[Federal Register Volume 86, Number 152 (Wednesday, August 11, 2021)]
[Notices]
[Pages 44142-44225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17113]



[[Page 44141]]

Vol. 86

Wednesday,

No. 152

August 11, 2021

Part II





Securities and Exchange Commission





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





Joint Industry Plan; Order Approving, as Modified, a National Market 
System Plan Regarding Consolidated Equity Market Data August 6, 2021.; 
Notice

  Federal Register / Vol. 86 , No. 152 / Wednesday, August 11, 2021 / 
Notices  

[[Page 44142]]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92586; File No. 4-757]


Joint Industry Plan; Order Approving, as Modified, a National 
Market System Plan Regarding Consolidated Equity Market Data

August 6, 2021.

I. Introduction

    On August 11, 2020, pursuant to Section 11A of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 608 of Regulation NMS 
thereunder,\2\ Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe 
EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe Exchange, Inc., 
Investors Exchange LLC (``IEX''), Long Term Stock Exchange, Inc. 
(``LTSE''), MEMX LLC (``MEMX''), Nasdaq BX, Inc., Nasdaq ISE, LLC, 
Nasdaq PHLX LLC, Nasdaq Stock Market LLC (``Nasdaq''), New York Stock 
Exchange LLC (``NYSE''), NYSE American LLC, NYSE Arca, Inc., NYSE 
Chicago, Inc., NYSE National, Inc., and Financial Industry Regulatory 
Authority, Inc. (``FINRA'') (collectively, the ``SROs'' or 
``Participants'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') a proposed new national market system plan 
governing the public dissemination of real-time consolidated equity 
market data for national market system (``NMS'') stocks (the ``CT Plan 
or ``Plan''). The CT Plan was published for comment in the Federal 
Register on October 13, 2020.\3\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ See Notice of Filing of a National Market System Plan 
Regarding Consolidated Equity Market Data, Securities Exchange Act 
Release No. 90096 (Oct. 6, 2020), 85 FR 64565 (Oct. 13, 2020) 
(``Notice'').
---------------------------------------------------------------------------

    On January 11, 2021, the Commission instituted proceedings, under 
Rule 608(b)(2)(i) of Regulation NMS,\4\ to determine whether to approve 
the CT Plan, disapprove the CT Plan, or approve the CT Plan with any 
changes or subject to any conditions the Commission deems necessary or 
appropriate after considering public comment.\5\ On April 8, 2021, the 
Commission extended the deadline for Commission action on the CT Plan 
and designated June 10, 2021, as the new date by which the Commission 
would be required to take action.\6\ On June 9, 2021, the Commission 
further extended the deadline for Commission action on the CT Plan and 
designated August 9, 2021, as the date by which the Commission would be 
required to take action.\7\
---------------------------------------------------------------------------

    \4\ 17 CFR 242.608(b)(2)(i).
    \5\ See Order Instituting Proceedings to Determine Whether to 
Approve or Disapprove a National Market System Plan Regarding 
Consolidated Equity Market Data, Securities Exchange Act Release No. 
90885 (Jan. 11, 2021), 86 FR 4142 (Jan. 15, 2021) (File No. 4-757) 
(``Order Instituting Proceedings''). Comments received in response 
to the Notice and Order Instituting Proceedings can be found on the 
Commission's website at https://www.sec.gov/comments/4-757/4-757.htm.
    \6\ See Securities Exchange Act Release No. 91504 (Apr. 8, 
2021), 86 FR 19667 (Apr. 14, 2021).
    \7\ See Securities Exchange Act Release No. 92130 (June 9, 
2021), 86 FR 31543 (June 14, 2021).
---------------------------------------------------------------------------

    This Order approves the CT Plan, with modifications that are 
described in detail below. The Commission concludes that the CT Plan, 
as modified, is necessary or appropriate in the public interest, for 
the protection of investors and the maintenance of fair and orderly 
markets, to remove impediments to, and perfect the mechanism of a 
national market system, or is otherwise in furtherance of the purposes 
of the Act. A copy of the CT Plan, marked to reflect the modifications 
the Commission has made, is Attachment A to this Order.

II. Discussion and Commission Findings

A. Background

    On May 6, 2020, the Commission ordered the SROs to act jointly in 
developing and filing with the Commission a proposed new national 
market system plan to govern the public dissemination of real-time, 
consolidated equity market data for NMS stocks (``Governance Order'') 
\8\ to replace the existing equity data plans.\9\ The Commission sought 
to address with the Governance Order, among other things, the inherent 
conflicts of interest between the self-regulatory organizations' role 
in collecting and disseminating consolidated equity market data and 
their interests in selling proprietary data products. As the Commission 
stated in the Governance Order, since the adoption of Regulation NMS in 
2005,
---------------------------------------------------------------------------

    \8\ See Order Directing the Exchanges and the Financial Industry 
Regulatory Authority to Submit a New National Market System Plan 
Regarding Consolidated Equity Market Data, Securities Exchange Act 
Release No. 88827 (May 6, 2020), 85 FR 28702 (May 13, 2020) (File 
No. 4-757).
    \9\ The three equity data plans that currently govern the 
collection, consolidation, processing, and dissemination of SIP data 
are (1) the Consolidated Tape Association Plan (``CTA Plan''), (2) 
the Consolidated Quotation Plan (``CQ Plan''), and (3) 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 (``UTP Plan'') (collectively, the 
``Equity Data Plans''). See Governance Order, supra note 8, 85 FR at 
28703 & n.34.

developments in technology and changes in the equities markets have 
heightened an inherent conflict of interest between the 
Participants' collective responsibilities in overseeing the Equity 
Data Plans and their individual interests in maximizing the 
viability of proprietary data products that they sell to market 
participants. This conflict of interest, combined with the 
concentration of voting power in the Equity Data Plans among a few 
large ``exchange groups''--multiple exchanges operating under one 
corporate umbrella--has contributed to significant concerns 
regarding whether the consolidated feeds meet the purposes for them 
set out by Congress and by the Commission in adopting the national 
market system. Additionally, the Commission believes that the 
continued existence of three separate NMS plans for equity market 
data creates inefficiencies and unnecessarily burdens ongoing 
improvements in the provision of equity market data to market 
participants. Addressing the issues with the current governance 
structure of the Equity Data Plans . . . is a key step in responding 
to broader concerns about the consolidated data feeds.\10\
---------------------------------------------------------------------------

    \10\ See Governance Order, supra note 8, 85 FR at 28702.

    Moreover, as stated in the Governance Order, ``[t]he Commission 
believes that the demutualization of the exchanges and the 
proliferation of proprietary exchange data products have heightened the 
conflicts between the SROs' business interests in proprietary data 
offerings and their obligations as SROs under the national market 
system to ensure prompt, accurate, reliable, and fair dissemination of 
core data through the jointly administered Equity Data Plans.'' \11\
---------------------------------------------------------------------------

    \11\ See id. at 28704.
---------------------------------------------------------------------------

    Thus, the Commission determined that the current governance 
structure of the existing Equity Data Plans is ``inadequate to respond 
to changes in the market and in the ownership of exchanges, and to the 
evolving needs of investors and other market participants,'' \12\ and 
the Commission ordered the SROs to develop and file with the Commission 
a proposed new NMS plan regarding equity market data with a set of 
specified governance provisions designed to address the issues 
identified by the Commission,\13\ and to ensure the ``prompt, accurate, 
reliable, and fair collection, processing, distribution, and 
publication of information with respect to quotations for and 
transactions in such securities and the fairness and usefulness of the 
form and content of such information.'' \14\
---------------------------------------------------------------------------

    \12\ Id. at 28702.
    \13\ See id. at 28729-31.
    \14\ 15 U.S.C. 78k-1(c)(1)(B).
---------------------------------------------------------------------------

    The Commission also acknowledged in the Governance Order that the 
SROs, ``as the parties that have been operating the NMS plans, can 
provide unique

[[Page 44143]]

insight in formulating the specific terms and provisions'' of the new 
NMS plan for consolidated equity market data.\15\ Accordingly, the 
Governance Order did not dictate all of the specific terms of the new 
NMS plan and contemplated that the operational and other terms of the 
plan not directed by the Governance Order would be proposed by the SROs 
and considered by the Commission after public comment.\16\ The CT Plan 
filed by the SROs includes both provisions directed by the Commission 
in the Governance Order and other provisions that have been proposed by 
the SROs.
---------------------------------------------------------------------------

    \15\ Governance Order, supra note 8, 85 FR at 28711.
    \16\ See id. at 28705, 28718 n.244.
---------------------------------------------------------------------------

    Below, this Order first addresses the threshold issue of the 
Commission's authority to modify the CT Plan proposed by the SROs, and 
then it separately addresses each of the proposed provisions of the 
Plan, discussing the comments received and explaining the 
modifications, if any, that the Commission is making.

B. The Commission's Authority To Modify the CT Plan

    As noted above, the Commission is modifying the CT Plan proposed by 
the SROs. Several commenters argued that, before modifying the CT Plan, 
the Commission should publish notice for public comment of the specific 
changes it proposes. One commenter urges the Commission not to make 
substantial modifications to the CT Plan in an order purporting to 
approve the plan without providing the opportunity for public comment, 
asserting that public comment is required by the Administrative 
Procedure Act (``APA'').\17\ One commenter asserts that the Notice 
provides an insufficient opportunity for comment, arguing that the 
Commission has not stated its position regarding any of the 62 separate 
topics of interest identified in the Notice or proposed any specific 
textual changes upon which the SROs and other persons can meaningfully 
comment.\18\ This commenter further argues that this approach does not 
comply with notice and comment obligations under the Act, Rule 608, or 
the APA.\19\
---------------------------------------------------------------------------

    \17\ See Letter from Patrick Sexton, EVP, General Counsel & 
Corporate Secretary, Cboe Global Markets, Inc. (Nov. 12, 2020) 
(``Cboe Letter''), at 9. This commenter argues that any changes to 
the governance of the SIP operating committees should be made 
through amendments to the current plans. See id. at 6 n.13. As the 
Commission explained in the Governance Order, one of its goals was 
to reduce redundancies, inefficiencies, and inconsistencies among 
the three existing Equity Data Plans by replacing them with a new, 
single plan. See Governance Order, supra note 8, 85 FR at 28710.
    \18\ See Letter from Elizabeth K. King, Chief Regulatory 
Officer, ICE, General Counsel and Corporate Secretary, NYSE (Nov. 
16, 2020) (``NYSE Letter I''), at 5, 32.
    \19\ See NYSE Letter I, supra note 18, at 32. This commenter 
also generally asserts that the Commission cannot make a finding 
that the CT Plan is necessary or appropriate in the public interest, 
for the protection of investors and the maintenance of fair and 
orderly markets, to remove impediments to, and perfect the 
mechanisms of, a national market system, or otherwise in furtherance 
of the purposes of the Act. See Letter from Elizabeth K. King, Chief 
Regulatory Officer, ICE, General Counsel and Corporate Secretary, 
NYSE (Feb. 4, 2021) (``NYSE Letter II''), at 2. As explained 
throughout this Order, the Commission disagrees and finds that, as 
modified, the CT Plan meets these standards.
---------------------------------------------------------------------------

    Another commenter also asserts that, if the Commission determines 
to approve the CT Plan with modifications, it should first publish the 
exact text of its proposed amendments and seek comment on them.\20\ 
This commenter argues that the need to publish proposed modifications 
for comment is evidenced by the ``numerous errors and potential 
unintended consequences visited on the current Equity Data Plans by the 
Commission's hasty issuance'' of the conflicts and confidentiality 
orders.\21\ This commenter argues that if the Commission does not 
publish the specific proposed modifications of the CT Plan, the SROs 
and other interested persons will be ``deprived of the opportunity to 
comment that is afforded them by the Administrative Procedure Act.'' 
\22\
---------------------------------------------------------------------------

    \20\ See Letter from Joan C. Conley, Senior Vice President and 
Corporate Secretary, Nasdaq (Nov. 12, 2020) (``Nasdaq Letter I''), 
at 3.
    \21\ Id.
    \22\ Id. at 7.
---------------------------------------------------------------------------

    The Commission does not agree that it is required to publish notice 
of specific proposed plan language in order to modify a proposed NMS 
plan. Under Rule 608, the Commission can approve a proposed NMS plan 
``with such changes or subject to such conditions as the Commission may 
deem necessary or appropriate, if it finds that such plan . . . is 
necessary or appropriate in the public interest, for the protection of 
investors and the maintenance of fair and orderly markets, to remove 
impediments to, and perfect the mechanisms of, a national market 
system, or otherwise in furtherance of the purposes of the Act.'' \23\ 
As set forth below, the Commission finds that each of its modifications 
of the CT Plan is necessary or appropriate. Moreover, the Commission 
asked extensive and detailed questions in the Notice that encompass 
each of the areas of the Plan the Commission is modifying and provided 
an opportunity for the public to comment on each of these topics as 
well as the Plan as a whole. As discussed throughout this Order, the 
Commission has carefully considered the comments received in response 
to these questions, as well as all other comments received, before 
finding that each of the modifications made is necessary or appropriate 
in order to sufficiently address the core problem identified in the 
Governance Order.\24\
    The Commission believes that this process has provided the public 
sufficient notice of, and an opportunity to comment on, the areas of 
modification and it was not necessary to provide a second round of 
comment on the specific language of the modifications approved in this 
Order. And the Commission finds that, as modified, the CT Plan is 
necessary or appropriate in the public interest, for the protection of 
investors and the maintenance of fair and orderly markets, to remove 
impediments to, and perfect the mechanisms of, a national market 
system.\25\
---------------------------------------------------------------------------

    \23\ 17 CFR 242.608(b)(2).
    \24\ See CSX Transp. v. Surface Transp. Bd., 584 F.3d 1076, 1081 
(D.C. Cir. 2009); City of Portland v. EPA, 507 F.3d 706, 715 (D.C. 
Cir. 2007).
    \25\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

C. The Provisions of the CT Plan

1. Recitals
    The Recitals of the CT Plan set forth the procedural history of the 
CT Plan, the proposed schedule for implementation of the CT Plan, and 
the SROs' acknowledgement of their regulatory obligations with respect 
to the CT Plan. As discussed below, the Commission is modifying certain 
of the Recitals with respect to the timeline for implementation of the 
CT Plan, as well as the Recital of the regulatory obligations of the 
SROs to the CT Plan.
(a) Implementation of the CT Plan
    Paragraphs (b) and (c) of the Recitals set forth the implementation 
schedule for the CT Plan that the SROs have proposed. Paragraph (b) of 
the Recitals defines the ``Effective Date'' of the CT Plan as the later 
of the date that the Commission has approved the CT Plan or the date 
that the SROs have filed a certificate of formation with the State of 
Delaware to form the Company as a limited liability company (``LLC''). 
Paragraph (c) of the Recitals provides that the CT Plan will become 
operative as an NMS plan that governs the public dissemination of real-
time consolidated equity market data on the ``Operative Date,'' which 
is defined as the first day of the month that is at least 90 days after 
the latest of five specified tasks has been accomplished:

[[Page 44144]]

    (i) SRO Voting Representatives and Non-SRO Voting Representatives 
of the Operating Committee have been selected;
    (ii) Fees have been established by the Operating Committee, are 
effective as an amendment to the CT Plan pursuant to Rule 608 of 
Regulation NMS, and are ready to be implemented;
    (iii) Agreements have been entered with the Processors currently 
performing under the CQ Plan, CTA Plan, and UTP Plan;
    (iv) Agreements have been entered with an Administrator and all 
required contracts with vendors and subscribers have been finalized and 
systems to administer distributions and fees are in place; and
    (v) The Operating Committee and, if applicable, the Commission have 
approved all policies and procedures that are necessary or appropriate.
    In the Notice, the Commission sought comment on whether the timing 
provisions might result in undue delay in the effectiveness of the CT 
Plan.\26\ The Commission asked whether the CT Plan should require that 
the certificate of formation be filed within a certain period of time, 
and whether 10 days would be an appropriate amount of time.\27\ The 
Commission also asked several questions about the actions that would be 
required to be taken before the CT Plan becomes operative. 
Specifically, the Commission sought comment on, among other things, 
whether the CT Plan should set deadlines for completion of each of the 
requisite actions, whether the Operating Committee should be required 
by the CT Plan to provide updates on the status of implementation, and, 
if so, whether such updates should be made public.\28\ The Commission 
also sought comment on whether the CT Plan should require that the 
selection of the Operating Committee be the first action undertaken 
after the Effective Date.\29\
---------------------------------------------------------------------------

    \26\ See Notice, supra note 3, 85 FR at 64567 (Question 1).
    \27\ Id.
    \28\ See Notice, supra note 3, 85 FR at 64567 (Question 2).
    \29\ Id.
---------------------------------------------------------------------------

    In response to the Notice, the Commission received a number of 
comments supporting changes to the CT Plan to establish specified 
timeframes within which the requisite actions must occur for the CT 
Plan to be effective or operative.\30\ These commenters express concern 
that the absence of specified deadlines in the CT Plan will cause the 
SROs to unduly delay its implementation.\31\ Specifically, one 
commenter argues that it would be ``nonsensical to rely on the SROs, 
many of whom have no incentive to change the current governance 
structure, to take actions on a timely basis to ensure the 
implementation of the Plan.'' \32\ Another commenter acknowledges that 
the SROs will have significant control and influence over how and when 
the necessary steps to implement the CT Plan are completed and asserts 
that, without a reasonable deadline or target date for completion, 
there is a ``significant risk'' that implementation will be delayed 
indefinitely, undermining important public policy goals.\33\ Another 
commenter similarly argues that the CT Plan fails to meet the core 
objectives of the Commission's Governance Order because the required 
number of steps would delay full implementation of the plan for an 
indefinite period, possibly years.\34\
---------------------------------------------------------------------------

    \30\ See, e.g., Letter from Ellen Greene, Managing Director, 
Equity and Options Market Structure, SIFMA (Nov. 12, 2020) (``SIFMA 
Letter I''), at 3; Letter from Ellen Greene, Managing Director, 
Equity and Options Market Structure, SIFMA (Feb. 18, 2021) (``SIFMA 
Letter II''), at 2; Letter from Michael Blasi, SVP, Enterprise 
Infrastructure, and Krista Ryan, VP, Associate General Counsel, 
Fidelity Investments (Nov. 12, 2020) (``Fidelity Letter''), at 2-3; 
Letter from John Ramsay, Chief Market Policy Officer, IEX (Nov. 13, 
2020) (``IEX Letter''), at 1-2; Letter from Rich Steiner, Head of 
Client Advocacy and Market Innovation, RBC Capital Markets (Nov. 12, 
2020) (``RBC Letter''), at 4; Letter from Thomas M. Merritt, Deputy 
General Counsel, Virtu Financial, Inc. (Nov. 11, 2020) (``Virtu 
Letter''), at 2; Letter from Jeffrey T. Brown, Senior Vice 
President, Legislative and Regulatory Affairs, Charles Schwab & Co., 
Inc. (Nov. 12, 2020) (``Schwab Letter I''), at 2; Letter from 
Jeffrey T. Brown, Senior Vice President, Legislative and Regulatory 
Affairs, Charles Schwab & Co., Inc. (Feb. 11, 2021) (``Schwab Letter 
II''), at 5; Letter from Joe Wald, Managing Director, Co-Head of 
Electronic Trading, and Ray Ross, Managing Director, Co-Head of 
Electronic Trading, BMO Capital Markets Group (Nov. 18, 2020) (``BMO 
Letter I''), at 2-3; Letter from Joe Wald, Managing Director, Co-
Head of Electronic Trading, and Ray Ross, Managing Director, Co-Head 
of Electronic Trading, BMO Capital Markets Group (Feb. 19, 2021) 
(``BMO Letter II''), at 2; Letter from Anders Franzon, General 
Counsel, MEMX (Feb. 5, 2021) (``MEMX Letter''), at 2-3; Letter from 
Hubert De Jesus, Managing Director, Global Head of Market Structure 
and Electronic Trading, and Samantha DeZur, Director, Global Public 
Policy, BlackRock (Feb. 5, 2021) (``BlackRock Letter II''), at 2; 
Letter from Jennifer W. Han, Managing Director & Counsel, Regulatory 
Affairs, Managed Funds Association (Nov. 18, 2020) (``MFA Letter''), 
at 4-5.
    \31\ See, e.g., IEX Letter, supra note 30, at 1; MFA Letter, 
supra note 30, at 5; BMO Letter I, supra note 30, at 2; BMO Letter 
II, supra note 30, at 2; Fidelity Letter, supra note 30, at 3; 
Letter from Dorothy Donohue, Deputy General Counsel, Securities 
Regulation, Investment Company Institute (Nov. 12, 2020) (``ICI 
Letter I''), at 6-7; Letter from Dorothy Donohue, Deputy General 
Counsel, Securities Regulation, Investment Company Institute (Feb. 
5, 2021) (``ICI Letter II''), at 2; RBC Letter, supra note 30, at 3; 
Letter from Kelvin To, Founder and President, Data Boiler 
Technologies, LLC (Nov. 12, 2020) (``Data Boiler Letter I''), at 20.
    \32\ BMO Letter II, supra note 30, at 2.
    \33\ IEX Letter, supra note 30, at 1.
    \34\ See RBC Letter, supra note 30, at 3.
---------------------------------------------------------------------------

    One commenter acknowledges that there will be ``some work'' in 
implementing the CT Plan, but states that the lack of deadlines and the 
number of conditions associated with the effective and operative dates 
are ``very concerning.'' \35\ Another commenter recommends that the 
Commission closely monitor implementation and potentially penalize the 
SROs for unwarranted delays.\36\ One commenter points to the National 
Market System Plan Governing the Consolidated Audit Trail (``CAT NMS 
Plan'') as a cautionary tale resulting from a lack of deadlines or 
accountability in meeting them,\37\ while another commenter favorably 
promotes the CAT NMS Plan's use of target deadlines for critical 
implementation deadlines, quarterly progress reports, and financial 
incentives.\38\
---------------------------------------------------------------------------

    \35\ SIFMA Letter I, supra note 30, at 3.
    \36\ See ICI Letter I, supra note 31, at 7; ICI Letter II, supra 
note 31, at 2. This commenter urges the Commission to provide 
financial incentives to the SROs either through fines or through not 
allowing the SROs to collect SIP fees for some period of time. See 
ICI Letter I, supra note 31, at 7.
    \37\ See Virtu Letter, supra note 30, at 2.
    \38\ See Fidelity Letter, supra note 30, at 3.
---------------------------------------------------------------------------

    Two commenters recommend making the Effective Date of the CT Plan 
the date of the Commission's approval order,\39\ without regard to the 
proposed delay for the administrative step of filing the LLC agreement 
with Delaware. One commenter does not express a view about the 
propriety of a 10 day requirement, but recommends that the SROs be 
required to file the LLC's certificate of formation with Delaware ``as 
promptly as the Commission determines is practicable following 
Commission approval'' of the plan.\40\ Another commenter anticipates no 
difficulty with filing the certificate of formation as an LLC and 
recommends ten business days as an appropriate timeframe.\41\
---------------------------------------------------------------------------

    \39\ See SIFMA Letter I, supra note 30, at 3; SIFMA Letter II, 
supra note 30, at 2; Virtu Letter, supra note 30, at 2.
    \40\ RBC Letter, supra note 30, at 3.
    \41\ See Fidelity Letter, supra note 30, at 2-3.
---------------------------------------------------------------------------

    A number of commenters support imposing a one-year deadline for the 
Operative Date for the CT Plan.\42\ One commenter suggests that a 
deadline for implementation of one year from the date of Commission 
approval of the CT Plan is reasonable and states that, if additional 
time proves necessary, the

[[Page 44145]]

CT Plan can provide for obtaining an extension based on a showing of 
good cause.\43\ One commenter states that, because the changes required 
of the plan are ``primarily organizational rather than operational,'' a 
period of no more than one year from the effective date to the 
operational date would be reasonable.\44\ Another commenter supports a 
one-year deadline for the completion of the necessary steps to fully 
transition to operating under the CT Plan, subject to an extension only 
for good cause shown.\45\ This commenter suggests that, immediately 
upon approval of the CT Plan, the Operating Committee, including the 
Non-SRO Voting Representatives, should be formed and begin meeting to 
complete the remaining prerequisites, including the adoption of 
fees.\46\ This commenter acknowledges the timing complexity of adopting 
fees under the new CT Plan and selecting and onboarding a new 
Administrator, emphasizing that the one year deadline is an ``ambitious 
project'' that will require a commitment from both the SROs and 
industry participants to ensure a smooth transition.\47\ Another 
commenter also supports requiring the CT Plan to become operational 
within one year and urges the Commission to finalize the proposal 
expeditiously.\48\
---------------------------------------------------------------------------

    \42\ See SIFMA Letter I, supra note 30, at 3; SIFMA Letter II, 
supra note 30, at 2; Fidelity Letter, supra note 30, at 4; IEX 
Letter, supra note 30, at 2; RBC Letter, supra note 30, at 4; Virtu 
Letter, supra note 30, at 2; Schwab Letter I, supra note 30, at 2; 
Schwab Letter II, supra note 30, at 5; BMO Letter I, supra note 30, 
at 2; MEMX Letter, supra note 30, at 2-3; BlackRock Letter II, supra 
note 30, at 2.
    \43\ See IEX Letter, supra note 30, at 2.
    \44\ RBC Letter, supra note 30, at 4.
    \45\ See MEMX Letter, supra note 30, at 3.
    \46\ See id.
    \47\ See id.
    \48\ See BlackRock Letter II, supra note 30, at 2.
---------------------------------------------------------------------------

    Other commenters argue that there is no reasonable way to impose 
deadlines on any part of the process.\49\ One of these commenters 
expresses concern that the Commission is ``vastly underestimating'' the 
amount of time needed to implement the new CT Plan, particularly given 
the Commission's requirements with respect to an Administrator and a 
new fee schedule.\50\ Another of these commenters argues that any 
deadline the Commission sets at this point would be ``inherently 
arbitrary'' and would do nothing to move the project forward, 
cautioning that, ``rushing to complete an inherently complex project 
may result in costly errors.'' \51\
---------------------------------------------------------------------------

    \49\ See Nasdaq Letter I, supra note 20, at 10; Letter from 
Erika Moore, Vice President and Corporate Secretary, Nasdaq (Feb. 5, 
2021) (``Nasdaq Letter II''), at 2; NYSE Letter I, supra note 18, at 
33; Cboe Letter, supra note 17, at 5.
    \50\ Cboe Letter, supra note 17, at 6.
    \51\ Nasdaq Letter I, supra note 20, at 11.
---------------------------------------------------------------------------

    In highlighting the difficulty in specifying deadlines for 
completing the Operative Date prerequisites, another commenter states 
that, because neither the SROs nor the Commission has jurisdiction over 
the individuals that constitute the Advisory Committee, any timeframes 
imposed on the Advisory Committee members to select the Non-SRO Voting 
Representatives would be unenforceable and the Operating Committee 
cannot function until the Non-SRO Voting Representatives have been 
selected.\52\ This commenter further emphasizes the complexity and 
uncertainty of determining fees, selecting an independent Administrator 
through a request-for-proposal (``RFP'') process, and negotiating new 
contracts with processors, data vendors and subscribers.\53\ This 
commenter states that because the RFP process is ``so specialized and 
idiosyncratic,'' there is ``no way to reasonably impose time limits on 
any part of that process, let alone a time limit for the entire process 
overall.'' \54\
---------------------------------------------------------------------------

    \52\ See NYSE Letter I, supra note 18, at 33.
    \53\ See id. at 33-35. This commenter further states that the 
90-day period between the finalization of earlier actions and the 
operational date is ``prudent'' and is the current industry standard 
for announcing the implementation of changes to market data plans. 
See id. at 35-36.
    \54\ NYSE Letter I, supra note 18, at 35. As examples, this 
commenter points out that OPRA's process to select a processor took 
two years even though OPRA ultimately decided to retain the same 
processor and cites the CAT NMS Plan for the risk that a selected 
administrator might be unable to perform the necessary functions, 
requiring that the RFP process be repeated. See id.
---------------------------------------------------------------------------

    Other commenters recommend that the CT Plan require a detailed 
project plan with interim dates,\55\ and public progress reports.\56\ 
One of these commenters states that because implementation will be a 
complex undertaking, it will be important for both the Commission and 
outside stakeholders to have reasonable visibility into progress.\57\ 
Another of these commenters argues that the SROs should be required to 
provide a detailed implementation plan with timeframes for each step 
and the rationale for each timeframe.\58\ One of these commenters 
states that it will be important for the CT Plan to require the 
Operating Committee to provide periodic public updates on the status of 
implementation.\59\ One commenter agrees, recommending that the CT Plan 
set ``milestone dates while remaining flexible depending on progress.'' 
\60\ This commenter favors periodic public updates on implementation 
from the Operating Committee.\61\
---------------------------------------------------------------------------

    \55\ See Fidelity Letter, supra note 30, at 2-3; IEX Letter, 
supra note 30, at 2.
    \56\ See Fidelity Letter, supra note 30, at 3; IEX Letter, supra 
note 30, at 2; BMO Letter I, supra note 30, at 3; BMO Letter II, 
supra note 30, at 2; ICI Letter I, supra note 31, at 7.
    \57\ See IEX Letter, supra note 30, at 2.
    \58\ See ICI Letter I, supra note 31, at 7.
    \59\ See BMO Letter I, supra note 30, at 3; BMO Letter II, supra 
note 30, at 2.
    \60\ Data Boiler Letter I, supra note 31, at 20. For example, 
this commenter argues against an overly prescriptive timeframe, 
suggesting that the process for nomination and selection of Non-SRO 
Voting Representatives should not take more than 90 days, with a 30-
day extension in case of an unprecedented event, such as a pandemic. 
See id. at 28.
    \61\ See id. at 20.
---------------------------------------------------------------------------

    Additionally, two commenters suggest that the Commission should 
``clarify'' that the fee schedules for the current Equity Data Plans 
will remain in effect and apply to the CT Plan until the CT Plan 
Operating Committee files a new schedule with the Commission and the 
Commission approves that schedule.\62\
---------------------------------------------------------------------------

    \62\ SIFMA Letter I, supra note 30, at 3; IEX Letter, supra note 
30, at 2.
---------------------------------------------------------------------------

    Finally, one commenter also asserts that the implementation of the 
new CT Plan before the existing contracts between the Equity Data Plans 
and the Administrators and Processors expire would constitute a Fifth 
Amendment ``taking.'' \63\
---------------------------------------------------------------------------

    \63\ See Nasdaq Letter I, supra note 20, at 10-11.
---------------------------------------------------------------------------

    While the Commission recognizes the challenges associated with 
completing the actions required for implementation of the CT Plan, the 
Commission also believes that the SROs have the relevant expertise and 
experience--both with respect to operating NMS plans generally and with 
respect to the dissemination of equity market data specifically--to 
implement the CT Plan. In particular, the Commission found in the 
Governance Order that the SROs could provide ``unique insight in 
formulating the terms and conditions of the New Consolidated Data 
Plan,'' \64\ even as it also highlighted the inherent conflicts of 
interest faced by SROs in the operation of the existing plans.\65\ The 
Commission disagrees with the comment that it is ``vastly 
underestimating'' the time needed to implement the CT Plan,\66\ and 
instead believes, consistent with the views of other market 
participants,\67\ that the SROs should be able to use their extensive 
experience in operating the existing Equity Data Plans to complete the 
specific actions needed to implement the CT Plan within the timeframes 
specified below. Moreover, the Commission believes that fully 
implementing the CT Plan within prescribed deadlines is important, 
because implementation of the CT Plan is critical to reducing existing 
redundancies, inefficiencies, and inconsistencies in the current Equity

[[Page 44146]]

Data Plans and to modernizing plan governance.\68\ Although one 
commenter recommends that the CT Plan explicitly provide for obtaining 
an extension based on a showing of good cause, in case good faith 
efforts by the Operating Committee are nonetheless unable to meet one 
or more of the specified deadlines,\69\ the Commission does not believe 
that it is necessary or appropriate to add a provision to the CT Plan 
regarding an extension of these deadlines. Further, the Commission does 
not believe that it is necessary or appropriate to suggest at this time 
how it might view a future request for an extension from the Operating 
Committee or other affected parties.\70\
---------------------------------------------------------------------------

    \64\ Governance Order, supra note 8, 85 FR at 28711.
    \65\ See, e.g., id. at 28713.
    \66\ See Cboe Letter, supra note 17, at 6.
    \67\ See supra notes 42-48 and accompanying text.
    \68\ See Governance Order, supra note 8, 85 FR at 28703-05, 
28711.
    \69\ See IEX Letter, supra note 30, at 2; see also MEMX Letter, 
supra note 30, at 3 (supporting a one-year deadline with an 
extension only for good cause shown).
    \70\ There are well-known mechanisms in existing law by which 
affected parties make such requests. If such a request were made at 
some point in the future, the Commission would decide whether to 
grant or deny the relief sought under the facts and circumstances 
applicable at that time.
---------------------------------------------------------------------------

    Additionally, the Commission disagrees with the commenter's 
statement that, because neither the Commission nor the SROs have 
jurisdiction over Non-SRO Voting Representatives, placing timeframes on 
the selection of Non-SRO Voting Representatives by the existing 
Advisory Committee of the Equity Data Plans will be unenforceable and 
therefore futile.\71\ The Commission fully expects, based on the 
widespread support among market participants for providing voting power 
to non-SROs,\72\ that the Advisory Committee members will willingly 
undertake the task of selecting Non-SRO Voting Representatives. 
Moreover, the two-month deadline imposed on the selection of SRO and 
Non-SRO Voting Representatives in this provision is consistent with the 
timeframe set forth in the procedures proposed by the SROs in Section 
4.2(b)(v) of the CT Plan for selection of Non-SRO Voting 
Representatives, and there is considerable overlap between the 
categories of market participants represented on the Advisory Committee 
and the categories of market participants who would be Non-SRO Voting 
Representatives.
---------------------------------------------------------------------------

    \71\ See NYSE Letter I, supra note 18, at 33.
    \72\ See, e.g., IEX Letter, supra note 30, at 2; ICI Letter II, 
supra note 31, at 1; BMO Letter I, supra note 30, at 3; BMO Letter 
II, supra note 30, at 2.
---------------------------------------------------------------------------

    Finally, the Commission disagrees with one commenter's statement 
that the timing of implementation of the CT Plan prior to the 
expiration of the existing contracts between the current Equity Data 
Plans and the Administrators and Processors would constitute a 
``taking'' without just compensation under the Fifth Amendment of the 
U.S. Constitution.\73\ As the Commission stated in the Governance Order 
in response to similar concerns previously expressed by the same 
commenter,\74\ the commenter fails to demonstrate how the proposal 
would ``impermissibly interfere with a protected property interest.'' 
\75\ Nor does the Commission anticipate any economic harm to the 
processors of the current Equity Data Plans.\76\ And operation of the 
Equity Data Plans is a ``fundamental component'' of the national market 
system, which is itself highly regulated pursuant to the broad 
authority provided the Commission by Congress.\77\ The Commission 
continues to believe that the commenter's argument that the 
implementation of the CT Plan would constitute a Fifth Amendment taking 
lacks merit.
---------------------------------------------------------------------------

    \73\ See Nasdaq Letter I, supra note 20, at 10-11.
    \74\ See Letter from Joan C. Conley, Senior Vice President and 
Corporate Secretary, Nasdaq (Feb. 28, 2020), at 13-14 (responding to 
the Commission's Proposed Order, infra note 483); see also Nasdaq 
Letter I, supra note 20, at 10-11.
    \75\ Governance Order, supra note 8, 85 FR at 28725, 28727.
    \76\ See id. at 28727.
    \77\ Id. at 28725.
---------------------------------------------------------------------------

    Accordingly, the Commission finds that, to facilitate the 
implementation of the CT Plan on a timely basis, it is appropriate to 
modify the CT Plan, as discussed below, to add specified deadlines to 
paragraphs (b) and (c) of the Recitals of the CT Plan and to add new 
paragraph (d) to the Recitals.
    First, with respect to the proposed definition of the Effective 
Date of the CT Plan, set forth in paragraph (b) of the Recitals, the 
Commission shares concerns raised by commenters about the uncertainty 
of the timing associated with defining the Effective Date as the later 
of the date of Commission approval or the SROs' filing of the required 
certificate with the State of Delaware.\78\ The Commission agrees with 
commenters that the act of filing the certificate of formation of the 
LLC is administrative and can be accomplished expeditiously.\79\ 
Accordingly, the Commission is modifying paragraph (b) of the Recitals 
of the CT Plan to define the Effective Date as the date of Commission 
approval of the CT Plan as an NMS plan governing the public 
dissemination of real-time consolidated market data for Eligible 
Securities \80\ pursuant to Rule 608 of Regulation NMS.\81\ The 
Commission finds that the modification of this provision is appropriate 
because Commission approval of the CT Plan, as modified, will finalize 
all of the terms of the CT Plan and because defining the Effective Date 
in this way will support timely implementation of the CT Plan and 
reduce the potential for unnecessary delay.
---------------------------------------------------------------------------

    \78\ See SIFMA Letter I, supra note 30, at 3; SIFMA Letter II, 
supra note 30, at 2; Virtu Letter, supra note 30, at 2.
    \79\ See, e.g., Fidelity Letter, supra note 30, at 2-3.
    \80\ Section 1.1(w) of Article I of the proposed CT Plan defines 
the term ``Eligible Securities'' as ``(i) any equity security, as 
defined in Section 3(a)(11) of the Act, or (ii) a security that 
trades like an equity security, in each case that is listed on a 
national securities exchange.''
    \81\ 17 CFR 242.608.
---------------------------------------------------------------------------

    In addition, the Commission is modifying paragraph (b) of the 
Recitals of the CT Plan to require that the documents needed to create 
the LLC be filed by the SROs with the State of Delaware within 10 
business days of the Effective Date. The Commission finds that this 
modification is appropriate because, once the language of the CT Plan 
as modified by the Commission is available to the SROs, 10 business 
days is a sufficient period of time for the SROs to execute the 
modified CT Plan and undertake the administrative step of filing the 
necessary formation documents for the CT Plan LLC with the State of 
Delaware.
    With respect to the proposed definition of the Operative Date, the 
Commission agrees with commenters that the CT Plan should set forth a 
date certain for the CT Plan to become operational and should also 
specify deadlines for interim steps to be completed.\82\ The Commission 
believes that the language of paragraph (c) of the Recitals--which 
provides that the CT Plan will be operative on the first day of the 
month that is at least 90 days after the specified actions--could serve 
to unnecessarily delay implementation of the CT Plan because it fails 
to impose deadlines that will help ensure the completion of the 
requisite actions in a timely manner.\83\
---------------------------------------------------------------------------

    \82\ See SIFMA Letter I, supra note 30, at 3; SIFMA Letter II, 
supra note 30, at 2; Fidelity Letter, supra note 30, at 4; IEX 
Letter, supra note 30, at 2; RBC Letter, supra note 30, at 4; Virtu 
Letter, supra note 30, at 2; Schwab Letter I, supra note 30, at 2; 
Schwab Letter II, supra note 30, at 5; BMO Letter I, supra note 30, 
at 2; MEMX Letter, supra note 30, at 2-3; BlackRock Letter II, supra 
note 30, at 2.
    \83\ While one commenter states that the proposed 90-day testing 
period is consistent with the current industry standard of 
announcing changes to market data plans before implementation, see 
NYSE Letter I, supra note 18, at 35-36, the Commission's concern is 
not with the 90-day period itself, but with the lack of any 
deadlines to determine when the 90-day period would begin. The 
Commission believes that any such testing period should take place 
within a prescribed period for implementation of the CT Plan, not 
simply at the end of an indefinite period in which other preliminary 
steps take place.

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

[[Page 44147]]

    In addition, the Commission shares the view of commenters, 
particularly those with experience with the operation of the current 
Equity Data Plans, that it is not unreasonable to require the CT Plan 
to become operational within one year of the date of Commission 
approval.\84\ The Commission further agrees that meeting these 
deadlines is an ``ambitious project'' that will undoubtedly require a 
commitment from both the SROs and other industry participants.\85\ As 
discussed below, while implementation of the CT Plan would, among other 
things, require selecting a new Administrator (which would in turn 
require new contracts with vendors and subscribers, as well as new 
billing systems) and would also require entering into new contracts 
with the existing Processors, the Commission believes that the SROs 
have the expertise and experience, with diligence and commitment, to 
enable the Operating Committee of the CT Plan to complete all of the 
required actions within one year while avoiding costly errors. Although 
the CT Plan would be a new NMS plan, significant expertise and 
experience would be directly transferrable from the operation of the 
Equity Data Plans to the implementation of the CT Plan. Not only have 
the SROs run the Equity Data Plans for decades, but the current 
processors for the Equity Data Plan would, as proposed by the SROs, be 
the processors for the CT Plan. Therefore, the Commission disagrees 
that setting deadlines would be ``inherently arbitrary'' or ``may 
result in costly errors.'' \86\ A number of market participants, 
including market participants that have experience with the operation 
of the current Equity Data Plans,\87\ have commented that it is 
appropriate for the Commission to set deadlines for implementation of 
the CT Plan and that the specific actions required to fully implement 
the CT Plan, described below, can be accomplished within the timeframe 
that the Commission is prescribing. The Commission agrees with these 
commenters and believes, for the reasons discussed below, that the 
prescribed timeframes are achievable and that costly errors can be 
avoided. Therefore, the Commission is modifying paragraph (c) of the 
Recitals to the CT Plan to require the LLC Agreement to become 
operative as an NMS plan governing the public dissemination of real-
time consolidated equity market data for Eligible Securities within 12 
months of the Effective Date. The Commission finds that the 
modification to paragraph (c) of the Recitals of the CT Plan is 
appropriate because it will create a certain and achievable date for 
implementation and require the SROs to implement the CT Plan in a 
timely manner for the benefit of all market participants.
---------------------------------------------------------------------------

    \84\ See IEX Letter, supra note 30, at 2; MEMX Letter, supra 
note 30, at 2-3. See also SIFMA Letter I, supra note 30, at 3; SIFMA 
Letter II, supra note 30, at 2; Fidelity Letter, supra note 30, at 
4; RBC Letter, supra note 30, at 4; Virtu Letter, supra note 30, at 
2; Schwab Letter I, supra note 30, at 2; Schwab Letter II, supra 
note 30, at 5; BMO Letter I, supra note 30, at 2; BlackRock Letter 
II, supra note 30, at 2.
    \85\ MEMX Letter, supra note 30, at 3.
    \86\ Nasdaq Letter I, supra note 20, at 11.
    \87\ See IEX Letter, supra note 30, at 2; MEMX Letter, supra 
note 30, at 2-3. See also SIFMA Letter I, supra note 30, at 3; SIFMA 
Letter II, supra note 30, at 2; Fidelity Letter, supra note 30, at 
4; RBC Letter, supra note 30, at 4; Virtu Letter, supra note 30, at 
2; Schwab Letter I, supra note 30, at 2; Schwab Letter II, supra 
note 30, at 5; BMO Letter I, supra note 30, at 2; BlackRock Letter 
II, supra note 30, at 2.
---------------------------------------------------------------------------

    Paragraph (c) of the Recitals of the CT Plan also sets forth the 
five specified actions that must be completed before the Operative 
Date. The Commission is concerned that the sequence for completion of 
the required actions is not expressly clear from the CT Plan. If, for 
example, certain actions required prior to the Operative Date were 
taken before the selection of the entire Operating Committee, including 
Non-SRO Voting Representatives, those initial decisions would be made 
by the SROs alone, in a manner inconsistent with the Commission's 
Governance Order.\88\
---------------------------------------------------------------------------

    \88\ See Governance Order, supra note 8, 85 FR at 28714-20.
---------------------------------------------------------------------------

    To address this uncertainty, the Commission is modifying paragraph 
(c) of the Recitals by renumbering it as paragraph (d) and adding a 
specific deadline for each of the required actions. The Commission has 
modified renumbered paragraph (d) to add the following language: ``[i]n 
support of ensuring that the CT Plan is fully operational by the 
Operative Date, the following actions shall be completed within the 
specified periods.'' As discussed below, the Commission is modifying 
each of the requisite actions now set forth in subparagraphs (i)-(iv) 
of renumbered paragraph (d) of the Recitals to add specificity. The new 
language is intended to set forth the sequence for completion of the 
required actions, as well as to prescribe deadlines for completion. In 
addition, the Commission is adding new subparagraphs (v) and (vi) of 
renumbered paragraph (d) of the Recitals to specify the obligations of 
the Operating Committee. The Commission finds that the modifications to 
renumbered paragraph (d) of the Recitals are appropriate because they 
will provide clear timelines for the Operating Committee and greater 
certainty for other industry participants and because they will 
establish achievable objectives to facilitate CT Plan implementation.
    Specifically, the Commission is modifying subparagraph (i) of 
renumbered paragraph (d) of the Recitals to provide that the SRO Voting 
Representatives and Non-SRO Voting Representatives of the Operating 
Committee must be determined pursuant to the requirements of Section 
4.2 of Article IV of the CT Plan within two months of the Effective 
Date. This timeframe is consistent with subparagraph (v) of Section 
4.2(b) of Article IV of the CT Plan, which, as proposed by the SROs, 
contemplates a process for selecting Non-SRO Voting Representatives 
that could be completed within two months. In light of these provisions 
of Section 4.2(b)(v) of the CT Plan, as well as the Commission's belief 
that the Advisory Committee members have an incentive to facilitate 
non-SROs having a vote on plan governance, the Commission believes that 
the Advisory Committee of the current Equity Data Plans will proceed 
promptly to select, pursuant to Section 4.2 of the CT Plan, the Non-SRO 
Voting Representatives to serve on the Operating Committee. The 
Commission also believes that the SROs, who have already selected their 
representatives to the operating committees of the existing Equity Data 
Plans, and who have extensive experience in doing so, should be able to 
select their Voting Representatives to the CT Plan Operating Committee 
within the timeframe provided. Accordingly, the Commission finds that 
the modification to this provision is appropriate because it will 
establish a reasonable timeframe for selecting the Non-SRO and SRO 
Voting Representatives to form the Operating Committee--an 
indispensable first step of the implementation process.
    The Commission is further modifying subparagraph (ii) of renumbered 
paragraph (d) of the Recitals to provide that the Operating Committee 
must file with the Commission pursuant to Rule 608 of Regulation NMS 
\89\ an amendment to the CT Plan governing proposed fees with respect 
to the existing exclusive SIP model \90\ within

[[Page 44148]]

four months of the Effective Date, which is two months after the 
deadline for the formation of the Operating Committee. The Commission 
believes that the four-month period to file a proposed CT Plan fee 
schedule with the Commission is a reasonable and appropriate timeframe 
for several reasons. First, given the importance of market data fees to 
both SROs and other market participants, the Commission believes that 
the determination of CT Plan fees will be a critical priority for both 
SROs and Non-SRO Voting Representatives. Assessing fees to subscribers 
for access to the SIP data is one of the fundamental responsibilities 
of the Operating Committee and one of the issues most consequential to 
both SROs and other market participants. Second, the Commission 
believes that a number of persons selected to be members of the 
Operating Committee are likely to have detailed and substantial pre-
existing knowledge and experience with the content and pricing of the 
equity data products that are disseminated under the current 
centralized SIP model. Third, the four-month period is a deadline 
solely for filing the proposed fees with the Commission and not a 
requirement that the fee schedule be approved by the Commission and 
implemented within the four month period. Instead, the required fee 
filing would commence the process for Commission consideration of the 
proposed fees, which will include an opportunity for public comment. 
Accordingly, the Commission finds that the modification to this 
provision is appropriate because it provides sufficient time after the 
formation of the Operating Committee for proposed fees to be discussed 
by knowledgeable and experienced persons, agreed upon, and filed with 
the Commission.
---------------------------------------------------------------------------

    \89\ 17 CFR 242.608.
    \90\ Several commenters express views with respect to the 
interaction of the CT Plan with Commission Rule 614(e), the recently 
adopted Market Data Infrastructure Rule. 17 CFR 242.614(e). One of 
these commenters states, ``[t]he timely implementation of the CT 
Plan would undoubtedly facilitate the success of any new market data 
infrastructure regime and, at the very least, will be important to 
ensure that, upon Commission approval, the implementation of any 
such regime is not impeded.'' BMO Letter I, supra note 30, at 3. 
Another commenter, pointing to the lack of analysis of the impact of 
the Infrastructure rulemaking, suggests that the SROs acknowledge 
that the CT Plan may need to be amended to accommodate the competing 
consolidator model. See SIFMA Letter I, supra note 30, at 3. Other 
commenters express the view that the two initiatives are 
``inextricably intertwined.'' Nasdaq Letter I, supra note 20, at 34-
36 (incorporating its brief filed jointly with NYSE and CBOE); see 
also NYSE Letter I, supra note 18, at 3. Because the existing 
exclusive SIP model will continue to operate during the transition 
to the competing consolidator model, the participation of Non-SRO 
Voting Representatives in Operating Committee deliberations on the 
fee filing required by subparagraph (ii) of renumbered paragraph (d) 
of the Recitals would facilitate the determination of the fee 
schedule that will be needed to commence consolidated equity market 
data dissemination under the new CT Plan. In addition, the Non-SRO 
Voting Representatives' participation would likely provide valuable 
perspectives on fees that may serve as a reference point for, among 
other things, future fees under the competing consolidator model.
---------------------------------------------------------------------------

    The Commission is also modifying subparagraph (iii) of renumbered 
paragraph (d) of the Recitals to provide that the Operating Committee 
must enter into agreements with the Processors performing under the 
current Equity Data Plans within eight months of the Effective Date. 
The Processors performing under the current Equity Data Plans are 
performing pursuant to existing contracts, and the CT Plan as submitted 
by the SROs provides that the Operating Committee shall enter into 
agreements with those same Processors. While one commenter states that 
retaining the existing Processors would require, at a minimum, 
``negotiation of new contracts and related service level agreements,'' 
\91\ the Commission believes that concerns about the need to 
renegotiate all of the terms of the existing contracts are not well 
founded because the CT Plan does not by its terms change any of the 
technical provisions of the existing Equity Data Plans with respect to 
the dissemination of consolidated equity market data. And the SROs have 
not suggested that the terms of the new contracts of the Processors 
will be materially different than the existing contracts under the 
Equity Data Plans. Consequently, the Commission believes that the 
technical and business terms of the new Processor contracts with the CT 
Plan are likely to be substantially identical to the existing 
contracts. Therefore, the Commission finds that the modification to 
this provision is appropriate because the Operating Committee should 
encounter little unavoidable difficulty in executing agreements with 
the Processors within the prescribed timeframe, and the change will 
facilitate timely implementation for the benefit of market 
participants.
---------------------------------------------------------------------------

    \91\ NYSE Letter, supra note 18, at 34.
---------------------------------------------------------------------------

    Moreover, the Commission is modifying subparagraph (iv) of 
renumbered paragraph (d) of the Recitals to require that the proposed 
actions relating to the selection and duties of an Administrator, 
discussed in greater detail below, pursuant to Section 6.4 of Article 
VI and Section 4.3 of Article IV of the CT Plan, be completed within 
eight months of the Effective Date. The amended provision provides that 
the Administrator must be prepared to transition to the CT Plan, by 
finalizing new contracts with vendors and subscribers and having in 
place systems to administer distributions and fees, before the 
Operative Date.
    While commenters argue that deadlines could not reasonably be 
imposed on the process of selecting an Administrator and preparing to 
implement the CT Plan,\92\ the Commission disagrees. One commenter 
points to the difficulties attendant in selecting a processor for the 
CAT NMS Plan,\93\ but the Commission does not view the circumstances to 
be analogous. In the case of the CAT NMS Plan, the SROs were tasked 
with implementing the first-ever consolidated audit trail for equities 
trading, a complex NMS system without precedent. Here, by contrast, the 
Operating Committee will be conducting an RFP process to select an 
Administrator to perform functions with which market participants, 
whether SROs or market data consumers, have extensive familiarity. 
Thus, the Commission believes that crafting the necessary requirements 
for the RFP and evaluating proposals submitted in response should be a 
substantially less complicated and time-consuming process than 
searching for a processor to build an entirely new and comprehensive 
database. Moreover, with respect to certain commenters' concerns that 
it will be difficult to find an Administrator with the necessary 
expertise, the Commission understands that a number of different types 
of entities, such as accounting firms, market data administration 
firms, or consulting firms, would be capable of serving as 
Administrator to the CT Plan and providing the requisite billing, 
auditing, and licensing services. The Commission finds that the 
modifications to the provision are appropriate because, given the 
extensive experience of the SROs over several decades in supervising--
or serving as--the administrators of the Equity Data Plans, the process 
of selecting an Administrator, as well as the duties assigned to the 
firm selected pursuant to the provisions of the CT Plan, should be able 
to be completed within the established timeframes.
---------------------------------------------------------------------------

    \92\ See Nasdaq Letter I, supra note 20, at 10; Nasdaq Letter 
II, supra note 49, at 2; NYSE Letter I, supra note 18, at 33; Cboe 
Letter, supra note 17, at 5-6.
    \93\ See NYSE Letter I, supra note 18, at 35.
---------------------------------------------------------------------------

    In addition, the Commission is adding new subparagraph (v) of 
renumbered paragraph (d) of the Recitals to explicitly impose 
responsibility on the Operating Committee to ensure that all of the 
requirements set forth in the preceding subparagraphs of renumbered 
paragraph (d) have been satisfied prior to the Operative Date. In 
particular, the

[[Page 44149]]

provision provides that ``before the Operative Date, the Operating 
Committee will be required to ensure that the Administrator and the 
Processors have developed, implemented, and suitably tested the systems 
necessary with respect to the existing exclusive SIP model \94\--
including dissemination systems, billing and audit systems, and 
appropriate contracts with Vendors and Subscribers--and, if applicable, 
the Operating Committee has expeditiously filed any necessary policies 
and procedures with the Commission. This new language is designed to 
impose on the Operating Committee not only the initial obligation to 
select an Administrator and Processors, but also the explicit ongoing 
responsibility to oversee the Administrator and Processors' specific 
efforts to implement the CT Plan. The Commission finds that this 
modification is appropriate because the inclusion of this language 
establishes that the Operating Committee's obligation to oversee the 
development of all systems, agreements, and policies and procedures 
necessary to facilitate the implementation of the CT Plan within the 
prescribed timeframe continues beyond the time when the Administrator 
and Processors have been selected.
---------------------------------------------------------------------------

    \94\ This provision is designed to require the Operating 
Committee to oversee the Administrator's and Processors' efforts to 
test all pertinent systems prior to the transition from the existing 
Equity Data Plans to the CT Plan.
---------------------------------------------------------------------------

    Finally, the Commission is adding new subparagraph (vi) to 
renumbered paragraph (d) of the Recitals to impose on the Operating 
Committee the obligation to provide quarterly written progress reports 
to the Commission, and to make these reports publicly available, 
beginning three months after the Effective Date and continuing every 
three months until the Operative Date. These quarterly reports would be 
required to address the actions undertaken and the progress made toward 
completing each of the required actions listed in paragraph (d) with 
respect to implementation of the CT Plan. The Commission shares 
commenters' views that transparency with respect to the progress made 
to satisfy the requirements of the CT Plan would benefit not only the 
Commission but also interested market participants.\95\ The requirement 
to provide progress reports in writing to the Commission on a quarterly 
basis and to make them publicly available is designed to help ensure 
that affected market participants are informed about the status of the 
steps that are taken to implement the CT Plan within the prescribed 
time periods. Providing periodic updates to the Commission should also 
facilitate holding the Operating Committee accountable for its progress 
in completing the interim steps towards satisfying the longer-range 
requirements.
---------------------------------------------------------------------------

    \95\ See Fidelity Letter, supra note 30, at 3; IEX Letter, supra 
note 30, at 2; BMO Letter I, supra note 30, at 3; BMO Letter II, 
supra note 30, at 2; ICI Letter I, supra note 31, at 7. While one of 
these commenter urges the Commission to provide financial incentives 
to the SROs either through fines or through not allowing the SROs to 
collect SIP fees for some period of time, see ICI Letter I, supra 
note 31, at 7, the Commission believes that the required quarterly 
progress reports and the involvement of the Operating Committee, 
including the Non-SRO Voting Representatives, should be sufficient 
to ensure timely implementation of the CT Plan.
---------------------------------------------------------------------------

    The Commission believes that the required frequency of the progress 
reports, one report every three months, should be sufficient to 
identify for the Commission any notable delays in completing the 
interim steps needed to satisfy the deadlines established for CT Plan 
implementation without imposing unnecessary burdens on efforts to 
implement the CT Plan. The Commission believes that this requirement 
should not be overly burdensome to the Operating Committee or distract 
from its performance of the specified actions required by the CT Plan, 
because the quarterly reports would essentially reflect the analysis 
the Operating Committee would need to undertake in any event for its 
diligent oversight of the implementation process. The Commission finds 
that the modifications to renumbered paragraph (d) of the Recitals of 
the CT Plan are appropriate because the specified deadlines and 
sequence for completion prescribed by the provision will provide 
greater certainty regarding timeframes for the Operating Committee and 
other market participants and will establish achievable objectives to 
facilitate implementation of the CT Plan.
    For the reasons discussed above, the Commission is approving 
paragraph (b), which has been renumbered as paragraph (c), and 
renumbered paragraph (d) of the Recitals of the CT Plan, as modified.
(b) SRO Duties to the CT Plan
    Paragraph (f) of the Recitals, renumbered as paragraph (g) as a 
result of the modifications discussed above, sets forth the SROs' 
statement of their regulatory obligations to the CT Plan. With respect 
to several provisions of the CT Plan discussed below,\96\ a commenter 
expresses concern that the SROs are disclaiming any duty or obligation 
to the CT Plan.\97\ The Commission agrees with another commenter that 
the regulatory obligations of SROs with respect to the CT Plan are set 
by the federal securities laws and regulations,\98\ but finds that it 
is appropriate to reiterate that the provisions of the CT Plan do not 
lessen any of the SROs' regulatory obligations. Accordingly, the 
Commission is modifying this provision to add the following sentence, 
``No provision of this Agreement shall be construed to limit or 
diminish the obligations and duties of the Members as self-regulatory 
organizations under the federal securities laws and the regulations 
thereunder.'' \99\ The Commission finds that the modification to 
renumbered paragraph (g) of the Recitals of the CT Plan is appropriate 
because it ensures that the text of the CT Plan reflects the 
relationship between the CT Plan's provisions and the SROs' regulatory 
obligations. For the reasons discussed above, the Commission is 
approving this provision as modified.
---------------------------------------------------------------------------

    \96\ See infra notes 443-454 and accompanying text.
    \97\ See MFA Letter, supra note 30, at 1-2.
    \98\ See Nasdaq Letter I, supra note 20, at 16-17.
    \99\ The ``Members'' of the LLC Agreement, as defined in the 
first paragraph of the LLC Agreement, are the SROs identified in 
Exhibit A to the LLC Agreement.
---------------------------------------------------------------------------

(c) Other Provisions of the Recitals
    Paragraph (a) of the Recitals establishes that the CT Plan is filed 
with the Commission in response to the Commission's Governance Order. 
Paragraphs (d) and (e) of the Recitals as proposed establish that the 
current Equity Data Plans will continue to operate until the Operative 
Date.
    The Commission received no comment on paragraphs (a), (d), and (e) 
of the Recitals as proposed. The Commission is approving paragraph (a) 
as proposed, and paragraphs (d) and (e), renumbered as paragraphs (e) 
and (f), otherwise as proposed.
2. Definitions
    Article I of the CT Plan sets forth the defined terms used 
throughout the CT Plan and its Exhibits. In the Notice, the Commission 
sought comment on several of the proposed definitions.\100\ 
Specifically, the Commission requested comment on the proposed scope 
and use of the following defined terms: ``CT Feeds,'' ``Covered 
Persons,'' ``Fees,'' ``Member Observer,'' and ``Public Information.'' 
After considering the comments received, the Commission

[[Page 44150]]

finds that it is appropriate to modify several of the proposed 
definitions.\101\
---------------------------------------------------------------------------

    \100\ See Notice, supra note 3, 85 FR at 64567-68 (Questions 4-
8).
    \101\ While one commenter suggests that the definition of 
``fees'' should be ``similar to the comprehensiveness in defining 
`royalties for copyright works' in the music industry,'' Data Boiler 
Letter I, supra note 31, at 22-23; Letter from Kelvin To, Founder 
and President, Data Boiler Technologies, LLC (Jul. 20, 2021) (``Data 
Boiler Letter II''), at 2, the commenter has not provided specific 
suggestions as to how this high-level analogy would be appropriately 
applied in the context of consolidated equity market data. Further, 
the Commission does not believe that the analogy is apt in the 
context of data that the SROs have a regulatory obligation to 
disseminate through an NMS plan.
---------------------------------------------------------------------------

    First, for the reasons discussed below in Section II.C.11(a) of 
this Order, the Commission is expanding the definition of ``Company 
Indemnified Party,'' \102\ set forth in Article I, Section 1.1(k) and 
referred to in Article XII, Section 12.2, Section 12.3, and Section 
12.4 of the CT Plan,\103\ to include Non-SRO Voting Representatives.
---------------------------------------------------------------------------

    \102\ As proposed, Section 1.1(k) defines the term ``Company 
Indemnified Party'' as ``a Person, and any other Person of whom such 
Person is the legal representative, that is or was a Member or an 
SRO Voting Representative.''
    \103\ The term ``Company Indemnified Party'' is also referred to 
in Section 1.1(kk) (``Losses'') and Section 1.1(ccc) (``Party to a 
Proceeding'') of Article I of the CT Plan.
---------------------------------------------------------------------------

    Second, for the reasons discussed below in Section II.C.5(k)(iii) 
of this Order, the Commission is modifying Article I, Section 1.1(n), 
of the CT Plan--the proposed definition of ``Covered Persons'' \104\--
to define the phrase ``representatives of the Members'' to include SRO 
Voting Representatives, alternate SRO Voting Representatives, and 
Member Observers, to expand the definition of Covered Persons to 
include SRO Applicant Observers, and to delete the phrase, ``and the 
employers of Non-SRO Voting Representatives.'' The term, Covered 
Persons, is referred to in Section 4.11 of Article IV of the CT Plan 
and Exhibit C to the CT Plan.\105\
---------------------------------------------------------------------------

    \104\ As proposed, Section 1.1(n) of Article I defines the term 
``Covered Persons'' as ``representatives of the Members, the Non-SRO 
Voting Representatives, SRO Applicants, the Administrator, and the 
Processors; affiliates, employees, and agents of the Operating 
Committee, a Member, the Administrator, and the Processors; any 
third parties invited to attend meetings of the Operating Committee 
or subcommittees; and the employers of Non-SRO Voting 
Representatives. Covered Persons do not include staff of the SEC.''
    \105\ The term ``Covered Persons'' is also referred to in 
Section 1.1(l) (``Confidential Information'') of Article I of the CT 
Plan.
---------------------------------------------------------------------------

    Third, for the reasons discussed below in Section II.C.5(d)(iii) of 
this Order, the Commission is modifying the definition of ``Executive 
Session,'' \106\ set forth in Article I, Section 1.1(z), to require 
that the other persons as deemed appropriate to attend Executive 
Session will be determined by ``majority vote of'' the SRO Voting 
Representatives. The term ``Executive Session'' is referred to in 
Article IV, Section 4.2(d), Section 4.3(c), and Section 4.4(g) of the 
CT Plan and Exhibit C to the CT Plan.
---------------------------------------------------------------------------

    \106\ As proposed, Section 1.1(z) of Article I defines the term, 
``Executive Session,'' as a meeting of the Operating Committee 
pursuant to Section 4.4(g), which includes SRO Voting 
Representatives, Member Observers, SEC staff, and other persons as 
deemed appropriate by the SRO Voting Representatives.
---------------------------------------------------------------------------

    Fourth, for the reasons discussed below in Section II.C.5(j)(ii) of 
this Order, the Commission is modifying the definition of ``Member 
Observer,'' \107\ set forth in Article I, Section 1.1(oo), to require 
that a Member Observer be an employee of a Member or any attorney to a 
Member, and to provide that a Member's designation of a Member Observer 
is subject to the limitation contained in Article IV, Section 
4.10(b)(i) of the CT Plan. The term ``Member Observer'' is referred to 
in Article IV, Section 4.4 and Section 4.7 of the CT Plan and Exhibit C 
to the CT Plan.\108\
---------------------------------------------------------------------------

    \107\ As proposed, Section 1.1(oo) of Article I defines the term 
``Member Observer'' as any individual, other than a Voting 
Representative, that a Member, in its sole discretion, determines is 
necessary in connection with such Member's compliance with its 
obligations under Rule 608(c) of Regulation NMS to attend Operating 
Committee and subcommittee meetings.''
    \108\ The term ``Member Observer'' is also referred to in 
Section 1.1(z) (``Executive Session'') of Article I of the CT Plan.
---------------------------------------------------------------------------

    Fifth, for the reasons discussed below in Section II.C.5(k)(ii) of 
this Order, the Commission is modifying the definition of ``Highly 
Confidential Information,'' as set forth in Article I, Section 
1.1(ii),\109\ to replace the phrase, ``personnel matters'' with the 
phrase ``personnel matters that affect the employees of the SROs or the 
Company.'' The term ``Highly Confidential Information'' is referred to 
in Article IV, Section 4.4 and Section 4.10 of the CT Plan and Exhibit 
B to the CT Plan.
---------------------------------------------------------------------------

    \109\ The term ``Highly Confidential Information'' is also 
referred to in Section 1.1(l) (``Confidential Information''), and 
Section 1.1(kkk) (``Public Information'') of Article I of the CT 
Plan.
---------------------------------------------------------------------------

    Finally, for the reasons discussed below in Section II.C.11(a) of 
this Order, the Commission is modifying Section 1.1(eee) of Article I 
of the CT Plan, referred to in Article XII, Section 12.2 of the CT 
Plan,\110\ to expand the definition of the term ``Party to a 
Proceeding,'' \111\ to include Non-SRO Voting Representatives.
---------------------------------------------------------------------------

    \110\ The term, ``Party to a Proceeding,'' is also referred to 
in Section 1.1(kk) (``Losses'') of Article I of the CT Plan.
    \111\ As proposed, Section 1.1(eee) of Article I defines the 
term, ``Party to a Proceeding,'' as a ``Company Indemnified Party 
that is, was, or is threatened to be made, a party to a Proceeding, 
or is involved in a Proceeding, by reason of the fact that such 
Company Indemnified Party is or was a Member and/or an SRO Voting 
Representative.''
---------------------------------------------------------------------------

    Except for the modifications identified above, the Commission is 
approving Article I of the CT Plan as proposed.
3. Organization of LLC
    The SROs propose to organize the new NMS plan for consolidated 
equity market data in the form of a Delaware limited liability company 
pursuant to a limited liability company agreement, entitled the Limited 
Liability Company Agreement (``LLC Agreement'') of CT Plan LLC 
(``Company'' or ``LLC'').\112\ The Members (i.e., the equity owners) of 
the LLC will be the 17 national securities exchanges for equities and 
FINRA,\113\ each of which will be a ``Participant'' of the CT Plan as 
an effective NMS plan for the dissemination of consolidated equity 
market data.
---------------------------------------------------------------------------

    \112\ See Article II, Section 2.1 of the CT Plan.
    \113\ See Article III, Section 3.1 of the CT Plan. The names and 
addresses of each Member are set forth in Exhibit A to the CT Plan.
---------------------------------------------------------------------------

    The CT Plan states that the purposes of the LLC are to engage in 
the following activities on behalf of the Members: (i) The collection, 
consolidation, and dissemination of Transaction Reports, Quotation 
Information, and such other information concerning Eligible Securities 
as the Members shall agree as provided therein; (ii) contracting for 
the distribution of such information; (iii) contracting for and 
maintaining facilities to support any activities permitted in the LLC 
Agreement and guidelines adopted thereunder, including the operation 
and administration of the System; \114\ (iv) providing for those other 
matters set forth in the LLC Agreement and in all guidelines adopted 
thereunder; (v) operating the System to comply with Applicable Laws; 
and (vi) engaging in any other business or activity that now or 
thereafter may be necessary, incidental, proper, advisable, or 
convenient to accomplish any of the foregoing purposes and that is not 
prohibited by the Delaware Limited Liability Company Act (``Delaware 
Act''), the Act, or other Applicable Law.\115\ The LLC Agreement 
itself, including its appendices, is the CT Plan. Under the CT Plan, 
the governing body

[[Page 44151]]

of the LLC would be the Operating Committee, which would comprise 
representatives of the Members and the Non-SRO Voting 
Representatives.\116\
---------------------------------------------------------------------------

    \114\ Section 1.1(yyy) of Article I of the proposed CT Plan 
defines the term ``System'' as ``all data processing equipment, 
software, communications facilities, and other technology and 
facilities, utilized by the Company or the Processors in connection 
with the collection, consolidation, and dissemination of Transaction 
Reports, Quotation Information, and other information concerning 
Eligible Securities.''
    \115\ See Article II, Section 2.4 of the CT Plan.
    \116\ See Article IV, Section 4.1(a) of the CT Plan.
---------------------------------------------------------------------------

    In their Transmittal Letter, the SROs assert that, while the 
Governance Order requires Operating Committee approval for actions 
other than the selection of Non-SRO Voting Representatives and the 
decision to enter into Executive Session, certain provisions of the CT 
Plan that concern solely the operation of the LLC as an LLC and that 
are unrelated to consolidation and distribution of equity market data 
should require only a majority vote of the Members. Specifically, the 
SROs propose that the following actions require only a majority vote of 
the Members: (1) The selection of Officers of the LLC (other than the 
Chair and Secretary), if needed, and (2) certain decisions concerning 
the operation of the LLC as an LLC and approval of amendments to LLC-
related provisions of the CT Plan, including provisions related to 
indemnification, dissolution of the LLC, and tax-related matters.\117\ 
The SROs assert that neither of these topics would affect the 
consolidation and distribution of equity market data and that, 
therefore, the Members should have the sole authority to make decisions 
related to these topics, with Commission approval where necessary.\118\
---------------------------------------------------------------------------

    \117\ See Transmittal Letter, supra at 2.
    \118\ See id.
---------------------------------------------------------------------------

    Several commenters raise concerns with the proposed LLC structure 
and the Members' exclusive powers thereunder.\119\ One commenter states 
that the LLC structure is ``flawed'' and ``defies America's `Free 
Enterprise' concept.'' \120\ The commenter further states that, under 
the LLC structure proposed, the Members of the LLC will retain control 
over the actions under the CT Plan.\121\ Another commenter asserts that 
the CT Plan ``appears perfectly designed to facilitate the continued 
neglect of the distribution of consolidated market data in order to 
benefit the sale of SROs' proprietary market data feeds,'' \122\ and 
states that the CT Plan would allow the SROs to prioritize the sale of 
their proprietary market data products over the interests and statutory 
purposes of the CT Plan.\123\ This commenter asserts that the Plan 
``incentivizes the SROs to run the Plan and the LLC poorly to the 
extent they believe it is in their self-interest'' and there is ``no 
downside for an SRO to act in its self-interest contrary to the Plan as 
they are exculpated in taking any such action.'' \124\ This commenter 
states that it fears that the CT Plan structure will not promote the 
goals of Section 11A, given the absence of any obligations on the SROs 
to operate the plan consistent with its statutory purpose,\125\ and 
suggests that a balance must be struck with the principle of creating a 
governing arrangement that is reasonably designed to ensure that the CT 
Plan will carry out its statutory purpose.\126\
---------------------------------------------------------------------------

    \119\ See Data Boiler Letter I, supra note 31, at 4, 23, 25, 49; 
MFA Letter, supra note 30, at 1-2, 3; RBC Letter, supra note 30, at 
10; BMO Letter II, supra note 30, at 2.
    \120\ Data Boiler Letter I, supra note 31, at 25. This commenter 
also states that because of CT Plan's role and public purpose, it 
should be a non-profit rather than LLC. See id. at 24. The commenter 
opines that a non-profit structure would be ``better than an LLC in 
preserving an independent status when dealing with the establishment 
of fees, manners in entering into contracts with an Administrator 
and Processor(s), and other applicable policies and procedures. . . 
.'' Id. at 19; see also Data Boiler Letter II, supra note 101, at 2.
    \121\ See Data Boiler Letter I, supra note 31, at 21, 24, 30; 
see also RBC Letter, supra note 30, at 10.
    \122\ MFA Letter, supra note 30, at 3.
    \123\ See MFA Letter, supra note 30, at 1-2 (stating, CT Plan as 
proposed is likely to ``preserve the misaligned incentives that gave 
rise to the Order.''); see also BMO Letter II, supra note 30, at 2.
    \124\ MFA Letter, supra note 30, at 3.
    \125\ See id. at 2.
    \126\ See id.
---------------------------------------------------------------------------

    One commenter states that the CT Plan does not include all of the 
necessary provisions for an LLC agreement to function appropriately as 
an NMS plan, but does not provide further details about what is 
missing.\127\ Another commenter states that more detail needs to be 
provided on the types of decisions that would fall under ``the 
operation of the CT Plan as an LLC'' and ``modifications to the LLC-
related provisions of the CT Plan'' in order to ensure that non-SRO 
representatives have an opportunity to participate in any material 
decisions related to the regulatory operations of the CT Plan.\128\
---------------------------------------------------------------------------

    \127\ See Data Boiler Letter I, supra note 31, at 25.
    \128\ Virtu Letter, supra note 30, at 5.
---------------------------------------------------------------------------

    Another commenter, however, supports the LLC structure as proposed, 
arguing that the Non-SRO Voting Representatives do not need to be 
members of the LLC in order to fulfill their role on the Operating 
Committee,\129\ and that providing the Non-SRO Voting Representatives 
with an economic interest in the CT Plan is inappropriate because ``it 
would provide individuals with a claim on revenues that they did 
nothing to generate and expose them to funding obligations that they 
would not be prepared to support.'' \130\
---------------------------------------------------------------------------

    \129\ See Nasdaq Letter I, supra note 20, at 14.
    \130\ Id. at 14-15.
---------------------------------------------------------------------------

    The Governance Order did not specify the form or structure of the 
plan, and for the reasons discussed below, the Commission finds that it 
is appropriate for the SROs to organize this NMS plan as an LLC 
agreement. Foremost, an LLC agreement provides a formal legal structure 
through which the SROs will fulfill their obligations with respect to 
consolidated equity market data, which will necessarily entail, among 
other things, entering into contracts with the Administrator and the 
Processors, as well as, in all likelihood, outside counsel, 
accountants, and other parties. The Commission believes that 
structuring the CT Plan as an LLC will reduce ambiguities with respect 
to rights and obligations related to such contracts and with respect to 
the financial rights responsibilities of each SRO to the CT Plan and to 
each other.\131\ Moreover, the use of an LLC structure for a NMS plan 
is not novel. The most recent NMS plan approved by the Commission, CAT 
NMS Plan, employs an LLC structure,\132\ as does the Options Price 
Reporting Authority Plan (``OPRA Plan''),\133\ and the Commission does 
not believe that it is necessary to prescribe a different legal 
structure here.
---------------------------------------------------------------------------

    \131\ As noted above, however, the terms of the CT Plan shall 
not be construed to limit or diminish the obligations and duties of 
the Members of the LLC as SROs under the federal securities laws. 
See text accompanying note 99, supra.
    \132\ See Securities Exchange Act Release No. 79318 (Nov. 15, 
2016), 81 FR 84696 (Nov. 23, 2016) (Order Approving the National 
Market System Plan Governing the Consolidated Audit Trail).
    \133\ See Securities Exchange Act Release No. 61367 (Jan. 15, 
2010), 75 FR 3765 (Jan. 22, 2010) (Notice of Immediate Effectiveness 
of Proposed Amendment To Revise the Plan for Reporting of 
Consolidated Options Last Sale Reports and Quotation Information To 
Serve as the Operating Agreement for OPRA LLC).
---------------------------------------------------------------------------

    As described above, some commenters are concerned that the LLC 
Agreement as proposed would allow the SROs to continue to act 
exclusively in their own self-interest, rather than in the interest of 
the Plan, as significant powers would rest exclusively with the SROs. 
The Commission, however, does not believe that the choice of an LLC 
structure over other structures for the CT Plan will permit the SROs to 
act exclusively in their own self-interest. First, the terms of the LLC 
agreement must be consistent with the regulatory obligations of the 
SROs as set by the federal securities laws and regulations, and SROs 
also have direct obligations under the federal securities laws and 
regulations. And second, as required by the Governance Order, the CT 
Plan provides Non-SRO Voting Representatives with voting rights on the 
Operating Committee that is responsible for managing the activities

[[Page 44152]]

of the CT Plan, which will provide a means to mitigate the inherent 
conflicts of interests between the SROs' ``collective responsibilities 
in overseeing the Equity Data Plans and their individual interest in 
maximizing the viability of proprietary data products that they sell to 
market participants.'' \134\ Though one commenter suggests that a non-
profit structure for the CT Plan would better ensure independence in 
decisions relating to fees and administrator contracts than, for 
example, an LLC, the Commission believes that the requirement of the 
Governance Order that non-SROs have a vote on matters before the 
Operating Committee, together with the SROs' obligations under the 
federal securities laws and regulations, is sufficient at this time to 
mitigate conflicts of interests in making such decisions, regardless of 
the corporate structure used.
---------------------------------------------------------------------------

    \134\ Governance Order, supra note 8, 85 FR at 28707, 28715-16.
---------------------------------------------------------------------------

    Moreover, the Commission is modifying certain other provisions of 
the CT Plan to help ensure that the CT Plan meaningfully includes non-
SROs in Operating Committee decision-making, consistent with the 
Governance Order.\135\ Each of the following modifications is discussed 
in greater detail below.
---------------------------------------------------------------------------

    \135\ See, e.g., Governance Order, supra note 8, 85 FR at 28707.
---------------------------------------------------------------------------

    First, as discussed below in Section II.C.5(d)(iii), the Commission 
is modifying the CT Plan to limit the circumstances under which the SRO 
Voting Representatives may meet outside the presence of the Non-SRO 
Voting Representatives in Executive Session. Second, as discussed below 
in Section II.C.5(g)(iii), the Commission is modifying the CT Plan to 
limit the topics that may be addressed in a legal subcommittee without 
the Non-SRO Voting Representatives present and to require certain 
records of legal subcommittee meetings be kept to enhance transparency 
and accountability regarding the use of that subcommittee. Third, as 
discussed below in Section II.C.5(h), the Commission is modifying the 
CT Plan to require that the creation and assignment of any officer 
positions and duties be subject to a vote of the Operating Committee, 
rather than by a majority vote of the SROs. Fourth, as discussed below 
in Section II.C.5(g)(iii), the Commission is modifying the CT Plan to 
apply the Exculpation provisions available to the SROs to Non-SRO 
Voting Representatives. And fifth, as discussed below in Section 
II.C.12(e), the Commission is modifying the CT Plan to remove the 
provision that would allow the SROs to modify Article IX (Allocations), 
Article X (Records and Accounting; Reports), Article XI (Dissolution 
and Termination), and Article XII (Exculpation and Indemnification) by 
a majority vote of Members.
    Finally, one commenter states that the CT Plan does not include all 
of the necessary provisions for an LLC agreement to function 
appropriately as an NMS plan.\136\ The commenter does not, however, 
identify the areas in which it believes the agreement is deficient.
---------------------------------------------------------------------------

    \136\ See Data Boiler Letter I, supra note 31, at 25
---------------------------------------------------------------------------

    For the reasons stated above, the Commission finds that it is 
appropriate for the CT Plan to be structured as an LLC Agreement, and 
is approving Article II as proposed.
4. Membership (Obligations and Liabilities)
    Pursuant to Article III, Section 3.2(a) of the CT Plan, any 
national securities association or national securities exchange whose 
market, facilities, or members, as applicable, trades Eligible 
Securities may become a Member by (i) providing written notice to the 
Company; (ii) executing a joinder to the LLC Agreement; (iii) paying a 
Membership Fee to the Company as determined pursuant to Section 3.2(b) 
(``Membership Fee''); and (iv) executing a joinder to any other 
agreements to which all of the other Members have been made party in 
connection with being a Member.\137\ Membership Fees paid will be added 
to the general revenues of the Company.\138\
---------------------------------------------------------------------------

    \137\ See Article III, Section 3.2(a) of the CT Plan.
    \138\ See id.
---------------------------------------------------------------------------

    Article III, Section 3.2 of the CT Plan specifies that the factors 
that will be considered in determining a Membership Fee are: (1) The 
portion of costs previously paid by the Company (or by the Members 
prior to the formation of the Company) for the development, expansion 
and maintenance of the System which, under generally accepted 
accounting principles (``GAAP''), would have been treated as capital 
expenditures and would have been amortized over the five years 
preceding the admission of the new member; and (2) an assessment of 
costs incurred and to be incurred by the LLC for modifying the System 
or any part thereof to accommodate the new member, which costs are not 
otherwise required to be paid or reimbursed by the new Member.\139\ The 
CT Plan prohibits a Member's transfer of its Membership Interest in the 
LLC, except in connection with the withdrawal of a Member from the LLC, 
as discussed below.\140\
---------------------------------------------------------------------------

    \139\ See Article III, Section 3.2(b) of the CT Plan. The 
proposed CT Plan provides that Participants of the CQ Plan, CTA 
Plan, and UTP Plan are not required to pay the Membership Fee. See 
Article III, Section 3.2(c) of the CT Plan.
    \140\ See Article III, Section 3.3 of the CT Plan.
---------------------------------------------------------------------------

    Pursuant to Article III, Section 3.4, any Member may voluntarily 
withdraw from the LLC by: (i) Providing not less than 30 days' prior 
written notice of such withdrawal to the LLC, (ii) causing the LLC to 
file with the Commission an amendment to effectuate the 
withdrawal,\141\ and (iii) transferring such Member's Membership 
Interest to the LLC.\142\ If a Member ceases to be a registered 
national securities association or registered national securities 
exchange, that Member automatically withdraws from the LLC.\143\ 
Section 3.4 further provides that after withdrawal from Membership, the 
Member will remain liable for any obligations arising prior to 
withdrawal.\144\ A withdrawing Member is entitled to receive a portion 
of the Net Distributable Operating Income attributable to the period 
prior to the Member's withdrawal.\145\
---------------------------------------------------------------------------

    \141\ Any withdrawal will not be effective until an amendment to 
the Agreement is approved by the Commission. See Article III, 
Section 3.4(c) of the CT Plan.
    \142\ See Article III, Section 3.4(a) of the CT Plan.
    \143\ See Article III, Section 3.4(b) of the CT Plan. Article 
III, Section 3.5 of the CT Plan provides that a Member's bankruptcy 
under Section 18-304 of the Delaware Act shall not itself cause a 
withdrawal of such Member from the Company.
    \144\ See Article III, Section 3.4(d)(i) of the CT Plan.
    \145\ See Article III, Section 3.4(d)(ii) of the CT Plan.
---------------------------------------------------------------------------

    Pursuant to proposed Sections 3.4(d)(iii) and (iv), a Member that 
has withdrawn from the LLC will no longer have the right to have its 
Transaction Reports, Quotation Information, or other information 
disseminated over the System, and the Capital Account of that Member 
will not be allocated profits and losses of the LLC. In addition, 
Article III of the CT Plan provides that no Member, unless authorized 
by the Operating Committee, has the authority to represent the LLC or 
to make any expenditure on behalf of the LLC; provided, however, that 
the Tax Matters Partner may represent, act for, sign for or bind the 
LLC as permitted under Sections 10.2 and 10.3 of the LLC 
Agreement.\146\ In addition, the CT Plan provides that, following the 
Operative Date, each Member will be required to comply with the 
provisions of the Plan

[[Page 44153]]

and enforce compliance with the Plan by its members.\147\
---------------------------------------------------------------------------

    \146\ See Article III, Section 3.7(d) of the CT Plan.
    \147\ See Article III, Section 3.6 of the CT Plan.
---------------------------------------------------------------------------

    These provisions relating to joining and withdrawing from the CT 
Plan as a Member and enforcing compliance with the Plan are similar to 
those existing in other NMS Plans.\148\ The Commission received no 
comments addressing these provisions. Accordingly, the Commission is 
approving Section 3.4, as proposed.
---------------------------------------------------------------------------

    \148\ See, e.g., CAT NMS Plan, Article III.
---------------------------------------------------------------------------

    Article III of the CT Plan also sets forth the obligations and 
liabilities of the Members. Article III, Section 3.7(b) provides that 
Members will not be required to contribute capital or make loans to the 
LLC, nor will Members have any liability for the debts and liabilities 
of the LLC.\149\ This section also states that it is the intent of the 
Members that no distribution to any Member pursuant to the LLC 
Agreement will be considered a return of money or other property paid 
or distributed in violation of the Delaware Act, and that any such 
payment will be considered a compromise within the meaning of Delaware 
Act, and the Member receiving any payment will not be required to 
return any payment to any person, provided that a Member will be 
required to return any payment made due to a clear accounting or 
similar error or as otherwise provide in Section 3.7(b).\150\ Finally, 
Section 3.7(e) provides that no Member owes any duty (fiduciary or 
otherwise) to the LLC or to any other Member other than the duties 
expressly set forth in the LLC Agreement.
---------------------------------------------------------------------------

    \149\ However, in the event that the Processors or the 
Administrator have not been paid pursuant to the terms of the 
Processor Services Agreements and Administrative Services Agreement, 
the proposed CT Plan requires each Member to return to the Company 
its pro rata share of any moneys distributed to it by the Company 
until an aggregated amount equal to the amount owed has been 
recontributed to the Company. The Company will pay the amount(s) 
owed. See Article III, Section 3.7(b) of the CT Plan.
    \150\ See Article III, Section 3.7(c) of the CT Plan. The 
proposed CT Plan further provides that if any court of competent 
jurisdiction holds that any Member is obligated to make any such 
payment, such obligation shall be the obligation of such Member and 
not of the Operating Committee. See id.
---------------------------------------------------------------------------

    In the Notice, the Commission sought comment on Article III, 
Section 3.7 and the provision that states that SROs shall have no 
liability for the debt, liabilities, commitments, or any other 
obligations of the CT Plan or for any losses of the CT Plan. The 
Commission asked if the provision is consistent with the SROs' 
obligations to, and purposes of, the CT Plan. Several commenters 
express concern with this provision.\151\ One commenter states that the 
Members should not receive special liability protections.\152\ Another 
commenter states that the liability carve-out for SROs is too 
broad.\153\ This commenter states that the provisions in Article III, 
Section 3.7 would ``significantly increase the likelihood that Plan 
activities would be contrary to the role and public purpose of the Plan 
as part of the national market system,'' thereby creating a conflict of 
interest with SROs' obligations with respect to the Plan under federal 
securities rules and regulations.\154\ Another commenter views the 
provisions of Article III, Section 3.7 as allowing the LLC to have 
upside profit, but relieving the SROs of responsibility for any debt, 
liabilities, commitment, or any other obligations.\155\ This commenter 
further states that the SROs have significant influence on how the LLC 
operates through control of the Operating Committee, but no consequence 
for that control, and recommends that Article III, Section 3.7(e) be 
removed from the CT Plan.\156\
---------------------------------------------------------------------------

    \151\ See Notice, supra note 3, 85 FR at 64568 (Question 11).
    \152\ See RBC Letter, supra note 30, at 9. This commenter 
recommends that the CT Plan should make clear that the liability 
protection and indemnification provisions apply to non-SRO 
representatives acting in their role on the Operating Committee. See 
id. at 10. See also infra Section II.C.11 (discussing modification 
to the proposed CT Plan to provide indemnity to the Non-SRO Voting 
Representatives).
    \153\ See Virtu Letter, supra note 30, at 3.
    \154\ Id.
    \155\ See Data Boiler Letter I, supra note 31, at 24.
    \156\ See id.
---------------------------------------------------------------------------

    In contrast, one commenter states that the liability protections in 
Article III, Sections 3.7(b) and (e) are standard protections for the 
members of an LLC and are commonly included in LLC agreements.\157\ 
This commenter further argues that the Non-SRO Voting Representatives 
do not need similar protection since they are not members of the 
LLC.\158\ Another commenter states that the provisions in Article III 
are consistent with Delaware business organization law.\159\ This 
commenter also argues that including the principle that no Member of 
the CT Plan is liable for the obligations of the CT Plan ``is not an 
attempt to avoid appropriate funding for the CT Plan,'' \160\ and 
states that the requirements in CT Plan that each Member make capital 
contributions for ``reasonable administrative and other reasonable 
expenses'' of the CT Plan and that each Member return its pro rata 
share of distributions from the CT Plan in the one year period prior to 
a default in payment to the Processors or Administrator are evidence of 
appropriate funding responsibilities for the CT Plan.\161\
---------------------------------------------------------------------------

    \157\ See NYSE Letter I, supra note 18, at 37. This commenter 
points to Section 4.8 of the CAT NMS Plan as precedent for including 
the limitation on liability provisions at Section 3.7(b) and (e) and 
states that, similar to the proposed CT Plan, the CAT NMS Plan 
extends liability protection and indemnification coverage only to 
SROs that created the LLC. See id. at 37-38. Another commenter notes 
that the OPRA Plan is an LLC with similar limitation on liability 
provisions. See Nasdaq Letter I, supra note 20, at 16 n.26.
    \158\ See NYSE Letter I, supra note 18, at 38.
    \159\ See Nasdaq Letter I, supra note 20, at 15 (citing Section 
18-303 of the Delaware Act).
    \160\ Id. at 16.
    \161\ Id.
---------------------------------------------------------------------------

    While certain commenters object to the provisions that would 
absolve the Members of financial liabilities incurred by the LLC, 
arguing that the provisions are too broad and would allow the Members 
to act in their own self-interest, contrary to the purpose of the CT 
Plan,\162\ after careful consideration of the comments, the Commission 
is not modifying these provisions. As the Commission stated above, the 
SROs' regulatory obligations pursuant to the CT Plan flow from the 
federal securities laws and regulations, and the Commission has, as 
noted above, modified the language of the Recitals of the CT Plan to 
reiterate that the terms of the CT Plan cannot act to diminish those 
obligations.\163\ Further, the language proposed by the SROs for 
Section 3.7(b) states that an SRO shall not have liability to the CT 
Plan as a Member except as provided in the Agreement or ``Applicable 
Law'' (a defined term in the CT Plan), which means that the express 
terms of this provision of the LLC agreement do not contemplate 
limiting any regulatory obligations SROs might have under the federal 
securities laws and regulations with respect to the operation of the CT 
Plan. Finally, the Commission does not believe that it is necessary to 
extend these provisions to apply to Non-SRO Voting Representatives, as 
one commenter suggests,\164\ because while these persons serve on the 
Operating Committee, they have no financial obligation under the CT 
Plan and thus do not require the protections afforded to the Members in 
Article III. Accordingly, the Commission is approving Article III, 
Section 3.7 as proposed.
---------------------------------------------------------------------------

    \162\ See RBC Letter, supra note 30, at 9; Virtu Letter, supra 
note 30, at 3; see also Data Boiler Letter I, supra note 31, at 24.
    \163\ See supra Section II.C.1(b).
    \164\ See NYSE Letter I, supra note 18, at 38.
---------------------------------------------------------------------------

    In the Notice, the Commission specifically sought comment on 
Article III, Section 3.7(e) of the CT Plan, which absolves Members of 
any duty to the

[[Page 44154]]

LLC or other Members, and on the provision's potential impact on the CT 
Plan's responsibilities for the collection, processing, and 
dissemination of equity market data.\165\ Two commenters object to the 
provision that relieves Members of a duty (fiduciary or otherwise) to 
the CT Plan or each other.\166\ One of these commenters asserts that 
the SROs' disclaimer of duty or obligation to the CT Plan appears to be 
a ``complete abdication'' of responsibility to ensure that the Plan 
carries out its intended function, and that it is ``unclear'' why an 
SRO's representative to the CT Plan would not have a fiduciary duty to 
the LLC.\167\ This commenter states that the SROs should, at a minimum, 
establish a duty in the CT Plan to promote the plan's function of 
assuring the widespread availability of equity market data on terms 
that are fair and reasonable, consistent with statutory requirements, 
or to promote the interests of fair and orderly markets and the 
protections of investors and the public interest.\168\ This commenter 
encourages the SROs to adopt a fiduciary duty as well as to 
affirmatively articulate the duties that are owed to the CT Plan.\169\ 
Another commenter similarly believes that the SROs should assume 
fiduciary duties to the LLC.\170\
---------------------------------------------------------------------------

    \165\ See Notice, supra note 3, 85 FR at 64568 (Question 12).
    \166\ See MFA Letter, supra note 30, at 2; RBC Letter, supra 
note 30, at 9.
    \167\ MFA Letter, supra note 30, at 2 (also stating that the 
SROs cannot both disclaim any duty to the LLC and maintain the 
current level of control over the LLC if the CT Plan is to function 
properly.).
    \168\ See id.
    \169\ See id.
    \170\ See RBC Letter, supra note 30, at 9.
---------------------------------------------------------------------------

    One commenter disagrees that the CT Plan should impose a fiduciary 
duty on Members.\171\ This commenter states that, while individuals or 
entities that manage a limited liability company may have fiduciary 
duties under Delaware law, a member generally does not have fiduciary 
duties so long as it does not exercise control over the company.\172\ 
This commenter argues that under the CT Plan, the Operating Committee, 
not the Members, have managerial responsibility for the operations of 
the CT Plan and the Members only have limited rights to take 
actions.\173\ Further, the commenter explains, no individual Member of 
the CT Plan has the ability to control the actions of the CT Plan.\174\ 
The commenter concludes that ``it is unlikely that under Delaware law 
the Members of the CT Plan, when acting in such capacity, would owe 
fiduciary duties to the CT Plan or the Members.'' \175\ This commenter 
also argues that the proposed language of the CT Plan has no effect on 
the SROs' obligations under federal securities laws and that it is 
those obligations, rather than the SROs' obligations to the CT Plan and 
each other, that will ensure that the SROs comply with their 
responsibilities regarding the dissemination of real-time consolidated 
equity market data.\176\
---------------------------------------------------------------------------

    \171\ See Nasdaq Letter I, supra note 20, at 16-17.
    \172\ See id.
    \173\ See id.
    \174\ See id.
    \175\ Id.
    \176\ See id. at 16. This commenter further states that ``since 
the Plan is a product of federal law, it would be inappropriate to 
subject its Members to state fiduciary duties, as this would give 
rise to a potential conflict between state and federal law.'' Id.
---------------------------------------------------------------------------

    With respect to providing a disclaimer of fiduciary duty for Non-
SRO Voting Representatives, this commenter states that there would be 
some logic in expanding the disclaimer of fiduciary duties to cover 
Non-SRO Voting Representatives, but that this would not address the 
discrepancy between the federal law obligations of the Members and the 
Non-SRO Voting Representatives.\177\ This commenter states that Rule 
608 of Regulation NMS ``would require the Members to comply with the 
Plan, and enforce compliance by their broker members, but that neither 
that rule, nor any other provision of law, imposes corresponding duties 
on the Non-SRO Voting Representatives.'' \178\
---------------------------------------------------------------------------

    \177\ See id. at 17.
    \178\ Id. at 17; see also NYSE Letter I, supra note 18, at 7.
---------------------------------------------------------------------------

    The Commission agrees that the proposed language of the CT Plan has 
no effect on the SROs' obligations under the federal securities laws, 
and that it is those obligations than will ensure compliance with SRO 
responsibilities regarding consolidated equity market data. As 
discussed above,\179\ any disclaimer of fiduciary duty to the LLC 
cannot dilute, diminish, or otherwise alter the Members' regulatory 
responsibilities under the federal securities laws and rules because, 
as SROs and pursuant to the requirements under the national market 
system, the Members are prohibited from acting in contravention of 
Commission rules and regulations, which include rules for the 
protection of investors to ensure the ``prompt, accurate, reliable, and 
fair collection, processing, distribution, and publication of 
information with respect to quotations for and transactions in such 
securities and the fairness and usefulness of the form and content of 
such information.'' \180\ However, the Commission understands the 
concerns raised by commenters that the terms of the CT Plan fail to 
impose any express duty on the Members to act to promote the purpose of 
the Plan and expressly disclaim any such duty.\181\ To address this 
concern, as discussed above, the Commission is modifying the terms in 
the CT Plan's Recitals to explicitly state that no provision of the CT 
Plan shall be construed to limit or diminish the obligations of SRO 
Members to the CT Plan that arise pursuant to federal securities laws 
and regulations.\182\ The Commission is not, however, modifying the 
Plan to include a disclaimer of fiduciary duty for the Non-SRO Voting 
Representatives who serve on the Operating Committee, a possibility 
raised by one commenter,\183\ because Non-SRO Voting Representatives 
will not have the same legal obligations as the SRO Voting 
Representatives and because they may also have separate legal duties to 
their employers.
---------------------------------------------------------------------------

    \179\ See supra Section II.C.1(b).
    \180\ 15 U.S.C. 78k-1(c)(1)(B).
    \181\ See MFA Letter, supra note 30, at 2; RBC Letter, supra 
note 30, at 9.
    \182\ See supra Section II.C.1(b).
    \183\ See Nasdaq Letter I, supra note 20, at 16-17.
---------------------------------------------------------------------------

5. Management of the LLC
(a) Duties and Powers of the Operating Committee
    Article IV of the CT Plan establishes the overall governance 
structure for the management of the LLC. Article IV, Section 4.1(a) 
proposes that the LLC be managed by the Operating Committee.\184\ 
Article IV, Section 4.1 also provides that the Operating Committee has 
the authority to take actions it deems necessary to accomplish the 
purposes of the LLC, including: (1) Proposing amendments or 
implementing policies and procedures; \185\ (2) selecting, overseeing, 
specifying the role and responsibilities of, and evaluating the 
performance of the Administrator, the Processor, an auditor, and any 
other professional service providers; \186\ (3) developing fair and 
reasonable fees for equity market data \187\; (4) reviewing the 
performance of the Processor and ensuring public reporting of the 
Processors' performance and other metrics and information about the 
processors; \188\ (5) assessing the marketplace for equity data 
products

[[Page 44155]]

and ensuring that the CT Feeds are priced in a manner that is fair and 
reasonable, and designed to ensure the widespread availability of CT 
Feeds data to investors and market participants \189\; (6) designing a 
fair and reasonable formula to be applied by the Administrator for 
allocating revenue, and reviewing and revising the formula as needed; 
\190\ (7) interpreting the LLC Agreement and its provisions; \191\ and 
(8) other specific responsibilities provided for in the LLC 
Agreement.\192\
---------------------------------------------------------------------------

    \184\ See Article IV, Section 4.1(a) of the CT Plan.
    \185\ See Article IV, Section 4.1(a)(i) of the CT Plan.
    \186\ See Article IV, Section 4.1(a)(ii) of the CT Plan. This 
section further provides that any expenditure for professional 
services paid by the Company must be authorized by the Operating 
Committee and must be for activities consistent with the CT Plan. 
See id.
    \187\ See Article IV, Section 4.1(a)(iii) of the CT Plan.
    \188\ See Article IV, Section 4.1(a)(iv) of the CT Plan. See 
also infra Section II.C.6.
    \189\ See Article IV, Section 4.1(a)(v) of the CT Plan.
    \190\ See Article IV, Section 4.1(a)(vi) of the CT Plan.
    \191\ See Article IV, Section 4.1(a)(vii) of the CT Plan.
    \192\ See Article IV, Section 4.1(a)(viii) of the CT Plan.
---------------------------------------------------------------------------

    One commenter expresses general support for the provision of the CT 
Plan that states that the responsibilities of the Operating Committee 
include interpreting the LLC Agreement and its provisions, with the 
caveats that ``the Non-SRO Voting Representatives have the opportunity 
to meaningfully participate in the process of interpreting a provision 
of the plan'' \193\ and that the CT Plan should provide more detail on 
what role the Non-SRO representatives would have with respect to such 
decisions.\194\ This commenter also recommends that the Operating 
Committee adopt policies and procedures distinguishing operational 
interpretations of the CT Plan from amendments required to be submitted 
to the Commission under Rule 608 of Regulation NMS.\195\
---------------------------------------------------------------------------

    \193\ Virtu Letter, supra note 30, at 3.
    \194\ See id.
    \195\ See id.
---------------------------------------------------------------------------

    One commenter states that the Operating Committee has ``full and 
complete control over the business and affairs of the CT Plan, 
including interpretations of the CT Plan.'' \196\ This commenter argues 
that any interpretation of the CT Plan would be subject to a discussion 
at a meeting of the Operating Committee and that the minutes of such a 
meeting would include sufficient detail to inform the public of the 
matters under discussion and the views expressed (without 
attribution).\197\ Another commenter states that the CT Plan's language 
describing the power of the Operating Committee to ``develop[ ] and 
maintain[ ] fair and reasonable Fees and consistent terms for the 
distribution, transmission, and aggregation of core data'' is confusing 
and recommends that ``[i]f the intent of this language is to empower 
the Operating Committee to set fees, after public notice and comment, 
and subject to Commission approval, it should clearly say as much.'' 
\198\
---------------------------------------------------------------------------

    \196\ Nasdaq Letter I, supra note 20, at 17 (internal citations 
omitted). Another commenter similarly states that interpretation of 
the CT Plan is a decision for the SROs to make, not the Commission. 
See NYSE Letter I, supra note 18, at 38-39.
    \197\ See Nasdaq Letter I, supra note 20, at 17-18.
    \198\ RBC Letter, supra note 30, at 6.
---------------------------------------------------------------------------

    In response to the comment addressing the Operating Committee's 
authority to interpret the provisions of the CT Plan and stating that 
the Non-SRO Voting Representatives should participate in any 
interpretations,\199\ the Commission notes that the terms of the CT 
Plan provide that the Non-SRO Voting Representatives, as members of the 
Operating Committee, will be able to participate in any discussions 
regarding interpretations and will have a vote on whether to adopt an 
interpretation. Further, the Commission believes that, while 
operational interpretations in order to implement the CT Plan are 
appropriately within the authority of the Operating Committee, any such 
interpretations must be consistent with terms of the CT Plan and may 
not in any way modify the CT Plan. Any change to a provision of the CT 
Plan would require an amendment pursuant to Rule 608 of Regulation 
NMS.\200\
---------------------------------------------------------------------------

    \199\ See Virtu Letter, supra note 30, at 3.
    \200\ 17 CFR 242.608(b)(2). As proposed, Article XIII, Section 
13.5(b) of the CT Plan, would permit the Members to implement 
amendments that relate to the functioning of Company as an LLC. As 
discussed below, the Commission is modifying this provision such 
that all amendments to the CT Plan must be filed with the 
Commission. See supra Section II.C.12(e).
---------------------------------------------------------------------------

    Another commenter argues that the provision granting power to the 
Operating Committee to develop and maintain fair and reasonable fees is 
confusing and suggests that the provision expressly state that the 
Operating Committee has the authority to set fees, after public notice 
and comment, and subject to Commission approval.\201\ The Commission 
does not believe such a clarification is necessary. Market Data Fees 
will be established at a later date as proposed amendments to the CT 
Plan.\202\ Rule 608(b) under Regulation NMS sets forth the requirements 
for amending an NMS plan,\203\ and includes specific provisions 
relating to establishing and amending fees set forth in an NMS plan. 
Therefore, the Commission does not believe that this requirement needs 
to be restated in the CT Plan.
---------------------------------------------------------------------------

    \201\ See RBC Letter, supra note 30, at 6.
    \202\ See supra Recitals paragraph (d)(ii) (requiring that 
within four months of the Effective Date of the CT Plan, the 
Operating Committee file proposed fees).
    \203\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

    Finally, one commenter states that the Operating Committee should 
function as a legislature, with management to execute the Plan and 
``the SIP's public purpose.'' \204\ This commenter further states that 
the diversified Operating Committee will be ill-equipped to run daily 
operation management functions to the detriment of the LLC.\205\ The 
terms of the proposed CT Plan do, however, contemplate that the 
Operating Committee will act as a general decision-making body, while 
the Administrator and the Processors will be responsible for the day-
to-day operational decisions.
---------------------------------------------------------------------------

    \204\ Data Boiler Letter I, supra note 31, at 26.
    \205\ See id. This commenter further states, ``having members 
dominating the Legislative branch and assigning an `observer' to 
scrutinize everything the Operating Committee may try to do, [would] 
indeed tie the hands of Executive branch.'' Id.
---------------------------------------------------------------------------

    For the reasons stated above, the Commission is approving Article 
IV, Section 4.1(a) as proposed.
    Article IV, Section 4.1(b) proposes to permit the Operating 
Committee to delegate all or part of its administrative functions to 
(1) a subcommittee; (2) one or more of the Members; (3) one or more 
Non-SRO Voting Representatives; or (4) any other Persons (including the 
Administrator), provided that a delegation would not convey the 
authority to take action on behalf of the CT Plan.
    Two commenters state that the CT Plan should clearly state the 
scope and nature of an ``administrative function.'' \206\ One commenter 
states that it supports allowing administrative functions to be 
delegated, as long as the Non-SRO Voting Representatives have an 
opportunity to participate in the decision to delegate the matter and 
any delegation to an SRO Voting Representative or subcommittee 
controlled by SRO Voting Representatives is subject to an augmented 
majority vote of the Operating Committee.\207\ This commenter also 
expresses concern about delegating undefined administrative functions 
solely to SRO Voting Representatives.\208\ The second commenter 
expresses similar concerns and suggests that administrative functions 
should not be permitted to be delegated to a subcommittee composed only 
of either SRO Voting Representatives or Non-SRO Voting Representatives, 
and that both groups should be represented on any

[[Page 44156]]

subcommittee to which administrative functions are delegated.\209\
---------------------------------------------------------------------------

    \206\ See Virtu Letter, supra note 30, at 5; Data Boiler Letter 
I, supra note 31, at 29-30.
    \207\ See Virtu Letter, supra note 30, at 5.
    \208\ See id.
    \209\ See Data Boiler Letter I, supra note 31, at 29-30.
---------------------------------------------------------------------------

    One commenter rejects these concerns, explaining that there would 
be no delegation of the Operating Committee's voting authority, but 
instead solely a delegation of the authority to implement a decision by 
the Operating Committee, to develop a proposal for Operating Committee 
consideration, or to perform other ministerial functions on the 
Operating Committee's behalf.\210\ This commenter further explains that 
an Operating Committee vote is necessary for any delegation of 
administrative functions and that this should mitigate concerns about 
undue delegation of authority to an SRO Voting Representative or Non-
SRO Voting Representative.\211\ Finally, another commenter states that 
decisions relating to the administrative functions are for the SROs 
alone to make.\212\
---------------------------------------------------------------------------

    \210\ See Nasdaq Letter I, supra note 20, at 22.
    \211\ See id.
    \212\ See NYSE Letter I, supra note 18, at 38-39.
---------------------------------------------------------------------------

    The Commission agrees with commenters that the concept of 
``administrative functions'' of the Operating Committee should be 
limited to prohibit certain delegations of authority and is therefore 
modifying Section 4.1(b) to exclude from the functions that may be 
delegated those administrative functions to be performed by the 
independent Administrator pursuant to Section 6.1. The Commission finds 
that this modification is appropriate because the functions delegated 
to the independent Administrator, particularly those that involve 
administering Vendor and Subscribers contracts, performing audits, or 
assessing fees, necessarily involve access to sensitive information of 
significant commercial or competitive value and therefore raise 
heightened concerns about conflicts of interest that can be adequately 
addressed only if these functions are performed by the independent 
Administrator.
    In response to the comment that suggests that any delegation to an 
SRO Voting Representative or subcommittee controlled by SRO Voting 
Representatives should be subject to a vote of the Operating 
Committee,\213\ the Commission agrees and notes that the terms of the 
CT Plan state that delegations of administrative functions under this 
provision are subject to a vote of the Operating Committee. 
Additionally, in response to the comment that argues that 
administrative functions should not be delegated to a subcommittee 
composed only of either SRO Voting Representatives or Non-SRO Voting 
Representatives,\214\ the Commission recognizes the concern that SRO 
Voting Representatives or Non-SRO Voting Representatives could have 
exclusive control of an administrative function delegated under this 
provision. However, the Commission believes that this concern is 
mitigated by the requirement that a vote of the Operating Committee is 
required to approve any delegation of administrative functions. 
Further, the modification discussed above limits the types of functions 
that are eligible for delegation. The Commission agrees with the 
comment that states that a delegation under this provision does not 
convey any authority to take action.\215\ Such authority resides with 
the Operating Committee, and Article IV, Section 4.1(b) of the CT Plan 
permits the Operating Committee to delegate authority only to implement 
a decision by the Operating Committee, develop a proposal for Operating 
Committee consideration, or perform other ministerial functions on the 
Operating Committee's behalf.
---------------------------------------------------------------------------

    \213\ See Virtu Letter, supra note 30, at 5.
    \214\ See Data Boiler Letter I, supra note 31, at 26-27.
    \215\ See Nasdaq Letter I, supra note 20, at 22.
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission is approving 
Section 4.1(b) as modified.
    Finally, Article IV, Section 4.1(c) provides that neither the 
Company nor the Operating Committee will have authority over any 
Member's proprietary systems or the collection and dissemination of 
quotation or transaction information in Eligible Securities in any 
Member's Market, or, in the case of FINRA, from FINRA Participants. The 
Commission received no comments on this provision of the CT Plan and is 
approving it as proposed.
(b) Composition and Selection of the Operating Committee
    Article IV, Section 4.2 of the CT Plan addresses the composition 
and selection of the Operating Committee members.
(i) SRO Voting Representatives
    Section 4.2(a) provides that each group of Members that are 
Affiliates (an ``SRO Group'') \216\ and each Non-Affiliated SRO \217\ 
will select an SRO Voting Representative to serve on the Operating 
Committee and vote on its behalf.\218\ The Commission is approving this 
Section as proposed.\219\
---------------------------------------------------------------------------

    \216\ For example, NYSE, NYSE American, NYSE Chicago, and NYSE 
National would be one SRO Group for purposes of the proposed CT Plan 
and would select one individual to represent the SRO Group on the 
Operating Committee.
    \217\ Currently, the Non-Affiliated SROs are FINRA, IEX, LTSE, 
and MEMX.
    \218\ See Article IV, Section 4.2(a) of the CT Plan. Each SRO 
Group and each Non-Affiliated SRO may designate an alternate 
individual or individuals who shall be authorized to vote on its 
behalf if the SRO Voting Representative is unable. Each SRO Voting 
Representative may serve as such at the discretion of the SRO Group 
or Non-Affiliated SRO that it represents. See id.
    \219\ Discussion of the allocation of SRO votes by SRO Group 
appears in Section II.C.5(c)(i), infra.
---------------------------------------------------------------------------

(ii) Non-SRO Voting Representatives
(A) Inclusion of Non-SRO Voting Representatives
    Section 4.2(b) provides that Non-SRO Voting Representatives will 
also be permitted to serve and vote on Operating Committee 
matters.\220\ Several commenters express support for including Non-SRO 
Voting Representatives on the Operating Committee.\221\ One commenter 
states that the requirement for voting representation by a diverse set 
of stakeholders is ``a core element of the Governance Order, with the 
purpose of reducing conflicts of interest and providing `more 
meaningful inclusion of key stakeholders' views in New Consolidated 
Data Plan decision making.'' \222\ Another commenter similarly states 
that it supports expanding voting representation to non-SROs and having 
them participate as full voting members of the Operating Committee to 
allow non-SROs to have a role in the CT Plan's decision-making process 
and therefore help address conflicts of interest.\223\ Another 
commenter states that allowing only SROs to have a vote ``would impair 
[the] credibility of CT Plan as a public utility.'' \224\ Another 
commenter states that giving Non-SRO Voting Representatives a vote on 
the Operating Committee will ``break the current SRO voting monopoly.'' 
\225\
---------------------------------------------------------------------------

    \220\ See Article IV, Section 4.2(b) of the CT Plan.
    \221\ See IEX Letter, supra note 30, at 2; ICI Letter II, supra 
note 31, at 1; BMO Letter I, supra note 30, at 3; BMO Letter II, 
supra note 30, at 2. See also Letter from Kenneth E. Bentsen, Jr., 
President and CEO, SIFMA (June 9, 2021), at 2.
    \222\ IEX Letter, supra note 30, at 2 (quoting the Commission's 
Governance Order, supra note 8, 85 FR at 28707).
    \223\ See BMO Letter I, supra note 30, at 3; BMO Letter II, 
supra note 30, at 2.
    \224\ Data Boiler Letter I, supra note 31, at 30.
    \225\ Schwab Letter II, supra note 30, at 6.
---------------------------------------------------------------------------

    Other commenters oppose the CT Plan's provisions that grant non-
SROs voting rights on the Operating Committee. Three commenters state 
that these provisions are contrary to Section 11A of the Act.\226\ 
These commenters

[[Page 44157]]

state that Section 11A of the Act authorizes the Commission to direct 
only the SROs to jointly develop and operate NMS plans, and does not 
provide the authority to give non-SROs voting power on the operating 
committee of an NMS plan.\227\ While acknowledging that the non-SROs 
should have some voice in the operations of the CT Plan, one commenter 
argues that Congress ``determined to entrust the planning, development, 
operation, and regulation of NMS plans to SROs that have specific 
regulatory obligations to act in furtherance of the public interest.'' 
\228\ This commenter also argues that, because Rule 608 provides that 
only SROs have the authority to act jointly to file and amend NMS 
plans, providing voting rights to non-SROs violates Rule 608.\229\ 
Another commenter argues that the Act leaves no discretion for the 
Commission to grant votes to non-SROs,\230\ and that providing votes to 
non-SROs would conflict with the design and purpose of the Act, which 
entrusted responsibility for the planning, development, operation, and 
regulation of the national market system to SROs, which are subject to 
comprehensive regulation,\231\ rather than to non-SROs, whose 
representatives would have no obligation to act in the public interest 
and would be free to act in their own personal self-interest.\232\ This 
commenter further states that the Non-SRO Voting Representatives would 
not have an obligation to protect investors or further the public 
interest, or to comply with the terms of the CT Plan, despite being 
voting members of the Operating Committee.\233\
---------------------------------------------------------------------------

    \226\ See Cboe Letter, supra note 17, at 2, 3-4 (arguing that 
only SROs have the authority to act jointly to file, amend, 
implement, and administer an NMS plan); NYSE Letter I, supra note 
18, at 6-7 (arguing that neither Section 11A nor Rule 608(a)(3) 
authorize non-SROs to act jointly along with SROs with respect to 
NMS plans); Nasdaq Letter I, supra note 20, at 1-2 (attaching and 
incorporating by reference all arguments made by Petitioners in 
their opening brief challenging the Order). The Commission has 
responded to the arguments made by Nasdaq in its brief. See Brief 
for the Respondent, Securities and Exchange Commission, The Nasdaq 
Stock Market, et al. v. Securities and Exchange Commission (Case No. 
20-1181) (DC Cir. 2020).
    \227\ See Cboe Letter, supra note 17, at 2; Nasdaq Letter I, 
supra note 18, at 1-2. See also NYSE Letter I, supra note 18, at 6-
7; NYSE Letter II, supra note 19, at 3.
    \228\ Cboe Letter, supra note 17, at 3.
    \229\ See id. at 4.
    \230\ See NYSE Letter I, supra note 18, at 7.
    \231\ See id.
    \232\ See id. at 7-8.
    \233\ See NYSE Letter I, supra note 18, at 7 (``While these 
individuals are intended to `represent' each of the six enumerated 
categories of non-SRO market participants, such individuals would 
not even have the obligation to further the purportedly represented 
non-SROs' interest nor the public interest when voting on the 
Operating Committee, leaving each free to act in his or her own 
personal self-interest.'').
---------------------------------------------------------------------------

    The Commission specifically considered and addressed these 
arguments in the Governance Order.\234\ As stated therein, the 
Commission believes that it is within its authority under Section 11A 
to require the operating committee to include voting rights for non-
SROs. In Section 11A(a)(2), Congress directed the Commission to use its 
authority under the Act to facilitate the establishment of the NMS in 
accordance with and in furtherance of its specific findings and 
objectives. Here, the Commission is acting pursuant to its authority 
under Section 11A(a)(3)(B) to further Congress's express objective of 
assuring the availability to brokers, dealers, and investors of 
information with respect to quotations for and transactions in 
securities.\235\ Section 11A(a)(3)(B) expressly permits the Commission 
to require SROs to ``act jointly'' with respect to a ``matter[ ]'' as 
to which they ``share authority in planning, developing, operating, or 
regulating the national market system (or a subsystem thereof).'' \236\ 
But Congress left to the Commission's discretion the determination of 
which ``matters'' to require joint action and how such joint action 
should occur. The requirement for the CT Plan to include minority 
voting rights for non-SROs on the Operating Committee falls comfortably 
within that discretion.
---------------------------------------------------------------------------

    \234\ See Governance Order, supra note 8, 85 FR at 28715-16.
    \235\ See 15 U.S.C. 78k-1(a)(3)(B).
    \236\ Id.
---------------------------------------------------------------------------

    The particular ``matter'' as to which the Commission is requiring 
joint action here--the planning, development, and operation of an NMS 
plan governing dissemination of consolidated equity market data--is 
designed to achieve the goals of Section 11A(c), in particular by 
ensuring the prompt, accurate, reliable, and fair collection, 
processing, distribution, and publication of information with respect 
to quotations for and transactions in securities and the fairness and 
usefulness of the form and content of such information. Not only does 
that provision expressly contemplate the involvement of non-SROs,\237\ 
but as the Commission explained in the Governance Order, an operating 
committee that takes into account views from non-SRO members that are 
charged with carrying out the objectives of the CT Plan will have an 
overall improved governance structure that better supports those goals, 
because it will reflect a more diverse set of perspectives from a range 
of market participants, including significant subscribers of SIP core 
data products.\238\ As the Commission further stated, ``including 
representatives from non-SROs alongside the SROs on the operating 
committee will enhance the ability of all relevant constituencies to 
work together to facilitate the goals of Section 11A of the Act.'' 
\239\ These findings had substantial support in the comment file for 
the Governance Order, as a diverse set of commenters expressed the view 
that the governance of market data plans should include a broader array 
of viewpoints.\240\ And the Commission reiterates those findings here.
---------------------------------------------------------------------------

    \237\ See 15 U.S.C. 78k-1(c) (prohibiting any SRO ``securities 
information processor, broker or dealer'' from collecting, 
processing, distributing, or publishing market data in contravention 
of Commission rules).
    \238\ See Governance Order, supra note 8, 85 FR at 28715-16.
    \239\ Id. at 28716.
    \240\ See id. at 28706.
---------------------------------------------------------------------------

    The Commission disagrees with comments that argue that because 
Section 11A of the Act and Rule 608 of Regulation NMS authorize the 
Commission to permit or require SROs to ``act jointly'' in planning, 
developing, and operating the NMS plans, the Commission has no 
authority to mandate that SROs provide minority voting rights for 
certain non-SROs on the operating committee of the new plan. Nothing in 
Section 11A precludes the involvement of non-SROs in the national 
market system.\241\ Nor do the text or structure of Section 11A 
demonstrate that in permitting the Commission to authorize or require 
SROs to ``act jointly'' with respect to matters over which they share 
authority, Congress intended to entrust the development or operation of 
the NMS exclusively to SROs. ``Act jointly'' does not clearly connote 
``act jointly and exclusively.'' \242\ Likewise, the

[[Page 44158]]

Commission's grant of authority to SROs in Rule 608(a)(3) authorizes 
SROs to act jointly but, in doing so, does not by implication limit the 
Commission's authority to set forth a governance structure that 
includes non-SROs with some measure of voting power on an NMS plan 
operating committee. Rather, as the Governance Order notes, both 
Section 11A and Rule 608 are silent as to the participation of non-SROs 
in the operation of the plan.
---------------------------------------------------------------------------

    \241\ To the contrary, Section 11A expressly contemplates the 
involvement of non-SROs. See, e.g., Section 11A(b), 15 U.S.C. 78k-
1(b) (regarding Securities Information Processors); Section 11A(c), 
15 U.S.C. 78k-1(c) (prohibiting any SRO ``securities information 
processor, broker or dealer'' from collecting, processing, 
distributing, or publishing market data in contravention of 
Commission rules); Section 11A(d)(3), 15 U.S.C. 78k-1(d)(3) (listing 
brokers, dealers, securities information processors, issuers, and 
investors with ``other persons interested in or likely to 
participate in the establishment, operation, or regulation of the 
national market system'').
    \242\ Indeed, history indicates that there is a different 
congressional intent behind the inclusion of this language. As the 
Commission has explained, the ``act jointly'' provision ``enables 
the Commission to require joint activity that otherwise might be 
asserted to have an impact on competition, where the activity serves 
the public interest and the interests of investors.'' Order 
Directing the Exchanges and the National Association of Securities 
Dealers, Inc. to Submit a Phase-in Plan to Implement Decimal Pricing 
in Equity Securities and Options, Securities Exchange Act Release 
No. 42914 (June 8, 2000), 65 FR 38010, 38012 (June 19, 2000); see 
also Application Pursuant to Section 11A(a)(3)(B) of the Securities 
Exchange Act of 1934, Securities Exchange Act Release No. 41843 
(Sept. 8, 1999), 64 FR 50126, 50127 (Sept. 15, 1999); Order 
Directing Options Exchanges To Submit an Inter-Market Linkage Plan, 
Securities Exchange Act Release No. 42029 (Oct. 19, 1999), 64 FR 
57674, 57675 (Oct. 26, 1999). In other words, Congress permitted the 
Commission to authorize SROs to engage in joint action that may 
otherwise give rise to antitrust concerns in circumstances in which 
they are acting ``with respect to matters as to which they share 
authority . . . in planning, developing, operating, or regulating a 
national market system (or a subsystem thereof) or one of more 
facilities thereof.''
---------------------------------------------------------------------------

    Further, the Commission does not believe, as suggested by some 
commenters, that permitting non-SROs to serve on the Operating 
Committee will impede the SROs' ability to act jointly or interfere 
with their ability to operate the national market system. The CT Plan 
simply requires the SROs to include Non-SRO Voting Representatives in 
the decision-making process for plan action.\243\ Additionally, nothing 
in the legislative history of Section 11A indicates that Congress 
sought to preclude the Commission from directing the SROs to provide 
non-SROs with a voice in NMS plan governance, particularly where, as 
here, the Commission has reasonably concluded that doing so will 
promote the Plan's effectiveness, consistent with Section 11A's 
enumerated goals.
---------------------------------------------------------------------------

    \243\ See Governance Order, supra note 8, 85 FR at 28715.
---------------------------------------------------------------------------

    Further, the Commission does not believe that allowing a broader 
representation of market participants in the governance of the CT Plan 
by including non-SROs as voting members on the Operating Committee will 
diminish the SROs' ability to ensure that the CT Plan meets the 
requirements of Section 11A of the Act and Rule 608 of Regulation NMS. 
As discussed below, the proposed voting structure, provides the SROs, 
by themselves, sufficient voting power to ensure that the Plan meets 
the requirements of Section 11A and Rule 608. In addition, the 
inclusion of non-SROs as voting members does not create a risk that the 
CT Plan could be amended in a manner inconsistent with the SROs' 
regulatory obligations or with the Act, as any substantive amendments 
to the CT Plan would require Commission approval, and the Commission 
would determine if each such amendment was consistent with the Act and 
Rule 608. Therefore, the Commission continues to believe that inclusion 
of Non-SRO Voting Representatives on the Operating Committee would not 
interfere with the Commission's ability to exercise its oversight over 
the CT Plan.
(B) Categories of Non-SRO Voting Representatives
    Article IV, Section 4.2(b) provides that one Non-SRO Voting 
Representative will be chosen from each of the following categories to 
serve on the Operating Committee, with the right to vote on Operating 
Committee matters: (A) An institutional investor; (B) a broker-dealer 
with a predominantly retail investor customer base; (C) a broker-dealer 
with a predominantly institutional investor customer base; (D) a 
securities market data vendor that is not affiliated or associated with 
a Member, broker-dealer, or investment adviser with third-party 
clients; (E) an issuer of NMS stock that is not affiliated or 
associated with a Member, broker-dealer, or investment adviser with 
third-party clients; and (F) a Retail Representative.\244\
---------------------------------------------------------------------------

    \244\ See Article IV, Section 4.2(b) of the CT Plan. For 
purposes of the CT Plan, a Retail Representative is an individual 
who (1) represents the interests of retail investors, (2) has 
experience working with or on behalf of retail investors, (3) has 
the requisite background and professional experience to understand 
the interests of retail investors, the work of the Operating 
Committee of the Company, and the role of market data in the U.S. 
equity market, and (4) is not affiliated with a Member or broker-
dealer. See id.
---------------------------------------------------------------------------

    One commenter states it is ``not against'' the proposed categories 
of Non-SRO Voting Representatives, but argues that the representatives' 
ability to introduce new and useful innovation to reform the SIP should 
be emphasized.\245\ Another commenter expresses support, in particular, 
for the inclusion of an institutional investor, such as an asset 
manager, on the Operating Committee.\246\ One commenter opposes the 
proposed restriction that would prohibit the Non-SRO Voting 
Representative representing issuers from being affiliated with an SRO, 
a broker-dealer, or an investment adviser.\247\ This commenter argues 
that such a limitation would ``eliminate a significant portion of 
qualified issuer representatives with the industry experience necessary 
to be effective non-SRO members,'' and would unreasonably discriminate 
against ETF issuers as they are typically affiliated with a broker-
dealer or investment adviser, denying representation to a significant 
segment of the market.\248\
---------------------------------------------------------------------------

    \245\ Data Boiler Letter I, supra note 31, at 28.
    \246\ See ICI Letter II, supra note 31, at 1.
    \247\ See Letter from Hubert De Jesus, Managing Director, Global 
Head of Market Structure and Electronic Trading, and Samantha DeZur, 
Director, Global Public Policy, BlackRock (Nov. 12, 2020) 
(``BlackRock Letter I''), at 3.
    \248\ Id.
---------------------------------------------------------------------------

    Another commenter disagrees with the proposed restriction that 
would prohibit the Non-SRO Voting Representative representing Market 
Data Vendors from being affiliated or associated with a Member, broker-
dealer, or investment adviser with third-party clients.\249\ The 
commenter explains that many market data vendors partner with broker-
dealers to create, and have available, technology that will complement 
traditional vending technology. The commenter argues that if these 
vendors are excluded from the pool of possible adviser candidates, no 
employees of major vendors would be eligible to serve, and that would 
eliminate many candidates that have the depth and breadth of 
understanding that comes from working for a large vendor. The commenter 
suggests that the restriction on who is eligible to serve as the 
securities Market Data Vendor Non-SRO Voting Representative be revised 
so that the individual representing the vendor community may not be 
associated with or in a direct control relationship with a broker-
dealer.\250\
---------------------------------------------------------------------------

    \249\ See Letter from Sherry Madera, Chief Industry & Government 
Affairs Officer, Refinitiv (Nov. 12, 2020) (``Refinitiv Letter''), 
at 1-2.
    \250\ See id.
---------------------------------------------------------------------------

    Although some commenters object to the restriction that the 
securities market data vendor representative and the issuer 
representative cannot be affiliated with SROs, broker-dealers, and 
investment advisers with third-party clients,\251\ the Commission 
continues to believe that these restrictions are appropriate. These 
restrictions would operate to prevent certain affiliates of SROs, 
broker-dealers, or investment advisers from gaining additional 
representation on the Operating Committee by virtue of their 
affiliations. Under the CT Plan, SROs would have two-thirds of the 
votes on the Operating Committee, broker-dealers would have two 
representatives on the Operating Committee, and institutional investors 
would have one representative on the Operating Committee. Allowing a 
person from an issuer or market data

[[Page 44159]]

vendor affiliated with an SRO to serve as a Non-SRO Voting 
Representative would increase SRO representation and correspondingly 
diminish the representation of non-SROs on the Operating Committee.
---------------------------------------------------------------------------

    \251\ See BlackRock Letter I, supra note 247, at 3; Refinitiv 
Letter, supra note 249, at 1-2.
---------------------------------------------------------------------------

    The Commission also believes that it is important that the 
securities market data vendor representative and the issuer 
representative not be affiliated with a broker-dealer or an investment 
adviser with third-party clients so that there are entities with 
potentially diverse views on the Operating Committee. The Commission 
believes that adding an issuer representative that is not affiliated 
with an investment adviser would be more likely to add a different and 
valuable perspective than a second representative affiliated with an 
investment adviser. Similarly, the Commission believes that, although 
it is likely that the affiliation restrictions for a market data vendor 
representative would prevent at least some qualified and experienced 
persons from serving in that role, the Commission believes that this 
disadvantage is justified by the benefits of having a non-affiliated 
market data vendor, because the non-affiliated market data vendor would 
be more likely to add a different and valuable perspective to the 
deliberations of the Operating Committee than a third Non-SRO Voting 
Representative that is affiliated with a broker-dealer and would also 
be less likely to be affected by the same potential conflicts of 
interest. Moreover, as stated in the Governance Order, the Commission 
believes that even with these restrictions, the Operating Committee 
will be able to attract knowledgeable representatives of securities 
market data vendors and issuers, as the CT Plan will address issues and 
make important decisions that will impact these constituencies.\252\ 
The Commission believes that the opportunity to have a voice on the 
operating committee of an NMS plan responsible for issues related to 
market data will be highly coveted and that there will be qualified 
nominees willing to serve as representatives from organizations that 
are not affiliated with SROs, broker-dealers, or institutional 
investors.
---------------------------------------------------------------------------

    \252\ See Governance Order, supra note 8, 85 FR at 28718.
---------------------------------------------------------------------------

    The Commission therefore concludes that including representatives 
from these categories of Non-SRO Voting Representatives, as set forth 
in the CT Plan as proposed, will provide a diversity of views on the 
Operating Committee such that perspectives from key stakeholders in 
matters related to equity market data are heard. Accordingly, the 
Commission is approving the provision of Article IV, Section 4.2(b) 
that enumerates the categories of Non-SRO Voting Representatives as 
proposed.
(C) Term Limits
    Article IV, Section 4.2(b) of the CT Plan provides that Non-SRO 
Voting Representatives are eligible to serve for two-year terms for a 
maximum of two terms total, whether consecutive or non-
consecutive.\253\ Under this provision, after the expiration of a Non-
SRO Voting Representative's term, a replacement will be selected by a 
majority of the then-serving Non-SRO Voting Representatives.\254\ The 
CT Plan provides for a staggered start of the Non-SRO Voting 
Representatives official terms,\255\ but provides that those Non-SRO 
Voting Representatives whose official terms would not begin until the 
Third Quarterly Operating Committee Meeting after the Effective Date, 
would temporarily serve as a Non-SRO Voting Representative upon their 
selection and would still be eligible to be selected for another two-
year term.\256\
---------------------------------------------------------------------------

    \253\ See Article IV, Section 4.2(b) of the CT Plan.
    \254\ See Article IV, Section 4.2(b)(i) and (ii) of the CT Plan. 
See also infra Section II.C.5(b)(ii)(D).
    \255\ Specifically, the proposed CT Plan provides that the terms 
for the Issuer Representative, the Retail Representative, and the 
Institutional Representative would begin at the First Quarterly 
Operating Committee Meeting and the Securities Market Data Vendor 
Representative, the Broker-Dealer with a predominantly retail 
customer base Representative and the Broker-Dealer with a 
predominantly institutional investor base Representative would begin 
at the Third Quarterly Operating Committee Meeting. See Article IV, 
Section 4.2(b)(i) of the CT Plan.
    \256\ See Article IV, Section 4.2(b) of the CT Plan.
---------------------------------------------------------------------------

    Several commenters express views on the term limits proposed in 
Article IV, Section 4.2(b).\257\ One commenter states that the maximum 
term limit imposed on Non-SRO Voting Representatives in the CT Plan 
could adversely affect the operations of the Operating Committee by 
barring members with more experience from serving on it and by making 
it more difficult to attract qualified candidates for all the 
categories of Non-SRO Voting Representatives.\258\ Another commenter 
recommends allowing Non-SRO Voting Representatives to serve two two-
year terms and then take a break for two years before being eligible to 
serve again.\259\ The commenter believes that this term structure will 
``promote qualified participation by non-SROs, while preserving an 
egalitarian process which allows for a rotation of representatives and 
provides any interested candidate the opportunity to serve.'' \260\ 
Another commenter recommends that Non-SRO Voting Representatives be 
permitted to serve two consecutive terms and then serve again after a 
one-term break, arguing that there is a limited pool of individuals 
with adequate experience and knowledge that can serve and that there 
are benefits from institutional knowledge gained from serving on the 
Operating Committee.\261\ In addition, one commenter believes that a 
Non-SRO Voting Representative should be permitted to serve more than 
two terms, provided there is a sufficiently lengthy (e.g., two years) 
cooling-off process.\262\ This commenter believes that the cooling-off 
process should provide a check on any firm's or individual's influence 
and would foster a sufficiently deep pool of candidates.\263\
---------------------------------------------------------------------------

    \257\ See RBC Letter, supra note 30, at 8; MFA Letter, supra 
note 30, at 3-4; BlackRock Letter I, supra note 247, at 2; ICI 
Letter I, supra note 31, at 3-4; SIFMA Letter I, supra note 30, at 
3; SIFMA Letter II, supra note 30, at 2; Virtu Letter, supra note 
30, at 4; Letter from Marcia E. Asquith, Executive Vice President, 
Board and External Relations, FINRA (Nov. 12, 2020) (``FINRA Letter 
I''), at 7-8; MEMX Letter, supra note 30, at 3.
    \258\ See RBC Letter, supra note 30, at 8.
    \259\ See BlackRock Letter I, supra note 247, at 2.
    \260\ Id.
    \261\ See MFA Letter, supra note 30, at 3-4.
    \262\ See ICI Letter I, supra note 31, at 3-4.
    \263\ See id.
---------------------------------------------------------------------------

    Similarly, another commenter that supports a maximum term limit for 
Non-SRO Voting Representatives to allow for fresh perspectives from new 
industry representatives recommends that Non-SRO Voting Representatives 
be permitted to serve three consecutive two-year terms with ability to 
serve the same term limits after a two-year break.\264\ This commenter 
believes that the maximum term of four years proposed in the CT Plan 
would ``impede meaningful and informed participation of Non-SRO 
Representatives'' and ``does not allow sufficient time for the 
representative to provide meaningful contribution as it may take new 
members . . . some time to get up to speed on the many diverse and 
complex issues.'' \265\ Another commenter states that it supports term 
limits to ``incentivize a healthy rotation of industry experts on the 
[Operating] Committee,'' but it does not believe that the term limits 
proposed ``offer enough runway for experts to get up to speed

[[Page 44160]]

and to participate meaningfully in the work of the [Operating] 
Committee,'' and recommends permitting Non-SRO Voting Representatives 
to serve three two-year terms.\266\ Another commenter states that there 
is a sufficient number of qualified people to serve on the Operating 
Committee such that it is not necessary to have any person serve for 
more than six years, whether terms are consecutive or not.\267\ This 
commenter supports allowing Non-SRO Voting Representatives to serve for 
two three-year terms, arguing that such a term would provide continuous 
fresh ideas to the Operating Committee.\268\
---------------------------------------------------------------------------

    \264\ See SIFMA Letter I, supra note 30, at 3; SIFMA Letter II, 
supra note 30, at 2.
    \265\ SIFMA Letter I, supra note 30, at 3; see also SIFMA Letter 
II, supra note 30, at 2. FINRA similarly supports a longer maximum 
term to ``ensure that Non-SRO Voting Representatives are able to 
gain knowledge and experience with the specifics of SIP operations, 
which can be very technical in nature, and allow them to provide 
more meaningful input into the CT Plan's operations.'' FINRA Letter 
I, supra note 257, at 7-8.
    \266\ Virtu Letter, supra note 30, at 4.
    \267\ See Fidelity Letter, supra note 30, at 4.
    \268\ See id.
---------------------------------------------------------------------------

    Other commenters address when the Non-SRO Voting Representatives 
should commence their duties on the Operating Committee.\269\ One 
commenter suggests that the Operating Committee be established with 
both SRO and non-SRO voting representation before the CT Plan becomes 
effective to allow non-SROs the ability to participate in the process 
of operationalizing the CT Plan.\270\ Another commenter recommends that 
the Non-SRO Voting Representatives' terms begin at the first meeting of 
the Operating Committee and that the terms be staggered such that three 
Non-SRO Voting Representatives would serve for three years and three 
Non-SRO Voting Representatives would serve for two years to allow all 
representatives to be present from the start.\271\ Other commenters 
similarly support staggered terms. One commenter argues that staggered 
terms would reduce the distractions that could occur if all the Non-SRO 
Voting Representatives were replaced every two to four years.\272\ 
Another commenter believes that the terms for Non-SRO Voting 
Representatives should be staggered so that no more than half of the 
representatives are elected in one year.\273\ Similarly, another 
commenter recommends staggering terms ``by at least one or two years to 
ensure sufficient continuity and consistency in representation.'' \274\
---------------------------------------------------------------------------

    \269\ See RBC Letter, supra note 30, at 4; BlackRock Letter II, 
supra note 30, at 1-2; ICI Letter II, supra note 31, at 2; Data 
Boiler Letter I, supra note 31, at 31.
    \270\ See BlackRock Letter II, supra note 30 at 1-2; see also 
Data Boiler Letter I, supra note 31, at 31 (stating that Non-SRO 
Voting Representatives should be selected before the Effective Date 
so they can assist with implementation of governance policies and 
procedures).
    \271\ See ICI Letter II, supra note 31, at 2.
    \272\ See Data Boiler Letter I, supra note 31, at 31.
    \273\ See MEMX Letter, supra note 30, at 3. To accomplish this, 
the commenter suggests modifying the initial term of three of the 
Non-SRO Voting Representatives. See id.
    \274\ BlackRock Letter I, supra note 247, at 2; see also Virtu 
Letter, supra note 30, at 4.
---------------------------------------------------------------------------

    Several commenters recommend imposing term limits on SRO Voting 
Representatives.\275\ One commenter believes that by applying term 
limits to Non-SRO Voting Representatives only, the CT Plan could 
advantage SROs relative to non-SROs with respect to relevant 
information and experience.\276\ Another commenter states that SRO 
Voting Representatives should be subject to the same term limits as 
Non-SRO Voting Representatives.\277\ Another commenter similarly states 
that allowing SRO Voting Representatives to serve indefinitely may be 
``counterproductive.'' \278\
---------------------------------------------------------------------------

    \275\ See RBC Letter, supra note 30, at 8; Virtu Letter, supra 
note 30, at 4; MFA Letter, supra note 30, at 3-4.
    \276\ See RBC Letter, supra note 30, at 8.
    \277\ See MFA Letter, supra note 30, at 3-4.
    \278\ Virtu Letter, supra note 30, at 4.
---------------------------------------------------------------------------

    Other commenters disagree that SRO Voting Representatives should be 
subject to term limits. Two commenters objecting to term limits for SRO 
Voting Representatives explain that these representatives do not serve 
as individuals, but as representatives of a legal entity, and must vote 
based on that entity's position.\279\ Therefore, one commenter argues, 
changing the individual would not serve to bring new perspectives to 
the Operating Committee.\280\ Another commenter stated that whether 
term limits apply to either Non-SRO Voting Representatives or SRO 
Voting Representatives is a decision for the SROs to make, not the 
Commission.\281\
---------------------------------------------------------------------------

    \279\ See FINRA Letter I, supra note 257, at 7-8; Nasdaq Letter 
I, supra note 20, at 23.
    \280\ See Nasdaq Letter I, supra note 20, at 23. This commenter 
also argues that imposing term limits on SRO Voting Representatives 
would interfere with the SRO's ability to discharge its 
responsibilities under the Act through the individual that it 
believes best able to exercise those functions. See id.
    \281\ See NYSE Letter I, supra note 18, at 38-39.
---------------------------------------------------------------------------

    In the Governance Order, the Commission explained that term limits 
for Non-SRO Voting Representatives must balance the advantages of 
institutional knowledge with the potential benefits to be derived from 
new perspectives.\282\ Further, the Commission stated that it believed 
that a term of two years, with the potential for additional terms, 
would provide sufficient time for a member to become familiar with the 
issues dealt with by the operating committee.\283\ Several commenters, 
however, argue that Non-SRO Voting Representatives would need to be 
permitted to serve for longer than two two-year terms to get fully up 
to speed on all the complex matters covered by the CT Plan before 
rotating off the Operating Committee.\284\
---------------------------------------------------------------------------

    \282\ See Governance Order, supra note 8, 85 FR at 28720.
    \283\ See id.
    \284\ See RBC Letter, supra note 30, at 8; MFA Letter, supra 
note 30, at 3-4; BlackRock Letter I, supra note 247, at 2; SIFMA 
Letter I, supra note 30, at 3; SIFMA Letter II, supra note 30, at 2; 
Virtu Letter, supra note 30, at 4; Fidelity Letter, supra note 30, 
at 4; FINRA Letter I, supra note 257, at 7-8. Some of these 
commenters proposed alternative terms. See SIFMA Letter I, supra 
note 30, at 3; SIFMA Letter II, supra note 30, at 2; Virtu Letter, 
supra note 30, at 4; Fidelity Letter, supra note 30, at 4; FINRA 
Letter I, supra note 257, at 7-8; MEMX Letter, supra note 30, at 3.
---------------------------------------------------------------------------

    After considering the concerns raised by commenters, the Commission 
is modifying Section 4.2(b) of the CT Plan to provide that Non-SRO 
Voting Representatives shall serve no more than two consecutive three-
year terms, but shall be eligible, after a period of three years of 
non-service, to serve additional terms, subject to the requirement that 
three years of non-service must follow every set of two three-year 
terms of service.\285\ The Commission finds that the modification from 
two two-year terms to two three-year terms is appropriate because the 
Commission believes that these longer terms will better allow Non-SRO 
Voting Representatives to obtain sufficient experience with the 
operation of the CT Plan and to make informed contributions as members 
of the Operating Committee. The Commission also finds that--in order to 
preserve an appropriate balance between retaining institutional 
knowledge and allowing new perspectives to be heard--it is appropriate 
to require that, after serving a defined amount of time, Non-SRO Voting 
Representatives should be required to observe a ``cooling-off'' period 
before serving again so as to allow others the opportunity to serve. In 
response to a commenter's claim that the SROs should have discretion to 
set Non-SRO Voting Representatives' term limits, the Commission 
believes, as it stated in the Governance Order, that the determination 
of term limits for Non-SROs falls within its statutory authority under 
Section 11A of the Act.\286\ Moreover, the Commission believes that 
full participation by the Non-SRO Voting Representatives on the 
Operating Committee is a critical component of the

[[Page 44161]]

governance of the CT Plan and that permitting the SROs to set the terms 
of Non-SRO Voting Representatives would grant the SROs influence over 
the Non-SRO Voting Representatives and diminish the independence and 
effectiveness of Non-SRO Voting Representatives as they serve on the 
Operating Committee.
---------------------------------------------------------------------------

    \285\ The Commission is modifying references to the Non-SRO 
Voting Representatives' term limits in Article IV, Sections 
4.2(b)(iii) and (b)(vii) of the CT Plan to reflect this modification 
for consistency. See infra Section II.C.5(b)(ii)(C).
    \286\ See supra note 281. See also Brief for the Respondent, 
Securities and Exchange Commission, The Nasdaq Stock Market, et al. 
v. Securities and Exchange Commission (Case No. 20-1181) (DC Cir. 
2020).
---------------------------------------------------------------------------

    The Commission, however, disagrees with comments suggesting that 
term limits should also apply to SRO Voting Representatives.\287\ 
Rather, the Commission agrees with those comments that argue that the 
SRO Voting Representatives serve on the Operating Committee as 
representatives of a legal entity and vote at the direction of that 
entity. The SROs are, by virtue of their status as SROs, permanent 
participants in the CT Plan, and the Commission does not expect that 
varying the identity of the individuals representing a given SRO Group 
or Non-Affiliated SRO on the Operating Committee is likely to vary the 
views expressed or the votes cast by that SRO Group or Non-Affiliated 
SRO on the Operating Committee. The Non-SRO Voting Representatives, by 
contrast, will vary over time, and most will be employees of a set of 
firms that will vary over time, and the Commission expects that these 
individuals may have different perspectives regarding market data 
issues. Therefore, the Commission finds that imposing term limits on 
SRO Voting Representatives would not be appropriate, because it does 
not believe that doing so would bring fresh perspectives to the 
Operating Committee or further promote the goals of the CT Plan in the 
same manner as it would for Non-SRO Voting Representatives.
---------------------------------------------------------------------------

    \287\ See RBC Letter, supra note 30, at 8; Virtu Letter, supra 
note 30, at 4; MFA Letter, supra note 30, at 3-4.
---------------------------------------------------------------------------

    The Commission agrees with comments that suggest that all Non-SRO 
Voting Representatives should commence their duties upon selection and 
that the terms of Non-SRO Voting Representatives should be 
staggered,\288\ and the Commission believes that Sections 4.2(b)(ii) 
and (iii) of the CT Plan allow for both. Specifically, Section 
4.2(b)(ii) provides that the terms of the Non-SRO Voting 
Representatives will begin on a staggered basis with half of the Non-
SRO Voting Representatives beginning their term with the First 
Quarterly Meeting of the Operating Committee and half beginning their 
term with the Third Quarterly Meeting. However, Section 4.2(b)(iii) 
also states that, although the official term for certain of the Non-SRO 
Voting Representatives will not begin until the Third Quarterly 
Meeting, these Non-SRO Voting Representatives will temporarily serve on 
the Operating Committee, including having voting rights, before the 
official commencement of their terms and may be selected for a second 
full term. Therefore, all Non-SRO Voting Representatives will 
participate in, and have votes on, the Operating Committee as of the 
First Quarterly Meeting, even though the official term for half of the 
Non-SRO Voting Representatives will not begin to run until the Third 
Quarterly Meeting. Thus, the expiration of the Non-SRO Voting 
Representatives' terms will be staggered by approximately six months 
pursuant to this scheme.
---------------------------------------------------------------------------

    \288\ See RBC Letter, supra note 30, at 4; BlackRock Letter I, 
supra note 247, at 2; BlackRock Letter II, supra note 30, at 1-2; 
ICI Letter II, supra note 31, at 2; Data Boiler Letter I, supra note 
31, at 31.
---------------------------------------------------------------------------

    In response to comments recommending that the terms of Non-SRO 
Voting Representatives be staggered by at least one or two years to 
ensure continuity and consistency in representation,\289\ the 
Commission believes that the scheme for staggered terms proposed in the 
CT Plan, in combination with the Commission's modifications to the CT 
Plan's provisions regarding term length and term limits for Non-SRO 
Voting Representatives, as discussed above, appropriately balances the 
goal of continuity of service among Non-SRO Voting Representatives with 
the goal of providing for a rotation of Non-SRO Voting Representatives 
over time to help ensure a diversity of non-SRO viewpoints on the CT 
Plan Operating Committee. While it is possible that every Non-SRO 
Voting Representative would serve two three-year terms, leading to 
complete turnover among those representatives over the course of a 
single year in the future, it is also possible that the terms of Non-
SRO Voting Representatives will, over time, naturally become staggered 
as some representatives serve single terms or, for personal or business 
reasons, do not complete a full term. Moreover, prescribing a 
significant staggering of terms at the outset of CT Plan operations 
would require granting materially longer initial terms to certain 
categories of Non-SRO Voting Representatives and materially shorter 
initial terms to others, without a meaningful distinction on which to 
base that disparity. Therefore, the Commission is not modifying the 
approach proposed in the CT Plan.
---------------------------------------------------------------------------

    \289\ See BlackRock Letter I, supra note 247, at 2; MEMX Letter, 
supra note 30, at 3; Data Boiler Letter I, supra note 31, at 28.
---------------------------------------------------------------------------

    Finally, one commenter argues that the Non-SRO Voting 
Representatives should be empowered to participate in the governance of 
the current Equity Data Plans, as soon as those representatives are 
selected.\290\ While the Commission believes that adding the 
perspectives of Non-Voting SRO Representatives will be an important 
improvement to the governance structure for equity market data, the 
Commission does not believe that adding the Non-SRO Voting 
Representatives to the operating committees of the currently existing 
Equity Data Plans can be accomplished in the context of approving the 
proposed CT Plan or under the auspices of the Governance Order. The 
Commission agrees, however, that the input of Non-SRO Voting 
Representatives should be included in the governance of consolidated 
equity market data plans as soon as practicable, and the Commission 
has, as discussed above,\291\ sought to address this issue by adding 
deadlines to the CT Plan for the achievement of the steps necessary for 
implementation.
---------------------------------------------------------------------------

    \290\ See RBC Letter, supra note 30, at 4.
    \291\ See supra Section II.C.1(a).
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission is approving the 
provisions of Article IV, Section 4.2(b) of the CT Plan that govern the 
terms of members of the Operating Committee as modified.
(D) Process for Selecting Non-SRO Voting Representatives
    Article IV, Section 4.2(b)(i) provides that the initial Non-SRO 
Voting Representatives will be selected by a majority vote of the then-
current members of the Advisory Committee. This section further 
provides that the Advisory Committee Members will follow the procedures 
set forth in the CT Plan applicable for selection of Non-SRO Voting 
Representatives for those whose terms are expiring for selection of the 
initial Non-SRO Voting Representatives.\292\
---------------------------------------------------------------------------

    \292\ See Article IV, Section 4.2(b)(i) of the CT Plan.
---------------------------------------------------------------------------

    The Commission is modifying this Section to expressly permit 
Advisory Committee Members to nominate themselves to serve as Non-SRO 
Voting Representatives regardless of their length of service on the 
Advisory Committee, as well as to nominate other candidates. As 
proposed, under the procedure in Section 4.2(b)(v), although the 
Advisory Committee Members would be permitted to nominate themselves, 
only Members would be permitted to nominate other candidates.

[[Page 44162]]

The Commission finds that it is appropriate to allow the Advisory 
Committee Members to nominate candidates, in addition to themselves, 
because the Advisory Committee Members have the background, based on 
their experience with the Equity Data Plans, to select nominees from 
the industry who have the knowledge that is essential to effectively 
serve on the Operating Committee. The Commission also finds that it is 
appropriate to the modify the CT Plan to expressly state that Advisory 
Committee Members may nominate themselves, regardless of the length of 
their prior service, because service in an advisory capacity under the 
Equity Data Plans should not preclude a person's eligibility to serve 
on the CT Plan's Operating Committee as a voting representative under 
the CT Plan. To provide otherwise could prevent candidates who have 
direct experience with the operation of an NMS plan for consolidated 
equity market data, and who could provide continuity of ideas on the 
initial CT Plan Operating Committee, from being considered for Non-SRO 
Voting Representative positions. For these reasons, the Commission is 
approving Article IV, Section 4.2(b)(i) as modified.
    Article IV, Section 4.2(b)(v) proposes a procedure for nominating 
and electing Non-SRO Voting Representatives following their initial 
selection. Pursuant to the proposed procedure, the Operating Committee 
must post a notice on its website seeking nominations from the public 
for an upcoming position at least two months prior to the expiration of 
a Non-SRO Voting Representative's term. Members may submit individuals 
for consideration, and Non-SRO Voting Representatives may nominate 
themselves if they have not already served their maximum term.\293\ The 
Non-SRO Voting Representatives will review the nominations and confirm 
by majority vote that a nominated individual meets the requirements for 
the category up for election at least one month prior to expiration of 
the term for the position to be filled.\294\ Within a week of the Non-
SRO Voting Representatives' confirmation of eligible nominees, the 
Operating Committee must post the list of nominees on its website and 
solicit comment from the public.\295\ The Non-SRO Voting 
Representatives will then consider and discuss the comments received 
and elect an individual by majority vote.\296\ In the event that no 
nominee receives a majority vote, the individual with the lowest number 
of votes will be eliminated from consideration, and a new vote will be 
taken. The Non-SRO Voting Representatives will repeat this process 
until an individual receives a majority vote.\297\ Because Non-SRO 
Voting Representatives are elected to represent a category of market 
participants, in the event representatives leave their jobs or change 
duties such that they are in a position unrelated to the category that 
they represent, they must submit their resignation to the Chair of the 
Operating Committee. If representatives do not tender their resignation 
under such circumstances, they may be removed upon a vote of the 
Operating Committee.\298\ Each Non-SRO Voting Representative must agree 
in writing to comply with the provisions of the CT Plan relating to 
conflicts of interests \299\ and confidentiality.\300\
---------------------------------------------------------------------------

    \293\ See Article IV, Section 4.2(b)(v)(A) of the CT Plan.
    \294\ See Article IV, Section 4.2(b)(v)(B) of the CT Plan.
    \295\ See Article IV, Section 4.2(b)(v)(C) of the CT Plan. The 
Non-SRO Voting Representative will screen the comments for 
appropriateness prior to their posting on the LLC's website. See id.
    \296\ See id. Non-SRO Voting Representatives whose terms are 
expiring may vote in an election for an open position, provided they 
are not nominees for the position. See Article IV, Section 
4.2(b)(v)(D) of the CT Plan.
    \297\ See Article IV, Section 4.2(b)(v)(E) of the CT Plan.
    \298\ See Article IV, Section 4.2(b)(vi) of the CT Plan. The 
proposed CT Plan provides that if a Non-SRO Voting Representative 
resigns or is removed from the Operating Committee, a replacement 
will be selected by a majority vote of the then-serving Non-SRO 
Voting Representatives, and will serve out the remainder of the 
term. If the remainder of the term is less than a year, the 
individual will serve an additional two-year term, and if the 
remainder of the term is more than one year, the selection process 
outlined in Section 4.2(b)(v) will be followed. See Article IV, 
Section 4.2(b)(vii) of the CT Plan.
    \299\ See Article IV, Section 4.10 and Exhibit B of the CT Plan.
    \300\ See Exhibit C of the CT Plan.
---------------------------------------------------------------------------

    The Commission is modifying Article IV, Section 4.2(b)(v)(A) of the 
CT Plan in three respects. First, the Commission modifying this section 
to provide that SRO Voting Representatives, rather than Members, will 
be permitted to submit names for consideration for open Non-SRO Voting 
Representative positions.\301\ The Commission finds that this 
modification is appropriate because, while the Members of the CT Plan 
are the SRO entities, the CT Plan generally is organized such that it 
is the SRO Voting Representatives that act on behalf of the SROs in the 
operation of the CT Plan.
---------------------------------------------------------------------------

    \301\ The Commission is also making a non-substantive change to 
this Section of the CT Plan to insert ``the names of'' before 
``individuals'' for clarity.
---------------------------------------------------------------------------

    Second, the Commission is modifying this provision to permit Non-
SRO Voting Representatives to submit the names of individuals for 
consideration during the nominating process. The Commission finds that 
this modification is appropriate because it permits the Non-SRO Voting 
Representatives to use the same process as SRO Voting Representatives 
to nominate candidates for consideration to fill open Non-SRO Voting 
Representative positions. Without this modification, Non-SRO Voting 
Representatives would need to use the public process to nominate 
candidates, while the SRO Voting Representatives could directly 
nominate candidates. The Commission does not believe that such 
asymmetrical treatment of members of the Operating Committee is 
justified.
    Third, the Commission is modifying this provision to replace the 
language that permits Non-SRO Voting Representatives to nominate 
themselves ``if they have not served the maximum number of terms'' with 
the phrase ``if they are not then completing a second consecutive 
term.'' The Commission finds that this modification is appropriate 
because Non-SRO Voting Representatives cannot serve more than two 
consecutive three-year terms and they therefore cannot nominate 
themselves to serve if they are completing a second consecutive 
term.\302\
---------------------------------------------------------------------------

    \302\ See supra Section II.C.5(b)(ii)(C).
---------------------------------------------------------------------------

    One commenter states that Non-SRO Voting Representative seats 
should go to whoever can contribute to positive innovations in market 
data infrastructure, and questions whether allowing Non-SRO Voting 
Representatives to nominate themselves would further this end.\303\ The 
Commission does not share this concern because it believes that non-SRO 
market participants--for whom equity market data is a crucial aspect of 
business operations--will have a strong interest in the prompt, 
accurate, reliable, and fair collection, processing, distribution, and 
publication of consolidated equity market data. Thus, the Commission 
believes that it will be in the Non-SRO Voting Representatives' 
interest to select persons to serve on the Operating Committee who will 
further advance improvements and innovations in market data 
infrastructure. And the Commission further believes that the

[[Page 44163]]

public process for nominations, and the turnover of Non-SRO Voting 
Representatives required by the term limits included in the CT Plan, 
will help ensure that no set of individuals becomes permanently 
entrenched as Non-SRO Voting Representatives by virtue of the ability 
to nominate themselves.
---------------------------------------------------------------------------

    \303\ See Data Boiler Letter I, supra note 31, at 31, 32. This 
commenter also questions whether there would be a bias toward top 
elite firms, see Data Boiler Letter II, supra note 101, at 1, and 
states Non-SRO Voting Representatives should earn their seats by 
bringing in new and useful innovation, and if they do not do so, 
they should not be granted a seat regardless of how many terms or 
years they have served. See id. at 32.
---------------------------------------------------------------------------

    Another commenter states that the ability of Non-SRO Voting 
Representatives to select themselves without SRO approval is 
inconsistent with the statutory authorization for the national market 
system under Section 11A and Rule 608, as well as with the authority 
granted to SROs under Sections 6 and 19 of the Act.\304\ As previously 
stated, the Commission believes that it has broad authority under 
Section 11A of the Act to grant non-SROs voting rights with regard to 
the governance of the CT Plan. The Commission believes that the 
requirement that non-SRO members of the Operating Committee 
collectively select replacement non-SRO members will help to ensure 
that the individuals selected will represent their constituencies' 
views on important market data issues, and that the most effective and 
knowledgeable advocates for their views will serve on the Operating 
Committee.
---------------------------------------------------------------------------

    \304\ See Nasdaq Letter I, supra note 20, at 19; Nasdaq Letter 
II, supra note 49, at 1. See also MFA Letter, supra note 30, at 3. 
The Commission believes that in its comment letter, MFA may have 
misunderstood the proposed CT Plan to permit the SROs to exclusively 
select the Non-SRO Voting Representatives. As a result, MFA opposes 
providing such authority to the SROs and suggests alternatives for 
more equitable selection of Non-SRO Voting Representatives. See id. 
at 3. However, in fact, it is the Non-SRO Voting Representatives 
that exclusively select the Non-SRO Voting Representatives. See 
Article IV, Section 4.2(b)(iv) of the CT Plan.
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission is approving the 
provisions of Article IV, Section 4.2(b)(v) as modified.
(iii) SRO Applicant Observers
    Article IV, Section 4.2(c) of the CT Plan provides that entities 
that have not yet been registered with the Commission as national 
securities exchanges may appoint an individual to attend regularly 
scheduled Operating Committee Meetings (an ``SRO Applicant Observer'') 
if such an entity has submitted, and the Commission has published, a 
Form 1 to be registered as a national securities exchange or national 
securities association, or if such an entity is a national securities 
exchange that is not a Member and the Commission has published the 
exchange's proposed rule change to operate a Market.\305\ The CT Plan 
further provides that if the SRO Applicant's Form 1 or proposed rule 
change is withdrawn, returned, or otherwise not actively pending before 
the Commission, the SRO Applicant will no longer be permitted to attend 
Operating Committee meetings.\306\
---------------------------------------------------------------------------

    \305\ See Article IV, Section 4.2(c) of the CT Plan. The SRO 
Applicant may select an alternate to act on behalf of the SRO 
Applicant in his or her absence. See id.
    \306\ See id.
---------------------------------------------------------------------------

    The Commission finds that is reasonable to allow an entity to 
attend meetings of the Operating Committee as a non-voting observer 
when it has filed a Form 1 or proposed rule change to operate a Market 
and the Commission has published notice of that filing. The Commission 
believes that attending meetings of the Operating Committee as an 
observer will allow an equities market pending registration to be aware 
of and familiarize itself with issues before the Operating Committee 
before it becomes a national securities exchange or national securities 
association. The Commission received no comments on Section 4.2(c) of 
the CT Plan and is approving this Section as proposed.
(iv) Prohibiting Voting by Non-Operational Equity Trading Venues
    The CT Plan provides that in the event that a Non-Affiliated SRO, 
or that all national securities exchanges in an SRO Group, cease 
operations as a market (or have not commenced operation of a market), 
those entities will not be permitted to appoint an SRO Voting 
Representative. Such a Non-Affiliated SRO or SRO Group will, however, 
be permitted to attend meetings of the Operating Committee as an 
observer, except for Executive Sessions.\307\ If such a Non-Affiliated 
SRO or SRO Group does not commence operations within six months of 
attending the first Operating Committee as a non-operational 
exchange(s), it will no longer be permitted to attend Operating 
Committee meetings until it resumes operations as a market.\308\
---------------------------------------------------------------------------

    \307\ See Article IV, Section 4.2(d) of the CT Plan.
    \308\ See id.
---------------------------------------------------------------------------

    The Commission did not receive any comments on this provision of 
the CT Plan. The Commission believes that this provision will help 
ensure that only those SROs that are contributing to the generation or 
collection of the core data disseminated by the CT Plan will have a 
vote on CT Plan decisions. Accordingly, the Commission is approving the 
provision as proposed.
(c) Operating Committee Action/Voting Structure
    Article IV, Section 4.3 of the CT Plan sets forth the voting 
allocation and voting structure for actions of the Operating Committee.
(i) Allocation of Votes to the SROs
    Article IV, Section 4.3(a)(i) provides that each SRO Voting 
Representative will have one vote to cast on behalf of the SRO Group or 
Non-Affiliated SRO that he or she represents with a second vote 
provided if the SRO Group or Non-Affiliated SRO has a market center or 
centers that trade more than 15 percent of consolidated equity market 
share \309\ for four of the six consecutive months preceding a vote of 
the Operating Committee.\310\
---------------------------------------------------------------------------

    \309\ Article IV, Section 4.3(a)(i) of the CT Plan defines 
``consolidated equity market share'' as the average daily dollar 
equity trading volume of Eligible Securities of an SRO Group or Non-
Affiliated SRO as a percentage of the average daily trading volume 
of all the SRO Groups and Non-Affiliated SROs.
    \310\ Article IV, Section 4.3(a)(i) of the CT Plan states that 
FINRA is not considered a market center under this section of the 
proposed CT Plan solely by virtue of facilitating trades through any 
trade reporting facility that FINRA operates in affiliation with a 
national securities designed to report transactions otherwise than 
on an exchange.
---------------------------------------------------------------------------

    Several commenters object to the proposed allocation of voting 
rights.\311\ One commenter argues that the CT Plan's provisions for SRO 
group voting violate the Act and that the concept of ``exchange 
groups'' is found nowhere in the Act.\312\ Another commenter argues 
that the proposed exchange-group structure for SRO voting would 
impermissibly impair the ability of SROs to act jointly in 
administering the CT Plan and is inconsistent with both the Act and 
Rule 608.\313\ This commenter further argues that the proposed 
allocation would dilute each affiliated exchange's voting power 
relative to unaffiliated exchanges \314\ and that limiting votes to 
exchange groups would be a change from the Commission's ``long-standing 
practice of treating each SRO individually for regulatory purposes, 
regardless of its

[[Page 44164]]

corporate affiliation with other SROs.'' \315\ This commenter also 
opposes tying the number of votes cast by each Non-Affiliated SRO and 
SRO Group to market share, arguing that an SRO's statutory 
responsibilities ``bear no relationship to its market share,'' \316\ 
and specifically opposes the proposed 15% threshold as well, stating 
that it is ``arbitrary and may quickly become meaningless.'' \317\
---------------------------------------------------------------------------

    \311\ See Cboe Letter, supra note 17, at 4; NYSE Letter I, supra 
note 18, at 8; NYSE Letter II, supra note 19, at 3; Nasdaq Letter I, 
supra note 20, at 1-2 (attaching and incorporating by reference all 
arguments made by Petitioners in their opening brief challenging the 
Governance Order). The Commission has responded to the arguments 
made by Nasdaq in their brief in its own brief before the U.S. 
Circuit Court for the District of Columbia Circuit. See Brief for 
the Respondent, Securities and Exchange Commission, The Nasdaq Stock 
Market, et al. v. Securities and Exchange Commission (Case No. 20-
1181) (D.C. Cir. 2020).
    \312\ See Cboe Letter, supra note 17, at 4.
    \313\ See NYSE Letter I, supra note 18, at 8; NYSE Letter II, 
supra note 19, at 3.
    \314\ See NYSE Letter I, supra note 18, at 10.
    \315\ Id. at 9. NYSE provides examples of the Commission's 
practice of treating individual exchanges separately, including its 
requirements for separate pools of liquidity, separate fee 
schedules, and separate proposed rule changes. See id. at 9-10.
    \316\ Id. at 9 (``An SRO with 1% market share has the same 
obligations as one with 18% market share, yet under the [CT] Plan's 
voting structure, the latter SRO would have double the votes of the 
former.'').
    \317\ Id.
---------------------------------------------------------------------------

    While one commenter argues that the concept of an exchange group is 
not created by statute or rule,\318\ there is no statutory or 
regulatory provision that mandates ``one SRO, one vote'' either. 
Individual exchanges that historically had only one vote on NMS plans 
are now a part of groups that can control blocs of four or five votes. 
As the Commission stated in the Governance Order, ``in its oversight of 
the Equity Data Plans, [it] is unaware of an individual affiliated 
exchange member'' ever having ``cast its vote differently than the 
votes cast by its affiliated exchanges.'' \319\ Further, in response to 
the comment that the proposed allocation would dilute each affiliated 
exchange's voting power relative to unaffiliated exchanges, the 
Commission believes that this bloc voting has diluted the voting power 
of unaffiliated SROs over time, and that this concentration of ``voting 
power in a small number of exchange group stakeholders, which also have 
inherent conflicts of interest,'' has ``perpetuated disincentives for 
the Equity Data Plans to make improvements to the SIP data products.'' 
\320\
---------------------------------------------------------------------------

    \318\ See supra note 312 and accompanying text.
    \319\ Governance Order, supra note 8, 85 FR at 28713.
    \320\ Id.
---------------------------------------------------------------------------

    The Commission also disagrees with the comment that the Commission 
has treated affiliated exchanges as separate entities for regulatory 
purposes in the past, and therefore, should not treat them as a group 
for purposes of voting on the CT Plan's Operating Committee. The 
Commission agrees that each SRO has individual obligations with respect 
to compliance with its responsibility pursuant to Sections 6, 15A, 17, 
and 19 of the Act to comply with the statutory and regulatory 
requirements that apply to its operation and self-regulation of its 
individual market center.\321\ But both the applicable legal 
requirements and the function being performed here by the SROs differ 
in the context of the responsibility of the SROs to jointly operate the 
NMS plans pursuant to Section 11A of the Act and to disseminate 
consolidated market data, to which different SROs may contribute in 
varying degrees. The Commission therefore believes that it is 
appropriate to approach this circumstance differently. And, for the 
reasons discussed, the Commission finds it appropriate to treat 
affiliated exchanges under common management and control as one SRO 
Group limited to one vote, or at most two, in the context of NMS plan 
governance.
---------------------------------------------------------------------------

    \321\ 15 U.S.C. 78f; 15 U.S.C. 78o-3; 15 U.S.C. 78q; 15 U.S.C. 
78s.
---------------------------------------------------------------------------

    Moreover, the Commission's treatment of corporate affiliations 
varies based on the particular facts and circumstances and regulatory 
implications and concerns. Sometimes, the Commission treats affiliated 
entities independently. Other times, the Commission takes into account 
corporate relationships when deciding how to regulate.\322\ Because of 
the concentrated power affiliated SROs exert in the governance 
structure of consolidated equity market data, as demonstrated by the 
indisputable fact that affiliated SROs vote as blocs, the Commission 
has determined that affiliated exchanges under common management and 
control should be treated as one SRO Group limited to one vote, or at 
most two votes, in the context of NMS plan governance.
---------------------------------------------------------------------------

    \322\ See, e.g., Securities Exchange Act Release Nos. 90209 
(Oct. 15, 2020), 85 FR 67044, 67047-48 (Oct. 21, 2020), pet. for 
review docketed, No. 20-1470 (D.C. Cir. 2021) (Commission action 
concluding that an asset, service, or function may be a ``facility'' 
of an exchange despite being owned or operated by a legal entity 
other than the particular entity holding the exchange license); 
39086 (Sept. 17, 1997), 62 FR 50036 (Sept. 24, 1997) (similar).
---------------------------------------------------------------------------

    The Commission believes that reallocating votes by SRO Group should 
help to ensure the prompt, accurate, reliable, and fair collection, 
processing, distribution, and publication of information with respect 
to quotations for and transactions in NMS stocks and the fairness and 
usefulness of the form and content of that information. The Commission 
disagrees that the proposed exchange-group structure for SRO voting 
would impermissibly impair the ability of SROs to act jointly in 
administering the CT Plan and is inconsistent with both the Act and 
Rule 608. The Commission believes, as it stated in the Governance 
Order, that the allocation of voting power to exchanges, either 
individually or in groups, based on common management or control falls 
within its statutory authority under Section 11A of the Act.\323\
---------------------------------------------------------------------------

    \323\ See Brief for the Respondent, Securities and Exchange 
Commission, The Nasdaq Stock Market, et al. v. Securities and 
Exchange Commission (Case No. 20-1181) (D.C. Cir. 2021).
---------------------------------------------------------------------------

    In response to the comment that objects to tying market share to 
the number of votes an SRO Group or Non-Affiliated SRO is allocated, 
arguing that an SRO's regulatory responsibilities have no bearing on 
market share of the SRO,\324\ the Commission disagrees, because using a 
threshold amount of consolidated equity market share of more than 15 
percent over a specified period of time to provide a second vote to an 
SRO Group or Non-Affiliated SRO reflects the significance within the 
national market system of those exchanges that, in their roles as SROs, 
oversee trading activity that generates a significant amount of equity 
market data.
---------------------------------------------------------------------------

    \324\ See NYSE Letter I, supra note 18, at 9.
---------------------------------------------------------------------------

    For the reasons stated above, the Commission is approving Sections 
4.3(a)(i) as proposed.
(ii) Allocation of Votes to Non-SROs \325\
---------------------------------------------------------------------------

    \325\ See also supra Section II.C.5(b)(ii) (discussing Non-SRO 
Voting Representatives' participation on the Operating Committee).
---------------------------------------------------------------------------

    Article IV, Section 4.3(a)(ii) provides that, at all times, the 
Non-SRO Voting Representatives will have one-half the aggregate number 
of votes that the SRO Voting Representatives have. In other words, the 
SRO Voting Representatives will, in aggregate, have two-thirds of the 
voting power on the Operating Committee, and the Non-SRO Voting 
Representatives will, in aggregate, have one-third of the voting power. 
The number of votes attributed to the Non-SRO Voting Representatives 
will increase or decrease as necessary to preserve this ratio, in 
fractional share if necessary.
    One commenter expresses support for the allocation of voting power 
on the Operating Committee as proposed in Sections 4.3(a)(i) and (ii), 
stating that the proposed allocation of voting power between the Non-
SRO Voting Representatives and SRO Voting Representatives is consistent 
with the Act and the Governance Order.\326\ Another commenter suggests 
that there should be ``consideration to increase Non-SRO representation 
if SROs on the [Operating Committee] increases or perhaps adjusted if 
the `weight' of the user community increase/decreases in certain 
categories.'' \327\ In response, the Commission notes that the number 
of

[[Page 44165]]

votes for Non-SRO Voting Representatives will always be one-half of the 
SRO Voting Representatives' votes. Therefore, if the number of SRO 
Voting Representatives, and their aggregates votes, increases, the 
votes of the Non-SRO Voting Representatives will similarly increase.
---------------------------------------------------------------------------

    \326\ See ICI Letter II, supra note 31, at 1-2.
    \327\ Data Boiler Letter I, supra note 31, at 28.
---------------------------------------------------------------------------

    The Commission believes that the proposed allocation of votes to 
Non-SRO Voting Representatives will provide the Non-SRO Voting 
Representatives a meaningful presence and opportunity to vote on 
Operating Committee matters, while assuring that their voting power 
does not equal or exceed that of the SRO Voting Representatives. 
Accordingly, the Commission is approving Article IV, Sections 
4.3(a)(ii) as proposed.
(iii) Operating Committee Actions and Voting
    Article IV, Section 4.3(b) of the CT Plan provides that, with 
limited exceptions, action by the Operating Committee requires an 
``augmented majority vote,'' meaning a two-thirds majority of all votes 
on the Operating Committee, provided that this vote also includes a 
majority of the SRO Voting Representative votes. And Article IV, 
Section 4.3(c) provides that the only Operating Committee actions that 
would not require an augmented majority vote are: (1) The selection of 
Non-SRO Voting Representatives \328\; (2) the decision to enter into 
Executive Session \329\; (3) decisions concerning the operation of the 
Company as an LLC \330\; (4) modifications to LLC-related provisions of 
the Agreement pursuant to Section 13.5 of the CT Plan \331\; and (5) 
the selection of Officers of the Company, other than the Chair, 
pursuant to Section 4.8.\332\
---------------------------------------------------------------------------

    \328\ See Article IV, Section 4.2(b) of the CT Plan (providing 
that Non-SRO Voting Representatives will be selected by a majority 
vote of the then-serving Non-SRO Voting Representatives).
    \329\ See Article IV, Section 4.4(g) of the CT Plan (providing 
that the decision to enter into Executive Session will be subject to 
a majority vote of the SRO Voting Representatives).
    \330\ See Article X, Section 10.3 of the CT Plan (providing that 
any compromise or settlement of any tax audit or litigation 
affecting members, as well as any material proposed inaction or 
election to be taken by the Partnership Representative, require a 
majority vote of Members); and Article XI, Section 11.2 of the CT 
Plan (providing that the distribution of proceeds from the 
liquidation of the Company to Members is subject to a majority vote 
of the Members).
    \331\ See Article XIII, Section 13.5(b) of the CT Plan 
(providing that Articles IX, X, XI, and XII may be modified upon 
approval by a majority of Members).
    \332\ See Article IV, Section 4.8 of the CT Plan (providing 
that, the Members may, from time to time, designate and appoint one 
or more persons as an Officer of the Company by a majority vote of 
the Members).
---------------------------------------------------------------------------

    The Commission received comments on this aspect of the CT Plan. One 
commenter expressly supports requiring an augmented majority vote that 
requires at least two-thirds of the votes of SRO Voting Representatives 
and Non-SRO Voting Representatives, and a majority of the SRO Voting 
Representatives' votes.\333\ Another commenter recommends that the 
Commission amend the existing Equity Data Plans to adopt augmented 
majority voting.\334\ One commenter states that the CT Plan does not 
address instances where recusal of a Non-SRO Voting Representative 
would result in the Non-SROs having less than one third of the 
aggregate votes of the Operating Committee and ``strongly suggest[s]'' 
that the CT Plan be amended to provide that the votes of the Non-SROs 
will always equal one-third of the votes of the Operating Committee, 
even if one or more Non-SRO representatives has recused.\335\ Another 
commenter expresses concern about the proposed augmented majority 
voting scheme, particularly as it would be applied to Operating 
Committee actions, such as interpreting the CT Plan's provisions.\336\ 
This commenter believes that the augmented voting requirement should 
apply to the SROs only to the extent needed to carry out their explicit 
regulatory obligations under the law, rather than to meet general 
responsibilities under the Plan.\337\
---------------------------------------------------------------------------

    \333\ See Data Boiler Letter I, supra note 31, at 30. This 
commenter, however, expresses concern that ``numbers are always a 
problem as SRO counts increase as exchanges are added or merged, 
whereas Non-SRO counts stay at six.'' Id. at 30. This commenter also 
states that dividing the voting rights two-thirds and one-third 
between SROs and Non-SROs ``may result in a divide along partisan 
line . . . only passing trivia matters'' and the ``division would 
lead the SIP to run astray because of the bureaucracy.'' Id. at 4, 
13, 30. See also Data Boiler Letter II, supra note 101, at 1.
    \334\ See RBC Letter, supra note 30, at 4.
    \335\ Virtu Letter, supra note 30, at 7.
    \336\ See RBC Letter, supra note 30, at 6-7.
    \337\ See id. This commenter further suggests that ``the 
proposed Plan specify the limited matters requiring augmented 
voting, and state that all other matters--including procedural votes 
thereon--are to be decided by majority vote of the Operating 
Committee. This simple majority standard should also extend to any 
votes requiring a quorum. Otherwise, the SROs would have the ability 
to thwart decisions of the Operating Committee by denying the 
Operating Committee a quorum.'' Id.
---------------------------------------------------------------------------

    Other commenters state that the augmented majority vote will 
interfere with the SROs ability to comply with the Act.\338\ One 
commenter argues that the ``Commission's mandate that votes be 
allocated by exchange group would prevent SROs from fulfilling their 
duty under the Act to act jointly to implement the CT Plan. This is 
because that voting structure could result in a situation where actions 
and plan amendments might be approved by the individuals representing 
non-SROs and a minority of the SROs, even if those actions or 
amendments were opposed by a majority of the individual SROs.'' \339\ 
Another commenter echoes this concern stating, ``it is feasible that a 
minority of individual SROs would be able to adopt proposals over the 
objection of a majority of individual SROs'' under the proposed 
augmented majority voting scheme, and consequently, ``it would be 
possible for the non-SRO voting representatives and a minority of Non-
Affiliated SROs to force through plan actions and amendments without 
the assent of a majority of individual SROs.'' \340\ This commenter 
further states that allowing the CT Plan Operating Committee to act 
with only the concurrence of a minority of the individual SROs would 
subvert the ability of the SROs to act jointly pursuant to Section 
11A.\341\
---------------------------------------------------------------------------

    \338\ See Nasdaq Letter I, supra note 20, at 1-2 (attaching and 
incorporating by reference all arguments made by Petitioners in 
their opening brief challenging the Governance Order). The 
Commission responded to the arguments made by Nasdaq in their brief. 
See Brief for the Respondent, Securities and Exchange Commission, 
The Nasdaq Stock Market, et al. v. Securities and Exchange 
Commission (Case No. 20-1181) (D.C. Cir. 2021).
    \339\ Cboe Letter, supra note 17, at 4 (emphasis in original).
    \340\ NYSE Letter I, supra note 18, at 8-9; see also NYSE Letter 
II, supra note 19, at 3.
    \341\ See NYSE Letter I, supra note 18, at 9; NYSE Letter II, 
supra note 19, at 3.
---------------------------------------------------------------------------

    Contrary to commenters' concerns, and as explained in the 
Governance Order, the Commission believes that the requirement for an 
augmented majority vote strikes an appropriate balance between the plan 
receiving meaningful input from a broad range of stakeholders while 
also providing the SROs with voting power to help ensure that Plan 
actions meet the requirements of Section 11A of the Act and Rule 608 of 
Regulation NMS. Specifically, the proposed augmented majority voting 
structure provides the SROs in the aggregate with two-thirds of the 
voting power on the operating committee--and non-SRO members of the 
Operating Committee in aggregate with one-third of the voting power--
with proportionate fractional votes allocated to non-SRO members of the 
Operating Committee as necessary to preserve this ratio at all times. 
Further, as proposed, an ``augmented majority vote,'' requires a two-
thirds majority of all votes on the Operating Committee, provided that 
this vote also includes a majority of the votes allocated to the SROs.
    In response to those comments that the augmented majority vote 
could

[[Page 44166]]

result in a scenario in which a proposal is adopted with the support of 
a supermajority of votes on the Operating Committee and a majority of 
the votes allocated to the SROs, but without the support of a majority 
of the individual exchanges,\342\ the Commission notes, as it did in 
the Governance Order,\343\ that this outcome is intended to be 
permissible. The Commission believes that in order to break the voting 
monopoly currently held by the three SRO Groups, and give non-SROs a 
meaningful voice on the Operating Committee, requiring that plan action 
be supported by a supermajority of the Operating Committee (which would 
include a majority of the votes allocated to SROs along with sufficient 
non-SRO votes to achieve the supermajority), and that it not be 
constrained by the votes of one or two SRO Groups, is appropriate.
---------------------------------------------------------------------------

    \342\ See Cboe Letter, supra note 17, at 4; NYSE Letter I, supra 
note 18, at 9; NYSE Letter II, supra note 19, at 3.
    \343\ See Governance Order, supra note 8, 85 FR at 28713.
---------------------------------------------------------------------------

    In response to comments that suggest modifications to the voting 
allocation between SRO Voting Representatives and Non-SRO Voting 
Representatives to account for a recusal by a Non-SRO Voting 
Representative or a change in the number of SROs Members,\344\ the 
Commission does not believe it is necessary to modify the CT Plan. In 
the event a Non-SRO Voting Representative must recuse itself pursuant 
to the terms of the CT Plan, proposed Article IV, Section 4.4(c) 
provides that if a Voting Representative is recused, he or she will not 
count in the calculation to determine if there is a quorum necessary 
for the Operating Committee to vote.\345\
---------------------------------------------------------------------------

    \344\ See Virtu Letter, supra note 30, at 7; Data Boiler Letter 
I, supra note 31, at 30.
    \345\ See Article IV, Section 4.4(c) of the CT Plan.
---------------------------------------------------------------------------

    For the reasons stated above, the Commission is approving Article 
IV, Section 4.3(b) of the CT Plan as proposed. The Commission is, 
however, modifying Section 4.3(c) of the CT Plan to limit the 
circumstances in which the Operating Committee could act without an 
augmented majority vote. Specifically, for the reasons discussed in 
Section II.C.5(d)(iii), infra, the Commission is modifying Section 
4.3(c)(ii) of the CT Plan to provide that an augmented majority vote is 
required before a topic not specifically listed in Section 4.4(g)(i) of 
the CT Plan as appropriate for discussion in Executive Session may be 
discussed in Executive Session. In addition, for the reasons discussed 
in Section II.C.12(e), infra, the Commission is modifying Section 
4.3(c) of the CT Plan to delete the reference to modifications to LLC-
related provisions of the Agreement pursuant to Section 13.5(b) of the 
CT Plan, as well as, for the reasons discussed in Section II.C.5(h), 
infra, the reference to the selection of Officers, other than the 
Chair, pursuant to Section 4.8 of the CT Plan, as circumstances where 
an augmented majority vote is not required.
    For the reasons discussed, the Commission is approving Section 4.3 
of the CT Plan as modified.
(d) Meetings of the Operating Committee
    Article IV, Section 4.4 of the CT Plan addresses meetings of the 
Operating Committee.
(i) Conduct of Meetings and Attendance
    Section 4.4(a) provides that meetings of the Operating Committee 
may be attended by the Voting Representatives, Member Observers, SRO 
Applicant Observers, SEC staff, and other persons as deemed appropriate 
by the Operating Committee.\346\ As proposed, Member Observers would be 
entitled to receive notice of all meetings of the Company and to attend 
and participate in any discussion, but would not be entitled to vote on 
any matter.\347\
---------------------------------------------------------------------------

    \346\ The time and location of meetings will be determined by 
the Operating Committee. See Article IV, Section 4.4(a) of the CT 
Plan. The location of meetings will be in a location capable of 
holding the number of attendees of such meetings, or such other 
locations as may from time to time be determined by the Operating 
Committee. See Article IV, Section 4.4(e) of the CT Plan.
    \347\ See Article IV, Section 4.4(a) of the CT Plan.
---------------------------------------------------------------------------

    As discussed above,\348\ in Article I, Section 1.1(oo) of the CT 
Plan, the exchanges have proposed to define a new type of individual, a 
Member Observer, who may attend meetings of the CT Plan. As proposed, a 
Member Observer would be an ``individual other than a Voting 
Representative, that a Member, in its sole discretion, determines is 
necessary in connection with such Member's compliance with its 
obligations under Rule 608(c) of Regulation NMS to attend Operating 
Committee and subcommittee meetings.'' \349\ In the Notice, the 
Commission solicited commenters' views on whether an SRO would 
reasonably find it necessary to select a Member Observer to comply with 
its obligations under Rule 608(c) of Regulation NMS and under what 
circumstances, if any, the representation of an SRO on the Operating 
Committee by its selected SRO Voting Representative would be an 
insufficient means for the SRO to fulfill its obligations under Rule 
608 of Regulation NMS.\350\ The Commission also asked whether persons 
who hold certain positions within an SRO should be prohibited from 
serving as Member Observers, and whether, if Member Observers are 
necessary, only persons who perform certain roles within an SRO (e.g., 
legal or compliance personnel) should be able to serve as Member 
Observers.\351\ Lastly, the Commission solicited further comment on 
whether the CT Plan should limit the number of Member Observers that 
each SRO would be permitted to name or the frequency with which the 
person serving as a Member Observer can be changed.\352\
---------------------------------------------------------------------------

    \348\ See supra Section II.C.2.
    \349\ See Notice, supra note 3, 85 FR at 64576.
    \350\ See id. at 64568.
    \351\ See id.
    \352\ See id.
---------------------------------------------------------------------------

    In response to the questions in the Notice, the Commission received 
several comment letters regarding the proposed inclusion of Member 
Observers.\353\ Several commenters support including Member Observers 
in the CT Plan.\354\ Specifically, one commenter supports including 
Member Observers to ``account for the practical realities involved with 
the day-to-day operation of, and the SROs' participation in, the Equity 
Market Data Plans, which will be equally as relevant for the CT Plan if 
it is approved.'' \355\ The commenter explains that Member Observers 
are necessary because the SRO Voting Representative collaborates with 
others within their organization to make the best and most informed 
decisions, acknowledging that, while the SRO Voting Representative may 
cast the vote, staff and senior management from various departments 
within the organization provide input into decisions made, as 
needed.\356\ Another commenter that supports permitting SROs to 
designate Member Observers describes the SRO Voting Representative as a 
generalist and states that the SRO Voting Representative may be asked 
to opine on a wide variety of topics (legal, technical, regulatory, 
system, and business matters) that require the expertise of specialists 
in those areas.\357\ This commenter states

[[Page 44167]]

that most Member Observers would be employees of the Member charged 
with that Member's compliance obligations under Rule 608(c).\358\ This 
commenter also states that other Member Observers may be outside 
counsel, experts reporting to counsel, or other individuals advising 
the Member on compliance or other obligations.\359\ Another commenter 
contends that whether the SROs should be permitted to have Member 
Observers is a decision for the SROs to make, not the Commission, 
stating that, while the Commission has a role in supervising and 
enforcing SRO obligations, Commission rules establish that the SROs 
make operational decisions such as these.\360\
---------------------------------------------------------------------------

    \353\ See FINRA Letter I, supra note 257, at 4; Nasdaq Letter I, 
supra note 18, at 6, 13-14; NYSE Letter I, supra note 18, at 38; ICI 
Letter I, supra note 31, at 4; BMO Letter I, supra note 30, at 4; 
SIFMA Letter I, supra note 30, at 4-5; MFA Letter, supra note 30, at 
4; Schwab Letter I, supra note 30, at 5; BlackRock Letter I, supra 
note 247, at 4-5; Fidelity Letter, supra note 30, at 5; RBC Letter, 
supra note 30, at 7; Data Boiler Letter I, supra note 31, at 5.
    \354\ See FINRA Letter I, supra note 257, at 2-3; Nasdaq Letter 
I, supra note 20, at 26-27; Fidelity Letter, supra note 30, at 5; 
ICI Letter I, supra note 31, at 4; SIFMA Letter I, supra note 30, at 
4.
    \355\ FINRA Letter I, supra note 257, at 3.
    \356\ See id.
    \357\ See Nasdaq Letter I, supra note 20, at 14.
    \358\ See id. at 27.
    \359\ See id.
    \360\ See NYSE Letter I, supra note 18, at 38-39.
---------------------------------------------------------------------------

    Some commenters state that it would be inappropriate to restrict 
Member Observers to those who serve a particular role in the SRO, to 
limit the number of Member Observers that an SRO could name, or to 
limit the frequency with which such appointment of Member Observers 
could be changed.\361\ Two commenters argue that such limitations would 
be arbitrary, as there is no way to predict when expert assistance may 
be necessary, and they further assert that such restrictions would not 
provide any benefit and would otherwise restrict the SROs' ability to 
make decisions about how to fulfill their regulatory 
responsibilities.\362\ One commenter argues that any restrictions on 
the ability to call on such expertise when needed would interfere with 
the ability of the Operating Committee to address complex legal, 
regulatory, and technical issues as they arise.\363\ While one 
commenter does not recommend limiting the number of Member Observers 
permitted, it suggests that the Operating Committee members provide a 
reasonable basis for inviting Member Observers, taking into account 
criteria such as the person's area of expertise, potential or actual 
conflicts of interest, and the Operating Committee's agenda for the 
meeting.\364\
---------------------------------------------------------------------------

    \361\ See FINRA Letter I, supra note 257, at 4; Nasdaq Letter I, 
supra note 20, at 27; ICI Letter I, supra note 31, at 5.
    \362\ See FINRA Letter I, supra note 257, at 4; Nasdaq Letter I, 
supra note 20, at 27.
    \363\ See Nasdaq Letter I, supra note 20, at 14.
    \364\ See ICI Letter I, supra note 31, at 5.
---------------------------------------------------------------------------

    The Commission also received several comment letters expressing 
concerns regarding Member Observers as proposed in the CT Plan.\365\ 
One commenter states that without reasonable constraints, Member 
Observers may dilute the voice of Non-SRO Voting Representatives and 
enhance the SROs' ability to operate the CT Plan in their own interests 
instead of consistent with the statutory purposes for which the Plan 
exists.\366\ One commenter states that Member Observers should be 
limited so that an SRO cannot ``stack the deck'' with multiple Member 
Observers.\367\ Another commenter expresses concern that if Member 
Observers participate in Operating Committee meetings, it could 
exacerbate or create conflicts of interest and place the Non-SRO Voting 
Representatives at a competitive disadvantage, as they would not have a 
similar ability to consult with outside persons who have expertise in 
the matter being discussed.\368\
---------------------------------------------------------------------------

    \365\ See ICI Letter I, supra note 31, at 4-5; BMO Letter, supra 
note 30, at 3-4; SIFMA Letter I, supra note 30, at 4; MFA Letter, 
supra note 30, at 4; BlackRock Letter I, supra note 247, at 4; 
Fidelity Letter, supra note 30, at 5; RBC Letter, supra note 30, at 
7; Data Boiler Letter I, supra note 31, at 5.
    \366\ See MFA Letter, supra note 30, at 4.
    \367\ Data Boiler Letter I, supra note 31, at 6, 38.
    \368\ See RBC Letter, supra note 30, at 8.
---------------------------------------------------------------------------

    Several commenters state that Non-SRO Voting Representatives should 
also be permitted to invite observers to attend Operating Committee 
meetings, Executive Sessions, and subcommittee meetings.\369\ These 
commenters argue that better informed colleagues could advise Non-SRO 
Voting Representatives before, during, and after Operating Committee 
meetings, resulting in more informed discussions. Specifically, one 
commenter states that permitting Non-SRO observers would provide for 
broader participation, improve transparency, and enhance the quality of 
guidance, as well as assist in creating a pool of potential Non-SRO 
Voting Representatives.\370\ One commenter recommends that the CT Plan 
provide all Voting Representatives with the ability to request an 
observer to participate in Operating Committee meetings, so long as the 
Voting Representative specifies the purpose for their inclusion, 
including the relevancy to the topic under discussion, and subject to 
the Operating Committee's approval.\371\
---------------------------------------------------------------------------

    \369\ See ICI Letter I, supra note 31, at 5; ICI Letter II, 
supra note 31, at 2; Schwab Letter I, supra note 30, at 2; BlackRock 
Letter I, supra note 247, at 3; Fidelity Letter supra note 30, at 5; 
RBC Letter, supra note 30, at 7-8.
    \370\ See BlackRock Letter I, supra note 247, at 3.
    \371\ See RBC Letter, supra note 30, at 8-9.
---------------------------------------------------------------------------

    After careful consideration of the comments received, the 
Commission believes that it is appropriate for SROs to be permitted to 
designate Member Observers under the CT Plan. The Commission agrees 
that there may be instances in which an SRO Voting Representative will 
require input from, or benefit from collaboration with, individuals 
with specialized views, experience with day-to-day operations, or 
expertise (including legal, regulatory, and technical knowledge) who 
are not designated as the SRO Voting Representative in order to 
facilitate an SRO's compliance with its regulatory obligations with 
respect to the CT Plan.\372\
---------------------------------------------------------------------------

    \372\ The Commission further notes that Sections 4.4(a) and 
4.7(b) of the CT Plan, respectively, permit other persons as deemed 
appropriate by the Operating Committee to attend general session 
meetings and subcommittee meetings.
---------------------------------------------------------------------------

    The Commission also finds that it is appropriate to modify the 
definition of Member Observer because the role of a Member Observer is 
intended to include certain individuals employed by the Member, or its 
counsel. Specifically, the Commission is modifying the definition of 
``Member Observer'' in Section 1.1(oo) of CT Plan to remove the 
reference to ``individual'' and replace it with ``employee of a 
Member'' and adding ``or any attorney to a Member'' to provide for an 
employee or counsel that a Member determines is necessary in connection 
with the Member's compliance under Rule 608(c).\373\ Additionally, 
because Member Observers are permitted to attend Operating Committee 
meetings and subcommittee meetings, the Commission is deleting ``in its 
sole discretion'' from the definition of Member Observer and adding 
language that would prohibit a Member from designating as a Member 
Observer an individual who is responsible for or involved with the 
procurement for, or development, modeling, pricing, licensing, or sale 
of, proprietary equity market data products (called ``PDP'' in the CT 
Plan) \374\ offered to customers of the CT Feeds, consistent with the 
Commission's modifications to Section 4.10(b)(i).\375\ Specifically, 
the Commission is adding the following clause to the definition of 
Member Observer: ``provided that the designation of the Member Observer 
is consistent with the prohibition in Section 4.10(b)(i).'' The 
Commission finds that this modification is appropriate to mitigate the 
effect of an SRO's conflicts of interests on the

[[Page 44168]]

operation of the CT Plan. Specifically, to the extent that a Member 
offers proprietary market data products and designates an employee that 
has a financial interest that is tied directly to the Member's 
proprietary data business, that individual has an inherent conflict of 
interest and cannot be designated as a Member Observer.
---------------------------------------------------------------------------

    \373\ See Section 1.1(oo) of the CT Plan, as modified.
    \374\ Section 1.1(fff) of Article I defines the term ``PDP'' as 
``a Member or non-Member's proprietary market data product that 
includes Transaction Reports and Quotation Information data in 
Eligible Securities from a Member's Market or a Trading Center, and 
if from a Member, is filed with the Commission.''
    \375\ See infra Section II.C.5(j)(iii).
---------------------------------------------------------------------------

    In response to comments regarding Member Observer limitations, the 
Commission believes that, because it is difficult to predict who, when, 
and how many individuals may be called upon to assist with CT Plan 
related matters, it is appropriate not to limit the number of Member 
Observers an SRO may appoint. However, the Commission believes that 
participation of Member Observers in CT Plan meetings is appropriately 
limited by the requirement that appointment of a Member Observer be 
``necessary in connection with a Member's compliance with its 
obligations under Rule 608(c) of Regulation NMS to attend Operating 
Committee and subcommittee meetings.'' \376\ The Commission further 
believes that this requirement, in addition to the provisions 
permitting other persons to attend CT Plan meetings as discussed below 
and the non-voting status of Member Observers, would reasonably 
preclude the SROs from diluting the role and contributions of Non-SRO 
Voting Representatives and bolstering their own agendas.
---------------------------------------------------------------------------

    \376\ Section 1.1(oo) of the CT Plan, as modified.
---------------------------------------------------------------------------

    While the Commission believes it is appropriate to allow Member 
Observers to participate in Operating Committee meetings, the 
Commission is modifying Article IV, Section 4.4(a) to eliminate the 
requirement that the Operating Committee provide notice of all meetings 
of the Company to Member Observers. The Commission finds that this 
modification is appropriate because the proposed requirement would 
place an unnecessary burden on the Operating Committee, and believes 
that it is appropriate instead for the SROs, on whose behalf the Member 
Observers will attend Operating Committee meetings, to provide notice 
of meetings to their Member Observers. Additionally, the Commission is 
modifying this subsection to provide that Member Observers may not 
attend or participate in Operating Committee meetings if their 
attendance or participation would be inconsistent with the conflicts of 
interest provisions requiring recusal. The Commission finds that this 
modification is appropriate because it is consistent with, and serves 
the same purposes as, modifications the Commission is making to Article 
IV, Section 4.10(b), discussed below, which make the CT Plan's 
conflicts of interest provisions applicable to Member Observers, just 
as they apply to SRO Voting Representatives and any alternate SRO 
Voting Representative.\377\
---------------------------------------------------------------------------

    \377\ See Article IV, Section 4.10(b) of the CT Plan. See also 
infra Section II.C.5(j) (discussing the Commission's modification to 
the proposed CT Plan to make the recusal provisions of Article IV, 
Section 4.10(b) applicable to Member Observers and the rationale 
therefore).
---------------------------------------------------------------------------

    Finally, because Non-SRO Voting Representatives will serve on the 
Operating Committee in their individual capacity and do not have 
regulatory obligations paralleling those of the SROs, the Commission 
does not believe that Non-SRO Voting Representatives require a similar 
observer provision in the CT Plan. However, the Commission notes that 
Section 4.4(a) of the CT Plan permits other persons as deemed 
appropriate by the Operating Committee to attend Operating Committee 
meetings and that Section 4.7(b) of the CT Plan similarly permits other 
persons as deemed appropriate by the Operating Committee to attend 
subcommittee meetings.\378\ The Commission believes that a Non-SRO 
Voting Representative may draw upon these provisions to seek the 
approval of the Operating Committee to permit attendance by an informed 
colleague or other person at a CT Plan meeting when the Non-SRO Voting 
Representative believes that discussion of a matter may benefit from 
that person's additional expertise or input.
---------------------------------------------------------------------------

    \378\ See Article IV, Sections 4.4(a) and 4.7(b) of the CT Plan.
---------------------------------------------------------------------------

    For the reasons stated above, the Commission is approving Section 
4.4(a), as modified.
(ii) The Chair of the Operating Committee
    Article IV, Section 4.4(e) provides for the selection of a Chair of 
the Operating Committee. As proposed, a Chair will be elected from 
among the SRO Voting Representatives to serve a one-year term beginning 
on the date of the first quarterly meeting of the Operating Committee 
following the Operative Date.\379\ An election to select the Chair of 
the Operating Committee will be held every year.\380\ Pursuant to the 
CT Plan, to elect a Chair, the Operating Committee will elicit 
nominations for individuals to be considered for the Chair 
position.\381\ If no candidate is elected by an augmented majority vote 
of the Operating Committee, the candidate with the lowest number of 
votes will be eliminated from consideration, and the Operating 
Committee will take another vote and repeat this process until a 
candidate is elected by an augmented majority vote of the Operating 
Committee.\382\ In the event two candidates remain and neither is 
elected by an augmented majority vote of the Operating Committee, the 
candidate receiving the most votes from SRO Voting Representatives will 
be elected.\383\ The Chair of the Operating Committee will have the 
authority to enter into contracts on the Company's behalf and otherwise 
bind the Company, but only as directed by the Operating Committee.\384\ 
In addition, the Chair will designate a person to serve as Secretary of 
the Operating Committee to record minutes of each meeting.\385\
---------------------------------------------------------------------------

    \379\ See Article IV, Section 4.4(e) of the CT Plan.
    \380\ See id.
    \381\ See Article IV, Section 4.4(e)(i) of the CT Plan.
    \382\ See Article IV, Section 4.4(e)(ii) of the CT Plan.
    \383\ See id.
    \384\ See Article IV, Section 4.4(e) of the CT Plan.
    \385\ See id.
---------------------------------------------------------------------------

    The Commission finds that the provisions governing the nomination 
of candidates and the selection of a Chair of the Operating Committee, 
as well as the proposed term for service as Chair, are appropriate. 
These provisions provide for a nomination and selection process that 
allows input from all members of the Operating Committee. The 
Commission further believes that a one-year term will allow for 
frequent rotation of the duties and responsibilities that are 
associated with the Chair position. Additionally, the Commission finds 
that the specified authority of the Chair of the Operating Committee is 
appropriate in that it allows the Chair to enter into agreements on 
behalf of the Company, thus streamlining the process of contracting 
with the Company, but does not permit the Chair to act except as 
directed by the Operating Committee. The Commission also finds that 
because the Chair has authority to act only at the direction of the 
Operating Committee, it is not unreasonable to require that the Chair 
be an SRO Voting Representative, as this will not undermine the voting 
power that the Non-SRO Voting Representatives have with respect to 
action by the Operating Committee. The Commission received no comments 
addressing these provisions and is approving Article IV, Section 4.4(e) 
as proposed.
(iii) Executive Session
    Article IV, Section 4.4(g) of the CT Plan provides that, 
notwithstanding any other provision of the CT Plan, the SRO

[[Page 44169]]

Voting Representatives, Member Observers, SEC staff, and other persons 
as deemed appropriate by the SRO Voting Representatives may meet in an 
Executive Session to discuss an item of business for which it is 
appropriate to exclude Non-SRO Voting Representatives. A request to 
meet in Executive Session must be included on the written agenda for an 
Operating Committee meeting, along with identification of the item to 
be discussed and a clearly stated rationale as to why that item would 
be appropriate for discussion in Executive Session.\386\ A majority 
vote of the SRO Voting Representatives would be required to create an 
Executive Session.\387\ The SRO Voting Representatives would be 
permitted to discuss only the topic for which the Executive Session was 
created and would disband upon fully discussing the topic.\388\
---------------------------------------------------------------------------

    \386\ See Article IV, Section 4.4(g) of the CT Plan. The 
rationale provided may be that the topic falls within the list of 
topics in Section 4.4(g)(i). See id.
    \387\ See Article IV, Section 4.4(g) of the CT Plan.
    \388\ See id.
---------------------------------------------------------------------------

    Article IV, Section 4.4(g)(i) of the CT Plan also provides that 
topics discussed in Executive Session should be limited to the 
following: (1) Any topic that requires discussion of Highly 
Confidential Information; (2) Vendor or Subscriber Audit Findings; and 
(3) Litigation matters.\389\ Section 4.4(g)(ii) adds a catch-all 
provision stating that this list of enumerated items ``is not 
dispositive of all matters that may by their nature require discussion 
in an Executive Session,'' adding, however, that ``the mere fact that a 
topic is controversial or a matter of dispute does not, by itself, make 
a topic appropriate for Executive Session.'' \390\ This section further 
provides that the minutes for an Executive Session must include the 
reason for including any item in Executive Session.\391\ As proposed, 
any action that requires a vote in Executive Session would require a 
majority of the vote of the SRO Voting Representatives eligible to vote 
on such action.\392\
---------------------------------------------------------------------------

    \389\ See Article IV, Section 4.4(g)(i)(A)-(C) of the CT Plan.
    \390\ Article IV, Section 4.4(g)(ii) of the CT Plan.
    \391\ See id.
    \392\ See Article IV, Section 4.4(g)(iv) of the CT Plan.
---------------------------------------------------------------------------

    In the Notice, the Commission sought comment on whether the 
specified items proposed in the CT Plan are appropriate topics for 
Executive Session, including whether the proposed provision that the 
topics identified in the CT Plan are ``not dispositive of all matters 
that may by their nature require discussion in an Executive Session'' 
would allow the SROs excessive discretion to meet in Executive 
Session.\393\ In response, the Commission received numerous comments. 
In particular, certain commenters express the view that the topics 
proposed as appropriate for Executive Session are too broad,\394\ and 
recommend eliminating the language in Section 4.4(g)(ii) that would 
permit the SROs to enter into Executive Session for matters that by 
their nature require discussions in Executive Session.\395\ One 
commenter believes that the ``broad and open-ended use of Executive 
Sessions'' proposed in the CT Plan is inconsistent with the SEC's goals 
of transparency, effective operations of the Plan, and eliminating 
conflicts of interest.\396\ This commenter states that ``[s]anctioning 
the ability of competitors to meet in secret to discuss confidential 
business raises antitrust concerns,'' \397\ and believes that there 
should be a presumption against use of Executive Session except upon a 
showing of need and explanation why Non-SRO Voting Representatives 
should not be included.\398\
---------------------------------------------------------------------------

    \393\ Notice, supra note 3, 85 FR at 64569 (Question 21).
    \394\ See RBC Letter, supra note 30, at 9; Schwab Letter I, 
supra note 30, at 2; Schwab Letter II, supra note 30, at 5-6; Virtu 
Letter, supra note 30, at 5; SIFMA Letter I, supra note 30, at 4; 
SIFMA Letter II, supra note 30, at 4; MEMX Letter, supra note 30, at 
4.
    \395\ See ICI Letter I, supra note 31, at 6; ICI Letter II, 
supra note 31, at 2; BMO Letter I, supra note 30, at 5; SIFMA Letter 
I, supra note 30, at 4; SIFMA Letter II, supra note 30, at 4; 
BlackRock Letter I, supra note 247, at 5; Fidelity Letter, supra 
note 30, at 4.
    \396\ RBC Letter, supra note 30, at 9.
    \397\ Id.
    \398\ See id. at 10-11. This commenter also believes that the 
Commission should amend the existing Equity Data Plans to adopt the 
same Executive Session policies it includes in the CT Plan. See id. 
at 4.
---------------------------------------------------------------------------

    One commenter states that the proposed list of topics for 
discussion in Executive Session is too broad and should be tightened to 
ensure that such sessions are not abused and used to cut non-SROs out 
of discussions.\399\ Another commenter asserts that the broad list of 
topics proposed for Executive Session ``essentially grants the SROs 
unfettered discretion about what topics are appropriate for Executive 
Session.'' \400\ This commenter believes that the determination of what 
belongs in Executive Session should not be left to the discretion of 
the SROs.\401\ One commenter states that Executive Sessions could be 
used to circumvent the policy underlying the Market Data Structure 
reforms.\402\ Another commenter believes that use of Executive Sessions 
should be narrowly tailored given that Executive Session presents an 
exception to the general rule that non-SROs will participate with SROs 
in operation of the CT Plan.\403\ This commenter believes that 
Executive Sessions should be reserved for instances where there is a 
direct conflict of interest for participation by Non-SRO Voting 
Representatives.\404\ Another commenter states that it recognizes that 
there may be circumstances for SRO-only deliberations in Executive 
Session, but is concerned that overuse of Executive Session would limit 
transparency of the CT Plan's governance.\405\ This commenter supports 
either limiting the topics that can be discussed to the three 
enumerated topics \406\ or changing the mechanism for approval of a 
topic as appropriate for Executive Session.\407\
---------------------------------------------------------------------------

    \399\ See Schwab Letter I, supra note 30, at 2; Schwab Letter 
II, supra note 30, at 5-6.
    \400\ Virtu Letter, supra note 30, at 5. This commenter also 
questions why Non-SRO Voting Representatives should be excluded from 
discussions of litigation matters if they sign a non-disclosure 
agreement. See id.; see also RBC Letter, supra note 30, at 11 
(stating that information of a sensitive nature can be addressed by 
the confidentiality policies of the CT Plan).
    \401\ See Virtu Letter, supra note 30, at 5.
    \402\ See ICI Letter I, supra note 31, at 6; ICI Letter II, 
supra note 31, at 2.
    \403\ See Fidelity Letter, supra note 30, at 4.
    \404\ See id.
    \405\ See MEMX Letter, supra note 30, at 4.
    \406\ See id.; see also Fidelity Letter, supra note 30, at 4.
    \407\ See MEMX Letter, supra note 30, at 4.
---------------------------------------------------------------------------

    One commenter recommends eliminating the broad language in the CT 
Plan that would permit Executive Sessions for ``matters that by their 
nature require discussions in Executive Session.'' \408\ Another 
commenter states that this provision risks providing SROs with 
``excessive discretion to limit or prevent the participation of Non-SRO 
Voting Representative in certain CT Plan matters'' and thus believes 
that the list of permissible topics for Executive Session should be 
listed specifically in the CT Plan.\409\ Another commenter states that 
this provision gives the SROs too much latitude to meet outside the 
presence of the Non-SRO Voting Representatives and creates inherent 
conflicts of interest, and recommends

[[Page 44170]]

eliminating it.\410\ One commenter states that the presence of the 
Commission staff at Executive Session meetings, as well as the 
requirement that a written agenda for an Executive Session must be 
provided at an Operating Committee meeting, will help ensure that 
Executive Sessions are used properly, but continues to have concerns 
that use of Executive Sessions will limit information available to Non-
SRO Voting Representatives and impair the effectiveness of their 
participation on the Operating Committee.\411\ Another commenter 
believes that in order to preserve the independence of Voting 
Representatives, Member Observers should not participate in Executive 
Sessions unless a Voting Representative requests the Member Observer to 
testify on a particular matter during the Executive Session.\412\
---------------------------------------------------------------------------

    \408\ See ICI Letter I, supra note 31, at 6; ICI Letter II, 
supra note 31, at 2.
    \409\ BMO Letter I, supra note 30, at 5; see also SIFMA Letter 
I, supra note 30, at 4; SIFMA Letter II, supra note 30, at 4. 
Additionally, one commenter asserts that ``personnel matters'' under 
the definition of Highly Confidential Information, which, as 
proposed, the SROs can discuss in Executive Session, should be 
limited to matters that exclusively affect the employees of SROs or 
the LLC. See SIFMA Letter I, supra note 30, at 4.
    \410\ See BlackRock Letter I, supra note 247, at 5; see also 
Data Boiler Letter II, supra note 101, at 1.
    \411\ See Fidelity Letter, supra note 30, at 4.
    \412\ See Data Boiler Letter I, supra note 31, at 31.
---------------------------------------------------------------------------

    One commenter, however, supports the use of Executive Sessions as 
proposed in the CT Plan and states that Executive Sessions have been 
used rarely in recent years and that the requirement that the basis for 
using Executive Session must be publicly disclosed in the Operating 
Committee Agenda will ensure that Executive Sessions will be used only 
when necessary.\413\
---------------------------------------------------------------------------

    \413\ See Nasdaq Letter I, supra note 20, at 25-26.
---------------------------------------------------------------------------

    The Commission agrees with comments that the scope of matters that 
could be discussed in Executive Session, outside the presence of the 
Non-SRO Voting Representatives, is too broad as proposed in the CT 
Plan.\414\ While the Commission acknowledges that, as stated by one 
commenter,\415\ Executive Sessions are rarely used today, the 
Commission believes that the CT Plan must be clearer regarding the 
scope of topics eligible for discussion in Executive Session and that 
the CT Plan language should be narrowly tailored to permit the SRO 
Voting Representatives to meet outside the presence of the Non-SRO 
Voting Representatives--who are full members of the Operating 
Committee--to discuss only limited matters that exclusively concern the 
SROs or that pose direct conflicts of interest with respect to non-SRO 
participation. In particular, the Commission believes that the proposed 
``catch-all'' language in Section 4.4(g)(ii)--providing that certain 
matters may, by their nature, require discussion in an Executive 
Session--is too broad to serve the limited purpose of Executive 
Sessions. In addition, though the Commission believes that the 
requirement for a written agenda and the presence of Commission staff 
at Executive Sessions may curb the potential misuse of Executive 
Sessions, the Commission believes that the topics that may be discussed 
in Executive Session should be specifically enumerated in the CT Plan 
to provide transparent and clear boundaries. Accordingly, the 
Commission is modifying Article IV, Section 4.4(g) in several ways to 
clarify who may attend Executive Sessions and to explicitly state the 
topics regarding which SRO Voting Representatives may meet in Executive 
Session.
---------------------------------------------------------------------------

    \414\ See RBC Letter, supra note 30, at 9; Schwab Letter I, 
supra note 30, at 2; Schwab Letter II, supra note 30, at 5-6; Virtu 
Letter, supra note 30, at 5; SIFMA Letter I, supra note 30, at 4; 
SIFMA Letter II, supra note 30, at 4; MEMX Letter, supra note 30, at 
4.
    \415\ See Nasdaq Letter I, supra note 20, at 25-26.
---------------------------------------------------------------------------

    First, the Commission is deleting the phrase in Section 4.4(g) that 
provides that Executive Sessions may be held ``[n]otwithstanding any 
other provision'' of the CT Plan. The Commission finds that this 
modification is appropriate because it will serve to make all other 
provisions of the CT Plan--most importantly the provisions regarding 
conflicts of interest and confidentiality--applicable to Executive 
Sessions. Permitting the SROs to meet in Executive Session without the 
conflicts of interest and the confidentiality policies being applicable 
would substantially undermine the effectiveness of those policies and 
the Commission's goals in reforming the governance of the Equity Data 
Plans. This concern is magnified where, as here, the SROs have proposed 
an open-ended set of topics that could be discussed in Executive 
Session.
    Second, the Commission is modifying Section 4.4(g) to require that 
the ``other persons'' authorized to attend Executive Sessions will be 
determined collectively ``by majority vote of the SRO Voting 
Representatives.'' The Commission finds that this modification is 
appropriate because it is unclear how the SRO Voting Representatives 
would ``deem appropriate'' other persons to attend Executive Session as 
proposed; this modification will resolve that ambiguity. Further, this 
modification will ensure that any selection of ``other persons'' 
authorized to attend Executive Sessions will be made in a manner 
consistent with the allocation of voting power by SRO Group, as set 
forth in Section 4.3(a)(i) of the CT Plan.
    Third, the Commission is modifying Section 4.4(g) to provide that 
topics appropriate for discussion in Executive Session must not only be 
topics for which it is appropriate to exclude Non-SRO Voting 
Representatives, as the CT Plan proposes, but must also fall within a 
list of enumerated topics, as discussed below.\416\ The Commission 
finds that this modification is appropriate because coupling the 
requirement that Non-SRO Voting Representatives may only be excluded 
from discussions of an item of business for which it is appropriate to 
exclude them with a list of specific topics appropriate for discussion 
in Executive Session will appropriately narrow the discussions that may 
be held in Executive Session so that Non-SRO Voting Representatives are 
not excluded from Operating Committee discussions without sufficient 
justification.
---------------------------------------------------------------------------

    \416\ The Commission is also modifying Article IV, Section 
4.4(g)(i) of the CT Plan to state that the items for discussion 
within an Executive Session shall be limited to the topics 
enumerated in subsections 4.4(g)(i)(A)-(E) and for which it is 
appropriate to exclude Non-SRO Voting Representatives. So, for 
example, as an enumerated topic eligible for discussion in Executive 
Session, a litigation matter may be discussed in Executive Session 
if it involves a matter for which it is appropriate to exclude the 
Non-SRO Voting Representatives. The Commission believes that, as a 
practical matter, it is likely that discussions of litigation 
matters that are not appropriate to include Non-SRO Voting 
Representatives will take place in the forum of a legal subcommittee 
of the Operating Committee. See infra Section II.C.5(k)(iii).
---------------------------------------------------------------------------

    Fourth, the Commission is modifying the list of topics appropriate 
for discussion in Executive Session in Section 4.4(g)(i) of the CT Plan 
to exclude discussions regarding contract negotiations with Processors 
or the Administrator. The CT Plan as proposed provides that any topic 
that requires discussion of Highly Confidential Information is 
appropriate for Executive Session,\417\ which would include discussions 
regarding the Company's contract negotiations with the Processors or 
Administrator; personnel matters; information concerning the 
intellectual property of Members or customers; and any document subject 
to the Attorney-Client Privilege or Work Product Doctrine.\418\ The 
Commission finds that this modification is appropriate because 
discussions regarding contract negotiations with Processors or the 
Administrator are integral to the management and operation of the CT 
Plan, for which the Operating Committee, including the Non-SRO Voting 
Representatives, is responsible. The Commission believes that inclusion 
of views from the Non-

[[Page 44171]]

SRO Voting Representatives at this critical stage of development of CT 
Plan operations is important, as decisions made in these contracts 
negotiations may have important consequences for the categories of 
market participants whose views Non-SRO Voting Representatives 
represent on the Operating Committee. Further, with respect to these 
contract negotiations, there are not issues that would uniquely affect 
the SROs and warrant excluding the Non-SRO Voting Representatives from 
such discussions.
---------------------------------------------------------------------------

    \417\ See Article IV, Section 4.4(g)(i)(A) of the CT Plan.
    \418\ See Article I, Section 1.1(ii) of the CT Plan (defining 
``Highly Confidential Information'' as ``any highly sensitive 
Member-specific, customer-specific, individual-specific, or 
otherwise sensitive information relating to the Operating Committee, 
Members, Vendors, Subscribers, or customers that is not otherwise 
Restricted Information'').
---------------------------------------------------------------------------

    Fifth, the Commission is modifying Section 4.4(g)(i) to add two 
topics to the list of items eligible for discussion in Executive 
Session. The Commission is adding discussion of ``[r]esponses to 
regulators with respect to inquiries, examinations, or findings'' as 
new Section 4.4(g)(i)(D). The Commission believes that it is 
appropriate to permit the SRO Voting Representatives to discuss 
responses to regulators with respect to inquiries, examinations, or 
findings in Executive Session, because the SROs have unique regulatory 
obligations with respect to the operation of the CT Plan. However, this 
provision is not intended to prevent or limit the Non-SRO Voting 
Representatives from receiving copies of any regulatory inquiries, 
examinations, or findings directed to the Operating Committee of CT 
Plan (as opposed to those directed solely to one or more SROs). As 
voting members of the Operating Committee that is charged with the 
operation of the CT Plan, Non-SRO Voting Representatives need to be 
informed of inquiries, examinations, and findings that are directed to 
the Operating Committee in order to be active and informed participants 
on the Operating Committee with respect to ongoing and future 
operations of the CT Plan. For example, a regulatory inquiry, 
examination, or finding might identify areas of non-compliance with the 
terms of the Plan, shortcomings in the performance of the Administrator 
or Processors, or areas in which amendments to the CT Plan might be 
necessary or appropriate, and the full Operating Committee should be 
aware of such issues because the full Operating Committee will vote on 
any CT Plan actions taken or proposed in response. The Commission 
believes, however, that because the SROs have unique obligations for, 
and potential liability for, meeting regulatory obligations in the 
operation of the CT Plan, SRO Voting Representatives should be 
permitted to discuss outside the presence of the Non-SRO Voting 
Representatives any reply by the SROs to regulators regarding any 
inquiry, examination, or finding.
    The Commission is also adding Section 4.4(g)(i)(E), which would 
permit discussion in Executive Session of ``[o]ther discrete matters 
approved by a vote of the Operating Committee.'' The Commission finds 
that this modification is appropriate because it recognizes that not 
every topic that may be appropriate for Executive Session can be 
foreseen, and because some provision must therefore be made in the CT 
Plan for unanticipated topics suitable for Executive Session. The 
Commission believes that allowing matters that have been presented to, 
and approved by, the Operating Committee for discussion in Executive 
Session strikes a balance by providing leeway for unanticipated topics 
to be discussed in Executive Session, while also giving the Non-SRO 
Voting Representatives an opportunity to review the topic being 
considered and vote as part of the Operating Committee on whether the 
topic is appropriate for discussion in Executive Session.
    Finally, as recommended by several commenters,\419\ the Commission 
is modifying Section 4.4(g)(ii) to remove the language that states the 
list of topics considered appropriate for Executive Session ``is not 
dispositive of all matters that may by their nature require discussion 
in an Executive Session.'' The Commission finds that this modification 
is appropriate because the language in Section 4.4(g)(ii) of the CT 
Plan is too broad and leaves it to the SRO Voting Representatives' 
discretion which additional topics would require discussion in 
Executive Session. This provision has the potential to be used by the 
SRO Voting Representatives to limit transparency to discuss significant 
topics outside the presence of the Non-SRO Voting Representatives. For 
this reason, the Commission is approving Section 4.4(g) of the CT Plan 
as modified.
---------------------------------------------------------------------------

    \419\ See RBC Letter, supra note 30, at 9; Schwab Letter I, 
supra note 30, at 2; Schwab Letter II, supra note 30, at 5-6; Virtu 
Letter, supra note 30, at 5; SIFMA Letter I, supra note 30, at 4; 
SIFMA Letter II, supra note 30, at 4; MEMX Letter, supra note 30, at 
4.
---------------------------------------------------------------------------

    While one commenter suggests that Non-SRO Voting Representatives 
should be permitted to attend Executive Sessions if they sign a non-
disclosure agreement,\420\ the Commission is declining to include such 
a provision in light of the other modifications the Commission has made 
to the Executive Session provisions of the CT Plan, which are discussed 
above. These modifications are designed to limit the permissible topics 
for Executive Sessions to those for which it appropriate to exclude 
Non-SRO Voting Representatives, such as matters that exclusively 
concern the SROs or that pose direct conflicts of interest with respect 
to non-SRO participation. Because the reason for excluding Non-SRO 
Voting Representatives in such instances would not be a concern about 
confidentiality, a non-disclosure agreement would not sufficiently 
resolve the underlying concerns.
---------------------------------------------------------------------------

    \420\ See supra note 400.
---------------------------------------------------------------------------

(iv) Other Provisions
    The CT Plan provides that the Chair of the Operating Committee may 
call a special meeting of the Operating Committee on at least 24 hours' 
notice to each Voting Representative and all persons eligible to attend 
Operating Committee meetings.\421\
---------------------------------------------------------------------------

    \421\ See Article IV, Section 4.4(b) of the CT Plan.
---------------------------------------------------------------------------

    Article IV, Section 4.4(c) of the CT Plan sets forth quorum 
requirements for a vote of the Operating Committee. Specifically, the 
CT Plan requires that a quorum of all Voting Representatives be present 
for a vote of the Operating Committee, and that a quorum is equal to 
the minimum votes necessary to obtain approval under Section 4.3(b), 
i.e., Voting Representatives reflecting two-thirds of Operating 
Committee votes eligible to vote on an action and Non-SRO Voting 
Representatives reflecting 50% of SRO Voting Representative votes 
eligible to vote on that action. A Voting Representative will only be 
considered present if he or she is either in physical attendance at the 
meeting or participating by conference telephone or other electronic 
means that enables each Voting Representative to hear and be heard by 
all others present at the meeting.\422\ This section further provides 
that if a Voting Representative has been recused from voting on a 
particular action, he or she will not be considered for purposes of 
determining whether a quorum is present.\423\
---------------------------------------------------------------------------

    \422\ See Article IV, Section 4.4(c)(ii) of the CT Plan.
    \423\ See Article IV, Section 4.4(c)(i) of the CT Plan.
---------------------------------------------------------------------------

    Article IV, Section 4.4(d) of the CT Plan requires that at least 
one week prior to a meeting, a summary of any action sought to be 
resolved at a meeting must be sent to each Voting Representative 
entitled to vote on the matter via electronic mail, portal 
notification, or regular U.S. or private mail (or if one week is not 
practicable, then with as much time as may be reasonably practicable 
under the

[[Page 44172]]

circumstances).\424\ Finally, Article IV, Section 4.4(f) of the CT Plan 
provides that meetings may be held by conference telephone or other 
electronic means that enables each Voting Representative to hear and be 
heard by all others present at the meeting.
---------------------------------------------------------------------------

    \424\ This requirement may be waived by a vote of the Operating 
Committee. See id.
---------------------------------------------------------------------------

    The Commission believes that the provisions in Article IV, Sections 
4.4(b)-(d) and (f) of the CT Plan relating to special meetings of the 
Operating Committee, quorum requirements, notice of actions to be 
resolved at Operating Committee meetings, and the mediums through which 
meetings may be held, are reasonable. The Commission received no 
comments addressing these Sections and is approving these provisions as 
proposed.
(e) Certain Transactions
    Article IV, Section 4.5 of the CT Plan states that the CT Plan is 
not prohibited from employing or dealing with persons in which an SRO 
or any of its affiliates has a connection or a direct or indirect 
interest. Specifically, the section provides that the fact that a 
Member or any of its affiliates is directly or indirectly interested in 
or connected with any person employed by the Company to render or 
perform a service, or from which or to whom the Company may buy or sell 
any property, shall not prohibit the Company from employing or dealing 
with such person.
    In the Notice, the Commission sought comment on this provision, 
asking, among other things, if there are specific types of employment 
relationships or business dealings that should be permitted, and 
similarly if there are ones that should be prohibited.\425\ The 
Commission also asked for commenters' views regarding whether the CT 
Plan should require the relevant SROs to maintain information barriers 
between themselves and the affiliates or persons that have employment 
relationships or business dealings with the CT Plan, and if so, what 
type of information barriers would be appropriate.\426\ The Commission 
further asked whether Section 4.5 could permit conflicts of interests 
that should be disclosed under the conflicts of interest policy, and if 
so, what modifications to that policy, if any, should be made.\427\ 
Finally the Commission asked if commenters thought that any additional 
disclosure, recusal, or voting procedures should be required before the 
CT Plan employs or deals with persons in which an SRO or any of its 
affiliates has a direct or indirect interest or connection.\428\
---------------------------------------------------------------------------

    \425\ See Notice, supra note 3, 85 FR at 64569 (Question 22).
    \426\ See id. at 64569-70 (Question 22).
    \427\ See id. at 64570 (Question 22).
    \428\ See id.
---------------------------------------------------------------------------

    In response to the questions posed in the Notice, one commenter 
states that permitting the LLC to engage with a person with whom a 
Member or its affiliate may have a connection would ``significantly 
increase the likelihood that Plan activities would be contrary to the 
role and public purpose of the Plan as part of the national market 
system,'' and would create a conflict of interest with the SROs' 
obligations with respect to the CT Plan under federal securities rules 
and regulations.\429\ While another commenter expresses a similar 
concern, it acknowledges that there may be limited circumstances in 
which it would be appropriate for Members of the CT Plan to employ or 
transact with its affiliates.\430\ This commenter suggests that there 
be robust disclosures of, and guardrails around, the terms of such 
activity to ensure that no further conflicts arise. Specifically, the 
commenter recommends, in addition to the disclosure requirements, that 
the CT Plan adopt detailed policies and procedures that articulate the 
specific circumstances where it would be appropriate for the Member to 
employ an SRO-affiliated entity, and that mandate recusals when there 
is a potential conflict of interest.\431\ Another commenter also 
supports a clearly defined conflicts of interest policy and recusal for 
certain transactions and prefers that structure to prohibiting the CT 
Plan from transacting with a Member or its affiliate.\432\
---------------------------------------------------------------------------

    \429\ RBC Letter, supra note 30, at 9.
    \430\ See Virtu Letter, supra note 30, at 6.
    \431\ See id.
    \432\ See Data Boiler Letter I, supra note 31, at 32-33.
---------------------------------------------------------------------------

    In response to the Commission's question regarding information 
barriers, one commenter states that, while the disclosure requirements 
may, to an extent, elicit relevant information to mitigate conflicts of 
interest resulting from certain business activities, it recommends 
additional measures to address such conflicts.\433\ The commenter 
recommends that the SROs be required to maintain information barriers 
between themselves and the affiliates or persons that have employment 
relationships or business dealing with the CT Plan.\434\ Additionally, 
the commenter suggests that any necessary recusals should be required 
before the CT Plan employs or deals with persons in which an SRO or any 
of its affiliates has a direct or indirect interest or connection.\435\
---------------------------------------------------------------------------

    \433\ See BMO Letter I, supra note 30, at 4.
    \434\ See id.
    \435\ See id. The Commission notes that this comment letter 
applies to both the discussion regarding Certain Transactions, as 
well as Article IV, Section 4.6 (Company Opportunities) of the CT 
Plan.
---------------------------------------------------------------------------

    Regarding the types of employment relationships or business 
dealings that Section 4.5 may permit, one commenter argues that the 
provision allows for the Company to employ a Member or its affiliate to 
continue to serve as a Processor of the CT Plan.\436\ The commenter 
states that selecting an SRO to serve as a Processor of the Plan would 
allow the Operating Committee to apply the cutting-edge technology that 
Members have developed to the dissemination of consolidated data, which 
could result in a beneficial relationship.\437\ The commenter opposes 
any limitation on the CT Plan's ability to contract with a Member, 
arguing that it would jeopardize this relationship.\438\ Thus, the 
commenter recommends that any potential conflicts of interest concerns 
be addressed in the CT Plan's related policies or contractual 
agreements, rather than by prohibiting the Plan's ability to engage 
with an entity that, in the commenter's view, may be best equipped to 
provide the service.\439\
---------------------------------------------------------------------------

    \436\ See Nasdaq Letter I, supra note 20, at 23.
    \437\ See id.
    \438\ See id.
    \439\ See id.
---------------------------------------------------------------------------

    The Commission recognizes that an SRO or its affiliates may at 
times, and based on its experience or expertise, provide the best (or 
only) option in supporting the business operations of the CT Plan. In 
particular, the current processors for the existing Equity Data Plans 
are affiliates of SROs. Accordingly, the Commission believes that 
prohibiting the employment or dealings with an individual or entity 
because of a direct or indirect affiliation or connection with a Member 
could be detrimental to the CT Plan, despite the potential conflict of 
interest. The Commission, however, agrees with comments that conflicts 
of interest should be managed by the CT Plan's policies, and the 
Commission believes that Section 4.10 of the CT Plan, discussed below, 
provides the framework for handling conflicts of interest and recusals. 
In particular, Section 4.10(b)(iii) requires a Member's recusal, 
including the recusal of its representatives and its affiliates and 
their representatives, from voting on matters in which it or its 
affiliates is (i) seeking a position or contract with the Company or 
(ii) has a position or contract with the Company, and whose

[[Page 44173]]

performance is being evaluated by the Company. As discussed below, the 
Commission believes that the recusal policy appropriately balances the 
potential influence a Member may have in employing or dealing with an 
affiliated person or entity, while also permitting the CT Plan to 
consider a broad range of individuals or entities that would best 
support the CT Plan's interests. Additionally, the Commission believes 
that the Administrator of the CT Plan, which will be required to be 
independent of any entity that offers for sale its own proprietary data 
products for Eligible Securities, can play an important role in 
reducing the effect of conflicts of interest on the operation of the CT 
Plan. Further, as noted above, the Commission is modifying the CT Plan 
to make explicit that no provision of the CT Plan shall be construed to 
limit or diminish the obligations and duties of the Members as self-
regulatory organizations under the federal securities laws and the 
regulations thereunder.\440\ As discussed above, the Commission 
believes that the provisions of Section 4.10 and the requirement for an 
independent Administrator sufficiently address the concerns raised by 
commenters with respect to the transactions permitted by Section 4.5, 
and is approving Article IV, Section 4.5 as proposed.
---------------------------------------------------------------------------

    \440\ See supra Section II.C.1(b).
---------------------------------------------------------------------------

(f) Company Opportunities
    Article IV, Section 4.6(a) of the CT Plan provides that each 
Member, its affiliates, and each of its respective equity holders, 
controlling persons, and employees may have business interests and 
engage in business activities in addition to those relating to the 
Company. Section 4.6(b) provides that none of the SROs shall be 
obligated to recommend or take any action that prefers the interest of 
the CT Plan or any other Member over its own interests, and it also 
provides that none of the SROs will be obligated to inform or present 
to the CT Plan any opportunity, relationship, or investment. This 
provision defines investments or other business relationships with 
persons engaged in the business of the CT Plan other than through the 
CT Plan as ``Other Business.'' Separately, Exhibit B of the CT Plan 
provides a list of questions and instructions tailored to elicit 
responses that disclose potential conflicts of interest.
    In the Notice, the Commission asked whether, in response to the 
questions set forth in Exhibit B, the SROs would be required to 
disclose certain opportunities, relationships, or investments, and 
whether these disclosures would sufficiently mitigate any conflicts of 
interest. In the Notice, the Commission also requested comment on, 
among other things, the specific types of business activities that 
would be covered by the provision, and whether any of these business 
activities could create a conflict of interest with an SRO's 
obligations with respect to the CT Plan under the federal securities 
laws, rules, and regulations. The Commission also asked if any 
potential conflicts of interest are sufficiently mitigated by the 
conflicts of interest policy and, if not, how the CT Plan should 
address such conflicts of interest.\441\
---------------------------------------------------------------------------

    \441\ See Notice, supra note 3, 85 FR at 64570 (Question 23).
---------------------------------------------------------------------------

    The Commission further solicited comment on whether the CT Plan 
should require that an SRO's representatives (i.e., SRO Voting 
Representative or Member Observer, as applicable) be recused from 
discussion of, or voting on, matters relating to opportunities, 
relationships, or investments when the SRO's interests may be in 
conflict with the goals of the CT Plan.\442\ Lastly, the Commission 
asked if commenters believe that Section 4.6(b) could be interpreted in 
a manner that could result in the SROs acting inconsistently with their 
obligations under the federal securities laws, rules, and regulations, 
and whether the language could result in an SRO voting against needed 
improvements to the provision of consolidated equity market data.\443\
---------------------------------------------------------------------------

    \442\ See id. (Question 24).
    \443\ See id. (Question 25).
---------------------------------------------------------------------------

    In response to the questions presented in the Notice, one commenter 
argues that the provisions would permit the SROs to disclaim a duty or 
obligation to the CT Plan and appear to be a ``complete abdication'' of 
responsibility in ensuring that the CT Plan carries out its intended 
function.\444\ The commenter suggests that the SROs should, at a 
minimum, establish a duty in the CT Plan to promote the plan's function 
of ``assuring the widespread availability of equity market data on 
terms that are fair and reasonable, consistent with statutory 
requirements, or to promote the interests of fair and orderly markets 
and the protections of investors and the public interest.'' \445\
---------------------------------------------------------------------------

    \444\ MFA Letter, supra note 30, at 2.
    \445\ Id.
---------------------------------------------------------------------------

    Another commenter asserts that the CT Plan does not address 
situations in which an SRO's interest conflicts with its obligations to 
the Plan, and recommends that an SRO Voting Representative be recused 
from voting on matters relating to opportunities, relationships or 
investments when the interests of the SRO Voting Representative 
conflict with the interests of the CT Plan.\446\
---------------------------------------------------------------------------

    \446\ See SIFMA Letter I, supra note 30, at 4-5; SIFMA Letter 
II, supra note 30, at 2.
---------------------------------------------------------------------------

    Regarding SRO engagement in Other Business that may be in 
competition with the CT Plan, one commenter argues that imposing limits 
on the business activities of the SROs is not within the scope of the 
CT Plan, is unwarranted, and would require specific rulemaking by the 
Commission. The commenter further asserts that the CT Plan is not an 
appropriate vehicle for substantive regulation of SRO operations.\447\ 
In response to the Commission's question regarding whether Other 
Business activities would create a conflict of interest with an SRO's 
obligations pursuant to federal securities laws, the commenter affirms 
that each Member has obligations under the federal securities laws, and 
states that it is those requirements, rather than obligations to the CT 
Plan, that will ensure that Members comply with their responsibilities 
regarding the dissemination of real-time consolidated equity market 
data.\448\ Additionally, the commenter maintains that the required 
disclosures set forth in Exhibit B are adequate to identify and 
mitigate any potential conflict of interest.\449\
---------------------------------------------------------------------------

    \447\ See Nasdaq Letter I, supra note 20, at 23.
    \448\ See id. at 24.
    \449\ See id.
---------------------------------------------------------------------------

    In response to whether Section 4.6(b) could be interpreted in a 
manner that results in an SRO acting inconsistently with its 
obligations under the federal securities laws, rules, and regulations, 
one commenter contends that the subsection is intended to be a waiver 
of the corporate opportunities doctrine. According to the commenter, 
the doctrine generally provides ``that a person with fiduciary duties 
may not divert to themselves or their affiliates any business 
opportunity that belongs to the company.'' \450\ The commenter claims 
that the Members ``likely do not have fiduciary duties to the CT Plan 
under default Delaware law, and Section 3.7(e) further clarifies that 
the Member do not have such duties.'' \451\ For these reasons, the 
commenter believes that, while the Members likely are not subject to 
the corporate opportunities doctrine, because the Members are large 
companies with complex business dealings, the CT Plan should be 
explicit that a Member cannot

[[Page 44174]]

be sued for breach of the corporate opportunities doctrine by the Plan 
or the Members of the CT Plan.\452\ The commenter further asserts that 
an express waiver does not affect any of the obligations that the SROs 
have under the federal securities laws.\453\
---------------------------------------------------------------------------

    \450\ Id.
    \451\ Id.
    \452\ See id. at 25.
    \453\ See id.
---------------------------------------------------------------------------

    The Commission agrees that no provision of the CT Plan, as 
modified, dilutes or diminishes any Member's regulatory obligations 
under the federal securities laws, rules, and regulations. While 
Section 4.6 may permit a Member to engage in Other Business that may be 
complementary or competitive with the Company, SROs must act 
consistently with their statutory and regulatory obligations. 
Accordingly, the Commission does not believe it is necessary to include 
a fiduciary duty provision in the CT Plan. However as discussed above, 
the Commission is modifying the Recitals of the CT Plan to explicitly 
state that no provision of the CT Plan shall be construed to limit or 
diminish the obligations and duties of the Members as SROs under the 
federal securities laws and the regulations thereunder.\454\
---------------------------------------------------------------------------

    \454\ See supra Section.II.C.1(b).
---------------------------------------------------------------------------

    The Commission further believes the conflicts of interest 
provisions set forth in Section 4.10 of the CT Plan, along with the 
required disclosures in Exhibit B, would serve to mitigate potential 
conflicts of interest arising from Other Business activities. As the 
Commission has previously stated, the Commission believes that by 
requiring full disclosure of all material facts necessary to identify 
the nature of a potential conflict of interest and the effect it may 
have on the CT Plan action, all parties, including the Commission and 
the public, will be better positioned to evaluate competing interests 
among any of the parties involved in governing, operating, and 
overseeing the CT Plan, as those competing interests could materially 
affect the ability to carry out the purposes of the CT Plan.\455\ 
Accordingly, the Commission is approving Article IV, Section 4.6 as 
proposed.
---------------------------------------------------------------------------

    \455\ See Conflicts of Interest Approval Orders, infra note 509, 
85 FR at 28120 and 85 FR at 28047.
---------------------------------------------------------------------------

(g) Subcommittees
    Section 4.7 of Article IV of the CT Plan governs the Operating 
Committee's discretion to create and disband subcommittees, as well as 
the selection of subcommittee chairs, permissible attendees at 
subcommittee meetings and special provisions applicable to meetings of 
a legal subcommittee.
(i) Selection of Subcommittee Chairs
    Paragraph (a) of Section 4.7 permits the Operating Committee to 
determine the duties, responsibilities, powers, and composition of any 
of its subcommittees. This paragraph also grants the Chair of the 
Operating Committee the authority to select the chair of any 
subcommittee from SRO Voting Representatives or Member Observers, with 
input from the Operating Committee.
    In the Notice, the Commission sought comment on, among other 
things, whether Non-SRO Voting Representatives should be permitted to 
serve as the chair of a subcommittee.\456\ In response, most commenters 
addressing this issue agree that Non-SRO Voting Representatives should 
be permitted to serve as the chair of a subcommittee.\457\ One 
commenter states that chairs should be selected from all Operating 
Committee members.\458\ Another commenter states that it is appropriate 
for Non-SRO Voting Representatives to serve as subcommittee chairs, and 
that subcommittees should be chaired by the individual who is the most 
qualified and an expert in the area of the subcommittee.\459\ One 
commenter states that subcommittee chairs should be selected by the 
members of the subcommittee,\460\ while another commenter states that 
decisions about whether Non-SRO Voting Representatives should be 
permitted to chair a subcommittee should be left to the discretion of 
the SROs.\461\ Several other commenters also express the view that a 
Non-SRO Voting Representative should be permitted to serve as the chair 
of a subcommittee.\462\ Another commenter states that it does not 
object to Non-SRO Voting Representatives serving as the chair of a 
subcommittee, but, as discussed below, argues that Non-SRO Voting 
Representatives should be prohibited from serving on the legal 
subcommittee, as that would ``potentially waive the attorney-client 
privilege.'' \463\
---------------------------------------------------------------------------

    \456\ See Notice, supra note 3, 85 FR at 64570 (Question 26).
    \457\ See, e.g., RBC Letter, supra note 30, at 9, Schwab Letter 
I, supra note 30, at 3; Schwab Letter II, supra note 30, at 5; Virtu 
Letter, supra note 30, at 6.
    \458\ See RBC Letter, supra note 30, at 9.
    \459\ See Virtu Letter, supra note 30, at 5.
    \460\ See Data Boiler Letter I, supra note 31, at 35.
    \461\ See NYSE Letter I, supra note 18, at 38-39.
    \462\ See SIFMA Letter I, supra note 30, at 5; SIFMA Letter II, 
supra note 30, at 2; MEMX Letter, supra note 30, at 4; Schwab Letter 
I, supra note 30, at 3; Schwab Letter II, supra note 30, at 5.
    \463\ Nasdaq Letter I, supra note 20, at 25.
---------------------------------------------------------------------------

    The Commission believes that Non-SRO Voting Representatives should 
be eligible to serve as the chair of a subcommittee of the CT Plan's 
Operating Committee. Non-SRO Voting Representatives are full members of 
the Operating Committee and should not be excluded from serving as 
subcommittee chairs, particularly in light of the expertise that a 
specific Non-SRO Voting Representative might bring to a given 
subcommittee. In addition, the proposed exclusion of Non-SRO Voting 
Representatives from serving as subcommittee chairs would be contrary 
to the objectives of the Commission's Governance Order to broaden 
participation in the governance of the NMS plan for consolidated equity 
market data.\464\ Further, apart from objecting to the participation of 
Non-SRO Voting Representatives on the legal subcommittee,\465\ which is 
addressed below,\466\ the SROs provide no rationale for limiting the 
Non-SRO Voting Representatives' participation in this categorical 
manner. Accordingly, the Commission is modifying Section 4.7(a) of the 
CT Plan to expressly provide that Non-SRO Voting Representatives are 
eligible to serve as chairs of subcommittees to the Operating 
Committee. The Commission finds that this modification to Section 
4.7(a) is appropriate because it supports the objective of broader 
participation in Plan governance as set forth in the Governance 
Order.\467\
---------------------------------------------------------------------------

    \464\ See Governance Order, supra note 8, 85 FR at 28714-20.
    \465\ See Nasdaq Letter I, supra note 20, at 25.
    \466\ See text accompanying notes 486-490, infra.
    \467\ See Governance Order, supra note 8, 85 FR at 28714-20.
---------------------------------------------------------------------------

    In the Commission's view, however, Member Observers should not be 
eligible to serve as subcommittee chairs, and the Commission is 
therefore modifying Section 4.7(a) of the CT Plan to preclude Member 
Observers from serving as subcommittee chairs. The Commission finds 
this modification to be appropriate because, based on its observation 
of the operation of the existing Equity Data Plans, the Commission 
expects that important, substantive decisions of the CT Plan Operating 
Committee are likely to be based on work discussed and developed 
through subcommittees. Accordingly, the Commission believes that the 
chairs of those subcommittees should be selected from among the voting 
members of the Operating Committee, rather than delegated to persons 
who may be serving as a Member Observer on an ad hoc basis and for 
limited purposes. The Commission also notes that the CT Plan permits 
Members Observers to attend and participate in

[[Page 44175]]

meetings of CT Plan subcommittees, as well as meetings of the Operating 
Committee, and the Commission therefore believes that precluding Member 
Observers from serving as subcommittee chairs will not limit the 
ability of the CT Plan to benefit from the specific expertise that 
persons selected as Member Observers possess.
    Finally, the Commission believes that, along with the authority to 
determine the duties, responsibilities, powers, and composition of any 
subcommittees, the Operating Committee, rather than solely the Chair of 
the Operating Committee, should have the authority to select 
subcommittee chairs. Accordingly, the Commission is modifying Section 
4.7(a) of the CT Plan to provide that the Operating Committee, rather 
than the Chair of the Operating Committee, will select the chair of 
each subcommittee, and to delete the phrase, ``with input from the 
Operating Committee,'' to conform to this change. The Commission finds 
that this modification is appropriate because it further aligns the CT 
Plan with the objectives of the Governance Order to foster broader 
participation in plan governance.\468\
---------------------------------------------------------------------------

    \468\ See id.
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission is approving 
Section 4.7(a) of the CT Plan as modified.
(ii) Permissible Attendees of Subcommittee Meetings
    Paragraph (b) of Section 4.7 of the CT Plan states that SRO Voting 
Representatives, Non-SRO Voting Representatives, Member Observers, SEC 
staff, and other persons as deemed appropriate by the Operating 
Committee may attend subcommittee meetings.
    The Commission sought comment on whether the relative balance of 
membership should be the same in the subcommittees.\469\ In response, 
the Commission received several comments on this proposed provision. 
One commenter suggests there should be balanced participation among all 
Voting Representatives.\470\ This commenter expresses concern that 
subcommittees ``could conceivably make decisions without input from or 
regard for the Operating Committee as a whole, including non-SRO Voting 
Representatives.'' \471\ Another commenter states that, generally, both 
Non-SRO Voting Representatives and SRO Voting Representatives should be 
permitted to serve on subcommittees.\472\ This commenter expresses the 
view that Non-SRO Voting Representative input may not always be 
essential, but is concerned that an SRO-only subcommittee could discuss 
important administrative matters without non-SRO input.\473\ One 
commenter states that decisions about the composition requirements for 
subcommittees should be left to the discretion of the SROs.\474\
---------------------------------------------------------------------------

    \469\ See Notice, supra note 3, 85 FR at 64570 (Question 26).
    \470\ See RBC Letter, supra note 30, at 8.
    \471\ Id.
    \472\ See ICI Letter I, supra note 31, at 6.
    \473\ See id.
    \474\ See NYSE Letter I, supra note 18, at 38-39.
---------------------------------------------------------------------------

    The Commission agrees that both SRO Voting Representatives and Non-
SRO Voting Representatives should be permitted to serve on any 
subcommittees of the Operating Committee, albeit, as discussed below, 
with some provision to limit participation on a legal 
subcommittee.\475\ The Commission disagrees, however, with the view 
that it is necessary to require balanced participation on any 
subcommittees to prevent a subcommittee from making decisions without 
input or regard for the Operating Committee as a whole. First, any SRO 
Voting Representative or Non-SRO Voting Representative can voluntarily 
participate on any subcommittee, other than a legal subcommittee, as 
discussed below. Second, a subcommittee would have no decision making 
authority under the terms of the CT Plan--subcommittees would be 
permitted to make recommendations, but all actions of the CT Plan are 
subject to the vote of the Operating Committee. The Commission further 
disagrees with the view that the composition of subcommittees should be 
left to the discretion of the SROs,\476\ because the potential 
exclusion of the Non-SRO Voting Representatives who would like to 
participate on a subcommittee would not be consistent with the 
objectives of the Commission's Governance Order.\477\
---------------------------------------------------------------------------

    \475\ See infra Section II.C.5(g)(iii).
    \476\ See NYSE Letter I, supra note 18, at 38-39.
    \477\ See Governance Order, supra note 8, 85 FR at 28714-20.
---------------------------------------------------------------------------

    The Commission finds that Section 4.7(b), which permits SRO Voting 
Representatives, Non-SRO Voting Representatives, Member Observers, SEC 
staff, and other persons as deemed appropriate by the Operating 
Committee to attend subcommittee meetings, is reasonably designed to 
help ensure that all interested participants of Operating Committee 
meetings are provided an opportunity to participate in subcommittee 
meetings if they so choose. Accordingly, the Commission is approving 
Section 4.7(b) as proposed.
(iii) Legal Subcommittee
    Article IV, Section 4.7(c) provides that SRO Voting 
Representatives, Member Observers, and other persons as deemed 
appropriate by the SRO Voting Representatives may meet in a 
subcommittee to discuss an item subject to attorney-client privilege of 
the CT Plan or that is attorney work product of the CT Plan.
    The Commission requested comment in the Notice on the scope of the 
``other persons'' who may be deemed appropriate by the SRO Voting 
Representatives to discuss an item that is subject to attorney-client 
privilege of the CT Plan or that is attorney work product of the CT 
Plan, including whether there should there be any limitations.\478\ One 
commenter expresses the view that Non-SRO Voting Representatives should 
not serve on a legal subcommittee as their presence could result in a 
waiver of attorney-client privilege.\479\ This commenter further states 
that ``[p]lacing any sort of limitation on the ability of the Members 
to consult with counsel or the persons whom counsel may consult in 
order to provide legal advice to the Members would place an arbitrary 
and capricious limitation on the attorney-client relationship, and is 
beyond the power of the Commission.'' \480\
---------------------------------------------------------------------------

    \478\ See Notice, supra note 3, 85 FR at 64570 (Question 27).
    \479\ See Nasdaq Letter I, supra note 20, at 25.
    \480\ Id. at 26.
---------------------------------------------------------------------------

    One commenter questions why Non-SRO Voting Representatives should 
be excluded from discussions of litigation matters if they sign a non-
disclosure agreement.\481\ Another commenter believes that the same 
considerations that apply to subcommittee deliberations generally also 
would apply to subcommittee discussions that may be subject to 
attorney-client privilege or the attorney-work-product doctrine.\482\ 
Further, commenters responding to the Commission's Notice of Proposed 
Order,\483\ raise related points. One of these commenters expresses 
concerns that the Executive Session could be used to shield discussions 
by invoking privilege,\484\

[[Page 44176]]

and another states that one of the few legitimate uses of Executive 
Session would be to discuss legal issues.\485\
---------------------------------------------------------------------------

    \481\ See Virtu Letter, supra note 30, at 5.
    \482\ See FINRA Letter I, supra note 257, at 6.
    \483\ See Notice of Proposed Order Directing the Exchanges and 
the Financial Industry Regulatory Authority to Submit a New National 
Market System Plan Regarding Consolidated Equity Market Data, 
Securities Exchange Act Release No. 87906 (Jan. 8, 2020), 85 FR 2164 
(Jan. 14, 2020) (``Proposed Order'').
    \484\ See Letter from Joseph Kinahan, Managing Director, Client 
Advocacy and Market Structure, TD Ameritrade, Inc. (Feb. 24, 2020), 
at 7; see also Schwab Letter I, supra note 30, at 2.
    \485\ See Refinitiv Letter, supra note 249, at 3.
---------------------------------------------------------------------------

    The Commission believes the Non-SRO Voting Representatives must 
participate as full members of the CT Plan's Operating Committee. The 
Commission thus shares the concern some commenters have raised that the 
legal subcommittee may, if a blanket prohibition on Non-SRO Voting 
Representative participation applies, be used as a forum for SROs to 
inappropriately make decisions relating to plan business under the 
pretext that all such discussions necessarily invoke the attorney-
client privilege. The Commission believes that, while the Operating 
Committee of the CT Plan should be able to engage in discussions 
regarding legal advice of plan counsel outside the presence of 
Commission staff, it does not believe that all matters involving the 
plan's attorney-client privilege are necessarily appropriate for 
discussion outside the presence of the Non-SRO Voting Representatives, 
who are full members of the Operating Committee. To the extent that the 
Operating Committee retains legal counsel to advise it with respect to 
the operation of the CT Plan--for example, to provide advice on whether 
proposed Operating Committee actions are consistent with or required by 
the Plan, or whether proposed actions or Plan amendments are consistent 
with or required by the federal securities laws--the Commission 
believes that Non-SRO Voting Representatives, as full members of the 
Operating Committee, must participate in those discussions with Plan 
counsel and be informed by the advice counsel provides to the Operating 
Committee. Moreover, commenters do not explain how the presence of Non-
SRO Voting Representatives would waive the Plan's attorney-client 
privilege when the Non-SRO Voting Representatives themselves are full 
members of the Operating Committee of the CT Plan.
    The Commission recognizes, however, that even though Non-SRO Voting 
Representatives should be permitted to attend legal subcommittee 
meetings unless there is a legitimate reason to preclude their 
attendance, there are specific circumstances in which it would be 
appropriate for the SROs to meet collectively with counsel outside the 
presence of the Non-SRO Voting Representatives to discuss CT Plan 
business. The Commission further finds that it is appropriate to apply 
limits to the ability of the SROs to exclude Non-SRO Voting 
Representatives from legal subcommittee meetings and discussions so 
that those subcommittee meetings do not become the equivalent of an 
Executive Session meeting that inappropriately excludes Non-SRO Voting 
Representatives.\486\
---------------------------------------------------------------------------

    \486\ The Commission notes that while Commission staff 
historically have attended Executive Sessions, staff have not 
attended legal subcommittee meetings.
---------------------------------------------------------------------------

    The Commission therefore believes that the CT Plan should 
explicitly state the basis on which Non-SRO Voting Representatives 
could be excluded from the legal subcommittee meetings so that these 
circumstances are narrowly drawn to help ensure that such meetings are 
called on an appropriate basis. The Commission believes that such 
meetings should be limited to those that bear on matters that 
exclusively affect the SROs with respect to: (1) Litigation matters or 
responses to regulators with respect to inquiries, examinations, or 
findings; and (2) other discrete legal matters approved by the 
Operating Committee.\487\
---------------------------------------------------------------------------

    \487\ Of course, nothing in the CT Plan would prevent an SRO 
from seeking advice from its own internal or external legal counsel 
regarding any matter of CT Plan business.
---------------------------------------------------------------------------

    Accordingly, in an effort to reflect the status of Non-SRO Voting 
Representatives as full members of the Operating Committee, while also 
reflecting the unique responsibilities of the SROs under the federal 
securities laws, the Commission is modifying paragraph (c) of Section 
4.7 of the CT Plan to provide that Non-SRO Voting Representatives may 
be excluded from legal subcommittee meetings and discussions only under 
specified circumstances. As modified, Section 4.7(c) of the CT Plan 
would permit the SROs to exclude Non-SRO Voting Representatives from 
discussions within the legal subcommittee only to the extent that those 
meetings and discussions bear on matters that exclusively affect the 
SROs with respect to: (1) Litigation matters or responses to regulators 
with respect to inquiries, examinations, or findings; and (2) other 
discrete legal matters approved by the Operating Committee.\488\ The 
Commission believes that litigation matters or responses to regulators 
with respect to inquiries, examinations, or findings affect the SROs 
uniquely, given that the SROs have not only the express regulatory 
obligation as SROs for operation of the CT Plan, but they also, unlike 
the Non-SRO Voting Representatives, have financial responsibility for 
the CT Plan itself. As noted above with respect to a similar provision 
relating to the use of Executive Session,\489\ the Commission believes 
that--while Non-SRO Voting Representatives could be precluded from 
participating in legal subcommittee discussions regarding SRO responses 
to regulatory inquiries, examinations, or findings--to serve as active 
and informed participants on the Operating Committee, Non-SRO Voting 
Representatives would need to be informed about any regulatory 
inquiries, examinations, or findings that relate to the CT Plan. 
Consequently, this provision is not intended to prevent or limit the 
Non-SRO Voting Representatives' access to regulatory inquiries, 
examinations, or findings directed to the CT Plan or its Operating 
Committee.
---------------------------------------------------------------------------

    \488\ The Notice, in the context of the CT Plan provisions 
regarding Executive Session, sought comment about the circumstances 
under which it would be appropriate to exclude Non-SRO Voting 
Representatives from CT Plan meetings. See Notice, supra note 3, 85 
FR at 64569 (Question 21). Moreover, the Governance Order 
contemplated that a valid use of Executive Session might be 
attorney-client communications relating to matters that exclusively 
affect the SROs with respect to the Commission's oversight of the CT 
Plan. See Governance Order, supra note 8, 85 FR at 28727.
    \489\ See supra Section II.C.5(d)(iii).
---------------------------------------------------------------------------

    Moreover, the Commission is mindful that not every appropriate use 
of an SRO-only legal subcommittee meeting can be precisely foreseen, so 
the Commission's modification to this section of the CT Plan also 
provides that other discrete legal matters may be approved by the 
Operating Committee for SRO-only consideration in the legal 
subcommittee on a case-by-case basis. The Commission believes that this 
provision is designed to help ensure that the Operating Committee is 
sufficiently informed and can make reasonable decisions about 
unforeseen matters that may arise and exclusively affect the SROs. The 
Commission finds that these modifications to Section 4.7(c) of the CT 
Plan are appropriate because they are consistent with the objective of 
the Governance Order to include Non-SRO Voting Representatives as full 
members of the Operating Committee,\490\ while also recognizing, given 
the SROs' unique regulatory responsibilities, that certain legal 
matters relevant to the operating of the CT Plan may exclusively affect 
the SROs.
---------------------------------------------------------------------------

    \490\ See Governance Order, supra note 8, 85 FR at 28714-20.
---------------------------------------------------------------------------

    Additionally, the Commission is modifying paragraph (c) of Section 
4.7 of Article IV, to require that the ``other persons as deemed 
appropriate by the SRO Voting Representatives'' to attend meetings of 
the legal subcommittee will be determined collectively ``by majority 
vote of the SRO Voting Representatives.'' The Commission

[[Page 44177]]

finds that this modification is appropriate because it is designed 
ensure that any vote taken pursuant to Section 4.7(c) will be taken in 
a manner consistent with the allocation of voting power by SRO Group, 
as set forth in Section 4.3(a)(i) of the CT Plan.
    For the reasons discussed above, the Commission is approving 
Section 4.7(c) of the CT Plan as modified.
(iv) Transparency of Subcommittee Meetings
    One commenter expresses concern that the work of subcommittees 
under the CT Plan lacks transparency and accountability.\491\ To 
address these failings, this commenter recommends that all 
subcommittees should: ``(1) have a clearly identified purpose; (2) 
balanced participation among all Voting Representatives; (3) Chairs 
drawn from all Operating Committee members; (4) be required to keep 
minutes and distribute those minutes to the Operating Committee; and 
(5) be time- and product-limited.'' \492\
---------------------------------------------------------------------------

    \491\ See RBC Letter, supra note 30, at 8.
    \492\ Id.
---------------------------------------------------------------------------

    The Commission believes that the activities of the CT Plan's 
Operating Committee's subcommittees, if any, should be transparent to 
the Operating Committee. Transparency should help to ensure that the 
subcommittee meetings, including the legal subcommittee meetings, 
further the objectives of the CT Plan, as discussed in the Commission's 
Governance Order,\493\ particularly with respect to the full 
participation of Non-SRO Voting Representatives in the operation of the 
CT Plan. The Commission therefore is modifying the CT Plan, by adding 
new paragraph (d) to Section 4.7, to require that all subcommittees 
prepare minutes of all meetings and make those minutes available to all 
members of the Operating Committee.\494\ In addition, for each meeting 
of a legal subcommittee, discussed above, the Commission is modifying 
the CT Plan by including language in new paragraph (d) to Section 4.7 
to require that the minutes include (i) attendance at the meeting; (ii) 
the subject matter of each item discussed; (iii) sufficient non-
privileged information to identify the rationale for referring the 
matter to the legal subcommittee, (iv) the privilege or privileges 
claimed with respect to that item; and (v) for each matter, if 
applicable, sufficient non-privileged information to identify the basis 
on which the matter was determined to exclusively affect the SROs. The 
Commission finds that modifying Section 4.7 to add new paragraph (d) is 
appropriate because these elements of information--similar to those 
required for privilege logs, with respect to legal subcommittee 
meetings--will provide for transparency and accountability, 
particularly regarding the use of the legal subcommittee, while 
preserving the attorney-client privilege with respect to discussions at 
legal subcommittee meetings. For the reasons discussed above, the 
Commission is approving new Section 4.7(d) of the CT Plan.
---------------------------------------------------------------------------

    \493\ See Governance Order, supra note 8, 85 FR at 28714-20.
    \494\ Separately, Section 4.9 of the proposed CT Plan provides 
that nothing in the LLC Agreement shall limit or impede the rights 
of the Commission to access information of the Company or any of the 
Members pursuant to the federal securities laws and, as discussed 
below, the Commission is modifying Section 4.9 to provide that the 
Commission shall have access to all information ``and records.'' See 
infra Section II.C.5(i).
---------------------------------------------------------------------------

(h) Officers
    Section 4.8 of Article IV of the CT Plan governs the selection of 
CT Plan Officers by the SROs, with such authority and duties as the 
SROs may delegate to them. Paragraph (a) of Section 4.8 provides that, 
other than the Chair and the Secretary, the SROs may, from time to 
time, designate and appoint one or more persons as Officers of the LLC 
by a majority vote of the SROs. This provision further provides the 
SROs with sole discretion by majority vote to assign titles, determine 
compensation, if any, and revoke the delegation of authority at any 
time.
    In the Notice, the Commission sought comment on, among other 
things, whether it is appropriate for decisions about Officers and 
their attendant duties to be made solely by the SROs.\495\ The 
Commission received several comments on this issue. Some commenters 
criticize the proposed provision that grants the power to select 
Officers solely to the SROs,\496\ and one of these commenters argues 
that the selection (including appointment and removal) of Officers 
should be subject to an augmented majority vote.\497\
---------------------------------------------------------------------------

    \495\ See Notice, supra note 3, 85 FR at 64570 (Question 28).
    \496\ See Virtu Letter, supra note 30, at 6; MFA Letter, supra 
note 30, at 2; Data Boiler Letter I, supra note 31, at 26.
    \497\ See Virtu Letter, supra note 30, at 5.
---------------------------------------------------------------------------

    One commenter states that the ``selection of Officers of the plan 
is one of the most important functions of the Participants, and it is 
vital that Non-SRO representatives have a voice in this critical and 
material decision.'' \498\ This commenter further states that 
``permitting only the SROs to control the appointment of Officers would 
be inconsistent with the CT Plan's objective of providing a meaningful 
role to Non-SROs in the governance of the collection, processing, and 
dissemination of equity market data.'' \499\ Another commenter states 
that the absence of SRO duties and obligations in the CT Plan is 
particularly problematic in light of the significant control the SROs 
would retain over control of the Company and the CT Plan, including the 
ability to select Officers.\500\
---------------------------------------------------------------------------

    \498\ Id. at 6.
    \499\ Id. at 5.
    \500\ See MFA Letter, supra note 30, at 2.
---------------------------------------------------------------------------

    One commenter counters that matters relating to Officers would have 
no bearing on the governance of the CT Plan or the collection, 
processing, and dissemination of equity market data.\501\ This 
commenter states, instead, that these matters pertain solely to the LLC 
form and structure and, because only the SROs are Members of the LLC, 
only the SROs can vote on such matters.\502\ Another commenter argues 
that the power to appoint and remove persons as Officers of the CT 
Plan, delegate duties to such persons, and approve salary or other 
compensation for such persons belongs solely to the SROs.\503\
---------------------------------------------------------------------------

    \501\ See NYSE Letter I, supra note 18, at 36.
    \502\ See id.
    \503\ See Nasdaq Letter I, supra note 20, at 11-12.
---------------------------------------------------------------------------

    The Commission disagrees that decisions regarding the selection, 
appointment, and removal of Officers of the CT Plan, as well as 
Officers' authority, duties, and compensation, have no bearing on the 
governance or operation of the CT Plan. The SROs have proposed to 
structure the new NMS plan for consolidated equity market data as an 
LLC and to conduct all operations of that NMS plan directly through or 
under the auspices of that LLC. Thus, particularly depending on the 
nature, breadth, and scope of authority and duties assigned to the 
Officers of the LLC, those Officers could be, and would likely be, 
directly involved in the fulfillment by the SROs of their duties with 
respect to consolidated market data through the operation of the CT 
Plan. In addition, the SROs do not identify any LLC-specific functions 
for which an Officer might be selected that do not relate to the 
operation of the CT Plan and there is nothing in the CT Plan, as 
proposed by the SROs, that expressly limits the functions of any 
Officers selected to ``organizational aspects of the LLC's existence.'' 
\504\ The SROs' unilateral decision to propose the CT Plan in the form 
of an LLC Agreement of which the SROs alone are members does not in

[[Page 44178]]

any way justify reserving to the SROs alone the ability to direct 
operations of the CT Plan by selecting the Officers of the CT Plan. 
Such a structure would significantly undermine the Commission's 
objective to broaden participation in the plan governance, with Non-SRO 
Voting Representatives serving as full members of the Operating 
Committee, as set forth in the Commission's Governance Order.\505\ In 
addition, the provision of decision making authority in Section 4.8 
based on the vote of the majority of Members, rather than on the vote 
of the majority of SRO Voting Representatives, is inconsistent with the 
voting structure reflected in the Commission's Governance Order, which 
allocates voting rights by SRO Group, rather than by exchange 
license.\506\
---------------------------------------------------------------------------

    \504\ Id. at 10.
    \505\ See Governance Order, supra note 8, 85 FR at 28714-20.
    \506\ See id. at 28716.
---------------------------------------------------------------------------

    Consequently, the Commission believes that it is imperative that it 
be the Operating Committee by augmented majority vote, and not solely 
the SRO Members by majority vote, that decides on the creation and 
assignment of any officer positions and duties under the CT Plan. 
Accordingly, the Commission is modifying Section 4.8 of the CT Plan 
\507\ to require that the designation, appointment, delegation of 
authority and duties, and removal of Officers, and the revocation of 
any officer positions and duties, be subject to a vote of the Operating 
Committee. As discussed in the Governance Order, the voting scheme 
directed by the Commission, while it grants votes to Non-SRO Voting 
Representatives, nonetheless preserves for the SROs sufficient voting 
power at all times to act jointly on behalf of the CT Plan, which would 
include the selection of Officers of the CT Plan.\508\
---------------------------------------------------------------------------

    \507\ The Commission is also modifying Section 4.8 to substitute 
the phrase, ``Except as provided for in Section 4.4(e)'' for the 
language, ``In addition to the Chair and Secretary,'' that was 
proposed by the SROs. This modification is intended to make clear 
that the annual election of the Chair (from among the SRO Voting 
Representatives) and the selection of the Secretary (by the Chair) 
as set forth in Section 4.4(e) would not be affected by the 
Commission's modifications to Section 4.8.
    \508\ See Governance Order, supra note 8, 85 FR at 28716.
---------------------------------------------------------------------------

    The Commission therefore finds that modification of Section 4.8 of 
the CT Plan is appropriate because it should help to ensure meaningful 
participation in the governance of the CT Plan by Non-SRO Voting 
Representatives, including with respect to the selection of Officers 
who may be tasked to implement significant decisions of the Operating 
Committee. For the reasons discussed above, the Commission is approving 
Section 4.8, as modified.
(i) Commission Access to Information and Records
    Section 4.9 of Article IV of the CT Plan, as proposed, provides 
that the CT Plan ``shall not be interpreted to limit or impede the 
rights of the Commission to access information of the Company or any of 
the Members (including their employees) pursuant to U.S. federal 
securities laws and the rules and regulations promulgated thereunder.'' 
The Commission received no comment on this provision. Because the term 
``information'' is not defined in the CT Plan, the Commission is 
modifying Section 4.9 of Article IV of the CT Plan to add the phrase, 
``and records,'' to state explicitly that this Agreement does not in 
any manner limit the Commission's existing rights under the federal 
statutes, regulations, and rules to access such records. Accordingly, 
the Commission finds that this modification to Section 4.9 of the CT 
Plan is appropriate because it is consistent with the Commission's 
statutory authority for oversight of the governance and operation of 
the CT Plan. For the reasons discussed above, the Commission is 
approving Section 4.9 of the CT Plan, as modified.
(j) Disclosure of Potential Conflicts of Interest; Recusal
(i) General Provisions
    Article IV, Section 4.10 of the CT Plan sets forth the disclosure 
requirements with respect to conflicts of interest, and the provisions 
for recusal, as approved by the Commission.\509\ Specifically, Section 
4.10(a) provides that the Members, the Processors, the Administrator, 
the Non-SRO Voting Representatives, and each service provider or 
subcontractor (each a ``Disclosing Party'') engaged in Company business 
that has access to Restricted or Highly Confidential Information, as 
defined in the Plan,\510\ shall be subject to the disclosure 
requirements as described in Section 4.10(c) and Exhibit B to the Plan. 
Exhibit B to the CT Plan provides a list of questions and instructions 
tailored to elicit responses that disclose potential conflicts of 
interest. Section 4.10(a) also states that the Operating Committee, a 
Member, Processors, or Administrator may not use a service provider or 
subcontractor unless that service provider or subcontractor has agreed 
in writing to provide the disclosures. Section 4.10(a)(i) states that a 
conflict of interest may exist when personal, business, financial, or 
employment relationships could be perceived by a reasonable, objective 
observer to affect the ability of a person to be impartial.\511\ 
Section 4.10(a)(ii) requires that the disclosures be updated following 
a material change in information and that a Disclosing Party update 
annually any inaccurate information prior to the first quarterly 
meeting. Section 4.10(a)(iii) requires that the Disclosing Parties 
provide the Administrator with their disclosures and any required 
updates and that the Administrator will ensure that the disclosures are 
posted to the Company's website. Finally, Section 4.10(a)(iv) requires 
that the Company arrange for Disclosing Parties that are not Members or 
Non-SRO Voting Representatives to comply with the required disclosures 
and recusal pursuant to Section 4.10 and Exhibit B of the CT Plan.\512\
---------------------------------------------------------------------------

    \509\ See Securities Exchange Act Release Nos. 88823 (May 6, 
2020), 85 FR 28046 (May 12, 2020); 88824 (May 6, 2020), 85 FR 28119 
(May 12, 2020) (collectively, the ``Conflicts of Interest Approval 
Orders''). In the Governance Order, the Commission ordered the SROs 
to incorporate into the CT Plan provisions consistent with the 
Conflicts of Interest Approval Orders. See Governance Order, supra 
note 8, 85 FR at 28726.
    \510\ See infra Section II.C.5(k).
    \511\ See Article IV, Section 4.10(a) of the CT Plan.
    \512\ See Article IV, Section 4.10 of the CT Plan.
---------------------------------------------------------------------------

    The Commission received a number of comment letters addressing the 
conflicts of interest policy in general.\513\ Most commenters support 
including conflicts of interest provisions. Specifically, one commenter 
states that the CT Plan should require the Operating Committee to adopt 
detailed policies and procedures articulating, among other things, 
specific circumstances where it is appropriate for the Plan to deal 
with or employ an SRO affiliated entity, disclosure requirements, and a 
process mandating recusal of an individual SRO in circumstances where 
there is a potential conflict of interest.\514\ This commenter argues 
that the policies should also apply to transactions with Non-SRO Voting 
Representatives or any of their affiliates.\515\ Another commenter 
states that a conflicts of interest policy must

[[Page 44179]]

be rigorous enough to ensure that SROs take actionable steps to 
mitigate such conflicts.\516\ The commenter also contends that the 
policy cannot be based solely on disclosure and recommends additional 
steps, such as recusal and explicit prohibition of certain action and 
certain persons.\517\ Another commenter agrees, stating that the 
proposed disclosures are not sufficiently transparent and that self-
disclosure to mitigate conflicts would not be effective.\518\
---------------------------------------------------------------------------

    \513\ See Cboe Letter, supra note 17; BlackRock Letter I, supra 
note 247; RBC Letter, supra note 30; Virtu Letter, supra note 30; 
Fidelity Letter, supra note 30; Nasdaq Letter I, supra note 20; Data 
Boiler Letter I, supra note 31; ICI Letter I, supra note 31; FINRA 
Letter I, supra note 30; SIFMA Letter I, supra note 30; NYSE Letter 
I, supra note 18; BMO Letter, supra note 30; MFA Letter, supra note 
30; NYSE Letter II, supra note 19; ICI Letter II, supra note 31; 
Schwab Letter II, supra note 30; SIFMA Letter II, supra note 30; 
Letter from Patrick Flannery, Chief Executive Officer and Co-
Founder, MayStreet (Feb. 19, 2021) (``MayStreet Letter''); BMO 
Letter II, supra note 30.
    \514\ See Virtu Letter, supra note 30, at 6.
    \515\ See id.
    \516\ See BMO Letter II, supra note 30, at 2.
    \517\ See BMO Letter I, supra note 30, at 3.
    \518\ See Data Boiler Letter I, supra note 31, at 5, 49.
---------------------------------------------------------------------------

    In contrast, several commenters oppose including the conflicts of 
interest policy in the CT Plan.\519\ The commenters argue that the 
conflicts of interest policy is inconsistent with Section 11A of the 
Act and Rule 608.\520\ Specifically, one commenter states that the 
proposed policy would preclude the SROs from fulfilling their 
obligations under securities laws, in particular Rule 608, and is 
inconsistent with Rule 608(b)(2), and that therefore the CT Plan cannot 
be approved by the Commission.\521\ Another commenter requests that, if 
the Commission approves the CT Plan, it exclude the conflicts of 
interest policy from the Plan. Alternatively, the commenter suggests 
that the Commission publish the exact text of its intended amendments 
and seek comment before issuing any approval.\522\
---------------------------------------------------------------------------

    \519\ See Cboe Letter, supra note 17; NYSE Letter I, supra note 
18; Nasdaq Letter I, supra note 20.
    \520\ See NYSE Letter I, supra note 18, at 12, 15; NYSE Letter 
II, supra note 19, at 4; Nasdaq Letter I, supra note 20, at 1-2; 
Cboe Letter, supra note 17, at 2-4.
    \521\ See NYSE Letter I, supra note 18, at 15, 20.
    \522\ See Nasdaq Letter I, supra note 20, at 2-3, 7, 13.
---------------------------------------------------------------------------

    One commenter argues that the policies, as amended by the 
Commission, are vague and onerous and impede the ability of the 
Operating Committee to conduct its business.\523\ In support of its 
concern, the commenter states that ``representatives for the current 
equity data plans have been engaged in ongoing discussions with 
Commission staff for six months to establish how the policies 
applicable to those plans should be interpreted.'' \524\ Another 
commenter states that the required disclosures of the SRO Voting 
Representative, Processors, and the Administrator under the conflicts 
of interest policy would impose substantial costs without any benefit, 
as those parties do not have any regulatory obligations under the Act, 
and that, as the Processors and Administrator are agents of the CT 
Plan, they are obligated contractually and not under the Plan.\525\ The 
commenter further states that required disclosures of service providers 
and subcontractors would also impose onerous and burdensome 
requirements, while providing few, if any, benefits. In particular, the 
commenter claims that the service providers and subcontractors that 
would have access to Restricted or Highly Confidential Information 
would likely be accounting or legal firms, both of which have no role 
or responsibilities in the governance of the CT Plan.\526\
---------------------------------------------------------------------------

    \523\ See Cboe Letter, supra note 17, at 6-7. See also Nasdaq 
Letter I, supra note 20, at 6-7 (stating that the policy is unclear 
whether certain SRO employees are barred from attending meetings).
    \524\ Cboe Letter, supra note 17, at 7.
    \525\ See NYSE Letter I, supra note 18, at 30.
    \526\ See id. at 30-32.
---------------------------------------------------------------------------

    The Commission agrees with the comments that support a robust 
conflicts of interest and recusal policy in the CT Plan. As the 
Commission stated in the Conflicts of Interest Approval Orders, 
detailed, clear, and meaningful disclosures that provide insight into 
otherwise non-transparent structures and operations can raise awareness 
of potential conflicts of interest inherent in the current equity 
market data structure, and increased access to information can 
facilitate public confidence in Plan operations.\527\ The Commission 
continues to believe that full disclosure of all material facts 
necessary for market participants and the public to understand the 
conflicts of interest is one important approach to dealing with those 
conflicts.
---------------------------------------------------------------------------

    \527\ See Conflicts of Interest Approval Orders, supra note 509, 
85 FR at 28120 and 85 FR at 28047 (agreeing with the Members that 
potential conflicts of interest are inherent in the current market 
data governance structure where exchanges can offer proprietary 
market data products while they also act as Members in running the 
public market data stream).
---------------------------------------------------------------------------

    In response to commenters' objections to the conflicts of interest 
policy, the Commission continues to believe, as it stated in the 
Conflicts of Interest Approval Orders, that because Administrators and 
Processors will have access to highly sensitive and commercially 
valuable non-public information that would be of substantial value to a 
Member's proprietary data business, it is appropriate to provide 
insight into some of the key potential conflicts of interest faced by 
the parties engaged in Plan business.\528\ Similarly, the Commission 
has also stated that service providers and subcontractors can be 
affiliated with a Member that offers proprietary data products and 
connectivity services and that, because they may have access to 
competitively sensitive and commercially valuable Plan-related 
information, the potential for competitive harm exists if they share 
such information with the Member or its affiliates. Thus, the 
Commission continues to find that it is appropriate to include service 
providers and subcontractors within the conflicts of interest policies, 
as they would be under the direction of a Member, engaged in Plan 
business, and have access to Restricted or Highly Confidential 
Information.\529\
---------------------------------------------------------------------------

    \528\ See Conflicts of Interest Approval Orders, supra note 509, 
85 FR at 28126 and 85 FR at 28053.
    \529\ See Conflicts of Interest Approval Orders, supra note 509, 
85 FR at 28121 and 85 FR at 28048.
---------------------------------------------------------------------------

    Further, the Commission disagrees with commenters' assertions that 
the proposed conflicts of interest policy is inconsistent with Section 
11A of the Act and Rule 608. Section 11A of the Act directs the 
Commission to facilitate the establishment of a national market system 
for trading in securities,\530\ under which consolidated data about 
quotations for and transactions in securities is collected and 
disseminated by the Equity Data Plans governed and operated by the 
SROs. As the Commission stated in the Governance Order, the 
demutualization of exchanges and the proliferation of proprietary 
exchange data products have heightened the conflicts between the SROs' 
business interests in proprietary data offerings and their obligations 
as SROs under the national market system to ensure the prompt, 
accurate, reliable, and fair dissemination of core data through the 
jointly administered Equity Data Plans.\531\ In requiring that the CT 
Plan include the particular disclosure provisions identified in the 
Governance Order,\532\ the Commission reasonably exercised its 
authority under Section 11A to address the conflicts inherent in the 
dual responsibilities exchange representatives have with respect to 
proprietary data products and consolidated equity data products. 
Furthermore, the Commission reasonably required additional disclosure 
of the relevant conflicts of interest, as well as safeguards to 
mitigate the possibility that a Member's proprietary data business 
could benefit from commercially valuable data obtained by its SRO 
Voting Representative or other employees that have responsibilities to 
the Plan.
---------------------------------------------------------------------------

    \530\ See 15 U.S.C. 78k-1(a)(1).
    \531\ See Governance Order, supra note 8, 85 FR at 28704.
    \532\ See id. at 28726.
---------------------------------------------------------------------------

    Additionally, with respect to Rule 608, that rule provides that the 
Commission shall approve a proposed plan or plan amendment, ``with such 
changes or subject to such conditions as

[[Page 44180]]

the Commission may deem necessary or appropriate.'' \533\ The 
Commission provided a notice and comment period with respect to the 
proposed CT Plan and has acted within its discretion in determining 
that certain modifications are appropriate after considering comments 
received in response to the Notice. Further, the Commission does not 
believe that the conflict of interest policies are vague or onerous. 
Consistent with its findings in the Conflicts of Interest Approval 
Orders,\534\ the Commission concludes that the conflicts of interest 
policy of the CT Plan, as modified, would facilitate detailed, clear, 
and meaningful disclosures that would provide insight into otherwise 
non-transparent structures and operations of the Plan.
---------------------------------------------------------------------------

    \533\ 17 CFR 242.608(b)(2).
    \534\ See Conflicts of Interest Approval Orders, supra note 509, 
85 FR at 28120 and 85 FR at 28047.
---------------------------------------------------------------------------

    Finally, certain commenters argue that the Conflicts of Interest 
Approval Orders constituted impermissible rulemaking that required 
notice and comment because the Commission made substantial and material 
changes to the conflicts of interest policies proposed by the SROs for 
the Equity Data Plans,\535\ and that therefore the conflicts of 
interest policy should not be included in the CT Plan. The Commission 
disagrees with the assertion that the separate Conflicts of Interest 
Approval Orders constituted impermissible rulemaking, and the 
Commission responded to these objections both in the Conflicts of 
Interest Approval Orders and in subsequent litigation. In any event, 
those procedural objections have no bearing on the adequacy of the 
procedure resulting in this Order. The Governance Order required the 
SROs to include in the CT Plan provisions consistent with the Conflicts 
of Interest Approval Orders,\536\ and the public has had the 
opportunity to consider and comment on the provisions proposed for the 
CT Plan on multiple occasions. The provisions were published in the 
Conflicts of Interest Approval Orders, and the Governance Order issued 
the same day required that similar provisions be included in the New 
Consolidated Data Plan.\537\ Additionally, the CT Plan, including the 
proposed conflicts of interest policy was published for comment,\538\ 
providing interested persons with a further opportunity to consider the 
proposed language of the conflicts of interest policy and to express 
their views. Furthermore, the Order Instituting Proceedings provided 
yet another opportunity to comment on the relevant provisions of the 
proposed CT Plan.\539\
---------------------------------------------------------------------------

    \535\ See Cboe Letter, supra note 17, at 6-7; Nasdaq Letter I, 
supra note 20, at 28-29 (stating that the policies are unlawful and 
that the proposed Plan would perpetuate the arbitrary and capricious 
rulemaking undertaken by the Commission when it failed to provide 
notice or seek comment on its own modifications to the policy 
language proposed by the Equity Data Plans); NYSE Letter I, supra 
note 18, at 14 (stating that both policies are subject to pending 
litigation and that it would be inappropriate to mandate continued 
effectiveness following a judicial determination that they are 
contrary to law). These commenters also undertook a legal challenge 
to the Conflicts of Interest Approval Orders.
    \536\ See Governance Order, supra note 8, 85 FR at 28726.
    \537\ See id.
    \538\ See Notice, supra note 3, 85 FR at 64583-84.
    \539\ See Order Instituting Proceedings, supra note 5.
---------------------------------------------------------------------------

(ii) Applicability to Member Observers
    In the Notice, the Commission solicited comment on whether the same 
disclosure requirements and recusal provisions that apply to Members 
and other identified persons would sufficiently mitigate any conflicts 
of interest faced by Member Observers, and if not, what additional 
disclosures or recusal provisions commenters believe would be 
appropriate.\540\
---------------------------------------------------------------------------

    \540\ See Notice, supra note 3, 85 FR at 64570-71.
---------------------------------------------------------------------------

    In response, several commenters support extending the policies to 
include Member Observers.\541\ Specifically, these commenters recommend 
that all observers be subject to the conflicts of interest policy and 
procedures of the CT Plan.\542\ In contrast, one commenter objects to 
the application of the conflicts of interest policy to Member 
Observers, stating that most Member Observers are employees of the 
Member charged with that Member's compliance obligations under Rule 
608(c), and as such are already included in the disclosures of the 
Member.\543\ The commenter further argues that the identity and 
affiliation of a Member Observer would be disclosed in meeting minutes 
and that reasonable questions regarding the Member Observer's 
affiliation could be addressed at the Operating Committee meeting.\544\
---------------------------------------------------------------------------

    \541\ See RBC Letter, supra note 30; ICI Letter I, supra note 
31; Fidelity Letter, supra note 30.
    \542\ See RBC Letter, supra note 30, at 8-9; ICI Letter I, supra 
note 31, at 5; Fidelity Letter, supra note 30, at 5.
    \543\ See Nasdaq Letter I, supra note 20, at 27.
    \544\ See id.
---------------------------------------------------------------------------

    After considering the comments received, the Commission believes 
that the provisions regarding disclosures of potential conflicts of 
interest and recusal should be modified to apply to all Member 
Observers. Specifically, because Member Observers, under the definition 
modified by the Commission, will be an employee of a Member or any 
attorney to a Member,\545\ the Commission believes that the potential 
conflicts of interests that apply to the Member would equally apply to 
the Member Observer. The Commission does not agree with the assertion 
that all relevant information regarding a Member Observer would 
necessarily be included in the disclosures as the proposed Member 
disclosures require only the names of the Voting Representative and any 
alternate Voting Representative designated by the Member. As required 
in Exhibit B, a Member is also required to provide the name of each 
designated individual and a narrative description of each such persons' 
role within the Member organization, and the Commission believes that 
these disclosures should include Member Observers. Additionally, 
because Member Observers are by definition permitted to attend 
Operating Committee meetings, subcommittee meetings, and Executive 
Sessions,\546\ they may have access to competitively sensitive and 
commercially valuable information related to the CT Plan.
---------------------------------------------------------------------------

    \545\ See supra Section II.C.5(d)(i).
    \546\ See Article I, Sections 1.1(z) & 1.1(oo) of the CT Plan.
---------------------------------------------------------------------------

    The Commission believes that Member Observers should also be 
subject to Section 4.10, the disclosures pursuant to Exhibit B, and the 
recusal requirements of the conflicts of interest policy. Specifically, 
the Commission finds that it is appropriate to modify Section 4.10(a) 
of the CT Plan to expressly require that all Member Observers be 
included in the Members' disclosures because Member Observers may face 
conflicts of interest similar to those faced by SRO Voting 
Representatives. The Commission is also making a corresponding 
modification to Exhibit B of the CT Plan to expressly include Member 
Observers. The Commission finds that these modifications are 
appropriate because a Member Observer can have his or her own conflicts 
of interest, and consequently, a Member should also be required to 
respond to questions regarding whether its Member Observers have 
additional relationships or material economic interests that could be 
perceived by a reasonable objective observer to present a potential 
conflict of interest with their responsibilities to the Company and to 
provide a detailed narrative discussion of all material facts necessary 
to identify the potential conflicts of interest and the effects they 
may have on the CT Plan. Additionally, because the Commission is 
requiring

[[Page 44181]]

that Member Observers be included in a Member's conflicts disclosures, 
and because the Member disclosures as proposed would have required the 
name and narrative description of only the Voting Representative and 
alternate SRO Voting Representative, the Commission finds that it is 
appropriate to modify Exhibit B (a)(iii) to replace references to 
``representatives'' with ``persons'' to account for the new category of 
Member Observer, in addition to the Voting Representative and alternate 
SRO Voting Representative.
(iii) Recusals
    Article IV, Section 4.10(b) of the CT Plan discusses recusals and 
expressly prohibits a Member from appointing as its Voting 
Representative a person that is responsible for or involved with 
procurement for, or development, modeling, pricing, licensing, or sale 
of, PDP offered to customers of the CT Feeds, if the person has a 
financial interest (including compensation) that is tied directly to 
the Disclosing Party's market data business or the procurement of 
market data, and if that compensation would cause a reasonable 
objective observer to expect the compensation to affect the 
impartiality of the representative.\547\ Section 4.10(b)(ii) further 
requires recusal of a Disclosing Party from participating in Company 
activities if the individual has not submitted the required 
disclosure,\548\ and Section 4.10(b)(iii) states that a Disclosing 
Party, including its representatives(s), and its Affiliates and their 
representatives(s), is recused from voting on matters in which it or 
its Affiliate is seeking a position or contract with the Company or has 
a position or contract with the Company and whose performance is being 
evaluated.\549\ The subsection also states that all recusals will be 
reflected in the meeting minutes.\550\
---------------------------------------------------------------------------

    \547\ See Article IV, Section 4.10(b) of the CT Plan.
    \548\ See Article IV. Section 4.10(b)(ii) of the CT Plan.
    \549\ See Article IV, Section 4.10(b)(iii) of the CT Plan.
    \550\ See Article IV, Section 4.10(b)(iv) of the CT Plan.
---------------------------------------------------------------------------

    The Commission received several comments regarding the recusal 
provisions. One commenter expresses the view that the CT Plan as 
proposed is unclear regarding whether individuals that work on the 
proprietary operations of an SRO would be required to be recused from 
acting as a Member Observer. The commenter suggests that there be a 
clear approach to Member Observers that limits those individuals 
eligible for appointment to persons who are not involved in the 
management, marketing, sale or development of proprietary equity data 
products at the SRO.\551\ Several commenters made similar statements, 
recommending that persons who hold positions with an SRO, particularly 
those who are responsible for equity data products offered separately 
by the SRO, or who receive compensation tied to the sale of proprietary 
market data, should be prohibited from serving as a Member Observer, 
which in turn would help to address potential conflicts of 
interest.\552\ In support of this recommendation, one commenter 
believes that, because Member Observers are permitted to attend 
Executive Sessions and receive highly confidential information, an 
individual responsible for the sale of proprietary market data would 
face an inherent conflict of interest.\553\
---------------------------------------------------------------------------

    \551\ See SIFMA Letter I, supra note 30, at 4; SIFMA Letter II, 
supra note 30, at 2.
    \552\ See BMO Letter, supra note 30, at 4; ICI Letter I, supra 
note 31, at 5; ICI Letter II, supra note 31, at 2, Fidelity Letter, 
supra note 30, at 5; FINRA Letter I, supra note 257, at 5; BlackRock 
Letter I, supra note 247, at 4-5.
    \553\ See BlackRock Letter I, supra note 247, at 4-5.
---------------------------------------------------------------------------

    In contrast, one commenter argues that the recusal provisions of 
the conflicts of interest policy would impair the SROs' abilities to 
choose how to manage their businesses and fulfill their regulatory 
responsibilities.\554\ The commenter is particularly concerned with the 
standard of ``impartiality'' regarding appointment of a potential 
Voting Representative, stating that the Commission does not define 
impartiality in this context and assumes that the SRO is only 
appropriately impartial when there is a total separation between its 
involvement in an NMS plan and its proprietary data activities.\555\ 
The commenter further argues that there is no requirement under Section 
11A of the Act or Rule 608 for an SRO to be impartial when discharging 
its obligations to act jointly in the planning, development, operation, 
and regulations of an NMS plan.\556\
---------------------------------------------------------------------------

    \554\ See NYSE Letter I, supra note 18, at 18.
    \555\ See id.
    \556\ See id. at 19.
---------------------------------------------------------------------------

    The Commission continues to believe that, while it is an SRO rather 
than an individual SRO employee that has obligations to the CT Plan, to 
the extent an exchange that offers proprietary equity market data 
products appoints as its representative to the CT Plan an individual 
responsible for the sale of proprietary market data, that person has an 
inherent conflict of interest arising from his or her financial 
interest in the exchange's proprietary data business.\557\ The 
Commission believes that such an individual's financial interest in the 
exchange's proprietary data businesses, as well as the exchange's own 
commercial interest, could influence the individual's and the 
exchange's decision-making regarding the CT Plan's operations. As the 
Commission has previously stated, in light of this conflict, even if 
such individuals have the requisite expertise, the Commission believes 
that it is appropriate to prohibit a Member from appointing such an 
individual as its SRO Voting Representative to the CT Plan.\558\
---------------------------------------------------------------------------

    \557\ See Conflicts of Interest Approval Orders, supra note 509, 
85 FR at 28128 and 85 FR at 28054.
    \558\ See Conflicts of Interest Approval Orders, supra note 509, 
85 FR at 28128 and 85 FR at 28055.
---------------------------------------------------------------------------

    Separately, as discussed above,\559\ the Commission believes that 
certain discussions under the CT Plan may include Member Observers. The 
Commission believes that because Member Observers may attend CT Plan 
meetings and potentially receive and assess Highly Confidential 
Information, a Member Observer who is responsible for and has a 
financial interest (including compensation) in an exchange's 
proprietary market data products has an inherent conflict of interest. 
Thus, the Commission believes that Member Observers should be subject 
to the same restriction as SRO Voting Representatives and is therefore 
modifying the text of Section 4.10(b)(i) of the CT Plan to include any 
Members Observer, as well as any alternate SRO Voting 
Representative.\560\ The Commission finds that this modification is 
appropriate because it will prohibit a Member from appointing to either 
role a person that is responsible for or involved with the procurement 
for, or development, modeling, pricing, licensing, or sale of, PDP 
offered to customers of the CT Feeds if the person has a financial 
interest (including compensation) that is tied directly to the Member's 
market data business or the procurement of market data, and if that 
compensation would cause a reasonable

[[Page 44182]]

objective observer to expect the compensation to affect the 
impartiality of the representative.
---------------------------------------------------------------------------

    \559\ See supra Section II.C.5(d)(i).
    \560\ Pursuant to Article IV, Section 4.10(b) of the CT Plan, a 
Member is prohibited from appointing as its Voting Representative a 
person that is responsible for or involved with the procurement for, 
or development, modeling, pricing, licensing, or sale of, PDP 
offered to customers of the CT Feeds if the person has a financial 
interest (including compensation) that is tied directing to the 
Member's market data business or the procurement of market data and 
if that compensation would cause a reasonable objective observer to 
expect the compensation to affect the impartiality of the 
representative. Accordingly, the Commission is specifying that a 
Member would similarly be prohibited from appointing such a person 
as an alternate Voting Representative.
---------------------------------------------------------------------------

    Separately, in the Notice, the Commission asked whether the 
disclosure requirements under Section 4.10 and Exhibit B would elicit 
sufficient relevant information to mitigate conflicts of interest that 
may result from Members engaging in certain business activities outside 
of the business activities of the CT Plan as provided for in Section 
4.6.\561\ Although the Commission received comment letters 
acknowledging that the disclosure requirements may elicit relevant 
information to identify and mitigate potential conflicts of interest, 
one commenter recommends that an SRO Voting Representative be recused 
from voting on matters relating to opportunities, relationships, or 
investments when the interests of the Member employing the voting 
representative conflicts with the interests of the CT Plan.\562\ This 
Order addresses these comments in Section II.C.5(f) above, regarding 
Company Opportunities.\563\
---------------------------------------------------------------------------

    \561\ See Notice, supra note 3, 85 FR at 64571.
    \562\ See SIFMA Letter I, supra note 30, at 4-5; SIFMA Letter 
II, supra note 30, at 2; Nasdaq Letter I, supra note 20, at 24.
    \563\ See supra Section II.C.5(f).
---------------------------------------------------------------------------

(iv) Effect of Pending Petitions for Review
    Finally, the Commission also solicited comment on Section 4.10(d) 
of the CT Plan, which provides that if the Commission's Conflicts of 
Interest Approval Orders are stayed or overturned by a court, the 
requirements of Section 4.10 and Exhibit B shall not apply.\564\ The 
Commission sought commenters' views on whether such a provision is 
necessary or appropriate for the CT Plan and whether the CT Plan 
should, at a minimum, contain provisions for addressing conflicts of 
interests that are not subject to elimination, or provisions specifying 
that the CT Plan must be amended to include a new policy with respect 
to conflicts of interest before the existing policy can be 
removed.\565\ One commenter supports retaining the current provisions 
of Section 4.10 in the event that the Conflicts of Interest Approval 
Orders are stayed or overturned so that conflicts remain 
disclosed.\566\
---------------------------------------------------------------------------

    \564\ See Article IV, Section 4.10(d) of the CT Plan.
    \565\ See Notice, supra note 3, 85 FR at 64571 (Question 32).
    \566\ See RBC Letter, supra note 30, at 11.
---------------------------------------------------------------------------

    As the Commission previously stated in the Conflicts of Interest 
Approval Orders, the Commission believes that by requiring full 
disclosure of all material facts necessary to identify the nature of a 
potential conflict of interest and the effect it may have on Plan 
action, all parties, including the Commission and the public, will be 
better positioned to evaluate competing interests among any of the 
parties involved in governing, operating, and overseeing the CT Plan, 
as those competing interests could materially affect their ability to 
carry out the purposes of the Plan.\567\
---------------------------------------------------------------------------

    \567\ See Conflicts of Interest Approval Orders, supra note 509, 
85 FR at 28120 and 85 FR at 28047.
---------------------------------------------------------------------------

    The Commission is modifying Section 4.10 to remove subsection (d), 
which provides that if the Commission's Conflicts of Interest Approval 
Orders are stayed or overturned, the requirements of Section 4.10 and 
Exhibit B would not be applicable. The Commission finds that it is 
appropriate to remove this provision from the CT Plan. The U.S. Court 
of Appeals for the D.C. Circuit has dismissed the petitions for review 
of the Conflicts of Interest Approval Orders that were pending when the 
SROs filed the proposed CT Plan.\568\ Moreover, even if a court were to 
vacate the Conflicts of Interest Approval Orders, the CT Plan would be 
able to file an amendment with the Commission to align the policy with 
the court's decision, and the Commission could, on its own initiative, 
propose an amendment as well.
---------------------------------------------------------------------------

    \568\ See New York Stock Exchange, et al. vs. Securities and 
Exchange Commission, Nos. 20-1242, 20-1243, 20-1244, --F.4th--, 2021 
WL 2654987, *1-4 (D.C. Cir., June 29, 2021).
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission is approving 
Article IV, Section 4.10 of the CT Plan and Exhibit B, as modified.
(k) Confidentiality Policy
(i) General Provisions
    Article IV, Section 4.11 of the CT Plan sets forth the proposed 
confidentiality policy.\569\ As proposed, Section 4.11(a) provides that 
the Members and Non-SRO Voting Representatives are subject to the 
policy as set forth in Exhibit C to the Plan (the ``Confidentiality 
Policy''). The provision further states that the Company will arrange 
for Covered Persons that are neither Members nor Non-SRO Voting 
Representatives to comply with the Confidentiality Policy under their 
respective agreements with the Company, a Member, the Administrator, or 
the Processors. Section 4.11(b) states that if the Commission's 
Confidentiality Policy Approval Orders are stayed or overturned by a 
court, the requirements of Section 4.11 and related Confidentiality 
Policy in Exhibit C shall not apply.\570\
---------------------------------------------------------------------------

    \569\ See Securities Exchange Act Release Nos. 88825 (May 6, 
2020), 85 FR 28090 (May 12, 2020); 88826 (May 6, 2020), 85 FR 28069 
(May 12, 2020) (collectively, the ``Confidentiality Policy Approval 
Orders''). In the Governance Order, the Commission ordered the SROs 
to incorporate into the CT Plan provisions consistent with the 
Confidentiality Policy Approval Orders. See Governance Order, supra 
note 8, 85 FR at 28726.
    \570\ See Article IV, Section 4.11(b) of the CT Plan.
---------------------------------------------------------------------------

    For the reasons discussed below, the Commission is modifying the CT 
Plan to delete Section 4.11(b) from the CT Plan,\571\ and the 
Commission is therefore renumbering Section 4.11(a) of the CT Plan as 
Section 4.11. As discussed below, the requirements of the 
Confidentiality Policy apply to all Covered Persons. For consistency 
with Exhibit C, the Commission finds that it is appropriate to modify 
the first sentence of renumbered Section 4.11 to replace the phrase 
``The Members and Non-SRO Voting Representatives'' with the phrase 
``All Covered Persons.'' Additionally, because the defined term Covered 
Persons, as modified by the Commission \572\ will include Member 
Observers, the Commission finds that it is appropriate to modify the 
second sentence of renumbered Section 4.11 to replace the term 
``Members'' with the phrase ``SRO Voting Representatives and Member 
Observers.'' As modified, Section 4.11 of the CT Plan will state that 
the Company ``will arrange for Covered Persons that are not SRO Voting 
Representatives, Member Observers, or Non-SRO Voting Representatives to 
comply with the Confidentiality Policy under their respective 
agreements with either the Company, a Member, the Administrator, or the 
Processors.''
---------------------------------------------------------------------------

    \571\ See infra Section II.C.5(k)(iv) (discussing the effect of 
pending petitions for review).
    \572\ See infra Section II.C.5(k)(iii) (discussing the defined 
term Covered Persons).
---------------------------------------------------------------------------

    Separately, Exhibit C to the CT Plan \573\ describes the purpose 
and scope of the Confidentiality Policy, the procedures regarding the 
custodian and designations of all documents, and the procedures 
concerning Restricted Information,\574\ Highly Confidential 
Information,\575\ and Confidential

[[Page 44183]]

Information.\576\ Section (a)(ii) of Exhibit C states that the 
Confidentiality Policy applies to all Covered Persons,\577\ and 
provides that Covered Persons must adhere to the policy and may not 
receive Company data and information until they affirm in writing that 
they have read and undertake to abide by the terms of the 
Confidentiality Policy.
---------------------------------------------------------------------------

    \573\ See Exhibit C to the CT Plan.
    \574\ Article I, Section 1.1(mmm) of the CT Plan defines 
Restricted Information as highly sensitive customer-specific 
financial information, customer-specific audit information, other 
customer financial information, and personal identifiable 
information.
    \575\ Article I, Section 1.1(ii) of the CT Plan defines Highly 
Confidential Information as highly sensitive Member-specific, 
customer-specific, individual-specific, or otherwise sensitive 
information relating to the Operating Committee, Members, Vendors, 
Subscribers, or customers that is not otherwise Restricted 
Information. Highly Confidential Information includes: the Company's 
contract negotiations with the Processors or Administrator; 
personnel matters; information concerning the intellectual property 
of Members or customers; and any document subject to the Attorney-
Client Privilege or Work Product Doctrine.
    \576\ Article I, Section 1.1(l) of the CT Plan describes 
Confidential Information to mean, except to the extent covered by 
the definitions for Restricted Information, Highly Confidential 
Information, or Public Information: (i) any non-public data or 
information designated as Confidential by the Operating Committee 
pursuant to Section 4.3; (ii) any document generated by a Member or 
Non-SRO Voting Representative and designated by that Member or Non-
SRO Voting Representative as Confidential; and (iii) the individual 
views and statements of Covered Persons and SEC staff disclosed 
during a meeting of the Operating Committee or any subcommittees 
thereunder.
    \577\ Article I, Section 1.1(n) of the CT Plan defines Covered 
Persons.
---------------------------------------------------------------------------

    The Commission received several comments regarding the 
Confidentiality Policy.\578\ Generally, commenters support having a 
confidentiality policy in the CT Plan. Specifically, one commenter 
states that not all confidential information is the same and favors 
having tailored procedures for Restricted, Highly Confidential, and 
Confidential Information.\579\ The commenter further states that the 
specified procedures should also permit all Voting Representatives, and 
not just SRO Voting Representatives, to have access to Restricted and 
Highly Confidential Information so that they are able to make informed 
decisions, and that a strong confidentiality policy would improve the 
flow of information to decision-makers, including all Voting 
Representatives, which in turn would improve those decisions.\580\
---------------------------------------------------------------------------

    \578\ See Cboe Letter, supra note 17, at 6-8; BlackRock Letter 
I, supra note 247, at 5; RBC Letter, supra note 30, at 9-11; 
Fidelity Letter, supra note 30, at 5; Nasdaq Letter I, supra note 
20, at 2-7, 28-29; Data Boiler Letter I, supra note 31, at 38; ICI 
Letter I, supra note 31, at 4; FINRA Letter I, supra note 257, at 5-
6; SIFMA Letter I, supra note 30, at 4; NYSE Letter I, supra note 
18, at 12, 15-18, 20-29; BMO Letter, supra note 30, at 4; MFA 
Letter, supra note 30, at 4; NYSE Letter II, supra note 19, at 4-5; 
ICI Letter II, supra note 31, at 2; Schwab Letter I, supra note 30, 
at 2; MayStreet Letter, supra note 513, at 4.
    \579\ See RBC Letter, supra note 30, at 11.
    \580\ See id. In support, this commenter also suggests that Non-
SRO Voting Representatives could be required to sign non-disclosure 
agreements. See id.
---------------------------------------------------------------------------

    In contrast, several commenters oppose having such a policy in the 
CT Plan.\581\ These commenters state that the Confidentiality Policy is 
inconsistent with Section 11A of the Act and Rule 608,\582\ and that 
the Confidentiality Policy would frustrate the purposes of the Act and 
the national market system.\583\ Generally, these commenters state that 
by restricting an SRO Voting Representative from sharing CT Plan 
information with other personnel at an SRO--in the commenters' words, 
putting the SRO Voting Representative on an ``informational island'' 
\584\--the Confidentiality Policy would preclude Members from 
fulfilling their obligations under the securities laws, including Rule 
608.\585\ One of these commenters argues that if the Commission 
determines to approve the Plan with amendments, it should publish the 
exact text of the intended amendments and seek comment prior to issuing 
an approval. The commenter states that the necessity of seeking comment 
is demonstrated by the ``numerous errors and potential unintended 
consequences'' in the Conflicts of Interest Approval Orders and 
Confidentiality Policy Approval Orders currently applicable to the 
Equity Data Plans.\586\
---------------------------------------------------------------------------

    \581\ See Cboe Letter, supra note 17, at 6-8; NYSE Letter I, 
supra note 18, at 12; NYSE Letter II, supra note 19, at 4; Nasdaq 
Letter I, supra note 20, at 2-3.
    \582\ See Cboe Letter, supra note 17, at 6; NYSE Letter I, supra 
note 18, at 12, 15; NYSE Letter II, supra note 19, at 4; Nasdaq 
Letter I, supra note 20, at 1-2.
    \583\ See NYSE Letter I, supra note 18, at 20; NYSE Letter II, 
supra note 19, at 2; Nasdaq Letter I, supra note 20, at 1-2, 7; Cboe 
Letter, supra note 17, at 2, 6.
    \584\ See Cboe Letter, supra note 17, at 8; NYSE Letter I, supra 
note 18, at 17.
    \585\ See NYSE Letter I, supra note 18, at 15, 17; NYSE Letter 
II, supra note 19, at 4; Nasdaq Letter I, supra note 20, at 3; Cboe 
Letter, supra note 17, at 8.
    \586\ Nasdaq Letter I, supra note 20, at 3.
---------------------------------------------------------------------------

    Both here and in the Confidentiality Policy Approval Orders, the 
Commission has followed the procedures in Rule 608 for approval of an 
NMS plan. Moreover, what one commenter describes as ``errors'' and 
``unintended consequences'' in the Confidentiality Policy Approval 
Orders of the Equity Data Plans reflect instead a fundamental 
disagreement over whether any restrictions may be imposed on the use by 
SROs of commercially sensitive information garnered through their 
participation in the Equity Data Plans. And what one commenter \587\ 
asserts is guidance from Commission staff that is inconsistent with the 
Confidentiality Policy Approval Orders reflects instead the staff's 
good faith efforts to engage with the SROs and their counsel regarding 
their proposed ``interpretations'' of the Confidentiality Policy 
Approval Orders.
---------------------------------------------------------------------------

    \587\ See NYSE Letter I, supra note 18, at 24 & Attachment A.
---------------------------------------------------------------------------

    One commenter also states that the Confidentiality Policy imposes 
unreasonable burdens and risks upon the SROs, their representatives, 
and their senior management by failing to recognize that the SRO, not 
its voting representative, is the CT Plan's Member and that the SRO 
itself and its senior management are ultimately responsible for all 
aspects of the SRO's operations, including participating in national 
market system plans and compliance with Rule 608.\588\
---------------------------------------------------------------------------

    \588\ See Nasdaq Letter I, supra note 20, at 3.
---------------------------------------------------------------------------

    In response to commenters' concerns, the Commission notes that the 
SRO Voting Representative may, subject to certain conditions, share 
confidential information with individuals within the SRO. Depending on 
the type of confidential information, the provisions provide that 
Confidential Information may be disclosed ``in furtherance of the 
interests of the Company,'' Highly Confidential Information may be 
disclosed when employees are ``authorized to receive it,'' or when 
``required by law,'' \589\ and Restricted Information may be disclosed 
by the Administrator when it determines that it is appropriate to share 
a customer's financial information with the Operating Committee after 
redacting the customer's name and other personal information. 
Accordingly, if the SRO's Voting Representative has a legitimate need 
to share Plan information with, for example, the SRO's senior 
management, the CT Plan's provisions provide the means to do so.
---------------------------------------------------------------------------

    \589\ See infra Section II. C. 5(k)(ii) (discussing 
modifications to Treatment of Highly Confidential Information).
---------------------------------------------------------------------------

    Separately, one commenter claims that Section (b)(i)(B) of Exhibit 
C--which provides that the Administrator may, under delegated 
authority, designate documents as Restricted, Highly Confidential, or 
Confidential--is unlawful. Specifically, this commenter argues that, 
because the Administrator has no obligations under the securities laws 
and would only be acting as an agent of the Members, the 
Administrator's obligations are solely to the Operating Committee 
pursuant to its contract to perform functions required to allow the 
Members to meet their obligations under the securities laws.\590\ The 
commenter further contends that the Confidentiality Policy is unclear 
as to how the Operating Committee could provide oversight of the 
Administrator's designation of documents as Restricted, Highly 
Confidential, or Confidential, given the restrictions on sharing 
Restricted, Highly Confidential, and

[[Page 44184]]

Confidential Information.\591\ Accordingly, the commenter recommends 
that the Commission propose and publish for comment provisions 
authorizing the Operating Committee to direct the Administrator and 
Processors to apply confidentiality designations to such documents, 
which the Members could jointly administer and implement through CT 
Plan contracts with the Administrator and Processors.\592\
---------------------------------------------------------------------------

    \590\ See NYSE Letter I, supra note 18, at 27; NYSE Letter II, 
supra note 19, at 5.
    \591\ See NYSE Letter I, supra note 18, at 27.
    \592\ See id. at 28.
---------------------------------------------------------------------------

    The provisions of the CT Plan and Confidentiality Policy define and 
specify the types of Restricted, Highly Confidential, and Confidential 
Information. The Commission notes that the Administrator would be 
required to adhere to the defined terms and policy provisions as 
discussed below, rather than having unfettered discretion to categorize 
information under the Confidentiality Policy. Moreover, the Commission 
believes that permitting the Operating Committee, rather than the 
Administrator, to determine what information should be treated as 
Restricted, Highly Confidential, or Confidential would both fatally 
undermine the Confidentiality Policy and wholly defeat the purpose of 
having an independent Administrator that is not compromised by the core 
conflict faced by SROs that sell their own proprietary equity data 
products.
    Finally, one commenter argues that, while Exhibit C to the CT Plan 
includes the same provisions as the Confidentiality Policy Approval 
Orders, the CT Plan, if approved, would ``perpetuate the arbitrary and 
capricious rulemaking undertaken by the Commission when it failed to 
provide notice or seek comment on its own modifications to the policy 
language proposed by the Equity Data Plans.'' \593\ Accordingly, the 
commenter recommends that the confidentiality provisions be excluded 
from the Plan. The Commission, however, disagrees with the procedural 
objections raised to the separate Confidentiality Policy Approval 
Orders, and the Commission has responded to the procedural objections 
both in the Confidentiality Policy Approval Orders and in subsequent 
litigation. In any event, those procedural objections have no bearing 
on the adequacy of the procedure resulting in this Order. Here, the 
Commission noticed the SROs' proposed CT Plan, provided an opportunity 
for comment, and posed detailed and specific questions with respect to 
particular issues raised by the proposed CT Plan's provisions, 
including the Confidentiality Policy. Moreover, because the 
Confidentiality Policy Approval Orders were issued on the same day as 
the Governance Order, the language of the confidentiality policies of 
the Equity Data Plans as approved was available to commenters when 
discussing whether similar provisions should be included in the CT 
Plan. The Commission's modifications here both directly respond to the 
public comments received and more fully accomplish the CT Plan's stated 
purpose, consistent with the changes made by the Commission in the 
Confidentiality Policy Approval Orders. These changes are well within 
the Commission's discretion in deciding that additional measures are 
necessary or appropriate to address the conflict between an SRO both 
selling proprietary data in its commercial capacity and discharging its 
obligation to collect and disseminate consolidated data through a 
national market system plan.
---------------------------------------------------------------------------

    \593\ Nasdaq Letter I, supra note 20, at 3.
---------------------------------------------------------------------------

(ii) Treatment of Restricted, Highly Confidential, and Confidential 
Information

Restricted Information.

    Section (b)(ii) of Exhibit C provides the procedures concerning 
Restricted Information, generally prohibiting a Covered Person in 
possession of Restricted Information from disclosing it to others, 
including Agents, and provides that this prohibition does not apply to 
disclosures to the staff of the SEC or as otherwise required by 
Applicable Law, or to other Covered Persons as expressly provided for 
by the policy. Section (b)(ii) further states that Restricted 
Information will be kept in confidence by the Administrator and 
Processors and will not be disclosed to the Operating Committee or any 
subcommittee thereof or during Executive Session. However, Restricted 
Information may be shared if the Administrator determines that it is 
appropriate to share a customer's financial information with the 
Operating Committee and first anonymizes the information. The 
Administrator may disclose the identity of a customer in Executive 
Session if, in good faith, the Administrator determines that it is 
necessary to disclose the customer's identity in order to obtain input 
or feedback from the Operating Committee or a subcommittee thereof 
about a matter of importance to the Company. In such case, the 
Administrator will change the designation from Restricted Information 
to Highly Confidential Information.\594\
---------------------------------------------------------------------------

    \594\ See Section (b)(ii)(B) of Exhibit C of the CT Plan.
---------------------------------------------------------------------------

    As proposed, Section (b)(ii) of Exhibit C does not include a clause 
that is present in the Confidentiality Policy Approval Orders. That 
clause permits the Administrators of the existing Equity Data Plans to 
share with the staff of the SEC Restricted Information related to any 
willful, reckless, or grossly negligent conduct by a customer 
discovered by an Administrator, upon majority vote of the Operating 
Committee in Executive Session, and that clause served as a specific 
exception to the general provision in that same paragraph that 
``Restricted Information will be kept in confidence by the 
Administrator and Processor and will not be disclosed to the Operating 
Committee or any subcommittee thereof, or during Executive Session, or 
to the Advisory Committee.'' \595\ The Commission in the 
Confidentiality Policy Approval Orders also modified Section 3(b)(i) of 
the Equity Data Plans' confidentiality policies to more broadly provide 
that ``Covered Persons in possession of Restricted Information are 
prohibited from disclosing it to others, including Agents,'' but 
specifically further provided that this prohibition ``does not apply to 
disclosure to the staff of the SEC or as otherwise required by law, or 
to Covered Persons as expressly provided for by this Policy.'' \596\ 
Although the CT Plan as proposed does not contain the specific 
exception that appears in the Equity Data Plans regarding the sharing 
by the Administrator of Restricted Information regarding certain 
customer conduct, the Commission believes that the broader language of 
Section (b)(ii) of Exhibit C to the CT Plan, which provides that the 
restrictions on sharing of Restricted Information do not apply to 
disclosure to the staff of the Commission, is sufficient to ensure that 
Restricted Information regarding any willful, reckless or grossly 
negligent conduct by a customer can be shared with the Commission.
---------------------------------------------------------------------------

    \595\ Confidentiality Policy Approval Orders, supra note 569, 85 
FR at 28103 and 85 FR at 28081.
    \596\ Confidentiality Policy Approval Orders, supra note 569, 85 
FR at 28098 and 85 FR at 28077.
---------------------------------------------------------------------------

    Some commenters oppose the language in Sections (b)(ii) and 
(b)(iii)(A)(1) of Exhibit C that limits a Covered Person's ability to 
disclose Restricted Information and Highly Confidential Information to 
others, ``including agents.'' \597\ Generally, these commenters are 
concerned that the

[[Page 44185]]

restriction is broad and impedes the ability of the Plan Administrator 
and Processors to perform tasks--such as hiring independent auditors 
and outside counsel to perform administrative functions--necessary for 
a Member to comply with its obligations pursuant to Rule 608.\598\ For 
example, these commenters argue that for the Administrator to provide 
services to the CT Plan, such as audited financial statements, the 
Administrator must be able to provide Restricted Information and Highly 
Confidential Information to an independent auditor, but would be 
restricted from doing so under the Confidentiality Policy.\599\ One 
commenter argues that the policies are impermissibly vague and states 
that it has had ongoing discussions with Commission staff to establish 
how the policies should be interpreted.\600\ Another commenter 
similarly states that it has raised policy interpretation questions 
with Commission staff.\601\ The commenter argues that the staff`s 
response to the questions is not sufficiently clear and is inconsistent 
with the plain language of the Confidentiality Policy Approval Orders, 
and the commenter recommends that the Commission eliminate or 
substantially modify the prohibition on providing confidential 
information to agents and publish a new proposal for comment.\602\
---------------------------------------------------------------------------

    \597\ See NYSE Letter I, supra note 18, at 15, 23; Nasdaq Letter 
I, supra note 20, at 4-6.
    \598\ See NYSE Letter I, supra note 18, at 23-24; NYSE Letter 
II, supra note 19, at 4-5; Nasdaq Letter I, supra note 20, at 5-6; 
Cboe Letter, supra note 17, at 8 (stating that policy could be read 
to prohibit the sharing of certain types of confidential information 
with outside legal counsel, auditors, or other service providers 
that have a need to access that information).
    \599\ See NYSE Letter I, supra note 18, at 23-24. See also 
Nasdaq Letter I, supra note 20, at 6 (stating that its auditors have 
expressed concerns about whether the policy is consistent with 
professional obligations that require them to subject their work to 
peer review and that may therefore require making Restricted or 
Highly Confidential Information available to persons who are not 
Covered Persons).
    \600\ See Cboe Letter, supra note 17, at 7-8 (arguing that the 
policies would limit access to certain confidential information to 
the particular individual who is representing an SRO and would 
further limit the ability of an individual SRO representative to 
share information and consult with other employees of the SRO that 
is the actual plan participant).
    \601\ See NYSE Letter I, supra note 18, at 23.
    \602\ See NYSE Letter I, supra note 18, at 24; NYSE Letter II, 
supra note 19, at 5.
---------------------------------------------------------------------------

    After considering comments received, the Commission finds that it 
is appropriate to modify Exhibit C to the CT Plan to provide for 
additional sharing of protected information in certain circumstances. 
As discussed above, commenters raise concerns that the Confidentiality 
Policy improperly limits the Administrator's and Processors' ability to 
share Restricted Information with others, including agents, impeding 
the ability of an agent to perform its specific services to the CT 
Plan. The Commission has carefully considered these commenters' 
concerns and finds that it is appropriate to permit such disclosure 
when the Operating Committee, consistent with the purposes and goals of 
the CT Plan, determines that it is appropriate to do so, because there 
may be instances in which Restricted Information is required to be 
disclosed to a Covered Person or third party in the service of the CT 
Plan. Accordingly, the Commission is adding new subparagraph (C) to 
Section (b)(ii) of Exhibit C to provide that the Operating Committee 
may authorize the disclosure of specified Restricted Information to 
specific Covered Persons or third parties, if it determines that doing 
so is in furtherance of the interests of the Plan, which is to ensure 
the prompt, accurate, reliable, and fair collection, processing, 
distribution, and publication of information with respect to quotations 
for and transactions in such securities and the fairness and usefulness 
of the form and content of such information, consistent with Section 
11A of the Act.\603\
---------------------------------------------------------------------------

    \603\ 15 U.S.C. 78k-1(c)(1)(B).
---------------------------------------------------------------------------

    The new subparagraph (C) also requires that Covered Persons and 
third parties authorized by the Operating Committee that receive or 
have access to Restricted Information must segregate the information, 
retain it in confidence, and use it only in a manner consistent with 
the terms of the Confidentiality Policy. The Commission finds that this 
modification is appropriate because it will provide additional 
safeguards to ensure that highly sensitive customer and personally 
identifiable information is properly protected and not misused. 
Finally, new subparagraph (C) provides that such authorization will be 
granted on a case-by-case basis, unless the Operating Committee grants 
standing approval to allow disclosure of specified recurring 
information to specific Covered Persons. The Commission finds that this 
modification is appropriate because it promotes efficiency by allowing 
for the disclosure of Restricted Information to specific Covered 
Persons on an ongoing basis, where appropriate, without having to 
continually seek Operating Committee approval.
    Highly Confidential Information.
    As proposed, Section (b)(iii)(A) of Exhibit C permits Highly 
Confidential Information to be disclosed in Executive Session or to the 
subcommittee established pursuant to Section 4.7(c) of the CT Plan, and 
provides that Covered Persons in possession of Highly Confidential 
Information are prohibited from disclosing it to others, including 
Agents, except to other Covered Persons who need the information to 
fulfill their responsibilities to the Company. The prohibition does not 
apply to disclosures to the SEC staff or as otherwise required by law, 
or to other Covered Persons authorized to receive it. Thus, Highly 
Confidential Information may be disclosed to Commission staff unless it 
is protected by the Attorney-Client Privilege or the Work Product 
Doctrine. This section further states that the Operating Committee 
cannot authorize any other disclosure of Highly Confidential 
Information.
    Section (b)(iii)(B) provides that in the event that a Covered 
Person is determined by an affirmative vote of the Operating Committee 
to have disclosed Highly Confidential Information, ``the Operating 
Committee will determine the appropriate remedy for the breach based on 
the facts and circumstances of the event. For an SRO Voting 
Representative or Member Observer, remedies include a letter of 
complaint to the SEC, which may be made public by the Operating 
Committee. For a Non-SRO Voting Representative, remedies include 
removal of that Non-SRO Voting Representative.'' \604\
---------------------------------------------------------------------------

    \604\ Exhibit C, Section (b)(iii)(B) of the CT Plan.
---------------------------------------------------------------------------

    As noted above, some commenters express concerns that the 
Confidentiality Policy would preclude Members from fulfilling their 
obligations under the securities laws. Specifically, commenters argue 
that the SROs--not the individual Voting Representatives--have 
responsibilities under the Act and rules of the Commission and must be 
able to determine what information is available to individuals within 
an SRO in order to satisfy the SRO's regulatory obligations.\605\ 
Another commenter agrees, arguing that the Confidentiality Policy, as 
written, wrongly assumes that the SRO Voting Representative has sole 
responsibility for all CT Plan decisions without the ability of that 
individual to seek guidance from the SRO's senior management, technical 
advice from other SRO employees, or legal advice from SRO corporate 
counsel.\606\ The commenter is concerned that under the proposed 
Confidentiality Policy an SRO's senior management would not be able to 
access information that may be

[[Page 44186]]

necessary to make decisions related to the Plan if that information is 
determined to be Highly Confidential Information or Confidential 
Information. For example, the commenter states that an SRO's senior 
management would be denied access to privileged information and 
prevented from participating in decisions regarding legal strategy and 
litigation involving the CT Plan or regulatory interactions with the 
Commission.\607\ Thus, these commenters conclude that the Commission 
may not approve an NMS plan that prohibits SROs' senior management from 
having access to information that may be necessary to their informed 
decision-making related to regulatory obligations.\608\
---------------------------------------------------------------------------

    \605\ See NYSE Letter I, supra note 18, at 16-17; NYSE Letter 
II, supra note 19, at 4-5; Nasdaq Letter I, supra note 20, at 3.
    \606\ See Nasdaq Letter I, supra note 20, at 3.
    \607\ See NYSE Letter I, supra note 18, at 17.
    \608\ See id.; NYSE Letter II, supra note 19, at 5. See also 
Nasdaq Letter I, supra note 20, at 3.
---------------------------------------------------------------------------

    In response to commenters' concerns regarding the provisions 
governing disclosure of Highly Confidential Information, the Commission 
finds that it is appropriate to modify Section (b)(iii)(A) of Exhibit C 
to the CT Plan to specify the instances in which Highly Confidential 
Information can be shared. Specifically, the Commission is removing the 
language in subparagraph (A)(1) that permits disclosure to ``Covered 
Persons who need the Highly Confidential Information to fulfill their 
responsibilities to the Company.'' The Commission believes that this 
language is too general to provide a meaningful limitation on the 
sharing of commercially sensitive information or to provide useful 
guidance regarding what disclosures are permissible. The Commission 
therefore believes that the CT Plan should clearly specify the 
situations where Highly Confidential Information may be disclosed. 
Accordingly, the Commission is modifying the second sentence in Section 
(b)(iii)(A) of Exhibit C to state, ``Covered Persons in possession of 
Highly Confidential Information are prohibited from disclosing it to 
others, including Agents, except as provided below.'' The Commission 
finds that this modification is appropriate because the general 
prohibition on sharing, paired with specific instances of permissible 
sharing, which are discussed below, would specify and establish clear 
and limited circumstances for permitted disclosure of Highly 
Confidential Information.
    In connection with these changes, the Commission is also modifying 
subparagraph (A)(1) of Section (b)(iii) of Exhibit C to remove the 
language that states that the prohibition does not apply to disclosures 
``or as otherwise required by law (such as those required to receive 
the information to ensure the Member complies with its regulatory 
obligations), or to other Covered Persons authorized to receive it.'' 
In response to commenters' request for greater clarity, the Commission 
finds that it is appropriate to remove this broad language. 
Accordingly, the Commission is adding, in new subparagraph (A)(2), that 
Highly Confidential Information may be disclosed as required by 
Applicable Law.\609\ The Commission believes that this modification is 
appropriate because it provides greater specificity as to when Highly 
Confidential Information may be disclosed, consistent with the defined 
term.
---------------------------------------------------------------------------

    \609\ As defined in the CT Plan in Article I, Section 1.1(e), 
``Applicable Law'' means all applicable provisions of (a) 
constitutions, treaties, statutes, laws (including the common law), 
rules, regulations, decrees, ordinances, codes, proclamations, 
declarations or orders of any Governmental Authority; (b) any 
consents or approvals of any Governmental Authority; and (c) any 
orders, decisions, advisory or interpretative opinions, injunctions, 
judgments, awards, decrees of, or agreements with, any Governmental 
Authority. Article I, Section 1.1(hh) of the CT Plan defines 
``Governmental Authority'' to mean (a) the U.S. federal government 
or government of any state of the U.S., (b) any instrumentality or 
agency of any such government, (c) any other individual, entity or 
organization authorized by law to perform any executive, 
legislative, judicial, regulatory, administrative, military or 
police functions of any such government, or (d) any 
intergovernmental organization of U.S. entities, but ``Governmental 
Authority'' excludes any self-regulatory organization registered 
with the Commission.
    Although one commenter asks for the Commission's ``endorsement'' 
of the conclusion that a disclosure ``required by law'' would 
encompass the disclosure of financial information in connection with 
an audit, see Nasdaq Letter I, supra note 20, at 6, other provisions 
of the CT Plan as modified would permit sharing of information that 
is required for the preparation of an exchange's financial 
statements. As discussed above, the Commission is modifying the CT 
Plan to provide that the Operating Committee may authorize 
disclosure of Restricted Information under certain circumstances. 
See text accompanying note 603, supra. And as discussed immediately 
below, the Commission is also modifying the proposed CT Plan to 
provide for disclosure of Highly Confidential Information by SRO 
Voting Representatives to officers of the Member they represent who 
have direct or supervisory responsibilities for the Member's 
participation in the CT Plan. See also Section (b)(iii)(A)(4) of 
Exhibit C to the CT Plan, as modified. For the same reasons, the 
phrase ``required by Applicable Law'' does not authorize disclosure 
of Restricted Information or Highly Confidential Information on the 
basis of a determination by a Covered Person, or any other person, 
that disclosure of the information is required to ensure that a 
Member complies with its regulatory obligations.
---------------------------------------------------------------------------

    The Commission is also modifying Exhibit C to the CT Plan to re-
number the subparagraphs in Section (b)(iii) so that subparagraph 
(A)(2) will now be subparagraph (A)(3), and to add new Section 
(b)(iii)(A)(4), which specifies the circumstances under which SRO 
Voting Representatives are permitted to share Highly Confidential 
Information with officers of their SRO or agents of the Member. 
Specifically, new Section (b)(iii)(A)(4) provides that SRO Voting 
Representatives may share certain types of Highly Confidential 
Information with officers of their Member SRO who have direct or 
supervisory responsibility for the SRO's participation in the Company, 
or with Agents for that Member, provided that such information may not 
be used in the development, modeling, pricing, licensing, or sale of, 
PDP. The Commission finds that this modification is appropriate because 
it recognizes that certain officers and agents of the SRO may require 
relevant CT Plan information in order to comply with regulatory 
obligations. However, the Commission believes that such individuals 
should be limited to officers of a Member who have a direct or 
supervisory responsibility for the SRO's participation in the CT Plan, 
or with agents for the Member that support the SRO's participation in 
the CT Plan, and that the information shared must not be used in the 
development, modeling, pricing, licensing, or sale of, PDP.
    New Section (b)(iii)(A)(4) also specifies certain types of Highly 
Confidential Information that an SRO Voting Representative may share. 
Specifically, the Commission believes it is appropriate to identify the 
types of Highly Confidential Information permitted to be disclosed by 
the SRO Voting Representative as: (i) The Company's contract 
negotiations with the Processor(s) or Administrator; (ii) 
communications with, and work product of, counsel to the Company; and 
(iii) information concerning personnel matters that affect the 
employees of the SRO or of the Company. The Commission finds that it is 
appropriate for an SRO Voting Representative to share the contract 
negotiations with the Processor(s) or Administrator because the SRO 
will directly interact with the Processor(s) and Administrator pursuant 
to such contracts and would need to know the terms and conditions to 
ensure that it complies with the requirements of the CT Plan. 
Similarly, the Commission finds that it is appropriate for 
communications and work product of counsel to the Company to be shared 
because counsel would be representing the SROs, and SRO officers would 
need to be informed in order to provide relevant information to counsel 
or make decisions related to Plan matters.
    With respect to the definition of ``personnel matters'' as used in 
the definition of Highly Confidential Information, two commenters raise

[[Page 44187]]

concerns that the definition is too broad and that the definition of 
Highly Confidential Information should include only those personnel 
matters that affect the employees of the SROs or of the Company.\610\ 
The Commission believes that it is appropriate to modify this aspect of 
the definition of Highly Confidential Information so that the 
definition of personnel matters is limited to personnel matters that 
affect the employees of the SROs or the Company and thus is not 
construed broadly to include, for example, the performance of outside 
persons under contract with the CT Plan, which may be significant 
matters in which Non-SRO Voting Representatives, as full members of the 
Operating Committee, should be able to participate. The Commission 
further finds that it is appropriate for information regarding 
personnel matters that affect the employees of the SROs or of the 
Company to be shared with officers of the SROs because the SROs are the 
Members of the LLC and are responsible for compliance with the terms of 
the CT Plan and Rule 608.
---------------------------------------------------------------------------

    \610\ See Schwab Letter I, supra note 30, at 2; SIFMA Letter I, 
supra note 30, at 4.
---------------------------------------------------------------------------

    The Commission, however, does not believe that information 
concerning the intellectual property of Members or customers should be 
shared. For example, customer audit information is excluded and may not 
be shared as it contains highly sensitive information and could be 
commercially valuable. Additionally, the Commission does not believe 
that SRO officers require detailed audit information regarding 
individual customers' use of and payment for consolidated data to 
comply with the provisions of the CT Plan or with their regulatory 
obligations under Plan. The policies that would support the prompt, 
accurate, reliable, and fair collection, processing, distribution, and 
publication of information with respect to quotations for and 
transactions in such securities and the fairness and usefulness of the 
form and content of such information would not require detailed 
knowledge about specific amounts of an individual, identified 
customer's use of and payment for Plan data. Rather, appropriate 
policies for the CT Plan should be based on relevant information about 
the data usage and payments of different categories of customers. For 
similar reasons, the Commission does not believe that officers of an 
SRO would require information concerning the intellectual property of 
another Member, as SROs are in competition with each other, and sharing 
such information would not be in furtherance of the purposes of the CT 
Plan.
    The Commission's modifications to this subparagraph also provide 
that, to the extent that an SRO Voting Representative discloses Highly 
Confidential Information pursuant to Section (b)(iii)(A)(4), the 
individual will be required to maintain a log documenting each instance 
of such disclosure, including the information shared, the persons 
receiving the information, and the date the information was shared. The 
Commission is further modifying this subparagraph to add a requirement 
that Covered Persons who receive or have access to Highly Confidential 
Information pursuant to the new subparagraph must segregate the 
information, retain it in confidence, and use it only in a manner 
consistent with the terms of the Confidentiality Policy. The Commission 
believes that the requirement to log Highly Confidential Information 
when it is shared and to segregate the shared information, retain it in 
confidence, and use it only in a manner consistent with the terms of 
the Confidentiality Policy will provide greater transparency and 
accountability regarding the sharing of Highly Confidential Information 
of the CT Plan.\611\ The Commission finds that these modifications are 
appropriate because they will help to guard against misuse of that 
information for commercial or other purposes.
---------------------------------------------------------------------------

    \611\ The Commission notes that Section (b)(iii)(A)(1) of 
Exhibit C to the CT Plan specifies that the prohibition of 
disclosing Highly Confidential Information does not apply to 
disclosures made to the staff of the Commission. Additionally, 
Section (b)(iii)(A)(2) of Exhibit C permits disclosure of Highly 
Confidential Information as required by Applicable Law.
---------------------------------------------------------------------------

    The Commission is similarly modifying Section (b)(iii)(A) of 
Exhibit C to add new subparagraph (5), which will allow the Operating 
Committee to authorize the disclosure of specified Highly Confidential 
Information to specific third parties that are acting as Agents of the 
Company. The Commission finds that this modification is appropriate 
because it recognizes that certain Agents of the Company may at times 
require necessary information to make informed decisions regarding the 
CT Plan and to assist a Member's compliance with its regulatory 
obligations. Subparagraph (5) will also require that third parties that 
receive or have access to Highly Confidential Information must 
segregate the information, retain it in confidence, and use it only in 
a manner consistent with the terms of the Confidentiality Policy.\612\ 
The language further provides that authorization will be on a case-by-
case basis, unless the Operating Committee grants standing approval to 
allow disclosure of specified recurring information to specific third 
parties. The Commission finds that these modifications are appropriate 
because they are designed to ensure that the disclosed information is 
properly protected and not misused and because they will promote an 
efficient process by allowing for the ongoing disclosure of Highly 
Confidential Information to a specific Agent without having to 
continually seek Operating Committee approval.
---------------------------------------------------------------------------

    \612\ For example, the Operating Committee, when granting access 
to Highly Confidential Information to a third party (other than the 
Commission), could accomplish this by requiring the recipient to 
sign an agreement to abide by these requirements for storage and 
restrictions on use.
---------------------------------------------------------------------------

Confidential Information.

    As proposed, Section (b)(iv) of Exhibit C provides that 
Confidential Information may be disclosed during a meeting of the 
Operating Committee or any subcommittee thereof, and a Covered Person 
may disclose Confidential Information to other persons to allow such 
other persons to fulfill their responsibilities to the Company. Section 
(b)(iv)(D) of Exhibit C provides that a Covered Person that is a 
representative of a Member may be authorized by the Operating Committee 
to disclose particular Confidential Information to other employees or 
agents of the Member or its affiliates only in furtherance of the 
interests of the Company as needed for that Covered Person to perform 
his or her function on behalf of the Company.
    One commenter raises concerns with Section (b)(iv)(A) of Exhibit C, 
arguing that no Covered Person other than Members has responsibilities 
to the CT Plan, and as such, the provision would imply that 
``Confidential Information cannot be shared at all, or at a minimum, 
casts substantial doubt on what can be shared.'' \613\ The commenter 
states that it has discussed with Commission staff how Confidential 
Information may be shared with service providers who need access to 
such information but have no such responsibilities to the Plan.\614\ 
The commenter acknowledges that, in response, Commission staff stated 
its view that sharing Confidential Information is permissible because 
the Operating Committee can authorize its disclosure if the disclosure 
is not inconsistent with the goals and aims of

[[Page 44188]]

the Confidentiality Policy.\615\ Nonetheless, the commenter believes 
that the provision impedes the functioning of the national market 
system and requests that the Commission propose to eliminate or 
substantially modify the restriction and solicit comment.\616\
---------------------------------------------------------------------------

    \613\ NYSE Letter I, supra note 18, at 24.
    \614\ See id. at 25.
    \615\ See id.
    \616\ See id.
---------------------------------------------------------------------------

    In response to the commenter's concern, the Commission is modifying 
certain provisions of the Confidentiality Policy. Specifically, the 
Commission is modifying Section (b)(iv)(A) of Exhibit C, to state that 
Covered Persons may disclose Confidential Information only to other 
persons who need to receive such information to fulfill their 
responsibilities pursuant to the CT Plan, including oversight of the CT 
Plan. The Commission notes that, as defined in the CT Plan, 
Confidential Information may include non-public data or information 
designated as Confidential by the Operating Committee pursuant to 
Article IV, Section 4.3. The Commission finds that this modification is 
appropriate because, consistent with the current practices of the 
Equity Data Plans, financial information necessary for the leadership 
of an SRO to make decisions regarding the SRO's participation in the 
Plan--namely, Plan expenses and revenues--will be designated as 
Confidential and thus permitted to be shared. Consistent with other 
provisions of the Confidentiality Policy as discussed above, the 
Commission is also modifying this section of the Confidentiality Policy 
to provide that recipients of Confidential Information must segregate 
the information, retain it in confidence, and use it only in a manner 
consistent with the terms of the Confidentiality Policy. The Commission 
is also modifying Section (b)(iv)(B) of Exhibit C, which authorizes 
disclosure of Confidential Information by an affirmative vote of the 
Operating Committee, to add language to clarify that such authorization 
must be on a case-by-case basis, unless the Operating Committee grants 
standing approval to allow disclosure of specified recurring 
information to specific Covered Persons. The Commission finds that 
these modifications are appropriate because expressly including these 
requirements for handling Confidential Information will provide 
additional safeguards regarding disclosure of Confidential Information 
and help to guard against misuse of this information for commercial or 
other purposes.
(iii) Covered Persons
    In the Notice, the Commission solicited comment primarily focused 
on the applicability of the Confidentiality Policy to Member Observers. 
Specifically, the Commission asked whether Section 4.11(a) should be 
modified to expressly apply to Member Observers and if the definition 
of Member Observer should be more narrowly tailored to limit the 
individuals within an SRO that have access to Highly Confidential or 
Confidential Information.\617\ Among other questions, the Commission 
also asked if Member Observers should be prohibited from receiving 
Restricted or Highly Confidential Information, excluded from being 
present when such information is discussed, or required to demonstrate 
a legitimate or particularized need for specific Restricted or Highly 
Confidential Information before being granted access.\618\
---------------------------------------------------------------------------

    \617\ See Notice, supra note 3, 85 FR at 64571 (Question 33).
    \618\ See id. at 64567 (Question 5).
---------------------------------------------------------------------------

    Separately, in the Notice, the Commission also solicited comment on 
the definition of Covered Persons. As proposed, the CT Plan defines 
``Covered Persons'' as the representatives of the Members, the Non-SRO 
Voting Representatives, SRO Applicants, the Administrator, and the 
Processors; affiliates, employees, and Agents of the Operating 
Committee, a Member, the Administrator, and the Processors; any third 
parties invited to attend meetings of the Operating Committee or 
subcommittees; and the employers of Non-SRO Voting Representatives. 
Covered Persons do not include staff of the SEC. Specifically, the 
Commission asked whether other types of representatives, such as Member 
Observers, should be specifically included in the definition.\619\
---------------------------------------------------------------------------

    \619\ See id. at 64567 (Question 5).
---------------------------------------------------------------------------

    In response, the Commission received several comment letters 
discussing Covered Persons.\620\ One commenter notes that, as proposed, 
the definition of ``Covered Persons'' includes representatives of the 
Members as well as employees of a Member, and states that Member 
Observers would be implicitly included in the definition.\621\ However, 
the commenter does not oppose explicitly adding Member Observers for 
clarity and agrees that individuals qualifying as Member Observers 
should be subject to the Confidentiality Policy.\622\ Other commenters 
also support expressly including Member Observers in the definition of 
Covered Persons, stating that the CT Plan's Confidentiality Policy 
should apply to all Member Observers,\623\ particularly given the 
significant role a Member Observer may have in Plan deliberations and 
subcommittee recommendation formation.\624\
---------------------------------------------------------------------------

    \620\ See ICI Letter I, supra note 31, at 4 n.9; ICI Letter II, 
supra note 31, at 2; FINRA Letter I, supra note 257, at 3; MayStreet 
Letter, supra note 513, at 4; Data Boiler Letter I, supra note 31, 
at 22; Nasdaq Letter I, supra note 20, at 4-5; NYSE Letter I, supra 
note 18, at 21.
    \621\ See FINRA Letter I, supra note 257, at 3.
    \622\ See id.
    \623\ See ICI Letter I, supra note 31, at 4; ICI Letter II, 
supra note 31, at 2; Nasdaq Letter I, supra note 20, at 13, BMO 
Letter, supra note 30, at 4; MFA Letter, supra note 30, at 4, 
MayStreet Letter, supra note 513, at 4.
    \624\ See MayStreet Letter, supra note 513, at 4.
---------------------------------------------------------------------------

    In response to the Commission's question regarding whether Member 
Observers given access to confidential information should be required 
to demonstrate a legitimate or particularized need for such access, one 
commenter states that Members Observers and others given access to 
confidential information should be required to demonstrate the need for 
such access.\625\ Similarly, another commenter states that protecting 
confidential and proprietary information from misuse is important and 
believes that Member Observers should be required to demonstrate a 
legitimate or particularized need for Restricted or Highly Confidential 
Information before being granted access to such information.\626\
---------------------------------------------------------------------------

    \625\ See RBC Letter, supra note 30, at 10-11.
    \626\ See BMO Letter, supra note 30, at 4.
---------------------------------------------------------------------------

    Separately, one commenter raises concerns regarding Section (a)(ii) 
of Exhibit C, which requires all Covered Persons that are natural 
persons to affirm in writing that they have read the policy and 
undertake to abide by its terms before receiving Company data and 
information.\627\ Specifically, the commenter argues that it imposes 
onerous and impractical burdens on agents of the Members that would be 
providing services to the Plan, including auditors, bankers, and 
outside counsel and that it conflicts with independent professional 
standards and obligations, and standard market practice.\628\ The 
commenter states that existing customer relationship documents, such as 
engagement letters, are more than sufficient to protect the 
confidentiality of Restricted, Highly Confidential, or Confidential 
Information that such agents may need to perform services for the CT 
Plan.\629\ Accordingly, the

[[Page 44189]]

commenter recommends that the Commission propose and solicit comment on 
changes to the CT Plan that would eliminate the current requirement, or 
alternatively that the Commission propose revisions that would modify 
the undertaking such that Covered Persons must agree to abide with the 
Confidentiality Policy so long as it does not conflict with the 
applicable professional standards of conduct and such that a single 
representative may sign such an undertaking on behalf of an entire 
firm.\630\
---------------------------------------------------------------------------

    \627\ See NYSE Letter I, supra note 18, at 21.
    \628\ See id. at 21-22.
    \629\ See id. at 22.
    \630\ See id. at 22-23. See also Nasdaq Letter I, supra note 20, 
at 6 (acknowledging that while the Confidentiality Policy Approval 
Orders states that disclosures ``required by law or professional 
ethics obligations'' are permitted, the approved Confidentiality 
Policy included as Exhibit C to the Plan does not reference 
professional ethics obligations).
---------------------------------------------------------------------------

    One commenter states that while the Confidentiality Policy 
provisions purport to cover the Non-SRO Voting Representatives and 
their employers, such parties have no regulatory obligations under the 
CT Plan, and the commenter is concerned that Members do not have a way 
to monitor Non-SRO Voting Representatives' and their employers' 
compliance.\631\ The commenter thus questions whether Non-SRO Voting 
Representatives and their employers should be included in the 
definition of Covered Persons, and subsequently subject to the 
Confidentiality Policy. Specifically, the commenter states that Rule 
608(c) would obligate the Members to monitor Non-SRO Voting 
Representatives and their employers, but SROs have no authority over 
the Non-SRO Voting Representatives, their employers, nor the ability to 
monitor or enforce compliance, and no authority to impose sanctions for 
violations.\632\ Accordingly, the commenter recommends removing both 
Non-SRO Voting Representatives and their employers from the definition 
of Covered Persons, and separately requiring that the Non-SRO Voting 
Representatives enter into contractual agreements with the CT Plan to 
protect the confidentiality of the CT Plan information.\633\
---------------------------------------------------------------------------

    \631\ See NYSE Letter I, supra note 18, at 26; NYSE Letter II, 
supra note 19, at 5.
    \632\ See NYSE Letter I, supra note 18, at 26.
    \633\ See id.
---------------------------------------------------------------------------

    The Commission agrees that the definition of Covered Persons should 
specify the individuals that would be included in ``representatives of 
the Members.'' Specifically, the Commission believes that the 
definition should be clarified to include SRO Voting Representatives, 
alternate SRO Voting Representatives, and Member Observers. As any 
individual qualifying as one of these representatives may attend 
Operating Committee and subcommittee meetings and potentially receive 
and have access to confidential information, the Commission believes 
that they should be subject to the provisions of Section 4.11 and 
Exhibit C of the CT Plan and thus explicitly included as a Covered 
Person. Similarly, because the CT Plan also permits SRO Applicant 
Observers to attend Operating Committee meetings,\634\ the Commission 
likewise believes that the same provisions and policy should apply 
equally to this category of individuals. For the reasons stated above, 
the Commission finds that it is appropriate to modify Article I, 
Section 1.1(n), the proposed definition of Covered Persons, to clarify 
that the phrase ``representatives of the Members'' includes SRO Voting 
Representatives, alternate SRO Voting Representatives, and Member 
Observers, and to expand the definition of Covered Persons to include 
SRO Applicant Observers.
---------------------------------------------------------------------------

    \634\ See Article IV, Section 4.4(a) of the CT Plan.
---------------------------------------------------------------------------

    In response to comments regarding inclusion of Non-SRO Voting 
Representatives and their employers in the definition of Covered 
Persons, the Commission believes that Non-SRO Voting Representatives 
should be included in that definition, but agrees that the employers of 
Non-SRO Voting Representatives should not be included. As Non-SRO 
Voting Representatives will serve as full members of the Operating 
Committee and charged with carrying out the objectives of the CT Plan, 
Non-SRO Voting Representatives will have greater access to confidential 
information, including but not limited to contract negotiations with 
outsourced service providers, such as firms and persons that provide 
audit services, accounting services, or legal services to the CT Plan, 
Administrator, or Processors. As the Commission stated in the 
Confidentiality Policy Approval Orders, all parties that generate, 
receive, or have access to sensitive plan-related information by virtue 
of their service to the plan, or their affiliation with a party that 
has access, should be subject to the same standards to protect the 
confidentiality of that information.\635\ For the reasons stated above, 
the Commission finds that the inclusion of the Non-SRO Voting 
Representatives in the definition of Covered Persons, and in turn 
subjecting them to the Confidentiality Policy, is appropriate because 
it will strengthen the confidentiality of information protections 
afforded by the policy.
---------------------------------------------------------------------------

    \635\ See Confidentiality Policy Approval Orders, supra note 
569, 85 FR at 28093 and 85 FR at 28071.
---------------------------------------------------------------------------

    By contrast, the Commission is modifying the CT Plan to delete 
``employers of Non-SRO Voting Representatives'' from the definition of 
Covered Persons because Non-SRO Voting Representatives will not be 
authorized to share non-public Plan information with their employers, 
and those employers will not otherwise be entitled to access non-public 
Plan information. Further, a Non-SRO Voting Representative's employer 
will have no regulatory duties or responsibilities to the CT Plan and 
no corresponding need to receive confidential Plan information. 
Excluding the employers of Non-SRO Voting Representatives from the 
definition of Covered Persons would permit the sharing of Confidential 
Information with those employers only when specifically authorized by 
the Operating Committee in a manner permitted by the Confidentiality 
Policy. While the Commission previously modified the definition of 
Covered Persons under the existing Equity Data Plans to include the 
employer of an Advisory Committee member to protect the confidentiality 
of Plan information in a manner similar to how a Member's SRO employer 
is required to protect the confidentiality of Plan information,\636\ 
the role of Non-SRO Voting Representatives as full members of the 
Operating Committee provides them with significantly greater access to 
confidential Plan information, and the Commission believes that this 
greater access to protected information makes it appropriate to modify 
the CT Plan. Accordingly, the Commission is modifying Article 1, 
Section 1.1 (n) to remove ``employers of Non-SRO Voting 
Representative'' from the definition of Covered Persons. The Commission 
finds that the modification to remove the employers of Non-SRO Voting 
Representatives from the definition of Covered Persons is appropriate, 
because Non-SRO Voting Representatives will participate on the 
operating committee in their individual capacity, and their employer 
will not be authorized to have access to confidential Plan information.
---------------------------------------------------------------------------

    \636\ See Confidentiality Policy Approval Orders, supra note 
569, 85 FR at 28093 and 85 FR at 28072.
---------------------------------------------------------------------------

(iv) Effect of Pending Petitions for Review
    The Commission also solicited comment on Section 4.11(b), which 
states that if the Commission's Confidentiality Policy Approval Orders 
are stayed or overturned by a court, the requirements of Section 4.11 
and related Confidentiality Policy in Exhibit C

[[Page 44190]]

would no longer be applicable.\637\ The Commission sought commenters' 
views on whether such a provision is necessary or appropriate for the 
CT Plan and whether the CT Plan should, at a minimum, contain 
provisions for identifying and protecting confidential information that 
are not subject to elimination, or provisions specifying that the CT 
Plan must be amended to include a new policy with respect to 
confidential information before the existing policy can be 
removed.\638\ One commenter supports retaining the current provisions 
of the Confidentiality Policy in the event that the Confidentiality 
Policy Approval Orders are stayed or overturned so that information 
remains protected.\639\
---------------------------------------------------------------------------

    \637\ See Notice, supra note 3, 85 FR at 64571 (Question 34).
    \638\ See id.
    \639\ See RBC Letter, supra note 30, at 11.
---------------------------------------------------------------------------

    As the Commission previously stated in the Confidentiality Policy 
Approval Orders, the Commission believes that the CT Plan should 
include a confidentiality policy.\640\ The Commission continues to 
believe that a confidentiality policy is necessary and that the policy 
must balance protection against the potential misuse of confidential 
information with the strong interest in public transparency of the 
operations of the CT Plan in light of the important function the CT 
Plan will serve in the national market system.\641\ Accordingly the 
Commission is modifying Section 4.11 to remove subsection (b), which 
provides that if the Commission's Confidentiality Policy Approval 
Orders are stayed or overturned, the requirements of Section 4.11 and 
Exhibit C would not be applicable. The Commission finds that it is 
appropriate to remove this provision in the CT Plan. The U.S. Court of 
Appeals for the D.C. Circuit has dismissed the petitions for review of 
the Confidentiality Policy Approval Orders that were pending when the 
SROs filed the proposed CT Plan.\642\ Moreover, even if a court were to 
vacate the Confidentiality Policy Approval Orders, the CT Plan would be 
able to file an amendment with the Commission to align the policy with 
the court's decision, and the Commission could, on its own initiative, 
propose an amendment as well.
---------------------------------------------------------------------------

    \640\ See Confidentiality Policy Approval Orders, supra note 
569, 85 FR at 28092 and 85 FR at 28070.
    \641\ See Confidentiality Policy Approval Orders, supra note 
569, 85 FR at 28090 and 85 FR at 28069.
    \642\ See New York Stock Exchange, et al. vs. Securities and 
Exchange Commission, Nos. 20-1242, 20-1243, 20-1244, --F.4th--, 2021 
WL 2654987, *1-4 (D.C. Cir., June 29, 2021).
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission is approving 
Article IV, Section 4.11 of the CT Plan and Exhibit C, as modified.
6. The Processors; Information; Indemnification
(a) General Functions of the Processors
    Article V of the CT Plan sets forth the provisions related to the 
Processors. Pursuant to Article V, Section 5.1, the Company, under the 
direction of the Operating Committee, shall be required to enter into 
agreements with the Processors obligating the Processors to perform 
certain processing functions on behalf of the Company (the ``Processor 
Services Agreements'').\643\ The CT Plan specifies that, among other 
things, the Company shall require the Processors to collect from the 
Members, and consolidate and disseminate to Vendors and Subscribers, 
Transaction Reports and Quotation Information in Eligible Securities in 
a manner designed to ensure the prompt, accurate, and reliable 
collection, processing, and dissemination of information with respect 
to all Eligible Securities in a fair and non-discriminatory 
manner.\644\
---------------------------------------------------------------------------

    \643\ See Article V, Section 5.1 of the CT Plan.
    \644\ See id.
---------------------------------------------------------------------------

    In the Notice, the Commission solicited comment on Article V, 
Section 5.1 and, in particular, on whether further details on the terms 
and responsibilities of the Processors should be specified in the body 
of the CT Plan.\645\ One commenter states that the minimum technical 
and operational requirements for the Processors, along with any 
contractual terms and responsibilities, should either be detailed in 
the CT Plan or made publicly available (e.g., on the CT Plan 
website).\646\ This commenter argues that, today, public disclosure 
regarding Processor operations and standards of service is 
inadequate.\647\ Another commenter states that the Processor functions 
described in Section 5.1 are insufficient and suggests additional 
functions and responsibilities to be specified in the CT Plan, 
including provisions related to business continuity and disaster 
recovery for the SIPs and to providing analytical support for the 
consolidated audit trail project.\648\
---------------------------------------------------------------------------

    \645\ See Notice, supra note 3, 85 FR at 64571 (Question 35).
    \646\ See BlackRock Letter I, supra note 247, at 4.
    \647\ See id. This commenter states that ``[f]ull disclosure of 
performance standards improves transparency over the operation of 
the SIP and increases public confidence in the technical capability 
and operational resiliency of our market data system.'' Id.
    \648\ See Data Boiler Letter I, supra note 31, at 4, 12, 40.
---------------------------------------------------------------------------

    In contrast, one commenter states that codifying technical 
standards of the Processors in the CT Plan would interfere with the 
Operating Committee's ability to respond to changing technology 
conditions.\649\ This commenter states that ``[i]t is the 
responsibility of the Operating Committee to establish standards and 
adjust them in light of changing technology.'' \650\ Another commenter 
argues that the decision to include detailed terms about the 
responsibilities of the Processors in the LLC Agreement itself, as 
opposed to in the Processor Services Agreements, is a decision that 
should be left to the SROs rather than the Commission.\651\ Citing to 
Rule 608(a)(3)(iii) of Regulation NMS,\652\ this commenter states that 
it is the SROs--and not the Commission--that are authorized to act 
jointly in ``[i]mplementing or administering an effective [NMS] plan.'' 
\653\
---------------------------------------------------------------------------

    \649\ See Nasdaq Letter I, supra note 20, at 29.
    \650\ Id.
    \651\ See NYSE Letter I, supra note 18, at 39.
    \652\ 17 CFR 242.608(a)(3)(iii).
    \653\ See NYSE Letter I, supra note 18, at 39.
---------------------------------------------------------------------------

    In the Notice, the Commission also solicited comment on whether the 
terms of the CT Plan should require the Processors to ensure the 
``fairness and usefulness of the form and content'' of consolidated and 
disseminated transaction and quotation information.\654\ Two commenters 
state that the terms of the CT Plan should require the Processors to 
ensure the ``fairness and usefulness of the form and content'' of such 
information.\655\ One of these commenters states that including this 
obligation on Processors would ``add a layer of much needed 
accountability to the process.'' \656\
---------------------------------------------------------------------------

    \654\ See Notice, supra note 3, 85 FR at 64571 (Question 36).
    \655\ See Data Boiler Letter I, supra note 31, at 40; Virtu 
Letter, supra note 30, at 7. One of the commenters suggests that 
``mandating the use of time-lock encryption to make market data 
available securely in synchronized time'' is a way to ensure the 
fairness and usefulness of SIP information. Data Boiler Letter I, 
supra note 31, at 40.
    \656\ Virtu Letter, supra note 30, at 7.
---------------------------------------------------------------------------

    In response to commenters that seek additional detail in the CT 
Plan on the Processor operations and standards of service, the 
Commission believes that it is reasonable for detailed disclosures of 
the Processor functions to be addressed in the Processor Services 
Agreements rather than to be incorporated as requirements in the body 
of the CT Plan, which would require a formal amendment of the CT Plan 
each time

[[Page 44191]]

the requirements changed. The Commission agrees with the comment that 
codifying technical standards of the Processors in the CT Plan would 
interfere with the Operating Committee's ability to respond to changing 
technology conditions.\657\ Moreover, setting forth detailed rights and 
obligations of the Processors in service agreements outside of the CT 
Plan would be consistent with the framework utilized in the current NMS 
plans.\658\ Further, the Operating Committee of the CT Plan, including 
Non-SRO Voting Representatives, will have visibility into the process 
of setting the requirements in the Processor Services Agreements. The 
Commission also expects that establishing the technical and operational 
requirements of the Processors will be an iterative process between the 
Operating Committee and the Processors. Setting forth the requirements 
in the CT Plan itself may unnecessarily hinder the ability of the 
Operating Committee and the Processors to negotiate and modify the 
technical details of the functions and responsibilities of the 
Processors in response to, among other things, changing technology 
conditions.
---------------------------------------------------------------------------

    \657\ See supra note 649.
    \658\ See, e.g., Article V(c) of the CTA Plan, available at 
https://www.ctaplan.com/plans; Article V, Section 5.1 of the OPRA 
Plan, available at https://www.opraplan.com/document-library.
---------------------------------------------------------------------------

    While one commenter argues that public disclosure of Processor 
operations and standards of service are currently inadequate, Article 
IV, Section 4.1 of the CT Plan would expressly require the Operating 
Committee to ensure the public reporting of Processors' performance and 
other metrics and information about the Processors.\659\ With respect 
to this public reporting requirement, the Commission continues to 
believe that, as it stated in the Proposed Order, ``making this 
information public would provide all market participants with a view of 
how well or poorly a processor is performing across various metrics, 
which would allow market participants to provide meaningful input to 
the operating committee and to the Commission.'' \660\ The Commission 
further continues to believe that, if performance metrics are made 
public, the Operating Committee of the CT Plan will have enhanced 
incentives to ensure that the Processors are functioning well and that 
the CT Plan is providing prompt, accurate, and reliable publication of 
information with respect to quotations for and transactions in NMS 
stocks.\661\
---------------------------------------------------------------------------

    \659\ See Article IV, Section 4.1(a)(iv) of the CT Plan.
    \660\ Proposed Order, supra note 7, 85 FR at 2183.
    \661\ See id.
---------------------------------------------------------------------------

    Regarding comments that the terms of the CT Plan should require the 
Processors to ensure the ``fairness and usefulness of the form and 
content'' of consolidated and disseminated transaction and quotation 
information, the Commission believes that Article IV, Section 4.1 of 
the CT Plan incorporates this requirement, as it requires the Operating 
Committee to implement ``policies and procedures as necessary to ensure 
prompt, accurate, reliable, and fair collection, processing, 
distribution, and publication of information with respect to 
Transaction Reports and Quotation Information in Eligible Securities 
and the fairness and usefulness of the form and content of that 
information.'' \662\ For the reasons discussed above, the Commission is 
approving Article V, Section 5.1, as proposed.
---------------------------------------------------------------------------

    \662\ Article IV, Section 4.1(a)(i) of the CT Plan (emphasis 
added).
---------------------------------------------------------------------------

(b) Evaluation of the Processors
    Article V, Section 5.2 of the CT Plan requires that the Processors' 
performance of their functions under the Processor Services Agreements 
shall be subject to review at any time as determined by an affirmative 
vote of the Operating Committee, pursuant to Article IV, Section 4.3 of 
the CT Plan; provided, however, that a review will be conducted at 
least once every two calendar years but not more than once each 
calendar year.\663\ If the Processors have materially defaulted in 
their obligations under the Processor Services Agreements and such 
default has not been cured within the applicable cure period pursuant 
to the Processor Services Agreements, the CT Plan provides that the 
review period limitations will not apply.\664\ Furthermore, the CT Plan 
provides that the Operating Committee may review the Processors at 
staggered intervals.\665\
---------------------------------------------------------------------------

    \663\ See Article V, Section 5.2 of the CT Plan. See also 
Article IV, Section 4.1(a)(ii) of the CT Plan, which requires the 
Operating Committee to ensure the public reporting of Processors' 
performance and other metrics and information about the Processors.
    \664\ See Article V, Section 5.2 of the CT Plan.
    \665\ See id.
---------------------------------------------------------------------------

    In the Notice, the Commission solicited comment on the Processors' 
performance review process.\666\ One commenter states that Processor 
reviews are important and ``should not be done out of formality.'' 
\667\ This commenter, without identifying a specific area of 
deficiency, believes that the review mechanism as proposed in the CT 
Plan ``would cause continuous arguments rather than concrete 
improvements of SIP performance.'' \668\ As a solution, the commenter 
suggests that the Processor assessment should ``review potential 
implications/threats as a result of upcoming techs . . . and be used to 
plan ahead for the future.'' \669\
---------------------------------------------------------------------------

    \666\ See Notice, supra note 3, 85 FR at 64571 (Question 37).
    \667\ Data Boiler Letter I, supra note 31, at 40-41.
    \668\ Id.
    \669\ Id. at 40.
---------------------------------------------------------------------------

    The Commission believes that the provisions of the CT Plan setting 
forth the Processors' biennial review requirement, and the Operating 
Committee' ability to change the frequency of the review for 
circumstances in which the Processors have materially defaulted in 
their obligations, are reasonably designed to ensure that the 
Processors meet their performance obligations under the Processor 
Services Agreements. Indeed, the biennial review requirement is similar 
to the long-standing review process under the current Equity Data 
Plans,\670\ and the Commission believes that the biennial review 
requirement has provided a sufficient sample time period for the 
operating committees of the existing Equity Data Plans to evaluate the 
performance of the Processors without overburdening the operating 
committees with frequent reviews that might produce little additional 
information. Regarding a commenter's suggestion that the assessment 
should review technological developments in anticipation of future 
implications,\671\ the Commission believes that the CT Plan reasonably 
leaves the determination of the metrics used to evaluate the Processors 
to the discretion of the Operating Committee. Pursuant to Article IV, 
Section 4.1, the Operating Committee is expressly tasked with 
evaluating the performance of the Processors.\672\ Section 4.1 also 
requires the Operating Committee to assess the marketplace for equity 
data products and ensure that the CT Feeds are designed to ensure the 
widespread availability of CT Feeds data to investors and market 
participants. The Commission continues to believe that, as it stated in 
the Proposed Order, ``[i]mposing a direct responsibility on the 
operating committee to keep abreast of changes in the marketplace 
regarding demands for and pricing of equity market data, and to ensure 
that SIP data meets those demands and are widely distributed at fair 
and reasonable prices,

[[Page 44192]]

should help ensure that the SIPs' data feeds support the findings and 
goals of Section 11A of the Act.'' \673\ For the reasons discussed 
above, the Commission is approving Article V, Section 5.2, as proposed.
---------------------------------------------------------------------------

    \670\ See Section V.A of the UTP Plan and Section V(d) of the CT 
Plan.
    \671\ See Data Boiler Letter I, supra note 31, at 40-41.
    \672\ See Article IV, Section 4.1(a)(ii) of the CT Plan.
    \673\ Proposed Order, supra note 483, 85 FR at 2183.
---------------------------------------------------------------------------

(c) Process for Selecting New Processors
    Article V, Section 5.3 of the CT Plan requires that the Operating 
Committee, by an affirmative vote pursuant to Section 4.3 of the CT 
Plan, establish procedures for selecting a new Processor (the 
``Processor Selection Procedures'').\674\ The CT Plan requires that the 
Processor Selection Procedures be established no later than upon the 
termination or withdrawal of a Processor or the expiration of a 
Processor Services Agreement with a Processor.\675\ The Processor 
Selection Procedures are required to set forth, at a minimum: (i) The 
minimum technical and operational requirements to be fulfilled by the 
Processor; (ii) the criteria for selecting the Processor; (iii) the 
entities (other than Voting Representatives) that are eligible to 
comment on the selection of the Processor; and (iv) the entity that 
will: (A) Draft the Operating Committee's request for proposal for 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.\676\ The 
Operating Committee, as part of the process of establishing the 
Processor Selection Procedures, is permitted to solicit and consider 
the timely comment of any entity affected by the operation of the CT 
Plan.\677\
---------------------------------------------------------------------------

    \674\ See Article V, Section 5.3 of the CT Plan.
    \675\ See Article V, Section 5.3(a) of the CT Plan.
    \676\ See Article V, Section 5.3(b) of the CT Plan.
    \677\ See Article V, Section 5.3(a) of the CT Plan.
---------------------------------------------------------------------------

    In the Notice, the Commission solicited comment on the requirement 
to establish the Processor Selection Procedures, including the ability 
to seek comment on the selection of the Processor and whether to 
require a subcommittee of disinterested members of the Operating 
Committee (``disinterested subcommittee'') to vote and select a new 
Processor.\678\ One commenter supports allowing the public to comment 
on the selection of a new Processor because this commenter expects the 
CT Plan to be ``run as a public utility.'' \679\ This commenter also 
questions the value of including in the Processor Selection Procedures 
a requirement that a disinterested subcommittee vote and select a new 
Processor, asserting that this requirement ``would add more hands in 
the pool asking for resources'' and states that, at most, the 
subcommittee should be allowed only to ``consult'' and have no 
authority to vote.\680\
---------------------------------------------------------------------------

    \678\ See Notice, supra note 3, 85 FR at 64571-72 (Question 38).
    \679\ Data Boiler Letter I, supra note 31, at 41.
    \680\ Id.
---------------------------------------------------------------------------

    With respect to the comment in support of public comment on the 
selection of a new Processor, Section 5.3 provides that the Operating 
Committee may solicit and consider public comment as part of the 
process of establishing the Processor Selection Procedures, and the 
Processor Selection Procedures are required to set forth the entities 
(other than the Voting Representatives) that are eligible to comment on 
the selection of the Processor.\681\ The Commission also believes that 
the inclusion of Non-SRO Voting Representatives as full members of the 
Operating Committee, together with the Commission's modification of the 
proposed CT Plan in Section 4.4(g)(i) to prohibit discussions regarding 
contract negotiations with Processors in Executive Session, will help 
ensure that the Operating Committee considers broad industry viewpoints 
in the process of establishing the Processor Selection Procedures. As a 
result, the Commission believes that the CT Plan, as modified, 
addresses this issue.
---------------------------------------------------------------------------

    \681\ See Article VI, Section 5.3(b)(iv) of the CT Plan.
---------------------------------------------------------------------------

    With respect to the comment on the value of requiring a 
disinterested subcommittee to vote and select a new Processor, Section 
5.3 provides the Operating Committee with the responsibility to 
establish the procedures for selecting a Processor, including whether 
to include a disinterested subcommittee as part of the Processor 
Selection Procedures. The Commission believes that this authority is 
reasonable and does not believe it is necessary to require the 
Operating Committee to use a disinterested subcommittee, because the 
inclusion of Non-SRO Voting Representatives on the Operating Committee 
will help address conflicts of interest in the decision-making process 
to select a new Processor (which could, if the Operating Committee so 
choses, include a disinterested subcommittee). Additionally, the 
Commission notes that, while the current Equity Data Plans do not 
require the use of a disinterested subcommittee in the selection of a 
new Processor, the use of a disinterested subcommittee regarding 
certain critical plan matters, including the selection of a Processor, 
is a common practice under the current Equity Data Plans. Finally, with 
respect to the comment that the disinterested subcommittee should have 
no authority to vote on the selection of the Processor and can only be 
consulted on the matter, it is the Operating Committee that is 
authorized by Article IV, Section 4.1 of the CT Plan to select the 
Processors,\682\ and the Commission does not believe that it is 
necessary to preclude any disinterested subcommittee formed by the 
Operating Committee from holding a vote to, for example, recommend a 
Processor candidate to the Operating Committee.
---------------------------------------------------------------------------

    \682\ See Article IV, Section 4.1(a)(ii) of the CT Plan.
---------------------------------------------------------------------------

    The Commission believes that the provisions for the establishment 
of the Processor Selection Procedures are reasonably designed to ensure 
that the Operating Committee establishes a process that governs the 
selection of a new Processor through a fair, transparent, and 
competitive process. By setting forth the minimum requirements for 
Processor Selection Procedures, the CT Plan sets forth a reasonable 
outline of the Processor selection process without unnecessarily 
hindering the flexibility of the Operating Committee in determining the 
appropriate procedural requirements for future Processor selections. 
Additionally, the requirements of Section 5.3 of the CT Plan are 
similar to those of the UTP Plan.\683\ For the reasons discussed above, 
the Commission is approving Article V, Section 5.3, as proposed.
---------------------------------------------------------------------------

    \683\ See Section V.E of the UTP Plan, available at https://utpplan.com/utp_plan.
---------------------------------------------------------------------------

(d) Transmission of Information to Processor by Members
    Article V, Section 5.4 of the CT Plan sets forth the manner in 
which each Member is responsible for promptly collecting and 
transmitting to the Processors accurate Quotation Information and 
Transaction Reports as set forth in the Processor Services 
Agreements.\684\ In particular, this section requires Members to 
include the following elements in their Quotation Information: (i) 
Identification of the Eligible Security, using the listing market's 
symbol; (ii) the price bid and offered, together with size; (iii) for 
FINRA, the FINRA participant along with the FINRA participant's market 
participant identification or Member from which the quotation emanates; 
(iv) appropriate timestamps; (v) identification of quotations that are 
not firm; and (vi) through appropriate codes

[[Page 44193]]

and messages, withdrawals and similar matters.\685\ In the case of a 
national securities exchange, the Quotation Information includes the 
reporting Participant's matching engine publication timestamp.\686\ In 
the case of FINRA, the Quotation Information includes the quotation 
publication timestamp that FINRA's bidding or offering member reports 
to FINRA's quotation facility in accordance with FINRA rules.\687\
---------------------------------------------------------------------------

    \684\ See Article V, Section 5.4(a)(i) of the CT Plan.
    \685\ See Article V, Section 5.4(a)(ii) of the CT Plan.
    \686\ See Article V, Section 5.4(d)(iii)(A) of the CT Plan.
    \687\ See Article V, Section 5.4(d)(iii)(B) of the CT Plan. The 
CT Plan specifies that if FINRA's quotation facility provides a 
proprietary feed of its Quotation Information, then the quotation 
facility shall also furnish the Processors with the time of the 
quotation as published on the quotation facility's proprietary feed. 
See id. FINRA shall convert any quotation times reported to it to 
nanoseconds and shall furnish such times to the Processors in 
nanoseconds since Epoch. See id.
---------------------------------------------------------------------------

    In addition, Section 5.4 requires Members to report the following 
elements in their Transaction Reports: (i) Identification of the 
Eligible Security, using the listing market's symbol; (ii) the number 
of shares in the transaction; (iii) the price at which the shares were 
purchased or sold; (iv) the buy/sell/cross indicator; (v) appropriate 
timestamps; (vi) the market of execution; and (vii) through appropriate 
codes and messages, late or out-of-sequence trades, corrections, and 
similar matters.\688\ Each Member must also (a) transmit Transaction 
Reports to the Processors as soon as practicable, but not later than 
ten seconds, after the time of execution, (b) establish and maintain 
collection and reporting procedures and facilities reasonably designed 
to comply with this requirement, and (c) designate as ``late'' any last 
sale price not collected and reported as described above or as to which 
the Member has knowledge that the time interval after the time of 
execution is significantly greater than the time period referred to 
above.\689\ The CT Plan provides that Members shall seek to reduce the 
time period for reporting last sale prices to the Processors as 
conditions warrant.\690\ The CT Plan also sets forth the symbols used 
to denote the applicable Member.\691\
---------------------------------------------------------------------------

    \688\ See Article V, Section 5.4(b)(ii)(A)-(G) of the CT Plan.
    \689\ See Article V, Section 5.4(d)(iv) of the CT Plan.
    \690\ See id.
    \691\ See Article V, Section 5.4(c) of the CT Plan.
---------------------------------------------------------------------------

    Section 5.4 excludes the following types of transactions from being 
required to be reported to the Processors: (i) Transactions that are 
part of a primary distribution by an issuer or of a registered 
secondary distribution or of an unregistered secondary distribution; 
(ii) transactions made in reliance on Section 4(a)(2) of the Securities 
Act of 1933; (iii) 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); (iv) the 
acquisition of securities by a broker-dealer as principal in 
anticipation of making an immediate exchange distribution or exchange 
offering on an exchange; (v) purchases of securities pursuant to a 
tender offer; (vi) 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; and (vi) transfers of 
securities that are expressly excluded from trade reporting under FINRA 
rules.\692\
---------------------------------------------------------------------------

    \692\ See Article V, Section 5.4(b)(v)(A)-(G) of the CT Plan.
---------------------------------------------------------------------------

    Furthermore, Section 5.4 provides that each Member agrees to 
indemnify the Company, each other Member, the Processors, the 
Administrator, the Operating Committee, and each of their respective 
directors, officers, employees, agents, and affiliates (each, a 
``Member Indemnified Party'') against any liabilities as a result of a 
system error or disruption at a Member's Market affecting the 
information reported to the Processor by such Member and disseminated 
by the Processor to vendors and subscribers.\693\
---------------------------------------------------------------------------

    \693\ See Article V, Section 5.4(d)(i) of the CT Plan. Section 
5.4(d)(ii) of the CT Plan specifies the procedures for addressing 
claims by a Member Indemnified Party.
---------------------------------------------------------------------------

    In the Notice, the Commission solicited comment on whether the CT 
Plan should set minimum standards for the timely dissemination of 
information applicable to the Processors and, if so, the minimum 
standards that would be appropriate.\694\ One commenter argues the 
maximum ten second transaction reporting requirement to the Processors 
under Section 5.4(b)(iv) of the CT Plan is ``not acceptable'' and has 
the ``potential to be frequently exploited.'' \695\ This commenter 
states that ``thousands of trades can occur in 50 
milliseconds,'' \696\ and refers to the CAT NMS Plan as requiring 
broker-dealers to comply with a 50 milliseconds 
standard.\697\ The commenter further states that the ``SROs should 
pledge to provide SIP(s) the fastest connection and be mandated to 
maintain a maximum connectivity disparity ratio not more than 2.5 
times.'' \698\
---------------------------------------------------------------------------

    \694\ See Notice, supra note 3, 85 FR at 64572 (Question 39).
    \695\ Data Boiler Letter I, supra note 31, at 12. This commenter 
also suggested several minimum performance standards of the 
Processors related to the use of ``time-lock encryption'' that would 
enable both the proprietary data feeds and the SIPs to be available 
securely in synchronized time. See id. at 42.
    \696\ Id. at 12.
    \697\ See id. at 42.
    \698\ Id. at 7, 42.
---------------------------------------------------------------------------

    With respect to the comment on reducing the maximum ten-second 
transaction reporting limit, the Commission notes that the ten-second 
reporting requirement is consistent with the current Equity Data 
Plans.\699\ As stated in the Governance Order, the Commission believed 
that, ``at least initially, most of the detailed provisions relating to 
the operation of the existing [NMS plans] could be imported into the 
[CT] Plan.'' \700\ The Commission also believes that the commenter 
fails to take into account that the language in Section 5.4 specifies 
that Members must transmit all Transaction Reports to the Processors 
``as soon as practicable,'' \701\ which means that transaction 
reporting to the Processors will in nearly all circumstances occur 
faster than the ten-second reporting limit. If the Operating Committee 
determines that the ten-second reporting limit, or any other provision 
related to the transmission of information to the Processors, needs to 
be amended, the Operating Committee may amend the CT Plan according to 
Article XIII, Section 13.5. Indeed, Article IV, Section 4.1 specifies 
that one of duties of the Operating Committee is proposing amendments 
to the CT Plan as necessary to ensure the prompt processing, 
distribution, and publication of information with respect to 
Transaction Reports in NMS stocks.\702\
---------------------------------------------------------------------------

    \699\ See Section VIII.B of the UTP Plan and Section VIII(a) of 
the CTA Plan.
    \700\ Governance Order, supra note 8, 85 FR at 28711. The 
Commission further stated in the Governance Order that the CT Plan 
``could retain the same SIP processors under the same terms and 
conditions, thereby eliminating what otherwise would be a 
significant burden for the development of the [CT] Plan.'' Id.
    \701\ Article V, Section 5.4(b)(iv) of the CT Plan.
    \702\ See Article IV, Section 4.1(a)(i) of the CT Plan.
---------------------------------------------------------------------------

    Therefore, the Commission believes that the provisions of Section 
5.4 relating to each Member's obligations to collect and transmit to 
the Processors accurate and reliable Quotation Information and 
Transaction Reports are reasonably designed to facilitate the 
collection and dissemination of consolidated equity market data for NMS 
stocks for the beneficial use of investors and the market. Accordingly, 
the Commission is approving Article V, Section 5.4, as proposed.

[[Page 44194]]

(e) Operational Issues
    Article V, Section 5.5 of the CT Plan requires each Member to be 
responsible for collecting and validating quotes and last sale reports 
within its own system prior to transmitting this data to the 
Processors.\703\ This section also requires each Member to promptly 
notify the Processors whenever a level of trading activity or unusual 
market conditions prevent such Member from collecting and transmitting 
Transaction Reports or Quotation Information to the Processor, or where 
a trading halt or suspension in an Eligible Security is in effect in 
its market.\704\ This provision further requires the Member to resume 
collecting and transmitting Transaction Reports and Quotation 
Information to the Processors as soon as the condition or event is 
terminated.\705\ In the event of a system malfunction that prevents a 
Member or its members from transmitting Transaction Reports or 
Quotation Information to the Processors, the Member is required to 
promptly notify the Processors of such event or condition.\706\ Upon 
receiving such a notification, Section 5.5 of the CT Plan requires the 
Processors to take appropriate action, including either closing the 
quotation or purging the system of the affected quotations.\707\
---------------------------------------------------------------------------

    \703\ See Article V, Section 5.5(a) of the CT Plan. Section 5.5 
also provides that each Member may utilize a dedicated Member line 
into the Processors to transmit Transaction Reports and Quotation 
Information to the Processors. See Article V, Section 5.5(b) of the 
CT Plan.
    \704\ See Article V, Section 5.5(c) of the CT Plan.
    \705\ See id.
    \706\ See id.
    \707\ See id.
---------------------------------------------------------------------------

    In the Notice, the Commission solicited comment on whether the CT 
Plan should set minimum standards for the timely dissemination of 
information applicable to the Processors.\708\ One commenter states 
that the requirement for Members to promptly notify the Processors of 
market events in Section 5.5 is ``insufficient as a performance 
standard'' and states that ``promptly'' does not equal ``immediacy'' 
for reporting such events to the Processors.\709\
---------------------------------------------------------------------------

    \708\ See Notice, supra note 3, 85 FR at 64572 (Question 39).
    \709\ Data Boiler Letter I, supra note 31, at 42. This commenter 
also states that the proprietary data feeds and SIPs ``ought to be 
in synch [sic] before, during, and after such event(s).'' Id.
---------------------------------------------------------------------------

    The Commission does not agree with the comment that prompt 
notification is insufficient as a performance standard for reporting 
market events to the Processors. The commenter did not explain the 
basis for its statement. The Commission believes that changing 
technology conditions mean that prescribing a specific definition of 
``prompt'' in this context might lead over time to an outdated standard 
for reporting market events to the Processors, and the Commission 
therefore believes that the prompt notification requirement, which is 
consistent with the UTP Plan, is a reasonable standard that is designed 
to provide the Processors with timely notice of any reporting issues by 
a Member.\710\ Accordingly, the Commission is approving Article V, 
Section 5.5, as proposed.
---------------------------------------------------------------------------

    \710\ See Section VII.D of the UTP Plan.
---------------------------------------------------------------------------

7. The Administrator
    As discussed in detail below, the Commission is modifying Article 
VI of the CT Plan to create a new stand-alone Section 6.2 to govern the 
independence of the Administrator, which results in the renumbering of 
the sections of this Article. The modified numbering is as follows: 
Section 6.1, General Functions of the Administrator; Section 6.2, 
Independence of the Administrator; Section 6.3, Evaluation of the 
Administrator; and Section 6.4, Process for Selecting New 
Administrator.
(a) General Functions of the Administrator
    Article VI of the CT Plan sets forth the provisions relating to the 
Administrator. Pursuant to Article VI, Section 6.1, the LLC, under the 
direction of the Operating Committee, will be required to enter into an 
agreement with the Administrator obligating the Administrator to 
perform certain administrative functions on behalf of the LLC, 
including: Recordkeeping; administering vendor and subscriber 
contracts; administering fees, including billing, collection, and 
auditing of vendors and subscribers; administering distributions; tax 
functions of the LLC; and the preparation of the LLC's audited 
financial reports (the ``Administrative Services Agreement'').\711\
---------------------------------------------------------------------------

    \711\ See Article VI, Section 6.1 of the CT Plan.
---------------------------------------------------------------------------

    In the Notice, the Commission solicited comment on Article VI, 
Section 6.1 and whether further details on the terms and 
responsibilities of the Administrator should be specified in the CT 
Plan.\712\ One commenter states that the CT Plan should specify in 
detail the minimum performance standards applicable to the 
Administrator.\713\ Another commenter states that the minimum technical 
and operational requirements for the Administrator, along with any 
contractual terms and responsibilities, should either be detailed in 
the CT Plan or made publicly available (e.g., on the CT Plan 
website).\714\ This commenter argues that, today, public disclosure 
regarding Administrator operations and standards of service are 
inadequate.\715\ Finally, one commenter states that the CT Plan should 
clarify the level of discretion the Administrator has to ``mobilize 
budget.'' \716\
---------------------------------------------------------------------------

    \712\ See Notice, supra note 3, 85 FR at 64572 (Question 40).
    \713\ See SIFMA Letter I, supra note 30, at 3. This commenter 
further states that such minimum performance standards ``will be 
needed if the competing consolidator model is adopted by the 
Commission.'' Id.
    \714\ See BlackRock Letter I, supra note 247, at 4.
    \715\ See id.; see also supra note 647.
    \716\ Data Boiler Letter I, supra note 31, at 44.
---------------------------------------------------------------------------

    In contrast, one commenter argues that the decision to include 
detailed terms about the responsibilities of the Administrator in the 
LLC Agreement itself, as opposed to in the Administrative Services 
Agreement, is a decision that should be left to the SROs rather than 
the Commission.\717\ Citing Rule 608(a)(3)(iii) of Regulation NMS,\718\ 
this commenter states that it is the SROs--and not the Commission--that 
are authorized to act jointly in ``[i]mplementing or administering an 
effective [NMS] plan.'' \719\
---------------------------------------------------------------------------

    \717\ See NYSE Letter I, supra note 18, at 39.
    \718\ 17 CFR 242.608(a)(3)(iii).
    \719\ NYSE Letter I, supra note 18, at 39.
---------------------------------------------------------------------------

    In the Notice, the Commission also solicited comment on whether the 
Administrator's duties with respect to the preparation of the CT Plan's 
audited financial reports should include unaudited reports.\720\ One 
commenter states that including the preparation of unaudited financial 
reports as a duty of the Administrator is unnecessary because ``SROs 
may not care to discuss any unaudited matters with non-SROs, thereby 
pushing the matter down the road until actual audits are performed.'' 
\721\ This commenter further states that unaudited information may be 
claimed as confidential, thereby preventing appropriate access.\722\
---------------------------------------------------------------------------

    \720\ See Notice, supra note 3, 85 FR at 64572 (Question 41).
    \721\ Data Boiler Letter I, supra note 31, at 4, 43.
    \722\ Id.
---------------------------------------------------------------------------

    The Commission believes that it is reasonable for detailed 
disclosures of the Administrator functions and standards of service to 
be addressed in the Administrative Services Agreement rather than 
incorporated as requirements in the CT Plan, which would require a 
formal amendment of the CT Plan each time the requirements 
changed.\723\ The Commission expects that establishing the technical 
and

[[Page 44195]]

operational requirements of the Administrator will be an iterative 
process between the Operating Committee and the Administrator. Setting 
forth the requirements in the CT Plan itself may unnecessarily hinder 
the ability of the Operating Committee and the Administrator to 
negotiate and modify the technical details of the functions and 
responsibilities of the Administrator in response to, among other 
things, changing administrative needs of the CT Plan.
---------------------------------------------------------------------------

    \723\ Moreover, the Commission notes that it did not receive any 
comments specifying the minimum technical and operational 
requirements for the Administrator.
---------------------------------------------------------------------------

    While one commenter argues that public disclosure of Administrator 
operations and standards of service are currently inadequate, the 
Commission believes that fully setting forth the contractual 
relationship between the CT Plan and the Administrator in the 
Administrative Services Agreement would provide greater specificity and 
transparency regarding the functions of the Administrator as compared 
to the current Equity Data Plans, which do not specifically contemplate 
a separate Administrative Services Agreement. Moreover, the Operating 
Committee of the CT Plan, including Non-SRO Voting Representatives, 
will have visibility into the process of setting the requirements in 
the Administrative Services Agreement. Regarding the comment that the 
CT Plan should clarify the level of discretion for the Administrator to 
``mobilize budget,'' the Commission believes that Section 6.1, as 
proposed, reasonably addresses the general functions of the 
Administrator, which include administering financial matters of the CT 
Plan, and that further determinations of the specific functions of the 
Administrator should be subject to contractual negotiations between the 
Operating Committee and the Administrator in order not to impede the 
ability of the Operating Committee to negotiate terms and attract 
qualified administrative service providers for the role of 
Administrator. Accordingly, the Commission is approving Section 6.1 of 
the CT Plan as proposed.
(b) Independence of the Administrator
    Article VI, Section 6.3 of the CT Plan as proposed requires that 
the Administrator selected by the Operating Committee may not be owned 
or controlled by a corporate entity that, either directly or via 
another subsidiary, offers for sale its own PDP.\724\
---------------------------------------------------------------------------

    \724\ See Article VI, Section 6.3 of the CT Plan.
---------------------------------------------------------------------------

    The Commission received a number of comments regarding the 
requirement that the CT Plan use an independent Administrator. A number 
of commenters express support for the independent Administrator 
requirement.\725\ One of these commenters states that, in order to 
eliminate conflicts of interest associated with the management of 
consolidated equity market data, there should be a ``complete 
separation of the administrator of CT [Plan] data from proprietary data 
interests.'' \726\ This commenter states that the CT Plan ``should be 
administered by a team that is completely unaffiliated with Member 
exchanges.'' \727\ This commenter further states that, in the past, 
there have been complaints that the exchange administrators ``allowed 
their proprietary data interests to negatively influence the promotion 
and management of the consolidated tape.'' \728\ Another commenter 
argues that moving to an independent single plan Administrator will 
``minimize any real or perceived conflicts that exist today with the 
non-independent administrators.'' \729\ This commenter further states 
that under the independence requirement, the independent Administrator 
``should have no formal or informal role with any of the exchanges or 
their affiliates or subsidiaries, and no immediately past, present, or 
planned future business relationship with any of the exchanges or their 
affiliates or subsidiaries.'' \730\
---------------------------------------------------------------------------

    \725\ See Refinitiv Letter, supra note 249, at 3; ICI Letter II, 
supra note 31, at 1; Schwab Letter II, supra note 30, at 2; MFA 
Letter, supra note 30, at 1.
    \726\ Refinitiv Letter, supra note 249, at 3.
    \727\ Id.; see also ICI Letter II, supra note 31, at 1.
    \728\ Refinitiv Letter, supra note 249, at 3.
    \729\ Schwab Letter II, supra note 30, at 6.
    \730\ Id.
---------------------------------------------------------------------------

    In contrast, other commenters oppose the independent Administrator 
requirement and reiterate many of the same concerns these commenters 
expressed in response to the Proposed Order.\731\ First, commenters 
opposing the requirement states that the Commission fails to provide 
any evidence of problems in the current Administrator framework for the 
existing Equity Data Plans.\732\ One commenter argues that the 
Commission's concern of conflicts of interest faced by the existing 
administrators is unsupported by evidence.\733\ This commenter argues 
that, as a result, the independent Administrator requirement is 
contrary to the purposes of the Act and Rule 608(b) of Regulation 
NMS,\734\ as ``it is not necessary or appropriate in the public 
interest, for the protection of investors, or the maintenance of fair 
and orderly markets; it would disrupt the mechanisms of the national 
market system; and it is contrary to the purposes of the Act.'' \735\ 
This commenter further states that the Commission ``did not allow the 
SROs to consider other ways to address the potential conflict, such as 
through information barriers, which are commonly allowed under 
Commission rules, or the use of confidentiality requirements.'' \736\ 
Another commenter states that concerns about conflicts and 
confidentiality should be addressed in the context of the conflicts and 
confidentiality policies, or contractual agreements, not by limiting 
``the ability of the CT Plan to contract with the entity best able to 
provide the required services.'' \737\
---------------------------------------------------------------------------

    \731\ See NYSE Letter I, supra note 18, at 11; NYSE Letter II, 
supra note 19, at 4; Cboe Letter, supra note 17, at 5; Appendix B of 
Nasdaq Letter I, supra note 20, at 52-57 (attaching and 
incorporating by reference all arguments made by Nasdaq and other 
petitioners in their opening brief challenging the Governance 
Order); see also Opening Brief for Petitioners, The Nasdaq Stock 
Market, et al. v. Securities and Exchange Commission (Case No. 20-
1181) (DC Cir. 2020). The Commission responded to the arguments made 
by Nasdaq and other petitioners in their brief. See Brief for the 
Respondent, Securities and Exchange Commission, The Nasdaq Stock 
Market, et al. v. Securities and Exchange Commission (Case No. 20-
1181) (D.C. Cir. 2021).
    \732\ See NYSE Letter I, supra note 18, at 11; NYSE Letter II, 
supra note 19, at 4; Appendix B of Nasdaq Letter I, supra note 20, 
at 53.
    \733\ See NYSE Letter I, supra note 18, at 11; NYSE Letter II, 
supra note 19, at 4.
    \734\ 17 CFR 242.608(b).
    \735\ NYSE Letter I, supra note 18, at 11.
    \736\ Id. at 12; see also NYSE Letter II, supra note 19, at 4. 
This commenter states that prior to the issuance of the Governance 
Order, the current Administrators to the existing Equity Data Plans 
had already implemented information barriers designed to protect SIP 
customer information, and ``the Commission has not articulated any 
deficiencies with this information barrier approach.'' NYSE Letter 
I, supra note 18, at 12.
    \737\ Nasdaq Letter I, supra note 20, at 23.
---------------------------------------------------------------------------

    The Commission disagrees with the commenters' views that the 
Commission has not provided evidence of problems in the current 
Administrator framework for the existing Equity Data Plans. The 
Commission continues to believe, as it stated in the Governance Order, 
that ``an entity that acts as the administrator while also offering for 
sale its own proprietary data products faces a substantial, inherent 
conflict of interest, because it would have access to sensitive SIP 
customer information of significant commercial value.'' \738\ 
Additionally, the Commission in the Governance Order described these 
issues and cited the concerns of market participants that the audit 
function of the Administrator creates special conflicts when managed by 
an affiliate of an SRO, with the potential for the misuse of audit data 
to advance the

[[Page 44196]]

business objectives of the SROs.\739\ And as the Commission stated in 
the Proposed Order, ``Participants and Participant representatives have 
been privy to confidential information of substantial commercial or 
competitive value, including, among other things, information about 
core data usage, the SIPs' customer lists, financial information, and 
subscriber audit results.'' \740\ Indeed, during the general session of 
the Equity Data Plan meeting for the third quarter of 2020, a third-
party auditor was suggested as an option for addressing a conflict of 
interest issue raised by the Advisory Committee members regarding the 
audit practices of the current non-independent Administrators.\741\ 
Furthermore, as it stated in the Governance Order, the Commission 
understands that the current Administrators to the existing Equity Data 
Plans have significant latitude with respect to the information they 
may request during contract approval process for use of SIP market 
data, some of which may be highly sensitive.\742\ The Commission 
continues to believe, as it stated in the Governance Order, that the 
``independent Administrator requirement would address concerns 
regarding the potential use of SIP subscriber audit data to pursue 
commercial interests outside of the [CT] Plan.'' \743\
---------------------------------------------------------------------------

    \738\ Governance Order, supra note 8, 85 FR at 28722.
    \739\ See id. at 28723.
    \740\ Proposed Order, supra note 483, 85 FR at 2185.
    \741\ See Summary of CQ/CTA/UTP General Session, at 3 (Nov. 19, 
2020), available at https://www.utpplan.com/DOC/2020-11-19_Summary_CTA-UTP_General_Session.pdf.
    \742\ See Governance Order, supra note 8, 85 FR at 28724.
    \743\ Id. at 28723.
---------------------------------------------------------------------------

    The Commission also continues to believe that the conflicts of 
interest faced by a non-independent Administrator are so great that 
these conflicts cannot be sufficiently mitigated by policies and 
procedures alone.\744\ Unlike the exchanges that offer for sale their 
own proprietary equity market data products, an independent 
Administrator would not have the competing objective of maximizing its 
own proprietary data products' profitability.\745\ The Commission 
therefore continues to believe that in order to mitigate conflicts of 
interest associated with the management of consolidated equity market 
data, the administration of the CT Plan must be separated from 
proprietary equity market data interests. Regarding the comment 
concerning past, present, and future business relationships between the 
Administrator and any of the exchanges or their affiliates,\746\ the 
independent Administrator requirement will address one inherent 
conflict of interest by removing SROs with proprietary data businesses 
that compete with the SIP from consideration in the role of the 
Administrator.\747\ Moreover, the Commission believes that the 
disclosures required under the CT Plan's conflicts of interest policy 
will raise awareness of potential conflicts of interest between the 
Administrator and the Members and facilitate public confidence in the 
CT Plan operations.
---------------------------------------------------------------------------

    \744\ See id. at 28722-23.
    \745\ See id. at 28723.
    \746\ See Schwab Letter II, supra note 30, at 6.
    \747\ NYSE and Nasdaq currently act as Administrators of the 
existing Equity Data Plans. Under the independence provision, NYSE 
and Nasdaq will be excluded from operating as the Administrators of 
the CT Plan.
---------------------------------------------------------------------------

    As it stated in the Governance Order, the Commission believes that 
``the independence requirement would separate the independent 
Administrator from an exchange's commercial interests and allow it to 
focus on the regulatory objectives of Section 11A of the Act.'' \748\ 
Additionally, because the relevant conflict of interest for an 
Administrator would arise from administration of the SIPs while selling 
overlapping proprietary equity market data products, the Commission 
continues to believe that the independence requirement for the 
Administrator must prohibit an entity from serving as Administrator of 
the CT Plan if it is owned or controlled by a corporate entity that, 
either directly or via another subsidiary, offers for sale its own PDP.
---------------------------------------------------------------------------

    \748\ Governance Order, supra note 8, 85 FR at 28723.
---------------------------------------------------------------------------

    Second, commenters opposing the independence requirement state that 
adopting this requirement would be costly and disruptive to the 
administration of SIP data.\749\ One of these commenters states that 
the costs for SROs and market participant subscribers to switch to an 
independent administrator ``clearly outweighs any benefits.'' \750\ 
This commenter describes the ``decades of experience'' the current 
Administrators bring to the existing Equity Data Plans and asserts that 
CT Plan would ``throw away all of that experience and require the 
Operating Committee to hire as Administrator a new, unproven, 
inexperienced entity.'' \751\ This commenter further states that the 
``new Administrator would be starting from zero, and would have to 
build entirely new system infrastructure, train new personnel to 
perform tasks that the existing Administrators already perform, and 
create and then enter into new agreements with subscribers.'' \752\ 
Similarly, another commenter argues that identifying a new independent 
Administrator and transitioning the administrative services provided by 
the current Administrators to that entity ``will take a significant 
amount of time and resources.'' \753\
---------------------------------------------------------------------------

    \749\ See NYSE Letter I, supra note 18, at 11; NYSE Letter II, 
supra note 19, at 4; Cboe Letter, supra note 17, at 5, Appendix B of 
Nasdaq Letter I, supra note 20, at 54.
    \750\ NYSE Letter I, supra note 18, at 11; see also NYSE Letter 
II, supra note 19, at 4.
    \751\ NYSE Letter I, supra note 18, at 11.
    \752\ Id.
    \753\ Cboe Letter, supra note 17, at 5. This commenter further 
states that ``transitioning these administrative services to a new 
entity may require significant effort to ensure that the transition 
is seamless for market participants and does not create new 
potentially disruptive inefficiencies in the administration of the 
[CT] Plan.'' Id.
---------------------------------------------------------------------------

    The Commission acknowledges, as it stated in the Governance Order, 
that the current Administrators have ``significant experience and 
familiarity with the SIPs' practices and systems,'' and ``that there 
will be a transition period with additional costs to onboard the new 
Administrator, including system infrastructure (e.g., network 
connectivity to exchanges, hosting, and database upgrades) and human 
capital (e.g., contract management, hiring personnel, service support, 
and consolidating policies).'' \754\ The Commission believes, however, 
that the relevant expertise that has been developed by the SROs 
currently serving as administrators of the existing Equity Data Plans 
can be leveraged by the CT Plan, since those SROs will continue to be 
members of the CT Plan Operating Committee and will be able to advise 
and facilitate the onboarding process of the new Administrator.\755\ 
Furthermore, as it stated in the Governance Order, the Commission 
continues to believe that any industry experience loss in the audit 
process due to the transition to an independent Administrator would be 
specific to the previous administrative policies and procedures under 
the existing Equity Data Plans instead of the CT Plan.\756\ On balance, 
the Commission continues to believe that eliminating the substantial 
conflict of interest presented by having an entity serve as 
Administrator while directly or indirectly offering for sale its own 
equity market data products justifies the independent Administrator 
requirement in the CT Plan.\757\
---------------------------------------------------------------------------

    \754\ Governance Order, supra note 8, 85 FR at 28723.
    \755\ See Paragraph (d)(iv) of the Recitals to the CT Plan.
    \756\ See Governance Order, supra note 8, 85 FR at 28724.
    \757\ See id.

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

[[Page 44197]]

    In response to the comment about search costs for identifying a new 
independent Administrator,\758\ the Commission continues to believe, as 
it stated in the Governance Order, ``that there is a broad range of 
financial service firms, unaffiliated with an SRO, with specialized 
capabilities to oversee market data administrative functions of the CT 
Plan, such as licensing, billing, contract administration and client 
relationship management, and record keeping.'' \759\
---------------------------------------------------------------------------

    \758\ See Cboe Letter, supra note 17, at 5.
    \759\ Governance Order, supra note 8, 85 FR at 28724.
---------------------------------------------------------------------------

    The Commission also continues to believe that despite the 
implementation costs of selecting a new independent Administrator, the 
selection of an independent Administrator is an important step to help 
ensure that the CT Plan furthers the objectives of Section 11A of the 
Act.\760\ Further, the Commission continues to believe, as it stated in 
the Governance Order, ``based on its oversight experience and as 
described by commenters,'' that ``these costs are justified because the 
inherent conflicts of interest identified by the Commission, whereby an 
entity acts as a plan administrator while also offering its own 
competing products to the SIPs, either directly or via a subsidiary, 
raises significant concerns regarding access to confidential subscriber 
information.'' \761\ Access to such confidential subscriber information 
and its use for purposes outside the scope of the CT Plan by an SRO-
affiliated Administrator undermines the fair administration of equity 
market data in the public interest.\762\
---------------------------------------------------------------------------

    \760\ See id.
    \761\ Id.
    \762\ See id.
---------------------------------------------------------------------------

    Third, commenters opposing the independence requirement ask why 
this requirement would disqualify current exchange administrators to 
the Equity Data Plans but not similarly disqualify non-SRO data vendors 
from filling the Administrator role, when those entities might face 
conflict of interest concerns similar to those of exchange 
Administrators.\763\ One of the commenters argues that the independence 
requirement imposes an unfair burden on competition because ``it would 
not prohibit non-SRO data vendors from filling the Administrator role, 
even though such vendors may separately sell market data and could also 
theoretically benefit from access to subscriber lists.'' \764\ 
Regarding this concern, the Commission did not mandate in the 
Governance Order that non-SRO data vendors serve as the new independent 
Administrator. Nor are such entities the only viable alternative 
Administrator. As discussed above, the Commission chose to address one 
substantial, inherent conflict of interest when it decided that any 
plan Administrator cannot be owned or controlled by a corporate entity 
that offers for sale its own proprietary equity market data products. 
The CT Plan, under the direction of the Operating Committee, can 
exercise discretion in selecting the new Administrator.\765\ 
Furthermore, the Commission does not believe that the Operating 
Committee of the CT Plan would have any incentive to choose as the 
Administrator a non-SRO entity that would face a financial conflict of 
interest and act as a direct competitor to the SROs' proprietary data 
business.
---------------------------------------------------------------------------

    \763\ See NYSE Letter I, supra note 18, at 12; NYSE Letter II, 
supra note 19, at 4; Appendix B of Nasdaq Letter I, supra note 20, 
at 54.
    \764\ NYSE Letter I, supra note 18, at 11; see also NYSE Letter 
II, supra note 19, at 4.
    \765\ See Article IV, Section 4.1(a)(ii) of the CT Plan.
---------------------------------------------------------------------------

    Given the importance of the independent Administrator requirement 
as described above, the Commission is modifying CT Plan as proposed to 
relocate from Section 6.3 the language specifying the independent 
Administrator requirement to a new standalone section in Article VI, 
Section 6.2. Accordingly, new Section 6.2 of the CT Plan will state 
that ``[t]he Administrator may not be owned or controlled by a 
corporate entity that, either directly or via another subsidiary, 
offers for sale its own PDP.'' The Commission believes that this 
modification will eliminate uncertainty as to the application of the 
independent Administrator requirement. This modification will specify 
that the requirement for the Administrator to be independent does not 
apply only at the time that the Operating Committee selects the 
Administrator, but is an ongoing requirement of the CT Plan. For the 
reasons described above, the Commission is approving the independent 
Administrator requirement, as modified, in renumbered Article VI, 
Section 6.2 of the CT Plan.
(c) Evaluation of the Administrator
    Article VI, Section 6.2 of the CT Plan as proposed sets forth the 
provisions for the evaluation of an Administrator, which are 
substantially similar to the provisions relating to the evaluation of 
the Processors described above.\766\ This section specifies that the 
Administrator's performance of its functions under the Administrative 
Services Agreement will be subject to review at any time as determined 
by an affirmative vote of the Operating Committee pursuant to Section 
4.3 of the CT Plan; provided, however, that a review must be conducted 
at least once every two calendar years but not more frequently than 
once each calendar year.\767\ If the Administrator has materially 
defaulted in its obligations under the Administrative Services 
Agreement and that default has not been cured within the applicable 
cure period pursuant to the Administrative Services Agreement, the CT 
Plan provides that the review period limitations will not apply.\768\ 
Furthermore, the CT Plan provides that the Operating Committee must 
appoint a subcommittee or other persons to conduct the review of the 
Administrator and that the reviewer must provide the Operating 
Committee with a written report of its findings and recommendations, 
including with respect to the continuing operation of the 
Administrator.\769\ The CT Plan specifies that the Administrator must 
assist and participate in the process of the review.\770\ The CT Plan 
provides that the Operating Committee, upon completing a review of the 
Administrator, must notify the Commission of any recommendations it may 
approve as a result of the review and supply the Commission with copies 
of any related reports.\771\
---------------------------------------------------------------------------

    \766\ See supra Section II.C.6(a).
    \767\ See Article VI, Section 6.2 of the CT Plan.
    \768\ See id.
    \769\ See id.
    \770\ See id.
    \771\ See id.
---------------------------------------------------------------------------

    In the Notice, the Commission solicited comment on Article VI, 
Section 6.2 of the CT Plan as proposed and the proposed frequency of 
reviews of the Administrator.\772\ One commenter states that the 
proposed review period of every two years is appropriate if there is no 
performance issue.\773\ This commenter also states that more clarity on 
the Administrator evaluation criteria would ``improve the soundness the 
CT Plan.'' \774\
---------------------------------------------------------------------------

    \772\ See Notice, supra note 3, 85 FR at 64572 (Question 42).
    \773\ See Data Boiler Letter I, supra note 31, at 44.
    \774\ Id.
---------------------------------------------------------------------------

    The Commission believes that the provisions for the evaluation of 
the Administrator are reasonably designed to ensure that the 
Administrator meets its performance obligations under the 
Administrative Service Agreement. The Commission also believes that the 
requirement for the Operating Committee to appoint a subcommittee

[[Page 44198]]

or other persons to conduct the review is a commonly performed practice 
under the current Equity Data Plans and will promote efficient 
allocation of the Operating Committee's time and resources. 
Furthermore, the Commission believes that the requirement that the 
Operating Committee notify the Commission of any recommendations it may 
approve as a result of a review of the Administrator and supply the 
Commission with copies of any related reports will promote transparency 
and enhance Commission oversight of the Administrator's performance of 
its obligations to the CT Plan.
    The Commission agrees with the comment that the biennial review 
timeframe is appropriate if there are no Administrator performance 
issues.\775\ As described above, Section 6.2 as proposed provides that 
the timeframe limitations will not apply if the Administrator has 
materially defaulted, without cure, in its obligations under the 
Administrative Services Agreement. The Commission also believes that 
the biennial review timeframe provides a sufficient sample time period 
for the Operating Committee to evaluate the performance of the 
Administrator, without overburdening the Operating Committee with 
frequent reviews that might produce little additional information. 
Regarding the comment requesting additional clarity on the 
Administrator evaluation criteria,\776\ the Commission believes that 
the CT Plan appropriately assigns the responsibility of evaluating the 
performance of the Administrator to the Operating Committee, which is 
responsible for the operation of the CT Plan, and reasonably sets forth 
the parameters the Operating Committee must use to ensure that the 
Administrator meets its performance obligations under the 
Administrative Service Agreement, without prescribing the specific 
measurements of Administrator performance in a way that would require 
an amendment of the CT Plan to respond to market developments.\777\ 
Moreover, the commenter did not explain in detail the clarification it 
was seeking on the evaluation criteria. For the foregoing reasons, the 
Commission is approving Article VI, Section 6.2, as proposed, but is 
renumbering it as Section 6.3 of the CT Plan.
---------------------------------------------------------------------------

    \775\ See id.
    \776\ See id.
    \777\ See Article IV, Section 4.1(a)(ii) of the CT Plan.
---------------------------------------------------------------------------

(d) Process for Selecting New Administrator
    Article VI, Section 6.3 of the CT Plan as proposed sets forth the 
provisions for the selection of an Administrator, which are similar to 
the procedures for selecting a new Processor.\778\ In particular, 
Section 6.3 specifies that the Operating Committee shall establish 
procedures for selecting a new Administrator, by an affirmative vote 
pursuant to Section 4.3 of the CT Plan (the ``Administrator Selection 
Procedures'').\779\ Section 6.3 further provides that the Administrator 
Selection Procedures must set forth, at a minimum: (i) The minimum 
technical and operational requirements to be fulfilled by the 
Administrator; (ii) the criteria to be considered in selecting the 
Administrator; (iii) the entities (other than Voting Representatives) 
that are eligible to comment on the selection of the Administrator; and 
(iv) the entity that will: (A) Draft the Operating Committee's request 
for proposal for a new Administrator; (B) assist the Operating 
Committee in evaluating bids for the new Administrator; and (C) 
otherwise provide assistance and guidance to the Operating Committee in 
the selection process.\780\ Finally, Section 6.3 provides that the 
Operating Committee, as part of the process in establishing the 
Administrator Selection Procedures, is permitted to solicit and 
consider the timely comment of any entity affected by the operation of 
the CT Plan.\781\
---------------------------------------------------------------------------

    \778\ See Article V, Section 5.3 of the CT Plan.
    \779\ See Article VI, Section 6.4 of the CT Plan. The CT Plan 
requires that the Administrator Selection Procedures be established 
prior to the Operative Date, upon the termination or withdrawal of 
the Administrator, or upon the expiration of the Administrative 
Services Agreement. See id. See also paragraph (d)(iv) of the 
Recitals to the CT Plan, as modified by the Commission (stating that 
the Operating Committee shall enter into an agreement with the 
Administrator pursuant to Section 6.3 of the CT Plan within eight 
months of the Effective Date).
    \780\ See Article VI, Section 6.4 of the CT Plan.
    \781\ See id.
---------------------------------------------------------------------------

    In the Notice, the Commission solicited comment on Article VI, 
Section 6.3 of the CT Plan as proposed and whether the Administrator 
Selection Procedures should set forth additional terms, such as 
specifying a maximum time period to select a new Administrator.\782\ 
One commenter states that the CT Plan should clarify the protocols to 
transition to a new Administrator and specify the maximum time period 
to select a new Administrator.\783\ The commenter also states that the 
Administrator should not ``just be any major accounting, law, or 
consulting firm.'' \784\ Finally, the commenter states that the public 
should be allowed to comment on the selection of a new 
Administrator.\785\
---------------------------------------------------------------------------

    \782\ See Notice, supra note 3, 85 FR at 64572 (Question 43).
    \783\ See Data Boiler Letter I, supra note 31, at 44.
    \784\ Id. at 4, 44.
    \785\ See id. at 44.
---------------------------------------------------------------------------

    In response to the comment regarding transition protocols for a new 
Administrator, the Commission believes that details regarding 
transition protocols are reasonably described in paragraph (d)(iv) of 
the Recitals to the CT Plan, which discusses the transition from the 
prior administrators under the existing Equity Data Plans to the new 
independent Administrator.\786\ With respect to future changeovers in 
the Administrator role, the Commission believes that it is appropriate 
for the Operating Committee to evaluate and determine the specific 
appropriate transition protocols in close partnership with the new 
independent Administrator, as transition protocols may be highly 
detailed and depend on the particular service provider selected as the 
Administrator. Therefore, the Commission believes that setting forth 
specific requirements in the CT Plan, at this stage, may unnecessarily 
hinder the ability of the CT Plan, under the direction of the Operating 
Committee, and the Administrator to determine the appropriate 
transition protocols.
---------------------------------------------------------------------------

    \786\ See supra Section II.C.1.
---------------------------------------------------------------------------

    With respect to the comment on prescribing a maximum period of time 
to select a new Administrator,\787\ the Commission does not believe 
that it is necessary for Section 6.3 to set the maximum period of time 
for the Operating Committee to establish the Administrator Selection 
Procedures, because the Commission has separately modified the CT Plan 
to provide deadlines for implementation of the CT Plan, including for 
selecting, and entering into a contract with, an Administrator.\788\ 
Furthermore, the Commission did not receive any comments on a specific 
maximum

[[Page 44199]]

period of time to select a new Administrator.
---------------------------------------------------------------------------

    \787\ See Data Boiler Letter I, supra note 31, at 44.
    \788\ Paragraph (d)(iv) of the Recitals of the CT Plan provides 
that within eight months of the Effective Date, the Operating 
Committee must have selected and entered into an agreement with an 
Administrator and such Administrator shall prepare to transition 
from prior the Administrators under the Equity Data Plans such that, 
before the Operative Date, it is able to provide services under the 
Administrative Services Agreement, as determined by the Operating 
Committee pursuant to Section 4.3, including that (1) new contracts 
between the CT Plan and Vendors and the CT Plan and Subscribers have 
been finalized such that all Vendors and Subscribers under the 
Equity Data Plans are ready to transition to such new contracts, (2) 
the Administrator has in place a system to administer distributions, 
and (3) the Administrator has in place a system to administer fees.
---------------------------------------------------------------------------

    With respect to the comment on limiting the type of professional 
service firms that may serve the role of the independent 
Administrator,\789\ the Commission believes that the CT Plan should not 
limit the scope of firms based solely on the type or size of the firm, 
but should instead use the criteria required to be considered in 
selecting the Administrator pursuant to the Administrator Selection 
Procedures adopted by the Operating Committee. Finally, regarding the 
commenter's statement in support of public comment on the selection of 
a new Administrator,\790\ Section 6.3 provides that the Operating 
Committee may solicit and consider comment as part of the process of 
establishing the Administrator Selection Procedures, and the 
Administrator Selection Procedures are required to set forth the 
entities (other than the Voting Representatives) that are eligible to 
comment on the selection of the Administrator.\791\ The Commission also 
believes that the inclusion of Non-SRO Voting Representatives as full 
members of the Operating Committee, together with the Commission's 
modification of the proposed CT Plan in Section 4.4(g)(i) to prohibit 
discussions in Executive Session regarding contract negotiations with 
the Administrator, will help ensure that the Operating Committee 
considers broad industry viewpoints in the process of establishing the 
Administrator Selection Procedures. As a result, the Commission 
believes that the CT Plan, as modified, addresses this issue.
---------------------------------------------------------------------------

    \789\ See Data Boiler Letter I, supra note 31, at 4, 44.
    \790\ See id.
    \791\ See Article VI, Section 6.3(d) of the CT Plan.
---------------------------------------------------------------------------

    Although the provisions for the establishment of the Administrator 
Selection Procedures are reasonably designed to ensure that the 
Operating Committee establishes a process that governs the selection of 
a new Administrator through a fair, transparent, and competitive 
process, the Commission is modifying a sentence in Article VI, Section 
6.3 of the CT Plan. In particular, Section 6.3 states that the 
Administrator Selection Procedures shall be established by the Voting 
Representatives pursuant to Article IV, Section 4.3 of the CT Plan. The 
Commission is modifying Section 6.3 by replacing the phrase ``Voting 
Representatives'' with the phrase ``Operating Committee'' in order to 
remove any inconsistency and potential confusion in this section 
regarding the vote that would be required to establish the 
Administrator Selection Procedures. As described above, Section 4.3 
governs the action of the Operating Committee, which has the specific 
authority under the CT Plan for selecting, overseeing, and specifying 
the role and responsibilities of the Administrator.\792\ The reference 
to Voting Representatives is the only instance found in Section 6.3 
when discussing the body responsible for establishing the Administrator 
Selection Procedures, and modifying the provision to instead refer to 
the Operating Committee will make clear that an augmented majority vote 
of the Operating Committee is necessary to establish those procedures. 
Accordingly, for the reasons discussed above, the Commission is 
approving Article VI, Section 6.3, as modified and renumbered as 
Section 6.4 of the CT Plan.
---------------------------------------------------------------------------

    \792\ See Article IV, Section 4.1(a)(ii) of the CT Plan.
---------------------------------------------------------------------------

8. Regulatory Matters
    Article VII of the CT Plan sets forth the provisions governing 
regulatory matters. Section 7.1 of Article VII addresses regulatory and 
operational halts. Section 7.1(a) provides that a Member must notify 
the Processor if it has concerns about its ability to collect and 
transmit quotes, orders, or last sale prices, or where it has declared 
an Operational Halt or suspension of trading in one or more Eligible 
Securities, pursuant to the procedures adopted by the Operating 
Committee.
    Sections 7.1(b)-(f) provide procedures for the initiation of a 
regulatory halt and the resumption of trading following a regulatory 
halt. In particular, Section 7.1(d) provides that the Primary Listing 
Market will determine when to resume trading. In making that 
determination, the Primary Listing Market will make a good-faith 
determination and consider the totality of information to determine 
whether resuming trading would promote a fair and orderly market. 
Section 7.1(d) further provides that the Primary Listing Market retains 
discretion to delay the resumption of trading if it believes that 
trading will not resume in a fair and orderly manner.
    In the Notice, the Commission sought comment on these 
provisions.\793\ One commenter argues that ``good faith'' is ``too 
loose of a requirement.'' \794\ The Commission, however, believes that 
the proposed good-faith standard set forth in Section 7.1 is 
appropriate because it addresses potential concerns that primary 
listing markets may be subject to commercial pressures in making 
decisions to call regulatory halts or resume trading thereafter and 
also because it is combined with the requirement that the primary 
listing markets consider the broader interests of the national market 
system with respect to declaring regulatory trading halts and resuming 
trading thereafter, thereby promoting the maintenance of fair and 
orderly markets and enhancing the protection of investors.\795\ Section 
7.1(b)(ii) of the CT Plan requires the primary listing market to also 
consider the severity of the issue, its expected duration, and 
potential impact on market participants. Section 7.1(b)(ii) also 
requires the primary listing market to consult with, or seek input 
from, as feasible, the affected trading centers, processors, and others 
when making any such determinations. Moreover, Section 7.1(c)(iv) and 
Section 7.1(d)(1) each require the primary listing market to consider 
whether its determination would promote a fair and orderly market. 
Consequently, the Commission has determined that a good-faith 
determination, based on the totality of information and focusing on the 
promotion of fair and orderly markets, is reasonably designed to ensure 
that trading is halted and resumed in an appropriate manner. 
Additionally, consistent with its recent approval of the same 
provisions regarding trading halts in the existing Equity Data Plans, 
the Commission finds that the provisions of Section 7.1 are reasonably 
designed ``to enhance the resiliency of the national market system by 
clearly memorializing the coordinated actions to be taken by the 
Participants during such events so that trading may resume in a fair 
and orderly manner.'' \796\ Accordingly, the Commission is approving 
Section 7.1 as proposed.
---------------------------------------------------------------------------

    \793\ See Notice, supra note 3, 85 FR at 64572 (Question 46).
    \794\ Data Boiler Letter I, supra note 31, at 45.
    \795\ For example, Article VIII(a) of the CTA Plan does not 
prevent ``any Participant that is an exchange from halting or 
suspending trading, or any Participant that is a national securities 
association from suspending the furnishing of quotation information, 
in any Eligible Security for any reason it deems adequate. Any 
Participant which does so halt or suspend trading or the furnishing 
of quotation information shall immediately advise the Processor of 
its actions and the reasons therefor, and also advise the Processor 
when such halt or suspension is terminated.'' Moreover, Article X of 
the UTP Plan permits the Listing Market to declare a regulatory 
halt, ``[w]henever, in the exercise of its regulatory functions, the 
Listing Market for an Eligible Security determines that a Regulatory 
Halt is appropriate'' and to terminate a halt, ``[w]henever the 
Listing Market determines.''
    \796\ Securities Exchange Act Release Nos. 92070 (May 28, 2021), 
86 FR 29849, 29851 (June 3, 2021) (File No. SR-CTA/CQ-2021-01); and 
92071 (May 28, 2021), 86 FR 29846, 29848 (June 3, 2021) (File No. 
S7-24-89).

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

[[Page 44200]]

    Section 7.2 of Article VII of the CT Plan governs the hours of 
operation during which time quotations and Transaction Reports must be 
entered by Members and will be disseminated by the Processor. The 
Commission received no comment on Section 7.2. The Commission finds 
that the requirements of this provision with respect to regulatory 
halts are consistent with the provisions of the existing Equity Data 
Plans previously approved by the Commission,\797\ and that maintaining 
the same hours of operation for the CT Plan will avoid the need for 
market participants to adjust their systems to accept market data at 
other times, thereby reducing the risk of market disruption. For these 
reasons, the Commission is approving Section 7.2 as proposed.
---------------------------------------------------------------------------

    \797\ See Securities Exchange Act Release Nos. 92070 (May 28, 
2021), 86 FR 29849, 29851 (June 3, 2021) (File No. SR-CTA/CQ-2021-
01); and 92071 (May 28, 2021), 86 FR 29846, 29848 (June 3, 2021) 
(File No. S7-24-89).
---------------------------------------------------------------------------

9. Financial Matters
(a) Capital Contributions
    Article VIII of the CT Plan sets forth the provisions related to 
the maintenance of capital accounts for the Members, additional capital 
contributions to the LLC, and the distribution of revenues of the LLC 
to the Members. Specifically, Article VIII, Section 8.1 of the CT Plan 
requires a separate capital account to be established and maintained by 
the Company for each Member.\798\ In addition, the CT Plan specifies 
the formula for crediting and debiting a Member's capital account.\799\ 
The CT Plan provides that a Member's capital account will be credited 
for (i) the Member's capital contributions (at fair market value in the 
case of contributed property),\800\ (ii) allocations of Company profits 
and gain to such Member pursuant to Section 10.2; and (iii) any 
recaptured tax credits, or portion thereof, to the extent such increase 
to the tax basis of a Member's interest in the Company may be allowed 
pursuant to the federal tax code.\801\ Furthermore, the CT Plan 
provides that a Member's capital account will be decreased by (x) the 
amount of distributions (at fair market value in the case of property 
distributed in kind) to such Member, (y) allocations of Company losses 
to such Member and (z) any tax credits as may be required to be charged 
to the tax basis of a Member's interest pursuant to the federal income 
tax code.\802\
---------------------------------------------------------------------------

    \798\ See Article VIII, Section 8.1(a) of the CT Plan.
    \799\ See id.
    \800\ The CT Plan specifies that the fair market value of 
contributed, distributed, or revalued property shall be agreed to by 
the Operating Committee or, if there is no such agreement, by an 
appraisal. See Article VIII, Section 8.1(b) of the CT Plan.
    \801\ See Article VIII, Section 8.1(a) of the CT Plan.
    \802\ See id.
---------------------------------------------------------------------------

    Article VIII, Section 8.2 of the proposed CT specifies that no 
Member will be obligated or permitted to make any additional 
contribution to the capital of the Company except with the approval of 
the Operating Committee. The CT Plan specifies that the Members agree 
to make additional capital contributions from time to time as 
appropriate in respect of reasonable administrative and other 
reasonable expenses of the Company.\803\
---------------------------------------------------------------------------

    \803\ See Article VIII, Section 8.2 of the CT Plan.
---------------------------------------------------------------------------

    Article VIII, Section 8.3 of the CT Plan requires the distributions 
of revenues of the LLC to the Members at the times and in the aggregate 
amounts set forth in Exhibit D to the CT Plan. The CT Plan provides 
that distributions to Members may be made in cash or, if determined by 
the Operating Committee, in-kind.\804\ The CT Plan also specifies that 
the Operating Committee may reserve amounts for anticipated expenses or 
contingent liabilities of the LLC.\805\ Finally, the CT Plan provides 
that if additional capital contributions are called for, and any Member 
fails to provide the full amount of such additional capital 
contributions, any distributions to be made to such defaulting Member 
shall be reduced by the amount of any required but unpaid capital 
contribution due from such Member.\806\
---------------------------------------------------------------------------

    \804\ See Article VIII, Section 8.3 of the CT Plan.
    \805\ See id.
    \806\ See id.
---------------------------------------------------------------------------

    The provisions in the CT Plan related to the maintenance of capital 
accounts for the Members, additional capital contributions to LLC, and 
the distribution of revenues of the LLC to the Members are reasonable 
and customary for LLC agreements, and the Commission received no 
comments addressing Article VIII. The Commission has, however, 
identified two incorrect cross references in Article VIII, Section 8.1. 
In particular, Section 8.1(a) twice incorrectly cites to Section 10.2 
(Tax Status; Returns) instead of Section 9.2 (Allocation of Profits and 
Losses) of the CT Plan when describing provisions related to 
allocations of profits and losses. The Commission is therefore 
modifying Section 8.1(a) to correct these incorrect cross references. 
For the reasons discussed above, the Commission is approving Article 
VIII as modified.
(b) Allocations
    Article IX of the CT Plan sets forth the provisions related to the 
allocation of profits and losses of the LLC to Members. Pursuant to 
Article XI, Section 9.1, the profits and losses of the Company must be 
determined for each fiscal year in a manner consistent with GAAP. 
Article XI, Section 9.2 further provides that all profits and losses of 
the Company must be allocated among the Members in accordance with 
Exhibit D of the CT Plan. Section 9.2 also specifies the procedures for 
certain allocation events in accordance with federal tax code 
regulations.\807\
---------------------------------------------------------------------------

    \807\ See Article IX, Section 9.2(b)-(d) of the CT Plan.
---------------------------------------------------------------------------

    Exhibit D of the CT Plan outlines the methodology for revenue 
sharing among Members. Specifically, paragraph (a) of Exhibit D 
specifies that each Member will receive an annual payment (if any) for 
each calendar year that is equal to the sum of the Member's Trading 
Shares (as defined in the CT Plan) and Quoting Shares (as defined in 
the CT Plan), in each Eligible Security for such calendar year.\808\ In 
the event that total Net Distributable Operating Income (as defined 
below) is negative for a given calendar year, each Member will receive 
an annual bill for such calendar year in accordance with the same 
formula for determining annual payments to the Members.\809\ Moreover, 
the Company will cause the Administrator to provide the Members with 
written estimates of each Member's percentage of total volume within 
five business days of the end of each calendar month.\810\
---------------------------------------------------------------------------

    \808\ See Paragraph (a) of Exhibit D of the CT Plan.
    \809\ See id.
    \810\ See id.
---------------------------------------------------------------------------

    Paragraphs (b), (c), and (e) through (i) of Exhibit D set forth the 
definitions used for determining the revenue sharing among Members, 
including ``Security Income Allocation,'' \811\ ``Voting Percentage,'' 
\812\ ``Trading

[[Page 44201]]

Share,'' \813\ ``Trading Rating,'' \814\ ``Quoting Share,'' \815\ 
``Quote Rating,'' \816\ and ``Quote Credit.'' \817\
---------------------------------------------------------------------------

    \811\ Paragraph (b) of Exhibit D of the CT Plan defines 
``Security Income Allocation'' as ``multiplying (i) the Net 
Distributable Operating Income under [Exhibit D] for the calendar 
year by (ii) the Volume Percentage for such Eligible Security (the 
``Initial Allocation''), and then adding or subtracting any amounts 
specified in the reallocation set forth [in Exhibit D].''
    \812\ Paragraph (c) of Exhibit D of the CT Plan defines ``Volume 
Percentage'' as ``dividing (A) the square root of the dollar volume 
of Transaction Reports disseminated by the Processors in such 
Eligible Security during the calendar year by (B) the sum of the 
square roots of the dollar volume of Transaction Reports 
disseminated by the Processors in each Eligible Security during the 
calendar year.''
    \813\ Paragraph (e) of Exhibit D of the CT Plan defines 
``Trading Share'' as ``multiplying (i) an amount equal to fifty 
percent of the Security Income Allocation for the Eligible Security 
by (ii) the Member's Trade Rating in the Eligible Security.''
    \814\ Paragraph (f) of Exhibit D of the CT Plan defines ``Trade 
Rating'' as ``taking the average of (A) the Member's percentage of 
the total dollar volume of Transaction Reports disseminated by the 
Processors in the Eligible Security during the calendar year, and 
(B) the Member's percentage of the total number of qualified 
Transaction Reports disseminated by the Processors in the Eligible 
Security during the calendar year.''
    \815\ Paragraph (g) of Exhibit D of the CT Plan defines 
``Quoting Share'' as ``multiplying (A) an amount equal to fifty 
percent of the Security Income Allocation for the Eligible Security 
by (B) the Member's Quote Rating in the Eligible Security.''
    \816\ Paragraph (h) of Exhibit D of the CT Plan defines ``Quote 
Rating'' as ``dividing (A) the sum of the Quote Credits earned by 
the Member in such Eligible Security during the calendar year by (B) 
the sum of the Quote Credits earned by all Members in such Eligible 
Security during the calendar year.''
    \817\ Paragraph (i) of Exhibit D of the CT Plan states that a 
``Member shall earn one `Quote Credit' for each second of time (with 
a minimum of one full second) multiplied by dollar value of size 
that an automated best bid (offer) transmitted by the Member to the 
Processors during regular trading hours is equal to the price of the 
National Best Bid and Offer in the Eligible Security and does not 
lock or cross a previously displayed `automated quotation' (as 
defined under Rule 600 of Regulation NMS). The dollar value of size 
of a quote shall be determined by multiplying the price of a quote 
by its size.''
---------------------------------------------------------------------------

    Paragraph (d) of Exhibit D specifies a cap on the Net Distributable 
Operating Income of the CT Plan. In particular, if the Initial 
Allocation of Net Distributable Operating Income equals an amount 
greater than $4.00 multiplied by the total number of qualified 
Transaction Reports \818\ in such Eligible Security during the calendar 
year, the excess amount will be subtracted from the Initial Allocation 
for such Eligible Security and reallocated among all Eligible 
Securities in direct proportion to the dollar volume of Transaction 
Reports disseminated by the Processors in Eligible Securities during 
the calendar year.\819\
---------------------------------------------------------------------------

    \818\ Paragraph (d) of Exhibit D of the CT Plan provides that 
``[a] Transaction Report with a dollar volume of: (i) $5,000 or more 
shall constitute one qualified Transaction Report'' and that ``[a] 
Transaction Report with a dollar volume of less than $5,000 shall 
constitute a fraction of a qualified Transaction Report that equals 
the dollar volume of the Transaction Report divided by $5,000.''
    \819\ See Paragraph (d) of Exhibit D of the CT Plan.
---------------------------------------------------------------------------

    Paragraph (j) of Exhibit D specifies the formula for determining 
the Net Distributable Operating Income for any calendar year. 
Generally, the Net Distributable Operating Income is equal to: (1) All 
cash revenues, funds, and proceeds received by the Company during such 
calendar year, including all revenues from (A) the CT Feeds and (B) 
FINRA quotation data and last sale information for securities 
classified as OTC Equity Securities under FINRA's Rule 6400 Series 
(``FINRA OTC Data'') ((A) and (B) collectively, the ``Data Feeds''), 
and (C) any membership fees; less (2) 6.25% of the revenue received by 
the Company during such calendar year attributable to the segment of 
the Data Feeds reflecting the dissemination of information with respect 
to Network C Securities and FINRA OTC Data; less (3) reasonable working 
capital and contingency reserves for such calendar year, as determined 
by the Operating Committee, and all costs and expenses of the Company 
during such calendar year.\820\
---------------------------------------------------------------------------

    \820\ See Paragraph (j) of Exhibit D of the CT Plan.
---------------------------------------------------------------------------

    Paragraph (k) of Exhibit D specifies that once a new Member 
implements a Processor-approved electronic interface with the 
Processors, the Member will become eligible to receive revenue.\821\ 
Paragraph (l) of Exhibit D specifies that, generally, all quarterly 
payments or billings must be made to each eligible Member within 45 
days after the end of each calendar quarter in which the Member is 
eligible to receive revenue.\822\ Additionally, the Company will cause 
the Administrator to provide Members with written estimates of each 
Member's quarterly Net Distributable Operating Income within 45 
calendar days of the end of the quarter, and estimated quarterly 
payments or billings must be based on such estimates.\823\
---------------------------------------------------------------------------

    \821\ See Paragraph (k) of Exhibit D of the CT Plan.
    \822\ Paragraph (l) of Exhibit D also specifies conditions for 
the quarterly payments or billings to Members and interest accrual 
procedures.
    \823\ See Paragraph (l) of Exhibit D of the CT Plan.
---------------------------------------------------------------------------

    Paragraph (m) of Exhibit D specifies that the Company will cause 
the Administrator to submit to the Members a quarterly itemized 
statement setting forth the basis upon which Net Distributable 
Operating Income was calculated.\824\ Finally, the Company, subject to 
the voting requirements pursuant to Article IV, Section 4.3, will cause 
the Administrator to engage an independent auditor to audit the 
Administrator's costs or other calculation(s).\825\
---------------------------------------------------------------------------

    \824\ Paragraph (m) of Exhibit D of the CT Plan also specifies 
that the ``Net Distributable Operating Income shall be adjusted 
annually based solely on the quarterly itemized statement audited 
pursuant to the annual audit. The Company shall cause the 
Administrator to pay or bill Members for the audit adjustments 
within thirty days of completion of the annual audit.''
    \825\ See Paragraph (m) of Exhibit D of the CT Plan.
---------------------------------------------------------------------------

    In the Notice, the Commission solicited comment on Article IX, 
including allocations to the Members,\826\ and the definition of the 
term ``Net Distributable Operating Income'' in paragraph (j) of Exhibit 
D to the CT Plan.\827\ One commenter argues that the provision in 
paragraph (j) of Exhibit D the CT Plan, which provides that 6.25% of 
revenue received by the LLC be paid to FINRA as compensation for FINRA 
OTC Data, is an ``antiquated revenue allocation provision'' that serves 
no ongoing purpose and should be removed.\828\ In response, one 
commenter objects to the suggestion that FINRA OTC Data be removed from 
the CT Plan, arguing that the suggestion is outside the scope of the 
Commission's proposal and related directive.\829\ This commenter 
further argues that it would be inappropriate to modify the CT Plan to 
restructure the data covered by the CT Plan or the revenue allocation 
provisions in response to that suggestion.\830\
---------------------------------------------------------------------------

    \826\ See Notice, supra note 3, 85 FR at 64572 (Question 47).
    \827\ See id. at 64573 (Question 54).
    \828\ Nasdaq Letter I, supra note 20, at 31. This commenter also 
briefly describes a history of the revenue allocation formula and 
shares its previous proposals for modifying the revenue allocation 
formula. See id. at 29-30. In particular, the commenter states that 
it (i) favors revising the revenue allocation formula to reward 
exchanges that display quotes that result in an execution; and (ii) 
proposes removing the Over-the-Counter Bulletin Board (``OTCBB'') 
data from the Nasdaq SIP to lower costs. See id. at 30.
    \829\ See Letter from Marcia E. Asquith, Executive Vice 
President, Board and External Relations, FINRA (Nov. 24, 2020) 
(``FINRA Letter II''), at 4.
    \830\ See FINRA Letter II, supra note 829, at 4-6 (emphasizing 
that there are important benefits of including OTC equities data in 
the data feeds provided under the UTP Plan).
---------------------------------------------------------------------------

    While the Commission acknowledges the commenters' concerns with 
respect to the inclusion in the CT Plan of the 6.25% revenue allocation 
to FINRA, the Commission believes that the provisions of the 
Commission's recently adopted Market Data Infrastructure Rule will 
ultimately resolve this issue.\831\ First, new Rule 614 does not 
include OTC data within the definition of ``core data'' to be 
disseminated by the effective NMS plan(s) for equity market data.\832\ 
And second, Rule 614(e) specifically requires the effective NMS plan(s) 
for equity market data to file an amendment conforming the plan(s) to 
the new consolidation model under the Market Data Infrastructure 
Rule.\833\ Thus, when the CT Plan becomes the effective NMS plan for 
dissemination of equity market data under the Market Data 
Infrastructure Rule, the CT Plan will no longer include OTC data within 
the definition of ``core data,'' and no revenue allocation of CT Plan 
revenues

[[Page 44202]]

for OTC data will be necessary or appropriate. Consequently, because 
the Commission believes that the other provisions of the CT Plan 
related to the allocation of profits and losses of the LLC to the 
Members are similar to the UTP Plan, the Commission does not believe it 
is necessary at this time to modify the CT Plan's proposed revenue 
allocation. The Commission has, however, identified five incorrect 
cross references in Article IX, Section 9.2. In particular, Section 
9.2(d) incorrectly cites to Section 10.2 (Tax Status; Returns) instead 
of Section 9.2 when describing provisions related to allocations. The 
Commission is therefore modifying Section 9.2(d) to correct these cross 
references. For the reasons discussed above, the Commission is 
approving Article IX as modified.
---------------------------------------------------------------------------

    \831\ See Market Data Infrastructure, Securities Exchange Act 
Release No. 90610 (Dec. 9, 2020), 86 FR 18596 (File No. S7-03-20) 
(Final Rule).
    \832\ See id. at 18614-15.
    \833\ See id. at 18681.
---------------------------------------------------------------------------

(c) Records and Accounting
    Article X of the CT Plan sets forth the LLC's obligations and 
policies related to accounting and tax matters. Article X, Section 10.1 
of the CT Plan specifies that the Operating Committee shall determine 
all matters concerning accounting procedures of the Company and 
maintain an accounting system that enables the Company to produce 
accounting records and information substantially consistent with 
GAAP.\834\ The CT Plan also specifies that the fiscal year of the 
Company will be the calendar year unless applicable law requires a 
different fiscal year.\835\
---------------------------------------------------------------------------

    \834\ See Article X, Section 10.1(a), (b) of the CT Plan.
    \835\ See Article X, Section 10.1(a) of the CT Plan.
---------------------------------------------------------------------------

    Article X, Section 10.2 of the CT Plan specifies that the Company 
is intended to be treated as a partnership for federal, state, and 
local income tax purposes.\836\
---------------------------------------------------------------------------

    \836\ See Article X, Section 10.2(a) of the CT Plan. The CT Plan 
specifies that all tax returns shall be prepared in a manner 
consistent with the Distributions made in accordance with Exhibit D 
of the CT Plan. See Article X, Section 10.2(b) of the CT Plan.
---------------------------------------------------------------------------

    Article X, Section 10.3 of the CT Plan sets forth provisions 
regarding the functions and duties of an entity appointed as the 
``Partnership Representative'' of the Company as required by the 
federal tax code.\837\ This section requires that all federal, state, 
and local tax audits and litigation shall be conducted under the 
direction of the Partnership Representative.\838\ The Partnership 
Representative is required to use reasonable efforts to notify each 
Member of all significant matters that may come to its attention and to 
forward to each Member copies of all significant written communications 
it receives in such capacity.\839\ The Partnership Representative must 
also consult with the Members before taking any material actions with 
respect to tax matters and must not compromise or settle any tax audit 
or litigation affecting the Members without the approval of a majority 
of Members.\840\ Any material proposed action, inaction, or election to 
be taken by the Partnership Representative requires the prior approval 
of a majority of Members.\841\
---------------------------------------------------------------------------

    \837\ See Article X, Section 10.3(a) of the CT Plan.
    \838\ See id.
    \839\ See Article X, Section 10.3(b) of the CT Plan.
    \840\ See id.
    \841\ See Article X, Section 10.3(c) of the CT Plan.
---------------------------------------------------------------------------

    The Commission received no comments addressing Article X and notes 
that these provisions of the CT Plan relating to accounting and tax 
matters of the LLC are similar to those existing in other NMS 
plans.\842\ Accordingly, the Commission is approving the provisions of 
Article X as proposed.
---------------------------------------------------------------------------

    \842\ See Article IX, Sections 9.2, 9.3, and 9.5 of the CAT NMS 
Plan; Article VIII, Sections 8.1, 8.2, and 8.4 of the OPRA Plan.
---------------------------------------------------------------------------

10. Dissolution and Termination
(a) Dissolution of the LLC
    Article XI, Section 11.1 of the CT Plan specifies the events that 
would trigger the dissolution of the LLC. In particular, Section 11.1 
requires the dissolution of the Company as a result of one of the 
following events: (i) Unanimous written consent of the Members to 
dissolve the Company; (ii) the sale or other disposition of all or 
substantially all the Company's assets outside the ordinary course of 
business; (iii) an event which makes it unlawful or impossible for the 
Company business to be continued; (iv) the withdrawal of one or more 
Members such that there is only one remaining Member; or (v) the entry 
of a decree of judicial dissolution under Section 18-802 of the 
Delaware Act.
    In the Notice, the Commission solicited comment on whether the 
terms for the dissolution and termination of the LLC should require 
consideration by or the consent of the Non-SRO Voting 
Representatives.\843\ One commenter states that the dissolution and 
termination of the LLC should require consideration and consent of the 
broader industry, beyond just Non-SRO Voting Representatives.\844\ 
Another commenter states that ``[t]he existence and operation of the CT 
Plan is required by the Commission and therefore the dissolution of the 
CT Plan is only possible if the Commission is approving an alternative 
plan for the dissemination of information.'' \845\
---------------------------------------------------------------------------

    \843\ See Notice, supra note 3, 85 FR at 64572 (Question 48).
    \844\ See Data Boiler Letter I, supra note 31, at 45.
    \845\ Nasdaq Letter I, supra note 20, at 12.
---------------------------------------------------------------------------

    With respect to the concern that the dissolution and termination of 
the LLC should require broader industry consideration and consent, any 
cessation of the operations of the LLC as the structure through which 
the SROs fulfill their regulatory obligations with respect to 
consolidated equity market data typically would require a filing with 
the Commission pursuant to Rule 608(b)(1) and (2) of Regulation 
NMS,\846\ which would be noticed for public comment before Commission 
action to approve or disapprove the filing, providing an opportunity 
for all interested market participants to share their views with the 
Commission. Moreover, the triggering events for the dissolution of the 
LLC are similar to those existing in other NMS plans, and none of the 
terms of the existing NMS plans structured as an LLC agreement 
expressly specify broad industry consideration prior to dissolution and 
termination.\847\ For the reasons discussed above, the Commission is 
approving Article XI, Section 11.1 of the CT Plan as proposed.
---------------------------------------------------------------------------

    \846\ 17 CFR 242.608(b)(1) and (2).
    \847\ See Article X, Section 10.1 of the CAT NMS Plan; Article 
IX, Section 9.1 of the OPRA Plan.
---------------------------------------------------------------------------

(b) Liquidation and Distribution
    Article XI, Section 11.2 of the CT Plan sets forth the procedures 
for the liquidation and distribution of assets following the 
dissolution of the LLC. Specifically, in the event of the dissolution 
of the LLC, Section 11.2 requires the Members to appoint a liquidating 
trustee to wind up the affairs of the Company by (i) selling its assets 
in an orderly manner (so as to avoid the loss normally associated with 
forced sales), and (ii) applying and distributing the proceeds of such 
sale, together with other funds held by the Company: (a) First, to the 
payment of all debts and liabilities of the Company; (b) second, to the 
establishments of any reserves reasonably necessary to provide for any 
contingent recourse liabilities and obligations; (c) third, to the 
Members in accordance with Exhibit D (Distributions) of the CT Plan; 
and (d) fourth, to the Members as determined by a majority of Members.
    The procedures for the liquidation and distribution of assets 
following the dissolution of the LLC are similar to those existing in 
other NMS plans.\848\ The Commission received no comments addressing 
this provision and is

[[Page 44203]]

approving Article XI, Section 11.2 of the CT Plan as proposed.
---------------------------------------------------------------------------

    \848\ See Article X, Section 10.2 of the CAT NMS Plan; Article 
IX, Section 9.2 of the OPRA Plan.
---------------------------------------------------------------------------

(c) Termination
    Article XI, Section 11.3 of the CT Plan sets forth termination 
procedures following the dissolution of the LLC. Specifically, Section 
11.3 provides that each Member will receive a statement prepared by the 
independent accountants retained on behalf of the Company that sets 
forth (i) the assets and liabilities of the Company as of the date of 
the final distribution of Company's assets under Section 10.2 of the CT 
Plan and (ii) the net profit or net loss for the fiscal period ending 
on such date. The CT Plan further specifies that, upon compliance with 
the distribution process set forth in Section 10.2 of the CT Plan, the 
Members will cease to be such, and the liquidating trustee is required 
to execute, acknowledge, and file a certificate of cancellation of the 
Company.\849\ Finally, the CT Plan provides that upon completion of the 
dissolution, winding up, liquidation, and distribution of the 
liquidation proceeds, the Company will terminate.\850\
---------------------------------------------------------------------------

    \849\ See Article XI, Section 11.3 of the CT Plan.
    \850\ See id.
---------------------------------------------------------------------------

    The termination procedures following the dissolution of the LLC are 
similar to those existing in other NMS plans,\851\ and the Commission 
received no comments addressing this provision. The Commission has, 
however, identified two incorrect cross references in Article XI, 
Section 11.3. In particular, Section 11.3 incorrectly cites to Section 
10.2 (Tax Status; Returns) instead of Section 11.2 (Liquidation and 
Distribution) of the CT Plan when describing provisions related to the 
liquidation of the LLC. The Commission is therefore modifying Section 
11.3 to correct these incorrect cross references. For the reasons 
discussed above, the Commission is approving Article XI, Section 11.3 
as modified.
---------------------------------------------------------------------------

    \851\ See Article X, Section 10.3 of the CAT NMS Plan; Article 
IX, Section 9.3 of the OPRA Plan.
---------------------------------------------------------------------------

11. Exculpation and Indemnification
(a) Exculpation and Indemnification
    Article XII, Section 12.1 and Section 12.2 of the CT Plan provide 
broad liability, exculpation, and indemnification protections for SROs 
and SRO Voting Representatives. Specifically, Section 12.1 provides 
that the liability of each Member and each individual currently or 
formerly serving as an SRO Voting Representative (each, an ``Exculpated 
Party'') will be limited to the maximum extent permitted by law ``for 
any loss suffered in connection with a breach of any fiduciary duty, 
errors in judgment or other acts or omissions by such Exculpated 
Party.'' The provision explicitly does not extend to ``Non-Exculpated 
Items''--acts or omissions that involve ``gross negligence, willful 
misconduct or a knowing violation of law'' or ``losses resulting from 
such Exculpated Party's Transaction Reports, Quotation Information or 
other information reported to the Processors by such Exculpated 
Party.'' Moreover, Section 12.1(b), among other things, explicitly 
permits an Exculpated Party, in making decisions authorized to be in 
its sole discretion, to ``consider such interests and factors as it 
desires (including its own interests)'' and asserts that the Exculpated 
Party ``shall have no duty or obligation (fiduciary or otherwise) to 
give any consideration to any interest of or factors affecting the 
Company or the Members.''
    Section 12.2 provides indemnification to SROs and SRO Voting 
Representatives (``Company Indemnified Party'') for losses from being a 
Party to a Proceeding, so long as the CT Plan is not a claimant against 
the Company Indemnified Party and the claim does not involve Non-
Exculpated Items. Paragraph (c) of Section 12.2 expressly acknowledges 
that ``indemnification provided in this Article XII could involve 
indemnification for negligence or under theories of strict liability.'' 
Paragraph (d) of Section 12.2 makes clear that the CT Plan is primarily 
responsible for ``advancement of expenses, or for providing insurance'' 
for any Company Indemnified Party's claim for indemnification.
    In the Notice, the Commission sought comment on whether the 
indemnification and exculpation provisions of the CT Plan should also 
cover Non-SRO Voting Representatives.\852\ In response, the Commission 
received several comments addressing this issue. Most commenters 
addressing the issue argue that the CT Plan should extend liability 
protection and indemnification coverage to Non-SRO Voting 
Representatives acting in their role on the Operating Committee. One 
commenter recommends that the CT Plan should state that no liability 
can be imputed to Non-SRO Voting Representatives acting in their role 
on the Operating Committee and that Non-SRO Voting Representatives 
would be entitled to indemnification against any claims made against 
them related to their role on the Operating Committee.\853\ Other 
commenters suggest that the exculpation and indemnification protections 
under Article XII of the CT Plan be extended to non-SRO 
representatives.\854\ One of these commenters states that it is 
``customary and widespread in corporate situations to minimize 
potential personal liability for the directors of a company'' and that 
Non-SRO Voting Representatives ``may be equally exposed to the risk of 
litigation and penalties.'' \855\ Further, this commenter is concerned 
that without comparable protection from liabilities, ``the CT Plan may 
find it difficult to attract and retain qualified representatives, 
decreasing the pool of interested candidates,'' \856\ and Non-SRO 
Voting Representatives may potentially be hindered from freely 
providing input on CT Plan matters.\857\
---------------------------------------------------------------------------

    \852\ See Notice, supra note 3, 85 FR at 64572 (Question 49).
    \853\ See SIFMA Letter I, supra note 30, at 5; SIFMA Letter II, 
supra note 30, at 2.
    \854\ See BlackRock Letter I, supra note 247, at 3; RBC Letter, 
supra note 30, at 10; ICI Letter I, supra note 31, at 6 (``these 
protections are typically provided for the members of any governing 
body'').
    \855\ BlackRock Letter I, supra note 247, at 3-4.
    \856\ Id. at 4.
    \857\ See id.
---------------------------------------------------------------------------

    One commenter states that, since Non-SRO Voting Representatives are 
individuals, their ability to shoulder liability is of concern.\858\ 
This commenter also does not believe that the rights and 
responsibilities of an Exculpated Party under Article XII, Section 
12.1(b) are consistent with the SROs' obligations with respect to the 
operation of an NMS plan.\859\
---------------------------------------------------------------------------

    \858\ See Data Boiler Letter I, supra note 31, at 5, 46.
    \859\ See id. at 46, 49.
---------------------------------------------------------------------------

    One commenter states that the liability carve-out for SROs is too 
broad and supports a limitation on liability for SROs carrying out 
``quintessentially regulatory functions'' of the CT Plan.\860\ This 
commenter argues that it is neither appropriate nor warranted for SROs 
to have a ``blanket limitation on liability for non-regulatory 
activities.'' \861\ This commenter contends that the vast majority of 
activities carried out by the SROs--from technology services, to 
operations, to maintenance--would not involve ``quintessentially 
regulatory functions'' and SRO liability should not be limited for 
those functions.\862\ Another commenter argues that the SROs should be 
precluded from receiving any special liability protections.\863\ One 
commenter states the Plan ``incentivizes the SROs to run the Plan and 
the LLC poorly to the

[[Page 44204]]

extent they believe it is in their self-interest'' and there is ``no 
downside for an SRO to act in its self-interest contrary to the Plan as 
they are exculpated in taking any such action.'' \864\
---------------------------------------------------------------------------

    \860\ Virtu Letter, supra note 30, at 3.
    \861\ Id.
    \862\ Id.
    \863\ See RBC Letter, supra note 30, at 9.
    \864\ MFA Letter, supra note 30, at 3.
---------------------------------------------------------------------------

    Other commenters support the proposed provisions, arguing that the 
limitation of liability provisions are standard protections for members 
in LLC agreements.\865\ One of these commenters cites the OPRA and CAT 
LLC Plans as precedent for extending liability protection and 
indemnification coverage only to the SROs that created the LLC.\866\ 
These commenters argue that Non-SRO Voting Representatives do not need 
the same liability protections because they are not Members of the 
LLC.\867\
---------------------------------------------------------------------------

    \865\ See Nasdaq Letter I, supra note 20, at 15-16; NYSE Letter 
I, supra note 18, at 37-38.
    \866\ See NYSE Letter I, supra note 18, at 37-38.
    \867\ See id. at 38.
---------------------------------------------------------------------------

    For several reasons, the Commission disagrees with the argument 
that Non-SRO Voting Representatives do not need the liability, 
exculpation, and indemnification protections that the CT Plan provides 
solely to SROs.\868\ First, the Commission believes that the Non-SRO 
Voting Representatives could have liability exposure arising from their 
service as voting members of the Operating Committee, for example, in 
the case of a third-party civil action for damages against the CT Plan, 
which might, among other things, require Non-SRO Voting Representatives 
to engage the services of counsel. Thus, the Commission does not agree 
that liability exposure inures to the SROs solely as a result of their 
status as Members of the LLC. Instead, the Commission believes that the 
risk of liability also arises from the actions taken by the Operating 
Committee in its governance of the CT Plan and would, therefore, 
potentially affect both the SROs and the Non-SRO Voting Representatives 
of the Operating Committee.
---------------------------------------------------------------------------

    \868\ See Nasdaq Letter I, supra note 20, at 15-16; NYSE Letter 
I, supra note 18, at 37-38.
---------------------------------------------------------------------------

    Second, the Commission believes that the commenter's reliance on 
the OPRA Plan and the CAT NMS Plan as precedent for extending liability 
protection and indemnification coverage only to the SROs that created 
the LLC is misplaced.\869\ While the OPRA Plan and the CAT NMS Plan do, 
in fact, provide such protection only to the SROs as Members of the 
LLC, the comparison is inapt because neither of those NMS plans has any 
non-SRO voting members of its operating committee. Therefore, neither 
the OPRA Plan nor the CAT NMS Plan has had to address the issue in 
question.
---------------------------------------------------------------------------

    \869\ See NYSE Letter I, supra note 18, at 37-38.
---------------------------------------------------------------------------

    Third, the Commission shares the commenter's view that it is 
customary to provide such protection to members of governing 
boards.\870\ More importantly, the Commission agrees that the failure 
to provide liability, exculpation, and indemnification protections to 
the Non-SRO Voting Representatives could make it more difficult to 
attract qualified individuals to serve in the capacity of voting 
members of the Operating Committee and, further, could hinder such 
individuals' meaningful participation, for example by hindering their 
ability to freely share ideas if they choose to serve. The Commission 
believes that this potential result would be inconsistent with the 
objectives of the Governance Order to broaden participation in Plan 
governance to addressing the core problem described above.\871\ 
Moreover, Delaware law permits non-Members of an LLC agreement to 
receive such protections. Specifically, Section 18-108 of the Delaware 
Act provides that subject to the standards and restrictions, if any, 
set forth in its LLC agreement, ``a limited liability company may, and 
shall have the power to, indemnify and hold harmless any member or 
manager or other person from and against any and all claims and demands 
whatsoever.'' (Emphasis added.) Consequently, Section 18-108 of the 
Delaware Act provides flexibility to the contracting parties to specify 
the rights and obligations with respect to indemnification provisions 
in an LLC agreement.
---------------------------------------------------------------------------

    \870\ See BlackRock Letter I, supra note 247, at 3-4.
    \871\ See Governance Order, supra note 8, 85 FR at 28714-20.
---------------------------------------------------------------------------

    Accordingly, the Commission believes that, to promote the 
objectives of the Governance Order to broaden participation in Plan 
governance,\872\ the CT Plan should explicitly provide the same 
protections to Non-SRO Voting Representatives that Article XII, Section 
12.1 and Section 12.2 of the CT Plan currently provide only to SROs as 
Members of the LLC. To that end, the Commission is modifying several 
proposed definitions to explicitly include Non-SRO Voting 
Representatives. First, the Commission is modifying Article I, Section 
1.1(k) of the CT Plan to include Non-SRO Voting Representatives in the 
definition of ``Company Indemnified Party.'' Next, the Commission is 
modifying Article XII, Section 12.1 of the CT Plan to include Non-SRO 
Voting Representatives in the definition of ``Exculpated Party.'' In 
addition, the Commission is modifying Section 1.1(eee) of Article I of 
the CT Plan to include Non-SRO Voting Representatives in the definition 
of the term, ``Party to a Proceeding.'' The Commission finds that each 
of these modifications is appropriate to provide Non-SRO Voting 
Representatives with the same indemnification protections that are 
available to SRO Voting Representatives, because the modifications will 
remove a significant disincentive for persons to serve as Non-SRO 
Voting Representatives, thereby helping to support participation on the 
Operating Committee of a broad array of market participants. For these 
reasons, the Commission is approving Article I, Section 1.1(k), as 
modified; Article I, Section 1.1(eee), as modified; and Article XII, 
Section 12.1, as modified.
---------------------------------------------------------------------------

    \872\ See id.
---------------------------------------------------------------------------

    Finally, with respect to paragraph (b) of Section 12.1, which (1) 
explicitly permits an Exculpated Party, in making decisions authorized 
to be in its sole discretion, to consider its own interests and (2) 
asserts that the Exculpated Party has ``no duty or obligation 
(fiduciary or otherwise) to give any consideration to any interest of 
or factors affecting the Company or the Members,'' the Commission 
reiterates its view, expressed above and added by the Commission to the 
Recitals of the CT Plan, that ``no provision of this Agreement shall be 
construed to limit or diminish the obligations and duties of the 
Members as self-regulatory organizations under the federal securities 
laws and the regulations thereunder.'' \873\
---------------------------------------------------------------------------

    \873\ See supra Section II.C.1(b) (discussing paragraph (g) of 
the Recitals of the CT Plan).
---------------------------------------------------------------------------

    Because the modified definition of ``Company Indemnified Party'' in 
Section 1.1(k) of the CT Plan expands the indemnification provisions of 
Section 12.2 to include Non-SRO Voting Representatives,\874\ no further 
modification to Section 12.2 is necessary, and the Commission is 
approving Section 12.2 of the CT Plan as proposed.
---------------------------------------------------------------------------

    \874\ See supra discussion in Section II.C.2.
---------------------------------------------------------------------------

(b) Advance Payment
    Article XII, Section 12.3 of the CT Plan provides for the payment 
of reasonable expenses incurred by a Company Indemnified Party who is a 
named defendant or respondent to a Proceeding, except that such Company 
Indemnified Party must repay such amount if it is ultimately determined 
that he or she is not entitled to indemnification. The Commission

[[Page 44205]]

received no comment on this provision. As discussed above, the 
Commission is modifying Article I, Section 1.1(k) of the CT Plan to 
define the term, ``Company Indemnified Person,'' to include Non-SRO 
Voting Representatives. This provision is approved as proposed.
(c) Appearance as a Witnesses
    Article XII, Section 12.4 of the CT Plan provides for the payment 
or reimbursement of reasonable out-of-pocket expenses incurred by a 
Company Indemnified Party in connection with appearance as a witness or 
other participation in a Proceeding at a time when the Company 
Indemnified Party is not a named defendant or respondent in the 
Proceeding. The Commission received no comment on this provision. As 
the Commission is modifying Article I, Section 1.1(k) of the CT Plan to 
define the term, ``Company Indemnified Person,'' to include Non-SRO 
Voting Representatives, as discussed above, Section 12.4 is approved as 
proposed.
(d) Nonexclusivity of Rights
    Article XII, Section 12.5 of the CT Plan provides that the right to 
indemnification and the advancement and payment of expenses conferred 
in Article XII shall not be exclusive of any other right a Company 
Indemnified Person may have or hereafter acquire. The Commission 
received no comment on this Section 12.5. As the Commission is 
modifying the CT Plan to define the term, ``Company Indemnified 
Person,'' to include Non-SRO Voting Representatives, as discussed 
above, this provision is approved as proposed.
12. Miscellaneous Provisions
(a) Expenses
    Article XIII, Section 13.1 of the CT Plan governs the payment of 
expenses by the CT Plan and requires that all such expenses must be 
paid before any allocations may be made to the Members. Section 13.1 
further provides that Members will be responsible for reserves for 
contingent liabilities and that each Member shall be responsible for 
the costs of any technical enhancements ``made at its request and 
solely for its use,'' unless another Member subsequently makes use of 
the enhancement. The Commission received no comment on Section 13.1 and 
is approving the provision as proposed.
(b) Entire Agreement
    Article XIII, Section 13.2 of the CT plan provides that the CT Plan 
will supersede the existing Equity Data Plans and all other prior 
agreements with respect to consolidated equity market data. The 
Commission received no comment on Section 13.2 and, because the 
provision is consistent with the requirements of the Commission's 
Governance Order,\875\ is approving the provision as proposed.
---------------------------------------------------------------------------

    \875\ See Governance Order, supra note 8, 85 FR at 28729 (``The 
New Consolidated Data Plan shall provide for the orderly transition 
of functions and responsibilities from the three existing Equity 
Data Plans and shall provide that dissemination of, and fees for, 
SIP data will continue to be governed by the provisions of the 
Equity Data Plans until the New Consolidated Data Plan is ready to 
assume responsibility for the dissemination of SIP data and fees of 
the New Consolidated Data Plan have become effective.'').
---------------------------------------------------------------------------

(c) Notices and Addresses
    Article XIII, Section 13.3 of the CT Plan provides that all 
communications must be written and sets forth the permissible methods 
of delivery. The Commission received no comment on Section 13.3 and is 
approving the provision as proposed.
(d) Governing Law
    Article XIII, Section 13.4 of the CT Plan provides that Delaware 
law will be the governing law for the CT Plan. Specifically, the CT 
Plan states that the Agreement will be ``governed by and construed in 
accordance with the Delaware Act and internal laws and decisions of the 
State of Delaware, without regard to the conflicts of laws principles 
thereof'' but will also be subject to ``any applicable provisions of 
the Act and any rules and regulations promulgated thereunder.'' Section 
13.4 further states that, ``[f]or the avoidance of doubt, nothing in 
this Agreement waives any protection or limitation of liability 
afforded any of the Members or any of their Affiliates by common law, 
including the doctrines of self-regulatory organization immunity and 
federal preemption.''
    In the Notice, the Commission sought comment on this 
provision.\876\ The Commission received one comment on Section 13.4. 
The commenter asks whether the language regarding the limitation of 
liability may be inconsistent with the exculpation and indemnification 
provisions of Article XII.\877\ The Commission does not believe that 
the provisions of Section 13.4 are inconsistent either with the 
provisions of Article XII or with federal securities law. Article XII 
of the CT Plan speaks to the agreed exculpation and indemnification 
provisions of the LLC Agreement, but, as the Commission has discussed 
above, the provisions of the CT Plan cannot limit or diminish the 
obligations and duties of the Members as self-regulatory organizations 
under the federal securities laws and the regulations thereunder.\878\ 
Similarly, the general reference in Section 13.4 to the common law, 
including what the CT Plan describes as the ``doctrines of self-
regulatory organization immunity and federal preemption,'' cannot 
enlarge or otherwise modify any case law that defines the scope of SRO 
liability.\879\ For the reasons discussed above, the Commission is 
approving this provision, as proposed.
---------------------------------------------------------------------------

    \876\ See Notice, supra note 3, 85 FR at 64573 (Question 51).
    \877\ See Data Boiler Letter I, supra note 31, at 5, 46.
    \878\ See supra Section II.C.1(b).
    \879\ With respect to the judicial doctrine of regulatory 
immunity, the Commission has taken the position that immunity from 
suit ``is properly afforded to the exchanges when engaged in their 
traditional self-regulatory functions--where the exchanges act as 
regulators of their members,'' including ``the core adjudicatory and 
prosecutorial functions that have traditionally been accorded 
absolute immunity, as well as other functions that materially relate 
to the exchanges' regulation of their members,'' but should not 
``extend to functions performed by an exchange itself in the 
operation of its own market, or to the sale of products and services 
arising out of those functions.'' Order Setting Aside Action by 
Delegated Authority and Approving a Proposed Rule Change, Securities 
Exchange Act Release No. 88008 (Jan. 21, 2020), 85 FR 4726, 4735 
(Jan. 27, 2020) (File No. SR-BatsBZX-2017-34) (citing Brief of the 
Securities and Exchange Commission, Amicus Curiae, No. 15-3057, City 
of Providence v. Bats Global Markets, Inc. (2d Cir. 2016), at 22). 
The Court of Appeals for the Second Circuit recently reached a 
similar conclusion. See City of Providence v. Bats Global Markets, 
Inc., 878 F.3d 36, 48 (2d Cir. 2017) (``When an exchange engages in 
conduct to operate its own market that is distinct from its 
oversight role, it is acting as a regulated entity--not a regulator. 
Although the latter warrants immunity, the former does not.'').
---------------------------------------------------------------------------

(e) Amendments
    Article XIII, Section 13.5 of the CT Plans governs amendments to 
the CT Plan. Paragraph (a) of Section 13.5 states that the CT Plan may 
be modified when authorized by the Operating Committee pursuant to 
Section 4.3, subject to the requirements of Section 11A of the Act and 
Rule 608 of Regulation NMS. Paragraph (b) of Section 13.5 carves out an 
exception to the general rule set forth in the preceding paragraph, 
stating, ``[n]otwithstanding Section 13.5(a), Articles IX, X, XI, and 
XII may be modified upon approval by a majority of Members; provided, 
however, that Operating Committee approval pursuant to Section 4.3 will 
be required for modifications to the allocation.'' (Emphasis in 
original.) Paragraph (c) of Section 13.5 sets forth the process for 
Ministerial Amendments, in which the Chair of the Operating Committee 
may modify the CT Plan by filing an amendment with the Commission 
unilaterally, so long as 48-hours advance notice is provided to the 
Operating Committee. Paragraph (d) of

[[Page 44206]]

Section 13.5 defines the term, ``Ministerial Amendment.''
    In the Notice, the Commission sought comment on whether amendments 
to Articles IX through XII of the CT Plan should be subject to the 
approval only of SROs, as provided for in Article XIII, Section 
13.5(b), rather than the full Operating Committee.\880\ The Commission 
received several comments in response. One commenter opposes this 
provision, stating that amendments to Articles IX (Allocations), X 
(Records and Accounting; Reports), XI (Dissolution and Termination), 
and XII (Exculpation and Indemnification) should not be subject to the 
approval only of SROs.\881\
---------------------------------------------------------------------------

    \880\ See Notice, supra note 3, 85 FR at 64573 (Question 52).
    \881\ See Data Boiler Letter I, supra note 31, at 47.
---------------------------------------------------------------------------

    Another commenter agrees, expressing the concern that the CT Plan 
gives ``nearly unfettered discretion'' to the SROs to determine what 
decisions are appropriate for the Operating Committee and requests that 
the Commission require more detail in the Plan on the activities that 
will be solely decided by SROs.\882\ This commenter states, as an 
example, that decisions related to indemnification and the selection of 
Officers are ``highly material'' to the operation of the CT Plan and as 
proposed require only a simple majority vote of the SRO 
representatives.\883\ This commenter further argues that the CT Plan 
lacks sufficient detail regarding the nature and scope of decisions 
that are ministerial versus material.\884\ Consequently, this commenter 
argues that more detail needs to be provided on the types of decisions 
that would fall under ``the operation of the CT Plan as an LLC'' and 
``modifications to the LLC-related provisions of the CT Plan'' in order 
to ensure that non-SRO representatives have an opportunity to 
participate in any material decisions related to the regulatory 
operations of the CT Plan.\885\ This commenter supports a requirement 
for the Operating Committee to adopt policies and procedures 
distinguishing operational interpretations of the CT Plan from 
amendments required to be submitted to the Commission under Rule 608 of 
Regulation NMS.\886\
---------------------------------------------------------------------------

    \882\ Virtu Letter, supra note 30, at 2.
    \883\ Id.
    \884\ See id.
    \885\ See id. at 5.
    \886\ See id. at 3-4.
---------------------------------------------------------------------------

    On the other hand, one commenter states that the amendment rights 
provided to the Members by this Section are limited to provisions of 
this Agreement that affect only the economic interests of the Members 
(Articles IX and X), the protections of the Members as among themselves 
(Article XII), and the ongoing existence of the CT Plan (Article 
XI).\887\ This commenter argues that the provisions relating to the 
economic interests of the Members, exculpations and indemnification, 
and the ongoing operation of the CT Plan do not affect the 
dissemination of public information.\888\
---------------------------------------------------------------------------

    \887\ See Nasdaq Letter I, supra note 20, at 11.
    \888\ See id. at 11-12.
---------------------------------------------------------------------------

    The Commission disagrees with the view that the amendments covered 
by Section 13.5(b) do not affect the dissemination of public 
information and thus may be appropriately decided by the SROs alone, 
without Non-SRO Voting Representative participation through Operating 
Committee consideration. Rather, the Commission believes that several 
of the provisions that the SROs propose should be subject to amendment 
without a filing with the Commission materially affect the Non-SRO 
Voting Representatives that the Commission believes must be full 
members of the CT Plan's Operating Committee. For example, for the 
reasons set forth above, the Commission finds that the exculpation and 
indemnification provisions of Article XII must be extended not only to 
the SROs, but to the Non-SRO Voting Representatives on the Operating 
Committee as well. As another example, Article X, Section 10.1 of the 
CT Plan sets forth the Operating Committee's responsibilities with 
respect to the accounting procedures and records of the CT Plan, and 
the Commission believes that it is appropriate for the Operating 
Committee, including the Non-SRO Voting Representatives, to consider 
any proposed changes to those responsibilities.
    More generally, the Commission believes that, to help ensure that 
all amendments to the CT Plan are consistent with its goals and 
purposes, as well as with the objectives of the Commission's Governance 
Order,\889\ the entire Operating Committee, rather than the SROs alone, 
should share in decision making relating to amendment of the CT Plan. 
And the Commission notes that all amendments to an NMS plan must be 
filed with the Commission pursuant to Rule 608 of Regulation NMS.\890\
---------------------------------------------------------------------------

    \889\ See Governance Order, supra note 8, 85 FR at 28714-20.
    \890\ 17 CFR 242.608. In fact, neither the CAT NMS Plan nor the 
OPRA Plan contains a provision permitting the SROs to amend the LLC 
agreement for the plan outside of the Rule 608 process.
---------------------------------------------------------------------------

    Accordingly, the Commission is modifying the CT Plan by deleting 
proposed paragraph (b) of Section 13.5 to remove the ability of the SRO 
members of the LLC to make amendments to certain provisions of the CT 
Plan without an augmented majority vote of the Operating Committee and 
to reiterate that all amendments to the CT Plan must be filed with the 
Commission under Rule 608 of Regulation NMS. To be consistent, the 
Commission is also modifying subparagraph (v) of renumbered Section 
13.5(c) to delete the language that reads, ``or upon approval by a 
majority of the Members pursuant to Section 13.5(b), as applicable.'' 
The Commission finds that these modifications to Article XIII, Section 
13.5 of the CT Plan are appropriate because they will help to ensure 
that the Operating Committee, as a whole, participates in all aspects 
of the governance of the CT Plan and that all amendments to the CT Plan 
are filed with the Commission as required by Rule 608 of Regulation 
NMS.
    Finally, the Commission believes that the advance notice provided 
to the Operating Committee relating to any Ministerial Amendments filed 
with the Commission by the Chair of the Operating Committee pursuant to 
paragraph (c) of Section 13.5 should be provided in writing. Written 
notification should help to ensure that all members of the Operating 
Committee of the CT Plan are adequately informed in a timely manner 
regarding even ministerial actions taken on behalf of the Operating 
Committee. Consequently, the Commission is modifying the text of 
renumbered Section 13.5(b) of Article XIII to require that advance 
notice to the Operating Committee be in writing, and finds that this 
modification is appropriate because it will help to ensure informed 
governance of the CT Plan. For the reasons above, the Commission is 
approving Section 13.5, as modified.
(f) Successors
    Article XIII, Section 13.6 of the CT Plan provides that the CT Plan 
shall bind and inure ``to the benefit of the Members and their 
respective legal representatives and successors.'' The Commission 
received no comment on Section 13.6, and is approving the provision as 
proposed.
(g) Limitation on Rights of Others
    Article XIII, Section 13.7 of the CT Plan provides that the CT Plan 
shall not be enforceable by any creditor of the CT Plan and shall not 
create any legal rights, remedies, or claims. The Commission received 
no comment on Section 13.7, and is approving the provision as proposed.

[[Page 44207]]

(h) Counterparts
    Article XIII, Section 13.8 of the CT Plan provides that the Members 
to the CT Plan may execute the CT Plan individually in ``any number of 
counterparts.'' The Commission received no comment on Section 13.8 and, 
because this is the manner in which NMS plans are typically executed, 
the Commission is approving the provision as proposed.
(i) Headings
    Article XIII, Section 13.9 of the CT Plan provides that CT Plan 
headings are for ``reference purposes only and shall not be deemed to 
be a part of this Agreement or to affect the meaning or interpretation 
of any provisions of this Agreement.'' The Commission received no 
comment on Section 13.9 and is approving the provision as proposed.
(j) Validity and Severability
    Article XIII, Section 13.10 of the CT Plan provides that any 
determination that any provision of the CT Plan is invalid or 
unenforceable shall not affect the validity or enforceability of any 
other provisions of the CT Plan, all of which shall remain in full 
force and effect. The Commission received no comment on Section 13.10, 
and is approving the provision as proposed.
(k) Statutory References
    Article XIII, Section 13.11 of the CT Plan provides that the 
references in the CT Plan to a particular statute or regulation, or a 
provision thereof, ``shall be deemed to refer to such statute or 
regulation, or provision thereof, or to any similar or superseding 
statute or regulation, or provision thereof, as is from time to time in 
effect.'' The Commission received no comment on Section 13.11, and is 
approving the provision as proposed.
(l) Modifications To Be in Writing
    Article XIII, Section 13.12 of the CT Plan provides that any 
amendment, modification, or alteration of the CT Plan must in writing 
and must be adopted in accordance with the provisions of Section 13.5. 
The Commission received no comment on Section 13.12 and is approving 
the provision as proposed.

III. Conclusion

    For the reasons discussed above, the Commission finds that the CT 
Plan, as modified, is consistent with the requirements of Section 11A 
of the Act,\891\ and Rule 608 thereunder,\892\ that the provisions of 
an NMS plan be necessary or appropriate in the public interest, for the 
protection of investors and the maintenance of fair and orderly 
markets, to remove impediments to, and perfect the mechanism of, a 
national market system, or otherwise in furtherance of the purposes of 
the Act.
---------------------------------------------------------------------------

    \891\ 15 U.S.C. 78k-1.
    \892\ 17 CFR 242.608.
---------------------------------------------------------------------------

    It is therefore ordered, that pursuant to Section 11A of the 
Act,\893\ and the rules and regulations thereunder, that the CT Plan 
(File No. 4-757), as modified, be and it hereby is approved and 
declared effective, and the Participants are authorized to act jointly 
to implement the CT Plan as a means of facilitating a national market 
system.
---------------------------------------------------------------------------

    \893\ 15 U.S.C. 78k-1.

    By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.

Attachment A

LIMITED LIABILITY COMPANY AGREEMENT

OF

CT PLAN LLC

a Delaware limited liability company

(As modified by the Commission; additions are italicized; deletions 
are [bracketed].)

    This LIMITED LIABILITY COMPANY AGREEMENT (this ``Agreement'') 
dated as of the [] day of [], [] is made and 
entered into by and among the parties identified in Exhibit A, as 
Exhibit A may be amended from time to time (the ``Members''), which 
are the members of CT Plan LLC, a Delaware limited liability company 
(the ``Company''). The Members shall constitute the ``members'' (as 
that term is defined in the Delaware Act) of the Company.

RECITALS

    (a) On May 6, 2020, the Commission ordered the Members to act 
jointly in developing and filing with the Commission by August 11, 
2020, a proposed new single national market system (``NMS'') plan to 
govern the public dissemination of real-time consolidated equity 
market data for NMS stocks. See Order Directing the Exchanges and 
the Financial Industry Regulatory Authority to Submit a New National 
Market System Plan Regarding Consolidated Equity Market Data, 
Release No. 34-88827 (May 6, 2020), 85 FR 28702 (May 13, 2020) (File 
No. 4-757) (the ``Order''). This Agreement is being filed with the 
Commission, as directed in the Order.
    (b) This Agreement will become effective [after the last of the 
following has occurred (the ``Effective Date''):
    (i) this Agreement is approved by the Commission pursuant to 
Rule 608 of Regulation NMS] as an NMS plan governing the public 
dissemination of real-time consolidated market data for Eligible 
Securities (the ``Effective Date'') on the date that it is approved 
by the Commission pursuant to Rule 608 of Regulation NMS. Within ten 
(10) business days of the Effective Date, [; and
    (ii) ]the Members [have]shall form[ed] the Company as a limited 
liability company pursuant to the Delaware Act by filing a 
certificate of formation (the ``Certificate'') with the Delaware 
Secretary of State.
    (c) [Following the Effective Date, t]This Agreement will become 
operative as an NMS Plan that governs the public dissemination of 
real-time consolidated equity market data for Eligible Securities 
[on the first day of the month that is at least 90 days after the 
last of the following have occurred]within twelve months of the 
Effective Date (the ``Operative Date'').[:]
    (d) In support of ensuring that the CT Plan is fully operational 
by the Operative Date, the following actions shall be completed 
within the specified periods:
    (i) Within two months of the Effective Date, the SRO Voting 
Representatives and Non-SRO Voting Representatives of the Operating 
Committee shall be[have been] determined pursuant to Section 4.2 of 
the Agreement;
    (ii) [Fees have been established by]Within four months of the 
Effective Date, the Operating Committee[, are effective] shall file 
with the Commission proposed fees with respect to the existing 
exclusive SIP model as an amendment to this Agreement pursuant to 
Rule 608 of Regulation NMS[, and are ready to be implemented on the 
Operative Date];
    (iii) Within eight months of the Effective Date, the Operating 
Committee shall enter[Company has entered] into an agreement with 
the Processors currently performing under the CQ Plan, CTA Plan, and 
UTP Plan;
    (iv) Within eight months of the Effective Date, the Operating 
Committee shall enter[Company has entered] into an agreement with an 
Administrator selected pursuant to Section 6.[3]4 of this Agreement 
and such Administrator [has completed the]shall prepare to 
transition from prior Administrators under the CQ Plan, CTA Plan, 
and UTP Plan such that, before the Operative Date, it is able to 
provide services under the Administrative Services Agreement, as 
determined by the Operating Committee pursuant to Section 4.3 of 
this Agreement, including that (1) new contracts between the Company 
and Vendors and the Company and Subscribers have been finalized such 
that all Vendors and Subscribers under the CQ Plan, CTA Plan, and 
UTP Plan are ready to transition to such new contracts[ by the 
Operative Date], (2) the Administrator has in place a system to 
administer Distributions, and (3) the Administrator has in place a 
system to administer Fees; [and]
    (v) Before the Operative Date, the Operating Committee [and, if 
applicable, the Commission, have approved all]will be required to 
ensure that the Administrator and the Processors have developed, 
implemented, and suitably tested the systems necessary with respect 
to the existing exclusive SIP model--including dissemination 
systems, billing and audit systems, and appropriate contracts with 
Vendors and Subscribers--and, if applicable, the Operating Committee 
has expeditiously filed any necessary policies and procedures [that 
are necessary or appropriate for the

[[Page 44208]]

operation of the Company ]with the Commission; and
    (vi) Beginning three months after the Effective Date, and 
continuing every three months thereafter until the Operative Date, 
the Operating Committee shall provide a written report to the 
Commission, and shall make that report publicly available, on the 
actions undertaken and progress made toward completing each of the 
actions listed above in this subsection (d).
    [(d)](e) Until the Operative Date, the Members will continue to 
operate pursuant to the CQ Plan, CTA Plan, and UTP Plan with respect 
to the public dissemination of real-time consolidated equity market 
data for Eligible Securities rather than this Agreement.
    [(e)](f) As of the Operative Date, the Members shall conduct, 
through the Company, the Processor and Administrator functions 
related to the public dissemination of real-time consolidated equity 
market data for Eligible Securities required by the Commission to be 
performed by the Members under the Exchange Act.
    [(f)](g) It is understood and agreed that, in performing their 
obligations and duties under this Agreement, the Members are 
performing and discharging functions and responsibilities related to 
the operation of the national market system for and on behalf of the 
Members in their capacities as self-regulatory organizations, as 
required under the Section 11A of the Exchange Act, and pursuant to 
Rule 603(b) of Regulation NMS thereunder. It is further understood 
and agreed that this Agreement and the operations of the Company 
shall be subject to ongoing oversight by the Commission. No 
provision of this Agreement shall be construed to limit or diminish 
the obligations and duties of the Members as self-regulatory 
organizations under the federal securities laws and the regulations 
thereunder.

Article I.

DEFINITIONS

Section 1.1 Definitions.

    As used throughout this Agreement and the Exhibits:
    (a) ``Administrator'' means the Person selected by the Company 
to perform the administrative functions described in this Agreement 
pursuant to the Administrative Services Agreement.
    (b) ``Advisory Committee Member'' means an individual selected 
pursuant to Section III(e)(ii)(A) of the CTA Plan and Section 
IV(E)(b)(i) of the UTP Plan to be a member of the Advisory 
Committees of the CTA Plan and UTP Plan.
    (c) ``Affiliate'' means, as to any Person, any other Person 
that, directly or indirectly, Controls, is Controlled by, or is 
under common Control with such Person. Affiliate or Affiliated, when 
used as an adjective, shall have a correlative meaning.
    (d) ``Agent'' means, for purposes of Exhibit C, agents of the 
Operating Committee, a Member, the Administrator, and the 
Processors, including, but not limited to, attorneys, auditors, 
advisors, accountants, contractors or subcontractors.
    (e) ``Applicable Law'' means all applicable provisions of (a) 
constitutions, treaties, statutes, laws (including the common law), 
rules, regulations, decrees, ordinances, codes, proclamations, 
declarations or orders of any Governmental Authority; (b) any 
consents or approvals of any Governmental Authority; and (c) any 
orders, decisions, advisory or interpretative opinions, injunctions, 
judgments, awards, decrees of, or agreements with, any Governmental 
Authority.
    (f) ``Best Bid and Offer'' has the meaning ascribed to the term 
``best bid and best offer'' by Rule 600(b)(8) of Regulation NMS.
    (g) ``Capital Contributions'' means any cash, cash equivalents, 
or other property that a Member contributes to the Company with 
respect to its Membership Interest.
    (h) ``Chair'' shall mean the individual elected pursuant to 
Section 4.4(e).
    (i) ``Code'' means the Internal Revenue Code of 1986, as 
amended.
    (j) ``Commission'' or ``SEC'' means the U.S. Securities and 
Exchange Commission.
    (k) ``Company Indemnified Party'' means a Person, and any other 
Person of whom such Person is the legal representative, that is or 
was a Member[ or], an SRO Voting Representative, or a Non-SRO Voting 
Representative.
    (l) ``Confidential Information'' means, except to the extent 
covered by the definitions for Restricted Information, Highly 
Confidential Information, or Public Information: (i) Any non-public 
data or information designated as Confidential by the Operating 
Committee pursuant to Section 4.3; (ii) any document generated by a 
Member or Non-SRO Voting Representative and designated by that 
Member or Non-SRO Voting Representative as Confidential; and (iii) 
the individual views and statements of Covered Persons and SEC staff 
disclosed during a meeting of the Operating Committee or any 
subcommittees thereunder.
    (m) ``Control'' means, with respect to any Person, the 
possession, directly or indirectly, of the power to direct or cause 
the direction of the management and policies of such Person, whether 
through the ownership of voting securities (or other ownership 
interest), by contract or otherwise.
    (n) ``Covered Persons'' means representatives of the Members 
(including the SRO Voting Representative, alternate SRO Voting 
Representative, and Member Observers), the Non-SRO Voting 
Representatives, SRO Applicants, SRO Applicant Observers, the 
Administrator, and the Processors; A[a]ffiliates, employees, and 
Agents of the Operating Committee, a Member, the Administrator, and 
the Processors; and any third parties invited to attend meetings of 
the Operating Committee or subcommittees[; and the employers of Non-
SRO Voting Representatives]. Covered Persons do not include staff of 
the SEC.
    (o) ``CQ Plan'' means the Restated CQ Plan.
    (p) ``CT Feeds'' means the CT Quote Data Feed(s) and the CT 
Trade Data Feed(s).
    (q) ``CT Quote Data Feed(s)'' means the service(s) that provides 
Vendors and Subscribers with (i) National Best Bids and Offers and 
their sizes and the Members' identifiers providing the National Best 
Bids and Offers; (ii) each Member's Best Bids and Offers and their 
sizes and the Member's identifier; and (iii) in the case of FINRA, 
the identifier of the FINRA Participant(s) that constitute(s) 
FINRA's Best Bids and Offers, in each case for Eligible Securities.
    (r) ``CT Trade Data Feed(s)'' means the service(s) that provides 
Vendors and Subscribers with Transaction Reports for Eligible 
Securities.
    (s) ``CTA Plan'' means the Second Restatement of the CTA Plan.
    (t) ``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 Processors.
    (u) ``Delaware Act'' means the Delaware Limited Liability 
Company Act, Title 6, Chapter 18, Sec. Sec.  18-101, et seq., and 
any successor statute, as amended.
    (v) ``Distribution'' means a distribution to the Members of 
revenues of the Company under this Agreement pursuant to Section 8.3 
and Exhibit D of the Agreement.
    (w) ``Eligible Security'' means (i) any equity security, as 
defined in Section 3(a)(11) of the Exchange Act, or (ii) a security 
that trades like an equity security, in each case that is listed on 
a national securities exchange.
    (x) ``ET'' means Eastern Time.
    (y) ``Exchange Act'' means the Securities Exchange Act of 1934, 
as amended.
    (z) ``Executive Session'' means a meeting of the Operating 
Committee pursuant to Section 4.4(g), which includes SRO Voting 
Representatives, Member Observers, SEC Staff, and other persons as 
deemed appropriate by majority vote of the SRO Voting 
Representatives.
    (aa) ``Extraordinary Market Activity'' means a disruption or 
malfunction of any electronic quotation, communication, reporting, 
or execution system operated by, or linked to, the Processors or a 
Trading Center or a member of such Trading Center that has a severe 
and continuing negative impact, on a market-wide basis, on quoting, 
order, or trading activity or on the availability of market 
information necessary to maintain a fair and orderly market. For 
purposes of this definition, a severe and continuing negative impact 
on quoting, order, or trading activity includes (i) a series of 
quotes, orders, or transactions at prices substantially unrelated to 
the current market for the security or securities; (ii) duplicative 
or erroneous quoting, order, trade reporting, or other related 
message traffic between one or more Trading Centers or their 
members; or (iii) the unavailability of quoting, order, transaction 
information, or regulatory messages for a sustained period.
    (bb) ``Fees'' means fees charged to Vendors and Subscribers for 
Transaction Reports and Quotation Information in Eligible 
Securities.
    (cc) ``Final Decision of the Operating Committee'' means an 
action or inaction of the Operating Committee as a result of the 
vote of the Operating Committee, but will not include the individual 
votes of a Voting Representative.
    (dd) ``FINRA'' means the Financial Industry Regulatory 
Authority, Inc.
    (ee) ``FINRA Participant'' means a FINRA member that utilizes 
the facilities of FINRA pursuant to applicable FINRA rules.

[[Page 44209]]

    (ff) ``Fiscal Year'' means the fiscal year of the Company 
adopted pursuant to Section 10.1(a) of this Agreement.
    (gg) ``GAAP'' means United States generally accepted accounting 
principles in effect from time to time, consistently applied.
    (hh) ``Governmental Authority'' means (a) the U.S. federal 
government or government of any state of the U.S., (b) any 
instrumentality or agency of any such government, (c) any other 
individual, entity or organization authorized by law to perform any 
executive, legislative, judicial, regulatory, administrative, 
military or police functions of any such government, or (d) any 
intergovernmental organization of U.S. entities, but ``Governmental 
Authority'' excludes any self-regulatory organization registered 
with the Commission.
    (ii) ``Highly Confidential Information'' means any highly 
sensitive Member-specific, customer-specific, individual-specific, 
or otherwise sensitive information relating to the Operating 
Committee, Members, Vendors, Subscribers, or customers that is not 
otherwise Restricted Information. Highly Confidential Information 
includes: The Company's contract negotiations with the Processors or 
Administrator; personnel matters that affect the employees of SROs 
or the Company; information concerning the intellectual property of 
Members or customers; and any document subject to the Attorney-
Client Privilege or Work Product Doctrine.
    (jj) ``Limit Up Limit Down'' means the Plan to Address 
Extraordinary Market Volatility pursuant to Rule 608 of Regulation 
NMS under the Exchange Act.
    (kk) ``Losses'' means losses, judgments, penalties (including 
excise and similar taxes and punitive damages), fines, settlements, 
and reasonable expenses (including reasonable attorneys' fees) 
actually incurred by such Company Indemnified Party as a Party to a 
Proceeding.
    (ll) ``Market'' means (i) in respect of FINRA or a national 
securities association, the facilities through which FINRA 
Participants display quotations and report transactions in Eligible 
Securities to FINRA and (ii) in respect of each national securities 
exchange, the marketplace for Eligible Securities that such exchange 
operates.
    (mm) ``Market-Wide Circuit Breaker'' means a halt in trading in 
all stocks in all Markets under the rules of a Primary Listing 
Market.
    (nn) ``Material SIP Latency'' means a delay of quotation or last 
sale price information in one or more securities between the time 
data is received by the Processors and the time the Processors 
disseminate the data, which delay the Primary Listing Market 
determines, in consultation with, and in accordance with, publicly 
disclosed guidelines established by the Operating Committee, to be 
(a) material and (b) unlikely to be resolved in the near future.
    (oo) ``Member Observer'' means any [individual,]employee of a 
Member (other than a Voting Representative), or any attorney to a 
Member, that a Member[, in its sole discretion,] determines is 
necessary in connection with such Member's compliance with its 
obligations under Rule 608(c) of Regulation NMS to attend Operating 
Committee and subcommittee meetings, provided that the designation 
of the Member Observer is consistent with the prohibition in Section 
4.10(b)(i).[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/
SUBJECT][/PREAMB][SUPLINF][HED]*[/HED][APPENDIX][HED]*[/HED]
    (pp) ``Membership Fee'' means the fee to be paid by a new Member 
pursuant to Section 3.2.
    (qq) ``Membership Interest'' means an interest in the Company 
owned by a Member.
    (rr) ``Nasdaq'' means The Nasdaq Stock Market LLC.
    (ss) ``National Best Bid and Offer'' has the meaning ascribed to 
the term ``national best bid and national best offer'' by Rule 
600(b)(43) of Regulation NMS.
    (tt) ``National securities association'' means a securities 
association that is registered under Section 15A of the Exchange 
Act.
    (uu) ``National securities exchange'' means a securities 
exchange that is registered under Section 6 of the Exchange Act.
    (vv) ``Network A Security'' means an Eligible Security for which 
NYSE is the Primary Listing Market.
    (ww) ``Network B Security'' means an Eligible Security for which 
a national securities exchange other than NYSE or Nasdaq is the 
Primary Listing Market.
    (xx) ``Network C Security'' means an Eligible Security for which 
Nasdaq is the Primary Listing Market.
    (yy) ``Non-Affiliated SRO'' means a Member that is not 
affiliated with any other Member.
    (zz) ``Non-SRO Voting Representative'' means an individual 
selected pursuant to Section 4.2(b) to serve on the Operating 
Committee.
    (aaa) ``NYSE'' means the New York Stock Exchange LLC.
    (bbb) ``Officer'' means each individual designated as an officer 
of the Company pursuant to Section 4.8.
    (ccc) ``Operating Committee'' means the committee established 
under Article IV of this Agreement, each member of which shall be 
deemed a ``manager'' (as defined in the Delaware Act) and shall be 
referred to herein as a Voting Representative.
    (ddd) ``Operational Halt'' means a halt in trading in one or 
more securities only on a Member's Market declared by such Member 
and is not a Regulatory Halt.
    (eee) ``Party to a Proceeding'' means a Company Indemnified 
Party that is, was, or is threatened to be made, a party to a 
Proceeding, or is involved in a Proceeding, by reason of the fact 
that such Company Indemnified Party is or was a Member[ and/or], an 
SRO Voting Representative, or a Non-SRO Voting Representative.
    (fff) ``PDP'' means a Member or non-Member's proprietary market 
data product that includes Transaction Reports and Quotation 
Information data in Eligible Securities from a Member's Market or a 
Trading Center, and if from a Member, is filed with the Commission.
    (ggg) ``Person'' means an individual, corporation, partnership, 
joint venture, limited liability company, Governmental Authority, 
unincorporated organization, trust, association, or other entity.
    (hhh) ``Primary Listing Market'' means the national securities 
exchange on which an Eligible Security is listed. If an Eligible 
Security is listed on more than one national securities exchange, 
Primary Listing Market means the exchange on which the security has 
been listed the longest.
    (iii) ``Proceeding'' means any threatened, pending or completed 
suit, proceeding, or other action, whether civil, criminal, 
administrative, or arbitrative, or any appeal in such action or any 
inquiry or investigation that could lead to such an action.
    (jjj) ``Processor(s)'' means the entity(ies) selected by the 
Company to perform the processing functions described in this 
Agreement and pursuant to the Processor Services Agreement(s), 
including the operation of the System.
    (kkk) ``Public Information'' means: (i) any information that is 
not either Restricted Information or Highly Confidential Information 
or that has not been designated as Confidential Information; (ii) 
any Confidential Information that has been approved by the Operating 
Committee for release to the public; (iii) the duly approved minutes 
of the Operating Committee with detail sufficient to inform the 
public on matters under discussion and the views expressed thereon 
(without attribution); (iv) Vendor, Subscriber and performance 
metrics; (v) Processor transmission metrics; and (vi) any 
information that is otherwise publicly available, except for 
information made public as a result of a violation of the Company's 
Confidentiality Policy or Applicable Law. Public Information 
includes, but is not limited to, any topic discussed during a 
meeting of the Operating Committee, an outcome of a topic discussed, 
or a Final Decision of the Operating Committee.
    (lll) ``Regulatory Halt'' means a halt declared by the Primary 
Listing Market in trading in one or more securities on all Trading 
Centers for regulatory purposes, including for the dissemination of 
material news, news pending, suspensions, or where otherwise 
necessary to maintain a fair and orderly market. A Regulatory Halt 
includes a trading pause triggered by Limit Up Limit Down, a halt 
based on Extraordinary Market Activity, a trading halt triggered by 
a Market-Wide Circuit Breaker, and a SIP Halt.
    (mmm) ``Restricted Information'' means highly sensitive 
customer-specific financial information, customer-specific audit 
information, other customer financial information, and personal 
identifiable information.
    (nnn) ``Quotation Information'' means all bids, offers, 
displayed quotation sizes, market center identifiers and, in the 
case of FINRA, the identifier of the FINRA Participant that entered 
the quotation, all withdrawals, and all other information pertaining 
to quotations in Eligible Securities required to be collected and 
made available to the Processors pursuant to this Agreement.
    (ooo) ``Regular Trading Hours'' has the meaning provided in Rule 
600(b)(68) of Regulation NMS. Regular Trading Hours can end earlier 
than 4:00 p.m. ET in the case of an early scheduled close.
    (ppp) ``Retail Representative'' means an individual who (1) 
represents the interests of retail investors, (2) has experience 
working with or on behalf of retail investors, (3) has

[[Page 44210]]

the requisite background and professional experience to understand 
the interests of retail investors, the work of the Operating 
Committee of the Company, and the role of market data in the U.S. 
equity market, and (4) is not affiliated with a Member or broker-
dealer.
    (qqq) ``Self-regulatory organization'' or ``SRO'' has the 
meaning provided in Section 3(a)(26) of the Exchange Act.
    (rrr) ``SIP Halt'' means a Regulatory Halt to trading in one or 
more securities that a Primary Listing Market declares in the event 
of a SIP Outage or Material SIP Latency.
    (sss) ``SIP Halt Resume Time'' means the time that the Primary 
Listing Market determines as the end of a SIP Halt.
    (ttt) ``SIP Outage'' means a situation in which a Processor has 
ceased, or anticipates being unable, to provide updated and/or 
accurate quotation or last sale price information in one or more 
securities for a material period that exceeds the time thresholds 
for an orderly failover to backup facilities established by mutual 
agreement among the Processors, the Primary Listing Market for the 
affected securities, and the Operating Committee unless the Primary 
Listing Market, in consultation with the affected Processor and the 
Operating Committee, determines that resumption of accurate data is 
expected in the near future.
    (uuu) ``SRO Applicant'' means (1) any Person that is not a 
Member and for which the Commission has published a Form 1 to be 
registered as a national securities exchange or national securities 
association to operate a Market, or (2) a national securities 
exchange that is not a Member and for which the Commission has 
published a proposed rules change to operate a Market.
    (vvv) ``SRO Group'' means a group of Members that are 
Affiliates.
    (www) ``SRO Voting Representative'' means an individual 
designated by each SRO Group and each Non-Affiliated SRO pursuant to 
Section 4.2(a) to vote on behalf of such SRO Group or such Non-
Affiliated SRO.
    (xxx) ``Subscriber'' means a Person that receives Current 
Transaction Reports or Quotation Information from the Processors or 
a Vendor and that itself is not a Vendor.
    (yyy) ``System'' means all data processing equipment, software, 
communications facilities, and other technology and facilities, 
utilized by the Company or the Processors in connection with the 
collection, consolidation, and dissemination of Transaction Reports, 
Quotation Information, and other information concerning Eligible 
Securities.
    (zzz) ``Taxes'' means taxes, levies, imposts, charges, and 
duties (including withholding tax, stamp, and transaction duties) 
imposed by any taxing authority together with any related interest, 
penalties, fines, and expenses in connection with them.
    (aaaa) ``Trading Center'' has the same meaning as that term is 
defined in Rule 600(b)(82) of Regulation NMS.
    (bbbb) ``Transaction Reports'' means reports required to be 
collected and made available pursuant to this Agreement 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, trade modifiers, 
and any other required information reflecting completed transactions 
in Eligible Securities.
    (cccc) ``Transfer'' means to directly sell, transfer, assign, 
pledge, encumber, hypothecate, or similarly dispose of, either 
voluntarily or involuntarily, by operation of law or otherwise, or 
to enter into any contract, option, or other arrangement or 
understanding with respect to the sale, transfer, assignment, 
pledge, encumbrance, hypothecation, or similar disposition of any 
Membership Interests owned by a Person or any interest (including a 
beneficial interest) in any Membership Interests owned by a Person. 
``Transfer'' when used as a noun shall have a correlative meaning.
    (dddd) ``UTP Plan'' means 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.
    (eeee) ``Vendor'' means a Person that the Administrator has 
approved to re-distribute Current Transaction Reports or Quotation 
Information to the Person's employees or to others.
    (ffff) ``Voting Representative'' means an SRO Voting 
Representative or a Non-SRO Voting Representative.

Section 1.2 Interpretation.

    For purposes of this Agreement: (a) the words ``include,'' 
``includes,'' and ``including'' shall be deemed to be followed by 
the words ``without limitation''; (b) the word ``or'' is not 
exclusive; and (c) the words ``herein,'' ``hereof,'' ``hereby,'' 
``hereto,'' and ``hereunder'' refer to this Agreement as a whole. 
The definitions given for any defined terms in this Agreement shall 
apply equally to both the singular and plural forms of the terms 
defined. Whenever the context may require, any pronoun shall include 
the corresponding masculine, feminine, and neuter forms. Unless the 
context otherwise requires, references herein: (x) to Articles, 
Sections, and Exhibits mean the Articles and Sections of, and 
Exhibits attached to, this Agreement; (y) to an agreement, 
instrument, or other document mean such agreement, instrument, or 
other document as amended, supplemented, and modified from time to 
time to the extent permitted by the provisions thereof; and (z) to a 
statute mean such statute as amended from time to time and includes 
any successor legislation thereto and any rules and regulations 
promulgated thereunder. This Agreement shall be construed without 
regard to any presumption or rule requiring construction or 
interpretation against the party drafting an instrument or causing 
any instrument to be drafted. The Exhibits referred to herein shall 
be construed with, and as an integral part of, this Agreement to the 
same extent as if they were set forth verbatim herein.

Article II.

ORGANIZATION

Section 2.1 Formation.

    (a) The Members formed the Company as a limited liability 
company on [], [] pursuant to the Delaware Act by 
filing a certificate of formation (the ``Certificate'') with the 
Delaware Secretary of State.
    (b) This Agreement shall constitute the ``limited liability 
company agreement'' (as that term is used in the Delaware Act) of 
the Company. The rights, powers, duties, obligations, and 
liabilities of the Members shall be determined pursuant to the 
Delaware Act and this Agreement. To the extent that the rights, 
powers, duties, obligations, and liabilities of any Member are 
different by reason of any provision of this Agreement than they 
would be under the Delaware Act in the absence of such provision, 
this Agreement shall, to the extent permitted by the Delaware Act, 
control.

Section 2.2 Name.

    The name of the Company is ``CT Plan LLC'' and all Company 
business shall be conducted in that name or such other name or names 
as the Operating Committee may designate; provided, that the name 
shall always contain the words ``Limited Liability Company'' or the 
abbreviation ``L.L.C.'' or the designation ``LLC.''

Section 2.3 Registered Office; Registered Agent; Principal Office; 
Other Offices.

    (a) The registered office of the Company required by the 
Delaware Act to be maintained in the State of Delaware shall be the 
office of the initial registered agent named in the Certificate or 
such other office (which need not be a place of business of the 
Company) as the Operating Committee may designate from time to time 
in the manner provided by the Delaware Act and Applicable Law.
    (b) The registered agent for service of process of the Company 
in the State of Delaware shall be the initial registered agent named 
in the Certificate or such other Person or Persons as the Operating 
Committee may designate from time to time in the manner provided by 
the Delaware Act and Applicable Law.
    (c) The principal office of the Company shall be located at such 
place as the Operating Committee may designate from time to time, 
which need not be in the State of Delaware, and the Company shall 
maintain its books and records there. The Company shall give prompt 
notice to each of the Members of any change to the principal office 
of the Company.
    (d) The Company may have such other offices as the Operating 
Committee may designate from time to time.[FEDREG][VOL]*[/
VOL][NO]*[/NO][DATE]*[/DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT][/PREAMB][SUPLINF][HED]*[/
HED][APPENDIX][HED]*[/HED]

Section 2.4 Purpose; Powers.

    (a) The purposes of the Company are to engage in the following 
activities on behalf of the Members:
    (i) the collection, consolidation, and dissemination of 
Transaction Reports, Quotation Information, and such other 
information concerning Eligible Securities as the Members shall 
agree as provided herein;
    (ii) contracting for the distribution of such information;
    (iii) contracting for and maintaining facilities to support any 
activities permitted in this Agreement and guidelines adopted 
hereunder, including the operation and administration of the System;

[[Page 44211]]

    (iv) providing for those other matters set forth in this 
Agreement and in all guidelines adopted hereunder;
    (v) operating the System to comply with Applicable Laws; and
    (vi) engaging in any other business or activity that now or 
hereafter may be necessary, incidental, proper, advisable, or 
convenient to accomplish any of the foregoing purposes and that is 
not prohibited by the Delaware Act, the Exchange Act, or other 
Applicable Law.
    (b) The Company shall have all the powers necessary or 
convenient to carry out the purposes for which it is formed, 
including the powers granted by the Delaware Act.
    (c) It is expressly understood that each Member shall be 
responsible for the collection of Transaction Reports and Quotation 
Information within its Market and that nothing in this Agreement 
shall be deemed to govern or apply to the manner in which each 
Member does so.

Section 2.5 Term.

    The term of the Company commenced as of the date the Certificate 
was filed with the Secretary of State of the State of Delaware, and 
shall continue in existence perpetually until the Company is 
dissolved in accordance with the provisions of the Certificate or 
this Agreement. Notwithstanding the foregoing, this Agreement shall 
not become effective until the Effective Date.

Section 2.6 No State-Law Partnership.

    The Members intend that the Company not be a partnership 
(including a limited partnership) or joint venture, and that no 
Member be a partner or joint venturer of any other Member by virtue 
of this Agreement for any purposes other than as set forth in 
Sections 10.2 and 10.3, and neither this Agreement nor any other 
document entered into by the Company or any Member relating to the 
subject matter of this Agreement shall be construed to suggest 
otherwise.

Article III.

MEMBERSHIP

Section 3.1 Members.

    The Members of the Company shall consist of the Persons 
identified in Exhibit A, as updated from time to time to reflect the 
admission of new Members pursuant to this Agreement.

Section 3.2 New Members.

    (a) Any national securities association or national securities 
exchange whose market, facilities, or members, as applicable, trades 
Eligible Securities may become a Member by (i) providing written 
notice to the Company, (ii) executing a joinder to this Agreement, 
at which time Exhibit A shall be amended to reflect the addition of 
such association or exchange as a Member, (iii) paying a Membership 
Fee to the Company as determined pursuant to Section 3.2(b), and 
(iv) executing a joinder to any other agreements to which all of the 
other Members have been made party in connection with being a 
Member. Membership Fees paid shall be added to the general revenues 
of the Company.
    (b) The Membership Fee shall be based upon the following 
factors:
    (i) the portion of costs previously paid by the Company (or by 
the Members prior to the formation of the Company) for the 
development, expansion, and maintenance of the System which, under 
GAAP, would have been treated as capital expenditures and would have 
been amortized over the five years preceding the admission of the 
new Member (and for this purpose all such capital expenditures shall 
be deemed to have a five-year amortizable life); and
    (ii) an assessment of costs incurred and to be incurred by the 
Company for modifying the System or any part thereof to accommodate 
the new Member, which are not otherwise required to be paid or 
reimbursed by the new Member.
    [(a)](c) Participants of the CQ Plan, CTA Plan, and UTP Plan are 
not be required to pay the Membership Fee.

Section 3.3 Transfer of Membership Interests.

    Except as set forth in Section 3.4, a Member shall not have the 
right to Transfer (whether in whole or in part) its Membership 
Interest in the Company.

Section 3.4 Withdrawal From Membership.

    (a) Any Member may voluntarily withdraw from the Company at any 
time on not less than 30 days' prior written notice (the 
``Withdrawal Date''), by (i) providing such notice of such 
withdrawal to the Company, (ii) causing the Company to file with the 
Commission an amendment to effectuate the withdrawal and (iii) 
Transferring such Member's Membership Interest to the Company.
    (b) A Member shall automatically be withdrawn from the Company 
upon such Member no longer being a registered national securities 
association or registered national securities exchange. Such 
Member's Membership Interest will automatically transfer to the 
Company. The Company shall file with the Commission an amendment to 
effectuate the withdrawal.
    (c) A withdrawal of a Member shall not be effective until 
approved by the Commission after filing an amendment to the 
Agreement in accordance with Section 13.5.
    (d) From and after the Withdrawal Date of such Member:
    (iii) Such Member shall remain liable for any obligations under 
this Agreement of such Member (including indemnification 
obligations) arising prior to the Withdrawal Date (but such Member 
shall have no further obligations under this Agreement or to any of 
the other Members arising after the Withdrawal Date);
    (iv) Such Member shall be entitled to receive a portion of the 
Net Distributable Operating Income (if any) in accordance with 
Exhibit D attributable to the period prior to the Withdrawal Date of 
such Member;
    (v) Such Member shall cease to have the right to have its 
Transaction Reports, Quotation Information, or other information 
disseminated over the System; and
    (vi) Profits and losses of the Company shall cease to be 
allocated to the Capital Account of such Member.

Section 3.5

Member Bankruptcy.

    In the event a Member becomes subject to one or more of the 
events of bankruptcy enumerated in Section 18-304 of the Delaware 
Act, that event by itself shall not cause a withdrawal of such 
Member from the Company so long as such Member continues to be a 
national securities association or national securities exchange.

Section 3.6 Undertaking by All Members.

    Following the Operative Date, each Member shall be required, 
pursuant to Rule 608(c) of Regulation NMS, to comply with the 
provisions hereof and enforce compliance by its members with the 
provisions hereof.

Section 3.7 Obligations and Liability of Members.

    (a) Except as otherwise provided in this Agreement or Applicable 
Law, no Member shall be obligated to contribute capital or make 
loans to the Company.
    (b) Except as provided in this Agreement or Applicable Law, no 
Member shall have any liability whatsoever in its capacity as a 
Member, whether to the Company, to any of the Members, to the 
creditors of the Company or to any other Person, for the debts, 
liabilities, commitments or any other obligations of the Company or 
for any losses of the Company. Notwithstanding the foregoing, to the 
extent that amounts have not been paid to the Processors or 
Administrator under the terms of the Processor Services Agreements 
and Administrative Services Agreement, respectively, or this 
Agreement, as and when due, (i) each Member shall be obligated to 
return to the Company its pro rata share of any moneys distributed 
to such Member in the one year period prior to such default in 
payment (such pro rata share to be based upon such Member's 
proportionate receipt of the aggregate distributions made to all 
Members in such one year period) until an aggregate amount equal to 
the amount of any such defaulted payments has been re-contributed to 
the Company and (ii) the Company shall promptly pay such amount to 
the Processors or Administrator, as applicable.
    (c) In accordance with the Delaware Act, a member of a limited 
liability company may, under certain circumstances, be required to 
return amounts previously distributed to such member. It is the 
intent of the Members that no distribution to any Member pursuant to 
this Agreement shall be deemed a return of money or other property 
paid or distributed in violation of the Delaware Act. The payment of 
any such money or distribution of any such property to a Member 
shall be deemed to be a compromise within the meaning of the 
Delaware Act, and the Member receiving any such money or property 
shall not be required to return any such money or property to any 
Person; provided, however, that a Member shall be required to return 
to the Company any money or property distributed to it in clear and 
manifest accounting or similar error or as otherwise provided in 
Section 3.7(b). However, if any court of competent jurisdiction 
holds that, notwithstanding the

[[Page 44212]]

provisions of this Agreement, any Member is obligated to make any 
such payment, such obligation shall be the obligation of such Member 
and not of the Operating Committee.
    (d) No Member (unless duly authorized by the Operating 
Committee) has the authority or power to represent, act for, sign 
for or bind the Company or to make any expenditure on behalf of the 
Company; provided, however, that the Tax Matters Partner may 
represent, act for, sign for or bind the Company as permitted under 
Sections 10.2 and 10.3 of this Agreement.
    (e) To the fullest extent permitted by law, no Member shall, in 
its capacity as a Member, owe any duty (fiduciary or otherwise) to 
the Company or to any other Member other than the duties expressly 
set forth in this Agreement.

Article IV.

MANAGEMENT OF THE COMPANY

Section 4.1 Operating Committee.

    (a) Except for situations in which the approval of the Members 
is required by this Agreement, the Company shall be managed by the 
Operating Committee. Unless otherwise expressly provided to the 
contrary in this Agreement, no Member shall have authority to act 
for, or to assume any obligation or responsibility on behalf of, the 
Company, without the prior approval of the Operating Committee. 
Without limiting the generality of the foregoing and except as 
otherwise expressly provided in this Agreement, the Operating 
Committee shall have full and complete discretion to manage and 
control the business and affairs of the Company, to make all 
decisions affecting the business and affairs of the Company, and to 
take all such actions as it deems necessary or appropriate to 
accomplish the purposes of the Company, including the following:
    (i) proposing amendments to this Agreement or implementing other 
policies and procedures as necessary to ensure prompt, accurate, 
reliable, and fair collection, processing, distribution, and 
publication of information with respect to Transaction Reports and 
Quotation Information in Eligible Securities and the fairness and 
usefulness of the form and content of that information;
    (ii) selecting, overseeing, specifying the role and 
responsibilities of, and evaluating the performance of, the 
Administrator, the Processors, an auditor, and other professional 
service providers, provided that any expenditures for professional 
services that are paid for from the Company's revenues must be for 
activities consistent with the terms of this Agreement and must be 
authorized by the Operating Committee;
    (iii) developing and maintaining fair and reasonable Fees and 
consistent terms for the distribution, transmission, and aggregation 
of core data;
    (iv) reviewing the performance of the Processors and ensuring 
the public reporting of Processors' performance and other metrics 
and information about the Processors;
    (v) assessing the marketplace for equity market data products 
and ensuring that the CT Feeds are priced in a manner that is fair 
and reasonable, and designed to ensure the widespread availability 
of CT Feeds data to investors and market participants;
    (vi) designing a fair and reasonable revenue allocation formula 
for allocating plan revenues to be applied by the Administrator, and 
overseeing, reviewing, and revising that formula as needed;
    (vii) interpreting the Agreement and its provisions; and
    (viii) carrying out such other specific responsibilities as 
provided under this Agreement.
    (b) The Operating Committee may delegate all or part of its 
administrative functions under this Agreement, excluding those 
administrative functions to be performed by the Administrator 
pursuant to Section 6.1, to a subcommittee, to one or more of the 
Members, to one or more Non-SRO Voting Representatives, or to other 
Persons (including the Administrator), and any Person to which 
administrative functions are so delegated shall perform the same as 
agent for the Company, in the name of the Company. For the avoidance 
of doubt, no delegation to a subcommittee shall contravene Section 
4.3 and no subcommittee shall take actions requiring approval of the 
Operating Committee pursuant to Section 4.3 unless such approval 
shall have been obtained. Any authority delegated hereunder is 
subject to the provisions of Section 4.3 hereof.
    (c) It is expressly agreed and understood that neither the 
Company nor the Operating Committee shall have authority in any 
respect of any Member's proprietary systems. Neither the Company nor 
the Operating Committee shall have any authority over the collection 
and dissemination of quotation or transaction information in 
Eligible Securities in any Member's Market, or, in the case of 
FINRA, from FINRA Participants.[FEDREG][VOL]*[/VOL][NO]*[/
NO][DATE]*[/DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT][/PREAMB][SUPLINF][HED]*[/
HED][APPENDIX][HED]*[/HED]

Section 4.2 Composition and Selection of Operating Committee.

    (a) SRO Voting Representatives. The Operating Committee shall 
include one SRO Voting Representative designated by each SRO Group 
and each Non-Affiliated SRO to vote on behalf of such SRO Group or 
such Non-Affiliated SRO. Each SRO Group and each Non-Affiliated SRO 
may designate an alternate individual or individuals who shall be 
authorized to vote on behalf of such SRO Group or such Non-
Affiliated SRO, respectively, in the absence of the designated SRO 
Voting Representative.
    (b) Non-SRO Voting Representatives. The Operating Committee 
shall include one Non-SRO Voting Representative from each of the 
following categories: (A) An institutional investor; (B) a broker-
dealer with a predominantly retail investor customer base; (C) a 
broker-dealer with a predominantly institutional investor customer 
base; (D) a securities market data vendor that is not affiliated or 
associated with a Member, broker-dealer, or investment adviser with 
third-party clients; (E) an issuer of NMS stock that is not 
affiliated or associated with a Member, broker-dealer, or investment 
adviser with third-party clients; and (F) a Retail Representative. 
Non-SRO Voting Representatives shall serve [for]no more than two 
consecutive three-year terms[ for a maximum of two terms total, 
whether consecutive or non-consecutive], but shall be eligible after 
a period of three years of non-service to serve additional terms, 
subject to the same term limit requirements. Non-SRO Voting 
Representatives will be selected pursuant to the following 
procedures:
    (i) The initial Non-SRO Voting Representative for each category 
shall be selected by a majority vote of the Advisory Committee 
Members. The Advisory Committee Members shall follow the procedure 
set forth in subparagraph (b)(v) below, except that in addition to 
nominating others, Advisory Committee Members may nominate 
themselves, regardless of the length of their service on the 
Advisory Committees.
    (ii) Although the Non-SRO Voting Representatives will be 
selected at the same time, the Non-SRO Voting Representatives' terms 
will be staggered to allow for continuity of representation. The 
Non-SRO Voting Representatives' terms will begin in accordance with 
the following timeline after the Effective Date of the Agreement:
    (A) Issuer Representative: First Quarterly Operating Committee 
Meeting after Effective Date;
    (B) Retail Representative: First Quarterly Operating Committee 
Meeting after Effective Date;
    (C) Institutional investor: First Quarterly Operating Committee 
Meeting after Effective Date;
    (D) Securities market data vendor: Third Quarterly Operating 
Committee Meeting after Effective Date;
    (E) Broker-dealer with a predominantly retail investor customer 
base: Third Quarterly Operating Committee Meeting after Effective 
Date; and
    (F) Broker-dealer with a predominantly institutional investor 
customer base: Third Quarterly Operating Committee Meeting Effective 
Date.
    (iii) Although certain Non-SRO Voting Representatives' official, 
[two]three-year terms will not begin until the Third Quarterly 
Operating Committee Meeting after the Effective Date, such Non-SRO 
Voting Representatives will temporarily serve as a Non-SRO Voting 
Representative as of their selection. Such Non-SRO Voting 
Representatives may still be selected for another [two]three-year 
term.
    (iv) After the expiration of a Non-SRO Voting Representative's 
term, an individual will be selected by a majority of the then-
serving Non-SRO Voting Representatives to fill the position.
    (v) Procedure for Nominating and Electing Non-SRO Voting 
Representatives.
    (A) At least two months prior to the expiring term of a Non-SRO 
Voting Representative, the Operating Committee shall post a notice 
on its website requesting nominations from the public for the 
upcoming open position. [Members]Each SRO Voting Representative and 
Non-SRO Voting Representative may submit the names of individuals 
for consideration during the nomination process, and the Non-SRO 
Voting Representative may nominate themselves as long as they [have 
not served the maximum number of terms]are not then completing a 
second consecutive term.

[[Page 44213]]

    (B) At least one month prior to the expiring term of a Non-SRO 
Voting Representative, the Non-SRO Voting Representatives shall 
review the nominated individuals to confirm, by a majority vote, the 
nominated individuals that meet the requirements of the category up 
for election.
    (C) Within a week of the Non-SRO Voting Representatives 
finalizing the list of eligible individuals, the Operating Committee 
shall post a notice on the Company website listing the individuals 
nominated for the open position and requesting comment from the 
public. After the Non-SRO Voting Representatives screen comments for 
appropriateness, the public comments will be posted on the Company's 
website. Prior to electing an individual from the list of 
nominations, the Non-SRO Voting Representatives will consider and 
discuss the public comments.
    (D) The Non-SRO Voting Representatives whose terms are expiring 
may vote in the election for an open position; provided, however, 
that a Non-SRO Voting Representative may not vote in the election 
for an open position for which they are nominated.
    (E) In the event that no nominated individual receives a 
majority of votes, the individual(s) with the lowest number of votes 
will be eliminated from consideration. The Non-SRO Voting 
Representatives will repeat this process until an individual 
receives a majority of votes. In the event two candidates remain, 
the Person receiving the most votes will be elected.
    (vi) A Non-SRO Voting Representative may resign from the 
Operating Committee by tendering their resignation to the Chair of 
the Operating Committee. In the event a Non-SRO Voting 
Representative leaves his or her employment or changes his or her 
duties within the firm to a position unrelated to the category he or 
she represents before the expiration of his or her term, the Non-SRO 
Voting Representative shall tender his or her resignation to the 
Chair of the Operating Committee or be removed upon an affirmative 
vote of the Operating Committee pursuant to Section 4.3.
    (vii) In the event a Non-SRO Voting Representative resigns or is 
removed from the Operating Committee, the Operating Committee shall, 
as soon as practicable, follow the procedure set forth in 
subparagraph (b)(v). The individual selected shall serve out the 
remaining term of the resigning Non-SRO Voting Representative and, 
if the remaining term after selection is less than one year, such 
individual will automatically serve an additional [two]three-year 
term. If the remaining term after selection is greater than one 
year, the Operating Committee shall follow the procedure set forth 
in subparagraph (b)(v) at the end of the term. Under either 
circumstance, such individual may be elected for one additional 
[two]three-year term before reaching the term limit.
    (viii) Each Non-SRO Voting Representative will agree in writing 
to comply with the requirements of Section 4.10 and Exhibit B 
thereto and the Confidentiality Policy set forth in Exhibit C.
    (c) An SRO Applicant will be permitted to appoint one individual 
to attend (subject to Section 4.4(i)) regularly scheduled Operating 
Committee meetings in the capacity of a non-voting observer (each, 
an ``SRO Applicant Observer''). Each SRO Applicant may designate an 
alternate individual or individuals who shall be authorized to act 
as the SRO Applicant Observer on behalf of the SRO Applicant in the 
absence of the designated SRO Applicant Observer. If the SRO 
Applicant's Form 1 petition or Section 19(b)(1) filing is withdrawn, 
returned, or is otherwise not actively pending with the Commission 
for any reason, then the SRO Applicant will no longer be eligible to 
have an SRO Applicant Observer attend Operating Committee meetings.
    (d) Notwithstanding anything to the contrary herein, (i) a 
national securities exchange that has ceased operations as a Market 
(or has yet to commence operation as a Market) and that is a Non-
Affiliated SRO will not be permitted to designate an SRO Voting 
Representative and (ii) an SRO Group in which all national 
securities exchanges have ceased operations as a Market (or have yet 
to commence operation as a Market) will not be permitted to 
designate an SRO Voting Representative. Such SRO Group or Non-
Affiliated SRO may attend the Operating Committee as an observer but 
may not attend the Executive Session of the Operating Committee. In 
the event such an SRO Group or Non-Affiliated SRO does not commence 
operation as a Market for six months after first attending an 
Operating Committee meeting, such SRO Group or Non-Affiliated SRO 
may no longer attend the Operating Committee until it commences/re-
commences operation as a Market.

Section 4.3 Action of Operating Committee.

    (a) The SRO Voting Representatives and Non-SRO Voting 
Representatives shall be allocated votes as follows:
    (i) Each SRO Voting Representative shall be authorized to cast 
one vote on behalf of the SRO Group or Non-Affiliated SRO that he or 
she represents, provided, however, that each SRO Voting 
Representative representing an SRO Group or Non-Affiliated SRO whose 
combined market center(s) have consolidated equity market share of 
more than fifteen (15) percent during four of the six calendar 
months preceding an Operating Committee vote shall be authorized to 
cast two votes. For purposes of this Section 4.3(a)(i), 
``consolidated equity market share'' means the average daily dollar 
equity trading volume of Eligible Securities of an SRO Group or Non-
Affiliated SRO as a percentage of the average daily dollar equity 
trading volume of all of the SRO Groups and Non-Affiliated SROs, as 
reported under this Agreement. For the avoidance of doubt, FINRA 
shall not be considered to operate a market center within the 
meaning of this Section 4.3(a)(i) solely by virtue of facilitating 
trade reporting of Eligible Securities through the FINRA/Nasdaq 
Trade Reporting Facility Carteret, the FINRA/Nasdaq Trade Reporting 
Facility Chicago, the FINRA/NYSE Trade Reporting Facility, or any 
other trade reporting facility that FINRA may operate from time to 
time in affiliation with a registered national securities exchange 
to provide a mechanism for FINRA Participants to report transactions 
in Eligible Securities effected otherwise than on an exchange.
    (ii) With respect to any action on which the Non-SRO Voting 
Representatives may vote, the aggregate number of votes attributed 
to the Non-SRO Voting Representatives eligible to vote on such 
action shall at all times equal one half of the aggregate number of 
votes attributed to the votes of the SRO Voting Representatives who 
are eligible to vote on such action, and the number of Non-SRO 
Voting Representative votes shall increase or decrease as necessary 
to maintain the ratio between votes attributed to the SRO Voting 
Representatives and votes attributed to the Non-SRO Voting 
Representatives. Votes attributed to Non-SRO Voting Representatives 
will be allocated equally among Non-SRO Voting Representatives 
eligible to vote, in fractional shares if necessary.
    (b) All actions of the Operating Committee will require an 
augmented majority vote consisting of the affirmative vote of not 
less than (2/3rd) two-thirds of all votes allocated in the manner 
described in Section 4.3(a) to Voting Representatives who are 
eligible to vote on such action, combined with a majority (greater 
than (50) fifty percent of the votes) of all votes allocated in the 
manner described in Section 4.3(a) to SRO Voting Representatives who 
are eligible to vote on such action.
    (c) Notwithstanding Section 4.3(b), the following actions will 
not require an augmented majority vote of the Operating Committee:
    (i) the selection of Non-SRO Voting Representatives pursuant to 
Section 4.2(b);
    (ii) the decision to enter Executive Session pursuant to Section 
4.4(g)[;], except for matters considered pursuant to Section 
4.4(g)(i)(E); and
    (iii) decisions concerning the operation of the Company as an 
LLC as specified in Section 10.3 and Section 11.2[;
    (iv) modifications to LLC-related provisions of the Agreement 
pursuant to Section 13.5(b); and
    (v) the selection of Officers of the Company, other than the 
Chair, pursuant to Section 4.8].

Section 4.4 Meetings of the Operating Committee.

    (a) Subject to Section 4.4(g), meetings of the Operating 
Committee may be attended by each Voting Representative, Member 
Observers, SRO Applicant Observers, SEC staff, and other persons as 
deemed appropriate by the Operating Committee. Meetings shall be 
held at such times and locations as shall from time to time be 
determined by the Operating Committee. Member Observers shall be 
entitled to [receive notice of all meetings of the Company and to] 
attend and participate in any discussion at any such meeting, unless 
attendance or participation would be inconsistent with the 
provisions of Section 4.10(b), but shall not be entitled to vote on 
any matter.
    (b) Special meetings of the Operating Committee may be called by 
the Chair on at least 24 hours' notice to each Voting

[[Page 44214]]

Representative and all persons eligible to attend Operating 
Committee meetings.
    (c) Any action requiring a vote can be taken at a meeting only 
if a quorum of all Voting Representatives is present. A quorum is 
equal to the minimum votes necessary to obtain approval under 
Section 4.3(b), i.e., Voting Representatives reflecting 2/3rd of 
Operating Committee votes eligible to vote on such action and SRO 
Voting Representatives reflecting 50% of SRO Voting Representative 
votes eligible to vote on such action.
    (i) Any Voting Representative recused from voting on a 
particular action (i) mandatorily pursuant to Section 4.10(b) or 
(ii) upon a Voting Representative's voluntary recusal, shall not be 
considered in the numerator or denominator of the calculations in 
paragraph (c) for determining whether a quorum is present.
    (ii) A Voting Representative is considered present at a meeting 
only if such Voting Representative is either in physical attendance 
at the meeting or participating by conference telephone or other 
electronic means that enables each Voting Representative to hear and 
be heard by all others present at the meeting.
    (d) A summary of any action sought to be resolved at a meeting 
shall be sent to each Voting Representative entitled to vote on such 
matter at least one week prior to the meeting via electronic mail, 
portal notification, or regular U.S. or private mail (or if one week 
is not practicable, then with as much time as may be reasonably 
practicable under the circumstances); provided, however, that this 
requirement to provide a summary of any action prior to a meeting 
may be waived by the vote of the percentage of the Committee 
required to vote on any particular matter, under Section 4.3 
above.[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/
SUBJECT][/PREAMB][SUPLINF][HED]*[/HED][APPENDIX][HED]*[/HED]
    (e) Beginning with the first quarterly meeting of the Operating 
Committee following the Operative Date, the Chair of the Operating 
Committee shall be elected for a one-year term from the constituent 
SRO Voting Representatives (and an election for the Chair shall be 
held every year). Subject to the requirements of Section 4.3 hereof, 
the Chair shall have the authority to enter into contracts on behalf 
of the Company and otherwise bind the Company, but only as directed 
by the Operating Committee. The Chair shall designate a Person to 
act as Secretary to record the minutes of each meeting. The location 
of meetings shall be in a location capable of holding the number of 
attendees of such meetings, or such other locations as may from time 
to time be determined by the Operating Committee.
    (i) To elect a Chair, the Operating Committee will elicit 
nominations for those individuals to be considered for Chair.
    (ii) In the event that no nominated Person is elected by an 
affirmative vote of the Operating Committee pursuant to Section 4.3, 
the Person(s) with the lowest number of votes will be eliminated 
from consideration. The Operating Committee will repeat this process 
until a Person is elected by affirmative vote of the Operating 
Committee pursuant to Section 4.3. In the event two candidates 
remain and neither is elected by an affirmative vote of the 
Operating Committee pursuant to Section 4.3, the Person receiving 
the most votes from SRO Voting Representatives will be elected.
    (f) Meetings may be held by conference telephone or other 
electronic means that enables each Voting Representative to hear and 
be heard by all others present at the meeting.
    (g) [Notwithstanding any other provision of this Agreement, ]SRO 
Voting Representatives, Member Observers, SEC Staff, and other 
persons as deemed appropriate by a majority vote of the SRO Voting 
Representatives may meet in Executive Session of the Operating 
Committee to discuss an item of business that falls within the 
topics identified in subsection (i) below and for which it is 
appropriate to exclude Non-SRO Voting Representatives. A request to 
create an Executive Session must be included on the written agenda 
for an Operating Committee meeting, along with the clearly stated 
rationale as to why such item to be discussed would be appropriate 
for Executive Session. The creation of an Executive Session will be 
by a majority vote of SRO Voting Representatives with votes 
allocated pursuant to Section 4.3(a)(1). The Executive Session shall 
only discuss the topic for which it was created and shall be 
disbanded upon fully discussing the topic.
    (i) Items for discussion within an Executive Session 
[should]shall be limited to [such]the following topics[ as]:
    (A) Any topic that requires discussion of Highly Confidential 
Information, except for discussions regarding contract negotiations 
with the Processors or the Administrator;
    (B) Vendor or Subscriber Audit Findings;[ and]
    (C) Litigation matters[.];
    (D) Responses to regulators with respect to inquiries, 
examinations, or findings; and
    (E) Other discrete matters approved by the Operating Committee.
    (ii) [The list provided in subparagraph (i) is not dispositive 
of all matters that may by their nature require discussion in an 
Executive Session. ]The mere fact that a topic is controversial or a 
matter of dispute does not, by itself, make a topic appropriate for 
Executive Session. The minutes for an Executive Session shall 
include the reason for including any item in Executive Session.
    (iii) Requests to discuss a topic in Executive Session must be 
included on the written agenda for the Operating Committee meeting, 
along with the clearly stated rationale for each topic as to why 
such discussion is appropriate for Executive Session. Such rationale 
may be that the topic to be discussed falls within the list provided 
in subparagraph (g)(i).
    (iv) Any action that requires a vote in Executive Session will 
require a majority of the votes allocated in the manner described in 
Section 4.3(a) to SRO Voting Representatives eligible to vote on 
such action.

Section 4.5 Certain Transactions.

    The fact that a Member or any of its Affiliates is directly or 
indirectly interested in or connected with any Person employed by 
the Company to render or perform a service, or from which or to whom 
the Company may buy or sell any property, shall not prohibit the 
Company from employing or dealing with such Person.

Section 4.6 Company Opportunities.

    (a) Each Member, its Affiliates, and each of their respective 
equity holders, controlling persons and employees may have business 
interests and engage in business activities in addition to those 
relating to the Company. Neither the Company nor any Member shall 
have any rights by virtue of this Agreement in any business ventures 
of any such Person.
    (b) Each Member expressly acknowledges that (i) the other 
Members are permitted to have, and may presently or in the future 
have, investments or other business relationships with Persons 
engaged in the business of the Company other than through the 
Company (an ``Other Business''), (ii) the other Members have and may 
develop strategic relationships with businesses that are and may be 
competitive or complementary with the Company, (iii) the other 
Members shall not be obligated to recommend or take any action that 
prefers the interests of the Company or any Member over its own 
interests, (iv) none of the other Members will be prohibited by 
virtue of their ownership of equity in the Company or service on the 
Operating Committee (or body performing similar duties) from 
pursuing and engaging in any such activities, (v) none of the other 
Members will be obligated to inform or present to the Company any 
such opportunity, relationship, or investment, (vi) such Member will 
not acquire or be entitled to any interest or participation in any 
Other Business as a result of the participation therein of any of 
the other Members, and (vii) the involvement of another Member in 
any Other Business in and of itself will not constitute a conflict 
of interest by such Person with respect to the Company or any of the 
Members.

Section 4.7 Subcommittees.

    (a) Subject to Section 4.1, the Operating Committee shall have 
the power and right, but not the obligation, to create and disband 
subcommittees of the Operating Committee and to determine the 
duties, responsibilities, powers, and composition of such 
subcommittees. Subcommittee chairs will be selected by [the Chair of 
]the Operating Committee from SRO Voting Representatives or [Member 
Observers with input from the Operating Committee]Non-SRO Voting 
Representatives.
    (b) SRO Voting Representatives, Non-SRO Voting Representatives, 
Member Observers, SEC Staff, and other persons as deemed appropriate 
by the Operating Committee may attend meetings of any subcommittees.
    (c) Notwithstanding paragraph (b), SRO Voting Representatives, 
Member Observers, and other persons as deemed appropriate by 
majority vote of the SRO Voting Representatives may meet in a 
subcommittee to discuss an item [subject to the attorney-client 
privilege of the Company or that is attorney work product of the 
Company]that exclusively affects the Members with respect to: (1) 
litigation matters or responses to regulators with respect to 
inquiries,

[[Page 44215]]

examinations, or findings; and (2) other discrete legal matters 
approved by the Operating Committee.
    (d) All subcommittees shall prepare minutes of all meetings and 
make those minutes available to all members of the Operating 
Committee. In the case of the legal subcommittee, those minutes 
shall include (i) attendance at the meeting; (ii) the subject matter 
of each item discussed; (iii) the rationale for referring the matter 
to the legal subcommittee; (iv) the privilege or privileges claimed 
with respect to that item; and (v) for each matter, if applicable, 
the basis on which the matter was determined to exclusively affect 
the SROs.

Section 4.8 Officers.

    (a) [In addition to the Chair and Secretary, the Members]Except 
as provided in Section 4.4(e), the Operating Committee may (but need 
not), from time to time, designate and appoint one or more persons 
as an Officer of the Company[ by a majority vote of the Members]. 
Other than the Chair, no Officer need be a Voting Representative. 
Any Officers so designated shall have such authority and perform 
such duties as the [Members]Operating Committee may, from time to 
time, delegate to them. Any such delegation may be revoked at any 
time by [a majority vote of the Members in their sole discretion. 
The Members]the Operating Committee. The Operating Committee may 
assign titles to particular Officers. Each Officer shall hold office 
until such Officer's successor shall be duly designated or until 
such Officer's death, resignation, or removal as provided in this 
Agreement. Any number of offices may be held by the same individual. 
Officers shall not be entitled to receive salary or other 
compensation, unless approved by the [Members by a majority 
vote]Operating Committee.
    (b) Any Officer may resign at any time. Such resignation shall 
be made in writing and shall take effect at the time specified in 
the notice, or if no time be specified, at the time of its receipt 
by the [Members]Operating Committee. The acceptance of a resignation 
shall not be necessary to make it effective.
    (c) Any Officer may be removed at any time [upon the majority 
vote of the Members]by the Operating Committee.

Section 4.9 Commission Access to Information and Records.

    Nothing in this Agreement shall be interpreted to limit or 
impede the rights of the Commission to access information and 
records of the Company or any of the Members (including their 
employees) pursuant to U.S. federal securities laws and the rules 
and regulations promulgated thereunder.

Section 4.10 Disclosure of Potential Conflicts of Interest; Recusal.

    (a) Disclosure Requirements. The Members (including any Member 
Observers), the Processors, the Administrator, the Non-SRO Voting 
Representatives, and each service provider or subcontractor engaged 
in Company business (including the audit of Subscribers' data usage) 
that has access to Restricted or Highly Confidential information 
(for purposes of this section, ``Disclosing Parties'') shall 
complete the applicable questionnaire to provide the required 
disclosures set forth in subsection (c) below to disclose all 
material facts necessary to identify potential conflicts of 
interest. The Operating Committee, a Member, Processors, or 
Administrator may not use a service provider or subcontractor on 
Company business unless that service provider or subcontractor has 
agreed in writing to provide the disclosures required by this 
section and has submitted completed disclosures to the Administrator 
prior to starting work. If state laws, rules, or regulations, or 
applicable professional ethics rules or standards of conduct, would 
act to restrict or prohibit a Disclosing Party from making any 
particular required disclosure, a Disclosing Party shall refer to 
such law, rule, regulation, or professional ethics rule or standard 
and include in response to that disclosure the basis for its 
inability to provide a complete response. This does not relieve the 
Disclosing Party from disclosing any information it is not 
restricted from providing.
    (i) A potential conflict of interest may exist when personal, 
business, financial, or employment relationships could be perceived 
by a reasonable objective observer to affect the ability of a person 
to be impartial.
    (ii) Updates to Disclosures. Following a material change in the 
information disclosed pursuant to Section 4.10(a), a Disclosing 
Party shall promptly update its disclosures. Additionally, a 
Disclosing Party shall update annually any inaccurate information 
prior to the Operating Committee's first quarterly meeting of a 
calendar year.
    (iii) Public Dissemination of Disclosures. The Disclosing 
Parties shall provide the Administrator with its disclosures and any 
required updates. The Administrator shall ensure that the 
disclosures are promptly posted to the Company's website.
    (iv) The Company will arrange for Disclosing Parties that are 
not Members or Non-SRO Voting Representatives to comply with the 
required disclosures and recusals under this Section 4.10 and 
Exhibit B in their respective agreements with either the Company, a 
Member, the Administrator, or the Processors.
    (b) Recusal.
    (i) A Disclosing Party that is a Member may not appoint as its 
Voting Representative, alternate SRO Voting Representative, or 
Member Observer, a person that is responsible for or involved with 
the procurement for, or development, modeling, pricing, licensing, 
or sale of, PDP offered to customers of the CT Feeds if the person 
has a financial interest (including compensation) that is tied 
directly to the Disclosing Party's market data business or the 
procurement of market data and if that compensation would cause a 
reasonable objective observer to expect the compensation to affect 
the impartiality of the representative.
    (ii) A Disclosing Party (including its representative(s), 
employees, and agents) will be recused from participating in Company 
activities if it has not submitted a required disclosure form or the 
Operating Committee votes that its disclosure form is materially 
deficient. The recusal will be in effect until the Disclosing Party 
submits a sufficiently complete disclosure form to the 
Administrator.
    (iii) A Disclosing Party, including its representative(s), and 
its Affiliates and their representative(s), are recused from voting 
on matters in which it or its Affiliate (i) is seeking a position or 
contract with the Company or (ii) have a position or contract with 
the Company and whose performance is being evaluated by the Company.
    (iv) All recusals, including a person's determination of whether 
to voluntarily recuse himself or herself, shall be reflected in the 
meeting minutes.
    (c) Required Disclosures. As part of the disclosure regime, the 
Members, the Processors, the Administrator, Non-SRO Voting 
Representatives, and service providers and subcontractors must 
respond to questions that are tailored to elicit responses that 
disclose the potential conflicts of interest as set forth in Exhibit 
B.
    [(d) If the Commission's approval order of the conflicts of 
interest policies filed by the CQ Plan, CTA Plan, or UTP Plan is 
stayed or overturned by a Governmental Authority, the requirements 
of this Section 4.10 and Exhibit B shall not apply.]

Section 4.11 Confidentiality Policy.

    [(a) The Members and Non-SRO Voting Representatives]All Covered 
Persons are subject to the Confidentiality Policy set forth in 
Exhibit C to the Plan. The Company will arrange for Covered Persons 
that are not [Members]SRO Voting Representatives, Member Observers, 
or Non-SRO Voting Representatives to comply with the Confidentiality 
Policy under their respective agreements with either the Company, a 
Member, the Administrator, or the Processors.
    [(b) If the Commission's approval order of the confidentiality 
policy filed by the CQ Plan, CTA Plan, or UTP Plan is stayed or 
overturned by a Governmental Authority, the requirements of this 
Section 4.11 and Exhibit C shall not apply.][FEDREG][VOL]*[/
VOL][NO]*[/NO][DATE]*[/DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT][/PREAMB][SUPLINF][HED]*[/
HED][APPENDIX][HED]*[/HED]

Article V.

THE PROCESSORS; INFORMATION; INDEMNIFICATION

Section 5.1 General Functions of the Processors.

    Subject to the general direction of the Operating Committee, as 
more fully set forth in the agreement to be entered into between the 
Company and the Processors (the ``Processor Services Agreements''), 
the Company shall require the Processors to perform certain 
processing functions on behalf of the Company. Among other things, 
the Company shall require the Processors to collect from the 
Members, and consolidate and disseminate to Vendors and Subscribers, 
Transaction Reports and Quotation Information 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.

[[Page 44216]]

Section 5.2 Evaluation of the Processors.

    The Processors' performance of their functions under the 
Processor Services Agreements shall be subject to review at any time 
as determined by a vote of the Operating Committee pursuant to 
Section 4.3; provided, however, that a review shall be conducted at 
least once every two calendar years but not more frequently than 
once each calendar year (unless the Processors have materially 
defaulted in their obligations under the Processor Services 
Agreements and such default has not been cured within the applicable 
cure period set forth in the Processor Services Agreements, in which 
event such limitation shall not apply). The Operating Committee may 
review the Processors at staggered intervals.

Section 5.3 Process for Selecting New Processors.

    (a) No later than upon the termination or withdrawal of a 
Processor or the expiration of a Processor Services Agreement with a 
Processor, the Operating Committee shall establish procedures for 
selecting a new Processor (the ``Processor Selection Procedures''). 
The Operating Committee, as part of the process of establishing 
Processor Selection Procedures, may solicit and consider the timely 
comment of any entity affected by the operation of this Agreement.
    (b) The Processor Selection Procedures shall be established by 
the affirmative vote of the Operating Committee pursuant to Section 
4.3, and shall set forth, at a minimum:
    (i) 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;
    (ii) the minimum technical and operational requirements to be 
fulfilled by the Processor;
    (iii) the criteria to be considered in selecting the Processor; 
and
    (iv) the entities (other than Voting Representatives) that are 
eligible to comment on the selection of the Processor.

Section 5.4 Transmission of Information to Processors by Members.

    (a) Quotation Information.
    (i) Each Member shall, during the time it is open for trading, 
be responsible for promptly collecting and transmitting to the 
Processors accurate Quotation Information in Eligible Securities 
through any means set forth in the Processor Services Agreements to 
ensure that the Company complies with its obligations under the 
Processor Services Agreements.
    (ii) Quotation Information shall include:
    (A) identification of the Eligible Security, using the Listing 
Market's symbol;
    (B) the price bid and offered, together with size;
    (C) for FINRA, the FINRA Participant along with the FINRA 
Participant's market participant identification or Member from which 
the quotation emanates;
    (D) appropriate timestamps;
    (E) identification of quotations that are not firm; and
    (F) through appropriate codes and messages, withdrawals and 
similar matters.
    (iii) In addition, Quotation Information shall include:
    (A) in the case of a national securities exchange, the reporting 
Participant's matching engine publication timestamp; or
    (B) in the case of FINRA, the quotation publication timestamp 
that FINRA's bidding or offering member reports to FINRA's quotation 
facility in accordance with FINRA rules. In addition, if FINRA's 
quotation facility provides a proprietary feed of its quotation 
information, then the quotation facility shall also furnish the 
Processors with the time of the quotation as published on the 
quotation facility's proprietary feed. FINRA shall convert any 
quotation times reported to it to nanoseconds and shall furnish such 
times to the Processors in nanoseconds since Epoch.
    (b) Transaction Reports.
    (i) Each Member shall, during the time it is open for trading, 
be responsible for promptly transmitting to the Processor 
Transaction Reports in Eligible Securities executed in its Market by 
means set forth in the Processor Services Agreements.
    (ii) Transaction Reports shall include:
    (A) identification of the Eligible Security, using the Listing 
Market's symbol;
    (B) the number of shares in the transaction;
    (C) the price at which the shares were purchased or sold;
    (D) the buy/sell/cross indicator;
    (E) appropriate timestamps;
    (F) the Market of execution; and
    (G) through appropriate codes and messages, late or out-of-
sequence trades, corrections, and similar matters.
    (iii) In addition, Transaction Reports shall include the time of 
the transaction as identified in the Participant's matching engine 
publication timestamp. However, in the case of FINRA, the time of 
the transaction shall be the time of execution that a FINRA member 
reports to a FINRA trade reporting facility in accordance with FINRA 
rules. In addition, if the FINRA trade reporting facility provides a 
proprietary feed of trades reported by the trade reporting facility 
to the Processor, then the FINRA trade reporting facility shall also 
furnish the Processors with the time of the transmission as 
published on the facility's proprietary feed. The FINRA trade 
reporting facility shall convert times that its members report to it 
to nanoseconds and shall furnish such times to the Processors in 
nanoseconds since Epoch.
    (iv) Each Member shall (a) transmit all Transaction Reports in 
Eligible Securities to the Processors as soon as practicable, but 
not later than 10 seconds, after the time of execution, (b) 
establish and maintain collection and reporting procedures and 
facilities reasonably designed to comply with this requirement, and 
(c) designate as ``late'' any last sale price not collected and 
reported in accordance with the above-referenced procedures or as to 
which the Member has knowledge that the time interval after the time 
of execution is significantly greater than the time period referred 
to above. The Members shall seek to reduce the time period for 
reporting last sale prices to the Processors as conditions warrant.
    (v) The following types of transactions are not required to be 
reported to the Processors pursuant to this Agreement:
    (A) transactions that are part of a primary distribution by an 
issuer or of a registered secondary distribution or of an 
unregistered secondary distribution;[FEDREG][VOL]*[/VOL][NO]*[/
NO][DATE]*[/DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT][/PREAMB][SUPLINF][HED]*[/
HED][APPENDIX][HED]*[/HED]
    (B) transactions made in reliance on Section 4(a)(2) of the 
Securities Act of 1933;
    (C) 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);
    (D) the acquisition of securities by a broker-dealer as 
principal in anticipation of making an immediate exchange 
distribution or exchange offering on an exchange;
    (E) purchases of securities pursuant to a tender offer;
    (F) 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; and
    (G) transfers of securities that are expressly excluded from 
trade reporting under FINRA rules.
    (c) The following symbols shall be used to denote the applicable 
Member:

------------------------------------------------------------------------
                 Code                                Member
------------------------------------------------------------------------
A....................................  NYSE American LLC.
Z....................................  Cboe BZX Exchange, Inc.
Y....................................  Cboe BYX Exchange, Inc.
B....................................  Nasdaq BX, Inc.
W....................................  Cboe Exchange, Inc.
M....................................  NYSE Chicago, Inc.
J....................................  Cboe EDGA Exchange, Inc.
K....................................  Cboe EDGX Exchange, Inc.
I....................................  Nasdaq ISE, LLC.
V....................................  Investors' Exchange LLC.
D....................................  Financial Industry Regulatory
                                        Authority, Inc.
Q....................................  The Nasdaq Stock Market LLC.
C....................................  NYSE National, Inc.
N....................................  New York Stock Exchange LLC.
P....................................  NYSE Arca, Inc.
X....................................  Nasdaq PHLX LLC.
L....................................  Long-Term Stock Exchange Inc.
U....................................  MEMX LLC.
------------------------------------------------------------------------

    (d) Indemnification.
    (i) Each Member agrees, severally and not jointly, to indemnify 
and hold harmless and defend the Company, each other Member, the 
Processors, the Administrator, the Operating Committee, and each of 
their respective directors, officers, employees, agents, and 
Affiliates (each, an ``Member Indemnified Party'') from and against 
any and all loss, liability, claim, damage, and expense whatsoever 
incurred or threatened against such Member Indemnified Party as a 
result of a system error or disruption at such Member's Market 
affecting any Transaction Reports, Quotation Information, or other 
information reported to the Processors by such Member and 
disseminated by the Processors to Vendors and Subscribers. This 
indemnity shall be in addition to any liability that the 
indemnifying Member may otherwise have.
    (ii) Promptly after receipt by a Member Indemnified Party of 
notice of the commencement of any action, such Member Indemnified 
Party will, if it intends to make

[[Page 44217]]

a claim in respect thereof against an indemnifying Member, notify 
the indemnifying Member in writing of the commencement thereof; 
provided, however, that the failure to so notify the indemnifying 
Member will only relieve the indemnifying Member from any liability 
which it may have to any Member Indemnified Party to the extent such 
indemnifying Member is actually prejudiced by such failure. In case 
any such action is brought against any Member Indemnified Party and 
it promptly notifies an indemnifying Member of the commencement 
thereof, the indemnifying Member will be entitled to participate in, 
and, to the extent that it elects (jointly with any other 
indemnifying Member similarly notified), to assume and control the 
defense thereof with counsel chosen by it. After notice from the 
indemnifying Member of its election to assume the defense thereof, 
the indemnifying Member will not be liable to such Indemnified Party 
for any legal or other expenses subsequently incurred by such Member 
Indemnified Party in connection with the defense thereof but the 
Member Indemnified Party may, at its own expense, participate in 
such defense by counsel chosen by it without, however, impairing the 
indemnifying Member's control of the defense. If the indemnifying 
Member has assumed the defense in accordance with the terms hereof, 
the indemnifying Member may enter into a settlement or consent to 
any judgment without the prior written consent of the Member 
Indemnified Party if (i) such settlement or judgment involves 
monetary damages only, all of which will be fully paid by the 
indemnifying Member and without admission of fault or culpability on 
behalf of any Member Indemnified Party, and (ii) a term of the 
settlement or judgment is that the Person or Persons asserting such 
claim unconditionally and irrevocably release all Member Indemnified 
Parties from all liability with respect to such claim; otherwise, 
the consent of the Member Indemnified Party shall be required in 
order to enter into any settlement of, or consent to the entry of a 
judgment with respect to, any claim (which consent shall not be 
unreasonably withheld, delayed, or conditioned).

Section 5.5 Operational Issues.

    (a) Each Member shall be responsible for collecting and 
validating quotes and last sale reports within its own system prior 
to transmitting this data to the Processors.
    (b) Each Member may utilize a dedicated Member line into the 
Processors to transmit Transaction Reports and Quotation Information 
to the Processors.
    (c) Whenever a Member determines that a level of trading 
activity or other unusual market conditions prevent it from 
collecting and transmitting Transaction Reports or Quotation 
Information to the Processor, or where a trading halt or suspension 
in an Eligible Security is in effect in its Market, the Member shall 
promptly notify the Processors of such condition or event and shall 
resume collecting and transmitting Transaction Reports and Quotation 
Information to it as soon as the condition or event is terminated. 
In the event of a system malfunction resulting in the inability of a 
Member or its members to transmit Transaction Reports or Quotation 
Information to the Processors, the Member shall promptly notify the 
Processors of such event or condition. Upon receiving such 
notification, the Processors shall take appropriate action, 
including either closing the quotation or purging the system of the 
affected quotations.

Article VI.

THE ADMINISTRATOR

Section 6.1 General Functions of the Administrator.

    Subject to the general direction of the Operating Committee, as 
more fully set forth in the agreement entered into between the 
Company and the Administrator (the ``Administrative Services 
Agreement''), the Administrator shall perform administrative 
functions on behalf of the Company including recordkeeping; 
administering Vendor and Subscriber contracts; administering Fees, 
including billing, collection, and auditing of Vendors and 
Subscribers; administering Distributions; tax functions of the 
Company; and the preparation of the Company's audited financial 
reports.

Section 6.2 Independence of the Administrator.

    The Administrator may not be owned or controlled by a corporate 
entity that, either directly or via another subsidiary, offers for 
sale its own PDP.

Section 6.[2]3 Evaluation of the Administrator.

    The Administrator's performance of its functions under the 
Administrative Services Agreement shall be subject to review at any 
time as determined by an affirmative vote of the Operating Committee 
pursuant to Section 4.3; provided, however, that a review shall be 
conducted at least once every two calendar years but not more 
frequently than once each calendar year (unless the Administrator 
has materially defaulted in its obligations under the Administrative 
Services Agreement and such default has not been cured within the 
applicable cure period set forth in the Administrative Services 
Agreement, in which event such limitation shall not apply). The 
Operating Committee shall appoint a subcommittee or other Persons to 
conduct the review. The Company shall require the reviewer to 
provide the Operating Committee with a written report of its 
findings and to make recommendations (if necessary), including with 
respect to the continuing operation of the Administrator. The 
Administrator shall be required to assist and participate in such 
review. The Operating Committee shall notify the Commission of any 
recommendations it may approve as a result of the review of the 
Administrator and shall supply the Commission with a copy of any 
reports that may be prepared in connection therewith.

Section 6.[3]4 Process for Selecting New Administrator

    Prior to the Operative Date, upon the termination or withdrawal 
of the Administrator, or upon the expiration of the Administrative 
Services Agreement, the Operating Committee shall establish 
procedures for selecting a new Administrator (the ``Administrator 
Selection Procedures'').[ The Administrator selected by the 
Operating Committee may not be owned or controlled by a corporate 
entity that, either directly or via another subsidiary, offers for 
sale its own PDP.] The Operating Committee, as part of the process 
of establishing Administrator Selection Procedures, may solicit and 
consider the timely comment of any entity affected by the operation 
of this Agreement. The Administrator Selection Procedures shall be 
established by the [Voting Representatives]Operating Committee 
pursuant to Section 4.3, and shall set forth, at a minimum:
    (a) the entity that will:
    (i) draft the Operating Committee's request for proposal for 
bids on a new Administrator;
    (ii) assist the Operating Committee in evaluating bids for the 
new Administrator; and
    (iii) otherwise provide assistance and guidance to the Operating 
Committee in the selection process.
    (b) the minimum technical and operational requirements to be 
fulfilled by the Administrator;
    (c) the criteria to be considered in selecting the 
Administrator; and
    (d) the entities (other than Voting Representatives) that are 
eligible to comment on the selection of the Administrator.

Article VII.

REGULATORY MATTERS

Section 7.1 Regulatory and Operational Halts.

    (a) Operational Halts. A Member shall notify the Processors if 
it has concerns about its ability to collect and transmit quotes, 
orders, or last sale prices, or where it has declared an Operational 
Halt or suspension of trading in one or more Eligible Securities, 
pursuant to the procedures adopted by the Operating Committee.
    (b) Regulatory Halts.
    (i) The Primary Listing Market may declare a Regulatory Halt in 
trading for any security for which it is the Primary Listing Market:
    (A) as provided for in the rules of the Primary Listing Market;
    (B) if it determines there is a SIP Outage, Material SIP 
Latency, or Extraordinary Market Activity; or
    (C) in the event of national, regional, or localized disruption 
that necessitates a Regulatory Halt to maintain a fair and orderly 
market.
    (ii) In making a determination to declare a Regulatory Halt 
under subparagraph (b)(i), the Primary Listing Market will consider 
the totality of information available concerning the severity of the 
issue, its likely duration, and potential impact on Member Firms and 
other market participants and will make a good-faith determination 
that the criteria of subparagraph (b)(i) have been satisfied and 
that a Regulatory Halt is appropriate. The Primary Listing Market 
will consult, if feasible, with the affected Trading Center(s), the 
other Members, or the Processors, as applicable, regarding the scope 
of the issue and what steps are being taken to address the

[[Page 44218]]

issue. Once a Regulatory Halt under subparagraph (b)(i) has been 
declared, the Primary Listing Market will continue to evaluate the 
circumstances to determine when trading may resume in accordance 
with the rules of the Primary Listing Market.
    (c) Initiating a Regulatory Halt.
    (i) The start time of a Regulatory Halt is when the Primary 
Listing Market declares the halt, regardless of whether an issue 
with communications impacts the dissemination of the notice.
    (ii) If a Processor is unable to disseminate notice of a 
Regulatory Halt or the Primary Listing Market is not open for 
trading, the Primary Listing Market will take reasonable steps to 
provide notice of a Regulatory Halt, which shall include both the 
type and start time of the Regulatory Halt, by dissemination 
through:
    (A) PDP;
    (B) posting on a publicly-available Member website; or
    (C) system status messages.
    (iii) Except in exigent circumstances, the Primary Listing 
Market will not declare a Regulatory Halt retroactive to a time 
earlier than the notice of such halt.
    (iv) Resumption of Trading After Regulatory Halts Other Than SIP 
Halts. The Primary Listing Market will declare a resumption of 
trading when it makes a good-faith determination that trading may 
resume in a fair and orderly manner and in accordance with its 
rules.
    (v) For a Regulatory Halt that is initiated by another Member 
that is a Primary Listing Market, a Member may resume trading after 
the Member receives notification from the Primary Listing Market 
that the Regulatory Halt has been terminated.
    (d) Resumption of Trading After SIP Halt.
    (i) The Primary Listing Market will determine the SIP Halt 
Resume Time. In making such determination, the Primary Listing 
Market will make a good-faith determination and consider the 
totality of information to determine whether resuming trading would 
promote a fair and orderly market, including input from the 
Processors, the other Members, or the operator of the system in 
question (as well as any Trading Center(s) to which such system is 
linked), regarding operational readiness to resume trading. The 
Primary Listing Market retains discretion to delay the SIP Halt 
Resume Time if it believes trading will not resume in a fair and 
orderly manner.[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/
SUBJECT][/PREAMB][SUPLINF][HED]*[/HED][APPENDIX][HED]*[/HED]
    (ii) The Primary Listing Market will terminate a SIP Halt with a 
notification that specifies a SIP Halt Resume Time. The Primary 
Listing Market shall provide a minimum notice of a SIP Halt Resume 
Time, as specified by the rules of the Primary Listing Market, 
during which period market participants may enter quotes and orders 
in the affected securities. During Regular Trading Hours, the last 
SIP Halt Resume Time before the end of Regular Trading Hours shall 
be an amount of time as specified by the rules of the Primary 
Listing Market. The Primary Listing Market may stagger the SIP Halt 
Resume Times for multiple symbols in order to reopen in a fair and 
orderly manner.
    (iii) During Regular Trading Hours, if the Primary Listing 
Market does not open a security within the amount of time as 
specified by the rules of the Primary Listing Market after the SIP 
Halt Resume Time, a Member may resume trading in that security. 
Outside Regular Trading Hours, a Member may resume trading 
immediately after the SIP Halt Resume Time.
    (e) Member to Halt Trading During Regulatory Halt. A Member will 
halt trading for any security traded on its Market if the Primary 
Listing Market declares a Regulatory Halt for the security.
    (f) Communications. Whenever, in the exercise of its regulatory 
functions, the Primary Listing Market for an Eligible Security 
determines it is appropriate to initiate a Regulatory Halt, the 
Primary Listing Market will notify all other Members and the 
affected Processors of such Regulatory Halt as well as provide 
notice that a Regulatory Halt has been lifted using such protocols 
and other emergency procedures as may be mutually agreed to between 
the Members and the Primary Listing Market. The affected Processors 
shall disseminate to Members notice of the Regulatory Halt (as well 
as notice of the lifting of a Regulatory Halt) (i) through the CT 
Feeds or (ii) any other means the affected Processors, in its sole 
discretion, considers appropriate. Each Member shall be required to 
continuously monitor these communication protocols established by 
the Operating Committee and the Processors during market hours, and 
the failure of a Member to do so shall not prevent the Primary 
Listing Market from initiating a Regulatory Halt in accordance with 
the procedures specified herein.

Section 7.2 Hours of Operation of the System.

    (a) Quotation Information shall be entered, as applicable, by 
Members as to all Eligible Securities in which they make a market 
during Regular Trading Hours on all days the Processors are in 
operation. Transaction Reports shall be entered between 9:30 a.m. 
and 4:00:10 p.m. ET by Members as to all Eligible Securities in 
which they execute transactions during Regular Trading Hours on all 
days the Processors are in operation.
    (b) Members that execute transactions in Eligible Securities 
outside of Regular Trading Hours, shall report such transactions as 
follows:
    (i) transactions in Eligible Securities executed between 4:00 
a.m. and 9:29:59 a.m. ET and between 4:00:01 p.m. and 8:00 p.m. ET, 
shall be designated with an appropriate indicator to denote their 
execution outside normal market hours;
    (ii) transactions in Eligible Securities executed after 8:00 
p.m. and before 12:00 a.m. (midnight) shall be reported to the 
Processors between the hours of 4:00 a.m. and 8:00 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 12:00 
a.m. (midnight) and 4:00 a.m. ET shall be transmitted to the 
Processors between 4:00 a.m. and 9:30 a.m. ET, on trade date, shall 
be designated with an appropriate indicator to denote their 
execution outside normal market hours, and shall be accompanied by 
the time of execution; and
    (iv) transactions reported pursuant to this Section 7.3 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 Member in whose Market the transaction occurred and can be 
reported between the hours of 4:00 a.m. and 8:00 p.m. ET.
    (d) The Processors shall collect, process and disseminate 
Quotation Information in Eligible Securities at other times between 
4:00 a.m. and 9:30 a.m. ET, and after 4:00 p.m. ET, when any Member 
or FINRA Participant is open for trading, until 8:00 p.m. ET (the 
``Additional Period''); provided, however, that the National Best 
Bid and Offer quotation will not be disseminated before 4:00 a.m. or 
after 8:00 p.m. ET. Members that enter Quotation Information or 
submit Transaction Reports to the Processors during the Additional 
Period shall do so for all Eligible Securities in which they enter 
quotations.

Article VIII.

CAPITAL CONTRUBITIONS; CAPITAL ACCOUNTS

Section 8.1 Capital Accounts.

    (a) A separate capital account (``Capital Account'') shall be 
established and maintained by the Company for each Member in 
accordance with section 704(b) of the Code and Treasury Regulation 
section 1.704-1 (b)(2)(iv). There shall be credited to each Member's 
Capital Account (i) the Capital Contributions (at fair market value 
in the case of contributed property) made by such Member (which 
shall be deemed to be zero for the initial Members), (ii) 
allocations of Company profits and gain (or items thereof) to such 
Member pursuant to Section [10]9.2 and (iii) any recaptured tax 
credits, or portion thereof, to the extent such increase to the tax 
basis of a Member's interest in the Company may be allowed pursuant 
to the Code. Each Member's Capital Account shall be decreased by (x) 
the amount of distributions (at fair market value in the case of 
property distributed in kind) to such Member, (y) allocations of 
Company losses to such Member (including expenditures which can 
neither by capitalized nor deducted for tax purposes, organization 
and syndication expenses not subject to amortization and loss on 
sale or disposition of the Company's assets, whether or not 
disallowed under sections 267 or 707 of the Code) pursuant to 
Section [10]9.2 and (z) any tax credits, or portion thereof, as may 
be required to be charged to the tax basis of a Membership Interest 
pursuant to the Code. Capital Accounts shall not be adjusted to 
reflect a Member's share of liabilities under section 752 of the 
Code.
    (b) The fair market value of contributed, distributed, or 
revalued property shall be agreed to by the Operating Committee or, 
if there is no such agreement, by an appraisal.
    (c) The foregoing provisions and the other provisions of this 
Agreement relating to the

[[Page 44219]]

maintenance of Capital Accounts are intended to comply with Treasury 
Regulation section 1.704-1(b) promulgated under section 704(b) of 
the Code, and shall be interpreted and applied in a manner 
consistent with such Treasury Regulations.

Section 8.2 Additional Capital Contributions.

    Except with the approval of the Operating Committee or as 
otherwise provided in this Section 8.2, no Member shall be obligated 
or permitted to make any additional contribution to the capital of 
the Company. The Members agree to make additional Capital 
Contributions from time to time as appropriate in respect of 
reasonable administrative and other reasonable expenses of the 
Company.

Section 8.3 Distributions.

    Except as set forth in this Section 8.3 and Section 11.2, and 
subject to the provisions of Section 13.1, Distributions shall be 
made to the Members at the times and in the aggregate amounts set 
forth in Exhibit D. Notwithstanding any provisions to the contrary 
contained in this Agreement, the Company shall not make a 
Distribution to a Member on account of its interest in the Company 
if such Distribution would violate Section 18-607 of the Delaware 
Act or other Applicable Law. Distributions may be made in cash or, 
if determined by the Operating Committee, in-kind. The Operating 
Committee may reserve amounts for anticipated expenses or contingent 
liabilities of the Company. In the event that additional Capital 
Contributions are called for, and any Member fails to provide the 
full amount of such additional Capital Contributions as set forth in 
the relevant resolution of the Operating Committee, any 
Distributions to be made to such defaulting Member shall be reduced 
by the amount of any required but unpaid Capital Contribution due 
from such Member.

Article IX.

ALLOCATIONS

Section 9.1 Calculation of Profits and Losses.

    To the fullest extent permitted by Applicable Law, the profits 
and losses of the Company shall be determined for each fiscal year 
in a manner consistent with GAAP.

Section 9.2 Allocation of Profits and Losses.

    (a) Except as otherwise set forth in this Section 9.2, for 
Capital Account purposes, all items of income, gain, loss, and 
deduction shall be allocated among the Members in accordance with 
Exhibit D.
    (b) For federal, state and local income tax purposes, items of 
income, gain, loss, deduction, and credit shall be allocated to the 
Members in accordance with the allocations of the corresponding 
items for Capital Account purposes under this Section 9.2, except 
that items with respect to which there is a difference between tax 
and book basis will be allocated in accordance with Section 704(c) 
of the Code, the Treasury Regulations thereunder and Treasury 
Regulations Section 1.704-1(b)(4)(i).
    (c) Notwithstanding any provision set forth in this Section 9.2, 
no item of deduction or loss shall be allocated to a Member to the 
extent the allocation would cause a negative balance in such 
Member's Capital Account (after taking into account the adjustments, 
allocations and distributions described in Treasury Regulations 
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) that exceeds the 
amount that such Member would be required to reimburse the Company 
pursuant to this Agreement or Applicable Law.
    (d) In the event any Member unexpectedly receives any 
adjustments, allocations, or distributions described in Treasury 
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6), items of 
the Company's income and gain shall be specially allocated to such 
Member in an amount and manner sufficient to eliminate as quickly as 
possible any deficit balance in its Capital Account created by such 
adjustments, allocations or distributions in excess of that 
permitted under Section [10]9.2(c). Any special allocations of items 
of income or gain pursuant to this Section [10]9.2(d) shall be taken 
into account in computing subsequent allocations pursuant to this 
Section [10]9.2 so that the net amount of any items so allocated and 
all other items allocated to each Member pursuant to this Section 
[10]9.2 shall, to the extent possible, be equal to the net amount 
that would have been allocated to each such Member pursuant to the 
provisions of this Section [10]9.2 if such unexpected adjustments, 
allocations or distributions had not occurred.

Article X.

RECORDS AND ACCOUNTING; REPORTS

Section 10.1 Accounting.

    (a) The Operating Committee shall maintain a system of 
accounting which enables the Company to produce accounting records 
and information substantially consistent with GAAP. The Fiscal Year 
of the Company shall be the calendar year unless Applicable Law 
requires a different Fiscal Year.
    (b) All matters concerning accounting procedures shall be 
determined by the Operating Committee.

Section 10.2 Tax Status; Returns.

    (a) It is the intent of this Company and the Members that this 
Company shall be treated as a partnership for federal, state and 
local income tax purposes. Neither the Company nor any Member shall 
make an election for the Company to be classified as other than a 
partnership pursuant to Treasury Regulations Section 301.7701-3 or 
otherwise.
    (b) The Company shall cause federal, state, and local income tax 
returns for the Company to be prepared and timely filed with the 
appropriate authorities and shall arrange for the timely delivery to 
the Members of such information as is necessary for such Members to 
prepare their federal, state and local tax returns. All tax returns 
shall be prepared in a manner consistent with the Distributions made 
in accordance with Exhibit D.

Section 10.3 Partnership Representative.

    (a) The Operating Committee shall appoint an entity as the 
``Partnership Representative'' of the Company for purposes of 
Section 6223 of the Code and the Treasury Regulations promulgated 
thereunder, and all federal, state, and local Tax audits and 
litigation shall be conducted under the direction of the Partnership 
Representative.
    (b) The Partnership Representative shall use reasonable efforts 
to inform each Member of all significant matters that may come to 
its attention by giving notice thereof and to forward to each Member 
copies of all significant written communications it may receive in 
such capacity. The Partnership Representative shall consult with the 
Members before taking any material actions with respect to tax 
matters, including actions relating to (i) an IRS examination of the 
Company commenced under Section 6231(a) of the Code, (ii) a request 
for administrative adjustment filed by the Company under Section 
6227 of the Code, (iii) the filing of a petition for readjustment 
under Section 6234 of the Code with respect to a final notice of 
partnership adjustment, (iv) the appeal of an adverse judicial 
decision, and (v) the compromise, settlement, or dismissal of any 
such proceedings.
    (c) The Partnership Representative shall not compromise or 
settle any tax audit or litigation affecting the Members without the 
approval of a majority of Members. Any material proposed action, 
inaction, or election to be taken by the Partnership Representative, 
including the election under Section 6226(a)(1) of the Code, shall 
require the prior approval of a majority of Members.

Article XI.

DISSOLUTION AND TERMINATION

Section 11.1 Dissolution of Company.

    The Company shall dissolve, and its assets and business shall be 
wound up, upon the occurrence of any of the following events:
    (a) Unanimous written consent of the Members to dissolve the 
Company;
    (b) The sale or other disposition of all or substantially all 
the Company's assets outside the ordinary course of business;
    (c) An event which makes it unlawful or impossible for the 
Company business to be continued;
    (d) The withdrawal of one or more Members such that there is 
only one remaining Member; or[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/
SUBJECT][/PREAMB][SUPLINF][HED]*[/HED][APPENDIX][HED]*[/HED]
    (e) The entry of a decree of judicial dissolution under Sec.  
18-802 of the Delaware Act.

Section 11.2 Liquidation and Distribution.

    Following the occurrence of an event described in Section 11.1, 
the Members shall appoint a liquidating trustee who shall wind up 
the affairs of the Company by (i) selling its assets in an orderly 
manner (so as to avoid the loss normally associated with forced 
sales), and (ii) applying and distributing the proceeds of such 
sale, together with other funds held by the Company: (a) first, to 
the payment of all debts and liabilities of the Company; (b) second, 
to the establishments of any reserves reasonably necessary to 
provide for any contingent recourse liabilities and obligations; (c) 
third, to the Members in accordance with Exhibit D; and (d) fourth, 
to the Members as determined by a majority of Members.

[[Page 44220]]

Section 11.3 Termination.

    Each of the Members shall be furnished with a statement prepared 
by the independent accountants retained on behalf of the Company, 
which shall set forth the assets and liabilities of the Company as 
of the date of the final distribution of Company's assets under 
Section [10]11.2 and the net profit or net loss for the fiscal 
period ending on such date. Upon compliance with the distribution 
plan set forth in Section [10]11.2, the Members shall cease to be 
such, and the liquidating trustee shall execute, acknowledge, and 
cause to be filed a certificate of cancellation of the Company. Upon 
completion of the dissolution, winding up, liquidation, and 
distribution of the liquidation proceeds, the Company shall 
terminate.

Article XII.

EXCULPATION AND INDEMNIFICATION

Section 12.1 Exculpation.

    Each Member, by and for itself, each of its Affiliates and each 
of its and their respective equity holders, directors, officers, 
controlling persons, partners, employees, successors and assigns, 
hereby acknowledges and agrees that it is the intent of the Company 
and each Member that the liability of each Member and each 
individual currently or formerly serving as an SRO Voting 
Representative or Non-SRO Voting Representative (each, an 
``Exculpated Party'') be limited to the maximum extent permitted by 
Applicable Law or as otherwise expressly provided herein. In 
accordance with the foregoing, the Members hereby acknowledge and 
agree that:
    (a) To the maximum extent permitted by Applicable Law or as 
otherwise expressly provided herein, no present or former Exculpated 
Party or any of such Exculpated Party's Affiliates, heirs, 
successors, assigns, agents or representatives shall be liable to 
the Company or any Member for any loss suffered in connection with a 
breach of any fiduciary duty, errors in judgment or other acts or 
omissions by such Exculpated Party; provided, however, that this 
provision shall not eliminate or limit the liability of such 
Exculpated Party for (i) acts or omissions which involve gross 
negligence, willful misconduct or a knowing violation of law, or 
(ii) as provided in Section 5.4(d) hereof, losses resulting from 
such Exculpated Party's Transaction Reports, Quotation Information 
or other information reported to the Processors by such Exculpated 
Party (collectively ``Non-Exculpated Items''). Any Exculpated Party 
may consult with counsel and accountants in respect of Company 
affairs, and provided such Person acts in good faith reliance upon 
the advice or opinion of such counsel or accountants, such Person 
shall not be liable for any loss suffered in reliance thereon.
    (b) Notwithstanding anything to the contrary contained herein, 
whenever in this Agreement or any other agreement contemplated 
herein or otherwise, an Exculpated Party is permitted or required to 
take any action or to make a decision in its ``sole discretion'' or 
``discretion'' or that it deems ``necessary,'' or ``necessary or 
appropriate'' or under a grant of similar authority or latitude, the 
Exculpated Party may, insofar as Applicable Law permits, make such 
decision in its sole discretion (regardless of whether there is a 
reference to ``sole discretion'' or ``discretion''). The Exculpated 
Party (i) shall be entitled to consider such interests and factors 
as it desires (including its own interests), (ii) shall have no duty 
or obligation (fiduciary or otherwise) to give any consideration to 
any interest of or factors affecting the Company or the Members, and 
(iii) shall not be subject to any other or different standards 
imposed by this Agreement, or any other agreement contemplated 
hereby, under any Applicable Law or in equity.

Section 12.2 Right to Indemnification.

    (a) Subject to the limitations and conditions provided in this 
Article XII and to the fullest extent permitted by Applicable Law, 
the Company shall indemnify each Company Indemnified Party for 
Losses as a result of the Company Indemnified Party being a Party to 
a Proceeding. Notwithstanding the foregoing, no such indemnification 
shall be available in the event the Company is a claimant against 
the Company Indemnified Party.
    (b) Indemnification under this Article XII shall continue as to 
a Company Indemnified Party who has ceased to serve in the capacity 
that initially entitled such Company Indemnified Party to indemnity 
hereunder; provided, however, that the Company shall not be 
obligated to indemnify a Company Indemnified Party for the Company 
Indemnified Party's Non-Exculpated Items.
    (c) The rights granted pursuant to this Article XII shall be 
deemed contract rights, and no amendment, modification, or repeal of 
this Article XII shall have the effect of limiting or denying any 
such rights with respect to actions taken or Proceedings arising 
prior to any amendment, modification, or repeal. It is expressly 
acknowledged that the indemnification provided in this Article XII 
could involve indemnification for negligence or under theories of 
strict liability.
    (d) The Company shall be the primary obligor in respect of any 
Company Indemnified Party's claim for indemnification, for 
advancement of expenses, or for providing insurance, subject to this 
Article XII. The obligation, if any, of any Member or its Affiliates 
to indemnify, to advance expenses to, or provide insurance for any 
Company Indemnified Party shall be secondary to the obligations of 
the Company under this Article XII (and the Company's insurance 
providers shall have no right to contribution or subrogation with 
respect to the insurance plans of such Member or its Affiliates).

Section 12.3 Advance Payment.

    Reasonable expenses incurred by a Company Indemnified Party who 
is a named defendant or respondent to a Proceeding shall be paid by 
the Company in advance of the final disposition of the Proceeding 
upon receipt of an undertaking by or on behalf of such Company 
Indemnified Party to repay such amount if it shall ultimately be 
determined that he or she is not entitled to be indemnified by the 
Company.

Section 12.4 Appearance as a Witness.

    Notwithstanding any other provision of this Article XII, the 
Company shall pay or reimburse reasonable out-of-pocket expenses 
incurred by a Company Indemnified Party in connection with his 
appearance as a witness or other participation in a Proceeding at a 
time when he is not a named defendant or respondent in the 
Proceeding.

Section 12.5 Nonexclusivity of Rights.

    The right to indemnification and the advancement and payment of 
expenses conferred in this Article XII shall not be exclusive of any 
other right which any Company Indemnified Person may have or 
hereafter acquire under any law (common or statutory), provision of 
the Certificate or this Agreement or otherwise.

Article XIII.

MISCELLANEOUS

Section 13.1 Expenses.

    The Company shall pay all current expenses, including any Taxes 
payable by the Company, whether for its own account or otherwise 
required by law (including any costs of complying with applicable 
tax obligations), third-party service provider fees, and all 
administrative and processing expenses and fees, as well as any 
other amounts owing to the Processors under the Processor Services 
Agreements, to the Administrator under the Administrative Services 
Agreement, or to the Processors, Administrator, or FINRA under 
Exhibit D to this Agreement, before any allocations may be made to 
the Members. Appropriate reserves, as unanimously determined by the 
Members, may be charged to the Capital Account of the Members for 
(i) contingent liabilities, if any, as of the date any such 
contingent liabilities become known to the Operating Committee, or 
(ii) amounts needed to pay the Company's operating expenses, 
including administrative and processing expenses and fees, before 
any allocations are made to the Member. Each Member shall bear the 
cost of implementation of any technical enhancements to the System 
made at its request and solely for its use, subject to 
reapportionment should any other Member subsequently make use of the 
enhancement, or the development thereof.

Section 13.2 Entire Agreement.

    Upon the Operative Date, this Agreement supersedes the CQ Plan, 
the CTA Plan, and the UTP Plan and all other prior agreements among 
the Members with respect to the subject matter hereof. This 
instrument contains the entire agreement with respect to such 
subject matter.

Section 13.3 Notices and Addresses.

    Unless otherwise specified herein, all notices, consents, 
approvals, reports, designations, requests, waivers, elections, and 
other communications (collectively, ``Notices'') authorized or 
required to be given pursuant to this Agreement shall be in writing 
and may be delivered by certified or registered mail, postage 
prepaid, by hand, by any private overnight courier service, or 
notification through the Company's web

[[Page 44221]]

portal. Such Notices shall be mailed or delivered to the Members at 
the addresses set forth on Exhibit A or such other address as a 
Member may notify the other Members of in writing. Any Notices to be 
sent to the Company shall be delivered to the principal place of 
business of the Company or at such other address as the Operating 
Committee may specify in a notice sent to all of the Members. 
Notices shall be effective (i) if mailed, on the date three days 
after the date of mailing, (ii) if hand delivered or delivered by 
private courier, on the date of delivery, or (iii) if sent by 
through the Company's web portal, on the date sent; provided, 
however, that notices of a change of address shall be effective only 
upon receipt.

Section 13.4 Governing Law.

    This Agreement shall be governed by and construed in accordance 
with the Delaware Act and internal laws and decisions of the State 
of Delaware, without regard to the conflicts of laws principles 
thereof; provided, however, that the rights and obligations of the 
Members, the Processors and the Administrator, and of Vendors, 
Subscribers, and other Persons contracting with the Company in 
respect of the matters covered by this Agreement, shall at all times 
also be subject to any applicable provisions of the Exchange Act and 
any rules and regulations promulgated thereunder. For the avoidance 
of doubt, nothing in this Agreement waives any protection or 
limitation of liability afforded any of the Members or any of their 
Affiliates by common law, including the doctrines of self-regulatory 
organization immunity and federal preemption.

Section 13.5 Amendments.

    (a) Except as this Agreement otherwise provides, this Agreement 
may be modified from time to time when authorized by the Operating 
Committee pursuant to Section 4.3, subject to the approval of the 
Commission or when such modification otherwise becomes effective 
pursuant to Section 11A of the Exchange Act and Rule 608 of 
Regulation NMS.
    (b) [Notwithstanding Section 13.5(a), Articles IX, X, XI, and 
XII may be modified upon approval by a majority of Members; 
provided, however, that Operating Committee approval pursuant to 
Section 4.3 will be required for modifications to the allocation of 
all items of income, gain, loss, and deduction in accordance with 
Exhibit D.
    (c) ]In the case of a Ministerial Amendment, the Chair of the 
Company's Operating Committee may modify this Agreement by 
submitting to the Commission an appropriate amendment that sets 
forth the modification; provided, however, that 48-hours advance 
notice of the amendment to the Operating Committee in writing is 
required. Such an amendment shall become effective upon filing with 
the Commission in accordance with Section 11A of the Exchange Act 
and Rule 608 of Regulation NMS.
    [(d)](c) ``Ministerial Amendment'' means an amendment to this 
Agreement that pertains solely to any one or more of the following:
    (i) admitting a new Member to the Company;
    (ii) changing the name or address of a Member;
    (iii) incorporating a change that the Commission has implemented 
by rule and that requires no conforming language to the text of this 
Agreement;
    (iv) incorporating a change (A) that the Commission has 
implemented by rule, (B) that requires conforming language to the 
text of this Agreement, and (C) whose conforming language to the 
text of this Agreement has been approved by the affirmative vote of 
the Operating Committee pursuant to Section 4.3;
    (v) incorporating a change (A) that a Governmental Authority 
requires relating to the governance or operation of an LLC, (B) that 
requires conforming language to the text of this Agreement, and (C) 
whose conforming language to the text of this Agreement has been 
approved by the affirmative vote of the Operating Committee pursuant 
to Section 4.3[ or upon approval by a majority of Members pursuant 
to Section 13.5(b), as applicable]; or
    (vi) incorporating a purely technical change, such as correcting 
an error or an inaccurate reference to a statutory provision, or 
removing language that has become obsolete.

Section 13.6 Successors.

    This Agreement shall be binding upon and inure to the benefit of 
the Members and their respective legal representatives and 
successors.

Section 13.7 Limitation on Rights of Others.

    None of the provisions of this Agreement shall be for the 
benefit of or enforceable by any creditor of the Company. 
Furthermore, except as provided in Section 3.7(b), the Members shall 
not have any duty or obligation to any creditor of the Company to 
make any contribution to the Company or to issue any call for 
capital pursuant to this Agreement. Nothing in this Agreement shall 
be deemed to create any legal or equitable right, remedy or claim in 
any Person not a party hereto (other than any Person indemnified 
under Article XII).

Section 13.8 Counterparts.

    This Agreement may be executed by the Members in any number of 
counterparts, no one of which need contain the signature of all 
Members. As many such counterparts as shall together contain all 
such signatures shall constitute one and the same 
instrument.[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/
SUBJECT][/PREAMB][SUPLINF][HED]*[/HED][APPENDIX][HED]*[/HED]

Section 13.9 Headings.

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

Section 13.10 Validity and Severability.

    If any provision of this Agreement shall be held invalid or 
unenforceable, that shall not affect the validity or enforceability 
of any other provisions of this Agreement, all of which shall remain 
in full force and effect.

Section 13.11 Statutory References.

    Each reference in this Agreement to a particular statute or 
regulation, or a provision thereof, shall be deemed to refer to such 
statute or regulation, or provision thereof, or to any similar or 
superseding statute or regulation, or provision thereof, as is from 
time to time in effect.

Section 13.12 Modifications to be in Writing.

    This Agreement constitutes the entire understanding of the 
parties hereto with respect to the subject matter hereof, and no 
amendment, modification or alteration shall be binding unless the 
same is in writing and adopted in accordance with the provisions of 
Section 13.5.

[Signature Pages Follow]

    IN WITNESS WHEREOF, the undersigned Members have executed this 
Agreement as of the day and year first above written.

                                Exhibit A
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                         Members of CT Plan LLC
                         Member Name and Address
Cboe BYX Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois
 60605.
Cboe BZX Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois
 60605.
Cboe EDGA Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois
 60605.
Cboe EDGX Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois
 60605.
Cboe Exchange, Inc., 400 South LaSalle Street, Chicago, Illinois 60605.
Financial Industry Regulatory Authority, Inc., 1735 K Street NW,
 Washington, DC 20006.
Investors' Exchange LLC, 3 World Trade Center 58th Floor, New York, New
 York 10007.
Long-Term Stock Exchange, Inc., 300 Montgomery St., Ste. 790, San
 Francisco, CA 94104.
MEMX LLC, 111 Town Square Place, Suite 520, Jersey City, New Jersey
 07310.
Nasdaq BX, Inc., One Liberty Plaza, 165 Broadway, New York, New York
 10006.
Nasdaq ISE, LLC, One Liberty Plaza, 165 Broadway, New York, New York
 10006.
Nasdaq PHLX LLC, FMC Tower, Level 8, 2929 Walnut Street, Philadelphia,
 Pennsylvania 19104.
The Nasdaq Stock Market LLC, One Liberty Plaza, 165 Broadway, New York,
 NY 10006.
New York Stock Exchange LLC, 11 Wall Street, New York, New York 10005.
NYSE American LLC, 11 Wall Street, New York, New York 10005.
NYSE Arca, Inc., 11 Wall Street, New York, New York 10005.
NYSE Chicago, Inc., 11 Wall Street, New York, New York 10005.
NYSE National, Inc., 11 Wall Street, New York, NY 10005.
------------------------------------------------------------------------

                                 [FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES][NOTICE][PREAMB][AGEN
C
Y
]
*
[
/
A
G
E
N
C
Y
]
[
S
U
B
J
E
C
T
]
*
[
/
S
U
B
J
E
C
T
]
[
/
P
R
E
A
M
B
]
[
S
U
P
L
I
N
F
]
[
H
E
D
]
*
[
/
H
E
D
]
[
A
P
P
E
N
D
I
X
]
[
H
E
D
]
*
[
/
H
E
D
]
Exhibit B

Disclosures

    (a) The Members must respond to the following questions and 
instructions:
    (i) Is the Member for profit or not-for-profit? If the Member is 
for profit, is it publicly or privately owned? If privately owned, 
list any owner with an interest of 5% or more of the Member, where 
to the Member's knowledge, such owner, or any affiliate controlling, 
controlled by, or under common control with the owner, subscribes,

[[Page 44222]]

directly or through a third-party vendor, to CT Feeds and/or Member 
PDP.
    (ii) Does the Member offer PDP? If yes, list each product, 
describe its content, and provide a link to where fees for each 
product are disclosed.
    (iii) Provide the names of the Voting Representative[ and], any 
alternate Voting Representatives, and any Member Observers 
designated by the Member. Also provide a narrative description of 
such [representatives]persons' roles within the Member organization, 
including the title of each individual as well as any direct 
responsibilities related to the development, dissemination, sales, 
or marketing of the Member's PDP, and the nature of those 
responsibilities sufficient for the public to identify the nature of 
any potential conflict of interest that could be perceived by a 
reasonable objective observer as having an effect on the operation 
of the Company. If such [representatives]persons work in or with the 
Member's PDP business, describe such [representatives]persons' roles 
and describe how that business and such [representatives]persons' 
Company responsibilities impacts their compensation. In addition, 
describe how such [representatives]persons' responsibilities with 
the PDP business may present a conflict of interest with their 
responsibilities to the Company.
    (iv) Does the Member, its Voting Representative, [or ]its 
alternate Voting Representative, its Member Observers, or any 
affiliate have additional relationships or material economic 
interests that could be perceived by a reasonable objective observer 
to present a potential conflict of interest with their 
responsibilities to the Company? If so, provide a detailed narrative 
discussion of all material facts necessary to identify the potential 
conflicts of interest and the effects they may have on the Company.
    (b) The Processors must respond to the following questions and 
instructions:
    (i) Is the Processor an affiliate of or affiliated with any 
Member? If yes, disclose the Member(s) and describe the nature of 
the affiliation. Include an entity-level organizational chart 
depicting the Processor and its affiliates.
    (ii) Provide a narrative description of the functions directly 
performed by senior staff, the manager employed by the Processor to 
provide Processor services to the Company, and the staff that 
reports to that manager.
    (iii) Does the Processor provide any services for any Member's 
PDP, other NMS Plans, or creation of consolidated equity data 
information for its own use? If Yes, disclose the services the 
Processor performs and identify which NMS Plans. Does the Processor 
have any profit or loss responsibility for a Member's PDP or any 
other professional involvement with persons the Processor knows are 
engaged in a Member's PDP business? If so, describe.
    (iv) List the policies and procedures established to safeguard 
Restricted Information, Highly Confidential Information, and 
Confidential Information that is applicable to the Processor.
    (v) Does the Processor, or its representatives, have additional 
relationships or material economic interests that could be perceived 
by a reasonable objective observer to present a potential conflict 
of interest with the representatives' responsibilities to the 
Company? If so, provide a detailed narrative discussion of all 
material facts necessary to identify the potential conflicts of 
interest and the effects they may have on the Company.
    (c) The Administrator must respond to the following questions 
and instructions:
    (i) Provide a narrative description of the functions directly 
performed by senior staff, the administrative services manager, and 
the staff that reports to that manager.
    (ii) Does the Administrator provide any services for any 
Member's PDP? If yes, what services? Does the Administrator have any 
profit or loss responsibility, or licensing responsibility, for a 
Member's PDP or any other professional involvement with persons the 
Administrator knows are engaged in the Member's PDP business? If so, 
describe.
    (iii) List the policies and procedures established to safeguard 
Restricted Information, Highly Confidential Information, and 
Confidential Information that is applicable to the Administrator.
    (iv) Does the Administrator, or its representatives, have 
additional relationships or material economic interests that could 
be perceived by a reasonable objective observer to present a 
potential conflict of interest with the representatives' 
responsibilities to the Company? If so, provide a detailed narrative 
discussion of all material facts necessary to identify the potential 
conflicts of interest and the effects they may have on the Company.
    (d) The Non-SRO Voting Representatives must respond to the 
following questions and instructions:
    (i) Provide the Non-SRO Voting Representative's title and a 
brief description of the Non-SRO Voting Representative's role within 
the firm as well as any direct responsibilities related to the 
procurement of PDP or CT Feeds or the development, dissemination, 
sales, or marketing of PDP, and the nature of those responsibilities 
sufficient for the public to identify the nature of any potential 
conflict of interest that could be perceived by a reasonable 
objective observer as having an effect on the operation of the 
Company. If such representatives work in or with their employer's 
market data business, describe such Non-SRO Voting Representative's 
roles and describe how that business impacts their compensation. In 
addition, describe how such representatives' responsibilities with 
the market data business may present a conflict of interest with 
their responsibilities to the Company.
    (ii) Does the Non-SRO Voting Representative have 
responsibilities related to the firm's use or procurement of market 
data?
    (iii) Does the Non-SRO Voting Representative have 
responsibilities related to the firm's trading or brokerage 
services?
    (iv) Does the Non-SRO Voting Representative's firm use the CT 
Feeds? Does the Non-SRO Voting Representative's firm use a Member's 
PDP?
    (v) Does the Non-SRO Voting Representative's firm offer PDP? If 
yes, list each product, described its content, and provide 
information about the fees for each product.
    (vi) Does the Non-SRO Voting Representative's firm have an 
ownership interest of 5% or more in one or more Members? If yes, 
list the Member(s).
    (vii) Does the Non-SRO Voting Representative actively 
participate in any litigation against the CQ Plan, CTA Plan, UTP 
Plan, or the Company?
    (viii) Does the Non-SRO Voting Representative or the Non-SRO 
Voting Representative's firm have additional relationships or 
material economic interests that could be perceived by a reasonable 
objective observer to present a potential conflict of interest with 
their responsibilities to the Company. If so, provide a detailed 
narrative discussion of all material facts necessary to identify the 
potential conflicts of interest and the effects they may have on the 
Company.
    (e) Each service provider or subcontractor that has agreed in 
writing to provide required disclosures and be treated as a 
Disclosing Party shall respond to the following questions and 
instructions:
    (i) Is the service provider or subcontractor affiliated with a 
Member, Processor, Administrator, or employer of a Non-SRO Voting 
Representative? If yes, disclose with whom the person is affiliated 
and describe the nature of the affiliation.
    (ii) If the service provider's or subcontractor's compensation 
is on a commission basis or is tied to specific metrics, provide a 
detailed narrative summary of how compensation is determined for 
performing work on behalf of the Company.
    (iii) Is the service provider or subcontractor subject to 
policies and procedures (including information barriers) concerning 
the protection of confidential information that includes affiliates? 
If so, describe. If not, explain their absence.
    (iv) Does the service provider or subcontractor, or its 
representative, have additional relationships or material economic 
interests that could be perceived by a reasonable objective observer 
to present a potential conflict of interest with its 
responsibilities to the Company? If so, provide a detailed narrative 
discussion of all material facts necessary to identify the potential 
conflicts of interest and the effects they may have on the Company.
    (f) The responses to these questions will be posted on the 
Company's website. If a Disclosing Party has any material changes in 
its responses, the Disclosing Party must promptly update its 
disclosures. Additionally, the Disclosing Parties must update the 
disclosures on an annual basis to reflect any changes. This annual 
update must be made before the first quarterly session meeting of 
each calendar year, which is generally held in mid-
February.[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/
SUBJECT][/PREAMB][SUPLINF][HED]*[/HED][APPENDIX][HED]*[/HED]

Exhibit C

Confidentiality Policy

    (a) Purpose and Scope.
    (i) The purpose of this Confidentiality Policy is to provide 
guidance to the Operating Committee, and all subcommittees thereof, 
regarding the confidentiality of any data or information (in 
physical or electronic form) generated by, accessed by, or

[[Page 44223]]

transmitted to the Operating Committee or any subcommittee, as well 
as discussions occurring at a meeting of the Operating Committee or 
any subcommittee.
    (ii) This Policy applies to all Covered Persons. All Covered 
Persons must adhere to the principles set out in this Policy and all 
Covered Persons that are natural persons may not receive Company 
data and information until they affirm in writing that they have 
read this Policy and undertake to abide by its terms.
    (iii) Covered Persons may not disclose Restricted, Highly 
Confidential, or Confidential information except as consistent with 
this Policy and directed by the Operating Committee.
    (iv) The Administrator and Processors will establish written 
confidential information policies that provide for the protection of 
information under their control and the control of their Agents, 
including policies and procedures that provide systemic controls for 
classifying, declassifying, redacting, aggregating, anonymizing, and 
safeguarding information, that is in addition to, and not less than, 
the protection afforded herein. Such policies will be reviewed and 
approved by the Operating Committee pursuant to Section 4.3, 
publicly posted, and made available to the Operating Committee for 
review and approval every two years thereafter or when changes are 
made, whichever is sooner.
    (v) Information will be classified solely based on its content.
    (b) Procedures.
    (i) General
    (A) The Administrator and Processors will be the custodians of 
all documents discussed by the Operating Committee and will be 
responsible for maintaining the classification of such documents 
pursuant to this Policy.
    (B) The Administrator may, under delegated authority, designate 
documents as Restricted, Highly Confidential, or Confidential, which 
will be determinative unless altered by an affirmative vote of the 
Operating Committee pursuant to Section 4.3.
    (C) The Administrator will ensure that all Restricted, Highly 
Confidential, or Confidential documents are properly labeled and, if 
applicable, electronically safeguarded.
    (D) All contracts between the Company and its Agents shall 
require Company information to be treated as Confidential 
Information that may not be disclosed to third parties, except as 
necessary to effect the terms of the contract or as required by law, 
and shall incorporate the terms of this Policy, or terms that are 
substantially equivalent or more restrictive, into the contract.
    (ii) Procedures Concerning Restricted Information. Except as 
provided below, Covered Persons in possession of Restricted 
Information are prohibited from disclosing it to others, including 
Agents. This prohibition does not apply to disclosures to the staff 
of the SEC or as otherwise required by Applicable Law, or to other 
Covered Persons as expressly provided for by this Policy. Restricted 
Information will be kept in confidence by the Administrator and 
Processors and will not be disclosed to the Operating Committee or 
any subcommittee thereof, or during Executive Session, except as 
follows:
    (A) If the Administrator determines that it is appropriate to 
share a customer's financial information with the Operating 
Committee or a subcommittee thereof, the Administrator will first 
anonymize the information by redacting the customer's name and any 
other information that may lead to the identification of the 
customer.
    (B) The Administrator may disclose the identity of a customer 
that is the subject of Restricted Information in Executive Session 
only if the Administrator determines in good faith that it is 
necessary to disclose the customer's identity in order to obtain 
input or feedback from the Operating Committee or a subcommittee 
thereof about a matter of importance to the Company. In such an 
event, the Administrator will change the designation of the 
information at issue from ``Restricted Information'' to ``Highly 
Confidential Information,'' and its use will be governed by the 
procedures for Highly Confidential Information in subparagraph (iii) 
below.
    (C) If it determines that doing so is in furtherance of the 
interests of the Plan, the Operating Committee may authorize the 
disclosure of specified Restricted Information to specific Covered 
Persons or third parties. Covered Persons and third parties 
authorized by the Operating Committee that receive or have access to 
Restricted Information must segregate the information, retain it in 
confidence, and use it only in a manner consistent with the terms of 
this policy. Authorization shall be on a case-by-case basis, unless 
the Operating Committee grants standing approval to disclose 
specified recurring information to specific Covered Persons.
    (iii) Procedures Concerning Highly Confidential Information
    (A) Disclosure of Highly Confidential Information:
    (1) Highly Confidential Information may be disclosed in 
Executive Session of the Operating Committee or to the subcommittee 
established pursuant to Section 4.7(c). Covered Persons in 
possession of Highly Confidential Information are prohibited from 
disclosing it to others, including Agents, except [to other Covered 
Persons who need the Highly Confidential Information to fulfill 
their responsibilities to the Company]as provided below. This 
prohibition does not apply to disclosures to the staff of the SEC[ 
or as otherwise required by law (such as those required to receive 
the information to ensure the Member complies with its regulatory 
obligations), or to other Covered Persons authorized to receive it].
    (2) Highly Confidential Information may be disclosed, as 
required by Applicable Law.
    (3) Highly Confidential Information may be disclosed to the 
staff of the SEC, unless it is protected by the Attorney-Client 
Privilege or the Work Product Doctrine. Any disclosure of Highly 
Confidential Information to the staff of the SEC will be accompanied 
by a FOIA Confidential Treatment request.
    (4) SRO Voting Representatives may share the following types of 
Highly Confidential Information with officers of their Member SRO 
who have direct or supervisory responsibility for the SRO's 
participation in the Company--or with Agents for that Member--
provided that such information may not be used in the development, 
modeling, pricing, licensing, or sale of PDP: Information regarding 
the Company's contract negotiations with the Processor(s) or 
Administrator; communications with, and work-product of, counsel to 
the Company; and information concerning personnel matters that 
affect the employees of the SRO or of the Company. Each SRO Voting 
Representative that shares Highly Confidential Information pursuant 
to this subparagraph (4) shall maintain a log reflecting each 
instance of such sharing, including the information shared, the 
persons receiving the information, and the date the information was 
shared. Covered Persons who receive or have access to Highly 
Confidential Information pursuant to this subparagraph (4) must 
segregate the information, retain it in confidence, and use it only 
in a manner consistent with the terms of this policy.
    (5) The Operating Committee may authorize the disclosure of 
specified Highly Confidential Information to specific third parties 
acting as Agents of the Company. Third parties authorized by the 
Operating Committee that receive or have access to Highly 
Confidential Information must segregate the information, retain it 
in confidence, and use it only in a manner consistent with the goals 
of this policy. Authorization shall be on a case-by-case basis, 
unless the Operating Committee grants standing approval to allow 
disclosure of specified recurring information to specific third 
parties.
    [(3)](6) Apart from the foregoing, the Operating Committee has 
no power to authorize any other disclosure of Highly Confidential 
Information.
    (B) In the event that a Covered Person is determined by an 
affirmative vote of the Operating Committee pursuant to this Policy 
to have disclosed Highly Confidential Information, the Operating 
Committee will determine the appropriate remedy for the breach based 
on the facts and circumstances of the event. For an SRO Voting 
Representative or Member Observer, remedies include a letter of 
complaint submitted to the SEC, which may be made public by the 
Operating Committee. For a Non-SRO Voting Representative, remedies 
include removal of that Non-SRO Voting Representative.
    (iv) Procedures Concerning Confidential Information
    (A) Confidential Information may be disclosed during a meeting 
of the Operating Committee or any subcommittee thereof. 
Additionally, a Covered Person may disclose Confidential Information 
only to other persons who need to [allow such other persons]receive 
such information to fulfill their responsibilities to the 
[Company]Plan, including oversight of the Plan. The recipient must 
segregate the information, retain it in confidence, and use it only 
in a manner consistent with the terms of this policy. A Covered 
Person also may disclose Confidential Information to the staff of 
the SEC, as authorized by the Operating

[[Page 44224]]

Committee as described below, or as may be otherwise required by 
law.
    (B) The Operating Committee may authorize the disclosure of 
Confidential Information by an affirmative vote of the Operating 
Committee pursuant to Section 4.3. Authorization shall be on a case-
by-case basis, unless the Operating Committee grants standing 
approval to allow disclosure of specified recurring information to 
specific Covered Persons. Notwithstanding the foregoing, the 
Operating Committee will not authorize the disclosure of 
Confidential Information that is generated by a Member or Non-SRO 
Voting Representative and designated by such Member or Non-SRO 
Voting Representative as Confidential, unless such Member or Non-SRO 
Voting Representative consents to the disclosure.
    (C) Non-SRO Voting Representatives may be authorized by the 
Operating Committee to disclose particular Confidential Information 
only in furtherance of the interests of the Company, to enable them 
to consult with industry representatives or technical experts, 
provided that the Non-SRO Voting Representatives take any steps 
requested by the Operating Committee to prevent further 
dissemination of that Confidential Information, including providing 
the individual(s) consulted with a copy of this Policy and 
requesting that person to maintain the confidentiality of such 
information in a manner consistent with this policy.
    (D) A Covered Person that is a representative of a Member may be 
authorized by the Operating Committee to disclose particular 
Confidential Information to other employees or agents of the Member 
or its affiliates only in furtherance of the interests of the 
Company as needed for such Covered Person to perform his or her 
function on behalf of the Company. A copy of this Policy will be 
made available to recipients of such information who are employees 
or agents of a Member or its affiliates that are not Covered 
Persons, who will be required to abide by this Confidentiality 
Policy.
    (E) A Covered Person may disclose their own individual views and 
statements that may otherwise be considered Confidential Information 
without obtaining authorization of the Operating Committee, provided 
that in so disclosing, the Covered Person is not disclosing the 
views or statements of any other Covered Person or Member that are 
considered Confidential Information.
    (F) A person that has reason to believe that Confidential 
Information has been disclosed by another without the authorization 
of the Operating Committee or otherwise in a manner inconsistent 
with this Policy may report such potential unauthorized disclosure 
to the Chair of the Operating Committee. In addition, a Covered 
Person that discloses Confidential Information without the 
authorization of the Operating Committee will report such disclosure 
to the Chair of the Operating Committee. Such self-reported 
unauthorized disclosure of Confidential Information will be recorded 
in the minutes of the meeting of the Operating Committee and will 
contain: (a) The name(s) of the person(s) who disclosed such 
Confidential Information, and (b) a description of the Confidential 
Information disclosed. The name(s) of the person(s) who disclosed 
such Confidential Information will also be recorded in any publicly 
available summaries of Operating Committee minutes.[FEDREG][VOL]*[/
VOL][NO]*[/NO][DATE]*[/DATE][NOTICES][NOTICE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT][/PREAMB][SUPLINF][HED]*[/
HED][APPENDIX][HED]*[/HED]

Exhibit D

Distributions

Cost Allocation and Revenue Sharing

    (a) Payments. In accordance with Paragraph (l) of this Exhibit 
D, each Member will receive an annual payment (if any) for each 
calendar year that is equal to the sum of the Member's Trading 
Shares and Quoting Shares (each as defined below), in each Eligible 
Security for such calendar year. In the event that total Net 
Distributable Operating Income (as defined below) is negative for a 
given calendar year, each Member will receive an annual bill for 
such calendar year to be determined according to the same formula 
(described in this paragraph) for determining annual payments to the 
Members. Unless otherwise stated in this agreement, a year shall run 
from January 1st to December 31st and quarters shall end on March 
31st, June 30th, September 30th, and December 31st. The Company 
shall cause the Administrator to provide the Members with written 
estimates of each Member's percentage of total volume within five 
business days of the end of each calendar month.
    (b) Security Income Allocation. The ``Security Income 
Allocation'' for an Eligible Security shall be determined by 
multiplying (i) the Net Distributable Operating Income under this 
Agreement for the calendar year by (ii) the Volume Percentage for 
such Eligible Security (the ``Initial Allocation''), and then adding 
or subtracting any amounts specified in the reallocation set forth 
below.
    (c) Volume Percentage. The ``Volume Percentage'' for an Eligible 
Security shall be determined by dividing (A) the square root of the 
dollar volume of Transaction Reports disseminated by the Processors 
in such Eligible Security during the calendar year by (B) the sum of 
the square roots of the dollar volume of Transaction Reports 
disseminated by the Processors in each Eligible Security during the 
calendar year.
    (d) Cap on Net Distributable Operating Income. If the Initial 
Allocation of Net Distributable Operating Income in accordance with 
the Volume Percentage of an Eligible Security equals an amount 
greater than $4.00 multiplied by the total number of qualified 
Transaction Reports in such Eligible Security during the calendar 
year, the excess amount shall be subtracted from the Initial 
Allocation for such Eligible Security and reallocated among all 
Eligible Securities in direct proportion to the dollar volume of 
Transaction Reports disseminated by the Processors in Eligible 
Securities during the calendar year. A Transaction Report with a 
dollar volume of $5,000 or more shall constitute one qualified 
Transaction Report. A Transaction Report with a dollar volume of 
less than $5,000 shall constitute a fraction of a qualified 
Transaction Report that equals the dollar volume of the Transaction 
Report divided by $5,000.
    (e) Trading Share. The ``Trading Share'' of a Member in an 
Eligible Security shall be determined by multiplying (i) an amount 
equal to fifty percent of the Security Income Allocation for the 
Eligible Security by (ii) the Member's Trade Rating in the Eligible 
Security.
    (f) Trade Rating. A Member's ``Trade Rating'' in an Eligible 
Security shall be determined by taking the average of (A) the 
Member's percentage of the total dollar volume of Transaction 
Reports disseminated by the Processors in the Eligible Security 
during the calendar year, and (B) the Member's percentage of the 
total number of qualified Transaction Reports disseminated by the 
Processors in the Eligible Security during the calendar year.
    (g) Quoting Share. The ``Quoting Share'' of a Member in an 
Eligible Security shall be determined by multiplying (A) an amount 
equal to fifty percent of the Security Income Allocation for the 
Eligible Security by (B) the Member's Quote Rating in the Eligible 
Security.
    (h) Quote Rating. A Member's ``Quote Rating'' in an Eligible 
Security shall be determined by dividing (A) the sum of the Quote 
Credits earned by the Member in such Eligible Security during the 
calendar year by (B) the sum of the Quote Credits earned by all 
Members in such Eligible Security during the calendar year.
    (i) Quote Credits. A Member shall earn one ``Quote Credit'' for 
each second of time (with a minimum of one full second) multiplied 
by dollar value of size that an automated best bid (offer) 
transmitted by the Member to the Processors during regular trading 
hours is equal to the price of the National Best Bid and Offer in 
the Eligible Security and does not lock or cross a previously 
displayed ``automated quotation'' (as defined under Rule 600 of 
Regulation NMS). The dollar value of size of a quote shall be 
determined by multiplying the price of a quote by its size.
    (j) Net Distributable Operating Income. The ``Net Distributable 
Operating Income'' for any particular calendar year shall mean:
    (i) all cash revenues, funds and proceeds received by the 
Company during such calendar year (other than Capital Contributions 
by the Members or amounts paid pursuant to Section 3.7(b) of this 
Agreement), including all revenues from (A) the CT Feeds, which 
includes the dissemination of information with respect to Eligible 
Securities to foreign marketplaces, and (B) FINRA quotation data and 
last sale information for securities classified as OTC Equity 
Securities under FINRA's Rule 6400 Series (the ``FINRA OTC Data'') 
((A) and (B) collectively, the ``Data Feeds''), and (C) any 
Membership Fees; less
    (ii) 6.25% of the revenue received by the Company during such 
calendar year attributable to the segment of the Data Feeds 
reflecting the dissemination of information with respect to Network 
C Securities and FINRA OTC Data (but, for the avoidance of doubt, 
not including revenue attributable to the segment of the Data Feeds 
reflecting the dissemination of information with respect to Network 
A Securities and Network B Securities), which amount shall be paid 
to

[[Page 44225]]

FINRA as compensation for the FINRA OTC Data; \1\ less
---------------------------------------------------------------------------

    \1\ All costs associated with collecting, consolidating, 
validating, generating, and disseminating the FINRA OTC Data are 
borne directly by FINRA and not the Company and the Members.
---------------------------------------------------------------------------

    (iii) reasonable working capital reserves and reasonable 
reserves for contingencies for such calendar year, as determined by 
the Operating Committee, and all costs and expenses of the Company 
during such calendar year, including:
    (A) all amounts payable during such calendar year to the 
Administrator pursuant to the Administrative Services Agreement or 
this Agreement;
    (B) all amounts payable during such calendar year to the 
Processors pursuant to the Processor Services Agreements or this 
Agreement; and
    (C) all amounts payable during such calendar year to third-party 
service providers engaged by or on behalf of the Company.
    (k) Initial Eligibility. At the time a Member implements a 
Processor-approved electronic interface with the Processors, the 
Member will become eligible to receive revenue.
    (l) Quarterly Distributions. The Company shall cause the 
Administrator to provide Members with written estimates of each 
Member'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 
Member within 45 days following the end of each calendar quarter in 
which the Member is eligible to receive revenue; provided, that each 
quarterly payment or billing shall be reconciled against a Member's 
cumulative year-to-date payment or billing received to date and 
adjusted accordingly; 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.
    (m) Itemized Statements. In conjunction with calculating 
estimated quarterly and reconciled annual payments under this 
Exhibit D, the Company shall cause the Administrator to submit to 
the Members a quarterly itemized statement setting forth the basis 
upon which Net Distributable Operating Income was calculated. Such 
Net Distributable Operating Income shall be adjusted annually based 
solely on the quarterly itemized statement audited pursuant to the 
annual audit. The Company shall cause the Administrator to pay or 
bill Members for the audit adjustments within thirty days of 
completion of the annual audit. Upon the affirmative vote of Voting 
Representatives pursuant to Section 4.3, the Company shall cause the 
Administrator to engage an independent auditor to audit the 
Administrator's costs or other calculation(s).

Exhibit E

Fees

    To be determined by the Operating Committee under this Agreement

[FR Doc. 2021-17113 Filed 8-10-21; 8:45 am]
BILLING CODE 8011-01-P