[Federal Register Volume 61, Number 17 (Thursday, January 25, 1996)]
[Notices]
[Pages 2321-2324]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1182]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36725; File No. SR-CTA/CQ-96-1]


Consolidated Tape Association; Notice of Filing of Proposed 
Restatements and Amendments to the Restated Consolidated Tape 
Association Plan and the Consolidated Quotation Plan

January 17, 1996.
    Pursuant to Rule 11Aa3-2 of the Securities Exchange Act of 1934 
(``Act''), notice is hereby given that on December 26, 1995, the 
Consolidated Tape Association (``CTA'') and Consolidated Quotation 
(``CQ'') Plan Participants filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') amendments to the Restated CTA 
Plan and CQ Plan. The Commission is publishing this notice to solicit 
comments from interested persons on the amendments.

I. General Overview of the Amendments

A. Second Restatement of the CTA Plan

    The Participants propose to restate and amend the Restated CTA 
Plan.\1\ The restatement (the ``Second Restatement of the CTA Plan'') 
would incorporate into the Restated CTA Plan the 17 substantive 
amendments, and 16 charges amendments, to the Restated CTA Plan that 
the Commission has previously approved and would incorporate the 
additional amendments described below and in the attachments submitted 
to the Commission.\2\

    \1\ Certain of the CTA Plan Participants submitted the initial 
version of the CTA Plan to the Commission on March 2, 1973. The 
Commission declared that plan effective as of May 17, 1974. (See 
Securities Exchange Act Release No. 10787 (May 10, 1974), 39 FR 
17799.) The Participants filed a restatement and amendment of that 
Plan (the ``Restated CTA Plan'') to the Commission on May 12, 1980. 
The Commission approved the Restated CTA Plan on July 16, 1980. (See 
Securities Exchange Act Release No. 16983 (July 16, 1980) 45 FR 
49414.)
    \2\ In their filing with the Commission, the participants 
enclosed the following attachments:
    Attachment 1--The proposed Second Restatement of the CTA Plan, 
including its exhibits:
    Exhibit A--Restated Articles of Association of Consolidated Tape 
Association.
    Exhibit B--Forms of Processor Contracts.
    Exhibit C--Form of Vendor Contract (i.e., the ``Consolidated 
Vendor Form'', as the Participants propose to amend it).
    Exhibit D--Forms of Subscriber Contracts (including the 
``Subscriber Addendum'', which the Participants propose to add).
    Exhibit E--Schedules of Charges.
    Attachment 2--A second version of the proposed Second 
Restatement of the CTA Plan, marked to show changes from the 
Restated CTA Plan as currently in effect.
    Attachment 3--A memorandum describing the proposed changes 
incorporated into the Second Restatement of the CTA Plan and the 
reasons for those changes.
    Attachment 4--A second version of the proposed Consolidated 
Vendor Form, marked to show changes from the version that the 
Participants currently use.
    Attachment 5--A memorandum describing the proposed changes to 
the Consolidated Vendor Form and the reasons for those changes.
    Attachment 6--A memorandum describing the use and significant 
provisions of the Subscriber Addendum.
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    In connection with the proposed amendments, the Participants are 
also proposing (1) to revise the form of agreement \3\ into which the 
Participants require vendors and certain end users to enter (the 
``Consolidated Vendor Form'')\4\ and (2) to introduce a form of 
addendum (the ``Subscriber Addendum'')\5\ that the Participants, under 
appropriate circumstances, would allow vendors to attach to, or to 
incorporate into, agreements with certain subscribers as a surrogate 
for the form of agreement that the Exchange currently requires 
subscribers to execute.

    \3\ The Participants submitted the version of the Consolidated 
Vendor Form currently in use to the Commission on October 12, 1989. 
The Commission published a notice of the effectiveness of the 
Consolidated Vendor Form on September 6, 1990. (See Securities 
Exchange Act Release No. 28407 (September 6, 1990) 55 FR 37276.)
    \4\ The Participants propose to substitute the proposed version 
of the Consolidated Vendor Form for the existing version in the 
Second Restatement of the CTA Plan.
    \5\ The Subscriber Addendum would be added to Exhibit D of the 
Second Restatement of the CTA Plan.
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B. Restated CQ Plan

    The Participants in the CQ Plan propose to restate and amend the CQ 
Plan.\6\ The restatement (the ``Restated CQ plan'') would incorporate 
into the CQ Plan the 21 substantive amendments, and 6 charges 
amendments, to the CQ Plan that the Commission has previously approved 
and would incorporate the additional amendments described below and in 
the attachments. \7\

    \6\ AMEX and NYSE submitted the version of the CQ Plan currently 
in effect to the Commission on July 25, 1978. The Commission granted 
permanent approval of that plan effective as of January 22, 1980. 
(See Securities Exchange Act Release No. 16518 (January 22, 1980), 
45 FR 6521.)
    \7\ The Participants have enclosed the following attachments:
    Attachment 1--The proposed Restated CQ Plan, including its 
exhibits:
    Exhibit A--Form of Exchange-Processor Contract.
    Exhibit B--Form of Association-Processor Contract.
    Exhibit C--Form of Vendor Contract (i.e., the ``Consolidated 
Vendor Form'', as the Participants propose to amend it).
    Exhibit D--Forms of Subscriber Contracts (including the 
``Subscriber Addendum'', which the Participants propose to add).
    Exhibit E--Schedules of Charges.
    Attachment 2--A second version of the proposed Restated CQ Plan, 
marked to show changes from the CQ Plan as currently in effect.
    Attachment 3--A memorandum describing the proposed changes 
incorporated into the Restated CQ Plan and the reasons for those 
changes.
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    The Participants are also proposing to sue the revised Consolidated 
Vendor Form and the subscriber Addendum in connection with the Restated 
CQ Plan, in the same manner as in the proposed Second Restatement of 
the CTA Plan.

II. Description and Purpose of the Amendments

A. Rule 11Aa3-2

    Attachment 3 to each of the Plan binders submitted to the 
Commission describes in greater detail the purposes of the proposed 
changes. A brief overview of those changes follows:
1. Concurrent Use Securities
    The Participants propose to significantly redraft Section XI(d)(i) 
(``Concurrent Use'') and Section XIV (``Reporting of Other 
Transactions'') of the Restated CTA Plan \8\ and Section XI of the CQ 
Plan (``Other Uses of Facilities Utilized by the System''),\9\ which 
sections govern the concurrent use of CTA and CQ facilities. In 
particular, the scope of concurrent use information would be broadened 
to include virtually all Participant securities (including bonds) and 
index information. The new sections would also clarify that information 
sent out pursuant to concurrent use authority is subject to the same 
rights and privileges as information relating to Eligible Securities, 
although the sections would also affirm the primacy of information 
relating to Eligible Securities.

    \8\ See Section XIII of the proposed Second Restatement of the 
CTA Plan (Concurrent Use of Facilities).
    \9\ See Section X of the proposed Restated CQ Plan (Concurrent 
Use of Facilities).
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    The proposed Consolidated Vendor Form would be modified to extend 
the coverage of the Consolidated Vendor Form's terms and conditions to 
concurrent-use securities.
2. Housekeeping
    The Second Restatement of the CTA Plan would incorporate the 
several amendments to the CTA Plan that CTA has adopted and the 
Commission has approved since the Restated CTA Plan first became 
effective. Similarly, the Restated CQ Plan would incorporate the 

[[Page 2322]]
several amendments to the CQ Plan that the Operating Committee has 
adopted and the Commission has approved since the CQ Plan first became 
effective.
    In several instances, the Participants propose to amend the 
language and format of the two Plans in order to cause counterpart 
provisions of the two Plans to comport more closely. In other 
instances, the Participants propose to delete old, outdated language.
    A new ``definitions'' section (Section I) would be added to the CTA 
Plan, similar in concept to Section I of the CQ Plan (``Definitions''). 
The Participants propose to add or refine various definitions in order 
to cause them to comport more closely with current market data business 
practices and to improve the Plans' readability. In addition, the CTA 
Plan would be revised to take advantage of the drafting economies that 
the newly defined terms permit.
    New economies would be introduced into the ``Financial Matters'' 
section of the CTA Plan \10\ by addressing Network A and Network B 
simultaneously, rather than through separate provisions. (This same 
drafting technique already exists in the CQ Plan.) Accomplishing this 
task requires certain organizational changes to that section. Theses 
changes are not intended to effect the substance of the ``Financial 
Matters'' section.

    \10\ Cf. Section XI of the Restated CTA Plan (Financial Matters) 
to proposed Section XII of the Second Restatement of the CTA Plan 
(Financial Matters).
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    The Participants propose to relocate the ``boilerplate'' sections 
of the Plans (e.g., ``Counterparts'' and ``Effective Dates'') to a new 
``Miscellaneous'' section.\11\ `Governing Law'' and ``Section 
Headings'' provisions would be added to those sections.

    \11\ See Section XIV of the proposed Second Restatement of the 
CTA Plan (Miscellaneous) and Section XI of the proposed Restated CQ 
Plan (Miscellaneous).
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3. Receipt and Use of Market Data
    Section IX of the Second Restatement of the CTA Plan (``Receipt and 
Use of CTA Information'') and Section VII of the Restated CQ Plan 
(``Receipt and Use of Quotation Information''), which deal with the 
receipt and use of market information, would be significantly 
redrafted. The changes would include the following.
    The proposed ``Receipt and Use'' sections would make generic the 
terms and conditions pursuant to which vendors and subscribers can 
receive and use information. The proposed changes would also afford the 
Participants flexibility in determining which vendors and subscribers 
need to enter into contracts in order to receive and use information 
and which terms and conditions apply.
    The proposed ``Receipt and Use'' sections would accommodate current 
contract and administrative practices, yet would also accommodate 
anticipated future practices that changing technology and the 
perfection of the ``information superhighway'' are likely to require.
    The proposed ``Receipt and Use'' sections would omit specific 
references to nonprofessional services. From a technology standpoint, 
the Participants feel that the distinction between the level of 
services that vendors make available to nonprofessional subscribers as 
opposed to professional subscribers is small. Rather, the Participants 
state that the distinction is essentially a rate matter, and that they 
are not proposing to distribute that rate distinction at this time.
    The proposed ``Receipt and Use'' sections would omit equipment 
testing arrangements. The Participants claim that equipment testing 
provisions have become moot because equipment testers in today's 
environment invariably qualify as ``Service Facilitators'' under the 
Consolidated Vendor Form.
4. Financial Matters
    Section XII of the proposed Second Restatement of the CTA Plan 
(``Financial Matters'') and Section IX of the proposed Restated CQ Plan 
(``Financial Matters'') would change as follows:
    a. As a housekeeping measure, all of the language that discusses 
the sharing of revenues and expenses in the first years of the Plans 
would be removed.
    b. The Restated CQ Plan would replace the existing CQ Plan's 
definition of ``Annual Share'' with a cross reference to the CTA Plan 
definition of ``Annual Share''.
5. The Consolidated Vendor Form
    The proposed Consolidated Vendor Form would modify the version of 
the Consolidated Vendor Form currently in use in that it would 
accommodate the current use initiatives described above and would 
provide the Participants with greater flexibility. In particular, the 
proposed Consolidated Vendor Form:
    a. Would newly define several terms that have a long history of use 
in the market data industry (e.g., ``interrogation service'', ``market 
minder'', ``ticker display'');
    b. Would simplify the definitions of several terms;
    c. Would expand the scope of some types of market data in order to 
comport with the broadened notion of ``concurrent use'' that the 
Participants are proposing to add to the Plans;
    d. Would introduce the Subscriber Addendum and provide for its 
modification and enforcement;
    e. Would afford the Participants greater flexibility in prescribing 
contract and other requirements for subscriber services, including the 
use of the Subscriber Addendum or such alternative requirements as the 
Participants may prescribe; and
    f. Would omit the concepts of limited access services and 
nonprofessional subscriber services, in order to comport with similar 
changes to the Plans.
6. Subscriber Addendum
    The Participants claim that the use of the Subscriber Addendum 
would provide an alternative to vendors in certain circumstances as a 
replacement for the forms of subscriber agreement that the Participants 
currently require subscribers to execute. In practice, subscribers 
would not enter into the Subscriber Addendum with the Participants. 
Rather, vendors would incorporate the Subscriber Addendum into their 
agreements with subscribers.
    The Participants state that vendors have been prompting exchanges 
to develop and adopt a common form of subscriber agreement and the 
Financial Information Services Division of the Information Industry 
Association has endorsed an initiative of this nature for more than two 
years. The Subscriber Addendum represents a partial response to that 
effort, in that it contains only those terms and conditions that the 
Participants deem absolutely essential. In many cases, it would 
eliminate a separate document that today's practices require.
    The initial use of the Subscriber Addendum is intended for vendor 
services in respect of which the Participants do not bill end users 
directly, but rather impose the payment obligation on the vendor.
    The Participants view the Subscriber Addendum concept as an 
integral part of their ``usage-based fees'' initiative. Currently, such 
fees are the subject of pilot tests. They are designed to streamline 
the current rate structure and to promote the widespread dissemination 
of market data.
7. Governing or Constituent Documents
    The proposed restatements do not require any new governing or 
constituent documents relating to SIAC or any other person authorized 
to implement or administer the Plans on the Participants' behalf. 

[[Page 2323]]

8. Implementation of Amendment
    The restated Plans would take effect upon Commission approval. The 
Participants then intend to notify vendors and other interested 
parties, both in writing and through verbal contact, of the new 
Consolidated Vendor Form and the Subscriber Addendum.
9. Development and Implementation Phases
    The Participants intend to implement the new Consolidated Vendor 
Form and the Subscriber Addendum on a vendor-by-vendor basis, as 
appropriate, over the next few years. After Commission approval, the 
Participants would expect all new accounts that are required to execute 
the vendor form of agreement to execute the new Consolidated Vendor 
Form. As for the 500 or so parties that have executed the present 
version of the Consolidated Vendor Form, the Participants intend to 
convert those organizations to the proposed version of the Consolidated 
Vendor Form in an orderly manner over a period of 12 to 18 months.
    The Participants expect to make the Subscriber Addendum available 
for vendor use once the Commission approves it. Of course, the 
Subscriber Addendum would only be available to vendors that have 
executed the proposed Consolidated Vendor Form and that offer the types 
of services for which the use of the Subscriber Addendum is 
appropriate.
10. Analysis of Impact on Competition
    The Participants do not believe that any of the proposed changes 
would adversely impact or lessen competition. Instead, the Participants 
believe that the proposed Consolidated Vendor Form and the Subscriber 
Addendum may facilitate the entry of new parties into the market data 
industry because of the ``user friendly'' nature of those documents.

11. Written Understandings or Agreements Relating to Interpretation of, 
or Participation in, Plan
    The Participants do not anticipate that they will enter into any 
new written understandings or agreements relating to interpretations of 
the restated Plans or to conditions for becoming a sponsor or 
participant in either Plan.
12. Approval by Sponsors in Accordance with Plan
    Each of the Participants has approved the restatements of, and 
amendments to, both Plans in accordance with the Plans' terms.
13. Description of Operation of Facility Contemplated by the Proposed 
Amendment
    The proposed amendments to the Plans would not have any impact on 
the manner in which CTA and CQ facilities are operated.
14. Terms and Conditions of Access
    As explained in greater detail above and in Attachment 5 and 
Attachment 6 to the Second Restatement of the CTA Plan, the proposed 
revisions to the Consolidated Vendor Form and the introduction of the 
Subscriber Addendum would modify the terms and conditions under which 
brokers, dealers and others would be granted access. However, the 
Participants believe that the changes work to the net benefit of data 
recipients because the proposed changes to the Consolidated Vendor Form 
and the substitution (in appropriate cases) of the Subscriber Addendum 
for the forms of subscriber agreement currently in use permit more 
``use friendly'' terms and conditions than do current practices and, 
especially in the case of the Subscriber Addendum, streamline the 
procedures for subscriber processing.
15. Method of Determination and Imposition, and Amount of, Fees and 
Charges
    In restating and amending the Plans, the Participants are not 
proposing to make any changes to (a) the methods by which they 
determine or impose fees or charges of (b) the amount of such fees or 
charges.
16. Method and Frequency of Processor Evaluation
    In respect of changes in the methods of evaluating processor 
performance, please see the discussion of proposed Sections V(d) 
(``Review of Processor'') and V(e) (``Notice to SEC of Processor 
Reviews'') of the Second Restatement of the CTA Plan set forth in 
Attachment 3 to that Plan and the discussion of proposed Sections V(c) 
(``Review of Processor'') and V(d) (``Notice to SEC of Processor 
Reviews'') of the Restated CQ Plan set forth in Attachment 3 to that 
Plan.
17. Dispute Resolution
    In restating and amending the Plans, the Participants are not 
proposing to make any change to the method by which disputes arising in 
connection with the Plans will be resolved.

B. Rule 11Aa3-1 (In Respect of the CTA Plan Only)

1. Listed Securities
    In restating and amending the CTA Plan, the Participants do not 
intend to make any change to the listed equity securities or classes of 
such securities in respect of which the CTA Plan would require 
transaction reports. However, as explained in greater detail in 
Attachment 3 to the CTA Plan, the amendments would expand the scope of 
``concurrent use'' under the CTA Plan and would therefore expand the 
universe of securities in respect of which the CTA Plan would permit 
transaction reports.
2. Reporting Requirements
    In restating and amending the CTA Plan, the Participants do not 
intend to make any change to the reporting requirements for brokers or 
dealers for transactions in listed securities.
3. Manner of Collecting, Processing, Sequencing, Making Available and 
Disseminating Last Sale Information
    In restating and amending the CTA Plan, the Participants do not 
intend to change the manner of collecting, processing or sequencing 
last sale information. As for changes in the manner of making available 
and disseminating last sale information, please see the discussion of 
Section IX of the Second Restatement of the CTA Plan (``Receipt and Use 
of CTA Information'') set forth in Attachment 3 to that Plan.
4. Manner of Consolidation
    In restating and amending the CTA Plan, the Participants do not 
intend to make any change to the manner in which transaction reports 
are consolidated.
5. Standards and Methods Ensuring Promptness, Accuracy and Completeness 
of Transaction Reports
    In restating and amending the CTA Plan, the Participants do not 
intend to make any change to the standards and methods by which the 
promptness of reporting, and accuracy and completeness of transaction 
reports, is ensured.
6. Rules and Procedures Addressed to Fraudulent or Manipulative 
Dissemination
    The participants state that the proposed amendments to the CTA Plan 
do not impact the rules and procedures that ensure that last sale 
information will not be disseminated in a fraudulent or manipulative 
manner.

[[Page 2324]]

7. Terms of Access to Transaction Reports
    As explained in greater detail above and in Attachment 5 and 
Attachment 6 to the CTA Plan, the proposed revisions to the 
Consolidated Vendor form and the introduction of the Subscriber 
Addendum would modify the terms and conditions of access to last sale 
information. The Participants believe that the changes work to the net 
benefit of the investor community because the proposed changes to the 
Consolidated Vendor Form and the substitution (in appropriate cases) of 
the Subscriber Addendum for the forms of subscriber agreement currently 
in use permit more ``user friendly'' terms and conditions than do 
current practices and, especially in the case of the Subscriber 
Addendum, streamline the procedures for subscriber processing.
8. Identification of Marketplace of Execution
    The Participants state that the proposed amendments are intended to 
have no impact on the requirement that vendor displays of last sale 
information identify the marketplace of execution.

III. Solicitation of Comments

    Rule 11Aa3-2(c)(2) under the Act provides that the proposed 
amendment shall be approved by the Commission with such changes or 
subject to such conditions as the Commission may deem necessary or 
appropriate in the public interest, for the protection of investors and 
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 within 120 days of the date of 
publication of notice of filing, or within such longer period as the 
Commission may designate up to 180 days of such date pursuant to Rule 
11Aa3-2(c)(2).
    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
CTA/CQ. All submissions should refer to the file number in the caption 
above and should be submitted by February 15, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\

    \12\ 17 CFR 200.30-3(a)(27) (1989).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-1182 Filed 1-24-96; 8:45 am]
BILLING CODE 8010-01-M