[Federal Register Volume 67, Number 129 (Friday, July 5, 2002)]
[Notices]
[Pages 44888-44900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-16769]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46139; File No. S7-24-89]


Joint Industry Plan; Notice of Filing and Partial Summary 
Effectiveness of Amendment No. 13 to the Reporting Plan for Nasdaq-
Listed Securities Traded on Exchanges on an Unlisted Trading Privilege 
Basis, Submitted by the National Association of Securities Dealers, 
Inc., the Boston Stock Exchange, Inc., the Chicago Stock Exchange, 
Inc., the Cincinnati Stock Exchange, the Pacific Exchange, the American 
Stock Exchange LLC, and the Philadelphia Stock Exchange, Inc.

June 28, 2001.

I. Introduction

    Pursuant to Rule 11Aa3-2 \1\ and Rule 11Aa3-1 \2\ under the 
Securities Exchange Act of 1934 (``Act'' or ``Exchange Act''), notice 
is hereby given that on May 31, 2002, the Cincinnati Stock Exchange 
Inc. (``CSE'') on behalf of itself and the National Association of 
Securities Dealers, Inc. (``NASD''), the American Stock Exchange LLC 
(``Amex''), the Boston Stock Exchange, Inc. (``BSE''), the Chicago 
Stock Exchange, Inc. (``CHX''), the Pacific Exchange, Inc. (``PCX''), 
and the Philadelphia Stock Exchange, Inc. (``PHLX'') (hereinafter 
referred to as ``Participants''),\3\ as members of the operating 
committee (``Operating Committee'' or ``Committee'') \4\ of the Plan 
submitted to the Securities and Exchange Commission (``SEC'' or 
``Commission'') a proposal to amend the Plan. The proposal represents 
the 13th amendment (``13th Amendment'') made to the Plan and reflects 
several changes unanimously adopted by the Committee. The Commission is 
putting into effect summarily part of the 13th Amendment, granting an 
exemption under Rule 11Aa3-2(f) \5\ from compliance with Section 
VI.C.1. of the Plan as required by Rule 11Aa3-2(d),\6\ and publishing 
this notice to solicit comments from interested persons on the 13th 
Amendment generally.
---------------------------------------------------------------------------

    \1\ 17 CFR 240.11Aa3-2.
    \2\ 17 CFR 240.11Aa3-1.
    \3\ The CSE was elected chair of the Operating Committee for 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 Privilege Basis (``Nasdaq UTP Plan'' or ``Plan'') 
by the Participants.
    \4\ Among other things, the 13th Amendment shall add the Nasdaq 
Stock Market, Inc. (``Nasdaq'') as a Participant. The Committee is 
made up of all the Participants.
    \5\ 17 CFR 240.11Aa3-2(f).
    \6\ 17 CFR 240.11Aa3-2(d).
---------------------------------------------------------------------------

II. Background

    The Plan governs the collection, consolidation, and dissemination 
of quotation and transaction information for Nasdaq/National Market 
(``Nasdaq/NM'') and Nasdaq SmallCap securities listed on Nasdaq or 
traded on an exchange pursuant to unlisted trading privileges 
(``UTP'').\7\ The Plan provides for the collection from Plan 
Participants, and the consolidation and dissemination to vendors, 
subscribers and others, of quotation and transaction information in 
``eligible securities.''\8\ The Plan contains various provisions 
concerning its operation, including: Implementation of the Plan; Manner 
of Collecting, Processing, Sequencing, Making Available and 
Disseminating Last Sale Information; Reporting Requirements (including 
hours of operation); Standards and Methods of Ensuring Promptness, 
Accuracy and Completeness of Transaction Reports; Terms and Conditions 
of Access; Description of Operation of Facility Contemplated by the 
Plan; Method and Frequency of Processor Evaluation; Written 
Understandings of Agreements Relating to Interpretation of, or 
Participation in, the Plan; Calculation of the Best Bid and Offer 
(``BBO''); Dispute Resolution; and Method of Determination and 
Imposition, and Amount of Fees and Charges.
    The Commission originally approved the Plan on a pilot basis on 
June 26, 1990.\9\ The parties did not begin trading until July 12, 
1993, accordingly, the pilot period commenced on July 12, 1993. The 
Plan has since been in operation on an extended pilot basis.\10\
---------------------------------------------------------------------------

    \7\ Section 12 of the Act generally requires an exchange to 
trade only those securities that the exchange lists, except that 
Section 12(f) of the Act permits UTP under certain circumstances. 
For example, Section 12(f) of the Act, among other things, permits 
exchanges to trade certain securities that are traded over-the-
counter (``OTC/UTP''), but only pursuant to a Commission order or 
rule. For a more complete discussion of the Section 12(f) 
requirement, see November 1995 Extension Order, infra note .
    \8\ Pursuant to the 13th Amendment, the Plan defines ``Eligible 
Securities'' as any Nasdaq/NM or Nasdaq SmallCap listed security, as 
defined in Nasdaq Rule 4200: (i) As to which UTP have been granted 
to a national securities exchange pursuant to Section 12(f) of the 
Act; or (ii) which also is listed on a national securities exchange 
other than Nasdaq. Moreover, the definition states that ``Eligible 
Securities'' shall not include any security that is defined as an 
``Eligible Security'' within Section VII of the Consolidated Tape 
Association Plan.
    \9\ See Securities Exchange Act Release No. 28146, 55 FR 27917 
(July 6, 1990) (``1990 Plan Approval Order'').
    \10\ See Securities Exchange Act Release Nos. 34371 (July 13, 
1994), 59 FR 37103 (July 20, 1994); 35221 (January 11, 1995), 60 FR 
3886 (January 19, 1995); 36102 (August 14, 1995), 60 FR 43626 
(August 22, 1995); 36226 (September 13, 1995), 60 FR 49029 
(September 21, 1995); 36368 (October 13, 1995), 60 FR 54091 (October 
19, 1995); 36481 (November 13, 1995), 60 FR 58119 (November 24, 
1995) (``November 1995 Extension Order''); 36589 (December 13, 
1995), 60 FR 65696 (December 20, 1995); 36650 (December 28, 1995), 
61 FR 358 (January 4, 1996); 36934 (March 6, 1996), 61 FR 10408 
(March 13, 1996); 36985 (March 18, 1996), 61 FR 12122 (March 25, 
1996); 37689 (September 16, 1996), 61 FR 50058 (September 24, 1996); 
37772 (October 1, 1996), 61 FR 52980 (October 9, 1996); 38457 (March 
31, 1997), 62 FR 16880 (April 8, 1997); 38794 (June 30, 1997) 62 FR 
36586 (July 8, 1997); 39505 (December 31, 1997) 63 FR 1515 (January 
9, 1998); 40151 (July 1, 1998) 63 FR 36979 (July 8, 1998); 40896 
(December 31, 1998), 64 FR 1834 (January 12, 1999); 41392 (May 12, 
1999), 64 FR 27839 (May 21, 1999) (``May 1999 Approval Order''); 
42268 (December 23, 1999), 65 FR 1202 (January 6, 2000); 43005 (June 
30, 2000), 65 FR 42411 (July 10, 2000); 44099 (March 23, 2001), 66 
FR 17457 (March 30, 2001); 44348 (May 24, 2001), 66 FR 29610 (May 
31, 2001); 44552 (July 13, 2001), 66 FR 37712 (July 19, 2001); 44694 
(August 14, 2001), 66 FR 43598 (August 20, 2001); 44804 (September 
17, 2001), 66 FR 48299 (September 19, 2001); 45081 (November 19, 
2001), 66 FR 59273 (November 27, 2001).
---------------------------------------------------------------------------

III. Description and Purpose of the Amendment

    The complete text of the Plan, as amended, is attached as Exhibit 
A. The following is a summary of the proposed changes to the Plan 
prepared by the Participants. Each category of amendments listed below 
will have distinct effectiveness dates as noted by each category title 
and as discussed in Section IV below.

Category 1: Effective Upon Nasdaq's Exchange Registration

    1. Section I.A.8. of the Plan has been added to reflect the 
addition of The Nasdaq Stock Market, Inc. as a new and separate 
signatory to the Plan.
    2. Section III.B. of the Plan, which defines ``Eligible Security,'' 
is amended to reflect that such securities will be listed on a national 
securities exchange and to clarify that Eligible Security under the 
Plan shall not include any security that is an ``Eligible Security'' 
within the Consolidated Tape Association Plan. Finally, Section III.B. 
is amended to reflect that securities will cease to be Eligible 
Securities based upon a suspension from trading, and to establish a 
procedure for determining

[[Page 44889]]

which market may suspend an issue under the Plan.
    3. Section III.E. of the Plan, which defines ``Market,'' is amended 
to reflect that Nasdaq will be participating in the Plan as an 
independent national securities exchange and that the NASD will 
continue to participate as a national securities association.
    4. Section III.G. of the Plan, which defines ``NASD Participant,'' 
is added to reflect that the NASD will participate in the Plan as a 
national securities association separate and apart from Nasdaq.
    5. Section III.H. of the Plan, which defines ``Transaction 
Reporting System,'' is amended to reflect that, due to Nasdaq's 
registration as a national securities exchange, the governing 
Transaction Reporting Plan filed with and approved by the Commission 
pursuant to SEC Rule 11Aa3-1, shall no longer be referred to as the 
NASD Transaction Reporting Plan. The Plan Participants anticipate 
further amending this Section of the Plan to clarify the status of the 
Plan under the Exchange Act.
    6. Section III.I. and III.J, regarding Nasdaq Level 2 and Level 3 
Services, will be eliminated when Nasdaq registers as a national 
securities exchange.
    7. Section III.N. of the Plan, which defines ``OTC Montage Data 
Feed,'' is amended to reflect that, as a result of Nasdaq's 
registration as a national securities exchange, the Processor will no 
longer disseminate the NQDS Service.
    8. Section III.R. of the Plan, which defines ``Quotation 
Information'' is amended to reflect that Nasdaq will no longer send 
individual market participant information to the Processor. It is also 
amended to clarify that only displayed quotation sizes are included in 
the definition and that market center identifiers are also included.
    9. Section VIII.A. (Quotation Information) is amended to reflect 
that as an exchange, Nasdaq will submit a Best Bid and Offer in 
compliance with the SEC Quote Rule.
    10. Section VIII.C. is amended to reflect that Nasdaq and the NASD 
will both be participating in the Plan as separate and independent 
entities.
    11. Section IX. (Market Access) is amended to reflect that Nasdaq 
will no longer participate in the Plan as a national securities 
association.
    12. Section X. (Regulatory Halts) is amended to reflect that the 
Listing Market, rather than the Primary Market, shall have authority to 
call a Regulatory Halt, and a definition of Listing Market is 
established.
    13. Section XI.D. is amended to eliminate reference to individual 
Nasdaq Participants, and also to change a reference from ``best bid and 
offer'' to ``national best bid and offer.''
    14. Section XVIII (Operational Issues) is amended to substitute 
``Participant'' for ``Exchange Participant'' and to substitute 
``Processor'' for ``Nasdaq.''
    15. The 13th Amendment to the Plan also amends Plan Exhibit 1, 
which governs the distribution of revenue attributable to the sale of 
market data collected pursuant to the Plan. Specifically, Paragraph 3 
of Plan Exhibit 1 is amended to reflect the change in definition of the 
UTP Quote, UTP Trade, and OTC Montage Data Feeds contained in Sections 
III.I., III.J., and III.N. of the Plan. Paragraph 3 of Plan Exhibit 1 
is also amended to change certain aspects of the allocation of 
Securities Information Processor (``SIP'' or ``Processor'') costs 
attributable to collecting, consolidating, validating, generating, and 
disseminating the Data Feeds. Finally, Paragraph 3 is amended to limit 
the applicability of the definition of ``quote engine'' and ``trade 
engine'' to the period when Nasdaq serves as the Processor for the 
Plan. Paragraph 4 of Plan Exhibit 1 is amended to eliminate reference 
to computer-to-computer interfaces.

Category 2: Effective Upon Launch of the Internal SIP \11\

    1. Section III.I. of the Plan, which defines ``UTP Quote Data 
Feed,'' is amended to reflect that the Processor will replace the Level 
1 Service as it currently exists. In its place, the Processor will 
disseminate a data feed containing the National Best Bid and Offer 
quotations, size and market center identifier, as well as the Best Bid 
and Offer quotations, size and market center identifier from each 
individual Participant in Eligible Securities. While this change is 
effective upon launch of the Internal SIP, the Processor will continue 
to disseminate the current Level 1 service for a three-month parallel 
period (``Legacy SIP'') to enable market data vendors to have a smooth 
transition to the new feed.
---------------------------------------------------------------------------

    \11\ In November of 2001, Nasdaq began implementing the 
``Internal SIP'' project. The Internal SIP is a separate technology 
infrastructure within Nasdaq that will perform the functions of the 
SIP for Nasdaq-listed securities. When the Internal SIP is in place, 
Nasdaq will be able to separate its functions as a stock market from 
its functions as a SIP for the Plan.
---------------------------------------------------------------------------

    2. Section III.N. of the Plan defines the ``OTC Montage Data 
Feed,'' which will be launched as a new data feed for the dissemination 
of NASD ADF Participant quotations with the launch of the Internal SIP. 
However, as stated above in Category 1.7, NQDS will not be fully 
eliminated as a data feed disseminated by the Processor until Nasdaq is 
registered as an exchange.
    3. Section III.K. of the Plan changes the name of the Nasdaq Last 
Sale Information Service to ``UTP Trade Data Feed,'' but makes no 
changes to the data elements contained in that data feed. While this 
change is effective upon launch of the Internal SIP, the Processor will 
continue to disseminate the current Nasdaq Last Sale Information 
Service for a three-month parallel period to enable market data vendors 
to have a smooth transition to the new feed.
    4. Section III.R. of the Plan, which defines ``Quotation 
Information'' is amended to reflect that the NASD ADF will send 
individual market participant information to the Processor. It is also 
amended to clarify that only displayed quotation sizes are included in 
the definition and that market center identifiers are also included.
    5. Section VI.B. (Collection and Consolidation of Information) has 
been amended to clarify the devices available for sending information 
to the Processor and the data feeds which the Processor shall 
disseminate, for as long as Nasdaq remains the Processor. While this 
change is effective upon launch of the Internal SIP, the Processor will 
continue to disseminate the current data feeds for a three-month 
parallel period to enable market data vendors to have a smooth 
transition to the new feed. In addition, the Processor will continue to 
disseminate NQDS until Nasdaq registers as an exchange.
    6. Section VI.C. (Dissemination of Information) has been amended to 
identify the data feeds that the Processor shall disseminate. While 
this change is effective upon launch of the Internal SIP, the Processor 
will continue to disseminate the current data feeds for a three-month 
parallel period to enable market data vendors to have a smooth 
transition to the new feed. In addition, the Processor will continue to 
disseminate NQDS until Nasdaq registers as an exchange.
    7. Section VI.C.1. (Best Bid and Offer) is amended to change the 
method of calculating the national best bid and offer from price/time/
size to price/size/time and to establish a precise methodology for 
calculation.
    8. Section VI.C.3. is renamed ``Quotation Data Stream,'' and 
amended to reflect the change in definition of the UTP Quote Data Feed 
contained in Section III.I. of the Plan.
    9. Section VI.C.4. (Transaction Reports) is amended to reflect the 
change in name of the UTP Trade Data

[[Page 44890]]

Feed contained in Section III.K. of the Plan.
    10. Section XI (Hours of Operation) has been amended to change the 
reporting procedures for Participants that execute transactions in 
Eligible Securities outside of the normal trading hours of 9:30 a.m. to 
4 p.m. EST.

Category 3: Effective Upon End of Parallel Period--Elimination of the 
Legacy SIP

    1. Section VI.C.1. is amended to reflect that the Processor shall 
no longer carry quotation information from one trading day to the next, 
and that the Processor shall not calculate the best bid and offer for 
any individual Participant, including the NASD.
    2. Section VI.C.1. is also amended to reflect that the Processor 
shall disseminate an internally locked or crossed quotation submitted 
by a single Participant.
    3. Section XVIII.D.3, regarding Price Checks, is eliminated to 
reflect the Operating Committee's agreement that the Processor should 
no longer perform these functions.
    4. Plan Exhibit 1, Paragraph 3(d)(5) is eliminated to reflect that 
MarketWatch costs are no longer eligible Processor Operating Costs, 
contingent upon the elimination of the Processor's ability to perform 
price checks on Participant's trade reports.

Category 4: Timing Not An Issue

    1. Section III.S. of the Plan, which defines ``Regulatory Halt,'' 
is amended to include halts that are called for regulatory problems 
relating to an Eligible Security that should be clarified before 
trading therein is permitted to continue.
    2. Section IV.A. (Operating Committee: Composition) has been 
amended to permit entities that are actively pursuing registration as a 
national securities exchange to participate in Operating Committee 
meetings in limited capacities.
    3. Section IV.C. (Operating Committee: Voting) has been amended to 
eliminate references to events and contingencies that occurred when the 
Plan was first adopted. It also is clarified to reflect the 
Participants' agreement that neither the Plan nor the Operating 
Committee shall have authority in any respect over any Participant's 
proprietary systems.
    4. Section IV.D. (Operating Committee: Meetings) will permit the 
Operating Committee to waive the advance notice requirement contained 
therein.
    5. Section IV.E. has been added to establish an Advisory Committee 
and to define its composition and authority.
    6. Section V.A. (Selection and Evaluation of the Processor: 
Generally) has been amended to eliminate references to events and 
contingencies that occurred when the Plan was first adopted.
    7. Section VI.C. is amended to eliminate references to agreements 
between the NASD and certain foreign exchanges.
    8. Section VI.D. (Immediate Hard Copy Confirmations) is eliminated 
and the remaining subsections of Section VI. are re-lettered.
    9. Section VIII.B. (Transaction Reports) is amended to clarify that 
this Section applies only to transactions between Plan Participants 
pursuant to the Plan, and to eliminate reference to shared computer-to-
computer interfaces.
    10. Section X. is amended to include halts that are called for 
regulatory problems relating to an Eligible Security that should be 
clarified before trading therein is permitted to continue and to state 
that during a halt the Processor shall collect and disseminate 
Transaction Information but shall cease collection and dissemination of 
all Quotation Information.
    11. Section XI.C. is amended to reflect that late trades can be 
reported between the hours of 8 a.m. and 6:30 p.m. on the same trading 
day that the transaction occurred.
    12. Section XI.E. governing changes to operating hours, is 
eliminated.
    13. Section XIII (Undertakings by NASD) is eliminated, and 
subsequent sections re-numbered.
    14. Section XXI (Depth of Book Display) is added to reflect the 
Operating Committee's determination that the entity that succeeds 
Nasdaq as the Processor, upon certain specific conditions being met 
through a further Plan amendment should have the ability to collect, 
consolidate, and disseminate quotations at multiple price levels beyond 
the best bid and best offer from any Participant that voluntarily 
chooses to submit such quotations. Section XXI states that implementing 
the depth of book display functionality will require a plan amendment 
that addresses all pertinent issues.
    15. Within the body of the 13th Amendment, there are numerous 
``house-keeping'' corrections, including punctuation and renumbering 
changes. These changes are reflected in Exhibit A hereto.

IV. Date of Effectiveness of the Proposed Amendment

    The Commission has determined, pursuant to Rule 11Aa3-2(c)(4) under 
the Act,\12\ that the amendments detailed above in Category 2, which 
generally cover the creation of new data feeds associated with the 
launch of the Internal SIP, will be effective summarily upon 
publication of this notice of amendment in the Federal Register on a 
temporary basis not to exceed 120 days. The Commission believes that it 
is appropriate to put into effect summarily the Category 2 amendments 
because they deal with the creation of data feeds associated with the 
Internal SIP and should remove impediments to, and, perfect the 
mechanism of, a national market system. By granting temporary summary 
effectiveness, the July 1, 2002 target launch date for the new Internal 
SIP data feeds may be met.
---------------------------------------------------------------------------

    \12\ 17 CFR 240.11Aa3-2(c)(4).
---------------------------------------------------------------------------

    Moreover, the Commission approved Nasdaq's Order Display Facility, 
Order Collector Facility, and Trading Platform (collectively, 
``SuperMontage''),\13\ contingent upon the NASD offering a quote and 
trade reporting alternative thereto, subsequently named the Alternative 
Display Facility (``ADF''). In addition, the SuperMontage approval 
order required, as a condition for extension of the Plan, that the 
Participants develop an alternative SIP for all Nasdaq securities to 
provide an alternative to participation in SuperMontage.\14\
---------------------------------------------------------------------------

    \13\ See Securities Exchange Act Release No. 43863 (January 19, 
2001), 66 FR 8020 (January 26, 2001).
    \14\ Id.
---------------------------------------------------------------------------

    The result of these two contingencies is that, with concurrent 
operation of SuperMontage and the ADF, Nasdaq and the NASD need to 
submit distinct BBOs to the Internal SIP--one representing the 
SuperMontage execution facility, and the other representing 
Participants outside of SuperMontage. While both Nasdaq and the NASD 
operate under the umbrella of a single Plan Participant, the submission 
of two distinct BBOs could be deemed inconsistent with Section VI.C.1 
of the Plan.\15\ Pursuant to the 13th Amendment of the Plan and Rule 
11Aa3-2(a),\16\ Nasdaq cannot be granted Plan Participant status until 
it is registered as a national securities exchange. While Nasdaq 
submits a distinct BBO from the NASD and until

[[Page 44891]]

Nasdaq is registered as a national securities exchange, the NASD will 
submit quotes to the Internal SIP in a manner different than specified 
in Section VI.C.1. of the Plan.
---------------------------------------------------------------------------

    \15\ Section VI.C.1. of the Plan, as approved by the Operating 
Committee in the 13th Amendment, states that ``[t]he Processor shall 
disseminate on the UTP Quote Data Feed the best bid and offer 
information supplied by each Participant, including the NASD * * 
*.''
    \16\ 17 CFR 240.11Aa3-2(a).
---------------------------------------------------------------------------

    To relieve this inherent conflict among the SuperMontage approval 
order,\17\ Rule 11Aa3-2,\18\ and the Plan, the Commission has 
determined to grant the NASD an exemption under Rule 11Aa3-2(f)\19\ 
from compliance with Section VI.C.1. of the Plan as required by Rule 
11Aa3-2(d)\20\ until such time as Nasdaq is registered as a national 
securities exchange.
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 43863 (January 19, 
2001), 66 FR 8020 (January 26, 2001).
    \18\ 17 CFR 240.11Aa3-2.
    \19\ 17 CFR 240.11Aa3-2(f).
    \20\ 17 CFR 240.11Aa3-2(d).
---------------------------------------------------------------------------

V. Solicitation of Comments

    The Commission seeks general comments on the 13th Amendment. 
Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. Copies of 
the submission, all subsequent amendments, all written statements with 
respect to the proposed amendment that are filed with the Commission, 
and all written communications relating to the proposal 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. The 13th Amendment is being published as Exhibit A to 
this proposal. Copies of the amendment will also be available for 
inspection and copying at the office of the Secretary of the Committee, 
currently located at the CSE, One Financial Place, 440 South LaSalle 
St., Suite 2600, Chicago, IL 60126. All submissions should refer to 
File No S7-24-89 and be submitted by July 26, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(27).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.

Exhibit A

Amendment No. 13--Joint Self-Regulatory Organization Plan Governing the 
Collection, Consolidation and Dissemination of Quotation and 
Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges of an Unlisted Trading Privilege Basis

    The undersigned registered national securities association and 
national securities exchanges (collectively referred to as the 
``Participants''), have jointly developed and hereby enter into this 
Nasdaq Unlisted Trading Privileges Plan (``Nasdaq UTP Plan'' or 
``Plan'').

I. Participants.

    The Participants include the following:

A. Participants

1. American Stock Exchange, LLC, 86 Trinity Place, New York, New York 
10006
2. Boston Stock Exchange, 100 Franklin Street, Boston, Massachusetts 
02110
3. Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 
60605
4. Cincinnati Stock Exchange, 440 South LaSalle Street, 26th Floor, 
Chicago, Illinois 60605
5. National Association of Securities, Dealers, Inc., 1735 K Street, 
NW, Washington, DC 20006
6. Pacific Exchange, Inc., 301 Pine Street, San Francisco, CA 94104
7. Philadelphia Stock Exchange, 1900 Market Street, Philadelphia, 
Pennsylvania 19103
8. Nasdaq Stock Market, Inc., 1 Liberty Plaza, New York, New York 10006

B. Additional Participants

    Any other national securities association or national securities 
exchange, in whose market Eligible Securities become traded, may become 
a Participant, provided that said organization executes a copy of this 
Plan and pays its share of development costs as specified in Section 
XIII.

II. Purpose of Plan

    The purpose of this Plan is to provide for the collection, 
consolidation and dissemination of Quotation Information and 
Transaction Reports in Eligible Securities from the Participants in a 
manner consistent with the Exchange Act.
    It is expressly understood that each Participant shall be 
responsible for the collection of Quotation Information and Transaction 
Reports within its market and that nothing in this Plan shall be deemed 
to govern or apply to the manner in which each Participant does so.

III. Definitions

    A. Current means, with respect to Transaction Reports or Quotation 
Information, such Transaction Reports or Quotation Information during 
the fifteen (15) minute period immediately following the initial 
transmission thereof by the Processor.
    B. Eligible Security means any Nasdaq National Market or Nasdaq 
SmallCap listed security, as defined in Nasdaq Rule 4200: (i) As to 
which unlisted trading privileges have been granted to a national 
securities exchange pursuant to Section 12(f) of the Exchange Act; or 
(ii) which also is listed on a national securities exchange other than 
Nasdaq. Eligible Securities under this Nasdaq UTP Plan shall not 
include any security that is defined as an ``Eligible Security'' within 
Section VII of the Consolidated Tape Association Plan.
    A security shall cease to be an Eligible Security for purposes of 
this Plan if: (i) The security does not substantially meet the 
requirements from time to time in effect for continued listing on 
Nasdaq, and thus is suspended from trading; or (ii) the security has 
been suspended from trading because the issuer thereof is in 
liquidation, bankruptcy or other similar type proceedings. The 
determination as to whether a security substantially meets the criteria 
of the definition of Eligible Security shall be made by the exchange on 
which such security is listed provided, however, that if such security 
is listed on more than one exchange, then such determination shall be 
made by the exchange on which the greatest number of the transactions 
in such security were effected during the previous twelve-month period.
    C. Commission and SEC shall mean the U.S. Securities and Exchange 
Commission.
    D. Exchange Act means the Securities Exchange Act of 1934.
    E. Market shall mean (i) when used with respect to Quotation 
Information, the NASD in the case of an NASD Participant, or the 
Participant on whose floor or through whose facilities the quotation 
was disseminated; and (ii) when used with respect to Transaction 
Reports, the Participant through whose facilities the transaction took 
place or is reported, or the Participant to whose facilities the order 
was sent for execution.

[[Page 44892]]

    F. NASD means the National Association of Securities Dealers, Inc.
    G. NASD Participant means an NASD member that is registered as a 
market maker or an electronic communications network or otherwise 
utilizes the facilities of the NASD pursuant to applicable NASD rules.
    H. Transaction Reporting System means the System provided for in 
the Transaction Reporting Plan filed with and approved by the 
Commission pursuant to SEC Rule11Aa3-1, governing the reporting of 
transactions in Nasdaq securities.
    I. UTP Quote Data Feed means the service that provides Subscribers 
with the National Best Bid and Offer quotations, size and market center 
identifier, as well as the Best Bid and Offer quotations, size and 
market center identifier from each individual Participant in Eligible 
Securities.
    J. Nasdaq System means the automated quotation system operated by 
Nasdaq.
    K. UTP Trade Data Feed means the service that provides Vendors and 
Subscribers with Transaction Reports.
    L. Nasdaq Security or Nasdaq-listed Security means any security 
listed on the Nasdaq National Market or Nasdaq SmallCap Market.
    M. News Service means a person that receives Transaction Reports or 
Quotation Information provided by the Systems or provided by a Vendor, 
on a Current basis, in connection with such person's business of 
furnishing such information to newspapers, radio and television 
stations and other news media, for publication at least fifteen (15) 
minutes following the time when the information first has been 
published by the Processor.
    N. OTC Montage Data Feed means the data stream of information that 
provides Vendors and Subscribers with quotations and sizes from each 
NASD Participant.
    O. Participant means a registered national securities exchange or 
national securities association that is a signatory to this Plan.
    P. Plan means this Nasdaq UTP Plan, as from time to time amended 
according to its provisions, governing the collection, consolidation 
and dissemination of Quotation Information and Transaction Reports in 
Eligible Securities.
    Q. Processor means the entity selected by the Participants to 
perform the processing functions set forth in the Plan.
    R. Quotation Information means all bids, offers, displayed 
quotation sizes, market center identifiers and, in the case of NASD, 
the NASD market participant that entered the quotation, withdrawals and 
other information pertaining to quotations in Eligible Securities 
required to be collected and made available to the Processor pursuant 
to this Plan.
    S. Regulatory Halt means a trade suspension or halt called for the 
purpose of dissemination of material news, as described at Section X 
hereof or that is called for where there are regulatory problems 
relating to an Eligible Security that should be clarified before 
trading therein is permitted to continue.
    T. Subscriber means a person that receives Current Quotation 
Information or Transaction Reports provided by the Processor or 
provided by a Vendor for its own use or for distribution on a non-
Current basis, other than in connection with its activities as a 
Vendor.
    U. Transaction Reports means reports required to be collected and 
made available pursuant to this Plan containing the stock symbol, 
price, and size of the transaction executed, the Market in which the 
transaction was executed, and related information, including a buy/
sell/cross indicator and trade modifiers, reflecting completed 
transactions in Eligible Securities.
    V. Upon Effectiveness of the Plan means July 12, 1993, the date on 
which the Participants commenced publication of Quotation Information 
and Transaction Reports on Eligible Securities as contemplated by this 
Plan.
    W. Vendor means a person that receives Current Quotation 
Information or Transaction Reports provided by the Processor or 
provided by a Vendor, in connection with such person's business of 
distributing, publishing, or otherwise furnishing such information on a 
Current basis to Subscribers, News Services or other Vendors.

IV. Administration of Plan

A. Operating Committee: Composition

    The Plan shall be administered by the Participants through an 
operating committee (``Operating Committee''), which shall be composed 
of one representative designated by each Participant. Each Participant 
may designate an alternate representative or representatives who shall 
be authorized to act on behalf of the Participant in the absence of the 
designated representative. Within the areas of its responsibilities and 
authority, decisions made or actions taken by the Operating Committee, 
directly or by duly delegated individuals, committees as may be 
established from time to time, or others, shall be binding upon each 
Participant, without prejudice to the rights of any Participant to seek 
redress from the SEC pursuant to Rule 11Aa3-2 under the Exchange Act or 
in any other appropriate forum.
    An Electronic Communications Network, Alternative Trading System, 
Broker-Dealer or other securities organization (``Organization'') which 
is not a Participant, but has an actively pending Form 1 Application on 
file with the Commission to become a national securities exchange, will 
be permitted to appoint one representative and one alternate 
representative to attend regularly scheduled Operating Committee 
meetings in the capacity of an observer/advisor. If the Organization's 
Form 1 petition is withdrawn, returned, or is otherwise not actively 
pending with the Commission for any reason, then the Organization will 
no longer be eligible to be represented in the Operating Committee 
meetings. The Operating Committee shall have the discretion, in limited 
instances, to deviate from this policy if, as indicated by majority 
vote, the Operating Committee agrees that circumstances so warrant.
    Nothing in this section or elsewhere within the Plan shall 
authorize any person or organization other than Participants and their 
representatives to participate on the Operating Committee in any manner 
other than as an advisor or observer, or in any Executive Session of 
the Operating Committee.

B. Operating Committee: Authority

    The Operating Committee shall be responsible for:
    1. Overseeing the consolidation of Quotation Information and 
Transaction Reports in Eligible Securities from the Participants for 
dissemination to Vendors, Subscribers, News Services and others in 
accordance with the provisions of the Plan;
    2. Periodically evaluating the Processor;
    3. Setting the level of fees to be paid by Vendors, Subscribers, 
News Services or others for services relating to Quotation Information 
or Transaction Reports in Eligible Securities, and taking action in 
respect thereto in accordance with the provisions of the Plan;
    4. Determining matters involving the interpretation of the 
provisions of the Plan;
    5. Determining matters relating to the Plan's provisions for cost 
allocation and revenue-sharing; and
    6. Carrying out such other specific responsibilities as provided 
under the Plan.

[[Page 44893]]

C. Operating Committee: Voting

    Each Participant shall have one vote on all matters considered by 
the Operating Committee.
    1. The affirmative and unanimous vote of all Participants entitled 
to vote shall be necessary to constitute the action of the Operating 
Committee with respect to:
    a. Amendments to the Plan;
    b. Amendments to contracts between the Processor and Vendors, 
Subscribers, News Services and others receiving Quotation Information 
and Transaction Reports in Eligible Securities;
    c. Replacement of the Processor, except for termination for cause, 
which shall be governed by Section V(B) hereof;
    d. Reductions in existing fees relating to Quotation Information 
and Transaction Reports in Eligible Securities; and
    e. Except as provided under Section IV(C)(3) hereof, requests for 
system changes; and
    f. All other matters not specifically addressed by the Plan.
    2. With respect to the establishment of new fees or increases in 
existing fees relating to Quotation Information and Transaction Reports 
in Eligible Securities, the affirmative vote of two-thirds of the 
Participants entitled to vote shall be necessary to constitute the 
action of the Operating Committee.
    3. The affirmative vote of a majority of the Participants entitled 
to vote shall be necessary to constitute the action of the Operating 
Committee with respect to:
    a. Requests for system changes reasonably related to the function 
of the Processor as defined under the Plan. All other requests for 
system changes shall be governed by Section IV(C)(1)(e) hereof.
    b. Interpretive matters and decisions of the Operating Committee 
arising under, or specifically required to be taken by, the provisions 
of the Plan as written;
    c. Interpretive matters arising under Exchange Act Rules 11Aa3-1 
and 11Acl-1; and
    d. Denials of access (other than for breach of contract, which 
shall be handled by the Processor),
    4. It is expressly agreed and understood that neither this Plan nor 
the Operating Committee shall have authority in any respect over any 
Participant's proprietary systems. Nor shall the Plan or the Operating 
Committee have any authority over the collection and dissemination of 
quotation or transaction information in Eligible Securities in any 
Participant's marketplace or, in the case of the NASD, from NASD 
Participants.

D. Operating Committee: Meetings

    Regular meetings of the Operating Committee may be attended by each 
Participant's designated representative and/or its alternate 
representative(s), and may be attended by one or more other 
representatives of the parties. Meetings shall be held at such times 
and locations as shall from time to time be determined by the Operating 
Committee.
    Quorum: Any action requiring a vote only can be taken at a meeting 
in which a quorum of all Participants is present. For actions requiring 
a simple majority vote of all Participants, a quorum of greater than 
50% of all Participants entitled to vote must be present at the meeting 
before such a vote may be taken. For actions requiring a 2/3rd majority 
vote of all Participants, a quorum of at least 2/3rd of all 
Participants entitled to vote must be present at the meeting before 
such a vote may be taken. For actions requiring a unanimous vote of all 
Participants, a quorum of all Participants entitled to vote must be 
present at the meeting before such a vote may be taken.
    A Participant is considered present at a meeting only if a 
Participant's designated representative or alternate representative(s) 
is either in physical attendance at the meeting or is participating by 
conference telephone, or other acceptable electronic means.
    Any action sought to be resolved at a meeting must be sent to each 
Participant entitled to vote on such matter at least one week prior to 
the meeting via electronic mail, regular U.S. or private mail, or 
facsimile transmission, provided however that this requirement may be 
waived by the vote of the percentage of the Committee required to vote 
on any particular matter, under Section C above.
    Any action may be taken without a meeting if consent in writing, 
setting forth the action so taken, is sent to and signed by all 
Participant representatives entitled to vote with respect to the 
subject matter thereof. All the approvals evidencing the consent shall 
be delivered to the Chairman of the Operating Committee to be filed in 
the Operating Committee records. The action taken shall be effective 
when the minimum number of Participants entitled to vote have approved 
the action, unless the consent specifies a different effective date.
    The Chairman of the Operating Committee shall be elected annually 
by and from among the Participants by a majority vote of all 
Participants entitled to vote. The Chairman shall designate a person to 
act as Secretary to record the minutes of each meeting. The location of 
meetings shall be rotated among the locations of the principal offices 
of the Participants, or such other locations as may from time to time 
be determined by the Operating Committee. Meetings may be held by 
conference telephone and action may be taken without a meeting if the 
representatives of all Participants entitled to vote consent thereto in 
writing or other means the Operating Committee deems acceptable.

A. Advisory Committee

1. Composition
    a. Each Plan Participant may designate three representatives to 
participate in the Advisory Committee. The representatives shall each 
be an employee of a member of that Participant, a professor or other 
academic involved in the scholarly study of the securities industry, or 
an expert in one or more areas of the securities industry.
    b. Each representative shall serve a one-year term on the Advisory 
Committee.
2. Authority
    The Advisory Committee shall have the opportunity to:
    a. Meet twice yearly, each meeting to occur one day prior to a 
meeting of the Operating Committee.
    b. Discuss any matter related to the operation of the Plan.
    c. Present written comments or inquiries to the Operating Committee 
regarding matters related to the operation of the Plan.
    d. Respond to written inquiries from the Operating Committee 
seeking comment from the Advisory Committee on matters related to the 
operation of the Plan.

V. Selection and Evaluation of the Processor

A. Generally

    The Processor's performance of its functions under the Plan shall 
be subject to review by the Operating Committee at least every two 
years, or from time to time upon the request of any two Participants 
but not more frequently than once each year. Based on this review, the 
Operating Committee may choose to make a recommendation to the 
Participants with respect to the continuing operation of the Processor. 
The Operating Committee shall notify the SEC of any recommendations the 
Operating Committee shall make pursuant to the Operating Committee's 
review of the Processor and shall supply

[[Page 44894]]

the Commission with a copy of any reports that may be prepared in 
connection therewith.

B. Termination of the Processor for Cause

    If the Operating Committee determines that the Processor has failed 
to perform its functions in a reasonably acceptable manner in 
accordance with the provisions of the Plan or that its reimbursable 
expenses have become excessive and are not justified on a cost basis, 
the Processor may be terminated at such time as may be determined by a 
majority vote of the Operating Committee.

C. Factors To Be Considered in Termination for Cause

    Among the factors to be considered in evaluating whether the 
Processor has performed its functions in a reasonably acceptable manner 
in accordance with the provisions of the Plan shall be the 
reasonableness of its response to requests from Participants for 
technological changes or enhancements pursuant to Section IV(C)(3) 
hereof. The reasonableness of the Processor's response to such requests 
shall be evaluated by the Operating Committee in terms of the cost to 
the Processor of purchasing the same service from a third party and 
integrating such service into the Processor's existing systems and 
operations as well as the extent to which the requested change would 
adversely impact the then current technical (as opposed to business or 
competitive) operations of the Processor.

D. Processor's Right To Appeal Termination for Cause

    The Processor shall have the right to appeal to the SEC a 
determination of the Operating Committee terminating the Processor for 
cause and no action shall become final until the SEC has ruled on the 
matter and all legal appeals of right therefrom have been exhausted.

E. Process for Selecting New Processor

    At any time following effectiveness of the Plan, but no later than 
upon the termination of the Processor, whether for cause pursuant to 
Section IV(C)(1)(c) or V(B) of the Plan or upon the Processor's 
resignation, the Operating Committee shall establish procedures for 
selecting a new Processor (the ``Selection Procedures''). The Operating 
Committee, as part of the process of establishing Selection Procedures, 
may solicit and consider the timely comment of any entity affected by 
the operation of this Plan. The Selection Procedures shall be 
established by a two-thirds majority vote of the Plan Participants, and 
shall set forth, at a minimum:
    1. The entity that will:
    a. Draft the Operating Committee's request for proposal for bids on 
a new processor;
    b. Assist the Operating Committee in evaluating bids for the new 
processor; and
    c. Otherwise provide assistance and guidance to the Operating 
Committee in the selection process.
    2. The minimum technical and operational requirements to be 
fulfilled by the Processor;
    3. The criteria to be considered in selecting the Processor; and
    4. The entities (other than Plan Participants) that are eligible to 
comment on the selection of the Processor.
    Nothing in this provision shall be interpreted as limiting 
Participants' rights under Section IV or Section V of the Plan or other 
Commission order.

VI. Functions of the Processor

A. Generally

    The Processor shall collect from the Participants, and consolidate 
and disseminate to Vendors, Subscribers and News Services, Quotation 
Information and Transaction Reports in Eligible Securities in a manner 
designed to assure the prompt, accurate and reliable collection, 
processing and dissemination of information with respect to all 
Eligible Securities in a fair and non-discriminatory manner. The 
Processor shall commence operations upon the Processor's notification 
to the Participants that it is ready and able to commence such 
operations.

B. Collection and Consolidation of Information

    For as long as Nasdaq is the Processor, the Processor shall be 
capable of receiving Quotation Information and Transaction Reports in 
Eligible Securities from Participants by the Plan-approved, Processor 
sponsored interface, and shall consolidate and disseminate such 
information via the UTP Quote Data Feed, the UTP Trade Data Feed, and 
the OTC Montage Data Feed to Vendors, Subscribers and News Services.

C. Dissemination of Information

    The Processor shall disseminate consolidated Quotation Information 
and Transaction Reports in Eligible Securities via the UTP Quote Data 
Feed, the UTP Trade Data Feed, and the OTC Montage Data Feed to 
authorized Vendors, Subscribers and News Services in a fair and non-
discriminatory manner. The Processor shall specifically be permitted to 
enter into agreements with Vendors, Subscribers and News Services for 
the dissemination of quotation or transaction information on Eligible 
Securities to foreign (non-U.S.) marketplaces or in foreign countries.
    The Processor shall, in such instance, disseminate consolidated 
quotation or transaction information on Eligible Securities from all 
Participants.
    Nothing herein shall be construed so as to prohibit or restrict in 
any way the right of any Participant to distribute quotation, 
transaction or other information with respect to Eligible Securities 
quoted on or traded in its marketplace to a marketplace outside the 
United States solely for the purpose of supporting an intermarket 
linkage, or to distribute information within its own marketplace 
concerning Eligible Securities in accordance with its own format. If a 
Participant requests, the Processor shall make information about 
Eligible Securities in the Participant's marketplace available to a 
foreign marketplace on behalf of the requesting Participant, in which 
event the cost shall be borne by that Participant.
1. Best Bid and Offer
    The Processor shall disseminate on the UTP Quote Data Feed the best 
bid and offer information supplied by each Participant, including the 
NASD, and shall also calculate and disseminate on the UTP Quote Data 
Feed a national best bid and asked quotation with size based upon 
Quotation Information for Eligible Securities received from 
Participants. The Processor shall not calculate the best bid and offer 
for any individual Participant, including the NASD.
    The Participant responsible for each side of the best bid and asked 
quotation making up the national best bid and offer shall be identified 
by an appropriate symbol. If the quotations of more than one 
Participant shall be the same best price, the largest displayed size 
among those shall be deemed to be the best. If the quotations of more 
than one Participant are the same best price and best displayed size, 
the earliest among those measured by the time reported shall be deemed 
to be the best. A reduction of only bid size and/or ask size will not 
change the time priority of a Participant's quote for the purposes of 
determining time reported, whereas an increase of the bid size and/or 
ask size will result in a new time reported. The consolidated size 
shall be the size of the Participant that is at the best.
    If the best bid/best offer results in a locked or crossed 
quotation, the Processor shall forward that locked or crossed quote on 
the appropriate output

[[Page 44895]]

lines (i.e., a crossed quote of bid 12, ask 11.87 shall be 
disseminated). The Processor shall normally cease the calculation of 
the best bid/best offer after 6:30 p.m., Eastern Time.
2. Eligible Securities
    a. Number of Eligible Securities--If the Commission by order 
expands the number of Eligible Securities beyond 1,000, the number of 
Eligible Securities that Participants may trade shall be phased in 
(added) according to the schedule set out below:
    (i) At the end of the first calendar quarter following the 
Commission's order expanding the number of Eligible Securities beyond 
1,000 but in no case before September 30, 2001, Participants may 
commence trading 500 additional securities;
    (ii) At the end of each of the four calendar quarters following the 
date established under provision VI.C(2)(a)(i) of the Plan, 
Participants may commence trading an additional 500 securities, and at 
the end of the fifth calendar quarter following the date established 
under provision VI.C(2)(a)(i) of the Plan, Participants shall be 
permitted to trade all Eligible Securities.
    (iii) In no case shall the number of Eligible Securities exceed the 
number of securities that the Commission deems are eligible for trading 
pursuant to this Plan.
    (iv) After each of the aforementioned phase in periods (i.e., 
calendar quarters), the Processor shall evaluate its performance to 
determine whether it is prudent, in light of system capacity and any 
other operational factors, to continue to add additional securities 
pursuant to the phase in schedule. If the Processor determines, in 
light of system capacity and any other operational factors, that it is 
not prudent to continue to expand the number of Eligible Securities, 
the Processor upon notice to the Participants immediately may suspend 
the phase-in schedule and delay the expansion of the number of Eligible 
Securities that may be traded under the Plan. The Processor shall 
commence adding securities pursuant to a revised phase-in schedule, 
when the Processor determines it is prudent to do so, in light of 
system capacity and any other operational factors.
    (v) This provision shall not apply to The Nasdaq Stock Market, 
Inc., or Nasdaq market participants acting in such capacity, nor shall 
it apply to any Participant that does not engage in auto-quoting, as 
described in paragraph VI.C.(2)(b) below.
    b. Limitation on Auto-Quoting--Except as provided in sub-paragraph 
VI.C(2)(c) of this Plan, Participants shall be prohibited from the 
practice of ``auto-quoting.'' ``Auto-quoting'' means the practice of 
tracking, by automated means, the changes to the best bid or best ask 
quotation and responding by generating another quote change to keep 
that Participant away from the best bid or ask quotation, but for 
purposes of this Plan, shall not include:
    (i) An update that is in response to an execution in the security 
by that Participant;
    (ii) An update that requires a physical entry;
    (iii) An update that is to reflect the receipt, execution, or 
cancellation of a customer limit order; or
    (iv) The practice of automatically generating quote changes at a 
rate of less than 35% of all price changes to the national best bid or 
ask quotation. The Processor shall calculate this rate using quoting 
activity during the preceding calendar month.
    c. Applicability of Auto-Quoting Limitation--The Limitation on 
Auto-Quoting contained in subparagraph VI.C(2)(b) of this Plan shall 
only apply if the Processor deems it necessary to maintain adequate 
capacity for the normal and efficient operation of the Processor and 
the Processor provides at least 30 calendar days notice to the 
Participants and the basis thereof of such determination. The Processor 
shall lift the limitation on auto-quoting when the Processor determines 
it is prudent to do so, in light of system capacity and any other 
operational factors. Additionally, the Limitation on Auto-Quoting set 
forth in subparagraph VI.C(2)(b) of this Plan will not apply to a 
Participant whose aggregated quoting activity in eligible Nasdaq 
securities does not exceed 1% of the total quotation traffic across all 
Nasdaq securities by all Nasdaq market participants and Exchange 
Participants. The Processor shall calculate this rate using quoting 
activity during the preceding calendar month.
    d. Obligations of Participants Regarding Capacity--Each Participant 
shall exercise due diligence to promote quotation generation practices 
that mitigate quotation traffic so as to ensure prudential excess 
capacity within the Processor. The Operating Committee shall 
periodically review the performance of Participants and take such 
action as necessary to maintain prudential excess capacity.
    e. Procedures for Ensuring Acceptable Quote Generation Practices--
The following procedures shall apply if, in accordance with Section 
VI.C.2(c) of the Plan, the Processor determines that a capacity concern 
exists.
    (i) On a monthly basis, each Participant shall provide the 
Processor with a good faith estimate of the Participant's previous 
month's daily average number of aggregate quote updates to permit the 
Processor to determine compliance with the auto-quoting limitation 
referenced in Section VI.C.2.(b) of the Plan.
    (ii) If the Processor determines, from the Participant's data or 
otherwise, that the Participant has not complied with the limitations 
of Section VI.C.2.(b), the Processor shall give the Participant written 
notice of such condition. The Participant shall have 30 calendar days 
after receipt of the written notice to remedy the condition.
    (iii) If, after the aforementioned 30-day period has expired, the 
condition has not been remedied to the reasonable satisfaction of the 
Processor, then the Processor shall submit to the Operating Committee a 
written request for relief together with supporting documentation 
evidencing the alleged condition (i.e., failure to comply with the 
limitations of Section VI.C.2.(b)) and quantifying the impact of the 
violation on overall capacity of the Processor. The Processor's request 
for relief shall be limited to such remedial action (including but not 
limited to the termination of service to the subject Participant) as is 
necessary to modify the subject Participant's quote generation 
practices on a prospective basis, for such period as is necessary to 
resolve the condition that gave rise to the Processor's request for 
relief. The Participant shall have 15 calendar days to respond in 
writing to the Processor's request for relief.
    (iv) The Operating Committee, following written notice to the 
Participant and the Processor, shall conduct a hearing within five (5) 
business days after expiration of the 15-day response period to 
determine whether to grant or deny the Processor's claim for remedial 
action. At the hearing, the Operating Committee may consider, among 
other information, the request of the Processor, the response (if any) 
of the Participant and any other evidence (written or oral) that is 
presented at the hearing. At the conclusion of the hearing, the 
Operating Committee shall grant or deny the Processor's request. An 
affirmative vote of two-thirds of the Operating Committee members 
entitled to vote (excluding the subject Participant) shall be required 
for any decision of the Operating Committee. The decision of the 
Operating Committee shall be final and therefore reviewable by the 
Commission; provided, however, that any decision of the Operating

[[Page 44896]]

Committee shall not become effective until five business days after the 
date of the decision.
    f. Limitation on Applicability of Rule--The phase-in schedule 
contained in VI.C(2)(a) and the Limitation on Auto-Quoting contained in 
VI.C(2)(c) shall not apply:
    (i) To any Participant upon the designation and the operation of a 
new Processor; and
    (ii) To a Participant for the number of securities that the 
Participant quoted as of May 1, 2001; provided, however the exemption 
contained herein shall expire a year from the end-date of the phase-in 
schedule contained in VI.C(2)(a).
3. Quotation Data Streams
    The Processor shall disseminate on the UTP Quote Data Feed a data 
stream of all Quotation Information regarding Eligible Securities 
received from Participants. Each quotation shall be designated with a 
symbol identifying the Participant from which the quotation emanates. 
Quotation Information from individual NASD Participants will not be 
disseminated on the UTP Quote Data Feed. The Processor shall separately 
distribute on the OTC Montage Data Feed the Quotation Information 
regarding Eligible Securities from all NASD Participants from which 
quotations emanate.
4. Transaction Reports
    The Processor shall disseminate on the UTP Trade Data Feed a data 
stream of all Transaction Reports in Eligible Securities received from 
Participants. Each transaction report shall be designated with a symbol 
identifying the Participant in whose Market the transaction took place.

D. Closing Reports

    At the conclusion of each trading day, the Processor shall 
disseminate a ``closing price'' for each Eligible Security. Such 
``closing price'' shall be the price of the last Transaction Report in 
such security received prior to dissemination. The Processor shall also 
tabulate and disseminate at the conclusion of each trading day the 
aggregate volume reflected by all Transaction Reports in Eligible 
Securities reported by the Participants.

E. Statistics

    The Processor shall maintain quarterly, semi-annual and annual 
transaction and volume statistical counts. The Processor shall, at cost 
to the user Participant(s), make such statistics available in a form 
agreed upon by the Operating Committee, such as a secure website.

VII. Administrative Functions of the Processor

    Subject to the general direction of the Operating Committee, 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 this Plan, including, but not limited to, record keeping, 
billing, contract administration, and the preparation of financial 
reports.

VIII. Transmission of Information to Processor by Participants

A. Quotation Information

    Each Participant shall, during the time it is open for trading be 
responsible promptly to collect and transmit to the Processor accurate 
Quotation Information in Eligible Securities through any means 
prescribed herein.
    Quotation Information shall include:
    1. Identification of the Eligible Security, using the Nasdaq 
Symbol;
    2. The priced bid and offer, together with size;
    3. The NASD Participant along with that NASD Participant's market 
participant identification; or Participant from which the quotation 
emanates;
    4. Identification of quotations that are not firm; and
    5. Through appropriate codes and messages, withdrawals and similar 
matters.

B. Transaction Reports

    Each Participant shall, during the time it is open for trading, be 
responsible promptly to collect and transmit to the Processor 
Transaction Reports in Eligible Securities executed in its Market by 
means prescribed herein. With respect to orders sent by one Participant 
Market to another Participant Market for execution, each Participant 
shall adopt procedures governing the reporting of transactions in 
Eligible Securities specifying that the transaction will be reported by 
the Participant whose member sold the security. This provision shall 
apply only to transactions between Plan Participants.
    Transaction Reports shall include:
    1. Identification of the Eligible Security, using the Nasdaq 
Symbol;
    2. The number of shares in the transaction;
    3. The price at which the shares were purchased or sold;
    4. The buy/sell/cross indicator;
    5. The Market of execution; and,
    6. Through appropriate codes and messages, late or out-of-sequence 
trades, corrections and similar matters.
    All such Transaction Reports shall be transmitted to the Processor 
within 90 seconds after the time of execution of the transaction. 
Transaction Reports transmitted beyond the 90-second period shall be 
designated as ``late'' by the appropriate code or message.
    The following types of transactions are not required to be reported 
to the Processor pursuant to the Plan:
    1. Transactions that are part of a primary distribution by an 
issuer or of a registered secondary distribution or of an unregistered 
secondary distribution;
    2. Transactions made in reliance on Section 4(2) of the Securities 
Act of 1933;
    3. Transactions in which the buyer and the seller have agreed to 
trade at a price unrelated to the Current Market for the security, 
e.g., to enable the seller to make a gift;
    4. Odd-lot transactions;
    5. The acquisition of securities by a broker-dealer as principal in 
anticipation of making an immediate exchange distribution or exchange 
offering on an exchange;
    6. Purchases of securities pursuant to a tender offer; and
    7. Purchases or sales of securities effected upon the exercise of 
an option pursuant to the terms thereof or the exercise of any other 
right to acquire securities at a pre-established consideration 
unrelated to the Current Market.

C. Symbols for Market Identification for Quotation Information and 
Transaction Reports

    The following symbols shall be used to denote the Participant 
marketplaces:
Code Participant
A  American Stock Exchange
B  Boston Stock Exchange
C  Cincinnati Stock Exchange
M  Chicago Stock Exchange
D  NASD
Q  Nasdaq
P  Pacific Exchange
X  Philadelphia Stock Exchange

    D. 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, or where a trading halt or suspension in an Eligible 
Security is in effect in its Market, the Participant shall promptly 
notify the Processor of such condition or event and shall resume 
collecting and transmitting Quotation Information and 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

[[Page 44897]]

members to transmit Quotation Information or Transaction Reports to the 
Processor, the Participant shall promptly notify the Processor 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.

IX. Market Access

    A. Each Participant shall permit each NASD market participant, 
acting in its capacity as such, direct telephone access to the 
specialist, trading post, market maker and supervisory center in each 
Eligible Security in which such NASD market participant is registered 
as a market maker or electronic communications network/alternative 
trading system with NASD. Such access shall include appropriate 
procedures or requirements by each Participant or employee to assure 
the timely response to communications received through telephonic 
access. No Participant shall permit the imposition of any access or 
execution fee, or any other fee or charge, with respect to transactions 
in Eligible Securities effected with NASD market participants which are 
communicated to the floor by telephone pursuant to the provisions of 
this Plan. A Participant shall be free to charge for other types of 
access to its floor or facilities.
    B. The NASD shall assure that each Participant, and its members 
shall have direct telephone access to the trading desk of each NASD 
market participant in each Eligible Security in which the Participant 
displays quotations, and to the NASD Supervisory Center. Such access 
shall include appropriate procedures or requirements to assure the 
timely response of each NASD market participant to communications 
received through telephone access. No NASD market participant shall 
impose any access or execution fee, or any other fee or charge, with 
respect to transactions in Eligible Securities effected with a member 
of a Participant which are communicated by telephone pursuant to the 
provisions of this Plan.

X. Regulatory Halts

    A. Whenever, in the exercise of its regulatory functions, the 
Listing Market for an Eligible Security determines that a Regulatory 
Halt is appropriate, all other Participants shall also halt or suspend 
trading in that security until notification that the halt or suspension 
is no longer in effect. The Listing Market shall immediately notify the 
Processor of such Regulatory Halt as well as notice of the lifting of a 
Regulatory Halt. The Processor, in turn, shall disseminate to 
Participants notice of the Regulatory Halt (as well as notice of the 
lifting of a regulatory halt) through the UTP Quote Data Feed. This 
notice shall serve as official notice of a regulatory halt for purposes 
of the Plan only, and shall not substitute or otherwise supplant notice 
that a Participant may recognize or require under its own rules. 
Nothing in this provision shall be read so as to supplant or be 
inconsistent with a Participant's own rules on trade halts, which rules 
apply to the Participant's own members. The Processor will reject any 
quotation information and monitor for transaction reports received from 
any Participant on an Eligible Security that has a Regulatory Halt in 
effect.
    B. Whenever the Listing Market determines that an adequate 
publication or dissemination of information has occurred or the 
regulatory problem has been addressed so as to permit the termination 
of the Regulatory Halt then in effect, the Listing Market shall 
promptly notify the Processor and each of the other Participants that 
conducts trading in such security. Except in extraordinary 
circumstances, adequate publication or dissemination shall be presumed 
by the Listing Market to have occurred upon the expiration of one hour 
after initial publication in a national news dissemination service of 
the information that gave rise to the Regulatory Halt.
    C. Except in the case of a Regulatory Halt, the Processor shall not 
cease the dissemination of quotation or transaction information 
regarding any Eligible Security. In particular, it shall not cease 
dissemination of such information because of a delayed opening, 
imbalance of orders or other market-related problems involving such 
security. During a regulatory halt, the Processor shall collect and 
disseminate Transaction Information but shall cease collection and 
dissemination of all Quotation Information.
    D. For purposes of this Section X, ``Listing Market'' for an 
Eligible Security means the Participant's Market on which the Eligible 
Security is listed. If an Eligible Security is dually listed, Listing 
Market shall mean the Participant's Market on which the Eligible 
Security is listed that also has the highest number of the average of 
the reported transactions and reported share volume for the preceding 
12-month period. The Listing Market for dually-listed Eligible 
Securities shall be determined at the beginning of each calendar 
quarter.

XI. Hours of Operation

    A. Quotation Information may be entered by Participants as to all 
Eligible Securities in which they make a market between 9:30 a.m. and 4 
p.m. Eastern Time (``ET'') on all days the Processor is in operation. 
Transaction Reports shall be entered between 9:30 a.m. and 4:01:30 p.m. 
ET by Participants as to all Eligible Securities in which they execute 
transactions between 9:30 a.m. and 4 p.m. ET on all days the Processor 
is in operation.
    B. Participants that execute transactions in Eligible Securities 
outside the hours of 9:30 a.m. ET and 4 p.m., ET, shall be reported as 
follows:
    (i) Transactions in Eligible Securities executed between 8 a.m. and 
9:29:59 a.m. ET and between 4:00:01 and 6:30 p.m. ET, shall be 
designated as ``.T'' trades to denote their execution outside normal 
market hours;
    (ii) Transactions in Eligible Securities executed after 6:30 p.m. 
and before 12 a.m. (midnight) shall be reported to the Processor 
between the hours of 8 a.m. and 6:30 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;
    (iii) Transactions in Eligible Securities executed between 12 a.m. 
(midnight) and 8 a.m. ET shall be transmitted to the Processor between 
8 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;
    (iv) Transactions reported pursuant to this provision of the Plan 
shall be included in the calculation of total trade volume for purposes 
of determining net distributable operating revenue, but shall not be 
included in the calculation of the daily high, low, or last sale.
    C. Late trades shall be reported in accordance with the rules of 
the Participant in whose Market the transaction occurred and can be 
reported between the hours of 8 a.m. and 6:30 p.m.
    D. The Processor shall collect, process and disseminate Quotation 
Information in Eligible Securities between 8 a.m. and 9:30 a.m. ET, and 
after 4 p.m. ET, when any Participant or NASD Participant is open for 
trading, until 6:30 p.m. ET (the ``Additional Period''); provided, 
however, that the national best bid and offer quotation will not be 
disseminated before 9:30 a.m. or after 6:30 p.m. ET. Participants that 
enter Quotation Information or Transaction Reports to the Processor 
during the Additional Period shall do so for all Eligible Securities in 
which they enter quotations.

[[Page 44898]]

XII. Undertaking by All Participants

    The filing with and approval by the Commission of this Plan shall 
obligate each Participant to enforce compliance by its members with the 
provisions thereof. In all other respects not inconsistent herewith, 
the rules of each Participant shall apply to the actions of its members 
in effecting, reporting, honoring and settling transactions executed 
through its facilities, and the entry, maintenance and firmness of 
quotations to ensure that such occurs in a manner consistent with just 
and equitable principles of trade.

XIII. Financial Matters

A. Development Costs

    Any Participant becoming a signatory to this Plan after June 26, 
1990, shall, as a condition to becoming a Participant, pay to the other 
Plan Participants a proportionate share of the aggregate development 
costs previously paid by Plan Participants to the Processor, which 
aggregate development costs totaled $439,530, with the result that each 
Participant's share of all development costs is the same.
    Each Participant shall bear the cost of implementation of any 
technical enhancements to the Processor system made at its request and 
solely for its use, subject to reapportionment should any other 
Participant subsequently make use of the enhancement, or the 
development thereof.

B. Cost Allocation and Revenue Sharing

    The provision governing cost allocation and revenue sharing among 
the Participants are set forth in Exhibit 1 to the Plan.

C. Maintenance of Financial Records

    The Processor shall maintain records of revenues generated and 
development and operating expenditures incurred in connection with the 
Plan. In addition, the Processor shall provide the Participants with: 
(a) A statement of financial and operational condition on a quarterly 
basis; and (b) an audited statement of financial and operational 
condition on an annual basis.

XIV. Indemnification

    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 by 
such Participant and disseminated by the Processor to Vendors. This 
indemnity agreement shall be in addition to any liability that the 
indemnifying Participant may otherwise have.
    Promptly after receipt by an indemnified Participant of notice of 
the commencement of any action, such indemnified Participant will, if a 
claim in respect thereof is to be made against an indemnifying 
Participant, notify the indemnifying Participant in writing of the 
commencement thereof; but the omission to so notify the indemnifying 
Participant will not relieve the indemnifying Participant from any 
liability which it may have to any indemnified Participant. In case any 
such action is brought against any indemnified Participant and it 
promptly notifies an indemnifying Participant of the commencement 
thereof, the indemnifying Participant will be entitled to participate 
in, and, to the extent that it may wish, jointly with any other 
indemnifying Participant similarly notified, to assume and control the 
defense thereof with counsel chosen by it. After notice from the 
indemnifying Participant of its election to assume the defense thereof, 
the indemnifying Participant will not be liable to such indemnified 
Participant for any legal or other expenses subsequently incurred by 
such indemnified Participant in connection with the defense thereof but 
the indemnified Participant may, at its own expense, participate in 
such defense by counsel chosen by it without, however, impairing the 
indemnifying Participant's control of the defense. The indemnifying 
Participant may negotiate a compromise or settlement of any such 
action, provided that such compromise or settlement does not require a 
contribution by the indemnified Participant.

XV. Withdrawal

    Any Participant may withdraw from the Plan at any time on not less 
than 30 days prior written notice to each of the other Participants. 
Any Participant withdrawing from the Plan shall remain liable for, and 
shall pay upon demand, any fees for equipment or services being 
provided to such Participant pursuant to the contract executed by it or 
an agreement or schedule of fees covering such then in effect.
    A withdrawing Participant shall also remain liable for its 
proportionate share, without any right of recovery, of administrative 
and operating expenses, including start-up costs and other sums for 
which it may be responsible pursuant to Section XIII hereof. Except as 
aforesaid, a withdrawing Participant shall have no further obligation 
under the Plan or to any of the other Participants with respect to the 
period following the effectiveness of its withdrawal.

XVI. Modifications to Plan

    The Plan may be modified from time to time when authorized by the 
agreement of all of the Participants, subject to the approval of the 
SEC.

XVII. Applicability of Securities Exchange Act of 1934

    The rights and obligations of the Participants and of Vendors, News 
Services, Subscribers and other persons contracting with Participants 
in respect of the matters covered by the Plan shall at all times be 
subject to any applicable provisions of the Act, as amended, and any 
rules and regulations promulgated thereunder.

XVIII. Operational Issues

    A. Each Participant shall be responsible for collecting and 
validating quotes and last sale reports within their own system prior 
to transmitting this data to the Processor.
    B. Each Participant may utilize a dedicated Participant line into 
the Processor to transmit trade and quote information in Eligible 
Securities to the Processor. The Processor shall accept from 
Participants input for only those issues that are deemed Eligible 
Securities.
    C. The Processor shall consolidate trade and quote information from 
each Participant and disseminate this information on the Processor's 
existing vendor lines.
    D. The Processor shall perform gross validation processing for 
quotes and last sale messages in addition to the collection and 
dissemination functions, as follows:
1. Basic Message Validation
    (a) The Processor may validate format for each type of message, and 
reject non-conforming messages.
    (b) Input must be for an Eligible Security.
    2. Logging Function--The Processor shall return all Participant 
input messages that do not pass the validation checks (described above) 
to the inputting Participant, on the entering Participant line, with an 
appropriate reject notation. For all accepted Participant input 
messages (i.e., those that pass the validation check), the information 
shall be retained for

[[Page 44899]]

immediate processing in the Processor system.

XIX. Headings

    The section and other headings contained in this Plan are for 
reference purposes only and shall not be deemed to be a part of this 
Plan or to affect the meaning or interpretation of any provisions of 
this Plan.

XX. Counterparts

    This Plan may be executed by the Participants in any number of 
counterparts, no one of which need contain the signature of all 
Participants. As many such counterparts as shall together contain all 
such signatures shall constitute one and the same instrument.

XXI. Depth of Book Display

    The Operating Committee has determined that the entity that 
succeeds Nasdaq as the Processor should have the ability to collect, 
consolidate, and disseminate quotations at multiple price levels beyond 
the best bid and best offer from any Participant that voluntarily 
chooses to submit such quotations while determining that no Participant 
shall be required to submit such information. The Operating Committee 
has further determined that the costs of developing, collecting, 
processing, and disseminating such depth of book data shall be borne 
exclusively by those Participants that choose to submit this 
information to the Processor, by whatever allocation those Participants 
may choose among themselves. The Operating Committee has determined 
further that the primary purpose of the Processor is the collection, 
processing and dissemination of best bid, best offer and last sale 
information (``core data''), and as such, the Participants will adopt 
procedures to ensure that such functionality in no way hinders the 
collecting, processing and dissemination of this core data.
    Therefore, implementing the depth of book display functionality 
will require a plan amendment that addresses all pertinent issues, 
including:
    (1) Procedures for ensuring that the fully-loaded cost of the 
collection, processing, and dissemination of depth-of-book information 
will be tracked and invoiced directly to those Plan Participants that 
voluntarily choose to send that data, voluntarily, to the Processor 
allocating in whatever manner those Participants might agree; and
    (2) Necessary safeguards the Processor will take to ensure that its 
processing of depth-of-book data will not impede or hamper, in any way, 
its core Processor functionality of collecting, consolidating, and 
disseminating National Best Bid and Offer data, exchange best bid and 
offer data, and consolidated last sale data.
    Upon approval of a Plan amendment implementing depth of book 
display, this article of the Plan shall be automatically deleted.
    In witness whereof, this Plan has been executed as of the ---- day 
of , 2002, by each of the Signatories hereto.

American Stock Exchange, Inc.

 By:-------------------------------------------------------------------

Boston Stock Exchange, Inc.

 By:-------------------------------------------------------------------

Cincinnati Stock Exchange, Inc.

 By:-------------------------------------------------------------------

Pacific Exchange, Inc.

 By:-------------------------------------------------------------------

Nasdaq Stock Market, Inc

 By:-------------------------------------------------------------------

Chicago Stock Exchange, Inc.

 By--------------------------------------------------------------------

National Association of Securities Dealers, Inc.

 By--------------------------------------------------------------------

Philadelphia Stock Exchange

 By:-------------------------------------------------------------------

Exhibit 1

    1. Each Participant eligible to receive revenue under the Plan will 
receive an annual payment for each calendar year to be determined by 
multiplying (i) that Participant's percentage of total volume in Nasdaq 
securities reported to the Processor and disseminated to Vendors for 
that calendar year by (ii) the total distributable net operating income 
(as defined below) for that calendar year, provided, however, that for 
the implementation year (as defined in Paragraph 4 below), a 
Participant's payment shall be multiplied by the number of months 
during the implementation year the interface was in operation divided 
by twelve. In the event that total distributable net operating income 
is negative, each Participant eligible to receive revenue under the 
Plan will receive an annual bill for each calendar year to be 
determined according to the same formula (described in this paragraph) 
for determining annual payments to eligible Participants.
    2. A Participant's percentage of total volume in Nasdaq securities 
will be calculated by taking the average of (i) the Participant's 
percentage of total trades in Nasdaq securities reported to the 
Processor and disseminated to Vendors for the year and (ii) the 
Participant's percentage of total share volume in Nasdaq securities 
reported to the Processor and disseminated to Vendors for the year 
(trade/volume average). For any given year, a Participant's percentage 
of total trades shall be calculated by dividing the total number of 
trades that that Participant reports to the Processor as the selling 
party for that year by the total number of trades in Nasdaq securities 
reported to the Processor and disseminated to Vendors for the year. A 
Participant's total share volume shall be calculated by multiplying the 
total number of trades in Nasdaq securities in that year that that 
Participant reports to the Processor as the selling party multiplied by 
the number of shares for each such trade. Unless otherwise stated in 
this agreement, a year shall run from January 1 to December 31.
    3. For purposes of this Exhibit 1, net distributable operating 
income for any particular calendar year shall be calculated by adding 
all revenues from the UTP Quote Data Feed, the UTP Trade Data Feed, and 
the OTC Montage Data Feed, including revenues from the dissemination of 
information of Eligible Securities to foreign marketplaces 
(collectively, ``the Data Feeds''), and subtracting from such revenues 
the costs incurred by the Processor, set forth below, in collecting, 
consolidating, validating, generating, and disseminating the Data 
Feeds. These costs include, but are not limited to, the following:
    a. The Processor costs directly attributable to creating OTC 
Montage Data Feed, including:
    1. Cost of collecting Participant quotes into the Processor's quote 
engine;
    2. Cost of processing quotes and creating OTC Montage Data Feed 
messages within the Processor's quote engine;
    3. Cost of the Processor's communication management subsystem that 
distributes OTC Montage Data Feed to the market data vendor network for 
further distribution.
    b. The costs directly attributable to creating the UTP Quote Data 
Feed, including:
    1. The costs of collecting each Participant's best bid, best offer, 
and aggregate volume into the Processor's quote engine;
    2. Cost of calculating the national best bid and offer price within 
the Processor's quote engine;
    3. Cost of creating the UTP Quote Data Feed message within the 
Processor's quote engine;
    4. Cost of the Processor's communication management subsystem that 
distributes the UTP Quote Data Feed to the marker data vendors' 
networks for further distribution.

[[Page 44900]]

    c. The costs directly attributable to creating the UTP Trade Data 
Feed, including:
    1. The costs of collecting each Participant's last sale and volume 
amount into the Processor's quote engine;
    2. Cost of determining the appropriate last sale price and volume 
amount within the Processor's trade engine;
    3. Cost of utilizing the Processor's trade engine to distribute the 
UTP Trade Data Feed for distribution to the market data vendors.
    4. Cost of the Processor's communication management subsystem that 
distributes the UTP Trade Data Feed to the marker data vendors' 
networks for further distribution.
    d. The additional costs that are shared across all Data Feeds, 
including:
    1. Telecommunication Operations costs of supporting the Participant 
lines into the Processor's facilities;
    2. Telecommunications Operations costs of supporting the external 
market data vendor network;
    3. Data Products account management and auditing function with the 
market data vendors;
    4. Market Operations costs to support symbol maintenance, and other 
data integrity issues;
    5. Overhead costs, including management support of the Processor, 
Human Resources, Finance, Legal, and Administrative Services.
    e. Processor costs excluded from the calculation of net 
distributable operating income include trade execution costs for 
transactions executed using a Nasdaq service and trade report 
collection costs reported through a Nasdaq service, as such services 
are market functions for which Participants electing to use such 
services pay market rate.
    f. For the purposes of this provision, so long as Nasdaq is the 
Processor, the following definitions shall apply:
    1. ``Quote engine'' shall mean the Nasdaq's UNISYS or Tandem system 
that is operated by Nasdaq to collect quotation information for 
Eligible Securities;
    2. ``Trade engine'' shall mean the Nasdaq Tandem system that is 
operated by Nasdaq for the purpose of collecting last sale information 
in Eligible Securities.
    4. At the time a Participant implements a Processor-approved 
electronic interface with the Processor, the Participant will become 
eligible to receive revenue for the year in which the interface is 
implemented (implementation year).
    5. From the date a Participant is eligible to receive revenue 
(implementation date) until December 31 of the implementation year, 
Nasdaq shall pay the Participant a pro rata amount of its payment or 
bill the Participant for a pro rata amount of its losses for the 
implementation year (as calculated in Paragraph 1 above). This 
calculation and resultant payment (or bill) will be made (or due) 
within ninety (90) days after the twelfth month following the 
implementation date.
    6. For the calendar year subsequent to the implementation year, and 
continuing thereafter, the calculation of the Participant's annual 
payment or loss will be performed and the payment made or bill 
delivered by March 31 of the following year. Estimated quarterly 
payments or billings shall be made to each eligible Participant within 
45 days following the end of each calendar quarter in which the 
Participant is eligible to receive revenue, provided that the total of 
such estimated payments or billings shall be reconciled at the end of 
each calendar year and, if necessary, adjusted by March 31st of the 
following year. Interest shall be included in quarterly payments and in 
adjusted payments made on March 31st of the following year. Such 
interest shall accrue monthly during the period in which revenue was 
earned and not yet paid and will be based on the 90-day Treasury bill 
rate in effect at the end of the quarter in which the payment is made. 
Interest shall not accrue during the period of up to 45 days between 
the end of each calendar quarter and the date on which an estimated 
quarterly payment or billing is made.
    In conjunction with calculating estimated quarterly and reconciled 
annual payments under this Exhibit 1, the Processor shall submit to the 
Participants an itemized statement setting forth the basis upon which 
net operating income was calculated, including an itemized statement of 
the Processor costs set forth in Paragraph 3 of this Exhibit. Such 
Processor costs shall be reconciled annually based solely on the 
Processor's audited annual financial information. By majority vote of 
the Operating Committee, the Processor shall engage an independent 
auditor to audit the Processor's costs or other calculation(s), the 
cost of which audit shall be shared equally by all Participants. The 
Processor agrees to cooperate fully in providing the information 
necessary to complete such audit.

[FR Doc. 02-16769 Filed 7-3-02; 8:45 am]
BILLING CODE 8010-01-P