[Federal Register Volume 61, Number 17 (Thursday, January 25, 1996)]
[Notices]
[Pages 2321-2324]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1182]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36725; File No. SR-CTA/CQ-96-1]
Consolidated Tape Association; Notice of Filing of Proposed
Restatements and Amendments to the Restated Consolidated Tape
Association Plan and the Consolidated Quotation Plan
January 17, 1996.
Pursuant to Rule 11Aa3-2 of the Securities Exchange Act of 1934
(``Act''), notice is hereby given that on December 26, 1995, the
Consolidated Tape Association (``CTA'') and Consolidated Quotation
(``CQ'') Plan Participants filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') amendments to the Restated CTA
Plan and CQ Plan. The Commission is publishing this notice to solicit
comments from interested persons on the amendments.
I. General Overview of the Amendments
A. Second Restatement of the CTA Plan
The Participants propose to restate and amend the Restated CTA
Plan.\1\ The restatement (the ``Second Restatement of the CTA Plan'')
would incorporate into the Restated CTA Plan the 17 substantive
amendments, and 16 charges amendments, to the Restated CTA Plan that
the Commission has previously approved and would incorporate the
additional amendments described below and in the attachments submitted
to the Commission.\2\
\1\ Certain of the CTA Plan Participants submitted the initial
version of the CTA Plan to the Commission on March 2, 1973. The
Commission declared that plan effective as of May 17, 1974. (See
Securities Exchange Act Release No. 10787 (May 10, 1974), 39 FR
17799.) The Participants filed a restatement and amendment of that
Plan (the ``Restated CTA Plan'') to the Commission on May 12, 1980.
The Commission approved the Restated CTA Plan on July 16, 1980. (See
Securities Exchange Act Release No. 16983 (July 16, 1980) 45 FR
49414.)
\2\ In their filing with the Commission, the participants
enclosed the following attachments:
Attachment 1--The proposed Second Restatement of the CTA Plan,
including its exhibits:
Exhibit A--Restated Articles of Association of Consolidated Tape
Association.
Exhibit B--Forms of Processor Contracts.
Exhibit C--Form of Vendor Contract (i.e., the ``Consolidated
Vendor Form'', as the Participants propose to amend it).
Exhibit D--Forms of Subscriber Contracts (including the
``Subscriber Addendum'', which the Participants propose to add).
Exhibit E--Schedules of Charges.
Attachment 2--A second version of the proposed Second
Restatement of the CTA Plan, marked to show changes from the
Restated CTA Plan as currently in effect.
Attachment 3--A memorandum describing the proposed changes
incorporated into the Second Restatement of the CTA Plan and the
reasons for those changes.
Attachment 4--A second version of the proposed Consolidated
Vendor Form, marked to show changes from the version that the
Participants currently use.
Attachment 5--A memorandum describing the proposed changes to
the Consolidated Vendor Form and the reasons for those changes.
Attachment 6--A memorandum describing the use and significant
provisions of the Subscriber Addendum.
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In connection with the proposed amendments, the Participants are
also proposing (1) to revise the form of agreement \3\ into which the
Participants require vendors and certain end users to enter (the
``Consolidated Vendor Form'')\4\ and (2) to introduce a form of
addendum (the ``Subscriber Addendum'')\5\ that the Participants, under
appropriate circumstances, would allow vendors to attach to, or to
incorporate into, agreements with certain subscribers as a surrogate
for the form of agreement that the Exchange currently requires
subscribers to execute.
\3\ The Participants submitted the version of the Consolidated
Vendor Form currently in use to the Commission on October 12, 1989.
The Commission published a notice of the effectiveness of the
Consolidated Vendor Form on September 6, 1990. (See Securities
Exchange Act Release No. 28407 (September 6, 1990) 55 FR 37276.)
\4\ The Participants propose to substitute the proposed version
of the Consolidated Vendor Form for the existing version in the
Second Restatement of the CTA Plan.
\5\ The Subscriber Addendum would be added to Exhibit D of the
Second Restatement of the CTA Plan.
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B. Restated CQ Plan
The Participants in the CQ Plan propose to restate and amend the CQ
Plan.\6\ The restatement (the ``Restated CQ plan'') would incorporate
into the CQ Plan the 21 substantive amendments, and 6 charges
amendments, to the CQ Plan that the Commission has previously approved
and would incorporate the additional amendments described below and in
the attachments. \7\
\6\ AMEX and NYSE submitted the version of the CQ Plan currently
in effect to the Commission on July 25, 1978. The Commission granted
permanent approval of that plan effective as of January 22, 1980.
(See Securities Exchange Act Release No. 16518 (January 22, 1980),
45 FR 6521.)
\7\ The Participants have enclosed the following attachments:
Attachment 1--The proposed Restated CQ Plan, including its
exhibits:
Exhibit A--Form of Exchange-Processor Contract.
Exhibit B--Form of Association-Processor Contract.
Exhibit C--Form of Vendor Contract (i.e., the ``Consolidated
Vendor Form'', as the Participants propose to amend it).
Exhibit D--Forms of Subscriber Contracts (including the
``Subscriber Addendum'', which the Participants propose to add).
Exhibit E--Schedules of Charges.
Attachment 2--A second version of the proposed Restated CQ Plan,
marked to show changes from the CQ Plan as currently in effect.
Attachment 3--A memorandum describing the proposed changes
incorporated into the Restated CQ Plan and the reasons for those
changes.
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The Participants are also proposing to sue the revised Consolidated
Vendor Form and the subscriber Addendum in connection with the Restated
CQ Plan, in the same manner as in the proposed Second Restatement of
the CTA Plan.
II. Description and Purpose of the Amendments
A. Rule 11Aa3-2
Attachment 3 to each of the Plan binders submitted to the
Commission describes in greater detail the purposes of the proposed
changes. A brief overview of those changes follows:
1. Concurrent Use Securities
The Participants propose to significantly redraft Section XI(d)(i)
(``Concurrent Use'') and Section XIV (``Reporting of Other
Transactions'') of the Restated CTA Plan \8\ and Section XI of the CQ
Plan (``Other Uses of Facilities Utilized by the System''),\9\ which
sections govern the concurrent use of CTA and CQ facilities. In
particular, the scope of concurrent use information would be broadened
to include virtually all Participant securities (including bonds) and
index information. The new sections would also clarify that information
sent out pursuant to concurrent use authority is subject to the same
rights and privileges as information relating to Eligible Securities,
although the sections would also affirm the primacy of information
relating to Eligible Securities.
\8\ See Section XIII of the proposed Second Restatement of the
CTA Plan (Concurrent Use of Facilities).
\9\ See Section X of the proposed Restated CQ Plan (Concurrent
Use of Facilities).
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The proposed Consolidated Vendor Form would be modified to extend
the coverage of the Consolidated Vendor Form's terms and conditions to
concurrent-use securities.
2. Housekeeping
The Second Restatement of the CTA Plan would incorporate the
several amendments to the CTA Plan that CTA has adopted and the
Commission has approved since the Restated CTA Plan first became
effective. Similarly, the Restated CQ Plan would incorporate the
[[Page 2322]]
several amendments to the CQ Plan that the Operating Committee has
adopted and the Commission has approved since the CQ Plan first became
effective.
In several instances, the Participants propose to amend the
language and format of the two Plans in order to cause counterpart
provisions of the two Plans to comport more closely. In other
instances, the Participants propose to delete old, outdated language.
A new ``definitions'' section (Section I) would be added to the CTA
Plan, similar in concept to Section I of the CQ Plan (``Definitions'').
The Participants propose to add or refine various definitions in order
to cause them to comport more closely with current market data business
practices and to improve the Plans' readability. In addition, the CTA
Plan would be revised to take advantage of the drafting economies that
the newly defined terms permit.
New economies would be introduced into the ``Financial Matters''
section of the CTA Plan \10\ by addressing Network A and Network B
simultaneously, rather than through separate provisions. (This same
drafting technique already exists in the CQ Plan.) Accomplishing this
task requires certain organizational changes to that section. Theses
changes are not intended to effect the substance of the ``Financial
Matters'' section.
\10\ Cf. Section XI of the Restated CTA Plan (Financial Matters)
to proposed Section XII of the Second Restatement of the CTA Plan
(Financial Matters).
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The Participants propose to relocate the ``boilerplate'' sections
of the Plans (e.g., ``Counterparts'' and ``Effective Dates'') to a new
``Miscellaneous'' section.\11\ `Governing Law'' and ``Section
Headings'' provisions would be added to those sections.
\11\ See Section XIV of the proposed Second Restatement of the
CTA Plan (Miscellaneous) and Section XI of the proposed Restated CQ
Plan (Miscellaneous).
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3. Receipt and Use of Market Data
Section IX of the Second Restatement of the CTA Plan (``Receipt and
Use of CTA Information'') and Section VII of the Restated CQ Plan
(``Receipt and Use of Quotation Information''), which deal with the
receipt and use of market information, would be significantly
redrafted. The changes would include the following.
The proposed ``Receipt and Use'' sections would make generic the
terms and conditions pursuant to which vendors and subscribers can
receive and use information. The proposed changes would also afford the
Participants flexibility in determining which vendors and subscribers
need to enter into contracts in order to receive and use information
and which terms and conditions apply.
The proposed ``Receipt and Use'' sections would accommodate current
contract and administrative practices, yet would also accommodate
anticipated future practices that changing technology and the
perfection of the ``information superhighway'' are likely to require.
The proposed ``Receipt and Use'' sections would omit specific
references to nonprofessional services. From a technology standpoint,
the Participants feel that the distinction between the level of
services that vendors make available to nonprofessional subscribers as
opposed to professional subscribers is small. Rather, the Participants
state that the distinction is essentially a rate matter, and that they
are not proposing to distribute that rate distinction at this time.
The proposed ``Receipt and Use'' sections would omit equipment
testing arrangements. The Participants claim that equipment testing
provisions have become moot because equipment testers in today's
environment invariably qualify as ``Service Facilitators'' under the
Consolidated Vendor Form.
4. Financial Matters
Section XII of the proposed Second Restatement of the CTA Plan
(``Financial Matters'') and Section IX of the proposed Restated CQ Plan
(``Financial Matters'') would change as follows:
a. As a housekeeping measure, all of the language that discusses
the sharing of revenues and expenses in the first years of the Plans
would be removed.
b. The Restated CQ Plan would replace the existing CQ Plan's
definition of ``Annual Share'' with a cross reference to the CTA Plan
definition of ``Annual Share''.
5. The Consolidated Vendor Form
The proposed Consolidated Vendor Form would modify the version of
the Consolidated Vendor Form currently in use in that it would
accommodate the current use initiatives described above and would
provide the Participants with greater flexibility. In particular, the
proposed Consolidated Vendor Form:
a. Would newly define several terms that have a long history of use
in the market data industry (e.g., ``interrogation service'', ``market
minder'', ``ticker display'');
b. Would simplify the definitions of several terms;
c. Would expand the scope of some types of market data in order to
comport with the broadened notion of ``concurrent use'' that the
Participants are proposing to add to the Plans;
d. Would introduce the Subscriber Addendum and provide for its
modification and enforcement;
e. Would afford the Participants greater flexibility in prescribing
contract and other requirements for subscriber services, including the
use of the Subscriber Addendum or such alternative requirements as the
Participants may prescribe; and
f. Would omit the concepts of limited access services and
nonprofessional subscriber services, in order to comport with similar
changes to the Plans.
6. Subscriber Addendum
The Participants claim that the use of the Subscriber Addendum
would provide an alternative to vendors in certain circumstances as a
replacement for the forms of subscriber agreement that the Participants
currently require subscribers to execute. In practice, subscribers
would not enter into the Subscriber Addendum with the Participants.
Rather, vendors would incorporate the Subscriber Addendum into their
agreements with subscribers.
The Participants state that vendors have been prompting exchanges
to develop and adopt a common form of subscriber agreement and the
Financial Information Services Division of the Information Industry
Association has endorsed an initiative of this nature for more than two
years. The Subscriber Addendum represents a partial response to that
effort, in that it contains only those terms and conditions that the
Participants deem absolutely essential. In many cases, it would
eliminate a separate document that today's practices require.
The initial use of the Subscriber Addendum is intended for vendor
services in respect of which the Participants do not bill end users
directly, but rather impose the payment obligation on the vendor.
The Participants view the Subscriber Addendum concept as an
integral part of their ``usage-based fees'' initiative. Currently, such
fees are the subject of pilot tests. They are designed to streamline
the current rate structure and to promote the widespread dissemination
of market data.
7. Governing or Constituent Documents
The proposed restatements do not require any new governing or
constituent documents relating to SIAC or any other person authorized
to implement or administer the Plans on the Participants' behalf.
[[Page 2323]]
8. Implementation of Amendment
The restated Plans would take effect upon Commission approval. The
Participants then intend to notify vendors and other interested
parties, both in writing and through verbal contact, of the new
Consolidated Vendor Form and the Subscriber Addendum.
9. Development and Implementation Phases
The Participants intend to implement the new Consolidated Vendor
Form and the Subscriber Addendum on a vendor-by-vendor basis, as
appropriate, over the next few years. After Commission approval, the
Participants would expect all new accounts that are required to execute
the vendor form of agreement to execute the new Consolidated Vendor
Form. As for the 500 or so parties that have executed the present
version of the Consolidated Vendor Form, the Participants intend to
convert those organizations to the proposed version of the Consolidated
Vendor Form in an orderly manner over a period of 12 to 18 months.
The Participants expect to make the Subscriber Addendum available
for vendor use once the Commission approves it. Of course, the
Subscriber Addendum would only be available to vendors that have
executed the proposed Consolidated Vendor Form and that offer the types
of services for which the use of the Subscriber Addendum is
appropriate.
10. Analysis of Impact on Competition
The Participants do not believe that any of the proposed changes
would adversely impact or lessen competition. Instead, the Participants
believe that the proposed Consolidated Vendor Form and the Subscriber
Addendum may facilitate the entry of new parties into the market data
industry because of the ``user friendly'' nature of those documents.
11. Written Understandings or Agreements Relating to Interpretation of,
or Participation in, Plan
The Participants do not anticipate that they will enter into any
new written understandings or agreements relating to interpretations of
the restated Plans or to conditions for becoming a sponsor or
participant in either Plan.
12. Approval by Sponsors in Accordance with Plan
Each of the Participants has approved the restatements of, and
amendments to, both Plans in accordance with the Plans' terms.
13. Description of Operation of Facility Contemplated by the Proposed
Amendment
The proposed amendments to the Plans would not have any impact on
the manner in which CTA and CQ facilities are operated.
14. Terms and Conditions of Access
As explained in greater detail above and in Attachment 5 and
Attachment 6 to the Second Restatement of the CTA Plan, the proposed
revisions to the Consolidated Vendor Form and the introduction of the
Subscriber Addendum would modify the terms and conditions under which
brokers, dealers and others would be granted access. However, the
Participants believe that the changes work to the net benefit of data
recipients because the proposed changes to the Consolidated Vendor Form
and the substitution (in appropriate cases) of the Subscriber Addendum
for the forms of subscriber agreement currently in use permit more
``use friendly'' terms and conditions than do current practices and,
especially in the case of the Subscriber Addendum, streamline the
procedures for subscriber processing.
15. Method of Determination and Imposition, and Amount of, Fees and
Charges
In restating and amending the Plans, the Participants are not
proposing to make any changes to (a) the methods by which they
determine or impose fees or charges of (b) the amount of such fees or
charges.
16. Method and Frequency of Processor Evaluation
In respect of changes in the methods of evaluating processor
performance, please see the discussion of proposed Sections V(d)
(``Review of Processor'') and V(e) (``Notice to SEC of Processor
Reviews'') of the Second Restatement of the CTA Plan set forth in
Attachment 3 to that Plan and the discussion of proposed Sections V(c)
(``Review of Processor'') and V(d) (``Notice to SEC of Processor
Reviews'') of the Restated CQ Plan set forth in Attachment 3 to that
Plan.
17. Dispute Resolution
In restating and amending the Plans, the Participants are not
proposing to make any change to the method by which disputes arising in
connection with the Plans will be resolved.
B. Rule 11Aa3-1 (In Respect of the CTA Plan Only)
1. Listed Securities
In restating and amending the CTA Plan, the Participants do not
intend to make any change to the listed equity securities or classes of
such securities in respect of which the CTA Plan would require
transaction reports. However, as explained in greater detail in
Attachment 3 to the CTA Plan, the amendments would expand the scope of
``concurrent use'' under the CTA Plan and would therefore expand the
universe of securities in respect of which the CTA Plan would permit
transaction reports.
2. Reporting Requirements
In restating and amending the CTA Plan, the Participants do not
intend to make any change to the reporting requirements for brokers or
dealers for transactions in listed securities.
3. Manner of Collecting, Processing, Sequencing, Making Available and
Disseminating Last Sale Information
In restating and amending the CTA Plan, the Participants do not
intend to change the manner of collecting, processing or sequencing
last sale information. As for changes in the manner of making available
and disseminating last sale information, please see the discussion of
Section IX of the Second Restatement of the CTA Plan (``Receipt and Use
of CTA Information'') set forth in Attachment 3 to that Plan.
4. Manner of Consolidation
In restating and amending the CTA Plan, the Participants do not
intend to make any change to the manner in which transaction reports
are consolidated.
5. Standards and Methods Ensuring Promptness, Accuracy and Completeness
of Transaction Reports
In restating and amending the CTA Plan, the Participants do not
intend to make any change to the standards and methods by which the
promptness of reporting, and accuracy and completeness of transaction
reports, is ensured.
6. Rules and Procedures Addressed to Fraudulent or Manipulative
Dissemination
The participants state that the proposed amendments to the CTA Plan
do not impact the rules and procedures that ensure that last sale
information will not be disseminated in a fraudulent or manipulative
manner.
[[Page 2324]]
7. Terms of Access to Transaction Reports
As explained in greater detail above and in Attachment 5 and
Attachment 6 to the CTA Plan, the proposed revisions to the
Consolidated Vendor form and the introduction of the Subscriber
Addendum would modify the terms and conditions of access to last sale
information. The Participants believe that the changes work to the net
benefit of the investor community because the proposed changes to the
Consolidated Vendor Form and the substitution (in appropriate cases) of
the Subscriber Addendum for the forms of subscriber agreement currently
in use permit more ``user friendly'' terms and conditions than do
current practices and, especially in the case of the Subscriber
Addendum, streamline the procedures for subscriber processing.
8. Identification of Marketplace of Execution
The Participants state that the proposed amendments are intended to
have no impact on the requirement that vendor displays of last sale
information identify the marketplace of execution.
III. Solicitation of Comments
Rule 11Aa3-2(c)(2) under the Act provides that the proposed
amendment shall be approved by the Commission with such changes or
subject to such conditions as the Commission may deem necessary or
appropriate in the public interest, for the protection of investors and
maintenance of fair and orderly markets, to remove impediments to and
perfect the mechanisms of a National Market System, or otherwise in
furtherance of the purposes of the Act within 120 days of the date of
publication of notice of filing, or within such longer period as the
Commission may designate up to 180 days of such date pursuant to Rule
11Aa3-2(c)(2).
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
CTA/CQ. All submissions should refer to the file number in the caption
above and should be submitted by February 15, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
\12\ 17 CFR 200.30-3(a)(27) (1989).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-1182 Filed 1-24-96; 8:45 am]
BILLING CODE 8010-01-M
