The commenter states that the Proposed 
Amendment should have removed the addition of a new SRO participant 
from the Plan's ministerial amendment list,\91\ arguing that competing 
consolidators and self-aggregators would need more time to update their 
systems to handle the new Participant's data.\92\ The commenter also 
states that the Proposed Amendment needs to support the timestamps 
required by the MDI Rules to the microsecond,\93\ and that validation 
procedures to be used by competing consolidators need to be added to 
the Plan to describe the Participants' and the competing consolidator's 
obligations.\94\ The commenter further suggests that the Plan's 
capacity planning process needs to apply to competing consolidators and 
self-aggregators so that these entities can meet SRO-expected capacity 
requirements.\95\ Finally, the commenter states that the Plan's 
conflict of interest and confidentiality provisions need to apply to 
competing consolidators since they will be replacing the exclusive 
SIPs.\96\
---------------------------------------------------------------------------

    \91\ A ``ministerial amendment'' permits an amendment to the 
Plan that is submitted by the Chairman of the UTP Plan Operating 
Committee to the Commission with less than 48 hours advance notice 
to the Participants. See Notice, supra note 7, 86 FR at 67554 
(Proposed Amendment at Section XVII.).
    \92\ See MayStreet Letter II, supra note 55, at 6-7.
    \93\ See id. at 5.
    \94\ See MayStreet Letter I, supra note 55, at 4; MayStreet 
Letter II, supra note 55, at 8.
    \95\ See MayStreet Letter II, supra note 55, at 10.
    \96\ See id. at 7.
---------------------------------------------------------------------------

    The Commission agrees with the commenter that the failure to 
include the definitions established by the MDI Rules contributes to 
ambiguity within the Plan. In lieu of incorporating the MDI Rules' 
definitions, the Proposed Amendment adds a statement that ``[t]erms 
used in this plan have the same meaning as the terms defined in Rule

[[Page 58552]]

600(b) under the Act.'' \97\ This creates ambiguity because the 
Proposed Amendment uses terms adopted by the MDI Rules but does not 
include definitions of those terms, so their applicability and the 
obligations they create are unclear or are not reflected in the 
Proposed Amendment. For example, the Proposed Amendment adds a 
requirement for the collection and transmission of Quotation 
Information, stating that each Participant agrees to collect and 
transmit to competing consolidators and self-aggregators ``all data 
necessary to generated [sic] consolidated market data.'' \98\ However, 
the Proposed Amendment does not define ``consolidated market data'' or 
even the data necessary to generate it. The Plan thus fails to include 
an express requirement for the Participants to disseminate to competing 
consolidators and self-aggregators all of the elements of consolidated 
market data (e.g., core data,\99\ regulatory data, and administrative 
data) in accordance with the definition of ``consolidated market data'' 
in Rule 600(b)(19) \100\ and Rule 603(b).\101\ The absence of that 
definition in the Plan would lead to ambiguity about the Participants' 
obligations with respect to consolidated market data.
---------------------------------------------------------------------------

    \97\ See Notice, supra note 7, 86 FR at 67543 (Proposed 
Amendment at Section III.).
    \98\ Id. at 67549 (Proposed Amendment at Section IX.A.).
    \99\ Rule 600(b)(21) defines ``core data'' as (i) The following 
information with respect to quotations for, and transactions in, NMS 
stocks: (A) Quotation sizes; (B) Aggregate quotation sizes; (C) Best 
bid and best offer; (D) National best bid and national best offer; 
(E) Protected bid and protected offer; (F) Transaction reports; (G) 
Last sale data; (H) Odd-lot information; (I) Depth of book data; and 
(J) Auction information. See 17 CFR 242.600(b)(21).
    \100\ See supra note 68 (defining ``consolidated market data'').
    \101\ 17 CFR 242.603(b).
---------------------------------------------------------------------------

    Relatedly, Rule 614(e)(2) requires the Participants to amend the 
Plan to apply timestamps to all information with respect to quotations 
for and transactions in NMS stocks that is necessary to generate 
consolidated market data. However, because there is no definition of 
``consolidated market data'' in the Plan, there is thus no requirement 
in the language of the Plan for the Participants to timestamp the data 
components that constitute consolidated market data,\102\ such as the 
elements of core data \103\ (another definition established by the MDI 
Rules that the Proposed Amendment failed to include in the Plan), which 
include auction information, odd-lot information, and depth of book 
data. This is another instance in which the absence of definitions in 
the Plan would lead to ambiguity about the Participants' obligations 
with respect to consolidated market data.
---------------------------------------------------------------------------

    \102\ See supra note 68 (defining ``consolidated market data'').
    \103\ See supra note 99 (defining ``core data'').
---------------------------------------------------------------------------

    In addition, as discussed above, under the MDI Rules, the primary 
listing exchanges are required to collect, calculate, and make 
available regulatory data to competing consolidators and self-
aggregators in accordance with the definition of ``regulatory data'' in 
Rule 600(b)(78)(i).\104\ The Proposed Amendment, however, does not add 
the definition of ``regulatory data'' to the Plan. Therefore, there is 
no unambiguous requirement in the Plan that the primary listing 
exchanges perform these functions.
---------------------------------------------------------------------------

    \104\ See supra note 77 (defining ``regulatory data''). 
Regulatory data is one element of ``consolidated market data,'' as 
defined in Rule 600(b)(19). See supra note 68.
---------------------------------------------------------------------------

V. Conclusion

    For the reasons set forth above, the Commission finds, pursuant to 
Section 11A of the Act, and Rule 608(b)(2) thereunder, that the 
Proposed Amendment is inconsistent with the requirements of the Act and 
the rules and regulations thereunder applicable to an NMS plan 
amendment.
    It is therefore ordered, pursuant to Section 11A of the Act, and 
Rule 608(b)(2) thereunder, that the Proposed Amendment (File No. S7-24-
89) be, and hereby is, disapproved.

    By the Commission.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20827 Filed 9-26-22; 8:45 am]
BILLING CODE 8011-01-P


