\407\ See Roundtable Day One Transcript at 99 (Stacey
Cunningham, NYSE) (``[i]n the short term, we could use wireless
technology to deliver SIP and overcome some of the geographic
latencies.''); at 156-157 (Oliver Albers, Nasdaq) (stating that
Nasdaq could consider permitting microwave transmission from the
exchanges to the Nasdaq UTP SIP); ICE Global Network & Colocation:
Technical Specifications (Oct. 2019), available at https://www.nyse.com/publicdocs/data/IGN_Colo_US_Technical_Specifications.pdf.
    \408\ See NYSE Low-Latency SIP Filing, supra note 47. NYSE
currently assesses the following colocation fees for access to the
IP network: (1) For a 1 gb circuit, $2,500 per connection initial
charge plus $2,500 monthly per connection; (2) for 10 gb circuit,
$10,000 per connection initial charge plus $11,000 monthly per
connection; and (3) for a 40 gb circuit, $10,000 per connection
initial charge plus $18,000 monthly per connection. See NYSE Price
List 2020, available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf (last accessed Jan. 22, 2020).
    \409\ See NYSE Low-Latency SIP Filing, supra note 47, at 47594.
The filing defines ``NMS feeds'' to include the data streams of the
Consolidated Tape System, the Consolidated Quote System, and the
Options Price Reporting Authority (``OPRA'').
    \410\ Id. The Commission understands this to mean that,
currently, each of the CTA/CQ Plan participants must transmit its
data through connectivity options that have a round-trip latency of
at least 280 microseconds [140 microsecond one-way latency) * 2 =
280 microsecond round-trip latency]. The Commission believes that
this is in addition to the transmission latency that is in the
published CTA average aggregation latency metrics of between 69
microseconds for the quote feed and 139 microseconds for the trade
feed. See CTA, Key Operating Metrics of Tape A&B U.S. Equities
Securities Information Processor (CTA SIP), supra note 398
(regarding the second quarter of 2019). The round-trip latency of
280 microseconds would increase the 2Q19 realized CTA aggregation
latency to 349 microseconds (from 69 microseconds) for the quotes
feed and 419 microseconds (from 139 microseconds) for the trade
feed. At the same time, the Commission understands that NYSE, which
owns the CTA/CQ SIP, offers non-SIP proprietary data transmission to
end-users via faster microwave networks. See, e.g., ICE Global
Network: Chicago--New Jersey, available at https://www.theice.com/market-data/connectivity-and-feeds/wireless/chicago-to-new-jersey
(last accessed Jan. 22, 2020) (describing ICE's microwave route
between the Chicago metro trading hub to Nasdaq's data center in
Carteret, NJ); ICE Global Network: New Jersey Metro, available at
https://www.theice.com/market-data/connectivity-and-feeds/wireless/new-jersey-metro (last accessed Jan. 22, 2020) (describing ICE's
laser and millimeter wave route between ICE's Mahwah data center and
the Carteret and Secaucus data centers. The Commission has
instituted proceedings to allow for additional analysis and input
concerning proposed fees in connection with the NYSE Low-Latency SIP
Filing. See Securities Exchange Act Release No. 87699 (Dec. 9,
2019), 84 FR 68239 (Dec. 13, 2019). In addition, the CTA and OPRA
recently made changes that permit access to the NMS feeds with an
expected reduction in latency. ``The NMS Network uses low-latency
network switches and optimized topology to minimize latency, which
[CTA and OPRA] expects will result in one-way latency, across all
network hops, of approximately 5us, including fiber latency. This is
a substantial improvement over the current inbound one-way latency
of approximately 144us over [Secure Financial Transaction
Infrastructure].'' See NMS Network Customer FAQs, at 3 (2019),
available at https://www.ctaplan.com/publicdocs/ctaplan/notifications/trader-update/NMS_Network_FAQ.pdf (last accessed Jan.
22, 2020); CTA and UTP Annual Letter, supra note 181, at 1 (``In its
continuing effort to reduce latency and improve resiliency, the CTA
will be making two improvements to the CTA/CQ feeds this year.
First, subscribers will be able to connect to a new, dedicated, low
latency NMS network to access CTA/CQ feeds. Subject to SEC approval,
this should be available in the first quarter of 2020. Second, the
CTA will complete its migration to NYSE's new Pillar technology,
which will provide substantial latency reductions for the CTA/CQ
feeds. CTA anticipates that it will launch the new technology in the
summer of 2020.'').
---------------------------------------------------------------------------

    Over the past several years, market participants have increasingly
raised concerns about these various forms of latency and how they
affect their ability to participate competitively in today's markets
and provide best execution to their customers. Market participants have
argued that as significant investments have been made in the
proprietary data environment, the Equity Data Plans, which are operated
by the SROs, have not made--or have been slow to make--the investments
necessary to address most of these concerns.\411\ As a result, the
latency differentials, in their various forms, between SIP data and
proprietary data are significant enough that market participants
believe they affect their ability to trade competitively and to provide
best execution to customer orders.\412\
---------------------------------------------------------------------------

    \411\ See Letter from Theodore R. Lazo, Managing Director and
Associate General Counsel, SIFMA, to Mary Jo White, Chair,
Commission, 8-9 (Oct. 24, 2014), available at https://www.sec.gov/comments/s7-02-10/s70210-422.pdf; Letter from John Ramsay, Chief
Market Policy Officer, Investors Exchange LLC, to Vanessa
Countryman, Secretary, Commission (Sept. 24, 2019) (``Ramsay Letter
II'') (attachment to letter), available at https://www.sec.gov/comments/4-729/4729-6190352-192448.pdf; Proposed Governance Order,
supra note 8.
    \412\ See, e.g., Roundtable Day One Transcript at 64 (Brad
Katsuyama, IEX) (``[a]nyone who cares or is, you know, making
machine-level decisions cannot use the SIP just from a speed
standpoint . . . [b]ut if full information and speed become
important, which it is for the majority of large players maintaining
their own electronic trading platform, then I would not say the SIP
serves much of a purpose to them.''); at 66 (Mehmet Kinak, T. Rowe
Price (``[t]his is a best execution obligation. We are obligated to
try and produce best execution on every single order that we have.
If our brokers are not aligned in that manner to use the most
direct, the fastest, the most robust feeds they can get their hands
on, then we will trade with someone else.''); T. Rowe Price Letter
at 2 (explaining that broker-dealers must purchase proprietary data
because SIP data is slow and not as expansive as proprietary data
and that even if the Commission provided a safe harbor permitting
broker-dealers to fulfill their best execution requirements by
relying on SIP data, broker-dealers believe that they have an
obligation to obtain the ``more robust, faster'' proprietary data
feeds).
---------------------------------------------------------------------------

    Proprietary data products often rely on low latency wireless
connections, and the data is transmitted directly from each exchange to
the data center of the subscriber without first having to travel to a
centralized consolidation location as is the case with the exclusive
SIPs. In addition, new entities have entered the market data space by
providing specialized market data products for subscribers using
proprietary data feeds. In essence, the provision of proprietary data
to market participants via a decentralized consolidation model has
developed in a competitive environment that has enhanced content and
reduced latency for market participants; however, improvements to
latency occurred more slowly and to a lesser extent with the exclusive
SIPs.\413\ The concurrent existence of both the exclusive, centralized
consolidation model for SIP data and the decentralized consolidation
model for enhanced proprietary data has resulted in a two-tiered market
data environment, where those participants that can reasonably afford
and choose to

pay for the proprietary feeds receive other content rich data faster
than those who do not, such as smaller market participants that face
higher barriers to entry from data and other exchange fees.\414\ The
Commission is concerned about this disparity and its effect on
investors. Accordingly, the Commission is proposing to address the
latency differentials and reduce the asymmetries that exist within this
two-tiered environment.
---------------------------------------------------------------------------

    \413\ See supra note 411 and accompanying text.
    \414\ See infra note 418.
---------------------------------------------------------------------------

B. Proposed Decentralized Consolidation Model

    To enhance the speed and quality of the collection, consolidation,
and dissemination of the proposed consolidated market data, the
Commission is proposing a decentralized consolidation model with
competing consolidators \415\ and self-aggregators \416\ to replace the
existing centralized consolidation model which relies on the exclusive
SIPs.\417\
---------------------------------------------------------------------------

    \415\ See infra Section IV.B.2.
    \416\ See infra Section IV.B.3.
    \417\ The Commission is taking an incremental approach to
addressing market data infrastructure issues and is at this time
addressing only the market data infrastructure issues of NMS stocks.
The market data needs of options market participants and equities
market participants are different, as are the market structures for
options and equities more broadly. The Commission's proposal to
expand the content of consolidated market data and introduce a
decentralized consolidation model for its distribution to market
participants has been designed for NMS stocks. The Commission may in
the future consider the market data infrastructure of listed
options. See also Proposed Governance Order, supra note 8.
---------------------------------------------------------------------------

    The Commission preliminarily believes that a decentralized
consolidation model with competing consolidators and self-aggregators
would benefit market participants because it would significantly reduce
the geographic, aggregation, and transmission latency differentials
that exist between SIP data and proprietary data that have increasingly
reduced the utility of SIP data and disadvantaged, in particular,
smaller market participants.\418\ Specifically, as discussed above, the
Commission preliminarily believes that the decentralized consolidation
model would reduce geographic latency by facilitating the ability of
proposed consolidated market data to be delivered to subscribers more
directly, without going to a separate location to be consolidated by
the exclusive SIPs.\419\ In addition, the proposed decentralized
consolidation model likely would reduce geographic latency by allowing
consolidation to occur at the data center where a data end-user is
located instead of occurring only at the CTA/CQ SIP and the Nasdaq UTP
SIP data centers. This arrangement would permit competing consolidators
to receive data from each exchange directly at the point of
consolidation and latency-sensitive data end-users to receive proposed
consolidated market data at the same location if they so desired.\420\
This would eliminate the geographic latency necessarily encountered
when a latency-sensitive data end-user receives consolidated data from
an exclusive SIP that is in a separate data center and that exclusive
SIP is consolidating data from exchanges that are located in other data
centers.
---------------------------------------------------------------------------

    \418\ See infra Section VI.C.2(c). Roundtable panelists stated
that broker-dealers do not have the option to forgo buying the
proprietary data in meeting their clients' needs because the SIPs
are slower and not as expansive. See Roundtable Day One Transcript
at 65-66 (Mehmet Kinak, T. Rowe Price); T. Rowe Price Letter at 2;
Roundtable Day Two Transcript at 245 (Tyler Gellasch, Healthy
Markets) (asking how a small firm can be competitive when it has to
spend $50,000 per month to connect to one exchange group's
proprietary data feeds), at 280-281 (describing market data as a
mandatory ``tax'' on doing business that imposes a
disproportionately large burden on small brokers). But see Robert P.
Bartlett, III and Justin McCrary, How Rigged Are Stock Markets?
Evidence from Microsecond Timestamps (2017) (``Bartlett and
McCrary''), available at https://www.law.berkeley.edu/wp-content/uploads/2019/10/bartlett_mccrary_latency2017.pdf (``[O]ur analysis
suggests SIP reporting latencies generate remarkably little scope
for exploiting the informational asymmetries available to
subscribers to exchanges' direct data fees.''). Bartlett and
McCrary, however, cautioned that their ``results should not be over-
interpreted'' and noted that their results ``do not rule out other
types of latency arbitrage that might be prevalent in the current
environment.'' Roundtable respondents supported the view that a
competing consolidator model would reduce the speed differential
between current SIP data and proprietary data. See, e.g., Roundtable
Day One Transcript at 49-50 (Prof. Hal Scott, Harvard University);
SIFMA Letter II.
    \419\ As noted above, the current Equity Data Plan architecture
requires SRO data to be sent from an SRO's data center to the
exclusive SIP (typically in a separate data center in a different
geographic location) for consolidation, prior to then being
transmitted from the plan processor's data center to market data
users (again, typically in a separate data center in a different
geographic location) once the data is consolidated. See supra notes
395-396 and accompanying text.
    \420\ If a competing consolidator chooses not to consolidate
data at the data center of its users, the Commission believes the
users would still benefit from reduced aggregation and transmission
latencies resulting from the proposed decentralized consolidation
model. See infra notes 421-422 and accompanying text.
---------------------------------------------------------------------------

    In addition, the Commission preliminarily believes that the
introduction of competitive forces will lead to improvements in the use
of more competitive, low latency aggregation and transmission
technologies for consolidated market data. Specifically, competition
should incentivize competing consolidators to minimize the amount of
time it takes to aggregate SRO data into proposed consolidated market
data.\421\ In addition, competition could incentivize competing
consolidators to reduce transmission latency by offering superior
connectivity options that are faster than fiber optics, such as
microwave, laser, or other wireless means of connectivity.\422\
Competing consolidators and self-aggregators would not be restricted to
the transmission methods mandated by the Equity Data Plans \423\ and
would compete based on the efficiency of their aggregation of raw SRO
data to generate proposed consolidated market data. By introducing
competitive forces into the collection, consolidation, and
dissemination of proposed consolidated market data, the Commission
preliminarily believes such data could be delivered to market
participants with improved efficiencies and latencies comparable to
proprietary market data products.
---------------------------------------------------------------------------

    \421\ The Commission is proposing to require each competing
consolidator to publish on its website its latency statistics on a
monthly basis. See infra Section IV.B.2(e)(ii).
    \422\ See infra Section VI.C.2(c).
    \423\ As noted above, the NYSE and Nasdaq offer faster wireless
connectivity to their data centers and other data centers. See supra
Section IV.A.
---------------------------------------------------------------------------

    To implement this model, the Commission proposes to: (1) Amend Rule
600 to introduce definitions of competing consolidator and self-
aggregator; (2) amend Rule 603(b) to require the SROs to provide their
NMS information to competing consolidators and self-aggregators in the
same manner the SROs make available this information to any person and
to remove the requirement that there be only one plan processor for
each NMS stock; and (3) adopt new Rule 614 to require the registration
of competing consolidators and establish the obligations with which
they must comply and a new Form CC for competing consolidator
registration. In addition, the Commission is proposing to amend
Regulation SCI to expand the definition of ``SCI entities'' to include
competing consolidators because they would be sources of proposed
consolidated market data, and therefore would ``play a significant role
in the U.S. securities markets and/or have the potential to impact
investors, the overall market, or the trading of individual
securities.'' \424\ As discussed below, the Commission preliminarily
believes that if a competing consolidator's consolidated market data
feed became unavailable or otherwise unreliable, it could have a
significant impact on the trading of securities, and could interfere

with the maintenance of fair and orderly markets.\425\ Accordingly,
this change would subject competing consolidators to the requirements
of Regulation SCI. Under this new proposed decentralized consolidation
model, the SROs would be required to provide their NMS information to
competing consolidators and self-aggregators and the existing exclusive
SIP model would cease.
---------------------------------------------------------------------------

    \424\ See Regulation SCI Adopting Release, supra note 28, at
72258.
    \425\ See infra Section IV.B.2(f).
---------------------------------------------------------------------------

    The Commission preliminarily believes that the implementation of a
decentralized consolidation model with competing consolidators and
self-aggregators will fundamentally improve the way consolidated market
data, as proposed, is provided in the U.S. Among other things, this
model should materially reduce information asymmetries for those market
participants who rely exclusively on the exclusive SIP feed and
facilitate the ability to achieve best execution for those broker-
dealers who rely exclusively on the SIP feed. Finally, the Commission
believes that the introduction of competition into the collection,
consolidation, and dissemination of the proposed consolidated market
data should help ensure that such data continues to be provided in an
accurate, reliable, prompt, and fair manner \426\ as the market evolves
in the future.
---------------------------------------------------------------------------

    \426\ See 15 U.S.C. 78k-1(c)(1)(B).
---------------------------------------------------------------------------

1. Access to Data
    The Commission is proposing to amend Rule 603(b) of Regulation NMS
to reflect the decentralized consolidation model by requiring each SRO
to provide its NMS information, including all data necessary to
generate proposed consolidated market data, to all competing
consolidators and self-aggregators \427\ in the same manner and using
the same methods, including all methods of access \428\ and data
formats, as such SRO makes available any information to any other
person.\429\
---------------------------------------------------------------------------

    \427\ The proposal does not include a requirement that the SROs
provide a standardized format for the data because the Commission
preliminarily believes that imposing a standardized format would
increase costs and burdens on the SROs and that competing
consolidators and self-aggregators would be able to handle data
received in multiple formats, as determined by each SRO, as is the
case today for proprietary data. The Commission is proposing to
require each SRO to offer the same access or transmission options
and the same formats offered for proprietary data to proposed
consolidated market data. See proposed amendment to Rule 603(b).
    \428\ For example, the same access options available to
proprietary feeds, including, but not limited to transmission medium
(i.e., fiber optics or wireless), multicast communication,
colocation options, physical port, logical port, bandwidth, and
FPGA, would be required to be made available for proposed
consolidated market data feeds. Further, any enhancements to
proprietary feed methods of access should similarly be made to
consolidated market feeds.
    \429\ Four commenters supported this approach. One commenter
stated that for a new consolidator model to be competitive, the
consolidators would have to have the right to buy data from
exchanges on non-discriminatory terms. See Ramsay Letter II
(attachment to letter). Another commenter stated that the economic
terms of co-located competing consolidators at an exchange data
center should be equivalent to those offered to the exchange's
trading members. This commenter also suggested that any exchange
that operates a competing consolidator in its data center should
have policies and procedures to ensure that competing consolidators
in the same data center have equal access to the exchange's feeds at
equal latencies. This commenter also supported the provision of
direct market data feeds by exchanges to competing consolidators.
See Letter to Brent J. Fields, Secretary, Commission, from Melissa
MacGregor, Managing Director and Associate General Counsel, and
Theodore R. Lazo, Managing Director and Associate General Counsel,
SIFMA, dated Oct. 24, 2018 (``SIFMA Letter'') (attachment to
letter). The third commenter stated that all market data
distributors should receive the same market data at the same time
and at the same cost, which may require exchange proprietary data
feeds to be delayed to match the data receipt time of affiliated or
third-party SIPs. The commenter said that exchanges, affiliates, and
third parties then would be able to compete to provide market data
to recipients. See Letter to Jay Clayton, Chairman, Commission, from
Tyler Gellasch, Executive Director, Healthy Markets Association, 3
(Jan. 3, 2020) (``Healthy Markets Association Letter III''). The
fourth commenter suggested that the Commission update its
interpretations for Rule 603(a) to emphasize ``the synchronized
availability of data between SIP and exchanges' proprietary products
to satisfy the fair and reasonable, as well as non-discriminatory
principles.'' See Letter to Vanessa Countryman, Secretary,
Commission, from Kelvin To, Founder and President, Data Boiler
Technologies, LLC, 8 (Dec. 6, 2019) (``Data Boiler Letter''). The
Commission believes that its proposed amendment to Rule 603(b), as
discussed below, would achieve this result by requiring the same
manner and methods, including all methods of access and the same
format for competing consolidators, self-aggregators and subscribers
of proprietary data.
---------------------------------------------------------------------------

    Under the Commission's proposed approach, competing consolidators
and self-aggregators would have to collect, and the SROs would provide,
all of each SRO's market data that is necessary to generate
consolidated market data as proposed,\430\ and the competing
consolidators and self-aggregators would aggregate the SROs' market
data to generate the proposed consolidated market data. For exchange
data, an exchange could leverage its existing offerings and
infrastructure and make available to competing consolidators and self-
aggregators its current proprietary data products that contain data
elements that are specified in the proposed definition of consolidated
market data,\431\ or an exchange could develop a new market data
product that contains only the data elements that are specified in the
proposed definition of consolidated market data. Competing
consolidators and self-aggregators could choose to purchase products
that include only the proposed consolidated market data elements or
products that contain elements of both proposed consolidated market
data and other proprietary data. However, all SROs must offer market
data, and access to such data, to those competing consolidators or
self-aggregators that elect to purchase only data that would be
necessary to create consolidated market data, as required under the
proposed rule amendments.
---------------------------------------------------------------------------

    \430\ One commenter advocated that each exchange provide a
single data feed to market participants. The commenter said that a
single data feed ``would better serve market participants from the
standpoint of equality and fairness.'' See T. Rowe Price Letter at
3. The proposed rule does not require the SROs to provide a single
feed. The Commission preliminarily believes that the SROs should be
able to utilize their current data feeds to make available the data
necessary to generate proposed consolidated market data. This would
reduce the costs and burdens of implementing the proposed amendments
to Rule 603(b).
    \431\ For example, an exchange could make available a current
proprietary DOB product that contains elements of proposed core data
to competing consolidators and self-aggregators for purposes of Rule
603(b).
---------------------------------------------------------------------------

    The proposed decentralized consolidation model and the proposed
consolidated market data definition do not preclude the exchanges from
continuing to sell proprietary data. If an exchange provided its
proprietary data products to a competing consolidator or self-
aggregator and a competing consolidator or self-aggregator developed a
product, or otherwise used data, that exceeded the scope of proposed
consolidated market data (e.g., full depth of book data), the competing
consolidator or self-aggregator would be charged separately for the
proprietary data use pursuant to the individual exchange fee
schedules.\432\ Self-aggregators and competing consolidators that limit
their use of exchange data to proposed consolidated market data
elements would be charged only for proposed consolidated market data
pursuant to the effective national market system plan(s) fee
schedules.\433\ As noted above, under the proposed decentralized
consolidation model, SROs must make available market data to competing
consolidators or self-aggregators that elect only to purchase

data necessary for the proposed consolidated market data.\434\
---------------------------------------------------------------------------

    \432\ Fees for market data that is outside of the proposed
definition of consolidated market data (i.e., proprietary data
products, and access to such proprietary data products) would be
subject to the rule filing process pursuant to Section 19(b) and
Rule 19b-4. As discussed above, competing consolidators would be
able to develop products for their subscribers based on subscriber
demand. See supra notes 322-323 and accompanying text.
    \433\ Fees for proposed consolidated market data would be
subject to the NMS plan process pursuant to Rule 608 of Regulation
NMS. See infra Section IV.B.4 for a discussion of the effective
national market system plan(s).
    \434\ Vendors would still be able to operate in the
decentralized consolidation model. Vendors would be able to receive
proprietary market data directly from the SROs as they do today or
they would be able to receive consolidated market data from a
competing consolidator in a manner that is similar to how they
receive SIP data today without being required to register as a
competing consolidator. However, if a vendor wished to receive
directly from the SROs information with respect to quotations for
and transactions in NMS stocks at the prices established by the
effective national market system plan(s) and generate consolidated
market data for dissemination, such vendor would be required to
register as a competing consolidator. Thus, only competing
consolidators and self-aggregators would be able to directly receive
the NMS information that is necessary to generate consolidated
market data from the SROs at the prices established by the effective
national market system plan(s). Id.
---------------------------------------------------------------------------

    Currently, the exclusive SIPs are subject to Exchange Act Section
11A(c)(1)(C) (as implemented by Rule 603(a)(1)), which requires that
exclusive processors (which include the exclusive SIPs and SROs when
they distribute their own data) must assure that all securities
information processors may obtain on fair and reasonable terms
information with respect to quotations for and transactions in
securities, which includes consolidated market data.\435\ Section
11A(c)(1)(D), in turn (as implemented by Rule 603(a)(2)), requires that
the SROs provide such data to broker-dealers and others on terms that
are not unreasonably discriminatory. As we have noted, competing
consolidators will be securities information processors and thus
Exchange Act Section 11(A)(c)(1)(C) will continue to apply. Similarly,
self-aggregators are broker-dealers and thus Exchange Act Section
11A(c)(1)(D) will continue to apply.
---------------------------------------------------------------------------

    \435\ 15 U.S.C. 78k-1(c). See also Rule 603(a)(1)-(2) of
Regulation NMS, 17 CFR 242.603(a)(1)-(2).
---------------------------------------------------------------------------

    The Commission seeks to ensure that consolidated market data is
widely available for reasonable fees.\436\ In discharging its
statutorily mandated review function, the Commission must assess the
proposed fees and determine whether they are fair and reasonable, and
not unreasonably discriminatory.\437\ The Commission must have
``sufficient information before it to satisfy its statutorily mandated
review function''--that the fees meet the statutory standard.\438\ The
Commission has previously stated that fees for consolidated SIP data
can be shown to be fair and reasonable if they are reasonably related
to costs.\439\
---------------------------------------------------------------------------

    \436\ Bloomberg Decision, supra note 37, at 4, n.12 (citing
Regulation NMS Adopting Release, supra note 10, at 37560) (``In the
Proposing Release, the Commission emphasized that one of its primary
goals with respect to market data is to assure reasonable fees that
promote the wide public availability of consolidated market
data.'').
    \437\ See 15 U.S.C. 78k-1(c); see also Rules 603(a)(1)-(2), 608
of Regulation NMS, 17 CFR 242.603(a)(1)-(2), 608; Bloomberg
Decision, supra note 37, at 11-12.
    \438\ Bloomberg Decision, supra note 37 at 15; cf. Rule of
Practice 700, 17 CFR 201.700 (providing that the burden of
demonstrating that a proposed rule change satisfies statutory
standards is on the self-regulatory organization that proposed the
rule change).
    \439\ In the Market Information Concept Release, the Commission
stated ``the fees charged by a monopolistic provider (such as the
exclusive processors of market information) need to be tied to some
type of cost-based standard in order to preclude excessive profits
if fees are too high or underfunding or subsidization if fees are
too low. The Commission therefore believes that the total amount of
market information revenues should remain reasonably related to the
cost of market information.'' See Market Information Concept
Release, supra note 11, at 70627. The Commission later explained
that because core data must be purchased, their fees are less
sensitive to competitive forces. See Securities Exchange Act Release
No. 59039 (Dec. 2, 2008), 73 FR 74770, 74782 (Dec. 9, 2008) (File
No. SR-NYSEArca-2006-21). A reasonable relation to costs has since
been the principal method discussed by the Commission for assessing
the fairness and reasonableness of such fees for core data, with the
recognition that ``[t]his does not preclude the Commission from
considering in the future the appropriateness of another guideline
to assess the fairness and reasonableness of core data fees in a
manner consistent with the Exchange Act.'' See Bloomberg Decision
supra note 37, at 15 & nn.63. Although this proposal introduces
competition into the dissemination of consolidated market data, the
mandatory nature of the provision of consolidated market data by the
SROs has not changed. The ``principal method we have discussed for
assessing the fairness and reasonableness of core data fees has
stated that core data fees should bear at least some relationship to
costs; past Commission statements have contemplated various
approaches for how that relationship might be assessed. This is
because distributors of core data have an effective monopoly over
such data, and accordingly competitive market forces are not
operating to impose sufficient constraints to promote core data
fees' fairness and reasonableness.'' See Bloomberg Decision, supra
note 37, at 15 (footnotes and citations omitted).
---------------------------------------------------------------------------

    The exchanges would be able to offer different access options
(e.g., with different latencies, throughput capacities, and data-feed
protocols) to market data customers, but any access options available
to proprietary data customers must also be available to competing
consolidators and self-aggregators for the purpose of collecting and
consolidating proposed consolidated market data.\440\ Proposed Rule
603(b) would require exchanges to provide all forms of access used for
proprietary data to all competing consolidators and self-aggregators
for the collection of the data necessary to generate proposed
consolidated market data. The Commission is proposing to require that
an exchange offer the same form of access, such as fiber optics,
wireless, or other forms, in the same manner and using the same
methods, including all methods of access and the same format, as the
exchange offers for its proprietary data. For instance, if an exchange
has more than one form of transmission for its proprietary data, then
the exchange must offer the competing consolidators and self-
aggregators those types of transmission for proposed consolidated
market data. The proposed rule would not require an exchange to offer
new forms of access, but if an exchange did offer any new forms of
access for proprietary data, it would have to offer them for proposed
consolidated market data as well. Different forms of access affect the
delivery of data. For example, as discussed above, fiber connections
have latencies that wireless connections do not. If an exchange
provided its proprietary market data via wireless connections and
proposed consolidated market data only via fiber connections, the
latencies that exist today would continue. Accordingly, the Commission
preliminarily believes that the SROs should be required to provide
proposed consolidated market data in the same manner and using the same
methods, including all methods of access and the same format as they
provide for proprietary data.
---------------------------------------------------------------------------

    \440\ See Rule 603(a) of Regulation NMS, 17 CFR 242.603(a).
Access fees would be set forth in each individual SRO's fee
schedules.
---------------------------------------------------------------------------

    The Commission understands that different market participants have
different access needs. The Commission is not mandating a specific
connectivity option or limiting options for market participants but
believes that all connectivity options, including co-location, must be
available to all market participants whether they are purchasing
proposed consolidated market data or proprietary data. In addition, the
access requirement under Rule 603(b) would require that the exchanges
provide their NMS information, including all data necessary to generate
consolidated market data, at one data dissemination location co-located
near each exchange's matching engine. This requirement would allow
competing consolidators and self-aggregators to receive data at that
location at the same speeds, and with the same access options, as the
exchange offers its market data. Different colocation options within a
data center could raise concerns about whether that exchange is
providing the same manner of access to its data as proposed to be
required under Rule 603(b). Further, the exchanges would not be
permitted to provide their NMS information necessary to generate
consolidated market data in a faster manner to any affiliate exchange,
a subsidiary or other affiliate that operates

as a competing consolidator or a subsidiary or affiliate that competes
in the provision of proprietary data.
    Furthermore, proposed Rule 603(b) would require that all access
options be provided in a latency-neutralized manner such that all
participants within the exchange's data center--such as proprietary
data subscribers, competing consolidators, and self-aggregators--would
receive the data at the same time, regardless of their location or
status within the data center.\441\ For example, exchanges could adopt
equal cable length protocols (i.e., where cable lengths from network
equipment to customer cabinets are harmonized for equal access) to
ensure that all of the exchange's data center connections provide
market data simultaneously. The proposed decentralized consolidation
approach would require the SROs to use the same latency-neutralization
processes for competing consolidators and self-aggregators as they
offer to subscribers of proprietary data.
---------------------------------------------------------------------------

    \441\ See also Rule 603(a) of Regulation NMS, 17 CFR 242.603(a);
supra note 440 and accompanying text.
---------------------------------------------------------------------------

    The Commission is also proposing to remove the requirement in Rule
603(b) that ``all consolidated information for an individual NMS stock
[be disseminated] through a single plan processor.'' \442\ While this
requirement is necessary for the centralized consolidation model, it
would be inconsistent with the proposed decentralized consolidation
model, which would allow multiple competing consolidators to
disseminate proposed consolidated market data in individual NMS stocks
and would permit self-aggregators to collect and generate proposed
consolidated market data for individual NMS stocks for their own
internal uses.
---------------------------------------------------------------------------

    \442\ 17 CFR 242.603(b).
---------------------------------------------------------------------------

    The Commission preliminarily believes that the proposed amendments
to Rule 603(b) would be consistent with the goals of Section 11A of the
Exchange Act by helping to ensure the prompt, accurate, reliable, and
fair collection, processing, distribution, and publication of NMS
information, as well as the fairness and usefulness of such data.\443\
---------------------------------------------------------------------------

    \443\ See Section 11A(c)(1)(B) of the Exchange Act, 15 U.S.C.
78k-1(c)(1)(B). Section 11A(c)(1)(B) of the Exchange Act authorizes
the Commission to prescribe rules, as necessary or appropriate in
the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Exchange Act, that assure the
prompt, accurate, reliable, and fair collection, processing,
distribution, and publication of quotation and transaction
information, as well as the fairness and usefulness of the form and
content of such data. Id.
---------------------------------------------------------------------------

    The Commission requests comment on the proposed amendments to Rule
603(b) of Regulation NMS. In particular the Commission solicits comment
on the following:
    64. Should the SROs be required to provide all of their market data
with respect to NMS stocks to competing consolidators and self-
aggregators? Should the SROs charge fees based on the use of the data,
e.g., fees for proposed consolidated market data set by the effective
national market system plan(s) and fees for proprietary data set by
individual SROs? Should the SROs only be required to provide the market
data that is necessary to generate and calculate proposed consolidated
market data? Or, should the determination as to how best to provide the
market data that is necessary to generate and calculate proposed
consolidated market data be left to the discretion of SROs? What are
the benefits and costs of each of these potential approaches?
    65. Should the SROs be required to offer both proposed consolidated
market data and proprietary data to competing consolidators from the
same platform and using the same technology infrastructure at an
exchange data center for both products?
    66. Should the SROs be required to offer both proposed consolidated
market data and proprietary data to competing consolidators from the
same platform and using the same SRO infrastructure where the pricing
model for the different products is based on data use as opposed to
being based upon distinct data feeds?
    67. Should the SROs be permitted to process their market data
before providing it to competing consolidators and self-aggregators?
For example, should the SROs be permitted to aggregate odd-lots before
providing data to competing consolidators and self-aggregators? If so,
why and to what extent? Should such processing only be allowed to the
extent that it does not result in any latency differential between
processed and unprocessed data? Alternatively, should such processing
be required to facilitate ease of use for certain customers?
    68. Should exchanges be required to permit co-location of competing
consolidators and self-aggregators within their data centers? If so,
should the fees charged for such colocation be subject to the effective
national market system plan(s) for NMS stocks?
    69. Should all data disseminated by the SROs to competing
consolidators and self-aggregators be in the same format (e.g.,
aggregated vs. message-by-message depth of book)? Please explain the
expected benefits and costs of allowing for multiple formats for data
dissemination.
    70. Should the SROs make historical data freely available to market
participants at a specified location and in a specified format? Why or
why not?
    71. Is there anything different about having competing
consolidators or changing the content of consolidated market data that
should affect the analysis of the fairness and reasonableness of fees
for data distributed pursuant to an NMS plan, or how the NMS plan
participants demonstrate the fairness and reasonableness of those fees?
If so, please explain why.
    72. Do commenters believe that the Commission should also require
the SROs to provide a connectivity option solely for access to the NMS
information necessary to generate proposed consolidated market data?
2. Competing Consolidators
    As noted above, currently Rule 603(b) requires all consolidated
information for an individual NMS stock to be disseminated through a
single plan processor.\444\ While the Commission has issued a proposed
order that would direct the SROs to develop a single ``New Consolidated
Data Plan'' with a new governance structure,\445\ the Commission now
proposes to update and modernize the manner in which NMS information is
collected, consolidated, and disseminated. The Commission is proposing
to amend Regulation NMS to introduce competitive forces as one of
several means to update and modernize the provision of proposed
consolidated market data. Competing consolidators would replace the
existing exclusive SIPs and would collect NMS information from each of
the SROs.\446\ Thereafter, competing consolidators would calculate,
consolidate, and disseminate the data as consolidated market data, as
proposed to be defined.\447\ The Commission

preliminarily believes that the proposed amendments to Regulation NMS
to introduce competing consolidators should help to ensure the
``prompt, accurate, reliable, and fair collection, processing,
distribution, and publication of information with respect to quotations
for and transactions in such securities and the fairness and usefulness
of the form and content of such information.'' \448\ Further, the
Commission preliminarily believes that these new market data providers
could help to effectively address the latency concerns related to the
exclusive SIPs, as well as the cost concerns that have been raised
regarding the need to buy both SIP data from the Equity Data Plans as
well as proprietary data from the exchanges, and add resilience to the
collection, consolidation and distribution of consolidated market data
by having redundant systems perform these functions rather than an
exclusive SIP.
---------------------------------------------------------------------------

    \444\ Rule 603(b) of Regulation NMS, 17 CFR 242.603(b). See also
supra Section II.B.
    \445\ See Proposed Governance Order, supra note 8.
    \446\ The existing exclusive SIPs would be required to continue
their operations until such time as the Commission considers and
approves an NMS plan amendment that would effectuate a cessation of
their operations. See infra Section IV.B.6. Should the existing
exclusive SIPs choose to become competing consolidators, proposed
Rule 614(a) mandates a registration process for securities
information processors that wish to become competing consolidators.
See infra Section IV.B.2(e). If the existing exclusive SIPs choose
to cease operations, the SROs would be required to amend the
effective national market system plan(s) for NMS stocks to reflect
this change.
    \447\ As discussed in Section IV.B.2(f), infra, because
competing consolidators would be the sources of proposed
consolidated market data, the Commission is proposing to define them
as ``SCI entities,'' and thus subject to the requirements of
Regulation SCI. The Commission proposes to amend Rule 1000 of
Regulation SCI to effect this change. See proposed amendment to Rule
1000 of Regulation SCI. See also 17 CFR 242.1000.
    \448\ 15 U.S.C 78k-1(c)(1)(B).
---------------------------------------------------------------------------

(a) Previous Consideration of Competing Consolidators Under Regulation
NMS
    The Commission previously considered introducing competitive forces
to the dissemination of SIP data when it proposed and adopted
Regulation NMS. Specifically, the Commission discussed a competing
consolidator model \449\ that, as described, would have retained the
consolidated display requirement of the predecessor to Rule 603(c) of
Regulation NMS but would have eliminated the Equity Data Plans and the
two exclusive SIPs.\450\ Under the competing consolidator model that
was being considered, each SRO would be allowed to establish its own
fees, enter into and administer its own market data contracts, and
provide its own data distribution facility.\451\ Competing
consolidators would purchase data from the individual SROs, consolidate
it, and distribute it to investors and other data users.\452\
---------------------------------------------------------------------------

    \449\ The competing consolidator model was recommended by the
Advisory Committee on Market Information (``Advisory Committee on
Market Information''), which had been formed to consider market data
issues. See Report of the Advisory Committee on Market Information:
A Blueprint for Responsible Change (Sept. 14, 2001), available at
https://www.sec.gov/divisions/marketreg/marketinfo/finalreport.htm.
    \450\ See Securities Exchange Act Release No. 49325 (Feb. 26,
2004), 69 FR 11126 (Mar. 9, 2004) (``Regulation NMS Proposing
Release''), at 11177-11178; Regulation NMS Adopting Release, supra
note 10, at 37558-37559.
    \451\ See Regulation NMS Proposing Release, supra note 450, at
11177; Regulation NMS Adopting Release, supra note 10, at 37559.
    \452\ Id.
---------------------------------------------------------------------------

    At that time, however, the Commission noted several drawbacks to
that competing consolidator model,\453\ including: (1) A lack of
uniform data distribution to the public, (2) the potential for an
increase in processing costs due to multiple consolidators performing
tasks previously performed by a single processor, and (3) the risk that
the fees for core data, as then contemplated, could increase because
payment of every SRO's fees would be mandatory, thereby affording
little room for competitive forces to influence the level of fees.\454\
---------------------------------------------------------------------------

    \453\ See Regulation NMS Proposing Release, supra note 450, at
11178.
    \454\ Id. The Commission stated that it would have to review
every SRO's market data fees and get involved in multiple market
data fee disputes.
---------------------------------------------------------------------------

    When addressing its concerns about a potential loss of data
uniformity, the Commission explained that a report issued by the
Advisory Committee on Market Information, which prompted consideration
of a competing consolidator model in the Regulation NMS Proposing and
Adopting Releases,\455\ noted four types of quality problems that could
arise from the competing consolidator model relating to: (1) Sequencing
of information, (2) validation tolerances, (3) capacity, and (4) data
protocols and formats.\456\ With respect to information sequencing, the
report stated that the competing consolidator model would impose a risk
that market data messages would be processed in different sequences by
different consolidators due to the use of differing hardware, software,
or communications platforms to process market data. On validation
tolerances, the report stated that standards would need to be
established for competing consolidators to verify the consistency of
information (such as the NBBO), since the plan processors currently
check all market center messages to verify that they utilize correct
message structures. The report stated that competing consolidators must
have sufficient capacity (for example, specifying network capacity,
input, output line, system, internal system threading, storage and
memory capacity, and database size) to process the information from all
reporting market centers, explaining that if capacity is lacking,
messages will be delayed to data recipients. Finally, with respect to
data protocols and formats, the report said that the use of different
protocols, message formats, and technologies by different consolidators
could make the market data system more cumbersome and prone to error.
The report noted that exclusive SIPs currently receive market center
information using standard input formats and disseminate consolidated
data using standard output formats.\457\
---------------------------------------------------------------------------

    \455\ See supra notes 449-450.
    \456\ See supra note 449. See infra text accompanying notes 503-
509, 513-515 for a discussion of the risks. The Advisory Committee
on Market Information report stated that these risks would be
manageable and recommended allowing the private sector to establish
technical standards for competing consolidators rather than the
Commission. See supra note 449, at Section VII.C.2.b(iv).
    \457\ See supra note 449, at Section VII.C.2.b.
---------------------------------------------------------------------------

    Ultimately, the Commission concluded that investors and other data
users would bear the most risk in switching to a competing consolidator
model, while the SROs would benefit by being able to charge higher fees
for lower quality information; \458\ therefore, the Commission decided
not to propose the competing consolidator model for adoption.\459\
---------------------------------------------------------------------------

    \458\ The Commission stated that the four types of data quality
problems identified by the Advisory Committee could be limited in
severity, but remained concerned that the introduction of competing
consolidators would compromise data quality. See Regulation NMS
Proposing Release, supra note 450, at 11178.
    \459\ See Regulation NMS Proposing Release, supra note 450, at
11178. In the Regulation NMS Adopting Release, the Commission
questioned the extent to which market data fees, which would be
charged per SRO, would be subject to competition. See Regulation NMS
Adopting Release, supra note 10, at 37559.
---------------------------------------------------------------------------

    In the Regulation NMS Adopting Release, the Commission focused its
discussion on the extent to which the competing consolidator model
would subject the level of market data fees to competitive forces.\460\
The Commission stated that market participants would need to purchase
data from the SROs and expressed concern that ``the overall level of
fees would not be reduced unless one or more of the SROs or Nasdaq was
willing to accept a significantly lower amount of revenue than they are
currently allocated by the Plans.'' \461\ The Commission believed that
it was ``unlikely that any SRO or Nasdaq would voluntarily propose to
lower just its own fees.'' Rather, the Commission stated that some
SROs, ``particularly those with dominant market shares whose
information is most vital to investors,'' might propose higher fees to
increase their revenues.\462\
---------------------------------------------------------------------------

    \460\ Id. While the Commission did not propose a competing
consolidator model, it received comments on the model described in
the Regulation NMS Proposing Release.
    \461\ Id.
    \462\ Id.

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

(b) Comments and Roundtable Discussion
    The current market data infrastructure, with the Equity Data Plans
providing SIP data and the exchanges providing proprietary data
products, has led some market participants to suggest that a competing
consolidator model be considered again as a means to address the
latency and cost differentials that exist between the two data
categories.\463\
---------------------------------------------------------------------------

    \463\ The Treasury Capital Markets Report (``Treasury Report''),
which was published one year prior to the Roundtable and referenced
by Roundtable respondents, recommended that the Commission amend
Regulation NMS to permit competing consolidators as alternatives to
the exclusive SIPs as a means to provide faster consolidation and
distribution of a wider breadth of market data, at a lower cost than
provided by the exclusive SIPs. The Treasury Report suggested that
competing consolidators be allowed to purchase proprietary data
feeds from exchanges on a non-discriminatory basis. See U.S.
Department of the Treasury, A Financial System that Creates Economic
Opportunities--Capital Markets, 64 (Oct. 2, 2017). Other
alternatives to the current centralized consolidation model are
discussed below. See infra Section IV.C.
---------------------------------------------------------------------------

    Several panelists and commenters at the Roundtable discussed a
competing consolidator model. One panelist presented a competing
consolidator model and noted that it would introduce competition in the
provision of market data by allowing competing consolidators to compete
against each other for subscribers.\464\ This panelist also stated that
market forces would drive consolidators' ``micro-decisions'' regarding
the technology that they would use to provide data.\465\ The panelist
also suggested that competing consolidators should be ``authorized''
and be Regulation SCI-compliant.\466\ The panelist expressed confidence
that a competitive market would produce a more reliable solution than
the current centralized consolidation model.\467\
---------------------------------------------------------------------------

    \464\ See Roundtable Day Two Transcript at 25 (Paul O'Donnell,
Morgan Stanley).
    \465\ Id. at 26.
    \466\ Id. at 25.
    \467\ Id.
---------------------------------------------------------------------------

    One panelist explained that the exclusive SIPs represent a single
point of failure for the equity markets and that competing
consolidators could improve the speed and quality of SIP data while
also reducing their costs.\468\ Another panelist said that his clients
have expressed interest in competitive SIPs.\469\ One panelist
suggested a competing consolidator model wherein entities would
consolidate messages from individual exchange members. The panelist
acknowledged that this approach would likely result in latency issues,
but suggested that such a consolidated feed could possibly be leveraged
from work being done on reporting to the consolidated audit trail.\470\
---------------------------------------------------------------------------

    \468\ See Roundtable Day One Transcript at 49-50 (Prof. Hal
Scott, Harvard University). This panelist also suggested that the
SIPs should include proprietary data and also permit competing
consolidators to do the same.
    \469\ See Roundtable Day Two Transcript at 43 (Jarred Yuster,
PICO).
    \470\ See Roundtable Day One Transcript at 182-184 (Michael
Friedman, Trillium Trading).
---------------------------------------------------------------------------

    Several comment letters submitted in connection with the Roundtable
expressed support for a competing consolidator model.\471\ One
commenter stressed the importance to investors of competition by
stating that competition would result in the reduction of the latency
differential between the exclusive SIPs and proprietary data feeds,
resilience through the use of multiple consolidators, and lower market
data costs.\472\ Another commenter stated that competing consolidators
would compete on ``speed, reliability, and price to the benefit of
traders and investors alike'' \473\ and that competing consolidators
would provide ``the benefit of expanded access to high-quality, low-
cost market data.'' \474\ Another commenter noted the Treasury Report,
which was published in 2017,\475\ recommended that the Commission
recognize that markets for SIP data and proprietary data feeds are not
fully competitive and consider amending Regulation NMS to enable
competing consolidators as an alternative to the exclusive SIPs.\476\
This commenter recommended that if competing consolidators are
permitted, regulators should examine why a broker-dealer chooses a
particular consolidator over others and should monitor how much
exchanges decide to charge consolidators for market data.\477\
---------------------------------------------------------------------------

    \471\ See T. Rowe Price Letter, Letter to Brent J. Fields,
Secretary, Commission, from Marcy Pike, SVP, Enterprise
Infrastructure, and Krista Ryan, VP, Associate General Counsel,
Fidelity Investments (Oct. 26, 2018) (``Fidelity Letter''); SIFMA
Letter; SIFMA Letter II; Ramsay Letter II.
    \472\ See SIFMA Letter II at 3. In addition to the use of
competing consolidators, this commenter suggested that the
Commission require the exclusive SIPs to compete with each other.
See also T. Rowe Price Letter at 3. This commenter believed that
competition among organizations eligible to serve as exclusive SIPs,
either through a periodic bidding process or the ability of multiple
firms to simultaneously serve as exclusive SIPs and compete to
provide the best overall combination of fees, services, and
reliability would be beneficial.
    \473\ See Ramsay Letter II; Fidelity Letter at 10 (noting that
competition may reduce the cost of consolidated market data).
    \474\ See Ramsay Letter II.
    \475\ See supra note 463.
    \476\ See Fidelity Letter at 10.
    \477\ Id.
---------------------------------------------------------------------------

    Several commenters suggested details on the types of entities that
could be competing consolidators and the functions they could
perform.\478\ For example, one commenter suggested that a competing
consolidator could be any commercial entity meeting minimum standards,
which may include exchanges or other financial technology vendors,\479\
and another suggested that they could be private companies that, unlike
the existing exclusive SIPs, could operate in any location and would
obtain and sell data comparable to proprietary data feeds.\480\ One
commenter suggested a list of functionality that competing
consolidators could provide, such as direct exchange feed data from all
tapes, quote and trade feeds, regulatory messages, and the market
status of all contributing markets.\481\
---------------------------------------------------------------------------

    \478\ See SIFMA Letter; Ramsay Letter II.
    \479\ See SIFMA Letter.
    \480\ See Ramsay Letter II.
    \481\ See SIFMA Letter (attachment to the letter). This
commenter also stated that depth of book should be considered but
stated that it should possibly be sold separately.
---------------------------------------------------------------------------

    Several panelists, in particular representatives of exchanges
operating the current exclusive SIPs, expressed concern with a
competing consolidator model. One panelist suggested that the interest
in competing consolidators arises from a perception that competing
consolidators will make market data less costly.\482\ The panelist said
that the cost to produce market data is not a competing consolidator's
cost and that this realization may make such a model less attractive to
potential users of competing consolidators.\483\ Another panelist said
that a competing consolidator model could result in multiple NBBOs
prevailing at the same nanosecond, which would provide a broker with a
choice regarding the price at which it filled a customer's order.\484\
The panelist believed that this discretion in choosing an NBBO could
result in uncertainty regarding whether the broker had executed a
customer's order at a price that was in the customer's interest or the
broker's own interest.\485\ One panelist stated that there is value in
understanding what the NBBO is when there are competing SIPs and asked
whether this model would introduce benchmark reference price
arbitrage.\486\ The panelist suggested that

a conflict could arise if a broker-dealer executes customer orders and
also manages the price against which such trades are benchmarked, i.e.,
by calculating the NBBO.\487\
---------------------------------------------------------------------------

    \482\ See Roundtable Day Two Transcript at 46-47 (Michael
Blaugrund, NYSE).
    \483\ Id.
    \484\ See Roundtable Day Two Transcript at 61 (Prof. Robert
Bartlett, U.C. Berkeley).
    \485\ Id.
    \486\ See Roundtable Day One Transcript at 151-152 (Oliver
Albers, Nasdaq); Bartlett and McCrary, supra note 418 (examining the
incidence of exclusive SIP latency arbitrage strategies using
timestamp data from the two SIPs and concluding that trading
surrounding exclusive SIP priced trades showed little evidence that
fast traders initiate liquidity taking orders to pick off stale
quotes).
    \487\ See Roundtable Day One Transcript at 151-152 (Oliver
Albers, Nasdaq).
---------------------------------------------------------------------------

    Several comment letters expressed skepticism about the benefits of
a competing consolidator model. One commenter said that making radical
market structure changes could undermine the NBBO and that adding
multiple competing SIPs would create operational, legal, and regulatory
complexities as well as unintended consequences, and may not solve
concerns about geographic latency.\488\ Further, this commenter
advocated that having a single source of best quote and trade data
creates confidence in the U.S. markets because investors can be assured
that orders will automatically route to the venue with the best quoted
price on the exclusive SIP feed.\489\
---------------------------------------------------------------------------

    \488\ See Wittman Letter at 14; Letter to Brent J. Fields,
Secretary, Commission, from Oliver Albers, SVP, Head of Global
Partnerships, Nasdaq, 3 (Oct. 24, 2018) (``Albers Letter'');
Blaugrund Letter at 2. The Wittman and Albers Letters were submitted
on behalf of Nasdaq. The Blaugrund Letter was submitted on behalf of
NYSE.
    \489\ See Albers Letter at 3.
---------------------------------------------------------------------------

    One commenter said that competition would result in multiple NBBOs
that would confuse the market. Further, the commenter stated that
competition would not ``curb rent-seeking behaviors, nor promote
fairness.'' \490\ This commenter suggested that the Commission mandate
a type of encryption instead of introducing competition, explaining
that encrypting market data would allow proprietary and exclusive SIP
feeds to be made available ``securely in synchronized time.'' \491\
---------------------------------------------------------------------------

    \490\ See Data Boiler Letter at 4. This commenter also suggested
that the Commission amend interpretations of Rule 603(a) of
Regulation NMS to emphasize ``synchronized availability of data
between SIP and exchanges' proprietary products.'' Id. at 8.
    \491\ Id. at 2, 8.
---------------------------------------------------------------------------

    Another commenter urged the Commission to do a cost benefit
analysis of efforts to decentralize the exclusive SIP architecture and
recommended introducing additional instances of existing technology
(i.e., a distributed SIP model) as the best approach to reducing
geographic latency.\492\ This commenter added that a competing
consolidator approach would create complexity that would undermine the
purposes of Regulation NMS to keep costs low for investors.\493\
---------------------------------------------------------------------------

    \492\ See NYSE Group Letter at 6; Blaugrund Letter at 4. The
Blaugrund Letter was submitted on behalf of NYSE.
    \493\ See Blaugrund Letter at 2.
---------------------------------------------------------------------------

    Finally, one commenter opined that competing SIPs would not solve
the problem of the exchanges' control over market data access.\494\
This commenter asked why a technology firm would become a competing SIP
when it cannot control the cost of the market data it must
purchase.\495\
---------------------------------------------------------------------------

    \494\ See Healthy Markets Association Letter I at 38.
    \495\ Id.
---------------------------------------------------------------------------

(c) Commission Discussion
    The Commission is proposing a decentralized consolidation model
with competing consolidators and self-aggregators who would collect
data from the SROs, and calculate, consolidate, and disseminate
proposed consolidated market data to investors and market
participants.\496\ As discussed below, the Commission preliminarily
believes that competing consolidators should be required to disclose
publicly certain information about their organization, operations, and
products, as well as regularly publish certain performance statistics
on, for example, capacity, system availability, and latency to
demonstrate their operational capability and to provide transparency
into the performance of their systems.\497\ In addition, the Commission
preliminarily believes that competing consolidators should have written
policies and procedures to assure the prompt, accurate, and reliable
delivery of consolidated market data.
---------------------------------------------------------------------------

    \496\ See infra Section IV.B.2(e)(ii) for a discussion of
proposed Rule 614, which would require competing consolidators that
are SIPs to register with the Commission and comply with specified
responsibilities.
    \497\ One Roundtable respondent supported publication of
operational capabilities and performance metrics by competing
consolidators. See SIFMA Letter (attachment to letter).
---------------------------------------------------------------------------

    The Commission preliminarily believes that the competing
consolidator proposal would reduce latency, bolster the resilience of
the market data infrastructure, and permit the market data
infrastructure to more readily adapt to changes in technology to better
fit the needs of market participants. The Commission also preliminarily
believes that market forces could help to ensure that the proposed
consolidated market data is reliable, accurate, and prompt. To attract
and maintain its subscriber base, a competing consolidator would have
to ensure that it provides consolidated market data, as proposed, with
minimal latency, but also reliably and accurately, and in a cost-
effective manner. A competing consolidator that does not adequately
perform would risk losing customers to another competing consolidator.
Competition should also incentivize competing consolidators to evolve
and adapt to the needs of the marketplace. If a new technology would
result in better provision of data, a competing consolidator likely
would adopt that technology to expand its client base. Finally, the
introduction of multiple competing consolidators may bring additional
resilience to the collection, consolidation, and distribution of
consolidated market data, as there would be redundant systems
performing these functions rather than one exclusive SIP creating a
single point of failure.\498\
---------------------------------------------------------------------------

    \498\ The single point of failure problem was most recently
evidenced on August 12, 2019, when the CTA/CQ SIP experienced
multiple system issues and was unable to effectively fail over to
its backup system. Among other impacts, final closing prices for
many symbols were not able to be published by the CTA until after
8:00 p.m. See CTA, CTA Processing Issue on August 12, 2019: CTA
Participant Trade Files--Revised Notice, Alert (Aug. 28, 2019),
available at https://www.ctaplan.com/alerts#110000144324. Several
Roundtable respondents noted the additional reliability through the
redundancy that multiple consolidators would provide. See Roundtable
Day One Transcript at 49-50 (Prof. Hal Scott, Harvard University);
Roundtable Day Two Transcript at 77 (Paul O'Donnell, Morgan
Stanley); Ramsay Letter II.
---------------------------------------------------------------------------

    In proposing this competing consolidator model, the Commission
considered the concerns it described when it previously evaluated a
different competing consolidator model in connection with the adoption
of Regulation NMS.\499\ The Commission preliminarily believes that the
proposed competing consolidator model should not raise the same
concerns due to the differences between the two models and the manner
in which market participants handle market data today.
---------------------------------------------------------------------------

    \499\ See supra notes 453-454.
---------------------------------------------------------------------------

    First, to address the Commission's prior concern about a lack of
data uniformity resulting from the use of multiple competing
consolidators,\500\ the Commission is proposing requirements governing
how consolidated market data is collected, calculated, generated, and
made available.\501\ The Commission acknowledges that the introduction
of multiple entities generating consolidated market data would result
in multiple versions of consolidated market data. However, market
participants currently consolidate proprietary data feeds, generate
their own consolidated data, and calculate their own NBBO.\502\ The
proposal

would require competing consolidators and self-aggregators to calculate
consolidated market data, including the NBBO, in a consistent manner as
set forth in the proposed definitions in Rule 600 of Regulation NMS,
which the Commission preliminarily believes would help ensure
continuity and consistency in how proposed consolidated market data,
including the NBBO, is calculated.
---------------------------------------------------------------------------

    \500\ See supra note 453.
    \501\ See proposed Rules 614(d)(1)-(3).
    \502\ See Roundtable Day One Transcript at 128 (Mark Skalabrin,
Redline Trading Solutions) (explaining that his firm builds an NBBO
for its customers that use proprietary data feeds), at 141
(``[E]ffectively today, people have to form the NBBO at their own
location. Even a dark pool does that that's just trying to match at
the best bid and offer. If they use the SIP NBBO, their customers
would be subject to latency harm, because it's too old to use at
their location after it's merged to really get effective
performance.''). Although the Commission does not know the exact
number of market participants that currently consolidate proprietary
data feeds, generate their own consolidated data, and calculate
their own NBBO, Nasdaq has stated that approximately 100 firms
purchase all depth of book data from every exchange. See In the
Matter of the Application of SIFMA, supra note 37, at 29 (citing an
assertion from Nasdaq that 100 firms purchase all depth of book data
from every exchange). The Commission acknowledges that not all of
these market participants consolidate the proprietary data feeds and
solicits comment on the number of market participants that do.
---------------------------------------------------------------------------

    Further, on the Advisory Committee on Market Information's
validation tolerance concerns from 2001,\503\ the report had stated
that standards should be created to ensure the consistency of
information, such as the NBBO and market center message
formatting.\504\ The report also stated that differences in the
protocols and formats used by competing consolidators could make the
market data system cumbersome or prone to error.\505\ As noted above,
the proposal would require competing consolidators and self-aggregators
to calculate consolidated market data, including the NBBO, in a
consistent manner in accordance with the proposed definitions in Rule
600 of Regulation NMS. Further, the Commission preliminarily believes
that competing consolidators would likely establish their own standards
for verifying information for consistency because they would be the
entities responsible, pursuant to proposed Rule 614(d)(2), for
calculating and generating consolidated market data based on this
information.\506\ In addition, as the entities responsible for
generating consolidated market data, competing consolidators would
likely be incentivized by competition to disseminate data using a
protocol or format that results in data that is readily usable by their
subscribers. As market participants are currently able to ingest market
data from different sources, such as the exclusive SIPs and proprietary
data feeds, the Commission preliminarily believes that differences in
the protocols or formats used by competing consolidators would not
likely introduce a new challenge to the market. Rather than impose
technical standards, the Commission preliminarily believes that
competing consolidators would be in the best position to develop
standards with respect to data consistency and generation, as
appropriate, because they would be directly responsible for the quality
of their product that is in compliance with Rule 614(d)(2), and would
be incentivized through competition to create standards to ensure the
integrity of their consolidated market data.
---------------------------------------------------------------------------

    \503\ See supra text accompanying notes 455-457.
    \504\ Id.
    \505\ Id.
    \506\ See proposed Rule 614(d)(2).
---------------------------------------------------------------------------

    With respect to the Advisory Committee on Market Information's
previous concerns about capacity,\507\ the Commission is proposing to
require each competing consolidator to publish on its website its
capacity statistics on a monthly basis so that market participants can
evaluate whether a competing consolidator has sufficient capacity to
process information.\508\ The Commission is also proposing to require
each competing consolidator to establish, maintain, and enforce written
policies and procedures reasonably designed to ensure that its systems
have levels of capacity to maintain operational capability and assure
the prompt, accurate, and reliable delivery of consolidated market
data.\509\
---------------------------------------------------------------------------

    \507\ See supra text accompanying notes 455-457.
    \508\ See infra Section IV.B.2(e)(ii).
    \509\ Id.
---------------------------------------------------------------------------

    The Commission was previously concerned about an increase in
processing costs due to multiple consolidators \510\ performing the
tasks performed by an exclusive SIP. As noted above, the Commission
preliminarily believes that the introduction of competition should help
to ensure that proposed consolidated market data is disseminated in a
cost-effective manner.\511\
---------------------------------------------------------------------------

    \510\ The Commission preliminarily estimates that there could be
up to twelve competing consolidators. This estimate includes the
CTA/CQ SIP and the Nasdaq UTP SIP. See infra Section V.C.
    \511\ See also, e.g., Roundtable Day One Transcript at 49-50
(Prof. Hal Scott, Harvard University) (``[C]ompetition among
consolidators of SIP data . . . could improve the speed and quality
of consolidated sources of market data while also reducing their
costs.''); Treasury Report, supra note 463, at 64 (``The competing
consolidators would aim to provide faster consolidation and
distribution, improved breadth of data, and lower cost than the
SIPs.'').
---------------------------------------------------------------------------

    Finally, the Commission was previously concerned about the risk
that fees for core data would increase because payment to each SRO
would be mandatory. The previous competing consolidator model would
have eliminated the Equity Data Plans and contemplated that each
individual exchange would have developed its own pricing scheme for its
individual data. As discussed below, in contrast, under the proposed
decentralized consolidation model, the SROs would continue to develop
jointly the fees associated with the provision of the proposed
consolidated market data through an effective national market system
plan(s) for NMS stocks.\512\ These fees would be subject to Commission
oversight under Rule 608.
---------------------------------------------------------------------------

    \512\ See infra Section IV.B.4; Proposed Governance Order, supra
note 8; Effective on Filing Proposal, supra note 37 (a proposal to
amend Regulation NMS to rescind a provision that allows a proposed
amendment to an effective national market system plan(s) to become
effective upon filing if the proposed amendment establishes or
changes a fee or other charge).
---------------------------------------------------------------------------

    The use of competing consolidators may introduce sequencing risk, a
concern raised by the Advisory Committee on Market Information \513\ as
well as the Commission when it dismissed a competing consolidator model
in proposing Regulation NMS.\514\ Having multiple competing
consolidators using different technology could result in messages being
processed in different sequences. The outcome would be the loss of a
single reference for consolidated market data, which could negatively
impact the reconstruction of the markets at a given point in time.
However, the Commission believes that the proposal would mitigate the
effects of sequencing risk by mandating that the effective national
market system plan(s) require the application of timestamps to all
consolidated market data by the SROs when they send market data to
competing consolidators as well as requiring competing consolidators to
apply timestamps to consolidated market data. Accordingly, no matter
the differences in message processing across the competing
consolidators, the sequencing of market data based on SRO timestamps
should be able to be reconstructed.\515\
---------------------------------------------------------------------------

    \513\ See supra text accompanying notes 455-457.
    \514\ See Regulation NMS Proposing Release, supra note 450, at
11178.
    \515\ The Commission further notes that the NBBOs currently
calculated by the exclusive SIPs at different data centers may vary
due to geographic and other forms of latency, and therefore, the
proposed competing consolidator model does not introduce a new issue
in this regard. However, under the proposed competing consolidator
model, NBBOs created at other data centers where the exclusive SIPs
currently do not have a point of presence (e.g., NY4 in Secaucus)
could be more accurate for those market participants that are
located in such data center.
---------------------------------------------------------------------------

    The Commission believes that there are a number of existing firms
that

would be well-positioned to become competing consolidators. First,
trading technology firms that today provide proprietary data
aggregation services for their subscribers may decide to register as
competing consolidators in order to potentially expand their subscriber
base and to be eligible for the pricing for data content used to create
proposed consolidated market data.\516\ In addition, the existing
exclusive SIPs, CTA/CQ and Nasdaq UTP, could consider becoming
competing consolidators, as they have extensive experience in this area
and may choose to remain in the market data consolidation business.
Similarly, SROs have experience collecting and processing market data
and may wish to act as competing consolidators. The Commission
preliminarily believes that the creation of a competing consolidator
market would open up the potential for other entrants, as well. For
example, various market participants that are currently self-
aggregating and have the technology to consolidate core data may decide
to enter the competing consolidator business given the potential market
opportunity. Finally, other entities have been interested in performing
as plan processors. For example, there were competing bids to be the
Nasdaq UTP SIP in 2014,\517\ and in 2013 and 2019 for OPRA. The bidding
firms (or similar types of firms) may decide to enter the market as
competing consolidators.
---------------------------------------------------------------------------

    \516\ The Commission does not know the number of aggregators in
operation today, but assumes that certain market data vendors in the
following list currently perform that function. See Nasdaq: Market
Data Vendors, available at http://www.nasdaqtrader.com/Trader.aspx?id=MarketDataVendorsList&StartAlphabet=A&EndAlphabet=ZZZ
(last accessed Dec. 17, 2019).
    \517\ Bidders included Nasdaq, Thesys Technologies LLC,
CenturyLink, and a unit of exchange operator Miami International
Holdings Inc. See Herbert Lash, Nasdaq Wins Bid to Manage Key Data
Processor for Stock Trading, Reuters (Nov. 5, 2014), available at
https://www.reuters.com/article/us-exchanges-stocktrading-nasdaq-omx-idUSKBN0IQ00220141106.
---------------------------------------------------------------------------

    The Commission preliminarily believes that sufficient incentives
exist to attract a number of entities to register as competing
consolidators and for a competitive market to develop. For one thing,
the proposed definition of core data will incorporate additional
elements such as quotation data in smaller size increments, depth of
book data, and auction information, all of which market participants
have recommended as necessary or useful. Therefore, there seems to be
demand for the key product--i.e., consolidated market data as
proposed--that competing consolidators will be producing and selling.
Moreover, the proposed competing consolidator registration regime and
responsibilities outlined below--while designed to collect relevant
information about competing consolidators and to require competing
consolidator performance data, data quality issues, and system issues
to be made publicly available--are intended to be a relatively
streamlined process that would impose appropriate burdens on entities
likely to register as competing consolidators.
    Several Roundtable panelists and commenters raised potential issues
about a competing consolidator model, in particular, about
uncertainties regarding control over market data access, the costs of
obtaining market data from the various SROs, and operational
complexities associated with the model, such as the introduction of
multiple NBBOs.\518\ However, the Commission preliminarily believes
that some of these issues would be addressed by the proposal and the
others would not be novel or insurmountable. On control over market
data access, Rule 603 and the proposed amendments to Rule 603(b) would
require that the SROs directly make available to competing
consolidators and self-aggregators NMS information, including all data
necessary to generate consolidated market data, on terms that are fair
and reasonable and not unreasonably discriminatory. With respect to the
costs of market data, the SRO fees associated with consolidated market
data would be subject to Equity Data Plan requirements and the fees
must be fair and reasonable.\519\ Finally, with respect to the concerns
regarding the complexities associated with a competing consolidator
model, many of the functions of competing consolidators are performed
today by market participants, such as the consolidation of proprietary
data feeds and calculation of NBBOs.\520\
---------------------------------------------------------------------------

    \518\ See Roundtable Day One Transcript at 151-152 (Oliver
Albers, Nasdaq); Roundtable Day Two Transcript at 46-47 (Michael
Blaugrund, NYSE), at 61 (Prof. Robert Bartlett, U.C. Berkeley);
Wittman Letter at 14; Albers Letter at 3; Blaugrund Letter, at 2;
Healthy Markets Association Letter I, at 38; Data Boiler Letter at
4, 8.
    \519\ See supra note 439.
    \520\ For example, multiple NBBOs exist today because many
broker-dealers independently calculate it for themselves.
---------------------------------------------------------------------------

    Finally, a Roundtable panelist suggested that multiple NBBOs could
raise concerns about broker-dealers executing customer orders at prices
that are in the broker's own interest, rather than the customers'
interest, and questioned whether a competing consolidator model would
introduce benchmark reference price arbitrage.\521\ A broker-dealer
must provide best execution to its customers' orders.\522\ However, the
existence of multiple NBBOs, which occurs today, does not impact a
broker's best execution obligations. Further, the panelist questioned
whether there would be conflicts for broker-dealers that execute
customer trades as well as manage the price against which the trades
are benchmarked (i.e., by calculating the NBBO). Broker-dealers today
purchase market data from the SIP as well as proprietary data feeds and
calculate NBBOs. Accordingly, the Commission is not persuaded by
concerns about the introduction of multiple NBBOs because multiple
NBBOs already exist.
---------------------------------------------------------------------------

    \521\ See Roundtable Day One Transcript at 151-152 (Oliver
Albers, Nasdaq); Roundtable Day Two Transcript at 61 (Prof. Robert
Bartlett, U.C. Berkeley); Data Boiler Letter at 4.
    \522\ See supra note 308.
---------------------------------------------------------------------------

(d) Proposed Definition of Competing Consolidator in Rule 600(b)
    The Commission is proposing to introduce a definition of competing
consolidator in Rule 600(b). Specifically, under proposed Rule
600(b)(16) of Regulation NMS, a competing consolidator would be defined
as a securities information processor required to be registered
pursuant to Rule 614 or a national securities exchange or national
securities association that receives information with respect to
quotations for and transactions in NMS stocks and generates
consolidated market data for dissemination to any person.
    The Commission requests comment on the proposed amendment to Rule
600(b) to introduce a definition of ``competing consolidator.'' In
particular, the Commission solicits comment on the following:
    73. Is a decentralized consolidation model with competing
consolidators and self-aggregators a viable and/or appropriate model
for the collection, consolidation, and dissemination of consolidated
market data? Are there any other viable and/or appropriate
alternatives?
    74. Do commenters believe that the definition of competing
consolidator accurately captures the requisite functions necessary for
collecting, consolidating, and disseminating consolidated market data?
Do commenters believe that there would be sufficient interest in
entities that would become competing consolidators?
    75. Do commenters believe that competing consolidators would
provide the necessary competition to lower the processing time and
distribution speeds

for consolidated market data, as proposed to be defined, as well as
reduce the overall costs of proposed consolidated market data?
    76. Do commenters believe that concerns identified by the
Commission regarding the competing consolidator model considered in the
Regulation NMS Proposing and Adopting Releases would be sufficiently
addressed with the proposed decentralized consolidation model with
competing consolidators and self-aggregators proposed in this release?
If not, how should these concerns be addressed?
    77. Will the change to a proposed competing consolidator/self-
aggregator model present any specific operational and/or regulatory
challenges to market participants? Are the challenges evenly
distributed amongst market participants or would one set of market
participants bear more of any burden? If so, please describe.
    78. The Commission solicits commenters' views regarding the various
concerns raised by Roundtable respondents about the competing
consolidator model. In particular, do commenters have any concerns
about competing consolidators calculating independent NBBOs? Please
explain. Do commenters have concerns about multiple versions of
consolidated market data, as proposed? Please explain. If there are
such concerns, please also explain how these concerns would vary from
the multiple different forms of aggregation that exist today among
broker-dealers either self-aggregating proprietary data feeds or
utilizing vendors to do so on their behalf.
(e) Proposed Rule 614
    The Commission preliminarily believes that SIPs that wish to act as
competing consolidators should be required to register with the
Commission \523\ and be required to publicly disclose certain
information about their organization, operations, and products. The
proposed disclosure framework is similar to the disclosures currently
required under Form SIP, with differences tailored to the proposed
regulatory structure that would apply to competing consolidators. As
described more fully below, a competing consolidator would be required
to register with the Commission on proposed Form CC and to amend its
Form CC (i) prior to the implementation of a material change to the
competing consolidator's pricing, connectivity, or products offered (a
``Material Amendment''); and (ii) no later than 30 calendar days after
the end of each calendar year to correct information that has become
inaccurate or incomplete for any reason and to provide an Annual Report
as required under Form CC (each a ``Form CC Amendment'').\524\ A
competing consolidator would be required to publish notice of its
cessation of operations on Form CC at least 30 business days prior to
the date it ceases to operate as a competing consolidator.\525\ The
Commission would make public on its website each effective initial Form
CC, order of ineffective initial Form CC, Form CC Amendment, and notice
of cessation.\526\
---------------------------------------------------------------------------

    \523\ As explained further below, SROs are excluded from the
definition of SIP under Section 3(a)(22)(A) of the Exchange Act. 15
U.S.C. 78c(a)(22)(A). SROs that wish to act as competing
consolidators would therefore not be required to register with the
Commission on proposed Form CC, which, as explained below, is the
form that SIPs would use to register as competing consolidators. See
infra Section IV.B.2(e)(iii). However, SROs that wish to act as
competing consolidators would be subject to the other requirements
of proposed Rule 614, including the responsibilities of competing
consolidators enumerated in proposed Rule 614(d), such as the
monthly publication of performance metrics. See infra Section
IV.B.2(e)(ii).
    \524\ See proposed Rules 614(a)(1)(i) and (a)(2)(i) and (ii).
    \525\ See proposed Rule 614(a)(3).
    \526\ See proposed Rule 614(b)(2). The Commission would publish
an effective initial Form CC upon effectiveness and would publish a
Form CC Amendment no later than 30 calendar days from the date of
filing. See proposed Rule 614(b)(2)(iii).
---------------------------------------------------------------------------

    The Commission also preliminarily believes that competing
consolidators should be subject to certain obligations and should
regularly publish certain performance statistics on a monthly basis on
their respective websites pursuant to proposed Rules 614(d)(5) and
(6).\527\ These disclosures are similar to disclosures currently made
by the exclusive SIPs.
---------------------------------------------------------------------------

    \527\ See infra Section IV.B.2(e)(ii) for a discussion of the
obligations and performance statistics. The information that the
Commission is proposing that competing consolidators publish is
based upon information that is currently collected or produced by
the CTA/CQ SIP and the Nasdaq UTP SIP, either for public or internal
distribution.
---------------------------------------------------------------------------

    These requirements, together with the operational transparency
proposed in new Form CC for those SIPs that register as competing
consolidators,\528\ should help to ensure that consolidated market
data, as proposed to be defined, is provided in a prompt, accurate, and
reliable manner and that all competing consolidators disclose the same
information to allow for easier comparison and evaluation.
Specifically, these requirements should allow market participants to
effectively evaluate competing consolidators and foster competition
among competing consolidators, which should result in high levels of
performance in the provision of proposed consolidated market data. In
addition, these requirements should facilitate Commission oversight of
competing consolidators and help to ensure the resiliency of their
systems.
---------------------------------------------------------------------------

    \528\ See infra Section IV.B.2(e)(iii) for a discussion of
proposed Form CC.
---------------------------------------------------------------------------

(i) Section 11A(b) of the Exchange Act
    Section 11A(b)(1) of the Exchange Act \529\ provides that a SIP not
acting as the ``exclusive processor'' \530\ of any information with
respect to quotations for or transactions in securities is exempt from
the requirement to register with the Commission as a SIP unless the
Commission, by rule or order, determines that the registration of such
SIP ``is necessary or appropriate in the public interest, for the
protection of investors, or for the achievement of the purposes of
[Section 11A].'' A SIP that proposes to act as a competing consolidator
would not engage on an exclusive basis on behalf of any national
securities exchange or registered securities association in collecting,
processing, or preparing for distribution or publication any
information with respect to quotations for or transactions in
securities; therefore, such a proposed competing consolidator would not
fall under the statutory definition of ``exclusive processor.''
However, under the proposed rules, competing consolidators would play a
vital role in the national market system by collecting, consolidating,
and disseminating proposed consolidated market data. Because the
availability of prompt, accurate, and reliable consolidated market
data, as proposed, is essential to investors and other market
participants, the Commission preliminarily believes that it is
necessary and appropriate in the public interest and for the protection
of investors to require each SIP that wishes to act as a competing
consolidator to register with the Commission as a SIP pursuant to
proposed Rule 614. Section 11A(b)(1) provides the Commission with
authority to require the registration of a SIP not acting as an
exclusive processor by rule or order. The Commission is exercising this
authority by proposing Rule 614 to establish the process by which SIPs
that wish to act as competing consolidators would be required to
register with the Commission.
---------------------------------------------------------------------------

    \529\ 15 U.S.C. 78k-1(b)(1).
    \530\ See supra note 20.
---------------------------------------------------------------------------

    The registration process for exclusive SIPs under Section 11A
requires the Commission to publish notice of an exclusive SIP's
application for registration and, within 90 days of publication of
notice of the application,

by order grant the application or institute proceedings to determine
whether the registration should be denied.\531\ At the conclusion of
the proceedings, the Commission must, by order, grant or deny the
registration.\532\ Section 11A(b)(1) of the Exchange Act also
authorizes the Commission, by rule or by order, upon its own motion or
by application, to conditionally or unconditionally exempt any SIP or
class of SIPs from any provision of Section 11A or the rules or
regulations thereunder if the Commission finds that such exemption is
consistent with the public interest, the protection of investors, and
the purposes of Section 11A, including the maintenance of fair and
orderly markets in securities and the removal of impediments to and
perfection of the mechanisms of a national market system. The
Commission preliminarily believes that it is consistent with the public
interest, the protection of investors, and the purposes of Section 11A
to use its authority under Section 11A(b)(1) to exempt SIPs that wish
to act as competing consolidators from the registration process
established in Section 11A(b)(3) of the Exchange Act and to allow such
competing consolidators to register pursuant to a process that is more
streamlined and limited than the process described in Section
11A(b)(3). The process specified in Section 11A(b)(3) of the Exchange
Act was developed for exclusive SIPs and reflects the heightened need
to review and analyze exclusive processors. In contrast, SIPs that do
not act as an exclusive SIP are exempt from registration unless the
Commission ``finds that the registration of such securities information
processor is necessary or appropriate in the public interest, for the
protection of investors, or for the achievement of the purposes of
[Section 11A].'' The Commission preliminarily believes that the
proposed registration process would provide the Commission with the
information necessary to oversee competing consolidators and help
ensure that relevant information regarding such competing consolidators
is available to the Commission and to the public, while providing a
streamlined registration process designed to encourage entities to
register as competing consolidators.
---------------------------------------------------------------------------

    \531\ See Section 11A(b)(3), 15 U.S.C. 78k-1(b)(3).
    \532\ See Section 11A(b)(3)(B), 15 U.S.C. 78k-1(b)(3)(B).
---------------------------------------------------------------------------

    The registration process proposed in new Rule 614 requires any
person, other than an SRO,\533\ that chooses to become a competing
consolidator to file with the Commission proposed Form CC.\534\ The
Commission would review the initial Form CC and such filing would
become effective, unless declared ineffective by the Commission by
order.\535\ The Commission would make public on its website each
effective initial Form CC and any order of ineffective initial Form CC,
amendment to Form CC and notice of cessation, if applicable. The
registration process proposed in new Rule 614 would not require the
publication for notice and comment of an application for registration
as a competing consolidator, nor would it require Commission approval
of such an application. However, the Commission preliminarily believes
that it is consistent with the public interest, the protection of
investors, and the purposes of Section 11A to establish a relatively
streamlined registration process based on disclosure for those SIPs
that wish to act as competing consolidators. The Commission
preliminarily believes that a relatively streamlined registration
process would impose minimal burdens on entities likely to register as
competing consolidators.
---------------------------------------------------------------------------

    \533\ See supra note 523.
    \534\ See infra Sections IV.B.2(e)(ii) and IV.B.2(e)(iii) for a
discussion of the registration process for competing consolidators
under proposed Rule 614.
    \535\ Proposed Rule 614(a)(1)(iii) provides that the Commission
may, by order, declare an initial Form CC ineffective no later than
90 calendar days from the date of filing with the Commission.
---------------------------------------------------------------------------

    In addition, the Commission preliminarily believes that it is
consistent with the public interest, the protection of investors, and
the purposes of Section 11A to use its exemptive authority under
Section 11A(b)(1) of the Exchange Act to exempt those SIPs that act as
competing consolidators from Section 11A(b)(5) of the Exchange
Act,\536\ which requires a registered SIP to notify the Commission if
the SIP prohibits or limits any person with respect to access to its
services. Section 11A(b)(5) allows any person aggrieved by a
prohibition or limitation of such access to the SIP's services to
petition the Commission to review the prohibition or limitation of
access. Exclusive SIPs, by definition, engage on an exclusive basis in
collecting, processing, or preparing data. In contrast, the proposed
competing consolidators would not engage in collecting, processing, or
preparing data on an exclusive basis. Therefore, the Commission
preliminarily believes that the protections of Section 11A(b)(5) of the
Exchange Act, including the ability of an aggrieved person to petition
the Commission for review of a SIP's prohibition or limitation of
access to the SIP's services, are not necessary for the SIPs that
register as competing consolidators. The Commission preliminarily
believes that competitive forces would reduce the likelihood that a
subscriber would not be able to access consolidated market data as
proposed because a subscriber should be able to obtain such data from
another competing consolidator. Accordingly, the Commission
preliminarily believes that it would be consistent with the protection
of investors and the public interest to exempt competing consolidators
from Section 11A(b)(5) of the Exchange Act.
---------------------------------------------------------------------------

    \536\ Section 11A(b)(5) of the Exchange Act, 15 U.S.C. 78k-
1(b)(5), requires a SIP promptly to notify the Commission if the
registered SIP prohibits or limits any person in respect of access
to services offered, directly or indirectly, by the registered SIP.
The notice must be in the form and contain the information required
by the Commission. Any prohibition or limitation on access to
services with respect to which a registered SIP is required to file
notice is subject to review by the Commission on its own motion, or
upon application by any person aggrieved by the prohibition or
limitation.
---------------------------------------------------------------------------

    The Commission requests comment on the proposal to establish a
registration process for SIPs that wish to act as competing
consolidators and to exempt such competing consolidators from Section
11A(b)(5) of the Exchange Act. In particular, the Commission solicits
comment on the following:
    79. Do commenters agree that the SIPs that wish to act as proposed
competing consolidators should be required to register with the
Commission? Do commenters agree that such competing consolidators
should be subject to the proposed registration requirements in proposed
Rule 614, rather than the registration requirements set forth in
Section 11A(b) of the Exchange Act? Why or why not?
    80. Do commenters believe that the Commission should establish a
registration process for competing consolidators different from the
registration process in proposed Rule 614? If so, please describe.
Should competing consolidator registration be subject to Commission
approval and/or additional or different regulation? Why or why not? If
so, please describe.
    81. Do commenters believe that competition and market forces would
be sufficient to support the proposed registration regime for SIPs that
wish to act as competing consolidators? Why or why not?
    82. Do commenters agree that the Commission should exempt SIPs that
register as competing consolidators from Section 11A(b)(5) of the
Exchange Act? Why or why not?
    83. Do commenters believe that competition and market forces are

sufficient to ensure that market participants would have access to
consolidated market data as proposed? Why or why not?
(ii) Description of Proposed Rule 614
    Proposed Rule 614(a)(1)(i) would prohibit any person, other than an
SRO,\537\ from (i) receiving directly from a national securities
exchange or national securities association information with respect to
quotations for and transactions in NMS stocks; and (ii) generating the
proposed consolidated market data for dissemination to any person
(i.e., acting as a competing consolidator by disseminating data to
external parties) unless that person files with the Commission an
initial Form CC and the initial Form CC has become effective pursuant
to proposed Rule 614(a)(1)(v).\538\ The Commission preliminarily
believes that a SIP that wishes to act as a competing consolidator
should not be permitted to commence operations until the Commission has
had the opportunity to review such competing consolidator's initial
Form CC. The Commission's review of initial Form CC would help to
ensure that a SIP that wishes to register as a competing consolidator
makes disclosures that comply with the requirements of proposed Rule
614 and that a consistent level of information, and consistent
disclosures, are made available to market participants to evaluate such
competing consolidators.
---------------------------------------------------------------------------

    \537\ As noted above, SROs are excluded from the definition of
SIP in Section 3(a)(22)(A) of the Exchange Act and therefore would
not be required to register as a competing consolidator pursuant to
proposed Rules 614(a)-(c) and proposed Form CC. However, SROs are
regulated entities, and an SRO competing consolidator would be
required to provide information equivalent to that required by
proposed Form CC. For example, national securities exchanges must
file information about their control persons, officers, and
directors, and affiliates on Form 1 that is similar to the
disclosures required under Exhibits A-D of proposed Form CC. See
Form 1 Instructions, at Exhibits C, J, and K, available at https://www.sec.gov/files/form1.pdf (last accessed Jan. 8, 2020). In
addition, SRO competing consolidators would be required to file with
the Commission all proposed rule changes pursuant to Section 19(b)
of the Exchange Act and Rule 19b-4 thereunder to begin operations as
a competing consolidator, including rule changes related to the SRO
competing consolidator's operations, disclosures regarding
consolidated market data products, and all fees related to
consolidated market data products. The other requirements of
proposed Rule 614--specifically, the responsibilities of competing
consolidators enumerated in proposed Rule 614(d), as described
below, including the monthly performance metrics and other
information required under proposed Rules 614(d)(5) and (d)(6)--
would apply to any competing consolidator, including any SRO that
acts as a competing consolidator. An SRO, however, would have a
choice of the manner in which--and the regulatory regime that would
apply to--its competing consolidator business: An SRO could operate
a competing consolidator as a facility of the SRO, which would be
subject to the rule filing requirements of Section 19(b) of the
Exchange Act and Rule 19b-4 thereunder, or the SRO could operate a
competing consolidator in a separate affiliated entity, not as a
facility, which, like other competing consolidators, would be
subject to the proposed registration requirements under proposed
Rule 614.
    \538\ In contrast, a self-aggregator would be defined as any
broker-dealer that receives information with respect to quotations
for and transactions in NMS stocks and generates consolidated market
data solely for internal use, and therefore would not be a competing
consolidator. See infra Section IV.B.3. If a self-aggregator
disseminated consolidated market data to any person, it would be
acting as a competing consolidator and would be required to register
pursuant to proposed Rule 614 and comply with the requirements
applicable to competing consolidators.
---------------------------------------------------------------------------

    Proposed Rule 614(a)(1)(ii) would require any reports required
under new Rule 614 to be filed electronically on Form CC, include all
of the information as prescribed in Form CC and the instructions to
Form CC, and contain an electronic signature.\539\ The electronic
signature requirement is consistent with the intention of the
Commission to receive documents that can be readily accessed and
processed electronically.
---------------------------------------------------------------------------

    \539\ This proposed requirement is consistent with electronic
reporting standards set forth in other Commission rules under the
Exchange Act, such as Rule 17a-25 (Electronic Submission of
Securities Transaction Information by Exchange Members, Brokers, and
Dealers). See 17 CFR 240.17a-25.
---------------------------------------------------------------------------

    The proposed rule contemplates the use of an online filing system
through which competing consolidators would file a completed Form CC.
The system, known as the electronic form filing system (``EFFS'') is
currently used by SROs to submit Form 19b-4 filings and by SCI entities
to submit Form SCI filings.\540\ Other methods of electronic filing of
Form CC could include the use of secure file transfer through
specialized electronic mailbox or through the Electronic, Data
Gathering, Analysis and Retrieval (``EDGAR'') system, or directly
through SEC.GOV via a simple HTML form. Based on the widespread use and
availability of the internet, the Commission believes that filing Form
CC in an electronic format would be less burdensome and a more
efficient filing process for competing consolidators and the Commission
because it is likely to be less expensive and cumbersome than mailing
and filing paper forms with the Commission.
---------------------------------------------------------------------------

    \540\ See Securities Exchange Act Release No. 50486 (Oct. 4,
2004), 69 FR 60287 (Oct. 8, 2004) (adopting the EFFS for use in
filing Form 19b-4).
---------------------------------------------------------------------------

    In addition, proposed Rule 614(a)(1)(ii) would establish a uniform
manner in which the Commission would receive, and competing
consolidators would provide, reports made pursuant to proposed Rule
614. The standardization would make it easier and more efficient for
the Commission to promptly review and analyze the information that
competing consolidators provide.
    Proposed Rule 614(a)(1)(iii) would provide that the Commission may,
by order, declare an initial Form CC filed by a competing consolidator
ineffective no later than 90 calendar days from filing with the
Commission.\541\ The Commission preliminarily believes that 90 calendar
days would provide the Commission with adequate time to carry out its
oversight functions with respect to its review of an initial Form CC,
including its responsibilities to protect investors and maintain fair,
orderly, and efficient markets.
---------------------------------------------------------------------------

    \541\ See also proposed Rule 614(a)(1)(iv)(B).
---------------------------------------------------------------------------

    Proposed Rule 614(a)(1)(iv) would require a competing consolidator
to withdraw an initial Form CC that has not become effective if any
information disclosed in the initial Form CC is or becomes inaccurate
or incomplete. The competing consolidator would be able to refile an
initial Form CC pursuant to proposed Rule 614(a)(1). The Commission
preliminarily believes that it would be appropriate to require an
initial Form CC to be withdrawn if any information in the form is or
becomes inaccurate or incomplete to assure that the Commission's review
is based on accurate and complete information and to assure that the
Commission has adequate time to review an accurate and complete initial
Form CC.
    Proposed Rule 614(a)(1)(v)(A) would provide that an initial Form CC
would become effective, unless declared ineffective, no later than the
expiration of the review period provided in paragraph (a)(1)(iii) and
upon publication of the initial Form CC pursuant to proposed Rule
614(b)(2)(i).
    Proposed Rule 614(a)(1)(v)(B) would provide that the Commission
would declare ineffective an initial Form CC if it finds, after notice
and opportunity for hearing, that such action is necessary or
appropriate in the public interest and is consistent with the
protection of investors. The Commission also preliminarily believes
that it would be necessary and appropriate in the public interest, and
consistent with the protection of investors, to declare ineffective an
initial Form CC if it finds, after notice and opportunity for hearing,
that one or more disclosures reveal non-compliance with federal
securities laws or the rules or regulations thereunder. The Commission
also would make such a declaration if it finds, for example, that one
or more disclosures on the initial Form CC were materially deficient
with respect to their accuracy,

currency, or completeness. The Commission preliminarily believes that
market participants would use the Form CC disclosure to understand and
evaluate the operations of a competing consolidator and to help
determine whether to subscribe to a competing consolidator. A
disclosure on Form CC that is materially deficient with respect to its
completeness or comprehensibility could mislead market participants or
impede their ability to evaluate a competing consolidator. In addition,
the Commission intends to use the information disclosed on an initial
Form CC to exercise oversight over competing consolidators. Given these
potential uses, the Commission believes that it is important that an
initial Form CC contain disclosures that are accurate, current, and
complete. During its review, the Commission and its staff may provide
comments to the applicant and may request that the applicant supplement
information in its initial Form CC or revise its disclosures on its
initial Form CC.\542\
---------------------------------------------------------------------------

    \542\ The responsibility for accurate, current, and complete
disclosures on proposed Form CC would lie with the competing
consolidator. The Commission's review of an initial Form CC would
focus on an evaluation of the completeness and accuracy of the
disclosures and compliance with federal securities laws. The
Commission's evaluation regarding compliance with federal securities
laws would involve a review of the Form CC disclosures for apparent
non-compliance with federal securities laws, or other rules or
regulations thereunder, and would focus on the disclosures made on
the Form CC.
---------------------------------------------------------------------------

    If the Commission declares an initial Form CC ineffective, the
applicant would be prohibited from operating as a competing
consolidator. An initial Form CC declared ineffective would not prevent
the competing consolidator from subsequently filing a new Form CC that
attempted to address any disclosure deficiencies or other issues that
caused the initial Form CC to be declared ineffective.
    The Commission requests comment on proposed Rule 614(a)(1), which
establishes filing requirements for an initial Form CC and a Commission
review period for determining whether a filed initial Form CC should be
declared ineffective. In particular, the Commission solicits comment on
the following:
    84. Do commenters believe that the proposed electronic filing
requirement is appropriate? Are there methods other than EFFS that
would be appropriate? If so, please describe. Is EFFS an efficient
system for filing proposed Form CC? Would another system be more
efficient? If so, please specify and describe the rationale for using a
different system.
    85. Should the Commission adopt the proposal that an initial Form
CC will become effective by operation of rule without the Commission
issuing an order declaring effective the initial Form CC? Do commenters
believe that publishing an initial Form CC on the Commission's website,
without a Commission order declaring an initial Form CC effective,
would provide sufficient notice that an initial Form CC has become
effective? Why or why not? Please support your arguments.
    86. Should the Commission require the existing exclusive SIPs to
file an initial Form CC before they may become competing consolidators
if they decide to act as competing consolidators? Why or why not?
Please support your arguments.
    87. Do commenters believe that the process to declare a Form CC
ineffective is appropriate? Why or why not?
    88. Do commenters believe that an SRO seeking to operate a
competing consolidator would establish the competing consolidator
within the SRO or in a separate affiliated entity? What do commenters
believe would be the advantages and disadvantages of each form of
operation? Do commenters believe that an SRO competing consolidator
would have any advantages over a competing consolidator registered
pursuant to proposed Rules 614(a)-(c) and proposed Form CC?
    89. If an SRO decides to act as a competing consolidator, should it
be required to file a specific notice of its intent to operate as a
competing consolidator in addition to, or in lieu of, a Form 19b-4 with
the Commission? Would a Form 19b-4 filing by itself provide sufficient
notice that an SRO intends to act as a competing consolidator? Please
explain.
    The Commission is proposing Rule 614(a)(2) to provide the
requirements for amending an effective Form CC. Under proposed Rule
614(b)(2)(iii), the Commission will make public any Form CC Amendment,
as described below, no later than 30 calendar days from the date of its
filing with the Commission. Proposed Form CC is similar to Form SIP and
the information required to be filed on proposed Form CC is designed to
enable market participants to make informed decisions when selecting a
competing consolidator and to facilitate Commission oversight of
competing consolidators. As described more fully below,\543\ proposed
Form CC would require information concerning, among other things: The
legal name and legal status of the competing consolidator; the owners,
directors, officers, and governors of the competing consolidator, or
persons performing similar functions; whether the competing
consolidator is a broker-dealer or an affiliate of a broker-dealer and
a description of the organizational structure of the competing
consolidator; contact information for an employee of the competing
consolidator prepared to respond to questions regarding Form CC; a
description of each consolidated market data service or function,
including connectivity and delivery options for subscribers, and a
description of all procedures utilized for the collection, processing,
distribution, publication and retention of information with respect to
quotations for, and transactions in, securities; a description of all
market data products with respect to consolidated data, or a subset
thereof, that the competing consolidator provides to subscribers; a
description of fees and charges for use of the competing consolidator
with respect to consolidated market data, including the types, range,
and structure of the competing consolidator's fees and differentiation
among the types of subscribers; a description of any co-location and
related services, the terms and conditions for co-location,
connectivity, and related services, including connectivity and
throughput options offered, and a description of any other means
besides co-location and related services to increase the speed of
communication, including a summary of the terms and conditions for its
use; and a narrative description, or the functional specifications, of
each consolidated market data service or function, including
connectivity and delivery options for the subscribers.
---------------------------------------------------------------------------

    \543\ See infra Section IV.B.2(e)(iii).
---------------------------------------------------------------------------

    The Commission is proposing Rule 614(a)(2)(i) to require a
competing consolidator to amend an effective Form CC in accordance with
the instructions therein: (i) Prior to the date of implementation of a
material change to the pricing, connectivity, or products offered; and
(ii) no later than 30 calendar days after the end of each calendar year
to correct information, whether material or immaterial, that has become
inaccurate or incomplete for any reason (``Annual Report''). The
Commission preliminarily believes that a change to a competing
consolidator's pricing, connectivity, or products offered would be
material if there is a substantial likelihood that a reasonable market
participant would consider the change important when evaluating the
competing consolidator as a provider of market data.\544\
---------------------------------------------------------------------------

    \544\ See Securities Exchange Act Release No. 833633 (July 18,
2018), 83 FR 38768 (Aug. 7, 2018) (Regulation of NMS Stock
Alternative Trading Systems) (stating that a change to the
operations of an NMS Stock ATS, or the disclosures regarding the
activities of the broker-dealer operator of the NMS Stock ATS and
its affiliates, would be material if there is a substantial
likelihood that a reasonable market participant would consider the
change important when evaluating the NMS Stock ATS as a potential
trading venue).

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

    The Commission preliminarily believes that the proposal to amend an
effective Form CC prior to implementing a Material Amendment would
provide market participants with information concerning changes to
significant aspects of the competing consolidator's services, which
would assist market participants in evaluating, or re-evaluating, the
competing consolidator as a provider of market data. The Commission
preliminarily believes that requiring a competing consolidator to amend
an effective Form CC no later than 30 calendar days after the end of
each calendar year to correct any other information that has become
inaccurate or incomplete for any reason would help to ensure that
market participants have accurate and current information regarding
competing consolidators. The Commission preliminarily believes that
providing a mechanism for competing consolidators to disclose changes
to their operations or to update information that does not constitute a
Material Amendment (e.g., a change in the organizational structure of
the competing consolidator, its officers or directors, or its
affiliated entities) no later than 30 calendar days after the end of
each calendar year would tailor the reporting burden on competing
consolidators to the degree of significance of the change in a manner
that does not compromise the ability of market participants to obtain
information about the competing consolidator's operations.
    The Commission believes that market participants would use
information regarding a competing consolidator's organization,