[Federal Register Volume 75, Number 117 (Friday, June 18, 2010)]
[Notices]
[Pages 34795-34796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14740]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62289; File No. SR-CTA/CQ-2009-03]
Consolidated Tape Association; Order Approving the Fifteenth
Substantive Amendment to the Second Restatement of the Consolidated
Tape Association Plan and Eleventh Substantive Amendment to the
Restated Consolidated Quotation Plan
June 14, 2010.
I. Introduction
On November 2, 2009, the Consolidated Tape Association (``CTA'')
Plan and Consolidated Quotation (``CQ'') Plan participants
(``Participants'') \1\ filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') pursuant to Section 11A of the
Securities Exchange Act of 1934 (``Act''),\2\ and Rule 608
thereunder,\3\ a proposal \4\ to amend the Second Restatement of the
CTA Plan and Restated CQ Plan (collectively, the ``Plans'').\5\ The
proposal represents the fifteenth substantive amendment to the CTA Plan
(``Fifteenth Amendment to the CTA Plan'') and the eleventh substantive
amendment to the CQ Plan (``Eleventh Amendment to the CQ Plan''), and
reflects changes unanimously adopted by the Participants. The Fifteenth
Amendment to the CTA Plan and the Eleventh Amendment to the CQ Plan
(``Amendments'') would amend the Plans to provide that the Participants
pay the Network B Administrator a fixed annual fee in exchange for its
performance of Network B administrator functions under the Plans. In
addition, the Amendments seek to accommodate recent changes in names
and addresses of certain Participants. The proposed Amendments were
published for comment in the Federal Register on February 8, 2010.\6\
No comment letters were received in response to the Notice. This order
approves the proposed amendments to the Plans.
---------------------------------------------------------------------------
\1\ Each participant executed the proposed amendment. The
Participants are: BATS Exchange, Inc.; Chicago Board Options
Exchange, Incorporated; Chicago Stock Exchange, Inc.; Financial
Industry Regulatory Authority, Inc.; International Securities
Exchange LLC; NASDAQ OMX BX, Inc.; NASDAQ OMX PHLX, Inc.; The NASDAQ
Stock Market LLC; National Stock Exchange, Inc.; New York Stock
Exchange LLC; NYSE Amex, Inc.; and NYSE Arca, Inc.
\2\ 15 U.S.C. 78k-1.
\3\ 17 CFR 242.608.
\4\ On January 13, 2010, the CTA filed a revised transmittal
letter indicating, among other technical changes, that the
Participants also proposed to make changes in the names and
addresses of certain Participants (``Transmittal Letter'').
\5\ See Securities Exchange Act Release Nos. 10787 (May 10,
1974), 39 FR 17799 (declaring the CTA Plan effective); 15009 (July
28, 1978), 43 FR 34851 (August 7, 1978) (temporarily authorizing the
CQ Plan); and 16518 (January 22, 1980), 45 FR 6521 (January 28,
1980) (permanently authorizing the CQ Plan). The most recent
restatement of both Plans was in 1995. The CTA Plan, pursuant to
which markets collect and disseminate last sale price information
for non-NASDAQ listed securities, is a ``transaction reporting
plan'' under Rule 601 under the Act, 17 CFR 242.601, and a
``national market system plan'' under Rule 608 under the Act, 17 CFR
242.608. The CQ Plan, pursuant to which markets collect and
disseminate bid/ask quotation information for listed securities, is
a ``national market system plan'' under Rule 608 under the Act, 17
CFR 242.608.
\6\ See Securities Exchange Act Release No. 61457 (February 1,
2010), 75 FR 6229 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposal
Section XII (``Financial Matters'') of the CTA Plan and Section IX
(``Financial Matters'') of the CQ Plan each provide that a network's
Operating Expenses are to be deducted from the network's Gross Income
to determine the amounts that the network's administrator distributes
to the Participants. Section XII(c)(i) (``Determination of Operating
Expenses'') of the CTA Plan currently provides that a CTA network's
Operating Expenses include all costs and expenses ``associated with,
relating to, or resulting from, the generation, consolidation or
dissemination of the CTA's network's last sale price information.''
Likewise, Section IX(c)(i) (``Determination of Operating Expenses'') of
the CQ Plan currently provides that a network's Operating Expenses
include all costs and expenses that the network's administrator incurs
in ``collecting, processing and making available that CQ network's
quotation information.'' The Network B Administrator stated that
accounting for operating costs is administratively burdensome,
especially the allocation of organization overhead costs to the Network
B Administrator function. As a result, the Network B Participants
proposed to pay the Network B Administrator a fixed fee in exchange for
the services the Network B administrator performs on behalf of the
Plans. Therefore, the Participants proposed to replace their payment to
the Network B Administrator of Operating Costs with their payment to
the Network B Administrator of a fixed fee.\7\
---------------------------------------------------------------------------
\7\ The Participants noted that the Network A Administrator
similarly receives a fixed fee for its performance of administrative
functions under the CTA and CQ Plans and the Participants understand
that Nasdaq receives a fixed fee for its performance of
administrative functions under the ``Joint Self-Regulatory
Organization Plan Governing the Collection, Consolidation and
Dissemination of Quotation and Transaction Information for Nasdaq-
Listed Securities Traded on Exchanges on an Unlisted Trading
Privileges Basis'' (``Nasdaq UTP Plan'').
---------------------------------------------------------------------------
For calendar year 2009, the Network B Participants proposed to set
the fixed fee at $3,000,000. The Participants concluded that this
amount would compensate the Network B Administrator for its Network B
Administrative services during 2009 under both the CTA Plan and the CQ
Plan. For each subsequent calendar year, the Network B Participants
proposed to increase (but not decrease) the amount of the payment by
the percentage increase (if any) in the annual cost-of-living
adjustment that the U.S. Social Security Administration applies to
Supplemental Security Income for the preceding calendar year, subject
to a maximum annual increase of five percent.\8\ The Participants'
payment of the fixed fee will compensate the Network B Administrator
for all ordinary and customary operating expenses that it incurs in
performing the network administrator functions under the CTA and CQ
Plans. However, it does not compensate the Network B Administrator for
extraordinary expenses that the Network B Administrator may incur on
behalf of the Network B Participants. Extraordinary expenses include
such things as that portion of legal and audit expenses and marketing
and consulting
[[Page 34796]]
fees that are outside of the ordinary functions that the Network B
Administrator performs.\9\
---------------------------------------------------------------------------
\8\ See Notice, supra note 6 at 6230 for a more detailed
description of how the fee will be assessed.
\9\ The Commission notes that the Transmittal Letter
accompanying the proposed Amendments included language not voted on
by the Participants and thus of no legal consequence: ``Network B
Administrator will not incur any extraordinary expense on behalf of
the Network B Participants unless the Network B Participants
determine by majority vote to approve the incurrence of that
extraordinary expense.''
---------------------------------------------------------------------------
In addition, the Participants proposed to amend the Plans to
reflect changes in the corporate names and street addresses of NASDAQ
OMX BX, Inc. (formerly Boston Stock Exchange, Inc.), NASDAQ OMX PHLX,
Inc. (formerly Philadelphia Stock Exchange, Inc.) and NYSE Amex, Inc.
(formerly American Stock Exchange LLC). They also proposed to conform
the language signifying the status of BATS Exchange, Inc. as a national
securities exchange to the language used for the other Plan
Participants.
III. Discussion
After careful review, the Commission finds that the Amendments to
the Plans are consistent with the requirements of the Act and the rules
and regulations thereunder,\10\ and, in particular, Section 11A(a)(1)
of the Act \11\ and Rule 608 thereunder \12\ in that they are necessary
or appropriate in the public interest, for the protection of investors
and the maintenance of fair and orderly markets, to remove impediments
to, and perfect the mechanisms of, a national market system. The
Commission believes that paying a flat fee to the Network B
Administrator should eliminate the need for the Network B Administrator
to account for operating costs and thus make the administration of the
Plans more efficient.\13\ Additionally, the Commission notes that every
two years the Network B Administrator is required to provide a report
detailing any significant changes to the administrative expenses during
the preceding two years to enable the Participants to review and
determine by majority vote whether to continue the Annual Fixed Payment
at its then current level.
---------------------------------------------------------------------------
\10\ The Commission has considered the proposed amendments'
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
\11\ 15 U.S.C. 78k-1(a)(1).
\12\ 17 CFR 240.608.
\13\ The Commission notes that the Network A Administrator under
the CTA Plan and CQ Plan and Nasdaq under the Nasdaq UTP Plan
similarly receive a fixed fee for the performance of administrative
functions.
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 11A of the Act,\14\
and the rules thereunder, that the proposed amendments to the CTA and
CQ Plans are approved.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78k-1.
\15\ 17 CFR 200.30-3(a)(27).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14740 Filed 6-17-10; 8:45 am]
BILLING CODE 8010-01-P