securities exchange makes available any information to its
affiliated competing consolidator.
    \967\ This condition is based on the particular risk, given the
special position of exchanges in the market and the regulatory
requirements applicable to exchanges, posed by allowing exchanges to
link services and pricing with those of the competing consolidator.
---------------------------------------------------------------------------

    Such limited exemptive relief is appropriate and in the public
interest to foster the successful implementation of the decentralized
consolidation model. The limited exemptive relief is designed to help
foster a competitive environment premised on a level regulatory playing
field. In particular, it will facilitate the entry of competing
consolidators that are affiliated with national securities exchanges
into the market for the consolidation and

dissemination of consolidated market data products thereby increasing
competition for those services as contemplated by the decentralized
consolidation model. This exemptive relief will not place any burdens
on, or otherwise disadvantage, non-affiliated competing consolidators.
    The limited exemptive relief is also consistent with the protection
of investors. Rule 19b-4 requires an SRO to file a proposed rule change
with respect to any ``material aspect'' of the operation of its
facilities that is then subject to Commission review and approval.\968\
Section 6(b), among other things, requires the rules of an exchange to
provide for equitable allocation of reasonable fees, not permit unfair
discrimination between customers, and not impose any unnecessary or
inappropriate burden on commerce. Section 19(d) of the Exchange Act,
among other things, limits the denial of access to SRO services. The
registration, disclosure and other regulatory requirements for
competing consolidators in Rule 614 and Form CC, including the
potential that such forms could be declared ineffective and the
requirement to make consolidated market data products available to
subscribers on terms that are not unreasonably discriminatory, help
ensure appropriate transparency and oversight for the protection of
investors. In addition, competing consolidators that are affiliated
with national securities exchanges that elect the exemption will be
subject to the same Regulation SCI requirements applicable to other
competing consolidators, which will help ensure systems integrity,
reliability, and resiliency to protect the interests of investors.
---------------------------------------------------------------------------

    \968\ 17 CFR 240.19b-4. Section 19(b)(1) of the Exchange Act
defines a ``proposed rule change'' as ``any proposed rule, or any
proposed change in, addition to, or deletion from the rules of'' a
self-regulatory organization. 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    This exemptive relief will promote a level playing field among the
various types of competing consolidators. The exemptive relief and the
conditions for that relief serve to subject competing consolidators
that are affiliated with a national securities exchange to the same
regulatory framework that applies to other competing consolidators to
eliminate competitive advantages and foster a competitive environment
for all competing consolidators. This exemptive relief thus addresses
the concerns raised by commenters that competing consolidators that are
affiliated with a national securities exchange will be at a
disadvantage to other competing consolidators.\969\
---------------------------------------------------------------------------

    \969\ See IDS Letter I at 21 and Nasdaq Letter IV at 44
(comments discussed supra note 952).
---------------------------------------------------------------------------

    The Commission intends to monitor the activities of all registered
competing consolidators, including those that are affiliated with a
national securities exchange, through the notification and filing
requirements in Rule 614 and Form CC, and other requirements applicable
to competing consolidators. In addition, the Commission will monitor
the activities of competing consolidators that are facilities of an
exchange through its examinations of both the national securities
exchange and the competing consolidator.
    This exemptive relief is limited to the regulatory requirements
described above. The Commission will consider requests for additional
exemptive relief from specific regulatory provisions to address any
remaining concerns about creating and maintaining an equal playing
field. The Commission will consider such requests based on the
particular facts and circumstances at hand, and grant such a request if
necessary or appropriate in the public interest and consistent with the
protection of investors. This limited exemptive relief does not affect
any regulatory obligations that apply to any other functions, products
or services provided by exchanges or facilities thereof, including the
provision, distribution and transport of proprietary market data feeds
and other market data, communication systems that convey order
information to and from the exchange, or connectivity to those
communication systems.
(v) Minimum Standards for Competing Consolidators
    Two commenters recommended that the Commission establish uniform
baseline standards that all competing consolidators would be required
to meet continuously to avoid possible ``conflation,'' which, according
to the commenters, may occur when an exchange or other market
participant provides only its most-recent quote or trade to the SIPs
and skips or removes prior quotes due to system capacity constraints or
by purposefully shaping bandwidth to remain below certain capacity
thresholds.\970\ The commenters stated that the absence of uniform
standards could allow a competing consolidator to offer a lower-cost
product that would often be conflated and incomplete and that could
conceal potential abuses.\971\ One commenter identified minimum
standards that it believed the Commission should require a competing
consolidator to satisfy.\972\
---------------------------------------------------------------------------

    \970\ See MIAX Letter at 2; Healthy Markets Letter II at 2.
    \971\ See id.
    \972\ See MIAX Letter at 2. The commenter recommended that the
Commission do the following: ``set forth reasonable minimum
bandwidth requirements for Competing Consolidators to ensure that
conflation does not occur due to capacity constraints, including
during times of increased market volatility; set forth minimum
performance requirements for Competing Consolidators that allow for
a reasonable amount of conflation; require all Competing
Consolidators to utilize the same transport protocols (i.e.,
Multicast) when transmitting data to market participants; likewise
require that each national securities exchange utilize these same
transfer protocols when transmitting core data to a Competing
Consolidator; and require each national securities exchange to
sequence the message fields in the same manner when transmitting
their core data to a Competing Consolidator or via their proprietary
data products, with any supplemental information (i.e., data
regarding exchange specific programs) sequenced behind core data.''
See MIAX Letter at 2.
---------------------------------------------------------------------------

    Rule 614(d) requires each competing consolidator to calculate and
generate consolidated market data products and make consolidated market
data products available to its subscribers. This means that competing
consolidators must be able to accept all of the data content that
encompasses the consolidated market data products they offer. In
addition, competing consolidators will be subject to operational
capability, systems integrity, and resiliency obligations,\973\ and
Rule 614(d)(5) requires each competing consolidator to publish certain
system performance metrics on its website each month. As stated
above,\974\ these disclosures should help to facilitate a broker-
dealer's ability to achieve and analyze best execution because they
provide information regarding the timeliness, completeness, and
accuracy of the market data offered by competing consolidators.\975\
These disclosures also provide statistics on capacity, network delay
and latency, offering additional insight into the technical
capabilities and expected performance of a competing consolidator. This
information will assist a broker-dealer in selecting an appropriate
competing consolidator, which in turn impacts the broker-dealer's
ability to obtain ``the most favorable terms reasonably available under
the circumstances'' for its customer orders. The Commission believes
that these requirements will help to ensure that competing
consolidators have adequate system capacity to meet the needs of
different types of subscribers and will ensure an accurate record of
quotes and trades for

subscribers. Accordingly, the Commission does not believe that it is
necessary, at this time, to mandate minimum capacity or other minimum
standards for competing consolidators.\976\
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    \973\ See infra Section III.F.
    \974\ See supra notes 104-105 and accompanying text.
    \975\ See supra note 90 and accompanying text.
    \976\ The Commission will monitor the performance of competing
consolidators, including whether there is a need to establish
minimum standards for competing consolidators.
---------------------------------------------------------------------------

(vi) Potential Advantage of Incumbent Exclusive SIPs
    One commenter asserted that the incumbent exclusive SIPs would have
a significant advantage over other entities seeking to become competing
consolidators because they could use their existing infrastructure to
operate a competing consolidator that could charge lower fees than new
entrants because they would not incur the upfront capital expenditures
required to build a competing consolidator.\977\ The commenter
suggested that the Commission consider ways to require the incumbent
exclusive SIPs to reimburse each Plan's Participants their
proportionate share of their costs paid and used to build and support
each exclusive SIP's systems as a means to allowing each exclusive SIP
to purchase its existing infrastructure to use to act as a competing
consolidator.\978\
---------------------------------------------------------------------------

    \977\ MIAX Letter at 2-3.
    \978\ Id. at 3.
---------------------------------------------------------------------------

    Any determinations regarding payments to Participants or the
disposition of the assets of the exclusive SIPs would be made by the
Participants of the Equity Data Plans.\979\ If the operators of the
exclusive SIPs (i.e., SIAC and Nasdaq) decide to become competing
consolidators and to operate their competing consolidator business
using existing infrastructure of the exclusive SIPs, the Commission
does not believe that they will have a significant advantage over other
potential competing consolidators. The current operators of the
exclusive SIPs would need to reach an agreement with the Participants
of the Equity Data Plans regarding the disposition of the assets of the
exclusive SIPs and would need to modify existing systems to produce
consolidated market data products, which as described above, may
contain more information than what the exclusive SIPs currently provide
as SIP data. In addition, the exclusive SIPs will have to make changes
to their systems to accommodate the changes to regulatory data. The
exclusive SIPs also might find it necessary to upgrade the performance
of the existing systems to compete effectively against market data
vendors that currently utilize superior technology and may register to
become competing consolidators.
---------------------------------------------------------------------------

    \979\ If the Participants determine that the effective national
market system plan(s) needs to be amended for this purpose, such
amendment would have to be filed with the Commission pursuant to
Rule 608 of Regulation NMS.
---------------------------------------------------------------------------

(b) Rule 614(a)(1)(ii): Electronic Filing and Submission
(i) Proposal
    Proposed Rule 614(a)(1)(ii) would require any reports required
under new Rule 614 to be filed electronically on Form CC, include all
of the information as prescribed in Form CC and the instructions to
Form CC, and contain an electronic signature. The proposal contemplated
the use of an online filing system through which competing
consolidators would file a completed Form CC. The system, known as the
electronic form filing system (``EFFS''), is used by SROs to file
proposed rules and rule changes and by SCI entities to file Forms
SCI.\980\ Other potential methods of electronic filing of Form CC were
also described, including the use of secure file transfer through
specialized electronic mailbox or through the Electronic, Data
Gathering, Analysis and Retrieval (``EDGAR'') system, or directly
through SEC.gov via a simple HTML form.
---------------------------------------------------------------------------

    \980\ See Securities Exchange Act Release No. 50486 (Oct. 4,
2004), 69 FR 60287 (Oct. 8, 2004) (adopting EFFS for use in filing
Form 19b-4).
---------------------------------------------------------------------------

(ii) Final Rule and Response to Comments
    The Commission requested comment on the electronic filing
requirement and asked whether EFFS or another system would be efficient
for purposes of filing Form CC. One commenter supported the use of
EFFS.\981\ The Commission believes that an electronic filing process is
efficient and cost effective. The Commission has used EFFS for many
years for proposed SRO rules and rule changes filed pursuant to Section
19(b) of the Exchange Act and Rule 19b-4 thereunder, as well as
Regulation SCI and the Commission believes that this system will be
appropriate for registering competing consolidators. Further, the
Commission believes that it will be easier and cost effective for
competing consolidators and the Commission to use one system for
competing consolidator filings. Competing consolidators that are SCI
entities will have to submit filings pursuant to Regulation SCI via
EFFS.\982\ Therefore, for those competing consolidators it would be
easier and cost effective to use one filing system to submit filings
with the Commission.\983\ The use of EFFS for all competing
consolidators' filings will also be cost effective for the Commission.
---------------------------------------------------------------------------

    \981\ See Data Boiler Letter I at 50.
    \982\ See 17 CFR 242.1006 (Rule 1006) of Regulation SCI
(relating to electronic filing and submission).
    \983\ See infra Section V.C.3(a).
---------------------------------------------------------------------------

(c) Rule 614(a)(1)(iii): Commission Review Period
(i) Proposal
    Proposed Rule 614(a)(1)(iii) would provide that the Commission may,
by order, declare an initial Form CC filed by a competing consolidator
ineffective no later than 90 calendar days from filing with the
Commission.\984\ The Commission believed that 90 calendar days would
provide the Commission with adequate time to carry out its oversight
functions with respect to its review of an initial Form CC, including
its responsibilities to protect investors and maintain fair, orderly,
and efficient markets.\985\
---------------------------------------------------------------------------

    \984\ See also proposed Rule 17 CFR 242.614(a)(1)(iv)(B) (Rule
614(a)(1)(iv)(B)).
    \985\ See Proposing Release, 85 FR at 16779.
---------------------------------------------------------------------------

(ii) Final Rule and Response to Comments
    The Commission did not receive any comments on this proposed rule.
The Commission believes that the review period provides adequate time
for the Commission to evaluate an initial Form CC. Therefore, the
Commission is adopting the rule as proposed.
(d) Rule 614(a)(1)(iv): Withdrawal of Initial Form CC
(i) Proposal
    Proposed Rule 614(a)(1)(iv) would require a competing consolidator
to withdraw an initial Form CC that has not become effective if any
information disclosed in the initial Form CC is or becomes inaccurate
or incomplete. The competing consolidator would be able to refile an
initial Form CC pursuant to proposed Rule 614(a)(1).
(ii) Final Rule and Response to Comments
    The Commission did not receive any comments on this proposed rule.
The Commission believes that competing consolidators should withdraw an
initial Form CC that becomes inaccurate or incomplete to ensure that
the Commission's review is based upon complete and accurate
information. Therefore, the Commission is adopting the rule as
proposed.
(e) Rule 614(a)(1)(v): Effectiveness; Ineffectiveness Determination
(i) Proposal
    Proposed Rule 614(a)(1)(v)(A) would provide that an initial Form CC
would

become effective, unless declared ineffective, no later than the
expiration of the review period provided in paragraph (a)(1)(iii) and
upon publication of the initial Form CC pursuant to proposed Rule
614(b)(2)(i). Proposed Rule 614(a)(1)(v)(B) would provide that the
Commission would declare ineffective an initial Form CC if it finds,
after notice and opportunity for hearing, that such action is necessary
or appropriate in the public interest and is consistent with the
protection of investors.
(ii) Final Rule and Response to Comments
    The Commission requested comment on whether the proposal to allow
an initial Form CC to become effective by operation of the rule without
a Commission issuing an order would provide sufficient notice that an
initial Form CC has become effective.\986\ One commenter stated,
without more, that ``an official order would be nice to have.'' \987\
---------------------------------------------------------------------------

    \986\ See Proposing Release, 85 FR at 16780.
    \987\ See Data Boiler Letter I at 50.
---------------------------------------------------------------------------

    The Commission is adopting Rule 614(a)(1)(v) as proposed. The
Commission believes that if it finds, after notice and opportunity for
hearing, that one or more disclosures reveal noncompliance with Federal
securities laws or the rules or regulations thereunder, an initial Form
CC should be declared ineffective. The Commission will make such a
declaration if it finds, for example, that one or more disclosures on
the initial Form CC were materially deficient with respect to their
accuracy, currency, or completeness. If the Commission declares an
initial Form CC ineffective, the applicant will be prohibited from
operating as a competing consolidator, but will be able to file a new
Form CC to address any disclosure deficiencies or other issues that
caused the initial Form CC to be declared ineffective.
    While one commenter suggested without articulating a reason that
the Commission issue an order declaring a Form CC effective, the
Commission does not believe that such an order is necessary in this
context because all effective Form CCs will be published by the
Commission on the Commission's website, which will provide notice to
market participants that a competing consolidator has an effective Form
CC and is permitted to operate.
(f) Rule 614(a)(2): Form CC Amendments
(i) Proposal
    Proposed Rule 614(a)(2) would provide the requirements for amending
an effective Form CC. Proposed Rule 614(a)(2)(i) would require a
competing consolidator to amend an effective Form CC in accordance with
the instructions therein: (i) Prior to the date of implementation of a
material change to the pricing, connectivity, or products offered (a
``Material Amendment''); and (ii) no later than 30 calendar days after
the end of each calendar year to correct information, whether material
or immaterial, that has become inaccurate or incomplete for any reason
(``Annual Report'') (each a ``Form CC Amendment'').\988\
---------------------------------------------------------------------------

    \988\ See proposed Rules 614(a)(1)(i) and (a)(2)(i) and (ii).
---------------------------------------------------------------------------

(ii) Final Rule 614(a)(2) and Response to Comments
    The Commission received several comments regarding proposed Rule
614(a)(2). One commenter questioned how far ahead of implementing a new
service or fee a competing consolidator would be required to file a
Form CC amendment.\989\ The commenter also questioned whether the
Commission or its staff could object to a new service or fee.\990\
---------------------------------------------------------------------------

    \989\ See IDS Letter I at 10.
    \990\ See id.
---------------------------------------------------------------------------

    One commenter stated that the requirement to file a Material
Amendment, along with information relating to operational capability,
market data products fees, co-location, and related services, would
reduce the variety of products offered.\991\ The commenter asserted
that this information would change frequently as a competing
consolidator improved and modified its services to meet the needs of
different customers.\992\ The commenter further stated that market
participants would find other ways to select competing consolidators,
making it unnecessary to report this information publicly.\993\ One
commenter raised no objection to the proposed requirement to prepare an
Annual Report because interested persons may be interested in learning
about changes in ownership.\994\
---------------------------------------------------------------------------

    \991\ See NovaSparks Letter at 2.
    \992\ See id.
    \993\ See id.
    \994\ See Data Boiler Letter I at 51.
---------------------------------------------------------------------------

    The Commission is adopting Rule 614(a)(2) as proposed. The
Commission acknowledges the commenter's concern that the requirement to
file a Material Amendment, along with information relating to
operational capability, market data products fees, co-location, and
related services, could reduce the variety of products offered.
However, the Commission believes that the required Form CC amendments,
including Material Amendments and Annual Reports, and the process by
which they are filed, properly balances this concern with the need to
provide market participants with necessary information regarding a
competing consolidator's organization, operational capability,
consolidated market data products, fees, and co-location and related
services to determine whether to subscribe, or continue subscribing, to
a competing consolidator. As required by Rule 614(a)(2)(i), a competing
consolidator must file a Material Amendment, which is defined as a
material change to the pricing, connectivity, or products offered,
prior to such change's implementation. The Commission will review all
Form CC amendments for completeness, clarity, and conformance with the
requirements of Rule 614 and Form CC. The instructions to Form CC state
that an incomplete or deficient filing may be returned to the competing
consolidator and any filing so returned will be deemed not to have been
filed with the Commission. However, the Commission will not
affirmatively approve amendments to Form CC, including Material
Amendments, which should streamline the process. Although some
competing consolidators may frequently file amendments to Form CC to
respond to subscriber demand, these amendments would not be subject to
Commission approval before effectiveness.
    The information in Form CC amendments will assist market
participants in evaluating which products and services of the competing
consolidator will be most useful to them. This information is also
designed to ensure that the Commission has specified information
regarding entities acting as competing consolidators, to facilitate the
Commission's oversight of competing consolidators, and help to ensure
the resiliency of a competing consolidator's systems. Given these
intended uses, the Commission believes that it is important for a
competing consolidator to be required to maintain an accurate, current,
and complete Form CC.
    The Commission disagrees with the commenter's assertion that it is
unnecessary to make the information required in the initial Form CC and
in Material Amendments publicly available. The information reported in
the initial Form CC and in Material Amendments will help to ensure that
all

market participants have access to the same information regarding
competing consolidators, the products and services they offer, and the
fees for those products and services, and that that information remains
current. Although the filing of Form CC and Material Amendments will
create an administrative requirement for competing consolidators, the
Commission does not believe that these filing requirements will unduly
limit the products that a competing consolidator is able to offer.
(g) Rule 614(a)(3): Notice of Cessation
(i) Proposal
    Proposed Rule 614(a)(3) required a competing consolidator to file
notice of its cessation of operations on Form CC at least 30 business
days before the date the competing consolidator ceases to operate as a
competing consolidator. The notice of cessation will cause the Form CC
to become ineffective on the date designated by the competing
consolidator.
(ii) Final Rule 614(a)(3) and Response to Comments
    The Commission received one comment regarding proposed Rule
614(a)(3), which stated that the 30-day time period in proposed Rule
614(a)(3) was too long and that 15 days would provide sufficient time
for a broker-dealer to switch to a different service provider.\995\
---------------------------------------------------------------------------

    \995\ See Data Boiler Letter I at 51.
---------------------------------------------------------------------------

    The Commission is revising proposed Rule 614(a)(3) to require a
competing consolidator to provide 90 calendar days' notice of its
cessation of operations.\996\ The Commission believes that 90 calendar
days' notice will help to ensure that the subscribers of a competing
consolidator that ceases operations will have adequate time to identify
and transition to a new competing consolidator, including making any
necessary systems changes and establishing connectivity to the new
market data provider. While one commenter stated that firms would only
need 15 days to switch to a new competing consolidator, the Commission
believes that firms will likely need more time to switch effectively to
another competing consolidator. As discussed above, competing
consolidators may generate different consolidated market data products
and use different formats. Firms will likely need to make systems
changes and perform testing of a new competing consolidator if the
competing consolidator they use decides to cease operations. The
Commission believes that firms should be provided with sufficient time
to make necessary systems changes and conduct performance testing
before losing the services of a competing consolidator so that they are
able to have continuity of consolidated market data services.
---------------------------------------------------------------------------

    \996\ Rule 614(a)(3), as adopted, will provide: Notice of
cessation. A competing consolidator shall notice its cessation of
operations on Form CC at least 90 calendar days prior to the date
the competing consolidator will cease to operate as a competing
consolidator. The notice of cessation shall cause the Form CC to
become ineffective on the date designated by the competing
consolidator.
---------------------------------------------------------------------------

(h) Rule 614(a)(4): Date of Filing
(i) Proposal
    The Commission proposed to define ``business day'' for purposes of
proposed Rule 614 to comport with provisions contained in Rule 19b-4
and to specify the conditions under which filings required pursuant to
proposed Rule 614 are deemed to have been made on a particular business
day. Specifically, the Commission proposed to define ``business day''
in the same manner in which it is defined in Rule 19b-4(b)(2).\997\
---------------------------------------------------------------------------

    \997\ See Rule 19b-4(b)(2), 17 CFR 240.19b-4(b)(2). Proposed
Rule 614(a)(ii) provided that if the conditions of proposed Rule 614
and proposed Form CC are otherwise satisfied, all filings submitted
electronically on or before 5:30 p.m. Eastern Standard Time or
Eastern Daylight Saving Time, whichever is currently in effect, on a
business day, shall be deemed filed on that business day, and all
filings submitted after 5:30 p.m. Eastern Standard Time or Eastern
Daylight Saving Time, whichever is currently in effect, shall be
deemed filed on the next business day.
---------------------------------------------------------------------------

(ii) Final Rule and Response to Comments
    The Commission did not receive any comments on proposed Rule
614(a)(4). The Commission is adopting the rule as proposed. The
Commission believes that the provisions providing a date-of-filings
standard would facilitate the ability of competing consolidators to
comply with the requirements of Rule 614 and facilitate the ability of
the Commission to effectively receive, review, and make public the
filings required under Rule 614.
(i) Rule 614(b): Public Disclosures
(i) Proposal
    Proposed Rule 614(b) would require the publication of all Form CC
reports and other information filed by competing consolidators.
Proposed Rule 614(b)(1) stated that every Form CC filed pursuant to
Rule 614 shall constitute a ``report'' within the meaning of sections
11A, 17(a), 18(a), and 32(a) of the Exchange Act (15 U.S.C. 78k-1,
78q(a), 78r(a), and 78ff(a)), and any other applicable provisions of
the Exchange Act. Proposed Rule 614(b)(2) stated that the Commission
would publish on its website each (1) effective initial Form CC, as
amended; (2) order of ineffective initial Form CC; (3) Form CC
amendment no later than 30 calendar days from the date of filing
thereof; and (4) notice of cessation.
(ii) Final Rule and Response to Comments
    The Commission requested comment on proposed Rule 614(b). One
commenter stated without more that it had ``no objection'' to the
publication of the Form CC on the Commission's website.\998\ The
Commission is adopting this provision as proposed but with one addition
to the items that will be published by the Commission on its website
pursuant to Rule 614(b)(2). Specifically, the Commission will publish
on its website a list of the names of each potential competing
consolidator that files with the Commission an initial Form CC and the
date of filing.\999\ This list would be updated upon each filing of an
initial Form CC by a potential competing consolidator. The Commission
believes that publishing a regularly updated list of potential
competing consolidators that have filed to register with the Commission
may encourage other potential competing consolidators to register for
the ``first wave'' of the transition period.\1000\ The Commission
believes that making the information detailed in Rule 614(b) available
will assist market participants in evaluating a particular competing
consolidator as a potential source of consolidated market data, as well
as motivate potential competing consolidators to enter the market by
signaling interest in the market.
---------------------------------------------------------------------------

    \998\ See Data Boiler Letter I at 52.
    \999\ See Adopted Rule 614(b)(2).
    \1000\ See infra Section III.H.2 for a discussion of the
transition period.
---------------------------------------------------------------------------

(j) Rule 614(c): Posting of Hyperlink to the Commission's Website
(i) Proposal
    Proposed Rule 614(c) would require each competing consolidator to
make public via posting on its website a direct URL hyperlink to the
Commission's website that contains each (1) effective initial Form CC,
as amended; (2) order of ineffective initial Form CC; (3) Form CC
amendment no later than 30 calendar days from the date of filing
thereof; and (4) notice of cessation (if applicable).

(ii) Final Rule and Response to Comments
    The Commission received one comment on proposed Rule 614(c) from a
commenter who stated that it did not oppose the proposal.\1001\ The
Commission is adopting this provision as proposed.\1002\ The Commission
believes that this requirement will make it easier for market
participants to review a competing consolidator's Form CC filings. This
provision provides an additional means for market participants to
locate Form CC filings that are posted on the Commission's website.
---------------------------------------------------------------------------

    \1001\ See Data Boiler Letter I at 52.
    \1002\ The Commission notes that Rule 614(c) is being updated to
reflect a change to the numbering of Rule 614(b)(2). The
requirements of Rule 614(c) are not changing and are adopted as
proposed.
---------------------------------------------------------------------------

8. Responsibilities of a Competing Consolidator
    The Commission proposed Rule 614(d) to establish the
responsibilities applicable to all competing consolidators, including
competing consolidators that are affiliated with SROs and those that
are not, under the decentralized consolidation model. Under proposed
Rule 614(d), all competing consolidators would be required to perform
many of the obligations currently performed by the existing exclusive
SIPs. Proposed Rule 614(d) also would require all competing
consolidators to disclose performance metrics and other information
that would facilitate Commission oversight of competing consolidators
and assist market participants in evaluating and choosing competing
consolidators.
(a) Rules 614(d)(1) Through (3): Collection, Calculation, and
Dissemination of Consolidated Market Data
(i) Proposal
    Proposed Rules 614(d)(1) through (3) would require competing
consolidators to collect, consolidate, and disseminate consolidated
market data. Proposed Rule 614(d)(1) would require each competing
consolidator to collect from each national securities exchange and
national securities association, either directly or indirectly, the
information with respect to quotations for and transactions in NMS
stocks as provided in Rule 603(b). Proposed Rule 614(d)(2) would
require each competing consolidator to calculate and generate
consolidated market data, as defined in proposed Rule 600(b)(19), from
the information collected in proposed Rule 614(d)(1). This proposed
rule would require competing consolidators to develop a complete
consolidated market data product that contained all of the data
elements specified in the proposed definition of consolidated market
data.\1003\ Proposed Rule 614(d)(3) would require competing
consolidators to make the proposed consolidated market data available
to subscribers on a consolidated basis and on terms that are not
unreasonably discriminatory, with the timestamps required by proposed
Rules 614(d)(4) and (e)(1)(ii), as discussed below.
---------------------------------------------------------------------------

    \1003\ See Proposing Release, 85 FR at 16782.
---------------------------------------------------------------------------

(ii) Final Rule and Response to Comments
    The Commission received several comments regarding proposed Rules
614(d)(1) through (3).\1004\ One commenter strongly supported requiring
competing consolidators to be subject to appropriate standards, such as
providing fair access to market participants.\1005\ Two commenters
criticized the proposed rules. One commenter stated that incorporating
aggregated odd-lot quotes into the NBBO calculation would cause
confusion and suggested instead that the NBBO be based on exchange BBOs
``to minimize any calculation or interference/influences'' by competing
consolidators.\1006\ With respect to proposed Rule 614(d)(2), one
commenter said that because the Commission did not define what it meant
by ``generate'' proposed consolidated market data, it was unclear what
types of activity would warrant registration by competing
consolidators.\1007\ The commenter also argued that the Commission did
not describe the meaning of ``unreasonably discriminatory'' in proposed
Rule 614(d)(3),\1008\ the consequences for competing consolidators that
make data available on an unreasonably discriminatory basis, the
``costs of the mechanisms and consequences for application and
enforcement of the unreasonably discriminatory requirement for both the
relevant competing consolidator and its clients,'' and whether
agreements between a competing consolidator and its subscribers that
limit the competing consolidator's liability would be deemed
``unreasonably discriminatory.'' \1009\
---------------------------------------------------------------------------

    \1004\ See Clearpool Letter at 7; Data Boiler Letter I at 52;
IDS Letter I at 10-11.
    \1005\ See Clearpool Letter at 7.
    \1006\ Data Boiler Letter I at 52. This commenter also suggested
that only a single competing consolidator should be obligated to
provide a consolidated market data product, not all competing
consolidators. See supra Section III.C.1(b).
    \1007\ IDS Letter I at 11.
    \1008\ The commenter said that data vendors are currently not
held to an ``unreasonably discriminatory'' standard. Because the
commenter believed the Commission did not explain how it would apply
this standard, the commenter said that commenters cannot assess the
standard's burden on potential competing consolidators, including
data vendors. Id. at 10.
    \1009\ Id. at 10-11.
---------------------------------------------------------------------------

    As discussed above,\1010\ the Commission is not requiring competing
consolidators to sell a full consolidated market data product and is
amending proposed Rules 614(d)(1) through (3) to reflect this change.
Rule 614(d)(1), as amended, requires each competing consolidator to
collect from each national securities exchange and national securities
association, either directly, or indirectly, only the information
required under Rule 603(b) that is necessary for the competing
consolidator to create the particular consolidated market data
product(s) it chooses to sell. Rule 614(d)(2), as amended, requires
each competing consolidator to calculate and generate a consolidated
market data product from the data collected pursuant to Rule 614(d)(1).
Rule 614(d)(3), as amended, requires each competing consolidator to
make the consolidated market data product(s) available to subscribers
on terms that are not unreasonably discriminatory, and timestamped as
required by Rule 614(d)(4) and including the national securities
exchange and national securities association generated timestamp as
required by Rule 614(e)(2).
---------------------------------------------------------------------------

    \1010\ See supra Section II.B.2; see also supra Section
III.C.1(b). The Commission is adopting a definition for
``consolidated market data product'' in Rule 600(b)(20).
---------------------------------------------------------------------------

    With respect to the comment that the NBBO should be based on
exchange BBOs and that incorporation of aggregated odd-lot quotes would
cause confusion,\1011\ the Commission believes that requiring the
exchanges to calculate their BBOs before sending them to the competing
consolidators for calculation into NBBOs would add latency to the
collection, consolidation, and dissemination of consolidated market
data products. One of the goals of the introduction of competing
consolidators is the reduction of latencies. Any exchange processing of
the data content underlying consolidated market data will add latency
in the collection, calculation, and dissemination of consolidated
market data. Further, the exchanges currently aggregate odd-lot quotes
into their BBOs, which are used to calculate the NBBO. Therefore, the
Commission does not believe that this

provision will cause confusion.\1012\ The Commission believes that
aggregating odd-lots into the BBO provides market participants with a
more complete view of the market for each security.
---------------------------------------------------------------------------

    \1011\ See Data Boiler Letter I at 52.
    \1012\ See supra Section III.B.10.
---------------------------------------------------------------------------

    In response to the comment that only one competing consolidator
should be obligated to provide a consolidated market data
product,\1013\ the Commission is not requiring all competing
consolidators to provide all consolidated market data. Competing
consolidators may sell a consolidated market data product comprising
some or all components of consolidated market data.\1014\ The
Commission believes that competing consolidators should have the
flexibility to tailor their market data products to their subscribers'
needs. Not requiring competing consolidators to sell a product that
contains all of the data elements of full consolidated market data
should enhance competition among competing consolidators by providing
more parameters (e.g., products) upon which they can compete.
---------------------------------------------------------------------------

    \1013\ See Data Boiler Letter I at 52.
    \1014\ See Rule 600(b)(20).
---------------------------------------------------------------------------

    With respect to the comment that requested clarification of the use
of the term ``generate'' in proposed Rule 614(d)(2), competing
consolidators will be required to calculate and generate a consolidated
market data product from the individual data streams made available by
the SROs pursuant to Rule 603(b). For example, competing consolidators
that choose to sell a consolidated market data product that includes
the NBBO will calculate the NBBO as set forth in Rule 600(b)(50) and
disseminate the NBBO in the consolidated market data product. Competing
consolidators that sell a consolidated market data product that
includes depth-of-book data will generate depth-of-book data by
considering the NBBO and then determining the five price levels above
(below) the NBBO from the quotation information provided by the SROs.
The ``calculate and generate'' description refers to the processes that
competing consolidators will use to create a consolidated market data
product from the individual SRO quotation and transaction information
they receive. Competing consolidators that receive transaction and
quotation information from the individual SROs pursuant to Rule 603(b)
and calculate and generate a consolidated market data product for
dissemination must register pursuant to Rule 614.
    ``Unreasonably discriminatory'' is a term used in Section
11A(c)(1)(D) of the Exchange Act.\1015\ Section 11A(c)(1)(D) of the
Exchange Act states that all exchange members, brokers, dealers, SIPs,
and, subject to such limitations that the Commission may impose as
necessary or appropriate for the protection of investors or maintenance
of fair and orderly markets, all other persons may obtain on terms that
are not unreasonably discriminatory such information with respect to
quotations for and transactions in any security, other than an exempted
security, as is published or distributed by any SRO or SIP. The term
``unreasonably discriminatory'' in Rule 614(d)(3) has the same meaning
as in Section 11A(c)(1)(D). With respect to the comment asking about
the applicability of this term,\1016\ while such determinations are
facts and circumstances-based and specific to each individual
situation, a competing consolidator should have a reasonable basis for
providing a consolidated market data product on different terms to
different customers.
---------------------------------------------------------------------------

    \1015\ 15 U.S.C. 78k-1(c)(1)(D). See also Bloomberg Order, supra
note 22.
    \1016\ See IDS Letter I at 10-11.
---------------------------------------------------------------------------

(b) Rule 614(d)(4): Timestamping of Consolidated Market Data
(i) Proposal
    Proposed Rule 614(d)(4) would require each competing consolidator
to timestamp the information collected in proposed Rule 614(d)(1): (i)
Upon receipt from each national securities exchange and national
securities association at the exchange's or association's data center;
(ii) upon receipt of such information at its aggregation mechanism; and
(iii) upon dissemination of consolidated market data to customers.
(ii) Final Rule and Response to Comments
    The Commission received several comments regarding proposed Rule
614(d)(4).\1017\ Three commenters supported the timestamp requirement
of the proposed Rule.\1018\ One commenter said that market participants
could use the originating venue timestamp and the consolidator
timestamps to gauge whether the latency meets their needs and whether
their best-execution obligations were met.\1019\ Another commenter
suggested a time granularity of +/- 50 milliseconds or in sub-
milliseconds.\1020\
---------------------------------------------------------------------------

    \1017\ See Capital Group Letter at 4; IEX Letter at 8; Data
Boiler Letter I at 53; TD Ameritrade Letter at 13.
    \1018\ See Capital Group Letter at 4; IEX Letter at 8; Data
Boiler Letter I at 53.
    \1019\ See Capital Group Letter at 4.
    \1020\ See Data Boiler Letter I at 53.
---------------------------------------------------------------------------

    One commenter, however, stated that the proposed rule could create
confusion.\1021\ This commenter said that multiple quotes with the same
timestamp could cause sequencing confusion and suggested that the
Commission provide more specificity to address this concern.\1022\
---------------------------------------------------------------------------

    \1021\ See TD Ameritrade Letter at 13.
    \1022\ See id.
---------------------------------------------------------------------------

    The Commission believes that timestamps are of particular
importance in a decentralized consolidation model because competing
consolidators will be generating consolidated market data products
individually. Market participants must be able to understand the market
at the time their orders are represented and executed. Further,
timestamps help to ensure that competing consolidators are accurately
calculating and disseminating consolidated market data products.
Therefore, the Commission is adopting these requirements as proposed.
    The exclusive SIPs' timestamp information is similar to what is
required of competing consolidators under Rules 614(d)(4)(i) and (iii).
The timestamp requirement will allow subscribers to ascertain how
quickly the competing consolidator can receive data from the exchanges,
transmit that data between the exchange's data center and its
aggregation center, and aggregate and disseminate its consolidated
market data product to subscribers (its realized latency). The
Commission also believes that this information will provide
transparency that should help subscribers evaluate a potential
competing consolidator or determine whether an existing competing
consolidator continues to meet their needs.
    The Commission does not think that the addition of timestamps on
competing consolidators' consolidated market data products will cause
sequencing confusion. Rule 614(d)(4) requires each competing
consolidator to affix its own timestamps to the information collected
in Rule 614(d)(1): (i) Upon receipt from each SRO at the exchange's or
association's data center; (ii) upon receipt of such information at its
aggregation mechanism; and (iii) upon dissemination of consolidated
market data to customers. As noted above, currently, the exclusive SIPs
similarly timestamp information. The timestamp requirement should not
introduce any new sequencing confusion. Instead, this timestamping
requirement should help subscribers

understand a competing consolidator's performance in generating
consolidated market data products. Competing consolidators will have
different systems to collect, calculate, and disseminate the data they
receive from the SROs and their timestamps will help market
participants measure latencies.
(c) Rules 614(d)(5) and (6): Monthly Website Publication of Performance
and Operational Information
(i) Proposal
    Proposed Rule 614(d)(5) required each competing consolidator to
publish prominently on its website, within 15 calendar days after the
end of each month, certain performance metrics. All information posted
pursuant to proposed Rule 614(d)(5) must be publicly posted in
downloadable files and must remain free and accessible (without any
encumbrances or restrictions) by the general public on the website for
a period of not less than three years from the initial date of posting.
    In particular, proposed Rule 614(d)(5) required the publication of
the following performance metrics: (i) Capacity statistics (such as
system tested capacity, system output capacity, total transaction
capacity, and total transaction peak capacity); (ii) message rate and
total statistics (such as peak output rates on the following bases: 1-
millisecond, 10-millisecond, 100-millisecond, 500-millisecond, 1-
second, and 5-second); (iii) system availability statistics (for
example, whether system up-time has been 100% for the month and
cumulative amount of outage time); (iv) network delay statistics (for
example, today under a TCP-IP network, network delay statistics would
include quote and trade zero window size events, quote and trade TCP
retransmit events, and quote and trade message total); and (v) latency
statistics (with distribution statistics up to the 99.99th percentile)
for (1) when a national securities exchange or national securities
association sends an inbound message to a competing consolidator
network and when the competing consolidator network receives the
inbound message; (2) when the competing consolidator network receives
the inbound message and when the competing consolidator network sends
the corresponding consolidated message to a subscriber; and (3) when a
national securities exchange or national securities association sends
an inbound message to a competing consolidator network and when the
competing consolidator network sends the corresponding consolidated
message to a subscriber.
    Proposed Rule 614(d)(6) required each competing consolidator to
publish prominently on its website, within 15 calendar days after the
end of each month, information on: (i) Data quality issues (such as
delayed message publication, publication of duplicative messages, and
message inaccuracies); (ii) system issues (such as processing,
connectivity, and hardware problems); (iii) any clock synchronization
protocol utilized; (iv) for the clocks used to generate the timestamps
described in Rule 614(d)(4), clock drift averages and peaks and number
of instances of clock drift greater than 100 microseconds; and (v)
vendor alerts (such as holiday reminders and testing dates). All
information posted pursuant to proposed Rule 614(d)(6) must be publicly
posted and must remain free and accessible (without any encumbrances or
restrictions) by the general public on the website for a period of not
less than three years from the initial date of posting.
(ii) Final Rule and Response to Comments
    The Commission received several comments regarding proposed Rules
614(d)(5) and (6).\1023\ Five commenters supported the proposed
Rules.\1024\ One commenter objected to the proposed rules.\1025\ One
commenter requested guidance from the Commission relating to broker-
dealers' use of the required information.\1026\
---------------------------------------------------------------------------

    \1023\ See Clearpool Letter at 9; IntelligentCross Letter at 5;
IEX Letter at 8; ACS Execution Services Letter at 6; Data Boiler
Letter I at 53; STANY Letter II at 6; FINRA Letter at 5.
    \1024\ See Clearpool Letter at 9; IntelligentCross Letter at 5;
IEX Letter at 8; ACS Execution Services Letter at 6; Data Boiler
Letter I at 53.
    \1025\ See STANY Letter II at 6.
    \1026\ See FINRA Letter at 5.
---------------------------------------------------------------------------

    Several commenters supported requiring competing consolidators to
disclose the information required by the proposed rules,\1027\ and some
commenters said this information would be useful in choosing a
competing consolidator.\1028\ One commenter said that such transparency
could help keep costs down,\1029\ and another commenter stated that the
publication of performance metrics, in combination with competition,
would ``advance the objective of promoting useful and widely available
market data for a range of market participants.'' \1030\ One commenter
indicated that the information and frequency with which it would be
provided were acceptable but suggested benchmark testing instead of
information disclosures.\1031\ The commenter said that benchmark tests
would better demonstrate a competing consolidator's capabilities
without revealing proprietary information.\1032\
---------------------------------------------------------------------------

    \1027\ See Clearpool Letter at 9; IntelligentCross Letter at 5;
IEX Letter at 8.
    \1028\ See IntelligentCross Letter at 5; ACS Execution Services
Letter at 6.
    \1029\ See ACS Execution Services Letter at 6.
    \1030\ IEX Letter at 8.
    \1031\ See Data Boiler Letter I at 53. This commenter did not
elaborate on benchmark testing.
    \1032\ See id. The performance and operational information to be
provided as required by Rules 614(d)(5) and (6) do not require the
disclosure of proprietary information. Rules 614(d)(5) and (6)
require the reporting of data that demonstrates how competing
consolidators are actually operating which should be directly
pertinent to subscribers and potential subscribers of competing
consolidators. If competing consolidators believe that benchmark
testing would be worthwhile, they can decide on their own to
establish benchmark criteria and publish the results of testing, in
addition to complying with the requirements of Rules 614(d)(5) and
(6).
---------------------------------------------------------------------------

    One commenter believed that the requirement to disclose performance
statistics as well as provide transparency into the performance of
competing consolidator systems would deter potential competing
consolidators from registration.\1033\ Another commenter asked the
Commission to issue guidance outlining a broker-dealer's obligations
with respect to review of the monthly performance metrics prior to and
after selection of a competing consolidator, and reevaluation of its
chosen competing consolidator based on such metrics or other
information.\1034\
---------------------------------------------------------------------------

    \1033\ See STANY Letter II at 6-7.
    \1034\ See FINRA Letter at 5.
---------------------------------------------------------------------------

    The Commission is adopting Rules 614(d)(5) and (6) as
proposed.\1035\ The Commission believes that this information will be
useful to market participants in evaluating competing consolidators.
The Commission believes that the public disclosure of this
information--particularly the system availability and network delay
statistics and data quality and system issues--will encourage competing
consolidators to provide consolidated market data products in a stable
and resilient manner and will allow market participants to hold them
accountable for their performance metrics.
---------------------------------------------------------------------------

    \1035\ The Commission is adopting Rules 614(d)(5) and (6) with
minor technical changes to cite more specifically to the information
that must be published by a competing consolidator to its website on
a monthly basis.
---------------------------------------------------------------------------

    The Commission does not believe that these disclosures will deter
potential competing consolidators from registering because the
disclosures should help competing consolidators to market themselves to
potential subscribers. This information will be used by market
participants to evaluate

competing consolidator performance. Competing consolidators could also
use these disclosures to evaluate their competitors, which could
motivate them to make changes to better serve their subscribers or
attract new ones.
    Finally, the Commission believes that the information disclosed
under these provisions--such as performance statistics, system
availability, and data quality issues--can help a broker-dealer assess
whether a potential competing consolidator can meet the broker-dealer's
performance and operational needs and should help to facilitate a
broker-dealer's ability to achieve and analyze best execution.\1036\
For these reasons, the Commission encourages these disclosures to be
provided in a manner facilitating comparison across competing
consolidators and their consolidated market data products.
---------------------------------------------------------------------------

    \1036\ See supra notes 104-105 and accompanying text.
---------------------------------------------------------------------------

(d) Rules 614(d)(7) and (8): Maintenance and Provision of Information
for Regulatory Purposes
(i) Proposal
    Proposed Rule 614(d)(7) required each competing consolidator to
keep and preserve at least one copy of all documents, including all
correspondence, memoranda, papers, books, notices, accounts, and such
other records as shall be made or received by it in the course of its
business as such and in the conduct of its business.\1037\ The proposed
rule required competing consolidators to keep these documents for a
period of no less than five years, the first two years in an easily
accessible place.
---------------------------------------------------------------------------

    \1037\ See Section 17(a)(1) of the Exchange Act, 15 U.S.C.
78q(a)(1).
---------------------------------------------------------------------------

    Proposed Rule 614(d)(8) required each competing consolidator to,
upon request of any representative of the Commission, promptly furnish
to the possession of such representative copies of any documents
required to be kept and preserved by it.\1038\
---------------------------------------------------------------------------

    \1038\ In this context, ``promptly'' or ``prompt'' means making
reasonable efforts to produce records that are requested by the
staff during an examination without delay. The Commission believes
that in many cases a competing consolidator could, and therefore
will be required to, furnish records immediately or within a few
hours of a request. The Commission expects that only in unusual
circumstances would a competing consolidator be permitted to delay
furnishing records for more than 24 hours. Accord Regulation
Crowdfunding, Securities Act Release No. 9974, Securities Exchange
Act Release No. 76324 (Oct. 30, 2015), 80 FR 71387, 71473 n. 1122
(Nov. 15, 2015) (similarly interpreting the term ``promptly'' in the
context of Regulation Crowdfunding Rule 404(e)); Security Based Swap
Data Repository Registration, Duties, and Core Principles,
Securities Exchange Act Release No. 74246 (Feb. 11, 2015), 80 FR
14438, 14500, n. 846 (Mar. 19, 2015) (similarly interpreting the
term ``promptly'' in the context of Exchange Act Rule 13n-7(b)(3));
Registration of Municipal Advisors, Securities Exchange Act Release
No. 70462 (Sept. 20, 2013), 78 FR 67468, 67578-79 n. 1347 (Nov. 12,
2013) (similarly interpreting the term ``prompt'' in the context of
Exchange Act Rule 15Ba1-8(d)).
---------------------------------------------------------------------------

(ii) Final Rule and Response to Comments
    The Commission received two comments on proposed Rules 614(d)(7)
and (8) from the same commenter.\1039\ The commenter stated that the
document retention and recording time periods of proposed Rule
614(d)(7) were acceptable.\1040\ In response to proposed Rule
614(d)(8), the commenter suggested that the Commission require
benchmark testing instead of paper documents.\1041\
---------------------------------------------------------------------------

    \1039\ See Data Boiler Letter I at 54.
    \1040\ Id.
    \1041\ Id.
---------------------------------------------------------------------------

    The Commission is adopting Rules 614(d)(7) and (8) as proposed.
These requirements will facilitate the Commission's oversight of
competing consolidators and the national market system. These
provisions are similar to those used by the Commission in other
contexts.\1042\ The Commission does not believe that ``benchmark
testing'' is applicable to the Commission's record retention
requirements because these requirements address the records to retain,
how long to retain them, and to whom the records should be furnished,
not how competing consolidators should demonstrate the capability of
their systems.\1043\
---------------------------------------------------------------------------

    \1042\ See Section 17(a)(1) of the Exchange Act, 15 U.S.C.
78q(a)(1).
    \1043\ See supra note 1032.
---------------------------------------------------------------------------

(e) Form CC
(i) Proposal
    The Commission proposed Form CC to require competing consolidators
to provide information and/or reports in narrative form to the
Commission and to make such information public. The proposed form
required a competing consolidator to indicate the purpose for which it
is filing the form (i.e., initial report, material amendment, annual
amendment, or notice of cessation) and to provide information in four
categories: (1) General information, along with contact information;
(2) business organization; (3) operational capability; and (4) services
and fees. The Commission explained that the requested information would
assist the Commission in understanding the competing consolidator's
overall business structure, technological reliability, and services
offered, and would better ensure consistent disclosures across
competing consolidators.
(ii) Final Rule and Response to Comments
    The Commission received multiple comments from one commenter on
proposed Form CC. In response to the Commission's question as to
whether the instructions to Form CC were sufficiently clear, one
commenter asked when a Form CC needed to be filed ``in order to give
[the] regulator sufficient time to review before authorizing it to
operate?'' \1044\ Under Rule 614(a)(1)(i), no competing consolidator
may receive the data content underlying consolidated market data and
generate a consolidated market data product for dissemination unless an
initial Form CC has been filed with the Commission and become
effective. Therefore, Form CC needs to be filed prior to a competing
consolidator beginning operations. Further, as described in Rule
614(a)(1)(iii), the Commission may declare an initial Form CC
ineffective no later than 90 calendar days from the date of filing with
the Commission.
---------------------------------------------------------------------------

    \1044\ See Data Boiler Letter I at 55.
---------------------------------------------------------------------------

    The Commission also asked whether competing consolidators would
bundle their products and/or services and if so, whether this should be
required to be disclosed on Form CC. One commenter responded that
bundling would be likely but did not specify whether it should be
disclosed on Form CC.\1045\ Two commenters stated that the Commission
should not to allow competing consolidators to link their pricing to
other areas of business.\1046\
---------------------------------------------------------------------------

    \1045\ See id. at 56.
    \1046\ See Clearpool Letter at 4; ACS Execution Services Letter
at 6.
---------------------------------------------------------------------------

    In the Proposing Release, the Commission stated that the
information in Section V of Form CC--which includes Exhibit F (a
description of all consolidated market data products), Exhibit G (a
description and identification of any fees or charges for the use of
the competing consolidator with respect to consolidated market data),
and Exhibit H (a description of any co-location and related services,
and the terms and conditions for co-location, connectivity and related
services)--would assist market participants in determining whether to
become a subscriber of a competing consolidator by requiring the
availability of information regarding the services offered and fees
charged for consolidated market data. The Form CC disclosures will
require the disclosure of fees and services related to consolidated
market data products that

may be bundled by a competing consolidator. The Commission does not
believe that competing consolidators should be prohibited from linking
their pricing of consolidated market data products to other areas of
their business.\1047\ The Commission believes that the transparency
resulting from the disclosures provided on Form CC will facilitate
competition across similar products and/or services and help to protect
market participants from unfair and unreasonable pricing.
---------------------------------------------------------------------------

    \1047\ In this regard, concerns regarding linked pricing or
conditioning availability could exist in the context of a competing
consolidator affiliated with a registered broker-dealer that offers
execution services to broker-dealer clients. For example, if the
registered broker-dealer linked the pricing for, or conditioned the
availability of the services of an affiliated competing consolidator
to, the execution services offered by the registered broker-dealer
to a broker-dealer client, and the registered broker-dealer was an
execution venue included on the broker-dealer client's report
required by Rule 606(a) of Regulation NMS, the material aspects of
such an arrangement must be disclosed by the broker-dealer client
pursuant to Rule 606(a)(1)(iv) of Regulation NMS. See also
Securities Exchange Act Release No. 84528, 83 FR 58338, 58376 n. 397
and accompanying text. In addition, in such a scenario, the broker-
dealer client of the registered broker-dealer with an affiliated
competing consolidator would continue to be obligated to seek the
best execution for its customers' orders. See supra Section I.E.
---------------------------------------------------------------------------

    Further, the Commission asked whether Form CC should require any
additional information or whether any proposed items should be removed.
One commenter responded that the NBBO should not be interfered with or
influenced by competing consolidators ``with ties to foreign government
officials'' and that Form CC should have disclosure of any such
ties.\1048\ Form CC requires specific information about the owners and
operators of a competing consolidator. If a ``foreign government
official'' were an owner of 10 percent or more of a competing
consolidator's stock or directly or indirectly controls the management
of policies of the competing consolidator, such person would have to be
identified in Exhibit A to Form CC. If a ``foreign government
official'' were an officer, director, governor, or other person
performing similar functions for a competing consolidator, such person
would have to be identified in Exhibit B to Form CC. These exhibits
would provide disclosure of such ties. Further, as discussed above, all
competing consolidators will be required to calculate the NBBO as set
forth in Rule 600(b)(50).\1049\ Competing consolidators could not
calculate a NBBO in another manner. All competing consolidators will be
regulated entities subject to inspection by Commission staff, which
should deter the development of inaccurate NBBOs.
---------------------------------------------------------------------------

    \1048\ Data Boiler Letter I at 4.
    \1049\ See supra Section III.B.10.
---------------------------------------------------------------------------

    This commenter also suggested a requirement that ``all procedures''
in the section on Operational Capability should exclude proprietary
techniques of a competing consolidator.\1050\ Exhibit E to Form CC
requires a narrative description of each consolidated market data
service or function, including connectivity and delivery options for
subscribers and a description of all procedures utilized for the
collection, processing, distribution, publication, and retention of
information with respect to quotations for and transactions in
securities. The information provided in Form CC relating to operational
capability should contain information that will allow market
participants to evaluate potential competing consolidators. It does not
require the public disclosure of proprietary information.
---------------------------------------------------------------------------

    \1050\ Data Boiler Letter I at 55.
---------------------------------------------------------------------------

    The Commission is adopting Form CC substantially as proposed, with
modifications to provide for the reporting of systems disruptions or
intrusions, as required under Rule 614(d)(9).\1051\ Form CC, as
adopted, will include new Section VI, which will require a competing
consolidator to promptly report whether a systems disruption or
intrusion (or both) has occurred, and to provide information regarding
the time and duration of the event, the date and time when the
competing consolidator had a reasonable basis to conclude that a
systems disruption/intrusion had occurred, whether and when the event
had been resolved, whether and when the investigation had been closed,
and the name of the system(s) involved. The revised Form CC also
requires the competing consolidator to attach as Exhibit J all other
information regarding the systems disruption or intrusion as required
by Rule 614(d)(9)(iii) (including a detailed description, an assessment
of those systems potentially affected, a description of the progress of
corrective action, and when the event has been or is expected to be
resolved). As discussed further below, Rule 614(d)(9) requires a
competing consolidator that is not required to comply with Regulation
SCI to publicly disseminate certain information regarding systems
disruptions and notify the Commission of systems disruptions and
systems intrusions.\1052\ Exhibit J to Form CC would be publicly
available, although Form CC provides for a competing consolidator to
request confidential treatment for information relating to a systems
intrusion.
---------------------------------------------------------------------------

    \1051\ See infra Section III.F.
    \1052\ See infra Section III.F and text accompanying notes 1302-
1312.
---------------------------------------------------------------------------

    In addition, Form CC, as adopted, has been modified to accommodate
filing by competing consolidators that are affiliated with an
exchange.\1053\ Section II of Form CC requires a competing consolidator
to report whether it is affiliated with an exchange. Section III of
Form CC specifies Form 1 exhibits related to the ownership and
leadership of an exchange that may be provided by an exchange-
affiliated competing consolidator in lieu of filing Exhibits A and B of
Form CC. Specifically, Section III states that a competing consolidator
that is affiliated with an exchange may provide Exhibit K of Form 1
relating to owners, shareholders, or partners that are not also members
of the exchange in lieu of Exhibit A of Form CC, and Exhibit J of Form
1 relating to officers, governors, members of all standing committees,
or persons performing similar functions in lieu of Exhibit B of Form
CC. If the competing consolidator chooses not to file Exhibits A and B
of Form CC or Exhibits J and K of Form 1, it must certify that the
information requested under Exhibits A and B of Form CC is available on
an internet website and provide the URL. The Commission believes that
permitting the filing of Exhibit J and K of Form 1 would lessen the
burden of registration for an exchange-affiliated competing
consolidator since this information has already been prepared and
reported to the Commission with the affiliated exchange's Form 1.
---------------------------------------------------------------------------

    \1053\ See supra Section III.C.7(a)(iv).
---------------------------------------------------------------------------

(iii) Comments on Fees Charged by Competing Consolidators
    Under Form CC, competing consolidators are required to disclose the
fees they charge to their subscribers for the consolidated market data
product services. The Commission received several comments on the fees
competing consolidators would charge for their consolidated market data
products.\1054\ One commenter said that it is unclear how competing
consolidators will price their data and whether such prices will be
``reliable, resilient or well-regulated.'' \1055\ One commenter stated
that the Commission should treat competing consolidator fees similar to
SRO proposed fee changes and should publish on its website each
amendment to a competing

consolidator's fees no later than 30 days after the amendment was
filed.\1056\ Another commenter suggested requiring competing
consolidator price transparency for investors.\1057\
---------------------------------------------------------------------------

    \1054\ See Clearpool Letter at 4; ACS Execution Services Letter
at 5, 6; RBC Letter at 6; TechNet Letter II at 1-2.
    \1055\ TechNet Letter II at 1-2.
    \1056\ See Clearpool Letter at 4. See also ACS Execution
Services Letter at 5 (stating that requiring competing consolidator
fees to be subject to Commission approval would potentially reduce
uncertainty about the cost of consolidated market data).
    \1057\ See RBC Letter at 6.
---------------------------------------------------------------------------

    Fees set by competing consolidators for the consolidated market
data services they offer will be transparent as they must be disclosed
on Exhibit G of Form CC. The Commission expects that competing
consolidator fees will reflect the services they provide relating to
consolidated market data products, such as collecting, consolidating,
generating, and disseminating the products that contain the data
underlying consolidated market data. The Commission, however, is not
implementing an approval process for competing consolidator fees.
Competing consolidators are not SROs and therefore not subject to
Section 19(b) of the Exchange Act with respect to their services or
fees. The Commission believes that competition, along with disclosure,
should be sufficient to establish a fee structure based on market
forces. On the other hand, the fees for the data content underlying
consolidated market data must be proposed by the effective national
market system plan(s) and are required to be submitted to the
Commission pursuant to Rule 608.\1058\ These fees will be published for
public comment and will not become effective until the Commission
approves them by order.\1059\
---------------------------------------------------------------------------

    \1058\ See infra Section III.E.
    \1059\ See Effective-Upon-Filing Adopting Release, supra note
17.
---------------------------------------------------------------------------

D. Self-Aggregators

1. Proposal
    The Commission proposed to amend Regulation NMS to permit broker-
dealers to ``self-aggregate'' consolidated market data under the
decentralized consolidation model. Under proposed Rule 600(b)(83), a
self-aggregator was defined as ``a broker or dealer that receives
information with respect to quotations for and transactions in NMS
stocks, including all data necessary to generate consolidated market
data, and generates consolidated market data solely for internal use. A
self-aggregator may not make consolidated market data, or any subset of
consolidated market data, available to any other person.''
    Under proposed Rule 603(b), the SROs would make available to self-
aggregators the data necessary to generate proposed consolidated market
data in the same manner and using same methods, including all methods
of access and the same format, as other persons, including competing
consolidators.\1060\ A self-aggregator that limits its use of SRO data
to the creation of proposed consolidated market data would be charged
only for proposed consolidated market data pursuant to the fee
schedules set forth by the effective national market system
plan(s).\1061\ A self-aggregator that uses an exchange's proprietary
data (e.g., full depth of book data) would be charged separately for
the proprietary data use pursuant to the individual exchange's fee
schedule.\1062\
---------------------------------------------------------------------------

    \1060\ See supra Section III.B.9.
    \1061\ See infra Section III.E. for a discussion of the
effective national market system plan(s).
    \1062\ SRO fees for market data other than the proposed
consolidated market data would be subject to the rule filing process
pursuant to Section 19(b) of the Exchange Act and Rule 19b-4
thereunder.
---------------------------------------------------------------------------

2. Final Rule and Response to Comments
    For the reasons discussed below, the Commission is revising the
definition of self-aggregator. Adopted Rule 600(b)(83) defines a self-
aggregator as a broker or dealer, national securities exchange,
national securities association, or investment adviser registered with
the Commission that receives information with respect to quotations for
and transactions in NMS stocks, including all data necessary to
generate consolidated market data, and generates consolidated market
data solely for internal use. A self-aggregator may make consolidated
market data available to its affiliates that are registered with the
Commission for their internal use. Except as provided in the preceding
sentence, a self-aggregator may not disseminate or otherwise make
available consolidated market data, or components of consolidated
market data, as provided in Sec.  242.600(b)(20), to any person.
(a) Scope of the Definition of Self-Aggregator
(i) National Securities Exchanges and National Securities Associations
    The Commission requested comment on several questions relating to
self-aggregators, including whether entities other than broker-dealers
should be allowed to act as self-aggregators.\1063\ One commenter
argued that exchanges should be permitted to act as self-aggregators of
consolidated market data because they use data to aid in matching
trades or routing orders to other markets through their affiliated
routing brokers.\1064\ Another commenter stated that exchanges must
receive and process data to comply with Regulation NMS and that
allowing exchanges to act as self-aggregators would provide exchanges
with flexibility to use NMS data made available by the SROs or exchange
proprietary data products.\1065\
---------------------------------------------------------------------------

    \1063\ See Proposing Release, 85 FR at 16791.
    \1064\ See IEX Letter at 9. See also NYSE Letter II at 18
(stating that the Commission had not explained why SROs would not be
permitted to continue to consolidate data obtained directly from
other SROs).
    \1065\ See MEMX Letter at 7.
---------------------------------------------------------------------------

    The national securities exchanges are SROs registered with and
overseen by the Commission. The national securities exchanges currently
aggregate market data obtained from the exclusive SIPs and from
proprietary data feeds to perform several exchange functions, including
order handling and execution, order routing, and regulatory
compliance.\1066\ Among other things, exchanges must determine
protected quotations on other markets for purposes of complying with
order protection requirements of Rule 611 and the locked and crossed
markets prohibition in Rule 610(d), including identifying where to
route intermarket sweep orders.\1067\ Exchanges also must know the NBBO
for purposes of order types that are priced based on the NBBO, and must
determine the NBB for purposes of complying with Rule 201 of Regulation
SHO. To help exchanges perform these functions, the Commission believes
that national securities exchanges should be permitted to act as self-
aggregators. As self-aggregators, national securities

exchanges will have the flexibility to determine the optimal means for
obtaining the market data they require to fulfill their regulatory
obligations.
---------------------------------------------------------------------------

    \1066\ See, e.g., Securities Exchange Act Release Nos. 72685
(July 28, 2014), 79 FR 44889 (Aug. 1, 2014) (notice of filing and
immediate effectiveness of File No. SR-BATS-2014-082); 72687 (July
28, 2014), 79 FR 44926 (Aug. 1, 2014) (notice of filing and
immediate effectiveness of BYX-2014-012); 72684 (July 28, 2014), 79
FR 44956 (Aug. 1, 2014) (notice of filing and immediate
effectiveness of File No. SR-NASDAQ-2014-072); and 72708 (July 29,
2014), 79 FR 45572 (Aug. 5, 2014) (notice of filing and immediate
effectiveness of File No. SR-NYSEArca-2014-82). See also IEX Rule
Series 11.400.
    \1067\ An intermarket sweep order is a limit order for an NMS
stock that meets the following requirements: (i) When routed to a
trading center, the limit order is identified as an intermarket
sweep order; and (ii) Simultaneously with the routing of the limit
order identified as an intermarket sweep order, one or more
additional limit orders, as necessary, are routed to execute against
the full displayed size of any protected bid, in the case of a limit
order to sell, or the full displayed size of any protected offer, in
the case of a limit order to buy, for the NMS stock with a price
that is superior to the limit price of the limit order identified as
an intermarket sweep order. These additional routed orders also must
be marked as intermarket sweep orders. See 17 CFR 242.600(b)(38)
(Rule 600(b)(38)) of Regulation NMS.
---------------------------------------------------------------------------

    One commenter recommended that exchanges be permitted to act as
self-aggregators for purposes of consolidated market data used to aid
in matching trades or routing orders to other markets through their
affiliated routing brokers.\1068\ The Commission believes that national
securities exchanges may route orders to away markets, primarily
through affiliated brokers that act as a facilities of the exchange and
are subject to exchange rules.\1069\ Because a broker-dealer used by an
exchange for order routing is a facility of the exchange, an exchange's
use of consolidated market data to route orders through an affiliated
broker-dealer generally would be an ``internal use'' of consolidated
market data by the exchange. An exchange that routes orders using an
unaffiliated broker-dealer would not provide that unaffiliated broker-
dealer with consolidated market data. The Commission understands that
the exchange would either send the routing broker a directed order or
would allow the broker to make the routing decision. In either case,
the exchange would not provide the unaffiliated routing broker with
consolidated market data for purposes of routing orders.
---------------------------------------------------------------------------

    \1068\ The commenter noted that routing broker-dealers do not
aggregate data themselves but receive it from their affiliated
exchanges. See IEX Letter at 9.
    \1069\ A broker-dealer that an exchange uses for outbound order
routing generally is regulated as a facility of the exchange. See
Securities Exchange Act Release No. 63241 (Nov. 3, 2010), 75 FR
69792, 69799 (Nov. 15, 2010) (stating that, in general, the outbound
order routing service provided to exchanges by broker-dealers is
regulated as a facility of the exchange).
---------------------------------------------------------------------------

    Like the national securities exchanges, FINRA is an SRO registered
with and overseen by the Commission. FINRA requires market data to
perform its regulatory oversight functions, including surveillance of
the U.S. equity and options markets. The Commission believes that FINRA
should have the same flexibility as the national securities exchanges
to determine how it will obtain consolidated market data. Accordingly,
the Commission is modifying the proposed definition of self-aggregator
to include national securities associations as well as national
securities exchanges.
(ii) Investment Advisers and Other Market Participants
    Some commenters argued that entities other than broker-dealers
should be permitted to be self-aggregators.\1070\ One commenter, a
proprietary trading firm, stated that because self-aggregated data
would only be used internally, it did not appear to be necessary for a
self-aggregator to be a broker-dealer.\1071\ The commenter further
stated that ``the primary ability needed to act as a self-aggregator is
technical skill, whereas the qualifications of a broker dealer are
primarily financial, regulatory, and legal.'' \1072\ The commenter also
suggested that permitting additional entities to act as self-
aggregators would help to promote competitive forces.\1073\ One
commenter stated that preventing registered investment advisers and
other non-broker-dealer direct consumers of market data from acting as
self-aggregators would be as disruptive to the current market data
infrastructure as preventing broker-dealers from self-aggregating
market data for their own use.\1074\ This commenter further stated that
many non-broker-dealer market participants currently subscribe directly
to proprietary data feeds from exchanges to facilitate their trading
activity and reduce latency.\1075\
---------------------------------------------------------------------------

    \1070\ See, e.g., MFA Letter; AHSAT Letter.
    \1071\ See AHSAT Letter at 3.
    \1072\ Id.
    \1073\ See id. See also IEX Letter at 9 (stating that the
ability of broker-dealers to self-aggregate will spur innovation by
competing consolidators, which will be motivated to differentiate
their services and deliver market data as efficiently as possible).
    \1074\ See MFA Letter at 3-4.
    \1075\ See id. at 4.
---------------------------------------------------------------------------

    Market participants that currently self-aggregate consolidated
market data using the exchanges' proprietary data feeds will be able to
continue to do so under the adopted rules. Broker-dealers were not
proposed to be permitted to act as self-aggregators because of their
technical ability to consolidate market data but because of the
important functions they perform in the national market system. Broker-
dealers are the only entities that can be members and direct customers
of exchanges. Broker-dealers execute customer orders and are subject to
specific requirements under Regulation NMS related to the routing and
execution of orders in the national market system, including Rules 611
and 610(d). In addition, broker-dealers are subject to the duty of best
execution, which requires a broker-dealer to seek to obtain the most
favorable terms available under the circumstances for its customer
orders.\1076\ Broker-dealers also are subject to FINRA rules requiring
them to use reasonable diligence to ascertain the best market for a
security and to buy or sell in that market so that the resultant price
to the customer is as favorable as possible under prevailing market
conditions.\1077\ Broker-dealers use consolidated market data to
fulfill these regulatory obligations, and allowing broker-dealers to
act as self-aggregators could assist them in fulfilling these
obligations.
---------------------------------------------------------------------------

    \1076\ See Securities Exchange Act Release No. 51808 (June 5,
2005), 70 FR 37496, 37537-38. See also Securities Exchange Act
Release No. 37619A (Sept. 6, 1996), 61 FR 48290 (Sept. 12, 1996);
supra Section I.E.
    \1077\ See FINRA Rule 5310, ``Best Execution and
Interpositioning.''
---------------------------------------------------------------------------

    With respect to the commenter's assertion that allowing additional
non-registered entities to act as self-aggregators would promote
competitive forces, the Commission believes that the presence of
competing consolidators will foster a competitive environment for
consolidated market data. However, the Commission believes that certain
non-broker-dealers should also be permitted to act as self-aggregators,
including RIAs and, as discussed above, SROs. Today, some RIAs may
aggregate consolidated market data to facilitate their electronic
trading systems or strategies. The Commission believes that RIAs, which
are subject to Commission oversight and examination, should continue to
be allowed to act as self-aggregators to enable them to continue to
consolidate data for their trading strategies if they so choose.\1078\
---------------------------------------------------------------------------

    \1078\ In addition, RIAs are fiduciaries to their advisory
clients, with a fundamental obligation to act in the best interests
of their clients and to provide investment advice in their clients'
best interests. RIAs also must seek to obtain the best price and
execution for the securities transactions of their advisory clients.
---------------------------------------------------------------------------

(iii) Self-Aggregators and Market Data Vendors
    The Proposing Release stated that ``[a] vendor providing hardware,
software, and/or other services for the purposes of self-aggregation
would not be a competing consolidator unless it collected and
aggregated proposed consolidated market data in a standardized format
within its own facility (e.g., not that of a broker-dealer customer)
and resold that configuration of proposed consolidated market data to a
customer.'' \1079\ One commenter stated that the definition of self-
aggregator could be flawed.\1080\ The commenter asked whether
aggregating consolidated market data in a public cloud would be a self-
aggregator's own facility, what constituted a standard format, and
whether reselling a variated version of consolidated market data would
be permitted.\1081\ The commenter suggested that competing
consolidators might not be able to earn a reasonable return on their
investment and that the proposal was unfair to competing

consolidators and biased towards self-aggregators.\1082\ The commenter
also questioned whether market data vendors would be self-aggregators
and urged the Commission to respect the commercial autonomy of private
data vendors.\1083\
---------------------------------------------------------------------------

    \1079\ Proposing Release, 85 FR at 16790.
    \1080\ See Data Boiler Letter I at 59.
    \1081\ See id.
    \1082\ See id.
    \1083\ See id. at 60.
---------------------------------------------------------------------------

    Under Rule 600(b)(83), as adopted, a self-aggregator may use
consolidated market data solely for its internal use. A market data
vendor could not be a self-aggregator because its function is to
disseminate data to its subscribers.\1084\ With respect to the
commenter's question regarding the sale of a variated version of
consolidated market data, as discussed in the Proposing Release, a
self-aggregator that redistributed or re-disseminated consolidated
market data, or any subset of proposed consolidated market data, would
be performing the functions of a competing consolidator and would be
required to register as a competing consolidator.\1085\ With respect to
the commenter's question regarding whether a vendor aggregating
consolidated market data in a public cloud would be using its own
facility, the Commission believes it would to the extent the vendor is
contracting for its own use of the public cloud, but not if the vendor
is contracting on behalf of individual self-aggregator customers.
However, the determination of whether a vendor is facilitating its
customer's self-aggregation or is acting as a competing consolidator
will depend on an assessment of the individual facts and circumstances
of its business and its arrangements with its customers. In this
regard, the Commission believes that a key factor in this determination
will be the degree of customization in the product or service that the
vendor provides because a highly customized product or service would
suggest that the vendor is fulfilling the highly specialized and
specific needs of its client. Thus, a vendor that provides meaningfully
customized products or services to its customers likely would be
facilitating its customer's self-aggregation and not acting as a
competing consolidator.\1086\ A vendor that provides a standardized
consolidated market data product to its customers, however, likely
would be acting as a competing consolidator. With respect to the
comment regarding a competing consolidator's ability to make a return
on its investment, the viability of the decentralized model is
discussed in Section III.B.3, supra.
---------------------------------------------------------------------------

    \1084\ See also supra Section III.C.7(a)(iii) for a discussion
of data vendors and competing consolidator registration.
    \1085\ See Proposing Release, 85 FR at 16790.
    \1086\ See Proposing Release, 85 FR at 16790.
---------------------------------------------------------------------------

(b) Permitted Uses of Self-Aggregated Data
(i) Sharing Consolidated Market Data With Affiliates
    The Commission requested comment on whether the restriction
preventing self-aggregators from providing consolidated market data or
a subset thereof to customers or affiliates reflected a significant
departure from current practices.\1087\ One commenter stated that
broker-dealers that self-aggregate typically share consolidated market
data with affiliates,\1088\ and another stated that requiring self-
aggregators either to register as competing consolidators or to
maintain separate and redundant market data sets for each affiliated
entity could be costly and disruptive.\1089\ Some commenters
recommended that the Commission allow self-aggregators to share market
data with affiliated entities to avoid significant changes to how firms
currently consume and manage data.\1090\ One commenter stated that the
proposal would raise costs for firms affiliated with a self-
aggregator,\1091\ and another stated that requiring each affiliated
entity to aggregate and build its own market data systems would be a
needless drain of resources.\1092\ This commenter further stated that
self-aggregators should be permitted to share self-aggregated data with
their affiliates because a market maker should be able to know when
facilitating interest for an agency affiliate that its view of the
quoted market is consistent with that of the affiliate.\1093\ Another
commenter suggested that the Commission allow self-aggregators to use
consolidated market data in handling and routing orders on behalf of
the broker-dealer's customers, including in cases where customer
business is conducted through an affiliate, without being required to
pay separate fees for that purpose.\1094\ However, one commenter stated
that permitting a self-aggregator to disseminate consolidated market
data to its affiliates would allow the self-aggregator to perform the
function of a competing consolidator without the burdens of being a
competing consolidator.\1095\
---------------------------------------------------------------------------

    \1087\ See id. at 16791.
    \1088\ See SIFMA Letter at 12.
    \1089\ See FIA-PTG Letter at 1-2. See also SIFMA Letter at 12
(broker-dealers should be able to continue their established
practice of sharing consolidated market data with affiliated
entities rather than being required to register as competing
consolidators or to develop and maintain redundant consolidated data
sets for each affiliate user within the organization); Susquehanna
Letter at 5 (precluding self-aggregating broker-dealers from sharing
market data with affiliates would be a ``significant departure from
current practices'' and ``unnecessarily disruptive to the current
market data infrastructure landscape'').
    \1090\ See SIFMA Letter at 12. See also STANY Letter II at 7
(stating that self-aggregators should include broker-dealer
affiliated organizations to avoid significant changes to how firms
currently consume and manage data).
    \1091\ See MFA Letter at 5.
    \1092\ See Susquehanna Letter at 5. In addition, the commenter
argued that ``self-aggregator organizations should not be faced with
the disruptive and needlessly costly and burdensome choice of (1)
developing and maintaining redundant consolidated data sets for each
respective user within the organization, (2) registering as a CC and
assum[ing] the related obligations and liabilities even though it
never wanted to be in that business, or (3) subscribing to the
outside services of registered CCs (again on a redundant basis for
each entity within the organization), whose quality and/or cost
efficiency may be less, and over whom such organization would have
less control to customize or improve services, or to remediate
problems.'' Id. at 6.
    \1093\ See Susquehanna Letter at 4.
    \1094\ See IEX Letter at 9. One commenter expressed the view
that sharing consolidated market data within a single affiliated
entity organization, under common beneficial ownership and senior
hierarchical management, is not performing the functions of a
competing consolidator because the consolidated market data is not
intended for public dissemination in connection with commercial
competition of exchange data feeds. See Susquehanna Letter at 5-6.
    \1095\ See Data Boiler Letter I at 60.
---------------------------------------------------------------------------

    The Commission believes that self-aggregators should be permitted,
as an internal use, to make consolidated market data available to their
affiliates that are registered with the Commission. A broker-dealer or
RIA that is affiliated with a self-aggregator may require consolidated
market data to fulfill its regulatory obligations, as described above.
In addition, as noted above, the Commission has the authority to
examine the registered affiliated entities of a self-aggregator and
would be able to determine how the self-aggregator provides
consolidated market data to a registered affiliate and how the
registered affiliate uses that data. Therefore, a self-aggregator will
be permitted to share consolidated market data only with affiliates
that are registered with the Commission.
    An affiliate of a self-aggregator that is not registered with the
Commission, however, may not have the same regulatory obligations as
registered entities,\1096\ and the Commission does not have the
authority to examine a self-aggregator's unregistered affiliates. In

addition, as discussed above, the Commission believes the widespread
dissemination of consolidated market data must be subject to Commission
oversight and, accordingly, must be performed by competing
consolidators. Competing consolidators will be subject to the
registration, disclosure, and other regulatory requirements in Rule 614
and Form CC.\1097\
---------------------------------------------------------------------------

    \1096\ For example, broker-dealers execute customer orders and
must comply with Regulation NMS related to the routing and execution
of orders in the national market system, including Rules 611 and
610(d). In addition, broker-dealers are subject to the duty of best
execution. RIAs and SROs also have regulatory obligations, as
discussed above in Sections III.D.2(a)(ii) and III.D.2(a)(i),
respectively.
    \1097\ See supra Section III.C.7(a)(iv).
---------------------------------------------------------------------------

(ii) Sharing Consolidated Market Data With Customers
    Several commenters stated that broker-dealers that self-aggregate
should be permitted to display their self-aggregated data to their
customers without registering as a competing consolidator or becoming a
Regulation SCI entity.\1098\ One commenter stated that if brokers are
not permitted to share consolidated market data with their customers,
proprietary traders and high frequency firms would add to their
significant data cost advantage over retail investors and the two-
tiered data system would be preserved.\1099\ The commenter further
stated that the Commission should allow self-aggregators to display
consolidated market data to their customers to encourage competition
among the competing consolidators, enable retail investor access to
data with the least amount of latency without additional cost, and
allow broker-dealers to share with their customers the same view of the
same core data.\1100\ Another commenter stated that registered broker-
dealers should be allowed to share self-aggregated consolidated market
data with their brokerage clients without registering as competing
consolidators, noting that the benefits of Regulation SCI compliance
are ``inherent in the registered broker-dealer regulatory regime for
continuity of operations and display of the data.'' \1101\
---------------------------------------------------------------------------

    \1098\ See SIFMA Letter at 12 (stating that broker-dealers that
self-aggregate should be permitted to display their data to their
customers, subject to the requirements of the Vendor Display Rule,
without being required to register as a competing consolidator or
Regulation SCI entity); TD Ameritrade Letter at 12 (stating that
registered broker-dealers should be allowed to use self-aggregated
consolidated market data for display to their brokerage clients,
without further sale or redistribution to unaffiliated third
parties; the proposal would require a broker-dealer self-aggregator
that wishes to provide its self-aggregated data to its clients to
invest time and resources into becoming a competing consolidator
compliant with Regulation SCI requirements, or to buy consolidated
market data from competing consolidators for display purposes);
Schwab Letter at 2, 6-7 (stating that self-aggregators should be
allowed to share consolidated data with their customers on a not-
for-profit and non-redistribution basis, but not with external
parties, and should not be required to comply with Regulation SCI
because they are not holding themselves out as a ``public
utility'').
    \1099\ See Schwab Letter at 7. See also TD Ameritrade Letter at
11-12 (stating that the internal-use limitation on self-aggregated
data could disadvantage retail investors because a broker-dealer
would be compelled to purchase consolidated data from a competing
consolidator, and those able to pay the competing consolidator for
faster speeds could ``get to the market'' more quickly).
    \1100\ See Schwab Letter at 6.
    \1101\ TD Ameritrade Letter at 12. The commenter noted that
broker-dealers are subject to FINRA Rule 4370 (establishing
requirements for designing business continuity plans which require
data backup and recovery, mission critical systems, and alternate
location requirements, among others) and FINRA Rule 4380 (requiring
mandatory participation in FINRA business continuity and disaster
recovery (``BC/DR'') Testing under Regulation SCI if determined
necessary by FINRA). See id. at n. 36.
---------------------------------------------------------------------------

    Under the amendments, self-aggregators will not be permitted to
disseminate or otherwise share or make available consolidated market
data to any persons, including their customers or clients.\1102\ The
dissemination of consolidated market data entails a different process
from self-aggregating consolidated market data for internal uses (e.g.,
for order handling, routing, and execution). Self-aggregators are not
subject to the regulatory regime established for competing
consolidators, which is designed to ensure that consolidated market
data is reliable, resilient, and accurate. The Commission believes that
entities that deliver consolidated market data to third parties should
be subject to such standards.\1103\
---------------------------------------------------------------------------

    \1102\ The Commission has revised the definition of self-
aggregator to further clarify that a self-aggregator may not
disseminate or otherwise make available consolidated market data, or
components of consolidated market data, as provided in Sec.
242.600(b)(20), to any person other than an affiliate that is
registered with the Commission.
    \1103\ Competing consolidators will be registered with the
Commission and will be subject to systems integrity and operational
capability standards that will help to ensure the accuracy and
availability of the consolidated market data that they produce. See
infra Section III.F. Competing consolidators also will have certain
responsibilities and obligations, including obligations to disclose
publicly operational information and performance metrics, which will
help to ensure transparency, accountability, and oversight, and
obligations to ensure the integrity, quality, and resiliency of
consolidated market data. See supra Section III.C.8. Self-
aggregators, by contrast, will not be subject to similar
requirements in the collection, consolidation, or generation of
consolidated market data because they will not disseminate
consolidated market data or otherwise make consolidated market data
available to persons other than affiliates registered with the
Commission.
---------------------------------------------------------------------------

    The Commission believes that investors and other non-registered
entities should receive consolidated market data from entities that are
subject to a regulatory regime that is designed to ensure the data they
receive is reliable, resilient, and accurate and that they are able to
assess such reliability, resiliency, and accuracy on an ongoing basis.
Self-aggregators are not subject to such standards or requirements and
therefore will not be permitted to disseminate or otherwise make
available self-aggregated consolidated market data with customers,
clients, or non-registered affiliates.
(c) Self-Aggregators and Market Data Fees
    One commenter stated that exchanges seeking the business of self-
aggregators might offer ``enterprise license'' pricing packages that
would allow a firm and all of its affiliates to receive proprietary
data for one price, effectively allowing the self-aggregator to share
data with its affiliates.\1104\ An exchange seeking to establish
``enterprise license'' pricing packages for proprietary data would be
required to file those proposed fees with the Commission pursuant to
Section 19(b) of the Exchange Act and Rule 19b-4 thereunder, and such
fees must satisfy the statutory standards of being an equitable
allocation of reasonable fees, dues, and other charges,\1105\ not being
unfairly discriminatory,\1106\ and not an undue burden on
competition.\1107\
---------------------------------------------------------------------------

    \1104\ Nasdaq Letter IV at 57, n. 80.
    \1105\ Section 6(b)(4) of the Exchange Act.
    \1106\ Section 6(b)(5) of the Exchange Act. See also Rule 603 of
Regulation NMS.
    \1107\ Section 6(b)(8) of the Exchange Act.
---------------------------------------------------------------------------

(d) Two-Tiered Market and Potential Advantages of Self-Aggregators
    The Commission requested comment on the potential latency advantage
of self-aggregators.\1108\ One commenter stated that self-aggregators'
latency advantage would not be material.\1109\ In contrast, another
commenter stated that the latency advantage would not be minor, given
the time increments currently used in the market and the likelihood of
finer increments over time.\1110\ The commenter questioned whether the
Commission had considered eliminating the self-aggregator category and
requiring all market participants to receive data from one or more
competing consolidators, or requiring SROs to delay the provision of
data to match the latencies introduced by competing
consolidators.\1111\ One

commenter stated that, because of ``the additional inherent latency in
third-party aggregation,'' it is unlikely that broker-dealer algorithms
would be competitive without self-aggregation.\1112\ Another commenter
stated that the proposal would create a tiered market in which broker-
dealers have systematically better and more timely access to market
data than registered investment advisers and noted that self-
aggregators would have both a speed and potential cost advantage over
those who receive consolidated market data from competing
consolidators.\1113\ Other commenters similarly argued that the
proposal would create a two-tiered market data system comprising self-
aggregators and those who receive data from competing
consolidators.\1114\
---------------------------------------------------------------------------

    \1108\ See Proposing Release, 85 FR at 16791.
    \1109\ See Clearpool Letter at 10.
    \1110\ See FINRA Letter at 8. See also Data Boiler Letter I at
59 (stating that the latency advantage would be material).
    \1111\ See FINRA Letter at 8-9. See also Angel Letter at 8
(suggesting that the Commission embargo the exchanges from releasing
any data until the consolidators have had sufficient time to process
the data to create a more level playing field); Healthy Markets
Letter at 3 (suggesting that the Commission remove the latency
advantage of exchange proprietary data feeds by requiring all market
participants to receive data from SIP distributors).
    \1112\ See NBIM Letter at 4.
    \1113\ The commenter stated that self-aggregators would be able
to receive the data necessary to generate consolidated market data
at the price established by the effective national market system
plan(s), while market participants that receive consolidated market
data from competing consolidators might have to pay a premium over
that amount to compensate the competing consolidator for its
services. See MFA Letter at 4.
    \1114\ See, e.g., FINRA Letter at 8; NYSE Letter II at 23
(stating that the proposal would continue the two-tiered structure,
with participants that can afford to act as self-aggregators able to
obtain and use that data faster than those relying on competing
consolidators); STANY Letter II at 6 (stating that the proposal
would replace the existing two-tiered structure between SIPs and
proprietary data feeds with, at minimum, a different two-tiered
structure between self-aggregators and competing consolidators);
Nasdaq Letter IV at 3 (stating that self-aggregation would add
market-wide disparities in terms of data content and speed).
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    The Commission acknowledges that, unlike self-aggregators,
competing consolidators would need to transmit consolidated market data
to their customers, but does not believe that this would lead to the
development of a two-tiered market. Latency sensitive customers of
competing consolidators are likely to be co-located in the same data
centers as their competing consolidators, so the transmission time
between the servers of the competing consolidator and its customer will
be exceedingly small. In many cases, self-aggregators may be located in
the same data centers, and the potential latency differential between a
self-aggregator and competing consolidator resulting from the extra hop
that competing consolidators add to the process of data consolidation
and dissemination could amount only to the period of time it takes to
send a message from one server (i.e., a competing consolidator's
server) that is located in close proximity to another server (i.e., a
subscriber's server) and connected via a cross connect.
    The Commission expects that market participants that elect to
aggregate consolidated market data, whether competing consolidators or
self-aggregators, will innovate and compete aggressively on the
efficiency and cost-effectiveness of their aggregation technologies.
The Commission believes that the development and implementation of the
technology to collect, consolidate, and generate consolidated market
data will create opportunities for latency efficiencies that are of
substantially greater magnitude than the transmission time between the
server of a competing consolidator and its customer. Competing
consolidators, for example, may benefit from economies of scale that
allow them to offer a very low-latency product more cost effectively
that an individual self-aggregator. In some cases, a competing
consolidator may have a latency or cost advantage, and in others a
self-aggregator may have such advantages.\1115\ Competition may also
impact the efficiency of choices.\1116\ Therefore, the Commission does
not believe that self-aggregators would necessarily have a systematic
latency advantage over customers of competing consolidators.
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    \1115\ Self-aggregators could have a cost advantage over market
participants that receive consolidated market data from a competing
consolidator because self-aggregators will not be required to
compensate a competing consolidator for its services. At the same
time, a self-aggregator will need to have the systems capability to
collect, consolidate, and generate consolidated market data, and it
may use a vendor to establish connectivity to an SRO or to perform
aggregation or other functions necessary for generating consolidated
market data. As a result, any potential cost advantage of a self-
aggregator over market participants that purchase consolidated
market data from competing consolidators may not be significant.
    \1116\ See infra Section V.C.4(b).
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(e) Fees Charged by Competing Consolidators
    One commenter recommended that the Commission implement a mechanism
for it to review or abrogate fees charged by competing consolidators to
ensure that consolidated market data is available on terms that are
fair and reasonable (i.e., reasonably related to costs) if non-broker-
dealers are not permitted to act as self-aggregators.\1117\ As
discussed above, competing consolidator fees will be disclosed on
Exhibit G to Form CC. The Commission believes that competition among
competing consolidators, along with disclosure, will help to ensure
that the fees charged by competing consolidators are fair and
reasonable. The fees for the data content underlying consolidated
market data established by the Equity Data Plan(s) will be filed under
Rule 608 and must comply with statutory standards.\1118\
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    \1117\ See MFA Letter at 5.
    \1118\ See infra Section III.E.2(c).
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E. Amendment to the Effective National Market System Plan(s) for NMS
Stocks Under Rule 614(e)

    The effective national market system plan(s) for NMS stocks will
continue to play an important but modified role in the provision of
consolidated market data to market participants.\1119\ Today, the
Equity Data Plans operate the exclusive SIPs and therefore, directly
collect, consolidate, and disseminate SIP data. Under the decentralized
consolidation model, the effective national market system plan(s) for
NMS stocks will no longer operate the exclusive SIPs and therefore,
will not be directly responsible for collecting, consolidating, and
disseminating consolidated market data. The plan(s) will, however,
continue to develop and oversee the national market system for
consolidated market data.
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    \1119\ See Governance Order, infra note 1128.
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1. Proposal
    The Commission proposed Rule 614(e), to require the participants to
the effective national market system plan(s) for NMS stocks to file an
amendment to such plan(s) to reflect the decentralized consolidation
model and the new role and functions of the plan(s). The Commission
proposed several specific provisions to be included in the amendment,
including (1) the proposed fees to be charged by the plan(s) for the
data content underlying consolidated market data, (2) a requirement
under the plan(s) for the application of timestamps by the SROs to the
data content underlying consolidated market data, (3) a requirement
under the plan for the completion of annual assessments by the plan
participants of the performance of competing consolidators, and (4) a
requirement for the development a list of the primary listing markets
for each NMS stock. In addition, under proposed Rule 614(d)(5), the
plan(s) would be required to develop the monthly performance metrics
for competing consolidators. As proposed, the participants would be
required to file this amendment pursuant to Rule 608 within 60 calendar
days from the effective date of Rule 614.
2. Final Rule and Response to Comments
    The Commission continues to believe in the importance of the use of
effective

national market system plan(s) in the planning, development, operation,
and regulation of the national market system for the dissemination of
consolidated market data. The Commission believes that joint
consideration by the SROs and other market participants on the
Operating Committee of such plan(s) will help to foster a consolidated
market data national market system that is prompt, accurate, reliable,
and fair and furthers the goal of helping to ensure that the
consolidated market data remains useful to investors in the future.
    The Commission received several comments on proposed Rule 614(e)
and the role of the effective national market system plan(s) in the
decentralized consolidation model.\1120\ One commenter questioned the
need for the effective national market system plan(s) saying that
retention of the plan(s) was ``illogical'' as the SROs would no longer
be responsible for jointly disseminating data.\1121\ This commenter
described the current responsibility of the Operating Committees to
include ``entering into agreements with the exclusive processors,
overseeing the operation of the exclusive processors, establishing the
fees for the consolidated data disseminated by the exclusive
processors, and overseeing the functions of the Administrators, which
manage the subscriber agreements, collect fees and distribute revenue
to SROs.'' \1122\ Another commenter stated that the proposal would
increase the power of the Operating Committee over the ``market for
market data.'' \1123\
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    \1120\ See NYSE Letter II; Nasdaq Letter IV; Better Markets
Letter.
    \1121\ NYSE Letter II at 26.
    \1122\ Id. at 27.
    \1123\ Nasdaq Letter IV at 34. This commenter stated that the
Operating Committee would set fees for ``the sale of any proprietary
data products of the exchanges that provide any of the newly defined
`core data.' '' Id. The Operating Committee will not be setting fees
for proprietary data products. The Operating Committee will be
required to develop the fees for data content underlying
consolidated market data and subsets of consolidated market data.
Subject to Section 19(b) of the Exchange Act and Rule 19b-4
thereunder, each exchange would be responsible for establishing fees
for its proprietary market data. While some proprietary DOB products
may be provided by the exchanges to competing consolidators and
self-aggregators for purposes of complying with Rule 603(b), the
exchanges will have to develop fees for their proprietary data and
the Operating Committee will have to develop the fees for the data
content underlying consolidated market data. See also supra Section
III.B.9(b).
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    The Commission continues to believe that the SROs should have joint
responsibilities and should continue to have an important role in
developing, operating, and regulating the national market system for
the dissemination of consolidated market data. Therefore, Rule 603(b)
requires the SROs to act jointly pursuant to one or more effective
national market system plans for the dissemination of consolidated
market data. As noted, the plan(s) will be responsible for: (1)
Developing the fees for the data content underlying consolidated market
data; (2) the billing and the audit process; (3) establishing the
multiple installations, single users (``MISU'') policy; \1124\ (4)
allocating revenue to the SRO participants that is collected for the
data content underlying consolidated market data; (5) considering
additional regulatory, administrative, or self-regulatory organization-
specific program data elements that may be included as consolidated
market data in the future; \1125\ (6) developing the list of primary
listing exchanges; (7) developing the monthly performance metrics for
competing consolidators; (8) assessing the operation of the
decentralized consolidation model; and (9) developing an annual report
that assesses competing consolidator performance for provision to the
Commission. The Operating Committee is equipped under the plan(s) to
develop the policies and rules necessary for developing, operating, and
regulating the national market system for the dissemination of
consolidated market data to market participants, subject to Commission
oversight under Rule 608.
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    \1124\ MISU policies seek to ensure that a single device fee is
applied to a data user that receives consolidated market data on
multiple display devices. See, e.g., CTA, CTA Multiple Installations
for Single Users (MISU) Policy (Apr. 2016), available at https://www.ctaplan.com/publicdocs/ctaplan/notifications/trader-update/Policy%20-%20MISU%20with%20FAQ.pdf. MISU policies will need to be
conformed in the decentralized consolidation model to reflect that
consolidated market data users may seek to receive consolidated
market data through more than one competing consolidator and/or
access through multiple devices.
    \1125\ See 17 CFR 242.600(b)(19)(v) (Rule 600(b)(19)(v)).
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    While the SROs may not be acting jointly in operating the exclusive
SIPs, they will continue to act jointly in planning, developing, and
regulating the national market system for the provision of consolidated
market data. These are important responsibilities for the operation of
the national market system and the Commission believes that the
national market system plan structure continues to be an efficient and
necessary mechanism. Section 11A(a)(3)(B) of the Exchange Act
authorizes the Commission, by rule or order, to require the SROs to act
jointly with respect to matters as to which they share authority in
planning, developing, operating, or regulating a national market system
(or subsystem thereof) or one or more facilities thereof to facilitate
the establishment of a national market system.
    Rule 614(e) requires the effective national market system plan(s)
to file an amendment to conform the plan(s) to the decentralized
consolidation model, including several specified provisions.\1126\ The
Commission is extending the date of the filing for the participants to
the effective national market system plan(s) to file the amendment to
the plan from within 60 calendar days to within 150 calendar days,
after the effectiveness of Rule 614. The additional time will allow the
Operating Committee of the existing Equity Data Plans or of the New
Consolidated Data Plan (if it has replaced the existing plans) to
develop and file the plan amendment.
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    \1126\ The amendment required by Rule 614(e) does not require
the plan(s) to include provisions to decommission the exclusive
SIPs. The exclusive SIPs will continue to collect, consolidate and
disseminate SIP data through the transition period. See infra
Section III.H.
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    The Commission is adopting Rule 614(e) substantially as proposed
with modifications to account for the establishment of a Regulation SCI
competing consolidator threshold, which is discussed below,\1127\ to
require the SROs to apply time stamps to the data content underlying
consolidated market data, and for the Commission to make public the
annual assessment on the Commission's website. Further, the Commission
received other comments on Rule 614(e) and the required amendment.
These comments are discussed below.
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    \1127\ See infra Section III.F (discussing amendment to Rule
1000 of Regulation SCI to apply to competing consolidators exceeding
a specified threshold and the adoption of Rule 614(d)(9)
establishing a tailored set of operational capability and resiliency