Market Data Infrastructure — SEC — US

SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 240, 242, and 249 [Release No. 34–88216; File No. S7–03–20] RIN 3235–AM61 Market Data Infrastructure AGENCY: Securities and Exchange Commission. ACTION: Proposed rule. SUMMARY: The Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) is proposing to amend 17 CFR 242, Rules 600 and 603 and to adopt new Rule 614 of Regulation National Market System (‘‘Regulation NMS’’) under the Securities Exchange Act of 1934 (‘‘Exchange Act’’) to update the national market system for the collection, consolidation, and dissemination of information with respect to quotations for and transactions in national market system (‘‘NMS’’) stocks (‘‘NMS information’’). Specifically, the Commission proposes to expand the content of NMS information that is required to be collected, consolidated, and disseminated as part of the national market system under Regulation NMS and proposes to amend the method by which such NMS information is collected, calculated, and disseminated by introducing a decentralized consolidation model where competing consolidators replace the exclusive securities information processors. DATES: Comments should be received on or before May 26, 2020. ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments

Use the Commission’s internet
comment form (http://www.sec.gov/ rules/proposed.shtml); or
Send an email to rule-comments@
sec.gov. Please include File Number S7– 03–20 on the subject line. Paper Comments
Send paper comments to Vanessa
A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number S7–03–20. This file number should be included on the subject line if email is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (http://www.sec.gov/rules/ proposed.shtml). Comments are also available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549–1090 on official business days between the hours of 10:00 a.m. and 3:00 p.m. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any materials will be made available on the Commission’s website. To ensure direct electronic receipt of such notifications, sign up through the ‘‘Stay Connected’’ option at www.sec.gov to receive notifications by email. FOR FURTHER INFORMATION CONTACT:
Kelly Riley, Senior Special Counsel, at (202) 551–6772; Ted Uliassi, Senior Special Counsel, at (202) 551–6095; Elizabeth C. Badawy, Senior Accountant, at (202) 551–5612; Leigh Duffy, Special Counsel, at (202) 551– 5928; Yvonne Fraticelli, Special Counsel, at (202) 551–5654; Steve Kuan, Special Counsel, at (202) 551–5624; or Joshua Nimmo, Attorney-Advisor, at (202) 551–5452, Division of Trading and Markets, Commission, 100 F Street NE, Washington, DC 20549. SUPPLEMENTARY INFORMATION: The Commission is proposing to expand the content of NMS information that is required to be collected, consolidated, and disseminated as part of the national market system under Regulation NMS by proposing several new defined terms under Rule 600 of Regulation NMS, including ‘‘consolidated market data,’’ ‘‘core data,’’ ‘‘regulatory data,’’ ‘‘administrative data,’’ and ‘‘exchangespecific program data.’’ To implement the decentralized consolidation model, the Commission is proposing to amend Rule 603 under Regulation NMS to remove the requirement that all consolidated information for individual NMS stocks be disseminated through a single plan processor and to require each national securities exchange and national securities association to make available its NMS information in the same manner and using the same methods, including all methods of access and the same format, as the exchange or association makes available any quotation or transaction information for NMS stocks to any person. In addition, the Commission is proposing to add new Rule 614 and a new Form CC to govern the registration and responsibilities of competing consolidators. Further, the Commission is proposing that the effective national market system plan(s) for NMS stocks be amended to reflect the decentralized consolidation model. Finally, the Commission is proposing to amend Regulation SCI to expand the definition of ‘‘SCI entities’’ to include competing consolidators. In particular, the Commission is proposing: (1) Amendments to Rule 600 [17 CFR 242.600] to add new definitions of ‘‘administrative data,’’ ‘‘auction information,’’ ‘‘competing consolidator,’’ ‘‘consolidated market data,’’ ‘‘core data,’’ ‘‘depth of book data,’’ ‘‘exchange-specific program data,’’ ‘‘primary listing exchange,’’ ‘‘regulatory data,’’ ‘‘round lot,’’ and ‘‘self-aggregator;’’ (2) amendments to Rule 603 [17 CFR 242.603] to require national securities exchanges and national securities associations to make available NMS information to competing consolidators and selfaggregators and to remove the requirement that all consolidated information for individual NMS stocks be disseminated through a single plan processor; (3) adoption of Rule 614 [17 CFR 242.614] and Form CC to require registration of competing consolidators; (4) that the participants to the effective national market system plan(s) relating to NMS stocks amend such plan(s) to reflect the definition of ‘‘consolidated market data’’ and the implementation of a
decentralized consolidation model; (5) amendments to Rule 1000 [17 CFR 242.1000] to include competing consolidators in the definition of ‘‘SCI entities;’’ and (6) conforming changes and updating cross-references in Rule 201(a)(3) [17 CFR 242.201(a)(3)], Rule 201(b)(1)(ii) [17 CFR 242.201(b)(1)(ii)], Rule 201(b)(3) [17 CFR 242.201(b)(3)], Rule 600(b)(43) [17 CFR 242.600(b)(43)], Rule 600(b)(61) [17 CFR 242.600(b)(61)], and Rule 602 [17 CFR 242.602].
Table of Contents
I. Introduction
II. Current Market Data Infrastructure under
Regulation NMS and the Equity Data Plans A. Consolidated Market Data and Proprietary Data B. NMS Regulatory Framework
C. Other Regulatory Data
1. Regulation SHO
2. Limit-Up Limit-Down Plan
3. Market-Wide Circuit Breakers
4. Odd-Lot Transaction Reports and
Aggregated Odd-Lot Orders
III. Proposed Enhancements to NMS
Information
A. Introduction
B. Proposed Definition of ‘‘Consolidated Market Data’’
C. Proposed Definition of ‘‘Core Data’’
1. Round Lot Size

1See infra Section II.A for a discussion of the NMS information that is consolidated and disseminated in the U.S. securities markets. 2 15 U.S.C. 78k–1(a)(2). 3 15 U.S.C. 78k–1(a)(1). 4 15 U.S.C. 78k–1(a)(1)(B). 5 15 U.S.C. 78k–1(a)(1)(C). The Senate Report for the enactment of Section 11A stated that ‘‘it is critical for those who trade to have access to accurate, up-to-the-second information as to the prices at which transactions in particular securities are taking place (i.e., last sale reports) and the prices at which other traders have expressed their willingness to buy or sell (i.e., quotations).’’ S. Rep. No. 94–75 at 8 (1975) (‘‘Senate Report’’). The Senate Report continued that ‘‘[f]or this reason, communications systems designed to provide automated dissemination of last sale and quotation information with respect to securities will form the heart of the national market system.’’ Id. at 6. 6See 17 CFR 242.601–603; infra Section II.B. 7See 15 U.S.C. 78k–1(c)(1)(B); Senate Report, supra note 5, at 189 (‘‘Examples of the types of subjects as to which the SEC would have the Continued
2. Depth of Book Data
3. Auction Information
D. Proposed Definition of ‘‘Regulatory Data’’
1. Regulation SHO
2. Limit Up-Limit Down Plan
3. Market-Wide Circuit Breakers
4. Other Regulatory Data
E. Proposed Definition of ‘‘Administrative Data’’ F. Proposed Definition of ‘‘ExchangeSpecific Program Data’’
IV. Need for and Proposed Enhancements to
Provision of Consolidated Market Data A. Existing Centralized Consolidation Model B. Proposed Decentralized Consolidation Model
1. Access to Data
2. Competing Consolidators
3. Self-Aggregators
4. Amendment to the Effective National
Market System Plan(s) for NMS Stocks
5. Effects on the National Market System
Plan Governing the Consolidated Audit Trail
6. Transition Period
C. Alternatives to the Centralized
Consolidation Model
1. Distributed SIP Alternative
2. Single SIP Alternative
V. Paperwork Reduction Act
A. Summary of Collection of Information
1. Registration Requirements and Form CC
2. Competing Consolidator Duties and Data
Collection
3. Recordkeeping
4. Reports and Reviews
5. Amendment to the Effective National
Market System Plan(s) for NMS Stocks
6. Collection and Dissemination of
Information by National Securities Exchanges and National Securities Associations B. Proposed Use of Information
1. Registration Requirements and Form CC
2. Competing Consolidator Duties and Data
Collection
3. Recordkeeping
4. Reports and Reviews
5. Amendment to the Effective National
Market System Plan(s) for NMS Stocks
6. Collection and Dissemination of
Information by National Securities Exchanges and National Securities Associations
C. Respondents
D. Total Annual Reporting and Recordkeeping Burden
1. Registration Requirements and Form CC
2. Competing Consolidator Duties and Data
Collection
3. Recordkeeping
4. Reports and Reviews
5. Amendment to the Effective National
Market System Plan(s) for NMS Stocks
6. Collection and Dissemination of
Information by National Securities Exchanges and National Securities Associations E. Collection of Information is Mandatory F. Confidentiality
1. Registration Requirements and Form CC
2. Competing Consolidator Duties and Data
Collection and Maintenance
3. Recordkeeping
4. Reports and Reviews
5. Amendment to the Effective National
Market System Plan(s) for NMS Stocks
6. Collection and Dissemination of
Information by National Securities Exchanges and National Securities Associations G. Revisions to Current Regulation SCI Burden Estimates H. Request for Comments
VI. Economic Analysis
A. Introduction and Market Failures
1. Introduction
2. Market Failures
B. Baseline
1. Current Regulatory Process for Equity
Data Plans and SIP Data
2. Current Process for Collecting,
Consolidating, and Disseminating Market Data
3. Competition Baseline
4. Request for Comments on Baseline
C. Economic Effects of the Rule
1. Core Data and Consolidated Market Data
2. Decentralized Consolidation Model
3. Economic Effects of Form CC
4. Economic Effects From the Interaction of
Changes to Core Data and the Decentralized Consolidation Model
5. Request for Comments on the Economic
Effects of the Proposed Rule D. Impact on Efficiency, Competition, and Capital Formation
1. Efficiency
2. Competition
3. Capital Formation
4. Request for Comments on Impact on
Efficiency, Competition, and Capital Formation E. Alternatives
1. Introduce Decentralized Consolidation
Model With Additional Changes in Core Data Definition
2. Introduce Changes in Core Data and
Introduce a Distributed SIP Model
3. Require Competing Consolidators’ Fees
be Subject to the Commission’s Approval
4. Do Not Extend Regulation SCI to Include
Competing Consolidators
5. Require Competing Consolidators to
Submit Form CC in the EDGAR System Using the Inline XBRL Format
6. Require Competing Consolidators to
Submit Monthly Disclosures in the EDGAR System Using the Inline XBRL Format
7. Prescribing the Format of NMS
Information
8. Request for Comments on Alternatives
F. Request for Comments on the Economic Analysis
VII. Consideration of Impact on the Economy
VIII. Regulatory Flexibility Certification
IX. Statutory Authority
I. Introduction
The widespread availability of NMS information 1 has been an essential element in the success of the U.S. securities markets. Congress recognized the importance of market information to the U.S. securities markets with the enactment of Section 11A of the Exchange Act. Section 11A(a)(2) of the Exchange Act 2 directs the Commission, having due regard for the public interest, the protection of investors, and the maintenance of fair and orderly markets, to use its authority under the Exchange Act to facilitate the establishment of a national market system for securities in accordance with the Congressional findings and objectives set forth in Section 11A(a)(1) of the Exchange Act.3 Among the findings and objectives in Section 11A(a)(1) are that ‘‘[n]ew data processing and communications techniques create the opportunity for more efficient and effective market operations’’ 4 and ‘‘[i]t is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure . . . the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities . . . ’’ 5 As discussed below, the Commission exercised its authority under Section 11A of the Exchange Act through the adoption of a series of rules that have been incorporated into Regulation NMS. Those rules address both the content of, and the means by which, NMS information is collected, consolidated, and disseminated.6 In particular,
Section 11A(c)(1)(B) of the Exchange
Act authorizes the Commission to prescribe rules, as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Exchange Act, that ‘‘assure the prompt, accurate, reliable, and fair collection, processing, distribution, and publication of information with respect to quotations for and transactions in such securities and the fairness and usefulness of the form and content of such information.’’ 7 Among other

authority to promulgate rules under these provisions include: The hours of operation of any type or quotation system, trading halts, what and how information is displayed and qualifications for the securities to be included on any tape or within any quotation system.’’). 8On January 8, 2020, the Commission issued a notice of proposed order directing the SROs to submit a new, single NMS plan for NMS stocks (‘‘New Consolidated Data Plan’’). See Securities Exchange Act Release No. 87906 (Jan. 8, 2020), 85 FR 2164 (Jan. 14, 2020) (‘‘Proposed Governance Order’’). The existing NMS plans for NMS stocks are: (1) The Consolidated Trade Association (‘‘CTA’’) Plan; (2) the Consolidated Quotation (‘‘CQ’’) Plan; and (3) the Nasdaq Unlisted Trading Privileges (‘‘Nasdaq UTP’’) Plan (collectively the ‘‘Equity Data Plans’’). See infra note 13 and Section II.A. The Commission is proposing provisions in new Rule 614 that would require the participants to amend the effective national market system plan(s) for NMS stocks. See infra Section IV.B.4. If adopted, the proposed amendments would apply to any effective national market system plan for NMS stocks. In response to the Proposed Governance Order, the NYSE submitted a comment letter that also discussed a number of market structure issues that are addressed in this release (e.g., expanding SIP data content and modernizing SIP data delivery such as through a potential competing consolidator model). See Letter from Elizabeth K. King, Chief Regulatory Officer, ICE, and General Counsel and Corporate Secretary, NYSE, to Vanessa Countryman, Secretary, Commission, 5 (Feb. 5,
2020) (‘‘NYSE Governance Letter’’). As with various
other comments referenced herein, including, without limitation, comments received in connection with the Roundtable on Market Data and Market Access, see infra note 17, the NYSE Governance Letter was not provided with reference to the specific proposals discussed in this release. To the extent that the NYSE or other commenters wish to modify or supplement their prior comments to reflect the particulars of the proposals discussed herein, the Commission welcomes such comments. 9See Exchange Act Rule 11Aa3–1 (renumbered and renamed as Exchange Act Rule 601, Dissemination of transaction reports and last sale data with respect to transactions in NMS stocks); Exchange Act Rule 11Ac1–1 (renumbered and renamed as Exchange Act Rule 602, Dissemination of quotations in NMS securities); Exchange Act Rule 11Ac1–2 (renumbered and renamed as Exchange Act Rule 603, Distribution, consolidation, and display of information with respect to quotations for and transactions in NMS stocks.). 10See, e.g., Securities Exchange Act Release Nos. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’); 84528 (Nov. 2, 2018), 83 FR 58338 (Nov. 19, 2018) (adopting amendments to Rule 606 to require additional disclosures by broker-dealers to customers regarding the handling of their orders). 11Section 11A(a)(1) of the Exchange Act, 15 U.S.C. 78k–1(a)(1). See also Senate Report supra note 5, at 8; Securities Exchange Act Release No. 42208 (Dec. 9, 1999), 64 FR 70613, 70614 (Dec. 17,
1999) (‘‘Market Information Concept Release’’);
Concept Release on Equity Market Structure, Securities Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3593, 3600 (Jan. 21, 2010) (‘‘Equity Market Structure Concept Release’’). 12 17 CFR 242.608. 13The Equity Data Plans are effective national market system plans as defined in Rule 600(b)(22) for NMS stocks. See Second Restatement of the Plan Submitted to the Securities and Exchange Commission Pursuant to Rule 11Aa3–1 under the Securities Exchange Act of 1934, composite as of Dec. 6, 2019, available at https://www.ctaplan.com/ publicdocs/ctaplan/notifications/trader-update/ CTA_Plan_Composite_as_of_December_6_2019.pdf; Restatement of Plan Submitted to the Securities and Exchange Commission Pursuant to Rule 11Ac1–1 under the Securities Exchange Act of 1934, composite as of Dec. 6, 2019, available at https:// www.ctaplan.com/publicdocs/ctaplan/ notifications/trader-update/CQ_Plan_Composite_ as_of_December_6_2019.pdf; 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 Privilege Basis, available at http:// www.utpplan.com/DOC/Nasdaq-UTPPlan_after_ 46th_Amendment-Excluding_21st_36th_38th_ 42nd_44th_45th_Amendments.pdf; Proposed Governance Order, supra note 8. 14Rule 600(b)(38) defines a market center as ‘‘any exchange market maker, OTC market maker, alternative trading system, national securities exchange, or national securities association.’’ 17 CFR 242.600(b)(38). 15See Eric Budish, et al., Will the Market Fix the Market? A Theory of Stock Exchange Competition and Innovation, University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019–72 (May 2019), available at SSRN: https:// ssrn.com/abstract=3391461; Andriy Shkilko and Konstantin Sokolov, Every Cloud Has a Silver Lining: Fast Trading, Microwave Connectivity and Trading Costs (Apr. 2019), available at https:// ssrn.com/abstract=2848562; Equity Market Structure Concept Release, supra note 11 (‘‘NYSElisted stocks were traded primarily on the floor of the NYSE in a manual fashion until October 2006. At that time, NYSE began to offer fully automated access to its displayed quotations.’’). In contrast to NYSE, stocks on the Nasdaq Stock Market LLC (‘‘Nasdaq’’) traded in a highly automated fashion at many different trading centers following the introduction of SuperMontage in 2002. See Securities Exchange Act Release No. 46429 (Aug. 29, 2002), 67 FR 56862 (Sept. 5, 2002); Steven Quirk, Senior Vice President, Trader Group, TD Ameritrade, Testimony before the U.S. Senate Committee on Homeland Security and Governmental Affairs, Permanent Subcommittee on Investigations, Hearing on ‘‘Conflicts of Interest, Investor Loss of Confidence, and High Speed Trading in U.S. Stock Markets’’ (June 17, 2014), available at https://www.hsgac.senate.gov/imo/ media/doc/STMT%20-%20Quirk%20- %20TD%20Ameritrade%20(June%2017%202014)
.pdf%20 (citing statistics that average execution speed has improved by 90% since 2004—from 7 seconds to 0.7 seconds in 2014). Today, trading speed is measured in microseconds and is moving towards nanoseconds. See, e.g., Vera Sprothen, Trading Tech Accelerates Toward Speed of Light, Wall Street Journal (Aug. 8, 2016), available at https://www.wsj.com/articles/trading-techaccelerates-toward-speed-of-light-1470559173; Alexander Osipovich, NYSE Aims to Speed Up Trading With Core Tech Upgrade, Wall Street Journal (Aug. 5, 2019), available at https:// www.wsj.com/articles/nyse-aims-to-speed-uptrading-with-core-tech-upgrade-11565002800. 16See, e.g., Equity Market Structure Concept Release, supra note 11; Eric Budish, et al., supra note 15; Andrew Morgan, The impact of high frequency trading on algorithms and smart order routing, Algorithmic Trading & Smart Order Routing, 3d. ed. (2009), available at https:// pdfs.semanticscholar.org/ba0b/ 5e952b27cc48513825cb7e4f6d15803e6973.pdf. 17See infra Section II.A. In addition, as discussed more fully below, on October 25–26, 2018, the Division of Trading and Markets hosted roundtables to gather information on market data and market access. See generally Equity Market Structure Roundtables, Oct. 25–26, 2018: Roundtable on Market Data and Market Access, https:// www.sec.gov/spotlight/equity-market-structureroundtables (‘‘Roundtable’’). Transcripts for both days of the Roundtable are available at https:// www.sec.gov/spotlight/equity-market-structureroundtables/roundtable-market-data-marketaccess-102518-transcript.pdf (‘‘Roundtable Day One Transcript’’) and https://www.sec.gov/spotlight/ equity-market-structure-roundtables/roundtablemarket-data-market-access-102618-transcript.pdf (‘‘Roundtable Day Two Transcript’’). Panelists at the Roundtable noted that the geographical delays inherent in the nature of a centralized processor results in significant latencies between the Equity Data Plans’ feeds and proprietary data feeds that cannot be eliminated in the current infrastructure. Roundtable Day One Transcript at 145 (Simon Emrich, Norges Bank Investment Management) (‘‘And part of that, the most interesting part of the delay for me is really the location of the consolidator, the geographical delay that’s introduced, and the data connection element to the consolidator. Right? So from our perspective, the latency of the consolidator itself, the consolidation things, the Commission required the self-regulatory organizations (‘‘SROs’’) to act jointly pursuant to NMS plans 8 to disseminate, through a single plan processor, a consolidated national best bid and national best offer, along with last sale data, for each NMS stock.9 While the Commission has periodically revised certain of its NMS rules with the goal of ensuring that the regulatory framework continues to fulfill the goals of Section 11A of the Exchange Act,10 the Commission has not significantly updated the rules that govern the content and distribution
of NMS information since their initial implementation in the late 1970s. The widespread availability of timely market information promotes fair and efficient markets and facilitates the ability of brokers and dealers to provide best execution to their customers.11 The structure of the equity markets has changed dramatically since the Commission adopted the rules now known as Regulation NMS in 2005 and approved the three existing Equity Data Plans under Rule 608 12 of Regulation NMS.13 In 2005, a substantial amount of trading was conducted on relatively slow manual markets, and for any given stock, concentrated on its listing exchange. Today, the U.S. equity markets have evolved into high-speed, latency-sensitive electronic markets where trading is dispersed among a wide range of competing market centers 14 and even small degrees of latency affect trading strategies.15 Sophisticated order routing algorithms dependent on low-latency, high-quality market information are widely used to execute securities transactions.16 Despite the evolution of latencysensitive markets, the provision of NMS information that is centrally consolidated and disseminated by the Equity Data Plans is meaningfully slower than certain proprietary market data products distributed by the exchanges.17 Today, the exchanges sell

engine, the improvements that we’ve made are remarkable over the years. But it just doesn’t measure the physical reality of the brokers that we’re using.’’); 148 (Michael Blaugrund, NYSE) (‘‘[T]he method of transmission of that information and the timing of the aggregation of that information into a consolidated feed plays a role. As I think we all acknowledge, the aggregation time has improved dramatically. As we’ve seen that decline, it highlights the fact that the geographic latency becomes a more meaningful portion of the overall time line.’’). See also Ivy Schmerken, Speeding Up the SIP Isn’t Enough, Say Market Pros at Baruch Conference, InformationWeek: Wall Street & Technology (Oct. 17, 2014), available at http://www.wallstreetandtech.com/infrastructure/ speeding-up-the-sip-isnt-enough-say-market-prosat-baruch-conference/d/d-id/1316724.html (‘‘Since the SIP is slower than proprietary data feeds that firms can obtain directly from exchanges, critics have said that the SIP enables ‘latency arbitrage’ between high-speed traders using fast data and those trading off of stale quotes from the consolidated feed.’’). 18 ‘‘Depth of book,’’ or ‘‘DOB,’’ refers to open buy and sell orders resting on a limit order book at prices away from the top of book (i.e., orders to buy at prices that are below the best bid and orders to sell that are higher than the best offer). 19See, e.g., Nasdaq, Data Products, available at http://www.nasdaqtrader.com/ Trader.aspx?id=DPSpecs (last accessed Jan. 7, 2020) (describing low-latency DOB data products); NYSE, Real-Time Data, available at https://www.nyse.com/ market-data/real-time (last accessed Jan. 7, 2020) (describing low-latency DOB data products); Cboe, Market Data Services: U.S. Equities, available at https://markets.cboe.com/us/equities/market_data_ services/ (last accessed Jan. 7, 2020) (describing low-latency DOB data products). Particularly when aggregated, proprietary DOB market data products provide a consolidated view of the market with greater content and lower latency. The exchanges also sell other data products that are limited in content, such as an exchange’s top of book (‘‘TOB’’) quotation information and transaction information, that are designed largely for the non-automated segment of the market (e.g., retail investors and wealth managers) that is less sensitive to latency (‘‘proprietary TOB products’’). Examples of such proprietary TOB products include NYSE BBO (https://www.nyse.com/market-data/real-time/bbo), NASDAQ Basic (https://business.nasdaq.com/intel/ GIS/nasdaq-basic.html), and Cboe One Feed (https://markets.cboe.com/us/equities/market_ data_services/cboe_one). NYSE BBO provides TOB data. Nasdaq Basic and Cboe One’s Summary Feed provide TOB and last sale information. Nasdaq Basic also provides Nasdaq Opening and Closing Prices and other information, including Emergency Market Condition event messages, System Status, and trading halt information. Cboe One, however, also offers a Premium
Feed that includes DOB data. Each of these products is sold separately by the relevant exchange group. See Letter from Matthew J. Billings, Managing Director, Market Data Strategy, TD Ameritrade, 5–8 (Oct. 24, 2018) (‘‘TD Ameritrade Letter’’), available at https:// www.sec.gov/comments/4-729/4729-4560068- 176205.pdf (stating that the lower cost of exchange TOB products, coupled with costs associated with the process to differentiate between retail professionals and non-professionals imposed by the Equity Data Plans, and associated audit risk, favors retail broker-dealer use of exchange TOB products). 20An ‘‘exclusive processor’’ is defined in Section 3(a)(22)(B) of the Exchange Act as ‘‘any [SIP] or [SRO] which, directly or indirectly, engages on an exclusive basis on behalf of any national securities exchange or registered securities association, or any national securities exchange or registered securities association which engages on an exclusive basis on its own behalf, in collecting, processing, or preparing for distribution or publication any information with respect to (i) transactions or quotations on or effected or made by means of any facility of such exchange or (ii) quotations distributed or published by means of any electronic system operated or controlled by such association.’’ 15 U.S.C. 78c(a)(22)(B). A securities information processor (‘‘SIP’’) is defined in Section 3(a)(22)(A) of the Exchange Act as ‘‘any person engaged in the business of (i) collecting, processing, or preparing for distribution or publication, or assisting, participating in, or coordinating the distribution or publication of, information with respect to transactions in or quotations for any security (other than an exempted security) or (ii) distributing or publishing (whether by means of a ticker tape, a communications network, a terminal display device, or otherwise) on a current and continuing basis, information with respect to such transactions or quotations.’’ 15 U.S.C. 78c(a)(22)(A). See infra note 42 and accompanying text. 21See Rule 603(b) of Regulation NMS. Rule 603(b) provides that all information for an individual NMS stock must be disseminated through a single plan processor. 17 CFR 242.603(b). See Rule 600(b)(59), which defines a plan processor as ‘‘any selfregulatory organization or securities information processor acting as an exclusive processor in connection with the development, implementation and/or operation of any facility contemplated by an effective national market system plan.’’ 17 CFR 242.600(b)(59). 22See infra Section II.A (discussing proprietary DOB and proprietary TOB). 23See supra note 19. 24Section 11A(a)(1)(C)(iii), 15 U.S.C. 78k– 1(a)(1)(C)(iii). 25Section 11A(c)(1)(B), 15 U.S.C. 78k–1(c)(1)(B).
Section 11A(c)(1)(B) provides the Commission with
the authority to prescribe rules and regulations as necessary or appropriate in the public interest, for the protection of investors or otherwise in furtherance of the purposes of the Exchange Act to ‘‘assure the prompt, accurate, reliable, and fair collection, processing, distribution, and publication of information with respect to quotations for and transactions in such securities and the fairness and usefulness of the form and content of such information.’’ Id. 26See Section 11A(a)(1)(C), 15 U.S.C. 78k– 1(a)(1)(C) (stating that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure ‘‘fair competition among brokers and dealers,’’ ‘‘the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities,’’ and ‘‘the practicability of brokers executing investors’ orders in the best market’’). proprietary data products that are fast, low-latency products designed for automated trading systems and include content, such as depth of book 18 and order imbalance information for opening and closing auctions (‘‘proprietary DOB products’’) that are not provided under the Equity Data Plans.19 The Commission believes that the content and operating model under which NMS information is collected, consolidated, and disseminated have not kept pace with technological and market developments and are no longer satisfying the needs of many investors. Today, the dissemination of NMS information relies upon a centralized consolidation model, where the SROs provide certain NMS information for each NMS stock to an exclusive processor (‘‘exclusive SIP’’).20 The exclusive SIP then consolidates this NMS information and makes it available to market participants.21 Market participants also may independently consolidate NMS information by purchasing individual exchange proprietary market data products 22 and consolidating that information for their own use, or obtain NMS information that has been consolidated by a vendor that provides a data aggregation service. As discussed further below, proprietary DOB products collected through this decentralized consolidation model typically contain enhanced information compared to the market information provided through the Equity Data Plans, such as information about all orders on an individual exchange’s order book.23 Market participants also are able to consolidate and use the data obtained in this manner more quickly than market participants relying on NMS information provided through the Equity Data Plans. As noted above, Section 11A of the Exchange Act specifically highlights the importance of making information with respect to quotations for and transactions in securities available to brokers, dealers, and investors in a prompt, accurate, reliable, and fair manner and directs the Commission to act in accordance with this finding. Accordingly, the Commission proposes to amend Regulation NMS to
better achieve the goal of assuring ‘‘the availability to brokers, dealers and investors of information with respect to quotations for and transactions in securities’’ 24 that is prompt, accurate, reliable, and fair.25 The Commission preliminarily believes that the proposals described herein would promote fair and efficient markets and would facilitate the best execution of investor orders, and reduce information asymmetries between market participants who currently rely on market data provided through the exclusive SIPs and those who purchase the proprietary market data products offered by the national securities exchanges.26 The proposed amendments include two key parts, and the Commission preliminarily believes that the proposals are complementary, but can be independently justified. First, the amendments would update the content of the information with respect to quotations for and transactions in NMS stocks that must be made available under Regulation NMS. In particular, the Commission proposes to expand the NMS information that is required to be collected, consolidated, and

27See proposed Rule 600(b)(81) (defining ‘‘round lot’’ as 100 shares, 20 shares, 10 shares, 2 shares, or 1 share depending upon the prior calendar month’s average closing price for each NMS stock). 28The Commission is proposing to include competing consolidators in the definition of ‘‘SCI entities;’’ therefore, competing consolidators would be subject to the requirements of Regulation SCI. See Rule 1000(a) of Regulation SCI, 17 CFR 242.1000(a). See Securities Exchange Act Release No. 73639 (Nov. 19, 2014), 79 FR 72252 (Dec. 5,
2014) (‘‘Regulation SCI Adopting Release’’). See
also infra Section IV.B.2(f).
29As discussed further below, only those entities that are SIPs would be required to register with the Commission pursuant to proposed Rule 614 and proposed Form CC. SROs that wish to act as competing consolidators would not be required to register pursuant to proposed Rule 614 and proposed Form CC but would be required to comply with the competing consolidator obligations set forth in proposed Rule 614(d). See infra Section IV.B. 30See infra Section IV.B.3. 31See Proposed Governance Order, supra note 8. 32See infra Section IV.B. 33See supra note 13. 34See Rule 602 of Regulation NMS, 17 CFR
242.602. 35See Rule 601 of Regulation NMS, 17 CFR
242.601. 36Rule 603(b) of Regulation NMS provides that
‘‘the dissemination of all consolidated information for an individual NMS stock’’ shall be through a single plan processor (i.e., exclusive SIP). 17 CFR 242.603(b). 37See In the Matter of the Application of Bloomberg L.P., Securities Exchange Act Release No. 83755 at 3 (July 31, 2018) (‘‘Bloomberg Decision’’), available at https://www.sec.gov/ litigation/opinions/2018/34-83755.pdf; accord In the Matter of the Application of Sec. Indus. & Fin. Markets Ass’n for Review of Action Taken by Nyse Arca, Inc., & Nasdaq Stock Mkt. LLC, Securities Exchange Act Release No. 84432 (Oct. 16, 2018) (‘‘In the Matter of the Application of SIFMA’’) (citing NetCoalition v. SEC., 615 F.3d 525, 529 (DC Cir. 2010)); Securities Exchange Act Release No. 87193 (Oct. 1, 2019), 84 FR 54794, 54795 (Oct. 11,
2019) (‘‘Effective on Filing Proposal’’).
38See Securities Exchange Act Release Nos. 85623 (Apr. 11, 2019), 84 FR 16086 (Apr. 17, 2019) (approving LULD Plan on a permanent basis); 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012) (approving LULD Plan, as modified by Amendment No. 1, on a pilot basis); Limit Up Limit Down Plan:
Overview, available at http://www.luldplan.com/ index.html (last accessed Dec. 16, 2019). 39See Securities Exchange Act Release No. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR– BATS–2011–038; SR–BYX–2011–025; SR–BX– 2011–068; SR–CBOE–2011–087; SR–C2–2011–024; SR–CHX–2011–30; SR–EDGA–2011–31; SR–EDGX– 2011–30; SR–FINRA–2011–054; SR–ISE–2011–61; SR–NASDAQ–2011–131; SR–NSX–2011–11; SR– NYSE–2011–48; SR–NYSEAmex–2011–73; SR– NYSEArca–2011–68; SR–Phlx–2011–129). 40See Rule 201(b)(3) of Regulation SHO, 17 CFR 242.201(b)(3). 41The exclusive SIPs also provide other data regarding NMS stocks pursuant to SRO rules that are described in the Equity Data Plans’ technical specifications, such as data relating to retail liquidity programs, market and settlement conditions, and the financial condition of the issuer. In addition, the Nasdaq UTP SIP separately provides Over-the-Counter Bulletin Board (‘‘OTCBB’’) data, and the CTA Plan allows participants to use the CTA/CQ SIP to disseminate disseminated under Regulation NMS to include: (1) Information about orders in sizes smaller than the current round lot size for certain higher priced stocks; 27 (2) information about certain orders that are outside of the best bid and best offer (i.e., certain depth of book data); and (3) information about orders that are participating in opening, closing, and other auctions. The Commission preliminarily believes that enhancing the content of NMS information in this manner should help ensure that all market participants have ready access to that market information in order to facilitate participation in today’s markets. Second, the amendments introduce a decentralized consolidation model whereby competing consolidators would assume responsibility for the collection, consolidation, and dissemination functions currently performed by the exclusive SIPs.28 To facilitate this decentralized consolidation model, the Commission proposes that each SRO would be required to make all of its market data that is necessary to generate consolidated market data (as proposed to be defined) directly available to two new categories of entities: (1) Competing consolidators and (2) self-aggregators. Competing consolidators would be either SROs or SIPs registered with the Commission pursuant to proposed Rule 614, and would be responsible for collecting, consolidating, and disseminating consolidated market data to the public. Self-aggregators would be brokers or dealers that elect to collect and generate consolidated market data for their own internal use. Non-SRO competing consolidators would be required to register with the Commission.29 All competing consolidators, SRO and non-SRO, would be subject to appropriate standards with respect to the promptness, accuracy, reliability, and fairness of their consolidated market data distribution. While self-aggregators would not be subject to a separate registration requirement, as registered broker-dealers, they would be subject to the full
broker-dealer regulatory regime.30 To support this proposed decentralized consolidation model, each SRO would be required to make all of its own data that is necessary to generate consolidated market data available to competing consolidators and self-aggregators directly from its data center, and in the same manner and using the same methods, including all methods of access and the same format, as it makes its proprietary market data products available to any market participant. Under the proposed structure, the effective national market system plan(s) would continue to serve an important role in the national market system by, among other things, governing the SROs’ provision of the data necessary to generate consolidated market data, including setting fees for the provision of such SRO data to competing consolidators and self-aggregators.31 The Commission preliminarily believes that, by introducing competition and market forces into the collection, consolidation, and dissemination process, the decentralized consolidation model would help ensure that consolidated market data is delivered to market participants in a more timely, efficient, and cost-effective manner than the current centralized consolidation model.32
II. Current Market Data Infrastructure
Under Regulation NMS and the Equity Data Plans A. Consolidated Market Data and Proprietary Data Today, in accordance with the centralized consolidation model, the SROs act jointly pursuant to the three Equity Data Plans to collect, consolidate, and publicly disseminate real-time, NMS information.33 For each NMS stock, the SROs are required, pursuant to Regulation NMS and the Equity Data Plans, to provide certain quotation 34 and transaction 35 data to the designated exclusive SIP for each Equity Data Plan.36 Each exclusive SIP collects, consolidates, and disseminates NMS information to the public on the consolidated tape, described below. The NMS information that is consolidated and made available under the Equity Data Plans generally includes: ‘‘(1) The price, size, and exchange of the last sale; (2) each exchange’s current highest bid and lowest offer, and the shares available at those prices; and (3) the national best bid and offer (i.e., the highest bid and lowest offer currently available on any exchange).’’ 37 In general, these data elements form what historically has commonly been referred to as ‘‘core data.’’ In addition to disseminating core data, the exclusive SIPs collect, calculate, and disseminate certain regulatory data, including information required by the NMS Plan to Address Extraordinary Market Volatility (‘‘LULD Plan’’),38 information relating to regulatory halts and market-wide circuit breakers (‘‘MWCBs’’),39 and information regarding short sale circuit breakers pursuant to Rule 201.40 The exclusive SIPs also collect and disseminate other NMS stock data and disseminate certain administrative messages.41 For purposes

last sale prices for corporate bonds and information about indices. 42See supra note 20. The exclusive SIPs are the plan processors for the Equity Data Plans. The Securities Industry Automation Corporation (‘‘SIAC’’), a wholly owned, indirect subsidiary of Intercontinental Exchange (‘‘ICE’’), of which the NYSE is also a subsidiary, is the plan processor for Tapes A and B; Nasdaq is the plan processor for Tape C. 43Tape B includes securities listed on exchanges other than NYSE or Nasdaq, including Cboe, NYSE Arca, and NYSE American. 44See NYSE Trader Update: NYSE and NYSE MKT Equity Emergency Procedures and New DR Plans (Sept. 9, 2016), available at https:// www.nyse.com/publicdocs/nyse/markets/nyse/ NYSE_and_NYSE_MKT_DR_Trader_Update_ Final.pdf; UTP Plan Administration Data Policies (Oct. 2018), available at http://www.utpplan.com/ DOC/Datapolicies.pdf; NYSE Chicago Disaster Recovery FAQs (July 2019), available at https:// www.nyse.com/publicdocs/nyse/markets/nysechicago/NYSE_Chicago_Disaster_Recovery_ FAQs.pdf; Cboe: US Equities/Options Connectivity Manual, Version 10.0.0 (Oct. 7, 2019), available at https://cdn.cboe.com/resources/membership/US_ Equities_Options_Connectivity_Manual.pdf; Securities Exchange Act Release No. 78101 (June 17, 2016), 81 FR 41142, 41154 (June 23, 2016). 45See FINRA, Trade Reporting Facility (TRF), available at https://www.finra.org/filing-reporting/ trade-reporting-facility-trf (last accessed Jan. 22, 2020). As of October 2019, the FINRA/Nasdaq TRF in Carteret handled approximately 30% of the share volume in OTC reported transactions. See Cboe Global Markets, U.S. Equities Market Volume Summary (month-to-date), available at https:// markets.cboe.com/us/equities/market_share/ (last accessed Oct. 21, 2019). 46See supra notes 34–35 and accompanying text. 47The NYSE operates the CTA/CQ SIP and has required that access to the CTA/CQ SIP be through the use of the NYSE’s IP local area network. The NYSE represents that this access requirement was mandated due to the IP network’s security, resiliency, and redundancy. See Securities Exchange Act Release No. 86865 (Sept. 4, 2019), 84 FR 47592, 47594, n.12 (Sept. 10, 2019) (‘‘NYSE Low-Latency SIP Filing’’). See also Consolidated Tape System (CTS) Participant Input Binary Specification, 60, available at https:// www.ctaplan.com/publicdocs/ctaplan/ notifications/trader-update/CTS_BINARY_INPUT_ SPECIFICATION.pdf, and Consolidated Quotation System (CQS) Participant Input Binary Specification, 42, available at https:// www.ctaplan.com/publicdocs/ctaplan/ notifications/trader-update/CQS_BINARY_INPUT_ SPECIFICATION.pdf (both depicting that the participants of those plans use ICE Data Services’ Secure Financial Transaction Infrastructure (‘‘SFTI’’) network to transmit data to those exclusive SIPs). SFTI provides connectivity to the individual ICE and NYSE Group markets including NYSE and NYSE Arca equities. SFTI also provides connectivity to the data center for the CTA and CQ Plans in
Mahwah. 48 In adopting Regulation NMS in 2005, the Commission determined not to require that DOB information be included in core data, reasoning that investors who needed DOB information would be able to obtain such information from markets or third-party vendors. See Regulation NMS Adopting Release, supra note 10, at 37567. In making that determination, the Commission stated that this would be ‘‘a competition-driven outcome [that] would benefit investors and the markets in general.’’ See id. at 37530. 49 In contrast, proprietary TOB products are generally limited in content, such as the exchange’s top of book quotation information and transaction information and are designed largely for the nonautomated segment of the market (e.g., retail or nonprofessional investors and wealth managers that access market data visually). But see CBOE One Feed Specification, CBOE, available at https:// cdn.cboe.com/resources/membership/Cboe_US_ Equities_Cboe_One_Feed_Specification.pdf (highlighting that CBOE offers a non-automated product with a five-level depth of book option). 50See, e.g., Nasdaq TotalView and NYSE Integrated. 51The exchanges have an inherent competitive advantage in the provision of connectivity services within exchange facilities, while connectivity options made available elsewhere, such as point-ofpresence connectivity at third-party data centers, are fully competitive. 52See, e.g., Nasdaq, Trade Management Services:
Wireless Connectivity Suite, available at http:// n.nasdaq.com/WirelessConnectivitySuite (last accessed Dec. 16, 2019); ICE Global Network, New Jersey Metro, available at https://www.theice.com/ market-data/connectivity-and-feeds/wireless/newjersey-metro (last accessed Dec. 16, 2019). 53See, e.g., Letter to Vanessa Countryman, Secretary, Commission, from Robert Toomey, Managing Director and Associate General Counsel, SIFMA, 1–2 (Jan. 13, 2020) (stating that exchange market data products are ‘‘complementary’’ and result in ‘‘not only supra-competitive prices, but supra-monopoly prices’’). of this release, these existing market data elements, together with the historical ‘‘core data’’ described above, are referred to as ‘‘SIP data.’’ The Equity Data Plans set the terms for the operation of the exclusive SIPs.42 There are two exclusive SIPs, each of which is physically located in a different data center. The exclusive SIP for the CTA and CQ Plans, which covers Tape A (i.e., securities listed on the New York Stock Exchange (‘‘NYSE’’)) and Tape B (i.e., securities listed on exchanges other than NYSE or Nasdaq),43 is located in Mahwah, New Jersey (‘‘CTA/CQ SIP’’), while the Nasdaq UTP Plan exclusive SIP, which covers Tape C (i.e., Nasdaq-listed securities), is located in Carteret, New Jersey (‘‘Nasdaq UTP SIP’’). Tapes A, B, and C are commonly referred to as the ‘‘consolidated tapes.’’ The exchanges’ primary data centers are in four different physical locations, namely Mahwah, Carteret, Secaucus, and Weehawken, New Jersey, and they all have back-up data centers in Chicago.44 Broker-dealers may report transactions effected otherwise than on an exchange (i.e., ‘‘over-the-counter’’ or ‘‘OTC’’) to trade reporting facilities (‘‘TRFs’’), which are facilities of FINRA. There are currently three active TRFs:
FINRA/Nasdaq TRF in Carteret, FINRA/ Nasdaq TRF in Chicago, and FINRA/ NYSE TRF in Mahwah.45 With this centralized consolidation model, each exchange and FINRA must first transmit its quotation and transaction information 46 from its own data center to the appropriate exclusive SIP’s data center for consolidation, at which point SIP data is then further transmitted to market data end-users, which are often located in other data centers. The SROs today typically transmit their market data through fiber optic cables to the exclusive SIPs and, in the case of the CTA/CQ SIP, through infrastructure owned and mandated by the NYSE.47 In addition to the provision of SIP data pursuant to the Equity Data Plans, the national securities exchanges separately sell their individual proprietary market data products, which include the SIP data elements as well as a variety of additional data elements.48 As noted above, the proprietary DOB products are generally characterized as fast, low-latency products designed for automated trading systems that include additional content.49 In addition to SIP data, proprietary DOB products typically include odd-lot quotations; orders at prices above and below the best prices (i.e., depth of book data); and information about orders participating in auctions, including auction order imbalances.50 In addition to proprietary DOB products, the exchanges offer a variety of connectivity options, such as colocation at primary data centers, fiber optic connectivity, wireless connectivity, and point-of-presence connectivity at third-party data centers.51 Typically, the data for proprietary DOB products is transmitted directly from each exchange to the data center of the subscriber, where the subscriber’s broker-dealer or vendor (or the subscriber itself) privately may consolidate such data with the proprietary data of the other exchanges. Furthermore, for many market participants, proprietary data is transmitted using wireless connectivity (often provided by the exchanges), such as microwave or laser technology,52 that allows faster data transmission than the fiber optic cables that are typically used by the exclusive SIPs for the purposes of transmitting SIP data. The exchanges charge fees for these proprietary data products,53 as well as for each of their connectivity options for co-location (e.g., physical ports, cross-connects, and field programmable gate array (‘‘FPGA’’) services) and for communications services providing connectivity between data centers (e.g., microwave and fiber optics). In the context of the Division of Trading and Markets’ Roundtable on Market Data and Market Access in October 2018, some market participants commented that, in their view, they need the more content-rich proprietary data feeds and low latency connectivity to provide best execution to their clients

54See, e.g., Roundtable Day One Transcript at 27 (Doug Cifu, Virtu Financial). See also Sections III.C.1(c), III.C.2(c), and III.C.3(b). 55See also supra Section I (discussing Section 11A of the Exchange Act). 56Rule 600(b)(84) defines a transaction report as ‘‘a report containing the price and volume associated with a transaction involving the purchase or sale of one or more round lots of a security.’’ 17 CFR 242.600(b)(84). 57Rule 600(b)(34) defines last sale data as ‘‘any price or volume data associated with a transaction.’’ 17 CFR 242.600(b)(34). 58 17 CFR 242.601(a)(2). 59Rule 600(b)(87) defines a vendor as ‘‘any securities information processor engaged in the business of disseminating transaction reports, last sale data, or quotations with respect to NMS securities to brokers, dealers, or investors on a realtime or other current and continuing basis, whether through an electronic communications network, moving ticker, or interrogation device.’’ 17 CFR 242.600(b)(87). 60Rule 600(b)(8) defines best bid and best offer as ‘‘the highest priced bid and the lowest priced offer.’’ 17 CFR 242.600(b)(8). 61Under Rule 600(b)(67), quotation size, ‘‘when used with respect to a responsible broker’s or dealer’s bid or offer for an NMS security, means: (i) [T]he number of shares (or units of trading) of that security which such responsible broker or dealer has specified, for purposes of dissemination to vendors, that it is willing to buy at the bid price or sell at the offer price comprising its bid or offer, as either principle or agent; or (ii) [i]n the event such responsible broker or dealer has not so specified, a normal unit of trading for that NMS security.’’ 17 CFR 242.600(b)(67). 62Rule 600(b)(2) defines aggregate quotation size as ‘‘the sum of the quotation sizes of all responsible brokers or dealers who have communicated on any national securities exchange bids or offers for an NMS security at the same price.’’ 17 CFR 242.600(b)(2). 63See supra note 20. 64 Id. 65See 17 CFR 242.603(a)(2). Proprietary data cannot be made available sooner than current core data is transmitted to the exclusive SIPs. See Regulation NMS Adopting Release, supra note 10, at 37567 (‘‘[I]ndependently distributed data could not be made available on a more timely basis than core data is made available to a Network processor. Stated another way, adopted Rule 603(a) prohibits an SRO or broker-dealer from transmitting data to a vendor or user any sooner than it transmits the data to a Network processor.’’). 66Rule 600(b)(43) defines national best bid and national best offer (‘‘NBBO’’) as ‘‘with respect to quotations for an NMS security, the best bid and best offer for such security that are calculated and disseminated on a current and continuing basis by a plan processor pursuant to an effective national market system plan . . .’’ 17 CFR 242.600(b)(43). 67 17 CFR 242.603(b). 68 17 CFR 242.201(b)(1)(i). 69Rule 201(a)(9) states the term trading center shall have the same meaning
as in 242.600(b)(82). 17 CFR 242.201(a)(9). 70Rule 201(a)(1) states the term covered security shall mean any NMS stock as defined in 242.600(b)(48). 17 CFR 242.201(a)(1). 71Rule 201(a)(4) states the term national best bid shall have the same meaning as in 242.600(b)(43). 17 CFR 242.201(a)(4). 72Rule 201(a)(3) states the term listing market shall have the same meaning as the term ‘‘listing market’’ as defined in the effective transaction reporting plan for the covered security. Rule 201(a)(2) states the term effective transaction reporting plan for a covered security shall have the same meaning as in 242.600(b)(23). 17 CFR 242.201(a)(2)–(3). 73Rule 201(a)(7) states the term regular trading hours shall have the same meaning as in 242.600(b)(68). 17 CFR 242.201(a)(7). 74Rule 201(a)(6) states the term plan processor shall have the same meaning as in 242.600(b)(59). 17 CFR 242.201(a)(6). 75Rule 201(c) provides an exception for a brokerdealer that has adopted and enforces its own such policies and procedures. More specifically, if such broker-dealer identifies a short sale order as being at a price above the current national best bid at the time of submission, such broker-dealer may mark the order as ‘‘short exempt.’’ However, such brokerdealer must establish, maintain, and enforce written policies and procedures reasonably designed to prevent incorrect identification of orders for purposes of the ‘‘short exempt’’ exception. Policies and procedures designed to create the appearance of technical compliance with Rule 201 but which otherwise are designed to circumvent, or assist others in circumventing, the Rule, would not be compliant. For example, any arrangement between market participants in which the execution price appears to be compliant with the Short Sale Circuit Breaker, but also includes a post-trade payment (i.e., fee, commission, or other payment) that effectively renders the execution price noncompliant with the Short Sale Circuit Breaker, would not be consistent with the Rule’s requirements. Further, in the Adopting Release for Rule 201, the Commission stated that, ‘‘any conduct and to competitively participate in the markets.54 B. NMS Regulatory Framework The Commission exercised its authority under Section 11A of the Exchange Act to facilitate the collection, consolidation, and dissemination of NMS information primarily by adopting five rules under Regulation NMS.55 Rule 601 of Regulation NMS governs the dissemination of transaction reports 56 and last sale data 57 with respect to transactions in NMS stocks. In particular, Rule 601 requires each national securities exchange and association to file a transaction reporting plan with the Commission that, among other things, must specify the manner of collecting, processing, sequencing, making available, and disseminating transaction reports and last sale data.58 Rule 602 of Regulation NMS governs the dissemination of quotations in NMS securities. Specifically, under Rule 602 each national
securities exchange and association is required to collect, process, and make available certain quotation data to vendors,59 including the best bid, best offer,60 quotation sizes,61 and aggregate quotation sizes.62 Rule 603 of Regulation NMS governs the distribution, consolidation, and display of information with respect to quotations for and transactions in NMS stocks. Specifically, Rule 603(a)(1) requires any exclusive processor,63 or any broker or dealer with respect to information for which it is the exclusive source, that distributes information with respect to quotations for or transactions in an NMS stock to a securities information processor 64 to do so on terms that are fair and reasonable. Rule 603(a)(2) requires any national securities exchange, national securities association, broker, or dealer that distributes information with respect to quotations for or transactions in an NMS stock to a securities information processor, broker, dealer, or other persons to do so on terms that are not unreasonably discriminatory.65 Rule 603(b) requires each national securities exchange and association to act jointly pursuant to one or more NMS plans to disseminate consolidated information, including an NBBO,66 on quotations for and transactions in NMS stocks.67 Further, the rule states that such plan or plans shall provide for the dissemination of all consolidated information for an individual NMS stock through a single plan processor. Rule 608 of Regulation NMS governs the procedures for the filing and Commission approval of NMS plans and plan amendments. The Commission approved the Equity Data Plans under Rule 608. Finally, Rule 609 of Regulation NMS governs the registration of exclusive SIPs.
C. Other Regulatory Data
As noted above, certain regulatory data is required—pursuant to Commission and exchange rules and NMS plans—to be generated by primary listing exchanges and the exclusive SIPs and included in the current SIP data. The availability of this data is critical to allowing market participants to understand when and where permissible trading may occur.

Regulation SHO
Rule 201(b)(1)(i) of Regulation SHO 68 requires a trading center 69 to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the execution or display of a short sale order of a covered security 70 at a price that is less than or equal to the current national best bid,71 if the price of that covered security decreases by 10% or more from the covered security’s closing price, as determined by the listing market 72 for the covered security as of the end of regular trading hours 73 on the prior day (the ‘‘Short Sale Circuit Breaker’’). The rule requires that the trading center impose the Short Sale Circuit Breaker for the remainder of the day and the following day when a national best bid for the covered security is calculated and disseminated on a current and continuing basis by a ‘‘plan processor’’ 74 pursuant to an effective national market system plan.75

by trading centers, or other market participants, that facilitates short sales in violation of Rule 201 could also lead to liability for aiding and abetting or causing a violation of Regulation SHO, as well as potential liability under the anti-fraud and antimanipulation provisions of the Federal securities laws, including Sections 9(a), 10(b), and 15(c) of the Exchange Act, and Rule 10b–5 thereunder.’’ Securities Exchange Act Release No. 61595 (Feb. 26, 2010), 75 FR 11232, 11260 (Mar. 10, 2010). 76See Securities Exchange Act Release Nos. 85623, supra note 38; 67091, supra note 38. 77 During regular trading hours for an NMS stock, the exclusive SIP for that stock uses a reference price, which it also calculates, to calculate and disseminate to the public a lower and upper price band. The reference price for each NMS stock equals the arithmetic mean price of eligible reported transactions for the NMS stock over the immediately preceding five-minute period (see LULD Plan Section V(A)(1)) and must remain in effect for at least 30 seconds. See LULD Plan
Section V(A)(2). The exclusive SIP calculates a proforma reference price on a continuous basis during
regular trading hours, and when that price has moved by 1% or more from the reference price currently in effect, the pro-forma reference price becomes the reference price, and the plan processor disseminates new price bands based on the new reference price. See LULD Plan Section V(A)(2). The price bands for an NMS stock are calculated by applying the appropriate percentage parameter for the stock, specified by the LULD Plan, to the stock’s reference price, with the lower price band as a percentage parameter below the reference price and the upper price band as a percentage parameter above the reference price. See LULD Plan Section V(A)(1). 78When a national best bid is below the lower price band or a national best offer is above the upper price band for an NMS stock, the exclusive SIP is required to disseminate the national best bid or national best offer with an appropriate flag identifying it as non-executable. See LULD Plan
Section VI(A)(2).
79When a national best bid is equal to the lower price band or a national best offer is equal to the upper price band for an NMS stock, the exclusive SIP is required to distribute the national best bid or national best offer with an appropriate flag identifying it as a ‘‘Limit State Quotation.’’ See id.; LULD Plan Section VI(B)(2). 80 If trading for an NMS stock does not exit a limit state within 15 seconds of entry during regular trading hours, then the primary listing exchange is required to declare a trading pause in that NMS stock and notify the exclusive SIP. See LULD Plan
Section VII(A)(1). The exclusive SIP is required to
disseminate trading pause information to the public. See LULD Plan Section VII(A)(3). 81Five minutes after declaring a trading pause for an NMS stock, if the primary listing exchange has not declared a regulatory halt, the primary listing exchange is required to attempt to reopen trading using its established reopening procedures. The exclusive SIP publishes the following information that the primary listing exchange provides to the exclusive SIP in connection with such reopening:
Auction reference price; auction collars; and number of extensions to the reopening auction. See LULD Plan Section VII(B)(1). In addition, the applicable exclusive SIP for an NMS stock is required to receive and disseminate to the public information from primary listing exchanges regarding their inability to reopen trading due to a systems or technology issue. Specifically, the primary listing exchange is required to notify the exclusive SIP if it is unable to reopen trading in an NMS stock due to a systems or technology issue and if it has not declared a regulatory halt. The exclusive SIP is required to disseminate this information to the public. See LULD Plan Section VII(B)(2). 82See supra note 39. 83 Id. 84See infra Section III.C.1. 85See infra notes 159–160 and accompanying text. 86See infra notes 160–161 and accompanying text. Rule 201(b)(3) of Regulation SHO provides that the determination regarding whether the Short Sale Circuit Breaker has been triggered shall be made by the listing market for the covered security, and, if the Short Sale Circuit Breaker has been triggered, the listing market shall immediately notify the ‘‘single plan processor’’ (i.e., the exclusive SIP responsible for consolidation of information for the covered security pursuant to Section 242.603(b)). The exclusive SIP must then disseminate this information.
2. Limit-Up Limit-Down Plan
The LULD Plan 76 sets forth procedures that provide for market-wide limit up-limit down (‘‘LULD’’) requirements to prevent trades in individual NMS stocks from occurring outside of specified price bands and reduce the negative impacts of extraordinary volatility in NMS stocks caused by momentary gaps in liquidity or erroneous trades. These price bands are coupled with the provision of trading pauses to accommodate more fundamental price moves. Under the LULD Plan, the applicable exclusive SIP for an NMS stock is required to perform certain key functions, including: (1) Calculating the applicable price bands,77 (2) disseminating flags identifying quotes that are not executable,78 (3) disseminating flags identifying quotes that are in a ‘‘limit state,’’ 79 (4) disseminating trading pause messages received from the primary listing exchanges,80 and (5) disseminating reopening auction information from the primary listing exchanges.81
3. Market-Wide Circuit Breakers
All of the equity exchanges and FINRA have adopted uniform rules, on a pilot basis, relating to MWCBs.82 The purpose of an MWCB is to address extraordinary market-wide volatility by halting trading across the markets when price declines reach certain specified levels.83 These levels are reached when the S&P 500 Index declines a specified percentage from the prior day’s closing price. Currently, there are three thresholds: 7% (Level 1), 13% (Level 2), and 20% (Level 3). A Level 1 or Level 2 market decline after 9:30 a.m. ET and before 3:25 p.m. ET would halt the equity and options markets for 15 minutes, while Level 1 and 2 declines at or after 3:25 p.m. ET would not halt trading. A Level 3 market decline at any time during the trading day would halt equity and options trading until the primary listing exchange opens the next trading day. The primary listing exchanges and the exclusive SIPs work together to implement the MWCB rules. The CTA/ CQ SIP monitors the S&P 500 Index throughout the trading day and would send a message to the primary listing exchanges and the Nasdaq UTP SIP in the event a Level 1, Level 2, or Level 3 circuit breaker was triggered. Upon receipt of such a message, the applicable primary listing exchange would impose a regulatory halt by sending the appropriate message to the applicable exclusive SIP, which would then disseminate the regulatory halt message to market participants. Trade resumption messages would be generated at the appropriate time by the primary listing exchange and similarly disseminated to market participants through the applicable exclusive SIP.
4. Odd-Lot Transaction Reports and
Aggregated Odd-Lot Orders As discussed further below, while Regulation NMS only requires NMS stock quotation and transaction data in round lots to be reported to the exclusive SIPs, SRO rules and the Equity Data Plans include some odd-lot information in the SIP data.84 Pursuant to exchange rules, odd-lot quotations that, when aggregated, equal or exceed a round lot are reported to the exclusive SIPs as round lots.85 Moreover, the Equity Data Plans were amended in 2013 to include odd-lot transaction reports in the SIP data.86
III. Proposed Enhancements to NMS
Information
A. Introduction
The Commission is proposing to expand the content of the NMS information that would be required to be collected, consolidated, and disseminated under the rules of the national market system to better meet the needs of today’s investors and other market participants. Specifically, the Commission proposes to amend Regulation NMS by introducing, in Rule 600, new defined terms for ‘‘consolidated market data,’’ ‘‘core data,’’ ‘‘regulatory data,’’ ‘‘administrative data,’’ ‘‘exchangespecific program data,’’ ‘‘round lot,’’ ‘‘depth of book data,’’ and ‘‘auction information’’ and by amending the current definitions of ‘‘national best bid and national best offer’’ and ‘‘protected

87See supra note 26.
88SORs employ the use of algorithms (e.g., by broker-dealers on behalf of a client) designed to optimally send parts of an order (child orders) to various market centers (e.g., exchange and ATSs) so as to optimally access market liquidity while minimizing execution costs. 89This proposal is also not designed to expand the content of NMS information to meet all needs of all market participants; the proprietary data market, which includes information that is not included in the proposed definition of core data, is expected to continue to fulfill additional needs beyond those that are met by the proposed definition of core data. 90While this proposal is intended to facilitate best execution, the Commission is not specifying minimum data elements needed to achieve best execution. 91See supra note 37 and accompanying text. 92Any new exchange programs would have to be filed with the Commission pursuant to Section 19(b) of the Exchange Act, 15 U.S.C. 78s(b), and Rule 19b–4 thereunder, 17 CFR 240.19b–4. 93See infra Section III.F. 94Amendments to the proposed definition of core data would only be able to be made by the Commission. To the extent that there are changes in the national market system, such as, in the provision of trading services, that suggest that the definition of core data should be updated, the Commission could exercise its authority to propose amendments to the proposed definition. See, e.g.,
Section 11A(c)(1)(B) of the Exchange Act which
provides that the Commission shall prescribe rules as necessary or appropriate in the public interest, for the protection of investors or otherwise to assure the prompt, accurate, reliable, and fair collection, processing, distribution, and publication of information with respect to NMS information and the fairness and usefulness of the form and content of such information. 95Pursuant to Rule 608(a)(1), any two or more SROs, acting jointly, may propose an amendment to an NMS plan. 17 CFR 242.608(a)(1). The Equity Data Plans also have provisions regarding the proposal of amendments to the Plans, which currently require a vote of the Plans’ operating committee. See CTA Plan, supra note 13, at Section IV(b)(i); CQ Plan supra note 13, at Section IV.(c)(i) of the CQ Plan; Nasdaq UTP Plan, supra note 13, at Sections IV.C.1.a. and XVI. 96A proposed NMS plan amendment may be put into effect upon filing if designated by the sponsors as: ‘‘(i) Establishing or changing a fee or other charge collected on behalf of all of the sponsors and/or participants in connection with access to, or use of, any facility contemplated by the plan or amendment (including changes in any provision with respect to distribution of any net proceeds from such fees or other charges to the sponsors and/ or participants); (ii) Concerned solely with the bid or protected offer.’’ The Commission preliminarily believes that these amendments will enhance the availability and usefulness of the NMS information that is required to be provided under the rules of the national market system for a wide variety of market participants. The Commission also preliminarily believes that expanding the content of NMS information would help to reduce information asymmetries between market participants who rely upon current SIP data and those who purchase proprietary data feeds from the national securities exchanges.87 The Commission’s objectives in expanding and modernizing the content of NMS information that would be collected, consolidated, and disseminated under the rules of the national market system reflect that different market participants and different trading applications have different needs for NMS information. For example, the needs of some retail investors that visually consume NMS information (e.g., humans looking at quotes on a screen) differ from those of institutional trading systems that electronically consume NMS information (e.g., algorithmic trading systems or smart order routers (‘‘SORs’’).88 This proposal to expand and modernize the content of NMS information is not intended solely to meet the needs of a narrow segment of the NMS information market; rather, the proposal is intended to address the needs of a broad cross-section of market participants.89 The Commission intends for the NMS information to promote both fair and efficient markets, be useful to a broad cross-section of market participants, reduce information asymmetries, and facilitate best execution.90 B. Proposed
Definition of ‘‘Consolidated Market Data’’ The Commission is proposing to amend Rule 600(b) to add a definition of ‘‘consolidated market data’’ that would include information that is currently disseminated by the exclusive SIPs as well as additional new information. Specifically, under proposed Rule 600(b)(19), consolidated market data would be defined as the following data, consolidated across all national securities exchanges and national securities associations: (1) Core data; (2) regulatory data; (3) administrative data; (4) exchangespecific program data; and (5) additional regulatory, administrative, or exchangespecific program data elements defined as such pursuant to the effective national market system plan or plans required under Rule 603(b). As discussed below, the Commission proposes to add definitions of the terms ‘‘core data,’’ ‘‘regulatory data,’’ ‘‘administrative data,’’ and ‘‘exchangespecific program data.’’ The proposed definition of core data would include those data elements that are currently considered core data 91 as well as reflect additional information that would be required to be collected, consolidated, and disseminated under Regulation NMS, including certain depth of book, odd-lot, and auction information, which would improve the usefulness of core data for market participants. The proposed definition of regulatory data would specify certain regulatory messages that must be provided under Regulation NMS, which would facilitate compliance with Commission, NMS plan, or SRO requirements. The proposed definition of administrative data would refer to the administrative or technical messages that are currently required by the Equity Data Plans, or their technical specifications, and would facilitate the efficient utilization of proposed consolidated market data. The proposed definition of ‘‘exchangespecific program data’’ would include information currently included in SIP data related to retail liquidity programs that certain exchanges have established, as well as information related to new programs that individual exchanges may develop in the future,92 but only if the effective national market system plan or plans required under Rule 603(b) are amended to include data elements related to any such new programs in consolidated market data.93 Finally, the Commission proposes to include a provision that would allow for additional regulatory, administrative, or exchange-specific program data elements 94 to be included within ‘‘consolidated market data’’ pursuant to amendments to the effective national market system plan(s).95 The Commission preliminarily believes that this provision would help to ensure that additional information in these specific categories may be proposed to be included in consolidated market data in the future in response to market and regulatory developments and that such additional information would be required to be made available by the SROs to competing consolidators and self-aggregators, and as a
result, competing consolidators would be required to, among other things, calculate and generate consolidated market data that includes this additional information. The Commission preliminarily believes that new administrative, regulatory, and exchange-specific program data elements may emerge from time to time, and that the proposed definition of consolidated market data should provide flexibility for such data elements to be included by NMS plan amendment. This provision would also maintain the current practice whereby SIP data of this type can be expanded through the NMS plan amendment process. National market system plans and amendments thereto must be filed with, and typically are not effective unless they are approved by, the Commission under Rule 608 of Regulation NMS.96

administration of the plan, or involving the governing or constituent documents relating to any person (other than a self-regulatory organization) authorized to implement or administer such plan on behalf of its sponsors; or (iii) Involving solely technical or ministerial matters.’’ 17 CFR 242.608(b)(3). As stated above, the Commission has proposed amendments to this provision. Effective on Filing Proposal, supra note 37 (proposing to rescind the provision of Rule 608 that allows a proposed amendment to an effective national market system plan(s) to become effective upon filing if the proposed amendment establishes or changes a fee or other charge). 97 17 CFR 242.608(b)(2). 98As discussed below, the Commission is not requiring broker-dealers to subscribe to or utilize every component of proposed consolidated market data to meet their regulatory obligations. See infra notes 306–309 and accompanying text. 99See infra Sections IV.B.1 and IV.B.2(e)(ii). 100See supra note 37 and accompanying text. 101For example, current core data includes the NBBO, which is useful to market participants for informational purposes and to inform trading and investment decisions. See, e.g., Roundtable Day One Transcript at 57 (Doug Cifu, Virtu Financial) (‘‘. . . the SIP is an eyeball product.’’); Roundtable Day One Transcript at 65 (Mehmet Kinak, T. Rowe Price) (‘‘So the SIP for us is kind of what we look at. Obviously, investment decisions are probably made by eyeballs and looking at the SIP itself from either our Bloomberg or FactSet terminals.’’). It is also used as a back-up for automated trading systems that otherwise rely on proprietary data feeds from the exchanges and to support less sophisticated automated trading systems. See, e.g., Roundtable Day One Transcript at 140 (Mark Skalabrin, Redline Trading Solutions) (‘‘the SIP . . . has been relegated to a backup feed, really. It’s a fail-over to the real feed you need to do the job.’’). 102See infra notes 276–279. 103See infra note 162. 104As explained below, odd-lot quotations are only reflected in SIP data to the extent that they are aggregated into round lots pursuant to exchange rules. See infra notes 157–158 and accompanying text. 105See infra notes 330–332. 106As discussed below, the existing centralized consolidation model for collecting, consolidating, and disseminating SIP data also has not kept pace with the needs of today’s investors and market participants. See infra Section IV.A. 107See several of the Roundtable comments summarized below in Sections III.C.1, III.C.2, and III.C.3. Pursuant to Rule 608(b), the Commission would publish for comment an amendment to add new consolidated market data elements, and thereafter, the Commission would evaluate any such proposed amendment and approve it if the Commission finds the amendment is ‘‘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, or otherwise in furtherance of the purposes of the [Exchange] Act.’’ 97 The Commission preliminarily believes that the proposed definition of consolidated market data, as well as the other definitions included therein, would, by expanding the NMS information that is required to be provided under the rules of the national market system, support more informed trading and investment decisions by market participants in today’s markets and facilitate the best execution of customer orders by the full range of broker-dealers.98 In addition, the proposed definition would be referenced in the amendments to Rule 603(b) and proposed Rule 614, both of which propose to implement the decentralized consolidation model.99 The Commission requests comment on the proposed definition of consolidated market data under proposed Rule 600(b)(19). Throughout this release, we request comment from the points of view of all interested parties. With regard to any comments, we note that such comments are of greatest assistance to our rulemaking initiative if accompanied by supporting data and analysis of the issues addressed in those comments. In particular, the Commission solicits comment on the following:

Do commenters believe that the
Commission should adopt a definition of consolidated market data? Why or why not? Should the Commission take an alternative approach? Why or why not?
Does the proposed definition of
consolidated market data capture the market data that would be useful to market participants for trading and regulatory compliance purposes? Please explain. Does the proposed definition of consolidated market data include any market data that should not be included? Please explain. The Commission is seeking input from commenters on whether the proposed definition of consolidated market data should include additional market data or whether the definition should otherwise be modified.
Should the definition of
consolidated market data be set forth in an effective national market system plan(s) instead of, or in addition to, Rule 600(b)? Please explain. Do commenters have views on the most appropriate process through which the content of proposed consolidated market data should be expanded or modified? Do commenters believe that the proposed definition of consolidated market data should include a provision stating that additional regulatory, administrative, or exchange-specific program data elements can be defined pursuant to the effective national market system plan or plans required under Section 242.603(b)? Please explain. Should the proposed definition of core data be able to be amended through the effective national market system plan process (for example, should the term ‘‘core data’’ be included in proposed Rule 600(b)(19)(v))? Why or why not? Do commenters believe that any data elements should not require an amendment to the effective national market system plan(s) to be added to consolidated market data? Please explain and describe what process would be appropriate for adding any such data elements.
C. Proposed Definition of ‘‘Core Data’’
Regulation NMS does not currently define core data. Rather, today, core data generally refers to the price, size, and exchange of the last sale; each exchange’s highest bid and lowest offer (‘‘BBO’’) and the number of shares available at those prices; and the NBBO.100 The core data that is provided today by the exclusive SIPs is of considerable utility to some market participants for certain purposes.101 However, it is of limited use to other market participants for other purposes (e.g., as the primary data source for automated trading systems) because of its limited content. The Commission preliminarily believes that the content of current core data has not kept pace with market developments. For example, decimalization in 2001 improved prices and narrowed spreads but also reduced the size of the top of book liquidity that is displayed and disseminated as part of current core data.102 Further, individual odd-lot quotations, especially for stocks with share prices that have risen substantially,103 have become more important to market participants as oddlot quotations can represent significant amounts of liquidity that are not reflected in current core data.104 Finally, an increasing proportion of total trading volume is executed during opening and closing auctions, which are significant liquidity events every trading day, but important information about auctions is not included within current core data provided by the exclusive SIPs.105 Because the content of current core data does not reflect these important market developments,106 many market participants state that they are unable to rely solely on SIP data to trade competitively and provide best execution to customer orders in today’s markets.107 The Commission preliminarily believes that the data that is required to be collected, consolidated, and disseminated under the rules of the national market system is no longer fulfilling the goals of Section 11A of the

108See supra notes 2–5 and accompanying text. 109See infra Sections III.C.1–III.C.3 for detailed discussions of the proposed definitions of ‘‘round lot,’’ ‘‘depth of book data,’’ and ‘‘auction information.’’ 110Section 11A(c)(1)(B) of the Exchange Act, 15 U.S.C. 78k–1(c)(1)(B). 111See supra note 37 and accompanying text. 112See infra notes 122–127 and accompanying text. 113As explained below, pursuant to Rule 603(b), as proposed to be amended, national securities exchanges and associations would be required to make available to competing consolidators and selfaggregators, as proposed to be defined, all data necessary to generate consolidated market data. See infra Section IV.B.1. Competing consolidators would be required to calculate and generate consolidated market data and make it available to subscribers. See proposed Rule 614(d). 114See infra notes 157–158 and accompanying text (discussing odd-lot aggregation). 115 Id. A protected quotation is defined as ‘‘a protected bid or a protected offer.’’ See Rule 600(b)(62) of Regulation NMS, 17 CFR 242.600(b)(62). A protected bid or protected offer is defined as ‘‘a quotation in an NMS stock that: (i) [i]s displayed by an automated trading center; (ii) [i]s disseminated pursuant to an effective national market system plan; and (iii) [i]s an automated quotation that is the best bid or best offer of a national securities exchange, the best bid or best offer of The Nasdaq Stock Market, Inc., or the best bid or best offer of a national securities association other than the best bid or best offer of The Nasdaq Stock Market, Inc.’’ See Rule 600(b)(61) of Regulation NMS, 17 CFR 242.600(b)(61). 116See infra notes 159–161 and accompanying text (discussing the addition of odd-lot transaction data to SIP data through NMS plan amendments approved in 2013). 117As discussed below, some of these proposed data elements—namely, the BBO and NBBO—will be derived from smaller sized quotations as a result of the Commission’s proposed definition of round lot, and the Commission is proposing amendments to the definitions of protected bid and protected offer and national best bid and offer to accommodate its proposed amendments to expand consolidated market data and implement a decentralized consolidation model with competing consolidators and self-aggregators. In addition, today, the exclusive SIPs collect, consolidate, and disseminate protected quotations, which in almost all cases, are the best bid or best offer of a trading center. Accordingly, the NBBO today reflects protected quotations. As discussed below, the Commission is proposing to amend the definition of ‘‘protected bid or protected offer’’ to require that protected bids and protected offers be at least 100 shares. In addition, the Commission is proposing a new round lot size definition, which would be less than 100 shares for higher-priced NMS stocks. See infra Section III.C.1(d)(i). Accordingly, if adopted, there would be an increase in instances where the
best bid or best offer and the NBBO would not be protected quotations. See infra
Section III.C.1(d)(ii).
118See supra note 101.
119See infra notes 276–279 and accompanying text. 120See infra notes 330, 348 and accompanying text. 121See infra Sections III.C.2(d) and III.C.3(c). 122 In addition, because this data does not fall under the proposed definitions of regulatory data or administrative data, it would not be part of proposed ‘‘consolidated market data’’ either. 123See Nasdaq UTP DataFeed Approval Request, available at http://www.utpplan.com/datafeed_ approval (last accessed Sept. 8, 2019); supra note 41. 124See CTA Plan, supra note 13, at Section XIII; supra note 41. Exchange Act.108 The Commission is proposing a definition of core data that would incorporate the information that is currently provided in SIP data as well as additional information, including quotation data for smaller-sized orders for higher-priced stocks, certain depth of book data, and additional auction information.109 As explained below, the Commission preliminarily believes that each of the new elements of core data, as proposed, would enhance the usefulness of the content of the NMS information that is collected, consolidated, and disseminated under the rules of the national market system.110 The Commission is proposing to define core data in Rule 600(b) to include all of the elements that currently are referred to as core data,111 as well as the following data elements that are not currently provided by the exclusive SIPs: (1) Quotation data for smaller-sized orders for higher-priced stocks (pursuant to a new definition of ‘‘round lot’’), (2) data on certain quotations below the best bid or above the best offer (pursuant to a new definition of ‘‘depth of book data’’), and (3) information about orders participating in auctions (pursuant to a new definition of ‘‘auction information’’). As discussed below, certain OTCBB and corporate bond and index data that are currently provided by the exclusive SIPs would not be included in the proposed definition of core data.112 Further, as noted above, the proposed term core data is reflected in the proposed definition of consolidated market data, which is referenced in proposed Rule 603(b) and proposed Rule 614.113 Specifically, under proposed Rule 600(b)(20), core data would be defined as the following information with respect to quotations for and transactions in NMS stocks: (1) Quotation sizes; (2) aggregate quotation sizes; (3) best bid and best offer; (4) national best bid and national best offer; (5) protected bid and protected offer; (6) transaction reports; (7) last sale data; (8) odd-lot transaction data disseminated pursuant to the effective national market system plan or plans required under Rule 603(b) as of [date of Commission approval of this proposal]; (9) depth of book data; and (10) auction information. For purposes of the calculation and dissemination of core data by competing consolidators, and the calculation of core data by self-aggregators, the best bid and best offer, national best bid and national best offer, and depth of book data
would include odd-lots that when aggregated are equal to or greater than a round lot, with such aggregation occurring across multiple prices and disseminated at the least aggressive price.114 Protected quotations, however, would only include odd-lots at a single price that when aggregated are equal to or greater than 100 shares.115 Some of the components of the proposed definition of core data— namely, quotation sizes, aggregate quotation sizes, BBO, NBBO, protected quotations, transaction reports, last sale data, and odd-lot transaction data 116— are already defined in Regulation NMS or are currently included in SIP data.117 The Commission preliminarily believes that these data elements continue to be necessary and useful for informed market participation. This baseline information about the best quotations and recent transactions across the national market system provides the foundation of transparency and price discovery in the U.S. securities markets, and the Commission preliminarily believes investors and other market participants need it today to make informed trading and investment decisions.118 Therefore, the Commission preliminarily believes that these data elements should be included in the definition of core data as proposed. As discussed in detail below, the Commission is proposing to include certain depth of book data and auction information in the proposed definition of core data. Because of the dispersion of liquidity to prices away from the best bids and best offers 119 and the increasing proportion of orders that are executed during auctions,120 the Commission preliminarily believes that market participants need depth of book data and auction information to fully participate in the markets and the information would facilitate best execution.121 The Commission preliminarily believes that the proposed depth of book data and auction information would enhance the usefulness of proposed core data. As discussed above, SIP data currently includes certain data that would not be included in the definition of core data under the Commission’s proposed definition.122 Currently, Nasdaq UTP Plan Level 1 subscribers can obtain OTCBB quotation and transaction feeds for unlisted stocks.123 Similarly, the CTA Plan permits the dissemination of ‘‘concurrent use’’ data relating to corporate bonds and indexes.124 This information would not be included in the proposed definitions of core data or consolidated market data. OTCBB stocks, corporate bonds, and

125 ‘‘NMS security’’ is defined as ‘‘any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in listed options.’’ 17 CFR 242.600(b)(47). ‘‘Effective transaction reporting plan’’ is defined as ‘‘any transaction reporting plan approved by the Commission pursuant to § 242.601.’’ 17 CFR 242.600(b)(23). Rule 601 requires a transaction reporting plan to be filed and approved pursuant to Rule 608 and to specify ‘‘[t]he listed equity and Nasdaq securities or classes of such securities for which transaction reports shall be required by the plan.’’ 17 CFR 242.601(a)(2). Therefore, OTCBB securities are not NMS securities. 126 ‘‘NMS stock’’ is defined as ‘‘any NMS security other than an option.’’ 17 CFR 242.600(b)(48). See also 17 CFR 242.600(b)(47) (defining NMS security). 127One commenter suggested that this ‘‘extraneous’’ data should be removed from the exclusive SIPs. See Nasdaq, Total Markets: A Blueprint for a Better Tomorrow, 18 (‘‘Nasdaq Total Markets Report’’), available at https:// www.nasdaq.com/docs/Nasdaq_TotalMarkets_ 2019_2.pdf. 128See infra note 157 and accompanying text. 129As discussed below, SROs may make the data necessary to generate consolidated market data available to competing consolidators and selfaggregators through their existing proprietary data products. See infra Section IV.B.1. Accordingly, any odd-lot quotations that are aggregated in an SRO’s existing proprietary data products would be required to be aggregated in a manner consistent with the method set forth in the proposed definition of core data. See also proposed Rule 603(b). However, self-aggregators would only be required to aggregate odd-lots as prescribed in Rule 600(b)(20) to the extent that generating a particular component of proposed core data is necessary for that selfaggregator to comply with applicable regulatory requirements. For example, to the extent that a selfaggregator’s activities require the self-aggregator to generate the NBBO, the self-aggregator shall do so as described in Rule 600(b)(20). 130Today, odd-lots are only aggregated into round lots for purposes of providing an exchange’s best bids and offers to the exclusive SIPs. See infra note 157. 131See supra note 115 for the definition of ‘‘protected quotation.’’ Odd-lot quotations are not protected quotations under Rule 611. However, as explained below, many exchanges, pursuant to their own rules, aggregate odd-lots across multiple price points into round lots for purposes of providing protected quotations to the exclusive SIPs. See infra notes 157–158 and accompanying text. Although not required by Rule 611 or contemplated upon adoption of Regulation NMS, this has become the prevailing practice. The odd-lot aggregation methodology set forth in the Commission’s proposed definition of core data would modify this
practice. See infra Section VI.C.1(c)(i). 132See infra Section III.C.1(d)(ii). 133See infra Section III.C.1(d)(ii) for a discussion of the proposed changes to protected bid and protected offer. indices are not NMS securities as defined in Regulation NMS 125 and, therefore, the Regulation NMS rules related to the collection, consolidation, and dissemination of information regarding NMS securities, and the NMS plan(s) required under Rule 603(b) for NMS stocks,126 do not apply. Accordingly, this information is not included in the proposed definition of core data.127 However, the Commission’s proposed definitions of core data and consolidated market data would not prohibit the independent provision of other types of market data by the SROs, and, as discussed below, under the decentralized consolidation model, competing consolidators would be permitted to collect data from the SROs and offer data products to subscribers that go beyond what is proposed to be defined as core data or consolidated market data. Therefore, the exclusion of OTCBB and concurrent use data from the proposed definitions of core data and consolidated market data does not preclude the provision of this data to market participants who wish to receive it. Finally, the proposed definition of core data requires that the BBO, NBBO, and the proposed depth of book data include odd-lots that when aggregated are equal to or greater than a round lot, and that such aggregation would occur across multiple prices and be disseminated at the least aggressive price of all such aggregated odd-lots. Several national securities exchanges today have rules that provide for a similar odd-lot aggregation procedure for purposes of providing quotation data to the exclusive SIPs.128 Although not currently required by Regulation NMS, odd-lot aggregation increases the amount of quotation data that is included in SIP data and provides transparency into trading interest would not otherwise have been represented in such data. The Commission preliminarily believes that this information is important and should uniformly be included in the proposed core data disseminated to investors and market participants.129 In addition, for similar reasons, the Commission proposes to include odd-lots that, when aggregated, form a round lot for purposes of the new proposed definition of depth of book data.130 The Commission preliminarily believes, however, that the proposed definition of core data should require a different procedure with respect to the aggregation of odd-lots for purposes of protected quotations.131 For the reasons discussed below, the scope of Rule 611 would not be extended to protected quotations of less than 100 shares.132 The Commission preliminarily believes that aggregating odd-lots across multiple price points for purposes of determining protected quotations would effectively extend trade-through protection to quotes of less than 100 shares at different prices.133 Therefore, the proposed definition of
core data provides that, for purposes of the calculation and dissemination of proposed core data by competing consolidators, and the calculation of proposed core data by self-aggregators, protected quotations would only include odd-lots at a single price that, when aggregated, are equal to or greater than 100 shares. However, the Commission is seeking comment on whether and how odd-lots should be aggregated and the specific proposed core data elements to which such aggregation should apply. The Commission requests comment on the proposed amendment to Rule 600(b)(20) to introduce a definition of core data. In particular, the Commission solicits comment on the following:
4. Do commenters believe Rule 600
should be amended to include a definition of core data? Why or why not?
5. Do commenters believe that the
Commission’s proposed definition of core data captures the key components of information with respect to quotations for and transactions in NMS stocks that are useful for participating in today’s markets? Are there any other useful market data elements that should be included in the proposed definition? Does the proposed definition include any elements that are not useful for trading? Please explain.
6. Do commenters believe that there is
sufficient demand for OTCBB, concurrent use, or other data currently provided by the exclusive SIPs that would not fall within the proposed definition of core data such that an independent market for the provision of this data would develop? Why or why not? Would the SROs or other entities that currently disseminate this data through the exclusive SIPs provide it through other means (i.e., to competing consolidators or directly to interested market participants)? Please explain.
7. The Commission is proposing to
include protected quotations in the proposed definition of core data. Do commenters believe that there is a need for a ‘‘national protected best bid or offer’’ analogous to the NBBO that would represent a snapshot of the single best protected bid and single best protected offer from among all the protected bids and offers of each SRO? Would this be a useful metric for competing consolidators to calculate and disseminate for market participants for either routing or regulatory compliance (e.g., the order execution disclosures required under Rule 605) purposes? Would firms that intend to self-aggregate produce such a metric on their own? Please explain.

134See infra note 166 and accompanying text, and infra text accompanying notes 166–170 for staff analysis of odd-lot activity for the top 500 securities by dollar volume. 135See infra notes 170–177. 136Rule 600(b)(51) defines odd-lot as ‘‘an order for the purchase or sale of an NMS stock in an amount less than a round lot.’’ 137See 15 U.S.C. 78k–1(a)(1)(C)(ii) (‘‘The Congress finds that . . . [i]t is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure . . . fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets.’’). 138See infra notes 159–160 and accompanying text. 139See infra notes 166–170 and accompanying text. 140Statements made by market participants suggest that a significant number of broker-dealers do not subscribe to all proprietary market data products. See Roundtable Day One Transcript at 178 (James Brooks, ICE Data Services) (‘‘[R]oughly half of the global investment banks take the most comprehensive New York Stock Exchange order-byorder feed, the other half do not.’’); Roundtable Day One Transcript at 181 (Michael Friedman, Trillium Management) (‘‘[T]he big fish . . . are the major consumers of depth-of-book data. I think there was some evidence . . . that there were only 50 to 100 firms, period who buy all of the depth-of-book feeds.’’). 141See, e.g., NYSE Rule 55 (‘‘Securities traded on the Exchange shall be quoted in round lots (generally 100 shares), except that in the case of certain stocks designated by the Exchange the round lot shall be such lesser number of shares as may be determined by the Exchange, with respect to each stock so designated.’’); Nasdaq Rule 5005(a)(39) (‘‘‘Round Lot’ or ‘Normal Unit of Trading’ means 100 shares of a security unless, with respect to a particular security, Nasdaq determines that a normal unit of trading shall constitute other than 100 shares.’’). According to NYSE Trade and Quote (‘‘TAQ’’) Data, as of August 2019, twelve stocks, all of which are listed on NYSE or NYSE American, had a round lot size other than 100. Ten stocks had a round lot of ten and two stocks had a round lot of one. 142Consolidated Tape System, Multicast Output Binary Specification, 85 (May 8, 2018), available at https://www.ctaplan.com/publicdocs/ctaplan/ notifications/trader-update/CTS_BINARY_ OUTPUT_SPECIFICATION.pdf. The technical specifications for the Nasdaq UTP Plan note that ‘‘[f]or most NASDAQ issues, the round lot size is 100 shares.’’ UTP Data Feed Services Specification, 22, available at http://www.utpplan.com/DOC/ UtpBinaryOutputSpec.pdf (last accessed Jan. 7, 2020). 143See supra note 141. 144 17 CFR 242.600(b)(51). 145See, e.g., Cboe BZX Rule 11.10 (‘‘One hundred (100) shares shall constitute a ‘round lot,’ any amount less than 100 shares shall constitute an ‘odd lot,’ and any amount greater than 100 shares that is not a multiple of a round lot shall
constitute a ‘mixed lot.’ ’’); Consolidated Tape System, Multicast Output Binary Specification, 84 (May 8, 2018), available at https://www.ctaplan.com/publicdocs/ ctaplan/notifications/trader-update/CTS_BINARY_ OUTPUT_SPECIFICATION.pdf (defining ‘‘odd lot’’ as ‘‘[a]n order amount for a security that is less than the normal unit of trading for that particular asset. Odd lots are considered to be anything less than the standard units of trade of 1, 10 or 100 shares.’’). 146The Commission’s proposal to add a definition of round lot will result in the inclusion of additional quotation data for smaller-sized orders in proposed core data, and, as discussed below in
Section III.C.1(d)(i), will also affect the firm quote
requirements of Rule 602(b), the customer limit order display requirements of Rule 604, the order execution disclosures required under Rule 605, the requirements under Rule 610(c) regarding fees for accessing quotations, and the Short Sale Circuit Breaker requirements of Rule 201. As discussed below in Section III.C.1(d)(ii), the Commission is also proposing certain amendments to the definition of ‘‘protected bid or protected offer’’ so that the scope of the order protection requirements of Rule 611 and the locked and crossed market prevention requirements of Rule 610(c) are not extended to the proposed smaller round lot sizes. 147See Rule 601, 17 CFR 242.601. 148See Rule 600(b)(84), 17 CFR 242.600(b)(84). 149See Rule 602, 17 CFR 242.602. 150See Rule 600(b)(9), 17 CFR 242.600(b)(9). 151See Rule 603, 17 CFR 242.603. 152See Rule 600(b)(43), 17 CFR 242.600(b)(43); Rule 600(b)(9), 17 CFR 242.600(b)(9). 153See Rule 610, 17 CFR 242.610. 154See Rule 611, 17 CFR 242.611. 155See Rule 604, 17 CFR 242.604. 156See Rule 604(b)(3), 17 CFR 242.604(b)(3).

Round Lot Size
Today, SIP data includes quotation information in round lots and transaction information in both round lots and odd-lots. Market participants interested in quotation data for individual odd-lot orders must purchase it from exchange proprietary feeds. As share prices for many widely-held stocks have risen, individual odd-lot orders now often represent economically significant trading opportunities at prices that are better than the prices of displayed and disseminated round lots.134 Accordingly, information about individual odd-lot orders has gained increased importance with investors and market participants, and some have suggested that odd-lot orders should be included in SIP data.135 The Commission is proposing to include certain information about quotations that are currently defined as odd-lots 136 in proposed core data by introducing a tiered definition of the term ‘‘round lot.’’ As proposed, the definition of round lot would assign different round lot sizes to individual NMS stocks depending upon their stock price. The Commission preliminarily believes this would improve the usefulness of proposed consolidated market data, promote fair competition,137 and, like the addition of odd-lot transaction data to SIP data, would provide important information to investors and other market participants that would enhance transparency and price discovery.138 Moreover, since oddlot quotes often represent opportunities to trade at prices that are superior to the prices disseminated by the Equity Data Plans,139 the inclusion of more of these quotes in proposed core data would facilitate the best execution analyses of broker-dealers who do not subscribe to proprietary data feeds that include all odd-lot information.140 Further, it would facilitate the ability of investors to use proposed core data to verify that their broker-dealers are providing best execution by providing investors with additional information on the pricing of smaller-sized orders. (a) Regulatory Background Round lot, though not defined in the Exchange Act or Regulation NMS, typically refers to orders or quotes for 100 shares or multiples thereof. Exchange rules typically define a round lot as 100 shares, but they also allow the exchange discretion to define it otherwise.141 The technical specifications for the Equity Data Plans provide similar definitions. For example, the CTA Plan defines round lot as ‘‘[t]ypically 100 shares of stock or any number of shares that is a multiple of 100 (i.e., 100, 600, 1,600, etc.).’’ 142 The exclusive SIP feeds also disseminate quotation and transaction information for stocks that have a round lot size of 10 or 1.143 Regulation NMS defines ‘‘odd-lot’’ as ‘‘an order for the purchase or sale of an NMS stock in an amount less than a round lot.’’ 144 Exchange definitions of odd-lot are similar, as is the definition of odd-lot in the technical specifications for the CTA Plan.145 Despite the absence of a round lot definition, other key defined terms in
Regulation NMS—such as ‘‘bid or offer,’’ ‘‘best bid and best offer,’’ and ‘‘quotation’’—refer, directly or indirectly, to round lot. The effect of these references to round lot is that oddlot quotation information is not currently collected or disseminated under Regulation NMS.146 For example, Rule 601 refers to ‘‘transaction reports,’’ 147 the definition of which refers to round lot.148 Rule 602 refers to ‘‘bids’’ and ‘‘offers,’’ 149 the definition of which also refer to round lot.150 Rule 603 refers to a ‘‘national best bid and national best offer,’’ 151 which ultimately refers back to round lot.152 Rules 610 (access to quotations) 153 and 611 (order protection rule) 154 do not apply to odd-lot orders. Rule 604 (display of customer limit orders) also refers to bids and offers 155 and specifically excludes odd-lot orders.156 Several exchanges, however, pursuant to their own rules, aggregate odd-lot orders into round lots and report such aggregated odd-lot orders as quotation information to the exclusive SIPs. Exchange rules specify how the

157See, e.g., NYSE Rule 7.36 (‘‘The best-ranked non-marketable displayed Limit Order(s) to buy and the best ranked non-marketable displayed Limit Order(s) to sell in the Exchange Book and the aggregate displayed size of such orders associated with such prices will be collected and made available to quotation vendors for dissemination pursuant to the requirements of Rule 602 of Regulation NMS under the Exchange Act. If nonmarketable odd-lot sized orders at multiple price levels can be aggregated to equal at least a round lot, such odd-lot sized orders will be displayed as the best ranked displayed orders to sell (buy) at the least aggressive price at which such odd-lot sized orders can be aggregated to equal at least a round lot.’’); Nasdaq Rule 4756 (‘‘Pursuant to Rule 602 of Regulation NMS under the Exchange Act, Nasdaq will transmit for display to the appropriate network processor for each System Security: (i) The highest price to buy wherein the aggregate size of all displayed buy interest in the System greater than or equal to that price is one round lot or greater; (ii) the aggregate size of all displayed buy interest in the System greater than or equal to the price in (i), rounded down to the nearest round lot; (iii) the lowest price to sell wherein the aggregate size of all displayed sell interest in the System less than or equal to that price is one round lot or greater; and (iv) the aggregate size of all displayed sell interest in the System less than or equal to the price in (iii), rounded down to the nearest round lot.’’); Cboe BZX Rule 11.9(c)(2) (‘‘Odd Lot Orders are only eligible to be Protected Quotations if aggregated to form a round lot.’’); supra Section III.C for a discussion of odd-lot aggregation. As noted above, the proposed definition of core data sets forth a methodology for odd-lot aggregation for the components of core data. Any odd-lot quotations that are aggregated in an SRO’s existing proprietary data products would be required to be aggregated in a manner consistent with the method set forth in the proposed definition of core data. See supra note 129. 158See id. For example, if there are three sell orders on an exchange for a particular NMS stock— 30 shares at $10.08, 20 shares at $10.09, and 50 shares at $10.10—the exchange will post 100 shares at $10.10 as a protected round lot quote to the exclusive SIP. See infra Section VI.C.1(c)(i). 159Odd-lot transaction data that is required to be collected, consolidated, and disseminated pursuant to the Equity Data Plans would be included in the proposed definition of consolidated market data pursuant to proposed Rule 600(b)(20)(viii). 160Securities Exchange Act Release Nos. 70793 (Oct. 31, 2013), 78 FR 66788 (Nov. 6, 2013) (order approving Amendment No. 30 to the UTP Plan to require odd-lot transactions to be reported to consolidated tape); 70794 (Oct. 31, 2013), 78 FR 66789 (Nov. 6, 2013) (order approving Eighteenth Substantive Amendment to the Second Restatement of the
CTA Plan to require odd-lot transactions to be reported to consolidated tape). 161 Id. at 66789–66790. 162For example, between 2004 and 2019, the average price of a stock in the Dow Jones Industrial Average nearly quadrupled. 163See Roundtable Day Two Transcript at 66 (Paul O’Donnell, Morgan Stanley) (‘‘We all know that, for high-price stocks, there is a market inside the NBBO’’); Roundtable Day One Transcript at 116 (Michael Blaugrund, NYSE) (recommending the inclusion in core data of odd-lots priced better than the BBO); Healthy Markets Association Letter II; staff odd-lot analysis, infra (observing that 43% of odd-lot transactions in September of 2019 occurred at prices better than the NBBO). 164Staff accessed consolidated data from the Equity Data Plans and exchange depth of book data, both of which staff receive through the SEC’s MIDAS platform. See Market Data Analytics System (‘‘MIDAS’’), available at https://www.sec.gov/ marketstructure/midas.html. This data is commercially available. 165 Id. See also Alexander Osipovich, Tiny ‘OddLot’ Trades Reach Record Share of U.S. Stock Market, Wall Street Journal (Oct. 23, 2019) (‘‘The share of trades in odd-lot sizes hit a record 48.9% on Oct. 7 and has stayed above 40% ever since, according to the NYSE data, which cover all U.S. equity trades, not just those on the Big Board.’’). 166See supra note 164. 167 Duration on the inside is the percent of the day the aggregate size at the best price (bid, offer, or both) is less than 100 shares based on the exchange proprietary data feeds. 168For example, staff observed that over 86% of the trades that occurred in the two largest securities by market capitalization that have share prices greater than $1,000 occurred in odd-lot share amounts. aggregation process works in different terms and with different levels of specificity,157 but many exchanges aggregate odd-lots across multiple prices and provide them to the exclusive SIPs at the least aggressive price if the combined odd-lot interest is equal to or greater than a round lot.158 In 2013, the participants to the Equity Data Plans filed proposed amendments to the Plans to add odd-lot transactions to SIP data.159 In support of the proposed amendments, the participants to the Equity Data Plans noted that ‘‘odd-lot transactions account for a not insignificant percentage of trading volume, [and] the Participants have determined that including odd-lot transactions on the consolidated tape . . . would add post-trade transparency to the marketplace.’’ 160 In approving the amendments, the Commission agreed that ‘‘odd-lot transactions comprise a noteworthy percentage of total trading volume,’’ and stated that ‘‘including odd-lot transactions on the consolidated tape will enhance post-trade transparency, as well as price discovery, and consequently would further the goals of the [Exchange] Act,’’ and that ‘‘information about odd-lot transactions would provide important information to investors and other market
participants and therefore represents a positive development in the provision of market data.’’ 161 (b) Market Evolution In recent years, the share prices of some of the most widely-held stocks have increased substantially.162 As a result of higher share prices, odd-lot orders in many securities have a high dollar, or notional, value. Because SIP data does not currently include odd-lot quotation information except to the extent that cumulative odd-lot interest equals or exceeds a round lot, the best quote reflected in proprietary data products, especially for many highpriced stocks, may be an odd-lot order that is at a price that is better than the best bid or best offer that is disseminated by the exclusive SIPs. Indeed, as discussed below, an analysis of odd-lot transaction data and comments made in connection with the Roundtable indicate that odd-lot orders are frequently priced better than the quotation prices that are disseminated by the exclusive SIPs, yet these orders are not seen by investors or market participants that rely solely on SIP data.163 The importance of increasing the transparency of odd-lot quotation information is supported by odd-lot quotation and transaction data. First, odd-lot transactions make up a significant proportion of transaction volume in NMS stocks, including exchange-traded products (‘‘ETPs’’). Based on data from the SEC’s MIDAS analytics tool,164 the daily exchange odd-lot rate (i.e., the number of exchange odd-lot trades as a proportion of the number of all exchange trades) for all corporate stocks ranged from approximately 29% to 42% of trades and the daily exchange odd-lot rate for all ETPs ranged from 14% to 20% of trades in 2018. More recently, in June 2019, the daily exchange odd-lot rate for all corporate stocks exceeded 50% several times (and exceeded 65% several times for the top decile by price) and reached almost 30% for all ETPs in the same period.165 Exchange odd-lot volume as a proportion of total exchange-traded volume also rose in June 2019, reaching approximately 15% for all corporate stocks (and over 30% for the top decile by price) and approximately 4% for all ETPs.166 Staff examined odd-lot trade and message volume, duration on the inside,167 order-book distribution, and quoted spreads for the top 500 securities by dollar volume during the week of September 10–14, 2018, using the exclusive SIP trades, exclusive SIP quotes, off-exchange data from FINRA’s TRFs, and all of the exchanges’ proprietary data feeds. Staff found that a significant portion of quotation and trading activity occurs in odd-lots, particularly for frequently traded, highpriced securities.168 Staff compared the bid-ask spread when using exclusive SIP quotation information (which is in round lots) vs. quotation information in the proprietary feeds (which includes odd-lots). On average, the measure of bid-ask spread, an important metric in understanding market liquidity and quote competition, widens (i.e., degrades)
significantly when calculated using only round lots relative to the odd-lot quotations displayed on proprietary feeds. In addition, as average stock share prices

169See supra note 163.
170Letter to Brent J. Fields, Secretary, Commission, from Tyler Gellasch, Executive Director, Healthy Markets Association, 5–11 (Mar. 5, 2019) (‘‘Healthy Markets Association Letter II’’). See also Letter to Brent J. Fields, Secretary, Commission, from Rich Steiner, Head of Client Advocacy and Market Innovation, RBC Capital Markets, LLC (Oct. 25, 2019) (‘‘RBC Letter’’) (stating that internal research suggested exclusive SIPs should display odd-lot quotes). 171See Roundtable Day One Transcript at 98–99 (Stacey Cunningham, NYSE); Roundtable Day One Transcript at 116–17 (Michael Blaugrund, NYSE); Roundtable Day Two Transcript at 72 (Michael Blaugrund, NYSE) (recommending expanding consolidated market data to include odd-lot orders priced better than the BBO); Roundtable Day One Transcript at 157–59 (Oliver Albers, Nasdaq) (stating that over 50% of the notional value of Nasdaq-listed names is in high priced stocks); Roundtable Day One Transcript at 226–27 (Chris Isaacson, Cboe); Roundtable Day Two Transcript at 73 (Prof. Robert Bartlett, UC Berkeley) (stating that including odd-lots in the trade data has been incredibly useful and including it in the quote data would be also helpful). 172See Roundtable Day One Transcript at 226–27 (Chris Isaacson, Cboe). In addition, another panelist suggested that revisiting Rule 611 for odd-lots has merit. See Roundtable Day One Transcript at 231– 32 (Vlad Khandros, UBS). See also Robert Battalio, et al., Unrecognized Odd Lot Liquidity Supply: A Hidden Trading Cost for High Priced Stocks, The Journal of Trading (Winter 2017), available at https://jot.pm-research.com/content/iijtrade/12/1/ 35.full.pdf (‘‘[T]he exclusion of odd lot orders from the protected NBBO quote produces cases in which trades fill at prices worse than available oppositeside trading interests.’’). 173See Roundtable Day One Transcript at 127–28 (Mark Skalabrin, Redline Trading Solutions). 174See Letter to Brent J. Fields, Secretary, Commission, from NYSE Group, 6, 13 (Oct. 24,
2018) (‘‘NYSE Group Letter’’) (stating that ‘‘[o]ddlot quoting, particularly in high-priced securities,
has become more prevalent in today’s markets and its exclusion from SIP feeds seems anachronistic’’; recommending that core data be expanded to include ‘‘the best bid and offer of any quantity’’; and stating that ‘‘Main Street would benefit if the prices disseminated by the SIPs included odd-lot quotes’’); Letter to Vanessa Countryman, Acting Secretary, Commission, from Theodore R. Lazo, Managing Director and Associate General Counsel, SIFMA (Sept. 18, 2019) (‘‘SIFMA Letter II’’); Letter to Brent J. Fields, Secretary, Commission, from Richard H. Baker, President and CEO, Global Head of Government Affairs Managed Funds Association and Jirı´ Kro´l, Deputy CEO, Global Head of Government Affairs, AIMA, 3–4 (Dec. 20, 2018) (‘‘MFA and AIMA Letter’’); Healthy Markets Association Letter II. 175See SIFMA Letter II at 3. 176See MFA and AIMA Letter at 3–4. 177See Healthy Markets Association Letter II. 178See RBC Letter at 1–2 (highlighting that approximately 50% of all odd-lot trades in stocks priced between $50 and $250 are in 20 shares or less). 179See Roundtable Day One Transcript at 159–60 (Adam Inzirillo, BAML) (stating that the different display options could result in a change from current practices). rose, bid-ask spreads based only on round lots generally widened by a greater amount than did spreads based on round lots and odd-lots. During the period staff analyzed, for the 500 most frequently traded securities by dollar volume, the average bid-ask spread of the 50 securities with the highest share prices decreased (improved or tightened) by $.05970 when calculated using the proprietary feeds relative to the exclusive SIP feed. Bid-ask spreads for the 50 securities with the lowest share prices showed less improvement when using the proprietary feeds relative to the exclusive SIP feed, decreasing (or tightening) on average by $.00017. Staff also evaluated the frequency of trades in odd-lot sizes for the top 500 securities by dollar volume and found that frequently traded, high priced securities are likely to have a substantial portion of executions occur in odd-lot sizes. More than 25 percent of the onexchange share volume of the 50 securities with the highest share prices occurred in odd-lot sizes. In comparison, less than 2% of the onexchange share volume of the 50 securities with the lowest share prices occurred in odd-lot sizes. In addition, as noted above,169 statements made by Roundtable panelists and commenters suggest that odd-lot orders can reflect prices that are better than the quotation prices that are disseminated by the exclusive SIPs. These observations are consistent with staff observations of odd-lot transaction pricing reflected in recent trading data. During the month of September 2019, a substantial proportion of odd-lot trades occurred at prices that are better than the prevailing NBBO. Specifically, approximately 51% of all trades executed on exchange and approximately 14% of all volume executed on exchange in corporate
stocks (3,930 unique symbols) occurred in odd-lot sizes (i.e., less than 100 shares), and 43% of those odd-lot transactions (representing approximately 39% of all odd-lot volume) occurred at a price better than the NBBO. (c) Roundtable Discussion, Comments, and Alternative Proposals In connection with the Roundtable, one commenter presented data showing increased odd-lot trading and quoting rates over the last several years, as well as the existence of quotes on proprietary feeds that are at prices better than the NBBO disseminated by the exclusive SIPs.170 Several panelists at the Roundtable were supportive of adding odd-lot quotation information to SIP data.171 One panelist who supported adding odd-lot orders to SIP data noted that the application of order protection under Rule 611 to odd-lot quotes would need to be considered and added that he would likely be in favor of applying Rule 611 to odd-lot quotes.172 Finally, one panelist emphasized the importance of odd-lot quotation data to market participants, stating that content that exists only in the proprietary feeds— such as odd-lots—is needed to make effective decisions in trading applications and to fill client orders effectively.173 In addition, several comment letters submitted in connection with the Roundtable supported adding odd-lot quotation information to SIP data or otherwise highlighted negative consequences of its exclusion from SIP data.174 One commenter stated that the Commission should consider rulemaking to expand SIP data to include odd-lot information during which the Commission could gather data and determine whether odd-lots are valuable for price discovery for all securities.175 Commenters asserted that having to purchase ‘‘relatively basic data such as odd-lots’’ through exchange proprietary offerings goes against one of the main purposes of the national market system: Enabling investors’ orders to be executed without the participation of a dealer.176 Another commenter provided data showing that proprietary feeds that include odd-lot quotes reflect superior pricing compared to the SIP data disseminated by the Equity Data Plans and indicated its support for adding odd-lot quotes to SIP data.177 Similarly, another commenter stated that as stock prices overall have risen and average trade sizes have fallen, odd-lots are becoming more important in the trading process, and the commenter presented data showing that stock price has a meaningful impact on odd-lot frequency and trade size and that high-priced stocks frequently trade in smaller quantities.178 Some Roundtable panelists, however, pointed out complications that might arise from the addition of more odd-lot information to the SIP data. One panelist stated that an issue with adding odd-lot quotations to the Equity Data Plans is that they are not protected quotations under Rule 611, so, in the view of the panelist, there would be uncertainty as to whether a brokerdealer has to access odd-lot quotations to meet
regulatory obligations. This panelist added that there will need to be clarity as to how odd-lots are reported to the exclusive SIPs and represented in the consolidated tapes (e.g., whether 50 shares at $10 and 100 shares at $10 will be shown separately or as 150 shares at $10).179 Another panelist stated that caution should be exercised in adding odd-lots to SIP data to avoid

180See Roundtable Day One Transcript at 160–61 (Matt Billings, TD Ameritrade). 181See CTA Plan and UTP Plan, Odd Lots Initial Proposal (‘‘SIP Odd Lot Initial Proposals’’), available at http://www.utpplan.com/DOC/Odd_ Lots_Proposal.pdf, https://ctaplan.com/publicdocs/ CTA_Odd_Lots_Proposal.pdf; CTA Plan and UTP Plan Operating Committees, SIP Operating Committees Seek Comment on Proposal to Add Odd Lot Quotes to SIP Data Feeds (Oct. 2, 2019) (‘‘SIP Odd Lots Proposal Press Release’’), available at https://www.globenewswire.com/news-release/ 2019/10/02/1924016/0/en/SIP-OperatingCommittees-Seek-Comment-on-Proposal-to-AddOdd-Lot-Quotes-to-SIP-Data-Feeds.html; Letter from Robert Books, Chairman, UTP and CTA Operating Committees, to industry members and investors, 1 (Jan. 6, 2020) (‘‘CTA and UTP Annual Letter’’), available at https://forefrontcomms.com/wpcontent/uploads/2020/01/2020-Annual-Letter_ FINAL_.pdf. The SIP Odd Lot Initial Proposals are the subject of continuing consideration by the operating committees. Comments are available at https://www.ctaplan.com/oddlots. 182See supra note 115. 183See SIP Odd Lot Initial Proposals, supra note 181, at 1. 184See id. 185See id. 186Cboe, Cboe’s Vision: Equity Market Structure Reform (Jan. 21, 2020) (‘‘Cboe Report’’), available at http://www.cboe.com/aboutcboe/governmentrelations/pdf/cboes-vision-equity-market-structurereform-2020.pdf. 187See id. at 3. 188See id. at 2–3. 189See supra Section III.C.1(b) (discussing staff odd-lot analysis). 190 Id. 191Specifically, larger or better resourced brokerdealers may be more capable of paying the fees for multiple proprietary data feeds to obtain odd-lot quotations from several markets and consolidating these feeds to create a more complete picture of the market. See infra Sections VI.B.2(c), VI.B.3(a), and VI.B.3(b). In addition, the proposed definition of round lot would help ensure that market participants, including retail investors, would receive information on smaller-sized orders in higher-priced stocks in a context in which a trading or order routing decision can be implemented and would receive more informative order execution quality information. See infra Section III.C.1(d)(i) (discussing the effect of the proposed definition of round lot on Rules 603(c) and 605). 192See supra note 180 and accompanying text. 193See infra note 195. Further, attempting to access orders of insignificant notional value—the share price multiplied by the number of shares in the order—could result in a situation where the benefit associated with accessing additional liquidity may be offset by the cost associated with signaling to other market participants the presence of a large incoming order. See Securities Exchange Act Release No. 78309 (July 13, 2016), 81 FR 49432, 49440 (July 27, 2016) (‘‘[S]ophisticated market participants closely monitor order and execution activity throughout the markets, looking for patterns that signal the existence of a large institutional order,
so that they can use that information to their trading advantage . . . Indeed, institutional customers have expressed concern that excessive routing of their orders may increase the risk of information leakage without a commensurate benefit to execution quality.’’). By limiting the quotation information that is added to the proposed core data to orders of $1,000 dollars notional value or more, as explained below, the proposed definition of round lot will increase transparency into smaller-sized orders while reducing the likelihood of information leakage. 194The IPO price would be used in lieu of the prior calendar month’s average closing price on the primary listing exchange for newly issued stocks. See proposed Rule 600(b)(81). overwhelming market participants with information. This panelist suggested that a ‘‘price level metric,’’ such as including odd-lot orders with a value in excess of a specified price, might make sense.180 On October 2, 2019, the Equity Data Plans published an ‘‘initial proposal’’ for public comment regarding the addition of odd-lot quotes to the Equity Data Plans for dissemination by the respective exclusive SIPs.181 Under this proposal, the addition of odd-lot quotes would not change how the NBBO is calculated, nor would such quotes be ‘‘protected quotations’’ 182 under Regulation NMS. Rather, the odd-lot quote data would be ‘‘ancillary’’ data available to exclusive SIP customers.183 Each exchange would send its top of book odd-lot quotes to the exclusive SIPs in the same form in which it currently sends its top of book round lot quotes.184 An ‘‘odd-lot best bid and offer’’ would be calculated in the same manner as the round lot NBBO, but would not be disseminated when it is worse than the NBBO.185 Additionally, on January 21, 2020, Cboe Global Markets, Inc. (‘‘Cboe’’) published a report detailing its recommendations for U.S. equity market structure.186 In the report, Cboe recommended that top of book odd-lot quotations be included in the exclusive SIP feeds.187 Furthermore, Cboe recommended redefining round lot with lower numbers for higher priced securities.188 (d) Commission Discussion and Proposal (i) Proposed Definition of Round Lot Data on odd-lot trading and quoting activity evaluated by staff,189 and the remarks and comments of market participants, suggest that SIP data omits a substantial amount of economically significant trading interest. Furthermore, bid-ask spreads calculated using round lot orders do not include some odd-lot quotations that may be at prices better than round lot orders, particularly for higher priced securities.190 The Commission is concerned that information about significant trading interest in odd-lot orders is only available to market participants who have purchased proprietary market data products from exchanges and remains unavailable to those that rely solely on SIP data. This creates a potentially significant information asymmetry between SIP data and proprietary data.191 Further,
the Commission is concerned about the view expressed by some market participants that achieving best execution may be difficult for brokerdealers that rely solely on SIP data. The Commission preliminarily believes that, to address these and other concerns, certain odd-lot quotation data should be required to be disseminated as part of proposed core data so that it is made more readily available to investors and market participants. The Commission is proposing that this be accomplished by defining the term ‘‘round lot’’ to include certain orders that currently are defined as ‘‘odd-lots.’’ Given the prevalence of odd-lot quoting and trading, particularly in higherpriced stocks, the absence of odd-lot quotation data significantly reduces the comprehensiveness and usefulness of SIP data. The Commission preliminarily believes that the inclusion of odd-lot quotations in proposed core data should be reasonably calibrated. The Commission is preliminarily concerned that including all odd-lot quotations could, as some Roundtable commenters suggested,192 burden systems, increase complexity, and degrade the usefulness of information in a manner that may not be warranted by the relative benefits of the additional information to investors and market participants.193 Accordingly, under proposed Rule 600(b)(81) of Regulation NMS, a ‘‘round lot’’ would be defined as: (1) For any NMS stock for which the prior calendar month’s average closing price on the primary listing exchange 194 was $50.00 or less per share, an order for the purchase or sale of an NMS stock of 100 shares; (2) for any NMS stock for which the prior calendar month’s average closing price on the primary listing exchange was $50.01 to $100.00 per share, an order for the purchase or sale of an NMS stock of 20 shares; (3) for any NMS stock for which the prior calendar month’s average closing price on the primary listing exchange was $100.01 to $500.00 per share, an order for the purchase or sale of an NMS stock of 10 shares; (4) for any NMS stock for which the prior calendar month’s average closing price on the primary listing exchange was $500.01 to $1,000.00 per share, an order for the purchase or sale of an NMS stock of 2 shares; and (5) for any NMS stock for which the prior calendar month’s average closing price on the primary listing exchange was $1,000.01 or more per share, an order

195The proposed definition of round lot only includes a subset of all odd-lot quotation data, namely, orders with a notional value of at least $1,000. This would limit the number of data messages that would be provided to market participants when compared to providing all oddlot quotation data. The Commission preliminarily believes that the proposed definition would address concerns regarding additional complexity and degradation of the usefulness of the data. See infra
Section VI.C.1(b)(i).
196See infra Section VI.C.1.
197See supra notes 163–169 and accompanying text. 198Commenters to the SIP Odd Lot Initial Proposals have suggested defining round lots based on share price. See Letter to SIP Operating Committees from Hubert De Jesus, Managing Director, Global Head of Market Structure and Electronic Trading, Blackrock, and Joanne Medero, Managing Director, Global Public Policy Group, Blackrock, regarding Odd Lots Proposal, 2 (Dec. 3, 2019), available at https://www.theice.com/ publicdocs/BlackRock_Odd_Lot_Proposal_ December_3_2019.pdf (‘‘The sizing of round lots provides an intuitive mechanism for expanding odd lot coverage because its designation as the normal unit of trading is embedded in exchange rulebooks and market regulations. . . . BlackRock believes that a data-driven redefinition of round lots to scale lot size relative to security price would improve transparency and promote fairer and more efficient markets.’’); Letter from Benjamin Connault, Economist, IEX Group, Inc., and Lucy Malcolm, Associate General Counsel, IEX Group, Inc., to Operating Committees, regarding Odd Lots Proposal and Round Lot Proposal, 2 (Nov. 18, 2019), available at https://www.theice.com/publicdocs/ IEX_Letter_re-CTA–UTP_Odd-Lots_Proposal_ 20191118.pdf (‘‘IEX strongly supports reducing the round lot size for higher-priced securities.’’). 199See supra Section III.C.1(b) (stating that the daily exchange odd-lot rate for the top decile of corporate stocks by price exceeds the rate for all corporate stocks). 200See RBC Letter at 5. 201 Id. 202 Deutsche Bank, Global Equities, There’s More to Odd Lots than High-Priced Stocks (June 25, 2019). 203See supra Section III.C.1(b). for the purchase or sale of an NMS stock of 1 share.
Table 1, below, shows the number of
NMS stocks that would be in each proposed round lot tier based on monthly average closing prices in September of 2019, as well as the percent of overall average daily volume (‘‘ADV’’) and notional value (‘‘$ADV’’) of each price group:
TABLE 1
Stock price group
Number of stocks in stock price group Percent of ADV, by price group (%) Percent of $ADV, by price group (%) $0.00–$50.00 ............................................................................................................................... 7,188 75.02 31.70 $50.01–$100.00 ........................................................................................................................... 1,094 13.64 21.06 $100.01–$500.00 ......................................................................................................................... 575 11.20 43.40 $500.01–$1,000.00 ...................................................................................................................... 14 0.05 0.64 $1,000.01 + .................................................................................................................................. 15 0.09 3.19 The Commission’s proposed definition of round lot attempts to balance the benefits of adding more quotation data regarding smaller-sized orders to proposed core data against the concerns raised by some Roundtable panelists and commenters that adding all odd-lot quotes to proposed core data could increase its complexity and undermine its usefulness.195 The proposed definition, in effect, limits the quotation data that would be added to proposed core data to quotations that represent a notional value of at least $1,000, which the Commission preliminarily believes to be meaningful order size for today’s market participants.196 A round lot is a standard unit of trading that traditionally has reflected an order of meaningful size to market participants. Given the per share price increases of certain securities, and the large number of orders in sub-100 share sizes in today’s market,197 the Commission preliminarily believes that the current round lot size of 100 shares no longer captures many orders of meaningful size. The number of shares in an order, on its own, has become a less accurate way of distinguishing orders of meaningful size from those of de minimis size. For example, a 100- share order for an $11 stock and a 10 share order for a $110 stock both have a notional value of $1,100, but, under exchange rules and NMS plans, only the former may be a round lot currently. The Commission preliminarily believes that defining round lots based on a dollar value would better reflect orders of meaningful size.198 Furthermore, higher odd-lot trading rates are associated with higher-priced stocks,199 and, according to data provided in connection with the Roundtable, odd-lot transaction sizes go down as share price goes up.200 The proposed tiered, price-based round lot definition is intended to reflect these market dynamics. More specifically, a significant odd-lot transaction market— measured by odd-lot trade frequency— emerges at approximately a $50 share price, and 50% of the odd-lots traded in stocks priced between $50 and $250 are 20 shares or less.201 This corresponds, approximately,
with the proposed 20 share round lot category for stocks priced between $50.01 and $100.00 per share. Moreover, according to data provided in connection with the Roundtable, 20, 10, 2, and 1 share oddlot trade sizes are among the most common, with approximately 2.8%, 5.1%, 5.3%, and 11.7%, of odd-lot executions, respectively.202 The proposed definition of round lot is intended to broadly reflect these key data points in the context of a relatively simple, intuitive framework for establishing round lot sizes and associated price thresholds. Moreover, a significant portion of the odd-lot transactions that occur at a price better than the NBBO 203 would be captured by the proposed definition of round lot. Specifically, of the odd-lot transactions executing at a price better than the NBBO during all of the trading days in September 2019, approximately 38% of such transactions and 61% of the odd-lot volume were in sizes that would be round lots under proposed Rule 600(b)(81). For example, for those stocks with an average prior calendar month’s closing price on the primary listing exchange equal to or greater than $500.01 and less than $1,000, approximately 77% of all trades (99% of volume) in sizes less than 100 shares that occurred at a price better than the prevailing NBBO had a transaction size of 2 shares or more. Table 2 and Table 3, below, show the portion of odd-lot trades and volume, respectively, executed a price better than the prevailing NBBO that would be defined as round lots under the proposal:

204Specifically, the prior calendar month’s average closing price on the primary listing exchange would be the mean of the daily closing prices on the primary listing exchange for all trading days in the prior calendar month. For each NMS stock, the prior calendar month’s average closing price on the primary listing exchange would only need to be computed at the beginning of each calendar month and would be in effect for the rest of the month (i.e., it would not be a ‘‘rolling’’ average requiring computation more frequently than once per calendar month). 205See Christopher Ting, Which Daily Price Is Less Noisy?, Financial Management 35, no. 3 (2006): 81–95 (describing daily closing price as a popular reference price, including for fund managers to compute net asset values). 206See 17 CFR 242.600(b)(9). 207See 17 CFR 242.600(b)(8). 208See 17 CFR 242.600(b)(43). 209Similarly, since ‘‘transaction report’’ is defined as ‘‘a report containing the price and volume associated with a transaction involving the purchase or sale of one or more round lots of a security,’’ core data, as proposed, would include transaction reports based on the new proposed round lot sizes. The Equity Data Plans already collect and disseminate all odd-lot transaction reports and last sale data. See supra notes 160–161 and accompanying text. Accordingly, under proposed Rule 600(b)(19)(iv), which incorporates data elements required by the NMS plan(s) into the proposed consolidated market data, the SROs would continue to be required to provide all oddlot transaction reports and last sale data as part of the proposed consolidated market data.
TABLE 2
Stock price group Proposed round lot definition Portion of all trades less than 100 shares, at a price better than the prevailing NBBO, occurring in a quantity that would be defined as a round lot under the proposal (%)
$0.00–$50.00 ............................................................ 100 shares ............................................................... 0
$50.01–$100.00 ........................................................ 20 shares ................................................................. 46
$100.01–$500.00 ...................................................... 10 shares ................................................................. 59
$500.01–$1000.00 .................................................... 2 shares ................................................................... 77
$1,000.01 or more .................................................... 1 share ..................................................................... 100
TABLE 3
Stock price group Proposed round lot definition Portion of all volume transacted in a quantity less than 100 shares, at a price better than the prevailing NBBO, occurring in a quantity that would be defined as a round lot under the proposal (%)
$0.00–$50.00 ............................................................ 100 Shares ............................................................... 0
$50.01–$100.00 ........................................................ 20 Shares ................................................................. 89
$100.01–$500.00 ...................................................... 10 Shares ................................................................. 95
$500.01–$1000.00 .................................................... 2 Shares ................................................................... 99
$1,000.01 or more .................................................... 1 Share .................................................................... 100
The proposed definition of round lot requires the round lot size of an NMS stock to be based on the prior calendar month’s average closing price on the primary listing exchange for that stock (or the IPO price if the prior calendar month’s average closing price on the primary listing exchange is not available).204 The Commission preliminarily believes that the prior calendar month’s average closing price on the primary listing exchange is a reasonable metric to assess an NMS stock’s share price for purposes of determining the applicable round lot size. The daily closing price is a widely followed indicator of a stock’s value that is often used to measure performance over time.205 Moreover, using a monthly average (rather than, e.g., each trading day’s closing price or a weekly average), would help ensure that round lot sizes are based on current pricing information, while preventing shortterm price fluctuations from impacting the round lot size, thereby avoiding unnecessary complexity and cost. The proposed definition of round lot would impact other terms that are currently defined in Regulation NMS, as well as the proposed definition of core data (and its included terms), so that quotation information in the proposed round lot sizes would be included in the proposed definition of core data. Specifically, the definition of ‘‘bid or offer’’ 206 is based on round lots, and the definition of ‘‘bid or offer’’ is reflected in the definition of ‘‘best bid and best offer.’’ 207 Similarly, the definition of ‘‘best bid and best offer’’ is reflected in the definition of ‘‘national best bid and national best offer.’’ 208 Therefore, the addition of the proposed definition of round lot would impact the calculation of the NBBO by requiring that it be calculated based upon the BBOs in the new round lot sizes. In addition, the proposed definition of depth of book data refers to ‘‘quotation size,’’ which refers to ‘‘bid or offer,’’ so the quotation data at the price levels that are proposed to be included in depth of book data would include quotations in the new proposed round lot sizes.209 The proposed definition of ‘‘round lot’’ would also affect Rules 602, 603, 604, 605, 606, and 610 of Regulation NMS. Rule 602 governs the dissemination of quotations in NMS securities. Specifically, Rule 602(a), among other things, requires SROs to have procedures to collect and make available certain quotation information from their members and make available their best bids and offers to vendors. As a result of the proposed definition of ‘‘round lot,’’ the SROs would be required to collect and make available quotations in the smaller round lot sizes depending on the price of the NMS stock. The Commission preliminarily believes the bids and offers collected and made available under Rule 602(a) should be in the proposed round lot sizes. As discussed above, the Commission preliminarily believes that the proposed round lot sizes represent orders of meaningful size to market
participants and should be collected, consolidated, and disseminated in proposed core data. To effectively implement this, exchanges must be required to collect and make available

210 ‘‘Subject security’’ means ‘‘(i) With respect to a national securities exchange: (A) Any exchangetraded security other than a security for which the executed volume of such exchange, during the most recent calendar quarter, comprised one percent or less of the aggregate trading volume for such security as reported pursuant to an effective transaction reporting plan or effective national market system plan; and (B) Any other NMS security for which such exchange has in effect an election, pursuant to 242.602(a)(5)(i), to collect, process, and make available to a vendor bids, offers, quotation sizes, and aggregate quotation sizes communicated on such exchange; and (ii) With respect to a member of a national securities association: (A) Any exchange-traded security for which such member acts in the capacity of an OTC market maker unless the executed volume of such member, during the most recent calendar quarter, comprised one percent or less of the aggregate trading volume for such security as reported pursuant to an effective transaction reporting plan or effective national market system plan; and (B) Any other NMS security for which such member acts in the capacity of an OTC market maker and has in effect an election, pursuant to 242.602(a)(5)(ii), to communicate to its association bids, offers, and quotation sizes for the purpose of making such bids, offers, and quotation sizes available to a vendor.’’ 17 CFR 242.600(b)(77). 211See Rule 602(b)(2), 17 CFR 242.602(b)(2); Regulation NMS Adopting Release, supra note 10, at 37538. ‘‘Published bid and published offer means the bid or offer of a responsible broker or dealer for an NMS security communicated by it to its national securities exchange or association pursuant to § 242.602 and displayed by a vendor on a terminal or other display device at the time an order is presented for execution to such responsible broker or dealer.’’ 17 CFR 242.600(b)(64). 212 17 CFR 242.602(b)(2). See also Rule 600(b)(64) which defines ‘‘published bid and published offer.’’ 17 CFR 242.600(b)(64). 213Rule 600(b)(14) defines ‘‘consolidated display’’ as ‘‘(i) The prices, sizes, and market identifications of the national best bid and national best offer for a security; and (ii) Consolidated last sale information for a security.’’ 17 CFR 242.600(b)(14). 214Rule 603(c)(2) further states that this provision does not apply to a display of information on the trading floor or through the facilities of a national securities exchange or to a display in connection with the operation of a market linkage system implemented in accordance with an effective national market system plan. 17 CFR 242.603(c)(2). 215See 17 CFR 242.604(b)(3). 216Among other things, these reports must be ‘‘categorized by order size,’’ which means ‘‘dividing orders into separate categories for sizes from 100 to 499 shares, from 500 to 1999 shares, from 2000 to 4999 shares, and 5000 or greater shares.’’ 17 CFR 242.600(b)(11). 217Rule 600(b)(7) defines ‘‘average
realized spread’’ as ‘‘the share-weighted average of realized spreads for order executions calculated, for buy orders, as double the amount of difference between the execution price and the midpoint of the national best bid and national best offer five minutes after the time of order execution and, for sell orders, as double the amount of difference between the midpoint of the national best bid and national best offer five minutes after the time of order execution and the execution price; provided, however, that the midpoint of the final national best quotations in these sizes under Rule 602(a). In addition, Rule 602(b) provides that each ‘‘responsible broker or dealer’’ shall communicate to its SROs its best bids and offers and quotation sizes for a ‘‘subject security.’’ 210 Thereafter, each responsible broker or dealer is obligated to execute an order to buy or sell a subject security, other than an odd-lot order, that is presented to that responsible broker or dealer at a price at least as favorable to such buyer or seller as the responsible broker’s or dealer’s ‘‘published bid or published offer.’’ 211 In other words, the responsible broker or dealer must be firm for its ‘‘published bid or published offer.’’ 212 As a result of the proposed definition of round lot, responsible brokers or dealers will be required to communicate bids and offers in the proposed round lot sizes and be firm for such bids and offers. The Commission preliminarily believes that the proposed round lot definition should apply to the obligations of responsible brokers or dealers under Rule 602(b). As explained above, the Commission preliminarily believes that the proposed round lot sizes better reflect orders of meaningful size in today’s markets. The Commission also preliminarily believes that the objectives of Rule 602(b) of ensuring that broker-dealers disseminate their best quotes, and are firm for such quotes, would be furthered by applying the proposed definition of round lots such that those obligations would apply to quotes of meaningful size. Rule 603(c) governs the display of information with respect to quotations for and transactions in NMS stocks. Specifically, Rule 603(c)(1) states that no securities information processor, broker, or dealer shall provide, in a context in which a trading or order routing decision can be implemented, a display of any information with respect to quotations for or transactions in an NMS stock without also providing, in an equivalent manner, a consolidated display—i.e., the NBBO and consolidated last sale information 213— for such stock.214 As a result of the proposed definition of ‘‘round lot,’’ a securities information processor, broker, or dealer would be required to provide a consolidated display that reflects smaller-sized orders in higher-priced stocks. As discussed above, the Commission preliminarily believes that the proposed round lot sizes represent orders of meaningful size to market participants. The Commission also
preliminarily believes that the objective of Rule 603(c) of ensuring that market participants receive basic quotation and transaction information in a context in which a trading or order routing decision can be implemented would be furthered to the extent that such information is based on orders of meaningful size such as round lots as proposed to be defined in this proposal. Rule 604, which governs the display of customer limit orders for NMS stocks, would also be affected by the proposed definition of round lot. Rule 604(a)(1) requires each member of a national securities exchange that is registered with that exchange as a specialist, or is authorized by that exchange to perform functions substantially similar to those of a specialist, to publish immediately a bid or offer that reflects: (i) The price and the full size of each customer limit order held by the specialist that is at a price that would improve the bid or offer of such specialist in such security; and (ii) the full size of each customer limit order held by the specialist that is priced equal to the bid or offer of such specialist for such security, is priced equal to the national best bid or national best offer, and represents more than a de minimis change in relation to the size associated with the specialist’s bid or offer. Rule 604(a)(2) imposes similar requirements on OTC market makers with respect to their customer limit orders. The requirements of Rule 604 do not apply to customer limit orders that, among other things, are odd-lots.215 Under the proposed definition of round lot, a specialist or OTC market maker would have to include customer limit orders in the new round lot sizes within its published bids and offers. Rule 604 currently applies to round lots and the Commission preliminarily believes that Rule 604 should continue to use round lots, as proposed to be defined, as the measure for customer limit orders that must be reflected in a specialist or OTC market maker’s published bid or offer. The Commission preliminarily believes that the objectives of Rule 604 of ensuring that customers have the ability to effectively seek price improvement through the dissemination of their limit orders by specialists or OTC market makers would be furthered by applying the proposed definition of round lot such that those obligations would apply to customer limit orders of meaningful size. Therefore, the Commission preliminarily believes that the customer limit order display requirements of Rule 604 should apply to orders in the new proposed round lot sizes. Rule 605, which governs the disclosure of order execution quality information, would also be affected by the proposed definition of round lot because of the effect on the definition of NBBO. Rule 605 requires market centers to publish monthly reports containing execution statistics 216 for certain NMS stock orders, including, but not limited to, the ‘‘average realized spread,’’ 217

bid and national best offer disseminated for regular trading hours shall be used to calculate a realized spread if it is disseminated less than five minutes after the time of order execution.’’ 17 CFR 242.600(b)(7). 218Rule 600(b)(6) defines ‘‘average effective spread’’ as ‘‘the share-weighted average of effective spreads for order executions calculated, for buy orders, as double the amount of difference between the execution price and the midpoint of the national best bid and national best offer at the time of order receipt and, for sell orders, as double the amount of difference between the midpoint of the national best bid and national best offer at the time of order receipt and the execution price.’’ 17 CFR 242.600(b)(6). 219Rule 600(b)(29) defines ‘‘executed with price improvement’’ as ‘‘for buy orders, execution at a price lower than the national best offer at the time of order receipt and, for sell orders, execution at a price higher than the national best bid at the time of order receipt.’’ 17 CFR 242.600(b)(29). 220Rule 600(b)(28) defines ‘‘executed outside the quote’’ as ‘‘for buy orders, execution at a price higher than the national best offer at the time of order receipt and, for sell orders, execution at a price lower than the national best bid at the time of order receipt.’’ 17 CFR 242.600(b)(28). 221Rule 600(b)(27) defines ‘‘executed at the quote’’ as ‘‘for buy orders, execution at a price equal to the national best offer at the time of order receipt and, for sell orders, execution at a price equal to the national best bid at the time of order receipt.’’ 17 CFR 242.600(b)(27). 222Supra note 219. 223Supra note 220. 224See supra Section III.C.1(d)(i) (discussing the impact of the proposed definition of round lot on other Regulation NMS defined terms, such as the NBBO). As discussed above, the Commission preliminarily believes that actual execution quality for retail investors will be improved as a result of the inclusion of odd-lot quotes in core data as a result of the better pricing that is often reflected in odd-lots. 225The NBBO used for purposes of Rule 605 would be calculated by competing consolidators and self-aggregators using the proposed round lot sizes. See supra Section III.C.1(d)(i). Under the proposal, each competing consolidator and selfaggregator would be required to calculate an NBBO consistent with the requirements set forth in the NBBO definition found in Rule 600(b)(50). See proposed Rule 614(d)(2). Accordingly, even though each competing consolidator and self-aggregator would be calculating its own NBBO, the calculation methodology for the NBBO would be consistent. Because the NBBO would be calculated in a consistent manner, Rule 605 reports should still provide uniform comparisons of execution quality. 226Broker-dealers who engage in outsourced routing activity are exempt from the requirement to comply with Rule 606(b)(3) until April 1, 2020. See Securities Exchange Act Release No. 86874 (Sept. 4, 2019), 84 FR
47625 (Sept. 10, 2019). 227See 17 CFR 242.600(b)(1). See also Securities Exchange Act Release No. 84528 (Nov. 2, 2018), 83 FR 58338 (Nov. 19, 2018) (‘‘Rule 606 Adopting Release’’). 228See id. 229See Regulation NMS Adopting Release, supra note 10, at 37502. ‘‘average effective spread,’’ 218 data on shares ‘‘executed with price improvement,’’ 219 and data on shares ‘‘executed outside the quote.’’ 220 The calculations of average realized spread and average effective spread rely on the mid-point of the NBBO. Similarly, the benchmark for price improvement statistics, as reflected in the definitions of ‘‘executed at the quote,’’ 221 ‘‘executed with price improvement,’’ 222 and ‘‘executed outside the quote,’’ 223 is the NBBO. As discussed above, since the NBBO will be based on the proposed round lot sizes, any Rule 605 execution quality statistics that rely on the NBBO as a benchmark would be affected by the proposed definition of round lot on the NBBO.224 The Commission preliminarily believes that order execution disclosures required under Rule 605 should be based on the NBBO that reflects the new proposed round lot sizes. The NBBO is currently based on round lots, and the proposed definition of round lot would allow additional orders of meaningful size to determine the NBBO. As a result, the execution quality and price improvement statistics required under Rule 605 would be based upon an updated NBBO that the Commission preliminarily believes is a more meaningful benchmark for these statistics. Therefore, the Commission preliminarily believes that the NBBO, as modified by the proposed definition of round lot, should continue to be used as a basis for the statistics required under Rule 605.225 Rule 606, which requires brokerdealers to provide disclosure of information regarding the handling of the broker-dealers’ customers’ orders,226 would also be affected by the proposed definition of round lot because of the effect on the definition of actionable indication of interest.227 Specifically, Rule 606(b)(3) requires every brokerdealer, upon a request of a customer who places a not held order, to provide the customer with a standardized set of individualized disclosures concerning the broker-dealer’s handling of the orders. The disclosures include, among other things, not held orders exposed by the broker-dealer through actionable indications of interest, and the venue(s) to which the actionable indications of interest were exposed, provided that the identity of such venue(s) may be anonymized if the venue is a customer of the broker-dealer. Rule 600(b)(1) defines an actionable indication of interest as any indication of interest that explicitly or implicitly conveys all of the following information with respect to any order available at the venue sending the indication of interest: (i) Symbol; (ii) side (buy or sell); (iii) a price that is equal to or better than the national best bid for buy orders and the national best offer for sell orders; and (iv)
a size that is at least equal to one round lot.228 As a result of the proposed definition of round lot, there could be more actionable indications of interest in higher priced securities. The Commission preliminarily believes that applying the proposed round lot definition to actionable indications of interest would further the objectives of Rule 606 regarding the disclosure of order handling information—to make it easier for investors to evaluate how their brokers handle orders and make more informed decisions about brokers, and help investors to better understand how broker-dealers route and handle orders and assess the impact of broker-dealer routing decisions on order execution quality. In addition, Rule 610, which governs access to quotations, would be affected by the proposed definition of round lot. Specifically, Rule 610(c) prohibits trading centers from imposing fees for the execution of an order against a protected quotation or any other quotation that is the best bid or offer of an SRO if the fees exceed certain limits ($0.003 per share for quotes of $1.00 or more and 0.3% of the quotation price per share for quotes less than $1.00). As the Commission explained in adopting Regulation NMS, ‘‘the purpose of the fee limitation is to ensure the fairness and accuracy of displayed quotations by establishing an outer limit on the cost of accessing such quotations,’’ and Rule 610 ‘‘thereby assures order routers that displayed prices are, within a limited range, true prices.’’ 229 As a result of the proposed definition of round lot, these fee limitations would apply to quotes in the smaller round lot sizes because they would apply to quotations that are the ‘‘best bid or offer’’ of an SRO. Rule 610(c) currently applies to quotations in round lots and the Commission preliminarily believes that Rule 610(c) should apply to quotations in the new proposed round lot sizes. The Commission preliminarily believes that applying the fee limitations of Rule 610(c) to orders of meaningful size, as reflected in the proposed definition of round lot, would further that rule’s objectives of ensuring the accuracy of displayed quotations by establishing an outer limit on the cost of accessing them. Finally, Rule 201 of Regulation SHO requires, among other things, that trading centers have written policies and procedures reasonably designed to prevent the execution or display of a short sale order of a covered security at a price that is less than or equal to the current national best bid if the price of that covered security decreases by 10% or more from the covered security’s closing price as determined by the listing market for the covered security as of the end of regular trading hours on

230 17 CFR 242.201(b)(1)(i).
231Securities Exchange Act Release No. 61595, supra note 75. The Commission also preliminarily believes that instituting a different round lot size for purposes of Rule 201 would introduce unnecessary complexity into the markets. In particular, excessive order routing complexity may be introduced if order routers are allowed to execute a short sale order against certain bids (i.e., smaller round lots that are priced better than the 100-share national best bid) but not allowed to execute a short sale order against other bids (i.e., a 100-share bid). 232See supra notes 181–185. the prior day.230 As a result of the proposed definition of round lot, the national best bid would include orders in the proposed round lot sizes. The Commission preliminarily believes that the objectives of Rule 201 of restricting destabilizing short sale orders in rapidly declining markets would be furthered by applying the proposed definition of round lot such that bids of meaningful size would be included within this restriction.231 The Commission requests comment on the proposed definition of round lot in proposed Rule 600(b)(81) and the inclusion of additional quotation information for higher priced shares in proposed core data that would result from this proposed definition. In particular, the Commission solicits comment on the following:
8. Should odd-lot quotation data that
is not currently reflected in SIP data be incorporated into core data, as proposed, and, if so, what is the best way to do so?
9. Should core data, as proposed,
include quotation information for smaller sized orders in higher priced stocks? Why or why not? Does adding this quotation information enhance the usefulness of core data, as proposed? Please explain. What kinds of market participants would use this information? For what purposes? Would the inclusion of this information have any negative or unintended consequences, such as ‘‘information overload’’ effects? Please explain.
10. Do commenters believe the
Commission’s proposed definition of round lot is an effective way to incorporate this additional quotation information into core data, as proposed? Why or why not? What effect would the proposed definition have on systems capacity? Please explain and provide data. Would the proposed definition affect market complexity? Please explain. Do commenters believe that the proposed definition of round lot appropriately balances the benefits of providing additional quotation data to investors and other market participants against potential costs such as additional system burdens or increased data complexity? If not, please explain how this balance could be more appropriately achieved. Specifically, please provide details on the quantity of additional data or the increase in message traffic that would be represented by the Commission’s proposal and any alternative proposals.
11. Are there alternative approaches,
such as requiring all or a subset of oddlot quotations to be included in the proposed definition of core data, or directly requiring all quotes over a certain notional value to be included in the proposed definition of core data (rather than indirectly as in the proposed definition of ‘‘round lot’’)? Please describe any alternative approaches. What would be the advantages and disadvantages of any alternative approaches?
12. Would the Commission’s
proposed definition of round lot capture a significant portion of the odd-lot quotation activity that is currently not included in SIP data? Is the definition appropriately tailored to capture the odd-lot quotation information that would be useful to market participants? If not, please identify and discuss alternative approaches that might be more appropriate. For example, do commenters believe round lot sizes and price intervals different from those in the proposed definition would capture more useful odd-lot quotation data? Please include data to support any suggested alternative sizes or price intervals. Please also discuss any issues related to increased order routing complexity or compliance with Commission rules that might result from the proposed definition of ‘‘round lot.’’
13. Do commenters believe that oddlot quotes should be aggregated into the
new round lot sizes at multiple price levels for the purposes of calculating and disseminating the NBBO in the proposed definition of core data? Why or why not? What are commenters’ views on the specific odd-lot aggregation methodology set forth in the proposed definition of core data?
14. Do commenters agree with the
Commission’s proposal to require oddlot aggregation for purposes of protected quotations only at a single price level? Please explain. Should odd-lots be aggregated only at a single price level for purposes of determining the protected bid and offer for stocks valued at $50.00 or less based on the prior calendar month’s average closing price on the primary listing exchange even though the round lot for this price tier remains 100 shares (i.e., both the best bid and offer and protected bid and offer must be 100-shares in this price tier)? Should a multiple price level aggregation methodology for determining protected quotations apply to stocks valued at $50.00 or less? Would there be any costs or negative effects of having different odd-lot aggregation methodologies for stocks at different price levels?
15. Is a price-based metric for
determining round lot size an appropriate metric for determining the proposed round lot tiers? Are the proposed tiered round lot sizes appropriate? Why or why not? Should the tiers be set at different intervals? Should there be more or fewer tiers? For example, should the round lot size be one share for any NMS stock for which the prior calendar month’s average closing price on the primary listing exchange was $500.01 or greater? Why or why not? Are the round lot sizes appropriate for the share prices? If not, what is the appropriate round lot size? Please provide empirical support for any suggested alternatives.
16. Do commenters believe that a
significant number of broker-dealers do not currently subscribe to proprietary market data products, including proprietary market data products that include odd-lot quotations? If so, how many and what type of broker-dealers (e.g., executing broker-dealers, introducing broker-dealers, small broker-dealers, large broker-dealers)? Are there specific types of proprietary market data products to which any such broker-dealers do not subscribe? If so, which types of proprietary market data products? Do any such broker-dealers subscribe to proprietary data products from some exchanges but not others?
17. Do commenters have views on the
odd-lot proposal released by the operating committees of the Equity Data Plans? 232 What are the advantages and disadvantages of the proposal by the Equity Data Plans as compared to the Commission’s proposed definition of round lot?
18. Each of the proposed tiers
represent a notional value of over $1,000. Is this an appropriate threshold? Should it be higher or lower? Please explain and submit data to support your analysis.
19. Do commenters believe that the
prior calendar month’s average closing price on the primary listing exchange (or IPO price if the prior calendar month’s average closing price is not available) is an effective way to assess the price of a stock for purposes of determining its round lot size? Why or why not? Do commenters believe it would be costly, difficult, or problematic for market participants to adjust procedures and systems to take into account new round lot sizes based

233See supra note 216.
234Rule 611(a)(1). See also supra notes 115, 182. Rule 600(b)(81) defines ‘‘trade-through’’ as ‘‘the purchase or sale of an NMS stock during regular trading hours, either as principal or agent, at a price that is lower than a protected bid or higher than a protected offer.’’ 17 CFR 242.600(b)(81). 235Specifically, Rule 611 applies to ‘‘protected quotations’’ which means ‘‘protected bid[s] or []protected offer[s].’’ 17 CFR 242.600(b)(62). ‘‘Protected bid or protected offer,’’ as defined in Rule 600(b)(61), refers to ‘‘a quotation,’’ defined in Rule 600(b)(66), which in turn refers to ‘‘a bid or an offer,’’ defined in Rule 600(b)(9), which, as noted above, applies to round lots. 236For example, in its April 2017 memorandum discussing Rules 610 and 611 under the Exchange Act, the Equity Market Structure Advisory Committee (‘‘EMSAC’’) Regulation NMS Subcommittee (‘‘Subcommittee’’) stated that the industry largely remained divided in its view on both the success and the continued need for the trade-through and the locked and crossed markets provisions of Regulation NMS. See Memorandum to EMSAC from the Subcommittee (Apr. 3, 2017), available at https://www.sec.gov/spotlight/emsac/ emaac-regulation-nms-subcommittee-discussionframework-040317.pdf. In the memorandum, the Subcommittee recommended, among other things, that the Commission consider repealing Rule 611 on a pilot basis, with the goals of reducing excess complexity in the marketplace (as demonstrated by venue fragmentation, order types, and routing complexity); testing the hypothesis that Rule 611 has not created an incentive for posting visible liquidity; and opening the markets to competition and innovation over a longer time horizon, which the Subcommittee believed is currently constrained due to the proscriptive nature of Regulation NMS. The Subcommittee noted several arguments supporting the removal of Rule 611, including the apparent failure of Regulation NMS to increase the display of limit orders in the marketplace and the increase in dark liquidity, smaller trade sizes, and ‘‘small’’ venues; the de minimis benefit from decreased trade-through rates, coupled with a relatively high cost of trade-through compliance and the creation of new venues, complex order types, and a need to focus on speed and other market complexities as a requirement to manage queue priority; the fact that competition among market centers is largely based on price and speed; and the difficulty of setting the NBBO in active stocks without the use of sophisticated price-sliding order types and intermarket sweep orders. The Subcommittee also identified several arguments in support of retaining Rule 611, including concerns, especially among individual investors, of losing the best execution backstop of the trade-through rule; the concern that individual investors’ nonmarketable orders would lose trade-through protection; and a concern regarding the amount of effort that could be required to further monitor order
routing behavior by agents in the absence of a trade-through rule. The Subcommittee also expressed the view that Rule 611 is too prescriptive as a best execution rule and that concerns about Continued on the prior calendar monthly average closing price on the primary listing exchange, or to account for a particular stock’s potentially different round lot size every month? Are there alternative time periods over which a stock’s price for purposes of assigning a round lot size should be measured or alternative methods for measuring a stock’s price that the Commission should consider? When should a stock whose price changes from one tier to another be assigned to a new round lot size and for how long should it remain in that round lot size? Would stocks priced near the thresholds that differentiate the round lot tiers be affected by frequent shifts between round lot sizes? Please explain.
20. During the month following the
IPO of a newly listed stock, should a minimum number of trading days be required to elapse before the stock’s round lot size is determined? If so, should the average daily closing price on the primary listing exchange (or some other metric) over the course of that number of trading days be used to calculate the stock’s price for purposes of determining its round lot size? If so, how would the stock’s round lot size be determined in the interim?
21. Do commenters have views on
how monthly average closing price should be determined for stocks that are not traded every day? Should the closing price of the most recent trading day on which there was a trade be used each intervening day until the stock is traded again?
22. Do commenters believe that the
impacts of the proposed definition of round lot on the Commission rules described above are appropriate? Why or why not? Will any SRO rules be affected? Please explain. Specifically, please describe any effect of the proposed definition of round lot on market maker quoting obligations under SRO rules.
23. Should the proposed definition of
round lot apply to Rules 602 and 604? Do commenters believe the applicability of the proposed smaller round lot sizes to these rules will help foster more displayed quotations of small orders? Do commenters believe this will result in a significant tightening of quoted spreads?
24. Should the Commission amend
Rule 605 in light of the proposed round lot definition? Specifically, since the disclosures required by Rule 605 must be ‘‘categorized by order size,’’ 233 which currently begins at 100 shares, should the definition of ‘‘categorized by order size’’ be amended to require the relevant execution information to be provided for sub-100 share orders, such as orders in the proposed round lot sizes? Do commenters believe this would negatively or positively affect the execution quality statistics provided pursuant to Rule 605? More broadly, do commenters believe the proposed definition of round lot would improve the actual prices provided to retail investors (as distinct from the Rule 605 execution quality statistics)?
25. Should the proposed definition of
round lot apply to Rule 610(c)?
Specifically, should the fee limits under Rule 610(c) apply to quotations in the proposed new round lot sizes? Would exchanges or other trading centers increase access fees for the smaller round lots if Rule 610(c) were limited to 100-share protected quotations? Why or why not? Do commenters believe that market forces would provide sufficient control over access fees for quotations in the smaller round lots? Why or why not? Should Rule 610(c) be limited to the Commission’s definition of protected bid or protected offer, as amended? What would be the benefits and costs of each approach?
26. Should the proposed definition of
round lot apply to Rule 201 of Regulation SHO? Would the scope of Rule 201 be expanded as a result of the proposed definition of round lot in a way that would unnecessarily restrict the ability of market participants to sell short? Will additional or excessive order routing complexity result from the application of Rule 201 to quotations in the proposed smaller round lot sizes? Should ‘‘protected bid,’’ as proposed to be amended, rather than the national best bid be used as the reference price for determining which short sales are required to be prevented under Rule 201? What would be the benefits and costs of each approach?
27. Do commenters believe that the
proposed definition of round lot would have any effect on an exchange’s official closing prices? Would the proposed definition of round lot have any effect on the pricing practices of mutual funds and other investment companies, including the calculation of net asset value or trading in portfolio securities? Please explain the potential costs and benefits of any such effects.
28. Do commenters believe that the
proposed definition of round lot would affect the proportion of on-exchange or off-exchange liquidity? Please explain. (ii) Proposed Amendments to the Definition of Protected Bid or Protected Offer Rule 611 requires trading centers to have policies and procedures that are reasonably designed to prevent tradethroughs on that trading center of protected bids or protected offers in NMS stocks, subject to specified exceptions.234 Rule 611 currently applies only to round lots.235 If the definition of protected bid or protected offer were left unmodified, the Commission’s proposed definition of round lot would result in an expansion of Rule 611 by requiring the protection of quotations in the new smaller round lot sizes. Whether Rule 611 should be modified or repealed has been the subject of much debate in recent years.236 Rule

best execution could be addressed more effectively through enhanced guidance and procedures. 237See Regulation NMS Adopting Release, supra note 10, dissenting opinion. 238See Regulation NMS Adopting Release, supra note 10, at 37505–37506, 37516, 37524–37526. 239See Memorandum to EMSAC from the Subcommittee, supra note 236; Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, SIFMA to Brent J. Fields, Secretary, SEC, 5–7 (Mar. 29, 2017), available at https://www.sec.gov/comments/s7-21-16/s72116- 1674693-149275.pdf (recommending that the SEC consider (1) eliminating Rule 611 and relying on the duty of best execution to maintain intermarket price protection, or (2) modifications to Rule 611 to add volume thresholds for protected quote status and a block exception); Letter from William R. Harts, CEO, Modern Markets Initiative, to Brent J. Fields, Secretary, SEC (Dec. 9, 2016), available at https:// www.sec.gov/comments/s7-21-16/s72116-9.pdf (recommending that the SEC review Rule 611 to assess whether it should be modified in light of the costs of compliance). 240See Memorandum to EMSAC from the Subcommittee, supra note 236. 241See Equity Market Structure Concept Release, supra note 11, 75 FR at 3594 (‘‘NYSE-listed stocks were traded primarily on the floor of the NYSE in a manual fashion until October 2006. At that time, NYSE began to offer fully automated access to its displayed quotations.’’). In contrast to NYSE, stocks listed on Nasdaq traded in a highly automated fashion at many different trading centers following the introduction of SuperMontage in 2002. See Securities Exchange Act Release No. 46429, supra note 15; Steven Quirk, Senior Vice President, Trader Group, TD Ameritrade, Testimony before the U.S. Senate Committee on Homeland Security and Governmental Affairs, Permanent Subcommittee on Investigations, Hearing on ‘‘Conflicts of Interest, Investor Loss of Confidence, and High Speed Trading in U.S. Stock Markets’’ (June 17, 2014), available at https://www.hsgac.senate.gov/imo/ media/doc/STMT%20-%20Quirk%20- %20TD%20Ameritrade%20(June%2017%202014) .pdf%20 (citing statistics that average execution speed has improved by 90% since 2004—from 7 seconds to 0.7 seconds in 2014). Today, trading speed is measured in microseconds and is moving towards nanoseconds. See, e.g., Vera Sprothen, Trading Tech Accelerates Toward Speed of Light, Wall Street Journal (Aug. 8, 2016), available at https://www.wsj.com/articles/trading-techaccelerates-toward-speed-of-light-1470559173; Alexander Osipovich, NYSE Aims to Speed Up Trading With Core Tech Upgrade, Wall Street Journal (Aug. 5, 2019), available at https:// www.wsj.com/articles/nyse-aims-to-speed-uptrading-with-core-tech-upgrade-11565002800. 242See Securities Exchange Act Release No. 59039 (Dec. 2, 2008), 73 FR 74770, 74782 (Dec. 9,
2008) (File No. SR–NYSEArca–2006–21) (NYSE’s
reported market share of trading in NYSE-listed stocks declined from 79.1% in January 2005 to 30.6% in June 2008.); Equity Market Structure Concept Release, supra note 11. 243See Equity Market Structure Concept Release, supra note 11, 75 FR at 3598 (‘‘The registered exchanges all have adopted highly automated trading systems that can offer extremely high-speed, or ‘low-latency,’ order responses and executions.’’). 244See Equity Market Structure Concept Release, supra note 11, at 3594, 3598; Paul G. Mahoney and Gabriel Rauterberg, The Regulation of Trading Markets: A Survey and Evaluation, University of Virginia School of Law, Law and Economics Research Paper Series 2017–07, at 6 (Apr. 2017) (‘‘Brokers overwhelmingly place orders and trade through [NYSE’s] electronic trading system . . . all markets have come to rely more and more on using software to match buy and sell orders automatically.’’). 245See Securities Exchange Act Release No. 37619A (Sept. 6, 1996) 61 FR 48290, 48305 and 48323 (Sept. 12, 1996) (‘‘Order Execution Obligations Release’’) (‘‘The market maker still will have best execution obligations with respect to the remaining odd-lot portion of the customer limit order.’’). 246See supra notes 196–198 and accompanying text (explaining that the proposed definition of round lot is intended to reflect orders of meaningful size for today’s market participants). 247Moreover, the Commission is aware that many market participants today already utilize proprietary data feeds that include odd-lots and, therefore, already have visibility into odd-lot quotations priced better than the NBBO. Accordingly, since these market participants already see and trade with quotations that are priced better than protected quotations and have best execution obligations, the greater transparency into smaller-sized orders that the Commission is proposing is not dissimilar from the trading environment that exists today for many market participants. See also supra note 90. 248See supra Section III.C.1(b) (stating that, during the month of September 2019, approximately 51% of all trades executed on exchange and approximately 14% of all volume executed on exchange in corporate stocks occurred in odd-lot sizes and 43% of those odd-lot transactions (representing approximately 39% of all odd-lot volume) occurred at a price better than the NBBO); supra Tables 2 and 3 (showing the portion of all trades and volume less than 100 shares, at a price better than the prevailing NBBO, occurring in a quantity that would be defined as a round lot under the proposal). 249But see infra notes 250–252 and accompanying text (discussing stocks that currently have non-100 share round lot sizes). In addition, the proposed amendments to the definition of protected bid or protected offer would also provide clarity to market participants as to whether quotations in the new round lot sizes are protected quotations for purposes of Rule 611, which is responsive to comments made by some
Roundtable panelists regarding uncertainty as to whether additional oddlot quotation information would be protected under 611 was controversial when adopted,237 with many commenters either opposing the rule entirely or advocating for exceptions, such as for block trades or for those wishing to opt out of the Rule’s protections.238 In the years since, Rule 611 has continued to be the subject of much debate, with some arguing that the rule has negatively impacted equity market structure, others taking the position that any benefits were achieved early on when the Rule induced widespread automated quotations and connectivity, and yet others expressing the view that the Rule continues to play an important role in supporting best execution and retail investor confidence.239 Recently, a Subcommittee of the Commission’s Equity Market Structure Advisory Committee advocated that the EMSAC recommend that the Commission consider repealing Rule 611 on a pilot basis to test its impact.240 In light of the concerns about the existing scope of Rule 611, the Commission preliminarily believes that Rule 611 should not be extended to smaller-sized quotations reflected in the proposed definition of round lot. Moreover, the Commission preliminarily believes that extending Rule 611 to the proposed new round lots is not necessary in light of market developments since the adoption of Regulation NMS in 2005. While a substantial amount of trading in 2005 was conducted on relatively slow manual markets,241 and was concentrated for any given stock on its listing exchanges,242 nearly all trading now occurs on fast, electronic markets (where even small degrees of latency affect trading strategies) and is dispersed among a wide range of competing market centers.243 In a market environment characterized by fast, electronic trading across multiple venues, order routing and execution strategies have become highly automated and increasingly sophisticated at obtaining the best prices throughout the national market system.244 In addition, best execution obligations apply to odd-lot orders 245 and would apply to bids and offers in the proposed round lot sizes. The Commission preliminarily believes that these market developments and improvements in trading and order routing technology, in combination with their pursuit of best execution, would provide sufficient incentives for market participants to engage with meaningfully sized orders 246 even in the absence of an expanded order protection mandate under Rule 611.247 Further, the additional pre-trade transparency that would be provided to these orders by their inclusion in proposed core data should encourage market participants to access this liquidity, as many market participants that access similar data through proprietary feeds are already doing today.248 Moreover, as discussed above, the execution quality and price improvement statistics required under Rule 605 would be based upon an NBBO that reflects the new proposed round lot
sizes, and would provide investors, including retail investors, with higher-quality information about their order executions. Thus, the Commission is proposing to amend the definition of ‘‘protected bid or protected offer’’ in Rule 600(b)(61) by requiring automated quotations that are the best bid or offer of a national securities exchange or national securities association to be ‘‘of at least 100 shares’’ in order to qualify as a protected bid or protected offer. The proposed addition of this language will preserve the existing scope of Rule 611 for the vast majority of NMS stocks.249

Rule 611. See supra note 179 and accompanying text. 250See supra note 141. 251Of the 12 stocks that had non-100 share round lot sizes, ten had a round lot of ten, and two had a round lot of one. Seven are common stocks, and five are preferred stocks. Prices of these stocks ranged from about $27 to over $300,000. See supra note 141 and accompanying text. Currently, each of these stocks is thinly-traded. For example, during the third quarter of 2019, each of these stocks had:
An average daily share volume below 40,000, with most trading only hundreds of shares a day; an average trade count of less than 3,200, with some trading only dozens of times per day; and an average daily dollar volume of less than $130 million, with most trading on average less than $1 million per day. 252A ‘‘protected bid or protected offer’’ is defined as a ‘‘quotation in an NMS stock that (i) is displayed by an automated trading center; (ii) is disseminated pursuant to an effective NMS plan; and (iii) is an automated quotation that is the best bid or best offer of a national securities exchange . . . or national securities association.’’ Rule 600(b)(61), 17 CFR 242.600(b)(61). ‘‘Protected quotation means a protected bid or protected offer.’’ Rule 600(b)(62), 17 CFR 242.600(b)(62). As explained above, ‘‘protected quotations’’ must be round lots, and exchange rules permit round lot sizes other than 100, so quotes in these stocks in their non-100 round lot sizes are ‘‘protected quotes.’’ See supra notes 141, 235. Similarly, other rules in Regulation NMS that apply to round lots as a result of references to ‘‘bid or offer’’ or other defined terms that directly or indirectly reference ‘‘round lot,’’ such as Rules 602, 603, 604, and 605, also apply to 1 or 10 share round lot quotes of these stocks. 253See supra notes 241–244 and accompanying text. 254See supra note 245. 255For example, pursuant to the proposed definitions of round lot and protected bid or offer, a 20 share buy order for a stock that had an average monthly closing price of between $50.01 and $100.00 could be locked or crossed. 256See Memorandum to EMSAC from the Subcommittee, supra note 236; Letter from Joanna Mallers, Secretary, FIA Principal Trading Group, to Brent J. Fields, Secretary, SEC, 2–3 (Mar. 13, 2017), available at https://www.sec.gov/comments/s7-21- 16/s72116-1686170-149597.pdf (recommending the Commission review Rule 610(d) in light of increased complexity associated with restrictions on locking and crossing quotations); Letter from William R. Harts, CEO, Modern Markets Initiative, to Brent J. Fields, Secretary, SEC (Dec. 9, 2016), available at https://www.sec.gov/comments/s7-21- 16/s72116-9.pdf (recommending the Commission review the prohibition on locking or crossing quotations in light of the unnecessary complexity and investor confusion). 257See Memorandum to EMSAC from the Subcommittee, supra note 236. 258See supra notes 241–244 and accompanying text. As noted above, exchange rules generally permit the exchange to assign a round lot size other than 100 shares.250 As of market close on August 8, 2019, 12 stocks had a round lot size other than 100 shares,251 and because they are round lots, they are protected quotations to the extent that they satisfy the other requirements in the definition.252 Therefore, Rule 611 currently applies to orders of those stocks in their non-100 share round lot sizes. The proposed amendment to the definition of protected bid and
protected offer would mean that the smaller round lot orders in these 12 stocks would no longer be protected quotations, and therefore they would no longer be subject to Rule 611. The Commission preliminarily believes that the rule should be consistently applied to protected quotations of 100 shares or more (or quotations of fewer than 100 shares that can be aggregated at a single price into 100 shares or more). The Commission preliminarily believes that a single test for the applicability of the protected quotation definition, without special exceptions for certain stocks, would be simpler, would facilitate compliance with Rule 611, and would set consistent expectations among market participants. Further, the Commission preliminarily believes that competition among broker-dealers, improvements in trading and order routing technology,253 and the continued applicability of best execution requirements to sub-100 share orders of these stocks would provide sufficient incentives for the attainment of high-quality executions of such orders even in the absence of tradethrough protection pursuant to Rule 611.254 The Commission is also proposing to delete the references to ‘‘The Nasdaq Stock Market, Inc.’’ in the definition of protected bid or protected offer. Since the Nasdaq Stock Market is now a national securities exchange, that language is redundant. Finally, the locked and crossed markets restrictions of Rule 610 are based on the term ‘‘protected quotation.’’ Specifically, Rule 610(d) requires each national securities exchange and national securities association to establish, maintain, and enforce rules that, among other things, require its members to reasonably avoid displaying quotations that lock or cross any protected quotation in an NMS stock and that prohibit its members from engaging in a pattern or practice of displaying quotations that lock or cross any protected quotation in an NMS stock, absent an applicable exception. Under the proposed amendments to the definition of protected bid or protected offer, ‘‘protected quotation’’ will refer to displayed, automated quotations that are the best bids or offers of at least 100 shares of a national securities exchange or association. As a result, quotations in the new, smaller proposed round lot sizes would not be subject to Rule 610(d) and could be locked or crossed.255 As with Rule 611, the locked and crossed markets provisions of Rule 610 continue to be the subject of much debate, with some arguing that they create additional market complexity without a clear benefit.256 Recently, a Subcommittee of the Commission’s EMSAC advocated that the EMSAC recommend that the Commission consider repealing the locked and crossed markets provisions of Rule 610 on a pilot basis to test its impact, in conjunction with an access fee pilot.257 In light of the concerns about the existing scope of the locked and crossed markets provisions of Rule 610, the Commission preliminarily believes that such provisions
should not be extended to smaller sized quotations reflected in the proposed definition of round lot. In addition, the Commission preliminarily believes that market forces, such as the economic incentives of market participants to obtain the best price and resolve locked or crossed markets, as well as improvements in trading and order routing technology,258 are sufficient to mitigate excessive locking or crossing of quotations in the new round lot sizes and to resolve such locked or crossed markets efficiently. The Commission requests comment on the proposed amendments to the definition of protected bid or protected offer in proposed Rule 600(b)(69). In particular, the Commission solicits comment on the following:
29. Do commenters believe that the
Commission’s proposed amendments to the definition of protected bid or protected offer are an effective way to continue to require order protection for 100 share orders but not for smaller orders, or would an alternative be better? Please explain.
30. Do commenters believe that the
definition of NBBO should reflect the proposed round lot sizes or should it remain consistent with the 100-share protected quotation? Why or why not?
31. Do commenters believe that Rule
611 should be extended to orders in the smaller round lot sizes set forth in the proposed definition of round lot? Why or why not? If Rule 611 were to be extended to the proposed smaller round lot sizes, would there be any negative or unintended consequences? Please explain in detail.
32. Do commenters believe it would
be costly for market participants to adjust procedures and systems to comply with Rule 611 and prevent trade-throughs at the smaller round lot sizes? Please describe the necessary changes and any consequent costs in detail.
33. Do commenters believe it would
be costly for market participants to

259See supra note 141.
260 In addition, market participants that purchase exchange proprietary feeds may calculate their own NBBOs for their internal purposes. 261As discussed above, the best bid or best offer for an NMS stock of an exchange may contain multiple prices that are better than the best bid or best offer to the extent that an exchange aggregates better priced odd-lots and provides them to the exclusive SIPs at the least aggressive price that forms a round lot. 262The definition of NMS security is broader than NMS stock and includes ‘‘any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in listed options.’’ 17 CFR 242.600(47). 263See supra Section III.C.1(d)(i). 264The competing consolidator model described herein addresses the current market data infrastructure for NMS stocks and not the exclusive SIP for options. See infra note 417. 265See infra notes 499–502 and accompanying text. 266See infra notes 276–277 and accompanying text. 267See, e.g., Roundtable Day One Transcript at 120 (Jeff Brown, Charles Schwab) (‘‘So our recommendation for this panel and for this day is that the SEC move to impose . . . depth of book on the SIP.’’). Suggestions for enhancing core data, however, have failed to garner the support by participants to the Equity Data Plans necessary for action. See infra Section III.C.2(c); supra note 164 and accompanying text; supra Section II.A (discussing the distinction between the exclusive SIPs and proprietary DOB data feeds and market participants’ views regarding their ability to use core data to be competitive in today’s markets and provide best execution to their customers). See also, e.g., NYSE Sharing Data-Driven Insights—Stock Quotes and Trade Data: One Size Doesn’t Fit All (Aug. 22, 2019), available at https://www.nyse.com/ equities-insights#20190822 (proposing to replace the exclusive SIP feeds with three tiered levels of service, including certain DOB data, based on the needs of specific types of investors). adjust procedures and systems to comply with Rule 611 and prevent trade-throughs at 100 share order sizes when the new round lot size may be smaller? Please describe the necessary changes and any consequent costs in detail. Please also discuss how this differs meaningfully from today, if at all, for market participants that are currently using proprietary data feeds that include odd-lot information.
34. Do commenters believe that the
best execution obligation, combined with the greater transparency that the Commission is proposing for smallersized orders in higher-priced stocks, is sufficient, in the absence of the order protection rule, for market participants to engage with the liquidity represented by orders in the proposed round lot sizes to obtain the best execution for smaller-sized customer orders?
35. Should the Commission maintain
the applicability of Rule 611 to the small number of stocks 259 that currently have a round lot other than 100? Why or why not?
36. Do commenters agree with the
proposal not to extend Rule 610’s locking and crossing requirements to orders with the proposed smaller-round lot sizes? If not, why not? Do commenters have views or data on the frequency with which smaller-sized orders would be locked or crossed? Please explain. Would it be costly to apply locking and crossing prevention mechanisms to the new round lot sizes? Please explain. (iii) Proposed Amendments to the Definition of National Best Bid and National Best Offer Today, the NBBO is calculated by the exclusive SIPs and disseminated over the consolidated tapes.260 The NBBO is defined in Rule 600(b)(43) as the best bid and best offer 261 for an NMS security 262 that is calculated and disseminated on a current and continuous basis by the exclusive SIPs. The definition further provides that if two or more market centers transmit identical bids or offers for an NMS security, the best bid or best offer shall be determined by ranking all identical bids or offers first by size (giving the highest ranking to the bid or offer associated with the largest size) and then by time (giving the highest ranking to the bid or offer received first in time). Accordingly, the NBBO reflects one market center that is the best bid and one market center that is the best offer across all market centers. As noted above, the proposed round lot definition would affect the calculation of the NBBO by requiring that the best bids and offers transmitted by the SROs to be in the new round lot sizes.263 Accordingly, the proposed definition of round lot, if adopted, would result in an NBBO that reflects the smaller round lot sizes. The proposed definition of round lot does not necessitate changes to the definition of NBBO. However, as discussed further below, the Commission is proposing a decentralized consolidation model where competing consolidators and selfaggregators would replace the exclusive SIPs. Therefore, the Commission is proposing amendments to the definition of NBBO to reflect that competing consolidators and self-aggregators, rather than the exclusive SIPs, would be calculating the NBBO in the proposed decentralized consolidation model. In addition, to accommodate this proposed decentralized consolidation model, the Commission is proposing to bifurcate the NBBO definition between NMS stocks and other NMS securities (i.e., listed options) to reflect that the proposed decentralized consolidation would apply only with regard to NMS stocks, and therefore the exclusive SIP for options would continue to be responsible for calculating and disseminating the NBBO in listed options.264 The proposed changes to the definition of NBBO would not impact the manner in which the NBBO is calculated for NMS stocks or listed options. Specifically, the NBBO for an NMS stock would be the best bid and best offer for such stock that is calculated and disseminated on a current and continuing basis by a competing consolidator or calculated by a selfaggregator.265 The Commission is proposing to
remove references to a plan processor for NMS stocks because under the proposed decentralized consolidation model, there would not be plan processors. Further, competing consolidators and self-aggregators would have to calculate the NBBO in the same manner as it is calculated by the exclusive SIPs today, including the method currently set forth in the definition of NBBO for determining the best bid or offer in the event that two or more market centers transmit identical bid or offer prices. The Commission requests comment on the proposed amendments to the definition of national best bid and national best offer in proposed Rule 600(b)(50). In particular, the Commission solicits comment on the following:
37. What are commenters’ views on
the proposed amendments to the definition of national best bid and national best offer? Do the proposed amendments make appropriate adjustments to the definition to accommodate the proposed introduction of a consolidated market data distribution model with competing consolidators and self-aggregators? Are any additional amendments needed, whether to the definition of NBBO or to other provisions? Please be specific.
2. Depth of Book Data
Core data currently lacks quotation information in NMS stocks beyond the best round lot quotes of each SRO, commonly referred to as the ‘‘top of book.’’ However, as regulatory changes and market developments, such as decimalization, have increased the significance of information on quotes away from the best prices,266 some have suggested that core data be expanded to include certain depth of book data (i.e., quotations and aggregate size at prices outside the BBO).267 The Commission is proposing to define core data to include certain

268See supra Section III.C.1(d).
269 Id. See also infra notes 310–313 and accompanying text (describing how depth of book data can be used to optimize order placement and to provide directional signals regarding near-term market movements.). 270For example, CBOE One Premium offers five levels of aggregated depth while NYSE XDP Integrated, Nasdaq Total View, and CBOE Depth offer complete depth of book. 271See supra note 115. 272Specifically, the Commission considered a ‘‘Voluntary Depth Alternative’’ under which, in addition to protecting the best bids and offers of each SRO (the Market BBO Alternative), depth of book quotations that markets voluntarily disseminate in the consolidated quotations stream would be protected as well. See Regulation NMS Adopting Release, supra note 10, at 37529. The Commission decided to adopt the Market BBO Alternative, explaining that it would represent a major step toward achieving the objectives of intermarket price protection but with fewer of the costs and drawbacks associated with the Voluntary Depth Alternative. The Commission noted that the Market BBO Alternative will promote best execution for retail investors on an order-by-order basis, given that most retail investors justifiably expect that their orders will be executed at the NBBO and that the Market BBO Alternative would not require an expansion of the data disseminated through the exclusive SIP Plans. Id. at 37530. 273See Regulation NMS Adopting Release, supra note 10, at 37567. In making that determination, the Commission stated that this would be ‘‘a competition-driven outcome [that] would benefit investors and the markets in general.’’ See id. at 37530. 274See Regulation NMS Adopting Release, supra note 10, at 37565; 17 CFR 242.603(a)(2) (an exchange ‘‘that distributes information with respect to quotations for or transactions in an NMS stock to a securities information processor, broker, dealer, or other persons shall do so on terms that are not unreasonably discriminatory’’). While the preRegulation NMS rules did not prohibit the independent distribution of quotes by individual SROs, Rule 603(a) was intended to impose ‘‘uniform standards’’ to such distribution (i.e., the ‘‘fair and reasonable’’ and ‘‘not unreasonably discriminatory’’ standards). See Regulation NMS Adopting Release, supra note 10, at 37569. Prior to Regulation NMS, however, SROs and their members were prohibited from disseminating their trade reports independently. Id. at 37589. 275See supra note 19 and accompanying text. 276See Securities Exchange Act Release No. 42914 (June 8, 2000), 65 FR 38010 (June 19, 2000) (directing the National Association of Securities Dealers and the national securities exchanges to act jointly in developing a plan to convert their quotations in equity securities and options from fractions to decimals). 277Regulation NMS Adopting Release, supra note 10, at 37592; see also Securities Exchange Act Release No. 50870 (Dec. 16, 2004), 69 FR 77424 (Dec. 27, 2004) (‘‘the initiation of trading
in penny increments in 2001 transformed the equity markets. The number of quotation updates increased, and the quoted size at any particular price level dropped’’). 278See, e.g., Regulation NMS Adopting Release, supra note 10, at 37529 (noting a comment from the Consumer Federation of America concerning ‘‘complaints that decimal pricing has reduced price transparency because of the relatively thin volume of trading interest displayed in the best bid and offer’’); Letter from Craig S. Tyle, General Counsel, Investment Company Institute, to Jonathan G. Katz, Secretary, Commission (Nov. 20, 2001), available at https://www.sec.gov/rules/concept/s71401/ tyle1.htm#P41_3920 (‘‘As we have previously noted, the reduction in quoted market depth as the minimum quoting increment has narrowed to a penny has adversely affected institutional investors’ ability to execute large orders . . . Preliminary data has shown that, post-decimalization, it has become more difficult for large institutional orders to be filled entirely at the inside.’’). 279Report to Congress on Decimalization, 10–11 (July 2012), available at https://www.sec.gov/news/ studies/2012/decimalization-072012.pdf. Cumulative depth at competitive prices did not change, however. Id. See also Phil MacKintosh, What is Liquidity? (Dec. 12, 2019), available at https://www.nasdaq.com/articles/what-is-liquidity2019-12-12 (stating that while smaller quantity of the NBBO and smaller average trade sizes may suggest falling liquidity, depth of book liquidity suggests that overall liquidity is stronger than ever before); Citadel Securities Market Lens—Has Market Structure Evolution Made Equities Less Liquid (Sep. 2019), available at https:// s3.amazonaws.com/citadel-wordpress-prd102/wpcontent/uploads/sites/2/2019/09/27211934/MarketLens-Has-Market-Structure-Evolution-MadeEquities-Less-Liquid.pdf (analyzing full depth of displayed liquidity from the exchanges’ proprietary data feeds and finding that liquidity remained stable over the past eight years). ‘‘depth of book data.’’ Specifically, depth of book data would be defined to include aggregated quotes at each price between the best bid (and best offer) and the protected bid (and protected offer) (if different), as well as the five price levels above the protected offer and below the protected bid.268 The Commission preliminarily believes this approach would approximate the level of liquidity information available to market participants at the best bid or offer prior to decimalization and enable market participants to use proposed core data to trade in a more informed and effective manner.269 (a) Regulatory Background Regulation NMS and the Equity Data Plans neither require nor prohibit the collection, consolidation, or dissemination of depth of book data. Rule 602 requires that national securities exchanges and associations make available their best bids and best offers, which are defined in Rule 600(b)(8) as the highest priced bid and lowest priced offer.
Similarly, Rule 603(b) requires the dissemination of an NBBO, and the definition of NBBO in Rule 600(b)(43) refers to best bids and best offers. Market participants that want depth of book data for trading must rely upon the proprietary feeds offered by the exchanges, which include varying degrees of depth of book data.270 In adopting Regulation NMS, the Commission considered the scope of quotations to which trade-through protection should apply under Rule 611. The Commission decided to apply Rule 611 to protected quotations 271 but not to depth of book quotations.272 Similarly, the Commission determined not to require that depth of book quotations be included in core data, reasoning that investors who needed depth of book data would be able to obtain that data from markets or thirdparty vendors.273 However, the Commission acknowledged that depth of book data is important to investors and updated former Exchange Act Rule 11Ac1–2 (redesignated as Rule 603) to address the independent dissemination of depth of book and other market data by the exchanges.274 After the adoption of Regulation NMS in 2005, exchanges began to sell their proprietary data products separately from the core data required by Rule 603(b) of Regulation NMS.275 (b) Market Evolution The decimalization of securities pricing in 2001, and the resulting shift away from the larger fractional quoting and trading increments,276 had significant implications for the amount of liquidity available at the top of book, the transparency of order book liquidity, and the need for market participants to obtain depth of book information. With the larger quoting and trading increments associated with fractional quoting, such as one-sixteenth of a dollar, trading interest was distributed across fewer price points and more liquidity (i.e., aggregate order interest) was concentrated at the top of book. For example, as the Commission noted in adopting Regulation NMS, ‘‘depth-ofbook quotations have become increasingly important as decimal trading has spread displayed depth across a greater number of price points.’’ 277 Since the implementation of decimalization, market participants have raised concerns about reduced price transparency and difficulty executing large transactions at the best prices due to lower concentrations of trading interest at the top of book.278 In the Report to Congress on Decimalization, required under Section 106 of the Jumpstart Our Business Startups Act, Commission staff noted academic literature that found that quoted depth, on average, declined after decimalization.279 (c) Comments and Roundtable Discussion These developments have led market participants to call for depth of book data to be distributed through the Equity Data Plans. In connection with the Roundtable, several panelists and commenters recommended adding depth of book data to SIP data or otherwise emphasized their views about

280See Roundtable Day Two Transcript at 245 (Tyler Gellasch, Healthy Markets) (stating that the exclusive SIPs should include depth of book data (as well as auction imbalance data and odd-lot quote data)); Roundtable Day One Transcript at 228–29 (Joseph Wald, Clearpool Group) (explaining that the lack of depth of book and auction data on the exclusive SIP feeds needs to be addressed); Letter to Brent J. Fields, Secretary, Commission, from Joe Wald, Chief Executive Officer, The Clearpool Group (Oct. 23, 2018) (‘‘Clearpool Group Letter’’) (‘‘We believe that certain information currently provided through proprietary data feeds, for example, imbalance data and order depth-ofbook information, should be considered core data and provided to all market participants through the SIP.’’); MFA and AIMA Letter at 6 (stating that its members ‘‘purchase proprietary market data (e.g., depth-of-book and imbalance data) from exchanges for a variety of reasons, including strategy implementation, risk-analysis, best-execution, less latency than other sources and to fulfill fiduciary obligations.’’). 281See Roundtable Day One Transcript at 119– 120 (Jeff Brown, Charles Schwab). 282See Roundtable Day One Transcript at 136, 165–66 (Simon Emrich, Norges Bank Investment Management). 283See SIFMA Letter II at 2 (stating that retail firms generally use one level of depth for order routing and institutional firms generally use up to five levels of depth (sometimes as much as ten) and that the Commission should balance the need for more comprehensive information with the additional cost and potential increase in latency from including additional quotes, as well as adjust the exclusive SIP subscriber fee model to account for firms that do not need depth of book data). 284See Roundtable Day One Transcript at 192– 193 (Jamil Nazarali, Citadel Securities) (stating that proprietary feeds are required for best execution); Roundtable Day One Transcript at 48 (Prof. Hal Scott, Committee on Capital Markets Regulation) (making a similar statement); Roundtable Day Two Transcript at 58–59 (Prof. Robert Bartlett, UC Berkeley) (making a similar statement); MFA and AIMA Letter at 3–4 (stating that broker-dealers that do not have depth of book information will be challenged to provide best execution). 285See Roundtable Day One Transcript at 27, 57– 58, 73 (Doug Cifu, Virtu Financial); Letter to Brent J. Fields, Secretary, Commission, from Douglas A. Cifu, Chief Executive Officer, Virtu Financial Inc., 4 (Oct. 23, 2018) (‘‘Virtu Letter I’’) (‘‘Simply put, Virtu could not fulfill its obligations to its myriad of retail customers and institutional clients without full depth of book market data feeds and robust exchange connectivity features that the SIP feeds alone do not offer.’’). 286See Letter to Brent J. Fields, Secretary, Commission, from Mehmet Kinak, Global Head of Systematic Trading and Market Structure, and Jonathan D. Siegel, Vice President—Senior Legal Counsel, T. Rowe Price, 2
(Jan. 10, 2019) (‘‘T. Rowe Price Letter’’). 287See Roundtable Day One Transcript at 162– 163 (Matt Billings, TD Ameritrade). 288 Id.; see also Roundtable Day Two Transcript at 74 (Michael Blaugrund, NYSE). 289See Roundtable Day One Transcript at 227 (Chris Isaacson, Cboe) (stating that he would not go as far as to add depth of book data to the consolidated market data, stating that doing so could potentially cause confusion, and emphasizing the difference between the plan processors and nonSIPs); Roundtable Day One Transcript at 230 (Ronan Ryan, IEX) (stating that adding depth data could be confusing, but suggesting that perhaps there could be simpler alternatives, such as an aggregated size at each price level rather than orderby-order); Roundtable Day One Transcript at 232 (Michael Friedman, Trillium Management) (suggesting that perhaps some abbreviated version of depth rather than full depth of book could be added to the consolidated market data); Roundtable Day Two Transcript at 70 (Adam Nunes, Hudson River Trading) (cautioning against trying to force every market’s depth of book into a single feed). 290See Letter to Brent J. Fields, Secretary, Commission, from Thomas Wittman, Executive Vice President, Head of Global Trading and Market Services and CEO, Nasdaq Stock Exchange, 11 (Oct. 25, 2018) (‘‘Wittman Letter’’) (‘‘Main Street investors do not need the exchanges’ proprietary depth-of-book data offerings, and the fact that some firms choose to purchase them has no adverse consequence to the Main Street investor. Nearly 97% of trades occur at or within the NBBO, reflecting that most customers do not require any sort of depth-of-book data.’’); NYSE Group Letter at 13 (‘‘NYSE Group believes that the Commission’s prior conclusion that retail investors do not need depth-of-book data has not changed.’’). 291See Letter to Brent J. Fields, Secretary, Commission, from Charles M. Jones, Robert W. Lear Professor of Finance and Economics, Columbia Business School, 15–16 (Oct. 21, 2018) (‘‘Jones Letter’’) (citing Securities Exchange Act Release No. 59039, supra note 242). 292See supra Section III.C.2(b). 293See supra notes 278, 280–286 and accompanying text. the importance of depth of book data.280 One panelist stated that the exclusive SIPs could be upgraded and made ‘‘relevant again’’ by adding depth of book data, which would benefit retail investors by giving them information on which direction a stock may be moving and what type of order they may need to use.281 Another panelist stated that both his firm and the brokers it employs cannot rely solely on SIP data, as they believe they need depth of book data to have a full view of the market and to trade competitively, particularly with respect to large orders.282 One commenter stated that the Commission should require depth of book data to be included in SIP data and recommended adding at least five levels of depth.283 Some panelists and commenters went further, suggesting that depth of book data
(or data provided on the exchange proprietary feeds more generally) is needed to fulfill best execution obligations.284 One panelist stated that paying for full depth of book data from each exchange is essential to effective order routing and to fulfilling best execution obligations, noting that if his firm did not get depth of book—top of book and many levels away—it could not provide best execution to its clients.285 Another commenter noted that broker-dealers do not have the option to forgo buying proprietary data because SIP data has less content and is slower, and that, even if the Commission provided a safe harbor that best execution requirements may be satisfied by relying on SIP data, buying proprietary data would still be necessary from a business perspective.286 However, some panelists were reluctant to embrace the idea of adding depth of book data to SIP data and pointed out possible negative impacts from doing so. One panelist representing a retail brokerage firm stated that depth may be important for active traders and that his firm has platforms that incorporate it but added that depth is less important for retail investors who trade infrequently and that some of his firm’s platforms do not incorporate it.287 This panelist also stated that there could be technological challenges and latency implications (i.e., added latency associated with the need to process additional message traffic) to adding depth of book data to SIP data.288 Furthermore, several panelists noted that adding depth of book data to the SIP data, particularly on an order-by-order basis, could be confusing, but some suggested that the data could be aggregated at certain price levels or otherwise simplified.289 In addition, some commenters stated that depth of book data is unnecessary for best execution and not useful for retail investors and other market participants.290 In an article submitted to the comment file for the Roundtable, one commenter expressed the view that depth of book data is not helpful for many types of market participants, citing a 2014 statistic that only 3.3% of all trades take place outside the NBBO, where depth of book information would be particularly useful. The commenter also noted that the Commission has stated that depth of book data is not necessary for a broker to comply with its best execution obligations.291 (d) Commission Discussion and Proposal Decimalization led to a dispersion of quoted volume away from the top of book.292 Consequently, the top of book (or NBBO) currently shown in SIP data has become less informative, and some market participants have come to view depth of book data as essential both to their efforts to trade competitively and to provide best execution to customer orders.293 The Commission preliminarily believes that: (1) The lack of depth of book information in SIP data creates a significant information asymmetry between SIP data and proprietary data; and (2) the availability of the additional information could
help enhance the best execution analyses of market participants who currently rely solely on SIP data. Accordingly, the Commission preliminarily believes that core data, as proposed, should include certain depth of book data, including aggregated orders at each price between the best

294As discussed below, aggregated quotation sizes at the price levels between the best quotes and protected quotes and the five levels above and below the protected quotes, particularly for the most liquid stocks, represent only a subset of all depth of book price levels at which there are quotations and could hence be represented in fewer messages. 295Prior to decimalization, when stocks were quoted in sixteenths of a dollar ($0.0625), there were five one cent increments between each permissible quoting increment. For example, market participants could bid $20.0625 or bid $20.125 but not $20.07, $20.08, $20.09, $20.10, $20.11. Decimalization permitted quoting at these intermediate, one-cent price levels, spreading quotation volume to these price levels. As a result of the Commission’s proposal to define depth of book data to include aggregated quotation sizes at the five levels above and below the protected quotations, the proposed core data would provide transparency into the quotation interest that is comparable to the information that was available at the top of the book prior to decimalization. 296See supra Section III.C.1(d)(i) for a discussion of the proposed definition of round lot and its effect on the terms bid and offer. As discussed above, bids and offers would reflect the proposed round lot sizes. See also Section III.C; supra note 128 and accompanying text for a discussion of proposed odd-lot aggregation. 297See supra note 48. 298See supra note 275, 277–278 and accompanying text. 299See supra notes 241–244 and accompanying text; infra notes 310–313 and accompanying text (discussing how depth of book data is used in order placement and other trading decisions). 300Section 11A(c)(1)(B) of the Exchange Act, 15 U.S.C. 78k–1(c)(1)(B) (stating that the Commission shall prescribe rules to ‘‘assure . . . the fairness and usefulness of the form and content of’’ information with respect to quotations for or transactions in securities). 301See, e.g., 15 U.S.C. 78k–1(a)(1)(C) (‘‘The Congress finds that . . . [i]t is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure—(i) economically efficient execution of securities transactions; (ii) fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets; (iii) the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities; (iv) the practicability of brokers executing investors’ orders in the best market; and (v) an opportunity . . . for investors’ orders to be executed without the participation of a dealer.’’). 302See supra text accompanying notes 280–286. 303As discussed above, the inclusion of a limited number of price levels in the proposed definition of depth of book data means that fewer data Continued bid and best offer and the protected bid and protected offer (if different), as
well as several price levels above and below the protected bid and protected offer. The Commission believes that the number of additional price levels should strike an appropriate balance by significantly enhancing the utility of proposed core data for a wide range of market participants, without risking the excessive message traffic 294 or complexity that might result from the inclusion of full depth of book information in proposed core data. The Commission preliminarily believes that this balance is appropriately struck at five price levels (below and above the protected bid and protected offer) as this would approximate the level of liquidity available to market participants at the best bid or offer prior to decimalization.295 The Commission is seeking comment on whether and to what extent depth of book data should be included in the proposed definition of core data. Specifically, under proposed Rule 600(b)(25), ‘‘depth of book data’’ would be defined as all quotation sizes at each national securities exchange, aggregated at each price at which there is a bid or offer 296 that is lower than the best bid down to the protected bid and higher than the best offer up to the protected offer; and all quotation sizes at each national securities exchange, aggregated at each of the next five prices at which there is a bid that is lower than the protected bid and offer that is higher than the protected offer. Although the Commission determined not to add depth of book data to core data in adopting Regulation NMS,297 the Commission recognizes that the market data needs of market participants continuously evolve. Demand for more content-rich exchange proprietary feeds has increased substantially in the years since the adoption of Regulation NMS, indicating a growing need by market participants for additional data, including depth of book data,298 in the increasingly fast, electronic, and dispersed markets that have developed since 2005.299 The Commission preliminarily believes that enriching the content of the data that is made available to investors and market participants by including depth of book data, as defined, in the proposed core data would promote fairer markets by reducing the information asymmetry between market participants who subscribe to the exchanges’ proprietary depth products and those who rely on SIP data. In addition, the Commission preliminarily believes that many market participants would find depth of book data useful for trading in a more informed and effective manner in today’s markets. As proposed, core data would include the best bids and offers and the protected quotes of each exchange, which market participants need to comply with legal and regulatory requirements, such as the duty of best execution and Rule 611. The Commission preliminarily believes that information on any trading interest between the best bids or offers and the protected quotes, if they are different, would be of keen interest to market participants.
Therefore, the Commission is proposing to include aggregated quotation sizes at each price where there is a bid or offer in that range in the definition of depth of book data. However, the Commission preliminarily believes that not all individual quotations away from the best prices should be added to proposed core data. While there may be some market participants that need total visibility into exchange order books, the Commission does not believe, at this time, that complete depth of book data should be required to be made available as proposed core data. The addition of complete, order-by-order depth of book data to proposed core data would represent an enormous volume of information, which could increase latencies in the provision of proposed core data and introduce complexity that might impair the usability of such data for many subscribers. The Commission’s proposed definition of depth of book data is intended to incorporate into core data additional quotation information that would be useful to a broad array of market participants for trading 300 and to thereby further the goals of the national market system.301 The Commission is not supplanting the proprietary depth offerings of the exchanges that contain additional content and that may be more appropriate for certain market participants or more specialized use cases. The Commission recognizes that market participants have diverse market data needs. The discussions at the Roundtable and the comments received, however, suggest that many market participants need more than the best bids, best offers, and the NBBO disseminated by the exclusive SIPs in order to trade competitively and to optimize the placement of customer orders.302 As noted above, the Commission’s proposed definition of depth of book data seeks to approximate the quotes that market participants were able to access on the exclusive SIPs prior to decimalization, which the Commission preliminarily believes would significantly enhance the usefulness of proposed core data. The Commission preliminarily believes that its proposed definition of depth of book data strikes a balance between enhancing the usefulness of core data for the many market participants that cannot rely entirely on SIP data, and limiting the amount of data disseminated to limit complexity and the processing demand on systems for market participants that do not need full depth of book visibility.303 The

messages would be required than would be the case if full depth of book was proposed. See supra note
294. Accordingly, the proposal would place lower
processing demands on systems than if full depth of book data were included in the definition of depth of book data. Similarly, commenters have recommended the addition of five levels of depth to core data, emphasizing the importance of ‘‘balanc[ing] the need for more comprehensive information with the additional cost and potential increase in latency from including additional quotes.’’ See supra note 283; SIFMA Letter II at 2. The Commission is soliciting comment on the extent of depth of book data that best strikes this balance, specifically by seeking quantitative data from market participants regarding any complexity or processing implications associated with the proposed definition of depth of book data. 304Moreover, because a ‘‘bid or offer’’ is defined in terms of ‘‘round lot,’’ the proposed definition of round lot in effect would establish a minimum size requirement for depth price levels so that, for example, a small number of one share orders at an away price for a stock whose prior calendar month’s average closing price on the primary listing exchange was under $50 would not count as one of the price levels. The Commission acknowledges that the inclusion of price levels ‘‘at which there is a bid or offer’’ in the proposed definition of depth of book data could include quotations beyond what would have been available at the top of the book prior to decimalization for less liquid stocks, but believes that this approach would approximate the level of liquidity available at the top of the book prior to decimalization for more liquid stocks. 305See SIFMA Letter II at 2 (stating that SIFMA members that are retail firms generally use one level of depth for order routing, while SIFMA members that are institutional firms generally use up to five levels of depth, and sometimes as much as ten.). 306See supra notes 284–291 and accompanying text. 307FINRA Rule 5310. 308See Kurz v. Fidelity Management & Research Co., 556 F.3d 639, 640 (7th Cir. 2009) (describing the ‘‘duty of best execution’’ as ‘‘getting the optimal combination of price, speed, and liquidity for a securities trade’’); Geman v. SEC, 334 F.3d 1183, 1186 (10th Cir. 2003) (noting that ‘‘the duty of best execution requires that a broker-dealer seek to obtain for its customer orders the most favorable terms reasonably available under the circumstances’’ (quoting Newton v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 135 F.3d 266, 270 (3d Cir. 1998))). 309See Order Execution Obligations Release, supra note 245. 310See supra notes 276–277. 311For example, if a liquidity taking order is larger than the displayed liquidity at the top of book and seeks to access liquidity at additional price level(s), then information about liquidity at other price levels is valuable in determining where to send an oversized order when trading in a market ecosystem with multiple exchanges. See, e.g., Shmuel Baruch, Who Benefits from an Open LimitOrder Book?, Journal of Business, Vol. 78, No. 4, 1267–1306
(July 2005), available at https:// www.jstor.org/stable/10.1086/430860 (presenting some theoretical results showing that liquidity takers benefit more from an open limit order book). 312For example, if a market participant using a particular trading strategy wishes to post orders passively at multiple price levels, depth of book information is valuable in determining the order book queue length (and therefore the ability to achieve beneficial queue priority) at different market centers. Further, depth of book data can assist market participants’ trading strategies achieve better queue placement across market centers. See Roundtable Day One Transcript at 169 (Adam Inzirillo, BAML) (‘‘So depth of book is important to understand where you are potentially in the queue when you aggregate yourself across the overall market center.’’); Exegy, Checklist for Ensuring Best Execution with Historical Trade Performance Analysis (Dec. 6, 2018), available at https:// www.exegy.com/2018/12/checklist-best-executiontrade-performance-analysis/ (‘‘Liquidity can be valuable for executing large volume orders because the orders can be executed with minimal impact to market price. However, very high liquidity can also cause price volatility at a given exchange or time interval that produces slippage. Queue position and message volume are two valuable indicators of this liquidity. A long depth of book or high message volume may signal to traders to re-route an order to a different exchange. However, without a planned strategy for routing an order, slipping may arise.’’). 313See, e.g., A´ lvaro Cartea, et al., Enhancing Trading Strategies with Order Book Signals (Oct. 1, proposed definition of depth of book seeks to balance the needs of different market participants, while reducing the information asymmetries that exist today in the provision of SIP data and proprietary data. Staff believes that there is a substantial amount of quotation volume several levels below the best bid and above the best offer. For example, staff reviewed depth of book quotations for corporate stocks using data from July 19,
2019. This analysis revealed that for this
day, indeed, there was substantial quotation volume several levels below the best bid (the ask side was not examined). During active parts of the trading day, there is quotation interest at every $0.01 increment at least ten levels out for the most liquid stocks; for the least liquid stocks, there is a large gap between the best bid and the next highest bid, and large gaps are generally also present between the next several bid levels. This is consistent with the Commission’s proposal to define the depth of book price levels as the first five levels ‘‘at which there is a bid or offer,’’ rather than alternatives such as a fixed $0.05 band around the best quotes, since the former would capture much of the depth of book quotation information for less liquid stocks.304 In addition, the staff review found a significant percentage of the total notional value of all depth of book quotations for both liquid and illiquid stocks falls within the first five price levels. The Commission preliminarily believes that requiring aggregated quotation information at the first five price levels above and below the protected quote range is a reasonable way to delineate the trading interest that would be useful to a variety of market participants to support more effective quoting and trading. On the other hand, while quotations at price levels further away from the best bid and offer may be relevant for market participants handling very large orders or orders in highly illiquid securities for which liquidity at the top of the book and the next five price levels is not sufficient to fully execute the order, the Commission preliminarily believes that liquidity at price levels further away is less likely to provide relevant or immediately actionable information to many market participants.305 While some market participants have stated that depth of book data is necessary to fulfill their best execution obligations, other commenters disagreed and pointed out that the Commission previously stated that depth of book data is not necessary for best execution.306 Several factors are considered in determining whether a broker-dealer has ‘‘use[d] reasonable diligence to ascertain the best market’’ 307 for a customer order and fulfilled its best execution obligations.308 The Commission is not stating that a broker-dealer must always use all proposed depth of book data, under all circumstances, to provide best execution to its customers. However, the Commission preliminarily believes that the expanded set of proposed core data, including the proposed depth of book data, provides additional information that in many circumstances would be useful to a broker-dealer’s best execution analysis.309 Where liquidity is distributed over multiple price points and less liquidity is available at the top of book,310 depth of book data is of increased importance to market participants for a number of reasons. Depth of book data can assist SORs and electronic trading systems with the optimal
placement of orders across markets. For example, the Commission preliminarily believes that the proposed depth of book data would better inform traders on how to optimally place liquidity taking orders (i.e., marketable orders that execute against the liquidity of resting limit orders) that are larger than the displayed best bid or best offer.311 In addition, the Commission preliminarily believes that proposed depth of book data would assist market participants in determining how best to use liquidity providing orders (i.e., non-marketable orders that will be posted on an exchange’s order book without immediately executing) at prices away from the best bid or offer by providing insight into the length of order book queues.312 Finally, the Commission preliminarily believes that the proposed depth of book data would provide market participants with directional signals to help inform them about nearterm market movements based upon aggregate market imbalance information.313

2015), available at http://www.smallake.kr/wpcontent/uploads/2015/11/SSRN-id2668277.pdf (‘‘[O]ur measure of [volume] imbalance [in the limit order book] acts as a strong predictor of the rate of incoming [market orders] as well as the direction and magnitude of price movements following a [market order].’’); Charles Cao, et al., The Information Content of an Open Limit-Order Book, Journal of Futures Markets Vol. 29, No. 1, 16–41 (2009), available at http:// www.pbcsf.tsinghua.edu.cn/research/caoquanwei/ paper/10.The%20Information%20Content%20of %20an%20Open%20Limit%20Order%20Book.pdf (‘‘[T]he authors find that the order book beyond the first step is modestly informative and that price discovery measures suggest that the contribution of the order book beyond the best bid and offer is approximately 22%’’); Ke Xu, Martin D. Gould, and Sam D. Howison, Multi-Level Order-Flow Imbalance in a Limit Order Book, Mathematical Institute, University of Oxford (Oct. 29, 2019) (‘‘[W]e find that including net order flow deeper into the limit order book improves the goodness-offit of the multi-level order-flow imbalance regressions for all of the stocks in our sample, with an improvement of about 65–75% for large-tick stocks and about 15–30% for small-tick stocks. We argue that in many practical applications, improvements of this magnitude are economically meaningful.’’). 314See supra notes 287–289 and accompanying text. 315See supra Section III.A (explaining that different market participants and different trading applications have different needs for NMS information, that the proposal to expand and modernize the content of NMS information is intended to address the needs of a broad crosssection of market participants, and that the Commission is not specifying minimum data elements needed to achieve best execution). 316See, e.g., NYSE Equities Insights, Stock Quotes and Trade Data: One Size Doesn’t Fit All (Aug. 22, 2019), available at https://www.nyse.com/equitiesinsights (proposing enhancing the exclusive SIPs by offering depth of book, odd-lot quotes, and primary auction imbalance information in three new tiers of service, each of which would have different levels of data content); infra Section IV.B.4. 317Today, there are a number of private data vendors that have developed software and infrastructure solutions for consolidating several of the most voluminous depth of book data feeds across equity markets and are providing consolidated depth of book products, which suggest that technical challenges and latency concerns can be addressed. 318See supra note 289 and accompanying text. 319See supra notes 290–291 and accompanying text. 320Similarly, depth of book data can provide insight into the length of order book queues on different exchanges and therefore the prices at which limit orders can attain queue priority, helping market participants pursue trading strategies involving the placement of liquidityproviding orders that will not execute until the
NBBO changes. See supra note 312 and accompanying text. 321See supra note 281 and accompanying text. In addition, another Roundtable panelist whose firm handles the orders of retail customers indicated that his firm needs depth of book data to fulfill its obligations to its retail customers. See supra note 285. 322See infra Section IV.B.1. 323Competing consolidators would be required to calculate and generate consolidated market data, including depth of book data as set forth in the Commission’s proposed definition, and to offer such data to subscribers. See proposed Rule 614(d)(1)–(3). As explained above, the Commission believes that the proposed depth of book data would support the needs of some market participants. See supra notes 301–305. However, some market participants may not need the depth of book data specified in the proposed definition. As proposed, market participants would be able to choose the components of consolidated market data that meet their needs, consistent with regulatory requirements, and purchase such data from competing consolidators. Several Roundtable panelists and commenters raised potential concerns regarding the addition of depth of book data.314 The Commission preliminarily believes its proposed definition of depth of book data, and its proposal to introduce a definition of core data and a decentralized consolidation model for the dissemination of proposed consolidated market data more broadly, are responsive to these concerns. With respect to the view that depth of book data could be confusing or not of interest to all investors, the Commission is not mandating the consumption of five levels of depth data by all market data subscribers. While, as discussed below, competing consolidators must calculate and generate consolidated market data, as proposed, including depth of book data, and offer it to subscribers, competing consolidators would not be prohibited from developing and providing top of book only or customized depth of book products to customers who desire such products.315 The effective national market system plan(s) could offer a variety of proposed consolidated market data products geared toward particular categories of end-users, and certain exchanges, recently, have suggested possible approaches for doing so.316 With respect to the view that including depth of book data could present technical challenges and have latency ramifications, the Commission preliminarily believes the proposal to add five levels of aggregated depth from each exchange, rather than all order-byorder depth, is responsive to these concerns.317 Restricting depth of book data to the aggregate depth at each price level would limit the number of messages included within proposed core data, making the technological changes required more manageable and mitigating latency concerns. Indeed, the Commission’s proposed approach aligns with some of these commenters’ suggestions that simpler and more abbreviated versions of depth of book
data might be more workable.318 In addition, some commenters cited statistics on the high proportion (97%) of trades that execute at or within the NBBO in support of their views that depth of book data is not necessary for retail investors or other market participants.319 The Commission preliminarily believes that, even if these figures are accurate for the current market, they do not, on their own, persuade the Commission that it should not propose to add depth of book data to core data. The commenters, for example, do not specify whether or not the broker-dealers handling the orders at issue had access to proprietary DOB products for their automated trading systems; if they did, depth of book data may have been contributing to the observed high at-or-within-the-NBBO execution rates. For example, as discussed above, depth of book data can indicate the direction a stock price may be moving, which some market participants factor into the prices at which they place limit orders.320 Furthermore, in response to the comments that retail investors do not need depth of book data, the Commission preliminarily believes that there are different types of retail investors that have different market data needs and preferences. Some retail investors may not need depth of book information but other, more sophisticated retail investors may find depth of book data useful, as one Roundtable panelist from a retail firm stated.321 Further, while competing consolidators would have to offer proposed consolidated market data to end-users, they also would be permitted to develop products for their customers that could be customized to their customers’ needs.322 Therefore, a competing consolidator could develop a consolidated market data product that does not contain proposed depth of book data if there is demand.323 The Commission’s proposal aims to provide broker-dealers and other market participants with improved access to meaningful depth of book information, so it can be used to improve order placement or other trading decisions and thereby potentially improve execution quality for investors. Finally, the proposed definition of core data specifies that odd-lot quotations at the relevant price levels between the national best bid or offer and the protected quotation, and at the five price levels above and below the protected quotation that can be aggregated into at least a round lot, would be included in depth of book data. As discussed above, the Commission preliminarily believes that its proposed definition of round lot reflects trading interest of meaningful size to market participants. The Commission further preliminarily believes that trading interest that is of

324See supra notes 129–130, 157 and accompanying text. To the extent that an SRO provides proprietary data products for the purposes of making consolidated market data available to competing consolidators and self-aggregators, any odd-lot quotations that are aggregated in an SRO’s existing proprietary data products would be required to be aggregated in a manner consistent with the method set forth in the proposed definition of core data. See proposed Rule 600(b)(20). 325See infra notes 333–334 and accompanying text. 326See proposed Rule 600(b)(5). The definition of auction information in proposed Rule 600(b)(5) is ‘‘all information specified by national securities exchange rules or effective national market system plans that is generated by a national securities exchange leading up to and during an auction, including opening, reopening, and closing auctions, and disseminated during the time periods and at the time intervals provided in such rules and plans.’’ Accordingly, the proposed definition would include auction information that may be developed in the future and added to an SRO’s rules that are approved by the Commission pursuant to Rule 19b– 4, 17 CFR 240–19b–4. 327See, e.g., 15 U.S.C. 78k–1(a)(1)(C) (‘‘The Congress finds that . . . [i]t is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure . . . the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities . . . [and] the practicability of brokers executing investors’ orders in the best market.’’). 328See, e.g., NYSE Rule 7.31(d)(4) (A Discretionary Order, or ‘‘D Order,’’ is a ‘‘Limit Order that may trade at an undisplayed discretionary price’’); NYSE Rule 13(c)(1) (A Closing Offset, or ‘‘CO,’’ Order is ‘‘[a] day Limit Order to buy or sell as part of the closing transaction where the eligibility to participate in the closing transaction is contingent upon: (i) An imbalance in the security on the opposite side of the market from the CO Order; (ii) after taking into account all other types of interest eligible for executing at the closing price, there is still an imbalance in the security on the opposite side of the market from the CO Order; and (iii) the limit price of the CO Order being at or within the price of the closing transaction.’’); NYSE Rule 123C; Nasdaq Rule 4702(b)(13)(A) (‘‘An ‘Imbalance Only Order’ or ‘IO Order’ is an Order entered with a price that may be executed only in the Nasdaq Closing Cross and only against [market-on-close] Orders or [limit-on-close] Orders.’’). 329See, e.g., NYSE Open and Closing Auctions, available at https://www.nyse.com/publicdocs/ nyse/markets/nyse/NYSE_Opening_and_Closing_ Auctions_Fact_Sheet.pdf (last accessed Nov. 25, 2019); Nasdaq Opening and Closing Crosses, available at http://www.nasdaqtrader.com/ Trader.aspx?id=OpenClose (last accessed Nov. 25, 2019). 330See, e.g., Rosenblatt Securities, Closing
Time:
How End-of-Day Auctions are Taking Over U.S. Equity Trading (Jan. 17, 2019) (stating that the lots aggregates into a round lot, similarly represents trading interest of meaningful size and should be displayed at the most conservative price at which such trading interest could be accessed.324 The Commission requests comment on the proposed inclusion of depth of book data in the proposed definition of core data and the definition of depth of book data in proposed Rule 600(b)(25). In particular the Commission solicits comment on the following:
38. Should depth of book data be
included in the proposed definition of core data? Why or why not? Do commenters believe the proposed definition of depth of book data would have any negative or unintended consequences? Why or why not?
39. Do commenters believe that the
Commission’s proposed definition of depth of book data captures the appropriate level of depth data that should be included in the proposed definition of core data? Why or why not? Should the Commission include more or fewer levels of depth or otherwise revise the definition to capture the key depth information that would be useful to market participants? For example, should the Commission require depth only within a $0.05 band of the protected bid and offer rather than the first five price levels at which there is interest?
40. Does the proposed definition of
depth of book data adequately balance the need for more information against potential increases in complexity and processing demand that might result from the addition of such depth of book data? If not, where is this balance most appropriately struck in terms of the extent of depth of book data that should be included in the proposed definition of core data? Particularly, what processing demands would be associated with including varying levels of depth of book data? Please consider the proposed five levels of depth of book as well as any other possible depth of book alternatives. Please provide quantitative data and analyses to support your comments.
41. Do commenters believe that the
‘‘at which there is a bid or offer’’ language in the Commission’s proposed definition of depth of book data establishes an appropriate minimum size threshold (i.e., the existence of at least a round lot of aggregated interest) for inclusion as one of the five price levels? Why or why not? Are there alternative ways to set such a threshold, such as price levels where the volume of interest equals a certain percentage of the volume at the best price?
42. Do commenters believe that oddlot quotes at the depth price levels that
aggregate into at least a round lot should be included in the proposed definition of core data? Why or why not?
43. The proposed definition of depth
of book data refers to depth of book quotations on each national securities exchange, as FINRA’s Alternative Display Facility (‘‘ADF’’) currently does not have quotations submitted to it. Should the proposed definition be formulated to include the depth of book quotations of national securities associations as well to account for the possibility of OTC quotes being reported to the ADF in the future? Why or why not?
3. Auction Information
Even as the proportion of trades executing in auctions has risen, little auction information is currently included in today’s SIP data.325 The Commission is proposing to include auction information, including auction order imbalance and other auction data generated by the exchanges during an auction, in the proposed definition of core data.326 The Commission preliminarily believes that including auction information, as described below, in the proposed definition of core data would promote the goals of the national market system 327 by conveying important information about orders participating in auctions and helping market participants to participate in auctions in a more informed and effective manner. (a) Background Auctions are held pursuant to exchange rules at specified periods during the trading day (i.e., at the open, at the close, or during the day to reopen a stock that has been halted) when continuous trading is not occurring. During an auction, buy and sell orders generally interact at the single price, within limits, that maximizes the trading volume that can be executed. For example, a closing auction generally is held at the end of regular trading hours on the primary listing exchange pursuant to a process set forth in the primary listing exchange’s rules to determine a security’s official closing price. Typically, market-on-close orders, limit-on-close orders, and orders resting on the primary listing exchange’s order book at the time a closing auction begins may participate in a closing auction. However, the rules of a primary listing exchange may also allow other specified order types, such as closing offset orders and D-orders on NYSE or imbalanceonly close orders on Nasdaq, to participate in a closing auction.328 The opening auctions, which generally are held at the start of regular trading hours, also use specialized order types as specified in the rules of the primary listing market.329 Auctions conducted by the exchanges, especially opening and closing auctions, have become increasingly important liquidity events in recent years and represent a significant proportion of overall trading volume.330 One factor

percentage of consolidated volume in the executed at the close increased from 4.6% in 2013 to 8.4% in 2018); Financial Times, The 30 Minutes that Have an Outsized Role in US Stock Trading (Apr. 24, 2018), available at https://www.ft.com/content/ 9e1f05b4-43e7-11e8-803a-295c97e6fd0b (‘‘The first and last half-hour of the U.S. trading day now accounts for 39.6 per cent of all volumes, up from
31.5 per cent a decade ago, according to Credit
Suisse data. A decade ago about 16 per cent of all trading happened in the final 30 minutes, but that rose to more than 20 per cent in 2012, and almost 25 per cent this year. The closing auction alone— when most ETFs do their rebalancing—now accounts for 8.2 per cent of volumes in 2018, up from 3 per cent in 2007’’); Greenwich Associates, Stock Trading Volumes Gravitate to Open and Closing Auctions (Feb. 2, 2017), https:// www.greenwich.com/press-release/stock-tradingvolumes-gravitate-open-and-closing-auctions (stating that ‘‘[o]n average across both NYSE and Nasdaq listed securities, closing auctions now represent 5.5% of average daily volume, up from just 3.6% in 2011. Over the same period, average open auction volume increased from 1.1% to 1.25%’’). 331See, e.g., Securities Exchange Act Release No. 75165 (June 12, 2015); 80 FR 34729, 34729–30 (June 17, 2015) (‘‘[F]rom 2006 to 2013, the total number of ETPs [exchange-traded products] listed and traded as of year-end rose by an average of 160 per year, with a net increase of more than 200 in both 2007 and 2011. . . The total market capitalization of ETPs has also grown substantially, nearly doubling since the end of 2009. Much of this growth has been in index-based ETPs. As of December 31, 2014, there were 1,664 U.S.-listed ETPs, and they had an aggregate market capitalization of just over $2 trillion. Trading in these ETPs makes up a significant portion of secondary-market equities trading. For example, during 2014, trading in U.S.-listed ETPs made up about 16.7% of U.S. equity trading by share volume and 25.7% of U.S. equity trading by dollar volume.’’). 332See Greenwich Associates, Webinar: Trading the Auctions (Apr. 5, 2017), available at https:// business.nasdaq.com/media/Trading-the-AuctionsWebinar-April-2017-17_tcm5044-46070.pdf (‘‘As passive strategies and ETFs aim to track the performance of a benchmark index, they rely heavily on the closing auction, as it determines the closing price used in the benchmark index price calculation. Growth in passive investing and ETFs will thereby make the auction process ever more important.’’); see also, e.g., Nasdaq Rule 4754 (‘‘The Nasdaq Closing Cross price will be the Nasdaq Official Closing Price for stocks that participate in the Nasdaq Closing Cross.’’). 333The LULD Plan requires the primary listing exchanges to provide the exclusive SIPs with certain auction information for dissemination related to reopening auctions after LULD trading pauses: Auction reference price, auction collars, and number of extensions to the reopening auction. See LULD Plan, supra note 38, at VII.B.1. The reopening auction data in proprietary products contains this data plus additional data. For example, NYSE’s Integrated feed includes, among other data elements, a paired quantity (number of shares paired at the reference price), total imbalance quantity (number of shares not matched at the reference price), and the side of any imbalance (buy or sell). See NYSE XDP
Integrated Feed Client Specification (Jan. 29, 2018). Nasdaq’s Total View feed includes similar information for auctions that occur after halts or pauses. See Nasdaq TotalViewITCH 5.0 Specifications. 334For example, in 1998, the Commission approved a NYSE proposal to allow the exchange to disseminate via the CTA/CQ SIP market-on-close (‘‘MOC’’) and limit-on-close (‘‘LOC’’) imbalance information in the final minutes of each trading day. See Securities Exchange Act Release No. 40094 (June 15, 1998), 63 FR 33975 (June 22, 1998). The proposal provided for mandatory dissemination of all MOC and LOC imbalances of 50,000 shares or more at 3:40 p.m. Dissemination of imbalances of less than 50,000 shares could be made at the discretion of a floor official. The Commission stated its belief that the dissemination of such additional information through the plan processor would ‘‘increase the amount of accurate market information available to the public’’ and may ‘‘increase public awareness of MOC/LOC order imbalances,’’ potentially resulting in less market volatility. See id. at 33977–78; NYSE Rule 123C (providing that information regarding any disparity between MOC and marketable LOC interest to buy and MOC and marketable LOC interest to sell, measured at 3:50 p.m., of 50,000 shares or more shall be published on the consolidated tape; publication of imbalances in amounts less than 50,000 shares may also be published with the prior approval of a Floor Official or other qualified ICE employee). In addition, pre-opening indications, including the security and the price range within which the opening price is anticipated to occur, are published via the plan processors under certain conditions. See NYSE Rule 15. 335The auction-related information disseminated through exchange proprietary feeds includes: The ‘‘reference’’ or ‘‘indicative match’’ prices at which the largest potential auction would occur, imbalance side (buy or sell), number of shares of buy and sell orders at the indicative match price and reference price, paired quantity (number of shares matched at the indicative match price and reference price), execution quantity (number of shares executed at the indicative match price and reference price), imbalance quantity (number of shares not matched at the indicative match price and reference price), market order imbalance quantity (number of shares of market orders not matched at the indicative match price and reference price), far price (hypothetical auction-clearing price for cross orders only), near price (hypothetical auction-clearing price for cross orders and continuous orders), price variation indicator (absolute value of the percent of deviation of the near price to the nearest current reference price), continuous book clearing price, closing only clearing price, upper collar, lower collar, freeze status, and number of times halt period extended. See, e.g., Nasdaq Rule 4754; Nasdaq TotalViewITCH 5.0 Specifications; NYSE Rule 15; NYSE XDP
Integrated Feed Client Specification. 336See NYSE Rule 15. 337See NYSE Rule 123C (describing the dissemination of information regarding imbalances that accumulate prior to the closing transaction, including information on disparities between MOC and marketable LOC interest to buy and MOC and marketable LOC interest to sell, a data field indicating the price at which closing-only interest (e.g., MOC, LOC, and other auction-only orders) may be executed in full, and, beginning at 3:55 p.m., certain floor-broker quotes containing pegging instructions eligible to participate in the closing transaction). 338 During the five minutes prior to the Nasdaq closing auction (also referred to as the closing cross) at 4:00 p.m., Nasdaq disseminates an ‘‘Order Imbalance Indicator’’ every second. The Nasdaq closing cross is an auction process in which Nasdaq’s closing book and continuous book are brought together to create a single closing price. See Nasdaq Opening and Closing Crosses FAQs, available at https://www.nasdaqtrader.com/ content/ProductsServices/Trading/Crosses/ openclose_faqs.pdf (last accessed Jan. 7, 2020).) The Order Imbalance Indicator includes a reference price at which the maximum number of shares can be matched, the number of shares that can be matched at the reference price, the number of shares that cannot be matched at the reference price (i.e., the imbalance), the buy/sell direction of any imbalance, and a variety of indicative prices such as the ‘‘far price,’’ a hypothetical auction-clearing price for cross orders, and ‘‘near price,’’ a hypothetical auction-clearing price for cross orders as well as continuous orders. See Nasdaq Rule 4754; Nasdaq TotalView-ITCH 5.0 Specifications. that may be driving the higher concentration of trading in closing auctions is the growth of passive, indextracking investment strategies through mutual funds, ETFs, and similar products.331 Since passive strategies and ETFs often track the performance of a benchmark index, and the closing price used in the benchmark index calculation is often set during the closing auction, participation in closing auctions has become increasingly important.332 To participate efficiently in auctions conducted by the exchanges, market participants seek information about orders that are participating in the auctions. This includes information about auction order imbalances, which reflect the extent to which auction buy orders exceed auction sell orders (or vice-versa) and are generally provided at periodic intervals leading up to the auction. In addition, primary listing exchanges provide information about the indicative price for the auction based on auction orders received at that time. Today, only limited auction-related information is included in SIP data.333 Some NYSE auction data is disseminated through the CTA/CQ SIP,334 but this reflects only a small subset of the auction-related information that the primary listing exchanges generate. No auction information generated by
the other primary listing exchanges, including Nasdaq, NYSE Arca, and Cboe BZX, is distributed through the exclusive SIPs. By contrast, the primary listing exchanges provide a wide range of auction-related information through their proprietary data products.335 For example, NYSE provides opening auction information, such as opening order imbalance information and indicative pricing information, only through its proprietary market data products.336 In addition, with respect to closing auctions, NYSE disseminates order imbalance information approximately every five seconds between 3:50 p.m. and 4:00 p.m., which consists of real-time imbalances between marketable closing orders to buy and marketable closing orders to sell, along with the indicative price at which the auction would occur at that time. This information is available only through NYSE’s proprietary market data products.337 Similarly, Nasdaq,338

339NYSE Arca disseminates ‘‘Auction Imbalance Information’’ via proprietary data feeds, specifically the NYSE Arca Order Imbalance feed and NYSE Arca Integrated feed. See NYSE Arca Rule 7.35– E(a)(4)(C); NYSE Arca Trading Information:
Auctions Overview, available at https:// www.nyse.com/markets/nyse-arca/trading-info (last accessed Jan. 7, 2020). Auction Imbalance Information includes ‘‘if applicable, the Total Imbalance, Market Imbalance, Indicative Match Price, Matched Volume, Auction Reference Price, Auction Collar, Book Clearing Price, Far Clearing Price, Imbalance Freeze Indicator, and Auction Indicator.’’ NYSE Arca Rule 7.35–E(a)(4). 340Cboe BZX disseminates, via the Bats Auction Feed, Closing Match Process Information (the total size of all buy and sell orders matched at the close) for Non-BZX-Listed Securities and ‘‘information regarding the current status of price and size information related to auctions conducted by the Exchange.’’ See Cboe BZX Rules 11.22(i), 11.28(c). 341See supra note 333. 342See Roundtable Day One Transcript at 98 (Stacey Cunningham, NYSE); Roundtable Day One Transcript at 98 (Chris Concannon, CBOE); Roundtable Day One Transcript at 116 (Michael Blaugrund, NYSE); Roundtable Day Two Transcript at 124 (John Ramsay, IEX); Roundtable Day Two Transcript at 245–46 (Tyler Gellasch, Healthy Markets); NYSE Group Letter at 6, 13 (stating ‘‘information about auction imbalances is now automated and yet is available only via proprietary data feeds’’ and ‘‘NYSE Group believes that Main Street could also benefit if auction imbalance information were included in the core data disseminated by the SIPs’’ and recommending the expansion of the definition of core data to include auction imbalance information). 343See SIFMA Letter II at 2 (‘‘At minimum, auction imbalance information shall include matched quantity, imbalance size, near price, far price, paired shares and imbalance shares.’’). 344See Roundtable Day One Transcript at 228–29 (Joseph Wald, Clearpool Group) (stating that the lack of auction information (and depth of book data) on the exclusive SIPs needs to be addressed); Clearpool Letter (‘‘We believe that certain information currently provided through proprietary data feeds, for example, imbalance data and order depth of book information, should be considered core data and provided to all market participants through the SIP.’’); MFA and AIMA Letter at 6 (stating that that its members purchase proprietary market data (e.g., depth of book and imbalance data) from exchanges for a variety of reasons, including strategy implementation, risk-analysis, best execution, less latency than other sources, and to fulfill fiduciary obligations). 345See Roundtable Day Two Transcript at 68 (Paul O’Donnell, Morgan Stanley). 346See Roundtable Day One Transcript at 159–60 (Adam Inzirillo, BAML). 347See Roundtable Day One Transcript at 157–59 (Oliver Albers, Nasdaq). 348This figure is based on data available on Cboe’s website from November of 2019. See Cboe:
U.S. Equities Market Volume Summary, available at https://markets.cboe.com/us/equities/market_ share/ (last accessed Nov. 26, 2019); Rosenblatt Securities, supra note 330 (stating that closing auction volume amounted to 8.4% of consolidated volume); Greenwich Associates, Stock Trading Volumes Gravitate to Open and Closing Auctions (Feb. 2, 2017), available at https:// www.greenwich.com/press-release/stock-tradingvolumes-gravitate-open-and-closing-auctions (stating that average opening auction volume in 2017 was 1.25% of average daily volume). 349For example, on Aug. 24, 2015, LULD halts were triggered in 471 securities. More than half (55%) of the impacted securities triggered more than one halt, and over one quarter (26%) of the impacted securities were halted 4 or more times. See Staff of the Office of Analytics and Research, Division of Trading and Markets, Equity Market Volatility on Aug. 24, 2015, at 68 (Dec. 2015). 350See supra notes 333–341. 351See infra note 358 and accompanying text (explaining that auction data that would support more informed participation in auctions is not available publicly or to retail investors). 352See supra note 344. 353See supra note 333 (comparing the LULD information available through the exclusive SIP feeds with the more extensive reopening auction information available through proprietary market data products). 354Market participants use auction information in making a variety of trading decisions. See Markets Media, Auction Imbalance Data Affects Traders (Feb. 7, 2017), available at https:// www.marketsmedia.com/auction-imbalance-dataaffects-traders (stating that ‘‘70% of traders said real-time imbalance data can influence how their firm trades in the auction or continuous market’’ and explaining that large orders can be executed in auctions with less price impact). For example, market participants use auction imbalance information to predict closing volume, which is ‘‘an important factor in the optimal scheduling of algorithmic trading.’’ See Global Trading, Closing Volume Discovery (Sept. 23, 2019), available at https://www.fixglobal.com/home/closing-volumediscovery/. Since actual daily closing volume can vary widely, it is difficult for market participants to manage order placement logic for orders that are being submitted to auctions. Id. Auction imbalance messages published by the primary listing exchanges through proprietary market data products help market participants more accurately predict closing volume. Id. NYSE Arca,339 and Cboe BZX 340 provide auction information that is available only through each exchange’s proprietary market data products. As noted above, proprietary feeds also include additional information in connection with reopening auctions after trading halts that goes beyond the LULD information that primary listing exchanges are required to report to the exclusive SIP.341 (b) Comments and Roundtable Discussion In connection with the Roundtable, several panelists and commenters
supported the addition of auction information to SIP data.342 For example, one commenter stated that the Commission should require the inclusion of auction order imbalance information in SIP data and expressed the view that doing so should not materially increase the operating costs of the exclusive SIP.343 Similarly, other panelists and commenters emphasized the importance of auction information, including for achieving best execution.344 One panelist indicated that auctions are becoming more important and that institutional investors use auction imbalance data to trade.345 Another panelist stated that auction imbalance information is important for retail investors, particularly high-net worth individuals, because the amount of the imbalance may be significant to a trading decision.346 However, one panelist (Nasdaq) opposed adding auction information to the exclusive SIP. The panelist indicated that Nasdaq views its crossing process as its intellectual property, retail investors do not use the imbalance information, and auction data is already widely available to retail investors and retail online brokers.347 (c) Commission Discussion and Proposal Auctions have become an increasingly significant part of the trading day, accounting for approximately 7% of daily equity trading volume.348 Auctions, especially the opening and the closing auctions, are important for the implementation of passive investment strategies, as detailed above, and generate prices that are used for a variety of market purposes, including setting benchmark prices for index rebalances and for mutual fund pricing. Reopening auctions also play a crucial role in connection with security-specific or market-wide events, helping to assure the resumption of orderly trading following a limit up-limit down or other regulatory halt.349 Auction information, including auction order imbalance and other auction data, is important for effective participation in these significant market events. However, the content of SIP data has not been updated to reflect the growing importance of auctions, and today most auction-related information is available only through exchange proprietary data products.350 This exacerbates the information asymmetries between SIP data and proprietary data 351 and has raised concerns among market participants as to whether SIP data is sufficient to provide best execution to customer orders during auctions.352 Moreover, lack of full reopening auction information in SIP data may inhibit widespread participation in reopening auctions following limit-up-limit-down halts or other volatility events and may impede efficient price discovery during these critical periods.353 As discussed above, market participants rely upon auction information for effective participation in opening, closing, and reopening auctions.354 Accordingly, the Commission preliminarily believes that full auction-related information should be included in the proposed definition of core data.
Specifically, under proposed Rule 600(b)(5) of Regulation NMS, ‘‘auction information’’ would be defined as all information specified by national securities exchange rules or

355See, e.g., LULD Plan, supra note 38, Section VII(B)(1). 356See supra notes 342–346 and accompanying text. Moreover, as noted above, see supra note 323, competing consolidators will be required to calculate and generate consolidated market data, including the auction information set forth in the Commission’s proposed definition, and to offer this information to subscribers. See proposed Rule 614(d)(1)–(3). However, market participants may require more or less auction information than specified in the proposed definition, and can choose auction information products offered by competing consolidators that are more tailored to their specific needs. 357See supra note 347 and accompanying text. 358See Nasdaq Opening and Closing Crosses, http://www.nasdaqtrader.com/ Trader.aspx?id=OpenClose (last accessed Jan. 7,
2020) (providing share volume in the Nasdaq
crossing network but noting that imbalance data is available by subscription only); supra note 338. 359See Section 11A(c)(1)(C) of the Exchange Act, stating that the Commission shall assure the usefulness of the form and content of information with respect to quotations for and transactions in securities. 15 U.S.C. 78k–1(c)(1)(C). The Senate Report stated that the Commission would have the authority under Section 11A to promulgate rules as to what information and how such information is displayed on any tape or within any quotation system. See Senate Report, supra note 5, at 10. 360See supra Section II.C. effective national market system plans that is generated by a national securities exchange leading up to and during an auction, including opening, reopening, and closing auctions, and disseminated during the time periods and at the time intervals provided in such rules and plans. The elements of proposed auction information would be established by individual exchange rules or effective national market system plans (e.g., the LULD Plan). The individual exchanges have established their own auction information elements that are relevant to their individual auction processes, and effective national market system plans have also established information requirements related to certain auctions (e.g., reopenings after LULD trading pauses).355 The Commission preliminarily believes that each individual exchange and relevant plan should be able to design and develop its individual auctions and the data elements that would be useful to market participants that participate in such auctions. Further, by tying the proposed definition to the rules of the exchanges and effective national market system plans, the proposed definition could evolve over time as such exchanges or plans develop new data elements in the future. Any additional data element set forth in an exchange’s rules or plan(s) would be subject to Commission consideration pursuant to Section 19(b) of the Exchange Act and Rule 19b–4 or Rule 608, respectively. The Commission preliminarily believes that the proposed definition of auction information would promote more informed and effective trading in auctions. For example, information regarding the size and side of order imbalances can indicate the direction a stock’s price might move and inform decisions on where to price an auction order and what order type to use. Including auction information in core data, as proposed, would facilitate a broader distribution of this information to a greater number and variety of market participants. The Commission preliminarily believes that this would help to promote more informed trading for a greater number of market participants, which could also facilitate price formation, and improve execution quality for more traders and investors. While some market participants may not need the proposed auction information, based on the growth of auctions and the importance a variety of market participants have ascribed
to information about orders participating in auctions, the Commission preliminarily believes that many market participants, including some retail investors, would use this information to participate in auctions in a more informed and effective manner.356 Some Roundtable panelists objected to the inclusion of auction information in core data. For example, as previously noted, Nasdaq asserted that its crossing process is its intellectual property and that auction data is already widely available to retail investors on Nasdaq’s website and through other data vendors.357 Although some auctionrelated information may be available on Nasdaq’s website, the Commission preliminarily believes that meaningful auction information, such as the realtime imbalance data that would support decisions regarding order type selection and order pricing during auctions, is available only through Nasdaq’s proprietary market data products.358 In addition, the Commission’s proposal would not require the disclosure of any specific details about the operation of Nasdaq’s crossing process that would appropriate or compromise Nasdaq’s intellectual property. The proposed definition of auction information would require the dissemination of information about orders participating in auctions; 359 the proposed definition would not require the dissemination of information about the technology or processes used to hold an auction. Further, the proposed definition of auction information is based on information currently disseminated by Nasdaq. The Commission requests comment on the inclusion of auction information in the proposed definition of core data as well as the proposed definition of auction information in proposed Rule 600(b)(5). In particular, the Commission solicits comment on the following:
44. Do commenters believe that
auction information should be included in the proposed definition of core data? Why or why not? What kinds of market participants will use this information? For what purposes? What are the advantages or disadvantages of including auction information in proposed core data as opposed to proprietary data?
45. Do commenters believe that the
lack of auction information in current SIP data creates significant information asymmetries between users of current SIP data and users of proprietary data products? Do commenters believe that current SIP data is sufficient to meet the needs of some market participants even though it does not include auction information? Please explain.
46. Does the lack of auction
information in current SIP data create impediments to achieving best execution when participating in auctions? Do market participants believe that it is possible to participate in auctions without the auction information? Please explain.
47. What are commenters’ views on
the Commission’s proposed definition of auction information? Does it capture the full range of auction-related information that market participants need for informed trading in auctions? Does it include any information that is not necessary or useful for informed trading in auctions? Should the Commission delineate specific data elements in the definition of auction information as opposed to defining auction information in terms of the auction information that is currently generated pursuant to exchange rules or effective national market system plans?
48. Should the proposed definition of
auction information include information on orders participating in non-auction matching processes, such as Cboe’s market close order, that are related to auctions occurring on other exchanges? Why or why not? D. Proposed Definition of ‘‘Regulatory Data’’ As discussed above,360 the existing Equity Data Plans disseminate data elements related to a number of regulatory requirements, such as Regulation SHO, LULD, and MWCB requirements, and other information provided by the primary listing exchanges, such as official opening and

361Because, under the proposed decentralized consolidation model, primary listing exchanges would perform some of the functions that the exclusive SIPs perform today (such as monitoring the S&P 500 Index), each SRO would have to collect all elements of consolidated market data. SROs would not be required to obtain regulatory data or other consolidated market data from competing consolidators; SROs could choose to obtain such data directly from other SROs. 362 17 CFR 242.1000 et seq. 363See Rule 1000 of Regulation SCI, 17 CFR 242.1000. 364See Rule 1000 of Regulation SCI, 17 CFR 242.1000. 365 Id. 366See Rule 1001(a)(2)(v), 17 CFR 242.1001(a)(2)(v). As the Commission stated when it adopted Regulation SCI, ‘‘[i]n the event a trading halt is necessary, it is essential that the systems responsible for communicating the trading halt— typically maintained by the primary listing market—are robust and reliable so that the trading halt is effective across the U.S. securities markets. Thus, systems which communicate information regarding trading halts provide an essential service in the U.S. markets and, should a systems issue occur affecting the ability of an SCI entity to provide such notifications, the fair and orderly functioning of the securities markets may be significantly impacted.’’ See Regulation SCI Adopting Release, supra note 28, at 72278. 367A ‘‘covered security’’ is defined in Rule 201(a)(1) of Regulation SHO as any NMS stock as defined in Rule 600(b)(48). 17 CFR 242.201(a)(1). 368 17 CFR 242.201(b)(3). 369 Id. This is consistent with the current requirements under Rule 201(b)(3). Rule 201(b)(3) refers to the ‘‘listing market’’ as defined in Rule 201(a)(3). As discussed below, the Commission proposes to amend the definition of ‘‘listing market’’ to refer to the proposed definition of ‘‘primary listing exchange’’ in proposed Rule 600(b)(67). closing prices. To ensure that this information is included in the proposed definition of consolidated market data, the Commission is proposing to amend Rule 600 to add a definition of ‘‘regulatory data.’’ Specifically, under proposed Rule 600(b)(77) of Regulation NMS, regulatory data would be defined as: (1) Information required to be collected or calculated by the primary listing exchange for an NMS stock and provided to competing consolidators and self-aggregators pursuant to the effective national market system plan or plans required under Rule 603(b), including, at a minimum: (A) Information regarding Short Sale Circuit Breakers pursuant to Rule 201 of Regulation SHO; (B) information regarding Price Bands required pursuant to the LULD Plan; (C) information relating to regulatory halts or trading pauses (news dissemination/pending, LULD, and MWCBs) and reopenings or resumptions; (D) the official opening and closing prices of the primary listing exchange; and (E) an indicator of the applicable round lot size; and (2) information required to be collected or calculated by the national securities exchange
or national securities association on which an NMS stock is traded and provided to competing consolidators and self-aggregators pursuant to the effective national market system plan(s) required under Rule 603(b), including, at a minimum: (A) Whenever such national securities exchange or national securities association receives a bid (offer) below (above) an NMS stock’s lower (upper) LULD price band, an appropriate regulatory data flag identifying the bid (offer) as non-executable; and (B) other regulatory messages including subpenny execution and trade-though exempt indicators. For purposes of paragraph (1)(C), the primary listing exchange that has the largest proportion of companies included in the S&P 500 Index shall monitor the S&P 500 Index throughout the trading day, determine whether a Level 1, Level 2, or Level 3 decline, as defined in self-regulatory organization rules related to MarketWide Circuit Breakers, has occurred, and immediately inform the other primary listing exchanges of all such declines (so that the primary listing exchange can initiate trading halts, if necessary).361 The primary listing exchange is an SCI entity under Regulation Systems Compliance and Integrity (‘‘Regulation SCI’’).362 An SCI entity includes any national securities exchange other than an exchange that is notice registered with the Commission pursuant to 15 U.S.C. 78f(g) or a limited purpose national securities association registered with the Commission pursuant to 15 U.S.C. 78o–3(k).363 Under Regulation SCI, any SCI system of, or operated by or on behalf of, the primary listing exchange that directly supports functionality relating to trading halts, would be a ‘‘critical SCI system.’’ An ‘‘SCI system’’ means all computer, network, electronic, technical, automated, or similar systems of, or operated by or on behalf of, an SCI entity that, with respect to securities, directly support trading, clearance and settlement, order routing, market data, market regulation, or market surveillance.364 A ‘‘critical SCI system’’ means any SCI systems of, or operated by or on behalf of, an SCI entity that: (1) Directly support the functionality relating to (i) Clearance and settlement systems of clearing agencies; (ii) Openings, reopenings, and closings on the primary listing market; (iii) Trading Halts; (iv) Initial public offerings; (v) The provision of consolidated market data; or (vi) Exclusively-listed securities; or (2) Provides functionality to the securities markets for which the availability of alternatives is significantly limited or nonexistent and without which there would be a material impact on fair and orderly markets.365 Accordingly, with respect to any SCI systems used to determine whether LULD or MWCB trading halts have been triggered, and to notify other SROs of such halts, Regulation SCI requires the primary listing exchange to have reasonably designed business continuity and disaster recovery plans that include maintaining backup and recovery
capabilities sufficiently resilient and geographically diverse and that are reasonably designed to achieve two-hour resumption of such systems following a wide-scale disruption.366 Market participants use this regulatory data to meet their regulatory obligations and to be informed of trading halts, price bands, or other market conditions that may affect their trading activity. Accordingly, the Commission preliminarily believes that this information should be included in the proposed definition of consolidated market data.

Regulation SHO
In pertinent part, Rule 201(b) requires a trading center, including a listing market, to establish, maintain, and enforce certain written policies and procedures that are reasonably designed to prevent the execution or display of a short sale order of a covered security if the Short Sale Circuit Breaker has been triggered and further requires that such trading center, including a listing market, regularly surveil to ascertain the effectiveness of those policies and procedures and take prompt action to remedy any deficiencies. Under the proposed definition of regulatory data, the primary listing exchange for an NMS stock (i.e., a covered security under Rule 201 of Regulation SHO) 367 would make the determination 368 regarding whether a Short Sale Circuit Breaker has been triggered.369 The Commission proposes to amend the process required under Rule 201 in two ways. First, if the Short Sale Circuit Breaker has been triggered, the listing market would be required to immediately notify competing consolidators and self-aggregators (rather than a single plan processor as is currently the case). Competing consolidators would then be required to consolidate and disseminate this information to their subscribers. Second, under the proposed decentralized consolidation model with competing consolidators and selfaggregators, the listing market would have the option of obtaining proposed consolidated market data from one or

370 17 CFR 242.201(a)(3).
371 17 CFR 242.201(b)(1)(ii).
372 17 CFR 242.201(b)(3).
373See supra Section II.C.2. 374See supra Section II.C.2. more competing consolidators (rather than from a single plan processor as is currently the case) or, if aggregating consolidated market data itself, to make determinations as to whether a Short Sale Circuit Breaker has been triggered. Due to the changes proposed herein (i.e., a listing market would now have the ability to choose from one or more competing consolidators for proposed consolidated market data, or to aggregate proposed consolidated market data on its own), the Commission preliminarily believes that a trading center, including a listing market, should consider updating its written policies and procedures required under Rule 201(b) to address the source of core data that it uses in making its determination regarding whether the Short Sale Circuit Breaker has been triggered and any changes to that source of core data, including the underlying reason for such change. The Commission preliminarily believes that these types of updates to such written policies and procedures would assist a listing market in ensuring consistency in making its determination regarding whether the Short Sale Circuit Breaker has been triggered and avoiding any appearance of ‘‘gaming’’ or ‘‘cherrypicking’’ of core data in making that determination. Moreover, the Commission is proposing certain conforming amendments in Rule 201 to harmonize that rule with the Commission’s proposal. Currently, Rule 201(a) defines ‘‘listing market’’ by reference to the listing market as defined in the effective transaction reporting plan for the covered security.370 Since primary listing exchanges will be required to collect and calculate regulatory data, the Commission is proposing to introduce a definition of ‘‘primary listing exchange’’ in Rule 600(b)(67) to provide greater clarity with respect to the responsibilities regarding regulatory data. Specifically, under proposed Rule 600(b)(67), primary listing exchange would be defined as, for each NMS stock, the national securities exchange identified as the primary listing exchange in the effective national market system plan or plans required under Rule 603(b). The Commission preliminarily believes that it is appropriate for the effective national market system plan(s) to determine which exchange is the primary listing exchange for each NMS stock and that the proposed definition would ensure that primary listing exchanges are clearly identified. The Commission also preliminarily believes that the definition of listing market in Rule 201(a)(3) should be amended so that it cross-references this proposed definition of primary listing exchange, so as to facilitate the consistent identification of primary listing exchanges across Regulation SHO and Regulation NMS and to avoid potentially duplicative or confusing definitions in the Commission’s rules. Similarly, Rule 201(b)(1)(ii) requires Short Sale Circuit Breakers to be applied ‘‘the remainder of the day and the following day
when a national best bid for the covered security is calculated and disseminated on a current and continuing basis by a plan processor pursuant to an effective national market system plan.’’ 371 The Commission is proposing to update this provision by removing the reference to the plan processor to reflect the proposed decentralized consolidation model. In addition, Rule 201(b)(3) requires listing markets to immediately notify ‘‘the single plan processor responsible for consolidation of information for the covered security pursuant to Rule 603(b)’’ 372 when a Short Sale Circuit Breaker has been triggered. Again, as a result of the proposed decentralized consolidation model, this reference to a single plan processor is proposed to be removed and replaced by a requirement for the listing market to immediately make such information available as provided in Rule 603(b) (i.e., to competing consolidators and selfaggregators).
2. Limit Up-Limit Down Plan
Currently, the exclusive SIPs calculate and disseminate certain LULD data pursuant to the terms of the LULD Plan.373 Specifically, the exclusive SIPs calculate the price bands and reference prices and disseminate limit state flags identifying quotes that are nonexecutable, trading pause messages, and reopening information. To ensure that this important LULD information continues to be calculated and disseminated as part of proposed consolidated market data, the Commission is proposing several new provisions. First, the Commission is proposing that the primary listing exchanges be required to calculate and disseminate the price bands and reference prices for the LULD Plan as
part of proposed regulatory data. As
discussed below, the existing exclusive SIPs would be replaced by the proposed decentralized consolidation model with competing consolidators and selfaggregators, and, therefore, the obligation to calculate and disseminate LULD data would need to be shifted to another entity. Primary listing exchanges have a direct relationship with their listed companies and are responsible for imposing market-wide ‘‘news pending’’ and other regulatory halts. Further, under the LULD Plan, the primary listing exchanges currently have substantial obligations with regard to imposing and communicating LULD trading pauses, as well as with respect to the reopening of trading.374 The Commission therefore believes that the primary listing exchanges would be well-situated to perform these calculations as part of proposed regulatory data. The LULD Plan is an important mechanism in the national market system. The Commission preliminarily believes that having multiple entities (e.g., competing consolidators and selfaggregators) calculating reference prices and price bands could complicate and potentially undermine the purposes of the LULD Plan and create confusion during periods of market volatility. Accordingly, the Commission believes that the LULD reference prices and price bands should continue to be calculated and disseminated by a single entity—the primary listing exchange. The Commission’s proposal to continue to have a single entity calculate and disseminate LULD information as part of proposed consolidated market data and, as discussed below, to monitor the S&P 500 Index throughout the trading day and send notification messages to the primary listing exchanges regarding MWCBs, is not inconsistent with the proposed decentralized consolidation model under which multiple competing consolidators would calculate and disseminate consolidated market data, including the NBBO. With brokerdealers aggregating various proprietary market data products today, the potential for ‘‘multiple NBBOs’’ already exists, whereas LULD information is currently calculated and disseminated by a single entity (i.e., the exclusive SIPs) and notifications to primary listing exchanges regarding MWCBs triggered by S&P 500 Index declines are also sent by a single entity (i.e., SIAC). In addition, under the proposed definition of regulatory data, all national securities exchanges or national securities associations that receive a quote for an NMS stock that is outside of the price bands under the LULD Plan would be required to attach the appropriate regulatory flag signifying that the quote is non-executable and to

375By contrast, rather than the exclusive SIP notifying the primary listing exchange, under LULD, if trading for an NMS stock does not exit a limit state within 15 seconds of entry during regular trading hours, then the primary listing exchange is required to declare a trading pause in that NMS stock and notify the exclusive SIP. 376NYSE currently lists the largest proportion of companies in the S&P 500 Index. If this changes, NYSE and the other primary listing exchange would need to coordinate to ensure that these monitoring and notification responsibilities are transitioned effectively. 377See, e.g., NYSE Rule 123C(1)(e)(i) (Closing Procedures); NYSE Rule 123D(a) (Openings); Nasdaq Rule 4754(b)(4) (Nasdaq Closing Cross); Nasdaq Rule 4752(d) (Opening Process). 378Among other reasons, market participants would need to be aware of the applicable round lot size under the proposed amendments because several Commission rules would apply to round lot orders. See supra Section III.C.1(d)(i) (discussing the impact of the proposed definition of round lot on Rules 602, 603, 604, and 605 of Regulation NMS). 379See supra Section III.B. provide the quote and appropriate flag as part of its regulatory data to competing consolidators and selfaggregators. The Commission preliminarily believes that each national securities exchange or national securities association is in the best position to perform the function of attaching a flag to its own quote. The Commission preliminarily believes that assigning the responsibility to identify quotes as non-executable to parties other than the SRO disseminating the quote could add latency and complexity to the process and increase the risk of error.
3. Market-Wide Circuit Breakers
Today, SIAC (the CTA/CQ SIP) monitors the S&P 500 Index to determine whether a Level 1, Level 2, or Level 3 decline has occurred and is responsible for sending messages to the primary listing exchanges informing them of such declines.375 Under the proposed decentralized consolidation model, there would no longer be an exclusive SIP to perform this function. Accordingly, the proposed definition of regulatory data identifies a specific primary listing exchange to monitor the S&P 500 Index throughout the trading day, determine whether a Level 1, Level 2, or Level 3 decline, as defined in SRO rules related to MWCB, has occurred, and immediately inform the other primary listing exchanges of all such declines. Specifically, the primary listing exchange that has the largest proportion of companies included in the S&P 500 Index would be required to conduct this monitoring and notification function.376 As discussed above, the Commission preliminarily believes that these responsibilities should continue to be carried out by a single entity so that messages regarding the occurrence of Level 1, Level 2, or Level 3 declines are distributed to primary listing exchanges simultaneously from the same source, to avoid the complexity and confusion that might result if such messages were distributed from multiple parties during periods of market volatility. The Commission preliminarily believes that it is appropriate to allocate these functions to the primary listing exchange that has the largest proportion of companies included in the S&P 500 Index because a significant proportion of the monitoring would be related to its own listings. In addition, under the proposed definition of regulatory data, each primary listing exchange would be responsible for providing certain information required under the MWCB rules to competing consolidators and self-aggregators. Specifically, each primary listing exchange would be required to provide MWCB trading halt and resumption messages to competing consolidators and self-aggregators, just as they do with the exclusive SIPs today.
4. Other Regulatory Data
Official opening and closing prices are closely tracked data elements used by market participants for a variety of purposes. The primary listing exchanges currently determine the official opening and closing prices for their listed stocks 377 and provide these data elements to the exclusive SIPs. In addition to Regulation SHO, LULD, and MWCB information, the proposed definition of regulatory data will also require primary listing exchanges to provide the official opening and closing prices for the NMS stocks they list to competing consolidators and selfaggregators. The Commission preliminarily believes that the primary listing exchanges, because they determine the official opening and closing prices for their listed stocks and have direct and immediate access to this information, are best situated to provide official opening and closing prices in their listed securities to competing consolidators and self-aggregators under the decentralized consolidation model so that this important information is included in the proposed consolidated market data made available to market participants. In addition, the proposed definition of regulatory data would require the primary listing exchange for each NMS stock to calculate and make available to competing consolidators and selfaggregators an indicator of the applicable round lot size. As discussed above, the proposed definition of round lot would allocate stocks into five round lot categories based on each stock’s average closing price on the primary listing exchange over the prior calendar month. The Commission preliminarily believes that such an indicator would help market participants ascertain the applicable round lot size for each NMS stock on an ongoing basis.378 Due to the primary listing exchanges’ direct and immediate access to the official opening and closing prices of their listed stocks, the primary listing exchanges would be well-situated to calculate the monthly average closing price, the metric that will be used to allocate NMS stocks into round lot sizes under the proposed definition of round lot; assign a round lot size of 100, 20, 10, 2, or 1, as applicable; and include an indicator of the applicable round lot size in the data they make available to competing consolidators and self-aggregators. The proposed definition of regulatory data would also require an exchange or association on which an NMS stock is traded to provide other data pertaining to regulatory requirements, including sub-penny execution indicators and trade-though exempt indicators. Additional regulatory messages such as these are included in the technical specifications of the Equity Data Plans. The Commission preliminarily believes that all of these regulatory messages provide important information to the market and facilitate compliance with regulatory requirements. Therefore, the Commission preliminarily believes that such regulatory messages should be included in the proposed definition of consolidated market data.
Finally, as discussed above,379 as the markets continue to evolve, there may be a need to reflect new regulatory data elements in proposed consolidated market data. Accordingly, the Commission is proposing that the definition of regulatory data include a provision (as set forth in proposed consolidated market data) that would allow the definition of regulatory data to be amended to include additional regulatory data elements pursuant to amendments to effective national market system plan(s). As discussed above, amendments to effective national market system plans must be filed with, and approved by, the Commission pursuant to Rule 608(b). The Commission requests comment on the proposed definition of regulatory data in proposed Rule 600(b)(77). In particular, the Commission solicits comment on the following:

380See, e.g., UTP Data Feed Services Specification, supra note 142, at 20. 381 Id. at 33. 382As discussed above, administrative data elements could be added to consolidated market data pursuant to amendments to the effective national market system plan or plans required under Section 242.603(b). See supra Section III.B.
49. Do commenters believe that the
elements of proposed regulatory data enumerated in proposed Rule 600(b)(77) reflect the elements that are necessary for trading in compliance with Commission rules, Equity Data Plans, or SRO rules? Why or why not? Should any additional data elements be included? Is there any significant regulatory information that is currently included in SIP data, including pursuant to the technical specifications to the Equity Data Plans, which is not captured by the proposed definition of regulatory data? If so, should such elements be included in the proposed definition of regulatory data? Please describe.
50. Should any of the proposed
elements of regulatory data be excluded? Please explain.
51. Do commenters believe that the
primary listing exchange should be responsible for calculating regulatory data, as defined? Why or why not? Would any of those responsibilities be more effectively allocated to competing consolidators? Do commenters believe another party should perform these calculations? Would the proposed definition of regulatory data impose any additional costs on primary listing exchanges?
52. In the context of the Short Sale
Circuit Breaker, what benefits and/or challenges do commenters believe will result from the proposed change to a competing consolidator/self-aggregator model? Do primary listing exchanges anticipate utilizing a consistent source of core data in making their determination regarding whether a Short Sale Circuit Breaker has been triggered? Or multiple sources? Please describe.
53. Will updating the primary listing
exchange’s existing Rule 201 written policies and procedures, as discussed above, present any operational (or other) challenges? If yes, please describe.
54. Would a round lot size indicator
be useful to market participants and investors? Why or why not?
55. Do commenters believe that the
primary listing exchange that has the largest proportion of companies included in the S&P 500 Index should be required to perform the MWCBrelated functions described in the proposed definition of regulatory data? Why or why not? Should the primary listing market be determined by weighting the companies included in the S&P 500 Index? Why or why not? Do commenters believe that at least one other market should calculate this information as a backup contingency? Are there alternative approaches to the assignment of the S&P 500 Index monitoring and notification function? Would it be more appropriate to assign this function to another party? If so, please explain how any such other party could appropriately perform this function.
56. Do commenters believe that each
national securities exchange and national securities association receiving a quote outside the price bands under the LULD Plan should be required to flag each quote as non-executable? Why or why not? Are there alternative approaches to the assignment of the non-executable quote flagging function? Would it be more appropriate to assign this function to another party? If so, please explain how any such other party could appropriately perform this function. E. Proposed Definition of ‘‘Administrative Data’’ In addition to current core data and current regulatory data, SIP data today includes additional technical information. Much of this information is enumerated in the technical specifications of the Equity Data Plans and described as ‘‘administrative’’ or ‘‘control’’ messages. Examples of administrative messages include market center and issue symbol identifiers.380 Examples of control messages include messages regarding the beginning and end of trading sessions.381 The Commission preliminarily believes that administrative messages can facilitate the efficient and accurate use of consolidated market data by market participants and should be included in the proposed definition of consolidated market data. Further, the Commission preliminarily believes that this information is useful to market participants and should continue to be widely available. The proposed definition is intended to capture administrative information that is currently provided in SIP data.382 In order to capture this type of information, under proposed Rule 600(b)(2), ‘‘administrative data’’ would be defined as administrative, control, and other technical messages made available by national securities exchanges and national securities associations pursuant to the effective national market system plan or plans required under Section 242.603(b) or the technical specifications thereto as of [date of Commission approval of this proposal]. The Commission preliminarily believes that administrative data, as proposed to be defined and as currently exists, provides additional context for market participants to understand, and efficiently and accurately use, the proposed core and regulatory data to support their trading activities. For example, issue symbol and market center identifiers provide basic information necessary to understand to which stock the price and size information represented in core data relates and the specific exchange on which this interest is available, which informs decisions about where orders in such stocks should be directed. As such, this information should continue to be included in the proposed definition of consolidated market data. Moreover, the Commission preliminarily believes that SROs would be well-situated to provide administrative data messages, which relate to SRO-specific details such as the market-center identifiers or the beginning and ending of trading sessions, because SROs have direct and immediate access to this information and could
efficiently integrate it into the data feeds that they will utilize to make available the data necessary for competing consolidators and selfaggregators to generate core and regulatory data. The Commission requests comment on the proposed amendment to Rule 600(b)(2) to introduce a definition of administrative data. In particular, the Commission solicits comment on the following:
57. Do commenters believe that the
Commission should propose a definition of administrative data? Why or why not? Should the Commission take an alternative approach? Why or why not?
58. Do commenters believe that the
proposed definition of administrative data captures the market data that would be necessary or useful to market participants? Please explain. Does the proposed definition of administrative data include any market data that should not be included? Please explain.
59. Do commenters believe that each
national securities exchange and national securities association should make available administrative data? Should any of the elements be provided by the primary listing exchange? Are there specific administrative data elements that should be consistent across all SROs? Are there any administrative data elements that competing consolidators or some other party, as opposed to national securities exchanges and national securities

383See, e.g., CQS Binary Input Specifications (July 17, 2019), at 37 (describing a ‘‘retail interest indicator’’ as follows: ‘‘[w]hen Retail Price Improvement (RPI) interest is priced better than the Protected Best Bid or Offer (PBBO) by a minimum of $0.001, an indication of interest on the Bid, Offer, or both the Bid and Offer will identify that interest will be eligible to interact with incoming Retail Order interest.’’); supra note 47; NYSE Rule 107C; Securities Exchange Act Release No. 67347 (July 3, 2012), 77 FR 40673 (July 10, 2012) (NYSE Retail Liquidity Program Approval Order); CBOE BYX Rule 11.24; Securities Exchange Act Release No. 68303 (Nov. 27, 2012), 77 FR 71652 (Dec. 3, 2012) (CBOE BYX Retail Pilot Program Approval Order); Nasdaq BX Rule 4780; Securities Exchange Act Release No. 73702 (Nov. 28, 2014), 79 FR 72049 (Dec. 4, 2014) (NASDAQ BX Retail Pilot Program Approval Order). For example, NYSE’s retail liquidity program defines a class of market participants known as Retail Liquidity Providers who may provide potential price improvement, in the form of a non-displayed order that is priced better than NYSE’s best protected bid or offer called a Retail Price Improvement Order. See NYSE Rule 107C; NYSE Retail Liquidity Program Approval Order. Other NYSE members are allowed, but not required, to submit Retail Price Improvement Orders. Id. When there is a Retail Price Improvement Order in a particular security, NYSE disseminates an indicator, which is included in the SIP data, known as the Retail Liquidity Identifier, indicating that such interest exists. In response, a class of market participants known as Retail Member Organizations can submit a special type of order, called a Retail Order, to the exchange. A Retail Order would interact, to the extent possible, with available contra-side Retail Price Improvement Orders. Id. 384See NYSE Retail Liquidity Program Approval Order, supra note 383 (stating that ‘‘the Retail Liquidity Identifier will be disseminated through the consolidated public market data stream, and thus be widely viewable by market participants, and that members of the Exchanges that would not otherwise participate as Retail Liquidity Providers would be able to participate in the Program by submitting Retail Price Improvement Orders’’). 385See supra note 92 and accompanying text. Currently, the only exchange-specific program data disseminated pursuant to the Equity Data Plans relates to retail liquidity programs. 386See supra Sections I and II.A. 387These conflicts of interest are discussed in
Section VI.A.2 infra.
associations, should be required to generate or provide for inclusion in proposed consolidated market data? Please explain.
60. Do commenters believe that there
are administrative data elements that should not require an NMS Plan amendment for inclusion in consolidated market data? For example, are there administrative data elements that are provided solely in the course of providing or utilizing other consolidated market data elements, such as core or regulatory data? Please explain. What procedural mechanism would be appropriate for including any such data elements in consolidated market data? How could any such data elements be distinguished from those which would require an NMS Plan amendment to be added to consolidated market data? F. Proposed Definition of ‘‘ExchangeSpecific Program Data’’ In addition to current core data, regulatory data, and administrative data, current SIP data includes information related to individual exchange retail liquidity programs, which offer opportunities for retail orders to receive price improvement.383 The Commission preliminarily believes that existing retail liquidity programs and, in certain cases, other exchange-specific program information should continue to be included in proposed consolidated market data and is therefore proposing to define ‘‘exchange-specific program data’’ to include this information. Under proposed Rule 600(b)(32), exchangespecific program data, which would be included in the proposed definition of consolidated market data, would be defined as (i) information related to retail liquidity programs specified by the rules of national securities exchanges and disseminated pursuant to the effective national market system plan or plans required under Section 242.603(b) as of [date of Commission approval of this proposal] and (ii) other exchange-specific information with respect to quotations for or transactions in NMS stocks as specified by the effective national market system plan or plans required under Section 242.603(b). Proposed Rule 600(b)(32)(i) pertains to information related to existing exchange retail liquidity programs that is currently disseminated pursuant to the Equity Data Plans. The dissemination of retail liquidity identifiers in the current SIP data encourages market participants to submit orders to, or otherwise participate in, such programs that the Commission has approved as consistent with the Exchange Act, including the dissemination of the related retail liquidity program information as SIP data.384 The proposed definition of exchange-specific program information would help ensure that the retail liquidity program information that is currently included in SIP data would be included in consolidated market data. In addition, to the extent that an exchange, at its own discretion, determines to develop a new exchangespecific program in the future, proposed Rule 600(b)(32)(ii) would permit data elements related to any such program to be included in consolidated market data pursuant to the national market system plan or plans required under Section 242.603(b) or amendments thereto that are approved by the Commission. The
Commission preliminarily believes that, to the extent that (i) exchanges develop new programs in the future,385 and (ii) the broad dissemination of information about such programs as part of consolidated market data would facilitate participation in such programs, an amendment to the effective national market system plan(s) could be filed with the Commission under Rule 608 of Regulation NMS to include such information in consolidated market data. Accordingly, the Commission preliminarily believes that this information is useful and should be included in the definition of consolidated market data as proposed. The Commission requests comment on the proposed amendment to Rule 600(b)(32) to introduce a definition of exchange-specific program data. In particular, the Commission solicits comment on the following:
61. Do commenters believe that the
proposed exchange-specific program data should be included in proposed consolidated market data? Why or why not?
62. Do commenters believe that
information related to retail liquidity programs currently established pursuant to exchange rules should be included in the proposed definition of exchangespecific program data? Why or why not? Do commenters believe that the inclusion of data elements related to these programs in current SIP data is useful for trading or investment decisions? Please explain.
63. Do commenters believe that the
proposed definition of exchangespecific program data should permit data elements related to new exchangespecific programs that may be established to be included in consolidated market data pursuant to amendments to the effective national market system plan or plans required under Section 242.603(b)? Why or why not?
IV. Need for and Proposed
Enhancements to Provision of Consolidated Market Data The Commission is proposing to replace the existing centralized, exclusive consolidation model for SIP data 386 with a decentralized, competitive consolidation model. The Commission preliminarily believes this model would foster competition in the consolidation and dissemination of proposed consolidated market data, better serve the needs of market participants and investors, and help mitigate the influence of certain conflicts of interest inherent in the existing exclusive SIP model.387 The Commission also preliminarily believes

388See Bloomberg Decision, supra note 37, at 3,
4. See also infra note 439.
389See supra note 42 and accompanying text. 390See supra note 21. The Senate Report stated that an exclusive processor of market information is, ‘‘in effect, a public utility, and thus it must function in a manner which is absolutely neutral with respect to all market centers, all market makers, and all private firms.’’ See Senate Report, supra note 5, at 7. 391See Regulation NMS Adopting Release, supra note 10, at 37567. 392See infra Section VI.B.2(b). 393See, e.g., Letter to Brent J. Fields, Secretary, Commission, from Tyler Gellasch, Executive Director, Healthy Markets Association, 6 (Oct. 23,
2018) (‘‘Healthy Markets Association Letter I’’)
(‘‘SIP data feeds are still persistently slower and offer less information than is available through the private data feeds and connectivity offerings sold by the exchanges.’’). 394See, e.g., Letter to Brent J. Fields, Secretary, Commission, from Michael Blaugrund, Head of Transactions, New York Stock Exchange, 1 (Oct. 24,
2018) (‘‘Blaugrund Letter’’) (stating that, as
‘‘processing time approaches zero, it is clear that the time required for trade and quote data to travel from Participant datacenter -> SIP datacenter -> Recipient datacenter, or ‘geographic latency,’ is a larger portion of the total latency.’’). 395One commenter has stated ‘‘[w]hile it is true that the latencies of the SIPs are slightly greater than those of direct exchange feeds, it is important to remember that the SIPs are a consolidation of all market data feeds, not a single feed. Therefore, the SIPs must first aggregate data from multiple exchanges located in geographically disparate data centers before processing and transmitting it to the market, which means their feeds will always be, by definition, slightly slower than the data a user can receive directly from an exchange.’’ See Statement from the SIP Operating Committees Adding to SEC Commissioner Jackson’s Recent Comments (Sept. 24, 2018), available at https://www.nyse.com/ publicdocs/ctaplan/notifications/trader-update/ Media_Statement_from_SIP_Operating_ Committees_Chair_Emily_Kasparov.pdf; Nasdaq, Total Markets Report, supra note 127, at 20. 396See Roundtable Day One Transcript at 127 (Mark Skalabrin, Redline Trading Solutions) (stating that customers cannot be competitive using SIP data due to geographic latency, explaining ‘‘[i]f you’re sitting at Secaucus and you get a direct feed tick from BATS, it shows up in a few microseconds from when they publish it. That same tick for the SIP for Nasdaq-listed symbols goes to Carteret, for NYSE-listed symbols they go to Mahwah and they come back again. The real numbers are, for one, about 350 microseconds and the other about close to a millisecond in latency for those to show up for someone using the SIP to get the BATS tick. So this is just an architectural—an obsolete architecture, really, for an automated trading system in today’s world . . . you can’t be competitive with those kind of latencies compared to just getting it directly from the exchange.’’). 397See Joel Hasbrouck, Price Discovery in High Resolution, New York University (Aug. 9, 2019 draft) (‘‘The first analysis examines the extent to which the conventional source of market data (the consolidated tape) accurately reflects the prices observed by agents who subscribe (at additional cost) to direct exchange feeds. At a one-second resolution, the information share of the direct feeds is indistinguishable from that of the consolidated tape. At resolutions of 100 and 10 microseconds, however, the direct feeds are totally dominant, and the consolidated share approaches zero.’’); Elaine Wah and Michael P. Wellman, Latency Arbitrage, Market Fragmentation, and Efficiency: A TwoMarket Model, University of Michigan (2013) (‘‘Given order information from exchanges, the SIP takes some finite time, say [X] milliseconds, to compute and disseminate the NBBO. A computationally advantaged trader who can process the order stream in less than [X] milliseconds can simply out-compute the SIP to
derive NBBO*, a Continued that the proposed approach would modernize the infrastructure of the national market system by eliminating the existing, outdated centralized architecture for data consolidation and fostering the use of more competitive technologies for the collection, consolidation, and dissemination of proposed consolidated market data. Together, these would reduce latency differentials that currently exist between SIP data and proprietary data. Furthermore, the Commission preliminarily believes that this model will address concerns about the significant costs that accompany the exclusive 388 structure that currently exists for the aggregation and dissemination of SIP data. A. Existing Centralized Consolidation Model Today, SIP data is collected, consolidated, and disseminated to investors and market participants through a centralized consolidation model with an exclusive SIP for each NMS stock centrally collecting market data transmitted from the dispersed SRO data centers and then redistributing consolidated SIP data to end-users. Each exchange and FINRA is required to transmit its own data for each NMS stock to the appropriate exclusive SIP.389 As provided under Rule 603(b), the exclusive SIPs do not compete with each other in the collection, consolidation, or dissemination of SIP data.390 For many years, this centralized consolidation model served investors well by providing an accurate, reliable, and fair stream of SIP data that was considered prompt relative to the prevailing technological standards of the time. Technological advances as well as the order routing and trading strategies that developed in response to the adoption of Regulation NMS have greatly increased the speed and automation of both markets and common trading strategies. These changes, along with the provisions adopted in Regulation NMS that allow for the sale of proprietary data products,391 have created incentives for exchanges to develop enhanced proprietary data products that they sell to the same market participants that are subscribers to the SIP data, and to offer connectivity products and services (e.g., co-location, fiber connectivity, and wireless connectivity) that provide lowlatency access to the proprietary data products. Further, as the markets evolved and depth of book data became more important for some market participants, the exchanges continued to improve their proprietary data feeds without similarly improving the exclusive SIPs to reflect this market evolution. The content and latency differentials between SIP data and the proprietary market data products disseminated directly by the exchanges have become increasingly material.392 There are widespread and significant concerns about the current method of disseminating SIP data and its associated latencies.393 The centralized consolidation model of the Equity Data Plans and the exclusive SIPs suffers from three specific sources of latency disadvantage: (a) Geographic latency, (b) aggregation
or consolidation latency, and (c) transmission or communication latency. Geographic latency, as used herein, refers to the time it takes for data to travel from one physical location to another, which must also take into account that data does not always travel between two locations in a straight line. Greater distances usually equate to greater geographic latency, though geographic latency is also affected by the mode of data transmission, as discussed below. The Commission understands that geographic latency is typically the most significant component of the additional latency that SIP data feeds experience compared to proprietary data feeds.394 Because each exclusive SIP must collect data from geographically-dispersed SRO data centers, consolidate the data, and then disseminate it from its location to endusers, which are often in other locations, this hub-and-spoke form of centralized consolidation creates additional latency.395 For example, information about quotes and trades on Nasdaq for NYSE-listed securities incurs latency as it travels from Nasdaq’s data center in Carteret approximately 34.5 miles to the CTA/CQ SIP in Mahwah, and then back to Carteret.396 Aggregation or consolidation latency, as used herein, refers to the amount of time an exclusive SIP takes to aggregate the multiple sources of SRO market data into SIP data and includes calculation of the NBBO. This latency reflects the time interval between when an exclusive SIP receives data from an SRO and when it disseminates SIP data to the end-user. For years, market participants have claimed that the exclusive SIP aggregation speeds have remained measurably slower and uncompetitive with private market offerings.397 For

projection of the future NBBO that will be seen by the public. By anticipating future NBBO, an HFT algorithm can capitalize on cross-market disparities before they are reflected in the public price quote, in effect jumping ahead of incoming orders to pocket a small but sure profit.’’); Herbert Lash, Potential Profit from U.S. ‘‘Latency Arbitrage’’ Trading May Be $3 Billion—Study, Reuters (Feb. 25, 2016). 398Average latency is only one latency metric. Another metric for the use of evaluating the performance of the exclusive SIP is latency at the 99th percentile, which means that 99% of exclusive SIP latency observations for a given period were below that value. The 99th percentile is often reflective of periods of peak message traffic. These outlier periods tend to be among the more important trading periods during the day, and exclusive SIP latencies have tended to lag in performance during these periods. For example, in the second quarter of 2019, the latency measurement at the 99th percentile for Tapes A and B trades was 648 milliseconds, which is over 4 times slower than the average latency. See CTA, Key Operating Metrics of Tape A&B U.S. Equities Securities Information Processor (CTA SIP), available at https://www.ctaplan.com/publicdocs/ CTAPLAN_Processor_Metrics_2Q2019.pdf (last accessed Jan. 22, 2020). 399 Id.; see also UTP Q4 2016—Dec. Tape C Quote and Trade Metrics, available at http:// www.utpplan.com/DOC/UTP_website_Statistics_-_ Q4_2016_-December.pdf (last accessed Jan. 22, 2020). 400One commenter stated, ‘‘In the last three years, the SIP Operating Committees have invested in the technology that powers them, increasing resiliency and redundancy while reducing latency . . .’’ See Statement from the SIP Operating Committees Adding to SEC Commissioner Jackson’s Recent Comments, supra note 395. Following the Nasdaq UTP SIP Outage—and a meeting between the equities and options exchanges, FINRA, DTCC, the Options Clearing Corporation, and the then-Chair of the Commission—the Equity Data Plans’ operating committees discussed with Commission staff the operating committees’ plans for the exclusive SIPs ‘‘designed to improve operational resiliency, strengthen interoperability standards and disaster recovery capabilities, enhance governance, accountability, and establish a clear testing framework for the industry.’’ See Self-Regulatory Organizations Response to SEC for Strengthening Critical Market Infrastructure (Nov. 12, 2013), available at https://ir.theice.com/press/pressreleases/all-categories/2013/11-12-2013; NYSE Group Letter, at 3 (‘‘[E]xchanges have invested significantly in the operation of the [SIPs], resulting in improved resilience and reduced latency, all while managing increased volumes.’’); infra Section VI.B. 401See CTA, Key Operating Metrics of Tape A&B U.S. Equities Securities Information Processor (CTA SIP), available at https://www.ctaplan.com/ publicdocs/CTAPLAN_Processor_Metrics 2Q2019.pdf (last accessed Jan. 22, 2020).
402See UTP Q3 2019—July Tape C Quote and Trade Metrics, available at http:// www.utpplan.com/DOC/UTP_website_Statistics_ Q3-2019-July.pdf (last accessed Jan. 22, 2020). Nasdaq has stated that the Nasdaq UTP SIP is ‘‘faster at processing quote and trade messages than any Nasdaq-owned exchange trading system’’ with an average SIP processing time of 16 microseconds, compared to 25 microseconds ‘‘from entry of an order on the Nasdaq stock market until the associated quotation or execution or execution message is transmitted on the exchange’s proprietary TotalView data feed.’’ See Wittman Letter at 9. These latencies are perceived to be at or near competitive market standards. See also Roundtable Day One Transcript at 106 (statement of Oliver Albers, Nasdaq) (‘‘There have been vast improvements in SIP data in recent years, even as SIP revenue to exchanges has fallen. The Nasdaq UTP SIP has an average latency of just 16 millionths of a second . . . The Nasdaq UTP SIP can also handle 10 billion messages per day, 20 times more than a decade ago, and significant cybersecurity and fraud prevention investments by Nasdaq and other operators have increased the overall market efficiency and resiliency.’’). 403See Nasdaq Total Markets Report, supra note 127, at 19, n.19 (stating that the CTA/CQ SIP ‘‘currently operates with over 100 microseconds of latency, which is not up to the standard that investors have come to expect in the modern markets.’’). 404See Andriy Shkilko and Konstantin Sokolov, Every Cloud Has a Silver Lining: Fast Trading, Microwave Connectivity and Trading Costs (Apr. 2019), available at https://ssrn.com/ abstract=2848562. 405See Reuters, Lasers, Microwave Deployed in High-Speed Trading Arms Race (May 1, 2013), available at https://www.reuters.com/article/ushighfrequency-microwave/lasersmicrowavedeployed-in-high-speed-trading-armsrace-idUSBRE9400L920130501; ExtremeTech, New Laser Network between NYSE and Nasdaq Will Allow High-Frequency Traders to Make Even More Money (Feb. 14, 2014), available at https:// www.extremetech.com/extreme/176551-new-lasernetwork-between-nyse-andnasdaq-will-allow-highfrequency-traders-to-make-even-more-money; ‘‘The World’s First Laser Network for Transporting Equities Market Data between Nasdaq and BATS/ DirectEdge is Now Live and Operational’’ (July 22, 2015), available at https://anovanetworks.com/theworlds-first-laser-network-for-transporting-equitiesmarket-data-between-nasdaq-batsdirectedge-isnow-live-operational/; ICE Global Network: New Jersey Metro, available at https://www.theice.com/ market-data/connectivity-and-feeds/wireless/newjersey-metro (last accessed Jan. 22, 2020). example, in the second quarter of 2010, the average aggregation latency 398 for the Tapes A and B quotes and trades feeds exceeded 6,000 microseconds, and the Tape C feeds exceeded 5,500 microseconds.399 In recent years, the Equity Data Plans operating committees have made some improvements to aspects of the exclusive SIPs and
related infrastructure, including to address aggregation latency.400 For example, as of the second quarter of 2019, Tapes A and B reduced average quote feed aggregation latency to 69 microseconds and trade feed aggregation latency to 139 microseconds.401 As another example, Tape C reduced its average quote feed aggregation latency to an average of 16.9 microseconds for quotes and 17.5 microseconds for trades in the second quarter of 2019.402 As shown by these latency statistics, however, aggregation latency for the CTA/CQ SIP data continues to be meaningfully greater than that of Nasdaq UTP SIP data, despite these improvements.403 Transmission latency, as used herein, refers to the time interval between when data is sent (e.g., from an exchange) and when it is received (e.g., at an exclusive SIP and/or at the data center of the subscriber), and the transmission latency between two fixed points is determined by the transmission communications technology through which the data is conveyed. Transmission latency will also vary depending on the geographic distance between where the data is sent and where it is received. There are several options currently used for transmitting market data, such as fiber optics, which typically are used by the exclusive SIPs for receipt and dissemination of SIP data, and wireless microwave connections, which the exchanges offer as an alternative for their proprietary data feeds but not for SIP data. Fiber optics use light to transmit data through glass fiber cables. Wireless microwave connections (including extremely high frequency millimeter waves) transmit data through the air via towers in line of sight of one another and are commonly used to transmit market data today. Fiber optics are generally more reliable than wireless networks since the data signal is less affected by weather; 404 however, fiber tends to suffer greater latency because of its dependence on geography: The cables often cannot be laid in the most direct manner, adding distance for the signal to travel. Light also travels slower through fiber than microwaves travel through the air. Laser transmission, a more recent addition to high speed market data transmission, is another wireless mode of transmission that is known to be faster than microwaves but less susceptible to weather conditions.405

406Some of these services are solely offered by exchanges within the facility of an exchange (e.g., co-location connectivity at NYSE’s data center in Mahwah and Nasdaq’s co-location at its data center in Carteret) and some are offered by both exchanges and other third party providers (e.g., fiber and wireless connectivity between data centers). See, e.g., Nasdaq Trade Management Services—Wireless Connectivity Suite, available at http:// n.nasdaq.com/WirelessConnectivitySuite (last accessed on Jan. 22, 2020) (describing low-latency wireless network technology to deliver market data); ICE Global Network—Wireless, available at https://www.theice.com/market-data/connectivityand-feeds/wireless (last accessed on Jan. 22, 2020) (describing low-latency wireless connectivity options between trading hubs). 407See Roundtable Day One Transcript at 99 (Stacey Cunningham, NYSE) (‘‘[i]n the short term, we could use wireless technology to deliver SIP and overcome some of the geographic latencies.’’); at 156–157 (Oliver Albers, Nasdaq) (stating that Nasdaq could consider permitting microwave transmission from the exchanges to the Nasdaq UTP SIP); ICE Global Network & Colocation: Technical Specifications (Oct. 2019), available at https:// www.nyse.com/publicdocs/data/IGN_Colo_US_ Technical_Specifications.pdf. 408See NYSE Low-Latency SIP Filing, supra note
47. NYSE currently assesses the following
colocation fees for access to the IP network: (1) For a 1 gb circuit, $2,500 per connection initial charge plus $2,500 monthly per connection; (2) for 10 gb circuit, $10,000 per connection initial charge plus $11,000 monthly per connection; and (3) for a 40 gb circuit, $10,000 per connection initial charge plus $18,000 monthly per connection. See NYSE Price List 2020, available at https://www.nyse.com/ publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf (last accessed Jan. 22, 2020). 409See NYSE Low-Latency SIP Filing, supra note 47, at 47594. The filing defines ‘‘NMS feeds’’ to include the data streams of the Consolidated Tape System, the Consolidated Quote System, and the Options Price Reporting Authority (‘‘OPRA’’). 410 Id. The Commission understands this to mean that, currently, each of the CTA/CQ Plan participants must transmit its data through connectivity options that have a round-trip latency of at least 280 microseconds [140 microsecond oneway latency) * 2 = 280 microsecond round-trip latency]. The Commission believes that this is in addition to the transmission latency that is in the published CTA average aggregation latency metrics of between 69 microseconds for the quote feed and 139 microseconds for the trade feed. See CTA, Key Operating Metrics of Tape A&B U.S. Equities Securities Information Processor (CTA SIP), supra note 398 (regarding the second quarter of 2019). The round-trip latency of 280 microseconds would increase the 2Q19 realized CTA aggregation latency to 349 microseconds (from 69 microseconds) for the quotes feed and 419 microseconds (from 139 microseconds) for the trade feed. At the same time, the Commission understands that NYSE, which owns the CTA/CQ SIP, offers non-SIP proprietary data transmission to end-users via faster microwave networks. See, e.g., ICE Global Network: Chicago— New Jersey, available at https://www.theice.com/ market-data/connectivity-and-feeds/wireless/ chicago-to-new-jersey (last accessed Jan. 22, 2020) (describing ICE’s microwave route between the Chicago metro trading hub to Nasdaq’s data center in Carteret, NJ); ICE Global Network: New Jersey Metro, available at https://www.theice.com/marketdata/connectivity-and-feeds/wireless/new-jerseymetro (last accessed Jan. 22, 2020) (describing ICE’s laser and millimeter wave route between ICE’s Mahwah data center and the Carteret and Secaucus data centers. The Commission has instituted proceedings to allow for additional analysis and input concerning proposed fees in connection with the NYSE Low-Latency SIP Filing. See Securities Exchange Act Release No. 87699 (Dec. 9, 2019), 84 FR 68239 (Dec. 13, 2019). In addition, the CTA and OPRA recently made changes that permit access to the NMS feeds with an expected reduction in latency. ‘‘The NMS Network uses low-latency network switches and optimized topology to minimize latency, which [CTA and OPRA] expects will result in one-way latency, across all network hops, of approximately 5us, including fiber
latency. This is a substantial improvement over the current inbound one-way latency of approximately 144us over [Secure Financial Transaction Infrastructure].’’ See NMS Network Customer FAQs, at 3 (2019), available at https://www.ctaplan.com/publicdocs/ ctaplan/notifications/trader-update/NMS_Network_ FAQ.pdf (last accessed Jan. 22, 2020); CTA and UTP Annual Letter, supra note 181, at 1 (‘‘In its continuing effort to reduce latency and improve resiliency, the CTA will be making two improvements to the CTA/CQ feeds this year. First, subscribers will be able to connect to a new, dedicated, low latency NMS network to access CTA/CQ feeds. Subject to SEC approval, this should be available in the first quarter of 2020. Second, the CTA will complete its migration to NYSE’s new Pillar technology, which will provide substantial latency reductions for the CTA/CQ feeds. CTA anticipates that it will launch the new technology in the summer of 2020.’’). 411See Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, SIFMA, to Mary Jo White, Chair, Commission, 8–9 (Oct. 24, 2014), available at https://www.sec.gov/comments/ s7-02-10/s70210-422.pdf; Letter from John Ramsay, Chief Market Policy Officer, Investors Exchange LLC, to Vanessa Countryman, Secretary, Commission (Sept. 24, 2019) (‘‘Ramsay Letter II’’) (attachment to letter), available at https:// www.sec.gov/comments/4-729/4729-6190352- 192448.pdf; Proposed Governance Order, supra note 8. 412See, e.g., Roundtable Day One Transcript at 64 (Brad Katsuyama, IEX) (‘‘[a]nyone who cares or is, you know, making machine-level decisions cannot use the SIP just from a speed standpoint . . . [b]ut if full information and speed become important, which it is for the majority of large players maintaining their own electronic trading platform, then I would not say the SIP serves much of a purpose to them.’’); at 66 (Mehmet Kinak, T. Rowe Price (‘‘[t]his is a best execution obligation. We are obligated to try and produce best execution on every single order that we have. If our brokers are not aligned in that manner to use the most direct, the fastest, the most robust feeds they can get their hands on, then we will trade with someone else.’’); T. Rowe Price Letter at 2 (explaining that brokerdealers must purchase proprietary data because SIP data is slow and not as expansive as proprietary data and that even if the Commission provided a safe harbor permitting broker-dealers to fulfill their best execution requirements by relying on SIP data, broker-dealers believe that they have an obligation to obtain the ‘‘more robust, faster’’ proprietary data feeds). 413See supra note 411 and accompanying text. The modes of transmission for SIP data are typically slower than the modes of transmission used for proprietary data. For example, proprietary data products offered by the exchanges often rely on low-latency wireless connections,406 whereas the Equity Data Plans rely on fiber optics for connectivity.407
Additionally, the NYSE, as the operator of the CTA/CQ SIP, has required that access to the CTA/CQ SIP be through the use of the NYSE’s IP local area network. Recently, the NYSE submitted a proposed rule change to amend its prices related to colocation services to provide access to NMS feeds. The NYSE stated in that proposed rule change that the operating committee of the CTA and CQ Plans instituted this access requirement because of the IP network’s security, resiliency, and redundancy.408 The NYSE stated that the IP network is not a low-latency network, so ‘‘the requirement to use the IP network to access the NMS feeds introduces a layer of latency.’’ 409 The NYSE stated that it is in the process of building a lowlatency network alternative to connect to the CTA/CQ SIP that would result in a one-way latency reduction of over 140 microseconds.410 Over the past several years, market participants have increasingly raised concerns about these various forms of latency and how they affect their ability to participate competitively in today’s markets and provide best execution to their customers. Market participants have argued that as significant investments have been made in the proprietary data environment, the Equity Data Plans, which are operated by the SROs, have not made—or have been slow to make—the investments necessary to address most of these concerns.411 As a result, the latency differentials, in their various forms, between SIP data and proprietary data are significant enough that market participants believe they affect their ability to trade competitively and to provide best execution to customer orders.412 Proprietary data products often rely on low latency wireless connections, and the data is transmitted directly from each exchange to the data center of the subscriber without first having to travel to a centralized consolidation location as is the case with the exclusive SIPs. In addition, new entities have entered the market data space by providing specialized market data products for subscribers using proprietary data feeds. In essence, the provision of proprietary data to market participants via a decentralized consolidation model has developed in a competitive environment that has enhanced content and reduced latency for market participants; however, improvements to latency occurred more slowly and to a lesser extent with the exclusive SIPs.413 The concurrent existence of both the exclusive, centralized consolidation model for SIP data and the decentralized consolidation model for enhanced proprietary data has resulted in a two-tiered market data environment, where those participants that can reasonably afford and choose to

414See infra note 418.
415See infra Section IV.B.2.
416See infra Section IV.B.3.
417The Commission is taking an incremental approach to addressing market data infrastructure issues and is at this time addressing only the market data infrastructure issues of NMS stocks. The market data needs of options market participants and equities market participants are different, as are the market structures for options and equities more broadly. The Commission’s proposal to expand the content of consolidated market data and introduce a decentralized consolidation model for its distribution to market participants has been designed for NMS stocks. The Commission may in the future consider the market data infrastructure of listed options. See also Proposed Governance Order, supra note 8. 418See infra Section VI.C.2(c). Roundtable panelists stated that broker-dealers do not have the option to forgo buying the proprietary data in meeting their clients’ needs because the SIPs are slower and not as expansive. See Roundtable Day One Transcript at 65–66 (Mehmet Kinak, T. Rowe Price); T. Rowe Price Letter at 2; Roundtable Day Two Transcript at 245 (Tyler Gellasch, Healthy Markets) (asking how a small firm can be competitive when it has to spend $50,000 per month to connect to one exchange group’s proprietary data feeds), at 280–281 (describing market data as a mandatory ‘‘tax’’ on doing business that imposes a disproportionately large burden on small brokers). But see Robert P. Bartlett, III and Justin McCrary, How Rigged Are Stock Markets? Evidence from Microsecond Timestamps (2017) (‘‘Bartlett and McCrary’’), available at https:// www.law.berkeley.edu/wp-content/uploads/2019/ 10/bartlett_mccrary_latency2017.pdf (‘‘[O]ur analysis suggests SIP reporting latencies generate remarkably little scope for exploiting the informational asymmetries available to subscribers to exchanges’ direct data fees.’’). Bartlett and McCrary, however, cautioned that their ‘‘results should not be over-interpreted’’ and noted that their results ‘‘do not rule out other types of latency arbitrage that might be prevalent in the current environment.’’ Roundtable respondents supported the view that a competing consolidator model would reduce the speed differential between current SIP data and proprietary data. See, e.g., Roundtable Day One Transcript at 49–50 (Prof. Hal Scott, Harvard University); SIFMA Letter II. 419As noted above, the current Equity Data Plan architecture requires SRO data to be sent from an SRO’s data center to the exclusive SIP (typically in a separate data center in a different geographic location) for consolidation, prior to then being transmitted from the plan processor’s data center to market data users (again, typically in a separate data center in a different geographic location) once the data is consolidated. See supra notes 395–396 and accompanying text. 420 If a competing consolidator chooses not to consolidate data at the data center of its users, the Commission believes the users would still benefit from reduced aggregation and transmission
latencies resulting from the proposed decentralized consolidation model. See infra notes 421–422 and accompanying text. 421The Commission is proposing to require each competing consolidator to publish on its website its latency statistics on a monthly basis. See infra
Section IV.B.2(e)(ii).
422See infra Section VI.C.2(c).
423As noted above, the NYSE and Nasdaq offer faster wireless connectivity to their data centers and other data centers. See supra Section IV.A. 424See Regulation SCI Adopting Release, supra note 28, at 72258. pay for the proprietary feeds receive other content rich data faster than those who do not, such as smaller market participants that face higher barriers to entry from data and other exchange fees.414 The Commission is concerned about this disparity and its effect on investors. Accordingly, the Commission is proposing to address the latency differentials and reduce the asymmetries that exist within this twotiered environment. B. Proposed Decentralized Consolidation Model To enhance the speed and quality of the collection, consolidation, and dissemination of the proposed consolidated market data, the Commission is proposing a decentralized consolidation model with competing consolidators 415 and selfaggregators 416 to replace the existing centralized consolidation model which relies on the exclusive SIPs.417 The Commission preliminarily believes that a decentralized consolidation model with competing consolidators and self-aggregators would benefit market participants because it would significantly reduce the geographic, aggregation, and transmission latency differentials that exist between SIP data and proprietary data that have increasingly reduced the utility of SIP data and disadvantaged, in particular, smaller market participants.418 Specifically, as discussed above, the Commission preliminarily believes that the decentralized consolidation model would reduce geographic latency by facilitating the ability of proposed consolidated market data to be delivered to subscribers more directly, without going to a separate location to be consolidated by the exclusive SIPs.419 In addition, the proposed decentralized consolidation model likely would reduce geographic latency by allowing consolidation to occur at the data center where a data end-user is located instead of occurring only at the CTA/CQ SIP and the Nasdaq UTP SIP data centers. This arrangement would permit competing consolidators to receive data from each exchange directly at the point of consolidation and latency-sensitive data end-users to receive proposed consolidated market data at the same location if they so desired.420 This would eliminate the geographic latency necessarily encountered when a latencysensitive data end-user receives consolidated data from an exclusive SIP that is in a separate data center and that exclusive SIP is consolidating data from exchanges that are located in other data centers. In addition, the Commission preliminarily believes that the introduction of competitive forces will lead to improvements in the use of more competitive, low latency aggregation and transmission technologies for consolidated market data. Specifically, competition should incentivize competing consolidators to minimize the amount of time it takes to aggregate SRO data into
proposed consolidated market data.421 In addition, competition could incentivize competing consolidators to reduce transmission latency by offering superior connectivity options that are faster than fiber optics, such as microwave, laser, or other wireless means of connectivity.422 Competing consolidators and selfaggregators would not be restricted to the transmission methods mandated by the Equity Data Plans 423 and would compete based on the efficiency of their aggregation of raw SRO data to generate proposed consolidated market data. By introducing competitive forces into the collection, consolidation, and dissemination of proposed consolidated market data, the Commission preliminarily believes such data could be delivered to market participants with improved efficiencies and latencies comparable to proprietary market data products. To implement this model, the Commission proposes to: (1) Amend Rule 600 to introduce definitions of competing consolidator and selfaggregator; (2) amend Rule 603(b) to require the SROs to provide their NMS information to competing consolidators and self-aggregators in the same manner the SROs make available this information to any person and to remove the requirement that there be only one plan processor for each NMS stock; and (3) adopt new Rule 614 to require the registration of competing consolidators and establish the obligations with which they must comply and a new Form CC for competing consolidator registration. In addition, the Commission is proposing to amend Regulation SCI to expand the definition of ‘‘SCI entities’’ to include competing consolidators because they would be sources of proposed consolidated market data, and therefore would ‘‘play a significant role in the U.S. securities markets and/or have the potential to impact investors, the overall market, or the trading of individual securities.’’ 424 As discussed below, the Commission preliminarily believes that if a competing consolidator’s consolidated market data feed became unavailable or otherwise unreliable, it could have a significant impact on the trading of securities, and could interfere

425See infra Section IV.B.2(f). 426See 15 U.S.C. 78k–1(c)(1)(B). 427The proposal does not include a requirement that the SROs provide a standardized format for the data because the Commission preliminarily believes that imposing a standardized format would increase costs and burdens on the SROs and that competing consolidators and self-aggregators would be able to handle data received in multiple formats, as determined by each SRO, as is the case today for proprietary data. The Commission is proposing to require each SRO to offer the same access or transmission options and the same formats offered for proprietary data to proposed consolidated market data. See proposed amendment to Rule 603(b). 428For example, the same access options available to proprietary feeds, including, but not limited to transmission medium (i.e., fiber optics or wireless), multicast communication, colocation options, physical port, logical port, bandwidth, and FPGA, would be required to be made available for proposed consolidated market data feeds. Further, any enhancements to proprietary feed methods of access should similarly be made to consolidated market feeds. 429Four commenters supported this approach. One commenter stated that for a new consolidator model to be competitive, the consolidators would have to have the right to buy data from exchanges on non-discriminatory terms. See Ramsay Letter II (attachment to letter). Another commenter stated that the economic terms of co-located competing consolidators at an exchange data center should be equivalent to those offered to the exchange’s trading members. This commenter also suggested that any exchange that operates a competing consolidator in its data center should have policies and procedures to ensure that competing consolidators in the same data center have equal access to the exchange’s feeds at equal latencies. This commenter also supported the provision of direct market data feeds by exchanges to competing consolidators. See Letter to Brent J. Fields, Secretary, Commission, from Melissa MacGregor, Managing Director and Associate General Counsel, and Theodore R. Lazo, Managing Director and Associate General Counsel, SIFMA, dated Oct. 24, 2018 (‘‘SIFMA Letter’’) (attachment to letter). The third commenter stated that all market data distributors should receive the same market data at the same time and at the same cost, which may require exchange proprietary data feeds to be delayed to match the data receipt time of affiliated or third-party SIPs. The commenter said that exchanges, affiliates, and third parties then would be able to compete to provide market data to recipients. See Letter to Jay Clayton, Chairman, Commission, from Tyler Gellasch, Executive Director, Healthy Markets Association, 3 (Jan. 3,
2020) (‘‘Healthy Markets Association Letter III’’).
The fourth commenter suggested that the Commission update its interpretations for Rule 603(a) to emphasize ‘‘the synchronized availability of data between SIP and exchanges’ proprietary products to satisfy the fair and reasonable, as well as non-discriminatory principles.’’ See Letter to Vanessa Countryman, Secretary, Commission, from Kelvin To, Founder and President, Data Boiler Technologies, LLC, 8 (Dec. 6, 2019) (‘‘Data Boiler Letter’’). The Commission believes that its proposed amendment to Rule 603(b), as discussed below, would achieve this result by requiring the same manner and methods, including all methods of access and the same format for competing consolidators, self-aggregators and subscribers of proprietary data. 430One commenter advocated that each exchange provide a single data feed to market participants. The commenter said that a single data feed ‘‘would better serve market participants from the standpoint of equality and fairness.’’ See T. Rowe Price Letter at 3. The proposed rule does not require the SROs to provide a single feed. The Commission preliminarily believes that the SROs should be able to utilize their current data feeds to make available the data necessary to generate proposed consolidated market data. This would reduce the costs and burdens of implementing the proposed amendments to Rule 603(b). 431For example, an exchange could make available a current proprietary DOB product that contains elements of proposed core data to competing consolidators and self-aggregators for purposes of Rule 603(b). 432Fees for market data that is outside of the proposed definition of consolidated market data (i.e., proprietary data products, and access to such proprietary data products) would be subject to the rule filing process pursuant to Section 19(b) and Rule 19b–4. As discussed above, competing consolidators would be able to develop products for their subscribers based on subscriber demand. See supra notes 322–323 and accompanying text. 433Fees for proposed consolidated market data would be subject to the NMS plan process pursuant to Rule 608 of Regulation NMS. See infra Section IV.B.4 for a discussion of the effective national market system plan(s). with the maintenance of fair and orderly markets.425 Accordingly, this change would subject competing consolidators to the requirements of Regulation SCI. Under this new proposed decentralized consolidation model, the SROs would be required to provide their NMS information to competing consolidators and self-aggregators and the existing exclusive SIP model would cease. The Commission preliminarily believes that the implementation of a decentralized consolidation model with competing consolidators and selfaggregators will fundamentally improve the way consolidated market data, as proposed, is provided in the U.S. Among other things, this model should materially reduce information asymmetries for those market participants who rely exclusively on the exclusive SIP feed and facilitate
the ability to achieve best execution for those broker-dealers who rely exclusively on the SIP feed. Finally, the Commission believes that the introduction of competition into the collection, consolidation, and dissemination of the proposed consolidated market data should help ensure that such data continues to be provided in an accurate, reliable, prompt, and fair manner 426 as the market evolves in the future.

Access to Data
The Commission is proposing to amend Rule 603(b) of Regulation NMS to reflect the decentralized consolidation model by requiring each SRO to provide its NMS information, including all data necessary to generate proposed consolidated market data, to all competing consolidators and selfaggregators 427 in the same manner and using the same methods, including all methods of access 428 and data formats, as such SRO makes available any information to any other person.429 Under the Commission’s proposed approach, competing consolidators and self-aggregators would have to collect, and the SROs would provide, all of each SRO’s market data that is necessary to generate consolidated market data as proposed,430 and the competing consolidators and self-aggregators would aggregate the SROs’ market data to generate the proposed consolidated market data. For exchange data, an exchange could leverage its existing offerings and infrastructure and make available to competing consolidators and self-aggregators its current proprietary data products that contain data elements that are specified in the proposed definition of consolidated market data,431 or an exchange could develop a new market data product that contains only the data elements that are specified in the proposed definition of consolidated market data. Competing consolidators and self-aggregators could choose to purchase products that include only the proposed consolidated market data elements or products that contain elements of both proposed consolidated market data and other proprietary data. However, all SROs must offer market data, and access to such data, to those competing consolidators or self-aggregators that elect to purchase only data that would be necessary to create consolidated market data, as required under the proposed rule amendments. The proposed decentralized consolidation model and the proposed consolidated market data definition do not preclude the exchanges from continuing to sell proprietary data. If an exchange provided its proprietary data products to a competing consolidator or self-aggregator and a competing consolidator or self-aggregator developed a product, or otherwise used data, that exceeded the scope of proposed consolidated market data (e.g., full depth of book data), the competing consolidator or self-aggregator would be charged separately for the proprietary data use pursuant to the individual exchange fee schedules.432 Selfaggregators and competing consolidators that limit their use of exchange data to proposed consolidated market data elements would be charged only for proposed consolidated market data pursuant to the effective national market system plan(s) fee schedules.433 As noted above, under the proposed decentralized consolidation model, SROs must make available market data to competing consolidators or selfaggregators that elect only to purchase

434 Vendors would still be able to operate in the decentralized consolidation model. Vendors would be able to receive proprietary market data directly from the SROs as they do today or they would be able to receive consolidated market data from a competing consolidator in a manner that is similar to how they receive SIP data today without being required to register as a competing consolidator. However, if a vendor wished to receive directly from the SROs information with respect to quotations for and transactions in NMS stocks at the prices established by the effective national market system plan(s) and generate consolidated market data for dissemination, such vendor would be required to register as a competing consolidator. Thus, only competing consolidators and selfaggregators would be able to directly receive the NMS information that is necessary to generate consolidated market data from the SROs at the prices established by the effective national market system plan(s). Id. 435 15 U.S.C. 78k–1(c). See also Rule 603(a)(1)–(2) of Regulation NMS, 17 CFR 242.603(a)(1)–(2). 436Bloomberg Decision, supra note 37, at 4, n.12 (citing Regulation NMS Adopting Release, supra note 10, at 37560) (‘‘In the Proposing Release, the Commission emphasized that one of its primary goals with respect to market data is to assure reasonable fees that promote the wide public availability of consolidated market data.’’). 437See 15 U.S.C. 78k–1(c); see also Rules 603(a)(1)–(2), 608 of Regulation NMS, 17 CFR 242.603(a)(1)–(2), 608; Bloomberg Decision, supra note 37, at 11–12. 438Bloomberg Decision, supra note 37 at 15; cf. Rule of Practice 700, 17 CFR 201.700 (providing that the burden of demonstrating that a proposed rule change satisfies statutory standards is on the self-regulatory organization that proposed the rule change). 439 In the Market Information Concept Release, the Commission stated ‘‘the fees charged by a monopolistic provider (such as the exclusive processors of market information) need to be tied to some type of cost-based standard in order to preclude excessive profits if fees are too high or underfunding or subsidization if fees are too low. The Commission therefore believes that the total amount of market information revenues should remain reasonably related to the cost of market information.’’ See Market Information Concept Release, supra note 11, at 70627. The Commission later explained that because core data must be purchased, their fees are less sensitive to competitive forces. See Securities Exchange Act Release No. 59039 (Dec. 2, 2008), 73 FR 74770, 74782 (Dec. 9, 2008) (File No. SR–NYSEArca–2006– 21). A reasonable relation to costs has since been the principal method discussed by the Commission for assessing the fairness and reasonableness of such fees for core data, with the recognition that ‘‘[t]his does not preclude the Commission from considering in the future the appropriateness of another guideline to assess the fairness and
reasonableness of core data fees in a manner consistent with the Exchange Act.’’ See Bloomberg Decision supra note 37, at 15 & nn.63. Although this proposal introduces competition into the dissemination of consolidated market data, the mandatory nature of the provision of consolidated market data by the SROs has not changed. The ‘‘principal method we have discussed for assessing the fairness and reasonableness of core data fees has stated that core data fees should bear at least some relationship to costs; past Commission statements have contemplated various approaches for how that relationship might be assessed. This is because distributors of core data have an effective monopoly over such data, and accordingly competitive market forces are not operating to impose sufficient constraints to promote core data fees’ fairness and reasonableness.’’ See Bloomberg Decision, supra note 37, at 15 (footnotes and citations omitted). 440See Rule 603(a) of Regulation NMS, 17 CFR 242.603(a). Access fees would be set forth in each individual SRO’s fee schedules. data necessary for the proposed consolidated market data.434 Currently, the exclusive SIPs are subject to Exchange Act Section 11A(c)(1)(C) (as implemented by Rule 603(a)(1)), which requires that exclusive processors (which include the exclusive SIPs and SROs when they distribute their own data) must assure that all securities information processors may obtain on fair and reasonable terms information with respect to quotations for and transactions in securities, which includes consolidated market data.435
Section 11A(c)(1)(D), in turn (as
implemented by Rule 603(a)(2)), requires that the SROs provide such data to broker-dealers and others on terms that are not unreasonably discriminatory. As we have noted, competing consolidators will be securities information processors and thus Exchange Act Section 11(A)(c)(1)(C) will continue to apply. Similarly, self-aggregators are brokerdealers and thus Exchange Act Section 11A(c)(1)(D) will continue to apply. The Commission seeks to ensure that consolidated market data is widely available for reasonable fees.436 In discharging its statutorily mandated review function, the Commission must assess the proposed fees and determine whether they are fair and reasonable, and not unreasonably discriminatory.437 The Commission must have ‘‘sufficient information before it to satisfy its statutorily mandated review function’’— that the fees meet the statutory standard.438 The Commission has previously stated that fees for consolidated SIP data can be shown to be fair and reasonable if they are reasonably related to costs.439 The exchanges would be able to offer different access options (e.g., with different latencies, throughput capacities, and data-feed protocols) to market data customers, but any access options available to proprietary data customers must also be available to competing consolidators and selfaggregators for the purpose of collecting and consolidating proposed consolidated market data.440 Proposed Rule 603(b) would require exchanges to provide all forms of access used for proprietary data to all competing consolidators and self-aggregators for the collection of the data necessary to generate proposed consolidated market data. The Commission is proposing to require that an exchange offer the same form of access, such as fiber optics, wireless, or other forms, in the same manner and using the same methods, including all methods of access and the same format, as the exchange offers for its proprietary data. For instance, if an exchange has more than one form of transmission for its proprietary data, then the exchange must offer the competing consolidators and selfaggregators those types of transmission for proposed consolidated market data. The proposed rule would not require an exchange to offer new forms of access, but if an exchange did offer any new forms of access for proprietary data, it would have to offer them for proposed consolidated market data as well. Different forms of access affect the delivery of data. For example, as discussed above, fiber connections have latencies that wireless connections do not. If an exchange provided its proprietary market data via wireless connections and proposed consolidated market data only via fiber connections, the latencies that exist today would continue. Accordingly, the Commission preliminarily believes that the SROs should be required to provide proposed consolidated market data in the same manner and using the same methods, including all methods of access and the same format as they
provide for proprietary data. The Commission understands that different market participants have different access needs. The Commission is not mandating a specific connectivity option or limiting options for market participants but believes that all connectivity options, including colocation, must be available to all market participants whether they are purchasing proposed consolidated market data or proprietary data. In addition, the access requirement under Rule 603(b) would require that the exchanges provide their NMS information, including all data necessary to generate consolidated market data, at one data dissemination location co-located near each exchange’s matching engine. This requirement would allow competing consolidators and self-aggregators to receive data at that location at the same speeds, and with the same access options, as the exchange offers its market data. Different colocation options within a data center could raise concerns about whether that exchange is providing the same manner of access to its data as proposed to be required under Rule 603(b). Further, the exchanges would not be permitted to provide their NMS information necessary to generate consolidated market data in a faster manner to any affiliate exchange, a subsidiary or other affiliate that operates

441See also Rule 603(a) of Regulation NMS, 17 CFR 242.603(a); supra note 440 and accompanying text. 442 17 CFR 242.603(b). 443See Section 11A(c)(1)(B) of the Exchange Act, 15 U.S.C. 78k–1(c)(1)(B). Section 11A(c)(1)(B) of the Exchange Act authorizes the Commission to prescribe rules, as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Exchange Act, that assure the prompt, accurate, reliable, and fair collection, processing, distribution, and publication of quotation and transaction information, as well as the fairness and usefulness of the form and content of such data. Id. 444Rule 603(b) of Regulation NMS, 17 CFR 242.603(b). See also supra Section II.B. 445See Proposed Governance Order, supra note 8. 446The existing exclusive SIPs would be required to continue their operations until such time as the Commission considers and approves an NMS plan amendment that would effectuate a cessation of their operations. See infra Section IV.B.6. Should the existing exclusive SIPs choose to become competing consolidators, proposed Rule 614(a) mandates a registration process for securities information processors that wish to become competing consolidators. See infra Section IV.B.2(e). If the existing exclusive SIPs choose to cease operations, the SROs would be required to amend the effective national market system plan(s) for NMS stocks to reflect this change. 447As discussed in Section IV.B.2(f), infra, because competing consolidators would be the sources of proposed consolidated market data, the Commission is proposing to define them as ‘‘SCI Continued as a competing consolidator or a subsidiary or affiliate that competes in the provision of proprietary data. Furthermore, proposed Rule 603(b) would require that all access options be provided in a latency-neutralized manner such that all participants within the exchange’s data center—such as proprietary data subscribers, competing consolidators, and self-aggregators— would receive the data at the same time, regardless of their location or status within the data center.441 For example, exchanges could adopt equal cable length protocols (i.e., where cable lengths from network equipment to customer cabinets are harmonized for equal access) to ensure that all of the exchange’s data center connections provide market data simultaneously. The proposed decentralized consolidation approach would require the SROs to use the same latencyneutralization processes for competing consolidators and self-aggregators as they offer to subscribers of proprietary data. The Commission is also proposing to remove the requirement in Rule 603(b) that ‘‘all consolidated information for an individual NMS stock [be disseminated] through a single plan processor.’’ 442 While this requirement is necessary for the centralized consolidation model, it would be inconsistent with the proposed decentralized consolidation model, which would allow multiple
competing consolidators to disseminate proposed consolidated market data in individual NMS stocks and would permit self-aggregators to collect and generate proposed consolidated market data for individual NMS stocks for their own internal uses. The Commission preliminarily believes that the proposed amendments to Rule 603(b) would be consistent with the goals of Section 11A of the Exchange Act by helping to ensure the prompt, accurate, reliable, and fair collection, processing, distribution, and publication of NMS information, as well as the fairness and usefulness of such data.443 The Commission requests comment on the proposed amendments to Rule 603(b) of Regulation NMS. In particular the Commission solicits comment on the following:
64. Should the SROs be required to
provide all of their market data with respect to NMS stocks to competing consolidators and self-aggregators? Should the SROs charge fees based on the use of the data, e.g., fees for proposed consolidated market data set by the effective national market system plan(s) and fees for proprietary data set by individual SROs? Should the SROs only be required to provide the market data that is necessary to generate and calculate proposed consolidated market data? Or, should the determination as to how best to provide the market data that is necessary to generate and calculate proposed consolidated market data be left to the discretion of SROs? What are the benefits and costs of each of these potential approaches?
65. Should the SROs be required to
offer both proposed consolidated market data and proprietary data to competing consolidators from the same platform and using the same technology infrastructure at an exchange data center for both products?
66. Should the SROs be required to
offer both proposed consolidated market data and proprietary data to competing consolidators from the same platform and using the same SRO infrastructure where the pricing model for the different products is based on data use as opposed to being based upon distinct data feeds?
67. Should the SROs be permitted to
process their market data before providing it to competing consolidators and self-aggregators? For example, should the SROs be permitted to aggregate odd-lots before providing data to competing consolidators and selfaggregators? If so, why and to what extent? Should such processing only be allowed to the extent that it does not result in any latency differential between processed and unprocessed data? Alternatively, should such processing be required to facilitate ease of use for certain customers?
68. Should exchanges be required to
permit co-location of competing consolidators and self-aggregators within their data centers? If so, should the fees charged for such colocation be subject to the effective national market system plan(s) for NMS stocks?
69. Should all data disseminated by
the SROs to competing consolidators and self-aggregators be in the same format (e.g., aggregated vs. message-bymessage depth of book)? Please explain the expected benefits and costs of allowing for multiple formats for data dissemination.
70. Should the SROs make historical
data freely available to market participants at a specified location and in a specified format? Why or why not?
71. Is there anything different about
having competing consolidators or changing the content of consolidated market data that should affect the analysis of the fairness and reasonableness of fees for data distributed pursuant to an NMS plan, or how the NMS plan participants demonstrate the fairness and reasonableness of those fees? If so, please explain why.
72. Do commenters believe that the
Commission should also require the SROs to provide a connectivity option solely for access to the NMS information necessary to generate proposed consolidated market data?
2. Competing Consolidators
As noted above, currently Rule 603(b) requires all consolidated information for an individual NMS stock to be disseminated through a single plan processor.444 While the Commission has issued a proposed order that would direct the SROs to develop a single ‘‘New Consolidated Data Plan’’ with a new governance structure,445 the Commission now proposes to update and modernize the manner in which NMS information is collected, consolidated, and disseminated. The Commission is proposing to amend Regulation NMS to introduce competitive forces as one of several means to update and modernize the provision of proposed consolidated market data. Competing consolidators would replace the existing exclusive SIPs and would collect NMS information from each of the SROs.446 Thereafter, competing consolidators would calculate, consolidate, and disseminate the data as consolidated market data, as proposed to be defined.447 The Commission

entities,’’ and thus subject to the requirements of Regulation SCI. The Commission proposes to amend Rule 1000 of Regulation SCI to effect this change. See proposed amendment to Rule 1000 of Regulation SCI. See also 17 CFR 242.1000. 448 15 U.S.C 78k–1(c)(1)(B). 449The competing consolidator model was recommended by the Advisory Committee on Market Information (‘‘Advisory Committee on Market Information’’), which had been formed to consider market data issues. See Report of the Advisory Committee on Market Information: A Blueprint for Responsible Change (Sept. 14, 2001), available at https://www.sec.gov/divisions/ marketreg/marketinfo/finalreport.htm. 450See Securities Exchange Act Release No. 49325 (Feb. 26, 2004), 69 FR 11126 (Mar. 9, 2004) (‘‘Regulation NMS Proposing Release’’), at 11177– 11178; Regulation NMS Adopting Release, supra note 10, at 37558–37559. 451See Regulation NMS Proposing Release, supra note 450, at 11177; Regulation NMS Adopting Release, supra note 10, at 37559. 452 Id. 453See Regulation NMS Proposing Release, supra note 450, at 11178. 454 Id. The Commission stated that it would have to review every SRO’s market data fees and get involved in multiple market data fee disputes. 455See supra notes 449–450. 456See supra note 449. See infra text accompanying notes 503–509, 513–515 for a discussion of the risks. The Advisory Committee on Market Information report stated that these risks would be manageable and recommended allowing the private sector to establish technical standards for competing consolidators rather than the Commission. See supra note 449, at Section VII.C.2.b(iv). 457See supra note 449, at Section VII.C.2.b. 458The Commission stated that the four types of data quality problems identified by the Advisory Committee could be limited in severity, but remained concerned that the introduction of competing consolidators would compromise data quality. See Regulation NMS Proposing Release, supra note 450, at 11178. 459See Regulation NMS Proposing Release, supra note 450, at 11178. In the Regulation NMS Adopting Release, the Commission questioned the extent to which market data fees, which would be charged per SRO, would be subject to competition. See Regulation NMS Adopting Release, supra note 10, at 37559. 460 Id. While the Commission did not propose a competing consolidator model, it received comments on the model described in the Regulation NMS Proposing Release. 461 Id. 462 Id. preliminarily believes that the proposed amendments to Regulation NMS to introduce competing consolidators should help to ensure the ‘‘prompt, accurate, reliable, and fair collection, processing, distribution, and publication of information with respect to quotations for and transactions in such securities and the fairness and usefulness of the form and content of such information.’’ 448 Further, the Commission preliminarily believes that these new market data providers could help to effectively address the latency concerns related to the
exclusive SIPs, as well as the cost concerns that have been raised regarding the need to buy both SIP data from the Equity Data Plans as well as proprietary data from the exchanges, and add resilience to the collection, consolidation and distribution of consolidated market data by having redundant systems perform these functions rather than an exclusive SIP. (a) Previous Consideration of Competing Consolidators Under Regulation NMS The Commission previously considered introducing competitive forces to the dissemination of SIP data when it proposed and adopted Regulation NMS. Specifically, the Commission discussed a competing consolidator model 449 that, as described, would have retained the consolidated display requirement of the predecessor to Rule 603(c) of Regulation NMS but would have eliminated the Equity Data Plans and the two exclusive SIPs.450 Under the competing consolidator model that was being considered, each SRO would be allowed to establish its own fees, enter into and administer its own market data contracts, and provide its own data distribution facility.451 Competing consolidators would purchase data from the individual SROs, consolidate it, and distribute it to investors and other data users.452 At that time, however, the Commission noted several drawbacks to that competing consolidator model,453 including: (1) A lack of uniform data distribution to the public, (2) the potential for an increase in processing costs due to multiple consolidators performing tasks previously performed by a single processor, and (3) the risk that the fees for core data, as then contemplated, could increase because payment of every SRO’s fees would be mandatory, thereby affording little room for competitive forces to influence the level of fees.454 When addressing its concerns about a potential loss of data uniformity, the Commission explained that a report issued by the Advisory Committee on Market Information, which prompted consideration of a competing consolidator model in the Regulation NMS Proposing and Adopting Releases,455 noted four types of quality problems that could arise from the competing consolidator model relating to: (1) Sequencing of information, (2) validation tolerances, (3) capacity, and (4) data protocols and formats.456 With respect to information sequencing, the report stated that the competing consolidator model would impose a risk that market data messages would be processed in different sequences by different consolidators due to the use of differing hardware, software, or communications platforms to process market data. On validation tolerances, the report stated that standards would need to be established for competing consolidators to verify the consistency of information (such as the NBBO), since the plan processors currently check all market center messages to verify that they utilize correct message structures. The report stated that competing consolidators must have sufficient capacity (for example, specifying network
capacity, input, output line, system, internal system threading, storage and memory capacity, and database size) to process the information from all reporting market centers, explaining that if capacity is lacking, messages will be delayed to data recipients. Finally, with respect to data protocols and formats, the report said that the use of different protocols, message formats, and technologies by different consolidators could make the market data system more cumbersome and prone to error. The report noted that exclusive SIPs currently receive market center information using standard input formats and disseminate consolidated data using standard output formats.457 Ultimately, the Commission concluded that investors and other data users would bear the most risk in switching to a competing consolidator model, while the SROs would benefit by being able to charge higher fees for lower quality information; 458 therefore, the Commission decided not to propose the competing consolidator model for adoption.459 In the Regulation NMS Adopting Release, the Commission focused its discussion on the extent to which the competing consolidator model would subject the level of market data fees to competitive forces.460 The Commission stated that market participants would need to purchase data from the SROs and expressed concern that ‘‘the overall level of fees would not be reduced unless one or more of the SROs or Nasdaq was willing to accept a significantly lower amount of revenue than they are currently allocated by the Plans.’’ 461 The Commission believed that it was ‘‘unlikely that any SRO or Nasdaq would voluntarily propose to lower just its own fees.’’ Rather, the Commission stated that some SROs, ‘‘particularly those with dominant market shares whose information is most vital to investors,’’ might propose higher fees to increase their revenues.462

463The Treasury Capital Markets Report (‘‘Treasury Report’’), which was published one year prior to the Roundtable and referenced by Roundtable respondents, recommended that the Commission amend Regulation NMS to permit competing consolidators as alternatives to the exclusive SIPs as a means to provide faster consolidation and distribution of a wider breadth of market data, at a lower cost than provided by the exclusive SIPs. The Treasury Report suggested that competing consolidators be allowed to purchase proprietary data feeds from exchanges on a nondiscriminatory basis. See U.S. Department of the Treasury, A Financial System that Creates Economic Opportunities—Capital Markets, 64 (Oct. 2, 2017). Other alternatives to the current centralized consolidation model are discussed below. See infra Section IV.C. 464See Roundtable Day Two Transcript at 25 (Paul O’Donnell, Morgan Stanley). 465 Id. at 26. 466 Id. at 25. 467 Id. 468See Roundtable Day One Transcript at 49–50 (Prof. Hal Scott, Harvard University). This panelist also suggested that the SIPs should include proprietary data and also permit competing consolidators to do the same. 469See Roundtable Day Two Transcript at 43 (Jarred Yuster, PICO). 470See Roundtable Day One Transcript at 182– 184 (Michael Friedman, Trillium Trading). 471See T. Rowe Price Letter, Letter to Brent J. Fields, Secretary, Commission, from Marcy Pike, SVP, Enterprise Infrastructure, and Krista Ryan, VP, Associate General Counsel, Fidelity Investments (Oct. 26, 2018) (‘‘Fidelity Letter’’); SIFMA Letter; SIFMA Letter II; Ramsay Letter II. 472See SIFMA Letter II at 3. In addition to the use of competing consolidators, this commenter suggested that the Commission require the exclusive SIPs to compete with each other. See also T. Rowe Price Letter at 3. This commenter believed that competition among organizations eligible to serve as exclusive SIPs, either through a periodic bidding process or the ability of multiple firms to simultaneously serve as exclusive SIPs and compete to provide the best overall combination of fees, services, and reliability would be beneficial. 473See Ramsay Letter II; Fidelity Letter at 10 (noting that competition may reduce the cost of consolidated market data). 474See Ramsay Letter II. 475See supra note 463. 476See Fidelity Letter at 10. 477 Id. 478See SIFMA Letter; Ramsay Letter II. 479See SIFMA Letter. 480See Ramsay Letter II. 481See SIFMA Letter (attachment to the letter). This commenter also stated that depth of book should be considered but stated that it should possibly be sold separately. 482See Roundtable Day Two Transcript at 46–47 (Michael Blaugrund, NYSE). 483 Id. 484See Roundtable Day Two Transcript at 61 (Prof. Robert Bartlett, U.C. Berkeley). 485 Id. 486See Roundtable Day One Transcript at 151– 152 (Oliver Albers, Nasdaq); Bartlett and McCrary, supra note 418 (examining the incidence of exclusive SIP latency arbitrage strategies using Continued (b) Comments and Roundtable Discussion
The current market data infrastructure, with the Equity Data Plans providing SIP data and the exchanges providing proprietary data products, has led some market participants to suggest that a competing consolidator model be considered again as a means to address the latency and cost differentials that exist between the two data categories.463 Several panelists and commenters at the Roundtable discussed a competing consolidator model. One panelist presented a competing consolidator model and noted that it would introduce competition in the provision of market data by allowing competing consolidators to compete against each other for subscribers.464 This panelist also stated that market forces would drive consolidators’ ‘‘micro-decisions’’ regarding the technology that they would use to provide data.465 The panelist also suggested that competing consolidators should be ‘‘authorized’’ and be Regulation SCI-compliant.466 The panelist expressed confidence that a competitive market would produce a more reliable solution than the current centralized consolidation model.467 One panelist explained that the exclusive SIPs represent a single point of failure for the equity markets and that competing consolidators could improve the speed and quality of SIP data while also reducing their costs.468 Another panelist said that his clients have expressed interest in competitive SIPs.469 One panelist suggested a competing consolidator model wherein entities would consolidate messages from individual exchange members. The panelist acknowledged that this approach would likely result in latency issues, but suggested that such a consolidated feed could possibly be leveraged from work being done on reporting to the consolidated audit trail.470 Several comment letters submitted in connection with the Roundtable expressed support for a competing consolidator model.471 One commenter stressed the importance to investors of competition by stating that competition would result in the reduction of the latency differential between the exclusive SIPs and proprietary data feeds, resilience through the use of multiple consolidators, and lower market data costs.472 Another commenter stated that competing consolidators would compete on ‘‘speed, reliability, and price to the benefit of traders and investors alike’’ 473 and that competing consolidators would provide ‘‘the benefit of expanded access to highquality, low-cost market data.’’ 474 Another commenter noted the Treasury Report, which was published in 2017,475 recommended that the Commission recognize that markets for SIP data and proprietary data feeds are not fully competitive and consider amending Regulation NMS to enable competing consolidators as an alternative to the exclusive SIPs.476 This commenter recommended that if competing consolidators are permitted, regulators should examine why a broker-dealer chooses a particular consolidator over others and should monitor how much exchanges decide to charge consolidators for
market data.477 Several commenters suggested details on the types of entities that could be competing consolidators and the functions they could perform.478 For example, one commenter suggested that a competing consolidator could be any commercial entity meeting minimum standards, which may include exchanges or other financial technology vendors,479 and another suggested that they could be private companies that, unlike the existing exclusive SIPs, could operate in any location and would obtain and sell data comparable to proprietary data feeds.480 One commenter suggested a list of functionality that competing consolidators could provide, such as direct exchange feed data from all tapes, quote and trade feeds, regulatory messages, and the market status of all contributing markets.481 Several panelists, in particular representatives of exchanges operating the current exclusive SIPs, expressed concern with a competing consolidator model. One panelist suggested that the interest in competing consolidators arises from a perception that competing consolidators will make market data less costly.482 The panelist said that the cost to produce market data is not a competing consolidator’s cost and that this realization may make such a model less attractive to potential users of competing consolidators.483 Another panelist said that a competing consolidator model could result in multiple NBBOs prevailing at the same nanosecond, which would provide a broker with a choice regarding the price at which it filled a customer’s order.484 The panelist believed that this discretion in choosing an NBBO could result in uncertainty regarding whether the broker had executed a customer’s order at a price that was in the customer’s interest or the broker’s own interest.485 One panelist stated that there is value in understanding what the NBBO is when there are competing SIPs and asked whether this model would introduce benchmark reference price arbitrage.486 The panelist suggested that

timestamp data from the two SIPs and concluding that trading surrounding exclusive SIP priced trades showed little evidence that fast traders initiate liquidity taking orders to pick off stale quotes). 487See Roundtable Day One Transcript at 151– 152 (Oliver Albers, Nasdaq). 488See Wittman Letter at 14; Letter to Brent J. Fields, Secretary, Commission, from Oliver Albers, SVP, Head of Global Partnerships, Nasdaq, 3 (Oct. 24, 2018) (‘‘Albers Letter’’); Blaugrund Letter at 2. The Wittman and Albers Letters were submitted on behalf of Nasdaq. The Blaugrund Letter was submitted on behalf of NYSE. 489See Albers Letter at 3. 490See Data Boiler Letter at 4. This commenter also suggested that the Commission amend interpretations of Rule 603(a) of Regulation NMS to emphasize ‘‘synchronized availability of data between SIP and exchanges’ proprietary products.’’ Id. at 8. 491 Id. at 2, 8. 492See NYSE Group Letter at 6; Blaugrund Letter at 4. The Blaugrund Letter was submitted on behalf of NYSE. 493See Blaugrund Letter at 2. 494See Healthy Markets Association Letter I at 38. 495 Id. 496See infra Section IV.B.2(e)(ii) for a discussion of proposed Rule 614, which would require competing consolidators that are SIPs to register with the Commission and comply with specified responsibilities. 497One Roundtable respondent supported publication of operational capabilities and performance metrics by competing consolidators. See SIFMA Letter (attachment to letter). 498The single point of failure problem was most recently evidenced on August 12, 2019, when the CTA/CQ SIP experienced multiple system issues and was unable to effectively fail over to its backup system. Among other impacts, final closing prices for many symbols were not able to be published by the CTA until after 8:00 p.m. See CTA, CTA Processing Issue on August 12, 2019: CTA Participant Trade Files—Revised Notice, Alert (Aug. 28, 2019), available at https:// www.ctaplan.com/alerts#110000144324. Several Roundtable respondents noted the additional reliability through the redundancy that multiple consolidators would provide. See Roundtable Day One Transcript at 49–50 (Prof. Hal Scott, Harvard University); Roundtable Day Two Transcript at 77 (Paul O’Donnell, Morgan Stanley); Ramsay Letter II. 499See supra notes 453–454. 500See supra note 453. 501See proposed Rules 614(d)(1)–(3). 502See Roundtable Day One Transcript at 128 (Mark Skalabrin, Redline Trading Solutions) (explaining that his firm builds an NBBO for its customers that use proprietary data feeds), at 141 (‘‘[E]ffectively today, people have to form the NBBO a conflict could arise if a broker-dealer executes customer orders and also manages the price against which such trades are benchmarked, i.e., by calculating the NBBO.487 Several comment letters expressed skepticism about the benefits of a competing consolidator model. One commenter said that making radical market structure changes could undermine the NBBO and that adding multiple competing SIPs
would create operational, legal, and regulatory complexities as well as unintended consequences, and may not solve concerns about geographic latency.488 Further, this commenter advocated that having a single source of best quote and trade data creates confidence in the U.S. markets because investors can be assured that orders will automatically route to the venue with the best quoted price on the exclusive SIP feed.489 One commenter said that competition would result in multiple NBBOs that would confuse the market. Further, the commenter stated that competition would not ‘‘curb rent-seeking behaviors, nor promote fairness.’’ 490 This commenter suggested that the Commission mandate a type of encryption instead of introducing competition, explaining that encrypting market data would allow proprietary and exclusive SIP feeds to be made available ‘‘securely in synchronized time.’’ 491 Another commenter urged the Commission to do a cost benefit analysis of efforts to decentralize the exclusive SIP architecture and recommended introducing additional instances of existing technology (i.e., a distributed SIP model) as the best approach to reducing geographic latency.492 This commenter added that a competing consolidator approach would create complexity that would undermine the purposes of Regulation NMS to keep costs low for investors.493 Finally, one commenter opined that competing SIPs would not solve the problem of the exchanges’ control over market data access.494 This commenter asked why a technology firm would become a competing SIP when it cannot control the cost of the market data it must purchase.495 (c) Commission Discussion The Commission is proposing a decentralized consolidation model with competing consolidators and selfaggregators who would collect data from the SROs, and calculate, consolidate, and disseminate proposed consolidated market data to investors and market participants.496 As discussed below, the Commission preliminarily believes that competing consolidators should be required to disclose publicly certain information about their organization, operations, and products, as well as regularly publish certain performance statistics on, for example, capacity, system availability, and latency to demonstrate their operational capability and to provide transparency into the performance of their systems.497 In addition, the Commission preliminarily believes that competing consolidators should have written policies and procedures to assure the prompt, accurate, and reliable delivery of consolidated market data. The Commission preliminarily believes that the competing consolidator proposal would reduce latency, bolster the resilience of the market data infrastructure, and permit the market data infrastructure to more readily adapt to changes in technology to better fit the needs of market participants. The Commission also preliminarily believes that market forces could help to ensure that the proposed consolidated market data is reliable,
accurate, and prompt. To attract and maintain its subscriber base, a competing consolidator would have to ensure that it provides consolidated market data, as proposed, with minimal latency, but also reliably and accurately, and in a cost-effective manner. A competing consolidator that does not adequately perform would risk losing customers to another competing consolidator. Competition should also incentivize competing consolidators to evolve and adapt to the needs of the marketplace. If a new technology would result in better provision of data, a competing consolidator likely would adopt that technology to expand its client base. Finally, the introduction of multiple competing consolidators may bring additional resilience to the collection, consolidation, and distribution of consolidated market data, as there would be redundant systems performing these functions rather than one exclusive SIP creating a single point of failure.498 In proposing this competing consolidator model, the Commission considered the concerns it described when it previously evaluated a different competing consolidator model in connection with the adoption of Regulation NMS.499 The Commission preliminarily believes that the proposed competing consolidator model should not raise the same concerns due to the differences between the two models and the manner in which market participants handle market data today. First, to address the Commission’s prior concern about a lack of data uniformity resulting from the use of multiple competing consolidators,500 the Commission is proposing requirements governing how consolidated market data is collected, calculated, generated, and made available.501 The Commission acknowledges that the introduction of multiple entities generating consolidated market data would result in multiple versions of consolidated market data. However, market participants currently consolidate proprietary data feeds, generate their own consolidated data, and calculate their own NBBO.502 The proposal

at their own location. Even a dark pool does that that’s just trying to match at the best bid and offer. If they use the SIP NBBO, their customers would be subject to latency harm, because it’s too old to use at their location after it’s merged to really get effective performance.’’). Although the Commission does not know the exact number of market participants that currently consolidate proprietary data feeds, generate their own consolidated data, and calculate their own NBBO, Nasdaq has stated that approximately 100 firms purchase all depth of book data from every exchange. See In the Matter of the Application of SIFMA, supra note 37, at 29 (citing an assertion from Nasdaq that 100 firms purchase all depth of book data from every exchange). The Commission acknowledges that not all of these market participants consolidate the proprietary data feeds and solicits comment on the number of market participants that do. 503See supra text accompanying notes 455–457. 504 Id. 505 Id. 506See proposed Rule 614(d)(2). 507See supra text accompanying notes 455–457. 508See infra Section IV.B.2(e)(ii). 509 Id. 510The Commission preliminarily estimates that there could be up to twelve competing consolidators. This estimate includes the CTA/CQ SIP and the Nasdaq UTP SIP. See infra Section V.C. 511See also, e.g., Roundtable Day One Transcript at 49–50 (Prof. Hal Scott, Harvard University) (‘‘[C]ompetition among consolidators of SIP data . . . could improve the speed and quality of consolidated sources of market data while also reducing their costs.’’); Treasury Report, supra note 463, at 64 (‘‘The competing consolidators would aim to provide faster consolidation and distribution, improved breadth of data, and lower cost than the SIPs.’’). 512See infra Section IV.B.4; Proposed Governance Order, supra note 8; Effective on Filing Proposal, supra note 37 (a proposal to amend Regulation NMS to rescind a provision that allows a proposed amendment to an effective national market system plan(s) to become effective upon filing if the proposed amendment establishes or changes a fee or other charge). 513See supra text accompanying notes 455–457. 514See Regulation NMS Proposing Release, supra note 450, at 11178. 515The Commission further notes that the NBBOs currently calculated by the exclusive SIPs at different data centers may vary due to geographic and other forms of latency, and therefore, the proposed competing consolidator model does not introduce a new issue in this regard. However, under the proposed competing consolidator model, NBBOs created at other data centers where the exclusive SIPs currently do not have a point of presence (e.g., NY4 in Secaucus) could be more accurate for those market participants that are located in such data center. would require competing consolidators and self-aggregators to calculate consolidated market data, including the NBBO, in a consistent manner as set forth in the proposed definitions in Rule 600 of Regulation NMS, which the
Commission preliminarily believes would help ensure continuity and consistency in how proposed consolidated market data, including the NBBO, is calculated. Further, on the Advisory Committee on Market Information’s validation tolerance concerns from 2001,503 the report had stated that standards should be created to ensure the consistency of information, such as the NBBO and market center message formatting.504 The report also stated that differences in the protocols and formats used by competing consolidators could make the market data system cumbersome or prone to error.505 As noted above, the proposal would require competing consolidators and self-aggregators to calculate consolidated market data, including the NBBO, in a consistent manner in accordance with the proposed definitions in Rule 600 of Regulation NMS. Further, the Commission preliminarily believes that competing consolidators would likely establish their own standards for verifying information for consistency because they would be the entities responsible, pursuant to proposed Rule 614(d)(2), for calculating and generating consolidated market data based on this information.506 In addition, as the entities responsible for generating consolidated market data, competing consolidators would likely be incentivized by competition to disseminate data using a protocol or format that results in data that is readily usable by their subscribers. As market participants are currently able to ingest market data from different sources, such as the exclusive SIPs and proprietary data feeds, the Commission preliminarily believes that differences in the protocols or formats used by competing consolidators would not likely introduce a new challenge to the market. Rather than impose technical standards, the Commission preliminarily believes that competing consolidators would be in the best position to develop standards with respect to data consistency and generation, as appropriate, because they would be directly responsible for the quality of their product that is in compliance with Rule 614(d)(2), and would be incentivized through competition to create standards to ensure the integrity of their consolidated market data. With respect to the Advisory Committee on Market Information’s previous concerns about capacity,507 the Commission is proposing to require each competing consolidator to publish on its website its capacity statistics on a monthly basis so that market participants can evaluate whether a competing consolidator has sufficient capacity to process information.508 The Commission is also proposing to require each competing consolidator to establish, maintain, and enforce written policies and procedures reasonably designed to ensure that its systems have levels of capacity to maintain operational capability and assure the prompt, accurate, and reliable delivery of consolidated market data.509 The Commission was previously concerned about an increase in processing costs due to multiple
consolidators 510 performing the tasks performed by an exclusive SIP. As noted above, the Commission preliminarily believes that the introduction of competition should help to ensure that proposed consolidated market data is disseminated in a cost-effective manner.511 Finally, the Commission was previously concerned about the risk that fees for core data would increase because payment to each SRO would be mandatory. The previous competing consolidator model would have eliminated the Equity Data Plans and contemplated that each individual exchange would have developed its own pricing scheme for its individual data. As discussed below, in contrast, under the proposed decentralized consolidation model, the SROs would continue to develop jointly the fees associated with the provision of the proposed consolidated market data through an effective national market system plan(s) for NMS stocks.512 These fees would be subject to Commission oversight under Rule 608. The use of competing consolidators may introduce sequencing risk, a concern raised by the Advisory Committee on Market Information 513 as well as the Commission when it dismissed a competing consolidator model in proposing Regulation NMS.514 Having multiple competing consolidators using different technology could result in messages being processed in different sequences. The outcome would be the loss of a single reference for consolidated market data, which could negatively impact the reconstruction of the markets at a given point in time. However, the Commission believes that the proposal would mitigate the effects of sequencing risk by mandating that the effective national market system plan(s) require the application of timestamps to all consolidated market data by the SROs when they send market data to competing consolidators as well as requiring competing consolidators to apply timestamps to consolidated market data. Accordingly, no matter the differences in message processing across the competing consolidators, the sequencing of market data based on SRO timestamps should be able to be reconstructed.515 The Commission believes that there are a number of existing firms that

516The Commission does not know the number of aggregators in operation today, but assumes that certain market data vendors in the following list currently perform that function. See Nasdaq: Market Data Vendors, available at http:// www.nasdaqtrader.com/Trader.aspx?id=Market DataVendorsList&StartAlphabet=A&EndAlphabet= ZZZ (last accessed Dec. 17, 2019). 517Bidders included Nasdaq, Thesys Technologies LLC, CenturyLink, and a unit of exchange operator Miami International Holdings Inc. See Herbert Lash, Nasdaq Wins Bid to Manage Key Data Processor for Stock Trading, Reuters (Nov. 5, 2014), available at https://www.reuters.com/
article/us-exchanges-stocktrading-nasdaq-omx-id
USKBN0IQ00220141106.
518See Roundtable Day One Transcript at 151– 152 (Oliver Albers, Nasdaq); Roundtable Day Two Transcript at 46–47 (Michael Blaugrund, NYSE), at 61 (Prof. Robert Bartlett, U.C. Berkeley); Wittman Letter at 14; Albers Letter at 3; Blaugrund Letter, at 2; Healthy Markets Association Letter I, at 38; Data Boiler Letter at 4, 8. 519See supra note 439. 520For example, multiple NBBOs exist today because many broker-dealers independently calculate it for themselves. 521See Roundtable Day One Transcript at 151– 152 (Oliver Albers, Nasdaq); Roundtable Day Two Transcript at 61 (Prof. Robert Bartlett, U.C. Berkeley); Data Boiler Letter at 4. 522See supra note 308. would be well-positioned to become competing consolidators. First, trading technology firms that today provide proprietary data aggregation services for their subscribers may decide to register as competing consolidators in order to potentially expand their subscriber base and to be eligible for the pricing for data content used to create proposed consolidated market data.516 In addition, the existing exclusive SIPs, CTA/CQ and Nasdaq UTP, could consider becoming competing consolidators, as they have extensive experience in this area and may choose to remain in the market data consolidation business. Similarly, SROs have experience collecting and processing market data and may wish to act as competing consolidators. The Commission preliminarily believes that the creation of a competing consolidator market would open up the potential for other entrants, as well. For example, various market participants that are currently self-aggregating and have the technology to consolidate core data may decide to enter the competing consolidator business given the potential market opportunity. Finally, other entities have been interested in performing as plan processors. For example, there were competing bids to be the Nasdaq UTP SIP in 2014,517 and in 2013 and 2019 for OPRA. The bidding firms (or similar types of firms) may decide to enter the market as competing consolidators. The Commission preliminarily believes that sufficient incentives exist to attract a number of entities to register as competing consolidators and for a competitive market to develop. For one thing, the proposed definition of core data will incorporate additional elements such as quotation data in smaller size increments, depth of book data, and auction information, all of which market participants have recommended as necessary or useful. Therefore, there seems to be demand for the key product—i.e., consolidated market data as proposed—that competing consolidators will be producing and selling. Moreover, the proposed competing consolidator registration regime and responsibilities outlined below—while designed to collect relevant information about competing consolidators and to require competing consolidator performance data, data quality issues, and system issues to be made publicly available— are intended to be a relatively streamlined
process that would impose appropriate burdens on entities likely to register as competing consolidators. Several Roundtable panelists and commenters raised potential issues about a competing consolidator model, in particular, about uncertainties regarding control over market data access, the costs of obtaining market data from the various SROs, and operational complexities associated with the model, such as the introduction of multiple NBBOs.518 However, the Commission preliminarily believes that some of these issues would be addressed by the proposal and the others would not be novel or insurmountable. On control over market data access, Rule 603 and the proposed amendments to Rule 603(b) would require that the SROs directly make available to competing consolidators and self-aggregators NMS information, including all data necessary to generate consolidated market data, on terms that are fair and reasonable and not unreasonably discriminatory. With respect to the costs of market data, the SRO fees associated with consolidated market data would be subject to Equity Data Plan requirements and the fees must be fair and reasonable.519 Finally, with respect to the concerns regarding the complexities associated with a competing consolidator model, many of the functions of competing consolidators are performed today by market participants, such as the consolidation of proprietary data feeds and calculation of NBBOs.520 Finally, a Roundtable panelist suggested that multiple NBBOs could raise concerns about broker-dealers executing customer orders at prices that are in the broker’s own interest, rather than the customers’ interest, and questioned whether a competing consolidator model would introduce benchmark reference price arbitrage.521 A broker-dealer must provide best execution to its customers’ orders.522 However, the existence of multiple NBBOs, which occurs today, does not impact a broker’s best execution obligations. Further, the panelist questioned whether there would be conflicts for broker-dealers that execute customer trades as well as manage the price against which the trades are benchmarked (i.e., by calculating the NBBO). Broker-dealers today purchase market data from the SIP as well as proprietary data feeds and calculate NBBOs. Accordingly, the Commission is not persuaded by concerns about the introduction of multiple NBBOs because multiple NBBOs already exist. (d) Proposed Definition of Competing Consolidator in Rule 600(b) The Commission is proposing to introduce a definition of competing consolidator in Rule 600(b). Specifically, under proposed Rule 600(b)(16) of Regulation NMS, a competing consolidator would be defined as a securities information processor required to be registered pursuant to Rule 614 or a national securities exchange or national securities association that receives information with respect to quotations for and transactions in NMS stocks and generates consolidated market data for dissemination to any person. The
Commission requests comment on the proposed amendment to Rule 600(b) to introduce a definition of ‘‘competing consolidator.’’ In particular, the Commission solicits comment on the following:
73. Is a decentralized consolidation
model with competing consolidators and self-aggregators a viable and/or appropriate model for the collection, consolidation, and dissemination of consolidated market data? Are there any other viable and/or appropriate alternatives?
74. Do commenters believe that the
definition of competing consolidator accurately captures the requisite functions necessary for collecting, consolidating, and disseminating consolidated market data? Do commenters believe that there would be sufficient interest in entities that would become competing consolidators?
75. Do commenters believe that
competing consolidators would provide the necessary competition to lower the processing time and distribution speeds

523As explained further below, SROs are excluded from the definition of SIP under Section 3(a)(22)(A) of the Exchange Act. 15 U.S.C. 78c(a)(22)(A). SROs that wish to act as competing consolidators would therefore not be required to register with the Commission on proposed Form CC, which, as explained below, is the form that SIPs would use to register as competing consolidators. See infra Section IV.B.2(e)(iii). However, SROs that wish to act as competing consolidators would be subject to the other requirements of proposed Rule 614, including the responsibilities of competing consolidators enumerated in proposed Rule 614(d), such as the monthly publication of performance metrics. See infra Section IV.B.2(e)(ii). 524See proposed Rules 614(a)(1)(i) and (a)(2)(i) and (ii). 525See proposed Rule 614(a)(3). 526See proposed Rule 614(b)(2). The Commission would publish an effective initial Form CC upon effectiveness and would publish a Form CC Amendment no later than 30 calendar days from the date of filing. See proposed Rule 614(b)(2)(iii). 527See infra Section IV.B.2(e)(ii) for a discussion of the obligations and performance statistics. The information that the Commission is proposing that competing consolidators publish is based upon information that is currently collected or produced by the CTA/CQ SIP and the Nasdaq UTP SIP, either for public or internal distribution. 528See infra Section IV.B.2(e)(iii) for a discussion of proposed Form CC. 529 15 U.S.C. 78k–1(b)(1). 530See supra note 20. for consolidated market data, as proposed to be defined, as well as reduce the overall costs of proposed consolidated market data?
76. Do commenters believe that
concerns identified by the Commission regarding the competing consolidator model considered in the Regulation NMS Proposing and Adopting Releases would be sufficiently addressed with the proposed decentralized consolidation model with competing consolidators and self-aggregators proposed in this release? If not, how should these concerns be addressed?
77. Will the change to a proposed
competing consolidator/self-aggregator model present any specific operational and/or regulatory challenges to market participants? Are the challenges evenly distributed amongst market participants or would one set of market participants bear more of any burden? If so, please describe.
78. The Commission solicits
commenters’ views regarding the various concerns raised by Roundtable respondents about the competing consolidator model. In particular, do commenters have any concerns about competing consolidators calculating independent NBBOs? Please explain. Do commenters have concerns about multiple versions of consolidated market data, as proposed? Please explain. If there are such concerns, please also explain how these concerns would vary from the multiple different forms of aggregation that exist today among broker-dealers either selfaggregating proprietary data feeds or utilizing vendors to do so on their behalf. (e) Proposed Rule 614 The Commission preliminarily believes that SIPs that wish to act as competing consolidators should be required to register with the Commission 523 and be required to publicly disclose certain information about their organization, operations, and products. The proposed disclosure framework is similar to the disclosures currently required under Form SIP, with differences tailored to the proposed regulatory structure that would apply to competing consolidators. As described more fully below, a competing consolidator would be required to register with the Commission on proposed Form CC and to amend its Form CC (i) prior to the implementation of a material change to the competing consolidator’s pricing, connectivity, or products offered (a ‘‘Material Amendment’’); and (ii) no later than 30 calendar days after the end of each calendar year to correct information that has become inaccurate or incomplete for any reason and to provide an Annual Report as required under Form CC (each a ‘‘Form CC Amendment’’).524 A competing consolidator would be required to publish notice of its cessation of operations on Form CC at least 30 business days prior to the date it ceases to operate as a competing consolidator.525 The Commission would make public on its website each effective initial Form CC, order of ineffective initial Form CC, Form CC Amendment, and notice of cessation.526 The Commission also preliminarily believes that competing consolidators should be subject to certain obligations and should regularly publish certain performance statistics on a monthly basis on their respective websites pursuant to proposed Rules 614(d)(5) and (6).527 These disclosures are similar to disclosures currently made by the exclusive SIPs. These requirements, together with the operational transparency proposed in new Form CC for those SIPs that register as competing consolidators,528 should help to ensure that consolidated market data, as proposed to be defined, is provided in a prompt, accurate, and reliable manner and that all competing consolidators disclose the same information to allow for easier comparison and evaluation. Specifically, these requirements should allow market participants to effectively evaluate competing consolidators and foster competition among competing consolidators, which should result in high levels of performance in the
provision of proposed consolidated market data. In addition, these requirements should facilitate Commission oversight of competing consolidators and help to ensure the resiliency of their systems. (i) Section 11A(b) of the Exchange Act
Section 11A(b)(1) of the Exchange
Act 529 provides that a SIP not acting as the ‘‘exclusive processor’’ 530 of any information with respect to quotations for or transactions in securities is exempt from the requirement to register with the Commission as a SIP unless the Commission, by rule or order, determines that the registration of such SIP ‘‘is necessary or appropriate in the public interest, for the protection of investors, or for the achievement of the purposes of [Section 11A].’’ A SIP that proposes to act as a competing consolidator would not engage on an exclusive basis on behalf of any national securities exchange or registered securities association in collecting, processing, or preparing for distribution or publication any information with respect to quotations for or transactions in securities; therefore, such a proposed competing consolidator would not fall under the statutory definition of ‘‘exclusive processor.’’ However, under the proposed rules, competing consolidators would play a vital role in the national market system by collecting, consolidating, and disseminating proposed consolidated market data. Because the availability of prompt, accurate, and reliable consolidated market data, as proposed, is essential to investors and other market participants, the Commission preliminarily believes that it is necessary and appropriate in the public interest and for the protection of investors to require each SIP that wishes to act as a competing consolidator to register with the Commission as a SIP pursuant to proposed Rule 614. Section 11A(b)(1) provides the Commission with authority to require the registration of a SIP not acting as an exclusive processor by rule or order. The Commission is exercising this authority by proposing Rule 614 to establish the process by which SIPs that wish to act as competing consolidators would be required to register with the Commission. The registration process for exclusive SIPs under Section 11A requires the Commission to publish notice of an exclusive SIP’s application for registration and, within 90 days of publication of notice of the application,

531See Section 11A(b)(3), 15 U.S.C. 78k–1(b)(3). 532See Section 11A(b)(3)(B), 15 U.S.C. 78k– 1(b)(3)(B). 533See supra note 523. 534See infra Sections IV.B.2(e)(ii) and IV.B.2(e)(iii) for a discussion of the registration process for competing consolidators under proposed Rule 614. 535Proposed Rule 614(a)(1)(iii) provides that the Commission may, by order, declare an initial Form CC ineffective no later than 90 calendar days from the date of filing with the Commission. 536Section 11A(b)(5) of the Exchange Act, 15 U.S.C. 78k–1(b)(5), requires a SIP promptly to notify the Commission if the registered SIP prohibits or limits any person in respect of access to services offered, directly or indirectly, by the registered SIP. The notice must be in the form and contain the information required by the Commission. Any prohibition or limitation on access to services with respect to which a registered SIP is required to file notice is subject to review by the Commission on its own motion, or upon application by any person aggrieved by the prohibition or limitation. by order grant the application or institute proceedings to determine whether the registration should be denied.531 At the conclusion of the proceedings, the Commission must, by order, grant or deny the registration.532
Section 11A(b)(1) of the Exchange Act
also authorizes the Commission, by rule or by order, upon its own motion or by application, to conditionally or unconditionally exempt any SIP or class of SIPs from any provision of Section 11A or the rules or regulations thereunder if the Commission finds that such exemption is consistent with the public interest, the protection of investors, and the purposes of Section 11A, including the maintenance of fair and orderly markets in securities and the removal of impediments to and perfection of the mechanisms of a national market system. The Commission preliminarily believes that it is consistent with the public interest, the protection of investors, and the purposes of Section 11A to use its authority under Section 11A(b)(1) to exempt SIPs that wish to act as competing consolidators from the registration process established in
Section 11A(b)(3) of the Exchange Act
and to allow such competing consolidators to register pursuant to a process that is more streamlined and limited than the process described in
Section 11A(b)(3). The process specified
in Section 11A(b)(3) of the Exchange Act was developed for exclusive SIPs and reflects the heightened need to review and analyze exclusive processors. In contrast, SIPs that do not act as an exclusive SIP are exempt from registration unless the Commission ‘‘finds that the registration of such securities information processor is necessary or appropriate in the public interest, for the protection of investors, or for the achievement of the purposes of [Section 11A].’’ The Commission preliminarily believes that the proposed registration process would provide the Commission with the information necessary to oversee competing consolidators and help ensure that relevant information regarding such competing consolidators is available to the Commission and to the public, while providing a streamlined registration process designed to encourage entities to register as competing consolidators. The registration process proposed in new Rule 614 requires any person, other than an SRO,533 that chooses to become a competing consolidator to file with the Commission proposed Form CC.534 The Commission would review the initial Form CC and such filing would become effective, unless declared ineffective by the Commission by order.535 The Commission would make public on its website each effective initial Form CC and any order of ineffective initial Form CC, amendment to Form CC and notice of cessation, if applicable. The registration process proposed in new Rule 614 would not require the publication for notice and comment of an application for registration as a competing consolidator, nor would it require Commission approval of such an application. However, the Commission preliminarily believes that it is consistent with the public interest, the protection of investors, and the purposes of Section 11A to establish a relatively streamlined registration process based on disclosure for those SIPs that wish to act as competing consolidators. The Commission preliminarily believes that a relatively streamlined registration process would impose minimal burdens on entities likely to register as competing consolidators. In addition, the Commission preliminarily believes that it is consistent with the public interest, the protection of investors, and the purposes of Section 11A to use its exemptive authority under Section 11A(b)(1) of the Exchange Act to exempt those SIPs that act as competing consolidators from Section 11A(b)(5) of the Exchange Act,536 which requires a registered SIP to notify the Commission if the SIP prohibits or limits any person with respect to access to its services.
Section 11A(b)(5) allows any person
aggrieved by a prohibition or limitation of such access to the SIP’s services to petition the Commission to review the prohibition or limitation of access. Exclusive SIPs, by definition, engage on an exclusive basis in collecting, processing, or preparing data. In contrast, the proposed competing consolidators would not engage in collecting, processing, or preparing data on an exclusive basis. Therefore, the Commission preliminarily believes that the protections of Section 11A(b)(5) of the Exchange Act, including the ability of an aggrieved person to petition the Commission for review of a SIP’s prohibition or limitation of access to the SIP’s services, are not necessary for the SIPs that register as competing consolidators. The Commission preliminarily believes that competitive forces would reduce the likelihood that a subscriber would not be able to access consolidated market data as proposed because a subscriber should be able to obtain such data from another competing consolidator. Accordingly, the Commission preliminarily believes that it would be consistent with the protection of investors and the public interest to exempt competing consolidators from Section 11A(b)(5) of the Exchange Act. The Commission requests comment on the proposal to establish a registration process for SIPs that wish to act as competing consolidators and to exempt such competing consolidators from Section 11A(b)(5) of the Exchange Act. In particular, the Commission solicits comment on the following:
79. Do commenters agree that the SIPs
that wish to act as proposed competing consolidators should be required to register with the Commission? Do commenters agree that such competing consolidators should be subject to the proposed registration requirements in proposed Rule 614, rather than the registration requirements set forth in
Section 11A(b) of the Exchange Act?
Why or why not?
80. Do commenters believe that the
Commission should establish a registration process for competing consolidators different from the registration process in proposed Rule 614? If so, please describe. Should competing consolidator registration be subject to Commission approval and/or additional or different regulation? Why or why not? If so, please describe.
81. Do commenters believe that
competition and market forces would be sufficient to support the proposed registration regime for SIPs that wish to act as competing consolidators? Why or why not?
82. Do commenters agree that the
Commission should exempt SIPs that register as competing consolidators from
Section 11A(b)(5) of the Exchange Act?
Why or why not?
83. Do commenters believe that
competition and market forces are

537As noted above, SROs are excluded from the definition of SIP in Section 3(a)(22)(A) of the Exchange Act and therefore would not be required to register as a competing consolidator pursuant to proposed Rules 614(a)–(c) and proposed Form CC. However, SROs are regulated entities, and an SRO competing consolidator would be required to provide information equivalent to that required by proposed Form CC. For example, national securities exchanges must file information about their control persons, officers, and directors, and affiliates on Form 1 that is similar to the disclosures required under Exhibits A–D of proposed Form CC. See Form 1 Instructions, at Exhibits C, J, and K, available at https://www.sec.gov/files/form1.pdf (last accessed Jan. 8, 2020). In addition, SRO competing consolidators would be required to file with the Commission all proposed rule changes pursuant to Section 19(b) of the Exchange Act and Rule 19b–4 thereunder to begin operations as a competing consolidator, including rule changes related to the SRO competing consolidator’s operations, disclosures regarding consolidated market data products, and all fees related to consolidated market data products. The other requirements of proposed Rule 614—specifically, the responsibilities of competing consolidators enumerated in proposed Rule 614(d), as described below, including the monthly performance metrics and other information required under proposed Rules 614(d)(5) and (d)(6)—would apply to any competing consolidator, including any SRO that acts as a competing consolidator. An SRO, however, would have a choice of the manner in which—and the regulatory regime that would apply to—its competing consolidator business: An SRO could operate a competing consolidator as a facility of the SRO, which would be subject to the rule filing requirements of Section 19(b) of the Exchange Act and Rule 19b–4 thereunder, or the SRO could operate a competing consolidator in a separate affiliated entity, not as a facility, which, like other competing consolidators, would be subject to the proposed registration requirements under proposed Rule 614. 538 In contrast, a self-aggregator would be defined as any broker-dealer that receives information with respect to quotations for and transactions in NMS stocks and generates consolidated market data solely for internal use, and therefore would not be a competing consolidator. See infra Section IV.B.3. If a self-aggregator disseminated consolidated market data to any person, it would be acting as a competing consolidator and would be required to register pursuant to proposed Rule 614 and comply with the requirements applicable to competing consolidators. 539This proposed requirement is consistent with electronic reporting standards set forth in other Commission rules under the Exchange Act, such as Rule 17a–25 (Electronic Submission of Securities Transaction Information by Exchange Members, Brokers, and Dealers). See 17 CFR 240.17a–25. 540See Securities
Exchange Act Release No. 50486 (Oct. 4, 2004), 69 FR 60287 (Oct. 8, 2004) (adopting the EFFS for use in filing Form 19b–4). 541See also proposed Rule 614(a)(1)(iv)(B). sufficient to ensure that market participants would have access to consolidated market data as proposed? Why or why not? (ii) Description of Proposed Rule 614 Proposed Rule 614(a)(1)(i) would prohibit any person, other than an SRO,537 from (i) receiving directly from a national securities exchange or national securities association information with respect to quotations for and transactions in NMS stocks; and (ii) generating the proposed consolidated market data for dissemination to any person (i.e., acting as a competing consolidator by disseminating data to external parties) unless that person files with the Commission an initial Form CC and the initial Form CC has become effective pursuant to proposed Rule 614(a)(1)(v).538 The Commission preliminarily believes that a SIP that wishes to act as a competing consolidator should not be permitted to commence operations until the Commission has had the opportunity to review such competing consolidator’s initial Form CC. The Commission’s review of initial Form CC would help to ensure that a SIP that wishes to register as a competing consolidator makes disclosures that comply with the requirements of proposed Rule 614 and that a consistent level of information, and consistent disclosures, are made available to market participants to evaluate such competing consolidators. Proposed Rule 614(a)(1)(ii) would require any reports required under new Rule 614 to be filed electronically on Form CC, include all of the information as prescribed in Form CC and the instructions to Form CC, and contain an electronic signature.539 The electronic signature requirement is consistent with the intention of the Commission to receive documents that can be readily accessed and processed electronically. The proposed rule contemplates the use of an online filing system through which competing consolidators would file a completed Form CC. The system, known as the electronic form filing system (‘‘EFFS’’) is currently used by SROs to submit Form 19b–4 filings and by SCI entities to submit Form SCI filings.540 Other methods of electronic filing of Form CC could include the use of secure file transfer through specialized electronic mailbox or through the Electronic, Data Gathering, Analysis and Retrieval (‘‘EDGAR’’) system, or directly through SEC.GOV via a simple HTML form. Based on the widespread use and availability of the internet, the Commission believes that filing Form CC in an electronic format would be less burdensome and a more efficient filing process for competing consolidators and the Commission because it is likely to be less expensive and cumbersome than mailing and filing paper forms with the Commission. In addition, proposed Rule 614(a)(1)(ii) would establish a uniform manner in which the Commission would receive, and competing consolidators would
provide, reports made pursuant to proposed Rule 614. The standardization would make it easier and more efficient for the Commission to promptly review and analyze the information that competing consolidators provide. Proposed Rule 614(a)(1)(iii) would provide that the Commission may, by order, declare an initial Form CC filed by a competing consolidator ineffective no later than 90 calendar days from filing with the Commission.541 The Commission preliminarily believes that 90 calendar days would provide the Commission with adequate time to carry out its oversight functions with respect to its review of an initial Form CC, including its responsibilities to protect investors and maintain fair, orderly, and efficient markets. Proposed Rule 614(a)(1)(iv) would require a competing consolidator to withdraw an initial Form CC that has not become effective if any information disclosed in the initial Form CC is or becomes inaccurate or incomplete. The competing consolidator would be able to refile an initial Form CC pursuant to proposed Rule 614(a)(1). The Commission preliminarily believes that it would be appropriate to require an initial Form CC to be withdrawn if any information in the form is or becomes inaccurate or incomplete to assure that the Commission’s review is based on accurate and complete information and to assure that the Commission has adequate time to review an accurate and complete initial Form CC. Proposed Rule 614(a)(1)(v)(A) would provide that an initial Form CC would become effective, unless declared ineffective, no later than the expiration of the review period provided in paragraph (a)(1)(iii) and upon publication of the initial Form CC pursuant to proposed Rule 614(b)(2)(i). Proposed Rule 614(a)(1)(v)(B) would provide that the Commission would declare ineffective an initial Form CC if it finds, after notice and opportunity for hearing, that such action is necessary or appropriate in the public interest and is consistent with the protection of investors. The Commission also preliminarily believes that it would be necessary and appropriate in the public interest, and consistent with the protection of investors, to declare ineffective an initial Form CC if it finds, after notice and opportunity for hearing, that one or more disclosures reveal noncompliance with federal securities laws or the rules or regulations thereunder. The Commission also would make such a declaration if it finds, for example, that one or more disclosures on the initial Form CC were materially deficient with respect to their accuracy,

542The responsibility for accurate, current, and complete disclosures on proposed Form CC would lie with the competing consolidator. The Commission’s review of an initial Form CC would focus on an evaluation of the completeness and accuracy of the disclosures and compliance with federal securities laws. The Commission’s evaluation regarding compliance with federal securities laws would involve a review of the Form CC disclosures for apparent non-compliance with federal securities laws, or other rules or regulations thereunder, and would focus on the disclosures made on the Form CC. 543See infra Section IV.B.2(e)(iii). 544See Securities Exchange Act Release No. 833633 (July 18, 2018), 83 FR 38768 (Aug. 7, 2018) currency, or completeness. The Commission preliminarily believes that market participants would use the Form CC disclosure to understand and evaluate the operations of a competing consolidator and to help determine whether to subscribe to a competing consolidator. A disclosure on Form CC that is materially deficient with respect to its completeness or comprehensibility could mislead market participants or impede their ability to evaluate a competing consolidator. In addition, the Commission intends to use the information disclosed on an initial Form CC to exercise oversight over competing consolidators. Given these potential uses, the Commission believes that it is important that an initial Form CC contain disclosures that are accurate, current, and complete. During its review, the Commission and its staff may provide comments to the applicant and may request that the applicant supplement information in its initial Form CC or revise its disclosures on its initial Form CC.542 If the Commission declares an initial Form CC ineffective, the applicant would be prohibited from operating as a competing consolidator. An initial Form CC declared ineffective would not prevent the competing consolidator from subsequently filing a new Form CC that attempted to address any disclosure deficiencies or other issues that caused the initial Form CC to be declared ineffective. The Commission requests comment on proposed Rule 614(a)(1), which establishes filing requirements for an initial Form CC and a Commission review period for determining whether a filed initial Form CC should be declared ineffective. In particular, the Commission solicits comment on the following:
84. Do commenters believe that the
proposed electronic filing requirement is appropriate? Are there methods other than EFFS that would be appropriate? If so, please describe. Is EFFS an efficient system for filing proposed Form CC? Would another system be more efficient? If so, please specify and describe the rationale for using a different system.
85. Should the Commission adopt the
proposal that an initial Form CC will become effective by operation of rule without the Commission issuing an order declaring effective the initial Form CC? Do commenters believe that publishing an initial Form CC on the Commission’s website, without a Commission order declaring an initial Form CC effective, would provide sufficient notice that an initial Form CC has become effective? Why or why not? Please support your arguments.
86. Should the Commission require
the existing exclusive SIPs to file an initial Form CC before they may become competing consolidators if they decide to act as competing consolidators? Why or why not? Please support your arguments.
87. Do commenters believe that the
process to declare a Form CC ineffective is appropriate? Why or why not?
88. Do commenters believe that an
SRO seeking to operate a competing consolidator would establish the competing consolidator within the SRO or in a separate affiliated entity? What do commenters believe would be the advantages and disadvantages of each form of operation? Do commenters believe that an SRO competing consolidator would have any advantages over a competing consolidator registered pursuant to proposed Rules 614(a)–(c) and proposed Form CC?
89. If an SRO decides to act as a
competing consolidator, should it be required to file a specific notice of its intent to operate as a competing consolidator in addition to, or in lieu of, a Form 19b–4 with the Commission? Would a Form 19b–4 filing by itself provide sufficient notice that an SRO intends to act as a competing consolidator? Please explain. The Commission is proposing Rule 614(a)(2) to provide the requirements for amending an effective Form CC. Under proposed Rule 614(b)(2)(iii), the Commission will make public any Form CC Amendment, as described below, no later than 30 calendar days from the date of its filing with the Commission. Proposed Form CC is similar to Form SIP and the information required to be filed on proposed Form CC is designed to enable market participants to make informed decisions when selecting a competing consolidator and to facilitate Commission oversight of competing consolidators. As described more fully below,543 proposed Form CC would require information concerning, among other things: The legal name and legal status of the competing consolidator; the owners, directors, officers, and governors of the competing consolidator, or persons performing similar functions; whether the competing consolidator is a brokerdealer or an affiliate of a broker-dealer and a description of the organizational structure of the competing consolidator; contact information for an employee of the competing consolidator prepared to respond to questions regarding Form CC; a description of each consolidated market data service or function, including connectivity and delivery options for subscribers, and a description of all procedures utilized for the collection, processing, distribution, publication and retention of information with respect to quotations for, and transactions in, securities; a description of all market data products with respect to consolidated data, or a subset thereof, that the competing consolidator provides to subscribers; a description of fees and charges for use of the competing consolidator with respect to consolidated market data, including the types, range, and structure of the competing consolidator’s fees and differentiation among the types of subscribers; a description of any colocation and related services, the terms and conditions for co-location, connectivity, and related services, including connectivity and throughput options offered, and a description of any other means besides co-location and related services to increase the speed of communication, including a summary of the terms and conditions for its use; and a narrative description, or the functional specifications, of each consolidated market data service or function, including connectivity and delivery options for the subscribers. The Commission is proposing Rule 614(a)(2)(i) to require a competing consolidator to amend an effective Form CC in accordance with the instructions therein: (i) Prior to the date of implementation of a material change to the pricing, connectivity,
or products offered; and (ii) no later than 30 calendar days after the end of each calendar year to correct information, whether material or immaterial, that has become inaccurate or incomplete for any reason (‘‘Annual Report’’). The Commission preliminarily believes that a change to a competing consolidator’s pricing, connectivity, or products offered would be material if there is a substantial likelihood that a reasonable market participant would consider the change important when evaluating the competing consolidator as a provider of market data.544

(Regulation of NMS Stock Alternative Trading Systems) (stating that a change to the operations of an NMS Stock ATS, or the disclosures regarding the activities of the broker-dealer operator of the NMS Stock ATS and its affiliates, would be material if there is a substantial likelihood that a reasonable market participant would consider the change important when evaluating the NMS Stock ATS as a potential trading venue). The Commission preliminarily believes that the proposal to amend an effective Form CC prior to implementing a Material Amendment would provide market participants with information concerning changes to significant aspects of the competing consolidator’s services, which would assist market participants in evaluating, or reevaluating, the competing consolidator as a provider of market data. The Commission preliminarily believes that requiring a competing consolidator to amend an effective Form CC no later than 30 calendar days after the end of each calendar year to correct any other information that has become inaccurate or incomplete for any reason would help to ensure that market participants have accurate and current information regarding competing consolidators. The Commission preliminarily believes that providing a mechanism for competing consolidators to disclose changes to their operations or to update information that does not constitute a Material Amendment (e.g., a change in the organizational structure of the competing consolidator, its officers or directors, or its affiliated entities) no later than 30 calendar days after the end of each calendar year would tailor the reporting burden on competing consolidators to the degree of significance of the change in a manner that does not compromise the ability of market participants to obtain information about the competing consolidator’s operations. The Commission believes that market participants would use information regarding a competing consolidator’s organization, operational capability, market data products, fees, and colocation and related services to determine whether to subscribe, or continue subscribing, to a competing consolidator. In addition, this information would assist market participants in evaluating which products and services of the competing consolidator would be most useful to them. The information in proposed Form CC 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 maintain an accurate, current, and complete Form CC. The Commission requests comment on proposed Rule 614(a)(2), which establishes filing requirements for Form CC Amendments. In particular, the Commission solicits comment on the following:
90. In addition to material changes to
a competing consolidator’s pricing, connectivity, or products, what should be a Material Amendment?
91. Do commenters believe that a
competing consolidator should be required to file a Material Amendment within a specified time prior to implementing the change that constitutes a Material Amendment? Why or why not? Please support your arguments. Is 30 days an appropriate amount of time for a Material Amendment to be filed?
92. Do commenters believe that a
competing consolidator should be required to file an Annual Report? Why or why not? Proposed Rule 614(a)(3) would require a competing consolidator to provide 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 would cause the Form CC to become ineffective on the date designated by the competing consolidator. This requirement would provide notice to the public and the Commission that the competing consolidator intends to cease operations. The Commission preliminarily believes that this notice would provide market participants with time to find and select an alternative provider of market data. The Commission requests comment on proposed Rule 614(a)(3), which establishes filing requirements for a Form CC notice of cessation. In particular, the Commission solicits comment on the following:
93. Should the Commission require a
competing consolidator to give notice that it intends to cease operations 30 business days or more before ceasing operations as a competing consolidator? If not, why not? Is 30 business days an appropriate time for providing notice of an intention to cease operations? If not, what time period would be appropriate? In proposed Rule 614(b), the Commission is proposing to make public all Form CC reports filed by competing consolidators and other information. Under proposed Rule 614(b)(1), every Form CC filed pursuant to Rule 304 shall constitute a ‘‘report’’ within the meaning of Sections 11A, 17(a), 18(a), and 32(a), and any other applicable provisions of the Exchange Act. Because proposed Form CC is a report that is required to be filed under the Exchange Act, it would be unlawful for any person to willfully or knowingly make, or cause to be made, a false or misleading statement with respect to any material fact in Form CC. Under proposed Rule 614(b)(2), the Commission would make public via posting on the Commission’s website each: (i) Effective initial Form CC; (ii) order of ineffective Form CC; (iii) filed Form CC Amendment; and (iv) notice of cessation. Under the proposed rule, the Commission would publish each Form CC Material Amendment and Annual Report on its website no later than 30 days after the competing consolidator filed the amendment. The Commission preliminarily believes that making each Form CC filing public via public posting on the Commission’s website would provide market participants with important information about the operations of a competing consolidator and facilitate the Commission’s oversight of competing consolidators. The Commission preliminarily believes that this information should be easily accessible to all market participants so that market participants may better evaluate a competing consolidator as a potential provider of market data. Additionally, the Commission preliminarily believes that the publication of Material Amendments and Annual Reports would provide market participants with information necessary to evaluate, or re-evaluate, a competing consolidator as a provider of market data, facilitate the Commission’s oversight of competing consolidators, and help to ensure the continued resiliency of a competing consolidator’s systems. The Commission requests comment on proposed Rule 614(b), which would establish public disclosure requirements for Form CC filings. In particular, the Commission solicits comment on the following:
94. Do commenters believe that the
Commission should post on its website each effective initial Form CC, each notice of ineffectiveness of a Form CC, each Form CC Amendment, and each notice of cessation? Why or why not? Please support your arguments. Do commenters believe a competitive marketplace would provide competing consolidators with incentives to disclose sufficient information in the normal course of business? Why or why not?

545See supra Section III.A.
546See 15 U.S.C. 78k–1(c)(1)(D).
547 If a competing consolidator uses a vendor to transmit data between the SRO data center and the competing consolidator’s data center, the competing consolidator retains responsibility for collecting all of the timestamps described in proposed Rule 614(d)(4). The Commission preliminarily believes that it would be helpful for a competing consolidator to make market participants aware that the competing consolidator’s filings are publicly posted on the Commission’s website. Therefore, proposed Rule 614(c) would require each competing consolidator to post on its website a direct URL hyperlink to the Commission’s website that contains the documents enumerated in proposed Rule 614(b)(2), which includes the competing consolidator’s Form CC filings. The Commission preliminarily believes that this requirement would make it easier for market participants to review a competing consolidator’s Form CC filings by providing an additional means for market participants to locate Form CC filings that are posted on the Commission’s website. The Commission requests comment on proposed Rule 614(c), which would require each competing consolidator to provide a direct URL hyperlink to the Commission’s website that contains the documents identified in proposed Rule 614(b)(2). In particular, the Commission solicits comment on the following:
95. Do commenters believe that
proposed Rule 614(c) should require each competing consolidator to provide a direct URL hyperlink to the Commission’s website that contains the documents identified in proposed Rule 614(b)(2). Why or why not? Please support your arguments. Under the proposed decentralized consolidation model, competing consolidators would be required to perform many of the obligations currently performed by the existing exclusive SIPs. Proposed Rule 614(d) establishes the responsibilities applicable to competing consolidators, which also includes the disclosure of information that would facilitate the Commission’s oversight of competing consolidators and assist market participants in choosing and evaluating competing consolidators. 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), which would include all data necessary to generate the proposed consolidated market data. Proposed Rule 614(d)(2) would require each competing consolidator to calculate and generate consolidated market data, as defined in proposed Rule 600(b)(16), from the information collected in proposed Rule 614(d)(1). 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 Rule 614(d)(4) and Rule 614(e)(1)(ii), as discussed below. As noted above, competing consolidators would be required under proposed Rule 614(d)(2) to calculate and generate proposed consolidated market data and make proposed consolidated market data available to subscribers. Accordingly, all competing consolidators would be required to develop a consolidated market data product that contains all of the data elements provided under the proposed definition of consolidated market data. In addition, competing consolidators could develop other market data products that contain only a subset of consolidated market data elements (e.g., a TOB product) and could develop market data products that contain elements that go beyond the elements required under the proposed definition of consolidated market data (e.g., a full DOB product). The Commission recognizes that market participants have varying needs with respect to market data, and the proposed rules would permit a competing consolidator to offer additional market data products to meet these needs so long as the competing consolidator complies with proposed Rules 614(d)(2) and (d)(3) by providing a consolidated market data product.545 The Commission preliminarily believes that the proposed provisions are both necessary and appropriate because they reflect the main obligations of competing consolidators, which are to collect, calculate, and disseminate
consolidated market data, as proposed. In addition, the use of a competing consolidator at a specific data center would likely be more accurate and useful in assessing the trading activity of a trading participant in that same data center. As proposed, competing consolidators would be the only entities providing proposed consolidated market data to market participants. Accordingly, the terms by which they provide proposed consolidated market data to their subscribers must not be unreasonably discriminatory.546 The Commission requests comment on proposed Rules 614(d)(1)–(3). In particular, the Commission solicits comment on the following:
96. Do these provisions reflect the
main obligations of competing consolidators? Should there be any other obligations?
97. Competing consolidators would be
required to generate proposed consolidated market data, which would include the calculation of an NBBO consistent with the process outlined in the definition of NBBO in Rule 600(b)(42). Do commenters believe that the definition of NBBO would ensure the calculation of consistent NBBOs by competing consolidators?
98. Do commenters believe that
competing consolidators should be required to develop a consolidated market data product that contains all of the data elements provided under the proposed definition of consolidated market data? Why or why not? Could there be some competing consolidators that only offer a subset of the proposed consolidated market data? Please explain. 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. The Commission understands that the existing SIPs similarly timestamp information in accordance with proposed Rule 614(d)(4)(i) and (iii). The Commission preliminarily believes that the proposed rule is appropriate because it would allow subscribers to ascertain a competing consolidator’s realized latency (i.e., 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 proposed consolidated market data to subscribers). This information provides transparency that should help subscribers evaluate a potential competing consolidator or determine whether an existing competing consolidator continues to meet their needs.547 The Commission is also proposing several rules, described below, that would require public disclosure of metrics and other information concerning the performance and operations of a competing consolidator. The information that the Commission is

548The exclusive SIPs currently publish to their respective websites monthly processor metrics that provide the following information: System availability, message rate and capacity statistics, and the following latency statistics from the point of receipt by the SIP to dissemination from the SIP:
Average latency and 10th, 90th and 99th percentile latency. See CTA Metrics, available at https:// www.ctaplan.com/metrics; UTP Metrics, available at http://www.utpplan.com/metrics. Additionally, the exclusive SIPs post on their websites any system alerts and the Nasdaq UTP Plan posts vendor alerts as well. See CTA Alerts, available at https://www.ctaplan.com/alerts; UTP–SIP System Alerts, available at http://www.utpplan.com/ system_alerts; UTP Vendor Alerts, available at http://www.utpplan.com/vendor_alerts. Further, the exclusive SIPs publish on their websites charts detailing realized latency from the inception of a Participant matching engine event through the point of dissemination from the exclusive SIP. See CTA Latency Charts, available at https:// www.ctaplan.com/latency-charts; UTP Realized Latency Charting, available at http:// www.utpplan.com/latency_charts. 549Rule 600(b)(37) of Regulation NMS defines ‘‘make publicly available’’ as ‘‘posting on an internet website that is free and readily accessible to the public, furnishing a written copy to customers on request without charge, and notifying customers at least annually in writing that a written copy will be furnished on request.’’ See 17 CFR 242.600(b)(37). 550A competing consolidator that ceases operations would not be required to maintain the information posted pursuant to proposed Rule 614(d)(5) after the competing consolidator files its notice of cessation and its Form CC becomes ineffective, as provided in proposed Rule 614(a)(3). 551The Commission believes that the SIPs do not currently produce this latency statistic. 552The Commission believes that the SIPs do not currently produce this information. proposing that competing consolidators publish is based upon information that is currently produced by the CTA/CQ SIP and the Nasdaq UTP SIP, either for public or internal distribution.548 Because this information is useful to current users of the exclusive SIPs and participants of the Equity Data Plans, the Commission preliminarily believes that it should be made publicly available 549 by competing consolidators. The Commission preliminarily believes that public disclosure and accessibility of this information would help market participants to evaluate the merits of a competing consolidator by providing transparency into the services and performance, and resiliency of each competing consolidator, and could also lower search costs for market participants and enhance competition. In addition, the Commission preliminarily believes that the public disclosure of this information— particularly the system availability and network delay statistics and data quality and system issues—would help to ensure that competing consolidators have a demonstrated ability to provide consolidated market data in a stable and resilient manner. Proposed Rule 614(d)(5) would require 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. The Commission preliminarily believes that the availability of this information on a website (without any encumbrances or restrictions) would assist market participants in comparing competing consolidators and evaluating their performance over time.550 In particular, proposed Rule 614(d)(5) would provide that the performance metrics include: (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; 551 (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. Additionally, proposed Rule 614(d)(6) would require 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; 552 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. The Commission requests comment on proposed Rules 614(d)(4)–(d)(6). In particular, the Commission solicits comment on the following:
99. Do commenters believe that
separate timestamps should be required as described in Rule 614(d)(4)? Are these the relevant instances for timestamps? Should any other timestamps be adopted? Should any of the proposed timestamps not be required?
100. Do commenters believe that the
information required to be published pursuant to proposed Rule 614(d)(5) and proposed Rule 614(d)(6) is appropriate for competing consolidators? Should any further information be published? Is any information proposed to be published unnecessary?
101. Do commenters believe that the
frequency of publication of the information required to be published pursuant to proposed Rule 614(d)(5) and proposed Rule 614(d)(6) is sufficient? Is it too onerous?
102. Do commenters believe that
requiring each competing consolidator to publish the data required by proposed Rule 614(d)(5) and proposed Rule 614(d)(6) on its respective website is appropriate? Would commenters prefer that the competing consolidators instead file the data with the Commission for publication on the Commission’s website?
103. Do commenters believes that any
of the information required to be published on the competing consolidator’s website should not be required to be made publicly available? Please explain. If so, should this information be required to be provided to subscribers? Should any information proposed to be made publicly available not be made publicly available due to competitive concerns? If so, please

553See Section 17(a)(1) of the Exchange Act, 15 U.S.C. 78q(a)(1). 554 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 (March 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, 67578–67579 n. 1347 (Nov. 12, 2013) (similarly interpreting the term ‘‘prompt’’ in the context of Exchange Act Rule 15Ba1–8(d)). 555See Rule 19b–4(b)(2), 17 CFR 240.19b–4(b)(2). 556As explained above, only non-exclusive SIP competing consolidators, and not SRO competing consolidators, would be required to register on Form CC. identify the information and provide an explanation.
104. Do commenters believe a
requirement for the competing consolidators to publish historical performance data should be included in proposed Rule 614(d)(5) and proposed Rule 614(d)(6)? If yes, for what time periods should historical data be required to be published? The Commission is proposing several rules that would require competing consolidators to provide and maintain information for regulatory purposes. Proposed Rule 614(d)(7) would require 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.553 The proposed rule would require competing consolidators to keep these documents for a period of no less than five years, the first two years in an easily accessible place. Proposed Rule 614(d)(8) would require 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.554 These requirements would facilitate the Commission’s oversight of competing consolidators and the national market system. The Commission requests comment on proposed Rules 614(d)(7) and (d)(8). In particular, the Commission solicits comment on the following:
105. Do commenters believe that the
documents required to be kept and preserved by proposed Rule 614(d)(7) are appropriate for competing consolidators? If not, please explain. Are there any other documents that should be kept and preserved by competing consolidators?
106. Do commenters believe that the
recordkeeping time periods required by proposed Rule 614(d)(7) are appropriate for competing consolidators? If not, what would be more appropriate recordkeeping time periods?
107. Do commenters believe that
proposed Rule 614(d)(8), which requires competing consolidators to provide copies of any documents required to be kept and preserved to any representative of the Commission upon request, is appropriate for competing consolidators? If not, please explain. The Commission is proposing 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 Rule 614 are deemed to have been made on a particular business day. Specifically, the Commission proposes to define ‘‘business day’’ in the same manner in which it is defined in Rule 19b– 4(b)(2).555 The Commission preliminarily believes that these 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 proposed Rule 614. The Commission requests comment on proposed Rules 614(a)(4)(i) and (a)(4)(ii). In particular, the Commission solicits comment on the following:
108. Do commenters believe that the
definition of business day in proposed Rule 614(a)(4)(i) is appropriate? Why or why not? Would any alternative definition of business day be preferable? Please explain.
109. Do commenters believe that the
standards set forth in proposed Rule 614(a)(4)(ii) regarding when a filing or publication requirement is deemed to have occurred on a particular business day are appropriate? Why or why not? Would any alternative standards be preferable? Please explain. (iii) Proposed New Form CC Proposed new Form CC includes a set of instructions for its completion and submission. These instructions are attached to this release, together with proposed Form CC. Proposed Form CC would require competing consolidators556 to provide information and/or reports in narrative form by attaching specified exhibits. The proposed form would require 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 preliminarily believes that it is necessary to obtain the information requested in proposed Form CC to enable the Commission to determine whether to declare a Form CC ineffective. Specifically, the Commission believes that the requested information would assist the Commission in understanding the competing consolidator’s overall business structure, technological reliability, and services offered. In addition, Form CC would help to provide for consistent disclosures among competing consolidators. General Information: Proposed Form CC would require a competing consolidator to provide its legal name and ‘‘DBA’’ (doing business as), if applicable, its address, website URL, legal status (e.g., corporation, partnership, and sole proprietorship), and, except in the case of a sole proprietorship, the date of formation and state or country in which it was formed. The Commission preliminarily believes that this basic information is necessary for the Commission to evaluate a competing consolidator. Proposed Form CC also would require the competing consolidator to indicate (1) whether it is registered as a brokerdealer or affiliated with a registered broker-dealer and (2) whether it is a successor to a previously registered competing consolidator and, if so, the date of succession and the name and address of the predecessor registrant. The Commission preliminarily believes that this would provide basic identifying information about the competing consolidator and assist the Commission in its review of Form CC. Business Organization: Proposed Form CC would require each competing consolidator to provide information regarding its business organization, including: (1) In Exhibit A, information regarding any person who owns 10 percent or more of the competing

557See Regulation SCI Adopting Release, supra note 28, at 72252–56 for a discussion of the background of Regulation SCI. consolidator’s stock or who, either directly or indirectly, through agreement or otherwise, in any other manner, may control or direct the competing consolidator’s management or policies, including the full name and title of any such person and a copy of the agreement, or if there is no written agreement, a description of the agreement or basis upon which such person may exercise such control or direction; (2) in Exhibit B, a list of the officers, directors, governors, or persons performing similar functions of the competing consolidator; (3) in Exhibit C, a narrative or graphic description of the competing consolidator’s organizational structure; and (4) in Exhibit D, a list of all affiliates of the competing consolidator and the general nature of the affiliations. The Commission preliminarily believes that obtaining this information would assist the Commission in understanding the competing consolidator’s overall business structure, governance arrangements, and operations, all of which would assist the Commission in its review of Form CC. If the competing consolidator is a broker-dealer, or is affiliated with a broker-dealer, proposed Form CC would permit the competing consolidator to attach its, or its affiliate’s, Schedule A of Form BD, relating to direct owners and executive officers, and Schedule B of Form BD, relating to indirect owners. Alternatively, in lieu of filing Exhibits A and B to proposed Form CC, or providing Schedules A and B of Form BD, proposed Form CC would permit a competing consolidator to provide a URL address where the information requested under Exhibits A and B to proposed Form CC are available. The Commission preliminarily believes that this information would help the Commission and market participants understand the persons and entities that directly and indirectly own the brokerdealer, thereby enabling the Commission and market participants to better understand potential conflicts of interest that may arise for a competing consolidator that is a broker-dealer or is affiliated with a broker-dealer. Operational Capability: Proposed Form CC would require each competing consolidator to provide a description of each proposed 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 Commission further believes, preliminarily, that this information could assist the Commission in overseeing competing consolidators and assist market participants in assessing whether to become a subscriber of a certain competing consolidator. Competing consolidators could serve an important role in the national market system by calculating and generating consolidated market
data, as proposed, and, accordingly, it is important for the competing consolidator to provide the requested information relating to its operational capability. Services and Fees: Proposed Form CC would further require a competing consolidator to provide information regarding access to its competing consolidator services, including: (1) A description of all market data products with respect to proposed consolidated market data or any subset of proposed consolidated market data that are provided to subscribers; (2) a description of any fees or charges for use of the competing consolidator with respect to proposed consolidated market data or any subset of proposed consolidated market data, including the types of fees (e.g., subscription and connectivity), the structure of the fee (e.g., fixed and variable), variables that affect the fees (e.g., data center costs, aggregation costs, and transmission costs), pricing differentiation among the types of subscribers, and range of fees (high and low); (3) a description of any co-location, connectivity, and related services, and the terms and conditions for co-location and related services, including connectivity and throughput options offered; and (4) a description of any other means besides co-location and related services to increase the speed of communication, including a summary of the terms and conditions for its use. The Commission preliminarily believes that this information would assist market participants in determining whether to become a subscriber of a competing consolidator by requiring the availability to all market participants of information regarding the services offered by the competing consolidator and the fees it charges for services and proposed consolidated market data. The availability of this information would also help to assure that all subscribers and potential subscribers have the same information about the services that the competing consolidator offers. Contact Information: In addition to the foregoing, proposed Form CC would require a competing consolidator to provide Commission staff with point of contact information for a person(s) prepared to respond to questions regarding Form CC, including the name, title, telephone number, and email address of such person. Proposed Form CC also would require an electronic signature to help ensure the authenticity of the Form CC submission. The Commission preliminarily believes these proposed requirements would expedite communications between Commission staff and a competing consolidator and help to ensure that only personnel authorized by the competing consolidator are submitting required filings and responding to questions from Commission staff regarding Form CC. The Commission requests comment on proposed Form CC. In particular, the Commission solicits comment on the following:
110. Are the instructions in proposed
Form CC sufficiently clear? If not, identify any instructions that should be clarified, and, if possible, offer alternatives.
111. Should the Commission
implement an electronic filing system for receipt of Form CC, and, if so, what particular features should be incorporated into the system? Are there any burdens associated with the electronic filing of proposed Form CC that the Commission should consider?
112. Is the requested information
relating to a competing consolidator’s operational capability appropriate? If not, identify any items that are not appropriate, explain why, and, if possible, offer alternatives.
113. Is the requested information
relating to access to a competing consolidator’s services appropriate? If not, identify any items that are not appropriate, explain why, and, if possible, offer alternatives.
114. Do commenters believe that
competing consolidators will bundle their products and/or services? If so, should this be disclosed on Form CC?
115. Should the Commission require
any additional information on Form CC? If so, what information and why?
116. Are there any items on proposed
Form CC that the Commission should not request? If so, which items and why? (f) Amendments to Regulation SCI The Commission adopted Regulation SCI in November 2014 to strengthen the technology infrastructure of the U.S. securities markets.557 Regulation SCI is designed to reduce the occurrence of systems issues in the U.S. securities markets, improve resiliency when systems problems occur, and enhance

558See Rule 1000 of Regulation SCI, 17 CFR
242.1000. Because self-aggregators would be brokerdealers, see infra Section IV.B.3, they would be
subject to existing broker-dealer risk control and supervisory obligations. See, e.g., 17 CFR 240.15c3– 5, FINRA Rule 3110, FINRA Rule 4370, FINRA Rule 4380. 559See Rule 1001 of Regulation SCI, 17 CFR 242.1001, which is also discussed further below. 560See Rules 1002–1007 of Regulation SCI, 17 CFR 242.1001–1007, which are also discussed further below. 561See Rule 1000 of Regulation SCI, 17 CFR 242.1000. 562 Id. 563 Id. Subparagraph (1) of the definition of ‘‘critical SCI systems’’ in Rule 1000 of Regulation SCI specifically enumerates certain systems to be within its scope, including those that ‘‘directly support functionality relating to: (i) Clearance and settlement systems of clearing agencies; (ii) openings, reopenings, and closings on the primary listing market; (iii) trading halts;(iv) initial public offerings; (v) the provision of consolidated market data; or (vi) exclusively-listed securities . . .’’. 564See Regulation SCI Adopting Release, supra note 28, at 72258. 565 Id. at 72254. 566See Rule 600(b)(59) of Regulation NMS, 17 CFR 242.600(b)(59). 567See also Regulation SCI Adopting Release, supra note 28, at 72270–71, n. 196 (discussing how the term ‘‘plan processor’’ applies to the CTA, CQ, Nasdaq UTP, and OPRA plans). 568See also id. at 72271. The Commission also stated how systems issues affecting SIPs highlighted their importance within the national market system. See id. at n. 199 (discussing the impact of two systems issues involving SIPs). 569See Regulation SCI Adopting Release, supra note 28, at 72275. the Commission’s oversight of securities market technology infrastructure. The key market participants that are currently subject to Regulation SCI are called ‘‘SCI entities’’ and include certain SROs (including stock and options exchanges, registered clearing agencies, FINRA and the Municipal Securities Regulatory Board) (‘‘SCI SROs’’); alternative trading systems that trade NMS and non-NMS stocks exceeding specified volume thresholds (‘‘SCI ATSs’’); the exclusive SIPs (‘‘plan processors’’); and certain exempt clearing agencies.558 Regulation SCI, among other things, requires these SCI entities to establish, maintain, and enforce written policies and procedures reasonably designed to ensure that their key automated systems have levels of capacity, integrity, resiliency, availability, and security adequate to maintain their operational capability and promote the maintenance of fair and orderly markets, and that such systems operate in accordance with the Exchange Act and the rules and regulations thereunder and the entities’ rules and governing documents, as applicable.559 Broadly speaking, Regulation SCI also requires SCI entities to take appropriate corrective action when systems issues occur; provide certain notifications and reports to the Commission regarding systems problems and systems changes; inform members and participants about systems issues; conduct business continuity and disaster recovery testing and penetration
testing; conduct annual reviews of their automated systems; and make and keep certain books and records.560 Regulation SCI applies primarily to the systems of, or operated on behalf of, SCI entities that directly support any one of six key securities market functions—trading, clearance and settlement, order routing, market data, market regulation, and market surveillance (‘‘SCI systems’’).561 With respect to security, Regulation SCI also applies to systems that, if breached, would be reasonably likely to pose a security threat to SCI systems (‘‘indirect SCI systems’’).562 In addition, certain systems that raise concerns about single points of failure (defined as ‘‘critical SCI systems’’) are subject to certain heightened requirements.563 When adopting Regulation SCI, the Commission included within the scope of Regulation SCI those entities ‘‘that play a significant role in the U.S. securities markets and/or have the potential to impact investors, the overall market, or the trading of individual securities.’’ 564 The Commission identified by function the key market participants it believed were integral to ensuring the stability, integrity, and resiliency of securities market infrastructure.565 As discussed below, ‘‘plan processors’’ are currently among those entities that are subject to Regulation SCI. Under Regulation SCI, ‘‘plan processors’’ have the meaning set forth in Regulation NMS.566 Thus, currently, the exclusive SIPs, or plan processors of the Equity Data Plans and the OPRA Plan, are subject to Regulation SCI.567 The Commission included plan processors within the scope of Regulation SCI because the Commission believed that such entities, because they are exclusive processors and providers of key market data pursuant to a national market system plan, are central features of the national market system and serve an important role within the national market system in operating and maintaining computer and communications facilities for the receipt, processing, validating, and dissemination of quotation and/or last sale price information.568 The Commission preliminarily believes that competing consolidators, because they would be sources of consolidated market data, even if not exclusive sources of such data, would similarly serve an important role in the national market system, and therefore should be subject to the requirements of Regulation SCI. When adopting Regulation SCI, the Commission explained that Regulation SCI would apply not only to exclusive providers of consolidated market data, but also to the market data systems of SCI SROs, stating, ‘‘both consolidated and proprietary market data systems are widely used and relied upon by a broad array of market participants, including institutional investors, to make trading decisions, and [] if a consolidated or a proprietary market data feed became unavailable or otherwise unreliable, it could have a significant impact on the trading of the securities to which it pertains, and could
interfere with the maintenance of fair and orderly markets.’’ 569 The Commission preliminarily believes that if a consolidated market data feed of a competing consolidator became unavailable or otherwise unreliable, it could have a significant impact on the trading of NMS stocks and/or the market participants subscribing to its data feeds, and could possibly interfere with the maintenance of fair and orderly markets. A systems issue could occur at a competing consolidator (e.g., a systems disruption that prevented the competing consolidator from disseminating consolidated market data to its subscribers, a systems intrusion that impacted the quality of the data being disseminated, or another cybersecurity incident, such that certain market participants or the securities markets broadly could be significantly impacted until such time that the issue was resolved at the competing consolidator, or the end user (or its market data vendor, if applicable) was able to implement any backup arrangements with an alternative competing consolidator. As detailed further below, the Commission is requesting comment on whether all of the obligations set forth in Regulation SCI should apply to competing consolidators, or whether only certain requirements should be imposed, such as those requiring written policies and procedures, notification of systems problems, business continuity and disaster recovery testing (including testing with participants/subscribers of a competing consolidator), and penetration testing. In addition, the Commission is proposing to revise the definition of ‘‘critical SCI system,’’ to take account of competing consolidators, which, as proposed, would not be exclusive providers of consolidated market data. Currently, subparagraph (1)(v) of the

570See infra Section IV.B.6.
571See proposed Rule 600(b)(19) of Regulation NMS. See also supra Section III.B. 572See proposed amendment to Rule 1000 of Regulation SCI. 573See proposed amendment to Rule 1000 of Regulation SCI. As discussed above, competing consolidators would not fall within the definition of ‘‘plan processors’’ under Regulation SCI. See supra notes 566–567 and accompanying text. In addition to revising Rule 1000 of Regulation SCI to define ‘‘competing consolidators’’ and include them within the definition of ‘‘SCI entity,’’ corresponding changes would be made to Form SCI and the General Instructions to Form SCI to include references to ‘‘competing consolidators.’’ See infra note 595 and accompanying text (discussing Form SCI and Rule 1006 of Regulation SCI). 574Rule 1001(a) of Regulation SCI, 17 CFR 242.1001(a). 575Rule 1001(a)(2)(vi) of Regulation SCI, 17 CFR 242.1001(a)(2)(vi). 576Rule 1001(a)(3) of Regulation SCI, 17 CFR 242.1001(a)(3). 577Rule 1001(a)(4) of Regulation SCI, 17 CFR 242.1001(a)(4). We note that concurrent with the Commission’s adoption of Regulation SCI, Commission staff issued staff guidance on current SCI industry standards as referenced in Regulation SCI. The staff guidance listed examples of publications in nine domains describing processes, guidelines, frameworks, or standards an SCI entity could look to in developing reasonable policies and procedures to comply with Rule 1001(a) of Regulation SCI. See ‘‘Staff Guidance on Current SCI Industry Standards,’’ November 19, 2014, available at: https://www.sec.gov/rules/final/2014/staffguidance-current-sci-industry-standards.pdf. The domains included: Application controls; capacity planning; computer operations and production environment controls; contingency planning; information security and networking; audit; outsourcing; physical security; and systems development methodology. 578Rule 1001(b)(1)–(2) of Regulation SCI, 17 CFR 242.1001(b)(1)–(2). 579Rule 1001(b)(3) of Regulation SCI, 17 CFR 242.1001(b)(3). 580Rule 1001(b)(4) of Regulation SCI, 17 CFR 242.1001(b)(4). definition of ‘‘critical SCI systems’’ includes those SCI systems of, or operated on behalf of, an SCI entity that directly support functionality relating to ‘‘the provision of consolidated market data.’’ The Commission is proposing to revise this subparagraph to apply to those systems that directly support functionality relating to ‘‘the provision of market data by a plan processor.’’ The proposed revised language in subparagraph (1)(v) is intended to identify as critical SCI systems only those market data systems that perform an exclusive market data dissemination function pursuant to an NMS plan. Accordingly, the scope of ‘‘critical SCI systems’’ would still capture single points of failure within the national market system. Under the current consolidation model, because the exclusive SIPs represent such single points of failure, they are all subject to heightened requirements as ‘‘critical SCI systems.’’ However, because the
competing consolidator model is designed to result in multiple viable sources of consolidated market data, and would not be initiated until a transition period was complete,570 the Commission preliminarily believes that including systems of such competing consolidators within the scope of ‘‘critical SCI systems’’ would not be necessary. With multiple competing consolidators operating in the national market system, the systems of competing consolidators would be subject to the standard (i.e., as SCI systems that are not critical SCI systems) requirements of Regulation SCI, whereas the proposed revised definition of ‘‘critical SCI systems’’ would address single point of failure concerns. Because the competing consolidator model would not apply with respect to trading in options, the definition of ‘‘critical SCI systems’’ must still account for the systems of OPRA’s plan processor, whose systems would continue to be ‘‘critical SCI systems.’’ In addition, to avoid confusion with the term ‘‘consolidated market data’’— which is proposed to be defined to include (1) core data, (2) regulatory data, (3) administrative data, (4) exchangespecific program data, and (5) additional regulatory, administrative, or exchangespecific program data elements defined as such pursuant to the effective national market system plan(s) required under Rule 603(b) 571—the Commission is proposing to replace that phrase within the definition of ‘‘critical SCI systems’’ with ‘‘market data.’’ 572 Thus, under this proposal, the definition of ‘‘SCI entities’’ would be expanded to include ‘‘competing consolidators,’’ which would be defined to have the same meaning as the definition of ‘‘competing consolidators’’ set forth in proposed Rule 600(b)(16) of Regulation NMS.573 Competing consolidators would be subject to the requirements of Regulation SCI, as described below. Rule 1001(a) of Regulation SCI requires SCI entities to have policies and procedures reasonably designed to ensure that their SCI systems and, for purposes of security standards, indirect SCI systems, have levels of capacity, integrity, resiliency, availability, and security adequate to maintain their operational capability and promote the maintenance of fair and orderly markets, and includes certain minimum requirements for those policies and procedures relating to capacity planning, stress tests, systems development and testing methodology, the identification of vulnerabilities, business continuity and disaster recovery plans (including geographic diversity and resumption goals), and monitoring.574 Of particular note for competing consolidators is Rule 1001(a)(2)(vi), which requires that an SCI entity’s policies and procedures include standards ‘‘that result in such systems being designed, developed, tested, maintained, operated, and surveilled in a manner that facilitates the successful collection, processing, and dissemination of market data.’’ 575 Rule 1001(a)(3) of Regulation SCI requires that SCI entities
periodically review the effectiveness of these policies and procedures, and take prompt action to remedy any deficiencies.576 Rule 1001(a)(4) of Regulation SCI provides that, for purposes of the provisions of Rule 1001(a), an SCI entity’s policies and procedures will be deemed to be reasonably designed if they are consistent with current SCI industry standards, which shall be comprised of information technology practices that are widely available to information technology professionals in the financial sector and issued by an authoritative body that is a U.S. governmental entity or agency, association of U.S. governmental entities or agencies, or widely recognized organization; 577 however, Rule 1001(a)(4) of Regulation SCI also makes clear that compliance with such ‘‘current SCI industry standards’’ are not the exclusive means to comply with these requirements. Rule 1001(b) of Regulation SCI requires that each SCI entity establish, maintain, and enforce written policies and procedures reasonably designed to ensure that its SCI systems operate in a manner that complies with the Act and the rules and regulations thereunder and the entity’s rules and governing documents, as applicable, and specifies certain minimum requirements for such policies and procedures.578 Rule 1001(b)(3) of Regulation SCI requires that SCI entities periodically review the effectiveness of these policies and procedures, and take prompt action to remedy any deficiencies.579 Rule 1001(b)(4) of Regulation SCI provides individuals with a safe harbor from liability under Rule 1001(b) if certain conditions are met.580 Rule 1001(c) of Regulation SCI requires SCI entities to establish, maintain, and enforce reasonably designed written policies and procedures that include the criteria for identifying responsible SCI personnel, the designation and documentation of responsible SCI personnel, and

581Rule 1001(c) of Regulation SCI, 17 CFR 242.1001(c). 582Rule 1000 of Regulation SCI, 17 CFR 242.1000. 583A ‘‘systems disruption’’ means an event in an SCI entity’s SCI systems that disrupts, or significantly degrades, the normal operation of an SCI system. A ‘‘systems compliance issue’’ means ‘‘an event at an SCI entity that has caused any SCI system of such entity to operate in a manner that does not comply with the Act and the rules and regulations thereunder or the entity’s rules or governing documents, as applicable.’’ A ‘‘systems intrusion’’ means any unauthorized entry into the SCI systems or indirect SCI systems of an SCI entity.’’ See Rule 1000 of Regulation SCI, 17 CFR 242.1000. 584Rule 1001(c)(2) of Regulation SCI, 17 CFR 242.1001(c)(2). 585See Rule 1002(a) of Regulation SCI, 17 CFR 242.1002(a). 586See Rule 1002(b) of Regulation SCI, 17 CFR 242.1002(b). For any SCI event that ‘‘has had, or the SCI entity reasonably estimates would have, no or a de minimis impact on the SCI entity’s operations or on market participants,’’ Rule 1002(b)(5) provides an exception to the general Commission notification requirements under Rule 1002(b). Instead, an SCI entity must make, keep, and preserve records relating to all such SCI events, and submit a quarterly report to the Commission regarding any such events that are systems disruptions or systems intrusions. 587See Rule 1002(c) of Regulation SCI, 17 CFR 242.1002(c). 588See Rule 1002(c)(2) of Regulation SCI, 17 CFR 242.1002(c)(2). In addition, the information dissemination requirements of Rule 1002(c) do not apply to SCI events to the extent they relate to market regulation or market surveillance systems, or to any SCI event that has had, or the SCI entity reasonably estimates would have, no or a de minimis impact on the SCI entity’s operations or on market participants. See Rule 1002(c)(4) of Regulation SCI, 17 CFR 242.1002(c)(4). 589See Rule 1003(a) of Regulation SCI, 17 CFR 242.1003(a). 590See Rule 1003(b) of Regulation SCI, 17 CFR 242.1003(b). 591See Rule 1000 of Regulation SCI, 17 CFR
242.1000. In addition, Rule 1003(b)(1) of Regulation
SCI states that penetration test reviews of an SCI entity’s network, firewalls, and production systems must be conducted at a frequency of not less than once every three years, and assessments of SCI systems directly supporting market regulation or market surveillance must be conducted at a frequency based upon the risk assessment conducted as part of the SCI review, but in no case less than once every three years. See Rule 1003(b)(1)(i)–(ii) of Regulation SCI, 17 CFR 242.1003(b)(1)(i)–(ii). 592See Rule 1003(b)(2)–(3) of Regulation SCI, 17 CFR 242.1003(b)(2)–(3). 593See Rule 1004 of Regulation SCI, 17 CFR
242.1004. For a competing consolidator, its
designated members or participants generally would include the national securities exchanges that receive its consolidated market data, as well as its other significant subscribers for such data (including, but not limited, to major market data vendors that widely redistribute such data). 594See Rule 1005 of Regulation SCI, 17 CFR
242.1005. Rule 1005(a) relates to recordkeeping
provisions for SCI SROs, whereas Rule 1005(b) escalation procedures to quickly inform responsible SCI personnel of potential SCI events.581 Rule 1000 of Regulation SCI defines ‘‘responsible SCI personnel’’ to mean, ‘‘for a particular SCI system or indirect SCI system impacted by an SCI event, such senior manager(s) of the SCI entity having responsibility for such system, and their designee(s).’’ 582 Rule 1000 also defines ‘‘SCI event’’ to mean an event at an SCI entity that constitutes a system disruption, a systems compliance issue, or a systems intrusion.583 Rule 1001(c)(2) of Regulation SCI requires that SCI entities periodically review the effectiveness of these policies and procedures, and take prompt action to remedy any deficiencies.584 Under Rule 1002 of Regulation SCI, SCI entities have certain obligations related to SCI events. Specifically, when any responsible SCI personnel has a reasonable basis to conclude that an SCI event has occurred, an SCI entity must begin to take appropriate corrective action which must include, at a minimum, mitigating potential harm to investors and market integrity resulting from the SCI event and devoting adequate resources to remedy the SCI event as soon as reasonably practicable.585 Rule 1002(b) provides the framework for notifying the Commission of SCI events including, among other things, to: Immediately notify the Commission of the event; provide a written notification within 24 hours that includes a description of the SCI event and the system(s) affected, with other information required to the extent available at the time; provide regular updates regarding the SCI event until the event is resolved; and submit a final detailed written report regarding the SCI event.586 Rule 1002(c) of Regulation SCI also requires that SCI entities disseminate information to their members or participants regarding SCI events.587 These information dissemination requirements are scaled based on the nature and severity of an event. Specifically, for ‘‘major SCI events,’’ SCI entities are required to promptly disseminate certain information about the event to all of its members or participants. For SCI events that are not ‘‘major SCI events,’’ SCI entities must, promptly after any responsible SCI personnel has a reasonable basis to conclude that an SCI has occurred, disseminate certain information to those SCI entity members and participants reasonably estimated to have been affected by the event. In addition, dissemination of information to members or participants is permitted to be delayed for systems intrusions if such dissemination would likely compromise the security of the SCI entity’s systems or an investigation of the intrusion.588 Rule 1003(a) of Regulation SCI requires SCI entities to provide reports to the Commission relating to system changes, including a report each quarter describing completed, ongoing, and planned material changes to their SCI systems and the security of indirect SCI systems, during the
prior, current, and subsequent calendar quarters, including the dates or expected dates of commencement and completion.589 Rule 1003(b) of Regulation SCI also requires that an SCI entity conduct an ‘‘SCI review’’ not less than once each calendar year.590 ‘‘SCI review’’ is defined in Rule 1000 of Regulation SCI to mean a review, following established procedures and standards, that is performed by objective personnel having appropriate experience to conduct reviews of SCI systems and indirect SCI systems, and which review contains: A risk assessment with respect to such systems of an SCI entity; and an assessment of internal control design and effectiveness of its SCI systems and indirect SCI systems to include logical and physical security controls, development processes, and information technology governance, consistent with industry standards.591 Rule 1003(b)(2)– (3) SCI entities are also required to submit a report of the SCI review to their senior management, and must also submit the report and any response by senior management to the report, to their board of directors as well as the Commission.592 Rule 1004 of Regulation SCI sets forth the requirements for testing an SCI entity’s business continuity and disaster recovery plans with its members or participants. This rule requires that, with respect to an SCI entity’s business continuity and disaster recovery plan, including its backup systems, each SCI entity shall: (a) Establish standards for the designation of those members or participants that the SCI entity reasonably determines are, taken as a whole, the minimum necessary for the maintenance of fair and orderly markets in the event of the activation of such plans; 593 (b) designate members or participants pursuant to the standards established and require participation by such designated members or participants in scheduled functional and performance testing of the operation of such plans, in the manner and frequency specified by the SCI entity, provided that such frequency shall not be less than once every 12 months; and (c) coordinate the testing of such plans on an industry- or sector-wide basis with other SCI entities. Rule 1005(b) of Regulation SCI relates to the recordkeeping requirements of competing consolidators related to compliance with Regulation SCI.594

relates to the recordkeeping provision for SCI entities other than SCI SROs. 595See Rule 1006 of Regulation SCI, 17 CFR 242.1006. 596See Rule 1007 of Regulation SCI, 17 CFR 242.1007. 597See supra Section IV.A for a discussion of geographic, aggregation, and transmission latencies. Rule 1006 of Regulation SCI provides for certain requirements relating to the electronic filing, on Form SCI, of any notification, review, description, analysis, or report to the Commission required to be submitted under Regulation SCI.595 Finally, Rule 1007 of Regulation SCI contains requirements relating to a written undertaking when records required to be filed or kept by an SCI entity under Regulation SCI are prepared or maintained by a service bureau or other recordkeeping service on behalf of the SCI entity.596 The Commission requests comment on the proposed inclusion of competing consolidators in Regulation SCI and the related revisions to Rule 1000 of Regulation SCI. In particular, the Commission solicits comment on the following:
117. Do commenters believe that
Regulation SCI should apply to competing consolidators? If so, do commenters believe that the proposed revisions to Rule 1000 of Regulation SCI are appropriate? Why or why not? Is there a potential for a systems issue at a competing consolidator to have an adverse impact on the maintenance of fair and orderly markets? If so, what do commenters believe would be the most effective way to mitigate that potential?
118. Do commenters believe that
competing consolidators could play a significant role in the U.S. securities markets such that they should be defined as SCI entities? Why or why not? What do commenters believe are the risks related to subscribers associated with systems issues at a competing consolidator? What impact would a systems issue have on the trading of securities and the maintenance of fair and orderly markets? Do commenters believe that all requirements set forth in Regulation SCI should apply to competing consolidators? Why or why not?
119. Unlike other types of SCI
entities, ATSs are only subject to Regulation SCI if they meet certain volume thresholds set forth in the definition of ‘‘SCI ATS.’’ Do commenters similarly believe there is a threshold size, or a threshold for significant market share, at which Regulation SCI should apply to a competing consolidator? For example, the definition of SCI ATSs contains a two-pronged volume threshold test measured over a ‘‘four out of six-month’’ period to determine whether an alternative trading system is subject to Regulation SCI. Would a similar test be appropriate for competing consolidators? If so, what do commenters believe would be an appropriate measurement that should be used for such a test? For example, in the definition of SCI ATS, the NMS stock volume threshold test for inclusion of an alternative trading system in Regulation SCI is one percent (1%) or more of overall volume in NMS stocks during at least four of the preceding six calendar months. Would it, for example, be appropriate for the Commission to apply Regulation SCI to competing consolidators that had one percent (1%) or more of total subscribers of consolidated market data during at least four of the preceding six calendar months? Or, would a different threshold (such as five, ten, or twenty percent) be more appropriate? Why or why not? Please describe. Do commenters believe that another measurement (other than total subscribers of consolidated market data) be more appropriate? If so, what do commenters believe that measurement should be? Please describe.
120. Do commenters believe that only
certain provisions of Regulation SCI should apply to competing consolidators? For example, should competing consolidators only be subject to certain aspects of Regulation SCI, such as the policies and procedures required by Rule 1001 of Regulation SCI; the requirement to provide notification of SCI events and to take corrective action as required by Rule 1002 of Regulation SCI; the requirement to conduct SCI reviews as required by Rule 1003 of Regulation SCI; the requirement to perform disaster recovery testing as required by Rule 1004 of Regulation SCI; the requirements related to recordkeeping, as required by Rule 1005 of Regulation SCI; the requirements relating to electronic filing on Form SCI pursuant to Rule 1006 of Regulation SCI; and the requirements relating to service bureaus, as required by Rule 1007 of Regulation SCI? If so, which provisions should apply? Do commenters believe that different or unique requirements should apply to the systems of competing consolidators? What should they be and why?
121. In what instances, if at all,
should the systems of competing consolidators be defined as ‘‘critical SCI systems’’? Please describe.
122. Which subscribers or types of
subscribers should competing consolidators consider as ‘‘designated members or participants’’ that should be required to participate in the annual mandatory business continuity and disaster recovery testing? Please describe.
123. Do commenters believe that
requiring competing consolidators to be defined as SCI entities would deter parties from registering as competing consolidators? Why or why not?
124. Do commenters believe that
competing consolidators should not be defined as SCI entities but should be required to comply with provisions comparable to provisions of Regulation SCI? Why or why not?
125. If commenters believe that
competing consolidators should not be defined as SCI entities but should be required to comply with provisions comparable to provisions of Regulation SCI, what provisions should apply? Should competing consolidators be required to have business continuity and disaster plans, to designate subscribers that the competing consolidator determines are necessary for the maintenance of fair and orderly markets in the event of the activation of such plans, to mandate such subscribers’ participation in scheduled functional and performance testing of the operation of such plans not less than once every 12 months, and to coordinate testing of such plans on an industry- or sector-wide basis with SCI entities, or otherwise be required to participate in coordinated testing scheduled by SCI entities? Why or why not?
126. Do commenters believe that
existing proprietary market data aggregation firms that wish to register as competing consolidators would establish separate legal entities for that purpose? Why or why not?
3. Self-Aggregators
Currently, some broker-dealers effectively act as self-aggregators by purchasing proprietary data products from the exchanges, consolidating that information (either independently or with the use of vendor services and/or hardware), and calculating the NBBO for their own use. Broker-dealers may self-aggregate to eliminate various forms of latency 597 or to access the additional content provided by proprietary data feeds in a consolidated form. This selfaggregated consolidated data may be used for SORs, algorithmic trading systems, alternative trading systems (‘‘ATSs’’), visual display, or other uses. While broker-dealers raised concerns about the costs associated with proprietary data products, some have developed these self-aggregation solutions as a means to address the

598See, e.g., Roundtable Day One Transcript at 198–199 (Joseph Wald, Clearpool) (‘‘Clearpool and other broker-dealers are compelled to purchase exchanges’ proprietary data feeds, both to provide competitive execution services to our clients and to meet our best execution obligations due to the content of the information contained in the proprietary data feeds as well as the latency differences between them, which are major and important considerations for brokers.’’). 599A self-aggregator also would receive from the primary listing exchanges regulatory data (as defined as proposed consolidated market data), which would be necessary for meeting regulatory obligations, such as monitoring Short Sale Circuit Breakers and LULD price bands. See supra Section III.D. 600See supra Section IV.B.1. 601See infra Section IV.B.4 for a discussion of the effective national market system plan(s). This would apply to proposed consolidated market data provided through an exchange’s proprietary data product. 602SRO fees for market data other than the proposed consolidated market data would be subject to the rule filing process pursuant to Section 19(b) and Rule 19b–4. 603See Roundtable Day Two Transcript at 27–29 (Adam Nunes, Hudson River Trading). 604 Id. This panelist also published a note that described the ability of firms and vendors to receive data directly from the exchanges. See Adam Nunes, MMI Member Guest Editorial: Speed up the SIP, Modern Markets Initiative (Dec. 22, 2015), available at https://www.modernmarketsinitiative.org/ archive/2018/11/14/mmi-member-guest-editorialspeed-up-the-sip. In this note, the panelist described a model in which (1) firms would order the SIP data as they do today, by contacting their vendor or the SIP administrator; (2) the firm/vendor connecting to the SIP would get a connection to each exchange to listen to their data where the data is produced (rather than getting the data from a central location); and (3) the firm would receive and process the data similarly to how it handles direct market data feeds. 605See Letter to Brent J. Fields, Secretary, Commission, from Kirsten Wegner, Chief Executive Officer, Modern Markets Initiative, 5–6 (Oct. 18,
2018) (‘‘Modern Markets Initiative Letter’’). One
commenter advocated that each exchange should provide a single data feed to market participants (instead of a SIP data feed and proprietary data feeds). The commenter said that a single data feed ‘‘would better serve market participants from the standpoint of equality and fairness.’’ However, the commenter also noted that investors would benefit from competition among organizations able to operate as SIPs, either through a bidding process for a centralized SIP or the ability of multiple SIPs to operate (i.e., a competing consolidator model). See T. Rowe Price Letter at 3. 606See Wittman Letter at 15. 607 Id. at 16. latency and content issues that are present with the exclusive SIPs themselves.598 The Commission preliminarily believes that brokerdealers should be permitted to continue to self-aggregate consolidated market data as proposed to be defined under the proposed decentralized consolidation model. The Commission is concerned that eliminating the ability of broker-dealers to self-aggregate proposed consolidated market data for their own use would be unnecessarily disruptive to the current market data infrastructure landscape. Accordingly, the Commission proposes to amend Rule 600(b) to add a definition of a self-aggregator. The Commission proposes to define a selfaggregator 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.’’ In particular, a self-aggregator would collect the NMS information necessary to generate proposed consolidated market data that it needs to trade for its own account or to execute transactions for its customers. A self-aggregator would generate the proposed consolidated market data that it needs for its business, such as calculating current protected bids and offers from each trading center for purposes of Rule 611 and the current best bids and offers from each trading center for achieving and analyzing best execution.599 The proposed definition would prohibit selfaggregators from disseminating proposed consolidated market data to any person, including a customer or any affiliated entity, as such action would not be for the internal use of a selfaggregator and would be akin to the actions of a competing consolidator, and thus would require registration as a competing consolidator. Like competing consolidators, a selfaggregator would collect all information with respect to quotations for and transactions in NMS stocks directly from each SRO, but importantly, selfaggregators would not be permitted to re-distribute or re-disseminate proposed consolidated market data to any person, including to any affiliates or subsidiaries. A self-aggregator that redistributed or re-disseminated proposed
consolidated market data, or any subset of proposed consolidated market data, would be performing the functions of a competing consolidator and, accordingly, would be required to register as a competing consolidator. Self-aggregators would establish connectivity to the SROs directly or through the use of a service provider and would either use their own proprietary technology or that of a third party vendor to perform aggregation and any other functions necessary for generating proposed consolidated market data. A vendor providing hardware, software, and/or other services for the purposes of selfaggregation 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. As discussed above, pursuant to Rule 603(b), self-aggregators would receive access from the SROs, either directly or via the use of a vendor, to the data necessary to generate proposed consolidated market data in the same manner and using same methods as other persons, including competing consolidators.600 A self-aggregator that limits its use of exchange data to the creation of proposed consolidated market data would be charged only for proposed consolidated market data pursuant to the effective national market system plan(s) fee schedules.601 A selfaggregator that uses an exchange’s proprietary data (e.g., full depth of book data) could be charged separately for the proprietary data use pursuant to the individual exchange’s fee schedule.602 (a) Roundtable Discussion and Comments Roundtable participants discussed self-aggregation. One panelist described a variation of the self-aggregation alternative that he referred to as the ‘‘one feed-one speed’’ model.603 The panelist suggested that consolidated market data should be made available in a similar manner and using the same framework as the exchanges use to make available their direct proprietary data feeds.604 The Commission received one comment letter that supported consideration of a self-aggregation model. The commenter believed that this approach would further the principles of transparency and fairness and ‘‘level the playing field for industry participants.’’ 605 In contrast, the Commission received one comment letter that expressed criticism of a self-aggregation model. The commenter urged against government intervention requiring all market participants to use the same connectivity and the same data, explaining that different customers need different products and that the government should not limit choices ‘‘in this radical manner.’’ 606 The commenter also stated that adding multiple consolidators or competing SIPs to the model would magnify risks.607

608Some have argued that speed-based competition in modern markets—in particular, the speed advantages of high-frequency traders and practices such as ‘‘latency arbitrage’’— impose costs on investors and other market participants. See, e.g., Matteo Aquilina, et al., Quantifying the HighFrequency Trading ‘‘Arms Race’’: A Simple New Methodology and Estimates, Financial Conduct Authority (Jan. 2020), available at https:// www.fca.org.uk/publication/occasional-papers/ occasional-paper-50.pdf?mod=article_inline. But see Bartlett and McCrary, supra note 418. As discussed above, the Commission preliminarily believes that the proposed decentralized consolidation model would reduce latency in the distribution of proposed consolidated market data and speed-based information asymmetries between market participants. See supra Section IV.B. 609A self-aggregator that provides a software product to other broker-dealers for purposes of allowing such other broker-dealers to self-aggregate SRO data to generate proposed consolidated market data within such other broker-dealers’ facilities would not be a competing consolidator because the self-aggregator itself would not be generating consolidated market data for dissemination to such broker-dealers. However, if an entity uses its own software product to aggregate SRO data to generate proposed consolidated market data within the selfaggregator’s facilities and thereafter redistributes or disseminates proposed consolidated market data to other broker-dealers or market participants, such entity would be a competing consolidator because it would be generating and disseminating consolidated market data to others. (b) Commission Discussion The Commission preliminarily believes that the proposed decentralized consolidation model should allow broker-dealers to continue to selfaggregate by collecting and calculating consolidated market data, as proposed, solely for their internal use, in a manner that would allow access to proposed consolidated market data on fair and reasonable terms and without the inefficiencies and added latencies associated with the existing exclusive SIP model. The proposed decentralized consolidation model is designed to increase, rather than limit, market participants’ choices with respect to data products and connectivity. Accordingly, the Commission preliminarily believes that brokerdealers should be able to choose to selfaggregate consolidated market data for their own internal purposes in a similar manner as they may do today with proprietary data. Under the proposed rules, competing consolidators and selfaggregators would be able to select the transmission services that meet the needs of their client or their individual needs, respectively, rather than be restricted to transmission services mandated by the Equity Data Plans. In addition, the proposed rules would allow competing consolidators and selfaggregators to choose to receive exchange data products that include only proposed
consolidated market data elements or products that contain both proposed and non-proposed consolidated market data elements (e.g., existing proprietary data products). As discussed more fully above, the proposed rules would permit the exchanges to offer different connectivity options (e.g., with different latencies, throughput capacities, and data-feed protocols) to market data customers but would require that any options provided to proprietary data customers be available to competing consolidators and self-aggregators in the same manner and using the same methods, including all methods of access and the same format, for the purpose of collecting and consolidating proposed consolidated market data. Self-aggregators may have a minor latency advantage over market participants that decide to utilize a competing consolidator for their consolidated market data, due to the fact that self-aggregators will be collecting and consolidating this data for themselves rather than relying on a competing consolidator to do so, and therefore would eliminate a potential latency cost that comes with an extra hop within a given data center. The Commission, however, preliminarily believes that the addition of competitive forces with the introduction of competing consolidators should minimize these inherent latencies.608 The Commission has not proposed a separate registration requirement for self-aggregators, nor has it proposed to impose the obligations of competing consolidators on self-aggregators. Because self-aggregators will be brokerdealers who are subject to broker-dealer registration requirements, the Commission preliminarily believes that imposing an additional registration requirement and the competing consolidator obligations on selfaggregators would be unnecessary and could result in undue costs and burdens. Further, self-aggregators would be required to calculate and generate proposed consolidated market data, or a component of proposed consolidated market data, to the extent that such information is necessary for the selfaggregator to comply with applicable regulatory requirements. For example, to the extent that a self-aggregator’s activities require that self-aggregator to generate the NBBO, the self-aggregator would be required to do so consistent with proposed Rule 600(b)(50). Any self-aggregator that disseminates to any person—including to an affiliate or subsidiary of the self-aggregator—or makes public the proposed consolidated market data, or any subset of the proposed consolidated market data, would be required to register as a competing consolidator.609 The Commission requests comment on the proposed amendment to Rule 600(b)(82) to introduce a definition of ‘‘self-aggregator.’’ In particular, the Commission solicits comment on the following:
127. Is the definition of self-aggregator
as ‘‘a broker or dealer that receives information with respect to quotations for and transactions in NMS stocks, including all information necessary to generate consolidated market data, and generates consolidated market data solely for internal use’’ too broad or narrow? Should other entities be included in the definition? Please identify such entities and explain.
128. Are the distinctions between selfaggregators and competing consolidators
sufficiently clear? Should any additional clarification be provided to fully distinguish between a vendor that provides self-aggregation services to multiple broker-dealers and competing consolidators that provide aggregated data to multiple broker-dealers? If so, please describe what additional clarification should be provided.
129. Should self-aggregators be
subject to a registration requirement? Why or why not?
130. Self-aggregators may have a
minor latency advantage over competing consolidators. Please provide comment on this potential latency advantage. Would the latency advantage be material? Are there methods to neutralize any latency advantage between self-aggregators and competing consolidators? If so, should they be instituted?
131. Should self-aggregators be
permitted to disseminate proposed consolidated market data to their affiliates and subsidiaries without being required to register as a competing consolidator? Why or why not? Does the restriction on not providing consolidated market data or a subset thereof to customers or affiliates reflect a significant departure from current practices? Please explain.
132. Should any market participants
aside from broker-dealers be included in the proposed definition of selfaggregator? Please explain.
4. Amendment to the Effective National
Market System Plan(s) for NMS Stocks An integral part of the national market system is the use of NMS plans. Section 11A(a)(3)(B) of the Exchange Act reflects their importance by providing the Commission the authority to require the SROs, by order, ‘‘to act jointly . . . in planning, developing, operating, or

610See Proposed Governance Order, supra note 8. 611See supra Section II.A. 612 Id. 613Pursuant to the proposed amendments to Rule 603(b), proposed consolidated market data would be collected, consolidated, and disseminated pursuant to an effective national market system plan. 614See supra Section II.A. 615The Commission preliminarily believes that the operators of the existing exclusive SIPs may choose to become competing consolidators. See infra Section IV.B.6. 616For example, the operating committee of the effective national market system plan(s) could develop different pricing for a TOB product that includes only certain SRO data content used to create proposed consolidated market data. See supra note 316 and accompanying text. See also NYSE Sharing Data-Driven Insights—Stock Quotes and Trade Data: One Size Doesn’t Fit All (Aug. 22, 2019), available at https://www.nyse.com/equitiesinsights#20190822 (proposing to replace the exclusive SIP feeds with three tiered levels of service, including certain DOB data, based on the needs of specific types of investors). Nothing in this proposal would prevent the operating committee of the effective national market system plan(s) from structuring the sale of data in a similar manner. 617See supra Section IV.B.1. 618The effective national market system plan(s) for NMS stocks would review the performance of competing consolidators. See infra discussion on proposed Rule 614(e) (1)(iii). 619As noted above, pursuant to proposed Rule 603(b), each SRO must provide its NMS information, including all data necessary to generate proposed consolidated market data, to all competing consolidators and self-aggregators in the same manner and using the same methods, including all methods of access and the same format, as such SRO makes available any information to any other person. The competing consolidators and self-aggregators will be responsible for establishing the connectivity and transmission services they use to connect to the SROs. 620See Rule 603(a) of Regulation NMS, 17 CFR 242.603(a). 621MISU 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 would need to be conformed in the proposed decentralized consolidation model to reflect that consolidated market data users may seek to receive through more than one competing consolidator and/ or access through multiple devices. 622SRO timestamps would also assist market participants in their ability to assess latencies in the regulating a national market system (or a subsystem thereof).’’ The Equity Data Plans, which are the effective national market system plans for NMS stocks,610 historically have played an important role in developing, operating, and
governing the national market system.611 The proposed decentralized consolidation model would fundamentally change the national market system and the role of the Equity Data Plans.612 Under the decentralized consolidation model, the effective national market system plan(s) for NMS stocks, would continue to play an important but modified role in the national market system.613 Therefore, the Commission is proposing in Rule 614(e) that an amendment to the effective national market system plan(s) be filed with the Commission to conform the plan(s) to the decentralized consolidation model, to address the application of timestamps by the SROs, to require annual assessments of competing consolidators’ performance, and to develop a list of the primary listing market for each NMS stock, as discussed below. Proposed Rule 614(e) would require the participants to the effective national market system plan(s) for NMS stocks to submit an amendment pursuant to Rule 608 to conform the plan(s) to the proposed decentralized consolidation model within 60 calendar days from the effective date of Rule 614. As discussed above, today, the Equity Data Plans operate the exclusive SIPs for the collection, consolidation, and dissemination of SIP data.614 In the decentralized consolidation model, the effective national market system plan(s) for NMS stocks would no longer be responsible for collecting, consolidating, and disseminating consolidated market data and would no longer operate an exclusive SIP.615 Instead, the participants of the effective national market system plan(s) for NMS stocks would develop and file with the Commission the fees for SRO data content required to be made available by each SRO to competing consolidators and self-aggregators for the creation of proposed consolidated market data, including fees for SRO market data products that contain all of the components of proposed consolidated market data as well as the fees for market data products that contain only a subset of the components of proposed consolidated market data.616 The effective national market system plan(s) would also collect fees for the SRO data content used to create the proposed consolidated market data; 617 and allocate the revenues among the SRO participants. The effective national market system plan(s) would also oversee plan accounts and plan audits for purposes of billing, among other things.618 Rule 614(e)(1) would direct the participants to file with the Commission an amendment to the effective national market system plan(s) for NMS stocks in order to conform the plan(s) to reflect the proposed consolidated market data and proposed decentralized consolidation model. The Commission preliminarily believes that to conform to the proposed decentralized consolidation model, the effective national market system plan(s) for NMS stocks would need to be amended to reflect the fees for the proposed consolidated market data. The proposed new fees would need to reflect the following: (i)
That proposed consolidated market data includes the content described above, including depth of book data, auction information, and additional information on orders of sizes smaller than 100 shares; (ii) that the effective national market system plan(s) for NMS stocks is no longer operating an exclusive SIP and is no longer performing aggregation and other operational functions; and (iii) that the SROs are no longer responsible for the connectivity and transmission services required for providing data to the exclusive SIPs from the SROs’ data centers since the exclusive SIPs will no longer be operated by the effective national market system plan(s) for NMS stocks.619 The proposed new fees for consolidated market data must be fair and reasonable and not unfairly discriminatory.620 The proposed fees must be submitted by the participants of the effective national market system plan(s) for NMS stocks pursuant to Rule 608 under the Exchange Act. In addition, to conform the effective national market system plan(s) for NMS stocks to the proposed decentralized consolidation model, the amendment to the plan(s) generally should include a harmonized approach to data billing protocols, including with respect to any unified multiple installations, single users (‘‘MISU’’) policy.621 Proposed Rule 614(e)(1)(ii) would require the participants to file a proposed amendment to the effective national market system plan(s) for NMS stocks to address the application of timestamps by the SRO participants on proposed consolidated market data, including the time the proposed consolidated market data was generated by the SRO participant and the time the SRO participant made the proposed consolidated market data available to competing consolidators and selfaggregators. Timestamping should provide incentives for the SROs to generate and disseminate proposed consolidated market data as quickly as possible. Further, the Commission preliminarily believes that the application of timestamps will be an important part of market participants’ ability to measure latency and to seek to ensure accurate sequencing of data in the new national market system, and therefore the application of timestamps should be consistent and reliable.622

provision of proposed consolidated market data. Under proposed Rule 614(d)(3), competing consolidators would have to make available consolidated market data that includes timestamps assigned by the SROs as well as competing consolidators. See supra Section IV.B.2(e)(ii) and the discussion of proposed Rule 614(d)(4). 623See, e.g., CTA Plan, supra note 13, at Section VI.(c); Nasdaq UTP Plan, supra note 13, at Section VIII. 624See CAT NMS Plan at Sections 6.3(d), 6.8. As required by Rule 613, the CAT NMS Plan was filed with the Commission by the national securities exchanges and national securities associations, who include BATS Exchange, Inc. (n/k/a Cboe BZX Exchange, Inc.), BATS–Y Exchange, Inc. (n/k/a Cboe BYX Exchange, Inc.), BOX Exchange LLC, C2 Options Exchange, Incorporated (n/k/a Cboe C2 Exchange, Inc.), Chicago Board Options Exchange, Incorporated (n/k/a Cboe Exchange, Inc.), Chicago Stock Exchange, Inc. (n/k/a NYSE Chicago, Inc.), EDGA Exchange, Inc. (n/k/a Cboe EDGA Exchange, Inc.), EDGX Exchange, Inc. (n/k/a Cboe EDGX Exchange, Inc.), Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’), International Securities Exchange, LLC (n/k/a Nasdaq ISE, LLC), ISE Gemini, LLC (n/k/a Nasdaq GEMX, LLC), Miami International Securities Exchange LLC, NASDAQ OMX BX, Inc. (n/k/a Nasdaq BX, Inc.), NASDAQ OMX PHLX LLC (n/k/a Nasdaq PHLX LLC), The Nasdaq Stock Market LLC, National Stock Exchange, Inc. (n/k/a NYSE National, Inc.), New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. See 17 CFR 242.613; Securities Exchange Act Release No. 78318 (Nov. 15, 2016), 81 FR 84696, (Nov. 23, 2016) (‘‘CAT NMS Plan Approval Order’’). The CAT NMS Plan is Exhibit A to the CAT NMS Plan Approval Order. See CAT NMS Plan Approval Order, at 84943–85034. In approving the CAT NMS Plan, the Commission added ISE Mercury, LLC (n/k/a Nasdaq MRX, LLC) and Investors’ Exchange LLC as Participants to the CAT NMS Plan. See id. at 84728. On January 30, 2017 and March 1, 2019, the Commission noticed for immediate effectiveness amendments to the CAT NMS Plan to add MIAX PEARL, LLC and MIAX Emerald, LLC, respectively, as Participants. See Securities Exchange Act Release Nos. 79898 (Jan. 30, 2017), 82 FR 9250 (Feb. 3, 2017), and 85230 (Mar. 1, 2019), 84 FR 8356 (Mar. 7, 2019). On November 27, 2019, the Commission noticed for immediate effectiveness amendments to the CAT NMS Plan to add Long-Term Stock Exchange, Inc. as a Participant. See Securities Exchange Act Release No. 87595 (Nov. 22, 2019), 84 FR 65447 (Nov. 27, 2019). The CAT NMS Plan functions as the limited liability company agreement of the jointly owned limited liability company formed under Delaware state law through which the Participants conduct the activities of the CAT (the ‘‘Company’’). Each Participant is a member of the Company and jointly owns the Company on an equal basis. The Participants submitted to the Commission a proposed amendment to the CAT NMS Plan on August 29, 2019, which they designated as
effective on filing. Under the amendment, the limited liability company agreement of a new limited liability company named Consolidated Audit Trail, LLC serves as the CAT NMS Plan, replacing in its entirety the CAT NMS Plan. See Securities Exchange Act Release No. 87149 (Sept. 27, 2019), 84 FR 52905 (Oct. 3, 2019). The Commission understands that the SROs currently submit timestamped data under the SIP plans 623 and the National Market System Plan Governing the Consolidated Audit Trail (‘‘CAT NMS Plan’’).624 Proposed Rule 614(e)(1)(iii) would require the participants to file a proposed amendment to the effective national market system plan(s) for NMS stocks to reflect that the participants would need to conduct an annual assessment of the overall performance of competing consolidators, including speed, reliability, and cost of data provision and provide the Commission with a report of such assessment on an annual basis. As noted above, the Equity Data Plans play an important role in governing the operation of the national market system. The Commission preliminarily believes that the effective national market system plan(s) for NMS stocks should continue in this important role by monitoring the overall performance of competing consolidators to seek to ensure that the decentralized consolidation model is operating soundly. To aid the Commission’s monitoring, the Commission is requiring the effective national market system plan(s) for NMS stocks to provide assessments in key factors of competing consolidators, including: Speed of the competing consolidators in receiving, calculating, and disseminating proposed consolidated market data; the reliability of the transmission of proposed consolidated market data; and a detailed cost analysis of the provision of proposed consolidated market data. The effective national market system plan(s) would base their assessments on publicly available information about the competing consolidators, including the information that each competing consolidator would be required to make available under proposed Rule 614. Finally, proposed Rule 614(e)(1)(iv) would require the participants to file an amendment to the effective national market system plan(s) for NMS stocks to include a list that identifies the primary listing exchange for each NMS stock. As discussed above, primary listing exchanges will be required to collect, calculate, and provide the data included in the proposed definition of ‘‘regulatory data’’ to competing consolidators and self-aggregators. Moreover, the Commission is proposing to define ‘‘primary listing exchange’’ in proposed Rule 600(b)(67) as ‘‘for each NMS stock, the national securities exchange identified as the primary listing exchange in the effective national market system plan or plans required under § 242.603(b).’’ The effective national market system plan(s) for NMS stocks must accordingly be amended to include this list so that the primary listing exchange for each NMS stock— and the
responsibilities regarding the collection, calculation, and provision of regulatory data—are clear. The Commission preliminarily believes that information regarding the primary listing exchange for each NMS stock is readily accessible and that the operating committee of the effective national market system plan(s) for NMS stock, which will have representation from each primary listing exchange, is wellsituated to include such a list in a plan amendment. The Commission requests comment on proposed Rule 614(e). In particular, the Commission solicits comment on the following:
133. Do the proposed amendments to
the effective national market system plan(s) for NMS stocks reflect an appropriate role for the NMS plan(s) under the proposed decentralized consolidation model?
134. Should the rule include other
provisions that should be included in an amendment to the effective national market system plan(s) for NMS stocks? Please describe.
135. Should the rule require an
amendment to the effective national market system plan(s) for NMS stocks to include plan provisions related to the development by competing consolidators of non-core market data products (i.e., a full depth of book product)? Why or why not?
136. Should the rule require an
amendment to the effective national market system plan(s) to require the operating committee of such plan(s) to develop latency statistics based on the SRO timestamps and make them publicly available?
137. Do commenters believe that the
proposed timestamps are sufficiently comprehensive? Should the Commission require other timestamps to be added by the SROs, or should any of the proposed requirements for the timestamps be pared down or removed? Please explain.
138. Should the rule require an
amendment to the effective national market system plan(s) for NMS stocks to specify a method for synchronizing clocks on the various systems and networks utilized in the provision of proposed consolidated market data? If yes, what is the appropriate method or protocol (e.g., Precision Time Protocol vs. Network Time Protocol)? Or should the requirement for clock synchronization be performance based (i.e., accurate to less than one microsecond)? If so, what is the appropriate standard for maximum allowable clock drift? Please explain. Should the SROs be required to publish clock drift statistics?
139. Do commenters believe that there
are other measures to assess the performance of competing consolidators that should be included in the annual report? Please explain.

625The CAT NMS Plan defines ‘‘Central Repository’’ as ‘‘the repository responsible for the receipt, consolidation, and retention of all information reported to the CAT pursuant to SEC Rule 613 and this Agreement.’’ CAT NMS Plan, supra note 624, at Section 1.1. 626The CAT NMS Plan defines ‘‘Securities Information Processor’’ or ‘‘SIP’’ as having ‘‘the same meaning provided in Section 3(a)(22)(A) of the Exchange Act.’’ Id. at Section 1.1. 627The CAT NMS Plan defines ‘‘NMS Plan’’ as having ‘‘the same meaning as ‘National Market System Plan’ provided in SEC Rule 613(a)(1) and SEC Rule 600(b)(43).’’ Id. at Section 1.1. 628 Id. at Section 6.5(a)(ii). Section 6.5(a)(ii) specifically enumerates the following ‘‘SIP Data’’ elements: ‘‘(A) Information, including the size and quote condition, on quotes including the National Best Bid and National Best Offer for each NMS Security; (B) Last Sale Reports and transaction reports reported pursuant to an effective transaction reporting plan filed with the SEC pursuant to, and meeting the requirements of, SEC Rules 601 and 608; (C) trading halts, Limit Up/Limit Down price bands, and Limit Up/Limit Down indicators; and (D) summary data or reports described in the specifications for each of the SIPs and disseminated by the respective SIP.’’ Id. 629See CAT NMS Plan, supra note 624, at Section 6.5(g); infra Section VI.C.4(c). 630See supra Section IV.B.1. 631See supra Section III.D. 632Section 11A(c)(1)(B) of the Exchange Act, 15 U.S.C. 78k–1(c)(1)(B).
140. Do commenters believe that a
portion of the assessment or the full assessment should be made public? Do commenters believe that a portion of the annual report or the full annual report to the Commission should be made public? Why or why not? Please explain.
141. Do commenters believe that the
operating committee for the effective national market system plan(s) for NMS stocks should conduct an assessment and provide the Commission with a report more frequently than annually, or at all? Please describe any alternative frequency and the rationale.
142. Do commenters believe that a
similar report should be generated for self-aggregators? If so, please explain. Should self-aggregators be required to publish any performance statistics publicly or to the Commission?
143. Do commenters believe that the
effective national market system plan(s) for NMS stocks should be amended to include a list that identifies the primary listing exchange for each NMS stock? Please explain. Are there alternative ways to ensure that the primary listing exchange for each NMS stock is clearly identified? Please explain.
144. Do commenters believe that the
effective national market system plan(s) for NMS stocks should include fees for different types of proposed consolidated market data products, such as products that contain only a subset of proposed core data elements (e.g., a TOB product)? If so, what products should be included?
5. Effects on the National Market System
Plan Governing the Consolidated Audit Trail The CAT NMS Plan requires the Central Repository 625 to ‘‘collect (from a SIP 626 or pursuant to an NMS Plan 627) and retain on a current and continuing basis . . . all data, including the following (collectively, ‘SIP Data’).’’ 628 The Commission preliminarily believes that this provision of the CAT NMS Plan will be affected by the proposed decentralized consolidation model and the proposed definition of consolidated market data. Rule 603(b), as proposed to be amended, would require the national securities exchanges and associations to distribute consolidated market data ‘‘pursuant to one or more effective national market system plans.’’ Under
Section 6.5(a)(ii) of the CAT NMS Plan,
the Central Repository must collect and retain ‘‘all data’’ from ‘‘a SIP or pursuant to an NMS Plan,’’ so the Central Repository would be required to collect and retain consolidated market data. Because proposed consolidated market data would include information beyond the data that is currently disseminated by the exclusive SIPs, such as smaller-sized orders in higherpriced stocks pursuant to the proposed definition of round lot, proposed depth of book data, and proposed auction information, the scope of the consolidated data collected and retained by the CAT Central Repository would be expanded. In addition, the Central Repository may have to obtain the data from a different source. The Commission preliminarily believes that having the Central Repository collect an expanded set of data from a different source and retain this data in the Central Repository are appropriate to further the objectives of CAT by enabling regulators to use the expanded set of data ‘‘solely for surveillance and regulatory purposes.’’ 629 The Commission requests comment on the effects of the proposed decentralized consolidation model and the proposed definition of consolidated market data on the CAT. In particular, the Commission solicits comment on the following:
145. Do commenters believe that CAT
should receive consolidated market data from one competing consolidator, all competing consolidators, or some specific subset of competing consolidators? Please explain.
146. Do commenters believe the
selection by the CAT of a competing consolidator could have a competitive impact on other competing consolidators? Please explain.
6. Transition Period
A transition period would be necessary to implement the decentralized consolidation model. While SROs would be permitted to make the data necessary to generate consolidated market data, as proposed to be defined, available to competing consolidators and self-aggregators using their existing data feeds, SROs may also choose to provide this data through new, separate feeds,630 which would require development time. Furthermore, the proposed requirements related to the provision by SROs of regulatory data to competing consolidators and selfaggregators would require SROs to make adjustments to their data collection and processing systems and procedures to integrate the proposed regulatory data elements into new or existing data feeds.631 In addition, firms intending to act as competing consolidators or selfaggregators will need to register, develop or modify systems, establish pricing, and make other preparations needed to function as competing consolidators or self-aggregators. Finally, market participants would be expected to need some period of time for implementation and testing of any new data feeds. As these changes are being implemented, market participants will continue to need a consistent and reliable source of consolidated market data. Accordingly, the Commission preliminarily believes that the existing exclusive SIPs should continue their operations until such time as the Commission considers and approves an NMS plan amendment that would effectuate a cessation of their operations as exclusive SIPs. In considering and approving such an NMS plan amendment, the Commission preliminarily believes that it would need to consider the operational readiness of competing consolidators and self-aggregators to determine whether market participants are fully able to receive proposed consolidated market data in a manner that is sufficiently prompt, accurate, and reliable.632 The Commission preliminarily believes that sufficient operational readiness would only be achieved once consolidated market data generated under the decentralized consolidation model is demonstrably capable of supporting the various needs of users of consolidated market data, including needs for visual display, trading activities, and compliance with

633See 17 CFR 242.608(b)(2) (providing that the Commission shall approve an NMS plan amendment ‘‘if it finds that such plan or amendment is 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, or otherwise in furtherance of the purposes of the Act.’’). 634See supra Section IV.B.2(b). 635The exclusive SIPs may choose to utilize existing proprietary data feeds for the provision of consolidated market data. They may also choose to develop a business to support self-aggregation by broker-dealers. 636See supra notes 492–493 and accompanying text; Cboe Report, supra note 186, at 3–4 (recommending the creation of distributed SIPs in different geographic locations). 637One commenter noted that the distributed SIP alternative could address the issue of geographic latency. See SIFMA Letter II at 3. 638See Roundtable Day Two Transcript at 17 (Michael Blaugrund, NYSE). 639See Roundtable Day Two Transcript at 18 (Michael Blaugrund, NYSE). This panelist also believed that the distributed SIP model would not require changes to Rule 603(b) of Regulation NMS, which requires the dissemination of consolidated information for an individual NMS stock through a single plan processor. The panelist stated that the existing SIPs would remain under the distributed SIP model, only with additional processors. See Roundtable Day Two Transcript at 19–20 (Michael Blaugrund, NYSE). 640See, e.g., Roundtable Day One Transcript at 227–228 (Chris Issacson, Cboe) (‘‘[W]e’re open to discussion about distributed SIPs.’’); at 98–99 (Stacey Cunningham, NYSE) (‘‘. . . there is debate the NYSE brought to the SIP Committee a long time ago to talk about the nature of a distributed SIP and that is something we should explore.’’); Roundtable Day Two Transcript at 17 (Michael Blaugrund, NYSE) (‘‘. . . we think that a distributed SIP implementation of the existing processors would be the simplest, least costly approach for the industry to minimize delays when consolidated data and Continued regulatory obligations, such as under Rules 603(c) and Rule 611 under Regulation NMS and best execution. In determining whether to approve an NMS plan amendment to effectuate the cessation of the operations of the existing exclusive SIPs and whether it meets the standards set forth in Rule 608(b)(2),633 the Commission would consider the state of the market and the general readiness of the competing consolidator infrastructure. Examples of some of the things that the Commission could consider include, among other things: The status of registration, testing, and operational capabilities of multiple competing consolidators, selfaggregators, and market participants; capabilities of competing consolidators to provide monthly performance metrics and other data required to be published pursuant to proposed Rule 614(d)(5)– (6); 634 and the consolidated
market data products offered by competing consolidators. The Commission preliminarily believes that consideration of these and other factors should help to ensure that market participants have effective and continuous access to proposed consolidated market data and other market data products during the transition period and prior to the cessation of operations of the existing exclusive SIPs. The Commission anticipates that the operators of the existing exclusive SIPs may choose to become competing consolidators and that they too may need to make additional investments and operational changes during this transition period to provide a competitive competing consolidator service.635 The Commission preliminarily believes that the existing exclusive SIPs should have the ability to pursue such development while continuing concurrent operations of existing SIPs. Given their experience operating the exclusive SIPs, the exclusive SIP operators would likely be able to enter the competing consolidator business from a competitively strong position relative to other potential competing consolidators. The Commission requests comment on the proposed transition period to implement the decentralized consolidation model. In particular, the Commission solicits comment on the following:
147. What period of time should be
expected for SROs to make any changes necessary to provide the data necessary to generate proposed consolidated market data to competing consolidators and self-aggregators?
148. What period of time should be
expected for broker-dealers to make any changes necessary, including testing, to utilize the new data feeds in a manner that is not disruptive to their trading practices and their ability to meet their regulatory obligations?
149. What other factors should be
taken into consideration to allow for a smooth transition from a centralized, exclusive SIP model to a competitive, decentralized consolidation model?
150. What should the Commission
take into consideration in determining whether the availability of proposed consolidated market data from competing consolidators, or any other aspect of the development or implementation of the proposed decentralized consolidation model, is sufficient to allow for the cessation of the existing exclusive SIPs?
151. Should the Commission require
the operation of a certain number of competing consolidators before allowing the exclusive SIPs to cease operations? Why or why not? If so, how many competing consolidators should be operational before allowing exclusive SIPs to cease operations? Please explain.
152. How long do commenters think
such an implementation period should be? Please explain your answer.
C. Alternatives to the Centralized
Consolidation Model
Several alternative approaches to the centralized consolidation model were suggested by Roundtable respondents and separately by several exchanges. These suggestions include the distributed SIP model, a single SIP for all exchange-listed securities, and a lowlatency dedicated connection to existing exclusive SIP feeds.

Distributed SIP Alternative
A distributed SIP alternative has been suggested as one possible means to reduce geographic latency.636 Specifically, under a distributed SIP alternative, each exclusive SIP would place an additional processor in other major data centers, where the additional processor would separately aggregate and disseminate consolidated market data for its respective tape. The SROs would submit their quotations and trade information directly to each instance of the exclusive SIP in each data center, and each exclusive SIP instance would consolidate and disseminate its respective consolidated market data feeds to subscribers at those data centers, thereby eliminating geographic latency. Under the distributed SIP alternative, consolidated market data would not have to travel from an exchange at one location to an exclusive SIP at a second location for consolidation and dissemination prior to traveling yet again to a subscriber that may be at a third location.637 (a) Comments and Roundtable Discussion The distributed SIP model was suggested and discussed at the Roundtable by certain panelists and commenters. One panelist who presented on the distributed SIP model argued that it would be the least burdensome approach for the industry to reduce delays,638 explaining that firms could consume data under the current structure without having to make any changes if they did not have sub-millisecond latency concerns, while those firms for which geographic latency is critical could choose to consume data at the nearest SIP instance.639 Two other panelists expressed interest in considering the distributed SIP model.640 One panelist said that the

single market proprietary data are received in distant data centers.’’). 641See Roundtable Day One Transcript at 231– 232 (Vlad Khandros, UBS). 642See Roundtable Day One Transcript at 225 (Ronan Ryan, IEX). 643See Roundtable Day One Transcript at 229– 230 (Ronan Ryan, IEX). This is a reference to the understanding that a distributed SIP model would solve for geographic latency. 644See Roundtable Day Two Transcript at 27 (Adam Nunes, Hudson River Trading). 645 Id. 646See Roundtable Day One Transcript at 151– 152 (Oliver Albers, Nasdaq). 647See Blaugrund Letter at 4. The Blaugrund Letter was submitted on behalf of NYSE. 648See NYSE Group Letter at 10. 649See Albers Letter at 3; Wittman Letter at 14. The Albers and Wittman Letters were submitted on behalf of Nasdaq. The commenter also believed that significant advances in clock synchronization techniques would be necessary. See Wittman Letter at 14. This commenter later expressed support for the distributed SIP model, stating that the approach could reduce data transmission time for some market participants between 400 and 750 microseconds. See Nasdaq Total Markets Report, supra note 127, at 19–20; Remarks by Tal Cohen, Nasdaq, Meeting of the Securities and Exchange Commission Investor Advisory Committee, at 50 (‘‘[R]ecognizing the industry’s desire for a distributed SIP, we support this in concept to ensure geographic latency concerns are addressed.’’). 650Since 2017, a distributed SIP subcommittee created by the CTA and Nasdaq UTP Plan operating committees has considered and continues to consider implementation of a distributed SIP model to address geographic latencies. See CTA and UTP Annual Letter, supra note 181, at 1–2. 651See Nasdaq Total Markets Report, supra note 127, at 21; SIFMA Letter II at 3. This suggestion would apply the centralized consolidation structure. 652See Nasdaq Total Markets Report, supra note 127, at 21. 653See SIFMA Letter II at 3. The commenter did not elaborate on how this model could address latency issues. This commenter, however, noted that the use of competing consolidators would best resolve the latency issues because competition would provide the incentives for improvements. 654 Id. distributed SIP model could address the latencies of the current centralized consolidation model.641 Another panelist suggested that a distributed SIP model with enhanced content, such as auction imbalance and depth of book information, would be useful 642 and that even a fiber optics connection could be sufficient for a distributed SIP model since the consolidated market data would no longer have to travel throughout the various data centers for collection and distribution.643 Three panelists were skeptical about the value of the distributed SIP model. One panelist described the distributed SIP model as better than the current SIP system, ‘‘but just less worse than direct feeds,’’ 644 and said what is desired instead is an exclusive SIP that is as fast as the direct feeds.645 Another
panelist said that, with the distributed SIP model, determining the appropriate instance of the SIP locations would be complicated.646 One commenter submitted two comment letters that discussed the distributed SIP model. One letter urged the Commission to do a cost benefit analysis of efforts to decentralize the SIP architecture and recommended introducing additional instances of existing technology as the best approach to reducing geographic latency.647 The other letter noted questions about which SIP location would be responsible for regulatory messages, such as for LULD and MWCBs, and whether the costs for the industry to connect to this infrastructure would outweigh the benefits.648 Another commenter stated that the distributed SIP alternative would introduce new and expensive operational complexities, legal and regulatory questions, and possible unintended consequences. This commenter also questioned whether the distributed SIP alternative would resolve concerns regarding geographic latency and noted that the NBBO could differ among the distributed SIPs, leading to operational and compliance questions.649 (b) Commission Discussion The Commission preliminarily believes that a distributed SIP model could address the geographic latencies that exist in the current centralized consolidation model but is concerned that the distributed SIP model has certain fundamental shortcomings that make it a less desirable option compared to the proposed competitive, decentralized consolidation model. In particular, the distributed SIP model does not allow for the introduction of competitive forces and continues to allow for one exclusive SIP to have exclusive rights for the dissemination of market data for the NMS stocks on a given consolidated tape. Because the distributed SIP model does not introduce competitive forces, it is less likely to adequately address the broader array of latencies and competitive product and service offerings. In addition, insofar as the distributed SIP model does not allow for the provision of all three consolidated tapes to be consolidated and disseminated from a single entity, it retains the inefficiencies that would not apply to a competing consolidator model, such as the need for end-users to obtain data from multiple SIPs.650 As a result, the Commission preliminarily believes that, since the distributed SIP model could result in significant additional costs and complexity and would not be likely to competitively address all forms of content and latency differentials, the Commission preliminarily believes that the distributed SIP model is not the optimal solution for the provision of consolidated market data. The Commission requests comment on the distributed SIP alternative. In particular, the Commission solicits comment on the following:
153. Is the distributed SIP alternative
a viable or superior alternative to the proposed competing consolidator and self-aggregator model? If so, please describe the benefits of the distributed SIP model and why that model is the preferred alternative.
2. Single SIP Alternative
Another suggestion to modify the centralized consolidation model to address latency concerns was to combine the exclusive SIPs into a single exclusive SIP for all exchange-listed securities.651 Comments noted that such a change would permit the harmonization of exclusive SIP infrastructure 652 and narrow the latency difference between the exclusive SIPs and proprietary data feeds.653 One commenter thought this alternative would be a low cost alternative.654 In light of the fact that the Nasdaq UTP SIP has less latency that the CTA/ CQ SIP, within the current exclusive and centralized exclusive SIP model, this solution has certain merits. It could allow for an upgrade to existing processor technology for the CTA/CQ SIP, which continues to lag the performance of the Nasdaq UTP SIP. It could also eliminate certain inefficiencies in having two separate exclusive SIPs for SIP data. Potentially having a single administrator and exclusive SIP could ease these burdens and introduce benefits such as a less complex infrastructure and greater standardization. However, this alternative has certain key shortcomings. For one thing, it does not attempt to introduce competitive forces, and, therefore, as with the distributed SIP alternative, would not necessarily be expected to fully address all forms of latency in a competitive data environment. Further, it does not attempt to address geographic latency, which, as noted, is believed to be the most significant source of latency undermining the viability of the current centralized exclusive SIP model. The Commission requests comment on these alternative approaches to the current centralized consolidation

655 44 U.S.C. 3501 et seq.
656As discussed below, the proposed modifications to Regulation SCI contain ‘‘collection of information requirements’’ within the meaning of the PRA. See infra Section V.G. Further, as discussed above, the proposed definition of round lot would affect Rule 606(b)(3) by requiring actionable indications of interest to be in the proposed round lot sizes and included in 606(b)(3) reports. The Commission preliminarily believes that the PRA estimates set forth in the Rule 606 Adopting Release would cover the collection of actionable indications of interest in the proposed round lot sizes because there should only be minor systems updates to reflect the new round lot sizes. See Rule 606 Adopting Release, supra note 227. 657As explained above, SROs that wish to act as competing consolidators would not be required to register with the Commission on Form CC. See supra note 537. model. In particular, the Commission solicits comment on the following:
154. Is the single exclusive SIP
alternative a viable alternative to addressing the concerns with the current centralized consolidation model? If so, please describe the operation of the single exclusive SIP alternative and how it would address the latency and cost concerns arising from the centralized consolidation model. Are there any other viable alternatives?
155. Do commenters believe that the
single centralized exclusive SIP model could be a viable solution despite the fact that it would not introduce competitive forces into the provision of consolidated data and would not address geographic latency? If so, please describe any factors that make this solution as good as or better than the proposed decentralized model.
V. Paperwork Reduction Act
Certain provisions of the proposed rules and proposed rule amendments contain ‘‘collection of information requirements’’ within the meaning of the Paperwork Reduction Act of 1995 (‘‘PRA’’).655 The Commission is submitting these collections of information to the Office of Management and Budget (‘‘OMB’’) for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The title of the new collection of information is ‘‘Market Data Infrastructure and Form CC.’’ Further, the title of the existing collection of information for Regulation SCI is ‘‘Regulation SCI, Form SCI,’’ OMB Control No. 3235–0703.656 An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the agency displays a currently valid control number. A. Summary of Collection of Information The proposed rules and rule amendments would include a collection of information within the meaning of the PRA for competing consolidators who would be required to comply with the provisions of Rule 614 and file a Form CC with the Commission. In addition, SROs would be required to collect information that they would then have to provide to competing consolidators and self-aggregators for the purposes to generating proposed consolidated market data. Finally, the SROs would be required to amend the effective national market system plan(s) required under Rule 603(b).

Registration Requirements and Form
CC
Proposed Rule 614(a)(1)(i) would require each competing consolidator to register with the Commission by filing Form CC electronically in accordance with the instructions contained on the form.657 To file a form CC, a competing consolidator would need to access the Commission’s EFFS, a secure website operated by the Commission. Each competing consolidator would have to submit an application and register each individual who would access the EFFS system on behalf of the competing consolidator. Proposed Rule 614(a)(1)(ii) would require any reports required under proposed Rule 614 to be filed electronically on Form CC, include all of the information as prescribed in Form CC and contain an electronic signature. Proposed Rule 614(a)(1)(iv) would require a competing consolidator to withdraw an initial Form CC during its review by the Commission if information on the initial Form CC is or becomes inaccurate or incomplete. Under proposed Rule 614(a)(2)(i), a competing consolidator would be required to amend an effective Form CC in accordance with the instructions therein: (i) Prior to the implementation of a material change to pricing, connectivity or products offered; and (ii) no later than 30 calendar days after the end of each calendar year to correct information that has become inaccurate or incomplete for any reason. Proposed Rule 614(a)(3) would require a competing consolidator to provide 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.
Competing Consolidator Duties and
Data Collection
Proposed Rules 614(d)(1)–(4) would require each competing consolidator to:
(1) 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); (2) calculate and generate consolidated market data as defined in proposed Rule 600(b)(19) from the information collected pursuant proposed Rule 614(d)(1); (3) make consolidated market data, as defined in proposed Rule 600(b)(19), and as timestamped as required by proposed Rule 614(d)(4) and including the SRO data generation timestamp required to be provided by the SROs by proposed Rule 614(e)(1)(ii), available to subscribers on a consolidated basis on terms that are not unreasonably discriminatory; and (4) timestamp the information collected pursuant to proposed Rule 614(d)(1): (i) Upon receipt from each national securities exchange and national securities association; (ii) upon receipt of such information at its aggregation mechanism; and (iii) upon dissemination of consolidated market data, as defined in proposed Rule 600(b)(19), to customers. Proposed Rule 614(c) would require each competing consolidator to make public on its website a direct URL hyperlink to the Commission’s website that contains each effective initial Form CC, as amended, order of ineffective initial Form CC, and Form CC amendment to an effective Form CC.
Recordkeeping
Proposed Rule 614(d)(7) would require 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. The proposed rule would require competing consolidators to keep these documents for a period of no less than five years, the first two years in an easily accessible place. Proposed Rule 614(d)(8) would require each competing consolidator, upon request of any representative of the Commission, to promptly furnish to such representative copies of any documents required to be kept and preserved by it.
Reports and Reviews
Proposed Rule 614(d)(5) would require each competing consolidator, within 15 calendar days after the end of each month, to publish prominently on its website monthly performance metrics, as defined by the effective national market system plan(s) for NMS stocks, that shall include at least the following: (i) Capacity statistics; (ii)