operational capability, market data products, fees, and co-location and
related services to determine whether to subscribe, or continue
subscribing, to a competing consolidator. In addition, this information
would assist market participants in evaluating which products and
services of the competing consolidator would be most useful to them.
The information in proposed Form CC is also designed to ensure that the
Commission has specified information regarding entities acting as
competing consolidators, to facilitate the Commission's oversight of
competing consolidators and help to ensure the resiliency of a
competing consolidator's systems. Given these intended uses, the
Commission believes that it is important for a competing consolidator
to maintain an accurate, current, and complete Form CC.
    The Commission requests comment on proposed Rule 614(a)(2), which
establishes filing requirements for Form CC Amendments. In particular,
the Commission solicits comment on the following:
    90. In addition to material changes to a competing consolidator's
pricing, connectivity, or products, what should be a Material
Amendment?
    91. Do commenters believe that a competing consolidator should be
required to file a Material Amendment within a specified time prior to
implementing the change that constitutes a Material Amendment? Why or
why not? Please support your arguments. Is 30 days an appropriate
amount of time for a Material Amendment to be filed?
    92. Do commenters believe that a competing consolidator should be
required to file an Annual Report? Why or why not? Proposed Rule
614(a)(3) would require a competing consolidator to provide notice of
its cessation of operations on Form CC at least 30 business days before
the date the competing consolidator ceases to operate as a competing
consolidator. The notice of cessation would cause the Form CC to become
ineffective on the date designated by the competing consolidator. This
requirement would provide notice to the public and the Commission that
the competing consolidator intends to cease operations. The Commission
preliminarily believes that this notice would provide market
participants with time to find and select an alternative provider of
market data.
    The Commission requests comment on proposed Rule 614(a)(3), which
establishes filing requirements for a Form CC notice of cessation. In
particular, the Commission solicits comment on the following:
    93. Should the Commission require a competing consolidator to give
notice that it intends to cease operations 30 business days or more
before ceasing operations as a competing consolidator? If not, why not?
Is 30 business days an appropriate time for providing notice of an
intention to cease operations? If not, what time period would be
appropriate?
    In proposed Rule 614(b), the Commission is proposing to make public
all Form CC reports filed by competing consolidators and other
information. Under proposed Rule 614(b)(1), every Form CC filed
pursuant to Rule 304 shall constitute a ``report'' within the meaning
of Sections 11A, 17(a), 18(a), and 32(a), and any other applicable
provisions of the Exchange Act. Because proposed Form CC is a report
that is required to be filed under the Exchange Act, it would be
unlawful for any person to willfully or knowingly make, or cause to be
made, a false or misleading statement with respect to any material fact
in Form CC. Under proposed Rule 614(b)(2), the Commission would make
public via posting on the Commission's website each: (i) Effective
initial Form CC; (ii) order of ineffective Form CC; (iii) filed Form CC
Amendment; and (iv) notice of cessation. Under the proposed rule, the
Commission would publish each Form CC Material Amendment and Annual
Report on its website no later than 30 days after the competing
consolidator filed the amendment.
    The Commission preliminarily believes that making each Form CC
filing public via public posting on the Commission's website would
provide market participants with important information about the
operations of a competing consolidator and facilitate the Commission's
oversight of competing consolidators. The Commission preliminarily
believes that this information should be easily accessible to all
market participants so that market participants may better evaluate a
competing consolidator as a potential provider of market data.
Additionally, the Commission preliminarily believes that the
publication of Material Amendments and Annual Reports would provide
market participants with information necessary to evaluate, or re-
evaluate, a competing consolidator as a provider of market data,
facilitate the Commission's oversight of competing consolidators, and
help to ensure the continued resiliency of a competing consolidator's
systems.
    The Commission requests comment on proposed Rule 614(b), which
would establish public disclosure requirements for Form CC filings. In
particular, the Commission solicits comment on the following:
    94. Do commenters believe that the Commission should post on its
website each effective initial Form CC, each notice of ineffectiveness
of a Form CC, each Form CC Amendment, and each notice of cessation? Why
or why not? Please support your arguments. Do commenters believe a
competitive marketplace would provide competing consolidators with
incentives to disclose sufficient information in the normal course of
business? Why or why not?

    The Commission preliminarily believes that it would be helpful for
a competing consolidator to make market participants aware that the
competing consolidator's filings are publicly posted on the
Commission's website. Therefore, proposed Rule 614(c) would require
each competing consolidator to post on its website a direct URL
hyperlink to the Commission's website that contains the documents
enumerated in proposed Rule 614(b)(2), which includes the competing
consolidator's Form CC filings. The Commission preliminarily believes
that this requirement would make it easier for market participants to
review a competing consolidator's Form CC filings by providing an
additional means for market participants to locate Form CC filings that
are posted on the Commission's website.
    The Commission requests comment on proposed Rule 614(c), which
would require each competing consolidator to provide a direct URL
hyperlink to the Commission's website that contains the documents
identified in proposed Rule 614(b)(2). In particular, the Commission
solicits comment on the following:
    95. Do commenters believe that proposed Rule 614(c) should require
each competing consolidator to provide a direct URL hyperlink to the
Commission's website that contains the documents identified in proposed
Rule 614(b)(2). Why or why not? Please support your arguments.
    Under the proposed decentralized consolidation model, competing
consolidators would be required to perform many of the obligations
currently performed by the existing exclusive SIPs. Proposed Rule
614(d) establishes the responsibilities applicable to competing
consolidators, which also includes the disclosure of information that
would facilitate the Commission's oversight of competing consolidators
and assist market participants in choosing and evaluating competing
consolidators. Proposed Rule 614(d)(1) would require each competing
consolidator to collect from each national securities exchange and
national securities association, either directly or indirectly, the
information with respect to quotations for and transactions in NMS
stocks as provided in Rule 603(b), which would include all data
necessary to generate the proposed consolidated market data. Proposed
Rule 614(d)(2) would require each competing consolidator to calculate
and generate consolidated market data, as defined in proposed Rule
600(b)(16), from the information collected in proposed Rule 614(d)(1).
Proposed Rule 614(d)(3) would require competing consolidators to make
the proposed consolidated market data available to subscribers on a
consolidated basis and on terms that are not unreasonably
discriminatory, with the timestamps required by proposed Rule 614(d)(4)
and Rule 614(e)(1)(ii), as discussed below.
    As noted above, competing consolidators would be required under
proposed Rule 614(d)(2) to calculate and generate proposed consolidated
market data and make proposed consolidated market data available to
subscribers. Accordingly, all competing consolidators would be required
to develop a consolidated market data product that contains all of the
data elements provided under the proposed definition of consolidated
market data. In addition, competing consolidators could develop other
market data products that contain only a subset of consolidated market
data elements (e.g., a TOB product) and could develop market data
products that contain elements that go beyond the elements required
under the proposed definition of consolidated market data (e.g., a full
DOB product). The Commission recognizes that market participants have
varying needs with respect to market data, and the proposed rules would
permit a competing consolidator to offer additional market data
products to meet these needs so long as the competing consolidator
complies with proposed Rules 614(d)(2) and (d)(3) by providing a
consolidated market data product.\545\
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    \545\ See supra Section III.A.
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    The Commission preliminarily believes that the proposed provisions
are both necessary and appropriate because they reflect the main
obligations of competing consolidators, which are to collect,
calculate, and disseminate consolidated market data, as proposed. In
addition, the use of a competing consolidator at a specific data center
would likely be more accurate and useful in assessing the trading
activity of a trading participant in that same data center. As
proposed, competing consolidators would be the only entities providing
proposed consolidated market data to market participants. Accordingly,
the terms by which they provide proposed consolidated market data to
their subscribers must not be unreasonably discriminatory.\546\
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    \546\ See 15 U.S.C. 78k-1(c)(1)(D).
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    The Commission requests comment on proposed Rules 614(d)(1)-(3). In
particular, the Commission solicits comment on the following:
    96. Do these provisions reflect the main obligations of competing
consolidators? Should there be any other obligations?
    97. Competing consolidators would be required to generate proposed
consolidated market data, which would include the calculation of an
NBBO consistent with the process outlined in the definition of NBBO in
Rule 600(b)(42). Do commenters believe that the definition of NBBO
would ensure the calculation of consistent NBBOs by competing
consolidators?
    98. Do commenters believe that competing consolidators should be
required to develop a consolidated market data product that contains
all of the data elements provided under the proposed definition of
consolidated market data? Why or why not? Could there be some competing
consolidators that only offer a subset of the proposed consolidated
market data? Please explain.
    Proposed Rule 614(d)(4) would require each competing consolidator
to timestamp the information collected in proposed Rule 614(d)(1): (i)
Upon receipt from each national securities exchange and national
securities association at the exchange's or association's data center;
(ii) upon receipt of such information at its aggregation mechanism; and
(iii) upon dissemination of consolidated market data to customers. The
Commission understands that the existing SIPs similarly timestamp
information in accordance with proposed Rule 614(d)(4)(i) and (iii).
The Commission preliminarily believes that the proposed rule is
appropriate because it would allow subscribers to ascertain a competing
consolidator's realized latency (i.e., how quickly the competing
consolidator can receive data from the exchanges, transmit that data
between the exchange's data center and its aggregation center, and
aggregate and disseminate proposed consolidated market data to
subscribers). This information provides transparency that should help
subscribers evaluate a potential competing consolidator or determine
whether an existing competing consolidator continues to meet their
needs.\547\
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    \547\ If a competing consolidator uses a vendor to transmit data
between the SRO data center and the competing consolidator's data
center, the competing consolidator retains responsibility for
collecting all of the timestamps described in proposed Rule
614(d)(4).
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    The Commission is also proposing several rules, described below,
that would require public disclosure of metrics and other information
concerning the performance and operations of a competing consolidator.
The information that the Commission is

proposing that competing consolidators publish is based upon
information that is currently produced by the CTA/CQ SIP and the Nasdaq
UTP SIP, either for public or internal distribution.\548\ Because this
information is useful to current users of the exclusive SIPs and
participants of the Equity Data Plans, the Commission preliminarily
believes that it should be made publicly available \549\ by competing
consolidators. The Commission preliminarily believes that public
disclosure and accessibility of this information would help market
participants to evaluate the merits of a competing consolidator by
providing transparency into the services and performance, and
resiliency of each competing consolidator, and could also lower search
costs for market participants and enhance competition. In addition, the
Commission preliminarily believes that the public disclosure of this
information--particularly the system availability and network delay
statistics and data quality and system issues--would help to ensure
that competing consolidators have a demonstrated ability to provide
consolidated market data in a stable and resilient manner.
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    \548\ The exclusive SIPs currently publish to their respective
websites monthly processor metrics that provide the following
information: System availability, message rate and capacity
statistics, and the following latency statistics from the point of
receipt by the SIP to dissemination from the SIP: Average latency
and 10th, 90th and 99th percentile latency. See CTA Metrics,
available at https://www.ctaplan.com/metrics; UTP Metrics, available
at http://www.utpplan.com/metrics. Additionally, the exclusive SIPs
post on their websites any system alerts and the Nasdaq UTP Plan
posts vendor alerts as well. See CTA Alerts, available at https://www.ctaplan.com/alerts; UTP-SIP System Alerts, available at http://www.utpplan.com/system_alerts; UTP Vendor Alerts, available at
http://www.utpplan.com/vendor_alerts. Further, the exclusive SIPs
publish on their websites charts detailing realized latency from the
inception of a Participant matching engine event through the point
of dissemination from the exclusive SIP. See CTA Latency Charts,
available at https://www.ctaplan.com/latency-charts; UTP Realized
Latency Charting, available at http://www.utpplan.com/latency_charts.
    \549\ Rule 600(b)(37) of Regulation NMS defines ``make publicly
available'' as ``posting on an internet website that is free and
readily accessible to the public, furnishing a written copy to
customers on request without charge, and notifying customers at
least annually in writing that a written copy will be furnished on
request.'' See 17 CFR 242.600(b)(37).
---------------------------------------------------------------------------

    Proposed Rule 614(d)(5) would require each competing consolidator
to publish prominently on its website, within 15 calendar days after
the end of each month, certain performance metrics. All information
posted pursuant to proposed Rule 614(d)(5) must be publicly posted in
downloadable files and must remain free and accessible (without any
encumbrances or restrictions) by the general public on the website for
a period of not less than three years from the initial date of posting.
The Commission preliminarily believes that the availability of this
information on a website (without any encumbrances or restrictions)
would assist market participants in comparing competing consolidators
and evaluating their performance over time.\550\ In particular,
proposed Rule 614(d)(5) would provide that the performance metrics
include: (i) Capacity statistics (such as system tested capacity,
system output capacity, total transaction capacity, and total
transaction peak capacity); (ii) message rate and total statistics
(such as peak output rates on the following bases: 1-millisecond, 10-
millisecond, 100-millisecond, 500-millisecond, 1-second, and 5-second);
(iii) system availability statistics (for example, whether system up-
time has been 100% for the month and cumulative amount of outage time);
(iv) network delay statistics (for example, today under a TCP-IP
network, network delay statistics would include quote and trade zero
window size events, quote and trade TCP retransmit events, and quote
and trade message total); and (v) latency statistics (with distribution
statistics up to the 99.99th percentile) for (1) when a national
securities exchange or national securities association sends an inbound
message to a competing consolidator network and when the competing
consolidator network receives the inbound message; \551\ (2) when the
competing consolidator network receives the inbound message and when
the competing consolidator network sends the corresponding consolidated
message to a subscriber; and (3) when a national securities exchange or
national securities association sends an inbound message to a competing
consolidator network and when the competing consolidator network sends
the corresponding consolidated message to a subscriber.
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    \550\ A competing consolidator that ceases operations would not
be required to maintain the information posted pursuant to proposed
Rule 614(d)(5) after the competing consolidator files its notice of
cessation and its Form CC becomes ineffective, as provided in
proposed Rule 614(a)(3).
    \551\ The Commission believes that the SIPs do not currently
produce this latency statistic.
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    Additionally, proposed Rule 614(d)(6) would require each competing
consolidator to publish prominently on its website, within 15 calendar
days after the end of each month, information on: (i) Data quality
issues (such as delayed message publication, publication of duplicative
messages, and message inaccuracies); (ii) system issues (such as
processing, connectivity, and hardware problems); (iii) any clock
synchronization protocol utilized; (iv) for the clocks used to generate
the timestamps described in Rule 614(d)(4), clock drift averages and
peaks and number of instances of clock drift greater than 100
microseconds; \552\ and (v) vendor alerts (such as holiday reminders
and testing dates). All information posted pursuant to proposed Rule
614(d)(6) must be publicly posted and must remain free and accessible
(without any encumbrances or restrictions) by the general public on the
website for a period of not less than three years from the initial date
of posting.
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    \552\ The Commission believes that the SIPs do not currently
produce this information.
---------------------------------------------------------------------------

    The Commission requests comment on proposed Rules 614(d)(4)-(d)(6).
In particular, the Commission solicits comment on the following:
    99. Do commenters believe that separate timestamps should be
required as described in Rule 614(d)(4)? Are these the relevant
instances for timestamps? Should any other timestamps be adopted?
Should any of the proposed timestamps not be required?
    100. Do commenters believe that the information required to be
published pursuant to proposed Rule 614(d)(5) and proposed Rule
614(d)(6) is appropriate for competing consolidators? Should any
further information be published? Is any information proposed to be
published unnecessary?
    101. Do commenters believe that the frequency of publication of the
information required to be published pursuant to proposed Rule
614(d)(5) and proposed Rule 614(d)(6) is sufficient? Is it too onerous?
    102. Do commenters believe that requiring each competing
consolidator to publish the data required by proposed Rule 614(d)(5)
and proposed Rule 614(d)(6) on its respective website is appropriate?
Would commenters prefer that the competing consolidators instead file
the data with the Commission for publication on the Commission's
website?
    103. Do commenters believes that any of the information required to
be published on the competing consolidator's website should not be
required to be made publicly available? Please explain. If so, should
this information be required to be provided to subscribers? Should any
information proposed to be made publicly available not be made publicly
available due to competitive concerns? If so, please

identify the information and provide an explanation.
    104. Do commenters believe a requirement for the competing
consolidators to publish historical performance data should be included
in proposed Rule 614(d)(5) and proposed Rule 614(d)(6)? If yes, for
what time periods should historical data be required to be published?
    The Commission is proposing several rules that would require
competing consolidators to provide and maintain information for
regulatory purposes. Proposed Rule 614(d)(7) would require each
competing consolidator to keep and preserve at least one copy of all
documents, including all correspondence, memoranda, papers, books,
notices, accounts, and such other records as shall be made or received
by it in the course of its business as such and in the conduct of its
business.\553\ The proposed rule would require competing consolidators
to keep these documents for a period of no less than five years, the
first two years in an easily accessible place. Proposed Rule 614(d)(8)
would require each competing consolidator to, upon request of any
representative of the Commission, promptly furnish to the possession of
such representative copies of any documents required to be kept and
preserved by it.\554\ These requirements would facilitate the
Commission's oversight of competing consolidators and the national
market system.
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    \553\ See Section 17(a)(1) of the Exchange Act, 15 U.S.C.
78q(a)(1).
    \554\ In this context, ``promptly'' or ``prompt'' means making
reasonable efforts to produce records that are requested by the
staff during an examination without delay. The Commission believes
that in many cases a competing consolidator could, and therefore
will be required to, furnish records immediately or within a few
hours of a request. The Commission expects that only in unusual
circumstances would a competing consolidator be permitted to delay
furnishing records for more than 24 hours. Accord Regulation
Crowdfunding, Securities Act Release No. 9974, Securities Exchange
Act Release No. 76324 (Oct. 30, 2015), 80 FR 71387, 71473 n. 1122
(Nov. 15, 2015) (similarly interpreting the term ``promptly'' in the
context of Regulation Crowdfunding Rule 404(e)); Security Based Swap
Data Repository Registration, Duties, and Core Principles,
Securities Exchange Act Release No. 74246 (Feb. 11, 2015), 80 FR
14438, 14500, n. 846 (March 19, 2015) (similarly interpreting the
term ``promptly'' in the context of Exchange Act Rule 13n-7(b)(3));
Registration of Municipal Advisors, Securities Exchange Act Release
No. 70462 (Sept. 20, 2013), 78 FR 67468, 67578-67579 n. 1347 (Nov.
12, 2013) (similarly interpreting the term ``prompt'' in the context
of Exchange Act Rule 15Ba1-8(d)).
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    The Commission requests comment on proposed Rules 614(d)(7) and
(d)(8). In particular, the Commission solicits comment on the
following:
    105. Do commenters believe that the documents required to be kept
and preserved by proposed Rule 614(d)(7) are appropriate for competing
consolidators? If not, please explain. Are there any other documents
that should be kept and preserved by competing consolidators?
    106. Do commenters believe that the recordkeeping time periods
required by proposed Rule 614(d)(7) are appropriate for competing
consolidators? If not, what would be more appropriate recordkeeping
time periods?
    107. Do commenters believe that proposed Rule 614(d)(8), which
requires competing consolidators to provide copies of any documents
required to be kept and preserved to any representative of the
Commission upon request, is appropriate for competing consolidators? If
not, please explain.
    The Commission is proposing to define ``business day'' for purposes
of proposed Rule 614 to comport with provisions contained in Rule 19b-4
and to specify the conditions under which filings required pursuant to
Rule 614 are deemed to have been made on a particular business day.
Specifically, the Commission proposes to define ``business day'' in the
same manner in which it is defined in Rule 19b-4(b)(2).\555\ The
Commission preliminarily believes that these provisions providing a
date-of-filings standard would facilitate the ability of competing
consolidators to comply with the requirements of Rule 614 and
facilitate the ability of the Commission to effectively receive,
review, and make public the filings required under proposed Rule 614.
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    \555\ See Rule 19b-4(b)(2), 17 CFR 240.19b-4(b)(2).
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    The Commission requests comment on proposed Rules 614(a)(4)(i) and
(a)(4)(ii). In particular, the Commission solicits comment on the
following:
    108. Do commenters believe that the definition of business day in
proposed Rule 614(a)(4)(i) is appropriate? Why or why not? Would any
alternative definition of business day be preferable? Please explain.
    109. Do commenters believe that the standards set forth in proposed
Rule 614(a)(4)(ii) regarding when a filing or publication requirement
is deemed to have occurred on a particular business day are
appropriate? Why or why not? Would any alternative standards be
preferable? Please explain.
(iii) Proposed New Form CC
    Proposed new Form CC includes a set of instructions for its
completion and submission. These instructions are attached to this
release, together with proposed Form CC. Proposed Form CC would require
competing consolidators\556\ to provide information and/or reports in
narrative form by attaching specified exhibits. The proposed form would
require a competing consolidator to indicate the purpose for which it
is filing the form (i.e., initial report, material amendment, annual
amendment, or notice of cessation), and to provide information in four
categories: (1) General information, along with contact information;
(2) business organization; (3) operational capability; and (4) services
and fees. The Commission preliminarily believes that it is necessary to
obtain the information requested in proposed Form CC to enable the
Commission to determine whether to declare a Form CC ineffective.
Specifically, the Commission believes that the requested information
would assist the Commission in understanding the competing
consolidator's overall business structure, technological reliability,
and services offered. In addition, Form CC would help to provide for
consistent disclosures among competing consolidators.
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    \556\ As explained above, only non-exclusive SIP competing
consolidators, and not SRO competing consolidators, would be
required to register on Form CC.
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    General Information: Proposed Form CC would require a competing
consolidator to provide its legal name and ``DBA'' (doing business as),
if applicable, its address, website URL, legal status (e.g.,
corporation, partnership, and sole proprietorship), and, except in the
case of a sole proprietorship, the date of formation and state or
country in which it was formed. The Commission preliminarily believes
that this basic information is necessary for the Commission to evaluate
a competing consolidator. Proposed Form CC also would require the
competing consolidator to indicate (1) whether it is registered as a
broker-dealer or affiliated with a registered broker-dealer and (2)
whether it is a successor to a previously registered competing
consolidator and, if so, the date of succession and the name and
address of the predecessor registrant. The Commission preliminarily
believes that this would provide basic identifying information about
the competing consolidator and assist the Commission in its review of
Form CC.
    Business Organization: Proposed Form CC would require each
competing consolidator to provide information regarding its business
organization, including: (1) In Exhibit A, information regarding any
person who owns 10 percent or more of the competing

consolidator's stock or who, either directly or indirectly, through
agreement or otherwise, in any other manner, may control or direct the
competing consolidator's management or policies, including the full
name and title of any such person and a copy of the agreement, or if
there is no written agreement, a description of the agreement or basis
upon which such person may exercise such control or direction; (2) in
Exhibit B, a list of the officers, directors, governors, or persons
performing similar functions of the competing consolidator; (3) in
Exhibit C, a narrative or graphic description of the competing
consolidator's organizational structure; and (4) in Exhibit D, a list
of all affiliates of the competing consolidator and the general nature
of the affiliations. The Commission preliminarily believes that
obtaining this information would assist the Commission in understanding
the competing consolidator's overall business structure, governance
arrangements, and operations, all of which would assist the Commission
in its review of Form CC. If the competing consolidator is a broker-
dealer, or is affiliated with a broker-dealer, proposed Form CC would
permit the competing consolidator to attach its, or its affiliate's,
Schedule A of Form BD, relating to direct owners and executive
officers, and Schedule B of Form BD, relating to indirect owners.
Alternatively, in lieu of filing Exhibits A and B to proposed Form CC,
or providing Schedules A and B of Form BD, proposed Form CC would
permit a competing consolidator to provide a URL address where the
information requested under Exhibits A and B to proposed Form CC are
available. The Commission preliminarily believes that this information
would help the Commission and market participants understand the
persons and entities that directly and indirectly own the broker-
dealer, thereby enabling the Commission and market participants to
better understand potential conflicts of interest that may arise for a
competing consolidator that is a broker-dealer or is affiliated with a
broker-dealer.
    Operational Capability: Proposed Form CC would require each
competing consolidator to provide a description of each proposed
consolidated market data service or function, including connectivity
and delivery options for subscribers, and a description of all
procedures utilized for the collection, processing, distribution,
publication, and retention of information with respect to quotations
for, and transactions in, securities. The Commission further believes,
preliminarily, that this information could assist the Commission in
overseeing competing consolidators and assist market participants in
assessing whether to become a subscriber of a certain competing
consolidator. Competing consolidators could serve an important role in
the national market system by calculating and generating consolidated
market data, as proposed, and, accordingly, it is important for the
competing consolidator to provide the requested information relating to
its operational capability.
    Services and Fees: Proposed Form CC would further require a
competing consolidator to provide information regarding access to its
competing consolidator services, including: (1) A description of all
market data products with respect to proposed consolidated market data
or any subset of proposed consolidated market data that are provided to
subscribers; (2) a description of any fees or charges for use of the
competing consolidator with respect to proposed consolidated market
data or any subset of proposed consolidated market data, including the
types of fees (e.g., subscription and connectivity), the structure of
the fee (e.g., fixed and variable), variables that affect the fees
(e.g., data center costs, aggregation costs, and transmission costs),
pricing differentiation among the types of subscribers, and range of
fees (high and low); (3) a description of any co-location,
connectivity, and related services, and the terms and conditions for
co-location and related services, including connectivity and throughput
options offered; and (4) a description of any other means besides co-
location and related services to increase the speed of communication,
including a summary of the terms and conditions for its use. The
Commission preliminarily believes that this information would assist
market participants in determining whether to become a subscriber of a
competing consolidator by requiring the availability to all market
participants of information regarding the services offered by the
competing consolidator and the fees it charges for services and
proposed consolidated market data. The availability of this information
would also help to assure that all subscribers and potential
subscribers have the same information about the services that the
competing consolidator offers.
    Contact Information: In addition to the foregoing, proposed Form CC
would require a competing consolidator to provide Commission staff with
point of contact information for a person(s) prepared to respond to
questions regarding Form CC, including the name, title, telephone
number, and email address of such person. Proposed Form CC also would
require an electronic signature to help ensure the authenticity of the
Form CC submission. The Commission preliminarily believes these
proposed requirements would expedite communications between Commission
staff and a competing consolidator and help to ensure that only
personnel authorized by the competing consolidator are submitting
required filings and responding to questions from Commission staff
regarding Form CC.
    The Commission requests comment on proposed Form CC. In particular,
the Commission solicits comment on the following:
    110. Are the instructions in proposed Form CC sufficiently clear?
If not, identify any instructions that should be clarified, and, if
possible, offer alternatives.
    111. Should the Commission implement an electronic filing system
for receipt of Form CC, and, if so, what particular features should be
incorporated into the system? Are there any burdens associated with the
electronic filing of proposed Form CC that the Commission should
consider?
    112. Is the requested information relating to a competing
consolidator's operational capability appropriate? If not, identify any
items that are not appropriate, explain why, and, if possible, offer
alternatives.
    113. Is the requested information relating to access to a competing
consolidator's services appropriate? If not, identify any items that
are not appropriate, explain why, and, if possible, offer alternatives.
    114. Do commenters believe that competing consolidators will bundle
their products and/or services? If so, should this be disclosed on Form
CC?
    115. Should the Commission require any additional information on
Form CC? If so, what information and why?
    116. Are there any items on proposed Form CC that the Commission
should not request? If so, which items and why?
(f) Amendments to Regulation SCI
    The Commission adopted Regulation SCI in November 2014 to
strengthen the technology infrastructure of the U.S. securities
markets.\557\ Regulation SCI is designed to reduce the occurrence of
systems issues in the U.S. securities markets, improve resiliency when
systems problems occur, and enhance

the Commission's oversight of securities market technology
infrastructure. The key market participants that are currently subject
to Regulation SCI are called ``SCI entities'' and include certain SROs
(including stock and options exchanges, registered clearing agencies,
FINRA and the Municipal Securities Regulatory Board) (``SCI SROs'');
alternative trading systems that trade NMS and non-NMS stocks exceeding
specified volume thresholds (``SCI ATSs''); the exclusive SIPs (``plan
processors''); and certain exempt clearing agencies.\558\ Regulation
SCI, among other things, requires these SCI entities to establish,
maintain, and enforce written policies and procedures reasonably
designed to ensure that their key automated systems have levels of
capacity, integrity, resiliency, availability, and security adequate to
maintain their operational capability and promote the maintenance of
fair and orderly markets, and that such systems operate in accordance
with the Exchange Act and the rules and regulations thereunder and the
entities' rules and governing documents, as applicable.\559\ Broadly
speaking, Regulation SCI also requires SCI entities to take appropriate
corrective action when systems issues occur; provide certain
notifications and reports to the Commission regarding systems problems
and systems changes; inform members and participants about systems
issues; conduct business continuity and disaster recovery testing and
penetration testing; conduct annual reviews of their automated systems;
and make and keep certain books and records.\560\
---------------------------------------------------------------------------

    \557\ See Regulation SCI Adopting Release, supra note 28, at
72252-56 for a discussion of the background of Regulation SCI.
    \558\ See Rule 1000 of Regulation SCI, 17 CFR 242.1000. Because
self-aggregators would be broker-dealers, see infra Section IV.B.3,
they would be subject to existing broker-dealer risk control and
supervisory obligations. See, e.g., 17 CFR 240.15c3-5, FINRA Rule
3110, FINRA Rule 4370, FINRA Rule 4380.
    \559\ See Rule 1001 of Regulation SCI, 17 CFR 242.1001, which is
also discussed further below.
    \560\ See Rules 1002-1007 of Regulation SCI, 17 CFR 242.1001-
1007, which are also discussed further below.
---------------------------------------------------------------------------

    Regulation SCI applies primarily to the systems of, or operated on
behalf of, SCI entities that directly support any one of six key
securities market functions--trading, clearance and settlement, order
routing, market data, market regulation, and market surveillance (``SCI
systems'').\561\ With respect to security, Regulation SCI also applies
to systems that, if breached, would be reasonably likely to pose a
security threat to SCI systems (``indirect SCI systems'').\562\ In
addition, certain systems that raise concerns about single points of
failure (defined as ``critical SCI systems'') are subject to certain
heightened requirements.\563\
---------------------------------------------------------------------------

    \561\ See Rule 1000 of Regulation SCI, 17 CFR 242.1000.
    \562\ Id.
    \563\ Id. Subparagraph (1) of the definition of ``critical SCI
systems'' in Rule 1000 of Regulation SCI specifically enumerates
certain systems to be within its scope, including those that
``directly support functionality relating to: (i) Clearance and
settlement systems of clearing agencies; (ii) openings, reopenings,
and closings on the primary listing market; (iii) trading halts;(iv)
initial public offerings; (v) the provision of consolidated market
data; or (vi) exclusively-listed securities . . .''.
---------------------------------------------------------------------------

    When adopting Regulation SCI, the Commission included within the
scope of Regulation SCI those entities ``that play a significant role
in the U.S. securities markets and/or have the potential to impact
investors, the overall market, or the trading of individual
securities.'' \564\ The Commission identified by function the key
market participants it believed were integral to ensuring the
stability, integrity, and resiliency of securities market
infrastructure.\565\ As discussed below, ``plan processors'' are
currently among those entities that are subject to Regulation SCI.
Under Regulation SCI, ``plan processors'' have the meaning set forth in
Regulation NMS.\566\ Thus, currently, the exclusive SIPs, or plan
processors of the Equity Data Plans and the OPRA Plan, are subject to
Regulation SCI.\567\ The Commission included plan processors within the
scope of Regulation SCI because the Commission believed that such
entities, because they are exclusive processors and providers of key
market data pursuant to a national market system plan, are central
features of the national market system and serve an important role
within the national market system in operating and maintaining computer
and communications facilities for the receipt, processing, validating,
and dissemination of quotation and/or last sale price information.\568\
---------------------------------------------------------------------------

    \564\ See Regulation SCI Adopting Release, supra note 28, at
72258.
    \565\ Id. at 72254.
    \566\ See Rule 600(b)(59) of Regulation NMS, 17 CFR
242.600(b)(59).
    \567\ See also Regulation SCI Adopting Release, supra note 28,
at 72270-71, n. 196 (discussing how the term ``plan processor''
applies to the CTA, CQ, Nasdaq UTP, and OPRA plans).
    \568\ See also id. at 72271. The Commission also stated how
systems issues affecting SIPs highlighted their importance within
the national market system. See id. at n. 199 (discussing the impact
of two systems issues involving SIPs).
---------------------------------------------------------------------------

    The Commission preliminarily believes that competing consolidators,
because they would be sources of consolidated market data, even if not
exclusive sources of such data, would similarly serve an important role
in the national market system, and therefore should be subject to the
requirements of Regulation SCI. When adopting Regulation SCI, the
Commission explained that Regulation SCI would apply not only to
exclusive providers of consolidated market data, but also to the market
data systems of SCI SROs, stating, ``both consolidated and proprietary
market data systems are widely used and relied upon by a broad array of
market participants, including institutional investors, to make trading
decisions, and [] if a consolidated or a proprietary market data feed
became unavailable or otherwise unreliable, it could have a significant
impact on the trading of the securities to which it pertains, and could
interfere with the maintenance of fair and orderly markets.'' \569\ The
Commission preliminarily believes that if a consolidated market data
feed of a competing consolidator became unavailable or otherwise
unreliable, it could have a significant impact on the trading of NMS
stocks and/or the market participants subscribing to its data feeds,
and could possibly interfere with the maintenance of fair and orderly
markets. A systems issue could occur at a competing consolidator (e.g.,
a systems disruption that prevented the competing consolidator from
disseminating consolidated market data to its subscribers, a systems
intrusion that impacted the quality of the data being disseminated, or
another cybersecurity incident, such that certain market participants
or the securities markets broadly could be significantly impacted until
such time that the issue was resolved at the competing consolidator, or
the end user (or its market data vendor, if applicable) was able to
implement any backup arrangements with an alternative competing
consolidator. As detailed further below, the Commission is requesting
comment on whether all of the obligations set forth in Regulation SCI
should apply to competing consolidators, or whether only certain
requirements should be imposed, such as those requiring written
policies and procedures, notification of systems problems, business
continuity and disaster recovery testing (including testing with
participants/subscribers of a competing consolidator), and penetration
testing.
---------------------------------------------------------------------------

    \569\ See Regulation SCI Adopting Release, supra note 28, at
72275.
---------------------------------------------------------------------------

    In addition, the Commission is proposing to revise the definition
of ``critical SCI system,'' to take account of competing consolidators,
which, as proposed, would not be exclusive providers of consolidated
market data. Currently, subparagraph (1)(v) of the

definition of ``critical SCI systems'' includes those SCI systems of,
or operated on behalf of, an SCI entity that directly support
functionality relating to ``the provision of consolidated market
data.'' The Commission is proposing to revise this subparagraph to
apply to those systems that directly support functionality relating to
``the provision of market data by a plan processor.'' The proposed
revised language in subparagraph (1)(v) is intended to identify as
critical SCI systems only those market data systems that perform an
exclusive market data dissemination function pursuant to an NMS plan.
Accordingly, the scope of ``critical SCI systems'' would still capture
single points of failure within the national market system. Under the
current consolidation model, because the exclusive SIPs represent such
single points of failure, they are all subject to heightened
requirements as ``critical SCI systems.'' However, because the
competing consolidator model is designed to result in multiple viable
sources of consolidated market data, and would not be initiated until a
transition period was complete,\570\ the Commission preliminarily
believes that including systems of such competing consolidators within
the scope of ``critical SCI systems'' would not be necessary. With
multiple competing consolidators operating in the national market
system, the systems of competing consolidators would be subject to the
standard (i.e., as SCI systems that are not critical SCI systems)
requirements of Regulation SCI, whereas the proposed revised definition
of ``critical SCI systems'' would address single point of failure
concerns.
---------------------------------------------------------------------------

    \570\ See infra Section IV.B.6.
---------------------------------------------------------------------------

    Because the competing consolidator model would not apply with
respect to trading in options, the definition of ``critical SCI
systems'' must still account for the systems of OPRA's plan processor,
whose systems would continue to be ``critical SCI systems.'' In
addition, to avoid confusion with the term ``consolidated market
data''--which is proposed to be defined to include (1) core data, (2)
regulatory data, (3) administrative data, (4) exchange-specific program
data, and (5) additional regulatory, administrative, or exchange-
specific program data elements defined as such pursuant to the
effective national market system plan(s) required under Rule 603(b)
\571\--the Commission is proposing to replace that phrase within the
definition of ``critical SCI systems'' with ``market data.'' \572\
---------------------------------------------------------------------------

    \571\ See proposed Rule 600(b)(19) of Regulation NMS. See also
supra Section III.B.
    \572\ See proposed amendment to Rule 1000 of Regulation SCI.
---------------------------------------------------------------------------

    Thus, under this proposal, the definition of ``SCI entities'' would
be expanded to include ``competing consolidators,'' which would be
defined to have the same meaning as the definition of ``competing
consolidators'' set forth in proposed Rule 600(b)(16) of Regulation
NMS.\573\ Competing consolidators would be subject to the requirements
of Regulation SCI, as described below.
---------------------------------------------------------------------------

    \573\ See proposed amendment to Rule 1000 of Regulation SCI. As
discussed above, competing consolidators would not fall within the
definition of ``plan processors'' under Regulation SCI. See supra
notes 566-567 and accompanying text. In addition to revising Rule
1000 of Regulation SCI to define ``competing consolidators'' and
include them within the definition of ``SCI entity,'' corresponding
changes would be made to Form SCI and the General Instructions to
Form SCI to include references to ``competing consolidators.'' See
infra note 595 and accompanying text (discussing Form SCI and Rule
1006 of Regulation SCI).
---------------------------------------------------------------------------

    Rule 1001(a) of Regulation SCI requires SCI entities to have
policies and procedures reasonably designed to ensure that their SCI
systems and, for purposes of security standards, indirect SCI systems,
have levels of capacity, integrity, resiliency, availability, and
security adequate to maintain their operational capability and promote
the maintenance of fair and orderly markets, and includes certain
minimum requirements for those policies and procedures relating to
capacity planning, stress tests, systems development and testing
methodology, the identification of vulnerabilities, business continuity
and disaster recovery plans (including geographic diversity and
resumption goals), and monitoring.\574\ Of particular note for
competing consolidators is Rule 1001(a)(2)(vi), which requires that an
SCI entity's policies and procedures include standards ``that result in
such systems being designed, developed, tested, maintained, operated,
and surveilled in a manner that facilitates the successful collection,
processing, and dissemination of market data.'' \575\ Rule 1001(a)(3)
of Regulation SCI requires that SCI entities periodically review the
effectiveness of these policies and procedures, and take prompt action
to remedy any deficiencies.\576\ Rule 1001(a)(4) of Regulation SCI
provides that, for purposes of the provisions of Rule 1001(a), an SCI
entity's policies and procedures will be deemed to be reasonably
designed if they are consistent with current SCI industry standards,
which shall be comprised of information technology practices that are
widely available to information technology professionals in the
financial sector and issued by an authoritative body that is a U.S.
governmental entity or agency, association of U.S. governmental
entities or agencies, or widely recognized organization; \577\ however,
Rule 1001(a)(4) of Regulation SCI also makes clear that compliance with
such ``current SCI industry standards'' are not the exclusive means to
comply with these requirements.
---------------------------------------------------------------------------

    \574\ Rule 1001(a) of Regulation SCI, 17 CFR 242.1001(a).
    \575\ Rule 1001(a)(2)(vi) of Regulation SCI, 17 CFR
242.1001(a)(2)(vi).
    \576\ Rule 1001(a)(3) of Regulation SCI, 17 CFR 242.1001(a)(3).
    \577\ Rule 1001(a)(4) of Regulation SCI, 17 CFR 242.1001(a)(4).
We note that concurrent with the Commission's adoption of Regulation
SCI, Commission staff issued staff guidance on current SCI industry
standards as referenced in Regulation SCI. The staff guidance listed
examples of publications in nine domains describing processes,
guidelines, frameworks, or standards an SCI entity could look to in
developing reasonable policies and procedures to comply with Rule
1001(a) of Regulation SCI. See ``Staff Guidance on Current SCI
Industry Standards,'' November 19, 2014, available at: https://www.sec.gov/rules/final/2014/staff-guidance-current-sci-industry-standards.pdf. The domains included: Application controls; capacity
planning; computer operations and production environment controls;
contingency planning; information security and networking; audit;
outsourcing; physical security; and systems development methodology.
---------------------------------------------------------------------------

    Rule 1001(b) of Regulation SCI requires that each SCI entity
establish, maintain, and enforce written policies and procedures
reasonably designed to ensure that its SCI systems operate in a manner
that complies with the Act and the rules and regulations thereunder and
the entity's rules and governing documents, as applicable, and
specifies certain minimum requirements for such policies and
procedures.\578\ Rule 1001(b)(3) of Regulation SCI requires that SCI
entities periodically review the effectiveness of these policies and
procedures, and take prompt action to remedy any deficiencies.\579\
Rule 1001(b)(4) of Regulation SCI provides individuals with a safe
harbor from liability under Rule 1001(b) if certain conditions are
met.\580\
---------------------------------------------------------------------------

    \578\ Rule 1001(b)(1)-(2) of Regulation SCI, 17 CFR
242.1001(b)(1)-(2).
    \579\ Rule 1001(b)(3) of Regulation SCI, 17 CFR 242.1001(b)(3).
    \580\ Rule 1001(b)(4) of Regulation SCI, 17 CFR 242.1001(b)(4).
---------------------------------------------------------------------------

    Rule 1001(c) of Regulation SCI requires SCI entities to establish,
maintain, and enforce reasonably designed written policies and
procedures that include the criteria for identifying responsible SCI
personnel, the designation and documentation of responsible SCI
personnel, and

escalation procedures to quickly inform responsible SCI personnel of
potential SCI events.\581\ Rule 1000 of Regulation SCI defines
``responsible SCI personnel'' to mean, ``for a particular SCI system or
indirect SCI system impacted by an SCI event, such senior manager(s) of
the SCI entity having responsibility for such system, and their
designee(s).'' \582\ Rule 1000 also defines ``SCI event'' to mean an
event at an SCI entity that constitutes a system disruption, a systems
compliance issue, or a systems intrusion.\583\ Rule 1001(c)(2) of
Regulation SCI requires that SCI entities periodically review the
effectiveness of these policies and procedures, and take prompt action
to remedy any deficiencies.\584\
---------------------------------------------------------------------------

    \581\ Rule 1001(c) of Regulation SCI, 17 CFR 242.1001(c).
    \582\ Rule 1000 of Regulation SCI, 17 CFR 242.1000.
    \583\ A ``systems disruption'' means an event in an SCI entity's
SCI systems that disrupts, or significantly degrades, the normal
operation of an SCI system. A ``systems compliance issue'' means
``an event at an SCI entity that has caused any SCI system of such
entity to operate in a manner that does not comply with the Act and
the rules and regulations thereunder or the entity's rules or
governing documents, as applicable.'' A ``systems intrusion'' means
any unauthorized entry into the SCI systems or indirect SCI systems
of an SCI entity.'' See Rule 1000 of Regulation SCI, 17 CFR
242.1000.
    \584\ Rule 1001(c)(2) of Regulation SCI, 17 CFR 242.1001(c)(2).
---------------------------------------------------------------------------

    Under Rule 1002 of Regulation SCI, SCI entities have certain
obligations related to SCI events. Specifically, when any responsible
SCI personnel has a reasonable basis to conclude that an SCI event has
occurred, an SCI entity must begin to take appropriate corrective
action which must include, at a minimum, mitigating potential harm to
investors and market integrity resulting from the SCI event and
devoting adequate resources to remedy the SCI event as soon as
reasonably practicable.\585\ Rule 1002(b) provides the framework for
notifying the Commission of SCI events including, among other things,
to: Immediately notify the Commission of the event; provide a written
notification within 24 hours that includes a description of the SCI
event and the system(s) affected, with other information required to
the extent available at the time; provide regular updates regarding the
SCI event until the event is resolved; and submit a final detailed
written report regarding the SCI event.\586\ Rule 1002(c) of Regulation
SCI also requires that SCI entities disseminate information to their
members or participants regarding SCI events.\587\ These information
dissemination requirements are scaled based on the nature and severity
of an event. Specifically, for ``major SCI events,'' SCI entities are
required to promptly disseminate certain information about the event to
all of its members or participants. For SCI events that are not ``major
SCI events,'' SCI entities must, promptly after any responsible SCI
personnel has a reasonable basis to conclude that an SCI has occurred,
disseminate certain information to those SCI entity members and
participants reasonably estimated to have been affected by the event.
In addition, dissemination of information to members or participants is
permitted to be delayed for systems intrusions if such dissemination
would likely compromise the security of the SCI entity's systems or an
investigation of the intrusion.\588\
---------------------------------------------------------------------------

    \585\ See Rule 1002(a) of Regulation SCI, 17 CFR 242.1002(a).
    \586\ See Rule 1002(b) of Regulation SCI, 17 CFR 242.1002(b).
For any SCI event that ``has had, or the SCI entity reasonably
estimates would have, no or a de minimis impact on the SCI entity's
operations or on market participants,'' Rule 1002(b)(5) provides an
exception to the general Commission notification requirements under
Rule 1002(b). Instead, an SCI entity must make, keep, and preserve
records relating to all such SCI events, and submit a quarterly
report to the Commission regarding any such events that are systems
disruptions or systems intrusions.
    \587\ See Rule 1002(c) of Regulation SCI, 17 CFR 242.1002(c).
    \588\ See Rule 1002(c)(2) of Regulation SCI, 17 CFR
242.1002(c)(2). In addition, the information dissemination
requirements of Rule 1002(c) do not apply to SCI events to the
extent they relate to market regulation or market surveillance
systems, or to any SCI event that has had, or the SCI entity
reasonably estimates would have, no or a de minimis impact on the
SCI entity's operations or on market participants. See Rule
1002(c)(4) of Regulation SCI, 17 CFR 242.1002(c)(4).
---------------------------------------------------------------------------

    Rule 1003(a) of Regulation SCI requires SCI entities to provide
reports to the Commission relating to system changes, including a
report each quarter describing completed, ongoing, and planned material
changes to their SCI systems and the security of indirect SCI systems,
during the prior, current, and subsequent calendar quarters, including
the dates or expected dates of commencement and completion.\589\ Rule
1003(b) of Regulation SCI also requires that an SCI entity conduct an
``SCI review'' not less than once each calendar year.\590\ ``SCI
review'' is defined in Rule 1000 of Regulation SCI to mean a review,
following established procedures and standards, that is performed by
objective personnel having appropriate experience to conduct reviews of
SCI systems and indirect SCI systems, and which review contains: A risk
assessment with respect to such systems of an SCI entity; and an
assessment of internal control design and effectiveness of its SCI
systems and indirect SCI systems to include logical and physical
security controls, development processes, and information technology
governance, consistent with industry standards.\591\ Rule 1003(b)(2)-
(3) SCI entities are also required to submit a report of the SCI review
to their senior management, and must also submit the report and any
response by senior management to the report, to their board of
directors as well as the Commission.\592\
---------------------------------------------------------------------------

    \589\ See Rule 1003(a) of Regulation SCI, 17 CFR 242.1003(a).
    \590\ See Rule 1003(b) of Regulation SCI, 17 CFR 242.1003(b).
    \591\ See Rule 1000 of Regulation SCI, 17 CFR 242.1000. In
addition, Rule 1003(b)(1) of Regulation SCI states that penetration
test reviews of an SCI entity's network, firewalls, and production
systems must be conducted at a frequency of not less than once every
three years, and assessments of SCI systems directly supporting
market regulation or market surveillance must be conducted at a
frequency based upon the risk assessment conducted as part of the
SCI review, but in no case less than once every three years. See
Rule 1003(b)(1)(i)-(ii) of Regulation SCI, 17 CFR 242.1003(b)(1)(i)-
(ii).
    \592\ See Rule 1003(b)(2)-(3) of Regulation SCI, 17 CFR
242.1003(b)(2)-(3).
---------------------------------------------------------------------------

    Rule 1004 of Regulation SCI sets forth the requirements for testing
an SCI entity's business continuity and disaster recovery plans with
its members or participants. This rule requires that, with respect to
an SCI entity's business continuity and disaster recovery plan,
including its backup systems, each SCI entity shall: (a) Establish
standards for the designation of those members or participants that the
SCI entity reasonably determines are, taken as a whole, the minimum
necessary for the maintenance of fair and orderly markets in the event
of the activation of such plans; \593\ (b) designate members or
participants pursuant to the standards established and require
participation by such designated members or participants in scheduled
functional and performance testing of the operation of such plans, in
the manner and frequency specified by the SCI entity, provided that
such frequency shall not be less than once every 12 months; and (c)
coordinate the testing of such plans on an industry- or sector-wide
basis with other SCI entities.
---------------------------------------------------------------------------

    \593\ See Rule 1004 of Regulation SCI, 17 CFR 242.1004. For a
competing consolidator, its designated members or participants
generally would include the national securities exchanges that
receive its consolidated market data, as well as its other
significant subscribers for such data (including, but not limited,
to major market data vendors that widely redistribute such data).
---------------------------------------------------------------------------

    Rule 1005(b) of Regulation SCI relates to the recordkeeping
requirements of competing consolidators related to compliance with
Regulation SCI.\594\

Rule 1006 of Regulation SCI provides for certain requirements relating
to the electronic filing, on Form SCI, of any notification, review,
description, analysis, or report to the Commission required to be
submitted under Regulation SCI.\595\ Finally, Rule 1007 of Regulation
SCI contains requirements relating to a written undertaking when
records required to be filed or kept by an SCI entity under Regulation
SCI are prepared or maintained by a service bureau or other
recordkeeping service on behalf of the SCI entity.\596\
---------------------------------------------------------------------------

    \594\ See Rule 1005 of Regulation SCI, 17 CFR 242.1005. Rule
1005(a) relates to recordkeeping provisions for SCI SROs, whereas
Rule 1005(b) relates to the recordkeeping provision for SCI entities
other than SCI SROs.
    \595\ See Rule 1006 of Regulation SCI, 17 CFR 242.1006.
    \596\ See Rule 1007 of Regulation SCI, 17 CFR 242.1007.
---------------------------------------------------------------------------

    The Commission requests comment on the proposed inclusion of
competing consolidators in Regulation SCI and the related revisions to
Rule 1000 of Regulation SCI. In particular, the Commission solicits
comment on the following:
    117. Do commenters believe that Regulation SCI should apply to
competing consolidators? If so, do commenters believe that the proposed
revisions to Rule 1000 of Regulation SCI are appropriate? Why or why
not? Is there a potential for a systems issue at a competing
consolidator to have an adverse impact on the maintenance of fair and
orderly markets? If so, what do commenters believe would be the most
effective way to mitigate that potential?
    118. Do commenters believe that competing consolidators could play
a significant role in the U.S. securities markets such that they should
be defined as SCI entities? Why or why not? What do commenters believe
are the risks related to subscribers associated with systems issues at
a competing consolidator? What impact would a systems issue have on the
trading of securities and the maintenance of fair and orderly markets?
Do commenters believe that all requirements set forth in Regulation SCI
should apply to competing consolidators? Why or why not?
    119. Unlike other types of SCI entities, ATSs are only subject to
Regulation SCI if they meet certain volume thresholds set forth in the
definition of ``SCI ATS.'' Do commenters similarly believe there is a
threshold size, or a threshold for significant market share, at which
Regulation SCI should apply to a competing consolidator? For example,
the definition of SCI ATSs contains a two-pronged volume threshold test
measured over a ``four out of six-month'' period to determine whether
an alternative trading system is subject to Regulation SCI. Would a
similar test be appropriate for competing consolidators? If so, what do
commenters believe would be an appropriate measurement that should be
used for such a test? For example, in the definition of SCI ATS, the
NMS stock volume threshold test for inclusion of an alternative trading
system in Regulation SCI is one percent (1%) or more of overall volume
in NMS stocks during at least four of the preceding six calendar
months. Would it, for example, be appropriate for the Commission to
apply Regulation SCI to competing consolidators that had one percent
(1%) or more of total subscribers of consolidated market data during at
least four of the preceding six calendar months? Or, would a different
threshold (such as five, ten, or twenty percent) be more appropriate?
Why or why not? Please describe. Do commenters believe that another
measurement (other than total subscribers of consolidated market data)
be more appropriate? If so, what do commenters believe that measurement
should be? Please describe.
    120. Do commenters believe that only certain provisions of
Regulation SCI should apply to competing consolidators? For example,
should competing consolidators only be subject to certain aspects of
Regulation SCI, such as the policies and procedures required by Rule
1001 of Regulation SCI; the requirement to provide notification of SCI
events and to take corrective action as required by Rule 1002 of
Regulation SCI; the requirement to conduct SCI reviews as required by
Rule 1003 of Regulation SCI; the requirement to perform disaster
recovery testing as required by Rule 1004 of Regulation SCI; the
requirements related to recordkeeping, as required by Rule 1005 of
Regulation SCI; the requirements relating to electronic filing on Form
SCI pursuant to Rule 1006 of Regulation SCI; and the requirements
relating to service bureaus, as required by Rule 1007 of Regulation
SCI? If so, which provisions should apply? Do commenters believe that
different or unique requirements should apply to the systems of
competing consolidators? What should they be and why?
    121. In what instances, if at all, should the systems of competing
consolidators be defined as ``critical SCI systems''? Please describe.
    122. Which subscribers or types of subscribers should competing
consolidators consider as ``designated members or participants'' that
should be required to participate in the annual mandatory business
continuity and disaster recovery testing? Please describe.
    123. Do commenters believe that requiring competing consolidators
to be defined as SCI entities would deter parties from registering as
competing consolidators? Why or why not?
    124. Do commenters believe that competing consolidators should not
be defined as SCI entities but should be required to comply with
provisions comparable to provisions of Regulation SCI? Why or why not?
    125. If commenters believe that competing consolidators should not
be defined as SCI entities but should be required to comply with
provisions comparable to provisions of Regulation SCI, what provisions
should apply? Should competing consolidators be required to have
business continuity and disaster plans, to designate subscribers that
the competing consolidator determines are necessary for the maintenance
of fair and orderly markets in the event of the activation of such
plans, to mandate such subscribers' participation in scheduled
functional and performance testing of the operation of such plans not
less than once every 12 months, and to coordinate testing of such plans
on an industry- or sector-wide basis with SCI entities, or otherwise be
required to participate in coordinated testing scheduled by SCI
entities? Why or why not?
    126. Do commenters believe that existing proprietary market data
aggregation firms that wish to register as competing consolidators
would establish separate legal entities for that purpose? Why or why
not?
3. Self-Aggregators
    Currently, some broker-dealers effectively act as self-aggregators
by purchasing proprietary data products from the exchanges,
consolidating that information (either independently or with the use of
vendor services and/or hardware), and calculating the NBBO for their
own use. Broker-dealers may self-aggregate to eliminate various forms
of latency \597\ or to access the additional content provided by
proprietary data feeds in a consolidated form. This self-aggregated
consolidated data may be used for SORs, algorithmic trading systems,
alternative trading systems (``ATSs''), visual display, or other uses.
While broker-dealers raised concerns about the costs associated with
proprietary data products, some have developed these self-aggregation
solutions as a means to address the

latency and content issues that are present with the exclusive SIPs
themselves.\598\ The Commission preliminarily believes that broker-
dealers should be permitted to continue to self-aggregate consolidated
market data as proposed to be defined under the proposed decentralized
consolidation model. The Commission is concerned that eliminating the
ability of broker-dealers to self-aggregate proposed consolidated
market data for their own use would be unnecessarily disruptive to the
current market data infrastructure landscape.
---------------------------------------------------------------------------

    \597\ See supra Section IV.A for a discussion of geographic,
aggregation, and transmission latencies.
    \598\ See, e.g., Roundtable Day One Transcript at 198-199
(Joseph Wald, Clearpool) (``Clearpool and other broker-dealers are
compelled to purchase exchanges' proprietary data feeds, both to
provide competitive execution services to our clients and to meet
our best execution obligations due to the content of the information
contained in the proprietary data feeds as well as the latency
differences between them, which are major and important
considerations for brokers.'').
---------------------------------------------------------------------------

    Accordingly, the Commission proposes to amend Rule 600(b) to add a
definition of a self-aggregator. The Commission proposes to define a
self-aggregator as ``a broker or dealer that receives information with
respect to quotations for and transactions in NMS stocks, including all
data necessary to generate consolidated market data, and generates
consolidated market data solely for internal use. A self-aggregator may
not make consolidated market data, or any subset of consolidated market
data, available to any other person.'' In particular, a self-aggregator
would collect the NMS information necessary to generate proposed
consolidated market data that it needs to trade for its own account or
to execute transactions for its customers. A self-aggregator would
generate the proposed consolidated market data that it needs for its
business, such as calculating current protected bids and offers from
each trading center for purposes of Rule 611 and the current best bids
and offers from each trading center for achieving and analyzing best
execution.\599\ The proposed definition would prohibit self-aggregators
from disseminating proposed consolidated market data to any person,
including a customer or any affiliated entity, as such action would not
be for the internal use of a self-aggregator and would be akin to the
actions of a competing consolidator, and thus would require
registration as a competing consolidator.
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    \599\ A self-aggregator also would receive from the primary
listing exchanges regulatory data (as defined as proposed
consolidated market data), which would be necessary for meeting
regulatory obligations, such as monitoring Short Sale Circuit
Breakers and LULD price bands. See supra Section III.D.
---------------------------------------------------------------------------

    Like competing consolidators, a self-aggregator would collect all
information with respect to quotations for and transactions in NMS
stocks directly from each SRO, but importantly, self-aggregators would
not be permitted to re-distribute or re-disseminate proposed
consolidated market data to any person, including to any affiliates or
subsidiaries. A self-aggregator that re-distributed or re-disseminated
proposed consolidated market data, or any subset of proposed
consolidated market data, would be performing the functions of a
competing consolidator and, accordingly, would be required to register
as a competing consolidator. Self-aggregators would establish
connectivity to the SROs directly or through the use of a service
provider and would either use their own proprietary technology or that
of a third party vendor to perform aggregation and any other functions
necessary for generating proposed consolidated market data. A vendor
providing hardware, software, and/or other services for the purposes of
self-aggregation would not be a competing consolidator unless it
collected and aggregated proposed consolidated market data in a
standardized format within its own facility (e.g., not that of a
broker-dealer customer) and resold that configuration of proposed
consolidated market data to a customer.
    As discussed above, pursuant to Rule 603(b), self-aggregators would
receive access from the SROs, either directly or via the use of a
vendor, to the data necessary to generate proposed consolidated market
data in the same manner and using same methods as other persons,
including competing consolidators.\600\ A self-aggregator that limits
its use of exchange data to the creation of proposed consolidated
market data would be charged only for proposed consolidated market data
pursuant to the effective national market system plan(s) fee
schedules.\601\ A self-aggregator that uses an exchange's proprietary
data (e.g., full depth of book data) could be charged separately for
the proprietary data use pursuant to the individual exchange's fee
schedule.\602\
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    \600\ See supra Section IV.B.1.
    \601\ See infra Section IV.B.4 for a discussion of the effective
national market system plan(s). This would apply to proposed
consolidated market data provided through an exchange's proprietary
data product.
    \602\ SRO fees for market data other than the proposed
consolidated market data would be subject to the rule filing process
pursuant to Section 19(b) and Rule 19b-4.
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(a) Roundtable Discussion and Comments
    Roundtable participants discussed self-aggregation. One panelist
described a variation of the self-aggregation alternative that he
referred to as the ``one feed-one speed'' model.\603\ The panelist
suggested that consolidated market data should be made available in a
similar manner and using the same framework as the exchanges use to
make available their direct proprietary data feeds.\604\
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    \603\ See Roundtable Day Two Transcript at 27-29 (Adam Nunes,
Hudson River Trading).
    \604\ Id. This panelist also published a note that described the
ability of firms and vendors to receive data directly from the
exchanges. See Adam Nunes, MMI Member Guest Editorial: Speed up the
SIP, Modern Markets Initiative (Dec. 22, 2015), available at https://www.modernmarketsinitiative.org/archive/2018/11/14/mmi-member-guest-editorial-speed-up-the-sip. In this note, the panelist
described a model in which (1) firms would order the SIP data as
they do today, by contacting their vendor or the SIP administrator;
(2) the firm/vendor connecting to the SIP would get a connection to
each exchange to listen to their data where the data is produced
(rather than getting the data from a central location); and (3) the
firm would receive and process the data similarly to how it handles
direct market data feeds.
---------------------------------------------------------------------------

    The Commission received one comment letter that supported
consideration of a self-aggregation model. The commenter believed that
this approach would further the principles of transparency and fairness
and ``level the playing field for industry participants.'' \605\
---------------------------------------------------------------------------

    \605\ See Letter to Brent J. Fields, Secretary, Commission, from
Kirsten Wegner, Chief Executive Officer, Modern Markets Initiative,
5-6 (Oct. 18, 2018) (``Modern Markets Initiative Letter''). One
commenter advocated that each exchange should provide a single data
feed to market participants (instead of a SIP data feed and
proprietary data feeds). The commenter said that a single data feed
``would better serve market participants from the standpoint of
equality and fairness.'' However, the commenter also noted that
investors would benefit from competition among organizations able to
operate as SIPs, either through a bidding process for a centralized
SIP or the ability of multiple SIPs to operate (i.e., a competing
consolidator model). See T. Rowe Price Letter at 3.
---------------------------------------------------------------------------

    In contrast, the Commission received one comment letter that
expressed criticism of a self-aggregation model. The commenter urged
against government intervention requiring all market participants to
use the same connectivity and the same data, explaining that different
customers need different products and that the government should not
limit choices ``in this radical manner.'' \606\ The commenter also
stated that adding multiple consolidators or competing SIPs to the
model would magnify risks.\607\
---------------------------------------------------------------------------

    \606\ See Wittman Letter at 15.
    \607\ Id. at 16.

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

(b) Commission Discussion
    The Commission preliminarily believes that the proposed
decentralized consolidation model should allow broker-dealers to
continue to self-aggregate by collecting and calculating consolidated
market data, as proposed, solely for their internal use, in a manner
that would allow access to proposed consolidated market data on fair
and reasonable terms and without the inefficiencies and added latencies
associated with the existing exclusive SIP model.
    The proposed decentralized consolidation model is designed to
increase, rather than limit, market participants' choices with respect
to data products and connectivity. Accordingly, the Commission
preliminarily believes that broker-dealers should be able to choose to
self-aggregate consolidated market data for their own internal purposes
in a similar manner as they may do today with proprietary data. Under
the proposed rules, competing consolidators and self-aggregators would
be able to select the transmission services that meet the needs of
their client or their individual needs, respectively, rather than be
restricted to transmission services mandated by the Equity Data Plans.
In addition, the proposed rules would allow competing consolidators and
self-aggregators to choose to receive exchange data products that
include only proposed consolidated market data elements or products
that contain both proposed and non-proposed consolidated market data
elements (e.g., existing proprietary data products).
    As discussed more fully above, the proposed rules would permit the
exchanges to offer different connectivity options (e.g., with different
latencies, throughput capacities, and data-feed protocols) to market
data customers but would require that any options provided to
proprietary data customers be available to competing consolidators and
self-aggregators in the same manner and using the same methods,
including all methods of access and the same format, for the purpose of
collecting and consolidating proposed consolidated market data.
    Self-aggregators may have a minor latency advantage over market
participants that decide to utilize a competing consolidator for their
consolidated market data, due to the fact that self-aggregators will be
collecting and consolidating this data for themselves rather than
relying on a competing consolidator to do so, and therefore would
eliminate a potential latency cost that comes with an extra hop within
a given data center. The Commission, however, preliminarily believes
that the addition of competitive forces with the introduction of
competing consolidators should minimize these inherent latencies.\608\
---------------------------------------------------------------------------

    \608\ Some have argued that speed-based competition in modern
markets--in particular, the speed advantages of high-frequency
traders and practices such as ``latency arbitrage''-- impose costs
on investors and other market participants. See, e.g., Matteo
Aquilina, et al., Quantifying the High-Frequency Trading ``Arms
Race'': A Simple New Methodology and Estimates, Financial Conduct
Authority (Jan. 2020), available at https://www.fca.org.uk/publication/occasional-papers/occasional-paper-50.pdf?mod=article_inline. But see Bartlett and McCrary, supra note
418. As discussed above, the Commission preliminarily believes that
the proposed decentralized consolidation model would reduce latency
in the distribution of proposed consolidated market data and speed-
based information asymmetries between market participants. See supra
Section IV.B.
---------------------------------------------------------------------------

    The Commission has not proposed a separate registration requirement
for self-aggregators, nor has it proposed to impose the obligations of
competing consolidators on self-aggregators. Because self-aggregators
will be broker-dealers who are subject to broker-dealer registration
requirements, the Commission preliminarily believes that imposing an
additional registration requirement and the competing consolidator
obligations on self-aggregators would be unnecessary and could result
in undue costs and burdens. Further, self-aggregators would be required
to calculate and generate proposed consolidated market data, or a
component of proposed consolidated market data, to the extent that such
information is necessary for the self-aggregator to comply with
applicable regulatory requirements. For example, to the extent that a
self-aggregator's activities require that self-aggregator to generate
the NBBO, the self-aggregator would be required to do so consistent
with proposed Rule 600(b)(50). Any self-aggregator that disseminates to
any person--including to an affiliate or subsidiary of the self-
aggregator--or makes public the proposed consolidated market data, or
any subset of the proposed consolidated market data, would be required
to register as a competing consolidator.\609\
---------------------------------------------------------------------------

    \609\ A self-aggregator that provides a software product to
other broker-dealers for purposes of allowing such other broker-
dealers to self-aggregate SRO data to generate proposed consolidated
market data within such other broker-dealers' facilities would not
be a competing consolidator because the self-aggregator itself would
not be generating consolidated market data for dissemination to such
broker-dealers. However, if an entity uses its own software product
to aggregate SRO data to generate proposed consolidated market data
within the self-aggregator's facilities and thereafter redistributes
or disseminates proposed consolidated market data to other broker-
dealers or market participants, such entity would be a competing
consolidator because it would be generating and disseminating
consolidated market data to others.
---------------------------------------------------------------------------

    The Commission requests comment on the proposed amendment to Rule
600(b)(82) to introduce a definition of ``self-aggregator.'' In
particular, the Commission solicits comment on the following:
    127. Is the definition of self-aggregator as ``a broker or dealer
that receives information with respect to quotations for and
transactions in NMS stocks, including all information necessary to
generate consolidated market data, and generates consolidated market
data solely for internal use'' too broad or narrow? Should other
entities be included in the definition? Please identify such entities
and explain.
    128. Are the distinctions between self-aggregators and competing
consolidators sufficiently clear? Should any additional clarification
be provided to fully distinguish between a vendor that provides self-
aggregation services to multiple broker-dealers and competing
consolidators that provide aggregated data to multiple broker-dealers?
If so, please describe what additional clarification should be
provided.
    129. Should self-aggregators be subject to a registration
requirement? Why or why not?
    130. Self-aggregators may have a minor latency advantage over
competing consolidators. Please provide comment on this potential
latency advantage. Would the latency advantage be material? Are there
methods to neutralize any latency advantage between self-aggregators
and competing consolidators? If so, should they be instituted?
    131. Should self-aggregators be permitted to disseminate proposed
consolidated market data to their affiliates and subsidiaries without
being required to register as a competing consolidator? Why or why not?
Does the restriction on not providing consolidated market data or a
subset thereof to customers or affiliates reflect a significant
departure from current practices? Please explain.
    132. Should any market participants aside from broker-dealers be
included in the proposed definition of self-aggregator? Please explain.
4. Amendment to the Effective National Market System Plan(s) for NMS
Stocks
    An integral part of the national market system is the use of NMS
plans. Section 11A(a)(3)(B) of the Exchange Act reflects their
importance by providing the Commission the authority to require the
SROs, by order, ``to act jointly . . . in planning, developing,
operating, or

regulating a national market system (or a subsystem thereof).'' The
Equity Data Plans, which are the effective national market system plans
for NMS stocks,\610\ historically have played an important role in
developing, operating, and governing the national market system.\611\
The proposed decentralized consolidation model would fundamentally
change the national market system and the role of the Equity Data
Plans.\612\ Under the decentralized consolidation model, the effective
national market system plan(s) for NMS stocks, would continue to play
an important but modified role in the national market system.\613\
Therefore, the Commission is proposing in Rule 614(e) that an amendment
to the effective national market system plan(s) be filed with the
Commission to conform the plan(s) to the decentralized consolidation
model, to address the application of timestamps by the SROs, to require
annual assessments of competing consolidators' performance, and to
develop a list of the primary listing market for each NMS stock, as
discussed below. Proposed Rule 614(e) would require the participants to
the effective national market system plan(s) for NMS stocks to submit
an amendment pursuant to Rule 608 to conform the plan(s) to the
proposed decentralized consolidation model within 60 calendar days from
the effective date of Rule 614.
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    \610\ See Proposed Governance Order, supra note 8.
    \611\ See supra Section II.A.
    \612\ Id.
    \613\ Pursuant to the proposed amendments to Rule 603(b),
proposed consolidated market data would be collected, consolidated,
and disseminated pursuant to an effective national market system
plan.
---------------------------------------------------------------------------

    As discussed above, today, the Equity Data Plans operate the
exclusive SIPs for the collection, consolidation, and dissemination of
SIP data.\614\ In the decentralized consolidation model, the effective
national market system plan(s) for NMS stocks would no longer be
responsible for collecting, consolidating, and disseminating
consolidated market data and would no longer operate an exclusive
SIP.\615\ Instead, the participants of the effective national market
system plan(s) for NMS stocks would develop and file with the
Commission the fees for SRO data content required to be made available
by each SRO to competing consolidators and self-aggregators for the
creation of proposed consolidated market data, including fees for SRO
market data products that contain all of the components of proposed
consolidated market data as well as the fees for market data products
that contain only a subset of the components of proposed consolidated
market data.\616\ The effective national market system plan(s) would
also collect fees for the SRO data content used to create the proposed
consolidated market data; \617\ and allocate the revenues among the SRO
participants. The effective national market system plan(s) would also
oversee plan accounts and plan audits for purposes of billing, among
other things.\618\
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    \614\ See supra Section II.A.
    \615\ The Commission preliminarily believes that the operators
of the existing exclusive SIPs may choose to become competing
consolidators. See infra Section IV.B.6.
    \616\ For example, the operating committee of the effective
national market system plan(s) could develop different pricing for a
TOB product that includes only certain SRO data content used to
create proposed consolidated market data. See supra note 316 and
accompanying text. See also NYSE Sharing Data-Driven Insights--Stock
Quotes and Trade Data: One Size Doesn't Fit All (Aug. 22, 2019),
available at https://www.nyse.com/equities-insights#20190822
(proposing to replace the exclusive SIP feeds with three tiered
levels of service, including certain DOB data, based on the needs of
specific types of investors). Nothing in this proposal would prevent
the operating committee of the effective national market system
plan(s) from structuring the sale of data in a similar manner.
    \617\ See supra Section IV.B.1.
    \618\ The effective national market system plan(s) for NMS
stocks would review the performance of competing consolidators. See
infra discussion on proposed Rule 614(e) (1)(iii).
---------------------------------------------------------------------------

    Rule 614(e)(1) would direct the participants to file with the
Commission an amendment to the effective national market system plan(s)
for NMS stocks in order to conform the plan(s) to reflect the proposed
consolidated market data and proposed decentralized consolidation
model. The Commission preliminarily believes that to conform to the
proposed decentralized consolidation model, the effective national
market system plan(s) for NMS stocks would need to be amended to
reflect the fees for the proposed consolidated market data. The
proposed new fees would need to reflect the following: (i) That
proposed consolidated market data includes the content described above,
including depth of book data, auction information, and additional
information on orders of sizes smaller than 100 shares; (ii) that the
effective national market system plan(s) for NMS stocks is no longer
operating an exclusive SIP and is no longer performing aggregation and
other operational functions; and (iii) that the SROs are no longer
responsible for the connectivity and transmission services required for
providing data to the exclusive SIPs from the SROs' data centers since
the exclusive SIPs will no longer be operated by the effective national
market system plan(s) for NMS stocks.\619\ The proposed new fees for
consolidated market data must be fair and reasonable and not unfairly
discriminatory.\620\ The proposed fees must be submitted by the
participants of the effective national market system plan(s) for NMS
stocks pursuant to Rule 608 under the Exchange Act. In addition, to
conform the effective national market system plan(s) for NMS stocks to
the proposed decentralized consolidation model, the amendment to the
plan(s) generally should include a harmonized approach to data billing
protocols, including with respect to any unified multiple
installations, single users (``MISU'') policy.\621\
---------------------------------------------------------------------------

    \619\ As noted above, pursuant to proposed Rule 603(b), each SRO
must provide its NMS information, including all data necessary to
generate proposed consolidated market data, to all competing
consolidators and self-aggregators in the same manner and using the
same methods, including all methods of access and the same format,
as such SRO makes available any information to any other person. The
competing consolidators and self-aggregators will be responsible for
establishing the connectivity and transmission services they use to
connect to the SROs.
    \620\ See Rule 603(a) of Regulation NMS, 17 CFR 242.603(a).
    \621\ MISU policies seek to ensure that a single device fee is
applied to a data user that receives consolidated market data on
multiple display devices. See, e.g., CTA, CTA Multiple Installations
for Single Users (MISU) Policy (Apr. 2016), available at https://www.ctaplan.com/publicdocs/ctaplan/notifications/trader-update/Policy%20-%20MISU%20with%20FAQ.pdf. MISU policies would need to be
conformed in the proposed decentralized consolidation model to
reflect that consolidated market data users may seek to receive
through more than one competing consolidator and/or access through
multiple devices.
---------------------------------------------------------------------------

    Proposed Rule 614(e)(1)(ii) would require the participants to file
a proposed amendment to the effective national market system plan(s)
for NMS stocks to address the application of timestamps by the SRO
participants on proposed consolidated market data, including the time
the proposed consolidated market data was generated by the SRO
participant and the time the SRO participant made the proposed
consolidated market data available to competing consolidators and self-
aggregators. Timestamping should provide incentives for the SROs to
generate and disseminate proposed consolidated market data as quickly
as possible. Further, the Commission preliminarily believes that the
application of timestamps will be an important part of market
participants' ability to measure latency and to seek to ensure accurate
sequencing of data in the new national market system, and therefore the
application of timestamps should be consistent and reliable.\622\

The Commission understands that the SROs currently submit timestamped
data under the SIP plans \623\ and the National Market System Plan
Governing the Consolidated Audit Trail (``CAT NMS Plan'').\624\
---------------------------------------------------------------------------

    \622\ SRO timestamps would also assist market participants in
their ability to assess latencies in the provision of proposed
consolidated market data. Under proposed Rule 614(d)(3), competing
consolidators would have to make available consolidated market data
that includes timestamps assigned by the SROs as well as competing
consolidators. See supra Section IV.B.2(e)(ii) and the discussion of
proposed Rule 614(d)(4).
    \623\ See, e.g., CTA Plan, supra note 13, at Section VI.(c);
Nasdaq UTP Plan, supra note 13, at Section VIII.
    \624\ See CAT NMS Plan at Sections 6.3(d), 6.8. As required by
Rule 613, the CAT NMS Plan was filed with the Commission by the
national securities exchanges and national securities associations,
who include BATS Exchange, Inc. (n/k/a Cboe BZX Exchange, Inc.),
BATS-Y Exchange, Inc. (n/k/a Cboe BYX Exchange, Inc.), BOX Exchange
LLC, C2 Options Exchange, Incorporated (n/k/a Cboe C2 Exchange,
Inc.), Chicago Board Options Exchange, Incorporated (n/k/a Cboe
Exchange, Inc.), Chicago Stock Exchange, Inc. (n/k/a NYSE Chicago,
Inc.), EDGA Exchange, Inc. (n/k/a Cboe EDGA Exchange, Inc.), EDGX
Exchange, Inc. (n/k/a Cboe EDGX Exchange, Inc.), Financial Industry
Regulatory Authority, Inc. (``FINRA''), International Securities
Exchange, LLC (n/k/a Nasdaq ISE, LLC), ISE Gemini, LLC (n/k/a Nasdaq
GEMX, LLC), Miami International Securities Exchange LLC, NASDAQ OMX
BX, Inc. (n/k/a Nasdaq BX, Inc.), NASDAQ OMX PHLX LLC (n/k/a Nasdaq
PHLX LLC), The Nasdaq Stock Market LLC, National Stock Exchange,
Inc. (n/k/a NYSE National, Inc.), New York Stock Exchange LLC, NYSE
MKT LLC, and NYSE Arca, Inc. See 17 CFR 242.613; Securities Exchange
Act Release No. 78318 (Nov. 15, 2016), 81 FR 84696, (Nov. 23, 2016)
(``CAT NMS Plan Approval Order''). The CAT NMS Plan is Exhibit A to
the CAT NMS Plan Approval Order. See CAT NMS Plan Approval Order, at
84943-85034. In approving the CAT NMS Plan, the Commission added ISE
Mercury, LLC (n/k/a Nasdaq MRX, LLC) and Investors' Exchange LLC as
Participants to the CAT NMS Plan. See id. at 84728. On January 30,
2017 and March 1, 2019, the Commission noticed for immediate
effectiveness amendments to the CAT NMS Plan to add MIAX PEARL, LLC
and MIAX Emerald, LLC, respectively, as Participants. See Securities
Exchange Act Release Nos. 79898 (Jan. 30, 2017), 82 FR 9250 (Feb. 3,
2017), and 85230 (Mar. 1, 2019), 84 FR 8356 (Mar. 7, 2019). On
November 27, 2019, the Commission noticed for immediate
effectiveness amendments to the CAT NMS Plan to add Long-Term Stock
Exchange, Inc. as a Participant. See Securities Exchange Act Release
No. 87595 (Nov. 22, 2019), 84 FR 65447 (Nov. 27, 2019). The CAT NMS
Plan functions as the limited liability company agreement of the
jointly owned limited liability company formed under Delaware state
law through which the Participants conduct the activities of the CAT
(the ``Company''). Each Participant is a member of the Company and
jointly owns the Company on an equal basis. The Participants
submitted to the Commission a proposed amendment to the CAT NMS Plan
on August 29, 2019, which they designated as effective on filing.
Under the amendment, the limited liability company agreement of a
new limited liability company named Consolidated Audit Trail, LLC
serves as the CAT NMS Plan, replacing in its entirety the CAT NMS
Plan. See Securities Exchange Act Release No. 87149 (Sept. 27,
2019), 84 FR 52905 (Oct. 3, 2019).
---------------------------------------------------------------------------

    Proposed Rule 614(e)(1)(iii) would require the participants to file
a proposed amendment to the effective national market system plan(s)
for NMS stocks to reflect that the participants would need to conduct
an annual assessment of the overall performance of competing
consolidators, including speed, reliability, and cost of data provision
and provide the Commission with a report of such assessment on an
annual basis. As noted above, the Equity Data Plans play an important
role in governing the operation of the national market system. The
Commission preliminarily believes that the effective national market
system plan(s) for NMS stocks should continue in this important role by
monitoring the overall performance of competing consolidators to seek
to ensure that the decentralized consolidation model is operating
soundly. To aid the Commission's monitoring, the Commission is
requiring the effective national market system plan(s) for NMS stocks
to provide assessments in key factors of competing consolidators,
including: Speed of the competing consolidators in receiving,
calculating, and disseminating proposed consolidated market data; the
reliability of the transmission of proposed consolidated market data;
and a detailed cost analysis of the provision of proposed consolidated
market data. The effective national market system plan(s) would base
their assessments on publicly available information about the competing
consolidators, including the information that each competing
consolidator would be required to make available under proposed Rule
614.
    Finally, proposed Rule 614(e)(1)(iv) would require the participants
to file an amendment to the effective national market system plan(s)
for NMS stocks to include a list that identifies the primary listing
exchange for each NMS stock. As discussed above, primary listing
exchanges will be required to collect, calculate, and provide the data
included in the proposed definition of ``regulatory data'' to competing
consolidators and self-aggregators. Moreover, the Commission is
proposing to define ``primary listing exchange'' in proposed Rule
600(b)(67) as ``for each NMS stock, the national securities exchange
identified as the primary listing exchange in the effective national
market system plan or plans required under Sec.  242.603(b).'' The
effective national market system plan(s) for NMS stocks must
accordingly be amended to include this list so that the primary listing
exchange for each NMS stock--and the responsibilities regarding the
collection, calculation, and provision of regulatory data--are clear.
The Commission preliminarily believes that information regarding the
primary listing exchange for each NMS stock is readily accessible and
that the operating committee of the effective national market system
plan(s) for NMS stock, which will have representation from each primary
listing exchange, is well-situated to include such a list in a plan
amendment.
    The Commission requests comment on proposed Rule 614(e). In
particular, the Commission solicits comment on the following:
    133. Do the proposed amendments to the effective national market
system plan(s) for NMS stocks reflect an appropriate role for the NMS
plan(s) under the proposed decentralized consolidation model?
    134. Should the rule include other provisions that should be
included in an amendment to the effective national market system
plan(s) for NMS stocks? Please describe.
    135. Should the rule require an amendment to the effective national
market system plan(s) for NMS stocks to include plan provisions related
to the development by competing consolidators of non-core market data
products (i.e., a full depth of book product)? Why or why not?
    136. Should the rule require an amendment to the effective national
market system plan(s) to require the operating committee of such
plan(s) to develop latency statistics based on the SRO timestamps and
make them publicly available?
    137. Do commenters believe that the proposed timestamps are
sufficiently comprehensive? Should the Commission require other
timestamps to be added by the SROs, or should any of the proposed
requirements for the timestamps be pared down or removed? Please
explain.
    138. Should the rule require an amendment to the effective national
market system plan(s) for NMS stocks to specify a method for
synchronizing clocks on the various systems and networks utilized in
the provision of proposed consolidated market data? If yes, what is the
appropriate method or protocol (e.g., Precision Time Protocol vs.
Network Time Protocol)? Or should the requirement for clock
synchronization be performance based (i.e., accurate to less than one
microsecond)? If so, what is the appropriate standard for maximum
allowable clock drift? Please explain. Should the SROs be required to
publish clock drift statistics?
    139. Do commenters believe that there are other measures to assess
the performance of competing consolidators that should be included in
the annual report? Please explain.

    140. Do commenters believe that a portion of the assessment or the
full assessment should be made public? Do commenters believe that a
portion of the annual report or the full annual report to the
Commission should be made public? Why or why not? Please explain.
    141. Do commenters believe that the operating committee for the
effective national market system plan(s) for NMS stocks should conduct
an assessment and provide the Commission with a report more frequently
than annually, or at all? Please describe any alternative frequency and
the rationale.
    142. Do commenters believe that a similar report should be
generated for self-aggregators? If so, please explain. Should self-
aggregators be required to publish any performance statistics publicly
or to the Commission?
    143. Do commenters believe that the effective national market
system plan(s) for NMS stocks should be amended to include a list that
identifies the primary listing exchange for each NMS stock? Please
explain. Are there alternative ways to ensure that the primary listing
exchange for each NMS stock is clearly identified? Please explain.
    144. Do commenters believe that the effective national market
system plan(s) for NMS stocks should include fees for different types
of proposed consolidated market data products, such as products that
contain only a subset of proposed core data elements (e.g., a TOB
product)? If so, what products should be included?
5. Effects on the National Market System Plan Governing the
Consolidated Audit Trail
    The CAT NMS Plan requires the Central Repository \625\ to ``collect
(from a SIP \626\ or pursuant to an NMS Plan \627\) and retain on a
current and continuing basis . . . all data, including the following
(collectively, `SIP Data').'' \628\ The Commission preliminarily
believes that this provision of the CAT NMS Plan will be affected by
the proposed decentralized consolidation model and the proposed
definition of consolidated market data. Rule 603(b), as proposed to be
amended, would require the national securities exchanges and
associations to distribute consolidated market data ``pursuant to one
or more effective national market system plans.'' Under Section
6.5(a)(ii) of the CAT NMS Plan, the Central Repository must collect and
retain ``all data'' from ``a SIP or pursuant to an NMS Plan,'' so the
Central Repository would be required to collect and retain consolidated
market data.
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    \625\ The CAT NMS Plan defines ``Central Repository'' as ``the
repository responsible for the receipt, consolidation, and retention
of all information reported to the CAT pursuant to SEC Rule 613 and
this Agreement.'' CAT NMS Plan, supra note 624, at Section 1.1.
    \626\ The CAT NMS Plan defines ``Securities Information
Processor'' or ``SIP'' as having ``the same meaning provided in
Section 3(a)(22)(A) of the Exchange Act.'' Id. at Section 1.1.
    \627\ The CAT NMS Plan defines ``NMS Plan'' as having ``the same
meaning as `National Market System Plan' provided in SEC Rule
613(a)(1) and SEC Rule 600(b)(43).'' Id. at Section 1.1.
    \628\ Id. at Section 6.5(a)(ii). Section 6.5(a)(ii) specifically
enumerates the following ``SIP Data'' elements: ``(A) Information,
including the size and quote condition, on quotes including the
National Best Bid and National Best Offer for each NMS Security; (B)
Last Sale Reports and transaction reports reported pursuant to an
effective transaction reporting plan filed with the SEC pursuant to,
and meeting the requirements of, SEC Rules 601 and 608; (C) trading
halts, Limit Up/Limit Down price bands, and Limit Up/Limit Down
indicators; and (D) summary data or reports described in the
specifications for each of the SIPs and disseminated by the
respective SIP.'' Id.
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    Because proposed consolidated market data would include information
beyond the data that is currently disseminated by the exclusive SIPs,
such as smaller-sized orders in higher-priced stocks pursuant to the
proposed definition of round lot, proposed depth of book data, and
proposed auction information, the scope of the consolidated data
collected and retained by the CAT Central Repository would be expanded.
In addition, the Central Repository may have to obtain the data from a
different source. The Commission preliminarily believes that having the
Central Repository collect an expanded set of data from a different
source and retain this data in the Central Repository are appropriate
to further the objectives of CAT by enabling regulators to use the
expanded set of data ``solely for surveillance and regulatory
purposes.'' \629\
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    \629\ See CAT NMS Plan, supra note 624, at Section 6.5(g); infra
Section VI.C.4(c).
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    The Commission requests comment on the effects of the proposed
decentralized consolidation model and the proposed definition of
consolidated market data on the CAT. In particular, the Commission
solicits comment on the following:
    145. Do commenters believe that CAT should receive consolidated
market data from one competing consolidator, all competing
consolidators, or some specific subset of competing consolidators?
Please explain.
    146. Do commenters believe the selection by the CAT of a competing
consolidator could have a competitive impact on other competing
consolidators? Please explain.
6. Transition Period
    A transition period would be necessary to implement the
decentralized consolidation model. While SROs would be permitted to
make the data necessary to generate consolidated market data, as
proposed to be defined, available to competing consolidators and self-
aggregators using their existing data feeds, SROs may also choose to
provide this data through new, separate feeds,\630\ which would require
development time. Furthermore, the proposed requirements related to the
provision by SROs of regulatory data to competing consolidators and
self-aggregators would require SROs to make adjustments to their data
collection and processing systems and procedures to integrate the
proposed regulatory data elements into new or existing data feeds.\631\
In addition, firms intending to act as competing consolidators or self-
aggregators will need to register, develop or modify systems, establish
pricing, and make other preparations needed to function as competing
consolidators or self-aggregators. Finally, market participants would
be expected to need some period of time for implementation and testing
of any new data feeds. As these changes are being implemented, market
participants will continue to need a consistent and reliable source of
consolidated market data.
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    \630\ See supra Section IV.B.1.
    \631\ See supra Section III.D.
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    Accordingly, the Commission preliminarily believes that the
existing exclusive SIPs should continue their operations until such
time as the Commission considers and approves an NMS plan amendment
that would effectuate a cessation of their operations as exclusive
SIPs. In considering and approving such an NMS plan amendment, the
Commission preliminarily believes that it would need to consider the
operational readiness of competing consolidators and self-aggregators
to determine whether market participants are fully able to receive
proposed consolidated market data in a manner that is sufficiently
prompt, accurate, and reliable.\632\ The Commission preliminarily
believes that sufficient operational readiness would only be achieved
once consolidated market data generated under the decentralized
consolidation model is demonstrably capable of supporting the various
needs of users of consolidated market data, including needs for visual
display, trading activities, and compliance with

regulatory obligations, such as under Rules 603(c) and Rule 611 under
Regulation NMS and best execution. In determining whether to approve an
NMS plan amendment to effectuate the cessation of the operations of the
existing exclusive SIPs and whether it meets the standards set forth in
Rule 608(b)(2),\633\ the Commission would consider the state of the
market and the general readiness of the competing consolidator
infrastructure. Examples of some of the things that the Commission
could consider include, among other things: The status of registration,
testing, and operational capabilities of multiple competing
consolidators, self-aggregators, and market participants; capabilities
of competing consolidators to provide monthly performance metrics and
other data required to be published pursuant to proposed Rule
614(d)(5)-(6); \634\ and the consolidated market data products offered
by competing consolidators. The Commission preliminarily believes that
consideration of these and other factors should help to ensure that
market participants have effective and continuous access to proposed
consolidated market data and other market data products during the
transition period and prior to the cessation of operations of the
existing exclusive SIPs.
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    \632\ Section 11A(c)(1)(B) of the Exchange Act, 15 U.S.C. 78k-
1(c)(1)(B).
    \633\ See 17 CFR 242.608(b)(2) (providing that the Commission
shall approve an NMS plan amendment ``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 Act.'').
    \634\ See supra Section IV.B.2(b).
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    The Commission anticipates that the operators of the existing
exclusive SIPs may choose to become competing consolidators and that
they too may need to make additional investments and operational
changes during this transition period to provide a competitive
competing consolidator service.\635\ The Commission preliminarily
believes that the existing exclusive SIPs should have the ability to
pursue such development while continuing concurrent operations of
existing SIPs. Given their experience operating the exclusive SIPs, the
exclusive SIP operators would likely be able to enter the competing
consolidator business from a competitively strong position relative to
other potential competing consolidators.
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    \635\ The exclusive SIPs may choose to utilize existing
proprietary data feeds for the provision of consolidated market
data. They may also choose to develop a business to support self-
aggregation by broker-dealers.
---------------------------------------------------------------------------

    The Commission requests comment on the proposed transition period
to implement the decentralized consolidation model. In particular, the
Commission solicits comment on the following:
    147. What period of time should be expected for SROs to make any
changes necessary to provide the data necessary to generate proposed
consolidated market data to competing consolidators and self-
aggregators?
    148. What period of time should be expected for broker-dealers to
make any changes necessary, including testing, to utilize the new data
feeds in a manner that is not disruptive to their trading practices and
their ability to meet their regulatory obligations?
    149. What other factors should be taken into consideration to allow
for a smooth transition from a centralized, exclusive SIP model to a
competitive, decentralized consolidation model?
    150. What should the Commission take into consideration in
determining whether the availability of proposed consolidated market
data from competing consolidators, or any other aspect of the
development or implementation of the proposed decentralized
consolidation model, is sufficient to allow for the cessation of the
existing exclusive SIPs?
    151. Should the Commission require the operation of a certain
number of competing consolidators before allowing the exclusive SIPs to
cease operations? Why or why not? If so, how many competing
consolidators should be operational before allowing exclusive SIPs to
cease operations? Please explain.
    152. How long do commenters think such an implementation period
should be? Please explain your answer.

C. Alternatives to the Centralized Consolidation Model

    Several alternative approaches to the centralized consolidation
model were suggested by Roundtable respondents and separately by
several exchanges. These suggestions include the distributed SIP model,
a single SIP for all exchange-listed securities, and a low-latency
dedicated connection to existing exclusive SIP feeds.
1. Distributed SIP Alternative
    A distributed SIP alternative has been suggested as one possible
means to reduce geographic latency.\636\ Specifically, under a
distributed SIP alternative, each exclusive SIP would place an
additional processor in other major data centers, where the additional
processor would separately aggregate and disseminate consolidated
market data for its respective tape. The SROs would submit their
quotations and trade information directly to each instance of the
exclusive SIP in each data center, and each exclusive SIP instance
would consolidate and disseminate its respective consolidated market
data feeds to subscribers at those data centers, thereby eliminating
geographic latency. Under the distributed SIP alternative, consolidated
market data would not have to travel from an exchange at one location
to an exclusive SIP at a second location for consolidation and
dissemination prior to traveling yet again to a subscriber that may be
at a third location.\637\
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    \636\ See supra notes 492-493 and accompanying text; Cboe
Report, supra note 186, at 3-4 (recommending the creation of
distributed SIPs in different geographic locations).
    \637\ One commenter noted that the distributed SIP alternative
could address the issue of geographic latency. See SIFMA Letter II
at 3.
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(a) Comments and Roundtable Discussion
    The distributed SIP model was suggested and discussed at the
Roundtable by certain panelists and commenters. One panelist who
presented on the distributed SIP model argued that it would be the
least burdensome approach for the industry to reduce delays,\638\
explaining that firms could consume data under the current structure
without having to make any changes if they did not have sub-millisecond
latency concerns, while those firms for which geographic latency is
critical could choose to consume data at the nearest SIP instance.\639\
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    \638\ See Roundtable Day Two Transcript at 17 (Michael
Blaugrund, NYSE).
    \639\ See Roundtable Day Two Transcript at 18 (Michael
Blaugrund, NYSE). This panelist also believed that the distributed
SIP model would not require changes to Rule 603(b) of Regulation
NMS, which requires the dissemination of consolidated information
for an individual NMS stock through a single plan processor. The
panelist stated that the existing SIPs would remain under the
distributed SIP model, only with additional processors. See
Roundtable Day Two Transcript at 19-20 (Michael Blaugrund, NYSE).
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    Two other panelists expressed interest in considering the
distributed SIP model.\640\ One panelist said that the

distributed SIP model could address the latencies of the current
centralized consolidation model.\641\ Another panelist suggested that a
distributed SIP model with enhanced content, such as auction imbalance
and depth of book information, would be useful \642\ and that even a
fiber optics connection could be sufficient for a distributed SIP model
since the consolidated market data would no longer have to travel
throughout the various data centers for collection and
distribution.\643\
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    \640\ See, e.g., Roundtable Day One Transcript at 227-228 (Chris
Issacson, Cboe) (``[W]e're open to discussion about distributed
SIPs.''); at 98-99 (Stacey Cunningham, NYSE) (``. . . there is
debate the NYSE brought to the SIP Committee a long time ago to talk
about the nature of a distributed SIP and that is something we
should explore.''); Roundtable Day Two Transcript at 17 (Michael
Blaugrund, NYSE) (``. . . we think that a distributed SIP
implementation of the existing processors would be the simplest,
least costly approach for the industry to minimize delays when
consolidated data and single market proprietary data are received in
distant data centers.'').
    \641\ See Roundtable Day One Transcript at 231-232 (Vlad
Khandros, UBS).
    \642\ See Roundtable Day One Transcript at 225 (Ronan Ryan,
IEX).
    \643\ See Roundtable Day One Transcript at 229-230 (Ronan Ryan,
IEX). This is a reference to the understanding that a distributed
SIP model would solve for geographic latency.
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    Three panelists were skeptical about the value of the distributed
SIP model. One panelist described the distributed SIP model as better
than the current SIP system, ``but just less worse than direct feeds,''
\644\ and said what is desired instead is an exclusive SIP that is as
fast as the direct feeds.\645\ Another panelist said that, with the
distributed SIP model, determining the appropriate instance of the SIP
locations would be complicated.\646\
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    \644\ See Roundtable Day Two Transcript at 27 (Adam Nunes,
Hudson River Trading).
    \645\ Id.
    \646\ See Roundtable Day One Transcript at 151-152 (Oliver
Albers, Nasdaq).
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    One commenter submitted two comment letters that discussed the
distributed SIP model. One letter urged the Commission to do a cost
benefit analysis of efforts to decentralize the SIP architecture and
recommended introducing additional instances of existing technology as
the best approach to reducing geographic latency.\647\ The other letter
noted questions about which SIP location would be responsible for
regulatory messages, such as for LULD and MWCBs, and whether the costs
for the industry to connect to this infrastructure would outweigh the
benefits.\648\
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    \647\ See Blaugrund Letter at 4. The Blaugrund Letter was
submitted on behalf of NYSE.
    \648\ See NYSE Group Letter at 10.
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    Another commenter stated that the distributed SIP alternative would
introduce new and expensive operational complexities, legal and
regulatory questions, and possible unintended consequences. This
commenter also questioned whether the distributed SIP alternative would