composed only of either SRO Voting Representatives or Non-SRO Voting
Representatives,\214\ the Commission recognizes the concern that SRO
Voting Representatives or Non-SRO Voting Representatives could have
exclusive control of an administrative function delegated under this
provision. However, the Commission believes that this concern is
mitigated by the requirement that a vote of the Operating Committee is
required to approve any delegation of administrative functions.
Further, the modification discussed above limits the types of functions
that are eligible for delegation. The Commission agrees with the
comment that states that a delegation under this provision does not
convey any authority to take action.\215\ Such authority resides with
the Operating Committee, and Article IV, Section 4.1(b) of the CT Plan
permits the Operating Committee to delegate authority only to implement
a decision by the Operating Committee, develop a proposal for Operating
Committee consideration, or perform other ministerial functions on the
Operating Committee's behalf.
---------------------------------------------------------------------------

    \213\ See Virtu Letter, supra note 30, at 5.
    \214\ See Data Boiler Letter I, supra note 31, at 26-27.
    \215\ See Nasdaq Letter I, supra note 20, at 22.
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission is approving
Section 4.1(b) as modified.
    Finally, Article IV, Section 4.1(c) provides that neither the
Company nor the Operating Committee will have authority over any
Member's proprietary systems or the collection and dissemination of
quotation or transaction information in Eligible Securities in any
Member's Market, or, in the case of FINRA, from FINRA Participants. The
Commission received no comments on this provision of the CT Plan and is
approving it as proposed.
(b) Composition and Selection of the Operating Committee
    Article IV, Section 4.2 of the CT Plan addresses the composition
and selection of the Operating Committee members.
(i) SRO Voting Representatives
    Section 4.2(a) provides that each group of Members that are
Affiliates (an ``SRO Group'') \216\ and each Non-Affiliated SRO \217\
will select an SRO Voting Representative to serve on the Operating
Committee and vote on its behalf.\218\ The Commission is approving this
Section as proposed.\219\
---------------------------------------------------------------------------

    \216\ For example, NYSE, NYSE American, NYSE Chicago, and NYSE
National would be one SRO Group for purposes of the proposed CT Plan
and would select one individual to represent the SRO Group on the
Operating Committee.
    \217\ Currently, the Non-Affiliated SROs are FINRA, IEX, LTSE,
and MEMX.
    \218\ See Article IV, Section 4.2(a) of the CT Plan. Each SRO
Group and each Non-Affiliated SRO may designate an alternate
individual or individuals who shall be authorized to vote on its
behalf if the SRO Voting Representative is unable. Each SRO Voting
Representative may serve as such at the discretion of the SRO Group
or Non-Affiliated SRO that it represents. See id.
    \219\ Discussion of the allocation of SRO votes by SRO Group
appears in Section II.C.5(c)(i), infra.
---------------------------------------------------------------------------

(ii) Non-SRO Voting Representatives
(A) Inclusion of Non-SRO Voting Representatives
    Section 4.2(b) provides that Non-SRO Voting Representatives will
also be permitted to serve and vote on Operating Committee
matters.\220\ Several commenters express support for including Non-SRO
Voting Representatives on the Operating Committee.\221\ One commenter
states that the requirement for voting representation by a diverse set
of stakeholders is ``a core element of the Governance Order, with the
purpose of reducing conflicts of interest and providing `more
meaningful inclusion of key stakeholders' views in New Consolidated
Data Plan decision making.'' \222\ Another commenter similarly states
that it supports expanding voting representation to non-SROs and having
them participate as full voting members of the Operating Committee to
allow non-SROs to have a role in the CT Plan's decision-making process
and therefore help address conflicts of interest.\223\ Another
commenter states that allowing only SROs to have a vote ``would impair
[the] credibility of CT Plan as a public utility.'' \224\ Another
commenter states that giving Non-SRO Voting Representatives a vote on
the Operating Committee will ``break the current SRO voting monopoly.''
\225\
---------------------------------------------------------------------------

    \220\ See Article IV, Section 4.2(b) of the CT Plan.
    \221\ See IEX Letter, supra note 30, at 2; ICI Letter II, supra
note 31, at 1; BMO Letter I, supra note 30, at 3; BMO Letter II,
supra note 30, at 2. See also Letter from Kenneth E. Bentsen, Jr.,
President and CEO, SIFMA (June 9, 2021), at 2.
    \222\ IEX Letter, supra note 30, at 2 (quoting the Commission's
Governance Order, supra note 8, 85 FR at 28707).
    \223\ See BMO Letter I, supra note 30, at 3; BMO Letter II,
supra note 30, at 2.
    \224\ Data Boiler Letter I, supra note 31, at 30.
    \225\ Schwab Letter II, supra note 30, at 6.
---------------------------------------------------------------------------

    Other commenters oppose the CT Plan's provisions that grant non-
SROs voting rights on the Operating Committee. Three commenters state
that these provisions are contrary to Section 11A of the Act.\226\
These commenters

state that Section 11A of the Act authorizes the Commission to direct
only the SROs to jointly develop and operate NMS plans, and does not
provide the authority to give non-SROs voting power on the operating
committee of an NMS plan.\227\ While acknowledging that the non-SROs
should have some voice in the operations of the CT Plan, one commenter
argues that Congress ``determined to entrust the planning, development,
operation, and regulation of NMS plans to SROs that have specific
regulatory obligations to act in furtherance of the public interest.''
\228\ This commenter also argues that, because Rule 608 provides that
only SROs have the authority to act jointly to file and amend NMS
plans, providing voting rights to non-SROs violates Rule 608.\229\
Another commenter argues that the Act leaves no discretion for the
Commission to grant votes to non-SROs,\230\ and that providing votes to
non-SROs would conflict with the design and purpose of the Act, which
entrusted responsibility for the planning, development, operation, and
regulation of the national market system to SROs, which are subject to
comprehensive regulation,\231\ rather than to non-SROs, whose
representatives would have no obligation to act in the public interest
and would be free to act in their own personal self-interest.\232\ This
commenter further states that the Non-SRO Voting Representatives would
not have an obligation to protect investors or further the public
interest, or to comply with the terms of the CT Plan, despite being
voting members of the Operating Committee.\233\
---------------------------------------------------------------------------

    \226\ See Cboe Letter, supra note 17, at 2, 3-4 (arguing that
only SROs have the authority to act jointly to file, amend,
implement, and administer an NMS plan); NYSE Letter I, supra note
18, at 6-7 (arguing that neither Section 11A nor Rule 608(a)(3)
authorize non-SROs to act jointly along with SROs with respect to
NMS plans); Nasdaq Letter I, supra note 20, at 1-2 (attaching and
incorporating by reference all arguments made by Petitioners in
their opening brief challenging the Order). The Commission has
responded to the arguments made by Nasdaq in its brief. See Brief
for the Respondent, Securities and Exchange Commission, The Nasdaq
Stock Market, et al. v. Securities and Exchange Commission (Case No.
20-1181) (DC Cir. 2020).
    \227\ See Cboe Letter, supra note 17, at 2; Nasdaq Letter I,
supra note 18, at 1-2. See also NYSE Letter I, supra note 18, at 6-
7; NYSE Letter II, supra note 19, at 3.
    \228\ Cboe Letter, supra note 17, at 3.
    \229\ See id. at 4.
    \230\ See NYSE Letter I, supra note 18, at 7.
    \231\ See id.
    \232\ See id. at 7-8.
    \233\ See NYSE Letter I, supra note 18, at 7 (``While these
individuals are intended to `represent' each of the six enumerated
categories of non-SRO market participants, such individuals would
not even have the obligation to further the purportedly represented
non-SROs' interest nor the public interest when voting on the
Operating Committee, leaving each free to act in his or her own
personal self-interest.'').
---------------------------------------------------------------------------

    The Commission specifically considered and addressed these
arguments in the Governance Order.\234\ As stated therein, the
Commission believes that it is within its authority under Section 11A
to require the operating committee to include voting rights for non-
SROs. In Section 11A(a)(2), Congress directed the Commission to use its
authority under the Act to facilitate the establishment of the NMS in
accordance with and in furtherance of its specific findings and
objectives. Here, the Commission is acting pursuant to its authority
under Section 11A(a)(3)(B) to further Congress's express objective of
assuring the availability to brokers, dealers, and investors of
information with respect to quotations for and transactions in
securities.\235\ Section 11A(a)(3)(B) expressly permits the Commission
to require SROs to ``act jointly'' with respect to a ``matter[ ]'' as
to which they ``share authority in planning, developing, operating, or
regulating the national market system (or a subsystem thereof).'' \236\
But Congress left to the Commission's discretion the determination of
which ``matters'' to require joint action and how such joint action
should occur. The requirement for the CT Plan to include minority
voting rights for non-SROs on the Operating Committee falls comfortably
within that discretion.
---------------------------------------------------------------------------

    \234\ See Governance Order, supra note 8, 85 FR at 28715-16.
    \235\ See 15 U.S.C. 78k-1(a)(3)(B).
    \236\ Id.
---------------------------------------------------------------------------

    The particular ``matter'' as to which the Commission is requiring
joint action here--the planning, development, and operation of an NMS
plan governing dissemination of consolidated equity market data--is
designed to achieve the goals of Section 11A(c), in particular by
ensuring the prompt, accurate, reliable, and fair collection,
processing, distribution, and publication of information with respect
to quotations for and transactions in securities and the fairness and
usefulness of the form and content of such information. Not only does
that provision expressly contemplate the involvement of non-SROs,\237\
but as the Commission explained in the Governance Order, an operating
committee that takes into account views from non-SRO members that are
charged with carrying out the objectives of the CT Plan will have an
overall improved governance structure that better supports those goals,
because it will reflect a more diverse set of perspectives from a range
of market participants, including significant subscribers of SIP core
data products.\238\ As the Commission further stated, ``including
representatives from non-SROs alongside the SROs on the operating
committee will enhance the ability of all relevant constituencies to
work together to facilitate the goals of Section 11A of the Act.''
\239\ These findings had substantial support in the comment file for
the Governance Order, as a diverse set of commenters expressed the view
that the governance of market data plans should include a broader array
of viewpoints.\240\ And the Commission reiterates those findings here.
---------------------------------------------------------------------------

    \237\ See 15 U.S.C. 78k-1(c) (prohibiting any SRO ``securities
information processor, broker or dealer'' from collecting,
processing, distributing, or publishing market data in contravention
of Commission rules).
    \238\ See Governance Order, supra note 8, 85 FR at 28715-16.
    \239\ Id. at 28716.
    \240\ See id. at 28706.
---------------------------------------------------------------------------

    The Commission disagrees with comments that argue that because
Section 11A of the Act and Rule 608 of Regulation NMS authorize the
Commission to permit or require SROs to ``act jointly'' in planning,
developing, and operating the NMS plans, the Commission has no
authority to mandate that SROs provide minority voting rights for
certain non-SROs on the operating committee of the new plan. Nothing in
Section 11A precludes the involvement of non-SROs in the national
market system.\241\ Nor do the text or structure of Section 11A
demonstrate that in permitting the Commission to authorize or require
SROs to ``act jointly'' with respect to matters over which they share
authority, Congress intended to entrust the development or operation of
the NMS exclusively to SROs. ``Act jointly'' does not clearly connote
``act jointly and exclusively.'' \242\ Likewise, the

Commission's grant of authority to SROs in Rule 608(a)(3) authorizes
SROs to act jointly but, in doing so, does not by implication limit the
Commission's authority to set forth a governance structure that
includes non-SROs with some measure of voting power on an NMS plan
operating committee. Rather, as the Governance Order notes, both
Section 11A and Rule 608 are silent as to the participation of non-SROs
in the operation of the plan.
---------------------------------------------------------------------------

    \241\ To the contrary, Section 11A expressly contemplates the
involvement of non-SROs. See, e.g., Section 11A(b), 15 U.S.C. 78k-
1(b) (regarding Securities Information Processors); Section 11A(c),
15 U.S.C. 78k-1(c) (prohibiting any SRO ``securities information
processor, broker or dealer'' from collecting, processing,
distributing, or publishing market data in contravention of
Commission rules); Section 11A(d)(3), 15 U.S.C. 78k-1(d)(3) (listing
brokers, dealers, securities information processors, issuers, and
investors with ``other persons interested in or likely to
participate in the establishment, operation, or regulation of the
national market system'').
    \242\ Indeed, history indicates that there is a different
congressional intent behind the inclusion of this language. As the
Commission has explained, the ``act jointly'' provision ``enables
the Commission to require joint activity that otherwise might be
asserted to have an impact on competition, where the activity serves
the public interest and the interests of investors.'' Order
Directing the Exchanges and the National Association of Securities
Dealers, Inc. to Submit a Phase-in Plan to Implement Decimal Pricing
in Equity Securities and Options, Securities Exchange Act Release
No. 42914 (June 8, 2000), 65 FR 38010, 38012 (June 19, 2000); see
also Application Pursuant to Section 11A(a)(3)(B) of the Securities
Exchange Act of 1934, Securities Exchange Act Release No. 41843
(Sept. 8, 1999), 64 FR 50126, 50127 (Sept. 15, 1999); Order
Directing Options Exchanges To Submit an Inter-Market Linkage Plan,
Securities Exchange Act Release No. 42029 (Oct. 19, 1999), 64 FR
57674, 57675 (Oct. 26, 1999). In other words, Congress permitted the
Commission to authorize SROs to engage in joint action that may
otherwise give rise to antitrust concerns in circumstances in which
they are acting ``with respect to matters as to which they share
authority . . . in planning, developing, operating, or regulating a
national market system (or a subsystem thereof) or one of more
facilities thereof.''
---------------------------------------------------------------------------

    Further, the Commission does not believe, as suggested by some
commenters, that permitting non-SROs to serve on the Operating
Committee will impede the SROs' ability to act jointly or interfere
with their ability to operate the national market system. The CT Plan
simply requires the SROs to include Non-SRO Voting Representatives in
the decision-making process for plan action.\243\ Additionally, nothing
in the legislative history of Section 11A indicates that Congress
sought to preclude the Commission from directing the SROs to provide
non-SROs with a voice in NMS plan governance, particularly where, as
here, the Commission has reasonably concluded that doing so will
promote the Plan's effectiveness, consistent with Section 11A's
enumerated goals.
---------------------------------------------------------------------------

    \243\ See Governance Order, supra note 8, 85 FR at 28715.
---------------------------------------------------------------------------

    Further, the Commission does not believe that allowing a broader
representation of market participants in the governance of the CT Plan
by including non-SROs as voting members on the Operating Committee will
diminish the SROs' ability to ensure that the CT Plan meets the
requirements of Section 11A of the Act and Rule 608 of Regulation NMS.
As discussed below, the proposed voting structure, provides the SROs,
by themselves, sufficient voting power to ensure that the Plan meets
the requirements of Section 11A and Rule 608. In addition, the
inclusion of non-SROs as voting members does not create a risk that the
CT Plan could be amended in a manner inconsistent with the SROs'
regulatory obligations or with the Act, as any substantive amendments
to the CT Plan would require Commission approval, and the Commission
would determine if each such amendment was consistent with the Act and
Rule 608. Therefore, the Commission continues to believe that inclusion
of Non-SRO Voting Representatives on the Operating Committee would not
interfere with the Commission's ability to exercise its oversight over
the CT Plan.
(B) Categories of Non-SRO Voting Representatives
    Article IV, Section 4.2(b) provides that one Non-SRO Voting
Representative will be chosen from each of the following categories to
serve on the Operating Committee, with the right to vote on Operating
Committee matters: (A) An institutional investor; (B) a broker-dealer
with a predominantly retail investor customer base; (C) a broker-dealer
with a predominantly institutional investor customer base; (D) a
securities market data vendor that is not affiliated or associated with
a Member, broker-dealer, or investment adviser with third-party
clients; (E) an issuer of NMS stock that is not affiliated or
associated with a Member, broker-dealer, or investment adviser with
third-party clients; and (F) a Retail Representative.\244\
---------------------------------------------------------------------------

    \244\ See Article IV, Section 4.2(b) of the CT Plan. For
purposes of the CT Plan, a Retail Representative is an individual
who (1) represents the interests of retail investors, (2) has
experience working with or on behalf of retail investors, (3) has
the requisite background and professional experience to understand
the interests of retail investors, the work of the Operating
Committee of the Company, and the role of market data in the U.S.
equity market, and (4) is not affiliated with a Member or broker-
dealer. See id.
---------------------------------------------------------------------------

    One commenter states it is ``not against'' the proposed categories
of Non-SRO Voting Representatives, but argues that the representatives'
ability to introduce new and useful innovation to reform the SIP should
be emphasized.\245\ Another commenter expresses support, in particular,
for the inclusion of an institutional investor, such as an asset
manager, on the Operating Committee.\246\ One commenter opposes the
proposed restriction that would prohibit the Non-SRO Voting
Representative representing issuers from being affiliated with an SRO,
a broker-dealer, or an investment adviser.\247\ This commenter argues
that such a limitation would ``eliminate a significant portion of
qualified issuer representatives with the industry experience necessary
to be effective non-SRO members,'' and would unreasonably discriminate
against ETF issuers as they are typically affiliated with a broker-
dealer or investment adviser, denying representation to a significant
segment of the market.\248\
---------------------------------------------------------------------------

    \245\ Data Boiler Letter I, supra note 31, at 28.
    \246\ See ICI Letter II, supra note 31, at 1.
    \247\ See Letter from Hubert De Jesus, Managing Director, Global
Head of Market Structure and Electronic Trading, and Samantha DeZur,
Director, Global Public Policy, BlackRock (Nov. 12, 2020)
(``BlackRock Letter I''), at 3.
    \248\ Id.
---------------------------------------------------------------------------

    Another commenter disagrees with the proposed restriction that
would prohibit the Non-SRO Voting Representative representing Market
Data Vendors from being affiliated or associated with a Member, broker-
dealer, or investment adviser with third-party clients.\249\ The
commenter explains that many market data vendors partner with broker-
dealers to create, and have available, technology that will complement
traditional vending technology. The commenter argues that if these
vendors are excluded from the pool of possible adviser candidates, no
employees of major vendors would be eligible to serve, and that would
eliminate many candidates that have the depth and breadth of
understanding that comes from working for a large vendor. The commenter
suggests that the restriction on who is eligible to serve as the
securities Market Data Vendor Non-SRO Voting Representative be revised
so that the individual representing the vendor community may not be
associated with or in a direct control relationship with a broker-
dealer.\250\
---------------------------------------------------------------------------

    \249\ See Letter from Sherry Madera, Chief Industry & Government
Affairs Officer, Refinitiv (Nov. 12, 2020) (``Refinitiv Letter''),
at 1-2.
    \250\ See id.
---------------------------------------------------------------------------

    Although some commenters object to the restriction that the
securities market data vendor representative and the issuer
representative cannot be affiliated with SROs, broker-dealers, and
investment advisers with third-party clients,\251\ the Commission
continues to believe that these restrictions are appropriate. These
restrictions would operate to prevent certain affiliates of SROs,
broker-dealers, or investment advisers from gaining additional
representation on the Operating Committee by virtue of their
affiliations. Under the CT Plan, SROs would have two-thirds of the
votes on the Operating Committee, broker-dealers would have two
representatives on the Operating Committee, and institutional investors
would have one representative on the Operating Committee. Allowing a
person from an issuer or market data

vendor affiliated with an SRO to serve as a Non-SRO Voting
Representative would increase SRO representation and correspondingly
diminish the representation of non-SROs on the Operating Committee.
---------------------------------------------------------------------------

    \251\ See BlackRock Letter I, supra note 247, at 3; Refinitiv
Letter, supra note 249, at 1-2.
---------------------------------------------------------------------------

    The Commission also believes that it is important that the
securities market data vendor representative and the issuer
representative not be affiliated with a broker-dealer or an investment
adviser with third-party clients so that there are entities with
potentially diverse views on the Operating Committee. The Commission
believes that adding an issuer representative that is not affiliated
with an investment adviser would be more likely to add a different and
valuable perspective than a second representative affiliated with an
investment adviser. Similarly, the Commission believes that, although
it is likely that the affiliation restrictions for a market data vendor
representative would prevent at least some qualified and experienced
persons from serving in that role, the Commission believes that this
disadvantage is justified by the benefits of having a non-affiliated
market data vendor, because the non-affiliated market data vendor would
be more likely to add a different and valuable perspective to the
deliberations of the Operating Committee than a third Non-SRO Voting
Representative that is affiliated with a broker-dealer and would also
be less likely to be affected by the same potential conflicts of
interest. Moreover, as stated in the Governance Order, the Commission
believes that even with these restrictions, the Operating Committee
will be able to attract knowledgeable representatives of securities
market data vendors and issuers, as the CT Plan will address issues and
make important decisions that will impact these constituencies.\252\
The Commission believes that the opportunity to have a voice on the
operating committee of an NMS plan responsible for issues related to
market data will be highly coveted and that there will be qualified
nominees willing to serve as representatives from organizations that
are not affiliated with SROs, broker-dealers, or institutional
investors.
---------------------------------------------------------------------------

    \252\ See Governance Order, supra note 8, 85 FR at 28718.
---------------------------------------------------------------------------

    The Commission therefore concludes that including representatives
from these categories of Non-SRO Voting Representatives, as set forth
in the CT Plan as proposed, will provide a diversity of views on the
Operating Committee such that perspectives from key stakeholders in
matters related to equity market data are heard. Accordingly, the
Commission is approving the provision of Article IV, Section 4.2(b)
that enumerates the categories of Non-SRO Voting Representatives as
proposed.
(C) Term Limits
    Article IV, Section 4.2(b) of the CT Plan provides that Non-SRO
Voting Representatives are eligible to serve for two-year terms for a
maximum of two terms total, whether consecutive or non-
consecutive.\253\ Under this provision, after the expiration of a Non-
SRO Voting Representative's term, a replacement will be selected by a
majority of the then-serving Non-SRO Voting Representatives.\254\ The
CT Plan provides for a staggered start of the Non-SRO Voting
Representatives official terms,\255\ but provides that those Non-SRO
Voting Representatives whose official terms would not begin until the
Third Quarterly Operating Committee Meeting after the Effective Date,
would temporarily serve as a Non-SRO Voting Representative upon their
selection and would still be eligible to be selected for another two-
year term.\256\
---------------------------------------------------------------------------

    \253\ See Article IV, Section 4.2(b) of the CT Plan.
    \254\ See Article IV, Section 4.2(b)(i) and (ii) of the CT Plan.
See also infra Section II.C.5(b)(ii)(D).
    \255\ Specifically, the proposed CT Plan provides that the terms
for the Issuer Representative, the Retail Representative, and the
Institutional Representative would begin at the First Quarterly
Operating Committee Meeting and the Securities Market Data Vendor
Representative, the Broker-Dealer with a predominantly retail
customer base Representative and the Broker-Dealer with a
predominantly institutional investor base Representative would begin
at the Third Quarterly Operating Committee Meeting. See Article IV,
Section 4.2(b)(i) of the CT Plan.
    \256\ See Article IV, Section 4.2(b) of the CT Plan.
---------------------------------------------------------------------------

    Several commenters express views on the term limits proposed in
Article IV, Section 4.2(b).\257\ One commenter states that the maximum
term limit imposed on Non-SRO Voting Representatives in the CT Plan
could adversely affect the operations of the Operating Committee by
barring members with more experience from serving on it and by making
it more difficult to attract qualified candidates for all the
categories of Non-SRO Voting Representatives.\258\ Another commenter
recommends allowing Non-SRO Voting Representatives to serve two two-
year terms and then take a break for two years before being eligible to
serve again.\259\ The commenter believes that this term structure will
``promote qualified participation by non-SROs, while preserving an
egalitarian process which allows for a rotation of representatives and
provides any interested candidate the opportunity to serve.'' \260\
Another commenter recommends that Non-SRO Voting Representatives be
permitted to serve two consecutive terms and then serve again after a
one-term break, arguing that there is a limited pool of individuals
with adequate experience and knowledge that can serve and that there
are benefits from institutional knowledge gained from serving on the
Operating Committee.\261\ In addition, one commenter believes that a
Non-SRO Voting Representative should be permitted to serve more than
two terms, provided there is a sufficiently lengthy (e.g., two years)
cooling-off process.\262\ This commenter believes that the cooling-off
process should provide a check on any firm's or individual's influence
and would foster a sufficiently deep pool of candidates.\263\
---------------------------------------------------------------------------

    \257\ See RBC Letter, supra note 30, at 8; MFA Letter, supra
note 30, at 3-4; BlackRock Letter I, supra note 247, at 2; ICI
Letter I, supra note 31, at 3-4; SIFMA Letter I, supra note 30, at
3; SIFMA Letter II, supra note 30, at 2; Virtu Letter, supra note
30, at 4; Letter from Marcia E. Asquith, Executive Vice President,
Board and External Relations, FINRA (Nov. 12, 2020) (``FINRA Letter
I''), at 7-8; MEMX Letter, supra note 30, at 3.
    \258\ See RBC Letter, supra note 30, at 8.
    \259\ See BlackRock Letter I, supra note 247, at 2.
    \260\ Id.
    \261\ See MFA Letter, supra note 30, at 3-4.
    \262\ See ICI Letter I, supra note 31, at 3-4.
    \263\ See id.
---------------------------------------------------------------------------

    Similarly, another commenter that supports a maximum term limit for
Non-SRO Voting Representatives to allow for fresh perspectives from new
industry representatives recommends that Non-SRO Voting Representatives
be permitted to serve three consecutive two-year terms with ability to
serve the same term limits after a two-year break.\264\ This commenter
believes that the maximum term of four years proposed in the CT Plan
would ``impede meaningful and informed participation of Non-SRO
Representatives'' and ``does not allow sufficient time for the
representative to provide meaningful contribution as it may take new
members . . . some time to get up to speed on the many diverse and
complex issues.'' \265\ Another commenter states that it supports term
limits to ``incentivize a healthy rotation of industry experts on the
[Operating] Committee,'' but it does not believe that the term limits
proposed ``offer enough runway for experts to get up to speed

and to participate meaningfully in the work of the [Operating]
Committee,'' and recommends permitting Non-SRO Voting Representatives
to serve three two-year terms.\266\ Another commenter states that there
is a sufficient number of qualified people to serve on the Operating
Committee such that it is not necessary to have any person serve for
more than six years, whether terms are consecutive or not.\267\ This
commenter supports allowing Non-SRO Voting Representatives to serve for
two three-year terms, arguing that such a term would provide continuous
fresh ideas to the Operating Committee.\268\
---------------------------------------------------------------------------

    \264\ See SIFMA Letter I, supra note 30, at 3; SIFMA Letter II,
supra note 30, at 2.
    \265\ SIFMA Letter I, supra note 30, at 3; see also SIFMA Letter
II, supra note 30, at 2. FINRA similarly supports a longer maximum
term to ``ensure that Non-SRO Voting Representatives are able to
gain knowledge and experience with the specifics of SIP operations,
which can be very technical in nature, and allow them to provide
more meaningful input into the CT Plan's operations.'' FINRA Letter
I, supra note 257, at 7-8.
    \266\ Virtu Letter, supra note 30, at 4.
    \267\ See Fidelity Letter, supra note 30, at 4.
    \268\ See id.
---------------------------------------------------------------------------

    Other commenters address when the Non-SRO Voting Representatives
should commence their duties on the Operating Committee.\269\ One
commenter suggests that the Operating Committee be established with
both SRO and non-SRO voting representation before the CT Plan becomes
effective to allow non-SROs the ability to participate in the process
of operationalizing the CT Plan.\270\ Another commenter recommends that
the Non-SRO Voting Representatives' terms begin at the first meeting of
the Operating Committee and that the terms be staggered such that three
Non-SRO Voting Representatives would serve for three years and three
Non-SRO Voting Representatives would serve for two years to allow all
representatives to be present from the start.\271\ Other commenters
similarly support staggered terms. One commenter argues that staggered
terms would reduce the distractions that could occur if all the Non-SRO
Voting Representatives were replaced every two to four years.\272\
Another commenter believes that the terms for Non-SRO Voting
Representatives should be staggered so that no more than half of the
representatives are elected in one year.\273\ Similarly, another
commenter recommends staggering terms ``by at least one or two years to
ensure sufficient continuity and consistency in representation.'' \274\
---------------------------------------------------------------------------

    \269\ See RBC Letter, supra note 30, at 4; BlackRock Letter II,
supra note 30, at 1-2; ICI Letter II, supra note 31, at 2; Data
Boiler Letter I, supra note 31, at 31.
    \270\ See BlackRock Letter II, supra note 30 at 1-2; see also
Data Boiler Letter I, supra note 31, at 31 (stating that Non-SRO
Voting Representatives should be selected before the Effective Date
so they can assist with implementation of governance policies and
procedures).
    \271\ See ICI Letter II, supra note 31, at 2.
    \272\ See Data Boiler Letter I, supra note 31, at 31.
    \273\ See MEMX Letter, supra note 30, at 3. To accomplish this,
the commenter suggests modifying the initial term of three of the
Non-SRO Voting Representatives. See id.
    \274\ BlackRock Letter I, supra note 247, at 2; see also Virtu
Letter, supra note 30, at 4.
---------------------------------------------------------------------------

    Several commenters recommend imposing term limits on SRO Voting
Representatives.\275\ One commenter believes that by applying term
limits to Non-SRO Voting Representatives only, the CT Plan could
advantage SROs relative to non-SROs with respect to relevant
information and experience.\276\ Another commenter states that SRO
Voting Representatives should be subject to the same term limits as
Non-SRO Voting Representatives.\277\ Another commenter similarly states
that allowing SRO Voting Representatives to serve indefinitely may be
``counterproductive.'' \278\
---------------------------------------------------------------------------

    \275\ See RBC Letter, supra note 30, at 8; Virtu Letter, supra
note 30, at 4; MFA Letter, supra note 30, at 3-4.
    \276\ See RBC Letter, supra note 30, at 8.
    \277\ See MFA Letter, supra note 30, at 3-4.
    \278\ Virtu Letter, supra note 30, at 4.
---------------------------------------------------------------------------

    Other commenters disagree that SRO Voting Representatives should be
subject to term limits. Two commenters objecting to term limits for SRO
Voting Representatives explain that these representatives do not serve
as individuals, but as representatives of a legal entity, and must vote
based on that entity's position.\279\ Therefore, one commenter argues,
changing the individual would not serve to bring new perspectives to
the Operating Committee.\280\ Another commenter stated that whether
term limits apply to either Non-SRO Voting Representatives or SRO
Voting Representatives is a decision for the SROs to make, not the
Commission.\281\
---------------------------------------------------------------------------

    \279\ See FINRA Letter I, supra note 257, at 7-8; Nasdaq Letter
I, supra note 20, at 23.
    \280\ See Nasdaq Letter I, supra note 20, at 23. This commenter
also argues that imposing term limits on SRO Voting Representatives
would interfere with the SRO's ability to discharge its
responsibilities under the Act through the individual that it
believes best able to exercise those functions. See id.
    \281\ See NYSE Letter I, supra note 18, at 38-39.
---------------------------------------------------------------------------

    In the Governance Order, the Commission explained that term limits
for Non-SRO Voting Representatives must balance the advantages of
institutional knowledge with the potential benefits to be derived from
new perspectives.\282\ Further, the Commission stated that it believed
that a term of two years, with the potential for additional terms,
would provide sufficient time for a member to become familiar with the
issues dealt with by the operating committee.\283\ Several commenters,
however, argue that Non-SRO Voting Representatives would need to be
permitted to serve for longer than two two-year terms to get fully up
to speed on all the complex matters covered by the CT Plan before
rotating off the Operating Committee.\284\
---------------------------------------------------------------------------

    \282\ See Governance Order, supra note 8, 85 FR at 28720.
    \283\ See id.
    \284\ See RBC Letter, supra note 30, at 8; MFA Letter, supra
note 30, at 3-4; BlackRock Letter I, supra note 247, at 2; SIFMA
Letter I, supra note 30, at 3; SIFMA Letter II, supra note 30, at 2;
Virtu Letter, supra note 30, at 4; Fidelity Letter, supra note 30,
at 4; FINRA Letter I, supra note 257, at 7-8. Some of these
commenters proposed alternative terms. See SIFMA Letter I, supra
note 30, at 3; SIFMA Letter II, supra note 30, at 2; Virtu Letter,
supra note 30, at 4; Fidelity Letter, supra note 30, at 4; FINRA
Letter I, supra note 257, at 7-8; MEMX Letter, supra note 30, at 3.
---------------------------------------------------------------------------

    After considering the concerns raised by commenters, the Commission
is modifying Section 4.2(b) of the CT Plan to provide that Non-SRO
Voting Representatives shall serve no more than two consecutive three-
year terms, but shall be eligible, after a period of three years of
non-service, to serve additional terms, subject to the requirement that
three years of non-service must follow every set of two three-year
terms of service.\285\ The Commission finds that the modification from
two two-year terms to two three-year terms is appropriate because the
Commission believes that these longer terms will better allow Non-SRO
Voting Representatives to obtain sufficient experience with the
operation of the CT Plan and to make informed contributions as members
of the Operating Committee. The Commission also finds that--in order to
preserve an appropriate balance between retaining institutional
knowledge and allowing new perspectives to be heard--it is appropriate
to require that, after serving a defined amount of time, Non-SRO Voting
Representatives should be required to observe a ``cooling-off'' period
before serving again so as to allow others the opportunity to serve. In
response to a commenter's claim that the SROs should have discretion to
set Non-SRO Voting Representatives' term limits, the Commission
believes, as it stated in the Governance Order, that the determination
of term limits for Non-SROs falls within its statutory authority under
Section 11A of the Act.\286\ Moreover, the Commission believes that
full participation by the Non-SRO Voting Representatives on the
Operating Committee is a critical component of the

governance of the CT Plan and that permitting the SROs to set the terms
of Non-SRO Voting Representatives would grant the SROs influence over
the Non-SRO Voting Representatives and diminish the independence and
effectiveness of Non-SRO Voting Representatives as they serve on the
Operating Committee.
---------------------------------------------------------------------------

    \285\ The Commission is modifying references to the Non-SRO
Voting Representatives' term limits in Article IV, Sections
4.2(b)(iii) and (b)(vii) of the CT Plan to reflect this modification
for consistency. See infra Section II.C.5(b)(ii)(C).
    \286\ See supra note 281. See also Brief for the Respondent,
Securities and Exchange Commission, The Nasdaq Stock Market, et al.
v. Securities and Exchange Commission (Case No. 20-1181) (DC Cir.
2020).
---------------------------------------------------------------------------

    The Commission, however, disagrees with comments suggesting that
term limits should also apply to SRO Voting Representatives.\287\
Rather, the Commission agrees with those comments that argue that the
SRO Voting Representatives serve on the Operating Committee as
representatives of a legal entity and vote at the direction of that
entity. The SROs are, by virtue of their status as SROs, permanent
participants in the CT Plan, and the Commission does not expect that
varying the identity of the individuals representing a given SRO Group
or Non-Affiliated SRO on the Operating Committee is likely to vary the
views expressed or the votes cast by that SRO Group or Non-Affiliated
SRO on the Operating Committee. The Non-SRO Voting Representatives, by
contrast, will vary over time, and most will be employees of a set of
firms that will vary over time, and the Commission expects that these
individuals may have different perspectives regarding market data
issues. Therefore, the Commission finds that imposing term limits on
SRO Voting Representatives would not be appropriate, because it does
not believe that doing so would bring fresh perspectives to the
Operating Committee or further promote the goals of the CT Plan in the
same manner as it would for Non-SRO Voting Representatives.
---------------------------------------------------------------------------

    \287\ See RBC Letter, supra note 30, at 8; Virtu Letter, supra
note 30, at 4; MFA Letter, supra note 30, at 3-4.
---------------------------------------------------------------------------

    The Commission agrees with comments that suggest that all Non-SRO
Voting Representatives should commence their duties upon selection and
that the terms of Non-SRO Voting Representatives should be
staggered,\288\ and the Commission believes that Sections 4.2(b)(ii)
and (iii) of the CT Plan allow for both. Specifically, Section
4.2(b)(ii) provides that the terms of the Non-SRO Voting
Representatives will begin on a staggered basis with half of the Non-
SRO Voting Representatives beginning their term with the First
Quarterly Meeting of the Operating Committee and half beginning their
term with the Third Quarterly Meeting. However, Section 4.2(b)(iii)
also states that, although the official term for certain of the Non-SRO
Voting Representatives will not begin until the Third Quarterly
Meeting, these Non-SRO Voting Representatives will temporarily serve on
the Operating Committee, including having voting rights, before the
official commencement of their terms and may be selected for a second
full term. Therefore, all Non-SRO Voting Representatives will
participate in, and have votes on, the Operating Committee as of the
First Quarterly Meeting, even though the official term for half of the
Non-SRO Voting Representatives will not begin to run until the Third
Quarterly Meeting. Thus, the expiration of the Non-SRO Voting
Representatives' terms will be staggered by approximately six months
pursuant to this scheme.
---------------------------------------------------------------------------

    \288\ See RBC Letter, supra note 30, at 4; BlackRock Letter I,
supra note 247, at 2; BlackRock Letter II, supra note 30, at 1-2;
ICI Letter II, supra note 31, at 2; Data Boiler Letter I, supra note
31, at 31.
---------------------------------------------------------------------------

    In response to comments recommending that the terms of Non-SRO
Voting Representatives be staggered by at least one or two years to
ensure continuity and consistency in representation,\289\ the
Commission believes that the scheme for staggered terms proposed in the
CT Plan, in combination with the Commission's modifications to the CT
Plan's provisions regarding term length and term limits for Non-SRO
Voting Representatives, as discussed above, appropriately balances the
goal of continuity of service among Non-SRO Voting Representatives with
the goal of providing for a rotation of Non-SRO Voting Representatives
over time to help ensure a diversity of non-SRO viewpoints on the CT
Plan Operating Committee. While it is possible that every Non-SRO
Voting Representative would serve two three-year terms, leading to
complete turnover among those representatives over the course of a
single year in the future, it is also possible that the terms of Non-
SRO Voting Representatives will, over time, naturally become staggered
as some representatives serve single terms or, for personal or business
reasons, do not complete a full term. Moreover, prescribing a
significant staggering of terms at the outset of CT Plan operations
would require granting materially longer initial terms to certain
categories of Non-SRO Voting Representatives and materially shorter
initial terms to others, without a meaningful distinction on which to
base that disparity. Therefore, the Commission is not modifying the
approach proposed in the CT Plan.
---------------------------------------------------------------------------

    \289\ See BlackRock Letter I, supra note 247, at 2; MEMX Letter,
supra note 30, at 3; Data Boiler Letter I, supra note 31, at 28.
---------------------------------------------------------------------------

    Finally, one commenter argues that the Non-SRO Voting
Representatives should be empowered to participate in the governance of
the current Equity Data Plans, as soon as those representatives are
selected.\290\ While the Commission believes that adding the
perspectives of Non-Voting SRO Representatives will be an important
improvement to the governance structure for equity market data, the
Commission does not believe that adding the Non-SRO Voting
Representatives to the operating committees of the currently existing
Equity Data Plans can be accomplished in the context of approving the
proposed CT Plan or under the auspices of the Governance Order. The
Commission agrees, however, that the input of Non-SRO Voting
Representatives should be included in the governance of consolidated
equity market data plans as soon as practicable, and the Commission
has, as discussed above,\291\ sought to address this issue by adding
deadlines to the CT Plan for the achievement of the steps necessary for
implementation.
---------------------------------------------------------------------------

    \290\ See RBC Letter, supra note 30, at 4.
    \291\ See supra Section II.C.1(a).
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission is approving the
provisions of Article IV, Section 4.2(b) of the CT Plan that govern the
terms of members of the Operating Committee as modified.
(D) Process for Selecting Non-SRO Voting Representatives
    Article IV, Section 4.2(b)(i) provides that the initial Non-SRO
Voting Representatives will be selected by a majority vote of the then-
current members of the Advisory Committee. This section further
provides that the Advisory Committee Members will follow the procedures
set forth in the CT Plan applicable for selection of Non-SRO Voting
Representatives for those whose terms are expiring for selection of the
initial Non-SRO Voting Representatives.\292\
---------------------------------------------------------------------------

    \292\ See Article IV, Section 4.2(b)(i) of the CT Plan.
---------------------------------------------------------------------------

    The Commission is modifying this Section to expressly permit
Advisory Committee Members to nominate themselves to serve as Non-SRO
Voting Representatives regardless of their length of service on the
Advisory Committee, as well as to nominate other candidates. As
proposed, under the procedure in Section 4.2(b)(v), although the
Advisory Committee Members would be permitted to nominate themselves,
only Members would be permitted to nominate other candidates.

The Commission finds that it is appropriate to allow the Advisory
Committee Members to nominate candidates, in addition to themselves,
because the Advisory Committee Members have the background, based on
their experience with the Equity Data Plans, to select nominees from
the industry who have the knowledge that is essential to effectively
serve on the Operating Committee. The Commission also finds that it is
appropriate to the modify the CT Plan to expressly state that Advisory
Committee Members may nominate themselves, regardless of the length of
their prior service, because service in an advisory capacity under the
Equity Data Plans should not preclude a person's eligibility to serve
on the CT Plan's Operating Committee as a voting representative under
the CT Plan. To provide otherwise could prevent candidates who have
direct experience with the operation of an NMS plan for consolidated
equity market data, and who could provide continuity of ideas on the
initial CT Plan Operating Committee, from being considered for Non-SRO
Voting Representative positions. For these reasons, the Commission is
approving Article IV, Section 4.2(b)(i) as modified.
    Article IV, Section 4.2(b)(v) proposes a procedure for nominating
and electing Non-SRO Voting Representatives following their initial
selection. Pursuant to the proposed procedure, the Operating Committee
must post a notice on its website seeking nominations from the public
for an upcoming position at least two months prior to the expiration of
a Non-SRO Voting Representative's term. Members may submit individuals
for consideration, and Non-SRO Voting Representatives may nominate
themselves if they have not already served their maximum term.\293\ The
Non-SRO Voting Representatives will review the nominations and confirm
by majority vote that a nominated individual meets the requirements for
the category up for election at least one month prior to expiration of
the term for the position to be filled.\294\ Within a week of the Non-
SRO Voting Representatives' confirmation of eligible nominees, the
Operating Committee must post the list of nominees on its website and
solicit comment from the public.\295\ The Non-SRO Voting
Representatives will then consider and discuss the comments received
and elect an individual by majority vote.\296\ In the event that no
nominee receives a majority vote, the individual with the lowest number
of votes will be eliminated from consideration, and a new vote will be
taken. The Non-SRO Voting Representatives will repeat this process
until an individual receives a majority vote.\297\ Because Non-SRO
Voting Representatives are elected to represent a category of market
participants, in the event representatives leave their jobs or change
duties such that they are in a position unrelated to the category that
they represent, they must submit their resignation to the Chair of the
Operating Committee. If representatives do not tender their resignation
under such circumstances, they may be removed upon a vote of the
Operating Committee.\298\ Each Non-SRO Voting Representative must agree
in writing to comply with the provisions of the CT Plan relating to
conflicts of interests \299\ and confidentiality.\300\
---------------------------------------------------------------------------

    \293\ See Article IV, Section 4.2(b)(v)(A) of the CT Plan.
    \294\ See Article IV, Section 4.2(b)(v)(B) of the CT Plan.
    \295\ See Article IV, Section 4.2(b)(v)(C) of the CT Plan. The
Non-SRO Voting Representative will screen the comments for
appropriateness prior to their posting on the LLC's website. See id.
    \296\ See id. Non-SRO Voting Representatives whose terms are
expiring may vote in an election for an open position, provided they
are not nominees for the position. See Article IV, Section
4.2(b)(v)(D) of the CT Plan.
    \297\ See Article IV, Section 4.2(b)(v)(E) of the CT Plan.
    \298\ See Article IV, Section 4.2(b)(vi) of the CT Plan. The
proposed CT Plan provides that if a Non-SRO Voting Representative
resigns or is removed from the Operating Committee, a replacement
will be selected by a majority vote of the then-serving Non-SRO
Voting Representatives, and will serve out the remainder of the
term. If the remainder of the term is less than a year, the
individual will serve an additional two-year term, and if the
remainder of the term is more than one year, the selection process
outlined in Section 4.2(b)(v) will be followed. See Article IV,
Section 4.2(b)(vii) of the CT Plan.
    \299\ See Article IV, Section 4.10 and Exhibit B of the CT Plan.
    \300\ See Exhibit C of the CT Plan.
---------------------------------------------------------------------------

    The Commission is modifying Article IV, Section 4.2(b)(v)(A) of the
CT Plan in three respects. First, the Commission modifying this section
to provide that SRO Voting Representatives, rather than Members, will
be permitted to submit names for consideration for open Non-SRO Voting
Representative positions.\301\ The Commission finds that this
modification is appropriate because, while the Members of the CT Plan
are the SRO entities, the CT Plan generally is organized such that it
is the SRO Voting Representatives that act on behalf of the SROs in the
operation of the CT Plan.
---------------------------------------------------------------------------

    \301\ The Commission is also making a non-substantive change to
this Section of the CT Plan to insert ``the names of'' before
``individuals'' for clarity.
---------------------------------------------------------------------------

    Second, the Commission is modifying this provision to permit Non-
SRO Voting Representatives to submit the names of individuals for
consideration during the nominating process. The Commission finds that
this modification is appropriate because it permits the Non-SRO Voting
Representatives to use the same process as SRO Voting Representatives
to nominate candidates for consideration to fill open Non-SRO Voting
Representative positions. Without this modification, Non-SRO Voting
Representatives would need to use the public process to nominate
candidates, while the SRO Voting Representatives could directly
nominate candidates. The Commission does not believe that such
asymmetrical treatment of members of the Operating Committee is
justified.
    Third, the Commission is modifying this provision to replace the
language that permits Non-SRO Voting Representatives to nominate
themselves ``if they have not served the maximum number of terms'' with
the phrase ``if they are not then completing a second consecutive
term.'' The Commission finds that this modification is appropriate
because Non-SRO Voting Representatives cannot serve more than two
consecutive three-year terms and they therefore cannot nominate
themselves to serve if they are completing a second consecutive
term.\302\
---------------------------------------------------------------------------

    \302\ See supra Section II.C.5(b)(ii)(C).
---------------------------------------------------------------------------

    One commenter states that Non-SRO Voting Representative seats
should go to whoever can contribute to positive innovations in market
data infrastructure, and questions whether allowing Non-SRO Voting
Representatives to nominate themselves would further this end.\303\ The
Commission does not share this concern because it believes that non-SRO
market participants--for whom equity market data is a crucial aspect of
business operations--will have a strong interest in the prompt,
accurate, reliable, and fair collection, processing, distribution, and
publication of consolidated equity market data. Thus, the Commission
believes that it will be in the Non-SRO Voting Representatives'
interest to select persons to serve on the Operating Committee who will
further advance improvements and innovations in market data
infrastructure. And the Commission further believes that the

public process for nominations, and the turnover of Non-SRO Voting
Representatives required by the term limits included in the CT Plan,
will help ensure that no set of individuals becomes permanently
entrenched as Non-SRO Voting Representatives by virtue of the ability
to nominate themselves.
---------------------------------------------------------------------------

    \303\ See Data Boiler Letter I, supra note 31, at 31, 32. This
commenter also questions whether there would be a bias toward top
elite firms, see Data Boiler Letter II, supra note 101, at 1, and
states Non-SRO Voting Representatives should earn their seats by
bringing in new and useful innovation, and if they do not do so,
they should not be granted a seat regardless of how many terms or
years they have served. See id. at 32.
---------------------------------------------------------------------------

    Another commenter states that the ability of Non-SRO Voting
Representatives to select themselves without SRO approval is
inconsistent with the statutory authorization for the national market
system under Section 11A and Rule 608, as well as with the authority
granted to SROs under Sections 6 and 19 of the Act.\304\ As previously
stated, the Commission believes that it has broad authority under
Section 11A of the Act to grant non-SROs voting rights with regard to
the governance of the CT Plan. The Commission believes that the
requirement that non-SRO members of the Operating Committee
collectively select replacement non-SRO members will help to ensure
that the individuals selected will represent their constituencies'
views on important market data issues, and that the most effective and
knowledgeable advocates for their views will serve on the Operating
Committee.
---------------------------------------------------------------------------

    \304\ See Nasdaq Letter I, supra note 20, at 19; Nasdaq Letter
II, supra note 49, at 1. See also MFA Letter, supra note 30, at 3.
The Commission believes that in its comment letter, MFA may have
misunderstood the proposed CT Plan to permit the SROs to exclusively
select the Non-SRO Voting Representatives. As a result, MFA opposes
providing such authority to the SROs and suggests alternatives for
more equitable selection of Non-SRO Voting Representatives. See id.
at 3. However, in fact, it is the Non-SRO Voting Representatives
that exclusively select the Non-SRO Voting Representatives. See
Article IV, Section 4.2(b)(iv) of the CT Plan.
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission is approving the
provisions of Article IV, Section 4.2(b)(v) as modified.
(iii) SRO Applicant Observers
    Article IV, Section 4.2(c) of the CT Plan provides that entities
that have not yet been registered with the Commission as national
securities exchanges may appoint an individual to attend regularly
scheduled Operating Committee Meetings (an ``SRO Applicant Observer'')
if such an entity has submitted, and the Commission has published, a
Form 1 to be registered as a national securities exchange or national
securities association, or if such an entity is a national securities
exchange that is not a Member and the Commission has published the
exchange's proposed rule change to operate a Market.\305\ The CT Plan
further provides that if the SRO Applicant's Form 1 or proposed rule
change is withdrawn, returned, or otherwise not actively pending before
the Commission, the SRO Applicant will no longer be permitted to attend
Operating Committee meetings.\306\
---------------------------------------------------------------------------

    \305\ See Article IV, Section 4.2(c) of the CT Plan. The SRO
Applicant may select an alternate to act on behalf of the SRO
Applicant in his or her absence. See id.
    \306\ See id.
---------------------------------------------------------------------------

    The Commission finds that is reasonable to allow an entity to
attend meetings of the Operating Committee as a non-voting observer
when it has filed a Form 1 or proposed rule change to operate a Market
and the Commission has published notice of that filing. The Commission
believes that attending meetings of the Operating Committee as an
observer will allow an equities market pending registration to be aware
of and familiarize itself with issues before the Operating Committee
before it becomes a national securities exchange or national securities
association. The Commission received no comments on Section 4.2(c) of
the CT Plan and is approving this Section as proposed.
(iv) Prohibiting Voting by Non-Operational Equity Trading Venues
    The CT Plan provides that in the event that a Non-Affiliated SRO,
or that all national securities exchanges in an SRO Group, cease
operations as a market (or have not commenced operation of a market),
those entities will not be permitted to appoint an SRO Voting
Representative. Such a Non-Affiliated SRO or SRO Group will, however,
be permitted to attend meetings of the Operating Committee as an
observer, except for Executive Sessions.\307\ If such a Non-Affiliated
SRO or SRO Group does not commence operations within six months of
attending the first Operating Committee as a non-operational
exchange(s), it will no longer be permitted to attend Operating
Committee meetings until it resumes operations as a market.\308\
---------------------------------------------------------------------------

    \307\ See Article IV, Section 4.2(d) of the CT Plan.
    \308\ See id.
---------------------------------------------------------------------------

    The Commission did not receive any comments on this provision of
the CT Plan. The Commission believes that this provision will help
ensure that only those SROs that are contributing to the generation or
collection of the core data disseminated by the CT Plan will have a
vote on CT Plan decisions. Accordingly, the Commission is approving the
provision as proposed.
(c) Operating Committee Action/Voting Structure
    Article IV, Section 4.3 of the CT Plan sets forth the voting
allocation and voting structure for actions of the Operating Committee.
(i) Allocation of Votes to the SROs
    Article IV, Section 4.3(a)(i) provides that each SRO Voting
Representative will have one vote to cast on behalf of the SRO Group or
Non-Affiliated SRO that he or she represents with a second vote
provided if the SRO Group or Non-Affiliated SRO has a market center or
centers that trade more than 15 percent of consolidated equity market
share \309\ for four of the six consecutive months preceding a vote of
the Operating Committee.\310\
---------------------------------------------------------------------------

    \309\ Article IV, Section 4.3(a)(i) of the CT Plan defines
``consolidated equity market share'' as the average daily dollar
equity trading volume of Eligible Securities of an SRO Group or Non-
Affiliated SRO as a percentage of the average daily trading volume
of all the SRO Groups and Non-Affiliated SROs.
    \310\ Article IV, Section 4.3(a)(i) of the CT Plan states that
FINRA is not considered a market center under this section of the
proposed CT Plan solely by virtue of facilitating trades through any
trade reporting facility that FINRA operates in affiliation with a
national securities designed to report transactions otherwise than
on an exchange.
---------------------------------------------------------------------------

    Several commenters object to the proposed allocation of voting
rights.\311\ One commenter argues that the CT Plan's provisions for SRO
group voting violate the Act and that the concept of ``exchange
groups'' is found nowhere in the Act.\312\ Another commenter argues
that the proposed exchange-group structure for SRO voting would
impermissibly impair the ability of SROs to act jointly in
administering the CT Plan and is inconsistent with both the Act and
Rule 608.\313\ This commenter further argues that the proposed
allocation would dilute each affiliated exchange's voting power
relative to unaffiliated exchanges \314\ and that limiting votes to
exchange groups would be a change from the Commission's ``long-standing
practice of treating each SRO individually for regulatory purposes,
regardless of its

corporate affiliation with other SROs.'' \315\ This commenter also
opposes tying the number of votes cast by each Non-Affiliated SRO and
SRO Group to market share, arguing that an SRO's statutory
responsibilities ``bear no relationship to its market share,'' \316\
and specifically opposes the proposed 15% threshold as well, stating
that it is ``arbitrary and may quickly become meaningless.'' \317\
---------------------------------------------------------------------------

    \311\ See Cboe Letter, supra note 17, at 4; NYSE Letter I, supra
note 18, at 8; NYSE Letter II, supra note 19, at 3; Nasdaq Letter I,
supra note 20, at 1-2 (attaching and incorporating by reference all
arguments made by Petitioners in their opening brief challenging the
Governance Order). The Commission has responded to the arguments
made by Nasdaq in their brief in its own brief before the U.S.
Circuit Court for the District of Columbia Circuit. See Brief for
the Respondent, Securities and Exchange Commission, The Nasdaq Stock
Market, et al. v. Securities and Exchange Commission (Case No. 20-
1181) (D.C. Cir. 2020).
    \312\ See Cboe Letter, supra note 17, at 4.
    \313\ See NYSE Letter I, supra note 18, at 8; NYSE Letter II,
supra note 19, at 3.
    \314\ See NYSE Letter I, supra note 18, at 10.
    \315\ Id. at 9. NYSE provides examples of the Commission's
practice of treating individual exchanges separately, including its
requirements for separate pools of liquidity, separate fee
schedules, and separate proposed rule changes. See id. at 9-10.
    \316\ Id. at 9 (``An SRO with 1% market share has the same
obligations as one with 18% market share, yet under the [CT] Plan's
voting structure, the latter SRO would have double the votes of the
former.'').
    \317\ Id.
---------------------------------------------------------------------------

    While one commenter argues that the concept of an exchange group is
not created by statute or rule,\318\ there is no statutory or
regulatory provision that mandates ``one SRO, one vote'' either.
Individual exchanges that historically had only one vote on NMS plans
are now a part of groups that can control blocs of four or five votes.
As the Commission stated in the Governance Order, ``in its oversight of
the Equity Data Plans, [it] is unaware of an individual affiliated
exchange member'' ever having ``cast its vote differently than the
votes cast by its affiliated exchanges.'' \319\ Further, in response to
the comment that the proposed allocation would dilute each affiliated
exchange's voting power relative to unaffiliated exchanges, the
Commission believes that this bloc voting has diluted the voting power
of unaffiliated SROs over time, and that this concentration of ``voting
power in a small number of exchange group stakeholders, which also have
inherent conflicts of interest,'' has ``perpetuated disincentives for
the Equity Data Plans to make improvements to the SIP data products.''
\320\
---------------------------------------------------------------------------

    \318\ See supra note 312 and accompanying text.
    \319\ Governance Order, supra note 8, 85 FR at 28713.
    \320\ Id.
---------------------------------------------------------------------------

    The Commission also disagrees with the comment that the Commission
has treated affiliated exchanges as separate entities for regulatory
purposes in the past, and therefore, should not treat them as a group
for purposes of voting on the CT Plan's Operating Committee. The
Commission agrees that each SRO has individual obligations with respect
to compliance with its responsibility pursuant to Sections 6, 15A, 17,
and 19 of the Act to comply with the statutory and regulatory
requirements that apply to its operation and self-regulation of its
individual market center.\321\ But both the applicable legal
requirements and the function being performed here by the SROs differ
in the context of the responsibility of the SROs to jointly operate the
NMS plans pursuant to Section 11A of the Act and to disseminate
consolidated market data, to which different SROs may contribute in
varying degrees. The Commission therefore believes that it is
appropriate to approach this circumstance differently. And, for the
reasons discussed, the Commission finds it appropriate to treat
affiliated exchanges under common management and control as one SRO
Group limited to one vote, or at most two, in the context of NMS plan
governance.
---------------------------------------------------------------------------

    \321\ 15 U.S.C. 78f; 15 U.S.C. 78o-3; 15 U.S.C. 78q; 15 U.S.C.
78s.
---------------------------------------------------------------------------

    Moreover, the Commission's treatment of corporate affiliations
varies based on the particular facts and circumstances and regulatory
implications and concerns. Sometimes, the Commission treats affiliated
entities independently. Other times, the Commission takes into account
corporate relationships when deciding how to regulate.\322\ Because of
the concentrated power affiliated SROs exert in the governance
structure of consolidated equity market data, as demonstrated by the
indisputable fact that affiliated SROs vote as blocs, the Commission
has determined that affiliated exchanges under common management and
control should be treated as one SRO Group limited to one vote, or at
most two votes, in the context of NMS plan governance.
---------------------------------------------------------------------------

    \322\ See, e.g., Securities Exchange Act Release Nos. 90209
(Oct. 15, 2020), 85 FR 67044, 67047-48 (Oct. 21, 2020), pet. for
review docketed, No. 20-1470 (D.C. Cir. 2021) (Commission action
concluding that an asset, service, or function may be a ``facility''
of an exchange despite being owned or operated by a legal entity
other than the particular entity holding the exchange license);
39086 (Sept. 17, 1997), 62 FR 50036 (Sept. 24, 1997) (similar).
---------------------------------------------------------------------------

    The Commission believes that reallocating votes by SRO Group should
help to ensure the prompt, accurate, reliable, and fair collection,
processing, distribution, and publication of information with respect
to quotations for and transactions in NMS stocks and the fairness and
usefulness of the form and content of that information. The Commission
disagrees that the proposed exchange-group structure for SRO voting
would impermissibly impair the ability of SROs to act jointly in
administering the CT Plan and is inconsistent with both the Act and
Rule 608. The Commission believes, as it stated in the Governance
Order, that the allocation of voting power to exchanges, either
individually or in groups, based on common management or control falls
within its statutory authority under Section 11A of the Act.\323\
---------------------------------------------------------------------------

    \323\ See Brief for the Respondent, Securities and Exchange
Commission, The Nasdaq Stock Market, et al. v. Securities and
Exchange Commission (Case No. 20-1181) (D.C. Cir. 2021).
---------------------------------------------------------------------------

    In response to the comment that objects to tying market share to
the number of votes an SRO Group or Non-Affiliated SRO is allocated,
arguing that an SRO's regulatory responsibilities have no bearing on
market share of the SRO,\324\ the Commission disagrees, because using a
threshold amount of consolidated equity market share of more than 15
percent over a specified period of time to provide a second vote to an
SRO Group or Non-Affiliated SRO reflects the significance within the
national market system of those exchanges that, in their roles as SROs,
oversee trading activity that generates a significant amount of equity
market data.
---------------------------------------------------------------------------

    \324\ See NYSE Letter I, supra note 18, at 9.
---------------------------------------------------------------------------

    For the reasons stated above, the Commission is approving Sections
4.3(a)(i) as proposed.
(ii) Allocation of Votes to Non-SROs \325\
---------------------------------------------------------------------------

    \325\ See also supra Section II.C.5(b)(ii) (discussing Non-SRO
Voting Representatives' participation on the Operating Committee).
---------------------------------------------------------------------------

    Article IV, Section 4.3(a)(ii) provides that, at all times, the
Non-SRO Voting Representatives will have one-half the aggregate number
of votes that the SRO Voting Representatives have. In other words, the
SRO Voting Representatives will, in aggregate, have two-thirds of the
voting power on the Operating Committee, and the Non-SRO Voting
Representatives will, in aggregate, have one-third of the voting power.
The number of votes attributed to the Non-SRO Voting Representatives
will increase or decrease as necessary to preserve this ratio, in
fractional share if necessary.
    One commenter expresses support for the allocation of voting power
on the Operating Committee as proposed in Sections 4.3(a)(i) and (ii),
stating that the proposed allocation of voting power between the Non-
SRO Voting Representatives and SRO Voting Representatives is consistent
with the Act and the Governance Order.\326\ Another commenter suggests
that there should be ``consideration to increase Non-SRO representation
if SROs on the [Operating Committee] increases or perhaps adjusted if
the `weight' of the user community increase/decreases in certain
categories.'' \327\ In response, the Commission notes that the number
of

votes for Non-SRO Voting Representatives will always be one-half of the
SRO Voting Representatives' votes. Therefore, if the number of SRO
Voting Representatives, and their aggregates votes, increases, the
votes of the Non-SRO Voting Representatives will similarly increase.
---------------------------------------------------------------------------

    \326\ See ICI Letter II, supra note 31, at 1-2.
    \327\ Data Boiler Letter I, supra note 31, at 28.
---------------------------------------------------------------------------

    The Commission believes that the proposed allocation of votes to
Non-SRO Voting Representatives will provide the Non-SRO Voting
Representatives a meaningful presence and opportunity to vote on
Operating Committee matters, while assuring that their voting power
does not equal or exceed that of the SRO Voting Representatives.
Accordingly, the Commission is approving Article IV, Sections
4.3(a)(ii) as proposed.
(iii) Operating Committee Actions and Voting
    Article IV, Section 4.3(b) of the CT Plan provides that, with
limited exceptions, action by the Operating Committee requires an
``augmented majority vote,'' meaning a two-thirds majority of all votes
on the Operating Committee, provided that this vote also includes a
majority of the SRO Voting Representative votes. And Article IV,
Section 4.3(c) provides that the only Operating Committee actions that
would not require an augmented majority vote are: (1) The selection of
Non-SRO Voting Representatives \328\; (2) the decision to enter into
Executive Session \329\; (3) decisions concerning the operation of the
Company as an LLC \330\; (4) modifications to LLC-related provisions of
the Agreement pursuant to Section 13.5 of the CT Plan \331\; and (5)
the selection of Officers of the Company, other than the Chair,
pursuant to Section 4.8.\332\
---------------------------------------------------------------------------

    \328\ See Article IV, Section 4.2(b) of the CT Plan (providing
that Non-SRO Voting Representatives will be selected by a majority
vote of the then-serving Non-SRO Voting Representatives).
    \329\ See Article IV, Section 4.4(g) of the CT Plan (providing
that the decision to enter into Executive Session will be subject to
a majority vote of the SRO Voting Representatives).
    \330\ See Article X, Section 10.3 of the CT Plan (providing that
any compromise or settlement of any tax audit or litigation
affecting members, as well as any material proposed inaction or
election to be taken by the Partnership Representative, require a
majority vote of Members); and Article XI, Section 11.2 of the CT
Plan (providing that the distribution of proceeds from the
liquidation of the Company to Members is subject to a majority vote
of the Members).
    \331\ See Article XIII, Section 13.5(b) of the CT Plan
(providing that Articles IX, X, XI, and XII may be modified upon
approval by a majority of Members).
    \332\ See Article IV, Section 4.8 of the CT Plan (providing
that, the Members may, from time to time, designate and appoint one
or more persons as an Officer of the Company by a majority vote of
the Members).
---------------------------------------------------------------------------

    The Commission received comments on this aspect of the CT Plan. One
commenter expressly supports requiring an augmented majority vote that
requires at least two-thirds of the votes of SRO Voting Representatives
and Non-SRO Voting Representatives, and a majority of the SRO Voting
Representatives' votes.\333\ Another commenter recommends that the
Commission amend the existing Equity Data Plans to adopt augmented
majority voting.\334\ One commenter states that the CT Plan does not
address instances where recusal of a Non-SRO Voting Representative
would result in the Non-SROs having less than one third of the
aggregate votes of the Operating Committee and ``strongly suggest[s]''
that the CT Plan be amended to provide that the votes of the Non-SROs
will always equal one-third of the votes of the Operating Committee,
even if one or more Non-SRO representatives has recused.\335\ Another
commenter expresses concern about the proposed augmented majority
voting scheme, particularly as it would be applied to Operating
Committee actions, such as interpreting the CT Plan's provisions.\336\
This commenter believes that the augmented voting requirement should
apply to the SROs only to the extent needed to carry out their explicit
regulatory obligations under the law, rather than to meet general
responsibilities under the Plan.\337\
---------------------------------------------------------------------------

    \333\ See Data Boiler Letter I, supra note 31, at 30. This
commenter, however, expresses concern that ``numbers are always a
problem as SRO counts increase as exchanges are added or merged,
whereas Non-SRO counts stay at six.'' Id. at 30. This commenter also
states that dividing the voting rights two-thirds and one-third
between SROs and Non-SROs ``may result in a divide along partisan
line . . . only passing trivia matters'' and the ``division would
lead the SIP to run astray because of the bureaucracy.'' Id. at 4,
13, 30. See also Data Boiler Letter II, supra note 101, at 1.
    \334\ See RBC Letter, supra note 30, at 4.
    \335\ Virtu Letter, supra note 30, at 7.
    \336\ See RBC Letter, supra note 30, at 6-7.
    \337\ See id. This commenter further suggests that ``the
proposed Plan specify the limited matters requiring augmented
voting, and state that all other matters--including procedural votes
thereon--are to be decided by majority vote of the Operating
Committee. This simple majority standard should also extend to any
votes requiring a quorum. Otherwise, the SROs would have the ability
to thwart decisions of the Operating Committee by denying the
Operating Committee a quorum.'' Id.
---------------------------------------------------------------------------

    Other commenters state that the augmented majority vote will
interfere with the SROs ability to comply with the Act.\338\ One
commenter argues that the ``Commission's mandate that votes be
allocated by exchange group would prevent SROs from fulfilling their
duty under the Act to act jointly to implement the CT Plan. This is
because that voting structure could result in a situation where actions
and plan amendments might be approved by the individuals representing
non-SROs and a minority of the SROs, even if those actions or
amendments were opposed by a majority of the individual SROs.'' \339\
Another commenter echoes this concern stating, ``it is feasible that a
minority of individual SROs would be able to adopt proposals over the
objection of a majority of individual SROs'' under the proposed
augmented majority voting scheme, and consequently, ``it would be
possible for the non-SRO voting representatives and a minority of Non-
Affiliated SROs to force through plan actions and amendments without
the assent of a majority of individual SROs.'' \340\ This commenter
further states that allowing the CT Plan Operating Committee to act
with only the concurrence of a minority of the individual SROs would
subvert the ability of the SROs to act jointly pursuant to Section
11A.\341\
---------------------------------------------------------------------------

    \338\ See Nasdaq Letter I, supra note 20, at 1-2 (attaching and
incorporating by reference all arguments made by Petitioners in
their opening brief challenging the Governance Order). The
Commission responded to the arguments made by Nasdaq in their brief.
See Brief for the Respondent, Securities and Exchange Commission,
The Nasdaq Stock Market, et al. v. Securities and Exchange
Commission (Case No. 20-1181) (D.C. Cir. 2021).
    \339\ Cboe Letter, supra note 17, at 4 (emphasis in original).
    \340\ NYSE Letter I, supra note 18, at 8-9; see also NYSE Letter
II, supra note 19, at 3.
    \341\ See NYSE Letter I, supra note 18, at 9; NYSE Letter II,
supra note 19, at 3.
---------------------------------------------------------------------------

    Contrary to commenters' concerns, and as explained in the
Governance Order, the Commission believes that the requirement for an
augmented majority vote strikes an appropriate balance between the plan
receiving meaningful input from a broad range of stakeholders while
also providing the SROs with voting power to help ensure that Plan
actions meet the requirements of Section 11A of the Act and Rule 608 of
Regulation NMS. Specifically, the proposed augmented majority voting
structure provides the SROs in the aggregate with two-thirds of the
voting power on the operating committee--and non-SRO members of the
Operating Committee in aggregate with one-third of the voting power--
with proportionate fractional votes allocated to non-SRO members of the
Operating Committee as necessary to preserve this ratio at all times.
Further, as proposed, an ``augmented majority vote,'' requires a two-
thirds majority of all votes on the Operating Committee, provided that
this vote also includes a majority of the votes allocated to the SROs.
    In response to those comments that the augmented majority vote
could

result in a scenario in which a proposal is adopted with the support of
a supermajority of votes on the Operating Committee and a majority of
the votes allocated to the SROs, but without the support of a majority
of the individual exchanges,\342\ the Commission notes, as it did in
the Governance Order,\343\ that this outcome is intended to be
permissible. The Commission believes that in order to break the voting
monopoly currently held by the three SRO Groups, and give non-SROs a
meaningful voice on the Operating Committee, requiring that plan action
be supported by a supermajority of the Operating Committee (which would
include a majority of the votes allocated to SROs along with sufficient
non-SRO votes to achieve the supermajority), and that it not be
constrained by the votes of one or two SRO Groups, is appropriate.
---------------------------------------------------------------------------

    \342\ See Cboe Letter, supra note 17, at 4; NYSE Letter I, supra
note 18, at 9; NYSE Letter II, supra note 19, at 3.
    \343\ See Governance Order, supra note 8, 85 FR at 28713.
---------------------------------------------------------------------------

    In response to comments that suggest modifications to the voting
allocation between SRO Voting Representatives and Non-SRO Voting
Representatives to account for a recusal by a Non-SRO Voting
Representative or a change in the number of SROs Members,\344\ the
Commission does not believe it is necessary to modify the CT Plan. In
the event a Non-SRO Voting Representative must recuse itself pursuant
to the terms of the CT Plan, proposed Article IV, Section 4.4(c)
provides that if a Voting Representative is recused, he or she will not
count in the calculation to determine if there is a quorum necessary
for the Operating Committee to vote.\345\
---------------------------------------------------------------------------

    \344\ See Virtu Letter, supra note 30, at 7; Data Boiler Letter
I, supra note 31, at 30.
    \345\ See Article IV, Section 4.4(c) of the CT Plan.
---------------------------------------------------------------------------

    For the reasons stated above, the Commission is approving Article
IV, Section 4.3(b) of the CT Plan as proposed. The Commission is,
however, modifying Section 4.3(c) of the CT Plan to limit the
circumstances in which the Operating Committee could act without an
augmented majority vote. Specifically, for the reasons discussed in
Section II.C.5(d)(iii), infra, the Commission is modifying Section
4.3(c)(ii) of the CT Plan to provide that an augmented majority vote is
required before a topic not specifically listed in Section 4.4(g)(i) of
the CT Plan as appropriate for discussion in Executive Session may be
discussed in Executive Session. In addition, for the reasons discussed
in Section II.C.12(e), infra, the Commission is modifying Section
4.3(c) of the CT Plan to delete the reference to modifications to LLC-
related provisions of the Agreement pursuant to Section 13.5(b) of the
CT Plan, as well as, for the reasons discussed in Section II.C.5(h),
infra, the reference to the selection of Officers, other than the
Chair, pursuant to Section 4.8 of the CT Plan, as circumstances where
an augmented majority vote is not required.
    For the reasons discussed, the Commission is approving Section 4.3
of the CT Plan as modified.
(d) Meetings of the Operating Committee
    Article IV, Section 4.4 of the CT Plan addresses meetings of the
Operating Committee.
(i) Conduct of Meetings and Attendance
    Section 4.4(a) provides that meetings of the Operating Committee
may be attended by the Voting Representatives, Member Observers, SRO
Applicant Observers, SEC staff, and other persons as deemed appropriate
by the Operating Committee.\346\ As proposed, Member Observers would be
entitled to receive notice of all meetings of the Company and to attend
and participate in any discussion, but would not be entitled to vote on
any matter.\347\
---------------------------------------------------------------------------

    \346\ The time and location of meetings will be determined by
the Operating Committee. See Article IV, Section 4.4(a) of the CT
Plan. The location of meetings will be in a location capable of
holding the number of attendees of such meetings, or such other
locations as may from time to time be determined by the Operating
Committee. See Article IV, Section 4.4(e) of the CT Plan.
    \347\ See Article IV, Section 4.4(a) of the CT Plan.
---------------------------------------------------------------------------

    As discussed above,\348\ in Article I, Section 1.1(oo) of the CT
Plan, the exchanges have proposed to define a new type of individual, a
Member Observer, who may attend meetings of the CT Plan. As proposed, a
Member Observer would be an ``individual other than a Voting
Representative, that a Member, in its sole discretion, determines is
necessary in connection with such Member's compliance with its
obligations under Rule 608(c) of Regulation NMS to attend Operating
Committee and subcommittee meetings.'' \349\ In the Notice, the
Commission solicited commenters' views on whether an SRO would
reasonably find it necessary to select a Member Observer to comply with
its obligations under Rule 608(c) of Regulation NMS and under what
circumstances, if any, the representation of an SRO on the Operating
Committee by its selected SRO Voting Representative would be an
insufficient means for the SRO to fulfill its obligations under Rule
608 of Regulation NMS.\350\ The Commission also asked whether persons
who hold certain positions within an SRO should be prohibited from
serving as Member Observers, and whether, if Member Observers are
necessary, only persons who perform certain roles within an SRO (e.g.,
legal or compliance personnel) should be able to serve as Member
Observers.\351\ Lastly, the Commission solicited further comment on
whether the CT Plan should limit the number of Member Observers that
each SRO would be permitted to name or the frequency with which the
person serving as a Member Observer can be changed.\352\
---------------------------------------------------------------------------

    \348\ See supra Section II.C.2.
    \349\ See Notice, supra note 3, 85 FR at 64576.
    \350\ See id. at 64568.
    \351\ See id.
    \352\ See id.
---------------------------------------------------------------------------

    In response to the questions in the Notice, the Commission received
several comment letters regarding the proposed inclusion of Member
Observers.\353\ Several commenters support including Member Observers
in the CT Plan.\354\ Specifically, one commenter supports including
Member Observers to ``account for the practical realities involved with
the day-to-day operation of, and the SROs' participation in, the Equity
Market Data Plans, which will be equally as relevant for the CT Plan if
it is approved.'' \355\ The commenter explains that Member Observers
are necessary because the SRO Voting Representative collaborates with
others within their organization to make the best and most informed
decisions, acknowledging that, while the SRO Voting Representative may
cast the vote, staff and senior management from various departments
within the organization provide input into decisions made, as
needed.\356\ Another commenter that supports permitting SROs to
designate Member Observers describes the SRO Voting Representative as a
generalist and states that the SRO Voting Representative may be asked
to opine on a wide variety of topics (legal, technical, regulatory,
system, and business matters) that require the expertise of specialists
in those areas.\357\ This commenter states

that most Member Observers would be employees of the Member charged
with that Member's compliance obligations under Rule 608(c).\358\ This
commenter also states that other Member Observers may be outside
counsel, experts reporting to counsel, or other individuals advising
the Member on compliance or other obligations.\359\ Another commenter
contends that whether the SROs should be permitted to have Member
Observers is a decision for the SROs to make, not the Commission,
stating that, while the Commission has a role in supervising and
enforcing SRO obligations, Commission rules establish that the SROs
make operational decisions such as these.\360\
---------------------------------------------------------------------------

    \353\ See FINRA Letter I, supra note 257, at 4; Nasdaq Letter I,
supra note 18, at 6, 13-14; NYSE Letter I, supra note 18, at 38; ICI
Letter I, supra note 31, at 4; BMO Letter I, supra note 30, at 4;
SIFMA Letter I, supra note 30, at 4-5; MFA Letter, supra note 30, at
4; Schwab Letter I, supra note 30, at 5; BlackRock Letter I, supra
note 247, at 4-5; Fidelity Letter, supra note 30, at 5; RBC Letter,
supra note 30, at 7; Data Boiler Letter I, supra note 31, at 5.
    \354\ See FINRA Letter I, supra note 257, at 2-3; Nasdaq Letter
I, supra note 20, at 26-27; Fidelity Letter, supra note 30, at 5;
ICI Letter I, supra note 31, at 4; SIFMA Letter I, supra note 30, at
4.
    \355\ FINRA Letter I, supra note 257, at 3.
    \356\ See id.
    \357\ See Nasdaq Letter I, supra note 20, at 14.
    \358\ See id. at 27.
    \359\ See id.
    \360\ See NYSE Letter I, supra note 18, at 38-39.
---------------------------------------------------------------------------

    Some commenters state that it would be inappropriate to restrict
Member Observers to those who serve a particular role in the SRO, to
limit the number of Member Observers that an SRO could name, or to
limit the frequency with which such appointment of Member Observers
could be changed.\361\ Two commenters argue that such limitations would
be arbitrary, as there is no way to predict when expert assistance may
be necessary, and they further assert that such restrictions would not
provide any benefit and would otherwise restrict the SROs' ability to
make decisions about how to fulfill their regulatory
responsibilities.\362\ One commenter argues that any restrictions on
the ability to call on such expertise when needed would interfere with
the ability of the Operating Committee to address complex legal,
regulatory, and technical issues as they arise.\363\ While one
commenter does not recommend limiting the number of Member Observers
permitted, it suggests that the Operating Committee members provide a
reasonable basis for inviting Member Observers, taking into account
criteria such as the person's area of expertise, potential or actual
conflicts of interest, and the Operating Committee's agenda for the
meeting.\364\
---------------------------------------------------------------------------

    \361\ See FINRA Letter I, supra note 257, at 4; Nasdaq Letter I,
supra note 20, at 27; ICI Letter I, supra note 31, at 5.
    \362\ See FINRA Letter I, supra note 257, at 4; Nasdaq Letter I,
supra note 20, at 27.
    \363\ See Nasdaq Letter I, supra note 20, at 14.
    \364\ See ICI Letter I, supra note 31, at 5.
---------------------------------------------------------------------------

    The Commission also received several comment letters expressing
concerns regarding Member Observers as proposed in the CT Plan.\365\
One commenter states that without reasonable constraints, Member
Observers may dilute the voice of Non-SRO Voting Representatives and
enhance the SROs' ability to operate the CT Plan in their own interests
instead of consistent with the statutory purposes for which the Plan
exists.\366\ One commenter states that Member Observers should be
limited so that an SRO cannot ``stack the deck'' with multiple Member
Observers.\367\ Another commenter expresses concern that if Member
Observers participate in Operating Committee meetings, it could
exacerbate or create conflicts of interest and place the Non-SRO Voting
Representatives at a competitive disadvantage, as they would not have a
similar ability to consult with outside persons who have expertise in
the matter being discussed.\368\
---------------------------------------------------------------------------

    \365\ See ICI Letter I, supra note 31, at 4-5; BMO Letter, supra
note 30, at 3-4; SIFMA Letter I, supra note 30, at 4; MFA Letter,
supra note 30, at 4; BlackRock Letter I, supra note 247, at 4;
Fidelity Letter, supra note 30, at 5; RBC Letter, supra note 30, at
7; Data Boiler Letter I, supra note 31, at 5.
    \366\ See MFA Letter, supra note 30, at 4.
    \367\ Data Boiler Letter I, supra note 31, at 6, 38.
    \368\ See RBC Letter, supra note 30, at 8.
---------------------------------------------------------------------------

    Several commenters state that Non-SRO Voting Representatives should
also be permitted to invite observers to attend Operating Committee
meetings, Executive Sessions, and subcommittee meetings.\369\ These
commenters argue that better informed colleagues could advise Non-SRO
Voting Representatives before, during, and after Operating Committee
meetings, resulting in more informed discussions. Specifically, one
commenter states that permitting Non-SRO observers would provide for
broader participation, improve transparency, and enhance the quality of
guidance, as well as assist in creating a pool of potential Non-SRO
Voting Representatives.\370\ One commenter recommends that the CT Plan
provide all Voting Representatives with the ability to request an
observer to participate in Operating Committee meetings, so long as the
Voting Representative specifies the purpose for their inclusion,
including the relevancy to the topic under discussion, and subject to
the Operating Committee's approval.\371\
---------------------------------------------------------------------------

    \369\ See ICI Letter I, supra note 31, at 5; ICI Letter II,
supra note 31, at 2; Schwab Letter I, supra note 30, at 2; BlackRock
Letter I, supra note 247, at 3; Fidelity Letter supra note 30, at 5;
RBC Letter, supra note 30, at 7-8.
    \370\ See BlackRock Letter I, supra note 247, at 3.
    \371\ See RBC Letter, supra note 30, at 8-9.
---------------------------------------------------------------------------

    After careful consideration of the comments received, the
Commission believes that it is appropriate for SROs to be permitted to
designate Member Observers under the CT Plan. The Commission agrees
that there may be instances in which an SRO Voting Representative will
require input from, or benefit from collaboration with, individuals
with specialized views, experience with day-to-day operations, or
expertise (including legal, regulatory, and technical knowledge) who
are not designated as the SRO Voting Representative in order to
facilitate an SRO's compliance with its regulatory obligations with
respect to the CT Plan.\372\
---------------------------------------------------------------------------

    \372\ The Commission further notes that Sections 4.4(a) and
4.7(b) of the CT Plan, respectively, permit other persons as deemed
appropriate by the Operating Committee to attend general session
meetings and subcommittee meetings.
---------------------------------------------------------------------------

    The Commission also finds that it is appropriate to modify the
definition of Member Observer because the role of a Member Observer is
intended to include certain individuals employed by the Member, or its
counsel. Specifically, the Commission is modifying the definition of
``Member Observer'' in Section 1.1(oo) of CT Plan to remove the
reference to ``individual'' and replace it with ``employee of a
Member'' and adding ``or any attorney to a Member'' to provide for an
employee or counsel that a Member determines is necessary in connection
with the Member's compliance under Rule 608(c).\373\ Additionally,
because Member Observers are permitted to attend Operating Committee
meetings and subcommittee meetings, the Commission is deleting ``in its
sole discretion'' from the definition of Member Observer and adding
language that would prohibit a Member from designating as a Member
Observer an individual who is responsible for or involved with the
procurement for, or development, modeling, pricing, licensing, or sale
of, proprietary equity market data products (called ``PDP'' in the CT
Plan) \374\ offered to customers of the CT Feeds, consistent with the
Commission's modifications to Section 4.10(b)(i).\375\ Specifically,
the Commission is adding the following clause to the definition of
Member Observer: ``provided that the designation of the Member Observer
is consistent with the prohibition in Section 4.10(b)(i).'' The
Commission finds that this modification is appropriate to mitigate the
effect of an SRO's conflicts of interests on the

operation of the CT Plan. Specifically, to the extent that a Member
offers proprietary market data products and designates an employee that
has a financial interest that is tied directly to the Member's
proprietary data business, that individual has an inherent conflict of
interest and cannot be designated as a Member Observer.
---------------------------------------------------------------------------

    \373\ See Section 1.1(oo) of the CT Plan, as modified.
    \374\ Section 1.1(fff) of Article I defines the term ``PDP'' as
``a Member or non-Member's proprietary market data product that
includes Transaction Reports and Quotation Information data in
Eligible Securities from a Member's Market or a Trading Center, and
if from a Member, is filed with the Commission.''
    \375\ See infra Section II.C.5(j)(iii).
---------------------------------------------------------------------------

    In response to comments regarding Member Observer limitations, the
Commission believes that, because it is difficult to predict who, when,
and how many individuals may be called upon to assist with CT Plan
related matters, it is appropriate not to limit the number of Member
Observers an SRO may appoint. However, the Commission believes that
participation of Member Observers in CT Plan meetings is appropriately
limited by the requirement that appointment of a Member Observer be
``necessary in connection with a Member's compliance with its
obligations under Rule 608(c) of Regulation NMS to attend Operating
Committee and subcommittee meetings.'' \376\ The Commission further
believes that this requirement, in addition to the provisions
permitting other persons to attend CT Plan meetings as discussed below
and the non-voting status of Member Observers, would reasonably
preclude the SROs from diluting the role and contributions of Non-SRO
Voting Representatives and bolstering their own agendas.
---------------------------------------------------------------------------

    \376\ Section 1.1(oo) of the CT Plan, as modified.
---------------------------------------------------------------------------

    While the Commission believes it is appropriate to allow Member
Observers to participate in Operating Committee meetings, the
Commission is modifying Article IV, Section 4.4(a) to eliminate the
requirement that the Operating Committee provide notice of all meetings
of the Company to Member Observers. The Commission finds that this
modification is appropriate because the proposed requirement would
place an unnecessary burden on the Operating Committee, and believes
that it is appropriate instead for the SROs, on whose behalf the Member
Observers will attend Operating Committee meetings, to provide notice
of meetings to their Member Observers. Additionally, the Commission is
modifying this subsection to provide that Member Observers may not
attend or participate in Operating Committee meetings if their
attendance or participation would be inconsistent with the conflicts of
interest provisions requiring recusal. The Commission finds that this
modification is appropriate because it is consistent with, and serves
the same purposes as, modifications the Commission is making to Article
IV, Section 4.10(b), discussed below, which make the CT Plan's
conflicts of interest provisions applicable to Member Observers, just
as they apply to SRO Voting Representatives and any alternate SRO
Voting Representative.\377\
---------------------------------------------------------------------------

    \377\ See Article IV, Section 4.10(b) of the CT Plan. See also
infra Section II.C.5(j) (discussing the Commission's modification to
the proposed CT Plan to make the recusal provisions of Article IV,
Section 4.10(b) applicable to Member Observers and the rationale
therefore).
---------------------------------------------------------------------------

    Finally, because Non-SRO Voting Representatives will serve on the
Operating Committee in their individual capacity and do not have
regulatory obligations paralleling those of the SROs, the Commission
does not believe that Non-SRO Voting Representatives require a similar
observer provision in the CT Plan. However, the Commission notes that
Section 4.4(a) of the CT Plan permits other persons as deemed
appropriate by the Operating Committee to attend Operating Committee
meetings and that Section 4.7(b) of the CT Plan similarly permits other
persons as deemed appropriate by the Operating Committee to attend
subcommittee meetings.\378\ The Commission believes that a Non-SRO
Voting Representative may draw upon these provisions to seek the
approval of the Operating Committee to permit attendance by an informed
colleague or other person at a CT Plan meeting when the Non-SRO Voting
Representative believes that discussion of a matter may benefit from
that person's additional expertise or input.
---------------------------------------------------------------------------

    \378\ See Article IV, Sections 4.4(a) and 4.7(b) of the CT Plan.
---------------------------------------------------------------------------

    For the reasons stated above, the Commission is approving Section
4.4(a), as modified.
(ii) The Chair of the Operating Committee
    Article IV, Section 4.4(e) provides for the selection of a Chair of
the Operating Committee. As proposed, a Chair will be elected from
among the SRO Voting Representatives to serve a one-year term beginning
on the date of the first quarterly meeting of the Operating Committee
following the Operative Date.\379\ An election to select the Chair of
the Operating Committee will be held every year.\380\ Pursuant to the
CT Plan, to elect a Chair, the Operating Committee will elicit
nominations for individuals to be considered for the Chair
position.\381\ If no candidate is elected by an augmented majority vote
of the Operating Committee, the candidate with the lowest number of
votes will be eliminated from consideration, and the Operating
Committee will take another vote and repeat this process until a
candidate is elected by an augmented majority vote of the Operating
Committee.\382\ In the event two candidates remain and neither is
elected by an augmented majority vote of the Operating Committee, the
candidate receiving the most votes from SRO Voting Representatives will
be elected.\383\ The Chair of the Operating Committee will have the
authority to enter into contracts on the Company's behalf and otherwise
bind the Company, but only as directed by the Operating Committee.\384\
In addition, the Chair will designate a person to serve as Secretary of
the Operating Committee to record minutes of each meeting.\385\
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    \379\ See Article IV, Section 4.4(e) of the CT Plan.
    \380\ See id.
    \381\ See Article IV, Section 4.4(e)(i) of the CT Plan.
    \382\ See Article IV, Section 4.4(e)(ii) of the CT Plan.
    \383\ See id.
    \384\ See Article IV, Section 4.4(e) of the CT Plan.
    \385\ See id.
---------------------------------------------------------------------------

    The Commission finds that the provisions governing the nomination
of candidates and the selection of a Chair of the Operating Committee,
as well as the proposed term for service as Chair, are appropriate.
These provisions provide for a nomination and selection process that
allows input from all members of the Operating Committee. The
Commission further believes that a one-year term will allow for
frequent rotation of the duties and responsibilities that are
associated with the Chair position. Additionally, the Commission finds
that the specified authority of the Chair of the Operating Committee is
appropriate in that it allows the Chair to enter into agreements on
behalf of the Company, thus streamlining the process of contracting
with the Company, but does not permit the Chair to act except as
directed by the Operating Committee. The Commission also finds that
because the Chair has authority to act only at the direction of the
Operating Committee, it is not unreasonable to require that the Chair
be an SRO Voting Representative, as this will not undermine the voting
power that the Non-SRO Voting Representatives have with respect to
action by the Operating Committee. The Commission received no comments
addressing these provisions and is approving Article IV, Section 4.4(e)
as proposed.
(iii) Executive Session
    Article IV, Section 4.4(g) of the CT Plan provides that,
notwithstanding any other provision of the CT Plan, the SRO

Voting Representatives, Member Observers, SEC staff, and other persons
as deemed appropriate by the SRO Voting Representatives may meet in an
Executive Session to discuss an item of business for which it is
appropriate to exclude Non-SRO Voting Representatives. A request to
meet in Executive Session must be included on the written agenda for an
Operating Committee meeting, along with identification of the item to
be discussed and a clearly stated rationale as to why that item would
be appropriate for discussion in Executive Session.\386\ A majority
vote of the SRO Voting Representatives would be required to create an
Executive Session.\387\ The SRO Voting Representatives would be
permitted to discuss only the topic for which the Executive Session was
created and would disband upon fully discussing the topic.\388\
---------------------------------------------------------------------------

    \386\ See Article IV, Section 4.4(g) of the CT Plan. The
rationale provided may be that the topic falls within the list of
topics in Section 4.4(g)(i). See id.
    \387\ See Article IV, Section 4.4(g) of the CT Plan.
    \388\ See id.
---------------------------------------------------------------------------

    Article IV, Section 4.4(g)(i) of the CT Plan also provides that
topics discussed in Executive Session should be limited to the
following: (1) Any topic that requires discussion of Highly
Confidential Information; (2) Vendor or Subscriber Audit Findings; and
(3) Litigation matters.\389\ Section 4.4(g)(ii) adds a catch-all
provision stating that this list of enumerated items ``is not
dispositive of all matters that may by their nature require discussion
in an Executive Session,'' adding, however, that ``the mere fact that a
topic is controversial or a matter of dispute does not, by itself, make
a topic appropriate for Executive Session.'' \390\ This section further
provides that the minutes for an Executive Session must include the
reason for including any item in Executive Session.\391\ As proposed,
any action that requires a vote in Executive Session would require a
majority of the vote of the SRO Voting Representatives eligible to vote
on such action.\392\
---------------------------------------------------------------------------

    \389\ See Article IV, Section 4.4(g)(i)(A)-(C) of the CT Plan.
    \390\ Article IV, Section 4.4(g)(ii) of the CT Plan.
    \391\ See id.
    \392\ See Article IV, Section 4.4(g)(iv) of the CT Plan.
---------------------------------------------------------------------------

    In the Notice, the Commission sought comment on whether the
specified items proposed in the CT Plan are appropriate topics for
Executive Session, including whether the proposed provision that the
topics identified in the CT Plan are ``not dispositive of all matters
that may by their nature require discussion in an Executive Session''
would allow the SROs excessive discretion to meet in Executive
Session.\393\ In response, the Commission received numerous comments.
In particular, certain commenters express the view that the topics
proposed as appropriate for Executive Session are too broad,\394\ and
recommend eliminating the language in Section 4.4(g)(ii) that would
permit the SROs to enter into Executive Session for matters that by
their nature require discussions in Executive Session.\395\ One
commenter believes that the ``broad and open-ended use of Executive
Sessions'' proposed in the CT Plan is inconsistent with the SEC's goals
of transparency, effective operations of the Plan, and eliminating
conflicts of interest.\396\ This commenter states that ``[s]anctioning
the ability of competitors to meet in secret to discuss confidential
business raises antitrust concerns,'' \397\ and believes that there
should be a presumption against use of Executive Session except upon a
showing of need and explanation why Non-SRO Voting Representatives
should not be included.\398\
---------------------------------------------------------------------------

    \393\ Notice, supra note 3, 85 FR at 64569 (Question 21).
    \394\ See RBC Letter, supra note 30, at 9; Schwab Letter I,
supra note 30, at 2; Schwab Letter II, supra note 30, at 5-6; Virtu
Letter, supra note 30, at 5; SIFMA Letter I, supra note 30, at 4;
SIFMA Letter II, supra note 30, at 4; MEMX Letter, supra note 30, at
4.
    \395\ See ICI Letter I, supra note 31, at 6; ICI Letter II,
supra note 31, at 2; BMO Letter I, supra note 30, at 5; SIFMA Letter
I, supra note 30, at 4; SIFMA Letter II, supra note 30, at 4;
BlackRock Letter I, supra note 247, at 5; Fidelity Letter, supra
note 30, at 4.
    \396\ RBC Letter, supra note 30, at 9.
    \397\ Id.
    \398\ See id. at 10-11. This commenter also believes that the
Commission should amend the existing Equity Data Plans to adopt the
same Executive Session policies it includes in the CT Plan. See id.
at 4.
---------------------------------------------------------------------------

    One commenter states that the proposed list of topics for
discussion in Executive Session is too broad and should be tightened to
ensure that such sessions are not abused and used to cut non-SROs out
of discussions.\399\ Another commenter asserts that the broad list of
topics proposed for Executive Session ``essentially grants the SROs
unfettered discretion about what topics are appropriate for Executive
Session.'' \400\ This commenter believes that the determination of what
belongs in Executive Session should not be left to the discretion of
the SROs.\401\ One commenter states that Executive Sessions could be
used to circumvent the policy underlying the Market Data Structure
reforms.\402\ Another commenter believes that use of Executive Sessions
should be narrowly tailored given that Executive Session presents an
exception to the general rule that non-SROs will participate with SROs
in operation of the CT Plan.\403\ This commenter believes that
Executive Sessions should be reserved for instances where there is a
direct conflict of interest for participation by Non-SRO Voting
Representatives.\404\ Another commenter states that it recognizes that
there may be circumstances for SRO-only deliberations in Executive
Session, but is concerned that overuse of Executive Session would limit
transparency of the CT Plan's governance.\405\ This commenter supports
either limiting the topics that can be discussed to the three
enumerated topics \406\ or changing the mechanism for approval of a
topic as appropriate for Executive Session.\407\
---------------------------------------------------------------------------

    \399\ See Schwab Letter I, supra note 30, at 2; Schwab Letter
II, supra note 30, at 5-6.
    \400\ Virtu Letter, supra note 30, at 5. This commenter also
questions why Non-SRO Voting Representatives should be excluded from
discussions of litigation matters if they sign a non-disclosure
agreement. See id.; see also RBC Letter, supra note 30, at 11
(stating that information of a sensitive nature can be addressed by
the confidentiality policies of the CT Plan).
    \401\ See Virtu Letter, supra note 30, at 5.
    \402\ See ICI Letter I, supra note 31, at 6; ICI Letter II,
supra note 31, at 2.
    \403\ See Fidelity Letter, supra note 30, at 4.
    \404\ See id.
    \405\ See MEMX Letter, supra note 30, at 4.
    \406\ See id.; see also Fidelity Letter, supra note 30, at 4.
    \407\ See MEMX Letter, supra note 30, at 4.
---------------------------------------------------------------------------

    One commenter recommends eliminating the broad language in the CT
Plan that would permit Executive Sessions for ``matters that by their
nature require discussions in Executive Session.'' \408\ Another
commenter states that this provision risks providing SROs with
``excessive discretion to limit or prevent the participation of Non-SRO
Voting Representative in certain CT Plan matters'' and thus believes
that the list of permissible topics for Executive Session should be
listed specifically in the CT Plan.\409\ Another commenter states that
this provision gives the SROs too much latitude to meet outside the
presence of the Non-SRO Voting Representatives and creates inherent
conflicts of interest, and recommends

eliminating it.\410\ One commenter states that the presence of the
Commission staff at Executive Session meetings, as well as the
requirement that a written agenda for an Executive Session must be
provided at an Operating Committee meeting, will help ensure that
Executive Sessions are used properly, but continues to have concerns
that use of Executive Sessions will limit information available to Non-
SRO Voting Representatives and impair the effectiveness of their
participation on the Operating Committee.\411\ Another commenter
believes that in order to preserve the independence of Voting
Representatives, Member Observers should not participate in Executive
Sessions unless a Voting Representative requests the Member Observer to
testify on a particular matter during the Executive Session.\412\
---------------------------------------------------------------------------

    \408\ See ICI Letter I, supra note 31, at 6; ICI Letter II,
supra note 31, at 2.
    \409\ BMO Letter I, supra note 30, at 5; see also SIFMA Letter
I, supra note 30, at 4; SIFMA Letter II, supra note 30, at 4.
Additionally, one commenter asserts that ``personnel matters'' under
the definition of Highly Confidential Information, which, as
proposed, the SROs can discuss in Executive Session, should be
limited to matters that exclusively affect the employees of SROs or
the LLC. See SIFMA Letter I, supra note 30, at 4.
    \410\ See BlackRock Letter I, supra note 247, at 5; see also
Data Boiler Letter II, supra note 101, at 1.
    \411\ See Fidelity Letter, supra note 30, at 4.
    \412\ See Data Boiler Letter I, supra note 31, at 31.
---------------------------------------------------------------------------

    One commenter, however, supports the use of Executive Sessions as
proposed in the CT Plan and states that Executive Sessions have been
used rarely in recent years and that the requirement that the basis for
using Executive Session must be publicly disclosed in the Operating
Committee Agenda will ensure that Executive Sessions will be used only
when necessary.\413\
---------------------------------------------------------------------------

    \413\ See Nasdaq Letter I, supra note 20, at 25-26.
---------------------------------------------------------------------------

    The Commission agrees with comments that the scope of matters that
could be discussed in Executive Session, outside the presence of the
Non-SRO Voting Representatives, is too broad as proposed in the CT
Plan.\414\ While the Commission acknowledges that, as stated by one
commenter,\415\ Executive Sessions are rarely used today, the
Commission believes that the CT Plan must be clearer regarding the
scope of topics eligible for discussion in Executive Session and that
the CT Plan language should be narrowly tailored to permit the SRO
Voting Representatives to meet outside the presence of the Non-SRO
Voting Representatives--who are full members of the Operating
Committee--to discuss only limited matters that exclusively concern the
SROs or that pose direct conflicts of interest with respect to non-SRO
participation. In particular, the Commission believes that the proposed
``catch-all'' language in Section 4.4(g)(ii)--providing that certain
matters may, by their nature, require discussion in an Executive
Session--is too broad to serve the limited purpose of Executive
Sessions. In addition, though the Commission believes that the
requirement for a written agenda and the presence of Commission staff
at Executive Sessions may curb the potential misuse of Executive
Sessions, the Commission believes that the topics that may be discussed
in Executive Session should be specifically enumerated in the CT Plan
to provide transparent and clear boundaries. Accordingly, the
Commission is modifying Article IV, Section 4.4(g) in several ways to
clarify who may attend Executive Sessions and to explicitly state the
topics regarding which SRO Voting Representatives may meet in Executive
Session.
---------------------------------------------------------------------------

    \414\ See RBC Letter, supra note 30, at 9; Schwab Letter I,
supra note 30, at 2; Schwab Letter II, supra note 30, at 5-6; Virtu
Letter, supra note 30, at 5; SIFMA Letter I, supra note 30, at 4;
SIFMA Letter II, supra note 30, at 4; MEMX Letter, supra note 30, at
4.
    \415\ See Nasdaq Letter I, supra note 20, at 25-26.
---------------------------------------------------------------------------

    First, the Commission is deleting the phrase in Section 4.4(g) that
provides that Executive Sessions may be held ``[n]otwithstanding any
other provision'' of the CT Plan. The Commission finds that this
modification is appropriate because it will serve to make all other
provisions of the CT Plan--most importantly the provisions regarding
conflicts of interest and confidentiality--applicable to Executive
Sessions. Permitting the SROs to meet in Executive Session without the
conflicts of interest and the confidentiality policies being applicable
would substantially undermine the effectiveness of those policies and
the Commission's goals in reforming the governance of the Equity Data
Plans. This concern is magnified where, as here, the SROs have proposed
an open-ended set of topics that could be discussed in Executive
Session.
    Second, the Commission is modifying Section 4.4(g) to require that
the ``other persons'' authorized to attend Executive Sessions will be
determined collectively ``by majority vote of the SRO Voting
Representatives.'' The Commission finds that this modification is
appropriate because it is unclear how the SRO Voting Representatives
would ``deem appropriate'' other persons to attend Executive Session as
proposed; this modification will resolve that ambiguity. Further, this
modification will ensure that any selection of ``other persons''
authorized to attend Executive Sessions will be made in a manner
consistent with the allocation of voting power by SRO Group, as set
forth in Section 4.3(a)(i) of the CT Plan.
    Third, the Commission is modifying Section 4.4(g) to provide that
topics appropriate for discussion in Executive Session must not only be
topics for which it is appropriate to exclude Non-SRO Voting
Representatives, as the CT Plan proposes, but must also fall within a
list of enumerated topics, as discussed below.\416\ The Commission
finds that this modification is appropriate because coupling the
requirement that Non-SRO Voting Representatives may only be excluded
from discussions of an item of business for which it is appropriate to
exclude them with a list of specific topics appropriate for discussion
in Executive Session will appropriately narrow the discussions that may
be held in Executive Session so that Non-SRO Voting Representatives are
not excluded from Operating Committee discussions without sufficient
justification.
---------------------------------------------------------------------------

    \416\ The Commission is also modifying Article IV, Section
4.4(g)(i) of the CT Plan to state that the items for discussion
within an Executive Session shall be limited to the topics
enumerated in subsections 4.4(g)(i)(A)-(E) and for which it is
appropriate to exclude Non-SRO Voting Representatives. So, for
example, as an enumerated topic eligible for discussion in Executive
Session, a litigation matter may be discussed in Executive Session
if it involves a matter for which it is appropriate to exclude the
Non-SRO Voting Representatives. The Commission believes that, as a
practical matter, it is likely that discussions of litigation
matters that are not appropriate to include Non-SRO Voting
Representatives will take place in the forum of a legal subcommittee
of the Operating Committee. See infra Section II.C.5(k)(iii).
---------------------------------------------------------------------------

    Fourth, the Commission is modifying the list of topics appropriate
for discussion in Executive Session in Section 4.4(g)(i) of the CT Plan
to exclude discussions regarding contract negotiations with Processors
or the Administrator. The CT Plan as proposed provides that any topic
that requires discussion of Highly Confidential Information is
appropriate for Executive Session,\417\ which would include discussions