[Federal Register: November 3, 2008 (Volume 73, Number 213)]
[Notices]
[Page 65417-65427]
[DOCID:fr03no08-100]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58863; File No. S7-24-89]

Joint Industry Plan; Notice of Filing and Immediate Effectiveness
of Amendment No. 20 to the Joint Self-Regulatory Organization Plan
Governing the Collection, Consolidation and Dissemination of Quotation
and Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privileges Basis, Submitted by the
American Stock Exchange LLC, the Boston Stock Exchange, Inc., the
Chicago Stock Exchange, Inc., the Chicago Board Options Exchange,
Incorporated, the International Securities Exchange, LLC., the
Financial Industry Regulatory Authority, Inc., the National Stock
Exchange, Inc., The NASDAQ Stock Market LLC, the New York Stock
Exchange LLC, NYSE Arca, Inc., and the NASDAQ OMX PHLX, Inc.

October 27, 2008.

I. Introduction and Description

    Pursuant to Rule 608 of the Securities Exchange Act of 1934 (the
``Act'') \1\ notice is hereby given that on October 1, 2008, the
operating committee (``Operating Committee'' or ``Committee'') \2\ of
the Joint Self-Regulatory Organization Plan Governing the Collection,
Consolidation, and Dissemination of Quotation and Transaction
Information for Nasdaq-Listed Securities Traded on Exchanges on an
Unlisted Trading Privilege Basis (``Nasdaq/UTP Plan'' or ``Plan'')
filed with the Securities and Exchange Commission (``Commission'')
amendments to the Plan. These amendments represent Amendment 20 to the
Plan and reflect: Modifying the name of the National Association of
Securities Dealers and the Philadelphia Stock Exchange; adding BATS
Exchange as a new Plan Participant; modifying Exhibit 1 to reflect
changes to the Plan by Regulation NMS; and making ministerial changes
to the text of the Plan. Amendment 20 was unanimously approved by the
Committee on September 4, 2008.\3\ The Commission is publishing this
notice of filing and immediate effectiveness to solicit comments from
interested persons on Amendment No. 20.
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    \1\ 17 CFR 242.608.
    \2\ The Plan Participants (collectively, ``Participants'') are:
the American Stock Exchange LLC (``Amex''); the Boston Stock
Exchange, Inc. (``BSE''); the Chicago Stock Exchange, Incorporated
(``CHX''); the Chicago Board Options Exchange, Inc. (``CBOE''); the
International Securities Exchange, LLC (``ISE''); the Financial
Industry Regulatory Authority, Inc. (``FINRA''); the National Stock
Exchange, Inc. (``NSX''); The NASDAQ Stock Market LLC (``Nasdaq'');
NASDAQ OMX PHLX, Inc. (``NASDAQ OMX PHLX''); the New York Stock
Exchange, LLC (``NYSE'') and NYSE Arca, Inc. (``NYSE Arca'').
    \3\ See letter from Bridget F. Spaulding, Chairman, OTC/UTP
Operating Committee, to Florence E. Harmon, Acting Secretary,
Commission, dated September 8, 2008.
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II. Background

    The Plan governs the collection, processing, and dissemination on a
consolidated basis of quotation information and transaction reports in
Eligible Securities \4\ for each of its Participants. This consolidated
information informs investors of the current quotation and recent trade
prices of Nasdaq securities. It enables investors to ascertain from one
data source the current prices in all the markets trading Nasdaq
securities. The Plan serves as the required transaction reporting plan
for its Participants, which is a prerequisite for their trading
Eligible Securities.\5\
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    \4\ The Plan defines ``Eligible Securities'' as any Nasdaq
Global Market or Nasdaq Capital Market security, as defined in NASD
Rule 4200.
    \5\ See Securities Exchange Act Release No. 55647 (April 19,
2007) 72 FR 20891 (April 26, 2007).
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III. Description and Purpose of the Amendment 6
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    \6\ The complete text of the Plan, as amended by Amendment No.
20, is attached as Exhibit A.
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    The following is a summary of the changes to the Plan prepared by
the Participants:
    (i) Section I.A. shall be amended to add the BATS Exchange, Inc. as
a new Plan Participant, to change the name of the National Association
of Securities Dealers to the Financial Industry Regulatory Authority,
Inc., and to change the name of the Philadelphia Stock Exchange to
Nasdaq OMX PHLX, Inc.
    (ii) Section III shall be amended to reflect the name change from
the National Association of Securities Dealers (``NASD'') to the
Financial Industry Regulatory Authority, Inc. (``FINRA'').
    (iii) Section IV.A shall be modified to reflect the participation
of Advisory Committee members and to clarify that only Participants and
their representatives as well as Commission staff may participate in
Executive Sessions of the Operating Committee.
    (iv) Section IV.C shall be modified to reflect the NASD name change
to FINRA.
    (v) Section VI.B shall be modified to eliminate language that is no
longer relevant.
    (vi) Section VI.C shall be modified to reflect the NASD name change
to FINRA.
    (vii) Section VIII. shall be modified to add the BATS Exchange as a
new Participant, reflect the NASD name change as FINRA, and to modify
the Philadelphia Stock Exchange name to Nasdaq OMX PHLX.
    (viii) Section IX. shall be modified to eliminate vague language
regarding market access and to reflect the NASD name change to FINRA.
    (ix) Section X. shall be modified to clarify the language and make
ministerial changes to the text.
    (x) Section XI.D. shall be modified to reflect the NASD name change
to FINRA.
    (xi) Section XVIII.A shall be modified to correct a grammatical
error.
    (xii) The signature block shall be modified to add the BATS
Exchange as a new Participant, to reflect the NASD name change as
FINRA, and to modify the Philadelphia Stock Exchange name to Nasdaq OMX
PHLX.
    (xiii) Exhibit 1 shall be modified to reflect the NASD name change
to FINRA and to be updated to reflect the Regulation NMS revenue
formula.

IV. Date of Effectiveness of the Amendment

    The changes set forth in Amendment No. 20 have been designated by
the Participants as concerned solely with the administration of the
plan or involving solely technical or ministerial matters, and thus are
being put into effect upon filing with the Commission pursuant to Rules
608(b)(3)(ii) and 608(b)(3)(iii).\7\ At any time within 60 days of the
filing of any such amendment, the Commission may summarily abrogate the
amendment and require that the amendment be refiled in accordance with
paragraph (a)(1) of Rule 608 under the Act \8\ and reviewed in
accordance with paragraph (b)(2) of Rule 608 under the Act,\9\ if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or the
maintenance of fair and orderly markets, to remove impediments to, and
perfect mechanisms of, a national market system or otherwise in
furtherance of the purposes of the Act.\10\
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    \7\ 17 CFR 242.608(b)(3)(ii) and (b)(3)(iii).
    \8\ 17 CFR 242.608(a)(1).
    \9\ 17 CFR 242.608(b)(2).
    \10\ 17 CFR 242.608(b)(3)(iii).
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V. Solicitation of Comments

    The Commission seeks general comments on Amendment No. 20.
Interested persons are invited to submit

written data, views, and arguments concerning the foregoing, including
whether the proposal is consistent with the Act. Comments may be
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number S7-24-89 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number S7-24-89. This file number
should be included on the subject line if e-mail is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all written statements with respect to the
proposed Plan amendment that are filed with the Commission, and all
written communications relating to the proposed Plan amendment between
the Commission and any person, other than those that may be withheld
from the public in accordance with the provisions of 5 U.S.C. 552, will
be available for inspection and copying in the Commission's Public
Reference Room on official business days between the hours of 10 a.m.
and 3 p.m. Copies of the filing also will be available for inspection
and copying at the Office of the Secretary of the Committee, currently
located at NYSE Arca, Inc., 100 South Wacker Drive, Suite 1800,
Chicago, IL 60606. All comments received will be posted without change;
the Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number S7-24-
89 and should be submitted on or before November 24, 2008.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(27).
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Florence E. Harmon,
Acting Secretary.

Exhibit A

Nasdaq UTP Plan

Amended and Restated Plan

Amendment No. 20

    The undersigned registered national securities association and
national securities exchanges (collectively referred to as the
``Participants''), have jointly developed and hereby enter into this
Nasdaq Unlisted Trading Privileges Plan (``Nasdaq UTP Plan'' or
``Plan'').

I. Participants.

    The Participants include the following:

A. Participants

    1. American Stock Exchange LLC., 86 Trinity Place, New York, New
York 10006.
    2. BATS Exchange, Inc., 4151 North Mulberry Drive, Suite 275,
Kansas City, Missouri 64116.
    3. Boston Stock Exchange, 100 Franklin Street, Boston,
Massachusetts 02110.
    4. Chicago Stock Exchange, 440 South LaSalle Street, Chicago,
Illinois 60605.
    5. Chicago Board Options Exchange, Inc., 400 South LaSalle Street,
26th Floor, Chicago, Illinois 60605.
    6. International Securities Exchange, LLC., 60 Broad Street, New
York, New York 10004.
    7. Financial Industry Regulatory Authority, Inc., 1735 K Street,
NW., Washington, DC 20006.
    8. National Stock Exchange, Inc., 440 South LaSalle Street, 26th
Floor, Chicago, Illinois 60605.
    9. New York Stock Exchange LLC., 11 Wall Street, New York, New York
10005.
    10. NYSE Arca, Inc., 100 South Wacker Drive, Suite 1800, Chicago,
IL 60606.
    11. NASDAQ OMX PHLX, Inc., 1900 Market Street, Philadelphia,
Pennsylvania 19103.
    12. The NASDAQ Stock Market LLC., 1 Liberty Plaza, 165 Broadway,
New York, NY 10006.

B. Additional Participants

    Any other national securities association or national securities
exchange, in whose market Eligible Securities become traded, may become
a Participant, provided that said organization executes a copy of this
Plan and pays its share of development costs as specified in section
XIII.

II. Purpose of Plan

    The purpose of this Plan is to provide for the collection,
consolidation and dissemination of Quotation Information and
Transaction Reports in Eligible Securities from the Participants in a
manner consistent with the Exchange Act.
    It is expressly understood that each Participant shall be
responsible for the collection of Quotation Information and Transaction
Reports within its market and that nothing in this Plan shall be deemed
to govern or apply to the manner in which each Participant does so.

III. Definitions

    A. ``Current'' means, with respect to Transaction Reports or
Quotation Information, such Transaction Reports or Quotation
Information during the fifteen (15) minute period immediately following
the initial transmission thereof by the Processor.
    B. ``Eligible Security'' means any Nasdaq Global Market or Nasdaq
Capital Market security, as defined in NASDAQ Rule 4200. Eligible
Securities under this Nasdaq UTP Plan shall not include any security
that is defined as an ``Eligible Security'' within Section VII of the
Consolidated Tape Association Plan.
    A security shall cease to be an Eligible Security for purposes of
this Plan if: (i) the security does not substantially meet the
requirements from time to time in effect for continued listing on
Nasdaq, and thus is suspended from trading; or (ii) the security has
been suspended from trading because the issuer thereof is in
liquidation, bankruptcy or other similar type proceedings. The
determination as to whether a security substantially meets the criteria
of the definition of Eligible Security shall be made by the exchange on
which such security is listed provided, however, that if such security
is listed on more than one exchange, then such determination shall be
made by the exchange on which the greatest number of the transactions
in such security were effected during the previous twelve-month period.
    C. ``Commission'' and ``SEC'' shall mean the U.S. Securities and
Exchange Commission.
    D. ``Exchange Act'' means the Securities Exchange Act of 1934.
    E. ``Market'' shall mean (i) when used with respect to Quotation
Information, FINRA in the case of a FINRA Participant, or the
Participant on whose floor or through whose facilities the quotation
was disseminated; and (ii)

when used with respect to Transaction Reports, the Participant through
whose facilities the transaction took place or is reported, or the
Participant to whose facilities the order was sent for execution.
    F. ``FINRA'' means the Financial Industry Regulatory Authority,
Inc.
    G. ``FINRA Participant'' means a FINRA member that is registered as
a market maker or an electronic communications network or otherwise
utilizes the facilities of FINRA pursuant to applicable FINRA rules.
    H. ``Transaction Reporting System'' means the System provided for
in the Transaction Reporting Plan filed with and approved by the
Commission pursuant to SEC Rule 11Aa3-1, subsequently re-designated as
Rule 601 of Regulation NMS, governing the reporting of transactions in
Nasdaq securities.
    I. ``UTP Quote Data Feed'' means the service that provides
Subscribers with the National Best Bid and Offer quotations, size and
market center identifier, as well as the Best Bid and Offer quotations,
size and market center identifier from each individual Participant in
Eligible Securities and, in the case of FINRA, the FINRA Participant(s)
that constitute FINRA's Best Bid and Offer quotations.
    J. ``Nasdaq System'' means the automated quotation system operated
by Nasdaq.
    K. ``UTP Trade Data Feed'' means the service that provides Vendors
and Subscribers with Transaction Reports.
    L. ``Nasdaq Security'' or ``Nasdaq-listed Security'' means any
security listed on the Nasdaq Global Market or Nasdaq Capital Market.
    M. ``News Service'' means a person that receives Transaction
Reports or Quotation Information provided by the Systems or provided by
a Vendor, on a Current basis, in connection with such person's business
of furnishing such information to newspapers, radio and television
stations and other news media, for publication at least fifteen (15)
minutes following the time when the information first has been
published by the Processor.
    N. ``OTC Montage Data Feed'' means the data stream of information
that provides Vendors and Subscribers with quotations and sizes from
each FINRA Participant.
    O. ``Participant'' means a registered national securities exchange
or national securities association that is a signatory to this Plan.
    P. ``Plan'' means this Nasdaq UTP Plan, as from time to time
amended according to its provisions, governing the collection,
consolidation and dissemination of Quotation Information and
Transaction Reports in Eligible Securities.
    Q. ``Processor'' means the entity selected by the Participants to
perform the processing functions set forth in the Plan.
    R. ``Quotation Information'' means all bids, offers, displayed
quotation sizes, the market center identifiers and, in the case of
FINRA, the FINRA Participant that entered the quotation, withdrawals
and other information pertaining to quotations in Eligible Securities
required to be collected and made available to the Processor pursuant
to this Plan.
    S. ``Regulatory Halt'' means a trade suspension or halt called for
the purpose of dissemination of material news, as described at Section
X hereof or that is called for where there are regulatory problems
relating to an Eligible Security that should be clarified before
trading therein is permitted to continue, including a trading halt for
extraordinary market activity due to system misuse or malfunction under
Section X.E.1. of the Plan (``Extraordinary Market Regulatory Halt'').
    T. ``Subscriber'' means a person that receives Current Quotation
Information or Transaction Reports provided by the Processor or
provided by a Vendor, for its own use or for distribution on a non-
Current basis, other than in connection with its activities as a
Vendor.
    U. ``Transaction Reports'' means reports required to be collected
and made available pursuant to this Plan containing the stock symbol,
price, and size of the transaction executed, the Market in which the
transaction was executed, and related information, including a buy/
sell/cross indicator and trade modifiers, reflecting completed
transactions in Eligible Securities.
    V. ``Upon Effectiveness of the Plan'' means July 12, 1993, the date
on which the Participants commenced publication of Quotation
Information and Transaction Reports on Eligible Securities as
contemplated by this Plan.
    W. ``Vendor'' means a person that receives Current Quotation
Information or Transaction Reports provided by the Processor or
provided by a Vendor, in connection with such person's business of
distributing, publishing, or otherwise furnishing such information on a
Current basis to Subscribers, News Services or other Vendors.

IV. Administration of Plan

A. Operating Committee: Composition

    The Plan shall be administered by the Participants through an
operating committee (``Operating Committee''), which shall be composed
of one representative designated by each Participant. Each Participant
may designate an alternate representative or representatives who shall
be authorized to act on behalf of the Participant in the absence of the
designated representative. Within the areas of its responsibilities and
authority, decisions made or actions taken by the Operating Committee,
directly or by duly delegated individuals, committees as may be
established from time to time, or others, shall be binding upon each
Participant, without prejudice to the rights of any Participant to seek
redress from the SEC pursuant to Rule 608 of Regulation NMS under the
Exchange Act or in any other appropriate forum.
    An Electronic Communications Network, Alternative Trading System,
Broker-Dealer or other securities organization (``Organization'') which
is not a Participant, but has an actively pending Form 1 Application on
file with the Commission to become a national securities exchange, will
be permitted to appoint one representative and one alternate
representative to attend regularly scheduled Operating Committee
meetings in the capacity of an observer/advisor. If the Organization's
Form 1 petition is withdrawn, returned, or is otherwise not actively
pending with the Commission for any reason, then the Organization will
no longer be eligible to be represented in the Operating Committee
meetings. The Operating Committee shall have the discretion, in limited
instances, to deviate from this policy if, as indicated by majority
vote, the Operating Committee agrees that circumstances so warrant.
    Nothing in this section or elsewhere within the Plan shall
authorize any person or organization other than Participants, their
representatives, and members of the Advisory Committee to participate
on the Operating Committee in any manner other than as an advisor or
observer. Only the Participants and their representatives as well as
Commission staff may participate in Executive Sessions of the Operating
Committee.

B. Operating Committee: Authority

    The Operating Committee shall be responsible for:
    1. Overseeing the consolidation of Quotation Information and
Transaction Reports in Eligible Securities from the Participants for
dissemination to Vendors, Subscribers, News Services and others in
accordance with the provisions of the Plan;

    2. Periodically evaluating the Processor;
    3. Setting the level of fees to be paid by Vendors, Subscribers,
News Services or others for services relating to Quotation Information
or Transaction Reports in Eligible Securities, and taking action in
respect thereto in accordance with the provisions of the Plan;
    4. Determining matters involving the interpretation of the
provisions of the Plan;
    5. Determining matters relating to the Plan's provisions for cost
allocation and revenue-sharing; and
    6. Carrying out such other specific responsibilities as provided
under the Plan.

C. Operating Committee: Voting

    Each Participant shall have one vote on all matters considered by
the Operating Committee.
    1. The affirmative and unanimous vote of all Participants entitled
to vote shall be necessary to constitute the action of the Operating
Committee with respect to:
    a. Amendments to the Plan;
    b. Amendments to contracts between the Processor and Vendors,
Subscribers, News Services and others receiving Quotation Information
and Transaction Reports in Eligible Securities;
    c. Replacement of the Processor, except for termination for cause,
which shall be governed by section V(B) hereof;
    d. Reductions in existing fees relating to Quotation Information
and Transaction Reports in Eligible Securities; and
    e. Except as provided under section IV(C)(3) hereof, requests for
system changes; and
    f. All other matters not specifically addressed by the Plan.
    2. With respect to the establishment of new fees or increases in
existing fees relating to Quotation Information and Transaction Reports
in Eligible Securities, the affirmative vote of two-thirds of the
Participants entitled to vote shall be necessary to constitute the
action of the Operating Committee.
    3. The affirmative vote of a majority of the Participants entitled
to vote shall be necessary to constitute the action of the Operating
Committee with respect to:
    a. Requests for system changes reasonably related to the function
of the Processor as defined under the Plan. All other requests for
system changes shall be governed by section IV(C)(1)(e) hereof.
    b. Interpretive matters and decisions of the Operating Committee
arising under, or specifically required to be taken by, the provisions
of the Plan as written;
    c. Interpretive matters arising under Rules 601 and 602 of
Regulation NMS; and
    d. Denials of access (other than for breach of contract, which
shall be handled by the Processor),
    4. It is expressly agreed and understood that neither this Plan nor
the Operating Committee shall have authority in any respect over any
Participant's proprietary systems. Nor shall the Plan or the Operating
Committee have any authority over the collection and dissemination of
quotation or transaction information in Eligible Securities in any
Participant's marketplace, or, in the case of FINRA, from FINRA
Participants.

D. Operating Committee: Meetings

    Regular meetings of the Operating Committee may be attended by each
Participant's designated representative and/or its alternate
representative(s), and may be attended by one or more other
representatives of the parties. Meetings shall be held at such times
and locations as shall from time to time be determined by the Operating
Committee.
    Quorum: Any action requiring a vote only can be taken at a meeting
in which a quorum of all Participants is present. For actions requiring
a simple majority vote of all Participants, a quorum of greater than
50% of all Participants entitled to vote must be present at the meeting
before such a vote may be taken. For actions requiring a \2/3\ majority
vote of all Participants, a quorum of at least \2/3\ of all
Participants entitled to vote must be present at the meeting before
such a vote may be taken. For actions requiring a unanimous vote of all
Participants, a quorum of all Participants entitled to vote must be
present at the meeting before such a vote may be taken.
    A Participant is considered present at a meeting only if a
Participant's designated representative or alternate representative(s)
is either in physical attendance at the meeting or is participating by
conference telephone, or other acceptable electronic means.
    Any action sought to be resolved at a meeting must be sent to each
Participant entitled to vote on such matter at least one week prior to
the meeting via electronic mail, regular U.S. or private mail, or
facsimile transmission, provided however that this requirement may be
waived by the vote of the percentage of the Committee required to vote
on any particular matter, under section C above.
    Any action may be taken without a meeting if a consent in writing,
setting forth the action so taken, is sent to and signed by all
Participant representatives entitled to vote with respect to the
subject matter thereof. All the approvals evidencing the consent shall
be delivered to the Chairman of the Operating Committee to be filed in
the Operating Committee records. The action taken shall be effective
when the minimum number of Participants entitled to vote have approved
the action, unless the consent specifies a different effective date.
    The Chairman of the Operating Committee shall be elected annually
by and from among the Participants by a majority vote of all
Participants entitled to vote. The Chairman shall designate a person to
act as Secretary to record the minutes of each meeting. The location of
meetings shall be rotated among the locations of the principal offices
of the Participants, or such other locations as may from time to time
be determined by the Operating Committee. Meetings may be held by
conference telephone and action may be taken without a meeting if the
representatives of all Participants entitled to vote consent thereto in
writing or other means the Operating Committee deems acceptable.

E. Advisory Committee

    (a) Formation. Notwithstanding any other provision of this Plan, an
Advisory Committee to the Plan shall be formed and shall function in
accordance with the provisions set forth in this section.
    (b) Composition. Members of the Advisory Committee shall be
selected for two-year terms as follows:
    (1) Operating Committee Selections. By affirmative vote of a
majority of the Participants entitled to vote, the Operating Committee
shall select at least one representative from each of the following
categories to be members of the Advisory Committee: (i) A broker-dealer
with a substantial retail investor customer base, (ii) a broker-dealer
with a substantial institutional investor customer base, (iii) an
alternative trade system, (iv) a data vendor, and (v) an investor.
    (2) Participant Selections. Each Participant shall have the right
to select one member of the Advisory Committee. A Participant shall not
select any person employed by or affiliated with any participant or its
affiliates or facilities.
    (c) Function. Members of the Advisory Committee shall have the
right to submit their views to the Operating Committee on Plan matters,
prior to a decision by the Operating Committee on such matters. Such
matters shall

include, but not be limited to, any new or modified product, fee,
contract, or pilot program that is offered or used pursuant to the
Plan.
    (d) Meetings and Information. Members of the Advisory Committee
shall have the right to attend all meetings of the Operating Committee
and to receive any information concerning Plan matters that is
distributed to the Operating Committee; provided, however, that the
Operating Committee may meet in executive session if, by affirmative
vote of a majority of the Participants entitled to vote, the Operating
Committee determines that an item of Plan business requires
confidential treatment.

V. Selection and Evaluation of the Processor

A. Generally

    The Processor's performance of its functions under the Plan shall
be subject to review by the Operating Committee at least every two
years, or from time to time upon the request of any two Participants
but not more frequently than once each year. Based on this review, the
Operating Committee may choose to make a recommendation to the
Participants with respect to the continuing operation of the Processor.
The Operating Committee shall notify the SEC of any recommendations the
Operating Committee shall make pursuant to the Operating Committee's
review of the Processor and shall supply the Commission with a copy of
any reports that may be prepared in connection therewith.

B. Termination of the Processor for Cause

    If the Operating Committee determines that the Processor has failed
to perform its functions in a reasonably acceptable manner in
accordance with the provisions of the Plan or that its reimbursable
expenses have become excessive and are not justified on a cost basis,
the Processor may be terminated at such time as may be determined by a
majority vote of the Operating Committee.

C. Factors To Be Considered in Termination for Cause

    Among the factors to be considered in evaluating whether the
Processor has performed its functions in a reasonably acceptable manner
in accordance with the provisions of the Plan shall be the
reasonableness of its response to requests from Participants for
technological changes or enhancements pursuant to section IV(C)(3)
hereof. The reasonableness of the Processor's response to such requests
shall be evaluated by the Operating Committee in terms of the cost to
the Processor of purchasing the same service from a third party and
integrating such service into the Processor's existing systems and
operations as well as the extent to which the requested change would
adversely impact the then current technical (as opposed to business or
competitive) operations of the Processor.

D. Processor's Right To Appeal Termination for Cause

    The Processor shall have the right to appeal to the SEC a
determination of the Operating Committee terminating the Processor for
cause and no action shall become final until the SEC has ruled on the
matter and all legal appeals of right therefrom have been exhausted.

E. Process for Selecting New Processor

    At any time following effectiveness of the Plan, but no later than
upon the termination of the Processor, whether for cause pursuant to
section IV(C)(1)(c) or V(B) of the Plan or upon the Processor's
resignation, the Operating Committee shall establish procedures for
selecting a new Processor (the ``Selection Procedures''). The Operating
Committee, as part of the process of establishing Selection Procedures,
may solicit and consider the timely comment of any entity affected by
the operation of this Plan. The Selection Procedures shall be
established by a two-thirds majority vote of the Plan Participants, and
shall set forth, at a minimum:
    1. The entity that will:
    (a) Draft the Operating Committee's request for proposal for bids
on a new processor;
    (b) Assist the Operating Committee in evaluating bids for the new
processor; and
    (c) Otherwise provide assistance and guidance to the Operating
Committee in the selection process.
    2. The minimum technical and operational requirements to be
fulfilled by the Processor;
    3. The criteria to be considered in selecting the Processor; and
    4. The entities (other than Plan Participants) that are eligible to
comment on the selection of the Processor.
    Nothing in this provision shall be interpreted as limiting
Participants' rights under section IV or section V of the Plan or other
Commission order.

VI. Functions of the Processor

A. Generally

    The Processor shall collect from the Participants, and consolidate
and disseminate to Vendors, Subscribers and News Services, Quotation
Information and Transaction Reports in Eligible Securities in a manner
designed to assure the prompt, accurate and reliable collection,
processing and dissemination of information with respect to all
Eligible Securities in a fair and non-discriminatory manner. The
Processor shall commence operations upon the Processor's notification
to the Participants that it is ready and able to commence such
operations.

B. Collection and Consolidation of Information

    For as long as Nasdaq is the Processor, the Processor shall be
capable of receiving Quotation Information and Transaction Reports in
Eligible Securities from Participants by the Plan-approved, Processor
sponsored interface, and shall consolidate and disseminate such
information via the UTP Quote Data Feed, the UTP Trade Data Feed, and
the OTC Montage Data Feed to Vendors, Subscribers and News Services.

C. Dissemination of Information

    The Processor shall disseminate consolidated Quotation Information
and Transaction Reports in Eligible Securities via the UTP Quote Data
Feed, the UTP Trade Data Feed, and the OTC Montage Data Feed to
authorized Vendors, Subscribers and News Services in a fair and non-
discriminatory manner. The Processor shall specifically be permitted to
enter into agreements with Vendors, Subscribers and News Services for
the dissemination of quotation or transaction information on Eligible
Securities to foreign (non-U.S.) marketplaces or in foreign countries.
    The Processor shall, in such instance, disseminate consolidated
quotation or transaction information on Eligible Securities from all
Participants. Nothing herein shall be construed so as to prohibit or
restrict in any way the right of any Participant to distribute
quotation, transaction or other information with respect to Eligible
Securities quoted on or traded in its marketplace to a marketplace
outside the United States solely for the purpose of supporting an
intermarket linkage, or to distribute information within its own
marketplace concerning Eligible Securities in accordance with its own
format. If a Participant requests, the Processor shall make information
about Eligible Securities in the Participant's marketplace available to
a foreign marketplace on behalf of the requesting Participant, in which
event the cost shall be borne by that Participant.

1. Best Bid and Offer
    The Processor shall disseminate on the UTP Quote Data Feed the best
bid and offer information supplied by each Participant, including the
FINRA Participant(s) that constitute FINRA's single Best Bid and Offer
quotations, and shall also calculate and disseminate on the UTP Quote
Data Feed a national best bid and asked quotation with size based upon
Quotation Information for Eligible Securities received from
Participants. The Processor shall not calculate the best bid and offer
for any individual Participant, including FINRA.
    The Participant responsible for each side of the best bid and asked
quotation making up the national best bid and offer shall be identified
by an appropriate symbol. If the quotations of more than one
Participant shall be the same best price, the largest displayed size
among those shall be deemed to be the best. If the quotations of more
than one Participant are the same best price and best displayed size,
the earliest among those measured by the time reported shall be deemed
to be the best. A reduction of only bid size and/or ask size will not
change the time priority of a Participant's quote for the purposes of
determining time reported, whereas an increase of the bid size and/or
ask size will result in a new time reported. The consolidated size
shall be the size of the Participant that is at the best.
    If the best bid/best offer results in a locked or crossed
quotation, the Processor shall forward that locked or crossed quote on
the appropriate output lines (i.e., a crossed quote of bid 12, ask
11.87 shall be disseminated). The Processor shall normally cease the
calculation of the best bid/best offer after 6:30 p.m., Eastern Time.
2. Quotation Data Streams
    The Processor shall disseminate on the UTP Quote Data Feed a data
stream of all Quotation Information regarding Eligible Securities
received from Participants. Each quotation shall be designated with a
symbol identifying the Participant from which the quotation emanates
and, in the case of FINRA, the FINRA Participant(s) that constitute
FINRA's Best Bid and Offer quotations. In addition, the Processor shall
separately distribute on the OTC Montage Data Feed the Quotation
Information regarding Eligible Securities from all FINRA Participants
from which quotations emanate.
3. Transaction Reports
    The Processor shall disseminate on the UTP Trade Data Feed a data
stream of all Transaction Reports in Eligible Securities received from
Participants. Each transaction report shall be designated with a symbol
identifying the Participant in whose Market the transaction took place.

D. Closing Reports

    At the conclusion of each trading day, the Processor shall
disseminate a ``closing price'' for each Eligible Security. Such
``closing price'' shall be the price of the last Transaction Report in
such security received prior to dissemination. The Processor shall also
tabulate and disseminate at the conclusion of each trading day the
aggregate volume reflected by all Transaction Reports in Eligible
Securities reported by the Participants.

E. Statistics

    The Processor shall maintain quarterly, semi-annual and annual
transaction and volume statistical counts. The Processor shall, at cost
to the user Participant(s), make such statistics available in a form
agreed upon by the Operating Committee, such as a secure Web site.

VII. Administrative Functions of the Processor

    Subject to the general direction of the Operating Committee, the
Processor shall be responsible for carrying out all administrative
functions necessary to the operation and maintenance of the
consolidated information collection and dissemination system provided
for in this Plan, including, but not limited to, record keeping,
billing, contract administration, and the preparation of financial
reports.

VIII. Transmission of Information to Processor by Participants

A. Quotation Information

    Each Participant shall, during the time it is open for trading be
responsible promptly to collect and transmit to the Processor accurate
Quotation Information in Eligible Securities through any means
prescribed herein.
    Quotation Information shall include:
    1. Identification of the Eligible Security, using the Nasdaq
Symbol;
    2. The price bid and offered, together with size;
    3. The FINRA Participant along with the FINRA Participant's market
participant identification or Participant from which the quotation
emanates;
    4. Identification of quotations that are not firm; and
    5. Through appropriate codes and messages, withdrawals and similar
matters.

B. Transaction Reports

    Each Participant shall, during the time it is open for trading, be
responsible promptly to collect and transmit to the Processor
Transaction Reports in Eligible Securities executed in its Market by
means prescribed herein. With respect to orders sent by one Participant
Market to another Participant Market for execution, each Participant
shall adopt procedures governing the reporting of transactions in
Eligible Securities specifying that the transaction will be reported by
the Participant whose member sold the security. This provision shall
apply only to transactions between Plan Participants.
    Transaction Reports shall include:
    1. Identification of the Eligible Security, using the Nasdaq
Symbol;
    2. The number of shares in the transaction;
    3. The price at which the shares were purchased or sold;
    4. The buy/sell/cross indicator;
    5. The Market of execution; and,
    6. Through appropriate codes and messages, late or out-of-sequence
trades, corrections and similar matters.
    All such Transaction Reports shall be transmitted to the Processor
within 90 seconds after the time of execution of the transaction.
Transaction Reports transmitted beyond the 90-second period shall be
designated as ``late'' by the appropriate code or message.
    The following types of transactions are not required to be reported
to the Processor pursuant to the Plan:
    1. Transactions that are part of a primary distribution by an
issuer or of a registered secondary distribution or of an unregistered
secondary distribution;
    2. Transactions made in reliance on section 4(2) of the Securities
Act of 1933;
    3. Transactions in which the buyer and the seller have agreed to
trade at a price unrelated to the Current Market for the security,
e.g., to enable the seller to make a gift;
    4. Odd-lot transactions;
    5. The acquisition of securities by a broker-dealer as principal in
anticipation of making an immediate exchange distribution or exchange
offering on an exchange;
    6. Purchases of securities pursuant to a tender offer; and
    7. Purchases or sales of securities effected upon the exercise of
an option pursuant to the terms thereof or the exercise of any other
right to acquire securities at a pre-established consideration
unrelated to the Current Market.

C. Symbols for Market Identification for Quotation Information and
Transaction Reports

    The following symbols shall be used to denote the marketplaces:

------------------------------------------------------------------------
                  Code                             Participant
------------------------------------------------------------------------
A......................................  American Stock Exchange LLC
Z......................................  BATS Exchange, Inc.
B......................................  Boston Stock Exchange, Inc.
W......................................  Chicago Board Options Exchange,
                                          Inc.
M......................................  Chicago Stock Exchange, Inc.
I......................................   International Securities
                                          Exchange, LLC
D......................................   Financial Industry Regulatory
                                          Authority, Inc.
Q......................................   Nasdaq Stock Market LLC
C......................................   National Stock Exchange, Inc.
N......................................   New York Stock Exchange LLC
P......................................   NYSE Arca, Inc.
X......................................   Nasdaq OMX PHLX, Inc.
------------------------------------------------------------------------

    D. Whenever a Participant determines that a level of trading
activity or other unusual market conditions prevent it from collecting
and transmitting Quotation Information or Transaction Reports to the
Processor, or where a trading halt or suspension in an Eligible
Security is in effect in its Market, the Participant shall promptly
notify the Processor of such condition or event and shall resume
collecting and transmitting Quotation Information and Transaction
Reports to it as soon as the condition or event is terminated. In the
event of a system malfunction resulting in the inability of a
Participant or its members to transmit Quotation Information or
Transaction Reports to the Processor, the Participant shall promptly
notify the Processor of such event or condition. Upon receiving such
notification, the Processor shall take appropriate action, including
either closing the quotation or purging the system of the affected
quotations.

IX. Market Access

    Pursuant to the requirements of Rule 610 of Regulation NMS, a
Participant that operates an SRO trading facility shall provide for
fair and efficient order execution access to quotations in each
Eligible Security displayed through its trading facility. In the case
of a Participant that operates an SRO display-only quotation facility,
trading centers posting quotations through such SRO display-only
quotation facility must provide for fair and efficient order execution
access to quotations in each Eligible Security displayed through the
SRO display-only quotation facility. A Participant that operates an SRO
trading facility may elect to allow such access to its quotations
through the utilization of private electronic linkages between the
Participant and other trading centers. In the case of a Participant
that operates an SRO display-only quotation facility, trading centers
posting quotations through such SRO display-only quotation facility may
elect to allow such access to their quotations through the utilization
of private electronic linkages between the trading center and SRO
trading facilities of Plan Participants and/or other trading centers.
    In accordance with Regulation NMS, a Participant shall not impose,
or permit to be imposed, any fee or fees for the execution of an order
against a protected quotation of the Participant or of a trading center
posting quotes through a Participant's SRO display-only quotation
facility in an Eligible Security or against any other quotation
displayed by the Participant in an Eligible Security that is the
Participant's displayed best bid or offer for that Eligible Security,
where such fee or fees exceed the limits provided for in Rule 610(c) of
Regulation NMS. As required under Regulation NMS, the terms of access
to a Participant's quotations or of a trading center posting quotes
through a Participant's SRO display-only quotation facility in an
Eligible Security may not be unfairly discriminatory so as to prevent
or inhibit any person from obtaining efficient access to such displayed
quotations through a member of the Participant or a subscriber of a
trading center.
    If quotations in an Eligible Security are displayed by a
Participant that operates an SRO trading facility (or are displayed by
a trading center that posts quotations through an SRO display-only
quotation facility) that complies with the fair and efficient access
requirements of Regulation NMS (an ``NMS Compliant Facility''),
including prior to the compliance date of such access requirements,
that Participant (or trading center posting quotes through an SRO
display-only quotation facility) shall no longer be required to permit
each FINRA market participant to have direct telephone access to the
specialist, trading post, market maker and supervisory center in such
Eligible Security that trades on that NMS Compliant Facility. For
quotations in Eligible Securities that are displayed by a Participant
that operates an SRO trading facility that is not an NMS Compliant
Facility, such telephone access requirement will continue to be
applicable to the Participant.

X. Regulatory Halts

    A. Whenever, in the exercise of its regulatory functions, the
Listing Market for an Eligible Security determines that a Regulatory
Halt is appropriate pursuant to section III.S, the Listing Market will
notify all other Participants pursuant to section X.E and all other
Participants shall also halt or suspend trading in that security until
notified that the halt or suspension is no longer in effect. The
Listing Market shall immediately notify the Processor of such
Regulatory Halt as well as provide notice that a Regulatory Halt has
been lifted. The Processor, in turn, shall disseminate to Participants
notice of the Regulatory Halt (as well as notice of the lifting of a
Regulatory Halt) through the UTP Quote Data Feed. This notice shall
serve as official notice of a Regulatory Halt for purposes of the Plan
only, and shall not substitute or otherwise supplant notice that a
Participant may recognize or require under its own rules. Nothing in
this provision shall be read so as to supplant or be inconsistent with
a Participant's own rules on trade halts, which rules apply to the
Participant's own members. The Processor will reject any quotation
information or transaction reports received from any Participant on an
Eligible Security that has a Regulatory Halt in effect.
    B. Whenever the Listing Market determines that an adequate
publication or dissemination of information has occurred so as to
permit the termination of the Regulatory Halt then in effect, the
Listing Market shall promptly notify the Processor and each of the
other Participants that conducts trading in such security pursuant to
Section X.F. Except in extraordinary circumstances, adequate
publication or dissemination shall be presumed by the Listing Market to
have occurred upon the expiration of one hour after initial publication
in a national news dissemination service of the information that gave
rise to the Regulatory Halt.
    C. Except in the case of a Regulatory Halt, the Processor shall not
cease the dissemination of quotation or transaction information
regarding any Eligible Security. In particular, it shall not cease
dissemination of such information because of a delayed opening,
imbalance of orders or other market-related problems involving such
security. During a Regulatory Halt, the Processor shall collect and
disseminate Transaction Information but shall cease collection and
dissemination of all Quotation Information.
    D. For purposes of this section X, ``Listing Market'' for an
Eligible Security means the Participant's Market on which the Eligible
Security is listed. If an Eligible Security is dually listed, Listing
Market shall mean the Participant's Market on which the Eligible
Security is listed that also has

the highest number of the average of the reported transactions and
reported share volume for the preceding 12-month period. The Listing
Market for dually-listed Eligible Securities shall be determined at the
beginning of each calendar quarter.
    E. For purposes of coordinating trading halts in Eligible
Securities, all Participants are required to utilize the national
market system communication media (``Hoot-n-Holler'') to provide real-
time information to all Participants. Each Participant shall be
required to continuously monitor the Hoot-n-Holler system during market
hours, and the failure of a Participant to do so at any time shall not
prevent the Listing Market from initiating a Regulatory Halt in
accordance with the procedures specified herein.
    1. The following procedures shall be followed when one or more
Participants experiences extraordinary market activity in an Eligible
Security that is believed to be caused by the misuse or malfunction of
systems operated by or linked to one or more Participants.
    a. The Participant(s) experiencing the extraordinary market
activity or any Participant that becomes aware of extraordinary market
activity will immediately use best efforts to notify all Participants
of the extraordinary market activity utilizing the Hoot-n-Holler
system.
    b. The Listing Market will use best efforts to determine whether
there is material news regarding the Eligible Security. If the Listing
Market determines that there is non-disclosed material news, it will
immediately call a Regulatory Halt pursuant to section X.E.2.
    c. Each Participant(s) will use best efforts to determine whether
one of its systems, or the system of a direct or indirect participant
in its market, is responsible for the extraordinary market activity.
    d. If a Participant determines the potential source of
extraordinary market activity pursuant to section X.1.c., the
Participant will use best efforts to determine whether removing the
quotations of one or more direct or indirect market participants or
barring one or more direct or indirect market participants from
entering orders will resolve the extraordinary market activity.
Accordingly, the Participant will prevent the quotations from one or
more direct or indirect market participants in the affected Eligible
Securities from being transmitted to the Processor.
    e. If the procedures described in section X.E.1.a.-d. do not
rectify the situation, the Participant(s) experiencing extraordinary
market activity will cease transmitting all quotations in the affected
Eligible Securities to the Processor.
    f. If the procedures described in section X.E.1.a-e. do not rectify
the situation within five minutes of the first notification through the
Hoot-n-Holler system, or if Participants agree to call a halt sooner
through unanimous approval among those Participants actively trading
impacted Eligible Securities, the Listing Market may determine based on
the facts and circumstances, including available input from
Participants, to declare an Extraordinary Market Regulatory Halt in the
affected Eligible Securities. Simultaneously with the notification of
the Processor to suspend the dissemination of quotations across all
Participants, the Listing Market must notify all Participants of the
trading halt utilizing the Hoot-n-Holler system.
    g. Absent any evidence of system misuse or malfunction, best
efforts will be used to ensure that trading is not halted across all
Participants.
    2. If the Listing Market declares a Regulatory Halt in
circumstances other than pursuant to section X.E.1.f., the Listing
Market must, simultaneously with the notification of the Processor to
suspend the dissemination of quotations across all Participants, notify
all Participants of the trading halt utilizing the Hoot-n-Holler
system.
    F. If the Listing Market declares a Regulatory Halt, trading will
resume according to the following procedures:
    1. Within 15 minutes of the declaration of the halt, all
Participants will make best efforts to indicate via the Hoot-n-Holler
their intentions with respect to canceling or modifying transactions.
    2. All Participants will disseminate to their members information
regarding the canceled or modified transactions as promptly as
possible, and in any event prior to the resumption of trading.
    3. After all Participants have met the requirements of section
X.F.1-2, the Listing Market will notify the Participants utilizing the
Hoot-n-Holler and the Processor when trading may resume. Upon receiving
this information, Participants may commence trading pursuant to section
X.A.

XI. Hours of Operation

    A. Quotation Information may be entered by Participants as to all
Eligible Securities in which they make a market between 9:30 a.m. and 4
p.m. Eastern Time (''ET'') on all days the Processor is in operation.
Transaction Reports shall be entered between 9:30 a.m. and 4:01:30 p.m.
ET by Participants as to all Eligible Securities in which they execute
transactions between 9:30 a.m. and 4 p.m. ET on all days the Processor
is in operation.
    B. Participants that execute transactions in Eligible Securities
outside the hours of 9:30 a.m. ET and 4 p.m., ET, shall report such
transactions as follows:
    (i) Transactions in Eligible Securities executed between 4 a.m. and
9:29:59 a.m. ET and between 4:00:01 and 8 p.m. ET, shall be designated
as ``.T'' trades to denote their execution outside normal market hours;
    (ii) Transactions in Eligible Securities executed after 8 p.m. and
before 12 a.m. (midnight) shall be reported to the Processor between
the hours of 4 a.m. and 8 p.m. ET on the next business day (T+1), and
shall be designated ``as/of'' trades to denote their execution on a
prior day, and be accompanied by the time of execution;
    (iii) Transactions in Eligible Securities executed between 12 a.m.
(midnight) and 4 a.m. ET shall be transmitted to the Processor between
4 a.m. and 9:30 a.m. ET, on trade date, shall be designated as ``.T''
trades to denote their execution outside normal market hours, and shall
be accompanied by the time of execution;
    (iv) Transactions reported pursuant to this provision of the Plan
shall be included in the calculation of total trade volume for purposes
of determining net distributable operating revenue, but shall not be
included in the calculation of the daily high, low, or last sale.
    C. Late trades shall be reported in accordance with the rules of
the Participant in whose Market the transaction occurred and can be
reported between the hours of 4 a.m. and 8 p.m.
    D. The Processor shall collect, process and disseminate Quotation
Information in Eligible Securities at other times between 4 a.m. and
9:30 a.m. ET, and after 4 p.m. ET, when any Participant or FINRA
Participant is open for trading, until 8 p.m. ET (the ``Additional
Period''); provided, however, that the national best bid and offer
quotation will not be disseminated before 4 a.m. or after 8 p.m. ET.
Participants that enter Quotation Information or submit Transaction
Reports to the Processor during the Additional Period shall do so for
all Eligible Securities in which they enter quotations.

XII. Undertaking by All Participants

    The filing with and approval by the Commission of this Plan shall
obligate each Participant to enforce compliance by its members with the
provisions

thereof. In all other respects not inconsistent herewith, the rules of
each Participant shall apply to the actions of its members in
effecting, reporting, honoring and settling transactions executed
through its facilities, and the entry, maintenance and firmness of
quotations to ensure that such occurs in a manner consistent with just
and equitable principles of trade.

XIII. Financial Matters

A. Development Costs

    Any Participant becoming a signatory to this Plan after June 26,
1990, shall, as a condition to becoming a Participant, pay to the other
Plan Participants a proportionate share of the aggregate development
costs previously paid by Plan Participants to the Processor, which
aggregate development costs totaled $439,530, with the result that each
Participant's share of all development costs is the same.
    Each Participant shall bear the cost of implementation of any
technical enhancements to the Nasdaq system made at its request and
solely for its use, subject to reapportionment should any other
Participant subsequently make use of the enhancement, or the
development thereof.

B. Cost Allocation and Revenue Sharing

    The provisions governing cost allocation and revenue sharing among
the Participants are set forth in Exhibit 1 to the Plan.

C. Maintenance of Financial Records

    The Processor shall maintain records of revenues generated and
development and operating expenditures incurred in connection with the
Plan. In addition, the Processor shall provide the Participants with:
(a) A statement of financial and operational condition on a quarterly
basis; and (b) an audited statement of financial and operational
condition on an annual basis.

XIV. Indemnification

    Each Participant agrees, severally and not jointly, to indemnify
and hold harmless each other Participant, Nasdaq, and each of its
directors, officers, employees and agents (including the Operating
Committee and its employees and agents) from and against any and all
loss, liability, claim, damage and expense whatsoever incurred or
threatened against such persons as a result of any Transaction Reports,
Quotation Information or other information reported to the Processor by
such Participant and disseminated by the Processor to Vendors. This
indemnity agreement shall be in addition to any liability that the
indemnifying Participant may otherwise have.
    Promptly after receipt by an indemnified Participant of notice of
the commencement of any action, such indemnified Participant will, if a
claim in respect thereof is to be made against an indemnifying
Participant, notify the indemnifying Participant in writing of the
commencement thereof; but the omission to so notify the indemnifying
Participant will not relieve the indemnifying Participant from any
liability which it may have to any indemnified Participant. In case any
such action is brought against any indemnified Participant and it
promptly notifies an indemnifying Participant of the commencement
thereof, the indemnifying Participant will be entitled to participate
in, and, to the extent that it may wish, jointly with any other
indemnifying Participant similarly notified, to assume and control the
defense thereof with counsel chosen by it. After notice from the
indemnifying Participant of its election to assume the defense thereof,
the indemnifying Participant will not be liable to such indemnified
Participant for any legal or other expenses subsequently incurred by
such indemnified Participant in connection with the defense thereof but
the indemnified Participant may, at its own expense, participate in
such defense by counsel chosen by it without, however, impairing the
indemnifying Participant's control of the defense. The indemnifying
Participant may negotiate a compromise or settlement of any such
action, provided that such compromise or settlement does not require a
contribution by the indemnified Participant.

XV. Withdrawal

    Any Participant may withdraw from the Plan at any time on not less
than 30 days prior written notice to each of the other Participants.
Any Participant withdrawing from the Plan shall remain liable for, and
shall pay upon demand, any fees for equipment or services being
provided to such Participant pursuant to the contract executed by it or
an agreement or schedule of fees covering such then in effect.
    A withdrawing Participant shall also remain liable for its
proportionate share, without any right of recovery, of administrative
and operating expenses, including start-up costs and other sums for
which it may be responsible pursuant to section XIV hereof. Except as
aforesaid, a withdrawing Participant shall have no further obligation
under the Plan or to any of the other Participants with respect to the
period following the effectiveness of its withdrawal.

XVI. Modifications to Plan

    The Plan may be modified from time to time when authorized by the
agreement of all of the Participants, subject to the approval of the
SEC or which otherwise becomes effective pursuant to section 11A of the
Act and Rule 608 of Regulation NMS.

XVII. Applicability of Securities Exchange Act of 1934

    The rights and obligations of the Participants and of Vendors, News
Services, Subscribers and other persons contracting with Participant in
respect of the matters covered by the Plan shall at all times be
subject to any applicable provisions of the Act, as amended, and any
rules and regulations promulgated thereunder.

XVIII. Operational Issues

    A. Each Participant shall be responsible for collecting and
validating quotes and last sale reports within its own system prior to
transmitting this data to the Processor.
    B. Each Participant may utilize a dedicated Participant line into
the Processor to transmit trade and quote information in Eligible
Securities to the Processor. The Processor shall accept from Exchange
Participants input for only those issues that are deemed Eligible
Securities.
    C. The Processor shall consolidate trade and quote information from
each Participant and disseminate this information on the Processor's
existing vendor lines.
    D. The Processor shall perform gross validation processing for
quotes and last sale messages in addition to the collection and
dissemination functions, as follows:
    1. Basic Message Validation
    (a) The Processor may validate format for each type of message, and
reject non-conforming messages.
    (b) Input must be for an Eligible Security.
    2. Logging Function--The Processor shall return all Participant
input messages that do not pass the validation checks (described above)
to the inputting Participant, on the entering Participant line, with an
appropriate reject notation. For all accepted Participant input
messages (i.e., those that pass the validation check), the information
shall be retained in the Processor system.

XIX. Headings

    The section and other headings contained in this Plan are for
reference

purposes only and shall not be deemed to be a part of this Plan or to
affect the meaning or interpretation of any provisions of this Plan.

XX. Counterparts

    This Plan may be executed by the Participants in any number of
counterparts, no one of which need contain the signature of all
Participants. As many such counterparts as shall together contain all
such signatures shall constitute one and the same instrument.

XXI. Depth of Book Display

    The Operating Committee has determined that the entity that
succeeds Nasdaq as the Processor should have the ability to collect,
consolidate, and disseminate quotations at multiple price levels beyond
the best bid and best offer from any Participant that voluntarily
chooses to submit such quotations while determining that no Participant
shall be required to submit such information. The Operating Committee
has further determined that the costs of developing, collecting,
processing, and disseminating such depth of book data shall be borne
exclusively by those Participants that choose to submit this
information to the Processor, by whatever allocation those Participants
may choose among themselves. The Operating Committee has determined
further that the primary purpose of the Processor is the collection,
processing and dissemination of best bid, best offer and last sale
information (``core data''), and as such, the Participants will adopt
procedures to ensure that such functionality in no way hinders the
collecting, processing and dissemination of this core data.
    Therefore, implementing the depth of book display functionality
will require a plan amendment that addresses all pertinent issues,
including:
    (1) Procedures for ensuring that the fully-loaded cost of the
collection, processing, and dissemination of depth-of-book information
will be tracked and invoiced directly to those Plan Participants that
voluntarily choose to send that data, voluntarily, to the Processor
allocating in whatever manner those Participants might agree; and
    (2) Necessary safeguards the Processor will take to ensure that its
processing of depth-of-book data will not impede or hamper, in any way,
its core Processor functionality of collecting, consolidating, and
disseminating National Best Bid and Offer data, exchange best bid and
offer data, and consolidated last sale data.
    Upon approval of a Plan amendment implementing depth of book
display, this article of the Plan shall be automatically deleted.
    In witness whereof, this Plan has been executed as of the ---- day
of ----, 200--, by each of the Signatories hereto.

American Stock Exchange LLC
By:--------------------------------------------------------------------

Boston Stock Exchange, Inc.
By:--------------------------------------------------------------------

Chicago Board Options Exchange, LLC
By:--------------------------------------------------------------------

International Securities Exchange, Inc.
By:--------------------------------------------------------------------

FINRA
By:--------------------------------------------------------------------

National Stock Exchange, Inc.
By:--------------------------------------------------------------------

New York Stock Exchange LLC
By:--------------------------------------------------------------------

NYSE ARCA, Inc.
By:--------------------------------------------------------------------

NASDAQ OMX PHLX, Inc.
By:--------------------------------------------------------------------

Bats Exchange, Inc.
By:--------------------------------------------------------------------

Chicago Stock Exchange, Inc.
By:--------------------------------------------------------------------

The Nasdaq Stock Market LLC
By:--------------------------------------------------------------------

Exhibit 1

    1. Each Participant eligible to receive revenue under the Plan will
receive an annual payment for each calendar year that is equal to the
sum of the Participant's Trading Shares and Quoting Shares, as defined
below, in each Eligible Security for the calendar year. In the event
that total net distributable operating income (as defined below) is
negative, each Participant eligible to receive revenue under the Plan
will receive an annual bill for each calendar year to be determined
according to the same formula (described in this paragraph) for
determining annual payments to eligible Participants. Unless otherwise
stated in this agreement, a year shall run from January 1 to December
31 and quarters shall end on March 31, June 30, September 30, and
December 31. Processor shall endeavor to provide Participants with
written estimates of each Participant's percentage of total volume
within five business days of month end.
    2. Security Income Allocation. The Security Income Allocation for
an Eligible Security shall be determined by multiplying (i) the ``net
distributable operating income'' of this Nasdaq UTP Plan for the
calendar year by (ii) the Volume Percentage for such Eligible Security
(the ``initial allocation''), and then adding or subtracting any
amounts specified in the reallocation set forth below. The Volume
Percentage for an Eligible Security shall be determined by dividing (A)
the square root of the dollar volume of transaction reports
disseminated by the Processor in such Eligible Security during the
calendar year by (B) the sum of the square roots of the dollar volume
of transaction reports disseminated by the Processor in each Eligible
Security during the calendar year. If the initial allocation of net
distributable operating income in accordance with the Volume Percentage
of an Eligible Security equals an amount greater than $4.00 multiplied
by the total number of qualified transaction reports in such Eligible
Security during the calendar year, the excess amount shall be
subtracted from the initial allocation for such Eligible Security and
reallocated among all Eligible Securities in direct proportion to the
dollar volume of transaction reports disseminated by the Processor in
Eligible Securities during the calendar year. A transaction report with
a dollar volume of $5000 or more shall constitute one qualified
transaction report. A transaction report with a dollar volume of less
than $5000 shall constitute a fraction of a qualified transaction
report that equals the dollar volume of the transaction report divided
by $5000.
    3. Trading Share. The Trading Share of a Participant in an Eligible
Security shall be determined by multiplying (i) an amount equal to
fifty percent of the Security Income Allocation for the Eligible
Security by (ii) the Participant's Trade Rating in the Eligible
Security. A Participant's Trade Rating in an Eligible Security shall be
determined by taking the average of (A) the Participant's percentage of
the total dollar volume of transaction reports disseminated by the
Processor in the Eligible Security during the calendar year, and (B)
the Participant's percentage of the total number of qualified
transaction reports disseminated by the Processor in the Eligible
Security during the calendar year.
    4. Quoting Share. The Quoting Share of a Participant in an Eligible
Security shall be determined by multiplying (A) an amount equal to
fifty percent of the Security Income Allocation for the Eligible
Security by (B) the Participant's Quote Rating in the Eligible
Security. A Participant's Quote Rating in an Eligible Security shall be
determined by dividing (A) the sum of the Quote Credits earned by the
Participant in such Eligible Security during the calendar year by (B)
the sum of the Quote Credits earned by all Participants in such
Eligible Security during the

calendar year. A Participant shall earn one Quote Credit for each
second of time (with a minimum of one full second) multiplied by dollar
value of size that an automated best bid (offer) transmitted by the
Participant to the Processor during regular trading hours is equal to
the price of the national best bid (offer) in the Eligible Security and
does not lock or cross a previously displayed automated quotation. An
automated bid (offer) shall have the meaning specified in Rule 600 of
Regulation NMS of the Act for an ``automated quotation.'' The dollar
value of size of a quote shall be determined by multiplying the price
of a quote by its size.
    5. For purposes of this Exhibit 1, net distributable operating
income for any particular calendar year shall be calculated by adding
all revenues from the UTP Quote Data Feed, the UTP Trade Data Feed, and
the OTC Montage Data Feed including revenues from the dissemination of
information respecting Eligible Securities to foreign marketplaces
(collectively, ``the Data Feeds''), and subtracting from such revenues
the costs incurred by the Processor, set forth below, in collecting,
consolidating, validating, generating, and disseminating the Data
Feeds. These costs include, but are not limited to, the following:
    a. The Processor costs directly attributable to creating OTC
Montage Data Feed, including:
    1. Cost of collecting Participant quotes into the Processor's quote
engine;
    2. Cost of processing quotes and creating OTC Montage Data Feed
messages within the Processor's quote engine;
    3. Cost of the Processor's communication management subsystem that
distributes OTC Montage Data Feed to the market data vendor network for
further distribution.
    b. The costs directly attributable to creating the UTP Quote Data
Feed, including:
    1. The costs of collecting each Participant's best bid, best offer,
and aggregate volume into the Processor's quote engine and, in the case
of FINRA, the costs of identifying the FINRA Participant(s) that
constitute FINRA's Best Bid and Offer quotations;
    2. Cost of calculating the national best bid and offer price within
the Processor's quote engine;
    3. Cost of creating the UTP Quote Data Feed message within the
Processor's quote engine;
    4. Cost of the Processor's communication management subsystem that
distributes the UTP Quote Data Feed to the market data vendors'
networks for further distribution.
    c. The costs directly attributable to creating the UTP Trade Data
Feed, including:
    1. The costs of collecting each Participant's last sale and volume
amount into the Processor's quote engine;
    2. Cost of determining the appropriate last sale price and volume
amount within the Processor's trade engine;
    3. Cost of utilizing the Processor's trade engine to distribute the
UTP Trade Data Feed for distribution to the market data vendors;
    4. Cost of the Processor's communication management subsystem that
distributes the UTP Trade Data Feed to the marker data vendors'
networks for further distribution.
    d. The additional costs that are shared across all Data Feeds,
including:
    1. Telecommunication Operations costs of supporting the Participant
lines into the Processor's facilities;
    2. Telecommunications Operations costs of supporting the external
market data vendor network;
    3. Data Products account management and auditing function with the
market data vendors;
    4. Market Operations costs to support symbol maintenance, and other
data integrity issues;
    5. Overhead costs, including management support of the Processor,
Human Resources, Finance, Legal, and Administrative Services; and
    6. Costs of establishing and supporting the Security Income
Allocation System.
    e. Processor costs excluded from the calculation of net
distributable operating income include trade execution costs for
transactions executed using a Nasdaq service and trade report
collection costs reported through a Nasdaq service, as such services
are market functions for which Participants electing to use such
services pay market rate.
    f. For the purposes of this provision, the following definitions
shall apply:
    1. ``Quote Engine'' shall mean the Nasdaq's NT or Tandem system
that is operated by Nasdaq to collect quotation information for
Eligible Securities;
    2. ``Trade Engine'' shall mean the Nasdaq Tandem system that is
operated by Nasdaq for the purpose of collecting last sale information
in Eligible Securities.
    6. At the time a Participant implements a Processor-approved
electronic interface with the Processor, the Participant will become
eligible to receive revenue.
    7. Processor shall endeavor to provide Participants with written
estimates of each Participant's quarterly net distributable operating
income within 45 calendar days of the end of the quarter, and estimated
quarterly payments or billings shall be made on the basis of such
estimates. All quarterly payments or billings shall be made to each
eligible Participant within 45 days following the end of each calendar
quarter in which the Participant is eligible to receive revenue,
provided that each quarterly payment or billing shall be reconciled
against a Participant's cumulative year-to-date payment or billing
received to date and adjusted accordingly, and further provided that
the total of such estimated payments or billings shall be reconciled at
the end of each calendar year and, if necessary, adjusted by March 31st
of the following year. Interest shall be included in quarterly payments
and in adjusted payments made on March 31st of the following year. Such
interest shall accrue monthly during the period in which revenue was
earned and not yet paid and will be based on the 90-day Treasury bill
rate in effect at the end of the quarter in which the payment is made.
Monthly interest shall start accruing 45 days following the month in
which it is earned and accrue until the date on which the payment is
made.
    In conjunction with calculating estimated quarterly and reconciled
annual payments under this Exhibit 1, the Processor shall submit to the
Participants a quarterly itemized statement setting forth the basis
upon which net operating income was calculated, including a quarterly
itemized statement of the Processor costs set forth in Paragraph 3 of
this Exhibit. Such Processor costs and Plan revenues shall be adjusted
annually based solely on the Processor's quarterly itemized statement
audited pursuant to Processor's annual audit. Processor shall pay or
bill Participants for the audit adjustments within thirty days of
completion of the annual audit. By majority vote of the Operating
Committee, the Processor shall engage an independent auditor to audit
the Processor's costs or other calculation(s), the cost of which audit
shall be shared equally by all Participants. The Processor agrees to
cooperate fully in providing the information necessary to complete such
audit.

[FR Doc. E8-26108 Filed 10-31-08; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 83, Number 216 (Wednesday, November 7, 2018)]
[Notices]
[Pages 55763-55765]
[FR Doc No: 2018-24303]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84515; File No. SR-NYSE-2018-34]

Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To Amend NYSE Rule 104 Governing Transactions by
Designated Market Makers

November 1, 2018.

I. Introduction

    On July 31, 2018, New York Stock Exchange LLC (``Exchange'' or
``NYSE'') filed with the Securities and Exchange Commission
(``Commission'') pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend NYSE Rule 104 governing transactions by
Designated Market Makers (``DMMs''). The proposed rule change was
published for comment in the Federal Register on August 16, 2018.\3\ On
September 24, 2018, the Commission extended to November 14, 2018, the
time period in which to approve, disapprove, or institute proceedings
to determine whether to approve or disapprove, the proposal.\4\ The
Commission has received no comments on the proposal. This order
institutes proceedings under Section 19(b)(2)(B) of the Act \5\ to
determine whether to approve or disapprove the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 83821 (Aug. 10,
2018), 83 FR 40808 (Aug. 16, 2018) (``Notice'').
    \4\ See Securities Exchange Act Release No. 84276 (Sep. 24,
2018), 83 FR 49143 (Sep. 28, 2018).
    \5\ 15 U.S.C. 78s(b)(2)(B).
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II. Summary of the Proposed Rule Change

    The Exchange proposes to amend NYSE Rule 104, which governs the
dealings and responsibilities of Designated Market Makers (``DMMs'') on
the Exchange.\6\ According to the Exchange, the proposal would
consolidate and restructure current Rules 104(g), (h), and (i), which
would be deleted and incorporated into a new subsection (g) titled
``Transactions by DMMs.'' \7\
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    \6\ Details of the proposal rule change can be found in the
Notice. See Notice, supra note 3.
    \7\ See id. at 40809-10.
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    Rule 104 currently defines four types of DMM transactions. Current
Rule 104(g) defines Neutral Transactions, Non-Conditional Transactions,
and Prohibited Transactions, and current Rule 104(h) defines
Conditional Transactions.\8\ The Exchange proposes to eliminate the
definitions of Neutral Transactions, Non-Conditional Transactions, and
Prohibited Transactions and to amend the rules regarding Conditional
Transactions and rename them ``Aggressing Transactions'' under an
amended Rule 104(g).\9\
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    \8\ See id. at 40808-09 (describing current provisions regarding
these transaction types).
    \9\ See id. at 40809-10.
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    The Exchange proposes to define an Aggressing Transaction in
proposed Rule 104(g)(1)(A) as a DMM unit transaction that is (1) a
purchase (sale) that reaches across the market to trade as the contra-
side to the Exchange published offer (bid); and (2) priced above
(below) the last differently-priced trade on the Exchange and above
(below) the last differently-priced published offer (bid) on the
Exchange.\10\ According to the Exchange, under proposed Rule
104(g)(1)(B), an Aggressing Transaction during the last ten seconds
prior to the scheduled close of trading that would result in a new
consolidated high (low) price for a security during that trading day
would be prohibited, unless the transaction would bring the price of
the security

into parity with an underlying or related security or asset.\11\
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    \10\ See id. at 40810.
    \11\ See id.
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    According to the Exchange, proposed Rule 104(g)(2)--``Re-Entry
Obligations''--would provide that the DMM unit's obligation to maintain
a fair and orderly market may require re-entry on the opposite side of
the market after effecting one or more transactions.\12\ According to
the Exchange, proposed Rule 104(g)(2) would provide that this re-entry
should be commensurate with the size of the transactions and the
immediate and anticipated needs of the market, and the Exchange states
that these are the same requirements currently specified for Neutral
and Non-Conditional Transactions and for certain Conditional
Transactions.\13\
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    \12\ See id. at 40811.
    \13\ See id.
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    Proposed Rule 104(g)(2)(A) would require that, after an Aggressing
Transaction, a DMM unit must re-enter the opposite side of the market
at or before the applicable Price Participation Point--which would be
defined in proposed Rule 104(g)(3)--for that security, commensurate
with the size of the Aggressing Transaction.\14\ Proposed Rule
104(g)(2)(B) would require that, following an Aggressing Transaction
that is 10,000 shares or more or has a market value of $200,000 or more
and exceeds 50% of the published offer (bid) size, the DMM unit must
immediately re-enter the opposite side of the market at or before the
applicable Price Participation Point for that security commensurate
with the size of the Aggressing Transaction.\15\
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    \14\ See id.
    \15\ See id.
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    According to the Exchange, under proposed Rule 104(g)(3)(A), the
Exchange would periodically issue Price Participation Point guidelines
that identify the price at or before which a DMM unit is expected to
re-enter the market following an Aggressing Transaction.\16\ Proposed
Rule 104(g)(3)(A) would also provide that, the Price Participation
Points are only minimum guidelines and compliance with them does not
guarantee that a DMM unit is meeting its obligations.\17\
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    \16\ See id. at 40812.
    \17\ See id.
---------------------------------------------------------------------------

    Proposed Rule 104(g)(3)(B) would provide that, notwithstanding that
a security may not have reached the Price Participation Point, the DMM
unit may be required to re-enter the market immediately after an
Aggressing Transaction based on the price and/or volume of the DMM
unit's trading in reference to the market in the security at the time
of the trading.\18\ In such situations, proposed Rule 104(g)(3)(B)
would state, DMM units may or may not rely on the fact and circumstance
that there may have been one or more independent trades following the
DMM unit's trading to justify a failure to re-enter the market.\19\
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    \18\ See id.
    \19\ See id.
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III. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \20\ to determine whether the proposal should be
approved or disapproved. Institution of proceedings is appropriate at
this time in view of the legal and policy issues raised by the
proposal, as discussed below. Institution of disapproval proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as described in greater
detail below, the Commission seeks and encourages interested persons to
provide additional comment on the proposal.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act, the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act,\21\ which requires that the rules of an exchange be
designed, among other things, to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market and a national market system and, in general, to protect
investors and the public interest, and which prohibits the rules of an
exchange from being designed to permit unfair discrimination between
customers, issuers, brokers, or dealers, and with Section 6(b)(8) of
the Act, which requires that the rules of an exchange not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
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    \21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
concerns identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
inconsistent with Section 6(b)(5) or any other provisions of the Act,
or the rules and regulation thereunder. Although there do not appear to
be any issues relevant to approval or disapproval which would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\22\
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    \22\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by November 28, 2018. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
December 12, 2018.
    In particular, the Commission is interested in public comment on
the following topics.
    1. What are commenters' views regarding the Exchange's proposal to
replace the existing rule against Prohibited Transactions, which is in
effect during the last 10 minutes of trading, with the proposed
prohibition of Aggressing Transactions during the last 10 seconds of
trading that would result in a new consolidated high (low) price for a
security during that trading day? \23\
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    \23\ As noted above, such transaction would be permitted if they
would bring the price of the security into parity with an underlying
security or asset. See supra note 11 & accompanying text.
---------------------------------------------------------------------------

    2. Do commenters believe that a prohibition against Aggressing
Transactions during the last 10 seconds of trading that would result in
a new consolidated high (low) price for a security during that trading
day would be sufficient to prevent DMMs from aggressively taking
liquidity and moving prices on the Exchange immediately before the
closing auction? Why or why not? What are commenters' views on the
trading statistics offered by the Exchange to support its proposal to
prohibit Aggressing Transactions only during the last 10 seconds of
trading? \24\ Do commenters believe that a different

duration for such a prohibition would be preferable? If so, what
duration and why?
---------------------------------------------------------------------------

    \24\ See Notice, supra note 3, 83 FR 40813, nn.14 & 18.
---------------------------------------------------------------------------

    3. What are commenters' views on the significance of the proposed
change from the current prohibition against certain transactions that
would set a new high or low price on the Exchange for the day to the
proposed prohibition against certain transactions that would result in
a new consolidated high or low price for the day? Do commenters believe
that this change would have additional consequences for the operation
of Rule 104?
    4. What are commenters' views on how the obligations imposed on
DMMs by proposed NYSE Rule 104 during the rest of the trading day would
compare with the obligations imposed by current NYSE Rule 104?
    5. What are commenters' views on the Exchange's argument that
changes to NYSE Rule 104 would promote aggressive DMM quoting in their
assigned securities? What are commenters' views on the Exchange's
argument that DMMs are currently at a competitive disadvantage because
of NYSE Rule 104 and that the current rule ``thwarts the ability of the
DMM to meet their affirmative obligations to quote aggressively in
assigned securities''?
    6. What are commenters' views on whether the ``Price Participation
Points'' that the Exchange provides to its DMMs would be sufficient
under the proposed changes to NYSE Rule 104 to prevent DMMs from
aggressively taking liquidity and moving prices on the Exchange
immediately before the closing auction?
    7. Existing Rules 104(g) and (h) refer to ``DMMs,'' and proposed
Rule 104(g) would refer instead to ``DMM units.'' What are commenters'
views of the significance, if any, of this change in wording? What are
commenters' views on whether the amended rule should apply to the
activities of individuals trading as DMMs on the Exchange floor?
    8. Generally, would the Exchange's proposal maintain an appropriate
balance between the benefits and obligations of being a DMM on the
Exchange? \25\ In light of DMMs' special responsibility for closing
auctions under NYSE rules, would the obligations of DMMs under NYSE
rules be reasonably designed to prevent DMMs from inappropriately
influencing or manipulating the close if the proposed rule change were
approved?
---------------------------------------------------------------------------

    \25\ Current NYSE Rule 104 was originally approved as part of
the NYSE pilot program called the ``New Market Model.'' See
Securities Exchange Act Release No. 58845 (Oct. 24, 2008), 73 FR
64379 (Oct. 29, 2008). As the Commission stated when approving the
NYSE's proposal to conduct the New Market Model pilot, ``[w]e
carefully review trading rule proposals that seek to offer special
advantages to market makers. Although an exchange may reward such
participants for the benefits they provide to the exchange's market,
such reward must not be disproportionate to the services provided.''
See id. In 2015, the Commission permanently approved the New Market
Model pilot and noted that the pilot had been conducted to seek
``further evidence that the benefits proposed for DMMs are not
disproportionate to their obligations.'' See Securities Exchange Act
Release No. 75578 (July 31, 2015), 80 FR 47008 (Aug. 6, 2015).
---------------------------------------------------------------------------

    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-NYSE-2018-34 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2018-34. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSE-2018-34 and should be submitted on
or before November 28, 2018. Rebuttal comments should be submitted by
December 12, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(57).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-24303 Filed 11-6-18; 8:45 am]
 BILLING CODE 8011-01-P