[Federal Register Volume 71, Number 15 (Tuesday, January 24, 2006)]
[Notices]
[Pages 3896-3906]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-773]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53131; File No. S7-24-89]
Joint Industry Plan; Notice of Filing and Immediate Effectiveness
of Amendment Nos. 15 and 16 to the Joint Self-Regulatory Organization
Plan Governing the Collection, Consolidation and Dissemination of
Quotation and Transaction Information for Nasdaq-Listed Securities
Traded on Exchanges on an Unlisted Trading Privileges Basis, Submitted
by the Pacific Exchange, Inc., the National Association of Securities
Dealers, Inc., the American Stock Exchange LLC, the Boston Stock
Exchange, Inc., the Chicago Stock Exchange, Inc., the National Stock
Exchange, Inc., and the Philadelphia Stock Exchange, Inc.
January 17, 2006.
I. Introduction and Description
Pursuant to Rule 608 of the Securities Exchange Act of 1934 (the
``Act'') \1\ notice is hereby given that on December 15, 2005, the
operating committee (``Operating Committee'' or ``Committee'') \2\ of
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'')
filed with the Securities and Exchange Commission (``Commission'')
amendments to the Plan. These amendments are incorporated in Amendment
15 to the Plan and reflect elimination of the New York Stock Exchange
as a Plan Participant, removal of an outdated section of the Plan
regarding Eligible Securities, and modification of Exhibit 1 to the
Plan to reflect quarterly year-to-date payments and adjustments of
distributable net operating income. Amendment 15 was unanimously
approved by the Committee on September 22, 2005.\3\ In addition,
pursuant to Rule 608 of the Act, notice is hereby given that on
December 23, 2005, the Committee filed with the Commission another
amendment to the Plan, Amendment 16. Amendment 16 to the Plan reflects
the addition of the International Securities Exchange as a Plan
Participant. Amendment 16 was unanimously approved by the Committee on
November 17, 2005.\4\ The Commission is publishing this notice of
filing and immediate effectiveness to solicit comments from interested
persons on Amendment Nos. 15 and 16.
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\1\ 17 CFR 242.608.
\2\ The Plan Participants (collectively, ``Participants'') are:
The American Stock Exchange, LLC (``AMEX''), the Boston Stock
Exchange, Inc. (``BSE''), the Chicago Board Options Exchange, Inc.
(``CBOE''), the Chicago Stock Exchange, Inc. (``CHX''), the National
Stock Exchange, Inc. (``NSX''), the National Association of
Securities Dealers, Inc. (``NASD''), the Pacific Exchange (``PCX''),
and the Philadelphia Stock Exchange, Inc. (``PHLX'').
\3\ See letter from Bridget M. Farrell, Chairman, OTC/UTP
Operating Committee, to Jonathan G. Katz, Secretary, Commission,
dated December 14, 2005.
\4\ See letter from Bridget M. Farrell, Chairman, OTC/UTP
Operating Committee, to Jonathan G. Katz, Secretary, Commission,
dated December 20, 2005.
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II. Background
The Plan governs the collection, consolidation, and dissemination
of quotation and transaction information for the Nasdaq Stock Market,
Inc. (``Nasdaq'') National Market (``NNM'') and Nasdaq SmallCap
securities listed on Nasdaq or traded on an exchange pursuant to
unlisted trading privileges (``UTP'').\5\ 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.\6\
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\5\ 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 Securities Exchange Act Release No. 36481 (November
13, 1995), 60 FR 58119 (November 24, 1995).
\6\ The Plan defines ``Eligible Securities'' as any Nasdaq
National Market or Nasdaq SmallCap security, as defined in NASD Rule
4200, (i) as to which unlisted trading privileges have been granted
to a national securities exchange pursuant to section 12(f) of the
Act or which become eligible for such trading pursuant to order of
the Commission, or (ii) which is also listed on a national
securities exchange.
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The Commission originally approved the Plan on a pilot basis on
June 26, 1990.\7\ The parties did not begin trading until July 12,
1993; accordingly, the pilot period commenced on July 12, 1993. The
Plan was most recently extended on December 14, 2005.\8\
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\7\ See Securities Exchange Act Release No. 28146, 55 FR 27917
(July 6, 1990).
\8\ See Securities Exchange Act Release No. 52886, 70 FR 74059
(December 14, 2005).
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[[Page 3897]]
III. Description and Purpose of the Amendments \9\
A. Amendment No. 15
The following is a summary of the changes to the Plan prepared by
the Participants:
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\9\ The complete text of the Plan, as amended by Amendments No.
15 and 16, is attached as Exhibit A.
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(i) Section I.A. of the Plan provides for the list of Plan
Participants. Amendment 15 eliminates the New York Stock Exchange
(``NYSE'') as a Plan Participant.
(ii) Section VI.C.2 of the Plan provides for a phase-in of Eligible
Securities and certain Auto-Quoting restrictions that are no longer
relevant. Accordingly, Amendment 15 proposes to delete this section of
the Plan.
(iii) Section VI.C.3 and Section VI.C.4 shall be renumbered due to
the elimination of section VI.C.2.
(iv) Section VIII.C sets forth the symbols for market
identification for quotation information and transaction reports.
Amendment 15 eliminates ``N'' as a symbol, since NYSE is being
eliminated as a plan participant.
(v) Amendment 15 also modifies Exhibit 1 to the Plan to reflect
that Participants will be provided with written estimates of estimated
quarterly net distributable operating income within 45 calendar days of
the end of the quarter and estimated quarterly payments shall be made
on the basis of such estimates.
(vi) Further, Exhibit 1 has been modified to reflect that each
quarterly payment shall be reconciled against a Participant's
cumulative year-to-date payment received to date and adjusted
accordingly. Lastly, Amendment 15 clarifies language regarding interest
payments and audit adjustment procedures.
B. Amendment No. 16
Section I.A. of the Plan provides for the list of Plan
Participants. Amendment 16 adds the International Securities Exchange
(``ISE'') as a Plan Participant. ISE will commence quoting and trading
in Nasdaq-listed securities upon completing the necessary development
and implementation work required to become a new Participant in Nasdaq-
listed securities. ISE has paid the Plan entrance fee pursuant to
section XIII.A.
IV. Date of Effectiveness of the Amendment
The changes set forth in Amendment Nos. 15 and 16 are concerned
solely with the administration of the plan or involve solely technical
or ministerial matters, and thus are being put into effect upon filing
with the Commission pursuant to Rules 608(b)(3)(ii) and
608(b)(3)(iii).\10\ At any time within 60 days of the filing of any
such amendment, the Commission may summarily abrogate the amendment and
require that such amendment be refiled in accordance with paragraph
(a)(1) of Rule 608 under the Act \11\ and reviewed in accordance with
paragraph (b)(2) of Rule 608 under the Act,\12\ if it appears to the
Commission that such action is necessary or appropriate in the public
interest, for the protection of investors, or the maintenance of fair
and orderly markets, to remove impediments to, and perfect mechanisms
of, a national market system or otherwise in furtherance of the
purposes of the Act.\13\
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\10\ 17 CFR 242.608(b)(3)(ii) and (b)(3)(iii).
\11\ 17 CFR 242.608(a)(1).
\12\ 17 CFR 242.608(b)(2).
\13\ 17 CFR 242.608(b)(3)(iii).
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V. Solicitation of Comments
The Commission seeks general comments on Amendment Nos. 15 and 16.
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposal is
consistent with the Act. Comments may be submitted by any of the
following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number S7-24-89 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-9303.
All submissions should refer to File Number S7-24-89. This file number
should be included on the subject line if e-mail is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of the filing also will be
available for inspection and copying at the Office of the Secretary of
the Committee, currently located at the Pacific Exchange, Inc. and
Archipelago Exchange L.L.C., 100 South Wacker Drive, Suite 2000,
Chicago, IL 60606. All comments received will be posted without change;
the Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number S7-24-
89 and should be submitted on or before February 14, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(27).
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Jill M. Peterson,
Assistant Secretary.
Exhibit A
Amendment Nos. 15 and 16; 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.
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. Chicago Board Options Exchange, Inc., 400 South LaSalle Street,
26th Floor, Chicago, Illinois 60605.
5. International Securities Exchange, Inc., 60 Broad Street, New
York, New York 60605.
6. National Association of Securities, Dealers, Inc., 1735 K
Street, NW., Washington, DC 20006.
[[Page 3898]]
7. National Stock Exchange, 440 South LaSalle Street, 26th Floor,
Chicago, Illinois 60605.
8. Pacific Exchange, Inc., 115 Sansome Street, San Francisco, CA
94104.
9. Philadelphia Stock Exchange, 1900 Market Street, Philadelphia,
Pennsylvania 19103.
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 security, as defined in NASD 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 which become
eligible for such trading pursuant to order of the Securities and
Exchange Commission; or (ii) which also is listed on a national
securities exchange.
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 a Nasdaq market maker or a Nasdaq-
registered electronic communications network/alternative trading system
(hereafter collectively referred to as ``Nasdaq market participants'')
acting in such capacity, 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 was reported, or the
Participant to whose facilities the order was sent for execution.
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. ``NASD Transaction Reporting System'' means the System provided
for in the NASD's 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 Level 2 Service'' means the Nasdaq service that
provides Subscribers with query capability with respect to quotations
and sizes in securities included in the Nasdaq System, best bid and
asked quotations, and Transaction Reports.
K. ``Nasdaq Level 3 Service'' means the Nasdaq service that
provides Nasdaq market participants with input and query capability
with respect to quotations and sizes in securities included in the
Nasdaq System, best bid and asked quotations, and Transaction Reports.
L. ``Nasdaq System'' means the automated quotation system operated
by Nasdaq.
M. ``UTP Trade Data Feed'' means the service that provides Vendors
and Subscribers with Transaction Reports.
N. ``Nasdaq Security'' or ``Nasdaq-listed Security'' means any
security listed on the Nasdaq National Market or Nasdaq SmallCap
Market.
O. ``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.
P. ``OTC Montage Data Feed `` means the data stream of information
that provides Vendors and Subscribers with quotations and sizes from
all Participants and Nasdaq market participants.
Q. ``Participant'' means a registered national securities exchange
or national securities association that is a signatory to this Plan.
R. ``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.
S. ``Processor'' means the entity selected by the Participants to
perform the processing functions set forth in the Plan.
T. ``Quotation Information'' means all bids, offers, displayed
quotation sizes, the market center identifiers and, in the case of NASD
and Nasdaq, the NASD and Nasdaq 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.
U. ``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, including a trading halt for
extraordinary market activity due to system misuse or malfunction under
Section X.E.1. of the Plan (``Extraordinary Market Regulatory Halt'').
V. ``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.
W. ``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.
X. ``Upon Effectiveness of the Plan'' means July 12, 1993, the date
on which the Participants commenced publication of Quotation
Information and
[[Page 3899]]
Transaction Reports on Eligible Securities as contemplated by this
Plan.
Y. ``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.
Z. ``NQDS'' means the data stream of information that provides
Vendors and Subscribers with the best quotations and sizes from each
Nasdaq Participant.
AA. ``Nasdaq Participant'' means an entity that is registered as a
market maker or an electronic communications network in Nasdaq or
otherwise utilizes the facilities of The Nasdaq Stock Market pursuant
to applicable NASD rules but does not include an NASD Participant as
defined in Section III.G. of this Plan.
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.
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 11Ac1-1; 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 \2/3\ majority
vote of all Participants, a
[[Page 3900]]
quorum of at least \2/3\ 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 a 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.
E. 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 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'
[[Page 3901]]
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.
For so long as Nasdaq is not registered as a national securities
exchange and for so long as Nasdaq is the Processor, the Processor
shall also collect, consolidate, and disseminate the quotation
information contained in NQDS. For so long as Nasdaq is not registered
as a national securities exchange and after Nasdaq is no longer the
Processor for other SIP datafeeds, either Nasdaq or a third party will
act as the Processor to collect, consolidate, and disseminate the
quotation information contained in NQDS.
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
Nasdaq market participants, 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 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. 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. The Processor shall separately distribute NQDS for
so long as Nasdaq is not registered as a national securities exchange
and for so long as Nasdaq is the Processor. For so long as Nasdaq is
not registered as a national securities exchange and after Nasdaq is no
longer the Processor for other SIP datafeeds, either Nasdaq or a third
party will act as the Processor to collect, consolidate, and
disseminate the quotation information contained in NQDS.
3. 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
[[Page 3902]]
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 price bid and offered, together with size;
3. The Nasdaq market participant 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 marketplaces:
------------------------------------------------------------------------
Code Participant
------------------------------------------------------------------------
A................................. American Stock Exchange, LLC.
B................................. Boston Stock Exchange, Inc.
W................................. Chicago Board Options Exchange, Inc.
M................................. Chicago Stock Exchange, Inc.
D................................. National Association of Securities
Dealers, Inc.
Q................................. Nasdaq Stock Market.
C................................. National Stock Exchange.
P................................. Pacific Exchange, Inc.
X................................. Philadelphia Stock Exchange, Inc.
------------------------------------------------------------------------
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 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 Nasdaq market participant,
acting in its capacity as such, direct telephone access to the
specialist, trading post, and supervisory center in each Eligible
Security in which such Nasdaq market participant is registered as a
market maker or electronic communications network/alternative trading
system with Nasdaq. 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 Nasdaq 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 Nasdaq
market participant in each Eligible Security in which the Participant
displays quotations, and to the Nasdaq Supervisory Center. Such access
shall include appropriate procedures or requirements to assure the
timely response of each Nasdaq market participant to communications
received through telephone access. Neither the NASD nor any Nasdaq
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. For purposes of this section X, ``Participant'' shall include
the Nasdaq Stock Market. Whenever, in the exercise of its regulatory
functions, the Listing Market for an Eligible Security determines that
a Regulatory Halt is appropriate pursuant to section III.T, the Listing
Market will notify all other Participants pursuant to section X.E and
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
[[Page 3903]]
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 or 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 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 pursuant to
section X.F. 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.
E. For purposes of coordinating trading halts in Eligible
Securities, all Participants are required to utilize the national
market system communication media (``Hoot-n-Holler'') to verbally
provide real-time information to all Participants. Each Participant
shall be required to continuously monitor the Hoot-n-Holler system
during market hours, and the failure of a Participant to do so at any
time shall not prevent the Listing Market from initiating a Regulatory
Halt in accordance with the procedures specified herein.
1. The following procedures shall be followed when one or more
Participants experiences extraordinary market activity in an Eligible
Security that is believed to be caused by the misuse or malfunction of
systems operated by or linked to one or more Participants.
a. The Participant(s) experiencing the extraordinary market
activity or any Participant that becomes aware of extraordinary market
activity will immediately use best efforts to notify all Participants
of the extraordinary market activity utilizing the Hoot-n-Holler
system.
b. The Listing Market will use best efforts to determine whether
there is material news regarding the Eligible Security. If the Listing
Market determines that there is non-disclosed material news, it will
immediately call a Regulatory Halt pursuant to section X.E.2.
c. Each Participant(s) will use best efforts to determine whether
one of its systems, or the system of a direct or indirect participant
in its market, is responsible for the extraordinary market activity.
d. If a Participant determines the potential source of
extraordinary market activity pursuant to section X.1.c., the
Participant will use best efforts to determine whether removing the
quotations of one or more direct or indirect market participants or
barring one or more direct or indirect market participants from
entering orders will resolve the extraordinary market activity.
Accordingly, the Participant will prevent the quotations from one or
more direct or indirect market participants in the affected Eligible
Securities from being transmitted to the Processor.
e. If the procedures described in section X.E.1.a.-d. do not
rectify the situation, the Participant(s) experiencing extraordinary
market activity will cease transmitting all quotations in the affected
Eligible Securities to the Processor.
f. If the procedures described in section X.E.1.a-e do not rectify
the situation within five minutes of the first notification through the
Hoot-n-Holler system, or if Participants agree to call a halt sooner
through unanimous approval among those Participants actively trading
impacted Eligible Securities, the Listing Market may determine based on
the facts and circumstances, including available input from
Participants, to declare an Extraordinary Market Regulatory Halt in the
affected Eligible Securities. Simultaneously with the notification of
the Processor to suspend the dissemination of quotations across all
Participants, the Listing Market must verbally notify all Participants
of the trading halt utilizing the Hoot-n-Holler system.
g. Absent any evidence of system misuse or malfunction, best
efforts will be used to ensure that trading is not halted across all
Participants.
2. If the Listing Market declares a Regulatory Halt in
circumstances other than pursuant to section X.E.1.f., the Listing
Market must, simultaneously with the notification of the Processor to
suspend the dissemination of quotations across all Participants,
verbally notify all Participants of the trading halt utilizing the
Hoot-n-Holler system.
F. If the Listing Market declares a Regulatory Halt, trading will
resume according to the following procedures:
1. Within 15 minutes of the declaration of the halt, all
Participants will make best efforts to indicate via the Hoot-n-Holler
their intentions with respect to canceling or modifying transactions.
2. All Participants will disseminate to their members information
regarding the canceled or modified transactions as promptly as
possible, and in any event prior to the resumption of trading.
3. After all Participants have met the requirements of section
X.F.1-2, the Listing Market will notify the Participants utilizing the
Hoot-n-Holler and the Processor when trading may resume. Upon receiving
this information, Participants may commence trading pursuant to section
X.A.
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
[[Page 3904]]
4 p.m., ET, shall be required to report such transactions as follows:
(i) Transactions in Eligible Securities executed between 4 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 4 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 4 a.m. ET shall be transmitted to the Processor between
4 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 4 a.m. and 6:30 p.m.
D. The Processor shall collect, process and disseminate Quotation
Information in Eligible Securities at other times between 4 a.m. and
9:30 a.m. ET, and after 4 p.m. ET, when any Participant or Nasdaq
market participant is open for trading, until 6:30 p.m. ET (the
``Additional Period''); provided, however, that the best bid and offer
quotation will not be disseminated before 4 a.m. or after 6:30 p.m. ET.
Participants that enter Quotation Information or submit Transaction
Reports to the Processor during the Additional Period shall do so for
all Eligible Securities in which they enter quotations.
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 Nasdaq 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 provisions 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 XIV 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.
[[Page 3905]]
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 Participant 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 Exchange 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 Exchange 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
Exchange 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 Nasdaq
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 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------, 200----, by each of the Signatories hereto.
American Stock Exchange LLC
By:
Boston Stock Exchange, Inc.
By:
Chicago Stock Exchange, Inc.
By:
Chicago Board Options Exchange, Inc.
By:
International Securities Exchange, Inc.
By:
National Association of Securities Dealers, Inc.
By:
National Stock Exchange
By:
New York Stock Exchange, Inc.
By:
Pacific Exchange, Inc.
By:
Philadelphia Stock Exchange, Inc.
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 for that calendar year by (ii) the
total distributable net operating income (as defined below) for that
calendar year. 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 for the year and (ii) the Participant's percentage of total
share volume in Nasdaq securities reported to the Processor 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 for
that year by the total number of trades in Nasdaq securities reported
to the Processor 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
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 and quarters shall end on March 31, June 30, September 30,
and December 31. Processor shall endeavor to provide Participants with
written estimates of each Participant's percentage of total volume
within five business days of month end.
3. For purposes of this Exhibit 1, net distributable operating
income for any
[[Page 3906]]
particular calendar year shall be calculated by adding all revenues
from the UTP Quote Data Feed, the UTP Trade Data Feed, the OTC Montage
Data Feed, and NQDS, including revenues from the dissemination of
information among 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 and NQDS, including:
1. Cost of collecting Participant quotes into the Processor's quote
engine;
2. Cost of processing quotes and creating OTC Montage Data Feed and
NQDS messages within the Processor's quote engine;
3. Cost of the Processor's communication management subsystem that
distributes OTC Montage Data Feed and NQDS to the market data vendor
network for further distribution.
b. The costs directly attributable to creating the UTP Quote Data
Feed, including:
1. Cost of calculating the national best bid and offer price within
the Processor's quote engine;
2. Cost of creating the UTP Quote Data Feed message within the
Processor's quote engine;
3. Cost of the Processor's communication management subsystem that
distributes the UTP Quote Data Feed to the market data vendors'
networks for further distribution.
c. The costs directly attributable to creating the UTP Trade Data
Feed, including:
1. Cost of determining the appropriate last sale price and volume
amount within the Processor's trade engine;
2. Cost of utilizing the Processor's trade engine to distribute the
UTP Trade Data Feed for distribution to the market data vendors.
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, the following definitions
shall apply:
1. ``Quote engine'' shall mean the Nasdaq's NT 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 computer-to-computer-
interface or other Processor-approved electronic interface with the
Processor, the Participant will become eligible to receive revenue.
5. Processor shall endeavor to provide Participants with written
estimates of each Participant's quarterly net distributable operating
income within 45 calendar days of the end of the quarter, and estimated
quarterly payments or billings shall be made on the basis of such
estimates. All 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 each quarterly payment or billing shall be reconciled
against a Participant's cumulative year-to-date payment or billing
received to date and adjusted accordingly, and further 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.
Monthly interest shall start accruing 45 days following the month in
which it is earned and accrue until the date on which the payment is
made.
In conjunction with calculating estimated quarterly and reconciled
annual payments under this Exhibit 1, the Processor shall submit to the
Participants a quarterly itemized statement setting forth the basis
upon which net operating income was calculated, including a quarterly
itemized statement of the Processor costs set forth in Paragraph 3 of
this Exhibit. Such Processor costs and Plan revenues shall be adjusted
annually based solely on the Processor's quarterly itemized statement
audited pursuant to Processor's annual audit. Processor shall pay or
bill Participants for the audit adjustments within thirty days of
completion of the annual audit. 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. E6-773 Filed 1-23-06; 8:45 am]
BILLING CODE 8010-01-P