[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as a Plan Participant, removal of an outdated section of the Plan 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