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

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2024-27644

## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** November 29, 2024
- **Citation:** 89 FR 94924

## Text

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101672; File No. 4-757]
Joint Industry Plan; Order Approving, as Modified, a National Market System Plan Regarding Consolidated Equity Market Data
November 20, 2024.
I. Introduction

On October 23, 2023, Cboe BYX Exchange, Inc. (“Cboe BYX”), Cboe BZX Exchange, Inc. (“Cboe BZX”), Cboe EDGA Exchange, Inc. (“Cboe EDGA”), Cboe EDGX Exchange, Inc. (“Cboe EDGX”), Cboe Exchange, Inc., Investors Exchange LLC (“IEX”), Long Term Stock Exchange, Inc. (“LTSE”), MEMX LLC (“MEMX”), MIAX PEARL, LLC (“MIAX PEARL”), Nasdaq BX, Inc. (“Nasdaq BX”), Nasdaq ISE, LLC (“Nasdaq ISE”), Nasdaq PHLX LLC (“Nasdaq PHLX”), Nasdaq Stock Market LLC, New York Stock Exchange LLC, NYSE American LLC (“NYSE American”), NYSE Arca, Inc. (“NYSE Arca”), NYSE Chicago, Inc. (“NYSE Chicago”), NYSE National, Inc. (“NYSE National”), and the Financial Industry Regulatory Authority, Inc. (“FINRA”) (collectively, “SROs”)
1

filed with the Securities and Exchange Commission (“Commission”), pursuant to section 11A of the Securities Exchange Act of 1934 (“Exchange Act”)
2

and Rule 608 of Regulation National Market System (“Regulation NMS”) thereunder,
3

a proposed new single national market system plan governing the public dissemination of real-time consolidated equity market data for national market system stocks (the “Proposed CT Plan”). The Proposed CT Plan was published for comment in the
Federal Register
on January 25, 2024.
4

1
For purposes of this order, the exchange group consisting of Cboe BYX, Cboe BZX, Cboe EDGA, Cboe EDGX, and Cboe Exchange, Inc., will be referred to collectively as “Cboe”; the exchange group consisting of Nasdaq BX, Nasdaq ISE, Nasdaq PHLX, and Nasdaq Stock Market LLC will be referred to collectively as “Nasdaq”; and the exchange group consisting of the New York Stock Exchange LLC, NYSE American, NYSE Arca, NYSE Chicago, and NYSE National will be referred to collectively as “NYSE.”

2
15 U.S.C. 78k-1.

3
17 CFR 242.608.

4

See
Joint Industry Plan; Notice of Filing of a National Market System Plan Regarding Consolidated Equity Market Data, Securities Exchange Act Release No. 99403 (Jan. 19, 2024), 89 FR 5002 (Jan. 25, 2024) (“Notice”). Comments received in response to the Notice can be found on the Commission's website at:
https://www.sec.gov/comments/4-757/4-757.htm.

On April 23, 2024, the Commission instituted proceedings pursuant to Rule 608(b)(2)(i) of Regulation NMS
5

to determine whether to approve or disapprove the Proposed CT Plan or to approve the Proposed CT Plan with such changes or subject to such conditions as the Commission may deem necessary or appropriate, if it finds that such plan or amendment 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 Exchange Act.
6

On July 11, 2024, pursuant to Rule 608(b)(2)(i) of Regulation NMS,
7

the Commission extended the period within which to conclude proceedings regarding the Proposed CT Plan to September 21, 2024.
8

On September 20, 2024, pursuant to Rule 608(b)(2)(ii) of Regulation NMS,
9

the Commission further extended the period within which to conclude proceedings regarding the Proposed CT Plan to November 20, 2024.
10

5
17 CFR 242.608(b)(2)(i).

6

See
Joint Industry Plan; 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. 100017 (Apr. 23, 2024), 89 FR 33412 (Apr. 29, 2024) (“OIP”). Comments received in response to the OIP can be found on the Commission's website at:
https://www.sec.gov/comments/4-757/4-757.htm.

7
17 CFR 242.608(b)(2)(i).

8

See
Joint Industry Plan; Notice of Designation of a Longer Period for Commission Action on a Proposed National Market System Plan Regarding Consolidated Equity Market Data, Securities Exchange Act Release No. 100500 (July 11, 2024), 89 FR 58235 (July 17, 2024).

9
17 CFR 242.608(b)(2)(ii).

10

See
Joint Industry Plan; Notice of Designation of a Longer Period for Commission Action on a Proposed National Market System Plan Regarding Consolidated Equity Market Data, Securities Exchange Act Release No. 101125 (Sept. 20, 2024), 89 FR 78950 (Sept. 26, 2024).

This order approves the Proposed CT Plan with certain modifications that the Commission has determined are appropriate, which are described in detail below. As discussed throughout this order, the Commission finds that the Proposed CT Plan, as modified, is 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 Exchange Act. A copy of the Proposed 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 to replace the existing equity data plans.
11

The Commission sought to address with the Governance Order, among other things, the inherent conflicts of interest between the SROs' 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,

11

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) (“Governance Order”). The three NMS plans that currently govern the collection, consolidation, processing, and dissemination of equity market data for NMS stocks and oversee the securities information processors (“SIPs”) for equity market data for NMS stocks 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 id.
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.
12

12
Governance Order,
supra
note 11, 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.”
13

13

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,”
14

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,
15

and to ensure, consistent with the Exchange Act, 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.”
16

14

Id.
at 28702.

15

See id.
at 28729-31.

16
15 U.S.C. 78k-1(c)(1)(B).

On August 11, 2020, the SROs
17

filed a proposed new NMS plan pursuant to the Governance Order, and notice of the proposed plan was published for comment in the
Federal Register
on October 13, 2020.
18

After instituting proceedings with respect to the new NMS plan proposed by the SROs, the Commission ultimately approved, as modified, the new NMS plan on August 6, 2021 (“2021 CT Plan”).
19

17
MIAX PEARL was not among the SROs filing that proposed plan because it did not become national securities exchange for trading equity securities until after that filing was made.
See
Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, To Establish Rules Governing the Trading of Equity Securities, Securities Exchange Act Release No. 89563 (Aug. 14, 2020), 85 FR 51510 (Aug. 20, 2020).

18

See
Joint Industry Plan; 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) (File No. 4-757).

19

See
Joint Industry Plan; Order Approving, as Modified, a National Market System Plan Regarding Consolidated Equity Market Data, Securities Exchange Act Release No. 92586 (Aug. 6, 2021), 86 FR 44142 (Aug. 11, 2021) (File No. 4-757) (“2021 Approval Order”).

Nasdaq, NYSE, and Cboe then petitioned the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) for review of the Commission's action, challenging three aspects of the Governance Order and the 2021 Approval Order: (1) the inclusion of non-SRO representatives as voting members of the 2021 CT Plan's operating committee; (2) the grouping of SROs by corporate affiliation for voting; and (3) the requirement that the 2021 CT Plan's administrator be independent of any SRO that sells its own proprietary equity market data.
20

20

See The Nasdaq Stock Market LLC, et al.
v.
Securities and Exchange Commission,
38 F.4th 1126, 1131 (D.C. Cir. 2022) (“
Nasdaq
v.
SEC
”). The petitioners were Nasdaq, NYSE, and Cboe. The petitioners also filed a motion with the Commission seeking a stay of the effect of the 2021 Approval Order pending final resolution of their petitions before the D.C. Circuit, which the Commission denied.
See
Order Denying Stay, Securities Exchange Release No. 93051 (Sept. 17, 2021), 86 FR 52933 (Sept. 23, 2021) (File No. 4-757). The petitioners also filed for and, on October 13, 2021, received a stay of the 2021 Approval Order from the D.C. Circuit.
See Nasdaq
v.
SEC,
38 F.4th at 1135.

On July 5, 2022, the D.C. Circuit granted the exchanges' petition with respect to the inclusion of non-SRO voting members on the new NMS plan operating committee, but denied the petition with respect to the other challenged aspects of the Governance Order and the 2021 Approval Order, including upholding the Commission's actions with respect to requiring voting by SRO group and requiring an independent administrator.
21

The court vacated the 2021 Approval Order in full, but “sever[ed] only those parts of the Governance Order directing [the SROs] to include non-SRO representation in its proposed plan, leaving the remainder in place.”
22

21

See Nasdaq
v.
SEC, supra
note 20, 38 F.4th at 1131.

22

Id.
at 1145.

On September 1, 2023, in light of the court's decision, the Commission issued an amended order directing the SROs to file a new NMS plan regarding consolidated equity market data,
23

and the SROs filed the Proposed CT Plan pursuant to that Amended Governance Order.
24

23
Amended Order Directing the Exchanges and the Financial Industry Regulatory Authority, Inc., to File a National Market System Plan Regarding Consolidated Equity Market Data, Securities Exchange Act Release No. 98271 (Sept. 1, 2023), 88 FR 61630, 61631 (Sept. 7, 2023) (File No. 4-757) (“Amended Governance Order”).

24

See
Notice,
supra
note 4, 89 FR at 5003.

Below, this order separately addresses each of the provisions of the Proposed CT Plan, discussing the comments received and explaining the modifications, if any, that the Commission is making.

B. The Provisions of the Proposed CT Plan

1. Recitals

Paragraph (a) of the Recitals states the procedural history of the Proposed CT Plan. Paragraph (a) of the Recitals also establishes that the Proposed CT Plan is filed with the Commission in response to the Commission's Amended Governance Order.
25

25

See
Paragraph (a) of the Recitals of the Proposed CT Plan.

Paragraph (b) of the Recitals states that, as the Members have already formed the Company
26

as a limited liability company pursuant to the Delaware Limited Liability Company Act
27

by filing a certificate of formation with the Delaware Secretary of State, the Proposed CT Plan will become effective on the date (the “Effective Date”) when 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.
28

26
For purposes of this order, all capitalized terms not otherwise defined in this order shall have the same meaning as in the Proposed CT Plan.

27

See
Article I, Section 1.1(21) of the Proposed CT Plan (as approved) (defining “Delaware Act” as “the Delaware Limited Liability Company Act, Title 6, Chapter 18, §§ 18-101,
et seq.,
and any successor statute, as amended”).

28

See
Paragraph (b) of the Recitals of the Proposed CT Plan. Upon approval by the Commission, the Proposed CT Plan will be an “effective national market system plan” within the meaning of Rule 600(b)(34) of Regulation NMS, 17 CFR 242.600(b)(34), and an “effective transaction reporting plan,” within the meaning of Rule 600(b)(35) of Regulation NMS, 17 CFR 242.600(b)(35).

Paragraph (c) of the Recitals sets forth the SROs' statement of their regulatory obligations to the Proposed CT Plan. Specifically, paragraph (c) states that, in performing their obligations and duties under the Proposed CT Plan, 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 section 11A of the Exchange Act, and pursuant to Rule 603(b) of Regulation NMS thereunder. Paragraph (c) of the Recitals further provides that the Proposed CT Plan and the operations of the Company shall be subject to ongoing oversight by the Commission.
29

Finally this paragraph of the Recitals sets forth that no provision of the Proposed 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.
30

29

See
Paragraph (c) of the Recitals of the Proposed CT Plan.

30

See
Paragraph (b) of the Recitals of the Proposed CT Plan. The “Members” of the Agreement, as defined in the first paragraph of the Agreement, are the SROs identified in Exhibit A to the Agreement.

The Commission is making a non-substantive modification to paragraph (b) to add the defined term “Plan” at the end of the phrase “an NMS plan governing the public dissemination of real-time consolidated market data for Eligible Securities.” This modification is appropriate because the Proposed CT Plan contains numerous references to the “plan,” which term had not been defined. Apart from this modification, the Recitals are substantively similar to corresponding recitals of the 2021 CT Plan approved by the Commission
31

and were not required to be modified by the Amended Governance Order. The Commission received no comments addressing paragraphs (a), (b), and (c) of the Recitals of the Proposed CT Plan, and the Commission is approving the Recitals as modified.

31

See
2021 Approval Order,
supra
note 19, 86 FR at 44143-49 (approving Paragraph (a) of the Recitals of the 2021 CT Plan, as proposed, Paragraph (b) of the Recitals of the 2021 CT Plan, as modified, and Paragraph (g) of the Recitals of the 2021 CT Plan as modified).

2. Definitions

Article I of the Proposed CT Plan sets forth the defined terms used throughout, as well as provisions for interpreting, the Proposed CT Plan and its Exhibits.
32

32

See
Article I, Sections 1.1 and 1.2 of the Proposed CT Plan.

(a) Section 1.1 Definitions

While the Commission received no comments on the proposed definitions, it is, as explained below, making certain modifications to the proposed definitions.

The Commission is modifying the definition of “Administrator” to delete text that incompletely duplicates part of the provisions of Article VI, Section 6.2 of the Proposed CT Plan as modified and instead refer directly to Article VI of the Proposed CT Plan. Specifically, the Commission is revising the definition to read, “ ‘Administrator’ means the Person selected by the Company to perform the administrative functions under Article VI of this Agreement.” This modification is appropriate to avoid potential ambiguity between the terms of the definition as proposed and the provisions of Article VI as modified by the Commission, in particular the text of Section 6.2 of the Agreement regarding the independence of the Administrator, as modified by the Commission.
33

33

See infra
Section II.B.7(b).

The Commission is modifying Section 1.1 to add a new paragraph (2) to define the term “Advisory Committee” to mean “the committee formed in accordance with Section 4.7 of this Agreement.”
34

This modification is appropriate because the term “Advisory Committee” is used throughout the Proposed CT Plan but was undefined. The Commission is further modifying Section 1.1 to renumber the following paragraphs of Section 1.1 accordingly.

34

See
Section 1.1(2) of the Proposed CT Plan (as approved). The Commission has also renumbered the paragraphs of Section 1.1 to reflect this addition.

The Commission is modifying the definitions of “Company Identified Party,” “Covered Persons,” “Executive Session,” and “Party to a Proceeding” to delete the acronym “SRO” from the term “SRO Voting Representative.” These modifications are appropriate because the defined term proposed in the Proposed CT Plan is “Voting Representative” rather than “SRO Voting Representative.”
35

35

See
Article I, Section 1.1(83) of the Proposed CT Plan (as approved) (defining “Voting Representative”).

The Commission is modifying the definition of “Agent” to insert, immediately after the words “the Administrator,” the words “the Interim Administrator(s).” The Commission is also modifying the definition of “Covered Persons” to insert in two places immediately following the words “the Administrator,” the words “the Interim Administrator(s).”
36

These modifications are appropriate because, as discussed below in Section II.B.7 of this order, the Commission is modifying the Proposed CT Plan to permit the appointment by the Operating Committee of one or more Interim Administrator(s), and these insertions are needed to conform to that modification.

36
As modified, Section 1.1(14) provides that the term “Covered Persons” means “representatives of the Members (including the Voting Representative, alternate Voting Representative, and Member Observers), members of the Advisory Committee, SRO Applicants, SRO Applicant Observers, the Administrator, the Interim Administrator(s), and the Processors; Affiliates, employees, and Agents of the Operating Committee, a Member, the Administrator, the Interim Administrator(s), and the Processors; and any third parties invited to attend meetings of the Operating Committee or subcommittees. Covered Persons do not include staff of the SEC.”

The Commission is modifying the definition of “Highly Confidential Information” to specify that “Highly Confidential Information” shall also include the Company's contract negotiations with the Interim Administrator(s).
37

This modification is appropriate because the Company's contract negotiations with the Interim Administrator(s) would raise confidentiality concerns similar to those of the Company's contract negotiations with the Administrator, which require classification as Highly Confidential Information under the confidentiality provisions of the Proposed CT Plan. The Commission is further modifying the definition of “Highly Confidential Information”
38

to delete the word “applicable” and insert, immediately after the words “privilege or immunity” the words “recognized under Applicable Law.” This modification is appropriate to place clear limits around the circumstances in which sharing of information with Advisory Committee members will be restricted under the Confidentiality Policy by requiring that the “privilege or immunity” under which information may be designated as Highly Confidential Information must be a “privilege or immunity recognized under Applicable Law,” which is a term defined in Section 1.1 of the Proposed CT Plan.
39

37
To effect this modification, the Commission is inserting, immediately after “Administrator” the words “or Interim Administrator(s).”
See
Section 1.1(35) of the Proposed CT Plan (as approved).

38

See
Article I, Section 1.1(35) of the Proposed CT Plan (as approved).

39

See infra
Section II.B.5(l) (discussing the Confidentiality Policy set forth in Article IV, Section 4.12 of and Exhibit C to the Proposed CT Plan).

The Commission is modifying the definition of “Operative Date” to insert, immediately after “Exchange Act,” the words “and the rules and regulations thereunder.” This modification is appropriate to help ensure that this provision more broadly encompasses all of the laws and regulations governing the regulatory functions to be performed by the Members through the Proposed CT Plan. The proposed and approved definition of “Operative Date” also differs from that approved by the Commission in the 2021 CT Plan
40

in that it specifies the two major conditions required to be fulfilled before the Proposed CT Plan has been fully implemented. This change is appropriate because it ties the definition of Operative Date to the accomplishment of key milestones.

40

See
2021 Approval Order,
supra
note 19, 86 FR at 44207.

Except as described above (and with respect to the removal of provisions regarding non-SRO representatives, as required by the Amended Governance Order
41

), the definitions in Section 1.1

are identical to the corresponding definitions in the 2021 CT Plan approved by the Commission,
42

and were not required to be modified by the Amended Governance Order. The Commission received no comments on Article I, Section 1.1 of the Proposed CT Plan, and the Commission is approving Article I, Section 1.1 of the Proposed CT Plan as modified.

41

See
Amended Governance Order,
supra
note 23, 88 FR at 61631 (“In accordance with the D.C. Circuit's ruling, the Commission is modifying the

Governance Order to remove the provisions regarding the participation of non-SRO representatives as members of the operating committee of the Revised New Consolidated Data Plan and to make conforming changes.”).

42

See
2021 Approval Order,
supra
note 19, 86 FR at 44149-50, 44207-10.

(b) Section 1.2 Interpretation

Section 1.2 of the Proposed CT Plan provides rules for the interpretation of terms used in the Proposed CT Plan. This provision is identical to the corresponding plan provisions of the 2021 CT Plan approved by the Commission
43

and was not required to be modified by the Amended Governance Order. The Commission received no comments addressing Section 1.2, and the Commission is approving Section 1.2 as proposed.

43

See
2021 Approval Order,
supra
note 19, 86 FR at 44210.

3. Organization

Article II of the Proposed CT Plan sets forth provisions governing the organization of the Company. The SROs have organized the Proposed CT Plan in the form of a Delaware limited liability company pursuant to a limited liability company agreement, entitled the Limited Liability Company Agreement (“Agreement”) of CT Plan LLC (“Company”).
44

The Members of the Company will be the national securities exchanges for equities and FINRA,
45

each of which will be a “Participant” of the Proposed CT Plan as an effective NMS plan for the dissemination of consolidated equity market data.

44

See
Article II, Section 2.1 of the Proposed CT Plan.

45

See
Article III, Section 3.1 of the Proposed CT Plan. The names and addresses of each Member are set forth in Exhibit A to the Proposed CT Plan.

The Proposed CT Plan states that 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 therein; (ii) contracting for the distribution of such information; (iii) contracting for and maintaining facilities to support any activities permitted in the Agreement and guidelines adopted thereunder, including the operation and administration of the System;
46

(iv) providing for those other matters set forth in the 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 Act, the Exchange Act, or other Applicable Law.
47

The Agreement itself, including its appendices, constitutes the Proposed CT Plan. Under the Proposed CT Plan, the governing body of the Company would be the Operating Committee.
48

46
Section 1.1(75) 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.”

47

See
Article II, Section 2.4 of the Proposed CT Plan.

48

See
Article IV, Section 4.1(a) of the Proposed CT Plan.

Article II of the Proposed CT Plan is identical to the corresponding plan provisions of the 2021 CT Plan approved by the Commission
49

and was not required to be modified by the Amended Governance Order. The Commission received no comments addressing Article II of the Proposed CT Plan, and the Commission is approving Article II of the Proposed CT Plan as proposed for the same reasons stated in the 2021 Approval Order.
50

49

See
2021 Approval Order,
supra
note 19, 86 FR at 44150-52.

50

Id.

4. Membership

Article III of the Proposed CT Plan sets forth provisions relating to membership in the Company. Pursuant to Article III, Section 3.2(a) of the Proposed CT Plan, any national securities association or national securities exchange whose market, facilities, or members, as applicable, trades Eligible Securities
51

may become a Member by (i) providing written notice to the Company; (ii) executing a joinder to the 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.
52

Membership Fees paid will be added to the general revenues of the Company.
53

51

See
Article I, Section 1.1(23) of the Proposed CT Plan (as approved) (defining “Eligible Security” as “(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”).

52

See
Article III, Section 3.2(a) of the Proposed CT Plan.

53

See
Article III, Section 3.2(a) of the Proposed CT Plan.

Article III, Section 3.2 of the Proposed 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 Company 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.
54

The Proposed CT Plan prohibits a Member's transfer of its Membership Interest in the Company, except in connection with the withdrawal of a Member from the Company, as discussed below.
55

54

See
Article III, Section 3.2(b) of the Proposed 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 Proposed CT Plan.

55

See
Article III, Section 3.3 of the Proposed CT Plan.

Pursuant to Article III, Section 3.4, any Member may voluntarily withdraw from the Company by: (i) providing not less than 30 days' prior written notice of such withdrawal to the Company, (ii) causing the Company to file with the Commission an amendment to effectuate the withdrawal,
56

and (iii) transferring such Member's Membership Interest to the Company.
57

If a Member ceases to be a registered national securities association or registered national securities exchange, that Member automatically withdraws from the Company.
58

Section 3.4 further provides that after withdrawal from Membership, the Member will remain liable for any obligations arising prior to withdrawal.
59

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.
60

56

See
Article III, Section 3.4(a) of the Proposed CT Plan.

57

See
Article III, Section 3.4(a) of the Proposed CT Plan.

58

See
Article III, Section 3.4(b) of the Proposed CT Plan.

59

See
Article III, Section 3.4(d)(i) of the Proposed CT Plan.

60

See
Article III, Section 3.4(d)(ii) of the Proposed CT Plan.

Pursuant to proposed Sections 3.4(d)(iii) and (iv), a Member that has withdrawn from the Company 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 Company.

Article III, Section 3.5 of the Proposed 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, so long as such Member continues to be a national securities association or national securities exchange. As proposed, Section 3.6 provides that, following the Operative Date, each Member will be required to comply with the provisions of the Proposed CT Plan and enforce compliance with the Proposed CT Plan by its members.
61

61

See
Article III, Section 3.6 of the Proposed CT Plan.

Article III of the Proposed CT Plan also sets forth the obligations and liabilities of the Members. Article III, Section 3.7 provides that Members will not be required to contribute capital or make loans to the Company, nor will Members have any liability for the debts and liabilities of the Company.
62

This section also states that it is the intent of the Members that no distribution to any Member pursuant to the Company 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 provided in Section 3.7(b).
63

In addition, Article III of the Proposed CT Plan provides that no Member, unless authorized by the Operating Committee, has the authority to represent 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 the Agreement.
64

Finally, Section 3.7(e) provides that no Member owes any duty (fiduciary or otherwise) to the Company or to any other Member other than the duties expressly set forth in the Agreement.
65

62

See
Article III, Section 3.7(a)-(b) of the Proposed CT Plan. 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 Proposed CT Plan.

63

See
Article III, Section 3.7(c) of the Proposed 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.

64

See
Article III, Section 3.7(d) of the Proposed CT Plan.

65

See
Article III, Section 3.7(e) of the Proposed CT Plan.

The Commission is modifying Section 3.6 to replace the “Operative Date” with “Effective Date” as that term is defined in the Recitals. This change is appropriate because the Effective Date of the Agreement is the date it is approved by the Commission, whereas the Operative Date is defined as the date that Members conduct, through the Company, the Processor and Administrator functions related to the public dissemination of real-time consolidated equity market data and the Equity Data Plans cease their operations. This modification will facilitate the implementation of the Proposed CT Plan as, pursuant to Article XIV of the approved plan, the obligation of each Member to comply with the provisions of the Agreement and enforce compliance by its members shall begin when the Agreement is approved.

Aside from the modification to Section 3.6, Article III is, with immaterial differences, identical to the corresponding provisions of the 2021 CT Plan approved by the Commission
66

and was not required to be modified by the Amended Governance Order. The Commission received no comments on Article III of the Proposed CT Plan, and the Commission is approving Article III of the Proposed CT Plan as modified for the same reasons stated in the 2021 Approval Order.
67

66

See
2021 Approval Order,
supra
note 19, 86 FR at 44152-54, 44211-12. With respect to proposed Article III of the Proposed CT Plan, the differences between the language of the 2021 CT Plan approved by the Commission in the 2021 Approval Order and that of the Proposed CT Plan as proposed are the substitution of the word “will” for the word “are” in Section 3.2(c) as proposed and the paragraph numbering in Section 3.4(d) as proposed.

67

Id.

5. Management of the Company

Article IV of the Proposed CT Plan establishes the overall governance structure for the management of the Company.

(a) Operating Committee

As an initial matter, Section 4.1 of the Proposed CT Plan has a typographical error in that the subsections are numbered in Section 4.1 as (f), (g), and (h), rather than (a), (b), and (c). Accordingly, the Commission is modifying the Proposed CT Plan to correct this typographical error, and, for ease of reading, all further references to Section 4.1 will be to the paragraphs as renumbered. These modifications are appropriate because they would alleviate confusion on those referencing the Proposed CT Plan.

Article IV, Section 4.1(a) provides that the Company be managed by the Operating Committee.
68

Article IV, Section 4.1(a) also provides that the Operating Committee has the authority to take actions it deems necessary to accomplish the purposes of the Company, including: (1) proposing amendments or implementing policies and procedures;
69

(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;
70

(3) developing fair and reasonable fees and consistent terms for Transaction Reports and Quotation Information;
71

(4) reviewing the performance of the Processors and ensuring public reporting of the Processors' performance and other metrics and information about the processors;
72

(5) assessing the marketplace for equity 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;
73

(6) designing a fair and reasonable formula to be applied by the Administrator for allocating plan revenues, and overseeing, reviewing, and revising the formula as needed;
74

(7) interpreting the Agreement and its provisions;
75

and (8) carrying out other specific responsibilities provided for in the Agreement.
76

68

See
Article IV, Section 4.1(a) of the Proposed CT Plan. This paragraph further provides that 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.
See id.

69

See
Article IV, Section 4.1(a)(i) of the Proposed CT Plan.

70

See
Article IV, Section 4.1(a)(ii) of the Proposed CT Plan.

71

See
Article IV, Section 4.1(a)(iii) of the Proposed CT Plan (providing that that the Operating Committee has the authority to take actions it deems necessary to accomplish the purposes of the Company, including “developing and maintaining fair and reasonable Fees and consistent terms for the distribution, transmission, and aggregation of Transaction Reports and Quotation Information in Eligible Securities”).
See id.

72

See
Article IV, Section 4.1(a)(iv) of the Proposed CT Plan.

73

See
Article IV, Section 4.1(a)(v) of the Proposed CT Plan.

74

See
Article IV, Section 4.1(a)(vi) of the Proposed CT Plan.

75

See
Article IV, Section 4.1(a)(vii) of the Proposed CT Plan.

76

See
Article IV, Section 4.1(a)(viii) of the Proposed CT Plan.

Section 4.1(b) proposes to permit the Operating Committee to delegate all or part of its administrative functions under the Proposed CT Plan, excluding those administrative functions to be performed by the Administrator pursuant to Section 6.1, to (1) a subcommittee; (2) one or more of the Members; or (3) any other Persons (including the Administrator),
77

provided that a delegation would not convey the authority to take action on behalf of the Proposed CT Plan.
78

And 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. Section 4.1 as proposed and approved differs from the corresponding provision of the 2021 CT Plan approved by the Commission in two ways. First, in lieu of the term “core data” in Section 4.1(a)(iii) of the 2021 CT Plan, the Proposed CT Plan uses the phrase “Transaction Reports and Quotation Information in Eligible Securities.” Second, Section 4.1(b) as proposed and approved removes a reference to Non-SRO Voting Representatives, which is consistent with the Amended Governance Order.
79

77
The limitations on the Operating Committee's authority to delegate those administrative functions to be performed by the Administrator pursuant to Section 6.1, to (1) a subcommittee; (2) one or more of the Members; or (3) any other Persons (including the Administrator) under Section 4.1(b) of the Proposed CT Plan apply equally with respect to those administrative functions to be performed by the Interim Administrator(s) appointed pursuant to Section 6.5 of the Proposed CT Plan.

78

See
Article IV, Section 4.1(b) of the Proposed CT Plan.

79

See
Amended Governance Order,
supra
note 23, 88 FR at 61631 (“In accordance with the D.C. Circuit's ruling, the Commission is modifying the Governance Order to remove the provisions regarding the participation of non-SRO representatives as members of the operating committee of the Revised New Consolidated Data Plan and to make conforming changes.”).

One commenter states that the Commission should “encourage the Revised CT Plan to consider” whether current policies of the Equity Data Plans, “such as those surrounding non-display use reporting and professional versus non-professional designations, are necessary or merely add unnecessary complexity and confusion.”
80

The commenter states that a “benefit of transparent, simple, fee schedules and policies governing consolidated equity market data is that they [would] also likely reduce the scope of services that the Plan Administrator would need to provide to the Revised CT Plan, thereby reducing Plan costs.”
81

Another commenter states that the policies for the Proposed CT Plan “must be improved” from those of the Equity Data Plans.
82

This commenter states that “there must be greater transparency in the various stages of the workstreams and alternative views considered” and that the “seemingly rent-seeking behavior that has plagued the Existing Plans must be addressed, and every aspect surrounding the governance and administration of Consolidated Data must be reimagined.”
83

Another commenter suggests that, in developing policies, consideration should be given to “invit[ing] potential RFP respondents to present their thoughts on issues and potential solutions for the new plan.”
84

80
Letter from Krista Ryan, SVP, Deputy General Counsel and Holly Grotnik, Head of Consolidated Data Services, Fidelity Investments, at 5 (Feb. 26, 2024) (“Fidelity Letter”) at 5.

81

Id.

82
Letter from Stan Sater, Legal Counsel, Polygon.io, Inc. (Feb. 26, 2024) (“Polygon Letter”), at 1.

83

Id.
at 2.

84
Letter from Thomas Jordan, President, Jordan & Jordan, at 2 (June 12, 2024) (“Jordan Letter”).

With respect to the comments addressing the policies to be developed for the Proposed CT Plan, including comments suggesting that such policies should improve upon those of the Equity Data Plans with respect to their complexity, effectiveness, and transparency,
85

and for the participants to the Proposed CT Plan to consider whether such policies are necessary,
86

these comments provide insufficient detail with respect to the measures or specific plan language that, in the commenters' views, would be necessary to address the commenters' concerns. Additionally, the requirements of the Proposed CT Plan, as proposed and approved, provide appropriate guidelines for the development and implementation of such policies. For example, the Proposed CT Plan, as proposed and approved, requires that the Operating Committee 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.”
87

Moreover, any plan policies or operational interpretations adopted by the Operating Committee must be consistent with the terms of the Plan.

85

See
Fidelity Letter,
supra
note 80, at 5; Polygon Letter,
supra
note 82, at 1.

86

See
Fidelity Letter
supra
note 80, at 5.

87
Article IV, Section 4.1(a)(1) of the Proposed CT Plan (as approved).

With respect to the concerns based on the commenters' experience with the Equity Data Plans as it relates to equity market data or plan policies in general,
88

these commenters provide insufficient detail with respect to the measures that, in the commenters' views, are necessary to address the expressed concerns. Regarding the plan policies to be developed, the Proposed CT Plan includes specified provisions designed to, among other things, address the governance concerns identified by the Commission with respect to the governance of the Equity Data Plans.
89

Implementing the governance reforms in the Proposed CT Plan, as approved in this order, is a key step in responding to broader concerns about whether the Equity Data Plans continue to serve their regulatory purpose.
90

These changes, including, as approved in this order, a reallocation of

voting power,
91

broader representation from members of the Advisory Committee,
92

as well as the appointment of an Administrator meeting the independence requirements of Section 6.2 of the Proposed CT Plan,
93

should, when combined into a single new NMS plan, significantly enhance the governance of the Proposed CT Plan.
94

They should also facilitate enhanced decision-making and innovation in the provision of equity market data, including with respect to the development of plan-related policies. Additionally, replacing the Equity Data Plans' two current administrators with the single independent Administrator upon full implementation of the Proposed CT Plan should improve upon the policies of the Equity Data Plans by facilitating both uniform plan policies and the uniform application of those policies. Moreover, the Proposed CT Plan will provide for a broader set of Advisory Committee members than the Equity Data Plans do, and the Advisory Committee will have the opportunity to provide input from a broader selection of market participants on any proposed policies prior to the adoption of those policies by the Operating Committee.
95

Accordingly, the Commission is not modifying the Proposed CT Plan in response to these comments.

88

See
Fidelity Letter,
supra
note 80, at 5; Polygon Letter,
supra
note 82, at 1-2.

89

See
Amended Governance Order,
supra
note 23, 88 FR at 61631. In the Governance Order, “[t]he Commission sought to address . . . , 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.”
See
2021 Approval Order,
supra
note 19, 86 FR at 44142.
See also
Governance Order,
supra
note 11 (“[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. And these conflicts bear on the exchanges' incentives to meaningfully improve the provision of core data.”) (citations omitted)).

90

See
Governance Order,
supra
note 11, 85 FR at 28705 (citing to Securities Exchange Act Release No. 87906 (Jan. 8, 2020), 85 FR 2164, 2173 (Jan. 14, 2020) (File No. 4-757).

91

See
Article IV, Section 4.3 (establishing requirements for action of the Operating Committee of the Proposed CT Plan).

92

See
Article IV, Section 4.7 of the Proposed CT Plan (governing, among other things, the formation, composition, function, and rights of the Advisory Committee of the Proposed CT Plan).

93

See
Article VI, Section 6.2 of the Proposed CT Plan (governing independence requirements for the Administrator of the Proposed CT Plan).

94
As the Commission stated in the Governance Order, changes to the governance structure of the SIPs are appropriate to create a governance structure that will reduce obstacles to ongoing improvement of the consolidated market data feeds in ways that the current governance structure of the Equity Data Plans has not; and making these governance changes will facilitate decision-making regarding operational changes.
See
Governance Order,
supra
note 11, 85 FR at 28707.

95

See, e.g.,
Article IV, Sections 4.1 and 4.7 of the Proposed CT Plan.

As discussed above, Section 4.1 of Article IV of the Proposed CT Plan is substantively similar to the corresponding provision of the 2021 CT Plan approved by the Commission,
96

and, other than for the removal of provisions regarding non-SRO representatives, which is consistent with the Amended Governance Order,
97

Section 4.1 was not required to be modified by the Amended Governance Order. For the same reasons stated in the 2021 Approval Order (apart from those pertaining to the participation of non-SRO representatives as members of the operating committee of the 2021 CT Plan, which is not included in the Proposed CT Plan),
98

the Commission is approving Section 4.1 of Article IV of the Proposed CT Plan as proposed.

96

See
2021 Approval Order,
supra
note 19, 86 FR at 44156-63.

97

See
Amended Governance Order,
supra
note 23, 88 FR at 61631 (stating that “[i]n accordance with the D.C. Circuit's ruling, the Commission is modifying the Governance Order to remove the provisions regarding the participation of non-SRO representatives as members of the operating committee of the Revised New Consolidated Data Plan and to make conforming changes”).

98

See
2021 Approval Order,
supra
note 19, 86 FR at 44156-63.

(b) Composition and Selection of Operating Committee

Article IV, Section 4.2 governs the composition and selection of the Operating Committee members. Article IV, Section 4.2(a) provides that each SRO group
99

and each non-affiliated SRO
100

will designate a Voting Representative to serve on the Operating Committee and vote on its behalf.
101

Article IV, Section 4.2(b) of the Proposed CT Plan provides that entities that have not yet been registered with the Commission as national securities exchanges may appoint, subject to Section 4.4(i), an individual to attend regularly scheduled Operating Committee meetings (an “SRO Applicant Observer”).
102

Paragraph (b) of Section 4.2 further provides that 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. Article IV, Section 4.2(c) of the Proposed 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 a 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.
103

If such a non-affiliated SRO or SRO group does not commence operations within six months of first attending an Operating Committee meeting as a non-operational exchange(s), it will no longer be permitted to attend Operating Committee meetings until it resumes operations as a market.
104

99
For example, New York Stock Exchange LLC, NYSE American, NYSE Arca, 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.

100
Currently, the non-affiliated SROs are FINRA, IEX, LTSE, MEMX, and MIAX PEARL.

101

See
Article IV, Section 4.2(a) of the Proposed CT Plan. Section 4.2(a) further provides that 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.
See id.

102

See
Article IV, Section 4.2(b) of the Proposed CT Plan. This section further provides that 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.
See id.

103

See
Article IV, Section 4.2(c) of the Proposed CT Plan.

104

See
Article IV, Section 4.2(c) of the Proposed CT Plan.

The text of Section 4.2 of the Proposed CT Plan is substantively similar to the corresponding provision of the 2021 CT Plan approved by the Commission, except for the following differences, which are consistent with the requirements of the Amended Governance Order:
105

(1) the removal of all provisions regarding the participation of non-SRO representatives as members of the operating committee (“Non-SRO Voting Representatives”), consistent with requirements of the Amended Governance Order; (2) the replacement of references to “SRO Voting Representatives” with references to “Voting Representatives” which, as discussed above, conforms to the defined term; and (3) the renumbering of paragraphs in proposed Section 4.2 to conform the section with the foregoing deletions. The Commission received no comments on Section 4.2 of the Proposed CT Plan. The Commission is approving Section 4.2 as proposed for the reasons stated in the 2021 Approval Order (apart from those pertaining to the participation of non-SRO representatives as members of the operating committee of the 2021 CT Plan, which is not included in the Proposed CT Plan).

105

See
Amended Governance Order,
supra
note 23, 88 FR at 61631.

(c) Action of Operating Committee

Article IV, Section 4.3 of the Proposed CT Plan sets forth the voting allocation and voting structure for actions of the Operating Committee.

(i) Allocation of Votes

Consistent with the requirements of the Amended Governance Order,
106

Article IV, Section 4.3(a) of the Proposed CT Plan provides that each

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
107

for four of the six calendar months preceding a vote of the Operating Committee.
108

Commenters addressed the allocation of votes in the Proposed CT Plan.
109

106

See
Amended Governance Order,
supra
note 23, 88 FR at 61639.

107

See
Article IV, Section 4.3(a) of the Proposed CT Plan. Section 4.3(a) further provides that, for purposes of Section 4.3(a), “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 or under the CQ, CTA, and UTP Plans.
See id.

108

See
Article IV, Section 4.3(a) of the Proposed CT Plan. Article IV, Section 4.3(a) of the Proposed CT Plan states that FINRA shall not be considered to operate a market center within the meaning of this Section 4.3(a) solely by virtue of facilitating quoting on the FINRA Alternative Display Facility or reporting on behalf of FINRA participants of transactions effected otherwise than on an exchange.

109

See
Letter from Patrick Sexton, EVP, General Counsel & Corporate Secretary, Cboe Global Markets, Inc. (Jan. 26, 2024) (“Cboe Letter I”); Fidelity Letter,
supra
note 80; Letter from Sarah Bessin, Deputy General Counsel, Securities Regulation and Nhan Nguyen, Associate General Counsel, Securities Regulation, Investment Company Institute (Feb. 26, 2024) (“ICI Letter”); Letter from Adrian Griffiths, Head of Market Structure, MEMX LLC (Feb. 26, 2024) (“MEMX Letter”); Letter from Erika Moore, Vice President and Corporate Secretary, Nasdaq, Inc. (Feb. 26, 2024) (“Nasdaq Letter”); Letter from Hope Jarkowski, General Counsel, NYSE Group, Inc. (Feb. 26, 2024) (“NYSE Letter”); Letter from Ellen Greene, managing Director, Equities & Options Market Structure and Joseph Corcoran, Managing Directors, Associate General Counsel, Securities Industry and Financial Markets Association (Feb. 26, 2024) (“SIFMA Letter”); Letter from Patrick Sexton, EVP, General Counsel & Corporate Secretary, Cboe Global Markets, Inc. (May 20, 2024) (“Cboe Letter II”); Jordan Letter,
supra
note 84; Letter from Adrian Griffiths, Head of Market Structure, MEMX, John Ramsay, Chief Market Policy Officer, IEX, Christopher Solgan, VP, Senior Counsel, MIAX Pearl, and Alanna Barton, Director and Senior Counsel, Markets and Regulation, LTSE (Aug. 16, 2024) (“MEMX-IEX-MIAX Pearl-LTSE Letter”); Letter from Patrick Sexton, EVP, General Counsel & Corporate Secretary, Cboe Global Markets, Inc. (Sept. 18, 2024) (“Cboe Letter III”).

(A) The Allocation of Votes by SRO Group and Trading Volume

Several commenters support approving the allocation of votes as proposed.
110

One commenter agrees with the Proposed CT Plan provision that the voting power on the Operating Committee should be limited to one vote per exchange group, with the ability to obtain a second vote if the exchange group maintains a consolidated market share of at least fifteen percent for at least four of the six calendar months preceding a vote of the Operating Committee.
111

One commenter states that it supports the allocation of votes as proposed because it would reduce the “concentration of voting authority that is currently held by a minority of Participant organizations that control several votes today.”
112

110

See
Fidelity Letter,
supra
note 80, at 3; MEMX Letter,
supra
note 109, at 2; ICI Letter,
supra
note 109, at 1-2; SIFMA Letter,
supra
note 109, at 2; MEMX-IEX-MIAX Pearl-LTSE Letter,
supra
note 109, at 1-5.

111

See
Fidelity Letter,
supra
note 80, at 3.

112
MEMX Letter,
supra
note 109, at 2, 10.

Conversely, certain commenters state that, while the Commission stated in the 2021 Approval Order that its voting framework was designed to reflect the importance of those SROs that oversee trading activity that generates a significant amount of equity market data, the 15-percent consolidated equity market share necessary for a second vote is not rationally related to the Commission's goal.
113

Specifically, these commenters state that the Proposed CT Plan's voting framework violates the Exchange Act and is arbitrary and capricious under the Administrative Procedure Act (“APA”).
114

113

See
Cboe Letter I,
supra
note 109, at 2-5; Cboe Letter II,
supra
note 109, at 2, 3-6; Nasdaq Letter,
supra
note 109, at 2-5; NYSE Letter,
supra
note 109, at 5-7.

114

See
Cboe Letter I,
supra
note 109, at 3-6; Nasdaq Letter,
supra
note 109, at 2; NYSE Letter,
supra
note 109, at 7.

One commenter states that the proposed allocation of voting power is “illogical and violative of the APA” because it (1) “lacks a rational basis” and “any rational connection” to this commenter's consolidated equity market share, (2) treats the commenter's SRO group the same as dissimilarly situated non-affiliated exchanges, while treating the commenter's SRO group differently from other similarly situated SRO groups, and (3) unjustifiably equates this commenter's significance to the market to that of the much smaller, non-affiliated exchanges, thus yielding results that are “antithetical” and inconsistent with the Commission's statement that voting should reflect 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.”
115

115
Cboe Letter I,
supra
note 109, at 2, 3-4;
see also
Cboe Letter II,
supra
note 109, at 3-6; Cboe Letter III,
supra
note 109, at 7-8.

This commenter further states that consolidated market share statistics for 2023 and year-to-date (“YTD”) 2024 support its argument against allocating to its SRO group the same single vote allocated to each of the unaffiliated SROs.
116

Specifically, the commenter states that for YTD August 2024, the consolidated equity market share of its SRO group is more than four times that of two unaffiliated SROs, almost ten times more than a third unaffiliated SRO, and approaching more than 2600 times more volume than a fourth unaffiliated SRO.
117

This commenter further states that for YTD August 2024, the combined consolidated equity market share of these four non-affiliated exchanges was little more than 50% of the consolidated equity market share alone of this commenter's SRO group.
118

The commenter states that, by allocating the non-affiliated exchanges four total votes and the commenter's SRO group one vote, the Commission has effectively given the non-affiliated exchanges eight times more voting power for their market share relative to the commenter's, which the commenter states is unsupported by reasoned analysis.
119

116

See
Cboe Letter II,
supra
note 109, at 3.

117

See
Cboe Letter III,
supra
note 109, at 7.

118

See
Cboe Letter II,
supra
note 109, at 3.

119

See id.
at 4; Cboe Letter III,
supra
note 109, at 8.

One commenter states that the Commission should consider more than just trading market share when considering the significance of exchanges and SRO groups to the national market structure, saying that it would not be reasonable for the Commission to conclude that an exchange group that operates one or more listing exchanges, attracts significant quoting and trading activity, generates a substantial portion of equity market data, and commands more than 10% of the trading market share is no longer “significant” enough to warrant a second vote (and have the same voting power as an exchange with zero percent market share).
120

120

See
NYSE Letter,
supra
note 109, at 6.

Another commenter states that consideration should be given to comments favoring a “more market oriented” approach to the allocation of votes under the Proposed CT Plan because, as proposed, the voting mechanism seems “somewhat arbitrary,” with one SRO group and much smaller unaffiliated SROs having equivalent voting power.
121

This commenter states that, based on average daily volume for the first week of June 2024, one SRO group executed over 1400 times the volume of one of the unaffiliated SROs.
122

This commenter

questions whether it is appropriate for the basis for an equity market data voting structure to differ from that of other regulations and states that Section 31 fees, the Trading Activity Fee (“TAF”) and Consolidated Audit Trail (“CAT”) fees are, for example, all based on either notional amount of sales multiplied by a fixed assessment fee or total number of round turn transactions multiplied by a fixed fee or number of shares executed or even an income assessment based on gross revenue.
123

121
Jordan Letter,
supra
note 84, at 2.

122

See id.
This commenter further states that approval of the Proposed CT Plan, including its proposed voting structure, would likely lead to

litigation with consequent delays to the implementation of the Proposed CT Plan.
See id.

123

See id.

The Commission disagrees that the allocation of the same voting power to a single SRO and to a group of several SROs—even if an SRO group operates one or more listing exchanges, attracts significant quoting and trading activity, generates a substantial portion of equity market data, and commands more than 10% of the trading market share—is without rational basis or inconsistent with the APA. As the Commission stated in the Governance Order:

Congress charged the Commission with ensuring 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.” In furtherance of this responsibility, the Commission seeks through its rules and regulations to help ensure that certain “core data” is widely available for reasonable fees. The Commission has recognized that investors must have this core data “to participate in the U.S. equity markets.” And the purpose of the Equity Data Plans, adopted pursuant to Regulation NMS, is to facilitate the collection and dissemination of core data so that the public has ready access to a “comprehensive, accurate, and reliable source of information for the prices and volume of any NMS stock at any time during the trading day.”
124

124
Governance Order,
supra
note 11, 85 FR at 28705 (citations omitted).

However, as the Commission also stated, “exchange consolidation has altered the relative voting power of SROs such that exchange groups under common management now have greater voting power with respect to plan governance. Exchanges that historically had only one vote on NMS plans have now been consolidated into exchange groups that can control blocks of four or five votes.”
125

Thus, as the Commission explained in the Governance Order, “the current governance structure [of the Equity Data Plans] provides voting power based on each exchange license and thereby concentrates voting power in a small number of exchange group stakeholders, which also have inherent conflicts of interest with respect to the operation of the Plans,”
126

that these conflicts have “perpetuated disincentives for the Equity Data Plans to make improvements to the SIP data products”
127

and “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,”
128

and that “modernizing plan governance by reallocating votes by exchange 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.”
129

125

Id.
at 28712.

126

Id.
at 28713.

127

Id.

128

Id.
at 28702.

129

Id.
at 28713.

Moreover, in ruling on the petition challenging the 2021 Approval Order, the D.C. Circuit confirmed that the allocation of votes in the CT Plan by exchange group is consistent with Section 11A of the Exchange Act and Rule 608 of Regulation NMS.
130

Inherent in that structure—which was included in both the Governance Order and the Amended Governance Order—is the provision of the same voting power to some SRO groups with larger market share and exchanges with smaller trading volume. And, at most, the largest SRO groups would have only twice the voting power of the smallest unaffiliated exchange. By implication, in upholding these provisions, the Court concluded that these features were rational.
131

Moreover, although commenters have opposed granting similar voting power to SRO groups and non-affiliated SROs with significantly different trading volumes,
132

the existing system for allocating votes in the Equity Data Plans, which is favored by these commenters, allocates voting power without
any
consideration of trading volume. The existing system also provides the large SRO groups disproportionate influence over the Equity Data Plans through casting the vote of multiple consolidated SROs as a unified block.
133

Addressing this allocation of disproportionate voting power to SRO groups with conflicts of interest—not simply favoring non-affiliated SRO groups or denying the SRO groups a majority of voting power
134

—remains the Commission's purpose in allocating votes among SROs in the Amended Governance Order.

130

See Nasdaq
v.
SEC, supra
note 20, 38 F.4th at 1138-42.

131

See id.
at 1139-42 (addressing the petitioners' arguments that the Commission's decision to “limit SRO votes according to an SRO's corporate affiliation with another SRO” was arbitrary, capricious, and contrary to section 11A of the Exchange Act);
see also infra
notes 189-197 and accompanying text.

132

See supra
notes 116-120, 122, 123 and accompanying text.

133

See
Governance Order,
supra
note 11, 85 FR at 28713 (citing the “disproportionate influence affiliated exchange groups currently exercise in Plan matters by voting as a block,” as well as the “need to rebalance voting power in Plan governance” to address this concern).

134

See
Cboe Letter II,
supra
note 109, at 2.

Finally, while one commenter also questions whether it is appropriate for the voting structure of the Proposed CT Plan to differ from other regulations—such as the allocation of Section 31 fees, the TAF, and CAT fees—the voting scheme required by the Amended Governance Order is designed to address issues specific to the Equity Data Plans: the concentration of voting power in a small number of exchange group stakeholders with inherent conflicts of interest with respect to the operation of the Equity Data Plans, which has perpetuated disincentives for the Equity Data Plans to make improvements to the SIP data products.
135

Moreover, if the Commission allocated voting power on the Proposed CT Plan purely by trading volume, similar to the fees cited by the commenter, the result would be an even greater concentration of voting power than currently exists in the Equity Data Plans, perpetuating the existing disincentives to improve the SIP data products.

135

See
Governance Order,
supra
note 11, 85 FR at 28713; Amended Governance Order,
supra
note 23, 88 FR at 61632.
See also Nasdaq
v.
SEC, supra
note 20, 38 F.4th at 1140-41 (finding that the Commission had justified its “differing treatment of SROs for voting” in the 2021 Approval Order).

(B) Market Changes Since 2020

Several commenters also state that, because of changes that have taken place in the markets since the Commission set the 15-percent threshold in the Governance Order, that threshold is no longer supportable and should be reconsidered. One commenter states that the 15-percent threshold for obtaining a second vote has become “stale” since the Commission first proposed it in 2020.
136

This commenter states that, since the Commission justified the 15-percent threshold in the Governance Order, there has been a proliferation of non-affiliated exchanges, with three independent exchanges having launched (LTSE, MEMX, and MIAX PEARL), BOX

Exchange LLC having received approval of its registration as an exchange, and that three other entities have announced plans to launch new exchanges.
137

136
NYSE Letter,
supra
note 109, at 2.

137

See id.
at 5.

This commenter further states that the Commission's concerns in 2020 and 2021 about exchange consolidation were unfounded when rejecting a 10% threshold.
138

This commenter states that the Commission justified the 15-percent threshold in 2020 as reflecting “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,” and by pointing to the market shares of the three SRO groups at that time, which the commenter says were all “comfortably above” the 15-percent threshold but have since declined.
139

138

See id. See also
Nasdaq Letter,
supra
note 109, at 4 (stating that, as new exchanges have entered the market over the past three years, the trend of liquidity moving toward non-exchange venues has continued).

139
NYSE Letter,
supra
note 109, at 5 (quoting the 2021 Approval Order,
supra
note 19, 86 FR at 44164).

The commenter states that the Commission “clearly did not foresee this turn of events,” and that, “[b]y the Commission's own reasoning, if the Proposed Plan does not allocate a second vote to the SRO Groups that oversee the vast majority of on-exchange quoting, trading, and related market data creation, then the voting threshold is incorrectly set.”
140

The commenter states that, given the increasing fragmentation of the market and decline of SRO-group market share, an exchange group that manages to achieve 14, or 12, or even 10 percent market share should qualify for a second vote,
141

and observes that, “while the four independent exchanges have collectively managed to achieve almost 8 percent market share, none of them individually has had a market share of more than 4 percent, and one of them has essentially zero percent.”
142

140

Id.
at 6.

141

See id.

142

Id.

Another commenter also states that the Commission based its analysis on the erroneous assumption that the largest exchange groups would have a market share ranging from 17 percent to 22 percent
143

—with the 15-percent threshold well below that range—and that data show the actual range to be approximately 4 points below that, between 13 and 18 percent, with the threshold in the middle of that range, a downward trend that is likely to endure.
144

According to this commenter, the 15-percent threshold is therefore “not fit for purpose” because it is too high to differentiate between exchanges that oversee trading activity that generates a significant amount of equity market data and those that do not.
145

This commenter further states that the Commission must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.
146

The commenter states that the data does not support the proposed voting scheme.
147

143

See
Nasdaq Letter,
supra
note 109, at 3 (citing Governance Order,
supra
note 11, 85 FR at 28714).

144

See id.
at 4.

145

Id.

146

See id.

147

See id.
at 4-5.

Some commenters that support the proposed voting allocation state that “relative market share trends are fluid and subject to constant change,” and therefore are not relevant to the proper effectuation of the SROs' shared regulatory responsibilities in the Proposed CT Plan's voting framework.
148

148
MEMX-IEX-MIAX Pearl-LTSE Letter,
supra
note 109, at 5.

The Commission agrees with commenters that stated that relative market share trends are by their nature fluid and subject to constant change and that the court's ruling did not suggest that a transitory change in market share between competitors is relevant to the question of how to properly effectuate the SROs' shared regulatory responsibilities in the Proposed CT Plan's voting framework, or that that proposed voting structure is now, after its long procedural history, inconsistent with the Exchange Act.
149

149

See id.
at 3-4.

Additionally, while the commenters opposing the voting allocation of the Proposed CT Plan
150

state that there has been a proliferation of non-affiliated exchanges and a decline in SRO-group market share, and that the 15-percent threshold is now inconsistent with the Commission's observation in the Governance Order that the consolidated equity market share of the largest exchange groups was “already well above 10 percent and continues to range from 17 percent to 22 percent,”
151

and the Commission's statement that the threshold “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,”
152

the Commission did not define “significant” to mean that each of the three SRO groups would, in perpetuity, receive a second vote on the new NMS plan's Operating Committee. That two SRO groups, as opposed to all three, would receive a second vote under the current distribution of trading volume, does not invalidate the Commission's decision to permit a second vote only for those unaffiliated SROs or SRO groups with at least a 15-percent market share.

150

See
Cboe Letter I,
supra
note 109, at 2-6; Cboe Letter II,
supra
note 109, at 2-8; Cboe Letter III,
supra
note 109, at 2-4; NYSE Letter,
supra
note 109, at 1-7; Nasdaq Letter,
supra
note 109, at 1-5.

151

See
Governance Order,
supra
note 11, 85 FR at 28714.

152

See
Cboe Letter I,
supra
note 109, at 3 (quoting 2021 Approval Order,
supra
note 19, 86 FR at 44164);
see also
Cboe Letter II,
supra
note 109, at 4-5; Cboe Letter III,
supra
note 109, at 5, 8; NYSE Letter,
supra
note 109, at 2; Nasdaq Letter,
supra
note 109, at 1-2 (citing 2021 Approval Order,
supra
note 19, 86 FR at 44164).

Moreover, the Commission specifically rejected a lower threshold in the Governance Order precisely because adopting a lower threshold would have created the expectation that SRO groups would receive a third vote at a higher level of market share:

Setting the threshold for a second vote at 10 percent consolidated equity market share would create the expectation that exchange groups should receive a third vote at the same interval threshold above 10 percent (
e.g.,
20 percent). However, the Commission is not permitting the exchange groups, regardless of their consolidated equity market share, to have a third vote as this would lead to a continuing concentration of voting power.
153

153
Governance Order,
supra
note 11, 85 FR at 28714.

And, in fact, the alternative voting framework proposed by one of the SRO groups, and discussed in detail below,
154

would do precisely that: lower the threshold for a second vote such that certain SRO groups would receive a third vote, increasing the concentration of voting power on the Operating Committee in the SRO groups.

154

See infra
Section II.B.5(c)(i)(D).

The Commission, in issuing the Governance Order, also agreed with a “commenter's assertion that the two-vote cap would serve to deter actions, such as establishing a new exchange or further consolidation of existing exchanges into groups, taken for the sole purpose of gaining additional voting power on the operating committee.”
155

The Commission remains concerned that, as it stated in the Governance Order, a lower market-share threshold “may be too easy to achieve through consolidation, which would result in too low a threshold for obtaining an additional vote and could lead to a

continuing concentration of voting power.”
156

155

Id.

156
Governance Order,
supra
note 11, 85 FR at 28714.

And although commenters state that further growth in the number of equities exchanges and further dispersion of trading volume across venues counter the Commission's concerns about exchange consolidation—and that, by the Commission's own reasoning, the threshold for a second vote was incorrectly set because it would now fail to assign a second vote to one of the three SRO groups—the ability of an SRO group or unaffiliated SRO to cross the threshold over time, in either direction, is entirely consistent with the voting scheme's express purpose. That purpose, as the Commission stated in the Governance Order, is “to rebalance voting power in Plan governance to address the disproportionate influence of affiliated exchange groups.”
157

Indeed, that an SRO group's market share has crossed the threshold for a second vote since 2020 demonstrates that the threshold selected by the Commission was set at a level that would, over time, continue to distinguish the very largest SRO groups and non-affiliated SROs—which will receive two votes on the Operating Committee—from the other SRO groups and non-affiliated exchanges—which would receive one vote. Thus, an analysis of the relevant data—the current distribution of equity trading volume across the exchanges and exchange groups, as well as the future distribution of voting power on the Operating Committee of the Proposed CT Plan—supports the Proposed CT Plan's allocation of a second vote on the Operating Committee only to SRO groups or non-affiliated SROs with at least a 15-percent share of equities trading volume.

157

Id.
at 28713.

(C) Commission Rulemaking

One commenter states that a proposed Commission rulemaking would affect the distribution of trading volume in a way that would undercut the rationale behind the 15-percent threshold for a second vote. This commenter states that the Commission's October 2023 proposal regarding volume-based exchange transaction pricing for NMS stocks would drive trading volumes away from exchanges to off-exchange venues where volume-based pricing would still be available.
158

The commenter states that the Commission's proposed changes to on- and off-exchange minimum pricing increments and exchange access fees
159

are likely to further impact the distribution of trading across on- and off-exchange venues, as well as the market shares of individual exchanges and SRO groups.
160

158

See
NYSE Letter,
supra
note 109, at 6 (citing Volume-Based Exchange Transaction Pricing for NMS Stocks, Securities Exchange Act Release No. 98766 (Oct. 18, 2023), 88 FR 76282 (Nov. 6, 2023) (File No. S7-18-23) (Proposed Rule)).

159

See
Regulation NMS: Minimum Pricing Increments, Access Fees, and Transparency of Better Priced Orders, Securities Exchange Act Release No. 101070 (Sept. 18, 2024), 89 FR 81620 (Oct. 8, 2024) (File No. S7-30-22) (Final Rules) (“Regulation NMS Amendments”).

160

See
NYSE Letter,
supra
note 109, at 6-7.

The Commission does not agree that a potential future change in the distribution of trading in the equities markets, including from the Commission's recently adopted amendments to Regulation NMS,
161

would merit changing the volume threshold for a second vote on the Proposed CT Plan's Operating Committee. And if rules adopted by the Commission were to significantly change the distribution of on- versus off-exchange trading, then the Commission could consider whether the threshold should be revisited, whether by proposed plan amendment or Commission rulemaking. For example, if the commenter were correct that Commission rulemaking would move significant trading volume off exchange, then lowering the threshold might be appropriate. However, the only recent rule amendments with expected distributional effects on order flow are the recently adopted Regulation NMS Amendments.
162

However, far from sending order flow off exchange, the net effect of the rules is expected to be additional order flow on the exchanges, potentially increasing the overall market share of the exchanges.
163

Directionally this effect would be opposite to the commenter's position and does not support its rational for lowering the threshold.

161

See
Regulation NMS Amendments,
supra
note 159.

162

See id.

163

See id.,
89 FR at 81760.

Changes in the distribution of trading may occur for many reasons in the future.
164

And that one SRO group has experienced a decline in market share crossing the 15-percent threshold does not undermine the rationale in initially setting that threshold. Indeed, the Commission considered such a possibility at the time the 15-percent threshold was set,
165

and this eventuality is consistent with the Commission's purpose in selecting the 15-percent threshold, which was to rebalance voting power to address the disproportionate influence of affiliated exchange groups.
166

164

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, 2176 (Jan. 14, 2020) (File No. 4-757) (“While exchange group market share has remained relatively steady over the past several years, competition for order flow among the exchanges and the registration of new national securities exchanges that trade equities may lead to more significant changes in market share.”) (citation omitted).

165

See
Governance Order,
supra
note 11, 85 FR at 28714 (“[U]sing a look-back period of at least four of the six calendar months preceding a vote of the operating committee for determining whether an exchange group or an unaffiliated exchange has met the threshold for a second vote would allow the voting structure of the New Consolidated Data Plan to adapt over time to potential fluctuations in trading volume among exchanges, while avoiding frequent changes in vote allocations resulting from short-term changes in trading activity.”).

166

See
Governance Order,
supra
note 11, 85 FR at 28713.

(D) Alternative Proposed Voting Framework

One commenter suggests,
167

and another commenter supports,
168

modifying the Proposed CT Plan to provide for a three-tiered voting framework in which SRO groups and non-affiliated SROs would receive either one, two, or three votes based on their consolidated equity market share. Pursuant to the commenter's suggestion, all SRO groups or unaffiliated SROs would receive at least one vote; SRO groups or unaffiliated SROs with between 5 and 15-percent consolidated equity market share would receive two votes; and those with more than 15-percent consolidated equity market share would receive three votes.
169

This commenter suggests that the Proposed CT Plan require a two-thirds majority vote for Plan action and that the calculation of consolidated equity market share in the Proposed CT Plan
170

be modified by removing 50 percent of the transaction volume reported by the Transaction Reporting Facilities (“TRFs”)
171

because, according to the commenter, the TRFs contribute “only trades, while exchanges contribute both trades and quotes, and any calculation of consolidated equity market share should

recognize this distinction.”
172

Another commenter states that including the TRF volume is an error, and while it would remove the TRF volume from the calculation of consolidated equity market share altogether, it supports the other commenter's suggestion of removing 50 percent of transaction volume on the TRFs as a reasonable compromise.
173

167

See
Cboe Letter I,
supra
note 109, at 6-11; Cboe Letter II,
supra
note 109, at 4.

168

See
Nasdaq Letter,
supra
note 109, at 5.

169

See
Cboe Letter I,
supra
note 109, at 3, 6-11.

170

See
Article IV, Section 4.3 of the Proposed CT Plan.

171

See
Cboe Letter I,
supra
note 109, at 3, 6-11. This commenter further states that its suggested voting allocation would support, as proposed, the Proposed CT Plan's provision that an exchange would be eligible to vote on the Proposed CT Plan's operating committee only if it operates a trading venue.
See id.

172
Cboe Letter I,
supra
note 109, at 3.

173

See
Nasdaq Letter,
supra
note 109, at 5.

Another commenter states that the Commission should consider more than just trading market share when evaluating the significance of the SRO or SRO group in the trading ecosystem because, according to the commenter, it would not be reasonable to conclude that an exchange group that generates a substantial portion of equity market data and commands more than 10 percent of the trading market share is no longer significant enough to warrant a second vote.
174

174

See
NYSE Letter,
supra
note 109, at 6.

As discussed above and in the Governance Order,
175

one reason that the Commission selected the 15-percent threshold for a second vote was to avoid creating the expectation that SRO groups should receive a third vote at a higher market share (
e.g.,
20 percent), which would perpetuate the ability of two exchange groups to command a majority of votes, which would perpetuate the status quo.
176

The Proposed CT Plan's vote allocation should not be designed to perpetuate the concentration of voting power among SRO groups or provide incentives for further exchange-group consolidation. Therefore, an individual SRO group should not receive a third vote on the Proposed CT Plan's Operating Committee, regardless of trading volume.

175

See supra
notes 153-156 and accompanying text; Governance Order,
supra
note 11, 85 FR at 28714.

176
Governance Order,
supra
note 11, 85 FR at 28714.

The Commission disagrees with commenters suggesting that the calculation of “consolidated equity market share” should be modified to remove some or all TRF volume from that calculation, because, as the Commission stated in the Governance Order, the threshold for a second vote on the Operating Committee is designed to reflect “the importance to the national market system of those exchanges that, in their roles as SROs, therefore oversee trading activity that generates a significant amount of equity market data,”
177

and removing from the calculation some or all of the trading volume that occurs off exchange would serve to exaggerate the share of trading activity that occurs on any given exchange. Further, the Proposed CT Plan's inclusion of TRF volume is not an “error,” as characterized by a commenter,
178

as the vote allocation scheme and underlying calculation in the Proposed CT Plan are consistent with the requirements of both the Governance Order and the Amended Governance Order.
179

177

Id.

178

See supra
note 173 and accompanying text.

179

Se
e Governance Order,
supra
note 11, 85 FR at 28712 (“[T]he term `consolidated equity market share' means the average daily dollar equity trading volume of an exchange group or unaffiliated SRO as a percentage of the average daily dollar equity trading volume of
all
of the SROs, as reported by the Equity Data Plans or the New Consolidated Data Plan.” (emphasis added; citation omitted)); Amended Governance Order,
supra
note 23, 88 FR at 61639 (providing that the threshold for a second vote on the Operating Committee is “consolidated equity market share of more than 15 percent during four of the previous six months preceding a vote of the operating committee”).

(E) The Effect of the D.C. Circuit's Ruling

Some commenters state that while the D.C. Circuit held that the Commission could not allocate votes to non-SRO market participants, the Commission should not “relitigate” the allocation of votes to SRO groups because the court already found that the arguments opposing the voting allocation in the Proposed CT Plan were without merit.
180

These commenters state that “the court's ruling is clear: the Commission is free to consider the policy objectives it identified in allocating votes, and the mandated allocation of votes among SROs was proper.”
181

Thus, these commenters state that the proposed allocation of votes, including the 15-percent threshold for a second vote, is consistent with the Exchange Act and request that the Commission approve the Proposed CT Plan without change to the proposed voting structure.
182

180
MEMX-IEX-MIAX Pearl-LTSE Letter,
supra
note 109, at 2-4.

181

Id.
at 3.

182

Id.
at 5.

In response, another commenter states that “the D.C. Circuit did not consider whether the 15% voting threshold was consistent either with the Exchange Act or the . . . APA . . . because that issue was never presented to the Court.”
183

This commenter states that the Commission is not precluded from considering this commenter's alternative voting framework.
184

The commenter further states that the D.C. Circuit ruled only on the three issues raised by the petitioning exchanges,
185

and did not rule that any of the other mandates in the Governance Order were proper.
186

Moreover, this commenter states, because the D.C. Circuit vacated the 2021 Approval Order in its entirety, this had the procedural effect of “sending the SEC and the SROs back to the drawing board on how to structure voting under the Plan.”
187

Finally, this commenter states that the Commission “did not limit the scope of the issues that could be raised by commenters,” and instead broadly sought comment on the Proposed CT Plan.
188

183
Cboe Letter III,
supra
note 109, at 2.

184

See id.
at 3.
See also supra
Section II.B.5(c)(i)(D) (discussing the commenter's suggested alternative voting framework).

185

See supra
note 20 and accompanying text.

186

See
Cboe Letter III,
supra
note 109, at 3.

187

Id.
at 3.

188

Id.
at 3-4.

The Commission agrees that the D.C. Circuit's ruling does not preclude consideration of comments on any aspect of the Proposed CT Plan or the Amended Governance Order, including the voting framework for the Proposed CT Plan. The Commission disagrees, however, that the D.C. Circuit's decision did not address or uphold the allocation of votes to SROs in the Governance Order. The precise allocation of votes to SROs in the Governance Order and the 2021 Approval Order—which is identical to that required by the Amended Governance Order
189

—was upheld by the court.
190

In challenging the 2021 Approval Order, the SRO groups
191

contended that “the Commission's use of SRO Groups departs from the Commission's past practice of treating affiliated SROs as distinct legal entities in other regulatory settings and subjects affiliated SROs to less favorable treatment as compared to unaffiliated SROs.”
192

The petitioning SROs argued that the Commission's “bare assertion that its arbitrary 15% threshold for a second `SRO Group' vote reflects the significance of those SROs' contributions to the national market system is . . . insufficient because it fails to justify affording the same number of votes to SRO groups that exceed the 15-percent threshold no matter their market share or the number of SROs in the group.”
193

They argued that the Commission “arbitrarily selected a 15% threshold for acquiring a second vote solely to dilute the

affiliated SROs' voting power,”
194

and that there could be no “justifiable reason for treating an SRO group with 14% market share differently from an otherwise identical SRO group with 15% market share.”
195

The court, however, found the petitioners' arguments about the allocation of votes to SROs and SRO groups to be “without merit.”
196

Further, the D.C. Circuit did not qualify in any way its judgment upholding the voting allocation scheme in the Governance Order. Thus, the court's decision did not cast any doubt on the Commission's reasoning in the Governance Order, and in fact left the allocation of votes to SROs unchanged. The Commission has considered the comments regarding the voting scheme, including alternatives suggested by commenters. However, as discussed above, the voting allocation in the Governance Order remains appropriate.
197

189

See
Amended Governance Order,
supra
note 23, 88 FR at 61639.

190

See Nasdaq
v.
SEC, supra
note 20;
see also
Cboe Letter I,
supra
note 109; Cboe Letter II
supra
note 109; Cboe Letter III,
supra
note 109; Nasdaq Letter,
supra
note 109, NYSE Letter,
supra
note 109.

191

See supra
note 190 and accompanying text.

192

Nasdaq
v.
SEC, supra
note 20, 38 F.4th at 1140.

193

Nasdaq
v.
SEC, supra
note 20, Reply Brief for Petitioners, 2022 WL 225906 at *24.

194

Nasdaq
v.
SEC, supra
note 20, Opening Brief for Petitioners, 2022 WL 225907 at *16.

195

Id.,
2022 WL 225907 at *52-53.

196

Id.

197
Commenters' statements about other commenters' underlying interests or motivations do not affect the Commission's analysis.
See, e.g.,
Cboe Letter III,
supra
note 109, at 6; MEMX-IEX-MIAX Pearl-LTSE Letter,
supra
note 109, at 4.

(F) SRO Revisions to Section 4.3

Section 4.3(a) of Article IV of the Proposed CT Plan differs from the corresponding provision of the 2021 CT Plan approved by the Commission in three respects. First, and consistent with the Amended Governance Order, proposed Section 4.3(a) omits provisions regarding the participation of non-SRO representatives as members of the Operating Committee and modifies the voting provisions to conform with modifications required by the Amended Governance Order.
198

Second, as proposed, Section 4.3(a), specifies that the average daily dollar equity trading volume used in the calculation of consolidated equity market share for purposes of establishing the SRO voting allocation pursuant to that section shall be that as reported under the Proposed CT Plan, or under the CQ, CTA, and UTP Plans, rather than as solely as reported under the CT Plan. The textual addition to Section 4.3(a) is appropriate because the average daily dollar equity trading volume of the Equity Data Plans, as proposed, would inform the
initial
allocation of SRO votes pursuant to this section. Thereafter, and for all subsequent allocation of SRO votes, it is the Proposed CT Plan's average daily dollar equity trading volume—and not that of the Equity Data Plans—that will be required to form the basis of that calculation. Finally, proposed Section 4.3(a) differs from the corresponding provision of the 2021 CT Plan in that the provision adds “quoting on the FINRA Alternative Display Facility” to the non-exhaustive list of activities that shall not cause FINRA to be considered to operate a market center within the meaning of Section 4.3. This change to proposed Section 4.3(a) makes clear that quoting activity outside the Proposed CT Plan, such as that on the FINRA Alternative Display Facility, will not figure into calculation for allocating SRO votes pursuant to Section 4.3(a) of the Proposed CT Plan.

198

See
Amended Governance Order,
supra
note 23, at 61631-32.

For the reasons discussed above, the Commission is approving Article IV, Section 4.3(a) of the Proposed CT Plan as proposed.

(ii) Operating Committee Actions and Voting

Article IV, Section 4.3(b) of the Proposed CT Plan provides that (with the limited exceptions listed in Section 4.3(c)) all actions of the Operating Committee will require the affirmative vote of not less than two-thirds of all votes on the Operating Committee, allocated in the manner provided for in Section 4.3(a).

As proposed, Section 4.3(c) provides that, notwithstanding the provisions of Section 4.3(b) the following Operating Committee actions that would require a majority vote of the Operating Committee: (1) the selection of the Advisory Committee;
199

(2) the decision to enter into Executive Session;
200

(3) the decision to discuss a matter in a legal subcommittee pursuant to Section 4.8(d) of the Proposed CT Plan;
201

and (4) decisions concerning the operation of the Company as an LLC.
202

199

See
Article IV, Section 4.7 of the Proposed CT Plan (providing for, among other things, the formation, composition, and function of the Advisory Committee).

200

See
Article IV, Section 4.3(c)(ii) of the Proposed CT Plan (providing that the decision to enter into Executive Session will be subject to a majority vote of the Operating Committee).

201

See
Article IV, Section 4.3(c)(iii) of the Proposed CT Plan (providing that the decision to discuss a matter in a legal subcommittee pursuant to Section 4.8(d) of the Proposed CT Plan will require only a majority vote of the Operating Committee).

202

See
Article IV, Section 4.3(c)(iv) of the Proposed CT Plan (providing that decisions concerning the operation of the Company as an LLC as specified in Section 10.3 and Section 11.2 of the Proposed CT Plan will require a majority vote of the Operating Committee).
See also
Article X, Section 10.3 of the Proposed 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 Proposed 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).

In the OIP, the Commission solicited comment on, among other things, whether there were additional actions of the Proposed CT Plan that should not be subject to the two-thirds voting requirement in Section 4.3(b) of the Proposed CT Plan.
203

The Commission received several comments addressing the two-thirds voting requirement in Section 4.3(b) of the Proposed CT Plan. One commenter states that the Proposed CT Plan should be modified to provide that a simple—rather than two-thirds—majority vote would be required for most actions of the Operating Committee, including those relating to implementation of the Proposed CT Plan, such as selection of the independent administrator, or filing of required fee amendments.
204

This potential modification, the commenter states, would streamline the Proposed CT Plan's decision-making process and reduce the risk of the delay in implementing the Proposed CT Plan.
205

This commenter states that the proposed two-thirds voting requirement is likely to be unworkable in practice, leading to gridlock, inaction, and delays in implementation.
206

This commenter states that another option would be to require different voting thresholds depending on the subject matter under consideration, adding that the commenter would not be opposed to requiring a two-thirds supermajority for more significant Proposed CT Plan amendments that are subject to a unanimous vote under the Equity Data Plans.
207

203

See
OIP,
supra
note 6, 89 FR at 33413.

204

See
MEMX Letter,
supra
note 109, at 12.

205

See id.

206

See id.

207

See id.

One commenter opposes the proposed two-thirds rather than simple majority-vote threshold, stating that it is, in conjunction with the allocation of voting by SRO group, “a compromise, rather than striking an appropriate balance in the divergence between private rights and social costs,” that will “cause stagnation rather than encourage innovation,” and that the Operating Committee will “continue to be a bureaucracy with countless arguments among SROs and with the Advisory Committee, while market participants continue to suffer from ever higher market data and connectivity costs.”
208

208
Letter from Kelvin To, Founder and President, Data Boiler Technologies, LLC, (Feb. 26, 2024) (“Data Boiler Letter”), at 2, 4.

The Commission agrees that certain additional actions by the Operating Committee should be subject to a majority vote pursuant to Section 4.3(c), beyond those proposed, in order to facilitate efficient operation of the Operating Committee and the Proposed CT Plan. Specifically, the Commission is modifying Section 4.3(c) to permit the election of the Chair and other Officers of the Plan by majority vote of the Operating Committee, rather than by the proposed two-thirds majority.
209

This modification is appropriate because requiring a two-thirds majority vote of the Operating Committee, as proposed, could provide opportunities for a minority of the votes allocated on the Operating Committee to obstruct a purely administrative action necessary for the day-to-day operations of the Proposed CT Plan.
210

Thus, modifying this section to require a majority vote of the Operating Committee to elect the Chair and Officers of the Proposed CT Plan is appropriate because it will reduce the likelihood of unnecessary delays in the administration and implementation of the Proposed CT Plan.

209
To effect this modification, the Commission is inserting, under Section 4.3(c)(i), the words “the election of the Chair and other Officers of the Plan;” and renumbering proposed Section 4.3(c)(i)-(iv) as Section 4.3(c)(ii-v) accordingly.
See
Article IV, Section 4.3 of the Proposed CT Plan (as approved).

210
With respect to the Equity Data Plans, unless otherwise specified, a majority vote of the Participants entitled to vote is required to constitute the action of the Operating Committees, including the election of a Chair.
See
Exhibit A, Article V, Section 2, and Article IV(a) of the CTA Plan; Article IV.C-D of the UTP Plan.

Further expanding the list of actions that can be taken by a majority vote of the Operating Committee is not warranted. While commenters raise concerns about potential gridlock, stagnation, or inefficiency, as the Commission stated in the Amended Governance Order:

the requirement for a two-thirds majority strikes an appropriate balance between ensuring that plan action has broad support among members of the operating committee while also preventing a single SRO group or unaffiliated SRO from vetoing plan action. Moreover, requiring a two-thirds, rather than a simple, majority of SRO votes, in conjunction with allocating votes by exchange group, prevents a small number of SRO groups from dictating plan action without further support from other SRO members.
211

211
Amended Governance Order,
supra
note 23, 88 FR at 61632.

Section 4.3(b) differs from the corresponding provision in 2021 CT Plan approved by the Commission in that it conforms to the requirements of the Amended Governance Order by: (1) removing provisions regarding the participation of non-SRO representatives as members of the Operating Committee, and (2) modifying voting provisions to provide that all actions by the Operating Committee shall require a two-thirds majority vote of the votes allocated to the Operating Committee, except for the actions specified in Section 4.3(c).
212

Section 4.3(c) differs from the corresponding provision in the 2021 CT Plan in that it conforms to requirements of the Amended Governance Order by removing provisions relating to the participation of non-SROs representatives as members of the Operating Committee and by requiring a majority vote of the Operating Committee for the selection of members of the Advisory Committee pursuant to Section 4.7. Separately, Section 4.3(c) adds to the actions requiring only a majority vote of the Operating Committee: (1) the election of the Chair and Officers of the Plan, as modified by the Commission, as well as (2) the decision to discuss a matter in a legal subcommittee pursuant to Section 4.8(d) of the Proposed CT Plan,
213

which, as discussed above, is consistent with the Amended Governance Order.

212

See id.
at 61639-41.

213

See id.

For the reasons discussed above, the Commission is approving Sections 4.3(b) as proposed and Section 4.3(c) as renumbered and modified.

(d) Meetings of the Operating Committee

Article IV, Section 4.4 of the Proposed CT Plan addresses meetings of the Operating Committee. Sections 4.4(a) through 4.4(f) contain general provisions regarding Operating Committee meetings, and Section 4.4(g) contains provisions specific to meetings in Executive Session.

Sections 4.4(a) through 4.4(f) are identical to the corresponding provisions of the 2021 CT Plan approved by the Commission,
214

with the following exceptions, all of which are consistent with the requirements of the Amended Governance Order.
215

First, as proposed, Section 4.4(a) adds a reference to “Advisory Committee members”
216

and corrects a cross-reference to reflect the numbering of paragraphs in the Proposed CT Plan. Second, proposed Section 4.4(c) deletes language regarding quorum requirements of Voting Representatives, consistent with the requirements of the Amended Governance Order.
217

And third, for the same reason as explained above—that the replaced term is the defined term—proposed Section 4.4(e) replaces reference to “SRO Voting Representatives” with reference to “Voting Representatives.”
218

The Commission is, however, modifying the text of Section 4.4(e)(ii) to replace the reference to “Section 4.3” in the first sentence of paragraph (ii) of Section 4.4(e) with a reference to “Section 4.3(c),” to conform this provision to the Commission's modifications to Section 4.3(c)(i) regarding the election of the Chair and other officers of the Proposed CT Plan.
219

Separately, the Commission is modifying Section 4.4(e) to replace the term “Operative Date” with the term “Effective Date” as that term is defined in the Recitals. This change is appropriate because the Effective Date of the Agreement is the date it is approved by the Commission, whereas the Operative Date, as defined, does not occur until the date that Members conduct, through the Company, the Processor and Administrator functions related to the public dissemination of real-time consolidated equity market data and the Equity Data Plans cease their operations. As proposed, Section 4.4(e) states that the Chair of the Operating Committee shall be elected beginning with the first quarterly meeting of the Operating Committee following the Operative Date. The modification will, consistent with the role and functions of the Chair as outlined in Section 4.4(e), facilitate the implementation of the Proposed CT Plan, as the Chair will be able to be elected following the Effective Date and will be able to enter into contracts on behalf of the Company.

214

See
2021 Approval Order,
supra
note 19, 86 FR at 44166-68, 44213-14.

215

See
Amended Governance Order,
supra
note 23, 88 FR at 61639-41.

216

See id.
at 61632 (stating that “because non-SRO representatives will no longer be required to be included as voting members of the operating committee of the Revised New Consolidated Data Plan, the Commission is modifying the Governance Order's requirements to provide that the Revised New Consolidated Data Plan must provide for participation by non-SROs in the operation of the plan as members of an advisory committee”).

217

See id.

218

See
Article I, Section 1.1(84) of the Proposed CT Plan (as approved) (defining the term “Voting Representative”).

219

See supra
note 209 and accompanying text.

The Commission received no comments on Section 4.4(a)-(d) and (f) of the Proposed CT Plan, and for the foregoing reasons, as well as for the reasons stated with respect to the corresponding provisions in the 2021 Approval Order,
220

the Commission is approving Section 4.4(a)-(d), and (f) of

the Proposed CT Plan as proposed, and Section 4.4(e) as modified.
221

220

See
2021 Approval Order,
supra
note 19, 86 FR at 44166-68.

221

See id.
at 44166-72.

Article IV, Section 4.4(g) of the Proposed CT Plan provides that, notwithstanding any other provision of the Proposed CT Plan, the Voting Representatives, Member Observers, SEC staff, and other persons as deemed appropriate by a majority vote of the Voting Representatives may meet in an Executive Session of the Operating Committee to discuss an item of business for which it is appropriate to exclude the Advisory Committee. A request to meet in Executive Session must be included on the written agenda for an Operating Committee meeting, along with a clearly stated rationale as to why that item would be appropriate for discussion in Executive Session.
222

A majority vote of the Voting Representatives would be required to create an Executive Session.
223

The 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.
224

222

See
Article IV, Section 4.4(g) of the Proposed CT Plan.

223

See id.

224

See
Article IV, Section 4.4(g) of the Proposed CT Plan.

Article IV, Section 4.4(g)(i) of the Proposed 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; (3) litigation matters; (4) responses to regulators with respect to inquiries, examinations, or findings; and (5) other discrete matters approved by the Operating Committee.
225

Section 4.4(g)(ii) states 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.
226

This section further provides that the minutes for an Executive Session must include the reason for including any item in an Executive Session.
227

Section 4.4(g)(iii) provides that 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.
228

This section further provides that the rationale may be that the topic to be discussed falls within the list of topics that may be discussed pursuant to paragraph 4.4(g)(i).
229

225

See
Article IV, Section 4.4(g)(i)(A)-(E) of the Proposed CT Plan.

226

See
Article IV, Section 4.4(g)(ii) of the Proposed CT Plan.

227

See id.

228

See
Article IV, Section 4.4(g)(iii) of the Proposed CT Plan.

229

See id.

The Commission received one comment on Section 4.4(g). Specifically, one commenter suggests that the Proposed CT Plan should be modified to: (1) use non-discretionary, rather than permissive language, with respect to the scope of potential items that could be discussed in Executive Session and (2) preclude discussions regarding contract negotiations with the plan processors or the plan administrator in Executive Session.
230

This commenter states that “similar policy rationales for narrowly tailoring the use of Executive Sessions or other exclusive meeting forums apply where non-SROs are Advisory Committee members” rather than voting non-SRO members, as provided in the 2021 CT Plan.
231

230

See
ICI Letter,
supra
note 109, at 3, n.11.

231

Id. See also
Section 4.4(g)(i) of the 2021 CT Plan; 2021 Approval Order,
supra
note 19, 86 FR at 44214.

The Commission agrees with the commenter that the Proposed CT Plan should provide clear boundaries with respect to the scope of potential topics permitted to be discussed in an Executive Session.
232

Thus, for the same reasons discussed in the 2021 Approval Order,
233

the Commission is modifying Article IV, Section 4.4(g)(i) of the Proposed CT Plan to require that the items for discussion in an Executive Session “shall be” limited to the topics enumerated in subsections 4.4(g)(i)(A)-(E) of the Proposed CT Plan.
234

232

See
2021 Approval Order,
supra
note 19, 86 FR at 44170 (stating that “the topics that may be discussed in Executive Session should be specifically enumerated in the CT Plan to provide transparent and clear boundaries”).

233

See id.
(modifying Article IV, Section 4.4(g)(i) of the 2021 CT Plan to require that the items for discussion in an Executive Session “shall be” limited to the topics enumerated in subsections 4.4(g)(i)(A)-(E) of that plan).

234
To effect this change, the Commission is modifying proposed Section 4.4(g)(i) of the Proposed CT Plan to delete the word “should” and replace it with “shall.” The Commission is also making a conforming change to proposed Section 4.4(g)(i) of the Proposed CT Plan to remove the word “as” that appears after “topics” in that subsection.

As the Commission stated in the 2021 Approval Order, “not every topic that may be appropriate for Executive Session can be foreseen, and . . . some provision must therefore be made in the CT Plan for unanticipated topics suitable for Executive Session.”
235

The language in Section 4.4(g)(i)(E) that permits the SROs to meet in Executive Session to discuss “[o]ther discrete matters approved by the Operating Committee” provides the necessary flexibility for unanticipated topics to be addressed without altering the list of permissible topics for Executive Session into a non-exclusive list of suggestions.

235
2021 Approval Order,
supra
note 19, 86 FR at 44171.

The Commission does not agree with the commenter's suggestion that the Proposed CT Plan provide that “discussions regarding contract negotiations with the Processors or Administrator” do not qualify for discussion in Executive Session.
236

While the Commission specifically added this language to the plan it approved in the 2021 Approval Order,
237

that was in the context of an Operating Committee that included Non-SRO Voting Representatives as full members, and the Commission did not believe that it was appropriate for
any
members of the Operating Committee to be excluded from such discussions by holding the discussions in an SRO-only Executive Session.
238

In the Proposed CT Plan, however, the Operating Committee will not include any non-SRO representatives,
239

and it is therefore appropriate, and consistent with the Amended Governance Order, for the Operating Committee to meet in Executive Session to discuss “[a]ny topic that requires discussion of Highly Confidential Information,” which, by definition, includes discussion concerning contract negotiations with the Processors or the Administrator.

236
ICI Letter,
supra
note 109, at 3.

237

See
2021 Approval Order,
supra
note 19, 86 FR at 44170-71.

238

See id.

239

See
Amended Governance Order,
supra
note 23, 88 FR at 61639-41.

Section 4.4(g) of the Proposed CT Plan differs from the corresponding provision of the 2021 CT Plan approved by the Commission
240

in several respects. First, this section conforms to requirements of the Amended Governance Order by removing provisions governing the participation of non-SROs as members of the Operating Committee, and, relatedly, by using the terms “Voting Representatives” rather than “SRO Voting Representatives,” and “Advisory Committee” rather than “Non-SRO Voting Representatives.” Separately, Section 4.4(g)(i) differs in that it (1) removes, as a topic not permitted for discussion within an Executive Session, discussions regarding contract negotiations with the Processor or the Administrator for the reasons discussed, and (2) removes a provision addressing voting requirements for actions requiring a vote in Executive Session,

which reduces redundancy because such requirements are set forth in Section 4.3(a). The modification made by the Commission to Section 4.4(g)(i) (to replace “should” with “shall”) is appropriate because it conforms this provision with the corresponding provision of the 2021 CT Plan approved by the Commission.
241

For the foregoing reasons, as well as those stated in the 2021 Approval Order with respect to the corresponding provisions of the 2021 CT Plan, (apart from those pertaining to the participation of non-SROs representatives as members of the operating committee of the 2021 CT Plan, which is not included in the Proposed CT Plan),
242

the Commission is approving Section 4.4(g) as modified.

240

See
2021 Approval Order,
supra
note 19, 86 FR at 44168-71.

241

See id.
at 44170.

242

See id.
at 44168-71.

(e) Certain Transactions

Article IV, Section 4.5 of the Proposed CT Plan states that the Company 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.

Section 4.5 is identical to the corresponding provision of the 2021 CT Plan approved by the Commission,
243

and was not required to be modified by the Amended Governance Or

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2024-27644. Public record. Not legal advice.