[Federal Register Volume 68, Number 34 (Thursday, February 20, 2003)]
[Notices]
[Pages 8314-8316]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-4093]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47363; File No. SR-CTA/CQ-2002-01]


Consolidated Tape Association; Order Approving the Fourth 
Substantive Amendment to the Second Restatement of the Consolidated 
Tape Association Plan and the Second Substantive Amendment to the 
Restated Consolidated Quotation Plan

February 12, 2003.

I. Introduction

    On December 16, 2002, the Consolidated Tape Association (``CTA'') 
Plan and Consolidated Quotation (``CQ'') Plan Participants 
(``Participants'') \1\ submitted to the Securities and Exchange 
Commission (``SEC'' or ``Commission'') a proposal to amend the CTA and 
CQ Plans (collectively, the ``Plans''), pursuant to Rule 11Aa3-2 \2\ 
under the Securities Exchange Act of 1934 (``Act''). The proposal 
represents the 4th substantive amendment made to the Second Restatement 
of the CTA Plan (``4th Amendment'') and the 2nd substantive amendment 
to the Restated CQ Plan (``2nd Amendment''), and reflects several 
changes unanimously adopted by the Participants. The proposed 
amendments would introduce a capacity planning process into the Plans 
and would allocate among the Participants the costs associated with 
their capacity needs under the Plans. Notice of the proposed amendments 
was published in the Federal Register on December 26, 2002.\3\
---------------------------------------------------------------------------

    \1\ Each Participant executed the proposed amendments. The 
Participants are the American Stock Exchange LLC (``AMEX''); Boston 
Stock Exchange, Inc. (``BSE''); Chicago Board Options Exchange, Inc. 
(``CBOE''); Chicago Stock Exchange, Inc. (``CHX''); Cincinnati Stock 
Exchange, Inc. (``CSE''); National Association of Securities 
Dealers, Inc. (``NASD''); New York Stock Exchange, Inc. (``NYSE''); 
Pacific Exchange, Inc. (``PCX''); and Philadelphia Stock Exchange, 
Inc. (``PHLX'').
    \2\ 17 CFR 240.11Aa3-2.
    \3\ Securities Exchange Act Release No. 47030 (December 18, 
2002), 67 FR 78832 (``Notice'').
---------------------------------------------------------------------------

    Through the Notice, and pursuant to Rule 11Aa3-2(c)(4) under the 
Act,\4\ the Commission granted temporary summary effectiveness to the 
4th Amendment to the CTA Plan and the 2nd Amendment to the CQ Plan. The 
Commission received no comments on the proposed amendments. The summary 
effectiveness expires on June 26, 2002.\5\ This order approves the 4th 
Amendment to the CTA Plan and the 2nd Amendment to the CQ Plan on a 
permanent basis.
---------------------------------------------------------------------------

    \4\ 17 CFR 240.11Aa3-2(c)(4).
    \5\ Pursuant to Rule 11Aa3-2(c)(4) under the Act, 17 CFR 
240.11Aa3-2(c)(4), summary effectiveness granted to national market 
system plans (or provisions thereof) may not exceed 120 days in 
length.
---------------------------------------------------------------------------

II. Description of the Proposed Amendments

    Through the proposed amendments to the Plans, the Participants have 
introduced a new capacity planning process into the Plans. The 
Participants will engage in the capacity planning process on a semi-
annual basis. The proposed capacity planning process requires each 
Participant to submit its projected capacity needs directly to the 
Securities Industry Automation Corporation (``SIAC'' or ``Processor''), 
the processor under both Plans. The process avoids any need for 
Participants to share their individual capacity needs with one another. 
SIAC will provide each Participant with aggregate capacity projections 
for all Participants, but will not provide any individual Participant's 
capacity projections with any other Participant.
    Under the proposed plan:

Semi-Annual Planning Cycles:

    1. At the start of each semi-annual capacity planning cycle, each 
Participant will develop and submit to SIAC an initial set of projected 
capacity needs.
    2. Once it receives all of the initial sets of projected capacity 
needs, SIAC will aggregate the initial projected capacity requirements 
for all of the Participants and will notify each Participant as to:

[[Page 8315]]

    a. the initial aggregate capacity projections for all Participants;
    b. the percentage of capacity requirements attributable to that 
Participant; and
    c. the amount of any projected excess capacity or any projected 
deficit capacity.

(SIAC determines the excess or deficit by comparing the capacity that 
the then existing systems under the Plans can provide and the aggregate 
projected capacity needs of the Participants.)
    3. Each Participant will then notify the Processor of its final 
projected capacity needs.
    4. Based on the information that SIAC provides, CTA and the CQ 
Operating Committee will determine and advise SIAC of any increase or 
decrease that they propose to make to the capacity of their respective 
systems. However, in directing SIAC to make any proposed change, the 
Participants must cause the system to have no less capacity than the 
capacity necessary to meet the aggregate projected capacity 
requirements for the system for all Participants.
    5. SIAC will then submit to each Participant a proposal for 
increasing or decreasing total system capacity and each Participant's 
proportionate share of the estimated costs for implementing any change. 
Each Participant's proportionate share of the costs will reflect that 
Participant's percentage of the final projected capacity requirements 
for all Participants.
    6. SIAC will bill each Participant directly and each Participant 
will pay SIAC for the services that SIAC renders to it. The cost of the 
services for each Participant will be its proportionate share of the 
total cost to all of the Participants.
    7. Each Participant will be entitled to use its proportionate share 
of the final capacity requirements of all Participants and, at no extra 
cost, of any excess capacity. If the Processor determines that a 
Participant is using more than its proportionate share of the aggregate 
capacity and the excess capacity, that Participant may be subject to a 
fine. The proceeds from any such fine will be distributed to each of 
the other Participants in accordance with their proportionate shares.

Intra-Cycle Capacity Transfers:

    1. In between the semi-annual capacity planning cycles, a 
Participant may seek to increase or decrease the amount of capacity 
available to it by notifying SIAC of its desire for more or less 
capacity. Under those circumstances, a Participant may purchase 
additional capacity only if another Participant has submitted to SIAC 
an unfilled request to sell a portion of its capacity or if excess 
capacity exists in the system at that time. A Participant may sell some 
of its capacity only if another Participant has submitted to SIAC an 
unfilled request to purchase additional capacity.
    2. If SIAC is able to match Participants' requests to buy and sell 
capacity within a planning cycle, SIAC will effect the sale for the 
Participants without revealing either Participant's identity.
    3. If a Participant determines to acquire available excess 
capacity, SIAC shall adjust each Participant's proportionate share of 
system costs based on the new amount of capacity available to the 
Participant acquiring the available excess capacity.
    4. On a periodic basis, SIAC will determine and inform each 
Participant of the total amount of the system capacity currently 
available, whether it is available from available excess capacity or 
from a Participant that seeks to sell capacity.
    Under this plan, SIAC will not disclose to any Participant:
    1. The initial or final projected capacity requirements of any 
other Participant;
    2. The percentage of the aggregate amount of capacity attributable 
to any other Participant; or
    3. Any other Participant's between-planning-cycles request to 
increase or decrease capacity.
    The Participants requested that the proposed amendments to the 
Plans become effective summarily upon publication of notice of the 
proposed amendments, on a temporary basis not to exceed 120 days, so 
that the proposed new capacity planning process could be implemented on 
January 1, 2003, the date of the next capacity planning cycle.\6\ The 
Commission put the proposed amendments to the Plans into effect 
summarily upon publication of the Notice on December 26, 2002.\7\
---------------------------------------------------------------------------

    \6\ Telephone conversation between Thomas E. Haley, Chairman, 
CTA, and Kathy A. England, Assistant Director, Sapna C. Patel, 
Attorney, Ian K. Patel, Attorney, Division of Market Regulation, 
Commission, on December 17, 2002. See also letter from Thomas E. 
Haley, Chairman, CTA, to Kathy A. England, Assistant Director, 
Division, Commission, dated December 16, 2002. The Commission notes 
that the original filing of the proposed amendments to the Plans 
incorrectly stated that the proposed amendments would take effect 
upon filing with the Commission because they are concerned solely 
with the administration of the Plans.
    \7\ See Notice, supra note 3.
---------------------------------------------------------------------------

III. Discussion

    The Commission finds that the proposed amendments to the Plans are 
consistent with the requirements of the Act and the rules and 
regulations thereunder,\8\ and, in particular, Section 11A(a)(1)\9\ of 
the Act and Rule 11Aa3-2 thereunder.\10\
---------------------------------------------------------------------------

    \8\ In approving the proposed plan amendments, the Commission 
has considered the proposed amendments' impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78k-1(a)(1).
    \10\ 17 CFR 240.11Aa3-2.
---------------------------------------------------------------------------

    The Commission notes that, pursuant to Rule 11Aa3-2(c)(4) under the 
Act\11\, it put the proposed 4th Amendment to the CTA Plan and the 
proposed 2nd Amendment to the CQ Plan into effect summarily upon 
publication of the proposed amendments. Rule 11Aa3-2(c)(4) under the 
Act provides that a proposed amendment may be put into effect summarily 
upon publication of such amendment, on a temporary basis not to exceed 
120 days, if the Commission finds that such action is necessary or 
appropriate in the public interest, for the protection of investors and 
maintenance of fair and orderly markets, to remove impediments to, and 
perfect the mechanisms of, a national market system or otherwise in 
furtherance of the Act. The Commission believes that summary 
effectiveness of the proposed amendments was necessary and appropriate 
for the new capacity planning process to take effect on January 1, 
2003, the date of the next capacity planning cycle.
---------------------------------------------------------------------------

    \11\ 17 CFR 240.11Aa3-2(c)(4).
---------------------------------------------------------------------------

    The Commission believes that an efficient capacity planning process 
is essential to the proper operation of CTA and administration of the 
CTA and CQ Plans. The Commission further believes that the proposed 
amendments to the Plans incorporating a new capacity planning process 
should address this need. The Commission notes that, under the new 
capacity planning process, each Participant will be required to submit 
its projected capacity needs directly to SIAC, and will not have to 
share its individual capacity needs with other Participants. 
Furthermore, SIAC will be responsible for providing each Participant 
with aggregates of both initial and final capacity projections for all 
Participants, and for directly billing each Participant for its 
proportionate share of the costs based on its percentage of the final 
projected capacity requirements for all Participants. The Commission 
finds that the proposed amendments incorporating this new capacity 
planning process into the Plans are consistent with Section 11A of the 
Act \12\ and the rules and regulations thereunder.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78k-1.

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

[[Page 8316]]

IV. Conclusion

    It is therefore ordered, pursuant to Section 11A of the Act \13\ 
and paragraph (c)(2) of Rule 11Aa3-2\14\ thereunder, that the proposed 
4th Amendment to the CTA Plan and the proposed 2nd Amendment to the CQ 
Plan are approved on a permanent basis.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78k-1.
    \14\ 17 CFR 240.11Aa3-2(c)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(27).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-4093 Filed 2-19-03; 8:45 am]
BILLING CODE 8010-01-P