[Federal Register Volume 86, Number 182 (Thursday, September 23, 2021)]
[Notices]
[Pages 52933-52937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-20554]


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SECURITIES AND EXCHANGE COMMISSION

[File No. 4-757; Release No. 93051/September 17, 2021]


Securities Exchange Act of 1934

    In the Matter of: Joint Industry Plan; Order Approving, as 
Modified, a National Market System Plan Regarding Consolidated 
Equity Market Data.

Order Denying Stay

    On August 6, 2021, the Commission issued Joint Industry Plan; Order 
Approving, as Modified, a National Market System Plan Regarding 
Consolidated Equity Market Data, Release, No. 34-92586 (the ``CT Plan 
Order''). It was published five days later in the Federal Register. See 
86 FR 44,142 (Aug. 11, 2021). Later that month, The Nasdaq Stock Market 
LLC, Nasdaq BX, Inc., Nasdaq PHLX LLC,

[[Page 52934]]

New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE 
Chicago, Inc., NYSE National, Inc., Cboe BYX Exchange, Inc., Cboe BZX 
Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., and 
Cboe Exchange, Inc. (the ``exchanges'') filed with the Commission a 
motion to stay the effect of the CT Plan Order pending final resolution 
of their petitions for review filed in the U.S. Court of Appeals for 
the D.C. Circuit that challenge the CT Plan Order and the 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. 88827, 85 FR 28,702 (May 13, 2020) (the 
``NMS Governance Order'').\1\
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    \1\ Petitioners filed a stay motion with the Commission dated 
August 19, 2021. Due to an administrative oversight, Commission 
staff did not learn of the filing and bring it to the Commissioners' 
attention until three weeks later. The Commission has issued this 
order expeditiously after becoming aware of the filing and, in any 
event, well within ``a reasonable period'' under Section 25(c)(2).
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    Pursuant to Section 25(c)(2) of the Securities Exchange Act of 1934 
(``Exchange Act'') and Section 705 of the Administrative Procedure Act, 
the Commission has discretion to stay the CT Plan Order. See 15 U.S.C. 
78y(c)(2); 5 U.S.C. 705. As discussed below, however, the exchanges 
have not met their burden to demonstrate that a stay of the CT Plan 
Order is appropriate. Accordingly, the exchanges' stay motion is 
denied.
    1. Staying a final agency action pending review is an 
``extraordinary remedy.'' 85 FR 36,921, 36,921 (June 18, 2020) 
(Commission order denying stay of NMS Governance Order). The Commission 
has discretion to grant a stay of its rules pending judicial review if 
it finds that ``justice so requires.'' 15 U.S.C. 78y(c)(2); 5 U.S.C. 
705. Traditionally, the Commission uses ``the familiar four-factor 
framework'' when considering whether a stay during litigation is 
appropriate:
    Whether there is a strong likelihood that a party will succeed on 
the merits in a proceeding challenging the particular Commission action 
(or, if the other factors strongly favor a stay, that there is a 
substantial case on the merits);
    whether the issuance of a stay would likely serve the public 
interest;
    whether there would be substantial harm to any person if the stay 
were granted; and
    whether, without a stay, a party will suffer imminent, irreparable 
injury. In re Am. Petroleum Inst., Release No. 68197, 2012 WL 5462858, 
at *2 (Nov. 8, 2012); see Nken v. Holder, 556 U.S. 418, 434-35 (2009) 
(noting that the harm-to-others factor and the public-interest factor 
``merge when the Government is the opposing party'').
    2. The exchanges have not met their burden to demonstrate a 
likelihood of success on the merits. The Commission has previously 
addressed the three arguments the exchanges make, not only in the CT 
Order itself, but also in denying a stay of the NMS Governance Order 
and in the prior litigation challenging that order. None has merit.
    First, the exchanges state that the CT Plan Order ``unlawfully 
vests representatives of [non-self-regulatory organizations, or non-
SROs] with voting power on the plan's operating committee,'' Mot. 5, 
because, in their view, SROs--and only SROs--may have voting power on a 
national market system operating committee. This argument 
misunderstands the statutory scheme and the Commission's authority. 
Section 11A(a)(2) directs the Commission to use its authority under the 
Exchange Act to facilitate the establishment of the national market 
system in accordance with and in furtherance of Congress's specific 
findings and objectives. One of Congress's express objectives in 
Section 11A(a)(1) is to assure the availability to brokers, dealers, 
and investors of information with respect to quotations for and 
transactions in securities. See 15 U.S.C. 78k-1(a)(1)(C). And Congress 
expressly authorized the Commission in Section 11A(c)(1)(B) to 
prescribe rules ``to assure the prompt, accurate, reliable, and fair 
collection, processing, distribution, and publication of information 
with respect to quotations for and transactions in'' NMS securities. 
Id. Sec.  78k-1(c)(1)(B). Section 11A(a)(3) grants the Commission 
additional authority, including ``to authorize or require self-
regulatory organizations to act jointly'' with respect to ``matters as 
to which they share authority under this chapter in planning, 
developing, operating, or regulating a national market system.'' Id. 
Sec.  78k-1(a)(3)(B); see also 17 CFR 242.608(a). Pursuant to its 
authority under Section 11A, as the CT Plan Order explained, the 
Commission may permit or require the operating committee to include 
voting rights for non-SROs. See 86 FR at 44,156-58.
    Against this backdrop, the exchanges insist that Section 
11A(a)(3)(B) forecloses the Commission from extending voting power to 
representatives of non-SROs. But nothing in the text of that provision 
constrains the manner in which the Commission can regulate the 
operating committee. Section 11A(a)(3)(B) authorizes the Commission to 
require the SROs to act ``jointly'' in furtherance of Section 11A's 
goals--which the CT Plan Order does. It does not provide that the 
Commission can only include the SROs in its regulation of the national 
market system or indicate that acting ``jointly'' means acting 
``jointly and exclusively.'' CT Plan Order, 86 FR at 44,157.
    Indeed, here the Commission is requiring joint action with respect 
to the planning, development, and operation of a national market system 
plan governing dissemination of consolidated equity market data to 
further the goals of Section 11A(c). That provision tasks the 
Commission with prescribing rules to ensure ``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,'' and expressly contemplates the 
involvement of non-SROs in that process. See 15 U.S.C. 78k-1(c)(1). 
Moreover, as the CT Plan Order stated, ``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.'' 86 FR at 44,157.
    Relying on the expressio unius canon, the exchanges claim that 
Section 11A's reference to the Commission's ability to order SROs to 
``act jointly'' categorically precludes the Commission from allowing 
any non-SRO entity to participate in plan governance. Mot. 6-7. But, 
given the express contemplation of the involvement of non-SROs in the 
dissemination of national market system data elsewhere in Section 11A, 
see 15 U.S.C. 78k-1(c)(1), this reference to joint SRO action does not 
preclude their inclusion. Section 11A's text, structure, and history 
demonstrate Congress's intent to provide the Commission with 
flexibility in carrying out the enumerated statutory goals. And 
granting non-SROs voting power is consistent with Section 11A for the 
reasons discussed above.
    Nor is the Commission expanding its authority to regulate entities 
over which it does not otherwise have authority. Instead, the CT Plan 
Order requires the plan operating committee to include non-SROs. Any 
specific non-SRO selected to be on an operating

[[Page 52935]]

committee can choose to participate or not.
    The exchanges likewise err in arguing that ``Section 11A's 
reference to `self-regulatory organizations' would be entirely 
superfluous if . . . the statute does not in fact limit the 
Commission's `act jointly' authority to SROs alone.'' Mot. 8. As the CT 
Plan Order explained, in granting the Commission broad powers, Congress 
was cognizant of how doing so could raise antitrust concerns. The 
provision allowing or requiring SROs to ``act jointly'' enables the 
Commission to require joint activity that otherwise might raise 
antitrust concerns. 86 FR at 44,157-58 & n.242; see Brief for NYSE 
Group, Inc. as Amicus Curiae, 2007 WL 173673, at *8, in Credit Suisse 
Sec. (USA) LLC v. Billing, 551 U.S. 264 (2007) (NYSE previously 
acknowledging that the Exchange Act ``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''). And even if Section 11A's grant of authority 
to permit or require SROs to act jointly could be read as superfluous 
or redundant of other Commission authority to oversee SROs, Congress's 
decision to remove any doubt that the Commission may authorize joint 
action by SROs cannot fairly be read as a conscious choice to limit the 
Commission's ability to require non-SRO participation.
    The exchanges are on no firmer ground in arguing that, ``even if 
the Exchange Act did not foreclose the Commission's effort to grant 
voting power to representatives of non-SROs, Rule 608 ``plainly'' does. 
Mot. 9. Rule 608 implements Section 11A(a)(3)(B), authorizing joint 
action in the creation, operation, and implementation of national 
market system plans. Specifically, it provides that ``[a]ny two or more 
self-regulatory organizations, acting jointly, may file a national 
market system plan'' and that ``[s]elf-regulatory organizations are 
authorized to act jointly in'' ``[p]lanning, developing, and operating 
any national market subsystem or facility contemplated by a national 
market system plan,'' ``[p]reparing and filing a national market system 
plan,'' and ``[i]mplementing or administering an effective national 
market system plan.'' 17 CFR 242.608(a). Nothing in the rule, which 
authorizes the SROs to act jointly, limits the Commission's ability to 
extend voting right to non-SROs under the Commission's Section 11A 
authority. To ``act jointly'' means to act together or cooperatively. 
There is no indication that in using the same phrase as in Section 11A 
the Commission intended to attribute a different meaning to that phrase 
or to constrain its own discretion in achieving Section 11A's goals.
    Nor does the exchanges' reference (Mot. 6) to a remark at oral 
argument in the prior litigation regarding the NMS Governance Order 
satisfy their burden to show that they now have a likelihood of success 
on the merits. See In re Adelphia Commc'ns Corp., 336 B.R. 610, 636 
n.44 (Bankr. S.D.N.Y. 2006) (``Thoughts voiced by judges in oral 
argument do not always find their way into final decisions, often 
intentionally and for good reason.''), aff'd, 342 B.R. 122 (S.D.N.Y. 
2006); Bd. of Trade of City of Chicago v. SEC, 883 F.2d 525, 530 (7th 
Cir. 1989) (``Comments by Commissioners during a meeting are no more 
the `decision' of the Commission than comments by judges of this court 
during oral argument are our opinion or judgment.'').
    Second, the exchanges contend that ``the CT Plan Order 
impermissibly allocates operating committee votes to `exchange 
groups'--rather than to each individual affiliated exchange--with each 
group limited to a maximum of two votes, no matter the number of 
exchanges in the group,'' which under the exchanges' view gives too 
much power to non-SROs and also disadvantages affiliated SROs. Mot. 10. 
The Commission in the CT Plan Order, just as it did in the NMS 
Governance Order, thoroughly considered and rejected that argument. 
E.g., CT Plan Order, 86 FR at 44,163-65. 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.'' Id. 
at 44,165. Under this structure, SROs will control two-thirds of the 
votes on the new plan operating committee and can collectively govern 
the plan without a single vote from a voting member that is not a self-
regulatory organization.
    The exchanges assert that it is improper to take into account 
corporate affiliations of the exchanges when deciding how votes should 
be allocated on the operating committee. Mot. 11. But as the Commission 
explained in the CT Plan Order, that argument fails for several 
reasons. ``Sometimes, the Commission treats affiliated entities 
independently,'' while ``[o]ther times, the Commission takes into 
account corporate relationships when deciding how to regulate.'' 86 FR 
at 44,164 (citing examples). Here, ``[b]ecause 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.'' Id.
    Third, the exchanges assert that the CT Plan Order ``arbitrarily 
and capriciously requires that the administrator of the CT Plan be 
`independent.' '' Mot. 11. But the Commission acted reasonably in 
finding that the new plan's administrator should not at the same time 
offer for sale its own proprietary data products because such an entity 
would have access to confidential information as administrator that 
would benefit its proprietary data business. The exchanges claim that 
the Commission did not adequately demonstrate that current 
administrators have ``misused customer audit data or that the 
combination of existing safeguards and the new confidentiality measures 
imposed by the CT Plan Order will be insufficient to eliminate that 
purported risk.'' Id. at 12. But the exchanges do not dispute the 
existence of this conflict of interest, or that such information is 
sensitive and commercially valuable. Further, as explained in the CT 
Plan Order, the Commission has ``provided evidence of problems in the 
current Administrator framework for the existing Equity Data Plans.'' 
CT Plan Order, 86 FR at 44,195. Moreover, ``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.'' Id. And the exchanges' concerns about costs were similarly 
addressed and rejected in the CT Plan Order. Id. at 44,196-97.
    3. The CT Plan Order serves a strong public interest. The 
governance model for the Equity Data Plans was established in 1970s. 
Since then, critical developments in the equities markets--including 
the heightening of an inherent conflict of interest between the for-
profit and regulatory roles of the exchanges and the concentration of 
voting power in the Equity Data Plans among a few large exchange 
groups--have demonstrated the need for an updated governance model. See 
CT Plan Order, 86 FR at 44,142. The public interest will be served by 
the enhanced decisionmaking and potential for innovation in the 
provision of equity market data that will result from the governance 
changes compelled by the

[[Page 52936]]

CT Plan Order. And the governance of the consolidated data feeds can be 
improved by consolidating the three existing, separate Equity Data 
Plans into a single New Consolidated Data Plan that will reduce 
existing redundancies, inefficiencies, and inconsistencies between and 
among the Equity Data Plans. See id.; see also NMS Governance Order, 85 
FR at 28,711. Moreover, ``[a]ddressing the issues with the current 
governance structure of the Equity Data Plans discussed in [the CT Plan 
Order] is a key step in responding to broader concerns about the 
consolidated data feeds.'' 86 FR at 44,142. Any further delay in 
establishing a new governance structure will impede the achievement of 
these benefits, including the Commission's efforts to mitigate the 
clear, inherent conflict between the exchanges' commercial interests in 
selling proprietary data products and their regulatory obligations to 
produce and disseminate consolidated market data. Indeed, the exchanges 
nowhere contest that this intractable conflict exists.
    The exchanges state that ``the CT Plan Order will not yield any 
immediate benefits for market participants'' because the Commission set 
forth an implementation schedule. Mot. 15. That argument could be made 
every time any agency adopts any rule or order that does not take 
effect immediately, yet a stay in those circumstances remains an 
extraordinary remedy. The exchanges also claim that any benefit from 
the CT Plan is ``purely speculative,'' id. at 16, but the Commission 
determined that the exchanges' inherent conflict affects their 
incentives to meaningfully enhance the provision of consolidated data 
and concluded that the current governance structure of the Equity Data 
Plans is inadequate to respond to these changes or to the evolving 
needs of investors and other market participants.
    The exchanges also claim that the operating committee of the CT 
Plan may set the fees for core data at the same level or a higher level 
than they are now. Mot. 16. That argument, however, is speculative and 
the exchanges offer no reason why that unsubstantiated concern warrants 
a stay. And that argument is particularly misplaced because the 
exchanges themselves will play a major role in setting those fees. In 
any event, the CT Plan Order is reasonably designed to improve the 
governance of the national market system by, among other things, 
addressing the conflict of interest between the exchanges' for-profit 
and regulatory roles.
    The exchanges speculate that, if the D.C. Circuit vacates the CT 
Plan, there will be market uncertainty regarding the distribution of 
core data. Mot. 16-17. But that speculation is insufficient to justify 
the extraordinary remedy of a stay, particularly when weighed against 
the harms from the delay of efforts to mitigate the undisputed 
conflicts of interest faced by the exchanges through their for-profit 
and regulatory roles. The Court could act before the CT Plan becomes 
operative in August 2022 and, in doing so, confirm the validity of the 
plan. And even if the Court were to decide in favor of the exchanges, 
the decision may not affect the entirety of the CT Plan. Moreover, the 
three Equity Data Plans will not simply cease to exist in August 2022 
or automatically lose their ability to fulfill their functions if the 
CT Plan Order were vacated.
    The exchanges' contention that vacatur would complicate the 
implementation of the Market Data Infrastructure rule, see 86 FR 18,596 
(Apr. 9, 2021), is likewise off base. As the Commission has already 
made clear, its initiatives to improve the governance and 
infrastructure of the national market system are mutually reinforcing 
but ``[n]either initiative depends on the other initiative being 
implemented before it may take effect.'' Order Denying Stay, Market 
Data Infrastructure Rule 5, Release No. 34-91397, (Mar. 24, 2021). 
Finally, the exchanges argue that ``a decision invalidating the CT Plan 
Order would raise a host of legally complicated and practically fraught 
questions about the validity of actions already taken by the CT Plan 
and the prospective implications of those actions.'' Mot. 17. That 
speculative concern is routinely present any time an agency rule or 
order is subject to legal challenge and in this case does not warrant a 
stay.
    4. The exchanges' stay request also mischaracterizes the harm that 
will result from their compliance with the CT Plan Order. The exchanges 
assert that they will incur ``out-of-pocket expenditures'' and devote 
``substantial time and effort'' as they work toward implementing the CT 
Plan. Mot. 14. But ``ordinary compliance costs are typically 
insufficient to constitute irreparable harm,'' Freedom Holdings, Inc. 
v. Spitzer, 408 F.3d 112, 115 (2d Cir. 2005), and ``it proves too much 
to suggest that `irreparable' injury exists, as a matter of course, 
whenever a regulated party seeks preliminarily to enjoin the 
implementation of a new regulatory burden,'' California Ass'n of 
Private Postsecondary Sch. v. DeVos, 344 F. Supp. 3d 158, 170 (D.D.C. 
2018). Otherwise, a regulated party would always suffer cognizable 
irreparable harm whenever it faces compliance costs from agency action 
while its legal challenge proceeds. The costs of complying with a new 
regulatory burden do not qualify as irreparable harm except in 
extraordinary circumstances. See Nat'l Lifeline Ass'n v. FCC, No. 18-
1026, 2018 WL 4154794, at *1 (D.C. Cir. Aug. 10, 2018) (stay justified 
where implementation of order ``will result in substantial, 
unrecoverable losses . . . that may indeed threaten the future 
existence of [petitioners'] businesses'' and ``is likely to result in a 
major reduction, or outright elimination, of critical 
telecommunications services for many tribal residents, which are vital 
for day-to-day medical, educational, family care, and other 
functions''). Here, the exchanges have made no attempt to offer even an 
estimate of their compliance costs or explain the extent to which those 
costs may affect their businesses.
    5. Finally, a stay is not warranted under the statutory provision 
granting the Commission authority to issue a stay where ``justice so 
requires.'' 15 U.S.C. 78y(c)(2). As the Commission has explained, the 
traditional four-factor analysis provides ``a useful framework to guide 
our consideration'' under the justice-so-requires standard. In re Am. 
Petroleum Inst., 2012 WL 5462858, at *2 n.1. As already discussed, the 
exchanges have failed to carry their burden to meet the traditional 
requirements for a stay. Although the exchanges cite two cases in which 
the Commission granted stays under this standard, Mot. 18-19, neither 
case involved the Commission's determination that a stay was justified 
despite the petitioner's failure to satisfy the traditional four-factor 
stay analysis. See In re Rule 610T of Regulation NMS, Release No. 
85447, 2019 WL 1424351 (Mar. 28, 2019); In re Motion of Business 
Roundtable and the Chamber of Commerce of the United States of America 
for Stay of Effect of Commission's Facilitating Shareholder Director 
Nominations Rules, Release No. 9149, 2010 WL 3862548 (Oct. 4, 2010). 
And in this matter, the exchanges cannot meet any of the factors. The 
exchanges have not demonstrated that the Commission should grant a stay 
even though they cannot meet their burden to show a strong likelihood 
of success on the merits, they have not shown that the issuance of a 
stay would serve the public interest, and they offer no evidence of 
legally cognizable irreparable harm.
    Accordingly, it is ordered, pursuant to Exchange Act Section 
25(c)(2) and Section 705 of the Administrative Procedure Act that the 
motion for a stay be denied.


[[Page 52937]]


    By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-20554 Filed 9-22-21; 8:45 am]
BILLING CODE 8011-01-P