18596 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 240, 242, and 249 

[Release No. 34–90610, File No. S7–03–20] 

RIN 3235–AM61 

Market Data Infrastructure 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’ or ‘‘SEC’’) 

is amending Regulation National Market 

System (‘‘Regulation NMS’’) under the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) to modernize 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 is 

expanding 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 is amending the method by which 

such NMS information is collected, 

calculated, and disseminated by 

fostering a competitive environment for 

the dissemination of NMS information 

via a decentralized consolidation model 

with competing consolidators. 

DATES: Effective date: The final rules are 

effective June 8, 2021. 

Compliance dates: The applicable 

compliance dates are discussed in 

Section III.H, titled ‘‘Transition Period 

and Compliance Dates.’’ 

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. For further 

information on Regulation SCI: Heidi 

Pilpel, Senior Special Counsel at (202) 

551–5666; David Liu, Special Counsel at 

(312) 353–6265 or Sara Hawkins, 

Special Counsel, at (202) 551–5523, 

Division of Trading and Markets, 

Commission, 100 F Street NE, 

Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: The 

Commission is adopting 17 CFR 242.614 

(new Rule 614) under the Exchange Act, 

Form CC to require registration of 

competing consolidators, and a 

requirement that the participants to the 

effective national market system plan(s) 

for NMS stocks amend such plan(s) to 

reflect the new role and functions of the 

plan(s). The Commission is also 

adopting amendments to the following 

rules: 

Commission reference CFR citation 

(17 CFR) 

Exchange Act: 

Rule 3a51–1 ...................................................................................... § 240.3a51–1. 

Rule 13h–1 ........................................................................................ § 240.13h–1. 

Regulation NMS: ...................................................................................... §§ 242.600 through 242.613.

Rule 600(b)(2) ................................................................................... § 242.600(b)(2). 

Rule 600(b)(5) ................................................................................... § 242.600(b)(5). 

Rule 600(b)(16) ................................................................................. § 242.600(b)(16). 

Rule 600(b)(19) ................................................................................. § 242.600(b)(19). 

Rule 600(b)(20) ................................................................................. § 242.600(b)(20). 

Rule 600(b)(21) ................................................................................. § 242.600(b)(21). 

Rule 600(b)(26) ................................................................................. § 242.600(b)(26). 

Rule 600(b)(50) ................................................................................. § 242.600(b)(50). 

Rule 600(b)(59) ................................................................................. § 242.600(b)(59). 

Rule 600(b)(68) ................................................................................. § 242.600(b)(68). 

Rule 600(b)(70) ................................................................................. § 242.600(b)(70). 

Rule 600(b)(78) ................................................................................. § 242.600(b)(78). 

Rule 600(b)(82) ................................................................................. § 242.600(b)(82). 

Rule 600(b)(83) ................................................................................. § 242.600(b)(83). 

Rule 600(b)(85) ................................................................................. § 242.600(b)(85). 

Rule 602 ............................................................................................ § 242.602. 

Rule 603 ............................................................................................ § 242.603. 

Rule 611 ............................................................................................ § 242.611. 

Regulation SCI: ........................................................................................ §§ 242.1000 through 242.1007. 

Rule 1000 .......................................................................................... § 242.1000. 

Forms, Exchange Act: .............................................................................. Part 249. 

Form CC ............................................................................................ § 249.1002. 

Form SCI ........................................................................................... § 249.1900. 

Finally, the Commission is adopting 

conforming changes and updates to 

cross-references in: 

Commission reference CFR citation 

(17 CFR) 

Exchange Act: 

Rule 105(b)(1)(i)(C) ........................................................................... § 242.105(b)(1)(i)(C). 

Rule 105(b)(1)(ii) ............................................................................... § 242.105(b)(1)(ii). 

Rule 201(a)(1) ................................................................................... § 242.201(a)(1). 

Rule 201(a)(2) ................................................................................... § 242.201(a)(2). 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18597 

Commission reference CFR citation 

(17 CFR) 

Rule 201(a)(3) ................................................................................... § 242.201(a)(3). 

Rule 201(a)(4) ................................................................................... § 242.201(a)(4). 

Rule 201(a)(5) ................................................................................... § 242.201(a)(5). 

Rule 201(a)(6) ................................................................................... § 242.201(a)(6). 

Rule 201(a)(7) ................................................................................... § 242.201(a)(7). 

Rule 201(a)(9) ................................................................................... § 242.201(a)(9). 

Rule 201(b)(1)(ii) ............................................................................... § 242.201(b)(1)(ii). 

Rule 201(b)(3) ................................................................................... § 242.201(b)(3). 

Rule 204(g)(2) ................................................................................... § 242.204(g)(2). 

Rule 600 ............................................................................................ § 242.600. 

Rule 602 ............................................................................................ § 242.602. 

Rule 611(c) ........................................................................................ § 242.611(c). 

Table of Contents 

I. Introduction and Background 

A. Current Market Data Content and 

Dissemination Model Under Regulation 

NMS 

B. National Market System Initiatives and 

the Market Data Infrastructure Proposing 

Release 

C. Enhancements to the Content of NMS 

Information 

D. Enhancements to the Provision of 

Consolidated Market Data 

E. Implications for Best Execution 

II. Enhancements to NMS Information 

A. Introduction 

B. Definition of ‘‘Consolidated Market 

Data’’ Under Rule 600(b)(19) 

1. Proposal 

2. Final Rule and Response to Comments 

3. The Fifth Amendment’s Takings Clause 

C. Definition of ‘‘Core Data’’ Under Rule 

600(b)(21) 

1. Proposal 

2. Final Rule and Response to Comments 

D. Definition of ‘‘Round Lot’’ Under Rule 

600(b)(82) 

1. Proposal 

2. Final Rule and Response to Comments 

E. Definition of ‘‘Protected Bid or Protected 

Offer’’ Under Rule 600(b)(70) 

1. Proposal 

2. Final Rule and Response to Comments 

F. Definition of ‘‘Depth of Book Data’’ 

Under Rule 600(b)(26) 

1. Proposal 

2. Final Rule and Response to Comments 

G. Definition of ‘‘Auction Information’’ 

Under Rule 600(b)(5) 

1. Proposal 

2. Final Rule and Response to Comments 

H. Definition of ‘‘Regulatory Data’’ Under 

Rule 600(b)(78) 

1. Proposal 

2. Final Rule and Response to Comments 

I. Regulation SHO: Conforming 

Amendments to Rule 201 

1. Proposal 

2. Final Rule and Response to Comments 

J. Definition of ‘‘Administrative Data’’ 

Under Rule 600(b)(2) 

1. Proposal 

2. Final Rule and Response to Comments 

K. Definition of ‘‘Self-Regulatory 

Organization-Specific Program Data’’ 

Under Rule 600(b)(85) 

1. Proposal 

2. Final Rule and Response to Comments 

III. Enhancements to the Provision of 

Consolidated Market Data 

A. Introduction 

B. Proposed Decentralized Consolidation 

Model 

1. Comments on the Decentralized 

Consolidation Model 

2. Comments on the Effectiveness of the 

Proposal 

3. Comments on the Viability of the 

Decentralized Consolidation Model 

4. Comments on Conflicts of Interest 

5. Comments on Latency 

6. Comments on the Potential Impact on 

Costs for Consolidated Market Data 

7. Comments on Complexity of the 

Decentralized Consolidation Model 

8. Comments on Surveillance and 

Regulation in the Decentralized 

Consolidation Model 

9. Access to Data: Rule 603(b) 

10. Calculation of the National Best Bid 

and National Best Offer Under Rule 

600(b)(50) 

C. Competing Consolidators 

1. Definition of ‘‘Competing Consolidator’’ 

Under Rule 600(b)(16) 

2. Comments on Resiliency 

3. Comments on Data Quality 

4. Comments on Competing Consolidator 

Products 

5. Comments on Selection of a Competing 

Consolidator 

6. Comments on a Standardized 

Consolidation Process 

7. Registration and Responsibilities of 

Competing Consolidators: Rule 614 

8. Responsibilities of a Competing 

Consolidator 

D. Self-Aggregators 

1. Proposal 

2. Final Rule and Response to Comments 

E. Amendment to the Effective National 

Market System Plan(s) for NMS Stocks 

Under Rule 614(e) 

1. Proposal 

2. Final Rule and Response to Comments 

F. Systems Capability: Amendment to Rule 

1000 of Regulation SCI To Expand ‘‘SCI 

Entities’’ Definition To Include ‘‘SCI 

Competing Consolidator’’; Adoption of 

Rule 614(d)(9): Systems Integrity 

G. Effects on the National Market System 

Plan Governing the Consolidated Audit 

Trail 

H. Transition Period and Compliance Dates 

1. Proposal 

2. Final Rule and Response to Comments 

I. Alternatives to the Centralized 

Consolidation Model 

1. Distributed SIP Alternative 

2. Single SIP Alternative 

3. Other Alternatives 

IV. Paperwork Reduction Act 

A. Summary of Collection of Information 

1. Registration Requirements and Form CC 

2. Competing Consolidators’ Public Posting 

of Form CC 

3. Competing Consolidator Duties and Data 

Collection 

4. Recordkeeping 

5. Reports and Reviews 

6. Amendment to the Effective National 

Market System Plan(s) for NMS Stocks 

7. 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 Consolidators’ Public Posting 

of Form CC 

3. Competing Consolidator Duties and Data 

Collection 

4. Recordkeeping 

5. Reports and Reviews 

6. Amendment to the Effective National 

Market System Plan(s) for NMS Stocks 

7. Collection and Dissemination of 

Information by National Securities 

Exchanges and National Securities 

Associations 

C. Respondents 

1. Initial Estimate 

D. Total Initial and Annual Reporting and 

Recordkeeping Burden 

1. Registration Requirements and Form CC 

2. Competing Consolidators’ Public Posting 

of Form CC 

3. Competing Consolidator Duties and Data 

Collection 

4. Recordkeeping 

5. Reports and Reviews 

6. Amendment to the Effective National 

Market System Plan(s) for NMS Stocks 

7. 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. Competing Consolidators’ Public Posting 

of Form CC 

4. Recordkeeping 

18598 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1 15 U.S.C. 78k–1. 

2 15 U.S.C. 78k–1(a)(1). 

3See 15 U.S.C. 78k–1(a)(1)(B). See also S. Rep. 

No. 94–75, 94th Cong., 1st Sess. (1975) (noting that 

the systems for collecting and distributing 

consolidated market data would ‘‘form the heart of 

the national market system’’). 

4See 15 U.S.C. 78k–1(a)(1)(C). 

5 15 U.S.C. 78k–1(c)(1)(B). 

6See infra note 17 and accompanying text 

(defining ‘‘core data’’). 

7See Rule 603 of Regulation NMS; see also, e.g., 

Securities Exchange Act Release No. 51808 (June 9, 

2005), 70 FR 37496, 37560 (June 29, 2005) 

(‘‘Regulation NMS Adopting Release’’) (‘‘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.’’). 

8Regulation NMS Adopting Release, supra note 

7, at 37560. 

9See Securities Exchange Act Release No. 88216 

(Feb. 14, 2020), 85 FR 16726, 27 (Mar. 24, 2020) 

(‘‘Market Data Infrastructure Proposing Release’’ or 

‘‘Proposing Release’’). 10The three effective national market system 

plans that govern the collection, consolidation, 

processing, and dissemination of certain NMS 

information are: (1) The Consolidated Tape 

Association Plan (‘‘CTA Plan’’); (2) the 

Consolidated Quotation Plan (‘‘CQ Plan’’); and (3) 

the Joint Self-Regulatory Organization Plan 

Governing the Collection, Consolidation, and 

Dissemination of Quotation and Transaction 

Information for Nasdaq-Listed Securities Traded on 

Exchanges on an Unlisted Trading Privileges Basis 

(‘‘UTP Plan’’) (together, the ‘‘Equity Data Plans’’). 

Each of the Equity Data Plans is an effective 

national market system plan under 17 CFR 242.608 

(Rule 608) of Regulation NMS. See also Securities 

Exchange Act Release Nos. 10787 (May 10, 1974), 

39 FR 17799 (order approving CTA Plan); 15009 

(July 28, 1978), 43 FR 34851 (Aug. 7, 1978) (order 

temporarily approving CQ Plan); 16518 (Jan. 22, 

1980), 45 FR 6521 (Jan. 28, 1980) (order 

permanently approving CQ Plan); 28146 (June 26, 

1990), 55 FR 27917 (July 6, 1990) (order approving 

UTP Plan). The options exchanges are participants 

in the Limited Liability Company Agreement of 

Options Price Reporting Authority, LLC (‘‘OPRA 

Plan’’), a plan under Rule 608 of Regulation NMS, 

which governs the collection, consolidation, 

processing, and dissemination of last sale and 

quotation information for listed options. See 

Securities Exchange Act Release Nos. 17638 (Mar. 

18, 1981), 22 SEC. Docket 484 (Mar. 31, 1981); 

61367 (Jan. 15, 2010), 75 FR 3765 (Jan. 22, 2010). 

11Rule 603(b) of Regulation NMS, 17 CFR 

242.603(b), requires that every national securities 

exchange on which an NMS stock is traded and 

national securities association act jointly pursuant 

to one or more effective national market system 

plans to disseminate consolidated information on 

quotations for and transactions in NMS stocks, and 

that such plan or plans provide for the 

dissemination of all consolidated information for an 

individual NMS stock through a single plan 

processor. 

12See Rule 602 of Regulation NMS. 

13See 17 CFR 242.601 (Rule 601 of Regulation 

NMS). 

14See Rule 600(b)(67) of Regulation NMS, 17 CFR 

242.600(b)(67) (defining plan processor). See also 

5. Reports and Reviews 

6. Amendment to the Effective National 

Market System Plan(s) for NMS Stocks 

7. Collection and Dissemination of 

Information by National Securities 

Exchanges and National Securities 

Associations 

G. Revisions to Current Regulation SCI 

Burden Estimates and Adoption of Rule 

614(d)(9) 

1. Proposed Estimates—Burden and Costs 

2. Comments/Responses on Burden and 

Costs 

3. Adopted Estimates—Burden and Costs 

V. 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 

C. Economic Effects of the Rule 

1. 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 

D. Impact on Efficiency, Competition, and 

Capital Formation 

1. Efficiency 

2. Competition 

3. Capital Formation 

E. Alternatives 

1. Introduce Decentralized Consolidation 

Model With Addition of Full Depth of 

Book to 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 

VI. Regulatory Flexibility Certification 

VII. Other Matters 

VIII. Statutory Authority 

I. Introduction and Background 

The widespread availability of timely 

NMS information is critical to the 

ability of market participants to 

participate effectively in the U.S. 

securities markets. NMS information is 

made widely available to investors 

through the national market system, a 

system set forth by Congress in Section 

11A of the Exchange Act 1 and 

facilitated by the Commission in 

Regulation NMS. The current national 

market system for NMS information was 

developed in the late 1970s, and the 

Commission is adopting changes that 

will modernize the national market 

system for NMS information for the 

benefit of investors. 

Section 11A of the Exchange Act 

directs the Commission to facilitate the 

establishment of a national market 

system for the trading of securities in 

accordance with the Congressional 

findings and objectives set forth in 

Section 11A(a)(1) of the Exchange Act.2

Among the findings and objectives of 

Section 11A(a)(1) are that new data 

processing and communications 

techniques create the opportunity for 

more efficient and effective market 

operations,3 and that it is in the public 

interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to ensure the availability to brokers, 

dealers, and investors of information 

with respect to quotations for and 

transactions in securities.4 Section 11A 

of the Exchange Act also authorizes the 

Commission to prescribe rules 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.’’ 5 In furtherance of 

these purposes, the Commission has 

sought through its rules and regulations 

to help ensure that certain ‘‘core data’’ 6

is widely available for reasonable fees.7

The Commission has recognized that 

investors must have certain core data 

‘‘to participate in the U.S. equity 

markets.’’ 8

On February 14, 2020, the 

Commission proposed to amend 

Regulation NMS to better achieve the 

goal of Section 11A of the Exchange Act 

of assuring ‘‘the availability to brokers, 

dealers, and investors of information 

with respect to quotations for and 

transactions in securities’’ that is 

prompt, accurate, reliable, and fair.9 The 

amendments as adopted endeavor to 

fulfill this goal of Section 11A of the 

Exchange Act by updating the content of 

‘‘core data’’ and the manner in which it 

is provided to investors in the national 

market system. 

A. Current Market Data Content and 

Dissemination Model Under Regulation 

NMS 

The Commission established many of 

the current requirements of the national 

market system under Regulation NMS 

and approved the three effective 

national market system plans shortly 

after Congress enacted Section 11A in 

the 1975 amendments to the Exchange 

Act (‘‘1975 Amendments’’).10 Under 

Regulation NMS and the Equity Data 

Plans,11 the self-regulatory 

organizations (‘‘SROs’’) are required to 

provide certain quotation12 and 

transaction information13 for each NMS 

stock to an exclusive plan processor 

(‘‘exclusive SIP’’),14 which consolidates 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18599 

Section 3(a)(22)(B) of the Exchange Act, 15 U.S.C. 

78c(22)(B) (defining exclusive processor). 15The Equity Data Plans disseminate SIP data 

over three separate networks: (1) Tape A for 

securities listed on the New York Stock Exchange 

(‘‘NYSE’’); (2) Tape B for securities listed on 

exchanges other than NYSE and Nasdaq; and (3) 

Tape C for securities listed on Nasdaq. These tapes 

are referred to as the ‘‘consolidated tapes.’’ The 

CTA Plan governs the collection, consolidation, 

processing, and dissemination of last sale 

information for Tape A and Tape B securities. The 

CQ Plan governs the collection, consolidation, 

processing, and dissemination of quotation 

information for Tape A and Tape B securities. 

Finally, the UTP Plan governs the collection, 

consolidation, processing, and dissemination of last 

sale and quotation information for Tape C 

securities. 

16See Rule 600(b)(50) of Regulation NMS for the 

definition of NBBO. 

17See Bloomberg Order, infra note 22, at 3; see 

also Rescission of Effective-Upon-Filing Procedures 

for NMS Plan Fee Amendments, Securities 

Exchange Act Release No. 89618 (Aug. 19, 2020), 

85 FR 65470 (Oct. 15, 2020) (‘‘Effective-Upon-Filing 

Adopting Release’’). 

18See Limit Up Limit Down Plan, available at 

http://www.luldplan.com (last accessed Sept. 24, 

2020). 

19Rule 201(b)(3). 

20For example, messages regarding cancelled and 

erroneous trades are included in the data 

disseminated by the exclusive SIPs. See, e.g., 

Consolidated Tape System, Multicast Output Binary 

Specification, 36, 47 (October 2, 2020), available at 

https://www.ctaplan.com/publicdocs/ctaplan/CTS_

Pillar_Output_Specification.pdf. 

21Concept Release on Equity Market Structure, 

Securities Exchange Act Release No. 61358 (Jan. 14, 

2010), 75 FR 3593 (Jan. 21, 2010). 22See In the Matter of the Application of 

Bloomberg L.P., Securities Exchange Act Release 

No. 83755 at 3 (July 31, 2018), available at https:// 

www.sec.gov/litigation/opinions/2018/34-83755.pdf 

(‘‘Bloomberg Order’’); SEC Concept Release: 

Regulation of Market Information Fees and 

Revenues, Securities Exchange Act Release No. 

42208 (Dec. 9, 1999), 64 FR 70613, 70615 (Dec. 17, 

1999) (‘‘Market Information Concept Release’’) 

(stating that the distribution of core data ‘‘is the 

principal tool for enhancing the transparency of the 

buying and selling interest in a security, for 

addressing the fragmentation of buying and selling 

interest among different market centers, and for 

facilitating the best execution of customers’ orders 

by their broker-dealers’’). 

23See Proposing Release, 85 FR at 16728, n. 13 

and accompanying text. 

24While the pre-Regulation NMS rules permitted 

the independent distribution of quotes by 

individual SROs, Rule 603(a) of Regulation NMS, 

17 CFR 242.603(a), was adopted to impose 

‘‘uniform standards’’ on such distribution (i.e., the 

‘‘fair and reasonable’’ and ‘‘not unreasonably 

discriminatory’’ standards). See Regulation NMS 

Adopting Release, supra note 7, at 37569. Prior to 

Regulation NMS, however, SROs and their members 

were prohibited from disseminating their trade 

reports independently. Id. at 37589. 

25See infra Section III.A. 

26Commenters generally expressed concern that 

SIP data provided by the Equity Data Plans was not 

sufficient for some market participants. See, e.g., 

letters to Vanessa Countryman, Secretary, 

Commission, from Mehmet Kinak, Vice President 

and Global Head of Systematic Trading and Market 

Structure, and Jonathan D. Siegel, Vice President 

and Senior Legal Counsel, Legislative and 

Regulatory Affairs, T. Rowe Price, dated June 3, 

2020, (‘‘T. Rowe Price Letter’’) at 1 (‘‘Unfortunately, 

as the SIPs have not kept pace with the dramatic 

technological and market developments over the 

past decade, they are no longer satisfying the needs 

of a broad cross-section of market participants. Due 

to its limited content and higher latency, the usage 

of SIP data is adequate only for investors that 

visually consume NMS information (e.g., humans 

looking at quotes on a screen’’); Thomas M. Merritt, 

Deputy General Counsel, Virtu Financial, Inc., 

dated May 26, 2020, (‘‘Virtu Letter’’) at 2 (‘‘the ‘core 

data’ offered through the SIPs is no longer sufficient 

for most market participants to trade competitively 

in today’s market place.’’), 5; Michael Blasi, Vice 

President, Enterprise Infrastructure, and Krista 

Ryan, Vice President and Associate General 

Counsel, Fidelity Investments, dated May 26, 2020, 

(‘‘Fidelity Letter’’) at 2 (‘‘the SIPs have not kept 

pace with the U.S. equity markets which, through 

technological and market developments, now offer 

more products, faster, and at a lower cost.’’); Joseph 

J. Barry, Senior Vice President and Global Head of 

Regulatory, Industry, and Government Affairs, State 

Street Corporation, dated May 26, 2020, (‘‘State 

Street Letter’’) at 2 (‘‘. . . regulatory obligations and 

customer expectations related to best execution, 

transaction cost analysis, transparency and market 

competition generated further need for data that is 

unavailable on the SIPs. As a result, market 

participants have become increasingly dependent 

on proprietary data feeds marketed by the 

exchanges outside of the SIPs.’’); Hubert De Jesus, 

Managing Director, Global Head of Market Structure 

and Electronic Trading, and Samantha DeZur, 

Director, Global Public Policy, BlackRock, Inc., 

dated May 26, 2020, (‘‘BlackRock Letter’’) at 1 

(‘‘However, the current model for and content of 

NMS market data has not kept pace with the 

evolution in equity markets and correspondingly 

the quality of the Securities Information Processors 

(‘‘SIPs’’) has declined, lowering public confidence 

in the market.’’); Jennifer W. Han, Associate General 

Counsel, Managed Funds Association, dated May 

29, 2020, (‘‘MFA Letter’’) at 2 (‘‘Today, the current 

exclusive SIP model and content of core data does 

not serve the needs of investors, many of whom 

must subscribe to the exchanges’ proprietary market 

data feeds at considerable additional cost to trade 

Continued 

this information and makes it available 

to market participants on the 

consolidated tapes.15 For each NMS 

stock, the Equity Data Plans currently 

provide for the dissemination of top-ofbook (‘‘TOB’’) data and transaction 

information, generally defining 

consolidated market information (or 

‘‘core data’’) as consisting of: (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 national best offer (‘‘NBBO’’) 16

(i.e., the highest bid and lowest offer 

currently available on any exchange).17

In addition to disseminating core data, 

the exclusive SIPs collect, calculate, and 

disseminate certain regulatory data— 

including information required by the 

National Market System Plan to Address 

Extraordinary Market Volatility (‘‘LULD 

Plan’’),18 information relating to 

regulatory halts and market-wide circuit 

breakers, and information regarding the 

short-sale price test pursuant to Rule 

201 of Regulation SHO.19 They also 

collect and disseminate other NMS 

information and disseminate certain 

administrative messages.20 Together 

with core data, the Commission refers to 

this broader set of data for purposes of 

this release as ‘‘SIP data.’’ 

The purpose of the Equity Data Plans, 

approved under Regulation NMS, is to 

facilitate the collection and 

dissemination of SIP data so that the 

public has ready access to a 

‘‘comprehensive, accurate, and reliable 

source of information for the prices and 

volume of any NMS stock at any time 

during the trading day.’’21 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.22 Many of 

the requirements under Regulation NMS 

and the Equity Data Plans that establish 

the national market system have not 

been updated since their adoption 

despite dramatic changes in the 

operation of the market and market 

participants’ information needs.23

In addition to the SIP data provided 

via the Equity Data Plans, most 

exchanges have developed many 

proprietary TOB products that contain 

the quotation and transaction data that 

they provide to the exclusive SIPs as 

well as proprietary depth-of-book 

(‘‘DOB’’) products that contain more 

extensive information that is not 

provided by the exclusive SIPs, such as 

complete order-by-order information, 

full depth of book information, auction 

information, and odd-lot quotation 

information.24 The exchanges provide 

individual exchange proprietary data 

products directly to market participants 

and sometimes consolidate them with 

their affiliated exchanges’ proprietary 

data feeds. The exchanges make these 

proprietary data products available with 

different connectivity and transmission 

options, many of which are faster than 

those available for the consolidated 

tapes. Market participants that purchase 

proprietary DOB data feeds directly 

generally aggregate the information in a 

decentralized manner in an effort to 

create a consolidated view of the market 

that is both more timely and more 

complete than the exclusive SIP data 

feeds provided by the Equity Data Plans. 

As discussed further below, 

Regulation NMS and the Equity Data 

Plans have not kept pace with the 

business demands of market 

participants.25 While the exchanges 

have developed individual proprietary 

data products to meet the needs of some 

market participants, the Commission 

believes that there should be 

improvement to, and modernization of, 

the national market system to fulfill the 

goals of Section 11A of the Exchange 

Act and to meet the current core data 

demands of market participants.26 Over 

18600 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

effectively, while others are forced to rely on 

inferior information and outdated technology.’’); 

Peter D. Stutsman, Global Equity Trading Manager, 

The Capital Group Companies, Inc., dated June 2, 

2020, (‘‘Capital Group Letter’’) at 2 (‘‘Over the last 

15 years, the discrepancy in data elements and 

latency between proprietary feeds and the 

consolidated tape has expanded such that the SIP 

is no longer a realistic tool for institutional 

investors or broker-dealers in meeting their 

respective best execution obligations when routing 

orders.’’); Makan Delrahim, Assistant Attorney 

General, U.S. Department of Justice, Antitrust 

Division, Rene L. Augustine, Deputy Assistant 

Attorney General, Michael F. Murray, Deputy 

Assistant Attorney General, David B. Lawrence, 

Chief, Karina B. Lubell, Assistant Chief, Charles J. 

Ramsey, Attorney, Antitrust Division Competition 

Policy and Advocacy Section, and Ihan Kim, 

Attorney, Technology and Financial Services 

Section, dated May 26, 2020, (‘‘DOJ Letter’’); Mark 

Garabedian, Manager, Trading Data and Analytics, 

and Lisa Mahon Lynch, Associate Director, Global 

Trading, Wellington Management Company LLP, 

dated May 27, 2020, (‘‘Wellington Letter’’). 

27See, e.g., letters to Vanessa Countryman, 

Secretary, Commission, from Lev Bagramian, Senior 

Securities Policy Advisor, Better Markets, Inc., 

dated May 26, 2020, (‘‘Better Markets Letter’’) at 1– 

2; Joe Wald and Ray Ross, Managing Directors, 

BMO Capital Markets Group and Co-Heads of 

Electronic Trading, Clearpool, dated June 2, 2020, 

(‘‘Clearpool Letter’’) at 1, 11; John Ramsay, Chief 

Market Policy Officer, Investors Exchange LLC, 

dated May 28, 2020, (‘‘IEX Letter’’) at 5; Jim 

Considine, Chief Financial Officer, McKay Brothers 

LLC, dated May 31, 2020, (‘‘McKay Letter’’) at 1; 

Rich Steiner, Head of Client Advocacy and Market 

Innovation, RBC Capital Markets, LLC, dated May 

27, 2020, (‘‘RBC Letter’’) at 4; Ellen Greene, 

Managing Director, Equity and Options Market 

Structure, SIFMA, dated May 26, 2020, (‘‘SIFMA 

Letter’’) at 3–4; Capital Group Letter at 2; DOJ Letter 

at 2, 4; State Street Letter at 2; T. Rowe Price Letter 

at 1; Virtu Letter at 2. 

28See, e.g., Virtu Letter at 5 (‘‘[I]ncluding depth 

of book information in the SIP will allow investors 

who cannot afford to pay for costly Exchange 

proprietary feeds to trade more competitively in the 

marketplace . . . .’’); SIFMA Letter at 2 (‘‘[W]e do 

not believe that the SIPs currently provide the 

necessary data to market participants at the 

requisite speed to efficiently trade in today’s high 

speed and automated marketplace. As a result, 

many broker-dealers, asset managers and other 

market participants are forced to purchase 

proprietary data feeds from individual exchanges to 

create a consolidated and robust view of the market, 

while additionally bearing the economic burden of 

having to purchase consolidated data from the SIPs. 

This results in an enormous cost burden on the 

marketplace and creates a two-tiered market for 

market data by limiting access to critical market 

data at the fastest speeds to those who can afford 

to pay the exorbitant fees charged for it by the 

exchanges.’’); MFA Letter at 2 (‘‘Today, the current 

exclusive SIP model and content of core data does 

not serve the needs of investors, many of whom 

must subscribe to the exchanges’ proprietary market 

data feeds at considerable additional cost to trade 

effectively, while others are forced to rely on 

inferior information and outdated technology.’’); 

Clearpool Letter at 2 (‘‘As we have stated on a 

number of previous occasions, of all the issues 

relating to the costs of trading, the trend toward 

higher market data fees has had the most negative 

impact on the securities markets. It remains 

increasingly difficult for many broker-dealers to 

compete in the current market environment due, in 

part, to issues related to the costs associated with 

trading.’’); Dorothy Donohue, Deputy General 

Counsel, Securities Regulation, Investment 

Company Institute, dated May 26, 2020, (‘‘ICI 

Letter’’) at 9–10 (‘‘Including auction information in 

the consolidated feed would enhance transparency 

into market activity. Doing so also would eliminate 

proprietary data costs as a barrier to auction trading 

and encourage a broader range of market 

participants to submit trading interest.’’). 

29Section 11A(a)(1)(C)(ii) of the Exchange Act, 15 

U.S.C. 78k–1(a)(1)(C)(ii). 

30Section 11A(a)(1)(C)(iii) of the Exchange Act, 

15 U.S.C. 78k–1(a)(1)(C)(iii). 

31Section 11A(a)(1)(C)(iv) of the Exchange Act, 

15 U.S.C. 78k–1(a)(1)(C)(iv). 

32Section 11A(c)(1)(B) of the Exchange Act, 15 

U.S.C. 78k–1(c)(1)(B). 33See Equity Market Structure Roundtables, Oct. 

25–26, 2018: Roundtable on Market Data and 

Market Access, SEC, available at https://

www.sec.gov/spotlight/equity-market-structureroundtables (‘‘Market Data Roundtable’’). 34See Proposing Release, 85 FR at 16765, n. 393 

and accompanying text. 35See Proposing Release, 85 FR at 16768. See also 

infra Section V.B.3(b). Proprietary data fees have 

increased over the last decade, and are generally 

more expensive relative to SIP data fees, and there 

are indicia that exchanges may not be subject to 

robust competition with respect to market data. See 

infra notes 1780–1788 and accompanying text. 

the last 15 years, the exchanges have 

moved from largely manual, floor-based 

models to predominantly electronic 

trading systems and market participants 

have likewise largely incorporated 

sophisticated, latency-sensitive, and 

data dependent electronic trading 

technologies for their trading needs. 

This has contributed to some market 

participants stating that they require 

additional, and more timely, 

information for their best execution 

analysis.27 The Commission agrees that 

more comprehensive and latencysensitive NMS information can be 

significantly beneficial in facilitating 

informed trading decisions, and the 

Commission believes that such 

information should be more widely 

distributed and more readily accessible. 

Further, while the proprietary DOB 

products provided by exchanges contain 

the data elements included within 

expanded core data, commenters have 

stated that the cost of these proprietary 

market data products inhibits the 

purchase of, and the widespread 

dissemination of, this data to market 

participants that may need it to 

participate effectively in the markets.28

The Commission is concerned that the 

two different methods of data 

dissemination—SIP data provided 

pursuant to Regulation NMS and the 

Equity Data Plans and proprietary data 

products provided by the exchanges— 

have contributed to the development of 

a two-tiered data market that raises 

fundamental concerns about the ability 

of the national market system to 

continue to ensure that the goals of 

Section 11A of the Exchange Act are 

being met, including: (i) Fair 

competition among brokers and 

dealers; 29 (ii) the availability to brokers, 

dealers, and investors of NMS 

information; 30 and (iii) the 

practicability of brokers executing 

investors’ orders at the best available 

prices.31 Section 11A of the Exchange 

Act directs the Commission to facilitate 

the establishment of a national market 

system in accordance with these, and 

other, Congressional findings. 

Therefore, the Commission believes that 

Regulation NMS should be amended to 

update the national market system in 

accordance with the findings and to 

carry out the objectives set forth in 

Section 11A and to ‘‘assure the prompt, 

accurate, reliable, and fair collection, 

processing, distribution, and 

publication’’ of NMS information and 

‘‘the fairness and usefulness of the form 

and content of such information.’’ 32

B. National Market System Initiatives 

and the Market Data Infrastructure 

Proposing Release 

The Commission has monitored the 

national market system and its 

operation in light of changes in the 

markets and, over the years, has 

observed increased concerns about the 

usefulness, fairness, and promptness of 

the consolidated tapes. The Division of 

Trading and Markets held a Roundtable 

on Market Data in October of 2018,33 at 

which some market participants 

discussed their views about the 

shortcomings of the existing centralized 

consolidation model and the need for 

updates to the national market system to 

reflect the now widespread use of 

electronic trading and the need for 

more, faster NMS information.34

Further, the Commission has 

considered how the provision of the 

current consolidated tapes and 

proprietary data feeds has affected 

investors’ access to NMS information. 

The Commission understands that 

different types of investors have 

different information needs. However, 

as stated above, the Commission is 

concerned that a two-tiered system has 

developed in which certain market 

participants who are able to afford, and 

choose to pay for, the exchanges’ 

proprietary DOB data feeds and 

associated connectivity and 

transmission offerings receive more 

content-rich data faster than those who 

do not receive these data feeds, such as 

market participants that face higher 

barriers to entry from data and other 

exchange fees.35 Market participants 

that do not receive proprietary DOB 

feeds may be affected in their efforts to 

seek best execution and otherwise 

effectively compete with market 

participants that receive proprietary 

DOB data feeds because they do not 

obtain access to the additional content 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18601 

36See supra note 17 and accompanying text. 

37The Commission notes that the number of 

Professional subscribers to the SIP feeds decreased 

23.5 percent between the first quarter of 2010, 

which is the first quarter for which Professional 

subscriber data for the SIP Plans was available after 

the introduction of the first proprietary TOB 

product in 2009, and the end of 2019. See CTA 

Plan, Metrics, available at https://

www.ctaplan.com/sip-metrics (last accessed Nov. 

20, 2020); UTP Plan, Metrics, available at http://

www.utpplan.com/metrics (last accessed Nov. 25, 

2020). For context, the number of registered 

representatives reported by FINRA during this time 

period decreased by only 1.0 percent. See FINRA, 

Statistics, available at https://www.finra.org/ 

newsroom/statistics (last accessed Nov. 19, 2020). 

38See Effective-Upon-Filing Adopting Release, 

supra note 17. 

39 17 CFR 242.608. 

40See Joint Industry Plan; Notice of Filing of a 

National Market System Plan Regarding 

Consolidated Equity Market Data, Securities 

Exchange Act Release No. 34–90096 (Oct. 6, 2020), 

85 FR 64565 (Oct. 13, 2020) (‘‘New Consolidated 

Data Plan Notice’’). See also infra Section III.E for 

a discussion on the Governance Order. 

41See, e.g., letter from John A. Zecca, Executive 

Vice President, Chief Legal Officer, and Chief 

Regulatory Officer, Nasdaq, to Jay Clayton, 

Chairman, Commission, dated Apr. 7, 2020 

(‘‘Nasdaq Letter II’’); letters to Vanessa Countryman, 

Secretary, Commission, from Elizabeth K. King, 

Chief Regulatory Officer, ICE, and General Counsel 

and Corporate Secretary, NYSE, dated May 15, 2020 

(‘‘NYSE Letter I’’); Linda Moore, President and 

Chief Executive Officer, TechNet, dated Apr. 29, 

2020 (‘‘TechNet Letter I’’); Christopher A. Iacovella, 

Chief Executive Officer, American Securities 

Association, dated Apr. 23, 2020; Kimberly Unger, 

Chief Executive Officer and Executive Director, 

Securities Traders Association of New York, Inc. 

(‘‘STANY’’), dated May 14, 2020 (‘‘STANY Letter 

I’’); Institutional Traders Advisory Council to 

Nasdaq, dated May 15, 2020; Gary A. LaBranche, 

President and Chief Executive Officer, National 

Investor Relations Institute, dated May 22, 2020; R 

T Leuchtkafer, dated May 20, 2020; Patrick J. Healy, 

Founder and CEO, Issuer Network, dated May 20, 

2020 (going further by suggesting the Commission 

‘‘table this proposal’’). 

and may be receiving data in a slower 

manner. 

On the other hand, the exchanges’ 

proprietary TOB products, which are 

typically cheaper than the SIP data, may 

be purchased instead of SIP data for 

certain use cases in certain market 

segments (e.g., retail investors).36 These 

proprietary TOB products have 

decreased many market participants’ 

utilization of SIP data even though they 

do not contain all ‘‘core data’’ and do 

not reflect TOB quotations and 

transactions from all markets and, 

therefore, do not display the NBBO. 

Market participants that solely use 

proprietary TOB products do not see all 

quotations in the market, including at 

times superior quotations, or all 

executed transactions and instead see 

only a subset of consolidated data.37

Accordingly, the Commission has 

undertaken three initiatives related to 

the provision of NMS information in the 

national market system. These 

initiatives work together to address 

specific, significant, separate but 

overlapping, issues in the national 

market system and are aimed at 

improving discrete areas in the national 

market system. First, the Commission 

amended the process so that, instead of 

becoming effective upon filing, changes 

to fees proposed by the Equity Data 

Plans would be published for public 

comment and approved by the 

Commission.38 These procedures 

enhance the efficiency and transparency 

of the process of assessing new NMS 

plan fees. Second, the Commission 

ordered the participants to the Equity 

Data Plans to submit a new, single 

effective national market system plan, 

i.e., the New Consolidated Data Plan, for 

Commission consideration under Rule 

608 of Regulation NMS.39 The New 

Consolidated Data Plan includes 

specific governance provisions that the 

Commission believes will help to 

address concerns that have been raised 

about the existing Equity Data Plans, 

including conflicts of interest stemming 

from the sale of competing proprietary 

data products by the exchanges that 

currently have majority voting power on 

the Operating Committee(s) of the 

Equity Data Plans.40 These committees 

are, among other things, responsible for 

proposing fees for SIP data. Finally, in 

this release, the Commission is adopting 

amendments to update and modernize 

the infrastructure of the national market 

system by adding data content to NMS 

information as defined under Regulation 

NMS and by amending the manner in 

which such NMS information is 

collected, consolidated, and 

disseminated. 

The Commission published the 

Proposing Release on its website on 

February 14, 2020. The comment period 

of 60 days from Federal Register 

publication ended on May 26, 2020. 

Many commenters asked the 

Commission to extend the comment 

period,41 particularly in light of the 

COVID–19 pandemic. 

The Commission has considered all 

comment letters received to date, 

including comments that were 

submitted after the comment deadline 

had passed. The last comment letter was 

received on October 13, 2020. 

Accordingly, the Commission believes 

that the time during which comments 

have been accepted is reasonable. 

C. Enhancements to the Content of NMS 

Information 

The Commission is adopting 

amendments to increase the content of 

NMS information that is required to be 

made available under Regulation NMS 

and to introduce a competitive 

decentralized consolidation model to 

disseminate the information. The 

content of NMS information that is 

made available under the rules of the 

national market system has not been 

adequately updated to reflect the needs 

of market participants trading in the 

U.S. market. As the U.S. market has 

evolved, market participants’ 

information needs have changed; many 

market participants need additional 

information to trade efficiently and 

competitively. Today, the only means 

for market participants to receive a 

wider array of information than what is 

provided under the national market 

system is through proprietary data 

offerings from exchanges (and their 

affiliates). The Commission is 

concerned that the national market 

system, including the content of SIP 

data and the way such data is 

disseminated, significantly lags behind 

these proprietary data offerings and 

delivery methods established by the 

exchanges and their affiliates. Therefore, 

as discussed further below, the 

Commission believes that the content of 

NMS information under the rules of the 

national market system needs to be 

enhanced to address the needs of market 

participants. The adopted definitions 

will expand and modernize the content 

of NMS information that is made 

available in the U.S. market in a manner 

that the Commission believes will better 

facilitate competition; help to ensure the 

prompt, accurate, reliable, and fair 

collection of such information; and help 

to ensure the usefulness of NMS 

information. The Commission is 

adopting a new model for the provision 

of consolidated market data as 

discussed in Section III below, but the 

Commission believes that market 

participants and investors will benefit 

from enhanced NMS information 

regardless of the method by which they 

receive it. In particular, as a result of the 

new round lot definition and the 

inclusion of odd-lot quotations in core 

data, retail investors will be able to see, 

and more readily access, better-priced 

quotations. Further, through the 

addition of depth of book data and 

auction information in core data, the 

scope of NMS information will, to a 

greater extent, allow some market 

participants to trade in a more informed, 

competitive, and efficient manner. The 

Commission believes that even investors 

that do not consume that data directly 

will benefit because their brokers will 

be able to use the enhanced NMS 

information to trade more efficiently 

18602 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

42See infra Section II.C.2(a). 

43 ‘‘Consolidated market data’’ is defined in Rule 

600(b)(19) as the following data, consolidated 

across all national securities exchanges and 

national securities associations: (i) Core data; (ii) 

regulatory data; (iii) administrative data; (iv) selfregulatory organization-specific program data; and 

(v) additional regulatory, administrative, or selfregulatory organization-specific program data 

elements defined as such pursuant to the effective 

national market system plan or plans required 

under § 242.603(b). 

44 ‘‘Core data’’ is defined in Rule 600(b)(21) of 

Regulation NMS. 

45See supra Section I.A for a discussion of the 

regulatory requirements for NMS information. 

‘‘Consolidated market data product’’ is defined as 

any data product developed by a competing 

consolidator that contains consolidated market data 

or any of the elements or subcomponents thereof. 

See Rule 600(b)(20); infra Section II.B.2. 

46See infra note 151 and accompanying text with 

respect to certain information that is not included 

in the definition of core data. 

47See infra Section II.D.1. 

48See infra Section II.E.1. 

49See Rule 600(b)(50). 

50See infra Sections II.D.2(a); II.E.2. 

51 Id. 

52See infra Section II.C.2(b). 

53See infra Section II.F.1. 

54See infra Section II.F. 

55See infra Section II.G.1. 

and competitively and to achieve best 

execution for their customer orders.42

To expand and enhance the data that 

is required to be made available for 

collection, consolidation, and 

dissemination under Regulation NMS, 

the Commission is adopting several new 

defined terms in Rule 600 of Regulation 

NMS, including ‘‘consolidated market 

data,’’ ‘‘consolidated market data 

product,’’ ‘‘core data,’’ ‘‘round lot,’’ 

‘‘auction information,’’ ‘‘depth-of-book 

data,’’ ‘‘odd-lot information,’’ 

‘‘regulatory data,’’ ‘‘administrative 

data,’’ and ‘‘self-regulatory organizationspecific program data.’’ Two of the new 

definitions in Regulation NMS— 

consolidated market data 43 and core 

data 44—specify the components of NMS 

information that must be made available 

for collection, consolidation, and 

dissemination under the national 

market system.45 The other new defined 

terms establish the scope of information 

included within the definitions of 

consolidated market data and core data. 

The definitions are designed to ensure 

that NMS information that is made 

available to market participants meets 

the goals set forth in Section 11A of the 

Exchange Act.46

The Commission is defining three 

new data elements as ‘‘core data:’’ (1) 

Information about better priced 

quotations in higher priced stocks 

(implemented through a new definition 

of ‘‘round lot’’ and the inclusion of 

certain odd-lot information), (2) 

information about quotations that are 

outside of the best-priced quotations 

(implemented through a new ‘‘depth of 

book data’’ definition), and (3) 

information about orders that are 

participating in auctions (implemented 

through a new definition of ‘‘auction 

information’’). 

Round Lot Definition. To provide 

investors with information about better 

priced orders in high-priced stocks, the 

Commission proposed a five-tier 

definition of ‘‘round lot’’ based on the 

share price of an NMS stock.47 The 

Commission also proposed to amend the 

definition of protected quotation to 

require that protected quotes be of at 

least 100 shares.48 These two changes 

would have established a NBBO 49 that 

could differ from the best protected bid 

and best protected offer (‘‘PBBO’’). 

Commenters responded by expressing 

support and raising several issues and 

concerns.50

For the reasons set forth below,51 the 

Commission has modified the round lot 

definition so that it has fewer tiers and 

is based on a higher notional value. 

Specifically, the adopted round lot 

definition is 100 shares for stocks priced 

at $250 or less, 40 shares for stocks 

priced at $250.01 to $1,000, 10 shares 

for stocks priced at $1,000.01 to 

$10,000, and 1 share for stocks priced at 

$10,000.01 or more. Further, the 

Commission has decided not to adopt 

the proposed amendment to the 

definition of protected quotation. A 

protected quotation will remain a round 

lot; however, the protected quotation 

will change only insomuch as the round 

lot definition is changing. 

The Commission also has decided to 

further increase the availability of 

information about better priced orders 

by adopting an additional element of 

‘‘core data’’ for aggregated odd-lot 

quotations on each exchange that are 

priced at or better than the NBBO.52 The 

Commission believes that the new 

definition of round lot and the increased 

availability of better priced odd-lot 

information will provide investors with 

valuable information about the best 

prices available and help to facilitate 

more informed order routing decisions 

and the best execution of investor 

orders. 

Depth of Book Data Definition. The 

Commission proposed a definition of 

depth of book data to include 

information about orders outside of the 

NBBO and PBBO because information 

about the depth of book on each 

exchange helps market participants 

decide where to place orders and 

provides information about order book 

imbalances and potential future price 

moves in a NMS stock.53

The Commission, for the reasons set 

forth below, is adopting the definition of 

depth of book data with a few 

modifications.54 First, the definition has 

been modified to reflect the fact that the 

definition of protected quotation is not 

changing, so it is not necessary to 

identify depth of book between the 

NBBO and PBBO. Second, the definition 

has been modified to specify that the 

five price levels included in the 

definition of depth of book data are 

measured from the NBBO. Third, the 

definition has been modified to specify 

that the aggregate size at each of the 

included price levels shall be attributed 

to each exchange so that market 

participants know where liquidity 

resides. Lastly, depth of book data will 

include all quotation sizes on a facility 

of a national securities association, 

instead of only on exchanges, as 

proposed. Adoption of the depth of 

book data definition with these 

modifications will provide useful 

information to market participants and 

support efficient order handling and 

execution. 

Auction Information Definition. 

Finally, the Commission proposed a 

definition of auction information to 

include information about orders that 

participate in auctions.55 Auctions have 

become increasingly significant 

liquidity events. Information about the 

orders participating in an auction can 

help market participants decide whether 

and how to submit orders in and around 

an auction and understand the potential 

price moves upon completion of the 

auction. For the reasons set forth below, 

the Commission is adopting the 

definition of auction information as 

proposed except for a modification to 

specify that the definition only includes 

auction information that an exchange 

publicly disseminates on its proprietary 

feeds. 

D. Enhancements to the Provision of 

Consolidated Market Data 

The Commission is adopting a new 

model for the provision of consolidated 

market data under Regulation NMS to 

foster a competitive environment for the 

dissemination of market data. Under the 

new decentralized consolidation model, 

competing consolidators will collect, 

consolidate, and disseminate 

consolidated market data products, and 

self-aggregators will collect and 

consolidate such data for their own 

internal use. By fostering a competitive 

environment for the provision and 

dissemination of critical market data to 

investors and other market participants, 

this new model will better achieve the 

goals of Section 11A of the Exchange 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18603 

56See infra Section III.B.2; note 588 and 

accompanying text. 57The SROs are required to provide NMS 

information to the national market system plan(s) 

disseminated to market participants under 

Regulation NMS. See supra Section I.A. 58Proprietary TOB products, like proprietary 

DOB products, are provided directly to market 

participants and are not centrally consolidated 

before dissemination as is required of SIP data 

under the national market system. 

59See also infra Section III.B.9(f) discussing the 

applicability of Rule 603(a). 

60See infra Section III.B. 

61The exclusive SIPs are operated by the 

exchanges, which also develop proprietary data 

products using the same data that they provide to 

the exclusive SIPs. See supra Section I.A. 

62See infra Section III.B.9(b). 

63See infra Section III.B.10. 

64 Id. 

65See infra Section III.B.8. 

66See infra Section III.C.7. 

67See infra Section III.B.3. 

Act and help to ensure broad 

availability to brokers, dealers, and 

investors of information with respect to 

quotations for and transactions in NMS 

stocks that is prompt, accurate, reliable, 

and fair. To implement this model, the 

Commission is amending Regulation 

NMS rules and adopting a new rule and 

a new form for entities seeking to 

register as competing consolidators. 

Since Congress adopted the 1975 

Amendments, the Commission has not 

substantially updated the distribution of 

NMS information in the national market 

system to reflect how the markets 

operate and investors’ trade. Today, 

markets rely on highly sophisticated 

electronic trading systems that can 

consume many points of data at speeds 

measured in sub-second increments. 

The data delivery mechanisms and data 

feeds established under the national 

market system have not kept up with 

the current needs of market participants. 

To fulfill the data needs of market 

participants, the exchanges have 

developed proprietary low-latency 

market data products that are designed 

for automated trading systems. These 

data products, which include data such 

as depth of book and order imbalance 

information for opening and closing 

auctions, are faster and more contentrich than the delivery mechanisms and 

content that the SROs provide pursuant 

to Regulation NMS and the Equity Data 

Plans. Because of this disparity, many 

market participants use the exchanges’ 

proprietary market data products for 

their competitive electronic trading 

systems.56

In addition, the exchanges have 

developed proprietary TOB data 

products for market participants that are 

less expensive and less content-rich 

than the data products that the SROs 

provide via the exclusive SIPs pursuant 

to Regulation NMS and the Equity Data 

Plans.57 Retail investors use these 

proprietary TOB products, which are 

specific to an individual exchange or 

affiliated exchanges. Because they are 

cheaper and faster, proprietary TOB 

products—despite their more limited 

content—decrease the demand for data 

delivered under the Equity Data Plans.58

The Commission is concerned that 

market participants who solely use 

individual exchange proprietary TOB 

products are not getting the full 

consolidated view of the market, may be 

missing better priced quotes on other 

exchanges, and may only have a partial 

view of the trades that were executed in 

the market. 

The Commission believes that 

proprietary DOB and TOB data products 

that decrease the utilization of SIP data 

highlight fundamental issues regarding 

the fairness, usefulness, and efficiency 

of NMS information and how it is 

distributed today. Therefore, as 

discussed further below, the 

Commission is adopting a new 

dissemination model for the national 

market system—a decentralized 

consolidation model that will foster a 

competitive environment in the 

provision of consolidated market data. 

To effect this change, the Commission is 

amending Rule 603 under Regulation 

NMS to: (1) Remove the requirement 

that all consolidated information for an 

individual NMS stock be disseminated 

through a single, exclusive plan 

processor; and (2) require each national 

securities exchange and national 

securities association to make available 

to competing consolidators and selfaggregators 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.59

Commenters who responded to this 

proposal expressed support and raised 

several issues and concerns.60

For the reasons set forth below, the 

Commission is adopting the 

decentralized consolidation model 

largely as proposed. The new 

decentralized consolidation model, with 

its fostering of a competitive 

environment, will modernize the 

provision of consolidated market data in 

the U.S. markets. Today, the national 

market system comprises two exclusive 

SIPs that consolidate and disseminate 

certain NMS information on a noncompetitive basis.61 The noncompetitive structure, as required under 

Regulation NMS, no longer adequately 

ensures the timely dissemination of 

NMS information. The Commission 

believes the fostering of a competitive 

environment and enabling the 

introduction of new market forces into 

the collection, consolidation, and 

dissemination process through a 

decentralized consolidation model will 

help to deliver consolidated market data 

to market participants in a more timely, 

efficient, and cost-effective manner than 

the current centralized consolidation 

model. The Commission is adopting 

Rule 603(b) as proposed.62

As part of establishing the 

decentralized consolidation model, the 

Commission is amending the definition 

of NBBO to remove references to the 

plan processors and replace them with 

competing consolidators and selfaggregators.63 Competing consolidators 

will be responsible for calculating the 

NBBO for their subscribers and selfaggregators will be responsible for 

calculating their own NBBO.64 Given 

market participants’ widespread usage 

of proprietary market data feeds and the 

array of issues these participants have 

raised with respect to NMS information 

currently provided by the exclusive 

SIPs, many of these market participants 

calculate their own NBBOs from 

different exchange proprietary data 

feeds in varying locations for their own 

internal use rather than rely on the 

exclusive SIPs. These current practices, 

as well as existing regulatory 

approaches to independent data 

aggregation,65 will help to ensure 

market participants are able to operate 

with different NBBOs calculated by 

different consolidators under this new 

model. 

Under the new decentralized 

consolidation model, competing 

consolidators will be responsible for 

collecting, consolidating, and 

disseminating consolidated market data 

products to subscribers. New Rule 614 

and new Form CC will govern the 

registration and responsibilities of 

competing consolidators.66 Informed by 

comments and upon further 

consideration, the Commission, for the 

reasons set forth below, is adopting Rule 

614 and Form CC largely as proposed 

but with certain modifications to 

address points raised during the 

comment process.67 Market participants 

need timely consolidated market data to 

route and execute orders. The 

Commission believes entities will be 

incentivized to register as competing 

consolidators to satisfy the expected 

robust demand for consolidated market 

data products. The Commission is also 

modifying the requirements of Rule 614 

so that competing consolidators are not 

required, as proposed, to offer a product 

18604 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

68See Rule 600(b)(20), which defines 

‘‘consolidated market data product.’’ 

69See infra Sections II.B.2; III.C.8(a). 

70See infra Section III.D. 

71 Id. 

72See infra Section III.C.7(a)(iv). 

73Currently, there are three effective national 

market system plans for the collection, 

consolidation, and dissemination of certain NMS 

information. See supra note 10 and accompanying 

text. The Commission has ordered the Operating 

Committees of these three effective national market 

system plans to file a single new plan. See infra 

note 1128; see also Section III.E.2(a). On August 11, 

2020, the participants filed a proposed plan, which 

the Commission published for comment on October 

6, 2020. See New Consolidated Data Plan Notice, 

supra note 40. 

74See infra Section III.E. 

75See infra Section III.F. 

76See id. 

77See Proposing Release, 85 FR at 16728, n. 17 

and accompanying text. 

containing all elements of consolidated 

market data. Competing consolidators 

will be able to develop the consolidated 

market data products 68 that their 

subscribers demand.69 Rule 614 

requires, among other things, that 

competing consolidators generate 

consolidated market data products in a 

manner that is consistent with the 

definitions in Regulation NMS and 

provide monthly performance metrics. 

Together with the Commission’s 

oversight of competing consolidators, 

these requirements will help to ensure 

that the dissemination of consolidated 

market data products by competing 

consolidators is prompt, accurate, 

reliable, and fair. 

Also, under the new decentralized 

consolidation model, self-aggregators 

will be able to collect and consolidate 

NMS information for their own internal 

use. As defined, a self-aggregator will be 

a broker-dealer, exchange, national 

securities association, or investment 

adviser registered with the Commission 

(‘‘RIA’’) that receives the NMS 

information that is necessary to generate 

consolidated market data from the SROs 

pursuant to Rule 603(b). A selfaggregator may only generate 

consolidated market data for its internal 

use. Market participants—including 

broker-dealers, exchanges, and RIAs— 

self-aggregate proprietary market data 

today. The Commission is adopting this 

provision to allow these market 

participants to aggregate consolidated 

market data for their own internal uses. 

Notwithstanding the adopted 

improvements to the collection, 

consolidation, and dissemination of 

consolidated market data with the 

decentralized consolidation model, 

some market participants will continue 

to need to aggregate data themselves for 

their own internal purposes, for a 

variety of business reasons.70

Specifically, we are adopting a 

definition of self-aggregator that will 

permit the exchanges, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’), and RIAs to self-aggregate 

for their own internal purposes, 

including for the purpose of sharing 

consolidated market data across 

affiliated entities that are registered with 

the Commission.71

In general, self-aggregators will not be 

permitted to disseminate or otherwise 

make available such data to any person, 

including customers or clients, because 

the Commission believes the 

widespread dissemination of 

consolidated market data must be 

subject to Commission oversight and, 

accordingly, must be performed by 

competing consolidators. As discussed 

below, competing consolidators will be 

subject to the registration, disclosure, 

and other regulatory requirements in 

Rule 614 and Form CC.72 The competing 

consolidator regulatory regime should 

help to ensure that non-registered 

persons receive market data that is 

consolidated and delivered in a reliable 

and accurate manner. Although selfaggregators will not be permitted to 

widely disseminate consolidated market 

data, they will be able to share 

consolidated market data with their 

affiliated entities that are registered with 

the Commission. The Commission has 

the authority to examine registered 

affiliated entities and would be able to 

determine how a self-aggregator 

provides consolidated market data to a 

registered affiliate and how the 

registered affiliate uses that data, 

whereas the Commission does not have 

the authority to examine a selfaggregator’s affiliated entities that are 

not registered with the Commission. 

Under the decentralized consolidation 

model, the effective national market 

system plan(s) for NMS stocks will 

continue to play an important role.73

The plan(s) will continue, for example, 

to develop and propose fees for the data 

content underlying consolidated market 

data, collect and allocate revenues 

collected for such data, develop the 

monthly performance metrics for 

competing consolidators, and provide 

an annual assessment of the competing 

consolidator model. Therefore, as 

discussed further below, the 

Commission is directing the effective 

national market system plan(s) 

participants to file an amendment to the 

plan(s) pursuant to Rule 608 of 

Regulation NMS to reflect the new 

functions of the plan(s). The 

Commission believes that the effective 

national market system plan structure 

provides a useful mechanism to gather 

consensus views from a wide variety of 

market participants on the operation of 

the national market system. The 

provisions requiring amendment to the 

effective national market system plan(s) 

are adopted largely as proposed with a 

few modifications.74

Finally, the Commission is amending 

Regulation SCI to expand the definition 

of ‘‘SCI entities’’ to include ‘‘SCI 

competing consolidators’’ that are 

subject to the requirements of 

Regulation SCI after an initial transition 

period if they meet a threshold based on 

a share of gross consolidated market 

data revenues, as described below. The 

Commission believes that the threshold 

as adopted is appropriate to identify 

those competing consolidators whose 

market share is large enough that they 

have the potential to significantly 

impact investors, the overall market, or 

the trading of securities should the 

competing consolidator have a systems 

or cybersecurity issue occur. As 

discussed below, based on the threshold 

being adopted for SCI competing 

consolidators, the Commission 

estimates that most competing 

consolidators will meet this 

definition.75 In addition, after 

consideration of commenters’ concerns 

regarding potential barriers to entry, the 

Commission is adopting a tailored set of 

operational capability and resiliency 

obligations that will apply during an 

initial transition period and thereafter to 

competing consolidators that do not 

meet the threshold in the definition of 

SCI competing consolidator.76

The amendments will significantly 

enhance and modernize the content of 

NMS information and the means by 

which it is disseminated to market 

participants. These changes will address 

meaningful shortcomings that have 

developed in the national market system 

relating to the consolidation and 

dissemination of NMS information.77

The centralized consolidation model is 

an outdated model that was initially 

developed for an entirely different, 

manual market structure, and it is no 

longer suitable for trading in today’s 

high-speed electronic markets. Further, 

the exclusive SIP model was developed 

when the exchanges were not selling 

competing proprietary data products 

that are superior in both content and 

delivery to the SIP data products. 

Therefore, as discussed further below, 

the Commission is amending Regulation 

NMS to modernize the national market 

system consistent with its mandate 

under the Exchange Act so that ‘‘[n]ew 

data processing and communications 

techniques [can be used] to create the 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18605 

78Section 11A(a)(1)(B) of the Exchange Act. 

79See Sections 11A(a)(1)(C)(ii) through (iv) of the 

Exchange Act. 

80Regulation NMS Adopting Release at 37538. 

See also Geman v. SEC, 334 F.3d 1183, 1186 (10th 

Cir. 2003) (‘‘[T]he 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))); 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’’). 

81Regulation NMS Adopting Release at 37538. 

82See, e.g., infra Sections II.F.2(h) (discussing 

comments received on best execution related to 

depth of book data); III.B.10(c) (discussing 

comments received on best execution related to 

‘‘multiple NBBOs’’ and the selection of a competing 

consolidator). 

83Proposing Release, 85 FR at 16729, 52, 69. 

84 Id. at 16734, 55. 

85Regulation NMS Adopting Release at 37537. 

86 Id. at 37538. 

87FINRA has codified a duty of best execution in 

its rules, requiring a broker-dealer to ‘‘use 

reasonable diligence to ascertain the best market for 

the subject security and buy or sell in such market 

so that the resultant price to the customer is as 

favorable as possible under prevailing market 

conditions.’’ FINRA Rule 5310, ‘‘Best Execution and 

Interpositioning.’’ 

88See Regulation NMS Adopting Release at 

37538. 

89Kurz v. Fidelity, supra note 80, 556 F.3d at 640. 

90Securities Exchange Act Release No. 43590 

(Nov. 17, 2000), 65 FR 75414, 18 (Dec. 1, 2000). The 

Commission has recognized that the scope of the 

duty of best execution must evolve as changes occur 

in the market that give rise to improved executions 

for customer orders. Order Execution Obligations, 

Release No. 37619A (Sept. 6, 1996), 61 FR 48290 

(Sept. 12, 1996). 

91Similarly, these amendments do not change 

investment advisers’ duty of best execution. See 

generally Commission Interpretation Regarding 

Standard of Conduct for Investment Advisers, 

Release No. IA–5248 (June 5, 2019). 

92The Commission will monitor the impact of 

these amendments on broker-dealer best execution 

policies and procedures and will consider whether 

additional steps, such as further best execution 

guidance, are necessary or appropriate. 

93See Regulation NMS Adopting Release at 37538 

(‘‘Broker-dealers must examine their procedures for 

seeking to obtain best execution in light of market 

and technology changes and modify those practices 

if necessary to enable their customers to obtain the 

best reasonably available prices.’’). 

94Best execution considerations may also be 

relevant to the selection of a market data provider 

and the choice to consume different data elements 

today. See FINRA, Regulatory Notice 15–46, 1, 3 n. 

12 (2015) (‘‘The exercise of reasonable diligence to 

ascertain the best market under prevailing market 

conditions can be affected by the market data, 

including specific data feeds, used by a firm. For 

example, a firm that regularly accesses proprietary 

data feeds, in addition to the consolidated SIP feed, 

for its proprietary trading, would be expected to 

also be using these data feeds to determine the best 

market under prevailing market conditions when 

handling customer orders to meet its best execution 

obligations.’’). 

95See Proposing Release, 85 FR at 16741, 54. 

96See supra notes 80–81 and accompanying text. 

opportunity for more efficient and 

effective market operations’’ 78 and to 

ensure fair competition, the availability 

of NMS information, and ‘‘the 

practicability of brokers executing 

investors’ orders in the best market.’’ 79

E. Implications for Best Execution 

The Commission has stated that the 

duty of best execution requires brokerdealers to ‘‘execute customers’ trades at 

the most favorable terms reasonably 

available under the circumstances, i.e., 

at the best reasonably available 

price.’’ 80 The Commission stated that 

certain other factors that are relevant to 

best execution include ‘‘order size, 

trading characteristics of the security, 

speed of execution, clearing costs, and 

the cost and difficulty of executing an 

order in a particular market.’’ 81

Commenters questioned the 

implications of the proposed changes to 

the content and provision of NMS 

information on the duty of best 

execution.82 In the Proposing Release, 

the Commission stated that the 

proposed additional data content in 

consolidated market data and the 

method by which such data was 

disseminated would facilitate the best 

execution of investor orders and 

enhance best execution analyses.83 The 

Commission also stated that it was not 

‘‘specifying minimum data elements 

needed to achieve best execution’’ or 

‘‘mandating the consumption’’ of the 

expanded data content and, more 

broadly, acknowledged that different 

market participants and different 

trading applications have different 

market data needs.84

A broker-dealer has a legal duty to 

seek best execution of customer 

orders.85 The duty of best execution 

derives from common law agency 

principles and fiduciary obligations.86 It 

is incorporated in SRO rules 87 and has 

been incorporated into the antifraud 

provisions of the Federal securities laws 

through judicial decisions.88 In addition 

to the best price reasonably available, 

speed of execution and available 

liquidity,89 the Commission has 

articulated a non-exhaustive list of 

factors that may be relevant to brokerdealers’ best execution analysis: (1) The 

size of the order; (2) the trading 

characteristics of the security involved; 

(3) the availability of accurate 

information affecting choices as to the 

most favorable market center for 

execution and the availability of 

technological aids to process such 

information; and (4) the cost and 

difficulty associated with achieving an 

execution in a particular market 

center.90

While these amendments do not 

change a broker-dealer’s duty of best 

execution,91 the Commission recognizes 

that the changes to consolidated market 

data resulting from the amendments 

may be relevant to a broker-dealer’s best 

execution analysis.92 Broker-dealers 

must execute customers’ trades at the 

most favorable terms reasonably 

available under the circumstances and 

must examine their procedures for 

seeking to obtain best execution in light 

of market and technology changes and 

modify those practices if necessary.93

Both the additional data content and the 

new method by which such data will be 

disseminated represent market and 

technology changes that should be 

considered by broker-dealers in 

connection with their best execution 

obligations.94

Specifically, the availability of more 

data content in consolidated market 

data, including odd-lot information, 

depth of book data, and auction 

information, may be relevant to a 

broker-dealer’s ability to achieve and 

analyze best execution because it can 

provide information that, in many 

circumstances, may be useful in making 

trading and order placement 

decisions.95 In addition, the availability 

of more timely consolidated market data 

may be relevant to a broker-dealer’s 

ability to achieve and analyze best 

execution because it can bear upon the 

accuracy of the information about the 

most favorable market center for 

executing customer orders. Therefore, 

broker-dealers should consider the 

availability of consolidated market data, 

including the various elements of data 

content and the timeliness, accuracy, 

and reliability of the data provided by 

competing consolidators, in developing 

and maintaining their best execution 

policies and procedures. Further, 

because richer, more timely 

consolidated market data may enhance 

the ability of broker-dealers to obtain 

the most favorable terms reasonably 

available under the circumstances, 

including the best reasonably available 

price and other factors,96 for their 

customer orders, broker-dealers should 

consider the availability of consolidated 

market data for purposes of evaluating 

best execution. 

However, while the additional data 

content may be relevant to brokerdealers’ best execution analyses and, in 

many cases, will facilitate the ability of 

broker-dealers to achieve best execution 

for their customer orders, the 

Commission, consistent with the 

approach taken in the Proposing 

Release, is not setting forth minimum 

data elements needed to achieve best 

execution and does not expect that all 

market participants will need to 

18606 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

97 17 CFR 242.603(c). 98 17 CFR 242.600(b)(17). 99 17 CFR 242.600(b)(95). 100See Proposing Release, 85 FR at 16743–46; 

infra Section II.D.2(b). 101See Proposing Release, 85 FR at 16760; infra 

Section II.H. 

102See supra notes 89 and 90 and accompanying 

text. 

103See infra notes 897, 907–908 and 

accompanying text. 

104See infra Section III.C.8(c). 

105See supra note 90 and accompanying text. 

106Cf. FINRA, Regulatory Notice 15–46, supra 

note 94. See also letter from Tyler Gellasch, 

Executive Director, Healthy Markets Association, to 

Vanessa Countryman, Secretary, Commission, dated 

May 26, 2020, (‘‘Healthy Markets Letter I’’) at 4–5; 

letter from Marcia E. Asquith, Executive Vice 

President, Board and External Relations, Financial 

Industry Regulatory Authority, Inc., to Vanessa 

Countryman, Secretary, Commission, dated May 26, 

2020, (‘‘FINRA Letter’’) at 6. 

107See Proposing Release, 85 FR at 16728. 

108See id. 

109See id. at 16751. 

110See infra note 240. See also Proposing Release, 

85 FR at 16739. 

purchase the most comprehensive or 

fastest consolidated market data product 

available. The legal requirements that 

establish minimum data standards for 

certain purposes are not changing. 

Specifically, Rule 603(c) of Regulation 

NMS,97 the Vendor Display Rule, 

requires SIPs and broker-dealers to 

provide a consolidated display, as 

defined in Rule 600(b)(17) of Regulation 

NMS,98 in a context in which a trading 

or order routing decision can be 

implemented. In addition, in order to 

comply with Rule 611 of Regulation 

NMS, the Order Protection Rule, trading 

centers, as defined in Rule 600(b)(95) of 

Regulation NMS,99 must have access to 

the protected bid and protected offer. 

While these rules are impacted by the 

new definition of round lot, and the 

data that must be processed and 

displayed will change as the definition 

of round lot changes, the minimum data 

requirements associated with these rules 

are not changing.100 Additionally, 

market participants will need to obtain 

regulatory data to meet regulatory 

obligations and to be informed of 

trading halts, price bands, or other 

market conditions that may affect their 

trading activity.101

Best execution analysis varies 

depending upon the characteristics of 

customers and orders handled. For 

example, the data requirements for an 

institutional broker’s smart order router 

(‘‘SOR’’) executing large algorithmic 

orders are likely different than for a 

small retail broker’s visual display for 

non-professional individual investors. 

Given the large array of potential 

scenarios, the Commission cannot 

specify the data elements that may be 

relevant to every specific situation. 

Rather, broker-dealers must perform a 

best execution analysis to determine 

what data is relevant to obtaining best 

execution of customer orders, in a 

manner that is similar to decisions they 

must make today regarding whether to 

obtain data content that is available on 

a proprietary basis. 

In addition, the decentralized 

consolidation model will change the 

method by which market data is 

disseminated by introducing competing 

consolidators, who will offer 

consolidated market data products, 

which broker-dealers may choose as a 

source of market data. The speed of 

execution, the availability of accurate 

information affecting choices as to the 

most favorable market center for 

execution, and the availability of 

technological aids to process such 

information may be relevant factors in 

conducting a best execution analysis.102

While all competing consolidators will 

offer consolidated market data products, 

they may do so at different prices or at 

different latencies or with different 

amounts of data content.103 Therefore, 

the selection of a competing 

consolidator may also be relevant to a 

broker-dealer’s ability to achieve and 

analyze best execution. Competing 

consolidators will be required to 

disclose information about their 

consolidated market data products, 

including the services they will offer, 

the prices for such services as well as 

performance metrics.104 These 

disclosures should help to facilitate a 

broker-dealer’s ability to achieve and 

analyze best execution because they 

provide information regarding the 

timeliness, completeness, and accuracy 

of the market data offered by competing 

consolidators.105 These disclosures also 

provide statistics on capacity, network 

delay, and latency, offering additional 

insight into the technical capabilities 

and expected performance of a 

competing consolidator. This 

information will assist a broker-dealer 

in selecting an appropriate competing 

consolidator, which will affect the 

broker-dealer’s ability to obtain ‘‘the 

most favorable terms reasonably 

available under the circumstances’’ for 

its customer orders. The Commission 

believes that a broker-dealer that uses 

low-latency or content-rich consolidated 

market data, whether self-aggregated or 

received from a competing consolidator, 

for its proprietary trading, would also be 

expected to use those data products 

when pursuing the best execution of 

customer orders, particularly those 

handled within the same aggregation 

unit that conducts proprietary trading. 

For example, a broker-dealer should not 

use a separate, less performant data 

source for its customer orders than the 

data source used for proprietary orders 

that may interact with those customer 

orders in a manner disadvantageous to 

those customer orders.106

II. Enhancements to NMS Information 

A. Introduction 

Today, most market participants 

utilize electronic trading systems to 

execute orders for themselves and for 

their customers. These electronic 

trading systems, which consume many 

pieces of data in an effort to trade 

competitively and efficiently in today’s 

markets, are designed to analyze more 

information than is provided by the 

exclusive SIPs. Given that the current 

market is vastly different from when the 

national market system was established 

in the 1970s, the Commission believes 

that a broad cross-section of market 

participants would benefit from 

information that goes beyond SIP data to 

trade competitively and efficiently and 

that the information that is provided 

within the national market system needs 

to be augmented with new information 

elements. As discussed in detail below, 

the Commission is adopting new rules 

and amending certain existing rules 

under Regulation NMS to add new 

elements to the information that is 

collected, consolidated, and 

disseminated under the national market 

system. 

By way of example, in the 1970s, 

trading volume in any given stock was 

concentrated on its listing exchange and 

trading largely occurred manually with 

individuals representing orders on 

exchange floors.107 Since then, 

technology has fundamentally altered 

market operations and trading today 

largely occurs electronically with little 

human intervention.108 Numerous other 

changes have also impacted how trading 

occurs. For example, in 2001, 

decimalization reduced the increment of 

trading from fractions to pennies and 

resulted in a reduction in the size of 

liquidity at the best prices, commonly 

referred to as the ‘‘top of book.’’ 109 The 

reduction in displayed order interest at 

the best bid or offer means liquidity is 

layered across multiple price levels, 

which makes depth of book information 

necessary for many market participants 

and trading systems to trade in an 

informed and effective manner. 

In addition, individual odd-lot 

quotations, especially in high share 

price stocks, have become more 

prevalent 110 and important to market 

participants as individual share prices 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18607 

111See Proposing Release, 85 FR at 16739 (stating 

that between 2004 and 2019, the average price of 

a stock in the Dow Jones Industrial Average nearly 

quadrupled). 

112See id. at 16740 (noting multiple Roundtable 

panelists and commenters supported the addition of 

odd-lot information to SIP data), 16751–52 (noting 

multiple Roundtable panelists and commenters 

supported the addition of depth of book data to SIP 

data), 16758 (noting multiple Roundtable panelists 

and commenters supported the addition of auction 

information to SIP data). 

113See, e.g., Securities 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). 

114Section 11A(c)(1)(B) of the Exchange Act 

provides the Commission with the authority to, 

among other things, assure the fairness and 

usefulness of the form and content of quotation and 

transaction information. 

115See, e.g., letter from John A. Zecca, Executive 

Vice President, Chief Legal Officer, and Chief 

Regulatory Officer, Nasdaq, to Vanessa 

Countryman, Secretary, Commission, dated May 26, 

2020, (‘‘Nasdaq Letter IV’’) at 31–34; letter from 

Elizabeth K. King, Chief Regulatory Officer, ICE, 

and General Counsel and Corporate Secretary, 

NYSE, to Vanessa Countryman, Secretary, 

Commission, dated June 1, 2020, (‘‘NYSE Letter II’’) 

at 3–8; letter from Joseph Kinahan Managing 

Director, Client Advocacy and Market Structure, TD 

Ameritrade, to Vanessa A. Countryman, Secretary, 

Commission, dated June 1, 2020, (‘‘TD Ameritrade 

Letter’’) at 4. 

116See infra Section II.C.2(a). 

117See infra Section III.E.2(e). 

118See supra Section I.E (discussing the 

implications for best execution). 

119See supra Section I.A. 

120As discussed below, the Commission also 

proposed and is adopting definitions for ‘‘core 

data,’’ ‘‘regulatory data,’’ ‘‘administrative data,’’ and 

‘‘self-regulatory organization-specific program 

data.’’ See infra Sections II.C, II.H, II.J, II.K, 

respectively. 

have increased.111 Finally, an increasing 

proportion of total trading volume is 

executed during opening and closing 

auctions, which has made information 

about orders participating in auctions 

increasingly important to many market 

participants. These changes have led 

market participants to call for additional 

information to be included in 

consolidated market data so that market 

participants can participate more fully 

and competitively.112 However, very 

few adjustments 113 have been made to 

NMS information to account for these 

changes since the adoption of the 1975 

Amendments. 

The Commission believes that the 

content of current SIP data and the 

mechanism by which SIP data is 

collected, consolidated, and 

disseminated has not kept pace with 

market developments. Therefore, the 

Commission is adopting these 

amendments to specify additional 

information that must be made available 

pursuant to the effective national market 

system plan(s).114 Information about 

better priced orders in smaller sizes can 

improve investors’ ability to trade at the 

best prices available. Further, certain 

market participants can more efficiently 

place larger sized orders that may not be 

fully executed at top of book prices 

using information about the prices of 

orders outside of the best bids and best 

offers, and they can more effectively 

participate in exchange auctions using 

relevant information about the trading 

interest in such auctions. Finally, 

market participants also need to have, 

and will continue to receive, regulatory 

information, administrative data, and 

other important information to 

participate effectively in the markets. 

The Commission received comments on 

each of these issues. 

As discussed more fully below, some 

commenters, stating that the 

information is not necessary for all 

investors, questioned the need to add 

new information elements.115 While the 

Commission recognizes that different 

market participants need differing 

amounts of information to meet 

different trading objectives, the 

Commission believes that the 

availability of the new information will 

enhance the ability of market 

participants to trade competitively and 

efficiently and will indirectly benefit 

investors who place orders in the 

national market system even if they do 

not directly consume all of the new data 

elements by facilitating executing 

broker-dealers’ access to information.116

In today’s market, information about 

odd-lot quotations, depth of book 

quotations, and auction information has 

become highly relevant. Together, these 

pieces of information can be 

significantly beneficial in facilitating 

informed trading decisions, and the 

Commission believes that they should 

be more widely distributed and more 

readily accessible. The Commission 

anticipates that a variety of consolidated 

market data products will be developed 

to meet the various needs investors have 

for data.117 The Commission believes 

that the amendments will enhance the 

usefulness of NMS information and thus 

better inform trading and investment 

decisions for all investors, which in turn 

will help maintain fair and efficient 

markets as well as facilitate best 

execution of customer orders.118

Accordingly, as discussed in more 

detail below, the Commission is 

adopting several new defined terms 

under Rule 600 of Regulation NMS to 

specify, and as a result expand and 

enhance, the data that Regulation NMS 

requires to be collected, consolidated, 

and disseminated. Importantly, the 

Commission is adopting two new 

definitions under Regulation NMS— 

‘‘consolidated market data’’ and ‘‘core 

data’’—to specify the components of 

NMS information that are required to be 

collected, consolidated, and 

disseminated under the national market 

system. ‘‘Consolidated market data 

product’’ is defined as any data product 

developed by a competing consolidator 

that contains consolidated market data 

or any of the elements or 

subcomponents thereof. The 

Commission is also adopting additional 

defined terms to further set forth the 

scope of information included within 

the definitions of consolidated market 

data and core data. The definitions 

include information that is currently 

provided by the exclusive SIPs as well 

as new information designed to ensure 

that brokers, dealers, and investors have 

available information with respect to 

quotations for and transactions in 

securities that is prompt, accurate, 

reliable, and fair.119

B. Definition of ‘‘Consolidated Market 

Data’’ Under Rule 600(b)(19) 

1. Proposal 

The Commission proposed 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 

through the proposed definition of 

‘‘consolidated market data.’’ 

Specifically, the Commission proposed 

that consolidated market data would 

include 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).120 In 

addition, the proposed definition of 

consolidated market data would be used 

to delineate the responsibilities and 

obligations of the SROs under Rule 

603(b) and competing consolidators 

under Rule 614. These rules implement 

the decentralized consolidation model, 

which is discussed in more detail in 

Section III below. 

2. Final Rule and Response to 

Comments 

The Commission received a number 

of comments on the proposed expansion 

of NMS information related to the 

specific elements that make up 

18608 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

121See infra Sections II.C through II.K. 

122See Capital Group Letter at 2. 

123TD Ameritrade Letter at 3 (quoting Regulation 

NMS Adopting Release). 

124See Clearpool Letter at 11 (stating that the 

Commission should provide flexibility in the 

definition of core data or the process by which the 

elements of core data are determined); RBC Letter 

at 4 (stating that the proposed definition of core 

data should serve as a ‘‘floor’’ that the Operating 

Committee should be permitted to expand upon 

(but not reduce) pursuant to Plan amendments); 

letter from Emil R. Framnes, Global Head of 

Trading, and Simon Emrich, Market Structure and 

Trading Research, Norges Bank Investment 

Management Letter, to Vanessa Countryman, 

Secretary, Commission (‘‘NBIM Letter’’) at 5 (‘‘[I]t 

might be prudent to allow for further modification 

of the definition of core data as market structure 

evolves.’’). 

125NYSE Letter II at 3. 

126See letter from Kelvin To, Founder and 

President, Data Boiler Technologies, LLC, to 

Vanessa Countryman, Secretary, Commission, dated 

May 26, 2020, (‘‘Data Boiler Letter I’’) at 19–20. 

However, this commenter also stated that 

administrative data should be included in the 

proposed definition of consolidated market data. 

See id. at 34. 

127The Commission is modifying the definition of 

exchange-specific program data to be self-regulatory 

organization-specific program data. See infra 

Section II.K. 

128See infra Sections II.C through II.K. 

129See Proposing Release, 85 FR at 16735. See 

also infra Section II.C.2(a); supra Section I.E. 

130See infra Sections II.C through II.K. 

131See NYSE Letter II at 3. 

132See infra Section III. See also infra notes 139 

and 140 and accompanying text (discussing the 

Commission’s adoption of the new defined term 

‘‘consolidated market data product’’). 

133See infra Section II.H. 

134See Clearpool Letter at 11. 

135See Proposing Release, 85 FR at 16734. 

136See infra Sections II.C through II.G. 

137The Commission will continue to monitor the 

usefulness of these core data elements to market 

participants and consider whether any 

modifications to the definition of core data are 

necessary or appropriate as the markets evolve. 

Interested persons also may petition the 

Commission to amend such definition if they 

believe particular changes are warranted. 

138See infra Sections II.H, II.J, and II.K. Both SRO 

rule changes and effective national market system 

plan amendments are subject to the public notice 

and comment process, as well as Commission 

review. See Exchange Act Section 19(b)(1), 15 

U.S.C. 78s(b)(1); 17 CFR 240.19b–4 (Rule 19b–4); 

Rule 608(b) of Regulation NMS, 17 CFR 242.608(b). 

139See infra Section VIII. 

140See infra Section III.C.8(a). 

consolidated market data,121 and the 

Commission also received some 

comments on the proposed definition of 

consolidated market data. One 

commenter supported the expansion of 

NMS information to include the 

proposed elements of consolidated 

market data.122 Another commenter 

agreed with the proposed definition, 

stating that these data elements need to 

be clearly defined and categorized and 

that ‘‘tight definitions would assist to 

‘preserve the integrity and affordability 

of the consolidated data stream.’ ’’ 123

Other commenters, however, stated 

that the Commission should allow 

additional core data elements to be 

included in consolidated market data 

through a process other than 

Commission rulemaking.124 A different 

commenter stated that the proposed 

changes to consolidated market data are 

‘‘not appropriately tailored to the needs 

of the market’’ and ‘‘are overly broad 

and unnecessarily complex.’’ 125

Another commenter, while agreeing that 

the definition of consolidated market 

data should be defined as proposed, 

suggested that it should only include 

depth-of-book data, certain odd-lot 

information, and three options for 

including auction data.126

The Commission is adopting the 

definition of consolidated market data 

largely as proposed.127 As discussed in 

detail below,128 the Commission 

continues to believe that expanding the 

NMS information that is required to be 

provided under the rules of the national 

market system, as set forth in the 

definition of consolidated market data, 

would 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 brokerdealers.129 As reflected in comments 

received from a variety of market 

participants, each of the elements of 

consolidated market data—and in 

particular the expansion of core data to 

include quotation interest in smaller 

orders of higher-priced stocks, depth of 

book data, and auction information— 

would provide significant, useful 

information to market participants.130

Consistent with the views of market 

participants—many of whom will be the 

users of consolidated market data—that 

this data would be useful to them to 

improve investment decisions and 

facilitate the best execution of customer 

orders, the Commission believes that the 

definition of consolidated market data is 

‘‘appropriately tailored’’ to market 

participants’ needs, that it is not overly 

broad, and that it does not entail 

unnecessary complexity.131 In addition, 

the proposed decentralized 

consolidation model permits competing 

consolidators to offer, and market 

participants to consume, customized 

market data products that suit their 

particular needs. This flexibility 

addresses concerns that consolidated 

market data is overly broad or 

unnecessarily complex because it allows 

competing consolidators and their 

subscribers to adjust the breadth and 

complexity of the market data products 

they offer and consume, respectively.132

On the other hand, limiting 

consolidated market data to only depth 

of book data, certain odd-lot 

information, and auction data, as one 

commenter suggested, would not 

include regulatory data—such as 

information regarding trading halts and 

price bands—that the Commission 

believes is necessary to trade effectively 

and efficiently.133

In response to comments 

recommending a more streamlined or 

flexible process to include additional 

data elements in core data,134 the 

Commission agrees that the definition of 

consolidated market data should permit 

additional data elements to be added 

pursuant to effective national market 

system plan amendments. However, the 

Commission continues to believe that 

this process should be limited to future 

regulatory, administrative, or selfregulatory organization-specific program 

information.135 As discussed below,136

the transaction and quotation 

information reflected in the definition of 

core data—including best bids and 

offers, the NBBO, protected quotations, 

last sale data, depth of book data, and 

auction information—is specified in the 

rule.137 The rule as proposed and 

adopted is designed to account 

appropriately for additional regulatory, 

administrative, and self-regulatory 

organization-specific program 

information data elements that may 

emerge periodically through the 

approval of new SRO rules or the 

development and refinement of 

technical specifications to be included 

in consolidated market data through the 

effective national market system plan 

amendment process.138

The Commission is defining a new 

term, ‘‘consolidated market data 

product’’ to mean any data product 

developed by a competing consolidator 

that contains consolidated market data 

or components of consolidated market 

data. The definition of consolidated 

market data product also specifies that 

components of consolidated market data 

include the enumerated elements, and 

any subcomponent of the elements, of 

consolidated market data in 

§ 242.600(b)(19) and that all 

consolidated market data products must 

reflect data consolidated across all 

national securities exchanges and 

national securities associations.139 As 

discussed further below, Rule 614 will 

require competing consolidators to offer 

one or more consolidated market data 

products to their subscribers, and will 

not, as proposed, require them to offer 

a product that contains all elements of 

consolidated market data.140 In 

addition, the Commission recognizes 

that some market participants will not 

want or need a consolidated market data 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18609 

141U.S. Const. amend. 5 (‘‘No person shall be 

held to answer for a capital, or otherwise infamous 

crime, unless on a presentment or indictment of a 

grand jury, except in cases arising in the land or 

naval forces, or in the militia, when in actual 

service in time of war or public danger; nor shall 

any person be subject for the same offense to be 

twice put in jeopardy of life or limb; nor shall be 

compelled in any criminal case to be a witness 

against himself, nor be deprived of life, liberty, or 

property, without due process of law; nor shall 

private property be taken for public use, without 

just compensation.’’). 

142Nasdaq Letter IV at 50. 

143 Id. 

144 Id. at 50–51. 

145See supra note 5. 

146See Ruckleshaus v. Monsanto Co., 467 U.S. 

986, 1005–07 (1984) (noting that the reasonableness 

of an investment-backed expectation depends in 

part on whether the regulated activity has been in 

an area ‘‘that has long been the source of public 

concern and the subject of government regulation’’); 

District Intown Properties Ltd. P’ship v. District of 

Columbia, 198 F.3d 874, 884 (D.C. Cir. 1999) 

(‘‘Businesses that operate in an industry with a 

history of regulation have no reasonable expectation 

that regulation will not be strengthened to achieve 

established legislative ends.’’); Me. Educ. Ass’n 

Benefits Tr. v. Cioppa, 695 F.3d 145, 154 (1st Cir. 

2012) (the plaintiff’s ‘‘expectations are substantially 

diminished by the highly regulated nature of the 

industry in which it operates’’). 

147See Proposing Release, 85 FR at 16730. 

148See, e.g., Rules 601, 602, and 603 of 

Regulation NMS. 

149See supra note 16. 

150As discussed below, the proposed definition 

of core data also specified an odd-lot aggregation 

methodology for protected quotations. See infra 

Section II.E.2(b). 

151See Proposing Release, 85 FR at 16736. 

152See T. Rowe Price Letter at 1–2 (‘‘Expanding 

the content of NMS information would improve its 

utility when consumed electronically (e.g., by 

algorithmic trading systems or smart order 

routers).’’); BlackRock Letter at 2 (‘‘BlackRock is 

supportive of expanding and revamping the content 

of NMS information. We agree that this would help 

to reduce information asymmetries between market 

participants who rely upon SIP data and those who 

purchase proprietary data feeds from the national 

securities exchanges.’’). 

153See Clearpool Letter at 11 (supporting ‘‘the 

inclusion of this additional information in core 

data, which can reduce the reliance on exchanges’ 

proprietary data feeds and provide market 

participants with additional information to make 

informed order routing and execution decisions,’’ 

while also ‘‘recommend[ing] that the Commission 

require a ‘retail interest indicator’ to be added to 

quotes to assist market participants in defining 

what portion of the quote is attributable to retail 

interest’’); RBC Letter at 4 (stating that RBC 

‘‘generally support[s] the Proposal’s definition of 

Core Data’’); letter from Tim Lang, Chief Executive 

Continued 

product that contains all elements of 

consolidated market data. 

3. The Fifth Amendment’s Takings 

Clause 

The Constitution’s Takings Clause 

prevents the taking of private property 

for public use without just 

compensation.141 One commenter stated 

that the proposal to expand the data that 

would be required to be provided under 

Regulation NMS would violate the 

Takings Clause by ‘‘effecting a physical 

taking . . . without just 

compensation.’’ 142 The commenter 

asserted that the proposal would require 

it to ‘‘turn over vast amounts of their 

proprietary market data—valuable 

property that Nasdaq currently sells to 

market participants at a reasonable rate 

of return—to competing consolidators 

and self-aggregators at prices set by the 

operating committee of the consolidated 

NMS plan.’’ 143 The commenter stated 

that the government would ‘‘expropriate 

property belonging to Nasdaq and 

redistribute it to Nasdaq’s competitors at 

prices set, in part, by the non-SRO 

members of the consolidated NMS 

plan’s operating committee’’ that would 

be ‘‘laboring under a conflict-of-interest 

and would have no incentive to pay 

‘just compensation’ for the property 

taken from Nasdaq.’’ 144

Neither the expansion of NMS 

information pursuant to the definition 

of consolidated market data nor the 

requirement that national securities 

exchanges and associations make the 

data necessary to generate consolidated 

market data available to competing 

consolidators and self-aggregators 

constitutes a taking for the following 

reasons. The Commission’s action does 

not encroach on or appropriate any 

property. The exchanges developed 

their proprietary data within a highly 

regulated statutory and regulatory 

structure that provides the Commission 

with ample authority to decide—and 

revise—which types of information the 

exchanges must provide to market 

participants to fulfill their 

responsibilities under the Exchange 

Act.145 Moreover, the SROs will be 

compensated for making the data 

necessary to generate consolidated 

market data available to competing 

consolidators and self-aggregators 

pursuant to fees established by the 

effective national market system plan(s). 

Even if non-SRO members of plan 

Operating Committees have a degree of 

authority to influence proposed 

consolidated market data fees, the 

Commission retains authority to ensure 

that those fees are ‘‘fair and reasonable’’ 

and ‘‘not unreasonably discriminatory.’’ 

The exchanges thus had no reasonable 

basis to expect that the current 

regulatory structure would remain in 

place in perpetuity in this highly 

regulated field, and, in any event, they 

will not be deprived of the economic 

benefits of the information they will 

provide to market participants.146

C. Definition of ‘‘Core Data’’ Under Rule 

600(b)(21) 

1. Proposal 

As stated in the Proposing Release,147

Regulation NMS does not contain a 

definition of ‘‘core data,’’ although 

various Regulation NMS rules describe 

the information that is required to be 

collected, consolidated, and 

disseminated under Regulation NMS.148

The Commission proposed defining 

‘‘core data’’ to include the information 

currently referred to as core data—last 

sale data, each SRO’s best bid and best 

offer (‘‘BBO’’), and the NBBO 149—along 

with new information that is not 

currently required to be provided under 

Regulation NMS or by the exclusive 

SIPs. The proposed new information 

included quotation data for smallersized orders in higher-priced stocks 

(pursuant to a new definition of ‘‘round 

lot’’), information on certain quotations 

below the best bid or above the best 

offer (pursuant to a new definition of 

‘‘depth of book data’’), and information 

about orders participating in auctions 

(pursuant to a new definition of 

‘‘auction information’’). Specifically, the 

proposed definition of core data 

included: (A) Quotation sizes; (B) 

aggregate quotation sizes; (C) best bid 

and best offer; (D) national best bid and 

national best offer; (E) protected bid and 

protected offer; (F) transaction reports; 

(G) last sale data; (H) odd-lot transaction 

data disseminated pursuant to the 

effective national market system plan or 

plans required under § 242.603(b) as of 

[date of Commission approval of this 

Adopting Release]; (I) depth of book 

data; and (J) auction information. 

Additionally, the proposed definition 

of core data specified how odd-lots are 

to be aggregated for purposes of certain 

data elements included within the 

definition of core data. Specifically, the 

proposed definition stated that the best 

bid and best offer, national best bid and 

national best offer, and depth of book 

data shall include odd-lots that when 

aggregated are equal to or greater than 

a round lot, and that such aggregation 

shall occur across multiple prices and 

shall be disseminated at the least 

aggressive price of all such aggregated 

odd-lots.150

Finally, the proposed definition of 

core data did not include certain 

information—specifically, OTC Bulletin 

Board (‘‘OTCBB’’) data, and corporate 

bond and index data—that is currently 

provided by the exclusive SIPs.151

2. Final Rule and Response to 

Comments 

(a) Expansion of Core Data, Generally 

Multiple commenters supported the 

expansion of NMS information 

generally 152 and of core data 153 in 

18610 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

Officer, ACS Execution Services, LLC, to Vanessa 

Countryman, Secretary, Commission, dated May 26, 

2020, (‘‘ACS Execution Services Letter’’) at 2; IEX 

Letter at 2 (‘‘We support the Market Infrastructure 

Proposal because it will update the content of ‘core 

data’ to better reflect the information needed to 

participate in today’s markets . . . .’’); ICI Letter at 

4 (‘‘We support the Commission expanding the 

scope of core data, which will benefit funds and 

their shareholders.’’). 

154As discussed below, many commenters also 

expressed views on the specific elements of the 

definition of core data. See infra Sections II.D; II.E; 

II.F; II.G. 

155ACS Execution Services Letter at 2. 

156Letter from Jeffrey T. Brown, Senior Vice 

President Legislative and Regulatory Affairs, 

Charles Schwab & Co., Inc., to Vanessa 

Countryman, Secretary, Commission, dated May 26, 

2020, (‘‘Schwab Letter’’) at 2–3. 

157 Virtu Letter at 2, 5 (‘‘[T]he ‘core data’ offered 

through the SIPs is no longer sufficient for most 

market participants to trade competitively in 

today’s marketplace.’’). 

158See TD Ameritrade Letter at 3. 

159NYSE Letter II at 3–4. 

160Nasdaq Letter IV at 7–8. 

161 Id. at 8 (footnote removed). See also NYSE 

Letter II at 3–8; TD Ameritrade Letter at 4. 

162The Commission is revising the proposed 

definition of core data to include odd-lots priced at 

or better than the NBBO, to specify how quotation 

sizes are to be displayed in core data, and to require 

SRO attribution of core data elements. The 

Commission is also modifying the proposed 

definitions of depth of book data and auction 

information and is not adopting the proposed 

amendments to the definition of protected bid or 

protected offer, which definitions are embedded in 

the definition of core data. The particular elements 

of the definition of core data are discussed below. 

See infra Sections II.C.2(b); II.D; II.E; II.F; II.G. 

163See Proposing Release, 85 FR at 16735–76. 

164See, e.g., T. Rowe Price Letter at 2 (‘‘We 

believe the addition of depth of book data 

(specifically, the five price levels above the 

protected offer and below the protected bid) and 

auction imbalance information, including opening, 

reopening, and closing auctions, will make SIP data 

a much more viable alternative to proprietary 

market data. . . . This additional data will help 

reduce the information asymmetries that currently 

exist between SIP data and proprietary data.’’); ACS 

Execution Services Letter at 2 (‘‘ACS strongly 

supports expanding core data to include additional 

information of significance to investors. As the 

proposal notes, through the provision of such 

additional information, market participants may 

have access to data to make better routing and 

trading decisions.’’). 

165See, e.g., Virtu Letter at 5 (‘‘[I]ncluding depth 

of book information in the SIP will allow investors 

who cannot afford to pay for costly Exchange 

proprietary feeds to trade more competitively in the 

marketplace, and we believe five levels of depth of 

book is a reasonable and appropriate place to 

land.’’); Clearpool Letter at 11 (‘‘[C]urrently, the 

‘core data’ provided through the SIP only includes 

the NBBO and top-of-book data. For this reason, 

there continues to be no viable alternatives for 

broker-dealers to paying exchanges for their 

proprietary market data, both to provide 

competitive execution services to clients and, 

equally important, to meet best execution 

obligations. Clearpool therefore strongly supports 

the inclusion of this additional information in core 

data, which can reduce the reliance on exchanges’ 

proprietary data feeds and provide market 

participants with additional information to make 

informed order routing and execution decisions.’’); 

IEX Letter at 5–6 (‘‘For these reasons, the NBBO no 

longer encompasses the ‘core data’ that market 

participants need to stay competitive and satisfy 

best execution responsibilities. The fact that depth 

of book data can only be obtained through exchange 

proprietary data feeds allows exchanges to charge 

extraordinarily high prices completely 

disproportionate to any reasonable estimation of the 

cost of producing that data. . . . Importantly, 

however, to the extent that a significant subset of 

market participants could rely on this data as a 

viable alternative to purchasing proprietary data, or 

could viably choose to purchase less proprietary 

data than they need today, it could help to harness 

market competition to restrain data fee increases 

that today are largely unrestrained.’’); letter from 

James J. Angel, Associate Professor of Finance, 

Georgetown University, to the Commission, dated 

June 12, 2020, (‘‘Angel Letter’’) at 7–8 (‘‘Providing 

data on a visibly level playing field will increase 

public trust in the integrity of the markets. . . . 

Freely available information about the entire 

market, including orders inside the spread and the 

depth of book, will reduce the asymmetry of 

information in the market between small retail 

investors and larger players. This added 

transparency will reduce the notion that markets 

are ‘rigged’ in favor of larger players.’’). 

166See Proposing Release, 85 FR at 16735–59 

(discussing market developments such as rising 

stock prices and increased odd-lot trading, 

decimalization, and the growth of auctions and the 

need to expand core data to include smaller-sized 

orders in higher priced stocks, depth of book data, 

and auction information to help market participants 

use core data to trade in a more informed and 

effective manner in light of these developments); 

infra Sections II.D through II.G. 

particular.154 One commenter, 

‘‘agree[ing] that the proposed 

information to be included in core data 

has become much more important to 

broker-dealers in recent years . . .,’’ 

‘‘strongly support[ed] expanding core 

data to include additional information 

of significance to investors.’’ 155 Another 

commenter stated that ‘‘add[ing] more 

pricing information to the consolidated 

tape . . . would be a fundamental 

improvement that would expand data 

access to Main Street investors in a very 

meaningful way.’’ 156 A different 

commenter said that ‘‘all data is ‘core 

data.’ ’’ 157

Some commenters opposed the 

expansion of core data, however. One 

commenter, though agreeing that 

Regulation NMS should define core 

data, stated that the new proposed core 

data elements are not necessary or 

useful for all market participants but 

will raise the costs of core data for all 

market participants by requiring them to 

receive and process core data to meet 

their regulatory obligations. 158

Similarly, another commenter, though 

supportive of the Commission formally 

defining core data in its regulations, 

argued that the proposed definition was 

‘‘poorly designed’’ because it ‘‘only 

consider[s] the requirements of market 

participants that need, and are able to 

consume, a richer data set’’ and that the 

proposed definition ‘‘would require 

non-professional investors who do not 

need such rich data to purchase and 

consume even more unnecessary data 

elements (e.g., depth of book data) than 

the current SIP product provides.’’ 159

Another commenter argued that the 

Commission falsely assumed that the 

decision by some market participants to 

supplement current core data with 

proprietary data means that this 

additional data is necessary to all 

market participants and investors, and 

that the expanded set of information 

included in the proposed definition of 

core data ‘‘is neither necessary nor 

relevant to the business models and 

trading or investment strategies of 

many, if not most, ordinary investors 

and market participants.’’ 160

Additionally, the commenter stated that 

the Commission ‘‘failed to collect data 

regarding whether any meaningful 

number of market participants that 

desire access to non-core data are 

actually unable to obtain it, either 

directly from exchanges or indirectly 

(and often free of charge) from their 

brokers.’’ 161

The Commission is adopting the 

definition of core data largely as 

proposed, as discussed further below.162

In the Proposing Release, the 

Commission stated its preliminary belief 

that the content of core data has not 

kept pace with market developments 

and that the proposed expansion of core 

data would enhance its usefulness to 

address the needs of a broad crosssection of market participants.163

Comments received from a variety of 

market participants—including 

exchanges, buy-side firms, and sell-side 

firms—have borne this out. Numerous 

commenters expressed support for the 

proposed definition of core data, stating 

that the specific subcomponents of core 

data, such as five levels of depth of book 

data, would help market participants to 

trade more effectively.164 Several 

commenters also pointed out that 

expanding core data would promote a 

wider dissemination of this data, 

including to market participants who 

cannot afford expensive proprietary 

feeds.165 For the reasons discussed in 

the Proposing Release and as set forth in 

detail below with respect to the specific 

elements of core data,166 the 

Commission believes that the expanded 

definition of core data will be useful to 

market participants and will help fulfill 

needs that are not currently being met 

by SIP data. Additionally, and for the 

same reasons, the Commission disagrees 

with comments suggesting that 

proposed core data would not be useful 

to many market participants, that 

proprietary market data products are 

adequately meeting the needs of all 

market participants, and that all market 

participants that have a need to access 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18611 

167See supra note 114 (describing the authority 

under Section 11A of the Exchange Act to specify 

additional information that must be made available 

within the national market system); Section I.A 

(explaining the need to improve and modernize the 

national market system to fulfill the goals of Section 

11A of the Exchange Act and to meet the current 

core data needs of all market participants). As 

stated below, some market participants stated that 

those who do not buy the exchange proprietary 

DOB feeds and associated connectivity and 

transmission offerings are at a competitive 

disadvantage relative to market participants who 

purchase these feeds. See infra note 1620 and 

accompanying text. See also infra Sections 

III.E.2(c); V.C.2(b)(i)a (discussing how the 

amendments will affect data content fees). 

168See TD Ameritrade Letter at 3; NYSE Letter II 

at 3–4; Nasdaq Letter IV at 7–8. 

169See infra Section III.C.8(a). 

170Proposing Release, 85 FR at 16775. 

171See infra notes 174–176 and accompanying 

text. 

172See letter from Elizabeth K. King, Chief 

Regulatory Officer, ICE, General Counsel and 

Corporate Secretary, NYSE to Vanessa Countryman, 

Secretary, Commission, dated Feb. 5, 2020, (‘‘Feb. 

NYSE Letter’’) (recommending that the Commission 

expand SIP content and ‘‘create products designed 

for modern use cases, including a SIP product with 

depth-of-book quotes for institutional traders and a 

National Best Bid and Offer (‘NBBO’) only version 

for retail customers, with fees based on content 

entitlements (or levels) instead of user type’’). See 

also infra notes 1201–1208 and accompanying text. 

173See supra note 28 (describing comments 

received by the Commission regarding the high cost 

of proprietary data products that contain data 

needed for effective participation in the markets); 

infra Sections III.E.2(c); V.C.2(b)(i)a (discussing 

how the amendments will affect data content fees). 

174See infra notes 878–880; supra notes 163–167 

and accompanying text. 

175See infra notes 878–880 and accompanying 

text. 

176See supra Section I.E. 

177See Clearpool Letter at 6. 

178See infra Section II.K. 

179See Proposing Release, 85 FR at 16746. 

180See letter from Patrick Sexton, Executive Vice 

President, General Counsel, and Corporate 

Secretary, Cboe, to Vanessa Countryman, Secretary, 

Commission, dated May 26, 2020, (‘‘Cboe Letter’’) 

at 15; NYSE Letter II at 5; Nasdaq Letter IV at 14; 

RBC Letter at 5; letters to Vanessa Countryman, 

Secretary, Commission, from Kimberly Unger, Chief 

Executive Officer and Executive Director, STANY, 

dated June 11, 2020, (‘‘STANY Letter II’’) at 3; 

Anders Franzon, General Counsel, MEMX LLC, 

dated May 26, 2020, (‘‘MEMX Letter’’) at 2 (‘‘[A]ll 

data currently made available through proprietary 

data feeds should be available through NMS data 

feeds. This includes complete depth-of-book data 

(and thus all odd lot data). . . .’’). 

181See CBOE Letter at 15. 

182See NYSE Letter II at 5. 

183See Nasdaq Letter IV at 14. 

184See RBC Letter at 5. 

185See STANY Letter II at 3. 

these products are able to do so. Rather, 

the definition of core data specifies 

important information that would be 

useful to a wide variety of market 

participants—including those who do 

not obtain it through proprietary market 

data products today—and facilitates a 

broader dissemination of this 

information.167

In addition, the Commission disagrees 

with comments that the definition of 

core data would require market 

participants, including non-professional 

investors, to purchase or consume all 

data that would be defined as core data, 

and thereby increase the cost of core 

data for all.168 Competing consolidators 

are not required to offer a data product 

that includes all consolidated market 

data,169 and the Commission has 

explicitly stated that the proposed 

definitions of core data and 

consolidated market data do not 

‘‘mandat[e] the consumption’’ of 

particular data elements.170 Thus, the 

Commission believes it has considered 

and addressed the needs of market 

participants that do not directly need all 

elements of core data. The purpose of 

expanding core data is to promote wider 

dissemination of data that will be useful 

in meeting the needs of a broad array of 

market participants. As explained 

below, the enhanced core data content 

will benefit all investors, regardless of 

whether they directly consume it.171

Furthermore, the Operating Committee 

of the effective national market system 

plan(s) could develop fees for data 

content underlying consolidated market 

data offerings for different subsets of 

consolidated market data to suit the 

needs of various market participants, as 

one member of the Operating Committee 

has already suggested.172 Within this 

framework, the Commission believes 

that the market would develop to enable 

market participants to consume and pay 

for the market data that best suits their 

needs and that there would be 

downward pressure on data content 

fees.173

Moreover, the Commission believes 

that all investors will benefit, directly or 

indirectly, from the expanded definition 

of core data. Even if only a subset of 

market participants may choose to 

acquire directly a data product that 

includes the full set of data elements 

included within the definition of core 

data, the Commission believes that there 

will be ample demand for expanded 

core data 174 and a corresponding 

incentive for competing consolidators to 

offer more content-rich products. The 

Commission expects that direct 

purchasers of such products likely will 

include many broker-dealers that are 

electronically routing orders for 

execution or executing orders internally. 

As discussed below, the additional data 

elements included within the definition 

of core data are useful to efficiently and 

effectively route and execute orders in 

today’s dispersed electronic markets,175

and their widespread availability should 

facilitate broker-dealers’ ability to 

achieve best execution for customers.176

Thus, broker-dealers will be 

incentivized to acquire products 

containing the expanded core data 

elements to compete effectively for 

customer business. In addition, by 

including these additional, important 

market data elements as part of 

expanded core data, this rulemaking 

should help facilitate executing brokerdealers’ access to information, to the 

benefit of all investors. Accordingly, 

while the Commission expects only 

some market participants to choose to 

purchase a data product that includes 

the full set of core data, any market 

participant that submits an order in an 

NMS stock should benefit indirectly 

from their doing so because more 

executing broker-dealers will receive the 

data elements that will help them place 

customer orders in a more informed and 

effective manner. 

Finally, in response to the comment 

recommending that a ‘‘retail interest 

indicator’’ be added to quotes,177 the 

definition of self-regulatory 

organization-specific program 

information already incorporates retail 

interest indicators disseminated in 

current SIP data and established 

pursuant to exchange retail liquidity 

programs in the definition of 

consolidated market data.178

(b) Odd-Lot Quotations 

In the Proposing Release, the 

Commission solicited comment on 

whether core data should include oddlot quotations, but did not include oddlot quotes in the definition of core data 

other than by incorporating them 

through the proposed definition of 

round lot.179 Several commenters 

recommended directly including oddlots in core data rather than doing so 

through the mechanism of the proposed 

definition of round lot.180 Specifically, 

one commenter suggested including 

odd-lots priced better than the PBBO in 

core data,181 and another suggested 

including the best-priced odd-lot 

quotation from each exchange.182

Another commenter supported the 

Commission’s aim of increasing odd-lot 

transparency for higher priced securities 

but questioned doing so through the 

proposed definition of round lot.183 One 

commenter recommended adding 

unprotected odd-lots to core data, 

combined with best execution guidance 

on broker-dealer obligations with 

respect to odd-lot quotations, rather 

than redefining round lot.184 Similarly, 

another commenter recommended 

including odd-lot quotations in core 

data while leaving the definition of 

round lot as it currently stands.185 A 

18612 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

186See Data Boiler Letter I at 19. 187See TD Ameritrade Letter at 4–5. 188Memorandum from the Division of Trading 

and Markets regarding a June 19, 2020, meeting 

with representatives of JP Morgan (‘‘JP Morgan 

Memo to File’’) at 2 (‘‘Under today’s rules: 11.6% 

of orders contain a contra-side oddlot [sic] quote 

better than the NBBO. Under SEC’s proposed round 

lot parameters: (i) Bucket A ($50.00 and less)¥100 

share round lot¥6.3% of orders would still contain 

a contra-side oddlot [sic] quote better than the 

NBBO; (ii) Bucket B (between $50.01 and 

$100.00)¥20 share round lot¥10.9% of orders 

would still contain a contra-side oddlot [sic] quote 

better than the NBBO; (iii) Bucket C (between 

$100.01 and $500.00)¥10 share round lot¥11.6% 

of orders would still contain a contra-side oddlot 

[sic] quote better than the NBBO; (iv) Bucket D 

(between $500.01 and $1,000.00)¥2 share round 

lot¥23% of orders would still contain a contra-side 

oddlot [sic] quote better than the NBBO; (v) Bucket 

E ($1,000.01 and higher)¥1 share round lot¥all 

quotes are at round lot levels.’’). 

189Proposing Release, 85 FR at 16741. 

190See infra Section II.D (explaining that the 

Commission is adopting a four-tiered definition of 

round lot rather than the five-tiered definition that 

was proposed). 

191See JP Morgan Memo to File at 2. 

different commenter recommended 

delaying odd-lots to mitigate the impact 

on processing times.186 On the other 

hand, one commenter expressed 

concerns that adding odd-lot quotations 

to core data would harm investor 

confidence in the markets resulting from 

confusion over protected and 

unprotected quotes and increased costs 

and latency for core data by adding 

more information that needs to be 

disseminated.187 A different commenter 

presented data showing that, for a 

significant percent of orders in each of 

the Commission’s proposed round lot 

tiers, there would still be a contra-side 

odd-lot quote better than the NBBO.188

The Commission continues to be 

concerned that the availability of oddlot order information solely to market 

participants who have purchased 

proprietary market data products creates 

a potentially significant information 

asymmetry relative to market 

participants who purchase only SIP 

data.189 For the reasons discussed 

below, the Commission is also 

modifying the definition of round lot.190

While the proposed definition of round 

lot, as modified, would incorporate a 

substantial proportion of odd-lot 

quotations that occur at a price better 

than the NBBO for certain higher-priced 

stocks, the Commission is concerned 

that a significant amount of liquidity 

that could be available at better prices 

would be excluded from core data.191

After considering comments, and given 

that the adopted round lot definition, on 

its own, would have resulted in less 

odd-lot information being included in 

core data, the Commission is adopting a 

definition of core data that includes all 

odd-lots that are priced at or better than 

the NBBO, aggregated at each price level 

at each national securities exchange and 

national securities association. 

As summarized in Tables 1 and 2 

below, staff analyzed data on the 

portion of all corporate stock and ETF 

volume executed on an exchange, 

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 both the adopted and 

proposed definitions of round lot. 

TABLE 1 

Adopted round lot tier Adopted round lot definition 

Portion of all corporate stock and ETF volume 

executed on an exchange, 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 adopted definition of round lot 

$0–$250.00 ......................................................... 100 Shares ....................................................... 0%. 

$250.01–$1,000 .................................................. 40 Shares ......................................................... 65.35%. 

$1,000.01–$10,000.00 ........................................ 10 Shares ......................................................... 88.28%. 

$10,000.01 or more ............................................ 1 share ............................................................. 100.00%. 

Source: Equity consolidated data feeds (CTS and UTDF), as collected by MIDAS (May 2020); NYSE Daily TAQ. 

TABLE 2 

Proposed round lot tier Proposed round lot definition 

Portion of all corporate stock and ETF volume 

executed on an exchange, 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 proposed definition of round lot 

$0–$50 ................................................................ 100 shares ....................................................... 0%. 

$50.01–$100 ....................................................... 20 shares ......................................................... 86.32%. 

$100.01–$500 ..................................................... 10 shares ......................................................... 93.57%. 

$500.01–$1,000 .................................................. 2 shares ........................................................... 98.85%. 

$1,000.01 or more .............................................. 1 share ............................................................. 100%. 

Source: Equity consolidated data feeds (CTS and UTDF), as collected by MIDAS (May 2020); NYSE Daily TAQ. 

In comparison to the proposed tiers, 

the round lot tiers in the final rule 

would have excluded a significant 

proportion of better-priced odd-lot 

liquidity, particularly for stocks priced 

between $50.01 and $250.00, and thus 

would not have included this liquidity 

in core data absent the Commission also 

including certain odd-lots in the 

definition of core data. 

The Commission believes that this 

better-priced odd-lot liquidity needs to 

be reflected in core data because it will 

help investors and other market 

participants to trade in a more informed 

and effective manner and to achieve 

better executions and reduce the 

information asymmetries that currently 

exist between subscribers to SIP data 

and subscribers to proprietary data. 

However, the Commission continues to 

be concerned that adding all odd-lot 

quotations, particularly those at less 

aggressive price levels, could ‘‘burden 

systems, increase complexity, and 

degrade the usefulness of information in 

a manner that may not be warranted by 

the relative benefit of the additional 

information to investors and market 

participants’’ and that the inclusion of 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18613 

192Proposing Release, 85 FR at 16741. 

193As discussed below, the Commission is 

adopting a standard odd-lot aggregation 

methodology for all elements of core data, including 

the NBBO, wherein odd-lots across multiple price 

levels would be aggregated and disseminated at the 

least aggressive price. See infra Section II.C.2(d). As 

a result, odd-lots priced at or better than the NBBO 

could be both included in the NBBO and displayed 

in the aggregate at each price level by exchange. 

The Commission believes that this is appropriate, 

since the NBBO and odd-lot interest at or better 

than the NBBO provide independently valuable 

information to market participants. For example, 

odd-lots priced at or better than the NBBO are 

beneficial for order routing and achieving best 

execution, while the NBBO is protected under Rule 

611 and must be provided in certain contexts 

pursuant to the Vendor Display Rule (Rule 603(c)). 

Additionally, as discussed below, competing 

consolidators will have the ability to customize data 

products for their customers, allowing investors to 

receive only the information they are able to 

process, so the Commission does not believe that 

including better-priced odd-lots both at each price 

level at each exchange and as part of an aggregated 

round lot would confuse investors. 

194The Commission is adding odd-lots priced at 

or better than the NBBO through a new definition, 

‘‘odd-lot information,’’ that is included in the 

definition of core data. The definition of odd-lot 

information will include both odd-lots priced at or 

better than the NBBO and odd-lot transaction data. 

Odd-lot transaction data, which was added to SIP 

data by the national market system plans in 2013 

(see Proposing Release, 85 FR at 16739), was 

proposed to be included in core data as a separate 

element, but the Commission believes it will 

simplify the definition of core data to include in a 

single defined term as ‘‘odd-lot information’’ oddlots priced at or better than the NBBO and odd-lot 

transaction data. See infra Section VIII. 

195As discussed below, odd-lots priced less 

aggressively than the NBBO are not included in 

core data unless they aggregate to a round lot and 

are within the first five price levels after the NBBO. 

See infra Section II.F.2(e) (discussing odd-lot 

aggregation in the depth of book context). 

196See supra note 194. 

197See Proposing Release, 85 FR at 16736, 16739. 

198See also infra Section II.C.2(c) (discussing 

why certain other data that is included in SIP data 

today is not included in core data but will be 

available through other means). 

199This would not reintroduce a single-price-only 

odd-lot aggregation methodology in the same sense 

that prompted concerns from some commenters. 

See infra note 232 and accompanying text; Section 

II.C.2(d). Aggregating better-priced odd-lots at each 

price level at each exchange is not the same as 

aggregating odd-lots into round lots. Rather, it 

simply means that better-priced odd-lot orders will 

be represented in core data in terms of the total 

number of shares available at each price level at 

each exchange rather than on an order-by-order 

basis. For example, if the NBB for XYZ, Inc. is 100 

shares at $25.00, and there are three orders of five 

shares and two orders of ten shares at $25.01 on 

Exchange A, a competing consolidator’s core data 

product would show 35 shares at $25.01 on 

Exchange A. 

200See infra Section II.D (stating that increasing 

the minimum stock price for the first sub-100 share 

round lot tier from $50 to $250 will not improve 

odd-lot transparency for stocks priced between $50 

and $250). See also supra Tables 1 and 2. 

201See NYSE Letter II at 5. 202 In response to the comment suggesting only 

including the best-priced odd-lot quote from each 

exchange, staff supplemented the analysis above 

(see, e.g., Tables 1 and 2) that evaluated the volume 

of trades occurring in a quantity that would be 

defined as a round lot under the adopted definition, 

by also considering the volume of quotation data for 

the week of May 22–29, 2020, for stocks priced from 

$250.01 to $1000.00, which will have a round lot 

size of 40 shares pursuant to the modified 

definition of round lot that the Commission is 

adopting herein. Staff found that there is odd-lot 

interest priced better than the new round lot NBBO 

28.49% of the time, and, in 48.49% of those cases, 

there are better priced odd-lots at multiple price 

levels, confirming the view that only including the 

best-priced odd-lot quote from each exchange 

would not include sufficient information about 

better-priced odd-lot liquidity in core data. 

203See TD Ameritrade Letter at 4–5. 

odd-lot quotations in proposed core data 

should be ‘‘reasonably calibrated.’’ 192

Therefore, the Commission is 

modifying the proposed definition of 

core data to include odd-lots that are 

priced at or more aggressively than the 

NBBO.193 Specifically, pursuant to the 

revised definition of core data that the 

Commission is adopting, core data will 

include odd-lot quotations priced 

greater than or equal to the national best 

bid and less than or equal to the 

national best offer, aggregated at each 

price level at each national securities 

exchange and national securities 

association, in addition to odd-lot 

transaction data.194 Making the best 

priced quotations available in core data 

is consistent with the Commission’s 

goals in expanding the content of NMS 

information: Enhancing the availability 

and usefulness of the information, 

reducing information asymmetries, and 

facilitating best execution. In addition, 

this modification is reasonably 

calibrated to include the odd-lot 

quotation data that would be of the most 

interest to investors and other market 

participants—namely, quotations that 

offer pricing at or superior to the 

NBBO—thus limiting complexity and 

systems burdens, and therefore costs, 

relative to alternatives such as including 

all odd-lot quotations.195

The Commission is also adopting the 

proposed inclusion of odd-lot 

transaction data in the definition of core 

data, through the definition of odd-lot 

information.196 Odd-lot transaction data 

is included in SIP data today, and it 

constitutes part of the baseline 

information that provides the 

foundation of transparency and price 

discovery in the U.S. securities 

markets.197 The Commission therefore 

believes that it should be included in 

the definition of core data so that 

investors and other market participants 

who consume core data can continue to 

use it to make informed trading and 

investment decisions.198

To further limit the cost and 

complexity of the inclusion of odd-lots 

priced at or better than the NBBO in 

core data, the definition of core data 

requires these odd-lots to be represented 

in the aggregate at each price level at 

each national securities exchange or 

national securities association rather 

than on an order-by-order basis.199

Finally, as discussed below, the 

Commission is modifying the proposed 

definition of round lot, which, relative 

to the proposal, will reduce the number 

of round lot tiers and eliminate certain 

better priced quotation information from 

the NBBO.200 However, the inclusion of 

odd-lot quotes priced at or better than 

the NBBO will make available 

additional quotation information market 

participants can use to trade in a more 

informed and effective manner, which 

counterbalances this reduction in 

information. 

The Commission believes that 

including only the best-priced odd-lot 

quote from each exchange, as one 

commenter suggested,201 would not 

include sufficient information about 

better-priced odd-lot liquidity in core 

data. Because for many securities there 

are odd-lot quotes priced better than the 

NBBO at multiple price levels,202 the 

Commission believes that including 

only the best-priced odd-lot quote from 

each exchange in core data would 

perpetuate some of the critical 

information asymmetries between SIP 

data and proprietary data and could 

impair the usability of core data for 

many market participants. 

Furthermore, the Commission does 

not share the view of some commenters 

that its adoption of a modified 

definition of core data that incorporates 

odd-lots priced at or better than the 

NBBO is an alternative to redefining 

round lot sizes. Defining smaller-sized 

orders in higher-priced stocks as round 

lots, in addition to providing 

transparency into such quotations, 

ensures that these smaller-sized orders 

can establish the NBBO, receive order 

protection, and invoke the applicability 

of several other rules under Regulation 

NMS. 

The Commission does not agree that 

including quotation information about 

odd-lot orders priced at or better than 

the NBBO in core data, and enabling 

more investors to see and access this 

information, will undermine investor 

confidence in the markets resulting from 

potential confusion over protected 

versus unprotected quotes.203 As is the 

case today, Rule 611 will not protect 

these odd-lot orders except to the extent 

that they are aggregated into round lots. 

Investors and other market participants 

who do not believe they need to 

consume information on odd-lots priced 

at or better than the NBBO may choose 

not to do so, and therefore the 

18614 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

204See infra Section III.B. 

205See Order Execution Obligations, supra note 

90, at 48305 (‘‘The market maker still will have best 

execution obligations with respect to the remaining 

odd-lot portion of the customer limit order.’’). 

206See supra note 95 and accompanying text. See 

also supra Section I.E. 

207See supra note 199; infra Section III.B.5. 

208 Data Boiler Letter I at 19. 

209 Id. 

210 ‘‘OTC Equity Security’’ is defined in FINRA 

Rule 6420(f) to mean ‘‘any equity security that is 

not an ‘NMS stock’ as that term is defined in Rule 

600(b)(47) of SEC Regulation NMS; provided, 

however, that the term ‘OTC Equity Security’ shall 

not include any Restricted Equity Security.’’ In its 

comment letter, FINRA notes that the Proposing 

Release refers to ‘‘OTCBB’’ data to describe the 

quotation and transaction data for OTC equities, 

which includes both transaction data from the 

FINRA OTC Reporting Facility (‘‘ORF’’) and 

quotation data from the OTCBB. See FINRA Letter 

at 9. 

211Currently, Nasdaq UTP Plan Level 1 

subscribers can obtain OTC equity quotation and 

transaction feeds for unlisted stocks. Similarly, the 

CTA Plan permits the dissemination of ‘‘concurrent 

use’’ data relating to NYSE-listed corporate bonds 

and indexes. See Proposing Release, 85 FR at 16736. 

212 Data Boiler Letter I at 21. 

213See TD Ameritrade Letter at 4; MEMX Letter 

at 6. 

214See TD Ameritrade Letter at 4. 

215FINRA Letter at 9. 

216 Id. at 11. 

217 Id. 

218See Proposing Release, 85 FR at 16736–37. 

219See infra Section III.B. 

220As discussed below, the fees for such 

additional data would be proposed and filed by an 

individual SRO pursuant to Section 19(b), 15 U.S.C. 

78s(b), and Rule 19b–4, rather than by the effective 

national market system plan(s). See infra Section 

III.B. 

221 In addition, one commenter suggested 

including exchange-traded product (‘‘ETP’’) 

intraday indicative values (‘‘IIVs’’) in core data and 

standardizing symbology across equity data feeds. 

See Angel Letter at 1, 11. The Commission is not 

including IIVs in core data because IIVs are not 

NMS stock quote or trade information and are 

therefore outside the scope of this proposal. In 

addition, the Commission did not require exchangetraded funds (‘‘ETFs’’) to disseminate IIVs in 

adopting Investment Company Act Rule 6c-11. See 

Securities Act Release Nos. 33–10695; IC–33646 

(Sept. 25, 2019), 84 FR 57162, 57179–80 (Oct. 24, 

2019) (describing various shortcomings of IIV and 

stating that the Commission ‘‘do[es] not believe that 

IIV will provide a reliable metric for retail investors 

. . .’’). The commenter also argued that the 

different suffixes for various securities—including 

preferred shares, rights, and warrants—cause 

‘‘confusion for investors and increases the risk of 

costly trading mistakes.’’ Id. at 11. This comment 

is unrelated to the dissemination of NMS stock 

quote or trade information and is therefore outside 

the scope of this proposal. 

222See supra note 210. On September 24, 2020, 

FINRA filed a proposed rule change to eliminate its 

OTCBB. Historically, FINRA operated the OTCBB to 

provide an electronic quotation medium for OTC 

equity securities. However, FINRA represents that 

quoting on the OTCBB has declined and that the 

OTCBB does not currently display or widely 

disseminate quotation information on any OTC 

equity securities. FINRA represents that all 

quotation activity in OTC equity securities now 

occurs on member-operated interdealer quotation 

systems. As a result, in place of the OTCBB, FINRA 

is proposing to adopt enhanced requirements 

governing member interdealer quotation systems 

that provide real-time quotations in OTC equity 

securities. Among other things, the proposed rules 

would require such systems to maintain and 

enforce written policies and procedures relating to 

the collection and dissemination of quotation 

information in OTC equity securities on or through 

their systems. See Securities Exchange Act Release 

No. 99067 (Oct. 1, 2020), 85 FR 63314 (Oct. 7, 2020) 

(SR–FINRA–2020–031). 

223See FINRA Rule 6600. 

Commission does not believe the 

inclusion of this information in core 

data will confuse investors.204

Moreover, odd-lots are subject to best 

execution requirements,205 so investors 

have the assurance that their brokerdealers are required to seek the most 

favorable terms reasonably available 

under the circumstances for such orders 

despite the fact that the odd-lot quotes 

are not protected quotations pursuant to 

Rule 611.206 Furthermore, the 

Commission does not believe adding 

odd-lot quotations priced at or better 

than the NBBO to core data would 

materially increase latency for core data. 

Market participants are not required to 

consume and process this additional 

odd-lot data, and could choose a 

consolidated market data product 

offered by a competing consolidator that 

does not contain such information, 

reducing concerns about the latency 

effects of additional odd-lot information 

on core data more broadly. In addition, 

the Commission believes that the 

decentralized consolidation model will 

result in lower latencies for the delivery 

of all consolidated market data.207

The Commission does not believe that 

including a subset of odd-lot quotes in 

core data is, as one commenter 

suggested, likely to ‘‘drag the processing 

time of SIP[s] and CC[s].’’ 208 The 

Commission believes that the most 

sophisticated, latency-sensitive market 

participants rely on proprietary market 

data feeds that include all odd-lots 

simultaneously with all other market 

data, which suggests that the inclusion 

of odd-lots, particularly the subset of 

odd-lots that will be included as part of 

core data, will not materially slow data 

dissemination. Therefore, the 

Commission does not believe it is 

necessary to consider new rulemaking 

that would ‘‘make odd-lots become true 

‘outliers’ ’’ and/or require the 

publication of ‘‘ ‘delayed’ odd-lot trades 

and quotations statistics.’’ 209

(c) OTC Equity, Corporate Bond, Index, 

and Other Information 

In the Proposing Release, the 

Commission solicited comment 

regarding the exclusion of information 

related to OTC equities,210 certain 

corporate bonds, and indices from the 

definition of core data.211 Commenters 

had mixed views about whether to 

include such information in the 

definition. One commenter favored the 

exclusion of this information on the 

grounds that core data should be kept 

‘‘light,’’ 212 while others agreed with the 

Commission that this information does 

not relate to ‘‘NMS securities’’ and that 

it should not be included on that 

basis.213 One of those commenters, 

however, suggested the Commission 

ensure the information remain available 

to retail investors.214

On the other hand, FINRA highlighted 

that excluding such data ‘‘would reduce 

investor access to [such data] and raise 

investor costs.’’ 215 FINRA argued that 

because OTC equities may become 

listed and become NMS stocks and vice 

versa, providing that information in the 

same data feed ‘‘facilitates more orderly 

markets and transparency continuity in 

relation to transitioning issuers.’’ 216

Excluding such data would also, FINRA 

argued, increase costs for both FINRA 

and market participants.217

Given that OTC equities, corporate 

bonds, and indices are not NMS 

stocks,218 the Commission is not 

revising the proposed definition of core 

data to include this information, even 

though this information is currently 

disseminated by the SIPs. Nothing in 

these amendments prohibits SROs from 

independently providing this kind of 

market data. As discussed below,219

under the decentralized consolidation 

model, competing consolidators would 

be permitted to purchase data from the 

SROs and offer data products to 

subscribers that go beyond core data or 

consolidated market data.220 Therefore, 

the exclusion of these types of data from 

the definitions of core data and 

consolidated market data does not 

preclude the provision of this data to 

market participants who wish to receive 

it.221

Additionally, as trades in OTC 

equities are reported to only one SRO 

(i.e., FINRA) while NMS stocks are 

traded on multiple SROs, there is less 

need to consolidate OTC data pursuant 

to an effective national market system 

plan, which functions primarily to 

consolidate data across market centers. 

Furthermore, FINRA makes information 

on OTC trades widely available to 

market participants through its ORF.222

In addition, FINRA’s rules related to the 

reporting of OTC equity transaction data 

remain in effect, and any change to 

FINRA’s rules would require 

Commission review.223 Finally, 

pursuant to Exchange Act Sections 

15A(b)(5), (b)(6), and (b)(9), FINRA 

could recoup the costs of providing OTC 

quotation and transaction data by 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18615 

224 15 U.S.C. 78o–3(b)(5), (b)(6), and (b)(9). 

225See infra Section III.H. 

226For example, if Market A had 25 shares offered 

at $1.98, 25 shares offered at $1.99, and 50 shares 

offered at $2.00, the round lot offer would be 

displayed as 100 shares offered at $2.00. As 

discussed below, the Commission proposed a 

single-price odd-lot aggregation methodology for 

purposes of protected quotations. See infra Section 

II.E.1. 

227See Fidelity Letter at 4; IEX Letter at 4. 

228 IEX Letter at 4–5. 

229TD Ameritrade Letter at 2. See also IEX Letter 

at 5 (‘‘[I]t is important that this method be specified 

in SEC rules so as to ensure a common 

understanding of the NBBO by all market 

participants.’’). 

230 Data Boiler Letter I at 24. 

231The Commission is specifying that the 

definition of core data does not require cross-market 

odd-lot aggregation. 

232As explained below, the Commission is also 

extending the multiple-price odd-lot aggregation 

methodology to protected quotations. See infra 

Section II.E. 

233See Data Boiler Letter I at 24. 

234See infra Section II.E.2(b). 

235See CBOE Letter at 13–14. For example, an 

investor would have to know that, for a $300 stock, 

‘‘2’’ means 80 shares pursuant to the adopted round 

lot sizes. 

236The Commission has considered whether the 

entire size should be displayed including any oddlot portion rather than rounding down to the 

nearest round lot multiple. The purpose of 

rounding down to the nearest round lot multiple is 

to ensure that the enumerated elements of core data 

reflect orders of meaningful size. Specifically with 

respect to the NBBO, rounding down also helps to 

ensure that the protected portion of the order is 

clearly represented, which addresses concerns 

about impacts on investor confidence and 

confusion that could result from showing 

unprotected size at the NBBO. In addition, as 

discussed above, odd-lots priced at or better than 

the NBBO, including the odd-lot portion of a mixed 

lot order at the NBBO, will be included in core data. 

237See infra Section VIII. 

238See also Section II.F.2(b). 

239See supra note 17 and accompanying text 

(stating that core data currently includes the price, 

size, and exchange of the last sale; each exchange’s 

current highest bid and lowest offer, and the shares 

available at those prices; and the NBBO). 

charging fees that are fair, equitable, and 

do not impose an unnecessary burden 

on competition.224 The Commission 

will monitor, during the transition 

period and thereafter,225 the impact of 

these amendments on the provision of 

OTC quotation and transaction data, 

including its cost and availability, and 

consider whether additional steps are 

necessary or appropriate. 

(d) Odd-Lot Aggregation 

The Commission proposed that the 

best bid and best offer, national best bid 

and national best offer, and depth of 

book data shall include odd-lots that 

when aggregated are equal to or greater 

than a round lot, and that such 

aggregation shall occur across multiple 

prices and shall be disseminated at the 

least aggressive price of all such 

aggregated odd-lots.226 Several 

commenters supported odd-lot 

aggregation across multiple price levels 

for purposes of determining these 

elements of core data.227 One 

commenter argued that this method 

would ‘‘provide market participants 

with a reasonably complete view of the 

best bids and offers for each 

security.’’ 228 Another commenter stated 

that ‘‘a common odd-lot aggregation 

logic should be employed by all 

exchanges for the purpose of displaying 

meaningful size.’’ 229 However, a 

different commenter recommended that 

odd-lot quotes not be aggregated across 

multiple price levels because it ‘‘would 

cause unnecessary confusion.’’ 230

The Commission is adopting the 

definition of core data with odd-lot 

aggregation across multiple price levels 

and specifying that such aggregation is 

for each market.231 Specifically, the best 

bid and best offer, national best bid and 

national best offer, and depth of book 

data shall include odd-lots that when 

aggregated are equal to or greater than 

a round lot, and such aggregation shall 

occur across multiple prices and shall 

be disseminated at the least aggressive 

price of all such aggregated odd-lots.232

The Commission does not believe that 

this would cause unnecessary 

confusion 233 because many exchanges 

currently aggregate odd-lot prices in this 

manner. Setting forth this cross-price 

aggregation methodology in 

Commission rules will promote 

consistency in the calculation and 

display of core data. Additionally, this 

method of odd-lot aggregation will 

enable market participants to obtain a 

more reasonably complete view of the 

best bids and best offers of each security 

than they would if odd-lots were not 

aggregated or aggregated at only a single 

price level because the aggregation 

methodology the Commission is 

adopting captures liquidity dispersed 

across multiple prices. Furthermore, 

this odd-lot aggregation methodology 

would benefit market participants by 

promoting tighter spreads in all stocks, 

especially high priced ones.234

(e) Quotation Sizes and SRO Attribution 

in Core Data 

Currently, the size of the NBBO is 

represented in core data in terms of the 

number of round lots. For example, if a 

200 share bid at $25.00 establishes the 

national best bid, the SIP feed shows 

‘‘2’’ at $25.00. 

One commenter, believing that this 

practice might be confusing given the 

new round lot sizes, particularly to 

retail investors, recommended requiring 

size to be represented in actual shares 

rather than round lots.235

The Commission agrees that 

continuing the current size 

representation convention—i.e., the 

number of round lots—could be 

confusing. Accordingly, the 

Commission is modifying the proposed 

definition of core data to require 

quotation sizes for core data elements— 

including the NBBO, each SRO’s best 

and protected quotes, depth of book 

data, and auction information—to be 

disseminated in share sizes, rounded 

down to the nearest round lot multiple. 

For example, a 275 share buy order at 

$25.00 for a stock with a 100 share 

round lot would be disseminated as 

‘‘200.’’ 236

The Commission is also modifying the 

proposed definition of core data to 

specify that core data elements— 

specifically, the best bid and best offer, 

NBBO, protected bid and protected 

offer, transaction reports, last sale data, 

odd-lot information, depth of book data, 

and auction information—to the extent 

that they are disseminated in a 

consolidated market data product, must 

be attributed to the national securities 

exchange or national securities 

association that is the source of each 

such element.237 The Commission 

believes that SRO attribution is critical 

to the utility of these core data elements 

so that market participants know where 

to access a displayed quotation.238 This 

requirement is consistent with the 

inclusion of exchange information in 

current SIP data.239

D. Definition of ‘‘Round Lot’’ Under 

Rule 600(b)(82) 

1. Proposal 

To better ensure the display and 

accessibility of significant liquidity for 

higher-priced stocks, the Commission 

proposed a definition of round lot that 

would assign different round lot sizes to 

individual NMS stocks depending upon 

their stock price. Specifically, the 

Commission proposed to define round 

lot as: (1) For any NMS stock for which 

the prior calendar month’s average 

closing price on the primary listing 

exchange 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 

18616 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

240Staff, using the week of June 8–12, 2020, 

instead of the week of September 10–14, 2018, 

repeated the analysis from the Proposing Release of 

odd-lot trade and message volume, duration on the 

inside, order-book distribution, and quoted spreads 

for the top 500 securities by dollar volume included 

in the Proposing Release (see Proposing Release, 85 

FR at 16739–40). The results were very similar and 

confirmed observations discussed in the Proposing 

Release. Bid-ask spreads widened significantly 

when calculated using only round lots relative to 

the odd-lot quotations displayed on proprietary 

feeds, and as average stock share prices rose, bidask spreads based only on round lots generally 

widened by a greater amount than did spreads 

based on round lots and odd-lots. Specifically, 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 $0.19839 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 $0.00093. Moreover, 

frequently traded, high priced securities were more 

likely to have executions occur in odd-lot sizes 

(about 34% of the share volume of the 50 securities 

with the highest share prices) than lower priced 

securities (about 3.4% of the share volume of the 

50 securities with the lowest share prices). Finally, 

around 91% of the trades that occurred in the two 

largest securities by market capitalization that have 

share prices greater than $1,000 occurred in oddlot share amounts. 

241Staff, using data from May 2020 instead of 

September 2019, repeated the analysis from the 

Proposing Release of the proportion of odd-lot 

trades that occurred at prices that are better than the 

prevailing NBBO included in the Proposing Release 

(see Proposing Release, 85 FR at 16740). The results 

were very similar and confirmed observations 

discussed in the Proposing Release. During May 

2020, a substantial proportion of odd-lot trades 

occurred at prices that were better than the 

prevailing NBBO. Specifically, approximately 45% 

of all trades executed on exchange and 

approximately 10% of all volume executed on 

exchange in corporate stocks and ETFs (6,926 

unique symbols) occurred in odd-lot sizes (i.e., less 

than 100 shares), and 40% of those odd-lot 

transactions (representing approximately 35% of all 

odd-lot volume) occurred at a price better than the 

NBBO. 

242See, e.g., BlackRock Letter at 3 (stating that the 

proposed round lot definition is ‘‘an elegant 

solution for increasing odd-lot transparency which 

innately extends the inclusion of odd-lots to 

complementary rules and mechanisms such as the 

determination of the national best bid and offer 

(‘NBBO’), the behavior of order types, and the 

disclosure of execution statistics’’ and strikes an 

appropriate balance between including every oddlot order and enhancing the quality of market data 

by establishing a threshold notional amount, but 

cautioning that round lots should be judiciously 

calibrated into groups to minimize complexity); 

Fidelity Letter at 6 (supporting a revised definition 

of round lot for higher priced securities but urging 

the Commission to undertake an investor education 

campaign and to provide sufficient implementation 

time); Schwab Letter at 4; letter from Joan C. 

Conley, Senior Vice President and Corporate 

Secretary, Nasdaq, to Vanessa Countryman, 

Secretary, Commission, dated July 22, 2020, 

(‘‘Nasdaq Letter V’’) at 3 (‘‘Of 31 total comments on 

the proposed introduction of round lot tiers, fewer 

than half (14) supported the actual proposal; 11 

comments supported a definition different from 

what the Commission proposed, and 6 opposed 

it.’’); letter from Luc Burgun, President and CEO, 

NovaSparks S.A., to Vanessa Countryman, 

Secretary, Commission, dated Aug. 7, 2020, 

(‘‘NovaSparks Letter’’) at 1; letter from Christopher 

Solgan, VP, Senior Counsel, MIAX Exchange Group, 

to Vanessa Countryman, Secretary, Commission, 

dated Aug. 18, 2020, (‘‘MIAX Letter’’) at 5–6 

(recommending that the Commission periodically 

review the definition of round lot). 

243See, e.g., IEX Letter at 3–4 (stating that the 

proposed round lot definition would make round 

lots ‘‘less arbitrary and more comparable across 

securities . . . [because] [e]ach round lot tier above 

the $50 price level would represent a minimum 

notional value of $1,000, resulting in relatively 

comparable treatment across securities, regardless 

of per share price’’); letter from Hitesh Mittal, 

Founder and Chief Executive Officer, BestEx 

Research, to Vanessa A. Countryman, Secretary, 

Commission, dated May 21, 2020, (‘‘BestEx 

Research Letter’’) at 2; Data Boiler Letter I at 24. 

244See, e.g., T. Rowe Price Letter at 4; Capital 

Group Letter at 3. 

245See State Street Letter at 3. 

246Angel Letter at 15. See also Nasdaq Letter V 

at 17–19 (suggesting adding intelligent ticks, in 

which the standard one cent tick that applies to all 

NMS stocks would be replaced with tick sizes that 

vary depending upon the trading characteristics of 

each such stock, while eliminating round lots). 

247See, e.g., Clearpool Letter at 11–12; STANY 

Letter II at 3 (‘‘A more prudent and nonetheless 

effective approach to addressing the increased 

trading in odd-lots, would be to include odd-lot 

quotations in core data while leaving the definition 

of round-lot as it currently stands.’’); Capital Group 

Letter at 3; Letter from Gerald D. O’Connell, SIG 

Compliance Coordinator, Susquehanna 

International Group, to Vanessa Countryman, 

Secretary, Commission, dated July 27, 2020, 

(‘‘Susquehanna Letter’’) at 2 (stating that any 

benefits of the proposing release ‘‘will be impacted 

by . . . quoting congestion; . . . customer 

confusion; and . . . gaming strategies.’’); Nasdaq 

Letter IV at 10; STANY Letter II at 3–4 

(recommending that the Commission conduct a 

derivative market impact analysis because ‘‘STANY 

is concerned the Commission has not considered 

the impact and potential for investor confusion 

when trading options on securities with round-lots 

quotes in sizes less than the 100-share option 

contract convention’’); TD Ameritrade Letter at 10 

(‘‘In the current Proposal for round lot tiers at five 

different increments, the Firm is also concerned for 

the potential confusion that may also be posed to 

investors trading options when contracts remain at 

100 shares and the NBBO is quoted in lesser 

sizes.’’); letter from Robert W. Holthausen, Professor 

of Accounting and Finance, and Robert Zarazowski, 

Managing Director, Wharton Research Data 

Services, The Wharton School, University of 

Pennsylvania, to Vanessa Countryman, Secretary, 

Commission, dated May 26, 2020, (‘‘Wharton 

Letter’’) at 4 (‘‘A top of book replacement product 

for TAQ, despite possible cheaper costs from 

competing consolidators, even if it did not consist 

of more consolidated market data, would incur 

significantly greater storage costs than TAQ due to 

changes in the definition of ‘round lot.’ ’’) (footnotes 

removed). 

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 for the purchase or 

sale of an NMS stock of 1 share. The 

Commission proposed using the IPO 

price if the prior month’s average 

closing price is not available. 

As explained in the Proposing 

Release, a significant proportion of 

quotation and trading activity occurs in 

odd-lots, particularly for frequently 

traded, high-priced stocks.240 The 

proposed definition of round lot would 

incorporate information about 

meaningfully sized orders, including 

many odd-lot quotations in higherpriced stocks that are priced more 

favorably than the current round lot 

NBBO, into core data.241 This would 

improve the comprehensiveness and 

usability of core data, facilitate the best 

execution of customer orders, and 

reduce information asymmetries. 

2. Final Rule and Response to 

Comments 

The Commission received multiple 

comments on the definition of round 

lot. Commenters offered suggestions on 

various ways the proposed round lot 

tiers should be adjusted and opined on 

the proposed methodology for 

determining a stock’s price for purposes 

of assigning a round lot size to a stock. 

(a) Round Lot Tiers 

Generally: Several commenters 

expressed general support for a revised 

definition of round lot for higher-priced 

securities, but some suggested certain 

modifications to the proposed definition 

or otherwise qualified their support.242

Some commenters agreed with the 

Commission’s proposed tiers of round 

lot sizes,243 while others agreed with the 

tier-based approach, but suggested fewer 

tiers.244 One commenter, stating that a 

one-share round lot for stocks over 

$1,000 could have ‘‘unintended negative 

impacts’’ on price discovery and routing 

complexity, suggested that the 

Commission ‘‘defer action’’ on defining 

round lots (and including them in core 

data) until the Commission receives 

further public input.245

Some commenters recommended the 

Commission eliminate the concepts of 

round lots and odd-lots in favor of 

displaying the exact number of shares of 

every order, arguing that the concepts 

are ‘‘obsolete’’ because ‘‘[m]odern 

computer processing power is up to the 

task’’ of calculating ‘‘in real time the 

cost to buy or sell a given number of 

shares at the displayed prices.’’ 246

Several commenters suggested that 

the proposed five tiers would increase 

complexity, add confusion, compound 

costs, create execution-quality 

challenges, and undermine the 

usefulness of the proposal, although 

these commenters offered different 

suggestions to improve the proposal.247

One commenter, however, stated that 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18617 

248See MEMX Letter at 4. 

249See Clearpool Letter at 11–12 (recommending, 

in the alternative, reducing the number of tiers to 

three with round lot sizes of 100, 50, and 20); letter 

from Roman Ginis, Founder, Intelligent Cross, to 

Vanessa Countryman, Secretary, Commission, dated 

June 1, 2020, (‘‘IntelligentCross Letter’’) at 3; ACS 

Execution Services Letter at 3. 

250See letter from Alec Hanson, Founder, AHSAT 

LLC, to Vanessa Countryman, Secretary, 

Commission, dated May 26, 2020, (‘‘AHSAT 

Letter’’) at 3–5. A mixed lot is an order for a number 

of shares greater than a round lot that is not a 

multiple of a round lot (for example, an order for 

107 shares). See, e.g., Cboe BZX Rule 11.10. 

251See ICI Letter at 7–8; letter from Stephen John 

Berger, Managing Director, Global Head of 

Government and Regulatory Policy, Citadel 

Securities, to Vanessa Countryman, Secretary, 

Commission, dated May 26, 2020, (‘‘Citadel Letter’’) 

at 2; ACS Execution Services Letter at 3; STANY 

Letter II at 3. 

252See IntelligentCross Letter at 3. 

253See, e.g., TD Ameritrade Letter at 6–7; T. Rowe 

Price Letter at 4; Capital Group Letter at 3. 

254See TD Ameritrade Letter at 6–7 (‘‘The 

Proposal for changing the nearly universal 100 

share round lot to a price-tiered model appears to 

be based on some misconceptions. Odd lot trade 

frequency, which is cited as the justification for the 

price-tiered model, is not a valid proxy for passive 

order interest. In reality, trade size is more often 

dictated by the liquidity-taker than the liquidityprovider and is often a result of algorithmic 

‘pinging’ behavior. TD Ameritrade performed a 

review in 2019 showing that the increase in odd lot 

trades was largely due to small liquidity-taking 

orders, not small passive orders.’’) (footnotes 

removed). 

255See id. at 10–11. 

256See T. Rowe Price Letter at 4. 257See Capital Group Letter at 3. 258See Virtu Letter at 3; SIFMA Letter at 9; MFA 

Letter at 10; Susquehanna Letter at 2–4 (stating that 

the proposal would be likely to increase 

significantly, for many high-priced securities, 

‘‘growth in quote changes, order routes, missed 

executions, and reroutes from missed executions,’’ 

but acknowledging that these consequences would 

be reduced to the extent that fewer tiers are 

adopted); STANY Letter II at 3 (stating that 

‘‘[a]mong those members who support a change in 

the definition of round-lots, there is a decided 

preference for’’ this particular three-tiered 

definition). 

259SIFMA Letter at 9. 260See Schwab Letter at 4. In a subsequent letter, 

this commenter provided further support for its 

suggestion of these three tiers. See letter from 

Jeffrey T. Brown, Senior Vice President, Legislative 

and Regulatory Affairs, Charles Schwab & Co., Inc., 

to Vanessa Countryman, Secretary, Commission, 

dated Oct. 13, 2020, (‘‘Schwab Letter II’’) at 1 (‘‘An 

analysis of orders filled for Schwab clients in the 

first quarter of 2020 shows that just 5 percent of all 

odd lot orders are placed for stocks priced greater 

than $500. Of these orders, roughly the same 

number of orders are placed for stocks priced from 

$500 to $1000 and stocks priced greater than $1000. 

With such a low proportion of orders at prices 

greater than $500, Schwab believes the additional 

data provided by the SEC’s proposed highest tier 

would not justify the operational complexity it 

would create or potential to confuse investors.’’). 

261See BlackRock Letter at 3. 262See Nasdaq Letter IV at 14–15. See also Angel 

Letter at 14 (‘‘The Commission appears to have 

done little in the way of substantive economic 

analysis to determine the optimal round lot size as 

a dollar value. If it had, the proposed dollar value 

would not be oscillating between $100 and 

$5,000.’’). 

263See Nasdaq Letter IV at 14. 

264See id. at 18. 

265See id. at 17. 

266See Nasdaq Letter V at 4–5. 

267See supra Section II.C.2(b). One commenter 

suggested an ‘‘intelligent tick’’ regime as an 

alternative to new round lots. However, the 

commenter’s intelligent tick proposal states that the 

proposal ‘‘attempts to address a discrete set of 

challenges in the national market system’’ and that 

policy makers also need to consider ‘‘other, related 

challenges,’’ including round lots. See Nasdaq, 

Intelligent Ticks: A Blueprint for a Better Tomorrow 

(Dec. 2019) at 8, available at https://

www.nasdaq.com/docs/2019/12/16/IntelligentTicks.pdf. Therefore, the commenter’s intelligent 

tick proposal is not presented as an alternative to 

adopting new round lot sizes. Changes to the tick 

size of stocks are outside the scope of the 

rulemaking and the market data issues the 

Commission is addressing herein. 

adding tiers would not significantly 

increase complexity.248

Notional Value: Some commenters 

stated that the definition of core data 

should include all quotes over a certain 

notional value.249 Another commenter 

recommended basing round lots on the 

notional value of an order, rather than 

the number of shares, and suggested that 

the Commission ensure that anything 

over a minimum threshold qualifies as 

a round lot, eliminating mixed lots.250

Different Threshold: Some 

commenters suggested increasing the 

$1,000 price-based threshold but did not 

suggest a specific number.251 One 

commenter suggested, as an alternative 

to including all quotes above a notional 

level in core data (as noted above), 

increasing the price-based threshold to 

$2,000, stating that ‘‘the notional value 

of the median trade today is about 

$2,000.’’ 252

Different Tiers: Multiple commenters 

offered recommendations to recalibrate 

the tiers in the proposed round lot 

definition, ranging from two to four 

tiers.253 One commenter, who opposed 

changing the definition of round lot,254

suggested that, if the Commission is 

committed to changing the definition of 

round lot, it should use two tiers: 100 

shares for stocks priced under $500 and 

50 shares for stocks priced over $500.255

Another commenter suggested a 

different definition using two tiers: 100 

shares for stocks priced less than $250 

and 10 shares for stocks at or greater 

than $250, where the 10 share round lot 

would remain unprotected.256 Another 

commenter suggested three tiers: 100 

shares for stocks priced under $100, 10 

shares for stocks priced between 

$100.01 and $1,000, and 1 share for 

stocks priced over $1,000.01.257 Some 

commenters suggested a different threetiered definition: 100 shares for stocks 

priced under $500, 10 shares for stocks 

priced from $500.01 to $1,000, and 1 

share for stocks priced $1,000.01 or 

more.258 One of these commenters 

stated that their ‘‘recommended round 

lot sizes of 1, 10 and 100 shares are ones 

that are used today and that market 

participants are accustomed to 

seeing.’’ 259 Another commenter 

suggested another three-tiered 

definition: 100 shares for securities 

priced up to $50, 20 shares for securities 

priced between $50.01 and $500, 2 

shares for securities priced from $500.01 

and higher.260 Another commenter 

suggested reducing the proposed five 

tiers to four by collapsing the two-share 

and one-share highest-priced tiers 

because there are so few stocks in each 

of those tiers.261

Inadequate Justification for the 

Proposed Tiers: One commenter stated 

the Commission failed to explain 

adequately its rationale for choosing the 

tiers it chose, suggesting the levels are 

arbitrary.262 That commenter also 

argued that the tiers are ‘‘clunky’’ and 

could result in large shifts in a round lot 

size in response to a small change in a 

stock’s price.263 The commenter further 

stated that the Commission failed to 

consider alternatives to the round lot 

definition, including the commenter’s 

‘‘intelligent tick’’ proposal, which 

would vary tick size based upon the 

trading characteristics of each NMS 

stock.264 Additionally, that commenter 

argued that the tiers would complicate 

the national market system and ‘‘upend 

longstanding conventions’’ for market 

participants and their systems as to how 

they view and process quotes, especially 

the convention that one order of a 

security is generally thought of as 100 

shares of that security.265 Similarly, in 

a subsequent letter, this commenter 

stated that the Commission did not 

undertake ‘‘data driven analysis’’ of the 

proposed round lot definition, that 

commenters raised concerns about the 

complexity of the proposal, and that 

therefore the Commission cannot 

determine whether the benefits of the 

proposal outweigh the costs.266

The Commission is adopting a 

modified definition of round lot (and, as 

discussed above, is including odd-lots 

that are priced at or more aggressively 

than the NBBO in core data).267

Specifically, the Commission is 

adopting a four-tiered definition of 

round lot: 100 shares for stocks priced 

$250.00 or less per share, 40 shares for 

stocks priced $250.01 to $1,000.00 per 

share, 10 shares for stocks priced 

$1,000.01 to $10,000.00 per share, and 

1 share for stocks priced $10,000.01 or 

more per share. These adjustments are 

responsive to comments that the 

proposed five-tiered approach is 

unnecessarily complex and that the new 

tiers should be based on a higher 

18618 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

268See supra Table 1 (showing that under the 

four-tiered round lot approach that the Commission 

is adopting, 0%, 65.35%, 88.28%, and 100% of all 

corporate stock and ETF volume transacted in a 

quantity less than 100 shares and at a price better 

than the prevailing NBBO would be captured in the 

$0–$250.00, $250.01–$1,000.00, $1,000.01– 

$10,000.00, and $10,000.01 or more tiers, 

respectively). 

269See IntelligentCross Letter at 3 (‘‘[T]he 

notional value of the median trade today is about 

$2,000’’); Virtu Letter at 3–4 (estimating that 

‘‘average retail trade size between 2007 and the 

present is around 436 shares or $14,581’’ but also 

stating that data from 2019 to present show that the 

vast majority (over 75%) of all trades are still for 

less than $10,000); Angel Letter at 17 (‘‘[T]he 

median trade size is roughly $10,000.’’). 

270See infra Section II.E.2(a). 271See supra Tables 1 and 2. 272See supra Section II.C.2(b). 273See supra notes 249–250 and accompanying 

text. 274Similarly, the Commission does not believe 

that the concept of a round lot should be eliminated 

as ‘‘obsolete’’ because round lot orders continue to 

play an important role in the national market 

system by delineating orders of meaningful size and 

focusing regulatory requirements and protections— 

such as those set forth in Rules 602 and 603, 17 CFR 

242.604, 242.605, 242.606, and 242.610 (Rules 604, 

605, 606, and 610), and Rule 611 of Regulation 

NMS—on such orders as opposed to less significant 

orders. See Proposing Release, 85 FR at 16743–46. 

Rather, the Commission believes that eliminating 

the concept of a round lot could cause investor 

confusion and other unintended consequences. 

275 IEX Letter at 4. 

276See infra Section II.H. 

277According to data analyzed by staff for 

September 2020, 9,023 stocks would be included in 

the 100-share tier, while only 117 stocks would be 

included in the 40-share tier, 16 stocks would be 

included in the 10-share tier, and 1 stock would be 

included in the one-share tier. 

notional value threshold. The 

Commission agrees that the number of 

round lot tiers should be decreased to 

reduce cost and complexity, avoid 

potential confusion among market 

participants, and promote a smoother 

transition to the new price-based round 

lot structure. In addition, the 

Commission believes that the objective 

of including additional information 

regarding orders currently defined as 

odd-lots in core data to enhance the 

usefulness of this data to market 

participants, reduce information 

asymmetries, and facilitate best 

execution would still be achieved with 

the simplified definition that the 

Commission is adopting.268

Moreover, under the modified 

approach, the new round lot tiers would 

still be normalized at a particular 

notional value threshold, albeit higher 

than the $1,000 notional value reflected 

in the proposed definition, promoting 

more consistent treatment of securities 

of varying prices than the 100-share 

definition that predominates today 

irrespective of how much a stock is 

worth. Commenters submitted data 

suggesting that average trade and order 

sizes are significantly higher than 

$1,000.269 To confirm those comments, 

staff evaluated all trades that occurred 

in 2019 and observed that the average 

number of shares for all trades was 

about 193 shares, with an average trade 

size of $8,842 (excluding auctions, the 

average number of shares per trade was 

178 shares, with an average trade size of 

$8,068). As a round lot is a trading unit 

that reflects an order of meaningful size 

to market participants, and since 

average trade or order sizes are a 

reasonable proxy for what market 

participants consider to be a 

meaningfully sized order, the 

Commission believes it is appropriate to 

adjust the notional value threshold of 

the new tiers upward to $10,000 in 

response to these comments. The 

Commission believes that using a round 

figure that is in line with data provided 

by commenters and internal staff 

analysis (i.e., $10,000) will reduce 

potential investor confusion and 

implementation cost and complexity. 

In addition, as discussed in more 

detail below, commenters 

overwhelmingly favored protecting 

orders in the new, smaller round lot 

sizes, and the Commission is not 

adopting its proposal to require 

protected quotations to be of at least 100 

shares.270 In a market environment 

where the new round lots are protected, 

adjusting the notional value threshold 

upward is appropriate so that order 

protection under Rule 611, and the 

applicability of other rules under 

Regulation NMS, are limited to 

meaningfully sized orders. Similarly, a 

higher notional value threshold for the 

new round lot tiers will prevent orders 

of a smaller notional value from 

establishing a new NBBO, which could 

have added significant cost and 

complexity to the national market 

system. 

The Commission acknowledges that 

increasing the minimum stock price for 

the first sub-100 share round lot tier 

from $50 to $250 will not improve oddlot transparency for stocks priced 

between $50 and $250.271 However, as 

discussed above,272 the Commission is 

including information about all odd-lots 

priced at or better than the NBBO in 

core data, which will counterbalance 

this loss of odd-lot transparency. In 

making these choices, the Commission 

has balanced the competing objectives 

of: (a) Improving the display and 

accessibility of orders that are of 

significant notional size; (b) reducing 

quoted spreads; and (c) reducing an 

excessive amount of complexity that 

comes with having too many tiers. 

The Commission is also not revising 

the proposed definition of round lot to 

reflect a ‘‘pure’’ notional value 

approach—whereby all quotes over a 

certain notional amount, regardless of 

the number of shares, would constitute 

a round lot—as some commenters 

suggested.273 The new 40-, 10-, and 1- 

share tiers effectively require orders to 

be over a certain notional value to be 

assigned to those round lot sizes, but the 

Commission is reluctant to disrupt the 

longstanding practice of defining a 

round lot in terms of a number of 

shares. Doing so could substantially 

increase complexity and require 

significant additional systems 

reprogramming costs.274

While 100, 10, and 1 are the round lot 

sizes in use today, the Commission does 

not believe that the round lot sizes of 

100, 40, 10, and 1 that the Commission 

is adopting will materially increase the 

difficulty of transitioning to the new 

round lot sizes. Only a few, infrequently 

traded stocks have round lot sizes other 

than 100 today, so market participants 

are not accustomed to 10 or 1 share 

round lot sizes on a significant scale. 

Additionally, the thresholds of the new 

round lot tiers that the Commission is 

adopting are set at a consistent notional 

value of $10,000, which, as one 

commenter observed, results in a more 

consistent treatment of securities 

regardless of per-share price 275 and 

helps to ensure that orders of 

meaningful size across securities of 

various prices are defined as round lots. 

The Commission believes that this 

structure will facilitate the transition to 

the new round lot sizes. Moreover, 

regulatory data includes an indicator of 

the applicable round lot size,276 and the 

Commission is requiring the 

representation of quotation sizes in 

terms of the number of shares rather 

than the number of round lots. These 

requirements should alleviate concerns 

regarding potential confusion caused by 

the switch to different round lot sizes 

because the size of each quotation and 

the round lot of each stock will be 

included in consolidated market data. 

Finally, only 134 stocks currently have 

share prices above $250.00, further 

limiting the cost and complexity of the 

introduction of the new round lot 

sizes.277 For these reasons, the 

Commission does not believe that the 

price-based definition of round lot will 

be confusing to investors. 

Additionally, the Commission does 

not believe that a one-share round lot 

for stocks priced at or above $10,000.01 

would have ‘‘unintended negative 

impacts’’ on price discovery and routing 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18619 

278See State Street Letter at 3 (suggesting there 

could be such impacts for a one-share round lot for 

stocks over $1,000). 

279See State Street Letter at 3. 

280See Market Data Roundtable, supra note 33. 

281See Proposing Release, 85 FR at 16739–43. 

282See supra Table 1 and Table 2; notes 240 and 

241. 

283See supra note 277 and accompanying text. 

284See Options Clearing Corporation, Equity 

Options, available at https://www.theocc.com/ 

Clearance-and-Settlement/Clearing/Equity-OptionsProduct-Specifications (last accessed Sept. 17, 

2020). 

285See infra Section III.H. 

286See Nasdaq Letter IV at 17; Angel Letter at 17; 

AHSAT Letter at 4; NovaSparks Letter at 1. 

287See Nasdaq Letter IV at 17. 

288 Id. 

289Angel Letter at 17. 

290AHSAT Letter at 4. 

291NovaSparks Letter at 1. 

292See MFA Letter at 10; Data Boiler I at 25. 

293 Data Boiler I at 25. 

294See Proposing Release, 85 FR at 16743. One 

commenter ‘‘suspect[ed]’’ that calculating round lot 

sizes automatically in real time might be 

operationally simpler and urged the Commission to 

‘‘listen carefully to the brokerage ops people’’ with 

respect to this issue. See Angel Letter at 17. 

However, the Commission did not receive any 

comments from brokerage operations professionals 

or other commenters that provided a reasoned 

explanation for a different approach. 

295See infra Section V.C.1(b)(v). 

296Moreover, the Commission does not believe 

the round lot tiers will be ‘‘clunky,’’ as one 

commenter suggested. Nasdaq Letter IV at 14. The 

Commission appreciates the commenter’s concern 

that a small price shift around certain thresholds 

could cause large changes in round lot size, but the 

monthly methodology would address this concern 

by requiring a more sustained or extensive price 

shift to cause a stock to switch tiers. 

297See supra Section II.D.1. 

298See Proposing Release, 85 FR at 16743, 47. 

299 Data Boiler Letter I at 25 (‘‘We tend to think: 

no round lot size information until there is a prior 

full calendar month’s average closing price on the 

primary listing exchange was [sic] $500.01 or 

greater. Yet, we remain flexible to accommodate 

whatever minimum number of trading days as [sic] 

required by the industry and the SEC.’’). 

complexity 278 because, based on 

current pricing, only one stock would be 

included in the one-share tier, and that 

stock already has a round lot size of one. 

Furthermore, the Commission does 

not believe it should defer action on 

defining round lot until it receives 

further public input, as one commenter 

recommended,279 because the 

Commission received substantial 

comment on this issue from a wide 

range of market participants during this 

rulemaking process and in connection 

with the Market Data Roundtable.280

Moreover, the definition of round lot is 

based on data-driven analysis. The 

Proposing Release included, among 

other things, data on the increasing 

prevalence of odd-lot trades, 

particularly among higher-priced stocks, 

the proportion of odd-lot trades 

occurring at prices better than the 

NBBO, and the proportion of these 

better-priced odd-lots that would be 

captured by the proposed definition of 

round lot.281 As discussed above, staff 

has updated these data analyses and has 

performed similar data analyses.282 The 

adopted definition is consistent with 

and supported by these analyses. 

Finally, in response to the comment 

on the impact of the definition of round 

lot on options markets and on the 

standard convention that an options 

contract represents 100 shares of the 

underlying equity, the Commission does 

not believe that any such impact will be 

substantial or disruptive. As stated 

above, only a limited number of stocks 

will experience a change in their round 

lot sizes as a result of the amended 

definition of round lot.283 Moreover, 

options on at least one stock that 

currently has a sub-100 round lot size 

are traded in standard units of 100 

shares, so there is some precedent for 

deviation between the standard number 

of shares for an options contract and the 

standard unit of trading for the 

underlying stock. Similarly, corporate 

actions, such as rights offerings, stock 

dividends, and mergers can result in 

adjusted contracts representing 

something other than 100 shares of 

stock.284 For these reasons, the 

Commission believes that options 

markets will be able to adjust without 

undue cost to the new round lot sizes 

that will apply to some NMS stocks. The 

Commission will monitor the impact of 

these amendments on options markets 

going forward, including during the 

transition period.285

Monthly Round Lot Calculation: Some 

commenters disagreed with using the 

prior calendar month’s average closing 

price on the primary listing exchange to 

determine a stock’s price for purposes of 

assigning a round lot size to a stock, as 

proposed.286 One commenter stated that 

the proposed monthly calculation for 

determining round lot size would be 

operationally risky and prone to errors 

and confusion.287 That commenter 

suggested a monthly calculation might 

‘‘cause a stock’s round lot size to 

become significantly out of step with 

what it should be, particularly during 

periods of significant market volatility 

or when stock splits occur.’’ 288 Another 

commenter suggested that monthly 

updates would be ‘‘messier’’ than 

updating continuously.289 A different 

commenter suggested ‘‘mak[ing] the 

referenced price that of the order itself 

(so each price level has a corresponding 

round lot size, and a given stock may 

have multiple round lot sizes at 

once).’’ 290 Another commenter 

recommended quarterly recalculations 

because the proposed monthly process 

‘‘will add an administrative burden.’’ 291

On the other hand, some commenters 

agreed with the proposal, stating that a 

monthly calculation time period strikes 

an appropriate balance.292 One 

commenter noted that the monthly 

calculation ‘‘should not be too much 

hassle as long as the requirements are 

. . . clear.’’ 293

Selecting an appropriate stock price 

metric for the round lot size 

determination involves striking an 

appropriate balance between using 

accurate, up-to-date pricing information 

and avoiding the cost and complexity of 

over-frequent computation and potential 

round lot reassignment. The 

Commission continues to believe the 

proposed monthly approach strikes an 

appropriate balance.294 The 

Commission believes continuous 

updating of round lot size or an orderbased calculation would be too complex 

and would be subject to short-term price 

fluctuations, while quarterly updating 

could result in severely out-of-date tier 

assignments. Additionally, market 

participants are accustomed to other 

kinds of monthly updates, including for 

SRO fees, so monitoring for round lot 

size changes resulting from price moves 

and making corresponding systems 

adjustments would not be overly 

burdensome or costly.295 Therefore, the 

Commission is adopting a stock price 

calculation methodology based on the 

prior calendar month’s average closing 

price on the primary listing exchange, as 

proposed. Additionally, to alleviate 

concerns that a stock’s round lot size 

changing as its stock price changes 

could be confusing to market 

participants, the new definition of 

regulatory data, as discussed below, 

includes an indicator of the applicable 

round lot. The Commission believes that 

including this information about the 

applicable round lot size in 

consolidated market data will reduce 

confusion as market participants adjust 

to the new round lot sizes.296

As stated above,297 the proposed 

definition of round lot provided that the 

IPO price would be used to determine 

an NMS stock’s round lot size if the 

prior calendar month’s average closing 

price is not available, and the 

Commission solicited comment 

regarding the stock price calculation 

methodology that should be utilized in 

this situation.298 The Commission 

received one comment in response.299

The Commission recognizes that there 

are other scenarios aside from IPOs— 

such as listings of securities traded in 

the OTC market or direct listings— 

where there may not be a full prior 

18620 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

300See infra Section VIII. 301Staff analysis found that for U.S. equity IPOs 

traded on U.S. exchanges and issued over the last 

year (as of November 12, 2020), the average share 

price was $13.75 and the highest share price was 

$120. 302See Proposing Release, 85 FR at 16743–45 

(explaining the requirements of Rules 602, 603, 604, 

605, and 610 of Regulation NMS and the impact of 

the proposed round lot definition upon these rules). 

Rule 602 governs the dissemination of quotations in 

NMS securities. Rule 603 governs the distribution, 

consolidation, and display of information with 

respect to quotations for and transactions in NMS 

stocks. Rule 604 governs the display of customer 

limit orders for NMS stocks. Rule 605 governs the 

disclosure of order execution quality information. 

Rule 610(d), 17 CFR 242.610(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. 

303Letter from Phil Mackintosh, Chief Economist, 

Nasdaq, to Vanessa Countryman, Secretary, 

Commission, dated May 26, 2020, (‘‘Nasdaq Letter 

III’’) at 24–25. 

304 Data Boiler Letter I at 26. 

305See infra Section III.B.10. 

306NYSE Letter II at 6–7. 

307 Id. 

308Fidelity Letter at 6. 

309Cboe Letter at 8. 

310Proposing Release, 85 FR at 16744. 

311See NYSE Letter II at 6–7. In addition, the 

comment related to additional complexity in the 

Vendor Display Rule as a result of the proposed 

amendment to the definition of protected quotation 

is no longer applicable, as the Commission is not 

adopting the proposed amendment to that 

definition. See infra Section II.E.2. 

312MFA Letter at 12–13. 

313 Id. 

314Nasdaq Letter IV at 20–21 (footnotes removed). 

315See Proposing Release, 85 FR at 16744. 

316See supra Section II.D; infra Section II.E. 

month of closing prices on the primary 

listing exchange that can be averaged to 

ascertain the stock’s price. Therefore, 

the Commission is modifying the 

proposed definition of round lot to 

delete references to the IPO price and to 

add a new provision that for any NMS 

stock for which the prior calendar 

month’s average closing price is not 

available, that stock’s round lot shall be 

100 shares.300 This more general 

formulation will capture IPOs as well as 

other types of initial stock listings. In 

addition, assigning an initial, default 

round lot size of 100 shares to newly 

listed stocks will provide certainty and 

consistency and avoid the need to make 

last minute computations. Finally, the 

default assignment of a 100-share round 

lot size should be accurate for almost all 

new listings, since their prices tend to 

be well below $250 per share.301

(b) Impact on Other Rules in Regulation 

NMS 

The Commission received multiple 

comments regarding how the proposed 

definition of round lot would impact 

Rules 602, 603, 604, 605, and 610.302

Rule 602 Comments: One commenter 

suggested that having multiple NBBOs 

would make the concept of locked and 

crossed markets and execution quality 

‘‘depend on your data provider and 

location. That in turn makes ‘fair access’ 

of exchange data (Rule 602) a little 

redundant. The SEC hopes there are 

around a dozen consolidators, so it’s 

likely some will be faster than 

others.’’ 303 On the other hand, another 

commenter agreed with the Commission 

‘‘that the bids and offers collected and 

made available under Rule 602(a) 

should be in the proposed round lot 

sizes, and the proposed round lot 

definition should apply to the 

obligations of responsible brokers or 

dealers under Rule 602(b).’’ 304

The amendments to the definition of 

NBBO to accommodate the 

decentralized consolidation model and 

the notion of ‘‘multiple NBBOs,’’ which 

already exist today,305 do not have any 

direct bearing on the requirements of 

Rule 602, which relate to the collection 

and provision of certain quotation data 

to vendors. 

Rule 603 Comments: A number of 

commenters addressed the impact of the 

definition of round lot on Rule 603(c), 

the Vendor Display Rule. One 

commenter argued that the Commission 

did not consider the ‘‘indirect impact’’ 

of ‘‘the NBBO reflecting smaller-sized 

orders’’ on the Vendor Display Rule.306

That same commenter stated, ‘‘[t]he 

Commission also fails to consider 

whether the costs associated with 

retaining the Vendor Display Rule 

outweigh its benefits if the Commission 

adopts its proposed changes to the 

definition of ‘round lot.’ ’’ 307 Another 

commenter argued that the round lot 

change would mean a ‘‘SIP, broker, or 

dealer would be required to provide a 

consolidated display reflecting smallersized orders in higher-priced stocks.’’ 308

A different commenter suggested that 

the protected quotation definition 

would increase complexity because the 

Vendor Display Rule ‘‘generally requires 

a ‘consolidated display,’ which would 

include an NBBO based on the revised 

round-lot sizes, in a context in which a 

trading or order routing decision can be 

implemented but would not require the 

display of valuable information about 

the protected quotation.’’ 309

The Commission continues to believe 

that providing a consolidated display 

that includes the new round lot NBBO 

is appropriate to help ensure that 

market participants receive basic 

quotation information, in a context in 

which a trading or order routing 

decision can be implemented. This 

information should reflect orders of 

meaningful size, including smaller-sized 

orders in higher-priced stocks.310

Moreover, the commenter did not 

describe any specific costs, including 

any indirect costs, that it believed the 

Commission had not considered.311

Rule 604 Comments: One commenter 

suggested the round lot definition 

would create a burden on market 

participants to engage in ‘‘careful 

monitoring and changes to the 

programming of market makers[’] 

systems . . . each month’’ in order to 

remain compliant with Rule 604, given 

the potential for month-to-month 

changes in round lot sizes for individual 

securities.312 That commenter 

recommended a three-tiered structure to 

reduce such a burden.313

Another commenter suggested that 

the round lot definition’s narrowing of 

the Rule 604 odd-lot exception, 

resulting in the display of customer 

limit orders at the NBBO but less than 

100 shares, in combination with the 

proposed amendment to the definition 

of protected quotation, would 

‘‘separate[ ] brokers’ Rule 604 

requirements from their best execution 

obligations . . . [and] create[ ] 

challenges for a broker-dealer to meet its 

best execution obligations because 

under the proposed amendments, a 

customer limit order that is less than 

100 shares would not be protected 

under Rule 611.’’ 314

The Commission continues to believe 

that Rule 604 should use round lots, as 

defined and adopted herein, as the 

measure for customer limit orders that 

must be reflected in a specialist or OTC 

market maker’s published bid or offer 

because customer limit orders of 

meaningful size should be displayed. 

The Commission believes this will 

further the objective of Rule 604: 

ensuring that customers have the ability 

to effectively seek price improvement 

through the dissemination of their limit 

orders by specialists or OTC market 

makers.315 Moreover, the concerns 

raised regarding Rule 604 complexities 

that would arise as a result of the 

proposed five-tier round lot definition 

and the proposed amendments to the 

definition of protected quotation are 

diminished significantly since the 

Commission is adopting a four-tiered 

definition of round lot with a higher 

notional value size and is not adopting 

the proposed amendments to the 

definition of protected quotation.316

Rule 605 Comments: Many 

commenters discussed the effects of the 

definition of round lot on the execution 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18621 

317STANY Letter II at 4, 6. See also Nasdaq Letter 

IV at 19–20 (stating that the proposed definition of 

round lot will render Rule 605 execution quality 

statistics less accurate, that statistics on price 

improvement for higher-priced stocks may show a 

reduction in the number of shares of marketable 

orders that received price improvement because 

price improvement would be measured against a 

narrower NBBO, that an increase in the frequency 

or length of crossed markets resulting from the 

proposed definitions of round lot and protected 

quote could cause more orders to be excluded from 

Rule 605 execution quality statistics, rendering 

those statistics less accurate, and that the creation 

of multiple NBBOs would undermine the 

comparability of Rule 605 statistics across different 

market centers). 

318Nasdaq Letter IV at 17. 

319 ICI Letter at 6–7. See also T. Rowe Price Letter 

at 2 (stating that one objective of the Commission’s 

rulemaking was to improve the accuracy of Rule 

605 reports). 

320See, e.g., Virtu Letter at 4 (‘‘many of the Rule 

605 execution quality share buckets now bear little 

relation to the average trade sizes sent by the 

majority of investors. . . . [F]or stocks with prices 

over $50, about 70% of trades are odd-lot orders 

which would not be captured by the current Rule 

605. . . . [A] significant overhaul of Rule 605 

would be necessary, including possibly expanding 

measurement of execution quality to include depth 

of book’’). 

321Citadel Letter at 4. 

322Healthy Markets Letter I at 1. 

323See Angel Letter at 16. 

324See Proposing Release, 85 FR at 16745. 

325See id. 

326See infra Section III.B.10(b). 

327See supra note 241 and accompanying text. 

328Additionally, because the Commission is 

adopting modified definitions of round lot and 

protected quotation, one commenter’s concern is no 

longer applicable—specifically, that an increase in 

the frequency or length of crossed markets as a 

result of the proposed definitions of round lot and 

protected quotation could cause more orders to be 

excluded from Rule 605 execution quality statistics. 

See Nasdaq Letter IV at 19–20. 

329NYSE Letter II at 7–8. 

330 Id. 

331 Data Boiler Letter I at 26. 

332See Clearpool Letter at 13–14; TD Ameritrade 

Letter at 9 (‘‘Because the proposed round lot sizes 

would allow stepping ahead by economically 

insignificant amounts, locked and crossed markets 

may not simply be arbitraged away. At times 

liquidity-takers may perceive a sophisticated trader 

has locked or crossed the market for an 

economically insignificant amount and be reluctant 

to interact with them. This may lead to occasions 

of sustained locked and crossed markets, similar to 

what was observed prior to Reg. NMS Rule 610’s 

prohibition on locked and crossed markets.’’); ICI 

Letter at 7, n. 24 (expressing ‘‘concern’’ about this 

approach); BlackRock Letter at 4 (‘‘This would 

directly contravene the intent of employing the 

round lot definition as a mechanism for expanding 

odd-lot coverage, as the application of other 

provisions, such as order protection, to round lot 

orders was a key consideration of this approach. 

Further, this policy perpetuates an archaic double 

standard for odd-lot quotations which seem 

incongruous to the acknowledged economic 

significance and prevalence of odd-lot activity in 

the market.’’) (footnotes removed); SIFMA Letter at 

1–2 (arguing the Commission should make any 

changes to Rule 610(d) of Regulation NMS in a 

separate proposal after ‘‘further industry dialogue 

and consideration’’); Nasdaq Letter IV at 18 (‘‘Many 

of the same concerns that Nasdaq has with respect 

to the Commission’s round lot and trade-through 

protection proposals also apply to the 

Commission’s proposal to allow orders to lock or 

cross unprotected round lot displayed quotes of less 

than 100 shares.’’). 

333Clearpool Letter at 13–14; BlackRock Letter at 

5. 

334NYSE Letter II at 8. See also Nasdaq Letter IV 

at 19 (‘‘[E]ven if the Commission is correct that 

protection against locked and crossed markets is no 

longer warranted, the Commission fails to explain 

why it is reasonable, and not arbitrary, for it to roll 

back Rule 610(d) only for quotes of under 100 

shares, rather than for all quotes in NMS stocks.’’). 

quality statistics under Rule 605. One 

commenter argued that ‘‘Rule 605 

reports would no longer . . . provid[e] 

uniform comparisons because the NBBO 

that each market center will use will be 

different,’’ and some suggested changes 

to Rule 605 in response.317 Another 

commenter argued that the monthly 

round lot calculation could create 

investor confusion if a stock is near a 

different tier threshold regarding 

whether ‘‘the execution information 

about such stocks needs to be added to 

Rule 605 reports,’’ leading ‘‘investors to 

be misled by execution quality 

statistics.’’ 318 However, other 

commenters suggested the proposal 

would improve the accuracy of Rule 605 

reports.319

Some commenters argued for 

‘‘moderniz[ing]’’ Rule 605.320 One 

suggested ‘‘(a) creating a ‘marketable 

benchmark’ statistic that reflects the size 

of the quote at the NBBO, (b) adding 

notional buckets as an additional 

method of categorization, and (c) 

incorporating all customer orders 

regardless of size.’’ 321 Another 

commenter provided an example of how 

the exclusion of odd-lot quotes from the 

SIP feeds can skew Rule 605 price 

improvement statistics.322 Additionally, 

a different commenter suggested 

measuring Rule 605 price improvement 

statistics using an ‘‘Effective Best Bid or 

Offer’’ calculated using the average fill 

price of an order at a given time.323

The Commission continues to believe 

that the order execution disclosures 

required under Rule 605 should be 

based on an NBBO that reflects orders 

in the new round lot sizes.324 The 

definition of round lot will allow 

additional orders of meaningful size to 

determine the NBBO, and, therefore, the 

execution quality and price 

improvement statistics required under 

Rule 605 would be based upon an 

NBBO that the Commission believes is 

a more meaningful benchmark for these 

statistics.325 As explained below, the 

Commission does not believe that the 

amendments to the definition of NBBO 

to accommodate the decentralized 

consolidation model or the notion of 

‘‘multiple NBBOs,’’ which already exist 

today, will confuse market 

participants.326 Similarly, the 

Commission does not believe the 

accuracy or comparability of Rule 605 

statistics will be impaired. On the 

contrary, the Commission believes that 

an NBBO that incorporates orders that 

often reflect superior pricing by 

comparison to today’s round lot 

orders 327 will provide market 

participants with more accurate 

information about the true quality of the 

executions they are receiving, even if 

this information may show a reduction 

in the number of shares that received 

price improvement.328 Finally, while 

the Commission has reviewed the 

comments about the need to modernize 

and update Rule 605, any changes to 

Rule 605—as opposed to the more 

limited impact on Rule 605 as a result 

of the Commission’s adoption of the 

definition of round lot—are beyond the 

scope of the present rulemaking. 

Rule 610 Comments: Commenters 

discussed the effects of the definition of 

round lot on 17 CFR 242.610(c) and (d) 

(Rule 610(c) and (d)). One commenter 

stated that, with the definition of round 

lot affecting Rule 610(c), the 

Commission did ‘‘not consider the harm 

that an expanded fee limitation would 

have on competition, or the burdens it 

would place on market participants, 

including trading centers that display 

quotes.’’ 329 The commenter stated that 

in not expanding order protection to 

orders in the new round lots, the 

Commission is eliminating one of the 

bases it used when it first created the fee 

limitation in Regulation NMS.330 On the 

other hand, another commenter agreed 

the Commission should change Rule 

610(c) to apply to quotations in the 

proposed round lot sizes because doing 

so ‘‘would further that rule’s objectives 

of ensuring the accuracy of displayed 

quotations by establishing an outer limit 

on the cost of accessing them.’’ 331

Multiple commenters raised concerns 

that the proposed amendment to the 

definition of protected quotation would 

limit the restrictions in Rule 610(d) on 

locked and crossed markets, allowing 

round lots smaller than 100 shares to be 

locked and crossed.332 Some 

commenters recommended ‘‘the locking 

and crossing requirements . . . be 

extended to orders reflected in the 

NBBO.’’ 333 Another commenter stated 

that the Commission did not ‘‘justify 

why it is proposing to expand the fee 

limitation applicable to SROs’ best bids 

and offers under Rule 610(c), but not 

proposing to expand the limits in Rule 

610(d) on SRO members locking and 

crossing protected quotations.’’ 334

Furthermore, one commenter argued 

that the Rule 610(d) effects ‘‘could add 

significant complexity to broker-dealers’ 

18622 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

335FINRA Letter at 7. 

336The concern expressed by one commenter 

suggesting that the Commission is eliminating one 

of the bases for the fee limitation in Rule 610(c) of 

Regulation NMS is no longer applicable in light of 

the Commission’s decision not to adopt the 

proposed amendments to the definition of protected 

bid or protected offer. See infra Section II.E. 

Similarly, the concerns relating to Rule 610(d) of 

Regulation NMS expressed by several commenters 

that the proposed amendments to the definition of 

protected bid or protected offer would allow 

quotations in the new round lot sizes to be locked 

or crossed are no longer applicable. Id. 

337See NYSE Letter II at 7–8. 

338See, e.g., Cboe U.S. Equities Fee Schedules, 

BZX Equities, Transaction Fees; NYSE Price List 

2020 (last updated Nov. 2, 2020), available at 

https://www.nyse.com/publicdocs/nyse/markets/ 

nyse/NYSE_Price_List.pdf; Nasdaq, Price List— 

Trading Connectivity, available at http://

nasdaqtrader.com/Trader.aspx?id=

PriceListTrading2 (last accessed Nov. 25, 2020). 

339See infra notes 364 and 365 and 

accompanying text. 

340See infra Section V.C.1(b)(vii) (stating that the 

impact of these amendments on 610(c) of 

Regulation NMS might not result in economic 

effects). 

341See Proposing Release, 85 FR at 16747–50. 

Rule 611 of Regulation NMS requires trading 

centers to have policies and procedures that are 

reasonably designed to prevent ‘‘trade-throughs’’ on 

that trading center of protected bids or protected 

offers in NMS stocks, subject to specified 

exceptions. Rule 600(b)(94) of Regulation NMS 

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.’’ 

Rule 600(b)(94) of Regulation NMS, 17 CFR 

242.600(b)(94). 

342See Proposing Release, 85 FR at 16737. 

343See Submitted Comments, Comments on 

Proposed Rule: Market Data Infrastructure, 

Commission, available at https://www.sec.gov/ 

comments/s7-03-20/s70320.htm; Nasdaq Letter V at 

3 (‘‘Just five commenters supported the 

Commission’s proposed treatment of the Order 

Protection Rule; 24 others opposed it outright.’’). 

See, e.g., Cboe Letter at 8; MIAX Letter at 6; Fidelity 

Letter at 7; Citadel Letter at 2; BestEx Research 

Letter at 6–9. 

344See T. Rowe Price Letter at 2. 

345See IEX Letter at 7; Data Boiler Letter I at 21. 

346See T. Rowe Price Letter at 3. In addition, one 

commenter highlighted that extending order 

protection to the new round lots would create 

complexity and confusion: ‘‘Protecting the new 

round lots could also significantly alter the 

behavior of market makers like Virtu, impacting 

their approach to internalization and affecting their 

capacity to provide price improvement to retail 

investors. It could also dramatically alter the flow 

of orders to the exchanges and other trading venues. 

And, of course, it would impose unknown, but 

surely significant, implementation costs on market 

participants.’’ Virtu Letter at 5. 

347See, e.g., Cboe Letter at 8; MEMX Letter at 4; 

NYSE Letter II at 6; Nasdaq Letter IV at 13–17; 

Fidelity Letter at 7; Citadel Letter at 2; FINRA Letter 

at 6–7; Healthy Markets Letter I at 5. 

348STANY Letter II at 4. See also Schwab Letter 

II at 2 (stating that protecting only transactions of 

100 shares or more ‘‘would create [an NBBO] that 

is distinct from the [PBBO] and would leave brokerdealers with uncertainty over order routing and 

data display decisions. Schwab believes this would 

confuse investors.’’). 

349See Fidelity Letter at 7. 

best execution analyses and could create 

confusion and uncertainty regarding the 

quotations that a broker-dealer should 

rely upon to provide best execution for 

its customers.’’ 335

The Commission continues to believe 

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 the rule’s 

objectives of ensuring the accuracy of 

displayed quotations by establishing an 

outer limit on the cost of accessing them 

and would help ensure that the rule 

applies consistently to orders of 

meaningful size.336 Further, the 

Commission does not believe that an 

expanded fee limitation would harm 

competition or unduly burden market 

participants, as one commenter 

stated.337 The national securities 

exchanges do not distinguish between 

protected or best quotations and other 

quotations for purposes of their 

transaction fees,338 so the extension of 

the requirements of Rule 610(c) to 

orders in the new round lot sizes will 

not affect an area of exchange pricing 

that has been subject to competition or 

differentiation among exchanges. In 

addition, as a result of the amended 

definition of round lot, a relatively 

small number of NMS stocks will have 

their round lot size change,339 so the 

impact on exchanges and other trading 

centers and market participants should 

be small.340

E. Definition of ‘‘Protected Bid or 

Protected Offer’’ Under Rule 600(b)(70) 

1. Proposal 

In connection with the proposed 

round lot definition, the Commission 

proposed to amend the definition of 

protected bid or protected offer in 17 

CFR 242.700(b)(70) (Rule 600(b)(70)) 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 

Commission proposed this change to 

maintain the status quo with regard to 

protected quotes, which are currently 

required to be round lots, and to avoid 

expanding to the proposed smaller 

round lots the order protection 

requirements of Rule 611 and the 

requirements of Rule 610(d) to prevent 

locked/crossed markets.341

Additionally, the Commission 

proposed that protected quotations 

would only include odd-lots at a single 

price (rather than multiple price levels) 

that, when aggregated, are equal to or 

greater than 100 shares.342

2. Final Rule and Response to 

Comments 

The Commission received multiple 

comments on the definition of protected 

bid or protected offer. Many 

commenters opposed the proposal to 

amend the definition and argued that 

round lots, which determine the NBBO, 

should be protected quotations. These 

commenters stated that not protecting 

the round lot NBBO would result in 

unnecessary complexity, investor 

confusion, more trade-throughs, 

additional locked and crossed markets, 

and harm to retail investors. Other 

commenters also discussed odd-lot 

aggregation for the purposes of the 

definition of protected bid or protected 

offer. Commenters also addressed the 

effects of withdrawing the protected 

status of the 12 stocks that currently 

have round lots smaller than 100 shares. 

Additional commenters discussed the 

effects of a different PBBO and NBBO 

on best execution. 

(a) Expanding Protection to New Round 

Lots 

Most commenters that mentioned 

order protection suggested that the 

definition of protected quotation should 

reflect the new round lot NBBO and not 

be limited to those quotations that are 

of at least 100 shares.343 One commenter 

supported the proposal not to protect 

the new round lots of less than 100 

shares,344 and two were neutral.345 In 

support, one commenter stated that the 

order protection rule would continue to 

function similarly to the way it does 

today and that extending order 

protection to the new round lots would 

have significant negative trading 

implications, such as encouraging the 

posting of quotes in insignificant sizes, 

which would cause asset managers to 

break down large orders to avoid 

signaling their full trading intent.346

Complexity and Confusion: Multiple 

commenters suggested that the 

amendment to the definition of 

protected quote would add complexity, 

including by requiring market 

participants to monitor an NBBO and a 

PBBO throughout the trading day.347

One commenter noted that the 

‘‘confusion and complexity of a NBBO 

that deviates from the PBBO outweighs 

concerns about protecting quotes that 

otherwise may not be ‘meaningful.’ ’’ 348

Similarly, another commenter argued 

that the round lot definition, in 

combination with the definition of 

protected bid or protected offer, would 

create a bifurcated system of displayed 

orders where better priced displayed 

orders are not protected against tradethroughs.349

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18623 

350See Nasdaq Letter IV at 21. 

351See id. at 16. 

352See supra Section I.E. 

353See, e.g., Fidelity Letter at 7; BlackRock Letter 

at 4; MFA Letter at 10–12. 

354Nasdaq Letter IV at 21. See also SIFMA Letter 

at 10, 13; FINRA Letter at 7. 

355T. Rowe Price Letter at 2. 

356See Cboe Letter at 6–7; Nasdaq Letter IV at 13– 

17. See also BlackRock Letter at 4 (‘‘[A] recent 

academic study has identified that ‘trade-throughs 

of non-protected odd-lot orders are frequent’ such 

that this ‘limitation in the National Market System 

. . . results in a hidden cost to equity traders.’ ’’). 

357See Nasdaq Letter IV at 16. 

358See TD Ameritrade Letter at 10. 

359Schwab Letter II at 2. 

360See SIFMA Letter at 14; Nasdaq Letter IV at 

14–15. 

361However, the Commission is still making the 

technical change to delete the references to ‘‘The 

Nasdaq Stock Market, Inc.’’ in the definition. The 

Commission did not receive comments on this 

piece of the proposal and continues to believe the 

language is redundant because the Nasdaq Stock 

Market is now a national securities exchange. See 

Proposing Release, 85 FR at 16749. 

362See Proposing Release, 85 FR at 16747–49. 

363See supra Section II.D. 

364This information is based on data analyzed by 

staff for September 2020. 

365By comparison, under the proposed definition 

of round lot, Rules 611 and 610(d) of Regulation 

NMS would have extended to over 1,600 stocks in 

the absence of the proposed amendment to the 

definition of protected bid or offer. 

366See infra Section II.E.2(c). 

367See supra Section II.D. 

Additionally, one commenter 

suggested that amending the definition 

of protected quote would de-couple the 

order protection rule and the duty of 

best execution, creating confusion 

where brokers have access to a wide 

swath of required core data but may, or 

may not, be obligated to use that data to 

benefit customers.350

Locked and Crossed Markets: Some 

commenters argued that the proposal to 

limit the definition of protected 

quotation to orders of 100 shares or 

more partially rescinds the rule against 

locked or crossed markets, allowing 

some orders to lock or cross the market 

depending on the price of the stock, the 

size of the order, and the state of the 

NBBO.351

Best Execution: 352 Some commenters 

argued that a bifurcated approach to 

protected and unprotected round lots 

would add complexity regarding best 

execution obligations, including routing 

and execution decisions.353 Others 

suggested that if the Commission were 

to adopt the proposed bifurcated 

approach, the Commission should 

‘‘promulgate clear guidance’’ 

surrounding market participants’ best 

execution obligations.354 However, one 

commenter stated that it was ‘‘not 

convinced by criticisms that the 

Proposal would alter asset managers’ 

best execution obligations as a result of 

potentially different reference prices 

(i.e., NBBO vs. PBBO).’’ 355

Effects on Retail Investors: Some 

commenters suggested that limiting 

protected quotations to those of 100 

shares would harm retail orders/ 

investors because displayed retail orders 

in the new round lot sizes would be 

traded-through.356 Furthermore, a 

commenter argued that the Commission 

provided no reasonable basis for the 

proposal to treat round lots differently 

and that the proposal would unfairly 

discriminate against retail investors.357

One commenter suggested that the order 

protection rule fosters retail investor 

confidence and that not protecting the 

new round lots could erode trust in the 

markets.358 Another commenter 

suggested that market makers may not 

protect round lot orders that are not 

within the scope of the order protection 

rule and stated that limiting order 

protection to transactions of 100 shares 

or more would ‘‘discourage limit 

orders—a valuable driver of price 

discovery—as investors would be less 

likely to receive execution without price 

protection.’’ 359

Separate Rulemaking: Some 

commenters stated that they disagreed 

with the proposal to separate order 

protection from the NBBO, and if the 

Commission were to make such a 

change, it should do so in a separate 

rulemaking.360

The Commission is not adopting the 

proposed amendment to the definition 

of protected bid or protected offer.361 A 

wide range of commenters expressed 

significant concerns regarding this 

aspect of the proposal, including 

concerns about complexity and 

ambiguity that could stem from the best 

execution, routing, and order handling 

ramifications of introducing round lot 

quotes that are unprotected, a potential 

increase in trade-throughs and locked 

and crossed markets, and possible 

erosion of confidence among retail 

investors that their orders are being 

treated fairly. The Commission 

recognizes these concerns and does not 

believe that adopting the proposed 

amendments to the definition, at this 

time, would appropriately advance the 

broader objectives of the proposal, 

particularly enhancing the utility and 

availability of consolidated market data. 

In support of its preliminary belief 

that Rules 611 and 610(d) should not be 

extended to the smaller-sized quotations 

reflected in the proposed definition of 

round lot, the Commission cited 

concerns expressed by various market 

participants about the existing scope of 

these rules.362 However, given the 

concerns expressed in comments on the 

proposal, the Commission believes that 

not extending Rules 611 and 610(d) to 

the new round lot sizes could create 

unnecessary complexity and confusion. 

For example, the Commission continues 

to believe that improvements in trading 

and order routing technology since 2005 

and the applicability of best execution 

requirements to orders of all sizes 

would incentivize market participants 

to engage with orders in the new round 

lot sizes even if they were not protected, 

and that these technological 

improvements and market forces would 

also help mitigate excessive locking or 

crossing of quotations in the new round 

lot sizes. However, the Commission also 

agrees with commenters that 

consistently applying Rules 611 and 

610(d) to all round lot sizes would 

promote confidence among investors 

and other market participants that 

market participants will engage with 

orders in the new round lot sizes and 

that orders in the new round lot sizes 

will not be excessively locked or 

crossed. 

Furthermore, other modifications to 

the proposal that the Commission is 

adopting herein mitigate the 

Commission’s concerns, as expressed in 

the Proposing Release, about the 

expansion of the order protection 

requirements in Rule 611 and the 

prohibitions on locked and crossed 

markets in Rule 610(d). Specifically, as 

discussed above, the Commission is: (a) 

Modifying the proposed definition of 

round lot so that only stocks priced over 

$250.00 will be assigned to a round lot 

size less than 100; and (b) increasing the 

notional size thresholds of the new 

round lot sizes so that protected order 

interest at the new round lot sizes is 

more meaningful.363 Further, since 

currently only 134 stocks are priced 

over $250.00,364 the scope of the 

extension of Rules 611 and 610(d) 

would be fairly limited, extending to a 

much smaller number of stocks than 

under the proposed amendments.365

Furthermore, of this number, six NMS 

stocks already have a round lot size of 

less than 100 today.366 Therefore, only 

128 NMS stocks would receive tradethrough protection for smaller-sized 

orders. Additionally, with the larger 

notional size of $10,000 adopted for the 

definition of round lot,367 the extension 

of order protection to round lots would 

apply only to orders of a more 

substantial size. 

(b) Odd-Lot Aggregation for Protected 

Quotations 

A number of commenters discussed 

odd-lot aggregation with respect to 

protected quotes, and most stated that 

18624 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

368See, e.g., AHSAT Letter at 4. 

369See Cboe Letter at 9–12; IEX Letter at 7; 

Nasdaq Letter IV at 16–17; Virtu Letter at 5. 

370See Cboe Letter at 10–11. 

371See TD Ameritrade Letter at 11. 

372See BlackRock Letter at 4; SIFMA Letter at 7– 

8 (suggesting different odd-lot aggregation 

methodologies would ‘‘rais[e] additional technical 

issues’’ and recommending that the Commission 

should provide clarification as to how depth-ofbook data is determined, ‘‘particularly because the 

aggregation process appears to work differently for 

the PBBO versus the NBBO, BBO and depth-of-book 

determinations’’). 

373See BlackRock Letter at 4. 

374MEMX Letter at 4. 

375 IEX Letter at 7. 

376Capital Group Letter at 4. 

377For example, if there is one 50-share bid at 

$25.10, one 50-share bid at $25.09, and two 50- 

share bids at $25.08, the adopted cross-price oddlot aggregation method would show a protected 

100-share bid at $25.09, while the proposed singleprice odd-lot aggregation method would show a 

protected 100-share bid at $25.08. 

378See, e.g., BlackRock Letter at 4. 

379See Proposing Release, 85 FR at 16747–50. 

380See supra notes 368 through 376. 

381See SIFMA Letter at 13–14. 

382See NYSE Letter II at 6. 

383See supra Section II.E.2(a). 

384 In addition, for four of the twelve stocks that 

currently have non-100 share round lot sizes, the 

round lot size would not change, and these stocks 

would not experience a change in terms of the 

applicability of Rules 611 or 610(d) of Regulation 

NMS. 

385See Proposing Release, 85 FR at 16749. 

the Commission should allow 

aggregation across multiple price levels, 

instead of at just one level.368 Some 

commenters stated that preventing oddlot orders from being aggregated across 

different price levels to create protected 

quotes, as proposed, would cause 

spreads to widen, with one commenter 

providing empirical data, based on 

quoting activity during the month of 

April 2020, showing that average 

spreads would widen by over $0.50 for 

shares with prices of $500.01 to 

$1,000.00 and nearly $1.50 for shares 

with prices of $1,000.01 or more.369 One 

commenter suggested this restriction 

would hurt retail investors because it 

would result in their orders being 

executed at inferior prices.370

Another commenter suggested that 

only allowing odd-lot aggregation at one 

price level, instead of across price 

levels, would lead to fewer protected 

quotes.371

One commenter suggested that 

different odd-lot aggregation 

methodologies between the NBBO and 

the PBBO would create confusion 

among market participants.372 That 

commenter also suggested that different 

methodologies could raise confusion 

from a best execution perspective.373

Similarly, one commenter suggested 

only allowing odd-lot aggregation at one 

price level, combined with the proposal 

to provide all levels of depth up to the 

PBBO, would ‘‘create[] implementation 

difficulties.’’ 374

Another commenter suggested that, 

given the proposal’s intent to maintain 

the status quo with respect to the scope 

of orders that are subject to Rule 611, 

the Commission should consider 

continuing the existing market practice, 

as codified in exchange rules, to 

aggregate quotes at multiple price 

levels.375

One commenter stated that if order 

protection were extended to all round 

lots, the commenter would ‘‘support 

aggregating odd lots in the manner 

currently described for the PBBO.’’ 376

In light of these comments, the 

Commission is modifying the proposed 

definition of core data to require odd-lot 

aggregation across multiple prices for 

purposes of the NBBO and protected 

quotations.377 The Commission believes 

that this approach will: (a) Provide a 

consistent odd-lot aggregation 

methodology for all elements of core 

data; (b) be consistent with existing 

practices, as some commenters pointed 

out,378 and would avoid potential costs 

associated with changing these 

practices; and (c) avoid unintended 

consequences that could adversely 

affect investors, such as widening 

spreads or reducing the number of 

protected quotes. As stated in the 

Proposing Release,379 this methodology 

effectively extends order protection to 

the aggregated odd-lot orders. However, 

as discussed above,380 a majority of 

commenters who opined on odd-lot 

aggregation for protected quotations 

preferred a cross-price methodology. 

Lastly, the comment raised regarding 

the need for a consistent odd-lot 

aggregation methodology for the NBBO 

and protected quotations is less relevant 

in light of changes the Commission is 

adopting herein—namely, that the new 

round lot NBBO will be protected. 

(c) Removing Protected Status From 

Certain NMS Stocks 

Some commenters stated that 

removing protected status for those 

NMS stocks that currently have a 

protected quotation size of under 100 

shares would potentially increase the 

number of locked and crossed markets 

for the twelve current NMS stocks that 

have protected quotations of under 100 

shares.381 One commenter stated that 

the Commission did not analyze the 

effects of removing order protection 

from those twelve stocks.382

The Commission understands these 

concerns regarding the possible 

reduction of order protection and 

locked/crossed markets restrictions for 

these 12 stocks in their current round 

lot sizes. However, as discussed 

above,383 the Commission is not 

adopting the proposed amendments to 

the definition of protected bid or offer, 

so all NMS stocks—including the 12 

that currently have non-100 round lot 

sizes—would be assigned to round lot 

sizes based on their per share price, and 

all round lot orders in these stocks 

would be protected quotations subject to 

the trade-through prevention 

requirements of Rule 611 and the locked 

and crossed markets restrictions of Rule 

610(d). 

In addition, the Commission 

acknowledges that, based on staff 

analysis of stock prices as of September 

2020, one stock will have its round lot 

size increased from 10 to 40, one will 

have its round lot size increased from 1 

to 10, and six will have their round lot 

size increased from 10 to 100. As a 

result, order protection pursuant to Rule 

611 and the locked/crossed markets 

prohibitions of Rule 610(d) will no 

longer apply to some smaller orders in 

these stocks.384 However, the 

Commission continues to believe that 

determining the round lot sizes of all 

stocks based upon price, without special 

exceptions for certain stocks that 

currently have non-standard round lot 

sizes, will reduce complexity and 

implementation costs, set consistent 

expectations regarding round lot sizes 

among market participants, facilitate the 

transition to price-based round lots, and 

justify any potential costs of increasing 

the round lot sizes of a limited number 

of stocks.385

F. Definition of ‘‘Depth of Book Data’’ 

Under Rule 600(b)(26) 

1. Proposal 

The Commission proposed to include 

‘‘depth of book data,’’ defined as 

follows, as an element of core data: All 

quotation sizes at each national 

securities exchange, aggregated at each 

price at which there is a bid or offer 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. 

The Commission solicited comment 

on various aspects of the proposed 

definition of depth of book data, 

including whether the definition 

captures the appropriate level of depth 

data and whether the Commission 

should include more or fewer levels of 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18625 

386See Angel Letter at 1–9 (stating that including 

depth of book in core data is a ‘‘great idea’’ and 

emphasizing the importance of depth of book data, 

particularly to retail investors trading in illiquid 

stocks of smaller companies and using liquidityproviding limit orders); letter from Allison Bishop, 

President, Proof Trading, to Vanessa Countryman, 

Secretary, Commission, dated May 1, 2020, (‘‘Proof 

Trading Letter’’) at 1; Healthy Markets Letter at 3; 

DOJ Letter at 2–4; NovaSparks Letter at 1. 

387See IEX Letter at 5; Capital Group Letter at 2– 

3; Fidelity Letter at 4–5; Schwab Letter at 4; T. 

Rowe Price Letter at 2; Wellington Letter at 1; Virtu 

Letter at 5; SIFMA Letter at 7; STANY Letter II at 

4; IntelligentCross Letter at 4. In addition, staff 

conducted the same analysis of book depth that was 

included in the Proposing Release but evaluated 

proprietary market data from a more recent time 

period (the week of May 4, 2020) than was included 

in the Proposing Release (July 19, 2019). The results 

were very similar and confirmed the Commission’s 

view that there is a substantial amount of quotation 

volume several levels below the best bid. Staff 

observed substantial quotation volume several 

levels below the best bid (the offer side was not 

examined). On average, 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. 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. 

388See State Street Letter at 2–3 (stating that 

institutional firms generally use up to five levels of 

depth for order routing); ICI Letter at 8–9 (stating 

that depth of book data ‘‘should consist of at least 

five price levels, based on the typical trading needs 

of funds’’); Clearpool Letter at 14 (stating that five 

levels of depth of book data is sufficient to improve 

the usefulness of core data for most market 

participants and that ‘‘five price levels typically 

tend to be a sufficient level of depth for Clearpool 

for sweeping multiple levels of the book in 

executing an order’’); SIFMA Letter at 7 (‘‘[A] 

review of our institutional member firms found that 

while some used less than five levels and others 

used more, five levels of depth strikes an 

appropriate balance for the order routing purposes 

of most.’’). 

389See Citadel Letter at 1. 

390See infra Sections II.F.2(b) through II.F.2(c). 

391See infra Section II.F.2(d) (discussing 

comments suggesting that full, order by order depth 

of book should be included in core data and the 

potential latency ramifications thereof). 

392See infra Section III.B.5. 

393See infra Section V.C.1(c)(iv). 

394See STANY Letter II at 4; TD Ameritrade 

Letter at 5 (‘‘[T]he proposal to include five levels 

of depth would add ten quotes per security for 

every exchange, which today amounts to 130 new 

data points per security.’’). 

395See STANY Letter II at 4; TD Ameritrade 

Letter at 5 (‘‘[T]the Proposal includes all price 

levels between the BBO and the protected quote, 

which for higher priced securities could add 

hundreds more data points.’’); NYSE Letter II at 5 

(stating that the number of price levels between the 

best and protected quotes, as proposed, could be 

more than five levels and could fluctuate intra-day 

as quotes update). 

396See SIFMA Letter at 7. 

397As discussed below, an indicator of the 

national securities exchange or national securities 

association on which the liquidity at a depth of 

book price level resides will be included in the 

adopted definition of depth of book data. 

398See supra Section II.E.2. 

399Among other things, a protected bid or offer 

must be an ‘‘automated quotation,’’ which means a 

quotation displayed by a trading center that: (1) 

Permits an incoming order to be marked as 

immediate-or-cancel; (2) Immediately and 

automatically executes an order marked as 

immediate-or-cancel against the displayed 

quotation up to its full size; (3) Immediately and 

automatically cancels any unexecuted portion of an 

order marked as immediate-or-cancel without 

routing the order elsewhere; (4) Immediately and 

automatically transmits a response to the sender of 

an order marked as immediate-or-cancel indicating 

the action taken with respect to such order; and (5) 

Immediately and automatically displays 

information that updates the displayed quotation to 

reflect any change to its material terms. Rules 

600(b)(6), (70) of Regulation NMS, 17 CFR 

242.600(b)(6), (70). Therefore, a ‘‘manual quotation’’ 

that is not automated—also known as a ‘‘slow 

quote’’—can sometimes be the best quotation 

without being a protected quotation. Rule 

600(b)(45) of Regulation NMS, 17 CFR 

242.600(b)(45). 

depth or otherwise revise the definition 

to capture the key depth information 

that would be useful to market 

participants. 

2. Final Rule and Response to 

Comments 

The Commission received comments 

expressing support for the proposed 

definition of depth of book data and 

comments raising various concerns, 

recommendations, and requests for 

clarification. As discussed in more 

detail below, the Commission is 

adopting a modified definition of depth 

of book data in response to comments. 

(a) Support for Five Levels of Depth 

Several commenters expressed 

general support for including depth of 

book data in core data 386 or specifically 

agreed with the Commission’s proposed 

five levels of depth,387 with some 

explaining that five levels of depth is 

suitable for certain market participants 

or trading practices.388 One commenter 

expressed general support for the 

expansion of core data, including depth 

of book data, provided that it does not 

materially increase overall latency.389

The Commission agrees that including 

depth of book data in core data will be 

useful for and beneficial to a variety of 

market participants and is adopting the 

definition of depth of book data largely 

as proposed, with certain 

modifications.390 The Commission does 

not believe that including depth of book 

data in core data will materially 

increase the overall latency of core data 

for several reasons. First, only five 

levels of depth are included, limiting 

the number of quotes necessary to be 

processed.391 Moreover, the 

decentralized consolidation model will 

result in consolidated market data, 

including depth of book data, being 

delivered to market participants with 

lower latencies.392 In addition, the 

Commission believes that market 

participants that choose to receive the 

full set of consolidated market data, 

including depth of book data, will either 

leverage the existing technology that 

they currently use to receive depth of 

book data on a proprietary basis or make 

the investments in technology to receive 

the data so that the additional content 

will not add significant latency.393

(b) Proposed Definition Would Include 

More Than Five Levels of Depth 

Some commenters stated that the 

proposed definition would include five 

levels of depth on each exchange, which 

could be confusing and costly and could 

add latency by increasing actual quote 

traffic and information to be processed 

significantly beyond five levels.394

Some commenters also stated that the 

proposal to include price levels between 

the best and protected quotes could 

similarly include a large number of 

additional data points.395 Some 

commenters recommended that the 

Commission clarify how depth of book 

data will be determined and made 

available on an individual exchange 

basis, particularly with respect to how 

odd-lots would be aggregated at depth of 

book price levels.396

The Commission believes that these 

comments highlight the need to more 

clearly articulate the scope of data that 

the definition of depth of book data 

includes and how this data will be 

attributed to individual SROs 397 in the 

consolidated market data products made 

available by competing consolidators. 

The Commission is therefore adopting a 

modified version of the definition of 

‘‘depth of book data.’’ 

First, the revised definition of depth 

of book data will not include the first 

clause of the proposed definition, which 

referred to ‘‘all quotation sizes at each 

national securities exchange, aggregated 

at each price at which there is a bid or 

offer that is lower than the best bid 

down to the protected bid and higher 

than the best offer up to the protected 

offer.’’ As discussed above, the 

Commission is not adopting the 

proposed amendments to the definition 

of protected bid or protected offer, 

which would have required such 

quotations to be ‘‘of at least 100 

shares.’’ 398 As a result, as is the case 

today, in the vast majority of cases the 

best quotes and the protected quotes 

will be the same.399 Therefore, the 

definition of depth of book data does 

not need to include quotation interest 

between the best and protected quotes. 

This modification also addresses 

commenters’ concerns that this aspect of 

the proposed definition would have 

18626 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

400The Commission notes that, in this example, 

the interest at $25.02 would also be included in 

core data because the NBBO is one of the elements 

of core data. 

401As explained below, Rule 614(d) requires 

competing consolidators to calculate, generate, and 

make available to subscribers a consolidated market 

data product, which can contain all elements of 

consolidated market data or a subset thereof, but 

competing consolidators are permitted to offer 

custom products containing more information as 

well. Competing consolidators would compensate 

SROs for the data necessary to generate 

consolidated market data through fees established 

by the effective national market system plan(s) and 

would compensate SROs for data that goes beyond 

consolidated market data on a proprietary basis 

pursuant to individual SRO fee schedules. See infra 

note 1132. 

402See id. 

403See Proposing Release, 85 FR at 16753 (stating 

that defining depth of book data to include a finite 

number of price levels would limit ‘‘processing 

demand on systems’’ and avoid ‘‘excessive message 

traffic or complexity’’). 404See Proposing Release, 85 FR at 16753 (stating 

that depth of book data should ‘‘enhance[ ] the 

utility of proposed core data for a wide range of 

market participants’’ rather than ‘‘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’’). Market participants in need 

of more depth than included in the definition of 

depth of book data could purchase a custom depth 

product separately from exchanges or through a 

competing consolidator. 

included an excessive amount of 

information in core data that would be 

difficult to calculate and consume as 

prices fluctuate throughout the trading 

day. 

Second, in response to comments 

suggesting that the proposed definition 

of depth of book data would require five 

price levels from each exchange to be 

included in core data, the Commission 

is modifying the second clause of the 

proposed definition so that it refers to 

the next five prices at which there is a 

bid (offer) that is lower (higher) than the 

national best bid (offer) rather than five 

price levels from the protected bid or 

offer. These changes specify that the 

starting points for the ‘‘next 5 prices’’ 

are the highest priced bid and lowest 

priced offer on any exchange (i.e., the 

national best bid and national best offer) 

rather than on each exchange. Thus, the 

modified definition specifies that depth 

of book data includes five levels of 

aggregated quotation sizes; it does not 

include more than five levels to account 

for differences in the highest priced bid 

or lowest priced offer on each exchange. 

The following example illustrates the 

price levels that are included in the 

definition of depth of book data. 

In this example, depth of book data 

would include aggregate quotation sizes 

at each price level at and between 

$25.01 400 and $24.97 because the 

starting point for the ‘‘next five prices’’ 

is $25.02 (the best bid on Exchange A 

and the national best bid) rather than 

$25.01 (the best bid on Exchange B) or 

$25.00 (the best bid on Exchange C). 

Depth of book data would not include 

the interest at or below $24.96, even if 

that interest is within the top five levels 

of any given exchange, because it is not 

within the first five price levels from the 

national best bid. A competing 

consolidator could provide interest 

beyond the first five levels of depth 

across exchanges but would have to 

acquire such data on a proprietary basis 

from the exchanges.401

The Commission believes that 

revising the definition of depth of book 

data so that the included price levels are 

the five prices below the national best 

bid and above the national best offer, 

rather than the five prices above and 

below the best quotes on each exchange, 

is appropriate because it limits the 

amount of information that competing 

consolidators will process and 

display,402 which mitigates concerns 

raised by some commenters about 

adverse consequences—such as 

unnecessary complexity or increased 

processing demands and latency—that 

could result from a broader 

interpretation of the proposed 

definition.403 In addition, the 

Commission believes, consistent with 

the views expressed by various 

commenters, that a broad array of 

market participants could use five levels 

of depth of book data away from the 

national best bid and national best offer 

to trade in an informed and effective 

manner.404

Third, the Commission is modifying 

the definition of depth of book data to 

specify that, in addition to quotation 

sizes at the first five price levels from 

the NBBO, the aggregate size at each 


ER09AP21.000</GPH>

Example 1: Bids for XYZ, Inc. on Three Exchanges 

Exchange A Exchange B Exchange C 

Best bid 100 shares at $25.02 100 shares at $25.01 100 shares at $25.00 

DOB 1 100 shares at $25.01 100 shares at $25.00 100 shares at $24.99 

DOB2 100 shares at $25.00 100 shares at $24.99 100 shares at $24.97 

DOB3 100 shares at $24.99 100 shares at $24.98 

DOB4 100 shares at $24.98 

DOB5 100 shares at $24.97 

Note: Prices in shaded areas would not be included in core data pursuant to the definition 

of depth of book data as amended. 
Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18627 

405For example, if the national best bid is $25.10, 

Exchanges A and B have 100-share bids at $25.09, 

and Exchange C has two 100 share bids at $25.09, 

the competing consolidator would disseminate: 100 

shares at Exchange A, 100 shares at Exchange B, 

200 shares at Exchange C. The Commission believes 

that aggregating quotation sizes at each price level 

at each exchange will limit the number of messages 

included in depth of book data as compared to an 

order by order approach, reducing potential 

concerns about processing demands on systems, 

latency, and operational costs. See infra Section 

II.F.2(d). 

406See infra Section II.F.2(c) for an explanation 

of why the Commission is revising the definition of 

depth of book data to include quotations on a 

facility of a national securities association. 

407Proposing Release, 85 FR at 16754. 

408Proposing Release, 85 FR at 16756. 

409FINRA Letter at 12–13. 

410 Id. The commenter recommended this 

particular formulation, rather than a direct 

reference to the ADF, ‘‘to account for the possibility 

that other quotation facilities may be developed in 

the future.’’ Id. at 13. 

411See MEMX Letter at 5; BlackRock Letter at 2. 

412See MEMX Letter at 5. 

413See BlackRock Letter at 2. 

414See IntelligentCross Letter at 4. 

415See Clearpool Letter at 14. 

416See Data Boiler Letter I at 19. 

417Proposing Release, 85 FR at 16734, 53. 

418 Id. at 16753. 

419 Id. 

included price level shall be attributed 

to each exchange on which the interest 

is available. Although the proposed 

definition of depth of book data referred 

to quotation sizes ‘‘at each national 

securities exchange’’ in order to require 

the price and size information in depth 

of book data to be associated with the 

source exchange, the Commission 

believes that specifying that depth of 

book data includes the aggregate 405

quotation size available at each price at 

each national securities exchange and 

national securities association would 

clarify where the liquidity resides.406

For instance, with respect to Example 1, 

depth of book data would include: 

$25.01 (100 on Exchange A, 100 on 

Exchange B) 

$25.00 (100 on Exchange A, 100 on 

Exchange B, 100 on Exchange C) 

$24.99 (100 on Exchange A, 100 on 

Exchange B, 100 on Exchange C) 

$24.98 (100 on Exchange A, 100 on 

Exchange B) 

$24.97 (100 on Exchange A, 100 on 

Exchange C) 

The Commission believes that 

attributing the quotation size at each 

price to its source national securities 

exchange or association can, in many 

circumstances, be essential to achieving 

the benefits of including depth of book 

data in consolidated market data. 

Improved placement of liquidity-taking 

and liquidity providing orders, for 

example,407 requires knowledge of the 

exchange at which the liquidity resides 

so that market participants can direct 

orders to that exchange. 

(c) Expand Definition to FINRA’s 

Alternative Display Facility 

The proposed definition of depth of 

book data referred to quotations only on 

national securities exchanges, but the 

Commission solicited comment on 

whether to include the depth of book 

quotations of national securities 

associations to account for the 

possibility of quotes being reported to 

FINRA’s Alternative Display Facility 

(‘‘ADF’’) in the future.408 One 

commenter stated that while the ADF 

does not currently have quoting 

participants, it is an actively maintained 

FINRA facility and could readily add 

quoting participants in the future.409

This commenter recommended 

including future potential ADF 

quotations by modifying the definition 

of depth of book data to refer to all 

quotation sizes at each national 

securities exchange and ‘‘on a facility of 

a national securities association.’’ 410

The Commission agrees and is 

modifying the proposed definition of 

depth of book data so that it refers to 

quotation sizes on a facility of a national 

securities association as well as 

quotation sizes on a national securities 

exchange. The Commission agrees with 

the commenter that any depth of book 

quotation activity displayed through the 

ADF or similar facilities is comparable 

to the exchange depth of book data that 

would be included as core data under 

the proposal and that it should be made 

available on the same terms as exchange 

depth of book data. To provide market 

participants with a more complete view 

of the liquidity that may be available at 

depth of book price levels, the 

Commission is modifying the proposed 

depth of book data definition so that any 

future ADF depth of book quotation 

data—or data from similar national 

securities association facilities that may 

be developed—would be included in 

core data without the need for 

additional Commission rulemaking. In 

addition, by modifying the definition to 

refer generally to a facility of a national 

securities association, rather than 

specifically to FINRA’s ADF, the 

definition will include any potential 

national securities association depth of 

book quotations. 

(d) Include Full Depth of Book and 

Order by Order Data 

Some commenters suggested 

including full depth of book data in core 

data rather than five levels of depth of 

data.411 One commenter stated that the 

proposal could be ‘‘counterproductive 

and confusing’’ and recommended 

adding full depth of book data, 

including order-by-order data across all 

price levels.412 Another commenter 

recommended including complete, 

order-by-order depth of book data in 

core data, explaining that ‘‘the existence 

of proprietary data feeds alongside a 

public tape creates incentives which are 

incompatible with promoting fair and 

orderly markets.’’ 413 One commenter 

agreed with the proposed five-levels of 

depth of book data but stated that, while 

not necessary for all market 

participants, providing full depth of 

book would not tax systems much more 

than providing five levels, since ninety 

percent of ‘‘quote changes’’ occur at the 

top five price levels.414 However, 

another commenter stated that 

providing complete depth of book data 

is not necessary at this time, explaining 

that additional data results in increased 

data processing, latency, and 

complexity that could impair the 

usability of the data.415 Finally, one 

commenter suggested that the 

Commission should replicate the full 

depth of book curve to help subscribers 

of consolidated data better understand 

the supply and demand imbalance of 

liquidity in real time.416

The Commission does not believe that 

the definition of depth of book data 

should be expanded to include 

complete, order-by-order depth of book 

at all price levels. As explained in the 

Proposing Release, the expansion of 

NMS information generally, and the 

inclusion of depth of book data in core 

data specifically, was intended to 

provide additional information that 

would be useful to a broad cross-section 

of market participants and to reduce 

information asymmetries between users 

of proprietary data and users of SIP 

data.417 However, the Commission 

explained that these objectives must be 

balanced against the risk of excessive 

complexity, message traffic, processing 

demand on systems, and associated 

operational costs that might result from 

the inclusion of more complete depth of 

book information.418 The Commission 

recognized that some market 

participants may need more granular 

and expansive data, such as the 

proprietary depth of book products 

offered by many exchanges, for certain 

use cases.419 Including complete depth 

of book data in core data would go 

beyond the needs of a wide array of 

market participants or standard use 

cases for depth of book data in trading, 

and could result in additional 

operational costs and latency because of 

increased message traffic with order by 

18628 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

420See, e.g., supra note 388. 

421See IntelligentCross Letter at 4. 

422Similarly, in response to the comment 

regarding the full depth of book curve, see supra 

note 416 and accompanying text, while full order 

book shape patterns may contain valuable 

information for certain sophisticated computerized 

models, the Commission, as discussed above, is 

concerned that mandating the inclusion of the 

entire depth of book across all national securities 

exchanges would have significant processing, 

latency, and cost ramifications. 

423See Cboe Letter at 15. 

424See id. at 16–17; see also SIFMA Letter at 7 

(requesting clarification regarding how odd-lots will 

be aggregated at depth of book price levels). 

425See supra Section II.C.2(b). 

426See also infra Section II.F.2(h) (explaining the 

relevance of depth of book data to best execution 

analyses); Proposing Release, 85 FR at 16754 

(explaining how depth of book data can enable 

market participants to trade in a more informed and 

effective manner). 

427Proposing Release, 85 FR at 16754. 

order data at all price levels. Therefore, 

consistent with the views of several 

commenters,420 the Commission 

continues to believe that while five 

levels of depth of book data would 

significantly enhance the usability of 

core data for many market participants, 

including complete depth of book data 

in core data could impair the usability 

of core data for many subscribers. 

Moreover, while the Commission has 

considered the view expressed by one 

commenter that providing depth of book 

data at all price levels would not be 

overly burdensome and would not tax 

systems much more than providing five 

levels, this commenter also 

acknowledged that full depth of book 

data is not necessary at this time for all 

market participants.421 The Commission 

shares some commenters’ concern about 

the processing and latency ramifications 

of including complete depth of book 

data and therefore is not adopting a 

definition of depth of book data that 

goes beyond five levels.422

(e) Odd-Lots at Depth and 

Determination of Five Price Levels 

One commenter recommended that 

‘‘depth-of-book quotations aggregated at 

each of the first five price levels where 

a displayed order is available to trade 

. . . regardless of the associated size 

displayed at those prices’’ be 

disseminated.423 This commenter 

requested that the Commission clarify, 

preferably with an example, how oddlots would be aggregated at depth of 

book price levels, stating that the 

proposed definition of core data 

requires odd-lots to be aggregated across 

prices and disseminated at the least 

aggressive price for purposes of depth of 

book data, while the proposed 

definition of depth of book data 

provides that the required five price 

levels are determined by the presence of 

a ‘‘bid’’ or ‘‘offer,’’ which by definition, 

implies a round lot.424

The Commission does not agree that 

all odd-lots within the first five price 

levels of the NBBO should be displayed 

in core data or that the five price levels 

included in depth of book data should 

be determined by the presence of an 

odd-lot quotation at those price levels. 

First, as explained in detail above, the 

inclusion of odd-lot quotations in core 

data must be reasonably calibrated to 

include the information that is most 

relevant to investors and other market 

participants.425 While the Commission 

believes that information on the most 

attractively priced individual odd-lots— 

namely, those priced at or better than 

the NBBO—should be included in core 

data, the inclusion of information 

regarding individual odd-lots at inferior 

prices is not warranted because these 

quotations do not represent direct and 

immediate opportunities for price 

improvement.426 Second, the magnitude 

of the quotation size available at a 

particular price level should factor in to 

whether that price level counts as one 

of the five price levels that are included 

in core data. Otherwise, particularly in 

cases where liquidity is widely 

dispersed over a number of price levels, 

as is the case with many illiquid stocks, 

orders of insignificant notional value 

could ‘‘take up’’ price levels and 

prevent the dissemination of more 

significant interest at price levels further 

away. For example, if the NBB for stock 

A is $25.15, and there are 1 share bids 

at $25.14–$25.10 and a 100 share bid at 

$25.09, the five bids of relatively 

insignificant notional value at $25.14– 

$25.10 would prevent the bid of 

relatively significant notional value at 

$25.09 from being captured by the 

definition of depth of book data. For this 

reason, the proposed definition of depth 

of book data included a ‘‘minimum size 

requirement’’ for depth price levels— 

namely, the presence of a ‘‘bid or offer,’’ 

which incorporates the concept of a 

‘‘round lot.’’ 427

That said, in response to the 

commenter’s request, the Commission is 

clarifying that the requirement for the 

presence of a bid or offer in determining 

the five price levels does not require a 

‘‘pure’’ or ‘‘unitary’’ round lot consisting 

of only one order to be present at a price 

level. Rather, odd-lots that aggregate 

into a round lot pursuant to the 

prescribed method could also establish 

a price level, as long as there is at least 

one round lot of interest—unitary or 

aggregated—on at least one SRO. As a 

round lot reflects trading interest of 

meaningful size to market participants, 

the Commission believes that odd-lots 

that in the aggregate reflect size 

equivalent to a round lot also represent 

trading interest of meaningful size and 

should be included in depth of book 

data. The following example illustrates 

how odd-lot aggregation would operate 

in the depth of book context. 

Example 2: Odd-Lot Aggregation at 

Depth 

Price 

Number of shares bid for stock X 

Exchange A Exchange B Exchange C 

$25.50 .......................................................................................................................................... 100 (NBB) ...... 0 0 

25.49 ............................................................................................................................................ 0 ..................... 100 0 

25.48 ............................................................................................................................................ 0 ..................... 0 50 

25.47 ............................................................................................................................................ 60 ................... 0 50 

25.46 ............................................................................................................................................ 0 ..................... 0 0 

25.45 ............................................................................................................................................ 60 ................... 0 0 

25.44 ............................................................................................................................................ 0 ..................... 25 0 

25.43 ............................................................................................................................................ 0 ..................... 75 0 

25.42 ............................................................................................................................................ 100 ................. 0 0 

25.41 ............................................................................................................................................ 0 ..................... 0 2 

25.40 ............................................................................................................................................ 0 ..................... 5 0 

25.39 ............................................................................................................................................ 0 ..................... 0 100 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18629 

428CBOE Letter at 19. 

429As discussed above, other alternatives 

presented by commenters, such as including five 

price levels of depth of book information without 

regard to whether those price levels are round lots, 

have other drawbacks. See supra notes 423–427 and 

accompanying text. 

430See Proposing Release, 85 FR at 16768; infra 

Section III.B.5. 

431See Nasdaq Letter IV at 33; TD Ameritrade 

Letter at 5; NYSE Letter II at 3–4. 

432See Nasdaq Letter IV at 33. 

433See Nasdaq Letter V at 5. 

434See TD Ameritrade Letter at 5. 

435See supra note 388. 

436See infra note 1974 and accompanying text. 

437See TD Ameritrade Letter at 5. 

438See supra Section II.C.2(a). 

439See infra note 879 and accompanying text. 

440These indirect benefits would accrue to 

customer orders executed by broker-dealers that do 

not currently use proprietary depth of book data but 

that would use the depth of book data as adopted 

and as included in core data. 

441See supra Section I.E (discussing the 

implications of these amendments generally for best 

execution obligations); infra Section II.F.2(h) 

(discussing best execution obligations in the context 

of depth of book data). 

442See TD Ameritrade Letter at 5. 

443See Proposing Release, 85 FR at 16754. 

444See supra note 387. 

Here, the first five prices at which 

there is a bid that is lower than the 

NBB—measured in terms of the 

presence of at least one singular or 

aggregated round lot on at least one 

SRO—are $25.49 (100 shares on 

Exchange B), $25.47 (50 shares at $25.48 

and 50 shares at $25.47 on Exchange C, 

aggregated and displayed at the less 

aggressive price), $25.45 (60 shares at 

$25.47 and 60 shares at $25.45 on 

Exchange A, aggregated and displayed 

at the less aggressive price), $25.43 (25 

shares at $25.44 and 75 shares at $25.43 

on Exchange B, aggregated and 

displayed at the less aggressive price), 

and $25.42 (100 shares on Exchange A). 

Hence, in Example 2, depth of book data 

would include: 100 shares at $25.49, 

$25.47, $25.45, $25.43, and $25.42 (with 

attribution to the relevant SRO, as 

explained above). 

One commenter argued that allowing 

aggregation across multiple price levels 

to determine whether there is a round 

lot bid or offer at a particular depth of 

book price level could create significant 

computational issues, particularly when 

orders are cancelled and the five price 

levels would have to be redetermined, 

possibly resulting in diminished 

competing consolidator performance 

and higher capacity requirements for 

downstream users of the data. This 

commenter also argued that displaying 

depth of book price levels in this 

manner could potentially lead to a 

deceptive view of market activity at 

prices that are nowhere near current 

market prices, raising concerning issues 

related to investor protection.428

The Commission acknowledges that 

aggregating odd-lots to determine depth 

of book price levels will require 

computation by competing 

consolidators and that new orders or 

order cancelations and modifications 

could require the five levels to be 

redetermined. However, alternatives 

such as the inclusion of all odd-lots at 

inferior prices would require more 

outbound message traffic from 

competing consolidators to subscribers 

and would therefore raise similar 

concerns about system performance and 

the capability of subscribers to consume 

the data.429 In addition, as explained 

below and in the Proposing Release, the 

decentralized consolidation model will 

foster a competitive environment for the 

provision of consolidated market data, 

and the Commission believes that this 

will lead to improvements in the use of 

more competitive, low-latency 

aggregation and transmission 

technologies, mitigating concerns about 

computational and performance issues 

related to the generation and 

dissemination of depth of book data.430

Competing consolidator subscribers also 

have the option of consuming varying 

levels of depth of book data, depending 

on their needs, and could determine 

that the latency costs of consuming 

several levels of depth exceed the 

benefits. Furthermore, the Commission 

does not believe that aggregating oddlots across prices will lead to a 

deceptive view of market activity or 

mislead investors because exchanges 

currently aggregate odd-lots across price 

levels to form round lots and provide 

their best bids and offers to the 

exclusive SIPs at the least aggressive 

price of all such odd-lots. In addition, 

Commission rules, which will include 

this methodology, will provide 

transparency to market participants 

regarding the inclusion in core data of 

odd-lots at depth of book price levels 

aggregated pursuant to this 

methodology, which addresses the 

concern that cross-price odd-lot 

aggregation would lead to a deceptive 

view of market activity or mislead 

investors. 

(f) Insufficient Justification for Inclusion 

of Depth of Book Data in Core Data 

Some commenters questioned 

whether there is sufficient need among 

market participants for depth of book 

data to be included in core data.431 One 

commenter stated that depth of book 

data is for ‘‘serious traders’’ and is 

already available on a proprietary basis 

for anyone who needs it, and that it is 

not clear whether there would be 

demand for the ‘‘truncated’’ set of 

information reflected in the proposed 

definition of depth of book from any 

particular set of market participants.432

In a subsequent letter, this commenter 

stated that the Commission’s depth of 

book data proposal ‘‘lacks data driven 

analysis’’ and that the Commission 

‘‘released no independent studies or 

research analyzing the impact of this 

proposal or addressing the five price 

level demarcation.’’ 433 Similarly, 

another commenter stated that depth of 

book data is not ‘‘necessary or helpful 

for all investors’’ and that its inclusion 

in core data would increase core data 

costs unnecessarily and create 

confusion as to what is necessary for 

regulatory compliance.434

The Commission disagrees with these 

comments. As evidenced by the support 

for including five levels of depth of 

book data expressed by a wide range of 

commenters—including exchange, buyside, and sell-side market participants, 

many of whom explained with 

specificity why five levels of depth of 

book would meet their needs 435—the 

Commission believes there is demand 

for core data that includes depth of book 

data, including the definition of depth 

of book data, as modified and adopted 

herein. The Commission also believes 

that including depth of book data in 

core data would promote a broader 

distribution of this data among market 

participants, particularly those who do 

not currently subscribe to the 

proprietary depth of book products 

offered by the exchanges.436

Nevertheless, the Commission 

acknowledges that depth of book data 

may not be ‘‘necessary or helpful for all 

investors’’ 437 in a direct sense, but even 

investors who do not directly consume 

depth of book data will benefit from it 

indirectly,438 since many of their 

broker-dealer intermediaries would 

likely use depth of book data for 

improved order placement,439 which 

ultimately will improve the execution 

quality of customer orders.440

Furthermore, the Commission has 

explained the implications of these 

amendments on best execution 

obligations in detail.441 Therefore, the 

inclusion of depth of book data in core 

data should not ‘‘cause confusion as to 

what may be required for regulatory 

compliance.’’ 442 Finally, the 

Commission disagrees that the 

definition of depth of book data is 

unsupported by ‘‘data driven analysis’’ 

because the Commission considered 

staff analyses of depth of book data in 

both proposing 443 and adopting 444 the 

definition. 

18630 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

445See BestEx Research Letter at 2, 5 (‘‘Given that 

exchanges have zero competition in providing their 

own market data feeds, we welcome the 

Commission’s proposed mandate that exchanges 

provide depth of book information and auction 

information to competing SIP vendors, thus 

reducing information asymmetry among market 

participants. However, we believe that SIP 

providers should not be required to include that 

information in their products.’’). 

446See BlackRock Letter at 2–3. 

447See infra Sections III.C.1(b); III.C.8(a). 

448See infra Section III.E.2(e). 

449See, e.g., RBC Letter at 4; SIFMA Letter at 3– 

4; T. Rowe Price Letter at 1; Clearpool Letter at 1, 

11 (stating that data content currently available only 

in proprietary feeds is necessary for best execution); 

Capital Group Letter at 2; McKay Letter at 1; Better 

Markets Letter at 1–2; DOJ Letter at 4. 

450See State Street Letter at 2; IEX Letter at 5. 

451Nasdaq Letter IV at 7. See also FINRA Letter 

at 7 (stating generally that the proposed changes to 

the content of consolidated market data and the 

manner in which it would be disseminated raise 

questions regarding best execution requirements 

and that the Commission should consider providing 

best execution guidance for broker-dealers). 

452See supra Section I.E. 

453See id. 

454See id. 

455See id. 

456See supra note 451 and accompanying text. 

See also supra note 92. 

457See Proposing Release, 85 FR at 16759. 458See id. 459The adopted definition of auction information 

also includes one technical change from the 

proposed definition—using the plural ‘‘auctions’’ 

rather than the singular ‘‘an auction’’ in the phrase 

‘‘generated by a national securities exchange 

leading up to and during auctions.’’ The plural form 

is more consistent with the use of ‘‘auctions’’ in the 

next clause of the definition. See infra Section VIII. 

(g) Need for Competing Consolidators 

To Offer Depth of Book 

Some commenters supported 

requiring SROs to provide depth of book 

information to competing consolidators 

but opposed requiring competing 

consolidators to include depth of book 

in the products offered to their 

subscribers 445 or emphasized that 

competing consolidators should be 

provided with enough raw data to be 

competitive with proprietary offerings 

but permitted to offer a range of 

products due to investors’ diverse 

market data needs.446

The Commission agrees that 

competing consolidators should be 

permitted to offer customers a range of 

products, including customized depth 

of book products that include more or 

less depth of book information than set 

forth in the definition of depth of book 

data. Modifying the requirements of 

Rule 614 so that competing 

consolidators will only be required to 

generate and offer one or more 

consolidated market data products, 

which can contain some or all of the 

elements of consolidated market data, 

will enable competing consolidators to 

specialize in different products to 

address their subscribers’ market data 

needs.447 Competing consolidators that 

receive proprietary data products from 

SROs to create products that go beyond 

consolidated market data (e.g., full 

depth of book data), would compensate 

SROs for this use pursuant to individual 

SRO fee schedules, while competing 

consolidators that limit their use of SRO 

data to the creation of products that 

include consolidated market data or a 

subset thereof would be charged 

pursuant to the effective national market 

system plan(s) fee schedules. If the 

effective national market system plan(s) 

establishes fees for data content 

underlying consolidated market data 

offerings that use subsets of 

consolidated market data, the competing 

consolidator would have the option of 

providing customized products that do 

not, for example, include all five levels 

of depth of book data, including 

products providing only the NBBO and/ 

or the top of book quotes of 

exchanges.448

(h) Best Execution Obligations 

Regarding Depth of Book Data 

Some commenters discussed market 

participants’ duty of best execution in 

light of the inclusion of depth of book 

data in core data. Some commenters 

noted that including depth of book data 

in core data would assist market 

participants in fulfilling their best 

execution requirements.449 Others went 

further and stated that depth of book 

data is currently necessary to fulfill 

their best execution obligations.450

However, one commenter stated that 

‘‘[s]upplementing core market data with 

depth-of-book data would confound 

market participants in fulfilling their 

best execution obligations.’’ 451

As explained above, these 

amendments do not change the duty of 

best execution.452 Rather, the 

availability of additional data content as 

core data—including depth of book 

data—may be relevant to a brokerdealer’s ability to achieve and analyze 

best execution, and broker-dealers 

should consider the availability of this 

information in connection with their 

best execution obligations.453 However, 

for the reasons stated above, the 

Commission is not setting forth 

minimum data elements needed to 

achieve best execution or specifying the 

data elements that may be relevant to 

any specific situation or customer.454 In 

addition, the Commission has explained 

the implications of these amendments 

on best execution obligations in 

detail,455 and does not agree that market 

participants will be ‘‘confounded’’ in 

fulfilling their best execution 

obligations by the addition of depth of 

book data to core data.456

G. Definition of ‘‘Auction Information’’ 

Under Rule 600(b)(5) 

1. Proposal 

The Commission proposed to define 

‘‘auction information’’ as an element of 

core data. Specifically, ‘‘auction 

information’’ would be defined as 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. Auctions have become 

increasingly important liquidity events 

in recent years and have come to 

represent a significant proportion of 

overall trading volume. The 

Commission proposed to include 

auction information in core data to 

promote more informed and effective 

trading in auctions, which could also 

facilitate price formation and improve 

execution quality for more traders and 

investors.457 The Commission solicited 

comment on the proposed definition of 

auction information, including the 

scope of auction-related information 

that should be included in the 

definition.458

2. Final Rule and Response to 

Comments 

Many commenters favored including 

auction information in core data, but 

some opposed doing so. The 

Commission is adopting the definition 

of auction information, as proposed, 

with one modification.459 Specifically, 

the Commission is adding the word 

‘‘publicly’’ before ‘‘disseminated’’ to 

specify that only auction information 

that is publicly disseminated on an 

exchange’s proprietary feeds is included 

in the definition of auction information 

and hence as an element of core data. 

The Commission believes that this 

modification will help ensure that all 

auction information that an exchange 

includes in its proprietary feeds will be 

included in core data, addressing the 

information asymmetries that currently 

exist between users of SIP data and 

proprietary data and facilitating the 

ability of core data subscribers to 

participate in auctions in an informed 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18631 

460See Proposing Release, 85 FR at 16758–59. 

461See NYSE Rule 123C(6)(b) (relating to the 

dissemination of certain auction-related 

information to floor brokers). 

462See IEX Letter at 6; MEMX Letter at 5–6; Cboe 

Letter at 21; BlackRock Letter at 2; Fidelity Letter 

at 5; Schwab Letter at 5; State Street Letter at 2– 

3; T. Rowe Price Letter at 2; Capital Group Letter 

at 2; ICI Letter at 9–10; SIFMA Letter at 7; Citadel 

Letter at 1 (supporting the inclusion of auction 

information in core data as long as it does not 

materially increase latency); Virtu Letter at 5; 

IntelligentCross Letter at 4; STANY Letter II at 4; 

BestEx Research Letter at 5 (stating that competing 

consolidators should be able to determine whether 

or not to include auction information in the 

products offered to subscribers); Healthy Markets 

Letter at 3; Clearpool Letter at 15; Wellington Letter 

at 1; Proof Trading Letter at 1 (stating that auction 

information could be useful for agency trading); 

NovaSparks Letter at 1. 

463See ICI Letter at 9–10 (‘‘Doing so also would 

eliminate proprietary data costs as a barrier to 

auction trading and encourage a broader range of 

market participants to submit trading interest.’’); see 

also SIFMA Letter at 7. 

464See RBC Letter at 5. 

465See Angel Letter at 8. 

466See Proposing Release, 85 FR at 16756 (stating 

that auctions account for approximately 7% of daily 

equity trading volume based on data available on 

Cboe’s website from November 2019). Staff 

conducted the same analysis of auction data that 

was included in the Proposing Release but for a 

more recent time period (the month of June 2020) 

and observed that auctions account for 

approximately 7% of daily equity trading volume. 

Staff also observed that auctions accounted for more 

than 20% of total volume on two days (June 19 and 

June 26). See Cboe: U.S. Equities Market Volume 

Summary, available at https://markets.cboe.com/ 

us/equities/market_share/ (last accessed Aug. 30, 

2020). 

467See Proposing Release, 85 FR at 16756–57. 

468See id. at 16826–27. 

469Nasdaq Letter IV at 51. 

470See id. (‘‘When performing an opening or 

closing auction, Nasdaq receives orders and 

disseminates (via NOII messages) the results of 

those simulations. The frequency at which the NOII 

is disseminated changes over the course of an 

auction; for example, in the closing auction, the 

NOII is disseminated every ten seconds for the first 

five minutes of the auction, and then every second 

for the final five minutes of the auction. The NOII 

includes a number of data fields, including: Symbol 

(indicating the security to which the NOII relates); 

Near Indicative Price (which is based on orders in 

both the closing and continuous books); Far 

Indicative Price (which is based on orders solely in 

the closing book); Current Reference Price (which 

is based solely on orders in the continuous book); 

Paired Shares (indicating how many shares would 

execute at the Current Reference Price); Imbalance 

Shares (indicating the number of shares that would 

remain after execution at the Current Reference 

Price); and Imbalance Side (indicating whether the 

Imbalance Shares relate to buy orders or sell 

orders). The three prices in the NOII are not simply 

based on executed transactions, but rather they are 

simulations of what the price ‘‘would be’’ if the 

auction were to execute at that moment, based on 

different inputs. Each day, Nasdaq generates over 

400 simulations of these three prices for each 

security. As there are over 3000 securities traded on 

Nasdaq each day, this means that Nasdaq compiles 

more than 1.2 million NOII records each day. The 

selection and arrangement of the NOII data fields 

are original and reflect Nasdaq’s creative judgment; 

Nasdaq did not copy this selection of auction data, 

and there is no precedent for this unique and 

creative assembly of auction data fields. . . .’’). 

471 Id. 

472 Id. 

473See Fidelity Letter at 5; SIFMA Letter at 7. 

474See SIFMA Letter at 7. 

475See supra note 114. 

and effective manner.460 This 

modification would also clarify that 

auction information does not include 

auction-related information that is made 

available to a limited group of market 

participants under certain exchange 

models, but not made publicly 

available.461

(a) Support for Inclusion of Auction 

Information in Core Data 

Many commenters supported the 

inclusion of auction information in core 

data, emphasizing the importance of 

this information in light of the 

increasing proportion of transaction 

volume that takes place during opening 

and closing auctions.462 One commenter 

stated that including auction 

information in core data would 

eliminate proprietary data costs as a 

barrier to auction trading and encourage 

a broader range of market participants to 

submit trading interest into auctions, 

enhancing market liquidity and price 

discovery.463 Another commenter cited 

recent market wide circuit breaker halts 

and the consequent re-opening auctions 

as reasons for its support of including 

auction information in core data.464

Another commenter stated that retail 

investors should be properly informed 

with appropriate information about the 

indicative auction price and the trading 

imbalance.465

The Commission agrees with these 

comments on the growing significance 

of auctions and auction information to 

investors and other market participants. 

As the Commission stated in the 

Proposing Release, opening and closing 

auctions conducted by the exchanges 

have become increasingly important 

liquidity events and represent a 

significant proportion of overall trading 

volume.466 The growth of passive, 

index-tracking investment strategies 

through mutual funds, ETFs, and 

similar products has contributed to the 

higher concentration of trading in 

closing auctions.467

For these reasons, the Commission 

believes that auction information should 

be included in core data to promote 

more informed and effective 

participation in auctions by market 

participants and to potentially broaden 

the range of market participants who 

participate in auctions, enhancing 

auction liquidity and price discovery. 

Specifically, the Commission believes 

that auction information, such as order 

imbalances and indicative prices, helps 

market participants determine whether 

to participate in auctions, how to trade 

leading up to an auction, and how to 

best place their trading interest into an 

auction.468 Finally, the Commission 

agrees that recent market wide circuit 

breaker halts, which occurred after the 

Commission’s issuance of the Proposing 

Release, further underscore the need for 

auction information to be included in 

core data so that information related to 

the reopening auctions that occur after 

such halts is broadly disseminated to 

market participants, promoting more 

informed participation in these 

auctions. 

(b) Asserted Violation of Intellectual 

Property Rights 

One commenter stated that it 

‘‘possesses copyright rights in its 

auction data as a compilation . . .’’ and 

the proposal would require that it 

‘‘forfeit these copyrights rights.’’ 469 The 

commenter noted that there have been 

‘‘auctions of financial instruments for 

hundreds of years,’’ and that it ‘‘has 

developed a unique approach to 

auctions that includes a creative 

selection and arrangement of auction 

data.’’ 470 The commenter stated that it 

‘‘has the exclusive right to reproduce its 

compilation in copies, to prepare 

derivative works based on the 

compilation, and to distribute copies of 

the compilation.’’ 471 The commenter 

further stated that the proposal would 

‘‘force Nasdaq to surrender these rights, 

robbing Nasdaq of its ability as 

copyright owner to obtain fair market 

value of licenses for its intellectual 

property.’’ 472

Some commenters disagreed.473 One 

commenter stated that viewing auction 

information (or depth of book data) as 

the intellectual property of the 

exchanges would ignore the fact that the 

broker-dealers who submit the orders 

and the investors who generate the 

orders are the source of this data and 

would contravene broker-dealers and 

investors’ ownership rights in the 

underlying data.474

The Commission does not agree that 

the definition of auction information or 

its inclusion in core data would violate 

any copyright interests of the 

commenter. The Commission has the 

authority to determine the content of the 

quotation and transaction information 

made available under the national 

market system rules, including 

information related to exchange 

auctions.475 In addition, other 

Commission rules require the public 

disclosure or provision of information 

that must be compiled, such as Rules 

601 (transaction reports), 602 

(quotations), 605 (order execution 

18632 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

476See also Securities Exchange Act Release No. 

74244 (Feb. 11, 2015), 80 FR 14564, 14669–70 (Mar. 

19, 2015) (Regulation SBSR—Reporting and 

Dissemination of Security-Based Swap Information 

Adopting Release) (‘‘Under the federal securities 

laws, the Commission imposes a number of 

requirements that compel the provision of 

information to the Commission itself or to the 

public. . . . Businesses that operate in an industry 

with a history of regulation have no reasonable 

expectation that regulation will not be strengthened 

to achieve established legislative ends.’’). 

477For example, the dissemination of auction 

information as required by these amendments does 

not violate any patents that the commenter has 

identified, as these amendments do not compel the 

disclosure of the process of how the auction prices 

are derived. See Rule 600(b)(5) of Regulation NMS 

(defining ‘‘auction information,’’ by reference to 

information specified in exchange rules, which do 

not disclose how auction prices are derived). 

Rather, these amendments require exchanges to 

make auction information available to competing 

consolidators and self-aggregators so that market 

participants may submit trading interest into 

auctions in a more informed manner. 

478Auction data for a particular NMS stock will 

likely be generated by a single exchange, namely 

the primary listing exchange for that stock. 

However, all data elements that make up 

consolidated market data, such as individual quotes 

and trades or regulatory data, originate from a single 

SRO, and, as explained below, the Operating 

Committees of the effective national market system 

plans historically have determined how best to 

allocate consolidated market data revenues among 

the SROs to fairly reflect their individual 

contributions. See infra Sections III.E.2(b), III.E.2(f). 

In addition, certain NYSE auction data is currently 

included in Tape A. See Proposing Release, 85 FR 

at 16757. 

479See Nasdaq Letter IV at 33. 

480See TD Ameritrade Letter at 5. 

481See supra note 462. 

482See Angel Letter at 8. 

483See supra note 468. 

484See supra Section II.C.2(a); infra Sections 

V.C.1(c)(iii) (discussing how the amendments will 

affect access to auction information); III.E.2(c); 

V.C.2(b)(i)a (discussing how the amendments will 

affect data content fees). 

485See ICI Letter at 9–10 (‘‘Including auction 

information in the consolidated feed would 

enhance transparency into market activity. Doing so 

also would eliminate proprietary data costs as a 

barrier to auction trading and encourage a broader 

range of market participants to submit trading 

interest.’’); SIFMA Letter at 7 (‘‘Adding this 

[auction] data to the definition of core data would 

assist with alleviating some of the discrepancies in 

content between the exchange proprietary feeds and 

the current SIP feeds and provide market 

participants with the ability to rely on SIP feeds 

rather than incurring the substantial costs in being 

forced to purchase both the proprietary data and the 

SIP data.’’). 

486See supra note 484. 

487See supra Section I.E. 

488TD Ameritrade Letter at 4. 

489See Cboe Letter at 21. 

information), and 606 (order routing 

information) of Regulation NMS and 17 

CFR 240.15c2–12 (Exchange Act Rule 

15c2–12) (credit rating and audit 

information related to municipal 

securities).476

Moreover, auction information, such 

as order imbalances and indicative 

pricing, pertains to certain outputs of an 

exchange’s auction process. Such 

auction information does not require the 

disclosure of any details about the 

process of the auction or require the 

exchanges to ‘‘reproduce’’ their 

compilations. Rather, the exchanges can 

comply with the requirement to make 

information related to their auctions 

available to competing consolidators 

and self-aggregators without using their 

existing compilation systems; they are 

free to collect and publish the factual 

information required by the 

amendments to be made public by any 

means they choose in a manner that 

does not utilize any copyrightable 

format or collection methodology. 

Therefore, to the extent that any 

intellectual property rights attach to 

exchange auction processes themselves, 

these amendments do not violate those 

rights.477

Furthermore, exchanges will continue 

to be compensated for making auction 

information available to competing 

consolidators and self-aggregators 

through fees established by the effective 

national market system plan(s). The 

Operating Committee of the effective 

national market system plan(s) will 

propose fees for the data content 

underlying consolidated market data, 

including auction information, as well 

as updates to the formula for allocating 

revenues from this data among the 

SROs.478 In so doing, the Commission 

expects the Operating Committee to 

assess the impact of the inclusion of 

auction information in consolidated 

market data on the fees to be charged for 

the data content underlying 

consolidated market data, as well as 

how exchanges that contribute auction 

information should be compensated for 

this data through the allocation formula. 

(c) Assertion of Insufficient Justification 

for Inclusion of Auction Information in 

Core Data 

One commenter characterized auction 

information as ‘‘esoteric’’ and ‘‘designed 

to assist sophisticated market 

participants,’’ arguing that anyone who 

needs this information can buy it now, 

that it is likely to be ‘‘useless’’ to anyone 

who does not currently buy it, and that 

including it in core data will not make 

it ‘‘any more or less available.’’ 479

Similarly, another commenter stated 

that auction information is not 

‘‘necessary or helpful for all investors’’ 

and that its inclusion in core data would 

increase core data costs unnecessarily 

and create confusion as to what is 

necessary for regulatory compliance.480

A variety of commenters—including 

exchange, buy-side, and sell-side market 

participants—stated, and the 

Commission agrees, that auction 

information is not ‘‘esoteric’’ 

information that would be of use only 

to some small subset of ‘‘sophisticated’’ 

market participants.481 Rather, the 

Commission continues to believe that 

auction information would be useful or 

beneficial to a broad cross-section of 

market participants—including retail 

investors, according to one 

commenter 482—and would enable these 

market participants to participate in 

auctions, and to trade leading up to 

auctions, in a more informed manner.483

Furthermore, as explained above, even 

market participants that do not directly 

acquire all elements of core data, 

including auction information, will still 

indirectly benefit from the inclusion of 

auction information in core data. The 

inclusion of auction information in core 

data will facilitate greater access to this 

information among a broader group of 

executing broker-dealers and will enable 

them to place orders into auctions more 

effectively and to achieve better 

executions for their customer orders.484

As commenters stated, proprietary data 

costs may discourage some market 

participants from participating in 

auctions.485 The Commission is 

sensitive to these concerns and believes 

that including auction information in 

core data would help facilitate its 

broader dissemination.486 Finally, the 

Commission is not mandating the 

consumption of auction information and 

has explained the implications of these 

amendments on best execution 

obligations above.487 The Commission 

believes the inclusion of auction 

information in core data will not create 

confusion as to regulatory requirements, 

as one commenter stated might 

happen.488

(d) Include Competing Crosses in 

Auction Information 

One commenter recommended 

expanding the proposed definition of 

auction information to include data on 

competing crosses offered by national 

securities exchanges other than the 

listing market, such as one of the 

commenter’s products (the Cboe Market 

Close product), so that investors have a 

full view of exchange trading in other 

mechanisms through which investors 

can seek to have their orders executed 

at official opening or closing prices.489

The Commission does not believe that 

information on competing crosses 

should be included in core data at this 

time. Auctions are held pursuant to 

exchange rules at specified periods 

during the trading day (e.g., at the open, 

at the close, or during the day to reopen 

a stock that has been halted) when 

continuous trading is not occurring. 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18633 

490See, e.g., NYSE Rule 123C(8). See also 

Proposing Release, 85 FR at 16756. 

491See, e.g., NYSE Rule 123C(1)(e). See also 

Proposing Release, 85 FR at 16756. 

492Securities Exchange Act Release No. 88008 

(Jan. 21, 2020), 85 FR 4726 (Jan. 27, 2020). Through 

Cboe Market Close, buy and sell market on close 

orders for stocks not listed on Cboe are matched 

together and executed at the closing price of the 

stock’s primary listing exchange. Because the Cboe 

Market Close process is using the primary listing 

exchange’s closing price as the execution price, the 

Cboe process is not independently discovering a 

closing price different than the primary listing 

exchange. Id. at 4727, 4738 (‘‘The Commission finds 

that . . . Cboe Market Close should not disrupt the 

price discovery process in the closing auctions of 

the primary listing exchanges. Importantly, Cboe 

Market Close will only accept, match, and execute 

unpriced MOC orders with other unpriced MOC 

orders (i.e., paired-off MOC orders). Contrary to 

some commenters’ assertions that MOC orders 

contribute to the determination of the official 

closing price, the Commission believes that pairedoff MOC orders, which do not specify a price but 

instead seek to be executed at whatever closing 

price is established via the primary listing 

exchange’s closing auction, do not directly 

contribute to setting the official closing price of 

securities on the primary listing exchanges but, 

rather, are inherently the recipients of price 

formation information.’’). 

493See supra Section II.B.2; infra Section II.K.2. 

494See TD Ameritrade Letter at 6 (‘‘Inclusion 

under the broader Consolidated Market Data 

definition would still require for the collection, 

aggregation, and dissemination of the data to make 

it available to self-aggregators and competing 

consolidators but would avoid future confusion 

about what is required of end users for regulatory 

purposes in the future.’’). 

495See Data Boiler Letter I at 20. 

496See supra Section II.C.2(a). 

497See supra Section I.E. These amendments do 

not mandate the consumption of auction 

information, regardless of whether auction 

information is defined as core data or consolidated 

market data, contrary to what one commenter 

suggested. See supra note 494 and accompanying 

text. 

During auctions, buy and sell orders 

generally interact at the single price, 

within limits, that maximizes the 

trading volume that can be executed.490

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.491

While the Cboe Market Close process 

seeks to provide executions on Cboe 

BZX Exchange at the official closing 

price published by the primary listing 

exchange, which is typically determined 

through an auction, it is not itself an 

auction process that establishes 

pricing.492 In proposing to include 

auction information in core data, the 

Commission was responding to the 

growing importance of auctions 

themselves rather than competing cross 

processes that leverage auction-based 

pricing. Because competing cross 

processes are a derivative of the 

underlying auctions that establish 

prices, the Commission does not believe 

that including information regarding 

Cboe Market Close or similar competing 

cross processes would further the 

objective of promoting more informed 

participation in auctions. The 

Commission’s decision does not 

preclude the dissemination of 

information related to such processes on 

a proprietary basis or prevent competing 

consolidators from acquiring and 

providing this information to their 

subscribers. Additionally, selfregulatory organization-specific program 

information can also be required 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.493

(e) Classification of Auction Information 

One commenter stated that auction 

information (along with odd-lots and 

depth of book data) should be part of the 

consolidated market data, rather than 

core data, and expressed its doubt that 

firms would have an option to receive 

only a portion of core data.494 Another 

commenter stated that auction 

information should be further split into 

three products: (1) Core data that has no 

auction data but includes Cboe Market 

Close orders in order not to drag the 

processing speed of normal data 

distribution; (2) separate subscription 

for auction imbalance information 

(matched quantity, imbalance size, near 

price, far price, paired shares, and 

imbalance shares); and (3) integrated 

auction data in a combined feed, the 

speed of which may be slower than (1) 

and (2).495

The Commission believes that auction 

information should be part of core data. 

Core data includes elements that the 

Commission has determined to be 

useful to inform trading decisions by 

today’s investors. Auction information 

is important to investors who wish to 

participate in the opening, reopening, 

and closing auctions, which make up an 

increasing proportion of overall trading 

volume. However, as discussed 

above,496 the Commission is not 

creating any new regulatory obligation 

to consume auction information.497

Furthermore, the Operating Committee 

of the effective national market system 

plan(s) could set separate fees for 

different data content subsets, and 

competing consolidators could offer a 

variety of customized market data 

products to meet their subscribers’ the 

diverse needs. This would help ensure 

that market participants pay for only the 

data that they consume and addresses 

the commenter’s recommendation to 

provide for product differentiation and 

customer choice with respect to auction 

data. 

H. Definition of ‘‘Regulatory Data’’ 

Under Rule 600(b)(78) 

1. Proposal 

The Commission proposed defining 

regulatory data as follows: (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 market wide circuit breakers 

(‘‘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 item 

(1)(C) of the proposed definition, 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 Market-Wide 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). 

2. Final Rule and Response to 

Comments 

The Commission received several 

comments regarding the definition of 

18634 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

498See FINRA Letter at 9; NYSE Letter II at 21; 

MFA Letter at 9; Capital Group Letter at 2; TD 

Ameritrade Letter at 3. 

499See Capital Group Letter at 2; TD Ameritrade 

Letter at 3; MFA Letter at 9 (recommending that 

competing consolidators should be allowed to 

provide a regulatory data only feed and/or 

exchanges should be allowed to provide regulatory 

data on proprietary feeds); Data Boiler Letter I at 33; 

MEMX Letter at 6. 

500See FINRA Letter at 7; NYSE Letter II at 21. 

501See FINRA Letter at 7. 

502See NYSE Letter II at 21. 

503See infra Sections III.E.2(c); V.C.2(b)(i)a 

(discussing how the amendments will affect data 

content fees). 

504See Nasdaq, Equity Trader Alert #2016–79: 

NASDAQ Announces Improved Protections for 

Equity Markets Coming Out of Halts (‘‘Leaky 

Bands’’) (Apr. 12, 2016), available at https://

www.nasdaqtrader.com/ 

TraderNews.aspx?id=ETA2016-79; NYSE, Trader 

Update: NYSE and NYSE MKT: Enhanced Limit Up 

Limit Down Procedures (Aug. 1, 2016), available at 

https://www.nyse.com/trader-update/history#

110000029205; Securities Exchange Act Release No. 

34–78435 (July 28, 2016), 81 FR 51239 (Aug. 3, 

2016) (SR–FINRA–2016–028). 

505Proposing Release, 85 FR at 16807–09. 

506See, e.g., NYSE Rule 7.37(e) (showing the data 

feeds for handling, execution, and routing of orders 

and subscribing to the direct feeds for all national 

securities exchanges except three exchanges 

(Investors’ Exchange, LLC, Long-Term Stock 

Exchange, Inc., and MEMX LLC)); Nasdaq Rule 

4759 (showing the data feeds for handling, routing, 

and execution of orders and subscribing to the 

direct feeds for all national securities exchanges 

except six exchanges (NYSE National, MIAX Pearl, 

Long-Term Stock Exchange, NYSE Chicago, MEMX, 

and IEX)). 

507 Id. 

508See infra Section III.D.2(a). The exchanges 

today perform with proprietary data many functions 

that are similar to self-aggregation, such as 

calculating the best bid and offer to decide where 

to route routable orders. The Exchanges would 

continue to have the option to self-aggregate under 

the adopted rules, allowing the exchanges to 

perform many of the functions they do today, 

including, among other things, routing of orders 

and compliance with the order protection rule. See 

also supra note 503 (regarding the Commission’s 

expectations with respect to the fees for data 

content, including regulatory data). 

regulatory data.498 Some commenters 

supported including regulatory data in 

consolidated market data and did not 

comment on the substance of the 

definition of regulatory data.499 Other 

commenters pointed out difficulties or 

unintended consequences that they 

believed would result from the 

proposed definition.500

The Commission is adopting the 

definition of regulatory data as 

proposed. As discussed below, the 

Commission believes that the 

information in the definition of 

regulatory data should help market 

participants meet their regulatory 

obligations and be informed of trading 

halts, price bands, or other market 

conditions that may affect their trading 

decisions. 

(a) Complexity of Shifting 

Responsibilities to Primary Listing 

Exchanges 

One commenter stated that shifting 

the dissemination of LULD and Short 

Sale Circuit Breaker information from 

the exclusive SIPs to multiple primary 

listing exchanges would lead to these 

key market functions becoming 

disaggregated, more expensive, more 

prone to errors, and more complex due 

to multiple calculation methodologies 

and the need to uniformly adapt to 

change requests that impact the 

calculations.501 Another commenter 

stated that the Commission did not 

consider how a primary listing exchange 

responsible for calculating and 

disseminating regulatory data would 

obtain the information needed to 

perform these calculations from the 

other exchanges and failed to account 

for the financial costs, competitive 

implications, and latency impacts of 

this design.502

The Commission does not believe that 

the proposal would significantly 

increase the cost, complexity, or error 

rate of regulatory data such as LULD or 

Short Sale Circuit Breakers information. 

With respect to LULD information, just 

as the primary listing exchanges provide 

trading pause and reopening auction 

messages to the two exclusive SIPs 

today, the primary listing exchanges 

will provide this same information to 

competing consolidators and selfaggregators under the decentralized 

consolidation model. Similarly, with 

respect to Rule 201 information, the 

primary listing exchange currently 

determines whether a Short Sale Circuit 

Breaker has been triggered and notifies 

the exclusive SIPs; under the 

decentralized consolidation model, the 

primary listing exchange will notify 

competing consolidators and selfaggregators. The Commission does not 

believe the incremental cost of 

providing this data to additional 

entities—i.e., competing consolidators 

and self-aggregators—will be 

substantial. Further, the Commission 

does not believe that the competing 

consolidator model would significantly 

increase complexity because the 

primary listing exchanges today already 

disseminate regulatory messages to the 

two exclusive SIPs. Finally, the 

Commission does not believe that 

shifting the calculation of regulatory 

data to primary listing exchanges would 

lead to more errors as the commenter 

suggested, since primary listing 

exchanges are capable of generating 

regulatory messages accurately and 

already generate many of these messages 

today. 

Moreover, the primary listing 

exchanges, and not only those that 

oversee the operation of exclusive SIPs, 

are qualified and capable to calculate 

LULD price bands, as the exclusive SIPs 

do today. The Commission does not 

agree with the commenter that the costs 

of performing these calculations at the 

primary listing exchange would be 

greater than the costs of doing so at the 

exclusive SIPs because the mechanical 

nature of these calculations would not 

introduce variable costs depending 

upon the entity performing the 

calculation. Furthermore, the 

Commission anticipates that the 

Operating Committee of the effective 

national market system plan(s) could 

reimburse these costs from plan revenue 

prior to allocation. In addition, as 

discussed below, the Commission 

believes that various factors would exert 

a downward pressure on the fees for the 

data content underlying consolidated 

market data, including regulatory 

data.503 Because the primary listing 

exchanges already calculate ‘‘synthetic’’ 

LULD price bands after reopening prices 

are disseminated but before the 

‘‘official’’ price bands are sent by the 

SIPs,504 any costs of requiring them to 

do so pursuant to the definition of 

regulatory data and the decentralized 

consolidation model should be limited. 

Finally, with respect to the comment 

that the Commission did not account for 

the financial costs of its regulatory data 

proposal, the Commission provided an 

estimate of the burdens and costs of 

providing competing consolidators and 

self-aggregators with the data necessary 

to generate consolidated market data, 

including regulatory data, and solicited 

comment on this estimate.505

With respect to the comment 

regarding how primary listing 

exchanges would obtain the information 

needed to calculate and disseminate 

regulatory data from the other 

exchanges, the Commission observes 

that many primary listing exchanges 

already subscribe to the proprietary 

feeds of many other exchanges and will 

continue to have this option under the 

decentralized consolidation model.506

Like many other market participants, 

the primary listing exchanges do so to 

calculate their own NBBOs based on 

data from across the national market 

system and use the proprietary feeds, 

rather than the SIP feeds, for their 

matching engines.507 Furthermore, the 

Commission is adopting rules to allow 

the primary listing exchanges the option 

of obtaining the data from other 

exchanges necessary to perform these 

calculations through self-aggregation.508

In addition, the Commission does not 

believe the proposal will introduce 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18635 

509LULD Plan Section V(A). 

510 In addition, the Operating Committee of the 

effective national market system plan(s) could 

consider the costs of providing competing 

consolidators and self-aggregators with regulatory 

data in proposing fees for consolidated market data 

and could propose adjustments to the revenue 

allocation formula to compensate primary listing 

exchanges in particular. 

511See Letter from Anthony J. Albanese, Chief 

Regulatory Officer, NYSE, et al. dated June 15, 2020 

(‘‘Joint CRO Letter’’) at 3. 

512See infra note 771 and accompanying text. In 

addition, time stamps will be added to all 

consolidated market data, including regulatory data, 

by the SROs as well as competing consolidators. 

See infra Sections III.C.8(b); III.E.2(h). These 

timestamps will help identify when LULD halts and 

Regulation SHO restrictions were triggered and 

communicated. 

513See infra Section III.B.5. 

514See id. 

515See infra note 1128. 

516RBC Letter at 7. 

517See infra note 1127. 

518See Proposing Release, 85 FR at 16759. 

519See MFA Letter at 9 (‘‘The Commission should 

require competing consolidators to provide a 

regulatory data-only feed at a fair and reasonable 

price relative to the cost of that subset of 

consolidated market data. Alternatively, we believe 

the Commission should explicitly permit exchanges 

to provide regulatory data through their proprietary 

market data feeds.’’). 

520See infra Section III.E.2(c). 

unwarranted complexity or 

inconsistency in the dissemination of 

regulatory data. While each primary 

listing exchange will calculate LULD 

price bands, the primary listing 

exchanges are not permitted to apply 

‘‘separate calculation methodologies’’ as 

suggested by the commenter, since the 

reference price calculation methodology 

is set forth in the LULD Plan and not 

subject to deviations.509 The definition 

of regulatory data that the Commission 

is adopting assigns a single entity, the 

primary listing exchange, with the 

responsibility to calculate regulatory 

data such as LULD price bands or to 

monitor the S&P 500 for purposes of 

sending MWCB alerts in order to avoid 

the complexity and confusion that could 

result from having multiple entities— 

competing consolidators and selfaggregators—performing these 

functions. 

Finally, the Commission does not 

believe these additional requirements 

would impose any competitive 

disadvantages on primary listing 

exchanges. Listing securities already 

entails significant regulatory 

obligations, including, as discussed 

above, the provision of certain 

regulatory data to the exclusive SIPs, as 

well as other regulatory functions that 

are required of a listing SRO to regulate 

its listed securities and the issuing 

companies. The Commission estimates 

that the incremental burdens imposed 

by the amendments, including the 

calculations required to disseminate the 

elements of regulatory data, and costs, if 

any, necessary to obtain the data 

underlying those calculations, would be 

minimal, particularly because the 

primary listing exchanges already 

perform many of these functions 

today.510

(b) Geographic Latency of Regulatory 

Data 

One commenter stated that as a result 

of competing consolidators being 

positioned at different locations, listing 

exchanges are likely to experience a 

delay in identifying the moment a LULD 

halt or a Regulation SHO restriction is 

triggered, which may result in executed 

trades that violate the LULD Plan and 

Regulation SHO, and that such latency 

issues will make it difficult for SROs to 

surveil and determine with certainty 

that a market participant intentionally 

violated a LULD or Regulation SHO 

rule.511

The Commission acknowledges that 

competing consolidators would be in 

different locations, likely co-located at 

the exchanges’ primary data centers 

currently in Mahwah, Carteret, 

Secaucus, and Weehawken, New Jersey. 

However, the Commission does not 

believe that the different locations 

would make it more difficult for SROs 

to conduct their market surveillance 

with respect to LULD and Regulation 

SHO. Currently, the SROs develop 

surveillance systems using the data 

sources that allow them to perform their 

regulatory obligations.512 As discussed 

below,513 the varying distances between 

the existing SIPs and the locations of 

different exchanges ensure that SIPprovided regulatory messages will arrive 

at different times today, measured in 

microseconds or finer increments of 

time. The Commission believes that, in 

fact, there will be less of a latency 

differential experienced under the 

decentralized consolidation model 

because it eliminates other material 

geographic latencies in the 

consolidation and regulatory message 

generation process.514

One commenter stated that assigning 

responsibility to the primary listing 

exchanges to produce regulatory 

information such as LULD bands, 

market-wide circuit-breaker 

information, and Regulation SHO 

thresholds underscores the importance 

of the Governance Order 515 and having 

a single effective national market system 

plan and a single, independent plan 

administrator and of ‘‘standing up the 

governance regime quickly’’ prior to the 

launch of the competing consolidator 

model.516 The Commission believes that 

ascribing the responsibility for 

calculating and providing regulatory 

data to primary listing exchanges 

pursuant to these amendments is not 

dependent on the changes contemplated 

in the Governance Order,517 such as the 

submission of a single consolidated data 

plan. Independent of issues related to 

the governance of the effective national 

market system plan(s), the primary 

listing markets, which are already 

performing many of these functions, are 

well-situated to calculate and provide 

regulatory data under the decentralized 

consolidation model.518

One commenter recommended that 

the Commission should require 

competing consolidators, not the 

effective national market system plan(s) 

participants, to make available a 

regulatory-data-only feed at a fair and 

reasonable price because this 

information is a public good, or, 

alternatively should allow exchanges to 

provide regulatory market data through 

their proprietary feeds.519

Regulatory data is essential for the 

investing public and necessary for 

market participants to fulfill regulatory 

obligations. The fees for regulatory data 

must be fair and reasonable and not 

unreasonably discriminatory.520 As 

discussed below, the Commission 

believes that the introduction of 

competitive forces and other factors will 

constrain regulatory data fees. 

Moreover, these amendments permit the 

Operating Committee of the effective 

national market system plan(s) to 

propose fees for data content underlying 

different consolidated market data 

offerings, including consolidated market 

data offerings that use a subset of 

consolidated market data, and permit 

competing consolidators to offer a 

variety of products—including, 

potentially, a regulatory-data-only 

product—suited to the needs of their 

subscribers. Therefore, the Commission 

is adopting the proposal without any 

changes. 

I. Regulation SHO: Conforming 

Amendments to Rule 201 

1. Proposal 

Under the definition of regulatory 

data, the primary listing exchange for an 

NMS stock would make the 

determination regarding whether a 

Short Sale Circuit Breaker has been 

triggered. The Commission proposed 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 

immediately to notify competing 

consolidators and self-aggregators 

18636 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

521For example, a listing market could selfaggregate for its own listings and obtain 

consolidated data from a competing consolidator for 

stocks listed elsewhere. The rules that the 

Commission is adopting do not require a listing 

market to purchase consolidated data from a 

competing consolidator. 

522See infra Section III.E.2(j) (discussing the 

requirement that the effective national market 

system plan(s) be amended to include a list of the 

primary listing exchange for each NMS stock). 

523See Data Boiler Letter I at 27. 

524See Proposing Release, 85 FR at 16763. 

525This commenter stated that the current 

administrative data ‘‘provides additional context for 

market participants to understand, and efficiently 

and accurately use, the proposed core and 

regulatory data to support their trading activities.’’ 

Data Boiler Letter I at 35. The commenter further 

added that ‘‘there can be streamlining opportunity 

for [competing consolidators] to eliminate any 

repetitive information during distribution and 

recipients should have a choice to opt-out.’’ Id. As 

stated above, the decentralized consolidation model 

permits competing consolidators to offer different 

products to market data end users, allowing end 

users to decide which data feeds to purchase and 

utilize. 

(rather than notifying a single plan 

processor as was previously the case). 

Competing consolidators would then be 

required to consolidate and disseminate 

this information to their subscribers. 

Specifically, the Commission 

proposed to amend Rule 201(b)(1)(ii)— 

which 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’’—by 

removing the reference to the plan 

processor to reflect the proposed 

decentralized consolidation model. 

Furthermore, the Commission proposed 

amending Rule 201(b)(3)—which 

requires listing markets to immediately 

notify ‘‘the single plan processor 

responsible for consolidation of 

information for the covered security 

pursuant to Rule 603(b)’’ when a Short 

Sale Circuit Breaker has been 

triggered—by removing the single plan 

processor notice requirement and 

replacing it with the requirement for the 

listing market to immediately make 

such information available as provided 

in Rule 603(b) (i.e., to competing 

consolidators and self-aggregators). 

Second, under the proposed 

decentralized consolidation model with 

competing consolidators and selfaggregators, the listing market, in order 

to make determinations as to whether a 

Short Sale Circuit Breaker has been 

triggered as required by 17 CFR 

242.201(b)(1)(i) (Rule 201(b)(1)(i)), 

would have the option of obtaining 

proposed consolidated market data from 

one or more competing consolidators 

(rather than from a single plan processor 

as is currently the case), to aggregate 

consolidated market data itself, or some 

combination of the two.521

The Commission also proposed 

certain conforming amendments in Rule 

201 to harmonize that rule with the 

Proposing Release. Currently, 17 CFR 

242.201(a) (Rule 201(a)) defines ‘‘listing 

market’’ by reference to the listing 

market as defined in the effective 

transaction reporting plan for the 

covered security. Since primary listing 

exchanges will be required to collect 

and calculate regulatory data, the 

Commission proposed to introduce a 

definition of ‘‘primary listing exchange’’ 

in Rule 600(b)(68) to provide greater 

clarity with respect to the 

responsibilities regarding regulatory 

data. Specifically, under proposed Rule 

600(b)(68), 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).522

The Commission 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 definition would ensure that 

primary listing exchanges are clearly 

identified. The Commission also 

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 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. 

2. Final Rule and Response to 

Comments 

The Commission received one letter 

supporting the amendments to 

Regulation SHO.523 For the same 

reasons discussed above with regard to 

how the proposed amendments would 

facilitate the decentralized 

consolidation model, the Commission is 

adopting the amendments to Regulation 

SHO as proposed. 

J. Definition of ‘‘Administrative Data’’ 

Under Rule 600(b)(2) 

1. Proposal 

The Commission proposed defining 

‘‘administrative data’’ 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 § 242.603(b) or the 

technical specifications thereto as of the 

date of Commission approval of the 

proposal. Administrative data would be 

a component of the definition of 

‘‘consolidated market data,’’ which 

permits additional administrative data 

elements to be added pursuant to 

amendments to the effective national 

market system plan(s). Examples of 

administrative messages include market 

center and issue symbol identifiers, and 

examples of control messages include 

messages regarding the beginning and 

end of trading sessions. As the 

Commission stated in the proposing 

release, the proposed definition was 

‘‘intended to capture administrative 

information that is currently provided 

in SIP data.’’ 524

2. Final Rule and Response to 

Comments 

The Commission received one 

comment supporting the proposed 

definition of administrative data,525 and 

is adopting the definition as proposed. 

The Commission continues to believe 

that including administrative messages 

in consolidated market data will 

facilitate market participants’ efficient 

and accurate use of consolidated market 

data. Further, the Commission believes 

that this information is useful to market 

participants and should continue to be 

widely available. The Commission 

believes that SROs would be wellsituated 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 self-aggregators to generate core and 

regulatory data. 

K. Definition of ‘‘Self-Regulatory 

Organization-Specific Program Data’’ 

Under Rule 600(b)(85) 

1. Proposal 

The Commission proposed to define 

exchange-specific program data as: (1) 

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 § 242.603(b) as of the 

date of Commission approval of the 

proposal and (2) other exchange-specific 

information with respect to quotations 

for or transactions in NMS stocks as 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18637 

526See IEX Letter at 7. 

527 Data Boiler Letter I at 35–36. 

528See NYSE Letter II at 28. 

529Nasdaq Letter IV at 33. 

530The Commission is also modifying proposed 

Rule 600(b)(85)(ii) of Regulation NMS so that it 

refers to ‘‘[o]ther self-regulatory organizationspecific information with respect to quotations for 

or transactions in NMS stocks . . .’’ rather than 

‘‘other exchange-specific information with respect 

to quotations for or transactions in NMS stocks 

. . .’’. See infra Section VIII. 

531See also supra Section II.F.2(c) (explaining 

that the Commission is adopting a modified 

definition of depth of book data that includes 

liquidity at depth of book price levels that may be 

available on FINRA’s ADF or other facilities of a 

national securities association in the future). 

532See supra Section II.B.2. 

533See Proposing Release, 85 FR at 16765–66 

(describing the latencies that exist in the current 

centralized consolidation model). The existing 

centralized consolidation model system suffers 

from three sources of latencies: (a) Geographic 

latency, (b) aggregation latency, and (c) 

transmission latency. Geographic latency is 

typically the most significant component of the 

latencies that the exclusive SIPs experience 

compared to the proprietary data feeds. 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. 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. Transmission 

Continued 

specified by the effective national 

market system plan or plans required 

under § 242.603(b). 

The Commission stated that existing 

retail liquidity programs, which offer 

opportunities for retail orders to receive 

price improvement, and, in certain 

cases, other exchange-specific program 

information should continue to be 

included in proposed consolidated 

market data. If (i) an exchange(s) 

develops new program(s) in the future, 

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. 

2. Final Rule and Response to 

Comments 

The Commission received comments 

regarding the definition of exchangespecific program data. One commenter 

supported the inclusion of exchangespecific program data in consolidated 

market data, stating that this data, 

which is already carried by the SIPs, is 

highly relevant and important to all 

types of market participants.526 Another 

commenter agreed with the inclusion of 

information related to existing retail 

liquidity programs but stated that there 

should be a ‘‘procedural mechanism to 

review if there might be other new 

exchange-specific program information 

to be included in the future.’’ 527

Some commenters objected to the 

proposed definition of exchangespecific program data. One commenter 

stated that the proposal would require 

changes to exchange-specific programs 

to become effective through an effective 

national market system plan 

amendment even though exchanges are 

currently free to propose such programs 

through the SRO rulemaking process 

provided in Section 19(b) of the 

Exchange Act and that requiring such 

changes to be duplicatively filed as 

proposed plan amendments would serve 

no policy or regulatory purpose and 

would improperly give competing 

exchanges (as members of the plans’ 

Operating Committee) a vote in whether 

or not an exchange may change its 

programs.528 Another commenter 

characterized exchange-specific 

program information as ‘‘an essentially 

unknown category of information that 

may or may not be useful to particular 

categories of investors’’ and stated that 

the Commission has determined that 

‘‘virtually all categories of information— 

even indeterminate ones—constitute 

core data.’’ 529

The Commission is adopting the 

definition of exchange-specific program 

data largely as proposed, but is 

modifying the definition to ‘‘selfregulatory organization-specific program 

data’’ so that it extends to national 

securities associations in addition to all 

national securities exchanges.530 The 

Commission believes that information 

related to any program developed by a 

national securities association in the 

future should also be able to be 

included in consolidated market data if 

specified by the effective national 

market system plan(s).531 Information 

related to retail liquidity programs is 

already in the SIP feeds today, and the 

Commission agrees that this information 

is relevant to market participants who 

wish to submit orders to, or otherwise 

participate in, such programs and 

should therefore be included in 

consolidated market data. To the extent 

other exchange-specific or national 

securities association-specific programs 

may be developed in the future, the 

Commission believes such information 

would be similarly relevant to market 

participants who wish to engage with 

such programs. 

The Commission also agrees that a 

procedural mechanism to modulate the 

inclusion in consolidated market data of 

information related to future SROspecific programs is needed. The 

Commission believes that requiring 

such data to be included by amendment 

to the effective national market systems 

plan(s), as proposed, is the appropriate 

mechanism because, as explained 

above, it allows for the inclusion of 

additional SRO-specific program 

information data elements that may 

emerge periodically through the 

approval of new SRO rules.532

The Commission disagrees with the 

comment that this process would be 

‘‘duplicative’’ of the Section 19(b) 

process or give an exchange’s 

competitors a vote in whether an 

exchange may change its programs. The 

Section 19(b) process for approval of an 

SRO’s rules and a plan amendment 

serve two distinct purposes. An 

individual SRO could develop a new 

program on its own initiative pursuant 

to the Section 19(b) process. The SRO 

could disseminate information related 

to any such program to market 

participants on a proprietary basis only. 

On the other hand, a plan amendment 

would only be required in order to 

include this information in consolidated 

market data if an SRO decides to pursue 

the option and the Operating Committee 

agrees it is appropriate to provide it to 

market participants under the national 

market system rules. 

Finally, the Commission disagrees 

that exchange-specific program data is 

an ‘‘essentially unknown category of 

information’’ that may or may not be 

useful to market participants. The rules 

would allow the effective national 

market system plan(s) to add other SROspecific information if the Operating 

Committee determines that the 

information would be useful to market 

participants. The Commission believes 

that allowing the Operating 

Committee(s) some flexibility to add 

additional SRO-specific information 

would be in the interest of investors and 

would strengthen the national market 

system. The Equity Data Plans have 

utilized such a mechanism in the past. 

III. Enhancements to the Provision of 

Consolidated Market Data 

A. Introduction 

The Commission is adopting a 

decentralized consolidation model in 

which competing consolidators, rather 

than the exclusive SIPs, will collect, 

consolidate, and disseminate 

consolidated market data. This new 

model will address the geographic, 

aggregation, and transmission latencies 

that characterize the existing centralized 

consolidation model,533 which has 

18638 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

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. 

534The CTA/CQ SIP is located in Mahwah, NJ, 

and the UTP SIP is located in Carteret, NJ. Other 

exchanges and broker-dealers are located in 

Secaucus, NJ. These three main data center 

locations are typically referred to as the ‘‘New 

Jersey Triangle.’’ 

535See supra note 533. 

536See, e.g., SIFMA Letter at 3 (‘‘Even if a brokerdealer elects to consolidate market data through 

proprietary feeds, it must also purchase the core 

data from the SIPs for a number of reasons, such 

as to comply with the Vendor Display Rule, receive 

regulatory messages like trading halts and have a 

backup source of data in case an exchange 

experiences issues with its proprietary feeds.’’). But 

see BestEx Research Letter at 2 (‘‘Despite the claims 

of many market participants, the SIP is a critical 

component of the US equity market structure and 

is widely used by institutional broker-dealers.’’). 

The commenter, however, also stated that ‘‘the 

reforms to the SIP proposed by the Commission will 

make it even more robust and useful.’’ Id. at 1. 

While SIP data is widely used, market participants, 

as well as the commenter, acknowledge that the 

decentralized consolidation model will modernize 

the national market system and make it more useful 

for today’s trading. 

537See Market Information Concept Release, 

supra note 22, at 70614. 

538Section 11A(c)(1)(B) of the Exchange Act 

states that the Commission should assure, among 

other things, the ‘‘prompt’’ collection, processing, 

distribution, and publication of information. 

Further, 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.’’ S. Rep. No. 94–75 at 8 (1975) 

(‘‘Senate Report’’). 

539Market Information Concept Release, supra 

note 22, at 70614. 

540One commenter stated that ‘‘[c]urrent market 

structure allows investors’ order [sic] to be traded 

at stale prices.’’ Better Markets Letter at 6. See also 

Capital Group Letter at 2, 4; Clearpool Letter at 2; 

DOJ Letter at 2, 4; Fidelity Letter at 2; MFA Letter 

at 2; State Street Letter at 2, 3; T. Rowe Price Letter 

at 1–2; Virtu Letter at 2, 5. 

541Section 11A(a)(1)(B) of the Exchange Act. 

542See supra Section II.C.2(a) (discussing the 

indirect benefits to market participants whose 

executing broker-dealers will receive expanded data 

content from competing consolidators); infra 

Section III.B.5 (discussing indirect benefits to 

investors from enhancements to trading by their 

broker-dealers resulting from reductions in latency, 

the expanded data content and the competitive 

environment fostered by the decentralized 

consolidation model). 

543See Proposing Release, 85 FR at n. 395. Under 

the centralized consolidation model, quotes and 

trades that occur on Nasdaq for NYSE-listed stocks 

must be provided to the CTA/CQ SIP for 

dissemination. Under the decentralized 

consolidation model, such quotes and trades in 

NYSE-listed stocks will be provided directly by 

Nasdaq to competing consolidators and selfaggregators. 

relied upon the exclusive SIP for each 

NMS stock to centrally collect, 

consolidate, and disseminate SIP data 

from its location, regardless of the 

location of other exchanges, FINRA, or 

subscribers. The Commission believes 

this new model will foster a competitive 

environment for the dissemination of 

consolidated market data and will 

modernize the underlying architecture 

of the national market system. 

The centralized consolidation model 

has largely remained unchanged despite 

significant market developments since it 

was developed in the 1970s. Today, the 

exclusive SIPs are located in disparate 

locations far from each other and from 

end users. Each exclusive SIP must 

collect data from geographically 

dispersed SRO data centers, consolidate 

that data, and then disseminate that data 

as SIP data from the exclusive SIP’s 

location to end-users, which are often in 

other locations. The need for market 

information to travel back and forth 

across the ‘‘New Jersey triangle’’ 534

prior to reaching subscribers creates 

significant geographic and other 

latencies.535 This structure, as well as 

the limited data content available in SIP 

data, has led many market participants 

to relegate SIP data to backup data.536

The national market system for the 

collection, consolidation, and 

dissemination of SIP data was 

established to be the heart of the 

national market system and is designed 

to provide broad public access to a 

consolidated, real-time stream of market 

information.537 Investors’ need for real 

time information has been recognized 

since the adoption of the 1975 

Amendments and is reflected in Section 

11A of the Exchange Act.538 In the 

context of market data, the Commission 

has said that ‘‘real time’’ means that 

‘‘there is very little delay between the 

time a quotation is made or a 

transaction is effected and the time that 

this information is made available to 

investors and others who use the 

information.’’ 539 Some market 

participants believe that the latencies 

inherent in the centralized 

consolidation model have affected the 

ability of brokers to trade competitively 

and to provide best execution to 

customer orders, especially when 

compared to proprietary data products 

that are not encumbered by centralized 

consolidation.540

Significant technological changes 

have occurred since the 1970s and the 

passage of the 1975 Amendments. 

Electronic trading has all but 

supplanted manual trading, and 

electronic trading systems can handle 

and process data at speeds unheard of 

when the national market system was 

established. While the Equity Data Plans 

have made various investments and 

systems upgrades over time, they have 

not kept up with the demands of all 

market participants. The concurrent 

existence of the centralized 

consolidation model for SIP data and 

the decentralized consolidation model 

for proprietary data has resulted in a 

two-tiered market in which certain 

market participants that can afford and 

choose to pay for proprietary data feeds 

receive content-rich data faster than 

those who do not purchase these feeds, 

including market participants who may 

face higher barriers to entry from data 

and other exchange fees. Market 

participants that do not receive 

proprietary DOB feeds may be affected 

in their efforts to seek best execution 

and otherwise effectively compete with 

market participants that receive 

proprietary DOB data feeds because they 

do not obtain access to the additional 

content and may be receiving data in a 

slower manner. 

Therefore, the Commission believes 

that the national market system must be 

modernized to allow ‘‘new data 

processing and communications 

systems [to] create the opportunity for 

more efficient and effective market 

operations.’’ 541 The centralized 

consolidation model no longer meets 

market participants’ need for real-time 

consolidated market data.542 The 

purpose of the decentralized 

consolidation model is to modernize the 

infrastructure of the national market 

system by eliminating the outdated 

centralized architecture for data 

consolidation and dissemination. 

Under the current model, each 

exclusive SIP must collect data for 

specific NMS stocks from 

geographically dispersed SRO data 

centers, consolidate the data, and then 

disseminate it from its location to endusers, which are often in other 

locations. The new decentralized 

consolidation model will speed up the 

dissemination of consolidated market 

data by allowing competing 

consolidators to collect data directly 

from each SRO and consolidate the data 

in the same data center as end users. 

Latency-sensitive data end-users will be 

able to receive consolidated market data 

products at the same data center 

location from which the competing 

consolidator operates. 

Under this new model, the relevant 

exchange will provide quotes and trades 

in the NMS stocks they trade directly to 

competing consolidators and selfaggregators and the hub-and-spoke 

method of centralized collection and 

dissemination will be eliminated.543

Further, by fostering a competitive 

environment for the collection, 

consolidation, and dissemination of 

consolidated market data, the 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18639 

544One commenter stated that it expects that its 

use of direct feeds would be eliminated if the 

proposal is implemented. See NBIM Letter at 4. 

545See Proposing Release, 85 FR at 16764–65. 

546See Proposing Release, 85 FR at nn. 419–20. 547See BlackRock Letter; Fidelity Letter; State 

Street Letter; Wellington Letter; ICI Letter; Virtu 

Letter; AHSAT Letter; IntelligentCross Letter; 

BestEx Research Letter; MEMX Letter; Clearpool 

Letter; T. Rowe Price Letter; ACS Execution 

Services Letter; IEX Letter; SIFMA Letter; MFA 

Letter; Schwab Letter; RBC Letter; STANY Letter II; 

Angel Letter; Nasdaq Letter III; Nasdaq Letter IV; 

NYSE Letter II; FINRA Letter; Cboe Letter; Proof 

Trading Letter; Citadel Letter; TD Ameritrade Letter; 

Data Boiler Letter I; Healthy Markets Letter I; Joint 

CRO Letter; Susquehanna Letter; NovaSparks Letter; 

Better Markets Letter; Capital Group Letter; McKay 

Letter; NBIM Letter; Wharton Letter; letter from 

Kermit R. Kubitz, dated May 26, 2020, (‘‘Kubitz 

Letter’’); letter from Kelvin To, Founder and 

President, Data Boiler Technologies, LLC, dated 

June 10, 2020, (‘‘Data Boiler Letter II’’); DOJ Letter; 

letter from Nandini Sukumar, Chief Executive 

Officer, World Federation of Exchanges, to 

Chairman Clayton and Commissioners Lee, Peirce, 

and Roisman, dated May 26, 2020, (‘‘WFE Letter’’); 

letters to Vanessa Countryman, Secretary, 

Commission, from Stephen J. McNeany Chief 

Executive Officer, and Frank W. Piasecki, President, 

ACTIV Financial Systems, Inc., dated May 26, 2020, 

(‘‘ACTIV Financial Letter’’); Doris Choi, Co-General 

Counsel, ICE Data Services, dated May 29, 2020, 

(‘‘IDS Letter I’’); John L. Thornton and R. Glenn 

Hubbard, Co-Chairs, and Hal S. Scott, President, 

Committee on Capital Markets Regulation, dated 

Apr. 23, 2020, (‘‘Committee on Capital Markets 

Regulation Letter’’); Kevin R. Edgar, Counsel, 

BakerHostetler LLP and Counsel, Equity Markets 

Association, dated June 30, 2020, (‘‘Equity Markets 

Association Letter’’); Joanna Mallers, Secretary, FIA 

Principal Traders Group, dated June 3, 2020, (‘‘FIA 

PTG Letter’’); Tom C. W. Lin, Professor of Law, 

Temple University Beasley School of Law, dated 

May 26, 2020, (‘‘Temple University Letter’’); Tyler 

Gellasch, Executive Director, Healthy Markets, 

dated July 27, 2020, (‘‘Healthy Markets Letter II’’); 

Doris Choi, Co-General Counsel, ICE Data Services, 

dated Aug. 12, 2020, (‘‘IDS Letter II’’). 

548See BlackRock Letter; Fidelity Letter; State 

Street Letter; Wellington Letter; ICI Letter; Virtu 

Letter; AHSAT Letter; FIA PTG Letter; 

IntelligentCross Letter; Committee on Capital 

Markets Regulation Letter; BestEx Research Letter; 

Wharton Letter; MEMX Letter; Clearpool Letter; T. 

Rowe Price Letter; Capital Group Letter; DOJ Letter; 

ACS Execution Services Letter; IEX Letter; SIFMA 

Letter; ACTIV Financial Letter; MFA Letter; Better 

Markets Letter; NBIM Letter; NovaSparks Letter; 

letter from Anthony H Steinmetz, dated Feb. 17, 

2020, (‘‘Steinmetz Letter’’) (supporting the proposal 

generally). 

549See STANY Letter II; Angel Letter; Nasdaq 

Letter III; Nasdaq Letter IV; NYSE Letter II; FINRA 

Letter; Cboe Letter; Proof Trading Letter; Citadel 

Letter; TD Ameritrade Letter; Kubitz Letter; Data 

Boiler Letter I; Data Boiler Letter II; Healthy Markets 

Letter I; WFE Letter; Joint CRO Letter; Equity 

Markets Association Letter. 550See MEMX Letter at 3, 8; Committee on 

Capital Markets Regulation Letter at 3; BestEx 

Research Letter at 1; State Street Letter at 3; ACTIV 

Financial Letter at 1; Fidelity Letter at 9; SIFMA 

Letter at 5, 12; Wellington Letter at 1; 

IntelligentCross Letter at 4–5; ICI Letter at 4, 10; 

RBC Letter at 6; DOJ Letter at 5; Capital Group 

Letter at 4; T. Rowe Price Letter at 4; Virtu Letter 

at 6. 

551See SIFMA Letter at 5; Fidelity Letter at 3, 10; 

IEX Letter at 2. 552See MEMX Letter at 6, 7, 8; Fidelity Letter at 

3, 10; Wellington Letter at 1; ICI Letter at 4, 10; 

Capital Group Letter at 4; BlackRock Letter at 5; IEX 

Letter at 3; Better Markets Letter at 3; AHSAT Letter 

at 1, 3; DOJ Letter at 3, 4; SIFMA Letter at 1, 5, 11; 

ACS Execution Services Letter at 5. 553See MFA Letter at 2; Capital Group Letter at 

2, 4; ICI Letter at 4; DOJ Letter at 2–3, 4; SIFMA 

Letter at 5; MEMX Letter at 2, 8; NBIM Letter at 4. 554See NovaSparks Letter at 1. 555See BestEx Research Letter at 1, 4; DOJ Letter 

at 3–4, 5; Committee on Capital Markets Letter at 

3; IntelligentCross Letter at 5; Better Markets Letter 

at 3; RBC Letter at 5–6; State Street Letter at 3; 

Fidelity Letter at 3, 9; Wellington Letter at 1; 

BlackRock Letter at 5; IEX Letter at 3; SIG Letter at 

1. 556See Committee on Capital Markets Regulation 

Letter at 3; BestEx Research Letter at 1; RBC Letter 

at 5–6; State Street Letter at 3. 557See Healthy Markets Letter I at 2; Kubitz Letter 

at 1; Data Boiler Letter I at 46–47; Data Boiler Letter 

II at 1; Citadel Letter at 5; TD Ameritrade Letter at 

2; NYSE Letter II at 22; Nasdaq Letter IV at 2–3, 8; 

Angel Letter at 18–20; STANY Letter II at 5. 558See FINRA Letter at 3, 4; letter from Linda 

Moore, President and CEO, TechNet, to Vanessa 

Countryman, Secretary, Commission, dated June 18, 

2020, (‘‘TechNet Letter II’’) at 2. 559See STANY Letter II at 5; Data Boiler Letter 

I at 47; TD Ameritrade Letter at 15; Nasdaq Letter 

Continued 

decentralized consolidation model will 

incentivize greater innovation, 

competitive pricing, and the timely 

adoption of updated technologies into 

the national market system. 

The Commission believes that the 

decentralized consolidation model will 

better serve the needs of market 

participants and investors. It should 

address concerns about the costs 

associated with the current structure, in 

which many market participants are 

compelled to buy proprietary feeds and 

the exclusive SIP feeds to trade 

competitively and represent their 

customers’ orders.544 The amendments 

also should address the concerns about, 

and improve, the content and latency 

differentials that currently exist between 

SIP data and proprietary data.545 The 

Commission believes that the 

amendments will provide all market 

participants with access to a real-time 

stream of consolidated market data, 

improve the national market system, 

help to ensure the continued success of 

the U.S. securities markets, and better 

achieve the goals of Section 11A of the 

Exchange Act by assuring ‘‘the 

availability to brokers, dealers and 

investors of information with respect to 

quotations for and transactions in 

securities’’ that is prompt, accurate, 

reliable, and fair. 

B. Proposed Decentralized 

Consolidation Model 

The Commission proposed a 

decentralized consolidation model in 

which new competing SIPs, called 

competing consolidators, would collect 

the data content underlying 

consolidated market data from the 

individual SROs, consolidate the 

information of all of the SROs, and 

disseminate that consolidated 

information as consolidated market data 

to end users. The proposed 

decentralized consolidation model also 

would allow broker-dealers to act as 

self-aggregators to collect all of the data 

content underlying consolidated market 

data from the individual SROs and 

consolidate that information solely for 

their internal use. The Commission 

proposed this model to reduce 

significantly the geographic and other 

latencies inherent in the existing 

centralized consolidation model. The 

proposed decentralized consolidation 

model would allow competing 

consolidators and self-aggregators to 

eliminate the back-and-forth travel of 

data associated with the centralized 

consolidation model, to operate in the 

data center of their choice (i.e., in close 

proximity to data subscribers), and to 

foster a competitive environment for the 

aggregation and transmission of 

consolidated market data.546

1. Comments on the Decentralized 

Consolidation Model 

The Commission received comments 

on the proposed decentralized 

consolidation model.547 Many 

commenters supported the goals of the 

decentralized consolidation model and 

the potential positive impacts this 

model would have on the provision of 

consolidated market data,548 while 

numerous commenters raised issues 

with—or questioned certain aspects of— 

the proposed model.549

Commenters that supported the 

decentralized consolidation model 

believed that it would inject needed 

competition into the consolidated 

market data environment,550 address 

conflicts of interest in the centralized 

consolidation model,551 reduce latency 

in the dissemination of consolidated 

market data,552 improve the usefulness 

of consolidated market data as an 

alternative to proprietary market data 

feeds,553 improve the reliability of the 

consolidated market data 

infrastructure,554 and reduce the cost of 

consolidated market data 555 while 

increasing its quality.556

Commenters that raised concerns 

about the proposed decentralized 

consolidation model said that it would 

not achieve its goal of disseminating 

consolidated market data to market 

participants in a more timely, efficient, 

and cost-effective manner than the 

current centralized consolidation 

model; 557 that its impact on the markets 

would be uncertain until 

implementation; 558 that the impact on 

fees and costs for consolidated market 

data was uncertain; 559 that the new 

18640 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

IV at 23, 26, 47–48, 60. See also, e.g., Angel Letter 

at 22–23. 

560See Cboe Letter at 23–24; FINRA Letter at 3, 

4. See also, e.g., Angel Letter at 21. 

561See FINRA Letter at 3, 4; Nasdaq Letter IV at 

27, 29, 30. 

562See Nasdaq Letter IV at 23–26; NYSE Letter II 

at 13, 17–18; IDS Letter I at 3, 4, 7–8; IDS Letter 

II at 1, 3; STANY Letter II at 6; Data Boiler Letter 

I at 46; Angel Letter at 18, 20; Equity Markets 

Association Letter at 3; FINRA Letter at 3; TechNet 

Letter II at 1–2. 

563See FINRA Letter at 2, 3, 5–6; Angel Letter at 

18–19; Healthy Markets Letter I at 4–5; TechNet 

Letter II at 2; STANY Letter II at 6, 8; Joint CRO 

Letter at 2; Data Boiler Letter I at 48; Nasdaq Letter 

III at 8; Citadel Letter at 5; TD Ameritrade Letter at 

12–13; WFE Letter at 1. 

564See Nasdaq Letter IV at 2, 3, 4, 12–13, 35; Joint 

CRO Letter at 2, 3, 4; FINRA Letter at 4, 5, 6; 

TechNet Letter II at 2; Data Boiler Letter I at 48; 

Healthy Markets Letter I at 4–5; TD Ameritrade 

Letter at 13; Citadel Letter at 5; Kubitz Letter at 1; 

NYSE Letter II at 23. 

565See Cboe Letter at 23; Nasdaq Letter IV at 49; 

STANY Letter II at 5, 6; Citadel Letter at 5; NYSE 

Letter II at 11, 22, 23; TD Ameritrade Letter at 12; 

Proof Trading Letter at 1; Angel Letter at 18, 19; 

FINRA Letter at 8; IDS Letter I at 15; Data Boiler 

Letter II at 1. 

566See Citadel Letter at 5; STANY Letter II at 8. 

567See Healthy Markets Letter I at 2; Kubitz Letter 

at 1; Data Boiler Letter I at 46–47; Data Boiler Letter 

II at 1; Citadel Letter at 5; TD Ameritrade Letter at 

2, 12; NYSE Letter II at 22; Nasdaq Letter IV at 2– 

3, 8; Angel Letter at 18–20; STANY Letter II at 5. 

568 Kubitz Letter at 1. 

569See Data Boiler Letter II at 1. 

570 5 U.S.C. 551 et seq. 

571See NYSE Letter II at 22. 

572See STANY Letter II at 5; TD Ameritrade 

Letter at 2. 

573TD Ameritrade Letter at 2. 

574TechNet Letter II at 2. 

575See TD Ameritrade Letter at 12. 

576See Data Boiler Letter I at 46–47. 

577See Nasdaq Letter IV at 3. 

578See id. 

579See MEMX Letter at 3, 8; T. Rowe Price Letter 

at 4; Committee on Capital Markets Regulation 

Letter at 3; BestEx Research Letter at 1; State Street 

Letter at 3; ACTIV Financial Letter at 1; Fidelity 

Letter at 9; SIFMA Letter at 5, 12; Wellington Letter 

at 1; IntelligentCross Letter at 4–5; ICI Letter at 4, 

10; RBC Letter at 6; DOJ Letter at 5; Capital Group 

Letter at 4; Virtu Letter at 6. 

580See Committee on Capital Markets Regulation 

Letter at 3; BestEx Research Letter at 1; RBC Letter 

at 6; State Street Letter at 3. 

581See Fidelity Letter at 3, 9, 10; Committee on 

Capital Markets Regulation Letter at 3; BestEx 

Research Letter at 1, 4; ACTIV Financial Letter at 

1; SIFMA Letter at 12; State Street Letter at 3; 

Wellington Letter at 1; IntelligentCross Letter at 5; 

ICI Letter at 4; RBC Letter at 5–6; DOJ Letter at 3– 

4, 5; Better Markets Letter at 3; BlackRock Letter at 

5; IEX Letter at 3. 

582See SIFMA Letter at 1, 5, 11; ICI Letter at 4, 

10; Capital Group Letter at 4; MEMX Letter at 8; 

Fidelity Letter at 3, 10; BlackRock Letter at 5; IEX 

Letter at 3; Better Markets Letter at 3; AHSAT Letter 

at 1; DOJ Letter at 3–4, Wellington Letter at 1 (‘‘We 

believe the introduction of competitive forces to the 

distribution of data will result in lower-latency, 

faster data that is more broadly available and also 

at reduced costs for participants.’’); NovaSparks 

Letter at 1 (‘‘The competitive nature of the new 

model will encourage Competing Consolidators to 

deliver excellent reliability, functionality and 

performance.’’). 

583See SIFMA Letter at 5, 12. 

584See State Street Letter at 3. 

585Capital Group Letter at 4. 

586See T. Rowe Price Letter at 4. 

587 Virtu Letter at 6. 

588See MFA Letter at 2; Capital Group Letter at 

2, 4; ICI Letter at 4; DOJ Letter at 2–3, 4; SIFMA 

Letter at 5; MEMX Letter at 2, 8; NBIM Letter at 4, 

5–6. 

architecture could result in increased 

costs for some market participants; 560

and that it could result in increased 

costs for SROs.561 Commenters also 

questioned its feasibility,562 the 

complexity introduced by multiple 

competing consolidators,563 its impact 

on regulation,564 and its benefits to 

latency.565 A few commenters also 

suggested that the decentralized 

consolidation model would benefit from 

further consideration by market 

participants and the Commission and 

should be the subject of a separate 

rulemaking.566

These comments are addressed below. 

2. Comments on the Effectiveness of the 

Proposal 

Several commenters questioned 

whether the proposed decentralized 

consolidation model would achieve its 

goal of disseminating consolidated 

market data to market participants in a 

more timely, efficient, and cost-effective 

manner than the current centralized 

consolidation model.567 One commenter 

stated that while the proposed system 

may be desirable, ‘‘it is not clear how 

the development of multiple parties 

interacting and providing quotations 

and trade data can be implemented over 

time to assure accuracy, completeness 

and avoidance of gaming and fraud.’’ 568

Another commenter said that the 

proposed decentralized consolidation 

model is impractical and would 

increase market fragmentation.569 One 

commenter stated that the Commission 

failed to show how the decentralized 

consolidation model would result in the 

dissemination of market data that is 

prompt, accurate, reliable, and fair and 

said that the proposal violates the 

Administrative Procedure Act 

(‘‘APA’’) 570 because it did not 

demonstrate a rational connection 

between the proposal and its goals.571

A few commenters stated that the 

Proposing Release did not include 

enough information to evaluate whether 

the decentralized consolidation model 

would reduce market data costs, 

improve transmission latency, and 

improve resiliency.572 One commenter 

stated that the proposal lacked 

information about ‘‘data quality, 

availability, reliability and potential for 

significant additional cost’’ and 

expressed the view that the negative 

effects of the proposal could exceed any 

benefits to retail investors.573 Another 

commenter said that it was ‘‘unclear 

whether the prices set by competing 

consolidators will be reliable, resilient, 

or well-regulated; and how anomalies 

and disparities among competing 

consolidators will be resolved.’’ 574

Some commenters raised questions 

regarding the competitive aspects of the 

proposal. One commenter stated that 

there was no guarantee that competition 

would improve latency and cost,575 and 

another commenter questioned the 

ability of competing consolidators to 

provide the needed competition to 

decrease latency and cost.576 Further, 

one commenter stated that, although the 

proposal would provide for 

competition, there is no guarantee that 

competition would occur or that the 

proposal would result in a competitive 

outcome that would benefit investors.577

This commenter stated that competition 

would result in competing consolidators 

selling differentiated products that 

would result in a proliferation of market 

data tiers and information 

asymmetries.578

However, several commenters said 

that the proposed decentralized 

consolidation model would introduce 

needed competition,579 which would 

result in better quality consolidated 

market data,580 lower market data 

costs,581 and improved latency.582 One 

commenter stated that competition in 

the consolidation and dissemination of 

market data would increase investor 

choice and would address both the 

conflicts of interest that exist in the 

centralized consolidation model and the 

latency advantages enjoyed by market 

participants that are able to purchase 

proprietary data feeds.583 One 

commenter stated that competition will 

allow for innovation that could reduce 

dependence on proprietary market 

data,584 and another asserted that ‘‘a 

market with competing data feeds will 

be more efficient and effective.’’ 585 One 

commenter said that modernization 

through competitive market forces 

would bring desired changes to 

consolidated market data and its 

framework,586 and another supported 

the proposal’s addition of competition 

‘‘while still preserving a significant role 

for the exchanges to participate.’’ 587

Several commenters stated that the 

proposed decentralized consolidation 

model could improve the usefulness of 

consolidated market data and make it a 

viable alternative to proprietary market 

data feeds.588 Commenters indicated 

that the exchange operators of the 

exclusive SIPs currently lack the 

incentive to improve the content, 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18641 

589See BestEx Research Letter at 1; State Street 

Letter at 3. 

590See DOJ Letter at 4; MEMX Letter at 8 (‘‘The 

new content and infrastructure enhancements 

would provide an opportunity to introduce new 

less-expensive NMS data alternatives to proprietary 

market data products.’’). 

591See DOJ Letter at 4. 

592See MFA Letter at 2 (stating that the proposal 

should narrow the ‘‘significant gap in usefulness 

between exchange proprietary data feeds and 

consolidated market data’’); Capital Group Letter at 

2. 

593MEMX Letter at 2. 

594See ICI Letter at 4. 

595Capital Group Letter at 4. 

596See NBIM Letter at 5–6. 

597See id. at 4. 

598 Id. at 4, 5. This commenter said that to be 

‘‘consistently competitive,’’ broker-dealers need to 

self-aggregate and use the fastest connectivity 

available. According to this commenter, this would 

require using direct proprietary market data feeds 

for algorithmic executions. Id. at 3–4. 

599See 15 U.S.C. 78k–1(c)(1)(B). 

600See Healthy Markets Letter I at 2; Kubitz Letter 

at 1; Data Boiler Letter I at 46–47; Citadel Letter at 

5; TD Ameritrade Letter at 2, 12; NYSE Letter II at 

22; Nasdaq Letter IV at 2–3, 8; Angel Letter at 18– 

20; STANY Letter II at 5. 

601See TD Ameritrade Letter at 12; Data Boiler 

Letter I at 46–47; Nasdaq Letter IV at 3. 

602See BestEx Research Letter at 1; State Street 

Letter at 2; SIFMA Letter at 5. 

603See SIFMA Letter at 3, 5; BestEx Research 

Letter at 1, 4 (citing the Proposing Release, 85 FR 

at 16767). The first commenter stated that the 

current market data infrastructure provides no 

incentives for the SRO operators of the SIPs to make 

such improvements. See SIFMA Letter at 3. The 

commenter also noted the ‘‘inherent conflicts of 

interest in the existing exclusive SIP model.’’ Id. at 

5. 

604See McKay Letter at 2; MIAX Letter at 1; 

NovaSparks Letter at 1 (‘‘[A] wide variety of trading 

firms consolidate this data and we believe several 

vendors will soon become Competing 

Consolidator.’’). See also Miami International 

Holdings Announces That It Is Evaluating 

Registration as a Competing Consolidator, dated 

Nov. 18, 2020, available at https://

www.miaxoptions.com/press-releases. The 

Commission notes that Virtu Financial submitted a 

comment letter on a proposed rule change in which 

it expressed interest in establishing a competing 

consolidator. See letter from Douglas A. Cifu, Chief 

Executive Officer, Virtu Financial, to Vanessa A. 

Countryman, Secretary, Commission, dated Aug. 

28, 2020, available at https://www.sec.gov/ 

comments/sr-nyse-2020-05/srnyse202005-7707480- 

222891.pdf. 

605See Committee on Capital Markets Regulation 

Letter at 3; Fidelity Letter at 9; BestEx Research 

Letter at 1; ACTIV Financial Letter at 1; SIFMA 

Letter at 5, 12; State Street Letter at 3; 

IntelligentCross Letter at 5; ICI Letter at 4, 10; RBC 

Letter at 6; DOJ Letter at 5; Wellington Letter at 1; 

Capital Group Letter at 4. 

delivery, and pricing of consolidated 

market data because improved 

consolidated market data could reduce 

demand for the proprietary data feeds 

that the exchanges sell.589 Two 

commenters stated that the proposal 

would result in a less costly alternative 

to proprietary market data feeds.590 One 

of these commenters stated that 

alternatives to proprietary data feeds 

could increase participation in the 

financial services industry and bring 

down costs for market participants.591

Two commenters stated that the 

proposal would narrow the content and 

latency gaps between proprietary market 

data feeds and consolidated market 

data.592 One commenter said that 

equalizing the content and distribution 

of market data provided by exchanges to 

competing consolidators and selfaggregators and proprietary market data 

would eliminate the ‘‘two-tiered’’ 

market data structure.593 Another 

commenter stated that the proposal’s 

improvements to content and latency 

could result in greater reliance on 

consolidated market data.594 One 

commenter stated that the proposal 

would ‘‘put consolidators on more equal 

footing’’ with proprietary market data 

feeds.595

Another commenter indicated that the 

geographic diversification of competing 

consolidators could increase the use of 

consolidated market data.596 The 

commenter stated that its own need for 

direct proprietary market data feeds 

would be eliminated if a competing 

consolidator were located within the 

same data center as the broker-dealers 

the commenter uses.597 The commenter 

also stated that it is unlikely that brokerdealers and ‘‘higher-turnover market 

participants’’ would use consolidated 

market data as a substitute for lowestlatency, self-aggregated direct 

proprietary market data feeds because 

latency minimization is critical for their 

trading activities.598

The Commission believes that the 

decentralized consolidation model will 

modernize the national market system 

so that consolidated market data is 

disseminated to market participants in 

an accurate, reliable, prompt, and fair 

manner.599 The Commission also 

believes that the decentralized 

consolidation model will help to ensure 

the accuracy and completeness of 

consolidated market data. 

The Commission disagrees with the 

comments that stated that the 

decentralized consolidation model 

would not achieve the goal of 

disseminating consolidated market data 

to market participants in a more timely, 

efficient, and cost-effective manner than 

the current centralized consolidation 

model.600 Further, in response to 

comments that stated that competition 

either would not materialize or would 

not guarantee any benefits to market 

participants,601 the Commission 

believes that the amendments will allow 

the introduction of competitive forces, 

and foster a competitive environment, 

for the dissemination of consolidated 

market data. Today, there is no 

competition in the collection, 

consolidation, and dissemination of SIP 

data. The exclusive SIPs do not compete 

with each other because Rule 603(b) 

currently requires the dissemination of 

all consolidated information for an 

individual NMS stock to occur through 

an exclusive SIP. Therefore, each 

exclusive SIP represents different tapes. 

The amendments to Rule 603(b) will 

provide an opportunity for competition 

to improve the dissemination of 

consolidated market data. Market 

participants have stated frequently that 

SIP data is slower than certain 

proprietary market data products 

distributed by the exchanges 602 and that 

the SRO operators of the Equity Data 

Plans—some of whom have an inherent 

conflict of interest because their 

proprietary data products compete with 

the SIP data distributed by the Equity 

Data Plans—have had little incentive to 

improve the quality of SIP data.603 The 

exclusive SIPs have not kept pace with 

the needs of certain market participants, 

while the exchanges have expanded the 

content and reduced the latency of their 

proprietary data products in response to 

market participants’ needs. 

Some commenters stated that they 

will consider entering the competing 

consolidator business.604 These 

statements suggest the potential 

competitive landscape that will develop 

in the national market system with the 

decentralized consolidation model. The 

Commission believes that competitors 

will be drawn to the significant market 

for the enhanced data content that will 

be included in consolidated market 

data. By fostering a competitive 

environment for consolidated market 

data, the Commission is providing the 

opportunity for competing consolidators 

to end the exclusive SIP monopoly by 

competing on the technology and data 

services they offer. A competitive 

environment should lead to the use of 

new, updated technology in a more 

expedited fashion than occurs today. 

The Commission believes that 

competing consolidators will develop 

different consolidated market data 

products and services for their 

subscribers and will compete on the 

basis of latency, resiliency, services and 

products offered, and other factors, 

including price. The Commission agrees 

with the commenters who stated that 

competition will lower market data 

costs, reduce latency, and provide better 

quality data.605

Due to the structure of the 

decentralized consolidation model, the 

Commission believes that competing 

consolidators and self-aggregators will 

18642 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

606As described in the Proposing Release, the 

transmission methods mandated by the Equity Data 

Plans typically rely on transmission options that are 

slower than competitive options. See Proposing 

Release, 85 FR at 16767. 

607See Committee on Capital Markets Regulation 

Letter at 3; Fidelity Letter at 9; BestEx Research 

Letter at 1; ACTIV Financial Letter at 1; SIFMA 

Letter at 5, 12; State Street Letter at 3; 

IntelligentCross Letter at 5; ICI Letter at 4, 10; RBC 

Letter at 6; DOJ Letter at 5; Wellington Letter at 1; 

Capital Group Letter at 4. 

608Rule 603(b) of Regulation NMS. See infra 

Section III.B.9. 

609The Commission recognizes that there will be 

a small ‘‘extra hop’’ for competing consolidators 

that could result in a small amount of additional 

latency as compared to proprietary data because 

competing consolidators must collect, consolidate, 

and disseminate consolidated market data products 

to end users. However, the extra hop will be 

significantly less than the geographic latency that 

currently exists with the exclusive SIPs. The extra 

hop refers to the need to transmit data within a data 

center, a span of feet, as compared to geographic 

latency among geographically diverse data centers, 

a span of miles. More specifically, a competing 

consolidator that chooses to collect, consolidate, 

and disseminate market data within the same data 

center as its end-users will only have to disseminate 

consolidated market data within the data center, 

while exclusive SIPs must collect data from 

geographically dispersed SRO data centers, and 

consolidate and disseminate consolidated market 

data to end-users in other data centers. If a 

competing consolidator does not consolidate data at 

its users’ data centers, its end-users may still benefit 

from reduced aggregation and transmission 

latencies due to the competitive aspect of the 

decentralized consolidated model. Further, the 

amount of latency that may result from using 

competing consolidators will depend upon other 

technical choices and competencies of the 

competing consolidator (i.e., a competing 

consolidator may choose to use the most 

technologically advanced aggregation and 

transmission technologies and therefore narrow its 

latency differential with proprietary data; 

conversely, a decision to use less state-of-the-art 

technology could widen this latency differential 

while potentially lowering costs to users). Selfaggregators would not have the extra hop because 

they will be collecting and consolidating this data 

for themselves. See infra Section III.D.2(d). 

610 Kubitz Letter at 1. 

611Under Section 11A(b)(3)(B) of the Exchange 

Act, 15 U.S.C. 78k–1(b)(3)(B), the Commission will 

be able to grant the registration of a competing 

consolidator only if the Commission is able to find, 

among other things, that the competing consolidator 

is so organized, and has the capacity, to be able to 

assure the prompt, accurate, and reliable 

performance of its functions and to operate fairly 

and efficiently as a SIP. 

612See infra Section III.C.8. 

significantly reduce the geographic, 

aggregation, and transmission latency 

differentials that exist between SIP data 

and proprietary data. With respect to 

geographic latency, competing 

consolidators will be able to deliver 

consolidated market data products 

directly to subscribers because such 

data will no longer be required to travel 

several miles to a separate location for 

consolidation by the exclusive SIPs. 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 in Mahwah, NJ, and the 

Nasdaq UTP SIP data center in Carteret, 

NJ, market participants located outside 

of these data centers should receive 

consolidated market data at reduced 

geographic latencies. With respect to 

aggregation latency, competition will 

incentivize competing consolidators to 

minimize the amount of time it takes to 

aggregate SRO data into consolidated 

market data products. Competition will 

also incentivize competing 

consolidators to reduce transmission 

latency because they will not be 

restricted to the transmission methods 

mandated by the Equity Data Plans; 606

therefore, they can compete based on 

the efficiency of their delivery of 

consolidated market data products. 

Even if a competing consolidator 

chooses not to consolidate data at its 

users’ data centers, the Commission 

believes the users may still benefit from 

reduced aggregation and transmission 

latencies because competing 

consolidators will be incentivized to use 

the latest aggregation and transmission 

mechanisms as a means to attract 

subscribers. 

The Commission believes that the 

competition fostered by the new model 

will enhance the speed and quality of 

the collection, consolidation, and 

dissemination of consolidated market 

data. For example, competing 

consolidators could seek to provide 

faster consolidation times, reduce 

transmission and connectivity latency, 

provide greater connectivity bandwidth, 

and reduce connectivity fees. Several 

commenters agreed that competition 

will enhance the national market 

system.607

The Commission recognizes that some 

market participants that require the 

lowest possible latency and additional 

(e.g., order-by-order data) content may 

continue to use proprietary data feeds 

for certain trading applications. 

However, for applications that do not 

require additional content beyond the 

scope of new core data, the Commission 

believes that, once operating in a 

competitive landscape with the 

requirement that data be made available 

‘‘in the same manner and using the 

same methods, including all methods of 

access and the same format,’’ 608 latency 

alone will not be a compelling reason to 

subscribe to proprietary data.609 As 

affirmed by commenters, the 

Commission believes the model’s 

significant improvements to the latency 

and content of consolidated market data 

products will enhance the usefulness of 

the data provided to users under the 

national market system. 

The rules adopted for the 

decentralized consolidation model have 

been designed to avoid ‘‘gaming and 

fraud’’ 610 and to ensure the accuracy 

and completeness of consolidated 

market data. Competing consolidators 

and self-aggregators will be regulated 

entities, which will help monitoring 

efforts regarding the accuracy and 

completeness of consolidated market 

data. Competing consolidators are 

required to register with the 

Commission pursuant to Rule 614 and 

will be subject to Commission oversight. 

In addition, self-aggregators, which 

must be registered entities—i.e., brokerdealers, national securities exchanges, 

national securities associations, or 

RIAs—will be subject to Commission 

oversight. 

Under Rule 614, all competing 

consolidators will be subject to 

standards with respect to the 

promptness, accuracy, reliability, and 

fairness of their consolidated market 

data products’ distribution.611 Form CC 

will require competing consolidators to 

provide operational transparency, and 

Rule 614(d) will require a competing 

consolidator to publish monthly 

performance metrics and other 

information concerning performance 

and operations.612 These requirements 

should help to ensure that consolidated 

market data products are provided in a 

prompt, accurate, and reliable manner 

by providing transparency to 

subscribers and potential subscribers 

into a competing consolidator’s 

performance and operations. Because 

these provisions require that all 

competing consolidators disclose the 

same information, they will allow 

market participants to evaluate and 

compare competing consolidators more 

easily based on cost, service, and 

performance. These requirements are 

designed to establish a system whereby 

a competing consolidator will have to 

provide consolidated market data 

products with competitive latency, but 

also reliably and accurately, and in a 

cost-effective manner in order to attract 

and maintain its subscriber base. 

The Commission does not believe that 

the decentralized consolidation model 

will be impractical or increase market 

fragmentation. While the decentralized 

consolidation model introduces 

multiple competing consolidators 

disseminating consolidated market data 

products, today, market participants 

utilize data products developed by 

multiple data vendors, exchanges, and 

the exclusive SIPs. The decentralized 

consolidation model does not introduce 

additional fragmentation in the market 

data landscape. 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18643 

613See Proposing Release, 85 FR at 16768. See 

also supra note 533 (discussing the latencies that 

exist in the current centralized consolidated 

model). See also infra Section III.B.5 (discussing 

comments on the decentralized consolidation 

model’s impact on latency). 

614See Proposing Release, 85 FR at 16782. See 

infra Section III.C.8 (discussing competing 

consolidator responsibilities under Rule 614). 

615See Nasdaq Letter IV at 23–26; NYSE Letter II 

at 9, 13–18; IDS Letter I at 3, 4, 7–8, 9; STANY 

Letter II at 6; Data Boiler Letter I at 46; Angel Letter 

at 18, 20. 

616See IDS Letter I at 3, 7; NYSE Letter II at 3, 

13; Nasdaq Letter IV at 25; Equity Markets 

Association Letter at 3 (quoting NYSE Letter II at 

3). 

617See NYSE Letter II at 9, 13–18; IDS Letter I at 

3–4. One commenter said that the Commission 

should have considered the European Union’s 

efforts to create a consolidated tape with competing 

consolidators, noting that no such competing 

consolidators have registered. Angel Letter at 20. 

This commenter said that the proposal’s lack of 

discussion of other jurisdictions as alternatives was 

a potential violation of the APA. See id. at 21. The 

Commission does not believe the European Union’s 

experience with developing a consolidated tape is 

relevant for purposes of this proposal. The market 

and regulatory structure of the European Union are 

different than they are in the United States. In 

December 2019, the European Securities and 

Markets Authority (‘‘ESMA’’) released a report 

describing the obstacles to developing a 

consolidated tape in the EU, including the lack of 

data quality for OTC transactions, the need for a 

consolidated tape provider to have to negotiate 

contracts for data from 170 trading venues and 

approved publication arrangements, and certain 

regulatory requirements. See ESMA, MiFID II/ 

MiFIR Review Report No. 1: On the development 

in prices for pre- and post-trade data and on the 

consolidated tape for equity instruments (Dec. 5, 

2019), available at https://www.esma.europa.eu/ 

sites/default/files/library/mifid_ii_mifir_review_

report_no_1_on_prices_for_market_data_and_the_

equity_ct.pdf. See also European Commission, The 

Study on the Creation of an EU Consolidated Tape 

(Sept. 2020), available at http://

www.marketstructure.co.uk/wp-content/uploads/ 

Full-Report--The-Study-on-the-Creation-of-an-EUConsolidated-Tape.pdf. The U.S. equity markets do 

not face the same issues and have vast experience 

in creating consolidated market data. 

618See IDS Letter I at 7. See also NYSE Letter II 

at 13. This commenter said that the success of the 

proposed decentralized consolidation model ‘‘rests 

entirely on unfounded assumptions regarding the 

appearance of a market for competing consolidators 

. . .’’ Id. at 3. 

619See IDS Letter I at 7. This commenter, a 

market data aggregation firm, also said that it would 

be very costly for it to become a competing 

consolidator because it would have to develop a 

new infrastructure to collect, consolidate, and 

disseminate NMS data since its method of data 

consolidation and dissemination is ‘‘fundamentally 

different’’ than that used by the exclusive SIPs. See 

IDS Letter II at 1, 2–3. 

620See IDS Letter I at 3, 9. The commenter also 

said that the Commission failed to meet its burden 

to examine economic costs and inefficiencies of the 

proposal because it did not consider the possibility 

of a delayed implementation, or that it may never 

be implemented or that it may cease to be viable. 

See also IDS Letter II at 3. The commenter stated 

that the proposal did not discuss contingencies in 

the event of such occurrences. See IDS Letter I at 

8. See also Nasdaq Letter IV at 24 (stating that the 

Commission did not imagine an environment in 

which only a few competing consolidators survive 

the initial period of entry). 

621Nasdaq Letter IV at 25. See also Angel Letter 

at 20 (stating the only competing consolidators will 

be the two existing exclusive SIPs because only 

they can afford to comply with Regulation SCI). 

622See NYSE Letter II at 17–18; IDS Letter I at 3– 

4. 

623See NYSE Letter II at 17–18. See also IDS 

Letter I at 3–4, 16 (stating that because the proposal 

did not establish criteria to determine when a 

competing consolidator would be deemed a facility 

of an exchange, there was no reasoned basis to 

assume that half of the competing consolidators 

would be exchanges); infra Section III.C.7(a)(iv) 

(discussing competing consolidators affiliated with 

exchanges). 

624See NYSE Letter II at 18. 17 CFR 242.614(a)(1) 

(Rule 614(a)(1)) provides that only entities that 

receive information with respect to quotations for 

and transactions in NMS stocks directly from a 

national securities exchange or national securities 

association pursuant to an effective NMS plan, and 

generate consolidated market data for 

dissemination, will be required to register as 

competing consolidators. See infra Section 

III.C.7(a)(iii) (discussing this change). 

625See NYSE Letter II at 18. 

626See id. at 17; Nasdaq Letter IV at 2, 24; STANY 

Letter II at 7 (‘‘[S]elf-aggregators may diminish what 

could potentially be a thin field.’’). 

627See NYSE Letter II at 17. See also Nasdaq 

Letter IV at 2. 

In the Proposing Release, the 

Commission described the significant 

latencies that exist in the centralized 

consolidation model and explained 

specifically how the decentralized 

consolidation model will address 

them.613 Further, the Commission 

discussed how the proposed rules will 

address data quality, availability, and 

reliability 614 and the disclosure of fees 

set by competing consolidators. The 

Commission provided information 

demonstrating how the proposed rules 

would achieve the Commission’s goal of 

modernizing the national market system 

so that consolidated market data is 

disseminated to market participants in 

an accurate, reliable, prompt, and fair 

manner. 

3. Comments on the Viability of the 

Decentralized Consolidation Model 

Commenters questioned whether 

enough competing consolidators would 

enter the market to make the 

decentralized consolidation model 

viable.615 Some commenters stated that 

the success of the model depends on the 

creation of multiple competing 

consolidators.616

Several of these commenters stated 

that the proposal lacked support to 

assume that multiple competing 

consolidators would enter the 

market.617 One commenter stated that 

the proposal assumes there would be a 

competitive market but lacks support for 

its assumption that there would be 

multiple competing consolidators.618

This commenter said that a competitive 

market could not arise if only a few 

competing consolidators were 

established, resulting in competing 

consolidators charging a premium for 

consolidated market data.619 The 

commenter said that the proposal did 

not consider this possibility, nor did it 

reasonably consider whether any 

competing consolidators would register, 

their viability, and the costs to investors 

and other market participants if the 

competing consolidators ceased 

operating.620

One commenter said that there may 

be few competing consolidators because 

‘‘SROs or other firms may have cost or 

other economic advantages (e.g., scale or 

scope economies) not enjoyed by other 

potential consolidators . . .’’ resulting 

in competition insufficient to achieve 

the proposal’s goals.621 Two other 

commenters, however, stated that the 

proposal incorrectly presumed the 

willingness of SROs to become 

competing consolidators.622 One of the 

commenters stated that the proposal 

lacked analysis supporting why SROs 

would want to incur the costs of 

becoming a competing consolidator, 

why the SROs that operate the existing 

exclusive SIPs would want to become 

competing consolidators, and how 

exchange-affiliated competing 

consolidators could avoid being deemed 

a facility of an exchange.623

Finally, one commenter questioned 

the proposal’s assumption that current 

market data vendors would choose to 

become competing consolidators.624

The commenter said data vendors that 

want to continue to receive proprietary 

data from an SRO would have to register 

as competing consolidators, or they 

would have to subscribe to a competing 

consolidator to purchase this data. The 

commenter said the price of this data 

could increase, causing a data vendor’s 

customer base to decrease. The 

commenter said the proposal lacks 

analysis of whether the added costs to 

vendors outweigh the benefits to 

vendors and said the proposal would 

cause data vendors to leave the 

market.625

Three commenters stated that large 

broker-dealers would opt to become 

self-aggregators instead of becoming 

competing consolidators or being 

subscribers of competing 

consolidators.626 Because one 

commenter believed that larger brokerdealers would likely become selfaggregators, the commenter said that the 

remaining potential customer base for 

competing consolidators would be less 

likely to need faster and more 

comprehensive market data and thus 

would not benefit from the introduction 

of competing consolidators.627 Another 

18644 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

628See Nasdaq Letter III at 7. 629See Nasdaq Letter IV at 24. One commenter 

also said that customers that decide to self-aggregate 

instead of subscribe to a competing consolidator 

would reduce the number of potential subscribers 

for competing consolidators. Accordingly, the 

potential revenues of competing consolidators 

would be reduced as well. IDS Letter I at 14. 630See infra Section V.C.2(a)(ii)c. The 

Commission estimates that approximately eight 

entities, including SRO affiliates and broker-dealers 

that currently aggregate for themselves, will become 

competing consolidators. See infra Section 

IV.C.1(b). Some commenters responded that they 

are considering registering as competing 

consolidators. See supra note 604. The Commission 

believes that even if a smaller number of competing 

consolidators enters the market, there will be some 

degree of competition, which will yield benefits. 

See infra Section V.C.2(a)(ii). 

631See infra Section III.E.2(c). 

632See infra Section III.B.6. 

633See supra note 630. 

634See infra Section III.C.7. See also infra Section 

III.H. 

635See CTA Plan, CTA Tape A & B Subscriber/ 

Household Metrics: CTA Q2 2020, available at 

https://www.ctaplan.com/publicdocs/ctaplan/ 

CTAPLAN_Population_Metrics_2Q2020.pdf (last 

accessed Nov. 27, 2020) (describing the different 

categories of subscribers). 

636See UTP Plan, UTP Q2 2020 U.S. Equities 

Securities Information Processor (UTP SIP) Key 

Quarterly Operating Metrics of TAP: Tape C 

Subscriber/Household Metrics, available at http://

www.utpplan.com/DOC/UTP_2020_Q2_Stats_with_

Processor_Stats.pdf (last accessed Nov. 27, 2020) 

(describing the different categories of subscribers). 

637See supra note 626. 

638See supra note 533. 

639Additionally, self-aggregators are permitted to 

generate consolidated market data solely for 

internal use. A firm that wants to generate and 

disseminate consolidated market data to its 

customers will have to purchase the consolidated 

market data from a competing consolidator rather 

than self-aggregate to avoid the internal use 

limitation or would have to purchase proprietary 

data feeds. See Rule 600(b)(83); see also infra 

Section III.D.2. 

commenter stated that less than 1% of 

exclusive SIP customers are proprietary 

DOB feed customers, and because 

proprietary data feeds would continue 

to be faster than competing 

consolidators, the potential increase in 

subscribers for competing consolidators 

over the total number of professional 

SIP data subscribers would amount to a 

fraction of the 1%.628 The commenter 

stated that the Commission’s 

assumption that there would be 12 

competing consolidators did not 

consider that many users of NMS 

information would become selfaggregators and not subscribers of 

competing consolidators.629

The Commission believes that the 

decentralized consolidation model is a 

viable data dissemination model and 

that a sufficient number of competing 

consolidators will register to provide 

data consolidation and dissemination 

services to market participants due to 

significant anticipated demand from 

market participants for consolidated 

market data products that will be 

provided competitively, with lower 

latency, enhanced content, and 

competitive pricing.630 Competing 

consolidators will be the only entities 

permitted to receive the data content 

underlying consolidated market data at 

the prices set by the Equity Data Plans, 

which will be filed with the 

Commission pursuant to Rule 608 and 

reviewed for compliance with statutory 

and regulatory standards,631 and 

permitted to sell consolidated market 

data products to customers, and the 

prices set by competing consolidators 

will be subject to competitive forces 

under the decentralized consolidation 

model. As consolidated market data 

products, including connectivity to 

competing consolidators, would be 

subject to competitive pricing, they 

would likely be offered at lower prices 

than the current equivalent proprietary 

data products.632 The Commission 

believes that competitive pricing, 

combined with market participants’ 

need for consolidated market data, will 

drive demand for competing 

consolidators. 

The decentralized consolidation 

model will foster a competitive 

environment, which should provide 

benefits to market participants even if 

there is a small number of competing 

consolidators.633 Competing 

consolidators will be able to register and 

begin operations at any time.634 This 

competitive dynamic should enhance 

the operation of the national market 

system by incentivizing competing 

consolidators to continually seek to 

provide optimal consolidated market 

data products for end users. 

In addition, the Commission believes 

that because market participants require 

consolidated market data to participate 

in the market and to comply with 

regulatory requirements, such as Rule 

611 and Rule 603(c), competing 

consolidators will enter the market to 

service this demand. The Commission 

believes that market participants will 

continue to need consolidated market 

data under the decentralized 

consolidation model because a 

significant number of non-professional 

subscribers and other market 

participants use SIP data today and 

likely will not become self-aggregators, 

thereby promoting the viability of this 

model. The Equity Data Plans report 

significant numbers of subscribers for 

SIP data. For example, the CTA Plan 

reports 5.4 million non-professional 

subscribers, 290,000 professional 

subscribers, 368 real-time internal use 

only vendors, 234 real-time external 

vendors, and 327 non-display vendors 

in the second quarter of 2020.635 The 

Nasdaq UTP Plan reports 5.7 million 

non-professional subscribers, 280,000 

professional subscribers, 316 real-time 

only vendors, 252 real-time external 

vendors and 319 non-display vendors 

for second quarter of 2020.636 Many of 

these current exclusive SIP subscribers 

are likely to need the data services of a 

competing consolidator, which 

indicates the potential demand for 

consolidated market data products. 

Further, some market participants that 

currently rely on proprietary market 

data feeds may decide to utilize a 

competing consolidator because the 

Commission believes that competing 

consolidators will offer faster and more 

comprehensive alternatives to current 

exclusive SIP and proprietary feeds at 

competitive pricing. 

Three commenters suggested that 

large broker-dealers that self-aggregate 

would either not become competing 

consolidators or would not become 

subscribers of competing 

consolidators.637 Some market 

participants today purchase exchange 

proprietary data products and aggregate 

such data for their own uses. There is 

no regulatory requirement to purchase 

proprietary data, but a market has 

developed for these enhanced products. 

The Commission believes that 

competing consolidators, operating in a 

decentralized consolidation model, will 

improve the latencies that exist in the 

current centralized consolidation 

model. The competitive environment 

fostered by the decentralized 

consolidation model should result in 

greater innovation and the timely 

adoption of updated technologies into 

the aggregation and transmission of 

consolidated market data.638 Further, 

the Commission believes that the 

additional content that will be available 

in consolidated market data products 

may also serve some market participants 

that purchase proprietary data. As a 

result, the Commission believes that 

some market participants may choose to 

use consolidated market data products 

disseminated by competing 

consolidators rather than aggregate it 

themselves; for example, with the 

improved latencies of a competing 

consolidator, it could be more 

convenient or cheaper for certain market 

participants to subscribe to a competing 

consolidator than to self-aggregate.639

Further, the Commission believes that 

it is possible that a broker-dealer or RIA 

that self-aggregates could decide to 

become a competing consolidator. For 

example, a firm may decide that the 

benefits of entering the competing 

consolidator business, such as 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18645 

640See letter from Douglas A. Cifu, Chief 

Executive Officer, Virtu Financial, to Vanessa A. 

Countryman, Secretary, Commission, dated Aug. 

28, 2020, at 4, available at https://www.sec.gov/ 

comments/sr-nyse-2020-05/srnyse202005-7707480- 

222891.pdf (expressing interest in establishing a 

competing consolidator); infra Section V.C.2(d)(i). 

641The commenter said that no potential 

competing consolidator would register and incur 

the attendant costs of becoming a competing 

consolidator before the Commission approves the 

effective national market system plan. The 

commenter said, ‘‘[n]o rational entity would expend 

the effort to create a competing consolidator if it 

cannot estimate the relevant costs and benefits.’’ 

IDS Letter I at 8. The commenter also said that 

without knowing the number of competitors and 

customers and the fees it can charge, a potential 

competing consolidator cannot estimate whether its 

revenue would exceed its costs. See IDS Letter I at 

14. 

642 Id. at 3. 

643See id. 

644NYSE Letter II at 14. See also id. at 15 (stating 

that potential competing consolidators would be 

deterred from registering because they would not 

know the cost of market data or what they could 

charge for consolidated market data). 

645See infra Section III.E.2(c). 

646See infra Section III.H. 

647See infra Section III.E.2(c). 

648See supra note 635 and accompanying text. 

649See, e.g., CTA Plan, Key Operating Metrics of 

Tape A&B U.S. Equities Securities Information 

Processor (CTA SIP), available at https://

www.ctaplan.com/publicdocs/ctaplan/CTAPLAN_

Processor_Metrics_3Q2020.pdf (last accessed Nov. 

27, 2020) (providing peak messages per second, 100 

milliseconds, and 10 milliseconds and peak 

transactions and capacity transactions per day and 

latency information for Tapes A and B); UTP Q3 

2020—July Tape C Quote Metrics, available at 

http://www.utpplan.com/DOC/UTP_website_

Statistics_Q3-2020-July.pdf (last accessed Nov. 27, 

2020) (for Tape C). 

650See NYSE Letter II at 13, n. 42. 

651 Id. 

652See id. 

653See id. at 14. 

654See IDS Letter I at 9. 

655See id. 

656See id. at 3. 

657See Proposing Release, 85 FR at 16776. 

658See SIFMA Letter at 5; Fidelity Letter at 3, 10; 

IEX Letter at 1, 2. 

659See SIFMA Letter at 5; Fidelity Letter at 3. 

660 IEX Letter at 2. 

generating a new revenue stream or 

providing services to its customers by 

disseminating consolidated market data 

products to them, exceed the costs of 

becoming a competing consolidator.640

One commenter stated that 

unresolved issues regarding the 

regulatory framework for competing 

consolidators would deter competing 

consolidators from registering, 

including whether and when the 

Commission would approve an effective 

national market system plan.641 The 

commenter said the proposal ‘‘does not 

adequately consider or analyze the 

structural requirements or potential 

revenue and cost streams for competing 

consolidators or the implications of this 

model on costs to market participants 

. . .’’ 642 The commenter said the 

proposal raises questions regarding the 

fees competing consolidators can charge 

and the value they add to subscribers.643

Similarly, another commenter stated 

that ‘‘[t]he stability and viability of any 

potential competing consolidator’s 

revenues are entirely dependent on 

outside conditions, including the yet-tobe determined fees set by NMS plans 

. . . . ’ ’’ 644

While the Commission acknowledges 

that the future fees for data content 

underlying consolidated market data 

have not been developed or proposed by 

the effective national market system 

plan(s),645 the Commission believes that 

this should not be an impediment to 

potential competing consolidators 

evaluating whether to register. The fees 

for the data content underlying 

consolidated market data will be 

established before competing 

consolidators can begin to register 646

and will be the same for all data users, 

so competing consolidators can evaluate 

how they will compete on the services 

they provide to subscribers, such as 

their aggregation and transmission 

services for consolidated market data 

products. Further, the Commission 

believes that there will be downward 

pressure on the fees for the data content 

underlying consolidated market data as 

compared to fees for proprietary data.647

Potential competing consolidators can 

evaluate the potential subscriber 

pool 648 of market participants that do 

not self-aggregate, including current SIP 

users, and current exclusive SIP metrics 

to evaluate potential technology 

needs.649

Finally, one commenter stated that 

the Commission did not address the 

possibility that a competing 

consolidator could begin operations, the 

exclusive SIPs would be dismantled, 

and the competing consolidator could 

go out of business and cease operations 

by publishing a notice of its cessation of 

operations on Form CC.650 This 

commenter also stated that the 

Commission did not ‘‘meaningfully 

rebut’’ the reasons why competing 

consolidators would not appear in 

sufficient numbers, qualifications, and 

duration to produce the proposed 

decentralized consolidation model 651

and that the Commission assumes, 

without relying on underlying data, that 

competing consolidators would be able 

to operate successfully.652 The 

commenter said this lack of analysis 

was a violation of the APA.653 Similarly, 

another commenter questioned what 

would happen if a number of competing 

consolidators ceased operations, which 

would result in the system not being 

viable.654 This commenter compared 

competing consolidators that could 

terminate operations by filing a Form 

CC to the exclusive SIPs, which are 

obligated to perform their duties.655 The 

commenter also stated that the proposal 

failed to consider the costs to investors 

and other market participants if a 

competing consolidator ceased to 

operate.656

The Commission believes that it is 

highly unlikely that all competing 

consolidators would cease operations 

because market participants require 

consolidated market data to trade, both 

for competitive purposes and to comply 

with regulatory requirements such as 

best execution, the Vendor Display 

Rule, and the Order Protection Rule. 

Market participants that do not selfaggregate will not be able to trade 

without the consolidated market data 

products produced by competing 

consolidators. This demand for 

consolidated market data will ensure 

that competing consolidators, as the 

providers of consolidated market data 

products, are operating in the national 

market system at all times. If one 

competing consolidator ceases to 

operate, the Commission believes that 

other competing consolidators will be 

available to provide consolidated 

market data products to the customers 

of the competing consolidator that has 

ceased operations or that new entrants 

would quickly arise to fill any gaps in 

supply. Finally, consistent with the 

requirements under the APA, the 

Commission discussed in the Proposing 

Release why it believes that competing 

consolidators would begin operations in 

the decentralized consolidation model 

and why they would be viable.657

4. Comments on Conflicts of Interest 

Three commenters said the proposed 

decentralized consolidation model 

would mitigate the conflicts of interest 

that exist in the current centralized 

consolidation model, in which the 

exchanges operate the exclusive SIPs 

while also selling proprietary market 

data products that compete with SIP 

data.658 Two of the commenters 

highlighted high market data costs and 

latency as two effects of the conflicts, 

suggesting that eliminating such 

conflicts would help make competing 

consolidators’ data dissemination a 

‘‘viable alternative’’ to proprietary 

feeds.659 Another commenter stated that 

the proposal would ‘‘replace an 

outdated and conflicted monopoly 

system to deliver core data with one that 

is competitive and better able to adapt 

to future changes and investors’ 

needs.’’ 660 The Commission agrees that 

18646 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

661See AHSAT Letter at 1, 3; BlackRock Letter at 

5; DOJ Letter at 2–3, 4; Fidelity Letter at 3, 10; 

MEMX Letter at 6, 7, 8; SIFMA Letter at 1, 5, 11; 

Wellington Letter at 1; ICI Letter at 4, 10; ACS 

Execution Services Letter at 5; Better Markets Letter 

at 3; Capital Group Letter at 4; IEX Letter at 3. 662See DOJ Letter at 4. 663AHSAT Letter at 1. 664SIFMA Letter at 1. 665See id. at 11. See also NovaSparks Letter at 1 

(stating that competition will encourage competing 

consolidators to deliver excellent performance). 

666See MEMX Letter at 6, 7, 8; ICI Letter at 10; 

BlackRock Letter at 5. 

667See ICI Letter at 10. 

668See MEMX Letter at 6, 8; BlackRock Letter at 

5. See also NBIM Letter at 6 (stating that it uses 

direct feeds to reflect the ‘‘physical reality’’ of the 

broker-dealers whose performance it needs to 

evaluate and that the proposal would provide an 

opportunity for competitive processors located in 

the same data centers as most institutional brokerdealers to emerge). 

669See ACS Execution Services Letter at 5 (stating 

that the model would reduce content and latency 

differentials between SIP and proprietary market 

data); DOJ at 2–3, 4 (supporting the proposal’s 

efforts to address the granularity and latency 

differentials between SIP and proprietary market 

data). 

670See Cboe Letter at 23; Citadel Letter at 5; 

STANY Letter II at 5, 6; NYSE Letter II at 11, 22, 

23; Nasdaq Letter IV at 49; Angel Letter at 18, 19; 

TD Ameritrade Letter at 12; FINRA Letter at 8; IDS 

Letter I at 15; Data Boiler Letter II at 2; Proof 

Trading Letter at 1. 

671See TD Ameritrade Letter at 12. 

672See Data Boiler Letter II at 2. 

673See Nasdaq Letter IV at 49. 

674NYSE Letter II at 9, 10, 23. Similarly, one 

commenter stated that the Commission solely relied 

on comments from the Market Data Roundtable to 

support its belief that the decentralized 

consolidation model would reduce transmission 

latency differentials between SIP and proprietary 

market data. See Nasdaq Letter IV at 45. 

675The commenter said that the Commission has 

ignored ‘‘the impact of significant changes to the 

SIP infrastructure already implemented by the 

SROs and to the governance of the national market 

systems that the Commission recently imposed, 

while overlooking the impressive performance of 

the existing system in a time of extreme market 

volatility.’’ NYSE Letter II at 10. 

676Today, each exclusive SIP must collect data 

from geographically dispersed SRO data centers, 

consolidate the data, and then disseminate the 

consolidated data from the exclusive SIP’s location 

to end-users, which are often in other locations, in 

a hub-and-spoke form of centralized consolidation 

that creates additional latency. See Proposing 

Release, 85 FR at 16765. 677See NBIM Letter at 4. 678See infra Section V.C.2(c) (discussing the 

effect of the decentralized consolidation model on 

innovation in data delivery and reducing latency 

differentials). Although the exclusive SIPs have 

reduced their aggregation latencies and made other 

improvements, as the Commission stated above, 

there is currently no competition for consolidated 

market data, and the technology for the distribution 

of SIP data has continued to meaningfully lag 

behind technologies utilized across the private 

competitive data landscape. See supra Section 

III.B.2. 

the decentralized consolidation model 

will help mitigate the conflicts of 

interest inherent in the existing 

exclusive SIP model by allowing 

independent entities in the form of 

competing consolidators and selfaggregators, rather than SRO-affiliated 

exclusive SIPs, to collect, consolidate, 

and disseminate consolidated market 

data. 

5. Comments on Latency 

Several commenters stated that the 

proposed decentralized consolidation 

model could reduce latency in the 

dissemination of consolidated market 

data.661 One commenter stated that the 

decentralized consolidation model 

would allow more timely delivery of 

consolidated market data.662 Another 

commenter said the proposal’s content 

and latency reforms ‘‘go a long way.’’ 663

One commenter stated that the 

proposal’s changes to latency would 

‘‘modernize market data 

infrastructure.’’ 664 This commenter said 

that competition among competing 

consolidators would reduce geographic 

and aggregation latency.665 Other 

commenters also noted the proposed 

decentralized consolidation model’s 

potential beneficial effects on 

geographic latency.666 One commenter 

stated that the proposal would reduce 

geographic latency because exchange 

data would no longer be aggregated by 

the exclusive SIPs in two locations, and 

competing consolidator subscribers 

could receive consolidated data within 

the data center of the competing 

consolidator.667 Two commenters said 

that the proposed decentralized 

consolidation model could reduce the 

geographic, aggregation, and 

transmission latency differentials 

between proprietary market data feeds 

and SIP data.668 Other commenters also 

noted the proposed decentralized 

consolidation model’s potential to 

reduce both the latency and the content 

differentials between proprietary market 

data feeds and SIP data.669

However, several commenters 

questioned whether the decentralized 

consolidation model could 

meaningfully impact the latency of 

consolidated market data.670 One 

commenter said that there was no 

guarantee that competition would result 

in improved latency.671 Another said 

that exchanges could increase the 

latency gap between proprietary data 

and consolidated market data with 

frequent upgrades.672 One commenter 

stated that the proposal failed to explain 

how the decentralized consolidation 

model would reduce latency and asked 

the Commission to explain why the 

proposed model is preferable to the 

distributed SIP alternative, which 

would address geographic latency.673

Another commenter said that the 

proposed decentralized consolidation 

model is inconsistent with the 

Commission’s obligations under the 

APA because it is not based on current 

market conditions and relies instead on 

‘‘outdated discussions and panelist 

comments’’ from the Market Data 

Roundtable.674 The commenter said that 

changes to market data infrastructure 

and governance have since reduced the 

latency differentials.675

The Commission believes that 

fostering a competitive environment for 

the collection, consolidation, and 

dissemination of consolidated market 

data will result in such data being 

delivered to market participants in a 

decentralized manner with improved 

geographic, aggregation, and 

transmission latencies. With respect to 

geographic latency, unlike the current 

exclusive centralized consolidation 

model, the decentralized consolidation 

model will allow the direct delivery of 

each SRO’s market data to competing 

consolidators and self-aggregators, and 

competing consolidators may be located 

in the same data center as their 

subscribers. This stands in stark contrast 

to today’s model where (a) one 

consolidator is located in one 

centralized data center while (b) a 

significant number (in some cases a 

majority) of subscribers are located in 

different data centers, and (c) each 

SRO’s market data is required to travel 

to the one centralized location to be 

aggregated, prior to (d) traveling to yet 

another data center for receipt and use 

by subscribers.676 In the decentralized 

consolidation model, SRO data will no 

longer be required to travel to a separate 

central location for consolidation by an 

exclusive SIP. Consolidation could 

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. As one 

commenter stated, the physical location 

of a processor is critical.677

Furthermore, competition will 

incentivize competing consolidators to 

minimize latency and improve 

aggregation and transmission 

performance and services for 

consolidated market data products 

through the use of low-latency 

aggregation and transmission 

technologies.678 Competing 

consolidators and self-aggregators will 

not be restricted to the transmission 

methods mandated by the Equity Data 

Plans, and competing consolidators will 

compete with each other based on the 

efficiency of their aggregation of raw 

SRO data to generate consolidated 

market data. In contrast to today’s noncompetitive exclusive SIPs, the 

Commission believes that competing 

consolidators will be incentivized to 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18647 

679See text accompanying notes 602–603. The 

Commission notes that the Nasdaq UTP SIP revised 

its technology in the fourth quarter of 2016 to lower 

quote latency at the 99th percentile from 5,393 

microseconds to 28 microseconds. In the same 

quarter, the CQS SIP’s 99th percentile of latency 

was 1,570 microseconds and it did not reduce that 

latency to below 100 microseconds until the third 

quarter of 2020. See Nasdaq UTP Q3 2020— 

September Tape C Quote Metrics, available at 

http://utpplan.com/DOC/UTP_website_Statistics_

Q3-2020-September.pdf (last accessed Nov. 27, 

2020); Key Operating Metrics of Tape A&B U.S. 

Equities Securities Information Processor (CTA 

SIP), available at https://www.ctaplan.com/ 

publicdocs/ctaplan/CTAPLAN_Processor_Metrics_

3Q2020.pdf (last accessed Nov. 27, 2020). 

680See SIFMA Letter at 11; BlackRock Letter at 

5. 

681See ICI Letter at 10; BlackRock Letter at 5. 

682See, e.g., ICE Global Network: New Jersey 

Metro, available at https://www.theice.com/marketdata/connectivity-and-feeds/wireless/new-jerseymetro (last accessed Nov. 27. 2020); Nasdaq, 

Wireless Connectivity—Metro Millimeter Wave 

Frequently Asked Questions, available at https://

www.nasdaq.com/docs/2020/01/15/Metro_

Millimeter_Wave_FAQ.pdf (last accessed Nov. 27, 

2020). 

683See NovaSparks Letter at 1. See also Nasdaq 

Equity Trader Alert #2015–194, ‘‘Nasdaq 

Reintroducing FPGA Order Entry Ports, 

Announcing Port and Pricing Updates for 2016,’’ 

available at https://www.nasdaqtrader.com/ 

TraderNews.aspx?id=ETA2015-194 (last accessed 

Nov. 27, 2020); Flanagan, Terry, Co-Location: How 

Close Can You Get?, MarketsMedia (Dec. 27, 2012), 

available at https://www.marketsmedia.com/colocation-how-close-can-you-get/ (explaining the use 

of FPGA to reduce co-location latencies). 

684See IDS Letter I at 15. 

685See id. 

686See infra Section III.B.9. 

687See Citadel Letter at 5; STANY Letter II at 6; 

NYSE Letter II at 11, 23. 

688See NYSE Letter II at 23. 

689See id. at 11. 

690See Angel Letter at 18. 

691See AHSAT Letter at 1; BlackRock Letter at 5; 

DOJ Letter at 2–3, 4; Fidelity Letter at 10; MEMX 

Letter at 3, 6, 7, 8; SIFMA Letter at 1, 11; Wellington 

Letter at 1; ICI Letter at 10; ACS Execution Services 

Letter at 5; Better Markets Letter at 3. 

692See Proof Trading Letter at 1. 

693See, e.g., Capital Group Letter at 2, 4; Fidelity 

Letter at 2; State Street Letter at 2. 

694See supra note 670. 

695See Nasdaq Letter IV at 8, 23–24; NYSE Letter 

II at 22, 23; STANY Letter II at 6; Angel Letter at 

19; FINRA Letter at 8–9. 

696Angel Letter at 19. 

697See id. 

698See Proposing Release, 85 FR at 16767–8. 

make continued improvements.679 For 

example, competing consolidators will 

be incentivized to minimize the amount 

of time it takes to aggregate consolidated 

market data products; 680 reduce their 

transmission latency681 (e.g., by offering 

wireless connectivity through 

microwave or laser technology, 

currently offered by exchanges 682); 

reduce connectivity latency (e.g., by 

offering field-programmable gate array 

(‘‘FPGA’’) services 683); lower 

connectivity fees; enhance customer 

service; and enhance their technology 

and services to remain competitive. 

Competing consolidators providing 

consolidated market data products to 

clients for electronic trading will likely 

compete along all of these lines, similar 

to the manner in which the providers of 

proprietary data products have 

competed. Further, self-aggregators will 

be able to better utilize technologies to 

perform their aggregation and 

transmission functions. 

One commenter asserted that the 

proposed decentralized consolidation 

model assumed that competing 

consolidators would specialize in lower 

latency data but said that this 

assumption was accurate only if the 

SROs from which they receive data can 

offer low-latency connectivity.684 The 

commenter noted that the proposal 

could result in the discontinuation of 

low-latency connectivity options by 

SROs and said that the Commission did 

not assess the impact of the proposal on 

this connectivity market.685 The 

Commission believes that this comment 

fails to recognize the ways in which the 

proposal addressed the connectivity 

market. In specifying ‘‘by the same 

means, and on the same terms,’’ at a 

minimum, the Commission has 

prohibited an SRO from providing 

superior connectivity for proprietary 

data products than it provides for NMS 

data. The Commission further addresses 

these concerns below.686

Some commenters stated that 

competing consolidators would not 

eliminate geographic latency.687 One 

commenter stated that geographic 

latency would still exist despite 

implementation of the proposed 

decentralized consolidation model.688

The commenter stated that incremental 

reductions to transmission latency 

would be the most the decentralized 

consolidation model could achieve but 

that the Commission failed to analyze 

whether such reductions would be 

worth the cost of the proposal.689

Another commenter stated that 

competing consolidators would still be 

subject to geographic and operational 

latency, which would result in 

competing consolidators located within 

the same data center disseminating 

differing prices.690

Other commenters stated that the 

proposed decentralized consolidation 

model would reduce the latencies 

associated with the dissemination of SIP 

data.691 The Commission agrees and 

believes that the model will 

significantly reduce geographic latency 

because, as described above, it will 

allow consolidation of market data to 

occur at the data center where a data 

end-user is located and end the 

consolidation of data at a single location 

where end-users may not be located. 

While full elimination of geographic 

latency for NMS data is impossible in a 

marketplace where different markets are 

located in different geographic 

locations, the reduction of latency 

caused by a centralized consolidation 

requirement is desirable and will result 

in significant latency benefits. If a 

competing consolidator chooses not to 

provide a consolidation service in all of 

the data centers of its users, the 

Commission believes the users will still 

benefit from reduced aggregation and 

transmission latencies resulting from 

competition among competing 

consolidators. 

Finally, one commenter said that the 

current latency of the exclusive SIPs is 

sufficient for agency trading and 

doubted that any latency improvements 

would benefit long-term investors.692

However, several commenters 

representing long-term investors 

expressed the view that the current 

latency of the SIPs was not sufficient to 

meet their needs.693 While the current 

latency of the exclusive SIPs may be 

sufficient for some retail investors and 

other visual consumers of market data, 

the Commission believes that the 

reduction in latency should enhance 

trading by the brokers who service retail 

investors by allowing them to evaluate 

the markets quickly, adjust their quotes, 

trade more efficiently and 

competitively, and facilitate best 

execution. Furthermore, the addition of 

new data content in consolidated 

market data and the competitive 

environment fostered by the 

decentralized consolidation model may 

allow agency brokers to purchase 

consolidated market data products, 

which may be offered at a lower cost 

than current proprietary data, rather 

than proprietary data feeds, which 

could result in cost savings for 

investors. 

While some commenters stated the 

proposed decentralized consolidation 

model would have little, if any, impact 

on latency,694 other commenters said 

that the decentralized consolidation 

model would perpetuate latency 

differentials.695 One commenter stated 

that competing consolidators would 

initiate a ‘‘costly arms race in 

speed,’’ 696 resulting in major market 

participants complaining about having 

to pay a premium for the fastest 

consolidator.697 One commenter said 

nothing in the proposal would address 

the Commission’s concerns expressed in 

the Proposing Release 698 about a ‘‘twoVerDate Sep<11>2014 19:52 Apr 08, 2021 Jkt 253001 PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 E:\FR\FM\09APR2.SGM 09APR2
18648 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

699Nasdaq Letter IV at 23–24. This commenter 

also said that the ‘‘two-tiered’’ environment adds no 

cost to the majority of traders and believed that SIP 

data is sufficient for human traders who would not 

benefit from expensive infrastructure and that 

professional traders tend to opt for custom solutions 

rather than buying the same products anyway. 

Nasdaq Letter III at 5. 

700See Nasdaq Letter IV at 8. 

701See id. at 8, 42. 

702 Id. at 26. 

703See Nasdaq Letter IV at 8, 23–24; NYSE Letter 

II at 22, 23; STANY Letter II at 6; Angel Letter at 

19; FINRA Letter at 8–9. 

704See NYSE Letter II at 22, 23; STANY Letter II 

at 6. 

705See NYSE Letter II at 23. See also Healthy 

Markets Letter I at 2–3. 

706See NYSE Letter II at 23. 

707FINRA Letter at 8. 

708See id. at 8. The commenter also said that 

competing consolidators that aggregate data for 

themselves would have a latency advantage over 

their subscribers. Id. 

709See id. at 8–9. See also Healthy Markets Letter 

I at 3 (recommending that an exchange that wished 

to send data to its customer be required to do so 

‘‘through an affiliate that would receive the same 

data, at the same time, on the same terms, and at 

the same cost as any competing SIP distributor’’). 

710See NBIM Letter at 4. This commenter, 

however, also stated that from an asset manager’s 

perspective, the proposal would reduce its needs 

for direct feeds if there is a competitive 

consolidated tape offering. Id. 

711See infra Section III.D.2(d). 

712 In the Proposing Release, the Commission 

noted that self-aggregators could have a minor 

latency advantage over market participants that use 

a competing consolidator for their consolidated 

market data. See Proposing Release, 85 FR at 16791. 

713Self-aggregators could have a cost advantage 

over market participants that receive consolidated 

market data from a competing consolidator because 

self-aggregators will not be required to compensate 

a competing consolidator for its services. A selfaggregator will of course incur expenses to generate 

consolidated market data including the costs of 

having the systems capability to collect, 

consolidate, and generate consolidated market data. 

It may use a vendor to establish connectivity to an 

SRO or to perform aggregation or other functions 

necessary for generating consolidated market data. 

As a result, any potential cost advantage of a selfaggregator over market participants that purchase 

consolidated market data from competing 

consolidators may not be significant. 

714See infra Section V.C.4(b). 

715See BestEx Research Letter at 4; DOJ Letter at 

4, 5; Committee on Capital Markets Letter at 6; 

IntelligentCross Letter at 5; Better Markets Letter at 

tiered market data environment’’ 699 and 

argued that competing consolidators 

would create a multi-tiered market 

where market participants would be 

charged more for better products and 

faster services.700 Further, this 

commenter stated that competing 

consolidator subscribers, such as retail 

investors, would be at a latency 

disadvantage to self-aggregators that can 

generate an NBBO faster.701 This 

commenter also said that competing 

consolidators could even start a ‘‘new 

fragmentation war’’ for latency-sensitive 

subscribers that need to be co-located 

near their competing consolidator.702

The Commission believes that 

competing consolidators, based on 

subscriber demand, will develop 

different consolidated market data 

products for their subscribers and will 

compete on the basis of latency, 

resiliency, products and services 

offered, and other factors, including 

price. Subscribers also will be able to 

evaluate competing consolidators on the 

basis of system availability, network 

delay statistics, and data quality and 

system issues that will be publicly 

available in the Form CC and the 

performance statistics and operational 

information required to be disclosed by 

competing consolidators on a monthly 

basis by Rule 614. Different subscribers 

and trading applications may prioritize 

these factors differently. The 

Commission recognizes that there will 

be different needs for different 

participants and applications. However, 

the Commission does not believe that 

the realm of such differentiation and 

innovation should be exclusively 

limited to proprietary data products. As 

noted above, some commenters believed 

that the decentralized consolidation 

model would perpetuate latency 

differentials.703 Although there may be 

differences in the latencies among 

competing consolidators, the 

Commission believes the decentralized 

consolidation model will result in a net 

benefit in overall improved latencies for 

users of consolidated market data 

relative to the current model, and 

competitive market forces should 

reduce the likelihood of an unlevel 

playing field. 

Two commenters stated that selfaggregators would have a latency 

advantage over competing 

consolidators, which would continue a 

two-tiered market data environment 

despite the presence of competitive 

forces.704 One of the commenters said 

that self-aggregators would continue to 

obtain and use market data faster than 

subscribers of competing 

consolidators.705 The commenter also 

said that the proposal lacked an analysis 

of the latency advantages of selfaggregators over competing 

consolidators.706 Another commenter 

said the decentralized consolidation 

model would ‘‘institutionalize latency 

inequities’’ through the use of selfaggregators and competing 

consolidators.707 The commenter stated 

that the latency advantage of selfaggregators over competing 

consolidators was not actually minor, 

nor did it believe that competing 

consolidators could minimize the 

latency differences.708 This commenter 

suggested that the Commission should 

either require the SROs to delay 

provision of market data to selfaggregators or allow only competing 

consolidators to provide consolidated 

market data.709 One other commenter 

stated that broker-dealers that offer 

algorithmic trading would not be able to 

utilize a competing consolidator due to 

the inherent latency of third party 

aggregation.710

As discussed more fully below,711 the 

Commission acknowledges that, unlike 

self-aggregators, competing 

consolidators would need to transmit 

consolidated market data to their 

customers,712 but does not believe that 

this would lead to the development of 

a two-tiered market. Latency sensitive 

customers of competing consolidators 

are likely to be co-located in the same 

data centers as their competing 

consolidators, so the transmission time 

between the servers of the competing 

consolidator and its customer will be 

exceedingly small. The Commission 

expects that market participants that 

elect to aggregate consolidated market 

data, whether competing consolidators 

or self-aggregators, will innovate and 

compete aggressively on the efficiency 

and cost-effectiveness of their 

aggregation technologies to attract and 

retain subscribers (in the case of 

competing consolidators) or to facilitate 

their trading strategies (in the case of 

self-aggregators). The Commission 

believes that the development and 

implementation of the technology to 

collect, consolidate, and generate 

consolidated market data will create 

opportunities for latency efficiencies 

that are of substantially greater 

magnitude than the transmission time 

between the server of a competing 

consolidator and its customer. 

Competing consolidators, for example, 

may benefit from economies of scale 

that allow them to offer a very lowlatency product more cost effectively 

that an individual self-aggregator. In 

some cases, a competing consolidator 

may have a latency or cost advantage, 

and in others a self-aggregator may have 

such advantages.713 Competition may 

also impact the efficiency of choices.714

Therefore, the Commission does not 

believe that self-aggregators would 

necessarily have a systematic latency 

advantage over customers of competing 

consolidators. 

6. Comments on the Potential Impact on 

Costs for Consolidated Market Data 

Several commenters said that the 

proposed decentralized consolidation 

model would result in a reduction in the 

cost of consolidated market data.715 One 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18649 

3; RBC Letter at 5–6; State Street Letter at 3; Fidelity 

Letter at 3, 9; Wellington Letter at 1; BlackRock 

Letter at 5; IEX Letter at 3. 

716See BestEx Research Letter at 4. 

717See DOJ Letter at 3–4 (‘‘The Department agrees 

with the SEC’s belief 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.’ ’’); Committee on Capital 

Markets Regulation Letter at 6; IntelligentCross 

Letter at 5; Fidelity Letter at 9; Wellington Letter at 

1; ICI Letter at 4. 

718See Better Markets Letter at 3. 

719See RBC Letter at 5–6. 

720See IEX Letter at 3. 

721See Citadel Letter at 5. 

722See STANY Letter II at 5; Data Boiler Letter 

I at 46–47; TD Ameritrade Letter at 12; NYSE Letter 

II at 9. 

723See Cboe Letter at 23–24; FINRA Letter at 1, 

2, 3, 4; Angel Letter at 21, 24; Kubitz Letter at 1; 

Nasdaq Letter IV at 23, 26, 47–48, 60; TD 

Ameritrade Letter at 15. 

724See STANY Letter II at 5. Similarly, another 

commenter said the proposal lacked a ‘‘reasoned 

analysis of expected costs and fees for market data 

under the decentralized consolidation model.’’ 

NYSE Letter II at 9. See also id. at 19–20. 

725See Data Boiler Letter I at 46–47. 

726See TD Ameritrade Letter at 12. 

727See Nasdaq Letter IV at 23, 26, 47–48, 60; TD 

Ameritrade Letter at 15. 

728See Nasdaq Letter IV at 23. 

729See id. at 26. 

730See id. at 60, n. 162. 

731See id. at 47–48. 

732TD Ameritrade Letter at 15. 

733See Angel Letter at 23. 

734See id. at 20. 

735See id. at 21. 

736See Cboe Letter at 23–24; Kubitz Letter at 1; 

Angel Letter at 21, 24; Nasdaq Letter IV at 27, 30, 

60, n. 162; Data Boiler Letter II at 1. 

737See FINRA Letter at 4; Nasdaq Letter IV at 5, 

27, 30. 

738Cboe Letter at 23–24. 

739See Cboe Letter at 4. 

740See Angel Letter at 24. 

741 Data Boiler Letter II at 1. 

742See FINRA Letter at 4; Nasdaq Letter IV at 5, 

27, 30. 

743See Nasdaq Letter IV at 5, 27, 30. See also 

Clearpool Letter at 3 (suggesting safeguards to keep 

exchanges from increasing consolidated market data 

prices to recoup any revenue lost from the proposed 

requirement to sell core data to competing 

consolidators). 

744See FINRA Letter at 4. 

commenter stated that having multiple 

competing consolidators will reduce the 

prices of consolidated market data and 

proprietary market data feeds.716

Several commenters stated that 

competition could bring down fees or 

the cost of consolidated market data.717

One commenter said that competing 

forces should help market participants 

to access market data in a cost-effective 

manner,718 and another commenter said 

that competition would maintain fair 

prices.719 A commenter stated that the 

proposal would constrain the cost of 

consolidated market data through 

competition among consolidators and 

the requirement that the fees charged to 

competing consolidators by the SROs be 

subject to approval.720 Another 

commenter said the introduction of 

competing consolidators could impact 

aggregation and dissemination costs but 

stated that the proposal did not explain 

how competing consolidators would 

address exchange market data fees.721

However, other commenters 

expressed uncertainty about whether 

the proposed decentralized 

consolidation model would lower the 

cost of consolidated market data 722 or 

believed that the proposed model would 

increase costs.723 One commenter stated 

that the proposal lacked proof that 

competing consolidators would reduce 

market data costs, explaining that the 

proposal lacked sufficient guidance and 

analysis of how market data fees would 

be determined, how to define reasonable 

fees, and how the proposed model 

would control costs to participants.724

Another commenter said that competing 

consolidators would not result in 

enough competition to lower the cost of 

consolidated market data,725 and a 

commenter stated that there was no 

guarantee that competition would 

improve costs.726

Commenters also stated that the 

proposed decentralized consolidation 

model would increase the cost of 

consolidated market data.727 One 

commenter stated that nothing in the 

proposal supported the conclusion that 

competing consolidators would price 

consolidated market data economically 

efficiently.728 This commenter argued 

that market data costs would be higher 

because differentiation would result in 

higher prices as differentiated 

competing consolidators would have 

fewer customers over which to spread 

their fixed costs.729 This commenter 

also said that the proposed increased 

content of consolidated market data 

could increase costs and burden retail 

investors who have no need for the 

more comprehensive data.730 The 

commenter also said that costs will be 

dependent on the effective national 

market system plan(s) and fee 

proposals.731 Another commenter said 

that retail investors could incur 

‘‘exponentially more’’ costs as a result of 

the proposal.732

One commenter stated that product 

differentiation among competing 

consolidators could lead to an increase 

in prices as the fastest competing 

consolidators would charge more due to 

inelastic demand.733 This commenter 

also believed that only the existing SIPs 

could afford Regulation SCI compliance; 

therefore, as the only competing 

consolidators, they would charge 

oligopolistic prices for consolidated 

market data.734 This commenter also 

said that the real prices for consolidated 

market data are determined by what the 

Commission will permit the exchanges 

to charge, not competition.735

Several commenters stated that the 

proposed decentralized consolidation 

model would result in higher 

consolidated market data costs 736 as 

well as other costs 737 for market 

participants. One commenter said that 

competing consolidators would ‘‘impose 

meaningful costs on investors’’ and said 

that the proposal did not explain how 

competing consolidators would charge 

fees to investors (such as whether they 

could charge additional fees for content 

or only for data delivery).738 This 

commenter also said that the proposal is 

deficient because ambiguities 

surrounding fees to be charged by 

competing consolidators to investors, as 

well as by SROs to competing 

consolidators, impede meaningful 

public comment and the ability of the 

Commission to perform a cost-benefit 

analysis as required under the APA.739

One commenter said that exchanges 

facing competitive pressure from 

shareholders will be forced to charge 

high prices to competing consolidators, 

which will then pass down these prices 

to their subscribers.740 Another 

commenter said that competing 

consolidators are ‘‘an intermediary 

between suppliers and users adding a 

layer of cost to the overall system.’’ 741

Two commenters stated that market 

participants would face increases in 

other costs as a result of the proposal.742

One of the commenters said that 

exchange trading costs for retail and 

other investors will increase due to 

reductions in SROs’ market data 

revenue as a result of the proposal.743

The other commenter said that costs 

would increase as a result of requiring 

broker-dealers (or other market 

participants) to subscribe and pay fees 

to multiple competing consolidators.744

The Commission recognizes that the 

fees for the data content underlying 

consolidated market data are unknown 

at this time and that such fees are a 

fixed cost for all competing 

consolidators to assess when developing 

their business plans. However, in 

response to the comments that 

expressed uncertainty about the 

direction of consolidated market data 

costs as a result of the proposal and 

those comments that stated that 

consolidated market data costs would 

increase for market participants, the 

18650 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

745See infra Section III.E.2(c) (discussing the 

statutory requirements applicable to consolidated 

market data and the standards the Commission has 

historically applied to assessing compliance with 

the statutory requirements). 

746 15 U.S.C. 78f(b)(4), 15 U.S.C. 78o–3(b)(5), and 

15 U.S.C. 78k–1(c)(1)(C)–(D). 

747 17 CFR 242.603(a). 

748 17 CFR 240.19b–4. 

749See infra Section III.E.2(c). 

750See Effective-Upon-Filing Adopting Release 

supra note 17. 

751See Governance Order, infra note 1128; New 

Consolidated Data Plan Notice, supra note 40. 

752See Sections 11A(c)(1)(C)–(D) of the Exchange 

Act and Rule 603(a) of Regulation NMS, 17 CFR 

242.603(a). 

753See Form CC, Exhibit F. 

754See supra note 743. 

755See note 2392 and accompanying text. 

756See FINRA Letter at 4. 

757Those broker-dealers that do not currently 

have back-up capabilities may decide not to have 

back-up capabilities under the decentralized 

consolidation model. To the extent that such 

broker-dealers decide to subscribe to redundant 

back-up competing consolidator feeds, they may 

incur higher costs. Further, as discussed below, the 

effective national market system plan(s) will have 

to develop MISU policies for consolidated market 

data subscribers. See infra Section III.E. 

758See TechNet Letter II at 1–2; STANY Letter II 

at 8. 

759See TechNet Letter II at 1–2. This commenter 

said that every new competing consolidator brings 

‘‘exponentially increasing risks’’ and that the 

competing consolidator model lacked strong 

industry support. Id. at 2. 

Commission believes that competition 

will constrain the prices at which 

competing consolidators can sell 

consolidated market data products. 

Further, the Commission believes that 

there will be downward pressure on the 

fees for the data content underlying 

consolidated market data as compared 

to fees for proprietary data.745

Specifically, the new data content 

underlying consolidated market data 

(i.e., depth of book data, auction 

information, and odd-lot information) 

are currently elements of proprietary 

data products that are assessed under 

the statutory standards that apply to 

proprietary data, including Sections 

6(b)(4), 15A(b)(5), and 11A(c)(1)(C)–(D) 

of the Exchange Act 746 and Rule 603(a) 

under Regulation NMS.747 These 

proprietary data fees are filed with the 

Commission pursuant to Section 19(b) 

of the Exchange Act and Rule 19b–4 

thereunder 748 and are effective upon 

filing with the Commission. 

Fees for the data content underlying 

consolidated market data will be 

assessed against the statutory standard 

that applies to fees proposed by the 

effective national market system plan(s), 

including Sections 11A(c)(1)(C)–(D) of 

the Exchange Act and Rule 603(a) under 

Regulation NMS. The proposed fees 

must be fair and reasonable and not 

unfairly discriminatory.749 The fees 

must be filed with the Commission 

pursuant to Rule 608 and will be 

published for public comment and 

thereafter, if consistent with the 

Exchange Act, must be approved by the 

Commission before becoming 

effective.750

In addition, a New Consolidated Data 

Plan has been filed that contains a 

proposed new governance structure and 

procedures that, if approved, will 

address some of the conflicts of interest 

inherent in the existing governance 

structure and will bring a more 

inclusive representation of market 

participants into the process for 

developing fees for the data content 

underlying consolidated market data.751

The Commission believes that the 

governance model required to be 

included in the proposed New 

Consolidated Data Plan will support the 

building of broad consensus in 

developing the future fees for the data 

content underlying consolidated market 

data. Notwithstanding the new 

governance model, the new fees for data 

content underlying consolidated market 

data will have to satisfy statutory 

standards: They must be fair and 

reasonable and not unfairly 

discriminatory.752

Further, competition should constrain 

other aspects of consolidated market 

data costs, including the fees charged by 

competing consolidators for their 

products and services. Competing 

consolidators will compete in their 

aggregation and transmission services, 

which should also be reflected in their 

prices for such services. All competing 

consolidators will be required, under 

Rule 614(d), to disclose publicly metrics 

and other information concerning their 

performance and operations, which will 

allow market participants to evaluate 

effectively competing consolidators, 

fostering competition among competing 

consolidators. Further, competing 

consolidators are required to disclose 

their prices for consolidated market data 

products.753 In response to the 

comments warning that product 

differentiation would permit competing 

consolidators to increase their fees for 

consolidated market data products, the 

Commission believes that competing 

consolidators will face competition from 

each other and from potential new 

entrants, especially if a differentiated 

product serves as a material economic 

opportunity. This threat of competition 

will discipline prices and efficiency in 

the consolidated market data space. For 

example, if products tailored to the 

different needs of market participants 

become popular, competition should 

drive the creation and sale of similar 

products at prices attractive to 

subscribers. 

In response to the comment that 

stated that exchange trading costs, and 

consequently retail investor trading 

costs, would increase due to a reduction 

in exchange revenue as a result of the 

proposal,754 the Commission notes that 

the exchanges may file proposed rule 

changes to reflect any necessary 

adjustments to their fees as a result of 

the proposal. These proposed rule 

changes must meet the applicable 

statutory standards for fees. However, a 

reduction in proprietary data revenue, if 

it were to occur, would not, by itself, 

necessarily make it optimal for 

exchanges to adjust their trading fees.755

In response to the comment that 

stated that market participant costs will 

increase as a result of the proposal 

because all market participants would 

need to retain a back-up competing 

consolidator,756 the Commission is not 

requiring market participants to have 

back-up competing consolidators. 

Market participants may choose to 

subscribe to competing consolidators 

that are ‘‘SCI competing 

consolidators’’—those subject to the 

requirements of Regulation SCI that 

help ensure that the core technology 

systems of SCI entities remain reliable 

and resilient, including the 

requirements to have geographically 

diverse back-up and recovery 

capabilities, and conduct an SCI review 

each year, as discussed below. Some 

market participants may choose to 

subscribe to multiple competing 

consolidators. In either case, this choice 

will be for market participants to elect 

after evaluating the needs of their 

business and their customers. The 

Commission cannot estimate at this 

point specific cost increases, if any, for 

market participants that subscribe to 

competing consolidators.757 But market 

participants may face an overall 

reduction in costs due to the 

competitive environment for 

consolidated market data fostered by the 

decentralized consolidation model. 

7. Comments on Complexity of the 

Decentralized Consolidation Model 

Several commenters stated that the 

proposed decentralized consolidation 

model would generally add complexity 

to the consolidated market data 

environment.758 One commenter said 

that competing consolidators would 

increase technological complexity, 

which would also increase risk and 

aggregate costs, while reducing 

resilience.759 Another commenter said 

that the complexity and costs created by 

competing consolidators could exceed 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18651 

760See STANY Letter II at 8. 

761FINRA Letter at 3. 

762See infra Section III.C.2. The competing 

consolidator model is designed to result in multiple 

viable sources of consolidated market data, not a 

single source of such data. Therefore, there will not 

be a single point of failure. However, the second 

prong of the definition of ‘‘critical SCI systems’’ in 

Regulation SCI, 17 CFR 242.1000 through 

242.1007—a catch-all for systems that ‘‘[p]rovide 

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’’— 

would apply in the event that availability of 

alternatives were significantly limited or 

nonexistent in the future. See infra Section III.F for 

a discussion of the application of Regulation SCI to 

competing consolidators. 

763See infra Section V.C.2(c)(iv) (discussing the 

benefits of the decentralized consolidation model to 

market resiliency). 

764See Nasdaq Letter IV at 2, 3, 4, 12–13, 35; 

TechNet Letter II at 2; Kubitz Letter at 1; Joint CRO 

Letter at 2, 3, 4; FINRA Letter at 3, 4–5, 6; Citadel 

Letter at 5; TD Ameritrade Letter at 13. 

765See Nasdaq Letter IV at 35; TechNet Letter II 

at 2; Kubitz Letter at 1. 

766See Citadel Letter at 5; FINRA Letter at 4, 5, 

6; TD Ameritrade Letter at 13. 

767See Nasdaq Letter IV at 2. 

768See id. at 37; see also NYSE Letter II at 22. 

769See Nasdaq Letter IV at 35; see also NYSE 

Letter II at 22. 

770See Joint CRO Letter at 3. 

771Section 6(b)(1) of the Exchange Act provides 

that an exchange must be so organized and have the 

capacity to be able to enforce compliance by its 

members, and persons associated with its members, 

with the Exchange Act, the rules and regulations 

thereunder, and the rules of the exchange. See also 

Section 15A(b)(2) of the Exchange Act. See, e.g., 

Securities Exchange Act Release Nos. 74690 (Apr. 

9, 2015), 80 FR 20282 (Apr. 15, 2015) (proposed 

rule change from Nasdaq explaining that Nasdaq 

uses a real-time surveillance system that uses a 

‘‘mirrored’’ version of Nasdaq’s ‘‘NMS feed,’’ which 

consumes the Nasdaq Protected Quote Service as 

well as certain proprietary market data feeds and 

SIP data); 74967 (May 15, 2015), 80 FR 29127 (May 

20, 2015) (proposed rule change from Nasdaq PHLX 

(‘‘Phlx’’) stating that Phlx’s surveillance similarly 

relies on a mirrored version of Phlx’s NMS feed, 

which consumes the Phlx Protected Quote Service 

and certain proprietary market data feeds and SIP 

data). See also Nasdaq Rule 4759(a) and Nasdaq 

PSX Rule 3304(a) for a list of the proprietary 

quotation feeds and SIP feeds used by the 

respective exchanges for the handling, routing, and 

execution of orders, as well as for regulatory 

compliance functions related to those functions. 

772The Commission has modified the definition 

of self-aggregator so that SROs would be permitted 

to be self-aggregators. 

773See Rule 614(d); see also infra Section III.C.8. 

774The information to be published by competing 

consolidators is based upon information that is 

currently produced by the CTA/CQ SIP and the 

Nasdaq UTP SIP, either for public or internal 

distribution. The exclusive SIPs currently publish 

to their respective websites monthly processor 

metrics that provide the following information: 

System availability, message rate and capacity 

Continued 

their benefits to investors.760 One 

commenter said that the proposed 

decentralized consolidation model and 

the proposed changes to consolidated 

market data ‘‘could introduce significant 

additional costs, confusion and 

complexity into an already complex 

system for equity market data, and 

raises a number of questions and 

issues.’’ 761

The markets currently have a 

decentralized model of data 

dissemination with regard to the 

exchange proprietary data feeds. This 

decentralized model operates alongside 

the current centralized consolidation 

model, and market participants must 

navigate the different data offerings, 

connectivity options, and fees. 

Therefore, the Commission does not 

believe that a decentralized 

consolidation model would necessarily 

increase complexity. Rather, the 

Commission believes that the 

decentralized consolidation model may 

lessen some of the complexities that 

exist today by eliminating the need to 

purchase both SIP data and proprietary 

data for some market participants. 

Additionally, because the Commission 

expects that there will be multiple 

competing consolidators providing 

consolidated market data products to 

market participants, rather than one 

exclusive SIP—the single point of 

failure that exists in the current model— 

the Commission believes that the 

decentralized consolidation model will 

enhance, rather than harm, the 

resiliency of the national market 

system.762 If one competing 

consolidator ceases operations, its 

impact on the markets should be 

minimized due to the presence of other 

competing consolidators that can 

perform the same functions 763 and the 

ability of new entrants to serve as 

competing consolidators. 

8. Comments on Surveillance and 

Regulation in the Decentralized 

Consolidation Model 

Several commenters expressed 

concern about the proposed 

decentralized consolidation model’s 

impact on regulation.764 Some 

commenters stated that the proposed 

model would present regulatory 

risks.765 Additionally, commenters 

asked questions related to the proposed 

model’s regulatory impact.766

One commenter stated that the 

proposal overlooked the effect of the 

proposed decentralized consolidation 

model on market surveillance and 

enforcement.767 The commenter also 

said that the proposal would limit 

exchange market data revenue because 

revenues would be based upon ‘‘some 

unspecified measure of cost,’’ which 

would impact exchanges’ abilities to 

perform their self-regulatory 

functions,768 while also increasing the 

cost of regulatory compliance.769

Another commenter, representatives 

from two exchanges, stated that the 

proposal leaves unclear whether SROs 

will be required to purchase all of the 

consolidated market data feeds of 

competing consolidators and selfaggregators for surveillance purposes, or 

if SROs can use a limited number of 

such feeds instead.770

The Commission does not believe that 

the decentralized consolidation model 

raises unique regulatory risks, 

undermines effective SRO surveillance, 

or imposes burdens on broker-dealers. 

The U.S. equity markets and the 

regulatory programs that have been 

developed to oversee their operation 

already have experience handling 

multiple sets of data due to the 

existence of the exclusive SIPs’ feeds 

and proprietary data feeds. Market 

participants currently can utilize many 

data options for different purposes, and 

the SROs are able to develop 

surveillance programs to oversee their 

members. Further, in the current model 

with both SIP data and proprietary data, 

the SROs develop their surveillance 

systems based on the data sets they 

believe best allow them to perform their 

regulatory obligations.771 Broker-dealers 

using different data sets than those used 

by their SROs already have to respond 

to SRO surveillance requests based on 

the different data used by the SROs. 

This process will not change in the 

decentralized consolidation model. 

Surveillance and regulatory programs 

that utilize SIP data may have to be 

updated to utilize a new data source, 

either from a competing consolidator or 

based on self-aggregation by the SRO.772

SROs will not be required to purchase 

every consolidated feed from all 

competing consolidators to conduct 

enforcement or surveillance, just as they 

are not required today to purchase all 

consolidated (synthetic NBBO) data 

products provided by each of the 

different market data vendors 

aggregating proprietary feeds. 

Furthermore, all competing 

consolidators will register with the 

Commission and become regulated 

entities (if not already SROs) subject to 

Rule 614 of Regulation NMS and 

Commission oversight. As required by 

Rule 614, competing consolidators will 

provide information about their 

operations through a public Form CC, as 

well as monthly reports on their 

performance and other metrics relevant 

to potential subscribers, such as latency, 

system up-time, and system issues.773

Like many of the disclosures made by 

the exclusive SIPs,774 the information 

18652 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

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 (last accessed 

Nov. 27, 2020); UTP Metrics, available at http://

www.utpplan.com/metrics (last accessed Nov. 27, 

2020). 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 (last 

accessed Nov. 27, 2020); UTP–SIP System Alerts, 

available at http://www.utpplan.com/system_alerts 

(last accessed Nov. 27, 2020); UTP Vendor Alerts, 

available at http://www.utpplan.com/vendor_alerts 

(last accessed Nov. 27, 2020). 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 (last accessed 

Nov. 27, 2020); UTP Realized Latency Charting, 

available at http://www.utpplan.com/latency_

charts (last accessed Nov. 27, 2020). 

775Because this information is useful to current 

users of the exclusive SIPs and participants of the 

Equity Data Plans, the Commission believes that it 

should be made publicly available by competing 

consolidators. 

776See Nasdaq Letter IV at 37; see also NYSE 

Letter II at 22. 

777See Nasdaq Letter IV at 35; see also NYSE 

Letter II at 22. 

778See infra Section III.E.2. The Commission 

discusses the potential economic effects of the 

proposal on exchange proprietary market data 

revenue in Section V.C.4(a). See infra Section 

V.C.4(a); see also infra text accompanying notes 

2468–2469. 

779 Kubitz Letter at 1. 

780Under Rule 600(b)(16) of Regulation NMS, a 

competing consolidator is defined as a SIP. See 

infra Section III.C.1(b). 

781See infra Section III.C.8. 

782See Citadel Letter at 5; FINRA Letter at 4–5, 

6. 

783See Citadel Letter at 5. 

784See also infra Section III.C.7(a)(iv); Brief of the 

Securities and Exchange Commission, Amicus 

Curiae, No. 15–3057, City of Providence v. Bats 

Global Markets, Inc. (2d Cir.), at 21, 22. Courts have 

found that SROs are entitled to absolute immunity 

from private claims under certain circumstances. In 

particular, ‘‘when acting in its capacity as a SRO, 

[the SRO] is entitled to immunity from suit when 

it engages in conduct consistent with the quasigovernmental powers delegated to it pursuant to the 

Exchange Act and the regulations and rules 

promulgated thereunder.’’ See DL Capital Group, 

LLC v. NASDAQ Stock Market, Inc., 409 F. 3d 93, 

97 (2d Cir. 2005) (quoting D’Alessio v. New York 

Stock Exchange, Inc., 258 F. 3d 93, 106 (2d Cir. 

2001)). If an SRO fails to comply with the 

provisions of the Exchange Act, the rules or 

regulations thereunder, or its own rules, the 

Commission is authorized to take action. See 15 

U.S.C. 78s(g). 

785See Proposing Release, 85 FR at 16769. 

786See id. 

787See id. 

788 17 CFR 242.603(b). 

required pursuant to Rule 614(d) will be 

publicly available.775 Competitive forces 

also will incentivize competing 

consolidators to operate reliably and 

with low latency, and in conjunction 

with Commission oversight, the 

application of Regulation SCI and the 

required disclosures and transparency 

provided by Rule 614, should help to 

ensure high performance and system 

integrity. 

In response to the comment that 

stated the proposal would limit 

exchange market data revenue, hurting 

exchanges’ abilities to perform their 

self-regulatory functions 776 and 

increasing the cost of regulatory 

compliance,777 the Commission notes 

that SROs will develop fees for the data 

content underlying consolidated market 

data via the effective national market 

system plan(s), and the SROs will 

receive their revenue allocation for their 

data, as they do today.778 One 

commenter suggested having an 

‘‘authority or agency’’ evaluate whether 

the proposed decentralized 

consolidation model could be gamed, 

arbitraged, or fraudulently used in a 

way to interfere with retail investors’ 

access to market data and execution of 

trades.779 The Commission believes that 

the adopted rules, as well as the 

oversight of SROs, competing 

consolidators, and self-aggregators 

should help to ensure that retail 

investors’ access to consolidated market 

data would not be impacted by the 

decentralized consolidation model. 

Specifically, Rule 603(b) requires the 

SROs to provide their information to 

competing consolidators, which would 

be responsible for disseminating 

consolidated market data products to 

their subscribers, which would likely 

include broker-dealers that have retail 

customers. Among other requirements, 

Rule 603(c) would continue to apply; 

therefore, broker-dealers and SIPs 780

must continue to provide a consolidated 

display of information in the context in 

which a trading decision can be 

implemented. 

Further, Rule 614(d)(3) requires 

competing consolidators to make 

available consolidated market data 

products to subscribers on terms that are 

not unreasonably discriminatory.781

Competing consolidators will also be 

subject to the requirements of Rule 

614(d), which, among other things, 

mandate the filing of a public Form CC 

to provide operational transparency, as 

well as the public monthly disclosure of 

metrics and other information 

concerning performance and operations. 

These requirements should allow 

subscribers of a competing consolidator 

to verify that consolidated market data 

products are provided in a prompt, 

accurate, and reliable manner and thus 

motivate competing consolidators to 

continue to provide consolidated market 

data products accordingly. 

Commenters also raised questions 

related to the proposed decentralized 

consolidation model’s regulatory 

impact.782 One commenter asked 

whether there would be any regulatory 

immunity differences between 

competing consolidator offerings from 

SROs and non-SROs.783 SRO immunity 

considerations would depend on the 

particular facts and circumstances.784

9. Access to Data: Rule 603(b) 

(a) Proposal 

Rule 603(b) of Regulation NMS 

currently requires a centralized 

consolidation model. The Commission 

proposed to amend Rule 603(b) to 

require each SRO to provide its NMS 

information, including all data 

necessary to generate 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 data formats, as such SRO 

makes available any information to any 

other person. Under the proposed 

approach, competing consolidators and 

self-aggregators would collect each 

SRO’s market data that is necessary to 

generate consolidated market data.785

As proposed, the same access options 

available to proprietary feeds, including, 

but not limited to, transmission medium 

(i.e., fiber optics or wireless), multicast 

communication, co-location options, 

physical port, logical port, bandwidth, 

and FPGA services, would be required 

to be made available for proposed 

consolidated market data feeds. Further, 

any enhancements to proprietary feed 

methods of access would similarly be 

made to consolidated market feeds.786

In the Proposing Release, the 

Commission stated that the exchanges 

could utilize their existing proprietary 

data product offerings that contain 

consolidated market data elements or 

the exchanges could develop new 

consolidated market data offerings for 

purposes of making information 

available under Rule 603(b). 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.787

The Commission also proposed to 

remove the requirement in Rule 603(b) 

that ‘‘all consolidated information for an 

individual NMS stock [be disseminated] 

through a single plan processor’’ 788

because it would be inconsistent with 

the proposed decentralized 

consolidation model. In a decentralized 

consolidation model, multiple 

competing consolidators would 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18653 

789Proposing Release, 85 FR at 16771. 

790 15 U.S.C. 78s(b) and 17 CFR 240.19b–4. See 

id. at 16769. 

791See id. 

792 17 CFR 242.608. 

793See also infra Section III.C.8(a). 

794For example, competing consolidators and 

self-aggregators will collect quotation information 

that is necessary to calculate the NBBO as described 

in Rule 600(b)(50). 795Competing consolidators and self-aggregators 

would be permitted to choose among the data feed 

options offered by the SROs to satisfy their 

obligations under Rule 603(b) to collect the SRO 

information that is necessary to generate 

consolidated market data. See also Section III.E.2(g) 

for a discussion of the licensing, billing and audit 

process. The effective national market systems 

plans through their licensing, billing and audit 

processes can determine the extent to which data 

content utilized by competing consolidators and 

self-aggregators constituted elements of 

consolidated market data. 

796See infra Section III.B.9(f). 

797Fees for proprietary data are filed with the 

Commission pursuant to Section 19(b) of the 

Exchange Act and Rule 19b–4 thereunder. 

798Fees for the data content underlying 

consolidated market data will be filed with the 

Commission pursuant to Rule 608 of Regulation 

NMS, 17 CFR 242.608. 

799See McKay Letter; SIFMA Letter. See also 

Clearpool Letter at 7 (supporting the proposed 

language of Rule 603(b)). 

800SIFMA Letter at 11. See also McKay Letter at 

4 (stating that the proposed language of Rule 603(b) 

would prevent an exchange from creating a 

proprietary data feed that would not be sufficient 

to create consolidated market data but which has 

a latency or other access advantage associated with 

it). 

801See SIFMA Letter at 11. 

802See Fidelity Letter at 10. 

803BestEx Research Letter at 5. 

804See MEMX Letter at 9. 

disseminate consolidated market data in 

individual NMS stocks rather than 

single plan processors.789

In the proposal, the Commission 

stated that the proposed decentralized 

consolidation model and the proposed 

consolidated market data definition 

would not preclude the exchanges from 

continuing to sell proprietary data and 

that the fees for proprietary data, which 

are outside of the proposed definition of 

consolidated market data, would be 

subject to the rule filing process 

pursuant to Section 19(b) of the 

Exchange Act and Rule 19b–4.790 The 

Commission stated that if an exchange 

provided its proprietary data products 

to a competing consolidator or selfaggregator 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.791 Self-aggregators and 

competing consolidators that limited 

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, in accordance 

with Rule 608 of Regulation NMS.792

(b) Final Rule and Response to 

Comments 

The Commission is adopting the 

amendments to Rule 603(b) as proposed. 

The Commission believes that these 

changes to Rule 603(b) are appropriate 

to establish the decentralized 

consolidation model. Under Rule 

603(b), the SROs are required to make 

available all quotation and transaction 

information that is necessary to generate 

consolidated market data 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 with respect 

to quotations for and transactions in 

NMS stocks to any person. Competing 

consolidators and self-aggregators will 

be able to collect from the SROs that 

NMS information that is necessary to 

generate consolidated market data as 

defined in Rule 600(b)(19),793 which 

includes core data,794 regulatory data, 

administrative data, and self-regulatory 

organization-specific program data. 

Under Rule 603(b), the SROs are 

allowed to provide their core data to 

competing consolidators and selfaggregators via the existing proprietary 

data feeds, a combination of proprietary 

data feeds, or a newly developed 

consolidated market data feed.795

However, if an SRO developed a 

dedicated consolidated market data 

feed, the SRO will have to take steps to 

ensure that any proprietary data feed is 

not made available on a more timely 

basis (i.e., by any time increment that 

could be measured by the SRO) than a 

consolidated market data feed.796 Rule 

603(a) also applies to the provision of 

data content underlying consolidated 

market data by the SROs to competing 

consolidators. The Commission believes 

that under Rule 603(a), if an SRO 

developed a consolidated market data 

feed, it would likely have to throttle any 

order-by-order proprietary data feed so 

that it is not made available on a more 

timely basis than such dedicated 

consolidated market data feed. Any 

dedicated consolidated market data feed 

developed by an exchange would likely 

involve processing by an exchange to 

segment its consolidated market data 

elements, which adds latency to data 

dissemination, while an order-by-order 

proprietary data feed would involve no 

less processing by the exchange. 

Further, the SROs are allowed to offer 

different access options (e.g., with 

different latencies, throughput 

capacities, and data-feed protocols) to 

market data customers, as long as any 

access options available to proprietary 

data customers are made available to 

competing consolidators and selfaggregators for their selection for the 

collection of the data necessary to 

generate consolidated market data. 

In addition, if an SRO provided its 

proprietary data products to competing 

consolidators or self-aggregators for 

purposes of Rule 603(b) and a 

competing consolidator or selfaggregator developed a product, or 

otherwise used data content that is 

beyond the scope of consolidated 

market data (e.g., full depth of book 

data), the proprietary data content will 

be subject to the individual exchange 

fees for proprietary data,797 while the 

data content underlying consolidated 

market data will be subject to the fees 

established pursuant to the effective 

national market system plan(s).798

The Commission received several 

comments on its proposed amendments 

to Rule 603(b). Some commenters stated 

that the changes to Rule 603(b) were key 

to the success of the proposal.799 One 

commenter stated that the proposed 

changes to Rule 603(b) ‘‘should help to 

ensure that proprietary feeds, competing 

consolidators and self-aggregators 

operate on a more level playing field 

with regards to the speed that market 

participants can obtain market data and 

access.’’ 800 The commenter continued 

that the proposal would create a true 

alternative to subscribing to and paying 

for each individual exchange’s 

proprietary feed.801 Another commenter 

stated that the requirement to make data 

available to competing consolidators in 

the same manner as the exchanges make 

it available to any other person would 

address latency issues that exist in core 

data.802

One commenter suggested that the 

exchanges provide content that is 

similar to what they provide on their 

direct feeds, stating that all data can be 

useful for ‘‘execution algorithms’ 

quantitative trading decisions.’’ 803

Another commenter suggested that the 

exchanges should provide a single data 

feed—their proprietary DOB feed—to 

satisfy the requirements of the proposed 

rules, simplify data distribution, and 

ease Rule 603(a) burdens.804 The 

Commission has set forth minimum data 

content underlying consolidated market 

data that must be made available by the 

SROs under Rule 603(b). The 

Commission has identified these 

elements as necessary for a wide array 

of trading in the national market system. 

18654 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

805See supra note 795 and accompanying text. 

806See Proposing Release, 85 FR at 16770. 

807 Data Boiler Letter II at 1. 

808 Id. at 1. 

809See infra Section III.B.9(f). 

810See IDS Letter I at 11. 

811See Proposing Release, 85 FR at 16770. 

812See Kubitz Letter. 

813McKay Letter at 3. See also Temple University 

Letter at 2 (stating that ‘‘intermediaries’’ including 

exchanges and SIPs should not ‘‘unfairly 

discriminate or privilege certain market participants 

to the detriment of others in terms of data access, 

execution and other market data operations’’ and 

that such intermediaries should act ‘‘independently 

and neutrally towards market participants to ensure 

the competitive integrity of the marketplace’’). 

814See McKay Letter at 3. 

815 Id. 

816See NovaSparks Letter at 1–2. 

Because the Commission recognizes that 

some market participants may need 

more information than what is defined 

as consolidated market data, SROs can 

provide additional information to these 

customers via proprietary feeds. 

Further, as discussed above, the SROs 

can satisfy their obligations under Rule 

603(b) by utilizing their proprietary data 

feeds, a combination of proprietary data 

feeds, or a newly developed core data 

feed that contains all of the data content 

underlying consolidated market data.805

Rule 603(b) does not specify a required 

method of delivery of the data content 

underlying consolidated market data but 

requires that such data be provided in 

the same manner and using the same 

methods of access and the same 

format,806 as the SROs use to make any 

NMS information available in NMS 

stocks to any person. 

One commenter, however, stated, 

without further explanation, that the 

‘‘same manner and methods’’ language 

was ‘‘merely a standard price list offered 

by the exchange.’’ 807 The commenter 

further stated that the ‘‘same format’’ 

language would hurt average investors 

and give high frequency trading firms an 

advantage and asserted that ‘‘[o]ne can 

only attempt to match faster 

connectivity by altering data format and 

compression methods.’’ 808 To the extent 

that the commenter is suggesting that 

investors who obtain consolidated 

market data products from a competing 

consolidator may be at a disadvantage to 

self-aggregators because of the latency 

advantage of self-aggregators, the 

Commission believes, as discussed in 

Section IV.D.2(d), that the selfaggregators will not necessarily have a 

systematic latency advantage over 

competing consolidators. If the 

commenter is suggesting that SROs 

provide data in a different format to 

compensate for faster connectivity, Rule 

603(b) requires the SROs to make the 

data content underlying consolidated 

market data available to competing 

consolidators and self-aggregators in the 

same manner and methods, including 

all methods of access and the same 

format, as proprietary data. Further, 

Rule 603(a) prohibits an SRO from 

making NMS information available to 

any person on a more timely basis (i.e., 

by any time increment that could be 

measured by the SRO) than it makes 

such data available to competing 

consolidators and self-aggregators.809

Another commenter stated that the 

proposed language in Rule 603(b) did 

not consider that an exchange’s 

connectivity options may not have the 

capacity to be provided to all competing 

consolidators and self-aggregators in the 

same manner and using the same 

methods.810 The commenter stated that 

the proposal did not address the 

possible impact on wireless 

connectivity or how customers would 

be affected if the SROs ceased to offer 

wireless connectivity. The commenter 

did not expand upon how the 

decentralized consolidation model 

would burden capacity beyond what 

occurs today in the provision of 

proprietary data using the same 

connectivity options. The exchanges 

assess capacity needs for their 

proprietary data products and will be 

able to assess such needs for the 

connectivity options for the data content 

underlying consolidated market data. 

Each individual SRO will be required to 

provide the data underlying 

consolidated market data to competing 

consolidators and self-aggregators in the 

same manner and using the same 

methods as is provided for proprietary 

data. The exchanges can utilize their 

proprietary data feeds to make the data 

content underlying consolidated market 

data available to competing 

consolidators and self-aggregators and 

will be able to offer any access options 

available to proprietary data feeds to 

competing consolidators and selfaggregators for their selection. 

(c) Comments on Access Options 

In the Proposing Release, the 

Commission stated that the exchanges 

could provide 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 self-aggregators. As 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.811 Further, an exchange must 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 self-aggregators those types of 

transmission for consolidated market 

data. As discussed, the rule will 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 will have to offer them for 

consolidated market data as well. 

One commenter stated that all forms 

of data submission must assure full and 

equal, transparent, and equally timed 

access to data.812 Another commenter 

stated that the most important 

component for the success of the 

competing consolidator model is ‘‘to 

ensure that all market participants have 

the opportunity for equal access within 

the facilities of an exchange for 

purposes of receiving market data from 

the exchange, transmitting that market 

data out of the exchange and receiving 

and distributing market data from 

another exchange (e.g., to receive and 

deliver an away exchange’s market 

data.’’ 813 This commenter further stated 

that exchanges should not favor certain 

market participants over others and that 

equal access must cover both egress and 

ingress within exchange data centers.814

Further, the commenter stated that the 

economic incentive to become a 

competing consolidator may not be 

sufficient without such equal access.815

Another commenter cautioned that 

allowing an exchange to develop a new 

market data product that contains only 

the data elements that are specified in 

the proposed definition of consolidated 

market data could be problematic 

because (1) competing consolidators 

likely will have feed handlers for 

publicly available feeds, which would 

impose additional burdens; and (2) 

there would be no incentive for 

exchanges to keep the latency of these 

special feeds similar to that of public 

feeds.816

The Commission believes that the 

SROs should be required to provide the 

information necessary to generate 

consolidated market data in the same 

manner and using the same methods, 

including all methods of access and the 

same format as they provide to any 

person. Different forms of access affect 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18655 

817See also infra Section III.B.9(f). 

818See McKay Letter at 6. 819See id. at 7. The commenter suggested that 

‘‘indirect control’’ means the use of the exchange 

or its affiliate’s influence, weight or pressure to 

create an advantage or disadvantage in exchange 

connectivity to select market participants. Further, 

the commenter described several different forms of 

direct or indirect control, including ‘‘requiring 

market participants to connect to a meet me room, 

specifying the types of cross connects that may be 

used, restricting the use of certain frequencies to 

certain market participants, through the use of one 

or more affiliates or select third parties to create 

advantages, or pursuant to formal and informal 

arrangements with the data center operator.’’ Id. at 

8–9. 

820See id. at 10. 

821See Proposing Release, 85 FR at 16771. For 

example, exchanges could adopt equal cable length 

protocols (i.e., where cross-connect cable lengths 

from network equipment to customer cabinets are 

harmonized for equal access) and ports of the same 

bandwidth (i.e., 1G, 10G, and 40G) to ensure that 

all of the exchange’s data center connections 

provide market data simultaneously to market 

participants located within a data center. 

the delivery of data. If an exchange 

provided a superior form of access to its 

proprietary data products, then 

transmission of consolidated market 

data would be negatively impacted and 

the benefits of the decentralized 

consolidation model, such as lower 

latencies, would not be realized. The 

national market system would be 

affected by this disparity as it is today— 

with certain proprietary data products 

providing superior access as compared 

to consolidated market data products. 

As stated in the Proposing Release, 

different market participants have 

different access needs. The Commission 

is not mandating a specific access 

option or limiting options for market 

participants, but all access options, 

including co-location, must be available 

to all market participants whether they 

are purchasing the data content 

underlying consolidated market data or 

proprietary data. 

The access requirement under Rule 

603(b) requires the exchanges to 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. The requirement in 

Rule 603(b) that access be provided in 

the same manner as any other 

information is provided to any person 

encompasses co-location options that 

are provided by exchanges to market 

participants that purchase proprietary 

data. Proprietary data users are typically 

co-located near an exchange’s matching 

engine. Rule 603(b) will allow 

competing consolidators and selfaggregators to receive data at the same 

speeds, and with the same access 

options, as the exchange offers its 

market data.817 Different co-location 

options within a data center could raise 

concerns about whether that exchange is 

providing the same manner of access to 

its data as 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 as a competing consolidator or 

a subsidiary or affiliate that competes in 

the provision of proprietary data. 

(d) Comments on Latency Neutralization 

In the Proposing Release, the 

Commission stated that proposed Rule 

603(b) would require that all access 

options be provided in a latencyneutralized manner such that all 

participants within an exchange’s data 

center—such as proprietary data 

subscribers, competing consolidators, 

and self-aggregators—would receive 

information at the same time, regardless 

of their location or status within the 

data center. The Commission continued 

that exchanges could, for example, 

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. Finally, the 

Commission stated that the SROs must 

use the same latency-neutralization 

processes for competing consolidators 

and self-aggregators as they offer 

subscribers of proprietary data. 

One commenter stated that to provide 

a level playing field ‘‘latencyneutralized’’ access must apply to 

locally produced data (i.e., data 

produced within an exchange’s data 

center where a market participant is colocated) and that the exchange must not 

interfere in the competition to provide 

inbound market data from exchanges 

located in other market centers.818 This 

commenter provided a detailed 

discussion of five steps of data access 

and delivery that it believed should be 

subject to latency neutralization 

requirements under Rule 603(b) if an 

exchange or its affiliate exercises direct 

control or indirect control.819

Specifically, the commenter stated that 

latency neutralization should apply to 

(1) the initial distribution from an 

exchange’s market data distribution 

engine to the cabinets of a competing 

consolidator, self-aggregator, or other 

direct recipient of market data; (2) the 

distribution from a competing 

consolidator’s cabinet out of an 

exchange’s data center to equipment 

(e.g., wireless or fiber equipment) for 

distribution to subscribers (described as 

the ‘‘egress leg’’); (3) the receipt of 

market data from an away exchange for 

delivery to co-located customers in the 

exchange’s data center (described as the 

‘‘ingress leg’’); (4) the delivery of data 

from a competing consolidator’s cabinet 

of market data received from away 

markets to the competing consolidator’s 

subscribers that are located in the same 

data center (described as the ‘‘delivery 

to subscriber leg’’); and (5) the 

transmission of data from an exchange 

data center to be received at other 

exchange data centers and/or for 

distribution to non-co-located market 

participants (described as the ‘‘transit 

leg’’). This commenter stated that these 

considerations are important to 

determining when and where 

competition begins in providing 

consolidated market data and that it 

believes that competition should begin 

when market data leaves those areas 

over which an exchange or its affiliates 

exercise direct or indirect control.820

Rule 603(b) requires that the 

exchanges provide their NMS 

information, including all data 

necessary to generate consolidated 

market data, in the same manner and 

using the same methods as such 

exchange provides any information to 

any person. As discussed above, this 

language encompasses the provision of 

data by an exchange at one data 

dissemination location co-located near 

each exchange’s matching engine to 

allow competing consolidators and selfaggregators to receive data at that 

location at the same speeds, and with 

the same access options, as the 

exchange offers its market data. The 

SROs are required to use the same 

latency-neutralization processes for 

competing consolidators and selfaggregators as they offer to subscribers 

of proprietary data such that all 

participants within the exchange’s data 

center, regardless of their location or 

status within the data center, would 

receive the data at the same time.821 In 

the Proposing Release, the Commission 

described latency neutralization 

protocols that exchanges could adopt, 

such as equal cable length protocols 

where cable lengths from network 

equipment to customer cabinets are 

harmonized for equal access. Any 

differential treatment of competing 

consolidators in the transmission of 

consolidated market data within a data 

center controlled by an exchange must 

be filed with the Commission as a 

proposed rule change pursuant to 

Section 19(b) of the Exchange Act and 

Rule 19b–4 thereunder and satisfy 

statutory requirements, such as not 

18656 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

822Section 6(b)(5) of the Exchange Act, 15 U.S.C. 

78f(b)(5). 

823Section 6(b)(8) of the Exchange Act, 15 U.S.C. 

78f(b)(8). 

824See FINRA Letter at 4. 

825See id. 

826Connectivity to the data underlying 

consolidated market data would be a new data 

service because such service does not currently 

exist. The SROs will have to file with the 

Commission any proposed new fees for 

connectivity to their individual data that underlies 

consolidated market data pursuant to Section 19(b) 

of the Exchange Act and Rule 19b–4 thereunder, 

and any proposed connectivity fee must satisfy the 

statutory standards, including being fair and 

reasonable, being not unreasonably discriminatory, 

and reflecting an equitable allocation of reasonable 

fees. See Sections 6(b)(4) and 15A(b)(5) of the 

Exchange Act. See also infra note 1158 and 

accompanying text and Section III.E.2(c). 

827See Rule 603(a)(2) of Regulation NMS, 17 CFR 

242.603(a)(2). 

828See Regulation NMS Adopting Release, supra 

note 7, at 37569. Specifically, the Commission 

stated, ‘‘Rule 603(a)(2) requires that any SRO, 

broker, or dealer that distributes market information 

must do so on terms that are not unreasonably 

discriminatory. These requirements prohibit, for 

example, a market from making its ‘core data’ (i.e., 

data that it is required to provide to a Network 

processor) available to vendors on a more timely 

basis than it makes available the core data to a 

Network processor.’’ Id. 

829 Id. at 37567. 

830For example, latency is currently measured for 

SIP data in microsecond increments. 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/CTAPLAN_Processor_Metrics_3Q2020.pdf 

(last accessed Nov. 27, 2020). 

831The NBBO will reflect the new round lot sizes. 

See supra Section II.D.2. 832See TD Ameritrade Letter at 12 (‘‘In the 

present-day structure, SIPs provide a ‘gold copy’ 

standard of the NBBO which can be used for 

comparison when meeting the regulatory 

requirements of best execution and the Vendor 

Display Rule . . . The industry may have as many 

NBBO quotes as there are [competing consolidators] 

and self-aggregators.’’); Healthy Markets Letter I at 

4 (‘‘We have significant concerns that by creating 

multiple, alternative SIPs, that market participants 

may cherry-pick the data feed that costs them the 

least or makes them look the best.’’); Nasdaq Letter 

IV at 12; Fidelity Letter at 10–11. 

833See TD Ameritrade Letter at 12–13 

(‘‘Furthermore, even if proprietary feeds 

disseminate a different quote than the NBBO, such 

quote has never been permitted for purposes of use 

in the Vendor Display Rule, meaning the retail 

investor has not previously experienced a multiple 

NBBO environment.’’). See also Fidelity Letter at 

10–11 (‘‘Under the Proposal, retail customers 

placing orders in the same security at two different 

brokerage firms may receive two different prices 

depending upon which competing consolidator 

each firm uses.’’). This scenario could happen 

today. The Commission does not believe the 

decentralized consolidation model will introduce 

confusion for retail investors. Retail investors will 

continue to be able to see the NBBO provided by 

their broker-dealer, whether it is calculated by their 

broker-dealer or a competing consolidator. 

834See TD Ameritrade Letter at 13. 

835See id. The commenter further questioned 

whether regulators would grant relief when 

being designed to permit unfair 

discrimination 822 nor impose a burden 

on competition.823

(e) Comments on SRO Costs 

One commenter, FINRA, stated that 

the ADF would be required to connect 

and provide data to all competing 

consolidators and self-aggregators.824

FINRA said that it potentially could 

incur significant costs to establish and 

maintain this required connectivity, 

despite minimal fee revenue from data 

disseminated from the ADF given the 

low volume of regularly reported trades 

and lack of quoting participants.825

FINRA stated in its comment letter that 

the ADF has a low volume of over-thecounter (‘‘OTC’’) trades and no quotes. 

Therefore, the connectivity options 

would not need to support much data 

capacity, which should limit the 

amount of costs incurred by FINRA to 

establish such connectivity. However, 

FINRA could seek to recoup any costs 

associated with establishing and 

maintaining connectivity to competing 

consolidators and self-aggregators by 

proposing connectivity fees pursuant to 

Section 19(b) of the Exchange Act.826

Information about OTC quotations and 

trades in NMS stocks are an important 

component of SIP data today and will 

continue to be important in 

consolidated market data. This OTC 

information must be collected, 

consolidated, and disseminated in the 

decentralized consolidation model. 

(f) Interpretation of Rule 603(a) 

Currently, Rule 603(a) requires that 

SROs distribute NMS information on 

terms that are fair and reasonable and 

not unreasonably discriminatory.827 The 

Commission stated in the Regulation 

NMS Adopting Release that Rule 603(a) 

would prohibit an SRO from making its 

core data available to vendors on a more 

timely basis than it makes such data 

available to the exclusive SIPs.828 In 

particular, the Commission said that 

‘‘independently 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 data to a Network 

processor.’’ 829 Today, latency 

differentials of any measurable amount 

are meaningful for certain market 

participants and their trading strategies. 

The Commission believes that Rule 

603(a) prohibits an SRO from making 

NMS information available to any 

person on a more timely basis (i.e., by 

any time increment that could be 

measured by the SRO 830) than it makes 

such data available to the existing 

exclusive SIPs and as amended, 

competing consolidators and selfaggregators. When it adopted Regulation 

NMS, the Commission did not provide 

a de minimis exception to the timeliness 

of data availability in Rule 603(a). If an 

SRO can measure the timeliness of data 

transmission in a specific increment, 

such increment generally should be 

utilized for determining whether such 

data has been transmitted on a more 

timely basis to persons other than an 

existing exclusive SIP, competing 

consolidators, or self-aggregators. 

10. Calculation of the National Best Bid 

and National Best Offer Under Rule 

600(b)(50) 

(a) Proposal 

The Commission proposed to amend 

the definition of national best bid and 

national best offer to reflect that 

competing consolidators and selfaggregators, 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 proposed 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 plan processor for 

options would continue to be 

responsible for calculating and 

disseminating the NBBO in listed 

options. The proposed changes to the 

definition of NBBO would not impact 

the manner in which the NBBO is 

calculated for NMS stocks.831

(b) Comments on Complexity and 

Confusion Resulting From Multiple 

NBBOs 

The Commission received multiple 

comments with respect to the proposed 

definition of NBBO, with commenters 

expressing concerns about multiple 

NBBOs and the impact on market 

participants and investors. Commenters 

stated that confusion could result from 

multiple NBBOs being available to 

market participants.832 One commenter 

stated that retail investors do not have 

experience with multiple NBBOs.833

The commenter further noted that 

multiple NBBOs would make brokerdealers’ Rule 605 reports difficult to 

compare because broker-dealers could 

be using different NBBOs.834 The 

commenter questioned whether a 

broker-dealer would be responsible for 

execution quality and compliance with 

the Vendor Display Rule if the 

competing consolidator that the brokerdealer is using miscalculates the 

NBBO.835

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18657 

reviewing execution quality on an order by order 

basis, when different competing consolidators are 

calculating NBBOs differently. 

836See Nasdaq Letter IV at 7 (‘‘Shedding the 

single NBBO—which has long been investors’ 

‘North Star’ for price discovery—in favor of 

multiple NBBOs would further complicate market 

structure, confuse investors as to whether they are 

actually seeing the best price, and hinder market 

surveillance and enforcement efforts.’’). 

837See FINRA Letter at 6. 

838See id. at 3–4. 

839See Healthy Markets Letter I at 4. 

840See id. 

841See Schwab Letter at 6; NYSE Letter II at 24; 

WFE Letter at 1. 

842See Data Boiler Letter I at 3. The commenter 

did not describe how it thought multiple NBBOs 

would impact liquidity. As discussed, the current 

market operates with multiple NBBOs. The 

Commission believes that the NBBOs that will be 

calculated in the decentralized consolidation model 

better reflect current market conditions due to the 

improvements in latencies and therefore, will be 

more prompt, accurate, and reliable. The enhanced 

and faster consolidated market data resulting from 

the proposal should allow market participants 

access to more up-to-date market data (including 

NBBO data) than provided by the SIP, permitting 

them to more readily find liquidity than before. 

843Nasdaq Letter III at 8. Many firms that 

aggregate proprietary feeds today likely have 

different aggregation times and are likely already 

exposed to latency arbitrage. It is unclear why the 

use of latency arbitrage would increase as a result 

of the proposal, especially since the existence of 

multiple NBBOs would not represent a change from 

current market practices. 

844See Nasdaq Letter IV at 11. 

845See id. at 3. 

846See McKay Letter at 10–11 (‘‘. . . many 

market participants are colocated at one or more of 

the major exchange datacenters in New Jersey and 

receive their market data at such colocated points 

of presence. If a competing consolidator seeks to 

provide market participants with the fastest and 

most efficient consolidated market data possible, 

the result would be a slightly different NBBO at 

each exchange datacenter.’’). 

847See also infra Section V.B.2(f). 

848See, e.g., Nasdaq Letter IV at 3, 12–13; 

Clearpool Letter at 8 (‘‘[W]hile the proposal states 

that the existence of multiple NBBOs does not 

impact a broker’s best execution obligations, we 

believe that ‘‘fragmenting’’ the NBBO could lead to 

several problems around such obligations, which 

would need to be addressed and clarified by the 

Commission prior to implementation.’’); Healthy 

Markets Letter I at 4–5 (‘‘Could a market participant 

seek to deliberately subscribe to an inferior data 

feed? . . . We urge the Commission to establish 

objective standards, including policies, procedures, 

and documentation requirements for brokers 

regarding their selection and usage of competing 

data feeds.’’); FINRA Letter at 5 (‘‘[T]he Commission 

may also want to consider providing guidance on 

whether a broker-dealer would, or should, be 

evaluated—by the Commission, FINRA, or others— 

on its decision of which competing consolidator(s) 

to receive consolidated market data from, what 

factors a broker-dealer should consider in 

evaluating its choice of a competing consolidator(s) 

(both initially and on an ongoing basis), and how 

a broker-dealer’s choice of a competing 

consolidator(s) might affect the broker-dealer’s best 

execution obligations.’’). 

Other commenters noted that a lack of 

a single NBBO as calculated by the 

existing SIPs could impact the market in 

a variety of ways, such as a lack of a 

single benchmark to determine trade 

quality; curtailing the Commission’s 

surveillance efforts; potentially creating 

a multi-tiered system where some 

traders can access faster NBBOs; 836 and 

adding significant complexity, 

confusion, and uncertainty to best 

execution analysis.837 One commenter 

said that it is unlikely the NBBOs 

produced by competing consolidators 

and their associated timestamps would 

ever be synchronized and that the 

NBBOs calculated by competing 

consolidators and self-aggregators will 

never align. The commenter said that 

the different versions of market data 

would impact broker-dealer compliance 

with market conduct rules.838

Another commenter noted that 

multiple NBBOs would make 

comparison of broker-dealer 

performance difficult, as broker-dealers 

may decide which NBBO to use 

depending on which NBBO costs the 

least or makes their execution quality 

look better.839 The commenter 

acknowledged that while there is no 

clear NBBO today, the exclusive SIPs do 

calculate and disseminate a NBBO.840

Commenters questioned how execution 

quality would be judged if each 

competing consolidator provided a 

different NBBO.841 Another commenter 

believed that multiple NBBOs will 

impact liquidity.842 One commenter 

said that latency arbitrage would be 

required to ‘‘keep markets in line,’’ 

estimating an increase of almost $3 

billion in latency arbitrage profits as a 

result of the multiple NBBOs introduced 

by the proposal.843 This commenter said 

that multiple NBBOs would also reduce 

investor confidence that trades will be 

executed at the best price 844 and 

believed that multiple NBBOs would 

negatively impact market quality, 

complicate best execution compliance 

by broker-dealers, and overall hurt 

investor confidence in the markets.845

Another commenter requested clarity 

that a single competing consolidator 

could produce multiple NBBOs at 

different locations at any given point of 

time, since some competing 

consolidators may co-locate at more 

than one exchange data centers.846

In the decentralized consolidation 

model, competing consolidators will 

replace the exclusive SIPs in generating 

the NBBO as defined in Rule 600. 

Therefore, there will be NBBOs 

generated by each competing 

consolidator, as well as self-aggregators, 

based upon the data content received 

from the SROs pursuant to Rule 603(b). 

While commenters expressed concerns 

about the loss of an NBBO generated by 

a single plan processor—the exclusive 

SIPs—the Commission believes that 

market participants will adjust to not 

having an NBBO generated by a single 

plan processor. ‘‘Multiple NBBOs’’ 

already exist today.847 Some market 

participants obtain the NBBO from the 

exclusive SIPs, and some market 

participants generate their own NBBO 

by aggregating multiple proprietary data 

feeds. Some market participants that 

generate their own NBBO use third 

party aggregation software or services to 

do so. The NBBO seen by market 

participants depends on the systems 

used to generate the NBBO and the 

systems used by the market participants 

to receive and view it. Market 

participants are therefore already 

accustomed to a market environment in 

which there are ‘‘multiple NBBOs’’ 

generated by different parties, at 

different speeds, in different locations. 

They are accustomed to performing best 

execution analysis and providing 

execution quality statistics in the 

current environment. Therefore, the 

Commission does not believe that the 

generation of NBBOs by multiple 

competing consolidators will add 

complexity or confusion to the markets. 

Moreover, neither the amended 

definition of NBBO, nor the 

decentralized consolidation model more 

generally, mandates the consumption of 

multiple NBBOs from multiple 

competing consolidators. So, while 

different competing consolidators may 

calculate and disseminate unique 

NBBOs or single competing 

consolidators may calculate different 

NBBOs at separate data center locations 

under the decentralized consolidation 

model, the Commission does not believe 

that this should cause confusion for 

market participants, who already 

consider market data from multiple 

sources. Finally, the amended definition 

of NBBO does not change the 

methodology by which the NBBO for a 

particular NMS stock is calculated, 

which will help to ensure consistency 

in the NBBO calculation. The 

Commission is therefore adopting the 

amendments to the definition of NBBO 

as proposed. 

(c) Comments on Impact of Multiple 

NBBOs on Best Execution Obligations 

With respect to best execution, 

commenters stated that the Commission 

did not sufficiently discuss the best 

execution implications of multiple 

NBBOs.848 Commenters stated that 

eliminating the single NBBO, and 

requiring broker-dealers to choose 

among multiple NBBOs, would 

complicate and increase the cost of 

compliance with best execution 

18658 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

849See Nasdaq Letter IV at 3, 42, 49; Joint CRO 

Letter at 2; STANY Letter II at 6; TD Ameritrade 

Letter at 12–13. 850Clearpool Letter at 8; see also Capital Group 

Letter at 4 (‘‘We also support the proposed 

commercial competing consolidators. Different 

users have different needs with regards to data 

complexity (e.g., what data elements are included 

or excluded), latency and price. We do not see this 

as the creation of ‘multiple truths’ or ‘multiple 

markets.’ Because the data will also be available for 

post trade analysis, market participants will be able 

to analyze outcomes using the difference between 

the originating venue timestamps and the 

consolidator timestamps to determine if best 

execution obligations were fulfilled and if the speed 

they chose to pay for meets their needs.’’). 

851See Better Markets Letter at 2. 852See supra Section I.E. 853See supra Section III.B.8. 854See Joint CRO Letter at 2, 3; Nasdaq Letter IV 

at 12; NYSE Letter II at 24; see also TechNet Letter 

II at 2 (stating that multiple NBBOs would 

undermine effective regulation and investor 

confidence). 

855See Joint CRO Letter at 2, 3, 4; Nasdaq Letter 

IV at 3, 12, 36, 49. 

856See Joint CRO Letter at 2, 4. 

857See id. at 3. 

858See id. at 4. The commenter stated that 

reprogramming its systems to comply with and 

surveil for compliance with the locked and crossed 

and order protection rules would be an ‘‘extensive 

undertaking.’’ Id. See also Nasdaq Letter IV at 12, 

36, 49. 

859See Joint CRO Letter at 3. 

860See id. at 2, 3. 

861See Nasdaq Letter IV at 12, 37. See also Joint 

CRO Letter at 4. 

862See Nasdaq Letter IV at 12. 

863See id. The commenter also stated that the 

proposal would lead to confusion and inconsistent 

application if adopted. See id. at 12–13. 

864See id. at 37. 

865See NYSE Letter II at 24. 

866See supra Section III.B.8. 

867See infra Section V.C.2(d); notes 1757–1760 

and accompanying text. 

obligations.849 However, another 

commenter stated that it ‘‘does not 

believe the existence of multiple NBBOs 

will create problems for market 

participants or the market as a whole at 

a level that would warrant not moving 

forward with the decentralized, 

competitive model. . . .’’ 850

Additionally, one commenter stated that 

expanding core data generally would 

facilitate best execution.851

As described above, ‘‘multiple 

NBBOs’’ already exist today. The 

amended definition of NBBO will not 

significantly alter this state of affairs; 

rather, it adjusts the definition of NBBO 

to accommodate the decentralized 

consolidation model to reflect that 

NBBOs will be calculated and 

disseminated by competing 

consolidators and calculated by selfaggregators. As is the case today, brokerdealers must act reasonably to obtain 

pricing information in carrying out their 

duty to seek to obtain the most favorable 

terms reasonably available under the 

circumstances for the execution of 

customer orders.852

(d) Comments on Impact of Multiple 

NBBOs on Surveillance and 

Enforcement 

While some commenters expressed 

concern about the proposed 

decentralized consolidation model’s 

impact on regulation,853 several 

commenters more specifically opined 

that the multiple NBBOs resulting from 

the proposed model would undermine 

exchange surveillance and 

enforcement,854 and raised questions 

about how market participants should 

consider multiple NBBOs in tradethrough prevention and locked and 

crossed markets.855 One commenter said 

that the proposal did not fully consider 

the impact of multiple NBBOs on 

surveillance and compliance with 

investor protection rules 856 and that 

multiple NBBOs would affect 

surveillances that detect broker-dealer 

market access controls deficiencies and 

fraud and manipulation.857 The 

commenter also stated that the proposed 

model would make it almost impossible 

to monitor for locked and crossed 

markets and to conduct trade-through 

surveillance due to the multiple 

competing consolidator feeds.858 In 

addition, the commenter stated that 

regulators and market participants will 

have different views of the market 

depending on the NBBO they use, 

which would allow bad actors to take 

advantage of the resulting regulatory 

loopholes and inefficiencies.859 The 

commenter stated that multiple NBBOs 

could create false positives, more 

investigations and data requests, as well 

as false negatives.860

Additionally, one commenter stated 

that the multiple NBBOs that will be 

produced by competing consolidators 

and self-aggregators under the proposed 

decentralized consolidation model will 

increase costs for exchanges to enforce 

their rules 861 and increase the risk of 

market manipulation.862 This 

commenter also said that regulations 

could be inconsistently applied due to 

variations in consolidated market data 

from different competing 

consolidators,863 and that the proposal 

would result in more frequent 

enforcement investigations, expansive 

data requests, and delays in concluding 

investigations.864 Another commenter 

stated that the proposed decentralized 

consolidation model would hurt Rule 

605 compliance because the baseline 

NBBO used by each market center for 

comparisons would vary.865

These issues are not new or unique to 

the decentralized consolidation model. 

As discussed earlier,866 SRO 

surveillance and regulatory programs 

currently need to consider different 

sources of market data, including 

different ‘‘NBBOs’’ calculated by 

different market participants as well as 

the NBBO calculated by exclusive SIPs 

pursuant to Rule 600(b)(50). While there 

may be an increased number of data 

sources in a decentralized consolidation 

model, the issues described by these 

commenters are currently dealt with by 

SRO market surveillance and 

enforcement staff today. Broker-dealers 

have considered multiple data sources 

in complying with trade-through and 

locked and crossed markets in the 

context of Regulation NMS. The 

Commission believes that the amended 

definition of NBBO should not cause 

increased exchange enforcement costs 

or an increase in alerts or false positives 

because the surveillance and regulatory 

process will continue as it does today. 

Currently, SROs already must decide 

among data sources to use for their 

surveillance and regulatory systems. 

SROs must also handle the different 

data sources used by market 

participants for regulatory compliance. 

Market participants may use SIP data, 

proprietary data, or a combination. 

Market participants also may calculate 

their own NBBOs. The data used by 

market participants today may differ 

from the data used by the SROs for their 

surveillance and regulatory systems. 

Broker-dealers are not required to use a 

particular source of market data for 

regulatory compliance. Because brokerdealers may rely on different sources of 

data—data sources that may not be used 

by SRO regulatory staff to generate 

alerts—SRO investigators typically 

request data from broker-dealers to 

evaluate whether an alert has 

discovered an actual violation of the 

Federal securities laws and exchange 

rules. This dynamic will not change in 

a decentralized consolidation model. 

SROs may decide to use a consolidated 

market data product generated by a 

competing consolidator, or they may 

decide to self-aggregate data to generate 

consolidated market data for purposes 

of their surveillance and regulatory 

systems. SROs will not be required to 

purchase every consolidated feed to 

conduct enforcement or surveillance, 

just as they are not required to purchase 

all direct proprietary feeds used by 

market participants. Therefore, SROs 

should not incur higher enforcement 

costs because the regulatory process will 

continue to operate as it does 

currently.867

Furthermore, even if SRO surveillance 

and regulatory programs used the same 

data source as a broker-dealer, SROs 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18659 

868See supra Section III.B.1; BlackRock Letter, 

Fidelity Letter, State Street Letter, Wellington 

Letter, ICI Letter, Virtu Letter, AHSAT Letter, FIA 

PTG Letter, IntelligentCross Letter, Committee on 

Capital Markets Regulation Letter, BestEx Research 

Letter, Wharton Letter, MEMX Letter, Clearpool 

Letter; T. Rowe Price Letter; Capital Group Letter; 

DOJ Letter; ACS Execution Services Letter; IEX 

Letter; Steinmetz Letter (commenting on the entire 

proposal); SIFMA Letter; ACTIV Financial Letter; 

MFA Letter; Better Markets Letter. 

869 Data Boiler Letter I at 46. 870See supra Section II.B.2. See also infra Section 

III.C.8(a)(ii) for a discussion of the revisions to the 

responsibilities of competing consolidators 

resulting from this change. 871See Proposing Release, 85 FR at 16782. 872See BestEx Research Letter at 2, 5. The 

commenter said the result would be consumers that 

prefer depth over latency would be able to find the 

right products, as would those that prefer latency 

over depth. 

873See id. at 5. 

874See NYSE Letter II at 14–15. 

875 Data Boiler Letter I at 52. 

876BlackRock Letter at 2–3. 

877See BestEx Research Letter at 2, 5; NYSE 

Letter II at 14–15; BlackRock Letter at 2–3; Data 

Boiler Letter I at 52. 

would still have to request information 

from such broker-dealer due to potential 

data differences—such as geographic 

latencies, access options, or processing 

options—to evaluate whether there is a 

potential violation. Therefore, the 

Commission believes that the existence 

of multiple NBBOs should not present 

any problems that the SROs have not 

previously handled. 

C. Competing Consolidators 

The Commission believes that the 

introduction of competing consolidators 

as the entities responsible for the 

collection, consolidation, and 

dissemination of consolidated market 

data products will update and 

modernize the national market system 

and provide market participants and 

investors with benefits. As noted above, 

the Commission received many 

comments that supported the goals of 

the decentralized consolidation model 

and the potential positive impacts this 

model would have on the provision of 

consolidated market data.868 However, 

some comments raised concerns about 

the introduction of competing 

consolidators and their impact on the 

national market system, which are 

discussed below. 

1. Definition of ‘‘Competing 

Consolidator’’ Under Rule 600(b)(16) 

(a) Proposal 

The Commission proposed to amend 

Regulation NMS to introduce competing 

consolidators as the entities responsible 

for the collection, consolidation, and 

dissemination of consolidated market 

data. 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.’’ 

(b) Final Rule and Response to 

Comments 

The Commission received one 

comment supporting the proposed 

definition of competing consolidator.869

The Commission, however, is revising 

the definition to reflect that competing 

consolidators are not required to 

generate a complete consolidated 

market data product.870 Rule 600(b)(16) 

defines a competing consolidator 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 a consolidated market data 

product for dissemination to any 

person.’’ 

Regarding the consolidated market 

data that must be generated by 

competing consolidators, the 

Commission asked in the Proposing 

Release whether competing 

consolidators should be required to 

develop a consolidated market data 

product that contained all of the 

elements provided under the proposed 

definition of consolidated market 

data.871 As proposed, competing 

consolidators would have had the 

flexibility to offer different products but 

were also required to offer a full 

consolidated market data product. One 

commenter stated that competing 

consolidators should not be required to 

include depth-of-book in the products 

they sell, as including such data would 

increase latency and complexity.872 The 

commenter stated that not mandating 

the provision of depth-of-book data 

would encourage competition further 

and reduce data costs for all 

consumers.873 Another commenter 

stated that the requirement that 

competing consolidators develop a 

consolidated market data product that 

contained all of the elements of 

consolidated market data, regardless of 

demand, along with other proposed 

competing consolidator requirements, 

including registration and Regulation 

SCI, imposed costs on competing 

consolidators that would serve as a 

barrier to entry to potential competing 

consolidators.874 Another commenter 

suggested that only a single competing 

consolidator should be obligated to 

provide a consolidated market data 

product, not all competing 

consolidators.875 One commenter 

suggested that competing consolidators 

should have the flexibility to compete 

with proprietary data offerings and 

decide what products to offer to their 

subscribers.876

The Commission agrees with the 

comments that objected to requiring that 

all competing consolidators sell a 

product containing all of the specified 

elements of consolidated market data 877

because forcing higher fixed costs and a 

mandatory product offering across all 

competing consolidators potentially 

would make it more difficult for 

competing consolidators to enter the 

market and to tailor their services and 

product offerings while recouping 

expenses. The Commission believes that 

allowing competing consolidators to 

generate their own set of product 

offerings, tailored to the needs of their 

subscriber base or otherwise 

differentiated, will lower the fixed costs 

of those competing consolidators that 

elect to specialize in targeted products 

that do not contain all of the elements 

of consolidated market data. 

Specifically, these competing 

consolidators can offer such products 

without acquiring the underlying data 

and developing the technological 

capability necessary to calculate and 

consolidate all elements of consolidated 

market data. This reduction in fixed 

costs will enable these competing 

consolidators to offer products that do 

not contain all elements of consolidated 

market data and do so in a more costeffective manner, which should enhance 

their ability to meet the specific data 

needs of various market participants. In 

addition, increased participation by 

more streamlined competing 

consolidators that operate with fewer 

constraints and potentially fewer fixed 

costs, or costs tailored to their own 

unique product offerings, would 

promote competition in the market. 

The Commission recognizes that 

competing consolidators are the only 

entities that will generate and 

disseminate consolidated market data 

products in the national market system, 

and acknowledges the possibility that 

competing consolidators may not offer 

consolidated market data products that 

do not contain all of the elements of 

consolidated market data. However, 

consistent with the views expressed by 

a variety of market participants 

regarding the importance of the 

18660 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

878See supra note 112 and accompanying text 

(noting that multiple Roundtable panelists and 

commenters supported the inclusion of odd-lot 

information, depth of book data, and auction 

information); supra notes 152–153 and 

accompanying text (describing comments 

expressing support for the expansion of 

consolidated market data and core data); 242–244 

(describing comments expressing support for the 

inclusion of smaller-sized orders in higher-priced 

stocks); 386–388 (describing comments expressing 

support for the inclusion of depth of book data); 

462–464 (describing comments expressing support 

for the inclusion of auction information). 

879See Proposing Release, 85 FR at 16754 

(describing how depth of book data can assist Smart 

Order Routers and electronic trading systems with 

the optimal placement of orders across markets); 

16759 (explaining how information regarding the 

size and side of order imbalances can indicate the 

direction a stock’s price might move, inform 

decisions on where to price an auction order and 

what order type to use, and improve execution 

quality). See also supra Sections II.C.2(b)–II.D.2 

(explaining how aggressively priced odd-lots will 

be included in core data through the definitions of 

odd-lot information and round lot); II.F.2; II.G.2. 

880See supra Section II.C.2(a). 

881See SIFMA Letter at 11. 

882See supra Section II.B.2 discussing the 

definition of consolidated market data product. 

883The Vendor Display Rule requires a SIP that 

provides a display of quotation and transaction 

information with respect to an NMS stock, in the 

context of which a trading or order-routing decision 

can be implemented, to also provide a consolidated 

display for that stock. Rule 603(c) of Regulation 

NMS, 17 CFR 242.603(c). See also supra note 97; 

FINRA, Regulatory Notice 15–46, 1, 3 n. 12 (2015) 

(‘‘The exercise of reasonable diligence to ascertain 

the best market under prevailing market conditions 

can be affected by the market data, including 

specific data feeds, used by a firm. For example, a 

firm that regularly accesses proprietary data feeds, 

in addition to the consolidated SIP feed, for its 

proprietary trading, would be expected to also be 

using these data feeds to determine the best market 

under prevailing market conditions when handling 

customer orders to meet its best execution 

obligations.’’). 

884See Committee on Capital Markets Regulation 

Letter at 3; BestEx Research Letter at 1; BlackRock 

Letter at 5; ACS Execution Services Letter at 5; 

Clearpool Letter at 7–8; Cboe Letter at 25; TechNet 

Letter II at 2; NYSE Letter II at 24; Data Boiler Letter 

I at 48; Data Boiler Letter II at 1; NBIM Letter at 

6; NovaSparks Letter at 1. The Commission also 

received one comment that urged the Commission 

to focus on cybersecurity in upgrading the 

infrastructure for market data. Temple University 

Letter at 2. The Commission is amending Rule 1000 

of Regulation SCI to make competing consolidators 

exceeding a threshold ‘‘SCI entities.’’ See infra 

Section III.F. 

885See Committee on Capital Markets Regulation 

Letter at 3; BestEx Research Letter at 1; BlackRock 

Letter at 5; ACS Execution Services Letter at 5; 

Clearpool Letter at 7–8; MEMX Letter at 3, 8; ACTIV 

Financial Letter at 1 (stating that competition could 

‘‘provide investors with a . . . higher reliability 

framework for determining accurate pricing of NMS 

securities’’); NovaSparks Letter at 1 (‘‘The 

competitive nature of the new model will encourage 

Competing Consolidators to deliver excellent 

reliability, functionality and performance.’’). 

886Committee on Capital Markets Regulation 

Letter at 3. 

887See BestEx Research Letter at 1. This 

commenter also said that competing consolidators 

would reduce reliance on a single SIP vendor. Id. 

at 5. 

888See BlackRock Letter at 5. 

889ACS Execution Services Letter at 5; Clearpool 

Letter at 7–8. However, with respect to business 

continuity planning and disaster recovery, one 

commenter said that having a single competitor to 

the SIP would be sufficient to address concerns 

about a single point of failure. See Data Boiler Letter 

I at 48. 

890See Cboe Letter at 25; TechNet Letter II at 2. 

One commenter noted an inverse relationship 

between data connection speed and reliability. The 

commenter stated that exchanges and competing 

consolidators would need to create a protocol for 

conditional use of slower, reliable consolidated 

market data feeds to ensure reliability of such feeds. 

See NBIM Letter at 6. Competing consolidators will 

be required to comply with operational capability 

and resiliency obligations to help ensure that the 

provision of proposed consolidated market data 

remains reliable. See infra Section III.F. 

891See NYSE Letter II at 24; Data Boiler Letter I 

at 48; Data Boiler Letter II at 1. 

892See Cboe Letter at 25. 

individual elements of consolidated 

market data, the Commission believes 

that there will be widespread demand 

for a product that contains all elements 

of consolidated market data, and 

particularly for the additional 

information included in core data.878

Specifically, because this additional 

data will provide useful information 

that will assist in order routing and 

placement decisions and achieving 

improved executions for customer 

orders,879 many broker-dealers that 

execute customer orders will acquire a 

product containing all elements of 

consolidated market data to compete 

effectively for customer business.880

Consolidated market data includes 

information that the Commission 

believes is necessary to disseminate 

under the rules of the national market 

system and useful for a broad-cross 

section of market participants. 

Accordingly, the Commission believes 

that there should be demand for 

products containing all elements of 

consolidated market data even though, 

as adopted, Rule 614 will not require 

competing consolidators to offer them. 

With respect to the receipt of data by 

competing consolidators, Rule 603(b), as 

adopted, requires each SRO to provide 

its NMS information, including all data 

necessary to generate consolidated 

market data, to competing consolidators. 

In accordance with Rule 603(b), 

competing consolidators will receive 

each SRO’s market data that is necessary 

to generate consolidated market data. 

One commenter stated that competing 

consolidators, their subscribers, and 

self-aggregators should be permitted to 

receive data elements or products based 

on need.881 As discussed above, 

competing consolidators will be 

permitted to develop different types of 

consolidated market data products 

based on the demands of their 

customers.882 Accordingly, competing 

consolidators will not be required to 

receive all of the data content 

underlying consolidated market data. 

Rather, competing consolidators can 

receive the data they need to generate 

the consolidated market data products 

they decide to offer, but the Commission 

notes that competing consolidators that 

are SIPs required to be registered 

pursuant to Rule 614 must comply with 

the Vendor Display Rule when offering 

consolidated market data products and 

therefore must receive, at a minimum, 

the data necessary to satisfy the Vendor 

Display Rule.883

Competing consolidators will also 

have the ability to select for themselves, 

from among the options offered by the 

SROs, how to access the data underlying 

consolidated market data (e.g., with 

different latencies, throughput 

capacities, and data-feed protocols) and 

consider costs and complexities related 

to each option. The Commission 

believes that these provisions will 

provide competing consolidators with 

flexibility to develop their consolidated 

market data products business in a way 

that best suits their capabilities and 

their subscribers’ needs. 

2. Comments on Resiliency 

The Commission received several 

comments with respect to the impact of 

competing consolidators on the 

resiliency of the markets.884 Some 

commenters stated that competing 

consolidators could add resiliency to 

the markets.885 One commenter said 

that competing consolidators would 

strengthen resiliency because there 

would no longer be a single point of 

failure that could cause ‘‘stock market 

paralysis.’’ 886 Similarly, another 

commenter said that competition could 

reduce the risk of a single point of 

failure,887 and another commenter said 

that the decentralized consolidation 

model would eliminate the SIP as a 

single point of failure.888 Two 

commenters said that having a 

‘‘sufficient number of competing 

consolidators will be important to 

ensure resiliency and backup in the 

collection, consolidation, and 

distribution of consolidated market 

data.’’ 889

Commenters also argued that 

introducing competing consolidators 

could weaken the national market 

system by increasing a risk of failure,890

or that competing consolidators would 

not address concerns about a single 

point of failure.891 One commenter 

stated that introducing competing 

consolidators would, in fact, introduce 

multiple opportunities of failure.892

This commenter said that a competing 

consolidator with ‘‘a significant 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18661 

893 Id. 

894See NYSE Letter II at 24. Another commenter 

stated, ‘‘. . . if either of the SIPs experiences a 

systems issue affecting the quality or availability of 

market data, all market participants are affected 

equally by the issue. However, under the competing 

consolidator model, if one competing consolidator 

is impaired, it could severely disadvantage that 

competing consolidator’s subscribers and their 

investor clients.’’ FINRA Letter at 4. 

895See NYSE Letter II at 24. 

896See id. 

897See Nasdaq Letter IV at 8, 35. 

898See TechNet Letter II at 2. 

899See Cboe Letter at 25; TechNet Letter II at 2. 

900See NYSE Letter II at 24; Data Boiler Letter I 

at 48. 

901See 17 CFR 242.614(d)(6) (Rule 614(d)(6)). 

902See infra Section III.F. 

903See FINRA Letter at 4. 

904See supra text accompanying notes 756–757. 

905See Committee on Capital Markets Regulation 

Letter at 3; RBC Letter at 5–6; State Street Letter at 

3. 

906See Committee on Capital Markets Regulation 

Letter at 3; RBC Letter at 5–6; Susquehanna Letter 

at 1. 

907See TD Ameritrade Letter at 13; Nasdaq Letter 

IV at 4, 7, 35; STANY Letter II at 6. 

908See Nasdaq Letter IV at 26. 

customer base’’ could even cause 

market-wide trading halts if it had 

system problems and urged caution in 

making any changes that could ‘‘imperil 

the resiliency of the U.S. equities 

market.’’ 893 Another commenter said 

that competing consolidators would 

continue the risk of a single point of 

failure because customers of a single 

competing consolidator that failed 

would lose access to its consolidated 

market data, and unlike when an 

exclusive SIP fails and impacts all 

market participants, only customers of 

the competing consolidator would be 

disadvantaged.894 To mitigate the risk of 

failure, the commenter said that 

subscribers would have to subscribe to 

at least two competing consolidators 

and incur the costs of doing so.895 This 

commenter stated that the Commission 

did not provide evidence to support its 

conclusion that the proposed 

decentralized consolidation model 

would improve the stability of the 

market data system for data 

consumers.896 Another commenter said 

that there may be high-risk competing 

consolidators that enter the market 

(such as cheaper or slower competing 

consolidators) and their subscribers may 

not be able to avoid harm quickly 

enough if technological issues occur.897

Another commenter said that competing 

consolidators would add technical 

complexity, which would reduce 

resilience.898

The Commission does not believe that 

competing consolidators will expose the 

national market system to an increased 

risk of failure 899 or propagate the risk of 

a single point of failure.900 The 

Commission believes that the 

decentralized consolidation model will 

improve the resiliency of national 

market system by eliminating single 

points of failure that exist in the current 

system. Today, SIP data for Tapes A and 

B is only provided by the exclusive SIP 

for the CTA/CQ Plan and SIP data for 

Tape C is only provided by the 

exclusive SIP for the Nasdaq UTP Plan. 

These are single points of failure. In the 

decentralized consolidation model, 

there will be multiple entities— 

competing consolidators—collecting, 

consolidating, and disseminating 

consolidated market data products, 

which will enhance the resiliency of the 

national market system. Competing 

consolidators also will be subject to 

requirements that are designed to 

support their resiliency. For example, 

competing consolidators will be 

required to disclose publicly, on a 

monthly basis, their system 

availability.901 This will encourage 

competing consolidators to invest in 

their systems to make sure that they 

have high rates of system ‘‘up-time.’’ 

The monthly disclosures will help 

support systems resiliency by imposing 

competitive pressures on competing 

consolidators to ensure that their 

systems are resilient, as market 

participants can use the monthly 

disclosures to assess and compare the 

performance of a competing 

consolidator. Competing consolidators 

that cannot generate and disseminate 

consolidated market data products 

reliably likely will not attract or retain 

subscribers. Furthermore, competing 

consolidators will be subject to 

requirements that are designed to 

support their operational resiliency, 

including, as appropriate, Regulation 

SCI. The Commission is also adopting 

changes to Regulation SCI to help to 

ensure the integrity and resiliency of 

competing consolidators.902 The 

Commission believes that it is important 

to impose requirements to help ensure 

that the technology systems of 

competing consolidators are reliable and 

resilient, consistent with the policy 

goals of Regulation SCI. These 

requirements are designed to address 

concerns that competing consolidators 

will become multiple points of failure in 

the decentralized consolidation model. 

One commenter urged the 

Commission to issue standards for when 

a market participant would have to 

subscribe to multiple competing 

consolidators to mitigate the risk that its 

primary competing consolidator fails.903

As noted above,904 the Commission is 

not requiring market participants to 

have back-up competing consolidators, 

whether such market participants 

subscribe to SCI competing 

consolidators or competing 

consolidators that are not SCI entities, 

though some may choose to do so in 

light of their own business needs. The 

Commission believes that having 

multiple competing consolidators 

collect, consolidate, and disseminate 

consolidated market data products 

would eliminate a single point of failure 

that would weaken the entire national 

market system because if one competing 

consolidator’s operations experiences a 

failure, its impact on the markets will be 

minimized due to the presence of other 

competing consolidators that can 

perform the same functions. 

3. Comments on Data Quality 

Several commenters supported the 

introduction of competing consolidators 

because of the potential enhancements 

to the quality of consolidated market 

data.905 Three commenters believed that 

competition would improve the quality 

of consolidated market data.906

However, three commenters 

questioned the proposal’s impact on 

data quality, stating that the effects were 

uncertain and that competition could 

harm data quality and accuracy, 

including through attracting untested 

vendors who provide cheaper but 

potentially less reliable service.907 One 

of these commenters stated that 

competing consolidators could produce 

varying NBBOs and cheap data products 

that would limit market information to 

non-self-aggregating market 

participants.908 The commenter stated 

that the Commission will likely have to 

create additional regulations to set 

minimum standards ensuring the 

quality, availability, and accessibility of 

consolidated market data produced by 

competing consolidators. 

The Commission believes that the 

definitions in Rule 600, as well as the 

registration and disclosure requirements 

of Rule 614, will help to ensure the data 

quality of consolidated market data. All 

competing consolidators will register 

with the Commission and become 

regulated entities (if not already SROs) 

and will be required to generate 

consolidated market data products in a 

manner that is consistent with the 

definitions set forth in Rule 600. 

Further, the Commission believes that 

competition in the decentralized 

consolidation model will also support 

high quality consolidated market data. 

Competing consolidators will be 

required to produce public monthly 

reports on their performance and other 

metrics, which should incentivize 

18662 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

909Competing consolidators would also be 

subject to Commission oversight under Rule 614. 

See infra Section III.C.7. 

910See Wharton Letter at 4; MFA Letter at 3, 9; 

McKay Letter at 11. 

911See Wharton Letter at 4; MFA Letter at 3, 9. 

912See Wharton Letter at 4. 

913See MFA Letter at 3, 9. 

914See McKay Letter at 11. 

915See Healthy Markets Letter I at 4–5 (urging the 

Commission to establish objective standards for 

brokers regarding their selection and usage of 

competing consolidator feeds); FINRA Letter at 6 

(stating that a broker-dealer’s best execution 

obligations would prevent it from selecting a more 

advantageous source of market data for its 

proprietary activities than it uses for its clients); 

Fidelity Letter at 10 (suggesting that regulators 

examine why a broker-dealer would choose one 

competing consolidator over another). 

916See supra Section I.E. 

917See FINRA Letter at 4–5. 

918See id. at 5–6. 

919See supra Section I.E. 

920See BlackRock Letter at 5; MEMX Letter at 8. 

See also RBC Letter at 6 (suggesting that the 

Commission provide guidance on the minimum 

specifications for methods and processes of delivery 

for competing consolidators to avoid having 

multiple methods and processes, which could 

result in a tiered system of market data and reduced 

competition); MIAX Letter at 2 (suggesting that the 

Commission require all competing consolidators to 

utilize the same transport protocols (i.e., multicast) 

when transmitting data to market participants). 

921The Commission will monitor issues related to 

the implementation of the decentralized 

consolidation model, including whether 

standardization of the competing consolidator 

consolidation or dissemination processes would 

benefit market participants. 

competing consolidators to perform at a 

high level in order to attract and 

maintain a subscriber base. A competing 

consolidator that does not produce 

accurate, high quality consolidated 

market data products would risk losing 

customers to other competing 

consolidators.909

4. Comments on Competing 

Consolidator Products 

Commenters offered suggestions on 

the types of products to be sold by 

competing consolidators.910 Two 

commenters suggested products that 

should be offered by competing 

consolidators.911 One of the commenters 

said that competing consolidators 

should provide consolidated market 

data at no charge to a registered 

academic aggregator to act as an 

intermediary for the academic 

community.912 The other commenter 

stated that competing consolidators 

should be required to sell a regulatory 

data-only feed at a fair and reasonable 

price (relative to the cost of that data as 

part of consolidated market data), and/ 

or exchanges should be allowed to sell 

a regulatory data proprietary market 

data feed.913 One commenter requested 

clarification as to the ability of a 

competing consolidator to offer separate 

co-location offerings as part of its 

competitive services.914

The Commission is not requiring 

competing consolidators to offer 

reduced cost or free services, but 

competing consolidators could develop 

such products if they so desired. In 

addition to consolidated market data 

products, competing consolidators will 

be able to offer other products, such as 

academic products or regulatory data 

products. Further, the Operating 

Committee of the effective national 

market system plan(s) for NMS stocks 

could develop reduced fees for the data 

content underlying consolidated market 

data for the academic community or for 

regulatory data, or the exchanges could 

develop and propose, pursuant to 

Section 19(b) of the Exchange Act and 

Rule 19b–4 thereunder, similar 

products. 

5. Comments on Selection of a 

Competing Consolidator 

Several commenters raised questions 

concerning the selection of competing 

consolidators by broker-dealers.915 The 

Commission believes that a brokerdealer will be responsible for selecting 

its competing consolidator(s) and will 

be required to perform its own due 

diligence to ensure that the competing 

consolidator(s) it chooses will be able to 

assist the broker-dealer in meeting its 

regulatory obligations and its 

obligations to its customers, including 

best execution.916

One commenter sought clarification of 

a broker-dealer’s responsibility for 

problems caused by its choice of 

competing consolidator.917 This 

commenter asked if a broker-dealer 

could be held liable for its competing 

consolidator’s systems issues if such 

issues negatively impact its customers. 

The commenter also suggested that the 

Commission provide guidance for 

broker-dealers that compliance with 

rules dependent on the availability of 

accurate market data be assessed based 

on the data provided by a brokerdealer’s competing consolidator or 

received directly by a self-aggregator.918

Broker-dealers have obligations to 

their customers (e.g., a duty of best 

execution) as well as regulatory 

obligations (e.g., Rule 603(c), Rule 611, 

Regulation SHO). Broker-dealers need 

high quality data to satisfy their 

obligations. The choice of a competing 

consolidator will be relevant to a brokerdealer’s receipt of market data and 

therefore, a broker-dealer should assess, 

both upon its initial selection and on an 

ongoing basis, the quality of data 

received from a competing consolidator. 

The Commission believes that the 

selection of a competing consolidator 

can impact a broker-dealer’s services to 

its customers as well as the brokerdealer’s ability to comply with its 

regulatory obligations, such as 

providing best execution for its 

customers.919 Broker-dealers will need 

to conduct their own analysis and 

perform their own due diligence in 

choosing and periodically assessing 

competing consolidators that meet their 

regulatory needs and the needs of their 

customers. 

6. Comments on a Standardized 

Consolidation Process 

Two commenters recommended 

standardizing aspects of the operation of 

competing consolidators, including the 

consolidation process and the content 

and distribution mechanism, arguing 

that standardization could make it 

easier for subscribers to switch to other 

competing consolidators and provide 

consistency across data sets.920

The Commission is not standardizing 

the competing consolidator 

consolidation and dissemination 

processes. The Commission believes 

competing consolidators are in the best 

position to develop technical standards 

for themselves. Furthermore, the 

Commission believes that competing 

consolidators should have the flexibility 

to design the consolidation and delivery 

services that their subscribers need.921

7. Registration and Responsibilities of 

Competing Consolidators: Rule 614 

The Commission proposed Rule 614 

to require SIPs that wish to act as 

competing consolidators to register with 

the Commission and publicly disclose 

certain information about their 

organization, operations, and products. 

Under proposed Rule 614, competing 

consolidators would be subject to 

certain obligations and would be 

required to regularly publish certain 

performance statistics on a monthly 

basis on their respective websites. 

(a) Competing Consolidator Registration: 

Rule 614(a) 

(i) Rule 614(a)(1)(i): Proposal 

Proposed Rule 614(a)(1)(i) would 

prohibit any person, other than an SRO, 

from (A) receiving directly from a 

national securities exchange or national 

securities association information with 

respect to quotations for and 

transactions in NMS stocks; and (B) 

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 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18663 

922 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. 

923See Proposing Release, 85 FR at 16778. 

924NYSE Letter at 14; ACTIV Financial Letter at 

2–3; Nasdaq Letter II at 37. 

925WFE Letter at 1. See also MIAX Letter at 5. 

926See infra Section V.C.3. 

927The Form CC filing process is a notice-based 

registration process and is similar to other noticebased filing processes required by the Commission. 

See Securities Exchange Act Release No. 40760 

(Dec. 8, 1998), 63 FR 70844 (Dec. 22, 1998) 

(‘‘Regulation ATS Adopting Release’’). 

928 15 U.S.C. 78k–1. 

929See Proposing Release, 85 FR at 16778. 

930 15 U.S.C. 78k–1(b)(1). 

931See Section 3(b)(22)(B) of the Exchange Act for 

the definition of exclusive processor. 

932See Section 11A(b)(3). 

933See Section 11A(b)(3)(B). 

with the Commission an initial Form CC 

and the initial Form CC has become 

effective pursuant to proposed Rule 

614(a)(1)(v).922

(ii) Rule 614(a)(1)(i): Final Rule and 

Response to Comments 

The Commission is revising proposed 

Rule 614(a)(1)(i) to address a comment 

relating to market data vendors, as 

discussed below. Rule 614(a)(1)(i)(A), as 

adopted, will provide: ‘‘No person other 

than a national securities exchange or a 

national securities association . . . may 

receive directly, pursuant to an effective 

national market system plan, from a 

national securities exchange or national 

securities association information with 

respect to quotations for and 

transactions in NMS stocks’’ (addition 

in italics). This new language is 

intended to clarify the entities that will 

be required to register as a competing 

consolidator. 

The Commission requested comment 

on the proposed registration process, 

including whether competing 

consolidator registration should be 

subject to Commission approval and/or 

additional or different regulation.923

The Commission received several 

comments regarding proposed Rule 

614(a)(1)(i). A few commenters 

described the proposed registration 

process as ‘‘onerous,’’ ‘‘overly 

burdensome’’ and a ‘‘barrier to 

entry.’’ 924 However, other commenters 

supported the registration process and 

urged regulating competing 

consolidators ‘‘with the same rigor and 

governance applied to the SIP plans 

today.’’ 925

While the registration of competing 

consolidators is a new regulatory 

process that will be required of entities 

that may not be regulated today, as 

discussed below, the registration 

process is necessary and does not 

unduly burden potential competing 

consolidators. While there are costs and 

burdens associated with the registration 

process,926 the Commission believes 

that such costs and burdens are justified 

by the benefits of Commission oversight 

and the disclosure of competing 

consolidator operations for market 

participants. As discussed in the 

Proposing Release, the regulatory regime 

and responsibilities of competing 

consolidators are 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 through a 

relatively streamlined process that 

imposes appropriate burdens on entities 

likely to register as competing 

consolidators. The Commission 

designed the competing consolidator 

registration process to provide the 

Commission with information necessary 

for it to perform its regulatory oversight 

of these important market participants 

without imposing burdensome 

regulatory requirements on 

registrants.927

Further, the registration process for 

competing consolidators was designed 

to limit the burdens on competing 

consolidators, commensurate with their 

role. The competing consolidator regime 

is less burdensome than the registration 

process applicable for exclusive 

processors. As described in the 

Proposing Release, the registration 

process for exclusive processors is set 

forth in Section 11A of the Exchange 

Act 928 and requires the Commission to 

grant applications or institute 

proceeding to determine whether a 

registration should be denied.929 The 

Commission, however, proposed a more 

streamlined and limited process. As part 

of this process, the Commission will not 

approve Form CC and amendments to 

Form CC. Rather, the Commission is 

adopting a process in which a potential 

competing consolidator’s registration 

will become effective unless the 

Commission issues an order declaring 

its Form CC ineffective. The 

Commission believes that this 

registration process will allow potential 

competing consolidators to begin 

operating relatively quickly, while still 

allowing the Commission to review 

Form CC for non-compliance with 

Federal securities laws and the rules 

and regulations thereunder, and for 

material deficiencies with respect to 

accuracy, currency, or completeness. 

Section 11A(b)(1) of the Exchange 

Act 930 provides that a SIP not acting as 

the ‘‘exclusive processor’’ 931 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, a competing 

consolidator would not fall under the 

statutory definition of ‘‘exclusive 

processor.’’ Section 11A(b)(1) of the 

Exchange Act provides the Commission 

with authority to require the registration 

of a SIP not acting as an exclusive 

processor by rule or order. Under the 

adopted rules, competing consolidators 

will play a vital role in the national 

market system by collecting, 

consolidating, and disseminating 

consolidated market data. Because the 

availability of prompt, accurate, and 

reliable consolidated market data is 

essential to investors and other market 

participants, the Commission 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 Rule 

614. The Commission is thus exercising 

this authority by adopting Rule 614 to 

establish the process by which SIPs that 

wish to act as competing consolidators 

will 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, 

by order grant the application or 

institute proceedings to determine 

whether the registration should be 

denied.932 At the conclusion of the 

proceedings, the Commission must, by 

order, grant or deny the registration.933

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 exempt conditionally or 

unconditionally 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 

18664 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

934 15 U.S.C. 78k–1(b)(3). 

935Section 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. 

936See IDS Letter I at 3, 4; NYSE Letter II at 18. 

937See IDS Letter I at 3, 4. 

938See id. at 3. 

939See NYSE Letter II at 18. 

940See Proposing Release, 85 FR at 16770, n. 434. 

941This provision is also updated to reflect the 

new definition of consolidated market data product. 

See supra Section II.B. 

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 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 934 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 exclusive SIPs 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 

does not believe that this process for 

exclusive processors in necessary for 

competing consolidators. The 

Commission believes that the 

registration process in Rule 614 will 

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. The streamlined registration 

process is also designed to reduce 

regulatory burdens and encourage 

entities to register as competing 

consolidators. 

In addition, the Commission 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,935 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 competing consolidators 

will not engage in collecting, 

processing, or preparing data on an 

exclusive basis. Therefore, the 

Commission 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 

competing consolidators. The 

Commission believes that the 

decentralized consolidation model with 

multiple competing consolidators will 

reduce the likelihood that a subscriber 

will not be able to access consolidated 

market data. Subscribers will be able to 

obtain such data from another 

competing consolidator. Accordingly, 

the Commission believes that it will be 

consistent with the protection of 

investors and the public interest to 

exempt competing consolidators from 

Section 11A(b)(5) of the Exchange Act. 

(iii) Comments on Data Vendors 

Two commenters expressed concern 

that current market data vendors would 

have to register as competing 

consolidators to continue receiving 

consolidated market data directly from 

SROs.936 One of the commenters stated 

that proposed Rule 614(a)(1)(i) appeared 

to require market data vendors that 

generate and disseminate consolidated 

market data in NMS stocks based on 

information received directly from SROs 

to register as competing 

consolidators.937 The commenter 

further stated that the discussion of 

market data vendors in the Proposing 

Release created uncertainty regarding 

whether the Commission intended to 

require market data vendors to register 

as competing consolidators to continue 

engaging in their current businesses.938

The other commenter said the proposal 

stated that data vendors that want to 

continue to receive proprietary data that 

included data content underlying 

consolidated market data from an SRO 

would have to register as competing 

consolidators, or they would have to 

subscribe to a competing consolidator to 

purchase this data. The commenter said 

the price of this data could increase, 

causing a data vendor’s customer base to 

decrease.939

In the Proposing Release, the 

Commission stated that 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 self-aggregators 

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).940

The Commission agrees that Rule 

614(a)(1)(i), as proposed, could create 

uncertainty with respect to whether 

market data vendors would be able to 

continue their current businesses 

without being required to register as 

competing consolidators. Accordingly, 

the Commission is revising proposed 

Rule 614(a)(1)(i) to provide that no 

person, other than a national securities 

exchange or a national securities 

association, ‘‘[m]ay receive directly, 

pursuant to an effective national market 

system plan, from a national securities 

exchange or national securities 

association information with respect to 

quotations for and transactions in NMS 

stocks’’ and ‘‘[g]enerate consolidated 

market data products for dissemination 

to any person unless the person files 

with the Commission an initial Form CC 

and the initial Form CC has become 

effective pursuant to paragraph 

(a)(1)(v)’’ (italicized to show changes to 

the proposed language).941

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18665 

942See IDS Letter I at 5–6. 

943 Id. at 5. 

944See Effective-Upon-Filing Adopting Release, 

supra note 17. NMS Plan amendments are subject 

to Rule 608 of Regulation NMS, 17 CFR 242.608. 

945Sections 6(b)(4) and 15A(b)(5) of the Exchange 

Act require that the rules of a national securities 

exchange or national securities association provide 

for the equitable allocation of reasonable dues, fees, 

and other charges among its members and issuers 

and other persons using its facilities. 

946See Proposing Release, 85 FR at 16779, n. 537. 

947See Proposing Release, 85 FR at 16779, n. 537. 

948See IEX Letter at 8–9. 

949See NYSE Letter II at 17–18; IDS Letter I at 15– 

21. 

950See NYSE Letter II at 17–18; IDS Letter I at 19– 

21; MIAX Letter at 5. 

951See NYSE Letter II at 17–18. 

952See IDS Letter I at 21. Another commenter 

stated that disparate treatment of exchanges as 

competing consolidators violates the APA, 

explaining that exchanges acting as competing 

consolidators would be subject to Sections 6(b) and 

19(d) of the Exchange Act, while non-facility 

competing consolidators would not be subject to 

these requirements. The commenter stated that nonfacility competing consolidators would enjoy a 

‘‘significant competitive advantage over exchange 

competing consolidators by having greater pricing 

flexibility and not being subject to the denial of 

access process.’’ See Nasdaq Letter IV at 44. 

953See MIAX Letter at 5. The commenter also 

expressed concern that an exchange-operated 

competing consolidator with an unregulated 

affiliate that provides access and connectivity 

services could use the networks of the nonregulated affiliate to offer pricing discounts or other 

incentives to encourage market participants to 

purchase the competing consolidator’s consolidated 

market data. The commenter asserted that an 

affiliate of an exchange that provides access and 

connectivity to exchange systems is a facility of the 

exchange because it is a ‘‘system of communication 

to or from the exchange, by ticker or otherwise, 

maintained by or with the consent of the 

exchange.’’ Id. at 4. 

954See NYSE Letter II at 17; IDS Letter I at 17. 

955See IDS Letter I at 21. 

956See id. at 18. 

The Commission believes that 

adopted Rule 614(a)(1) makes clear that 

only entities that receive information 

with respect to quotations for and 

transactions in NMS stocks directly 

pursuant to an effective national market 

system plan from a national securities 

exchange or national securities 

association, and generate consolidated 

market data products for dissemination, 

will be required to register as competing 

consolidators. A market data vendor 

that purchases proprietary data feeds 

from an SRO or SROs, or that purchases 

data from a competing consolidator, and 

aggregates and disseminates such data 

to its customers, will not be required to 

register as a competing consolidator. 

However, vendors that do not register as 

competing consolidators would not be 

permitted to purchase the NMS 

information necessary to generate 

consolidated market data from the SROs 

at prices established by an effective 

national market system plan. 

The commenter also argued that the 

proposal fails to assess the cost of the 

proposed changes on market data 

vendors.942 The commenter’s primary 

concern with respect to the proposal’s 

potential costs to market data vendors 

arose from the assumption that market 

data vendors would be required to 

register as competing consolidators. As 

stated above, a market data vendor is 

not required to register as competing 

consolidator unless it wishes to 

purchase information with respect to 

quotations for and transactions in NMS 

stocks directly from a national securities 

exchange or national securities 

association pursuant to an effective 

national market system plan, and 

generate consolidated market data 

products for dissemination, i.e., act as 

competing consolidator. Accordingly, 

the adopted rules do not necessarily 

increase costs for market data vendors. 

The commenter further stated that the 

primary impact of the proposal on a 

market data vendor that does not 

register as a competing consolidator 

(and therefore does not purchase data 

directly from the SROs at prices 

established by the effective national 

market system plan(s)) would come 

from changes in the prices that the SROs 

charge for their proprietary data feeds, 

which the commenter describes as 

‘‘unregulated.’’ 943 The Commission 

acknowledges this assessment but 

clarifies that proprietary data fees are 

regulated, although such fees are not 

subject to this rulemaking nor are they 

subject to the same regulatory process 

that is used for effective national market 

system plan(s) fees.944 The exchanges 

are required to file all proposed fees for 

their proprietary data products with the 

Commission pursuant to Section 19(b) 

of the Exchange Act and Rule 19b–4 

thereunder and the proposed fees must 

satisfy the standards under the 

Exchange Act, including Section 6(b)(4) 

and Section 15A(b)(5).945

(iv) Comments on Competing 

Consolidators Affiliated With Exchanges 

In the Proposing Release, the 

Commission stated that because Section 

3(a)(22)(A) of the Exchange Act 

excludes SROs from the definition of 

SIP they would not have to register as 

a competing consolidator pursuant to 

proposed Rules 614(a) through (c) and 

proposed Form CC.946 The Commission 

stated that an SRO could either operate 

a competing consolidator under its SRO 

as a facility or could operate a 

competing consolidator in a separate 

affiliated entity, not as a facility of the 

SRO.947

Several commenters addressed this 

topic. One commenter, arguing that SRO 

obligations are not a substitute for the 

competing consolidator requirements, 

stated that an SRO or its affiliate that 

acts as a competing consolidator should 

be registered as such and should be 

subject to the same disclosure and other 

requirements as other competing 

consolidators.948

Two commenters questioned the 

proposal’s assumption that SROs or 

their affiliates would be willing to 

become competing consolidators.949

Three commenters stated that a 

competing consolidator that was a 

facility of a national securities exchange 

would be at a competitive disadvantage 

to competing consolidators that were 

not exchange facilities.950 One 

commenter noted that a competing 

consolidator that was not an exchange 

facility could change its products and 

their associated fees in response to 

competitive forces, while a competing 

consolidator that was a facility of an 

exchange would be required to file a 

proposed rule change with the 

Commission pursuant to Section 19(b) 

of the Exchange Act to make the same 

changes.951 Another commenter stated 

that the proposal established a two 

tiered system, with competing 

consolidators that are not affiliated with 

an exchange subject to the relatively 

streamlined Form CC regime and 

exchange facility competing 

consolidators subject to the more 

stringent framework, including the 19b– 

4 rule filing process.952 A third 

commenter suggested that to alleviate 

this disparity the Commission should 

subject both SROs and non-SROs that 

seek to become competing consolidators 

to the same regulatory standards by 

subjecting the Form CC, and any 

amendment thereto, to Commission 

review and approval.953

Two commenters also stated that the 

Proposal did not explain how a 

competing consolidator affiliated with 

an exchange could avoid being a facility 

of the exchange.954 One commenter 

stated that the absence of guidance with 

respect to when an affiliated competing 

consolidator would be a facility of an 

exchange substantially reduces the 

likelihood that entities affiliated with 

SROs would create competing 

consolidators.955 The commenter 

further asserted that the failure to 

address this important issue for 

potential competing consolidators made 

it impossible to comment adequately 

and comprehensively on the 

proposal.956 Another commenter stated 

that the Commission should consider 

issuing interpretive guidance to provide 

18666 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

957See McKay Brothers Letter at 2. 

958Section 3(a)(1) of the Exchange Act defines 

‘‘exchange’’ as any organization, association, or 

group of persons, whether incorporated or 

unincorporated, which constitutes, maintains, or 

provides a market place or facilities for bringing 

together purchasers and sellers of securities or for 

otherwise performing with respect to securities the 

functions commonly performed by a stock exchange 

as that term is generally understood, and includes 

the market place and the market facilities 

maintained by such exchange. 15 U.S.C. 78c(a)(1). 

See also 17 CFR 240.3b–16. 

959Section 3(a)(2) of the Exchange Act defines the 

term ‘‘facility’’ when used with respect to an 

exchange includes its premises, tangible or 

intangible property whether on the premises or not, 

any right to the use of such premises or property 

or any service thereof for the purpose of effecting 

or reporting a transaction on an exchange 

(including, among other things, any system of 

communication to or from the exchange, by ticker 

or otherwise, maintained by or with the consent of 

the exchange), and any right of the exchange to the 

use of any property or service. 15 U.S.C. 78c(a)(2). 

960See id. See also Securities Exchange Act 

Release No. 90209 (October 15, 2020), 85 FR 67044, 

67048 (October 21, 2020) (SR–NYSE–2020–05; SR– 

NYSE–2020–11 et al.) (‘‘NYSE Wireless Order’’). 

961See Securities Exchange Act Release No. 

76127 (October 9, 2015), 80 FR 62584, 62586 n. 9 

(October 16, 2015) (SR–NYSE–2015–36) (Order 

Approving Proposed Rule Change amending 

Section 907.00 of the Listed Company Manual). 

962Proposing Release, 85 FR at n. 537. 

963See NYSE Wireless Order, supra note 960, at 

67047. Cf. Securities Exchange Act Release No. 

40760 (Dec. 8, 1998), 63 FR 70844, 70852 (Dec. 22, 

1998) (‘‘Regulation ATS Adopting Release’’) 

(stating, in the context of entities providing trading 

systems that function as ATSs, that ‘‘[t]he 

Commission will attribute the activities of a trading 

facility to a system if that facility is offered by the 

system directly or indirectly (such as where a 

system arranges for a third party or parties to offer 

the trading facility). . . . In addition, if an 

organization arranges for separate entities to 

provide different pieces of a trading system . . . , 

the organization responsible for arranging the 

collective efforts will be deemed to have established 

a trading facility.’’). 

964A particular function provided by an 

organization, association, or group of persons, 

whether incorporated or unincorporated, may fall 

within the statutory definition of ‘‘exchange’’ when 

business activities performed across the group 

constitute part of that market place for bringing 

together purchasers and sellers. See NYSE Wireless 

Order, supra note 960, at 67047. An entity’s mere 

affiliation with an exchange, without more, is not 

solely determinative of whether a function is a 

facility of an exchange. See Securities Exchange Act 

Release No. 44983 (Oct. 25, 2001), 66 FR 55225 

(Nov. 1, 2001) (SR–PCX–00–25). 

965 15 U.S.C. 78mm(a)(1). 966Rule 603(b) requires a national securities 

exchange to provide its NMS information, including 

all data necessary to generate consolidated market 

data, to all competing consolidators and selfaggregators in the same manner and using the same 

methods, including all methods of access and the 

same format, as the national securities exchange 

makes available any information to its affiliated 

competing consolidator. 

967This condition is based on the particular risk, 

given the special position of exchanges in the 

market and the regulatory requirements applicable 

to exchanges, posed by allowing exchanges to link 

services and pricing with those of the competing 

consolidator. 

additional clarity around the definition 

of a facility of an exchange.957

The questions raised by commenters 

relate to the Commission’s application 

of the terms ‘‘exchange’’ and ‘‘facility’’ 

of an exchange, defined in Sections 

3(a)(1) and (2) of the Exchange Act, to 

the activities of competing consolidators 

affiliated with exchanges. Section 

3(a)(1) defines an ‘‘exchange’’ to include 

‘‘an organization, association, or group 

of persons, whether incorporated or 

unincorporated,’’ that maintains a 

‘‘market place’’ for ‘‘bringing together 

purchasers and sellers of securities.’’ 958

Section 3(a)(2) defines a ‘‘facility’’ of an 

exchange to include the exchange’s 

premises, tangible or intangible property 

whether on the premises or not, or any 

right to the use of such premises or 

property or any service thereof for the 

purpose of effecting or reporting a 

transaction on an exchange.959 Section 

3(a)(2) specifically includes services 

such as systems of communication to or 

from the exchange.960 The Commission 

has observed that the determination of 

whether a service is a facility of an 

exchange requires an analysis of the 

particular facts and circumstances.961

In the Proposing Release, the 

Commission stated that an exchange 

could choose whether to operate a 

competing consolidator (1) as a facility 

of the exchange, or (2) as a separate 

affiliate, not as a facility, registered as a 

competing consolidator.962 The 

application of the definition of 

‘‘facility’’ of an exchange does not turn 

on which particular entity directly 

holds a particular asset, including the 

national securities exchange license.963

Accordingly, whether a competing 

consolidator affiliated with a national 

securities exchange is a facility of that 

exchange does not depend solely on 

corporate structure, but rather on a 

facts-and-circumstances analysis of the 

functions provided by the affiliated 

competing consolidator and its 

relationship with the exchange.964

The Commission would expect that 

the activities of a competing 

consolidator affiliated with a national 

securities exchange would be likely to 

fall within the statutory definitions. The 

Commission also understands that the 

facts and circumstances with respect to 

each exchange and competing 

consolidator relationship may be 

different, including that there are 

different corporate structures under 

which an exchange could operate a 

competing consolidator. Therefore, to 

address the concerns raised by 

commenters and to foster a level 

competitive playing field for competing 

consolidators that are facilities of an 

exchange, the Commission believes that 

an exemption from certain regulatory 

requirements, subject to the conditions 

set forth below, would be appropriate in 

the public interest and consistent with 

the protection of investors. 

Section 36(a)(1) of the Exchange Act 

authorizes the Commission, subject to 

certain limitations, to conditionally or 

unconditionally exempt any person, 

security, or transaction, or any class 

thereof, from any provision of the 

Exchange Act or rule thereunder, if 

necessary or appropriate in the public 

interest and consistent with the 

protection of investors.965 The limited 

exemption would exempt a national 

securities exchange with respect to its 

competing consolidator activities from 

(i) the rule filing requirements in 

Section 19(b)(1) of the Exchange Act 

and Rule 19b–4 thereunder, (ii) the 

denial of access provisions in Section 

19(d) of the Exchange Act, (iii) the 

requirements in Section 6(b) of the 

Exchange Act; and (iv) the requirements 

in Regulation SCI applicable to SCI 

SROs (unless the competing 

consolidator is otherwise subject to 

Regulation SCI as Regulation SCI would 

be applied to a competing consolidator). 

As a condition of the exemptive relief, 

the competing consolidator must be 

registered under Rule 614 and be in 

compliance with all regulatory 

requirements applicable to competing 

consolidators under Rule 614, including 

the requirement to file Form CC. To 

promote a level playing field, and as 

required by Rule 603(b), the national 

securities exchange must not provide 

any latency, content, connectivity, cost 

or other competitive advantages with 

respect to the provision of the content 

underlying the consolidated market data 

to the affiliated competing 

consolidator.966 As a further condition 

of the exemption, and to ensure that the 

national securities exchange does not 

leverage exchange products and services 

to establish an unfair competitive 

advantage, a national securities 

exchange would not be permitted to link 

the pricing for or condition availability 

for services of the affiliated competing 

consolidator to any products or services 

of the exchange, including transactions, 

connectivity and data.967

Such limited exemptive relief is 

appropriate and in the public interest to 

foster the successful implementation of 

the decentralized consolidation model. 

The limited exemptive relief is designed 

to help foster a competitive 

environment premised on a level 

regulatory playing field. In particular, it 

will facilitate the entry of competing 

consolidators that are affiliated with 

national securities exchanges into the 

market for the consolidation and 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18667 

968 17 CFR 240.19b–4. Section 19(b)(1) of the 

Exchange Act defines a ‘‘proposed rule change’’ as 

‘‘any proposed rule, or any proposed change in, 

addition to, or deletion from the rules of’’ a selfregulatory organization. 15 U.S.C. 78s(b)(1). 

969See IDS Letter I at 21 and Nasdaq Letter IV at 

44 (comments discussed supra note 952). 

970See MIAX Letter at 2; Healthy Markets Letter 

II at 2. 

971See id. 972See MIAX Letter at 2. The commenter 

recommended that the Commission do the 

following: ‘‘set forth reasonable minimum 

bandwidth requirements for Competing 

Consolidators to ensure that conflation does not 

occur due to capacity constraints, including during 

times of increased market volatility; set forth 

minimum performance requirements for Competing 

Consolidators that allow for a reasonable amount of 

conflation; require all Competing Consolidators to 

utilize the same transport protocols (i.e., Multicast) 

when transmitting data to market participants; 

likewise require that each national securities 

exchange utilize these same transfer protocols when 

transmitting core data to a Competing Consolidator; 

and require each national securities exchange to 

sequence the message fields in the same manner 

when transmitting their core data to a Competing 

Consolidator or via their proprietary data products, 

with any supplemental information (i.e., data 

regarding exchange specific programs) sequenced 

behind core data.’’ See MIAX Letter at 2. 

973See infra Section III.F. 

974See supra notes 104–105 and accompanying 

text. 

975See supra note 90 and accompanying text. 

dissemination of consolidated market 

data products thereby increasing 

competition for those services as 

contemplated by the decentralized 

consolidation model. This exemptive 

relief will not place any burdens on, or 

otherwise disadvantage, non-affiliated 

competing consolidators. 

The limited exemptive relief is also 

consistent with the protection of 

investors. Rule 19b–4 requires an SRO 

to file a proposed rule change with 

respect to any ‘‘material aspect’’ of the 

operation of its facilities that is then 

subject to Commission review and 

approval.968 Section 6(b), among other 

things, requires the rules of an exchange 

to provide for equitable allocation of 

reasonable fees, not permit unfair 

discrimination between customers, and 

not impose any unnecessary or 

inappropriate burden on commerce. 

Section 19(d) of the Exchange Act, 

among other things, limits the denial of 

access to SRO services. The registration, 

disclosure and other regulatory 

requirements for competing 

consolidators in Rule 614 and Form CC, 

including the potential that such forms 

could be declared ineffective and the 

requirement to make consolidated 

market data products available to 

subscribers on terms that are not 

unreasonably discriminatory, help 

ensure appropriate transparency and 

oversight for the protection of investors. 

In addition, competing consolidators 

that are affiliated with national 

securities exchanges that elect the 

exemption will be subject to the same 

Regulation SCI requirements applicable 

to other competing consolidators, which 

will help ensure systems integrity, 

reliability, and resiliency to protect the 

interests of investors. 

This exemptive relief will promote a 

level playing field among the various 

types of competing consolidators. The 

exemptive relief and the conditions for 

that relief serve to subject competing 

consolidators that are affiliated with a 

national securities exchange to the same 

regulatory framework that applies to 

other competing consolidators to 

eliminate competitive advantages and 

foster a competitive environment for all 

competing consolidators. This 

exemptive relief thus addresses the 

concerns raised by commenters that 

competing consolidators that are 

affiliated with a national securities 

exchange will be at a disadvantage to 

other competing consolidators.969

The Commission intends to monitor 

the activities of all registered competing 

consolidators, including those that are 

affiliated with a national securities 

exchange, through the notification and 

filing requirements in Rule 614 and 

Form CC, and other requirements 

applicable to competing consolidators. 

In addition, the Commission will 

monitor the activities of competing 

consolidators that are facilities of an 

exchange through its examinations of 

both the national securities exchange 

and the competing consolidator. 

This exemptive relief is limited to the 

regulatory requirements described 

above. The Commission will consider 

requests for additional exemptive relief 

from specific regulatory provisions to 

address any remaining concerns about 

creating and maintaining an equal 

playing field. The Commission will 

consider such requests based on the 

particular facts and circumstances at 

hand, and grant such a request if 

necessary or appropriate in the public 

interest and consistent with the 

protection of investors. This limited 

exemptive relief does not affect any 

regulatory obligations that apply to any 

other functions, products or services 

provided by exchanges or facilities 

thereof, including the provision, 

distribution and transport of proprietary 

market data feeds and other market data, 

communication systems that convey 

order information to and from the 

exchange, or connectivity to those 

communication systems. 

(v) Minimum Standards for Competing 

Consolidators 

Two commenters recommended that 

the Commission establish uniform 

baseline standards that all competing 

consolidators would be required to meet 

continuously to avoid possible 

‘‘conflation,’’ which, according to the 

commenters, may occur when an 

exchange or other market participant 

provides only its most-recent quote or 

trade to the SIPs and skips or removes 

prior quotes due to system capacity 

constraints or by purposefully shaping 

bandwidth to remain below certain 

capacity thresholds.970 The commenters 

stated that the absence of uniform 

standards could allow a competing 

consolidator to offer a lower-cost 

product that would often be conflated 

and incomplete and that could conceal 

potential abuses.971 One commenter 

identified minimum standards that it 

believed the Commission should require 

a competing consolidator to satisfy.972

Rule 614(d) requires each competing 

consolidator to calculate and generate 

consolidated market data products and 

make consolidated market data products 

available to its subscribers. This means 

that competing consolidators must be 

able to accept all of the data content that 

encompasses the consolidated market 

data products they offer. In addition, 

competing consolidators will be subject 

to operational capability, systems 

integrity, and resiliency obligations,973

and Rule 614(d)(5) requires each 

competing consolidator to publish 

certain system performance metrics on 

its website each month. As stated 

above,974 these disclosures should help 

to facilitate a broker-dealer’s ability to 

achieve and analyze best execution 

because they provide information 

regarding the timeliness, completeness, 

and accuracy of the market data offered 

by competing consolidators.975 These 

disclosures also provide statistics on 

capacity, network delay and latency, 

offering additional insight into the 

technical capabilities and expected 

performance of a competing 

consolidator. This information will 

assist a broker-dealer in selecting an 

appropriate competing consolidator, 

which in turn impacts the brokerdealer’s ability to obtain ‘‘the most 

favorable terms reasonably available 

under the circumstances’’ for its 

customer orders. The Commission 

believes that these requirements will 

help to ensure that competing 

consolidators have adequate system 

capacity to meet the needs of different 

types of subscribers and will ensure an 

accurate record of quotes and trades for 

18668 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

976The Commission will monitor the 

performance of competing consolidators, including 

whether there is a need to establish minimum 

standards for competing consolidators. 977MIAX Letter at 2–3. 978 Id. at 3. 979 If the Participants determine that the effective 

national market system plan(s) needs to be 

amended for this purpose, such amendment would 

have to be filed with the Commission pursuant to 

Rule 608 of Regulation NMS. 

980See Securities Exchange Act Release No. 

50486 (Oct. 4, 2004), 69 FR 60287 (Oct. 8, 2004) 

(adopting EFFS for use in filing Form 19b–4). 981See Data Boiler Letter I at 50. 982See 17 CFR 242.1006 (Rule 1006) of 

Regulation SCI (relating to electronic filing and 

submission). 

983See infra Section V.C.3(a). 984See also proposed Rule 17 CFR 

242.614(a)(1)(iv)(B) (Rule 614(a)(1)(iv)(B)). 

985See Proposing Release, 85 FR at 16779. 

subscribers. Accordingly, the 

Commission does not believe that it is 

necessary, at this time, to mandate 

minimum capacity or other minimum 

standards for competing 

consolidators.976

(vi) Potential Advantage of Incumbent 

Exclusive SIPs 

One commenter asserted that the 

incumbent exclusive SIPs would have a 

significant advantage over other entities 

seeking to become competing 

consolidators because they could use 

their existing infrastructure to operate a 

competing consolidator that could 

charge lower fees than new entrants 

because they would not incur the 

upfront capital expenditures required to 

build a competing consolidator.977 The 

commenter suggested that the 

Commission consider ways to require 

the incumbent exclusive SIPs to 

reimburse each Plan’s Participants their 

proportionate share of their costs paid 

and used to build and support each 

exclusive SIP’s systems as a means to 

allowing each exclusive SIP to purchase 

its existing infrastructure to use to act as 

a competing consolidator.978

Any determinations regarding 

payments to Participants or the 

disposition of the assets of the exclusive 

SIPs would be made by the Participants 

of the Equity Data Plans.979 If the 

operators of the exclusive SIPs (i.e., 

SIAC and Nasdaq) decide to become 

competing consolidators and to operate 

their competing consolidator business 

using existing infrastructure of the 

exclusive SIPs, the Commission does 

not believe that they will have a 

significant advantage over other 

potential competing consolidators. The 

current operators of the exclusive SIPs 

would need to reach an agreement with 

the Participants of the Equity Data Plans 

regarding the disposition of the assets of 

the exclusive SIPs and would need to 

modify existing systems to produce 

consolidated market data products, 

which as described above, may contain 

more information than what the 

exclusive SIPs currently provide as SIP 

data. In addition, the exclusive SIPs will 

have to make changes to their systems 

to accommodate the changes to 

regulatory data. The exclusive SIPs also 

might find it necessary to upgrade the 

performance of the existing systems to 

compete effectively against market data 

vendors that currently utilize superior 

technology and may register to become 

competing consolidators. 

(b) Rule 614(a)(1)(ii): Electronic Filing 

and Submission 

(i) Proposal 

Proposed Rule 614(a)(1)(ii) would 

require any reports required under new 

Rule 614 to be filed electronically on 

Form CC, include all of the information 

as prescribed in Form CC and the 

instructions to Form CC, and contain an 

electronic signature. The proposal 

contemplated the use of an online filing 

system through which competing 

consolidators would file a completed 

Form CC. The system, known as the 

electronic form filing system (‘‘EFFS’’), 

is used by SROs to file proposed rules 

and rule changes and by SCI entities to 

file Forms SCI.980 Other potential 

methods of electronic filing of Form CC 

were also described, including the use 

of secure file transfer through 

specialized electronic mailbox or 

through the Electronic, Data Gathering, 

Analysis and Retrieval (‘‘EDGAR’’) 

system, or directly through SEC.gov via 

a simple HTML form. 

(ii) Final Rule and Response to 

Comments 

The Commission requested comment 

on the electronic filing requirement and 

asked whether EFFS or another system 

would be efficient for purposes of filing 

Form CC. One commenter supported the 

use of EFFS.981 The Commission 

believes that an electronic filing process 

is efficient and cost effective. The 

Commission has used EFFS for many 

years for proposed SRO rules and rule 

changes filed pursuant to Section 19(b) 

of the Exchange Act and Rule 19b–4 

thereunder, as well as Regulation SCI 

and the Commission believes that this 

system will be appropriate for 

registering competing consolidators. 

Further, the Commission believes that it 

will be easier and cost effective for 

competing consolidators and the 

Commission to use one system for 

competing consolidator filings. 

Competing consolidators that are SCI 

entities will have to submit filings 

pursuant to Regulation SCI via EFFS.982

Therefore, for those competing 

consolidators it would be easier and 

cost effective to use one filing system to 

submit filings with the Commission.983

The use of EFFS for all competing 

consolidators’ filings will also be cost 

effective for the Commission. 

(c) Rule 614(a)(1)(iii): Commission 

Review Period 

(i) Proposal 

Proposed Rule 614(a)(1)(iii) would 

provide that the Commission may, by 

order, declare an initial Form CC filed 

by a competing consolidator ineffective 

no later than 90 calendar days from 

filing with the Commission.984 The 

Commission believed that 90 calendar 

days would provide the Commission 

with adequate time to carry out its 

oversight functions with respect to its 

review of an initial Form CC, including 

its responsibilities to protect investors 

and maintain fair, orderly, and efficient 

markets.985

(ii) Final Rule and Response to 

Comments 

The Commission did not receive any 

comments on this proposed rule. The 

Commission believes that the review 

period provides adequate time for the 

Commission to evaluate an initial Form 

CC. Therefore, the Commission is 

adopting the rule as proposed. 

(d) Rule 614(a)(1)(iv): Withdrawal of 

Initial Form CC 

(i) Proposal 

Proposed Rule 614(a)(1)(iv) would 

require a competing consolidator to 

withdraw an initial Form CC that has 

not become effective if any information 

disclosed in the initial Form CC is or 

becomes inaccurate or incomplete. The 

competing consolidator would be able 

to refile an initial Form CC pursuant to 

proposed Rule 614(a)(1). 

(ii) Final Rule and Response to 

Comments 

The Commission did not receive any 

comments on this proposed rule. The 

Commission believes that competing 

consolidators should withdraw an 

initial Form CC that becomes inaccurate 

or incomplete to ensure that the 

Commission’s review is based upon 

complete and accurate information. 

Therefore, the Commission is adopting 

the rule as proposed. 

(e) Rule 614(a)(1)(v): Effectiveness; 

Ineffectiveness Determination 

(i) Proposal 

Proposed Rule 614(a)(1)(v)(A) would 

provide that an initial Form CC would 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18669 

986See Proposing Release, 85 FR at 16780. 

987See Data Boiler Letter I at 50. 

988See proposed Rules 614(a)(1)(i) and (a)(2)(i) 

and (ii). 

989See IDS Letter I at 10. 

990See id. 

991See NovaSparks Letter at 2. 

992See id. 

993See id. 

994See Data Boiler Letter I at 51. 

become effective, unless declared 

ineffective, no later than the expiration 

of the review period provided in 

paragraph (a)(1)(iii) and upon 

publication of the initial Form CC 

pursuant to proposed Rule 614(b)(2)(i). 

Proposed Rule 614(a)(1)(v)(B) would 

provide that the Commission would 

declare ineffective an initial Form CC if 

it finds, after notice and opportunity for 

hearing, that such action is necessary or 

appropriate in the public interest and is 

consistent with the protection of 

investors. 

(ii) Final Rule and Response to 

Comments 

The Commission requested comment 

on whether the proposal to allow an 

initial Form CC to become effective by 

operation of the rule without a 

Commission issuing an order would 

provide sufficient notice that an initial 

Form CC has become effective.986 One 

commenter stated, without more, that 

‘‘an official order would be nice to 

have.’’ 987

The Commission is adopting Rule 

614(a)(1)(v) as proposed. The 

Commission believes that if it finds, 

after notice and opportunity for hearing, 

that one or more disclosures reveal 

noncompliance with Federal securities 

laws or the rules or regulations 

thereunder, an initial Form CC should 

be declared ineffective. The 

Commission will make such a 

declaration if it finds, for example, that 

one or more disclosures on the initial 

Form CC were materially deficient with 

respect to their accuracy, currency, or 

completeness. If the Commission 

declares an initial Form CC ineffective, 

the applicant will be prohibited from 

operating as a competing consolidator, 

but will be able to file a new Form CC 

to address any disclosure deficiencies or 

other issues that caused the initial Form 

CC to be declared ineffective. 

While one commenter suggested 

without articulating a reason that the 

Commission issue an order declaring a 

Form CC effective, the Commission does 

not believe that such an order is 

necessary in this context because all 

effective Form CCs will be published by 

the Commission on the Commission’s 

website, which will provide notice to 

market participants that a competing 

consolidator has an effective Form CC 

and is permitted to operate. 

(f) Rule 614(a)(2): Form CC 

Amendments 

(i) Proposal 

Proposed Rule 614(a)(2) would 

provide the requirements for amending 

an effective Form CC. Proposed Rule 

614(a)(2)(i) would require a competing 

consolidator to amend an effective Form 

CC in accordance with the instructions 

therein: (i) Prior to the date of 

implementation of a material change to 

the pricing, connectivity, or products 

offered (a ‘‘Material Amendment’’); and 

(ii) no later than 30 calendar days after 

the end of each calendar year to correct 

information, whether material or 

immaterial, that has become inaccurate 

or incomplete for any reason (‘‘Annual 

Report’’) (each a ‘‘Form CC 

Amendment’’).988

(ii) Final Rule 614(a)(2) and Response to 

Comments 

The Commission received several 

comments regarding proposed Rule 

614(a)(2). One commenter questioned 

how far ahead of implementing a new 

service or fee a competing consolidator 

would be required to file a Form CC 

amendment.989 The commenter also 

questioned whether the Commission or 

its staff could object to a new service or 

fee.990

One commenter stated that the 

requirement to file a Material 

Amendment, along with information 

relating to operational capability, 

market data products fees, co-location, 

and related services, would reduce the 

variety of products offered.991 The 

commenter asserted that this 

information would change frequently as 

a competing consolidator improved and 

modified its services to meet the needs 

of different customers.992 The 

commenter further stated that market 

participants would find other ways to 

select competing consolidators, making 

it unnecessary to report this information 

publicly.993 One commenter raised no 

objection to the proposed requirement 

to prepare an Annual Report because 

interested persons may be interested in 

learning about changes in ownership.994

The Commission is adopting Rule 

614(a)(2) as proposed. The Commission 

acknowledges the commenter’s concern 

that the requirement to file a Material 

Amendment, along with information 

relating to operational capability, 

market data products fees, co-location, 

and related services, could reduce the 

variety of products offered. However, 

the Commission believes that the 

required Form CC amendments, 

including Material Amendments and 

Annual Reports, and the process by 

which they are filed, properly balances 

this concern with the need to provide 

market participants with necessary 

information regarding a competing 

consolidator’s organization, operational 

capability, consolidated market data 

products, fees, and co-location and 

related services to determine whether to 

subscribe, or continue subscribing, to a 

competing consolidator. As required by 

Rule 614(a)(2)(i), a competing 

consolidator must file a Material 

Amendment, which is defined as a 

material change to the pricing, 

connectivity, or products offered, prior 

to such change’s implementation. The 

Commission will review all Form CC 

amendments for completeness, clarity, 

and conformance with the requirements 

of Rule 614 and Form CC. The 

instructions to Form CC state that an 

incomplete or deficient filing may be 

returned to the competing consolidator 

and any filing so returned will be 

deemed not to have been filed with the 

Commission. However, the Commission 

will not affirmatively approve 

amendments to Form CC, including 

Material Amendments, which should 

streamline the process. Although some 

competing consolidators may frequently 

file amendments to Form CC to respond 

to subscriber demand, these 

amendments would not be subject to 

Commission approval before 

effectiveness. 

The information in Form CC 

amendments will assist market 

participants in evaluating which 

products and services of the competing 

consolidator will be most useful to 

them. This information is also designed 

to ensure that the Commission has 

specified information regarding entities 

acting as competing consolidators, to 

facilitate the Commission’s oversight of 

competing consolidators, and help to 

ensure the resiliency of a competing 

consolidator’s systems. Given these 

intended uses, the Commission believes 

that it is important for a competing 

consolidator to be required to maintain 

an accurate, current, and complete Form 

CC. 

The Commission disagrees with the 

commenter’s assertion that it is 

unnecessary to make the information 

required in the initial Form CC and in 

Material Amendments publicly 

available. The information reported in 

the initial Form CC and in Material 

Amendments will help to ensure that all 

18670 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

995See Data Boiler Letter I at 51. 

996Rule 614(a)(3), as adopted, will provide: 

Notice of cessation. A competing consolidator shall 

notice its cessation of operations on Form CC at 

least 90 calendar days prior to the date the 

competing consolidator will cease to operate as a 

competing consolidator. The notice of cessation 

shall cause the Form CC to become ineffective on 

the date designated by the competing consolidator. 

997See Rule 19b–4(b)(2), 17 CFR 240.19b–4(b)(2). 

Proposed Rule 614(a)(ii) provided that if the 

conditions of proposed Rule 614 and proposed 

Form CC are otherwise satisfied, all filings 

submitted electronically on or before 5:30 p.m. 

Eastern Standard Time or Eastern Daylight Saving 

Time, whichever is currently in effect, on a 

business day, shall be deemed filed on that business 

day, and all filings submitted after 5:30 p.m. Eastern 

Standard Time or Eastern Daylight Saving Time, 

whichever is currently in effect, shall be deemed 

filed on the next business day. 

998See Data Boiler Letter I at 52. 

999See Adopted Rule 614(b)(2). 

1000See infra Section III.H.2 for a discussion of 

the transition period. 

market participants have access to the 

same information regarding competing 

consolidators, the products and services 

they offer, and the fees for those 

products and services, and that that 

information remains current. Although 

the filing of Form CC and Material 

Amendments will create an 

administrative requirement for 

competing consolidators, the 

Commission does not believe that these 

filing requirements will unduly limit 

the products that a competing 

consolidator is able to offer. 

(g) Rule 614(a)(3): Notice of Cessation 

(i) Proposal 

Proposed Rule 614(a)(3) required a 

competing consolidator to file notice of 

its cessation of operations on Form CC 

at least 30 business days before the date 

the competing consolidator ceases to 

operate as a competing consolidator. 

The notice of cessation will cause the 

Form CC to become ineffective on the 

date designated by the competing 

consolidator. 

(ii) Final Rule 614(a)(3) and Response to 

Comments 

The Commission received one 

comment regarding proposed Rule 

614(a)(3), which stated that the 30-day 

time period in proposed Rule 614(a)(3) 

was too long and that 15 days would 

provide sufficient time for a brokerdealer to switch to a different service 

provider.995

The Commission is revising proposed 

Rule 614(a)(3) to require a competing 

consolidator to provide 90 calendar 

days’ notice of its cessation of 

operations.996 The Commission believes 

that 90 calendar days’ notice will help 

to ensure that the subscribers of a 

competing consolidator that ceases 

operations will have adequate time to 

identify and transition to a new 

competing consolidator, including 

making any necessary systems changes 

and establishing connectivity to the new 

market data provider. While one 

commenter stated that firms would only 

need 15 days to switch to a new 

competing consolidator, the 

Commission believes that firms will 

likely need more time to switch 

effectively to another competing 

consolidator. As discussed above, 

competing consolidators may generate 

different consolidated market data 

products and use different formats. 

Firms will likely need to make systems 

changes and perform testing of a new 

competing consolidator if the competing 

consolidator they use decides to cease 

operations. The Commission believes 

that firms should be provided with 

sufficient time to make necessary 

systems changes and conduct 

performance testing before losing the 

services of a competing consolidator so 

that they are able to have continuity of 

consolidated market data services. 

(h) Rule 614(a)(4): Date of Filing 

(i) Proposal 

The Commission proposed to define 

‘‘business day’’ for purposes of 

proposed Rule 614 to comport with 

provisions contained in Rule 19b–4 and 

to specify the conditions under which 

filings required pursuant to proposed 

Rule 614 are deemed to have been made 

on a particular business day. 

Specifically, the Commission proposed 

to define ‘‘business day’’ in the same 

manner in which it is defined in Rule 

19b–4(b)(2).997

(ii) Final Rule and Response to 

Comments 

The Commission did not receive any 

comments on proposed Rule 614(a)(4). 

The Commission is adopting the rule as 

proposed. The Commission believes that 

the provisions providing a date-offilings standard would facilitate the 

ability of competing consolidators to 

comply with the requirements of Rule 

614 and facilitate the ability of the 

Commission to effectively receive, 

review, and make public the filings 

required under Rule 614. 

(i) Rule 614(b): Public Disclosures 

(i) Proposal 

Proposed Rule 614(b) would require 

the publication of all Form CC reports 

and other information filed by 

competing consolidators. Proposed Rule 

614(b)(1) stated that every Form CC filed 

pursuant to Rule 614 shall constitute a 

‘‘report’’ within the meaning of sections 

11A, 17(a), 18(a), and 32(a) of the 

Exchange Act (15 U.S.C. 78k–1, 78q(a), 

78r(a), and 78ff(a)), and any other 

applicable provisions of the Exchange 

Act. Proposed Rule 614(b)(2) stated that 

the Commission would publish on its 

website each (1) effective initial Form 

CC, as amended; (2) order of ineffective 

initial Form CC; (3) Form CC 

amendment no later than 30 calendar 

days from the date of filing thereof; and 

(4) notice of cessation. 

(ii) Final Rule and Response to 

Comments 

The Commission requested comment 

on proposed Rule 614(b). One 

commenter stated without more that it 

had ‘‘no objection’’ to the publication of 

the Form CC on the Commission’s 

website.998 The Commission is adopting 

this provision as proposed but with one 

addition to the items that will be 

published by the Commission on its 

website pursuant to Rule 614(b)(2). 

Specifically, the Commission will 

publish on its website a list of the 

names of each potential competing 

consolidator that files with the 

Commission an initial Form CC and the 

date of filing.999 This list would be 

updated upon each filing of an initial 

Form CC by a potential competing 

consolidator. The Commission believes 

that publishing a regularly updated list 

of potential competing consolidators 

that have filed to register with the 

Commission may encourage other 

potential competing consolidators to 

register for the ‘‘first wave’’ of the 

transition period.1000 The Commission 

believes that making the information 

detailed in Rule 614(b) available will 

assist market participants in evaluating 

a particular competing consolidator as a 

potential source of consolidated market 

data, as well as motivate potential 

competing consolidators to enter the 

market by signaling interest in the 

market. 

(j) Rule 614(c): Posting of Hyperlink to 

the Commission’s Website 

(i) Proposal 

Proposed Rule 614(c) would require 

each competing consolidator to make 

public via posting on its website a direct 

URL hyperlink to the Commission’s 

website that contains each (1) effective 

initial Form CC, as amended; (2) order 

of ineffective initial Form CC; (3) Form 

CC amendment no later than 30 

calendar days from the date of filing 

thereof; and (4) notice of cessation (if 

applicable). 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18671 

1001See Data Boiler Letter I at 52. 

1002The Commission notes that Rule 614(c) is 

being updated to reflect a change to the numbering 

of Rule 614(b)(2). The requirements of Rule 614(c) 

are not changing and are adopted as proposed. 

1003See Proposing Release, 85 FR at 16782. 

1004See Clearpool Letter at 7; Data Boiler Letter 

I at 52; IDS Letter I at 10–11. 

1005See Clearpool Letter at 7. 

1006 Data Boiler Letter I at 52. This commenter 

also suggested that only a single competing 

consolidator should be obligated to provide a 

consolidated market data product, not all 

competing consolidators. See supra Section 

III.C.1(b). 

1007 IDS Letter I at 11. 

1008The commenter said that data vendors are 

currently not held to an ‘‘unreasonably 

discriminatory’’ standard. Because the commenter 

believed the Commission did not explain how it 

would apply this standard, the commenter said that 

commenters cannot assess the standard’s burden on 

potential competing consolidators, including data 

vendors. Id. at 10. 

1009 Id. at 10–11. 

1010See supra Section II.B.2; see also supra 

Section III.C.1(b). The Commission is adopting a 

definition for ‘‘consolidated market data product’’ 

in Rule 600(b)(20). 

1011See Data Boiler Letter I at 52. 

(ii) Final Rule and Response to 

Comments 

The Commission received one 

comment on proposed Rule 614(c) from 

a commenter who stated that it did not 

oppose the proposal.1001 The 

Commission is adopting this provision 

as proposed.1002 The Commission 

believes that this requirement will make 

it easier for market participants to 

review a competing consolidator’s Form 

CC filings. This provision provides an 

additional means for market 

participants to locate Form CC filings 

that are posted on the Commission’s 

website. 

8. Responsibilities of a Competing 

Consolidator 

The Commission proposed Rule 

614(d) to establish the responsibilities 

applicable to all competing 

consolidators, including competing 

consolidators that are affiliated with 

SROs and those that are not, under the 

decentralized consolidation model. 

Under proposed Rule 614(d), all 

competing consolidators would be 

required to perform many of the 

obligations currently performed by the 

existing exclusive SIPs. Proposed Rule 

614(d) also would require all competing 

consolidators to disclose performance 

metrics and other information that 

would facilitate Commission oversight 

of competing consolidators and assist 

market participants in evaluating and 

choosing competing consolidators. 

(a) Rules 614(d)(1) Through (3): 

Collection, Calculation, and 

Dissemination of Consolidated Market 

Data 

(i) Proposal 

Proposed Rules 614(d)(1) through (3) 

would require competing consolidators 

to collect, consolidate, and disseminate 

consolidated market data. Proposed 

Rule 614(d)(1) would require each 

competing consolidator to collect from 

each national securities exchange and 

national securities association, either 

directly or indirectly, the information 

with respect to quotations for and 

transactions in NMS stocks as provided 

in Rule 603(b). Proposed Rule 614(d)(2) 

would require each competing 

consolidator to calculate and generate 

consolidated market data, as defined in 

proposed Rule 600(b)(19), from the 

information collected in proposed Rule 

614(d)(1). This proposed rule would 

require competing consolidators to 

develop a complete consolidated market 

data product that contained all of the 

data elements specified in the proposed 

definition of consolidated market 

data.1003 Proposed Rule 614(d)(3) would 

require competing consolidators to 

make the proposed consolidated market 

data available to subscribers on a 

consolidated basis and on terms that are 

not unreasonably discriminatory, with 

the timestamps required by proposed 

Rules 614(d)(4) and (e)(1)(ii), as 

discussed below. 

(ii) Final Rule and Response to 

Comments 

The Commission received several 

comments regarding proposed Rules 

614(d)(1) through (3).1004 One 

commenter strongly supported requiring 

competing consolidators to be subject to 

appropriate standards, such as 

providing fair access to market 

participants.1005 Two commenters 

criticized the proposed rules. One 

commenter stated that incorporating 

aggregated odd-lot quotes into the 

NBBO calculation would cause 

confusion and suggested instead that the 

NBBO be based on exchange BBOs ‘‘to 

minimize any calculation or 

interference/influences’’ by competing 

consolidators.1006 With respect to 

proposed Rule 614(d)(2), one 

commenter said that because the 

Commission did not define what it 

meant by ‘‘generate’’ proposed 

consolidated market data, it was unclear 

what types of activity would warrant 

registration by competing 

consolidators.1007 The commenter also 

argued that the Commission did not 

describe the meaning of ‘‘unreasonably 

discriminatory’’ in proposed Rule 

614(d)(3),1008 the consequences for 

competing consolidators that make data 

available on an unreasonably 

discriminatory basis, the ‘‘costs of the 

mechanisms and consequences for 

application and enforcement of the 

unreasonably discriminatory 

requirement for both the relevant 

competing consolidator and its clients,’’ 

and whether agreements between a 

competing consolidator and its 

subscribers that limit the competing 

consolidator’s liability would be 

deemed ‘‘unreasonably 

discriminatory.’’ 1009

As discussed above,1010 the 

Commission is not requiring competing 

consolidators to sell a full consolidated 

market data product and is amending 

proposed Rules 614(d)(1) through (3) to 

reflect this change. Rule 614(d)(1), as 

amended, requires each competing 

consolidator to collect from each 

national securities exchange and 

national securities association, either 

directly, or indirectly, only the 

information required under Rule 603(b) 

that is necessary for the competing 

consolidator to create the particular 

consolidated market data product(s) it 

chooses to sell. Rule 614(d)(2), as 

amended, requires each competing 

consolidator to calculate and generate a 

consolidated market data product from 

the data collected pursuant to Rule 

614(d)(1). Rule 614(d)(3), as amended, 

requires each competing consolidator to 

make the consolidated market data 

product(s) available to subscribers on 

terms that are not unreasonably 

discriminatory, and timestamped as 

required by Rule 614(d)(4) and 

including the national securities 

exchange and national securities 

association generated timestamp as 

required by Rule 614(e)(2). 

With respect to the comment that the 

NBBO should be based on exchange 

BBOs and that incorporation of 

aggregated odd-lot quotes would cause 

confusion,1011 the Commission believes 

that requiring the exchanges to calculate 

their BBOs before sending them to the 

competing consolidators for calculation 

into NBBOs would add latency to the 

collection, consolidation, and 

dissemination of consolidated market 

data products. One of the goals of the 

introduction of competing consolidators 

is the reduction of latencies. Any 

exchange processing of the data content 

underlying consolidated market data 

will add latency in the collection, 

calculation, and dissemination of 

consolidated market data. Further, the 

exchanges currently aggregate odd-lot 

quotes into their BBOs, which are used 

to calculate the NBBO. Therefore, the 

Commission does not believe that this 

18672 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1012See supra Section III.B.10. 

1013See Data Boiler Letter I at 52. 

1014See Rule 600(b)(20). 

1015 15 U.S.C. 78k–1(c)(1)(D). See also Bloomberg 

Order, supra note 22. 

1016See IDS Letter I at 10–11. 

1017See Capital Group Letter at 4; IEX Letter at 

8; Data Boiler Letter I at 53; TD Ameritrade Letter 

at 13. 

1018See Capital Group Letter at 4; IEX Letter at 

8; Data Boiler Letter I at 53. 

1019See Capital Group Letter at 4. 

1020See Data Boiler Letter I at 53. 

1021See TD Ameritrade Letter at 13. 

1022See id. 

provision will cause confusion.1012 The 

Commission believes that aggregating 

odd-lots into the BBO provides market 

participants with a more complete view 

of the market for each security. 

In response to the comment that only 

one competing consolidator should be 

obligated to provide a consolidated 

market data product,1013 the 

Commission is not requiring all 

competing consolidators to provide all 

consolidated market data. Competing 

consolidators may sell a consolidated 

market data product comprising some or 

all components of consolidated market 

data.1014 The Commission believes that 

competing consolidators should have 

the flexibility to tailor their market data 

products to their subscribers’ needs. Not 

requiring competing consolidators to 

sell a product that contains all of the 

data elements of full consolidated 

market data should enhance 

competition among competing 

consolidators by providing more 

parameters (e.g., products) upon which 

they can compete. 

With respect to the comment that 

requested clarification of the use of the 

term ‘‘generate’’ in proposed Rule 

614(d)(2), competing consolidators will 

be required to calculate and generate a 

consolidated market data product from 

the individual data streams made 

available by the SROs pursuant to Rule 

603(b). For example, competing 

consolidators that choose to sell a 

consolidated market data product that 

includes the NBBO will calculate the 

NBBO as set forth in Rule 600(b)(50) 

and disseminate the NBBO in the 

consolidated market data product. 

Competing consolidators that sell a 

consolidated market data product that 

includes depth-of-book data will 

generate depth-of-book data by 

considering the NBBO and then 

determining the five price levels above 

(below) the NBBO from the quotation 

information provided by the SROs. The 

‘‘calculate and generate’’ description 

refers to the processes that competing 

consolidators will use to create a 

consolidated market data product from 

the individual SRO quotation and 

transaction information they receive. 

Competing consolidators that receive 

transaction and quotation information 

from the individual SROs pursuant to 

Rule 603(b) and calculate and generate 

a consolidated market data product for 

dissemination must register pursuant to 

Rule 614. 

‘‘Unreasonably discriminatory’’ is a 

term used in Section 11A(c)(1)(D) of the 

Exchange Act.1015 Section 11A(c)(1)(D) 

of the Exchange Act states that all 

exchange members, brokers, dealers, 

SIPs, and, subject to such limitations 

that the Commission may impose as 

necessary or appropriate for the 

protection of investors or maintenance 

of fair and orderly markets, all other 

persons may obtain on terms that are 

not unreasonably discriminatory such 

information with respect to quotations 

for and transactions in any security, 

other than an exempted security, as is 

published or distributed by any SRO or 

SIP. The term ‘‘unreasonably 

discriminatory’’ in Rule 614(d)(3) has 

the same meaning as in Section 

11A(c)(1)(D). With respect to the 

comment asking about the applicability 

of this term,1016 while such 

determinations are facts and 

circumstances-based and specific to 

each individual situation, a competing 

consolidator should have a reasonable 

basis for providing a consolidated 

market data product on different terms 

to different customers. 

(b) Rule 614(d)(4): Timestamping of 

Consolidated Market Data 

(i) Proposal 

Proposed Rule 614(d)(4) would 

require each competing consolidator to 

timestamp the information collected in 

proposed Rule 614(d)(1): (i) Upon 

receipt from each national securities 

exchange and national securities 

association at the exchange’s or 

association’s data center; (ii) upon 

receipt of such information at its 

aggregation mechanism; and (iii) upon 

dissemination of consolidated market 

data to customers. 

(ii) Final Rule and Response to 

Comments 

The Commission received several 

comments regarding proposed Rule 

614(d)(4).1017 Three commenters 

supported the timestamp requirement of 

the proposed Rule.1018 One commenter 

said that market participants could use 

the originating venue timestamp and the 

consolidator timestamps to gauge 

whether the latency meets their needs 

and whether their best-execution 

obligations were met.1019 Another 

commenter suggested a time granularity 

of +/¥ 50 milliseconds or in submilliseconds.1020

One commenter, however, stated that 

the proposed rule could create 

confusion.1021 This commenter said that 

multiple quotes with the same 

timestamp could cause sequencing 

confusion and suggested that the 

Commission provide more specificity to 

address this concern.1022

The Commission believes that 

timestamps are of particular importance 

in a decentralized consolidation model 

because competing consolidators will be 

generating consolidated market data 

products individually. Market 

participants must be able to understand 

the market at the time their orders are 

represented and executed. Further, 

timestamps help to ensure that 

competing consolidators are accurately 

calculating and disseminating 

consolidated market data products. 

Therefore, the Commission is adopting 

these requirements as proposed. 

The exclusive SIPs’ timestamp 

information is similar to what is 

required of competing consolidators 

under Rules 614(d)(4)(i) and (iii). The 

timestamp requirement will allow 

subscribers to ascertain how quickly the 

competing consolidator can receive data 

from the exchanges, transmit that data 

between the exchange’s data center and 

its aggregation center, and aggregate and 

disseminate its consolidated market 

data product to subscribers (its realized 

latency). The Commission also believes 

that this information will provide 

transparency that should help 

subscribers evaluate a potential 

competing consolidator or determine 

whether an existing competing 

consolidator continues to meet their 

needs. 

The Commission does not think that 

the addition of timestamps on 

competing consolidators’ consolidated 

market data products will cause 

sequencing confusion. Rule 614(d)(4) 

requires each competing consolidator to 

affix its own timestamps to the 

information collected in Rule 614(d)(1): 

(i) Upon receipt from each SRO at the 

exchange’s or association’s data center; 

(ii) upon receipt of such information at 

its aggregation mechanism; and (iii) 

upon dissemination of consolidated 

market data to customers. As noted 

above, currently, the exclusive SIPs 

similarly timestamp information. The 

timestamp requirement should not 

introduce any new sequencing 

confusion. Instead, this timestamping 

requirement should help subscribers 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18673 

1023See Clearpool Letter at 9; IntelligentCross 

Letter at 5; IEX Letter at 8; ACS Execution Services 

Letter at 6; Data Boiler Letter I at 53; STANY Letter 

II at 6; FINRA Letter at 5. 

1024See Clearpool Letter at 9; IntelligentCross 

Letter at 5; IEX Letter at 8; ACS Execution Services 

Letter at 6; Data Boiler Letter I at 53. 

1025See STANY Letter II at 6. 

1026See FINRA Letter at 5. 

1027See Clearpool Letter at 9; IntelligentCross 

Letter at 5; IEX Letter at 8. 

1028See IntelligentCross Letter at 5; ACS 

Execution Services Letter at 6. 

1029See ACS Execution Services Letter at 6. 

1030 IEX Letter at 8. 

1031See Data Boiler Letter I at 53. This commenter 

did not elaborate on benchmark testing. 

1032See id. The performance and operational 

information to be provided as required by Rules 

614(d)(5) and (6) do not require the disclosure of 

proprietary information. Rules 614(d)(5) and (6) 

require the reporting of data that demonstrates how 

competing consolidators are actually operating 

which should be directly pertinent to subscribers 

and potential subscribers of competing 

consolidators. If competing consolidators believe 

that benchmark testing would be worthwhile, they 

can decide on their own to establish benchmark 

criteria and publish the results of testing, in 

addition to complying with the requirements of 

Rules 614(d)(5) and (6). 

1033See STANY Letter II at 6–7. 

1034See FINRA Letter at 5. 

1035The Commission is adopting Rules 614(d)(5) 

and (6) with minor technical changes to cite more 

specifically to the information that must be 

published by a competing consolidator to its 

website on a monthly basis. 

understand a competing consolidator’s 

performance in generating consolidated 

market data products. Competing 

consolidators will have different 

systems to collect, calculate, and 

disseminate the data they receive from 

the SROs and their timestamps will help 

market participants measure latencies. 

(c) Rules 614(d)(5) and (6): Monthly 

Website Publication of Performance and 

Operational Information 

(i) Proposal 

Proposed Rule 614(d)(5) required each 

competing consolidator to publish 

prominently on its website, within 15 

calendar days after the end of each 

month, certain performance metrics. All 

information posted pursuant to 

proposed Rule 614(d)(5) must be 

publicly posted in downloadable files 

and must remain free and accessible 

(without any encumbrances or 

restrictions) by the general public on the 

website for a period of not less than 

three years from the initial date of 

posting. 

In particular, proposed Rule 614(d)(5) 

required the publication of the 

following performance metrics: (i) 

Capacity statistics (such as system 

tested capacity, system output capacity, 

total transaction capacity, and total 

transaction peak capacity); (ii) message 

rate and total statistics (such as peak 

output rates on the following bases: 1- 

millisecond, 10-millisecond, 100- 

millisecond, 500-millisecond, 1-second, 

and 5-second); (iii) system availability 

statistics (for example, whether system 

up-time has been 100% for the month 

and cumulative amount of outage time); 

(iv) network delay statistics (for 

example, today under a TCP–IP 

network, network delay statistics would 

include quote and trade zero window 

size events, quote and trade TCP 

retransmit events, and quote and trade 

message total); and (v) latency statistics 

(with distribution statistics up to the 

99.99th percentile) for (1) when a 

national securities exchange or national 

securities association sends an inbound 

message to a competing consolidator 

network and when the competing 

consolidator network receives the 

inbound message; (2) when the 

competing consolidator network 

receives the inbound message and when 

the competing consolidator network 

sends the corresponding consolidated 

message to a subscriber; and (3) when a 

national securities exchange or national 

securities association sends an inbound 

message to a competing consolidator 

network and when the competing 

consolidator network sends the 

corresponding consolidated message to 

a subscriber. 

Proposed Rule 614(d)(6) required each 

competing consolidator to publish 

prominently on its website, within 15 

calendar days after the end of each 

month, information on: (i) Data quality 

issues (such as delayed message 

publication, publication of duplicative 

messages, and message inaccuracies); 

(ii) system issues (such as processing, 

connectivity, and hardware problems); 

(iii) any clock synchronization protocol 

utilized; (iv) for the clocks used to 

generate the timestamps described in 

Rule 614(d)(4), clock drift averages and 

peaks and number of instances of clock 

drift greater than 100 microseconds; and 

(v) vendor alerts (such as holiday 

reminders and testing dates). All 

information posted pursuant to 

proposed Rule 614(d)(6) must be 

publicly posted and must remain free 

and accessible (without any 

encumbrances or restrictions) by the 

general public on the website for a 

period of not less than three years from 

the initial date of posting. 

(ii) Final Rule and Response to 

Comments 

The Commission received several 

comments regarding proposed Rules 

614(d)(5) and (6).1023 Five commenters 

supported the proposed Rules.1024 One 

commenter objected to the proposed 

rules.1025 One commenter requested 

guidance from the Commission relating 

to broker-dealers’ use of the required 

information.1026

Several commenters supported 

requiring competing consolidators to 

disclose the information required by the 

proposed rules,1027 and some 

commenters said this information 

would be useful in choosing a 

competing consolidator.1028 One 

commenter said that such transparency 

could help keep costs down,1029 and 

another commenter stated that the 

publication of performance metrics, in 

combination with competition, would 

‘‘advance the objective of promoting 

useful and widely available market data 

for a range of market participants.’’ 1030

One commenter indicated that the 

information and frequency with which 

it would be provided were acceptable 

but suggested benchmark testing instead 

of information disclosures.1031 The 

commenter said that benchmark tests 

would better demonstrate a competing 

consolidator’s capabilities without 

revealing proprietary information.1032

One commenter believed that the 

requirement to disclose performance 

statistics as well as provide 

transparency into the performance of 

competing consolidator systems would 

deter potential competing consolidators 

from registration.1033 Another 

commenter asked the Commission to 

issue guidance outlining a brokerdealer’s obligations with respect to 

review of the monthly performance 

metrics prior to and after selection of a 

competing consolidator, and 

reevaluation of its chosen competing 

consolidator based on such metrics or 

other information.1034

The Commission is adopting Rules 

614(d)(5) and (6) as proposed.1035 The 

Commission believes that this 

information will be useful to market 

participants in evaluating competing 

consolidators. The Commission believes 

that the public disclosure of this 

information—particularly the system 

availability and network delay statistics 

and data quality and system issues— 

will encourage competing consolidators 

to provide consolidated market data 

products in a stable and resilient 

manner and will allow market 

participants to hold them accountable 

for their performance metrics. 

The Commission does not believe that 

these disclosures will deter potential 

competing consolidators from 

registering because the disclosures 

should help competing consolidators to 

market themselves to potential 

subscribers. This information will be 

used by market participants to evaluate 

18674 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1036See supra notes 104–105 and accompanying 

text. 

1037See Section 17(a)(1) of the Exchange Act, 15 

U.S.C. 78q(a)(1). 

1038 In this context, ‘‘promptly’’ or ‘‘prompt’’ 

means making reasonable efforts to produce records 

that are requested by the staff during an 

examination without delay. The Commission 

believes that in many cases a competing 

consolidator could, and therefore will be required 

to, furnish records immediately or within a few 

hours of a request. The Commission expects that 

only in unusual circumstances would a competing 

consolidator be permitted to delay furnishing 

records for more than 24 hours. Accord Regulation 

Crowdfunding, Securities Act Release No. 9974, 

Securities Exchange Act Release No. 76324 (Oct. 30, 

2015), 80 FR 71387, 71473 n. 1122 (Nov. 15, 2015) 

(similarly interpreting the term ‘‘promptly’’ in the 

context of Regulation Crowdfunding Rule 404(e)); 

Security Based Swap Data Repository Registration, 

Duties, and Core Principles, Securities Exchange 

Act Release No. 74246 (Feb. 11, 2015), 80 FR 14438, 

14500, n. 846 (Mar. 19, 2015) (similarly interpreting 

the term ‘‘promptly’’ in the context of Exchange Act 

Rule 13n–7(b)(3)); Registration of Municipal 

Advisors, Securities Exchange Act Release No. 

70462 (Sept. 20, 2013), 78 FR 67468, 67578–79 n. 

1347 (Nov. 12, 2013) (similarly interpreting the 

term ‘‘prompt’’ in the context of Exchange Act Rule 

15Ba1–8(d)). 

1039See Data Boiler Letter I at 54. 

1040 Id. 

1041 Id. 

1042See Section 17(a)(1) of the Exchange Act, 15 

U.S.C. 78q(a)(1). 

1043See supra note 1032. 

1044See Data Boiler Letter I at 55. 

1045See id. at 56. 

1046See Clearpool Letter at 4; ACS Execution 

Services Letter at 6. 

competing consolidator performance. 

Competing consolidators could also use 

these disclosures to evaluate their 

competitors, which could motivate them 

to make changes to better serve their 

subscribers or attract new ones. 

Finally, the Commission believes that 

the information disclosed under these 

provisions—such as performance 

statistics, system availability, and data 

quality issues—can help a broker-dealer 

assess whether a potential competing 

consolidator can meet the brokerdealer’s performance and operational 

needs and should help to facilitate a 

broker-dealer’s ability to achieve and 

analyze best execution.1036 For these 

reasons, the Commission encourages 

these disclosures to be provided in a 

manner facilitating comparison across 

competing consolidators and their 

consolidated market data products. 

(d) Rules 614(d)(7) and (8): Maintenance 

and Provision of Information for 

Regulatory Purposes 

(i) Proposal 

Proposed Rule 614(d)(7) required each 

competing consolidator to keep and 

preserve at least one copy of all 

documents, including all 

correspondence, memoranda, papers, 

books, notices, accounts, and such other 

records as shall be made or received by 

it in the course of its business as such 

and in the conduct of its business.1037

The proposed rule required competing 

consolidators to keep these documents 

for a period of no less than five years, 

the first two years in an easily accessible 

place. 

Proposed Rule 614(d)(8) required each 

competing consolidator to, upon request 

of any representative of the 

Commission, promptly furnish to the 

possession of such representative copies 

of any documents required to be kept 

and preserved by it.1038

(ii) Final Rule and Response to 

Comments 

The Commission received two 

comments on proposed Rules 614(d)(7) 

and (8) from the same commenter.1039

The commenter stated that the 

document retention and recording time 

periods of proposed Rule 614(d)(7) were 

acceptable.1040 In response to proposed 

Rule 614(d)(8), the commenter 

suggested that the Commission require 

benchmark testing instead of paper 

documents.1041

The Commission is adopting Rules 

614(d)(7) and (8) as proposed. These 

requirements will facilitate the 

Commission’s oversight of competing 

consolidators and the national market 

system. These provisions are similar to 

those used by the Commission in other 

contexts.1042 The Commission does not 

believe that ‘‘benchmark testing’’ is 

applicable to the Commission’s record 

retention requirements because these 

requirements address the records to 

retain, how long to retain them, and to 

whom the records should be furnished, 

not how competing consolidators 

should demonstrate the capability of 

their systems.1043

(e) Form CC 

(i) Proposal 

The Commission proposed Form CC 

to require competing consolidators to 

provide information and/or reports in 

narrative form to the Commission and to 

make such information public. The 

proposed form required a competing 

consolidator to indicate the purpose for 

which it is filing the form (i.e., initial 

report, material amendment, annual 

amendment, or notice of cessation) and 

to provide information in four 

categories: (1) General information, 

along with contact information; (2) 

business organization; (3) operational 

capability; and (4) services and fees. The 

Commission explained that the 

requested information would assist the 

Commission in understanding the 

competing consolidator’s overall 

business structure, technological 

reliability, and services offered, and 

would better ensure consistent 

disclosures across competing 

consolidators. 

(ii) Final Rule and Response to 

Comments 

The Commission received multiple 

comments from one commenter on 

proposed Form CC. In response to the 

Commission’s question as to whether 

the instructions to Form CC were 

sufficiently clear, one commenter asked 

when a Form CC needed to be filed ‘‘in 

order to give [the] regulator sufficient 

time to review before authorizing it to 

operate?’’ 1044 Under Rule 614(a)(1)(i), 

no competing consolidator may receive 

the data content underlying 

consolidated market data and generate a 

consolidated market data product for 

dissemination unless an initial Form CC 

has been filed with the Commission and 

become effective. Therefore, Form CC 

needs to be filed prior to a competing 

consolidator beginning operations. 

Further, as described in Rule 

614(a)(1)(iii), the Commission may 

declare an initial Form CC ineffective no 

later than 90 calendar days from the 

date of filing with the Commission. 

The Commission also asked whether 

competing consolidators would bundle 

their products and/or services and if so, 

whether this should be required to be 

disclosed on Form CC. One commenter 

responded that bundling would be 

likely but did not specify whether it 

should be disclosed on Form CC.1045

Two commenters stated that the 

Commission should not to allow 

competing consolidators to link their 

pricing to other areas of business.1046

In the Proposing Release, the 

Commission stated that the information 

in Section V of Form CC—which 

includes Exhibit F (a description of all 

consolidated market data products), 

Exhibit G (a description and 

identification of any fees or charges for 

the use of the competing consolidator 

with respect to consolidated market 

data), and Exhibit H (a description of 

any co-location and related services, 

and the terms and conditions for colocation, connectivity and related 

services)—would assist market 

participants in determining whether to 

become a subscriber of a competing 

consolidator by requiring the 

availability of information regarding the 

services offered and fees charged for 

consolidated market data. The Form CC 

disclosures will require the disclosure 

of fees and services related to 

consolidated market data products that 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18675 

1047 In this regard, concerns regarding linked 

pricing or conditioning availability could exist in 

the context of a competing consolidator affiliated 

with a registered broker-dealer that offers execution 

services to broker-dealer clients. For example, if the 

registered broker-dealer linked the pricing for, or 

conditioned the availability of the services of an 

affiliated competing consolidator to, the execution 

services offered by the registered broker-dealer to a 

broker-dealer client, and the registered brokerdealer was an execution venue included on the 

broker-dealer client’s report required by Rule 606(a) 

of Regulation NMS, the material aspects of such an 

arrangement must be disclosed by the broker-dealer 

client pursuant to Rule 606(a)(1)(iv) of Regulation 

NMS. See also Securities Exchange Act Release No. 

84528, 83 FR 58338, 58376 n. 397 and 

accompanying text. In addition, in such a scenario, 

the broker-dealer client of the registered brokerdealer with an affiliated competing consolidator 

would continue to be obligated to seek the best 

execution for its customers’ orders. See supra 

Section I.E. 

1048 Data Boiler Letter I at 4. 

1049See supra Section III.B.10. 

1050 Data Boiler Letter I at 55. 

1051See infra Section III.F. 

1052See infra Section III.F and text accompanying 

notes 1302–1312. 

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

1054See Clearpool Letter at 4; ACS Execution 

Services Letter at 5, 6; RBC Letter at 6; TechNet 

Letter II at 1–2. 

1055TechNet Letter II at 1–2. 

may be bundled by a competing 

consolidator. The Commission does not 

believe that competing consolidators 

should be prohibited from linking their 

pricing of consolidated market data 

products to other areas of their 

business.1047 The Commission believes 

that the transparency resulting from the 

disclosures provided on Form CC will 

facilitate competition across similar 

products and/or services and help to 

protect market participants from unfair 

and unreasonable pricing. 

Further, the Commission asked 

whether Form CC should require any 

additional information or whether any 

proposed items should be removed. One 

commenter responded that the NBBO 

should not be interfered with or 

influenced by competing consolidators 

‘‘with ties to foreign government 

officials’’ and that Form CC should have 

disclosure of any such ties.1048 Form CC 

requires specific information about the 

owners and operators of a competing 

consolidator. If a ‘‘foreign government 

official’’ were an owner of 10 percent or 

more of a competing consolidator’s 

stock or directly or indirectly controls 

the management of policies of the 

competing consolidator, such person 

would have to be identified in Exhibit 

A to Form CC. If a ‘‘foreign government 

official’’ were an officer, director, 

governor, or other person performing 

similar functions for a competing 

consolidator, such person would have to 

be identified in Exhibit B to Form CC. 

These exhibits would provide 

disclosure of such ties. Further, as 

discussed above, all competing 

consolidators will be required to 

calculate the NBBO as set forth in Rule 

600(b)(50).1049 Competing consolidators 

could not calculate a NBBO in another 

manner. All competing consolidators 

will be regulated entities subject to 

inspection by Commission staff, which 

should deter the development of 

inaccurate NBBOs. 

This commenter also suggested a 

requirement that ‘‘all procedures’’ in the 

section on Operational Capability 

should exclude proprietary techniques 

of a competing consolidator.1050 Exhibit 

E to Form CC requires a narrative 

description of each consolidated market 

data service or function, including 

connectivity and delivery options for 

subscribers and a description of all 

procedures utilized for the collection, 

processing, distribution, publication, 

and retention of information with 

respect to quotations for and 

transactions in securities. The 

information provided in Form CC 

relating to operational capability should 

contain information that will allow 

market participants to evaluate potential 

competing consolidators. It does not 

require the public disclosure of 

proprietary information. 

The Commission is adopting Form CC 

substantially as proposed, with 

modifications to provide for the 

reporting of systems disruptions or 

intrusions, as required under Rule 

614(d)(9).1051 Form CC, as adopted, will 

include new Section VI, which will 

require a competing consolidator to 

promptly report whether a systems 

disruption or intrusion (or both) has 

occurred, and to provide information 

regarding the time and duration of the 

event, the date and time when the 

competing consolidator had a 

reasonable basis to conclude that a 

systems disruption/intrusion had 

occurred, whether and when the event 

had been resolved, whether and when 

the investigation had been closed, and 

the name of the system(s) involved. The 

revised Form CC also requires the 

competing consolidator to attach as 

Exhibit J all other information regarding 

the systems disruption or intrusion as 

required by Rule 614(d)(9)(iii) 

(including a detailed description, an 

assessment of those systems potentially 

affected, a description of the progress of 

corrective action, and when the event 

has been or is expected to be resolved). 

As discussed further below, Rule 

614(d)(9) requires a competing 

consolidator that is not required to 

comply with Regulation SCI to publicly 

disseminate certain information 

regarding systems disruptions and 

notify the Commission of systems 

disruptions and systems intrusions.1052

Exhibit J to Form CC would be publicly 

available, although Form CC provides 

for a competing consolidator to request 

confidential treatment for information 

relating to a systems intrusion. 

In addition, Form CC, as adopted, has 

been modified to accommodate filing by 

competing consolidators that are 

affiliated with an exchange.1053 Section 

II of Form CC requires a competing 

consolidator to report whether it is 

affiliated with an exchange. Section III 

of Form CC specifies Form 1 exhibits 

related to the ownership and leadership 

of an exchange that may be provided by 

an exchange-affiliated competing 

consolidator in lieu of filing Exhibits A 

and B of Form CC. Specifically, Section 

III states that a competing consolidator 

that is affiliated with an exchange may 

provide Exhibit K of Form 1 relating to 

owners, shareholders, or partners that 

are not also members of the exchange in 

lieu of Exhibit A of Form CC, and 

Exhibit J of Form 1 relating to officers, 

governors, members of all standing 

committees, or persons performing 

similar functions in lieu of Exhibit B of 

Form CC. If the competing consolidator 

chooses not to file Exhibits A and B of 

Form CC or Exhibits J and K of Form 1, 

it must certify that the information 

requested under Exhibits A and B of 

Form CC is available on an internet 

website and provide the URL. The 

Commission believes that permitting the 

filing of Exhibit J and K of Form 1 

would lessen the burden of registration 

for an exchange-affiliated competing 

consolidator since this information has 

already been prepared and reported to 

the Commission with the affiliated 

exchange’s Form 1. 

(iii) Comments on Fees Charged by 

Competing Consolidators 

Under Form CC, competing 

consolidators are required to disclose 

the fees they charge to their subscribers 

for the consolidated market data 

product services. The Commission 

received several comments on the fees 

competing consolidators would charge 

for their consolidated market data 

products.1054 One commenter said that 

it is unclear how competing 

consolidators will price their data and 

whether such prices will be ‘‘reliable, 

resilient or well-regulated.’’ 1055 One 

commenter stated that the Commission 

should treat competing consolidator fees 

similar to SRO proposed fee changes 

and should publish on its website each 

amendment to a competing 

18676 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1056See Clearpool Letter at 4. See also ACS 

Execution Services Letter at 5 (stating that requiring 

competing consolidator fees to be subject to 

Commission approval would potentially reduce 

uncertainty about the cost of consolidated market 

data). 

1057See RBC Letter at 6. 

1058See infra Section III.E. 

1059See Effective-Upon-Filing Adopting Release, 

supra note 17. 

1060See supra Section III.B.9. 

1061See infra Section III.E. for a discussion of the 

effective national market system plan(s). 

1062SRO fees for market data other than the 

proposed consolidated market data would be 

subject to the rule filing process pursuant to Section 

19(b) of the Exchange Act and Rule 19b–4 

thereunder. 

1063See Proposing Release, 85 FR at 16791. 

1064See IEX Letter at 9. See also NYSE Letter II 

at 18 (stating that the Commission had not 

explained why SROs would not be permitted to 

continue to consolidate data obtained directly from 

other SROs). 

1065See MEMX Letter at 7. 

1066See, e.g., Securities Exchange Act Release 

Nos. 72685 (July 28, 2014), 79 FR 44889 (Aug. 1, 

2014) (notice of filing and immediate effectiveness 

of File No. SR–BATS–2014–082); 72687 (July 28, 

2014), 79 FR 44926 (Aug. 1, 2014) (notice of filing 

and immediate effectiveness of BYX–2014–012); 

72684 (July 28, 2014), 79 FR 44956 (Aug. 1, 2014) 

(notice of filing and immediate effectiveness of File 

No. SR–NASDAQ–2014–072); and 72708 (July 29, 

2014), 79 FR 45572 (Aug. 5, 2014) (notice of filing 

and immediate effectiveness of File No. SR– 

NYSEArca–2014–82). See also IEX Rule Series 

11.400. 

1067An intermarket sweep order is a limit order 

for an NMS stock that meets the following 

requirements: (i) When routed to a trading center, 

the limit order is identified as an intermarket sweep 

order; and (ii) Simultaneously with the routing of 

the limit order identified as an intermarket sweep 

order, one or more additional limit orders, as 

necessary, are routed to execute against the full 

displayed size of any protected bid, in the case of 

a limit order to sell, or the full displayed size of 

any protected offer, in the case of a limit order to 

buy, for the NMS stock with a price that is superior 

to the limit price of the limit order identified as an 

intermarket sweep order. These additional routed 

orders also must be marked as intermarket sweep 

orders. See 17 CFR 242.600(b)(38) (Rule 600(b)(38)) 

of Regulation NMS. 

consolidator’s fees no later than 30 days 

after the amendment was filed.1056

Another commenter suggested requiring 

competing consolidator price 

transparency for investors.1057

Fees set by competing consolidators 

for the consolidated market data 

services they offer will be transparent as 

they must be disclosed on Exhibit G of 

Form CC. The Commission expects that 

competing consolidator fees will reflect 

the services they provide relating to 

consolidated market data products, such 

as collecting, consolidating, generating, 

and disseminating the products that 

contain the data underlying 

consolidated market data. The 

Commission, however, is not 

implementing an approval process for 

competing consolidator fees. Competing 

consolidators are not SROs and 

therefore not subject to Section 19(b) of 

the Exchange Act with respect to their 

services or fees. The Commission 

believes that competition, along with 

disclosure, should be sufficient to 

establish a fee structure based on market 

forces. On the other hand, the fees for 

the data content underlying 

consolidated market data must be 

proposed by the effective national 

market system plan(s) and are required 

to be submitted to the Commission 

pursuant to Rule 608.1058 These fees 

will be published for public comment 

and will not become effective until the 

Commission approves them by 

order.1059

D. Self-Aggregators 

1. Proposal 

The Commission proposed to amend 

Regulation NMS to permit brokerdealers to ‘‘self-aggregate’’ consolidated 

market data under the decentralized 

consolidation model. Under proposed 

Rule 600(b)(83), a self-aggregator was 

defined as ‘‘a broker or dealer that 

receives information with respect to 

quotations for and transactions in NMS 

stocks, including all data necessary to 

generate consolidated market data, and 

generates consolidated market data 

solely for internal use. A self-aggregator 

may not make consolidated market data, 

or any subset of consolidated market 

data, available to any other person.’’ 

Under proposed Rule 603(b), the 

SROs would make available to selfaggregators the data necessary to 

generate proposed consolidated market 

data in the same manner and using same 

methods, including all methods of 

access and the same format, as other 

persons, including competing 

consolidators.1060 A self-aggregator that 

limits its use of SRO data to the creation 

of proposed consolidated market data 

would be charged only for proposed 

consolidated market data pursuant to 

the fee schedules set forth by the 

effective national market system 

plan(s).1061 A self-aggregator that uses 

an exchange’s proprietary data (e.g., full 

depth of book data) would be charged 

separately for the proprietary data use 

pursuant to the individual exchange’s 

fee schedule.1062

2. Final Rule and Response to 

Comments 

For the reasons discussed below, the 

Commission is revising the definition of 

self-aggregator. Adopted Rule 600(b)(83) 

defines a self-aggregator as a broker or 

dealer, national securities exchange, 

national securities association, or 

investment adviser registered with the 

Commission that receives information 

with respect to quotations for and 

transactions in NMS stocks, including 

all data necessary to generate 

consolidated market data, and generates 

consolidated market data solely for 

internal use. A self-aggregator may make 

consolidated market data available to its 

affiliates that are registered with the 

Commission for their internal use. 

Except as provided in the preceding 

sentence, a self-aggregator may not 

disseminate or otherwise make available 

consolidated market data, or 

components of consolidated market 

data, as provided in § 242.600(b)(20), to 

any person. 

(a) Scope of the Definition of SelfAggregator 

(i) National Securities Exchanges and 

National Securities Associations 

The Commission requested comment 

on several questions relating to selfaggregators, including whether entities 

other than broker-dealers should be 

allowed to act as self-aggregators.1063

One commenter argued that exchanges 

should be permitted to act as selfaggregators of consolidated market data 

because they use data to aid in matching 

trades or routing orders to other markets 

through their affiliated routing 

brokers.1064 Another commenter stated 

that exchanges must receive and process 

data to comply with Regulation NMS 

and that allowing exchanges to act as 

self-aggregators would provide 

exchanges with flexibility to use NMS 

data made available by the SROs or 

exchange proprietary data products.1065

The national securities exchanges are 

SROs registered with and overseen by 

the Commission. The national securities 

exchanges currently aggregate market 

data obtained from the exclusive SIPs 

and from proprietary data feeds to 

perform several exchange functions, 

including order handling and execution, 

order routing, and regulatory 

compliance.1066 Among other things, 

exchanges must determine protected 

quotations on other markets for 

purposes of complying with order 

protection requirements of Rule 611 and 

the locked and crossed markets 

prohibition in Rule 610(d), including 

identifying where to route intermarket 

sweep orders.1067 Exchanges also must 

know the NBBO for purposes of order 

types that are priced based on the 

NBBO, and must determine the NBB for 

purposes of complying with Rule 201 of 

Regulation SHO. To help exchanges 

perform these functions, the 

Commission believes that national 

securities exchanges should be 

permitted to act as self-aggregators. As 

self-aggregators, national securities 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18677 

1068The commenter noted that routing brokerdealers do not aggregate data themselves but receive 

it from their affiliated exchanges. See IEX Letter at 

9. 

1069A broker-dealer that an exchange uses for 

outbound order routing generally is regulated as a 

facility of the exchange. See Securities Exchange 

Act Release No. 63241 (Nov. 3, 2010), 75 FR 69792, 

69799 (Nov. 15, 2010) (stating that, in general, the 

outbound order routing service provided to 

exchanges by broker-dealers is regulated as a 

facility of the exchange). 

1070See, e.g., MFA Letter; AHSAT Letter. 

1071See AHSAT Letter at 3. 

1072 Id. 

1073See id. See also IEX Letter at 9 (stating that 

the ability of broker-dealers to self-aggregate will 

spur innovation by competing consolidators, which 

will be motivated to differentiate their services and 

deliver market data as efficiently as possible). 

1074See MFA Letter at 3–4. 

1075See id. at 4. 

1076See Securities Exchange Act Release No. 

51808 (June 5, 2005), 70 FR 37496, 37537–38. See 

also Securities Exchange Act Release No. 37619A 

(Sept. 6, 1996), 61 FR 48290 (Sept. 12, 1996); supra 

Section I.E. 

1077See FINRA Rule 5310, ‘‘Best Execution and 

Interpositioning.’’ 1078 In addition, RIAs are fiduciaries to their 

advisory clients, with a fundamental obligation to 

act in the best interests of their clients and to 

provide investment advice in their clients’ best 

interests. RIAs also must seek to obtain the best 

price and execution for the securities transactions 

of their advisory clients. 

1079Proposing Release, 85 FR at 16790. 

1080See Data Boiler Letter I at 59. 

1081See id. 

exchanges will have the flexibility to 

determine the optimal means for 

obtaining the market data they require 

to fulfill their regulatory obligations. 

One commenter recommended that 

exchanges be permitted to act as selfaggregators for purposes of consolidated 

market data used to aid in matching 

trades or routing orders to other markets 

through their affiliated routing 

brokers.1068 The Commission believes 

that national securities exchanges may 

route orders to away markets, primarily 

through affiliated brokers that act as a 

facilities of the exchange and are subject 

to exchange rules.1069 Because a brokerdealer used by an exchange for order 

routing is a facility of the exchange, an 

exchange’s use of consolidated market 

data to route orders through an affiliated 

broker-dealer generally would be an 

‘‘internal use’’ of consolidated market 

data by the exchange. An exchange that 

routes orders using an unaffiliated 

broker-dealer would not provide that 

unaffiliated broker-dealer with 

consolidated market data. The 

Commission understands that the 

exchange would either send the routing 

broker a directed order or would allow 

the broker to make the routing decision. 

In either case, the exchange would not 

provide the unaffiliated routing broker 

with consolidated market data for 

purposes of routing orders. 

Like the national securities 

exchanges, FINRA is an SRO registered 

with and overseen by the Commission. 

FINRA requires market data to perform 

its regulatory oversight functions, 

including surveillance of the U.S. equity 

and options markets. The Commission 

believes that FINRA should have the 

same flexibility as the national 

securities exchanges to determine how 

it will obtain consolidated market data. 

Accordingly, the Commission is 

modifying the proposed definition of 

self-aggregator to include national 

securities associations as well as 

national securities exchanges. 

(ii) Investment Advisers and Other 

Market Participants 

Some commenters argued that entities 

other than broker-dealers should be 

permitted to be self-aggregators.1070 One 

commenter, a proprietary trading firm, 

stated that because self-aggregated data 

would only be used internally, it did not 

appear to be necessary for a selfaggregator to be a broker-dealer.1071 The 

commenter further stated that ‘‘the 

primary ability needed to act as a selfaggregator is technical skill, whereas the 

qualifications of a broker dealer are 

primarily financial, regulatory, and 

legal.’’ 1072 The commenter also 

suggested that permitting additional 

entities to act as self-aggregators would 

help to promote competitive forces.1073

One commenter stated that preventing 

registered investment advisers and other 

non-broker-dealer direct consumers of 

market data from acting as selfaggregators would be as disruptive to 

the current market data infrastructure as 

preventing broker-dealers from selfaggregating market data for their own 

use.1074 This commenter further stated 

that many non-broker-dealer market 

participants currently subscribe directly 

to proprietary data feeds from exchanges 

to facilitate their trading activity and 

reduce latency.1075

Market participants that currently 

self-aggregate consolidated market data 

using the exchanges’ proprietary data 

feeds will be able to continue to do so 

under the adopted rules. Broker-dealers 

were not proposed to be permitted to act 

as self-aggregators because of their 

technical ability to consolidate market 

data but because of the important 

functions they perform in the national 

market system. Broker-dealers are the 

only entities that can be members and 

direct customers of exchanges. Brokerdealers execute customer orders and are 

subject to specific requirements under 

Regulation NMS related to the routing 

and execution of orders in the national 

market system, including Rules 611 and 

610(d). In addition, broker-dealers are 

subject to the duty of best execution, 

which requires a broker-dealer to seek to 

obtain the most favorable terms 

available under the circumstances for its 

customer orders.1076 Broker-dealers also 

are subject to FINRA rules requiring 

them to use reasonable diligence to 

ascertain the best market for a security 

and to buy or sell in that market so that 

the resultant price to the customer is as 

favorable as possible under prevailing 

market conditions.1077 Broker-dealers 

use consolidated market data to fulfill 

these regulatory obligations, and 

allowing broker-dealers to act as selfaggregators could assist them in 

fulfilling these obligations. 

With respect to the commenter’s 

assertion that allowing additional nonregistered entities to act as selfaggregators would promote competitive 

forces, the Commission believes that the 

presence of competing consolidators 

will foster a competitive environment 

for consolidated market data. However, 

the Commission believes that certain 

non-broker-dealers should also be 

permitted to act as self-aggregators, 

including RIAs and, as discussed above, 

SROs. Today, some RIAs may aggregate 

consolidated market data to facilitate 

their electronic trading systems or 

strategies. The Commission believes that 

RIAs, which are subject to Commission 

oversight and examination, should 

continue to be allowed to act as selfaggregators to enable them to continue 

to consolidate data for their trading 

strategies if they so choose.1078

(iii) Self-Aggregators and Market Data 

Vendors 

The Proposing Release stated that ‘‘[a] 

vendor providing hardware, software, 

and/or other services for the purposes of 

self-aggregation would not be a 

competing consolidator unless it 

collected and aggregated proposed 

consolidated market data in a 

standardized format within its own 

facility (e.g., not that of a broker-dealer 

customer) and resold that configuration 

of proposed consolidated market data to 

a customer.’’ 1079 One commenter stated 

that the definition of self-aggregator 

could be flawed.1080 The commenter 

asked whether aggregating consolidated 

market data in a public cloud would be 

a self-aggregator’s own facility, what 

constituted a standard format, and 

whether reselling a variated version of 

consolidated market data would be 

permitted.1081 The commenter 

suggested that competing consolidators 

might not be able to earn a reasonable 

return on their investment and that the 

proposal was unfair to competing 

18678 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1082See id. 

1083See id. at 60. 

1084See also supra Section III.C.7(a)(iii) for a 

discussion of data vendors and competing 

consolidator registration. 

1085See Proposing Release, 85 FR at 16790. 

1086See Proposing Release, 85 FR at 16790. 

1087See id. at 16791. 

1088See SIFMA Letter at 12. 

1089See FIA–PTG Letter at 1–2. See also SIFMA 

Letter at 12 (broker-dealers should be able to 

continue their established practice of sharing 

consolidated market data with affiliated entities 

rather than being required to register as competing 

consolidators or to develop and maintain redundant 

consolidated data sets for each affiliate user within 

the organization); Susquehanna Letter at 5 

(precluding self-aggregating broker-dealers from 

sharing market data with affiliates would be a 

‘‘significant departure from current practices’’ and 

‘‘unnecessarily disruptive to the current market 

data infrastructure landscape’’). 

1090See SIFMA Letter at 12. See also STANY 

Letter II at 7 (stating that self-aggregators should 

include broker-dealer affiliated organizations to 

avoid significant changes to how firms currently 

consume and manage data). 

1091See MFA Letter at 5. 

1092See Susquehanna Letter at 5. In addition, the 

commenter argued that ‘‘self-aggregator 

organizations should not be faced with the 

disruptive and needlessly costly and burdensome 

choice of (1) developing and maintaining redundant 

consolidated data sets for each respective user 

within the organization, (2) registering as a CC and 

assum[ing] the related obligations and liabilities 

even though it never wanted to be in that business, 

or (3) subscribing to the outside services of 

registered CCs (again on a redundant basis for each 

entity within the organization), whose quality and/ 

or cost efficiency may be less, and over whom such 

organization would have less control to customize 

or improve services, or to remediate problems.’’ Id. 

at 6. 

1093See Susquehanna Letter at 4. 

1094See IEX Letter at 9. One commenter 

expressed the view that sharing consolidated 

market data within a single affiliated entity 

organization, under common beneficial ownership 

and senior hierarchical management, is not 

performing the functions of a competing 

consolidator because the consolidated market data 

is not intended for public dissemination in 

connection with commercial competition of 

exchange data feeds. See Susquehanna Letter at 5– 

6. 

1095See Data Boiler Letter I at 60. 

1096For example, broker-dealers execute customer 

orders and must comply with Regulation NMS 

related to the routing and execution of orders in the 

national market system, including Rules 611 and 

610(d). In addition, broker-dealers are subject to the 

duty of best execution. RIAs and SROs also have 

regulatory obligations, as discussed above in 

Sections III.D.2(a)(ii) and III.D.2(a)(i), respectively. 

consolidators and biased towards selfaggregators.1082 The commenter also 

questioned whether market data 

vendors would be self-aggregators and 

urged the Commission to respect the 

commercial autonomy of private data 

vendors.1083

Under Rule 600(b)(83), as adopted, a 

self-aggregator may use consolidated 

market data solely for its internal use. A 

market data vendor could not be a selfaggregator because its function is to 

disseminate data to its subscribers.1084

With respect to the commenter’s 

question regarding the sale of a variated 

version of consolidated market data, as 

discussed in the Proposing Release, a 

self-aggregator that redistributed or redisseminated consolidated market data, 

or any subset of proposed consolidated 

market data, would be performing the 

functions of a competing consolidator 

and would be required to register as a 

competing consolidator.1085 With 

respect to the commenter’s question 

regarding whether a vendor aggregating 

consolidated market data in a public 

cloud would be using its own facility, 

the Commission believes it would to the 

extent the vendor is contracting for its 

own use of the public cloud, but not if 

the vendor is contracting on behalf of 

individual self-aggregator customers. 

However, the determination of whether 

a vendor is facilitating its customer’s 

self-aggregation or is acting as a 

competing consolidator will depend on 

an assessment of the individual facts 

and circumstances of its business and 

its arrangements with its customers. In 

this regard, the Commission believes 

that a key factor in this determination 

will be the degree of customization in 

the product or service that the vendor 

provides because a highly customized 

product or service would suggest that 

the vendor is fulfilling the highly 

specialized and specific needs of its 

client. Thus, a vendor that provides 

meaningfully customized products or 

services to its customers likely would be 

facilitating its customer’s selfaggregation and not acting as a 

competing consolidator.1086 A vendor 

that provides a standardized 

consolidated market data product to its 

customers, however, likely would be 

acting as a competing consolidator. 

With respect to the comment regarding 

a competing consolidator’s ability to 

make a return on its investment, the 

viability of the decentralized model is 

discussed in Section III.B.3, supra. 

(b) Permitted Uses of Self-Aggregated 

Data 

(i) Sharing Consolidated Market Data 

With Affiliates 

The Commission requested comment 

on whether the restriction preventing 

self-aggregators from providing 

consolidated market data or a subset 

thereof to customers or affiliates 

reflected a significant departure from 

current practices.1087 One commenter 

stated that broker-dealers that selfaggregate typically share consolidated 

market data with affiliates,1088 and 

another stated that requiring selfaggregators either to register as 

competing consolidators or to maintain 

separate and redundant market data sets 

for each affiliated entity could be costly 

and disruptive.1089 Some commenters 

recommended that the Commission 

allow self-aggregators to share market 

data with affiliated entities to avoid 

significant changes to how firms 

currently consume and manage data.1090

One commenter stated that the proposal 

would raise costs for firms affiliated 

with a self-aggregator,1091 and another 

stated that requiring each affiliated 

entity to aggregate and build its own 

market data systems would be a 

needless drain of resources.1092 This 

commenter further stated that selfaggregators should be permitted to share 

self-aggregated data with their affiliates 

because a market maker should be able 

to know when facilitating interest for an 

agency affiliate that its view of the 

quoted market is consistent with that of 

the affiliate.1093 Another commenter 

suggested that the Commission allow 

self-aggregators to use consolidated 

market data in handling and routing 

orders on behalf of the broker-dealer’s 

customers, including in cases where 

customer business is conducted through 

an affiliate, without being required to 

pay separate fees for that purpose.1094

However, one commenter stated that 

permitting a self-aggregator to 

disseminate consolidated market data to 

its affiliates would allow the selfaggregator to perform the function of a 

competing consolidator without the 

burdens of being a competing 

consolidator.1095

The Commission believes that selfaggregators should be permitted, as an 

internal use, to make consolidated 

market data available to their affiliates 

that are registered with the Commission. 

A broker-dealer or RIA that is affiliated 

with a self-aggregator may require 

consolidated market data to fulfill its 

regulatory obligations, as described 

above. In addition, as noted above, the 

Commission has the authority to 

examine the registered affiliated entities 

of a self-aggregator and would be able to 

determine how the self-aggregator 

provides consolidated market data to a 

registered affiliate and how the 

registered affiliate uses that data. 

Therefore, a self-aggregator will be 

permitted to share consolidated market 

data only with affiliates that are 

registered with the Commission. 

An affiliate of a self-aggregator that is 

not registered with the Commission, 

however, may not have the same 

regulatory obligations as registered 

entities,1096 and the Commission does 

not have the authority to examine a selfaggregator’s unregistered affiliates. In 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18679 

1097See supra Section III.C.7(a)(iv). 

1098See SIFMA Letter at 12 (stating that brokerdealers that self-aggregate should be permitted to 

display their data to their customers, subject to the 

requirements of the Vendor Display Rule, without 

being required to register as a competing 

consolidator or Regulation SCI entity); TD 

Ameritrade Letter at 12 (stating that registered 

broker-dealers should be allowed to use selfaggregated consolidated market data for display to 

their brokerage clients, without further sale or 

redistribution to unaffiliated third parties; the 

proposal would require a broker-dealer selfaggregator that wishes to provide its self-aggregated 

data to its clients to invest time and resources into 

becoming a competing consolidator compliant with 

Regulation SCI requirements, or to buy consolidated 

market data from competing consolidators for 

display purposes); Schwab Letter at 2, 6–7 (stating 

that self-aggregators should be allowed to share 

consolidated data with their customers on a not-forprofit and non-redistribution basis, but not with 

external parties, and should not be required to 

comply with Regulation SCI because they are not 

holding themselves out as a ‘‘public utility’’). 

1099See Schwab Letter at 7. See also TD 

Ameritrade Letter at 11–12 (stating that the internaluse limitation on self-aggregated data could 

disadvantage retail investors because a brokerdealer would be compelled to purchase 

consolidated data from a competing consolidator, 

and those able to pay the competing consolidator 

for faster speeds could ‘‘get to the market’’ more 

quickly). 

1100See Schwab Letter at 6. 

1101TD Ameritrade Letter at 12. The commenter 

noted that broker-dealers are subject to FINRA Rule 

4370 (establishing requirements for designing 

business continuity plans which require data 

backup and recovery, mission critical systems, and 

alternate location requirements, among others) and 

FINRA Rule 4380 (requiring mandatory 

participation in FINRA business continuity and 

disaster recovery (‘‘BC/DR’’) Testing under 

Regulation SCI if determined necessary by FINRA). 

See id. at n. 36. 

1102The Commission has revised the definition of 

self-aggregator to further clarify that a selfaggregator may not disseminate or otherwise make 

available consolidated market data, or components 

of consolidated market data, as provided in 

§ 242.600(b)(20), to any person other than an 

affiliate that is registered with the Commission. 

1103Competing consolidators will be registered 

with the Commission and will be subject to systems 

integrity and operational capability standards that 

will help to ensure the accuracy and availability of 

the consolidated market data that they produce. See 

infra Section III.F. Competing consolidators also 

will have certain responsibilities and obligations, 

including obligations to disclose publicly 

operational information and performance metrics, 

which will help to ensure transparency, 

accountability, and oversight, and obligations to 

ensure the integrity, quality, and resiliency of 

consolidated market data. See supra Section III.C.8. 

Self-aggregators, by contrast, will not be subject to 

similar requirements in the collection, 

consolidation, or generation of consolidated market 

data because they will not disseminate consolidated 

market data or otherwise make consolidated market 

data available to persons other than affiliates 

registered with the Commission. 

1104Nasdaq Letter IV at 57, n. 80. 

1105Section 6(b)(4) of the Exchange Act. 

1106Section 6(b)(5) of the Exchange Act. See also 

Rule 603 of Regulation NMS. 

1107Section 6(b)(8) of the Exchange Act. 

1108See Proposing Release, 85 FR at 16791. 

1109See Clearpool Letter at 10. 

1110See FINRA Letter at 8. See also Data Boiler 

Letter I at 59 (stating that the latency advantage 

would be material). 

1111See FINRA Letter at 8–9. See also Angel 

Letter at 8 (suggesting that the Commission embargo 

the exchanges from releasing any data until the 

consolidators have had sufficient time to process 

the data to create a more level playing field); 

Healthy Markets Letter at 3 (suggesting that the 

Commission remove the latency advantage of 

exchange proprietary data feeds by requiring all 

Continued 

addition, as discussed above, the 

Commission believes the widespread 

dissemination of consolidated market 

data must be subject to Commission 

oversight and, accordingly, must be 

performed by competing consolidators. 

Competing consolidators will be subject 

to the registration, disclosure, and other 

regulatory requirements in Rule 614 and 

Form CC.1097

(ii) Sharing Consolidated Market Data 

With Customers 

Several commenters stated that 

broker-dealers that self-aggregate should 

be permitted to display their selfaggregated data to their customers 

without registering as a competing 

consolidator or becoming a Regulation 

SCI entity.1098 One commenter stated 

that if brokers are not permitted to share 

consolidated market data with their 

customers, proprietary traders and high 

frequency firms would add to their 

significant data cost advantage over 

retail investors and the two-tiered data 

system would be preserved.1099 The 

commenter further stated that the 

Commission should allow selfaggregators to display consolidated 

market data to their customers to 

encourage competition among the 

competing consolidators, enable retail 

investor access to data with the least 

amount of latency without additional 

cost, and allow broker-dealers to share 

with their customers the same view of 

the same core data.1100 Another 

commenter stated that registered brokerdealers should be allowed to share selfaggregated consolidated market data 

with their brokerage clients without 

registering as competing consolidators, 

noting that the benefits of Regulation 

SCI compliance are ‘‘inherent in the 

registered broker-dealer regulatory 

regime for continuity of operations and 

display of the data.’’ 1101

Under the amendments, selfaggregators will not be permitted to 

disseminate or otherwise share or make 

available consolidated market data to 

any persons, including their customers 

or clients.1102 The dissemination of 

consolidated market data entails a 

different process from self-aggregating 

consolidated market data for internal 

uses (e.g., for order handling, routing, 

and execution). Self-aggregators are not 

subject to the regulatory regime 

established for competing consolidators, 

which is designed to ensure that 

consolidated market data is reliable, 

resilient, and accurate. The Commission 

believes that entities that deliver 

consolidated market data to third parties 

should be subject to such standards.1103

The Commission believes that 

investors and other non-registered 

entities should receive consolidated 

market data from entities that are 

subject to a regulatory regime that is 

designed to ensure the data they receive 

is reliable, resilient, and accurate and 

that they are able to assess such 

reliability, resiliency, and accuracy on 

an ongoing basis. Self-aggregators are 

not subject to such standards or 

requirements and therefore will not be 

permitted to disseminate or otherwise 

make available self-aggregated 

consolidated market data with 

customers, clients, or non-registered 

affiliates. 

(c) Self-Aggregators and Market Data 

Fees 

One commenter stated that exchanges 

seeking the business of self-aggregators 

might offer ‘‘enterprise license’’ pricing 

packages that would allow a firm and all 

of its affiliates to receive proprietary 

data for one price, effectively allowing 

the self-aggregator to share data with its 

affiliates.1104 An exchange seeking to 

establish ‘‘enterprise license’’ pricing 

packages for proprietary data would be 

required to file those proposed fees with 

the Commission pursuant to Section 

19(b) of the Exchange Act and Rule 19b– 

4 thereunder, and such fees must satisfy 

the statutory standards of being an 

equitable allocation of reasonable fees, 

dues, and other charges,1105 not being 

unfairly discriminatory,1106 and not an 

undue burden on competition.1107

(d) Two-Tiered Market and Potential 

Advantages of Self-Aggregators 

The Commission requested comment 

on the potential latency advantage of 

self-aggregators.1108 One commenter 

stated that self-aggregators’ latency 

advantage would not be material.1109 In 

contrast, another commenter stated that 

the latency advantage would not be 

minor, given the time increments 

currently used in the market and the 

likelihood of finer increments over 

time.1110 The commenter questioned 

whether the Commission had 

considered eliminating the selfaggregator category and requiring all 

market participants to receive data from 

one or more competing consolidators, or 

requiring SROs to delay the provision of 

data to match the latencies introduced 

by competing consolidators.1111 One 

18680 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

market participants to receive data from SIP 

distributors). 

1112See NBIM Letter at 4. 

1113The commenter stated that self-aggregators 

would be able to receive the data necessary to 

generate consolidated market data at the price 

established by the effective national market system 

plan(s), while market participants that receive 

consolidated market data from competing 

consolidators might have to pay a premium over 

that amount to compensate the competing 

consolidator for its services. See MFA Letter at 4. 

1114See, e.g., FINRA Letter at 8; NYSE Letter II 

at 23 (stating that the proposal would continue the 

two-tiered structure, with participants that can 

afford to act as self-aggregators able to obtain and 

use that data faster than those relying on competing 

consolidators); STANY Letter II at 6 (stating that the 

proposal would replace the existing two-tiered 

structure between SIPs and proprietary data feeds 

with, at minimum, a different two-tiered structure 

between self-aggregators and competing 

consolidators); Nasdaq Letter IV at 3 (stating that 

self-aggregation would add market-wide disparities 

in terms of data content and speed). 

1115Self-aggregators could have a cost advantage 

over market participants that receive consolidated 

market data from a competing consolidator because 

self-aggregators will not be required to compensate 

a competing consolidator for its services. At the 

same time, a self-aggregator will need to have the 

systems capability to collect, consolidate, and 

generate consolidated market data, and it may use 

a vendor to establish connectivity to an SRO or to 

perform aggregation or other functions necessary for 

generating consolidated market data. As a result, 

any potential cost advantage of a self-aggregator 

over market participants that purchase consolidated 

market data from competing consolidators may not 

be significant. 

1116See infra Section V.C.4(b). 

1117See MFA Letter at 5. 

1118See infra Section III.E.2(c). 

1119See Governance Order, infra note 1128. 

commenter stated that, because of ‘‘the 

additional inherent latency in thirdparty aggregation,’’ it is unlikely that 

broker-dealer algorithms would be 

competitive without selfaggregation.1112 Another commenter 

stated that the proposal would create a 

tiered market in which broker-dealers 

have systematically better and more 

timely access to market data than 

registered investment advisers and 

noted that self-aggregators would have 

both a speed and potential cost 

advantage over those who receive 

consolidated market data from 

competing consolidators.1113 Other 

commenters similarly argued that the 

proposal would create a two-tiered 

market data system comprising selfaggregators and those who receive data 

from competing consolidators.1114

The Commission acknowledges that, 

unlike self-aggregators, competing 

consolidators would need to transmit 

consolidated market data to their 

customers, but does not believe that this 

would lead to the development of a twotiered market. Latency sensitive 

customers of competing consolidators 

are likely to be co-located in the same 

data centers as their competing 

consolidators, so the transmission time 

between the servers of the competing 

consolidator and its customer will be 

exceedingly small. In many cases, selfaggregators may be located in the same 

data centers, and the potential latency 

differential between a self-aggregator 

and competing consolidator resulting 

from the extra hop that competing 

consolidators add to the process of data 

consolidation and dissemination could 

amount only to the period of time it 

takes to send a message from one server 

(i.e., a competing consolidator’s server) 

that is located in close proximity to 

another server (i.e., a subscriber’s 

server) and connected via a cross 

connect. 

The Commission expects that market 

participants that elect to aggregate 

consolidated market data, whether 

competing consolidators or selfaggregators, will innovate and compete 

aggressively on the efficiency and costeffectiveness of their aggregation 

technologies. The Commission believes 

that the development and 

implementation of the technology to 

collect, consolidate, and generate 

consolidated market data will create 

opportunities for latency efficiencies 

that are of substantially greater 

magnitude than the transmission time 

between the server of a competing 

consolidator and its customer. 

Competing consolidators, for example, 

may benefit from economies of scale 

that allow them to offer a very lowlatency product more cost effectively 

that an individual self-aggregator. In 

some cases, a competing consolidator 

may have a latency or cost advantage, 

and in others a self-aggregator may have 

such advantages.1115 Competition may 

also impact the efficiency of choices.1116

Therefore, the Commission does not 

believe that self-aggregators would 

necessarily have a systematic latency 

advantage over customers of competing 

consolidators. 

(e) Fees Charged by Competing 

Consolidators 

One commenter recommended that 

the Commission implement a 

mechanism for it to review or abrogate 

fees charged by competing consolidators 

to ensure that consolidated market data 

is available on terms that are fair and 

reasonable (i.e., reasonably related to 

costs) if non-broker-dealers are not 

permitted to act as self-aggregators.1117

As discussed above, competing 

consolidator fees will be disclosed on 

Exhibit G to Form CC. The Commission 

believes that competition among 

competing consolidators, along with 

disclosure, will help to ensure that the 

fees charged by competing consolidators 

are fair and reasonable. The fees for the 

data content underlying consolidated 

market data established by the Equity 

Data Plan(s) will be filed under Rule 608 

and must comply with statutory 

standards.1118

E. Amendment to the Effective National 

Market System Plan(s) for NMS Stocks 

Under Rule 614(e) 

The effective national market system 

plan(s) for NMS stocks will continue to 

play an important but modified role in 

the provision of consolidated market 

data to market participants.1119 Today, 

the Equity Data Plans operate the 

exclusive SIPs and therefore, directly 

collect, consolidate, and disseminate 

SIP data. Under the decentralized 

consolidation model, the effective 

national market system plan(s) for NMS 

stocks will no longer operate the 

exclusive SIPs and therefore, will not be 

directly responsible for collecting, 

consolidating, and disseminating 

consolidated market data. The plan(s) 

will, however, continue to develop and 

oversee the national market system for 

consolidated market data. 

1. Proposal 

The Commission proposed Rule 

614(e), to require the participants to the 

effective national market system plan(s) 

for NMS stocks to file an amendment to 

such plan(s) to reflect the decentralized 

consolidation model and the new role 

and functions of the plan(s). The 

Commission proposed several specific 

provisions to be included in the 

amendment, including (1) the proposed 

fees to be charged by the plan(s) for the 

data content underlying consolidated 

market data, (2) a requirement under the 

plan(s) for the application of timestamps 

by the SROs to the data content 

underlying consolidated market data, (3) 

a requirement under the plan for the 

completion of annual assessments by 

the plan participants of the performance 

of competing consolidators, and (4) a 

requirement for the development a list 

of the primary listing markets for each 

NMS stock. In addition, under proposed 

Rule 614(d)(5), the plan(s) would be 

required to develop the monthly 

performance metrics for competing 

consolidators. As proposed, the 

participants would be required to file 

this amendment pursuant to Rule 608 

within 60 calendar days from the 

effective date of Rule 614. 

2. Final Rule and Response to 

Comments 

The Commission continues to believe 

in the importance of the use of effective 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18681 

1120See NYSE Letter II; Nasdaq Letter IV; Better 

Markets Letter. 

1121NYSE Letter II at 26. 

1122 Id. at 27. 

1123Nasdaq Letter IV at 34. This commenter 

stated that the Operating Committee would set fees 

for ‘‘the sale of any proprietary data products of the 

exchanges that provide any of the newly defined 

‘core data.’ ’’ Id. The Operating Committee will not 

be setting fees for proprietary data products. The 

Operating Committee will be required to develop 

the fees for data content underlying consolidated 

market data and subsets of consolidated market 

data. Subject to Section 19(b) of the Exchange Act 

and Rule 19b–4 thereunder, each exchange would 

be responsible for establishing fees for its 

proprietary market data. While some proprietary 

DOB products may be provided by the exchanges 

to competing consolidators and self-aggregators for 

purposes of complying with Rule 603(b), the 

exchanges will have to develop fees for their 

proprietary data and the Operating Committee will 

have to develop the fees for the data content 

underlying consolidated market data. See also 

supra Section III.B.9(b). 

1124MISU policies seek to ensure that a single 

device fee is applied to a data user that receives 

consolidated market data on multiple display 

devices. See, e.g., CTA, CTA Multiple Installations 

for Single Users (MISU) Policy (Apr. 2016), 

available at https://www.ctaplan.com/publicdocs/ 

ctaplan/notifications/trader-update/Policy%20- 

%20MISU%20with%20FAQ.pdf. MISU policies 

will need to be conformed in the decentralized 

consolidation model to reflect that consolidated 

market data users may seek to receive consolidated 

market data through more than one competing 

consolidator and/or access through multiple 

devices. 

1125See 17 CFR 242.600(b)(19)(v) (Rule 

600(b)(19)(v)). 

1126The amendment required by Rule 614(e) does 

not require the plan(s) to include provisions to 

decommission the exclusive SIPs. The exclusive 

SIPs will continue to collect, consolidate and 

disseminate SIP data through the transition period. 

See infra Section III.H. 

1127See infra Section III.F (discussing 

amendment to Rule 1000 of Regulation SCI to apply 

to competing consolidators exceeding a specified 

threshold and the adoption of Rule 614(d)(9) 

establishing a tailored set of operational capability 

and resiliency obligations to all competing 

consolidators during the transition period and to 

other competing consolidators below a threshold 

thereafter). 

1128See Securities Exchange Act Release No. 

88827 (May 6, 2020), 85 FR 28702 (May 13, 2020) 

(‘‘Governance Order’’). 

national market system plan(s) in the 

planning, development, operation, and 

regulation of the national market system 

for the dissemination of consolidated 

market data. The Commission believes 

that joint consideration by the SROs and 

other market participants on the 

Operating Committee of such plan(s) 

will help to foster a consolidated market 

data national market system that is 

prompt, accurate, reliable, and fair and 

furthers the goal of helping to ensure 

that the consolidated market data 

remains useful to investors in the future. 

The Commission received several 

comments on proposed Rule 614(e) and 

the role of the effective national market 

system plan(s) in the decentralized 

consolidation model.1120 One 

commenter questioned the need for the 

effective national market system plan(s) 

saying that retention of the plan(s) was 

‘‘illogical’’ as the SROs would no longer 

be responsible for jointly disseminating 

data.1121 This commenter described the 

current responsibility of the Operating 

Committees to include ‘‘entering into 

agreements with the exclusive 

processors, overseeing the operation of 

the exclusive processors, establishing 

the fees for the consolidated data 

disseminated by the exclusive 

processors, and overseeing the functions 

of the Administrators, which manage 

the subscriber agreements, collect fees 

and distribute revenue to SROs.’’ 1122

Another commenter stated that the 

proposal would increase the power of 

the Operating Committee over the 

‘‘market for market data.’’ 1123

The Commission continues to believe 

that the SROs should have joint 

responsibilities and should continue to 

have an important role in developing, 

operating, and regulating the national 

market system for the dissemination of 

consolidated market data. Therefore, 

Rule 603(b) requires the SROs to act 

jointly pursuant to one or more effective 

national market system plans for the 

dissemination of consolidated market 

data. As noted, the plan(s) will be 

responsible for: (1) Developing the fees 

for the data content underlying 

consolidated market data; (2) the billing 

and the audit process; (3) establishing 

the multiple installations, single users 

(‘‘MISU’’) policy; 1124 (4) allocating 

revenue to the SRO participants that is 

collected for the data content 

underlying consolidated market data; (5) 

considering additional regulatory, 

administrative, or self-regulatory 

organization-specific program data 

elements that may be included as 

consolidated market data in the 

future; 1125 (6) developing the list of 

primary listing exchanges; (7) 

developing the monthly performance 

metrics for competing consolidators; (8) 

assessing the operation of the 

decentralized consolidation model; and 

(9) developing an annual report that 

assesses competing consolidator 

performance for provision to the 

Commission. The Operating Committee 

is equipped under the plan(s) to develop 

the policies and rules necessary for 

developing, operating, and regulating 

the national market system for the 

dissemination of consolidated market 

data to market participants, subject to 

Commission oversight under Rule 608. 

While the SROs may not be acting 

jointly in operating the exclusive SIPs, 

they will continue to act jointly in 

planning, developing, and regulating the 

national market system for the provision 

of consolidated market data. These are 

important responsibilities for the 

operation of the national market system 

and the Commission believes that the 

national market system plan structure 

continues to be an efficient and 

necessary mechanism. Section 

11A(a)(3)(B) of the Exchange Act 

authorizes the Commission, by rule or 

order, to require the SROs to act jointly 

with respect to matters as to which they 

share authority in planning, developing, 

operating, or regulating a national 

market system (or subsystem thereof) or 

one or more facilities thereof to facilitate 

the establishment of a national market 

system. 

Rule 614(e) requires the effective 

national market system plan(s) to file an 

amendment to conform the plan(s) to 

the decentralized consolidation model, 

including several specified 

provisions.1126 The Commission is 

extending the date of the filing for the 

participants to the effective national 

market system plan(s) to file the 

amendment to the plan from within 60 

calendar days to within 150 calendar 

days, after the effectiveness of Rule 614. 

The additional time will allow the 

Operating Committee of the existing 

Equity Data Plans or of the New 

Consolidated Data Plan (if it has 

replaced the existing plans) to develop 

and file the plan amendment. 

The Commission is adopting Rule 

614(e) substantially as proposed with 

modifications to account for the 

establishment of a Regulation SCI 

competing consolidator threshold, 

which is discussed below,1127 to require 

the SROs to apply time stamps to the 

data content underlying consolidated 

market data, and for the Commission to 

make public the annual assessment on 

the Commission’s website. Further, the 

Commission received other comments 

on Rule 614(e) and the required 

amendment. These comments are 

discussed below. 

(a) Governance Order 

On May 6, 2020, the Commission 

issued an order directing the SROs to 

develop and file with the Commission a 

new effective national market system 

plan that would combine the existing 

three Equity Data Plans into single 

national market system plan, the New 

Consolidated Data Plan.1128 The New 

Consolidated Data Plan was filed with 

the Commission pursuant to Rule 608 

on August 11, 2020, and contains 

several provisions related to its 

governance that are not in the existing 

Equity Data Plan, including establishing 

a new Operating Committee structure 

18682 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1129New Consolidated Data Plan Notice, supra 

note 40. 

1130See Clearpool Letter; Fidelity Letter; MFA 

Letter; RBC Letter; Schwab Letter; State Street 

Letter. 

1131See letter from Joan C. Conley, Senior Vice 

President and Corporate Secretary, Nasdaq, to 

Vanessa Countryman, Secretary, Commission, dated 

Feb. 28, 2020, (‘‘Nasdaq Letter I’’); Cboe Letter at 

4; NYSE Letter II at 12. 

1132The fees for the data content underlying 

consolidated market data will be proposed and filed 

with the Commission under Rule 608 of Regulation 

NMS. The effective national market system plan(s) 

will not develop fees for individual SRO data. If 

competing consolidators wish to receive SRO data 

that is beyond what is required to be provided by 

the SROs pursuant to Rule 603(b), they will have 

access to such data pursuant to individual SRO 

rules and fees. 

1133Under Rule 603(b), each SRO must provide 

its NMS information, including all data necessary 

to generate 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 would be 

responsible for establishing the connectivity and 

transmission services they use to connect to the 

SROs. 

1134See Rule 603(a) of Regulation NMS, 17 CFR 

242.603(a). See infra Section III.E.2(c) for a 

discussion of the statutory standards for the data 

content underlying consolidated market data. 

1135See IEX Letter at 8. See also Clearpool Letter 

at 3 (stating that it hoped the new governance 

structure of the effective national market system 

plan(s) would provide additional checks into 

controlling market data costs and help to ensure the 

reasonableness of such fees). 

1136 IEX Letter at 8. This commenter also 

suggested alternatives such as clarifying that the 

exchanges would not be permitted to impose a 

separate set of connectivity fees to competing 

consolidators and self-aggregators or charge fees for 

connectivity that are different than those charged to 

proprietary data customers. Connectivity fees will 

be developed by the exchanges. The SROs will need 

to develop new connectivity fees for competing 

consolidators and self-aggregators to receive the 

data necessary to generate consolidated market 

data. New connectivity fees will have to reflect that 

the SROs are only providing data to competing 

consolidators and self-aggregators with such 

connectivity. Further, as discussed below, the fees 

proposed by the SROs should not contain 

redistribution fees for competing consolidators 

because this would hinder their ability to compete. 

1137See NYSE Letter II at 28; Nasdaq Letter IV at 

34; Cboe Letter at 27; ACTIV Financial Letter at 3. 

One commenter offered suggestions as to the 

governance of the effective national market system 

plan(s). See Better Markets Letter at 7. The 

Commission has not proposed further governance 

changes in this release. 

1138 ICI Letter at 11. 

1139See Cboe Letter at 27; Nasdaq Letter IV at 10. 

1140The commenter stated that ‘‘as a practical 

matter order-by-order depth-of-book products are 

likely the only way to enable the creation of 

consolidated market data.’’ Cboe Letter at 28. 

1141See Nasdaq Letter IV at 10. 

1142See Cboe Letter at 28. 

1143The Commission believes that the use of 

effective national market system plan(s), along with 

with non-SRO members, a new voting 

structure for SRO members as well as 

non-SRO members, new conflicts of 

interest and confidentiality policies, the 

retention of an independent plan 

administrator, and the use of executive 

sessions by the Operating 

Committee.1129 The Commission 

received several comments regarding 

commenters’ views of the relationship 

between the Governance Order and the 

Market Data Infrastructure Proposing 

Release, with several commenters 

supporting the Governance Order,1130

but others stating that the Governance 

Order and the Proposing Release are 

contradictory or inconsistent.1131 The 

Governance Order and the Proposing 

Release are not contradictory or 

inconsistent. Rather, the two proposals 

address distinct aspects of the exclusive 

SIPs and the national market system for 

NMS information. The Governance 

Order addresses the governance 

structure of the Equity Data Plans and 

particularly concerns about certain 

conflicts of interest and the allocation of 

voting power with respect to these 

Plans. The amendments address the 

content of NMS information and the 

manner in which it is collected, 

consolidated, and disseminated under 

the rules of the national market system. 

(b) Comments on the Plan’s Role in 

Developing Fees for Data Content 

Underlying Consolidated Market Data 

While the effective national market 

system plan(s) will no longer operate 

the exclusive SIPs, the Operating 

Committee of the effective national 

market system plan(s) for NMS stocks 

will continue to develop and file with 

the Commission the fees associated with 

the NMS information that is required to 

be collected, consolidated, and 

disseminated, i.e., the data content 

underlying consolidated market data. 

Specifically, the Operating Committee 

will need to propose the new fees that 

will be charged for the quotation and 

transaction information that is necessary 

to generate consolidated market data 

that is required to be made available by 

the SROs under Rule 603(b) to 

competing consolidators and selfaggregators.1132 The proposed new fees 

will need to reflect the following: (i) 

That consolidated market data includes 

additional new content (i.e., 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) is no longer operating the 

exclusive SIPs and is no longer 

performing collection, consolidation, 

and dissemination 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.1133 The proposed new fees for 

the data underlying consolidated market 

data must be fair and reasonable and not 

unfairly discriminatory 1134 and must be 

filed with the Commission pursuant to 

Rule 608 under the Exchange Act. 

Several commenters supported the 

proposal to retain the use of the 

effective national market system plan(s) 

to propose fees for the data content 

underlying consolidated market data in 

the decentralized consolidation 

model.1135 One commenter suggested 

that the effective national market system 

plan(s) also propose fees for 

connectivity ‘‘in order to avoid the 

imposition of fees that are substantially 

disproportionate to the cost of providing 

these connectivity methods.’’ 1136

Four commenters questioned the role 

of the Operating Committee of the 

effective national market system plan(s) 

in developing fees for the data content 

underlying consolidated market 

data.1137 One commenter stated that the 

exchanges would ‘‘continue to have 

pricing power over a fundamental 

component of the NMS.’’ 1138 Two 

commenters argued that such a 

responsibility would be inconsistent 

with Section 19(b) of the Exchange 

Act.1139 Specifically, one commenter 

stated that fees for exchange facilities, 

including proprietary market data 

products, are considered part of the 

SROs’ rules and subject to the Section 

19(b) rule filing process.1140 The other 

commenter stated that the Exchange Act 

authorizes the exchanges to set their 

own fees for market data products.1141

One of the commenters further pointed 

out that an SRO would run afoul of the 

Exchange Act if it charged certain 

classes of customers a price for its 

proprietary products that is different 

from the pricing established pursuant to 

its effective fee schedule.1142

The Commission believes that the 

effective national market system plan(s) 

should continue to have an important 

role in the operation, development, and 

regulation of the national market system 

for the collection, consolidation, and 

dissemination of consolidated market 

data. The development, and proposal 

under Rule 608, of the fees for the data 

underlying consolidated market data, 

along with the other responsibilities 

described above, are critical for the 

successful operation of the national 

market system. The development of the 

fees for information required to be made 

available by the SROs pursuant to Rule 

603(b) of Regulation NMS to competing 

consolidators and self-aggregators is an 

integral component of the national 

market system.1143

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18683 

the new governance structure required by the 

Governance Order, will help to ensure broad 

participation in the development, operation, and 

regulation of the national market system. See infra 

note 1185 and accompanying text. 

1144One commenter stated that the Operating 

Committee would be establishing fees for exchange 

proprietary data products, which the commenter 

stated would greatly increase the power of the 

Operating Committee. See Nasdaq Letter IV at 34. 

However, the Operating Committee will only be 

developing fees for data content underlying 

consolidated market data products, not the 

exchanges’ fees for proprietary data products. 

1145See ACTIV Financial Letter at 3. 

1146 Id. See also Schwab Letter at 6 (stating that 

competing consolidators would be unlikely to 

commit to a business without confidence that the 

prices charged do not put then at a competitive 

disadvantage); ICI Letter at 11. 

1147See Effective-Upon-Filing Adopting Release, 

supra note 17. 

1148See Nasdaq Letter IV at 34. This commenter 

also suggested that the Operating Committee would 

reduce fees for proprietary market data, which the 

commenter stated would limit access to new 

proprietary data products. The commenter 

continued that this would be inconsistent with 

Section 11A(a)(2) of the Exchange Act by 

undermining the public interest and protection of 

investors. The Operating Committee would not be 

establishing fees for proprietary data products. 

1149See Nasdaq Letter IV at 34. 

1150As described below, the proposed new fees 

for the data content underlying consolidated market 

data must be fair and reasonable and not unfairly 

discriminatory and must be filed with the 

Commission pursuant to Rule 608 under the 

Exchange Act. See Section III.E.2(c). 

1151See Cboe Letter at 29. 

1152See NYSE Letter II at 27. 

1153 Id. 

The Equity Data Plans have been 

developing fees for SIP data for many 

years. It is one of their main 

responsibilities. The Commission 

disagrees with comments that the 

plan(s) will be developing fees for 

exchange data and that the development 

of fees by the plan(s) will be 

inconsistent with Sections 6 and 19 of 

the Exchange Act. The Commission is 

exercising its authority under Section 

11A of the Exchange Act to expand the 

content of core data to include new data 

elements that the Commission believes 

are necessary to enhance the usefulness 

of the NMS information that is 

disseminated within the national market 

system. Therefore, the fees for data 

content underlying consolidated market 

data, as now defined, are subject to the 

national market system process that has 

been established—specifically the 

effective national market system plan(s) 

will develop the fees for data content 

underlying consolidated market data 

and seek Commission approval for such 

fees pursuant to the notice and 

comment process under Rule 608. The 

amended rules, however, do not permit 

the plan(s) to develop fees for 

connectivity to the individual SROs. 

These fees must be filed by individual 

SROs with the Commission and 

approved pursuant to Section 19(b) of 

the Exchange Act and Rule 19b–4 

thereunder, and are subject to the 

substantive requirements of Sections 6 

and 15A of the Exchange Act, 

respectively for exchanges and national 

securities associations, as well as 

Section 19(b) of the Exchange Act. 

The plan(s) will not be developing 

fees for an SRO’s proprietary data 

products.1144 As the Commission 

discussed in the Proposing Release, the 

SROs may continue to develop 

proprietary data products and must 

propose fees for such products subject 

to the requirements of Sections 6(b), 

15A(b), and 19(b) of the Exchange Act. 

One commenter expressed concern 

about the ability of the SROs, some of 

which may become competing 

consolidators, to develop fees.1145 This 

commenter noted the new governance 

provisions on voting but stated that if 

the SROs could arbitrarily set fees 

charged to their competitors and ‘‘jam 

them through’’ the Operating Committee 

then no firm would be able to compete 

effectively and it would be doubtful that 

any firm would become a competing 

consolidator without assurances that the 

fees would be fair, reasonable, and do 

not unduly benefit one participant.1146

The fees for data content underlying 

consolidated market data will be filed 

with the Commission pursuant to Rule 

608. These fees will be subject to the 

procedure set forth in Rule 608(b)(1) 

and (2), including an opportunity for 

public comment and Commission 

approval by order before such fees can 

become effective. This regulatory 

process set forth in Rule 608 allows 

commenters to provide their views 

about any proposed fee before they are 

charged and allows the Commission to 

consider commenters’ views before such 

fees becomes effective.1147

One commenter stated that the 

Operating Committee would have no 

experience in undertaking a cost 

allocation between the data underlying 

consolidated market data and 

proprietary data.1148 This commenter 

stated that directing the Operating 

Committee to engage in cost allocation 

without standards is arbitrary because 

the Operating Committee would be 

unable to predict whether its cost 

allocation decisions and permissible 

rates of return would be consistent with 

the Exchange Act.1149

The Commission disagrees with the 

commenter that the Operating 

Committee is ill-suited to allocate costs 

to develop fees for the data content 

underlying consolidated market data or 

that the exchanges cannot develop 

reasonable fees for proprietary data 

products that contain data content 

underlying consolidated market data. 

The Operating Committee(s) have plenty 

of experience in developing fees for SIP 

data that contain different cost 

elements, and any future Operating 

Committee, which will comprise many 

of the same participants, should be wellsuited to develop fees for the data 

content underlying consolidated market 

data, with the expectation that the 

Operating Committee can leverage the 

experience and knowledge from 

operating today’s Equity Data Plans. The 

SROs and the Equity Data Plans each 

develop fees for market data—the SROs 

develop fees for proprietary data and the 

Equity Data Plans develop fees for SIP 

data. The Operating Committees have to 

evaluate, develop, and propose SIP data 

fees and the exchanges have to evaluate, 

develop, and propose proprietary data 

fees for the proprietary data products 

that they decide to offer. This dynamic 

will not change in the decentralized 

consolidation model. The effective 

national market system plan(s) will 

develop fees for the data content 

underlying consolidated market 

data,1150 and the SROs will develop fees 

for proprietary data, each of which may 

contain some of the same underlying 

data content. 

One commenter stated that the 

proposal to retain the use of the 

effective national market system plan(s) 

is at odds with how the Commission 

considered a competing consolidator 

model in the context of adopting 

Regulation NMS.1151 Another 

commenter suggested that the 

Commission rethink the use of effective 

national market system plan(s) and 

instead allow the exchanges to develop 

their individual fees for data content 

underlying consolidated market 

data.1152 This commenter questioned 

the need for the effective national 

market system plan(s) because the SROs 

would no longer be jointly operating an 

exclusive SIP and therefore no longer 

involved in the collection, 

consolidation, or dissemination of 

consolidated market data. The 

commenter stated that it would be more 

efficient and would eliminate the need 

for the plan(s) to determine fees for a 

competitor’s data.1153

As to the questions about the 

Commission’s past analysis of a 

competing consolidator model that was 

discussed in the context of adopting 

Regulation NMS, the Commission was 

analyzing a different competing 

consolidator model—one that would 

have eliminated the use of effective 

national market system plan(s). The 

18684 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1154See Securities Exchange Act Release No. 

49325 (Feb. 26, 2004), 69 FR 11126, 78 (Mar. 9, 

2004) (‘‘Regulation NMS Proposing Release’’). 

1155Sections 11A(c)(1)(C) and 11A(c)(1)(D) and 

Rule 603(a) of Regulation NMS. 

1156See also supra note 826. 

1157See Rule 603(b) of Regulation NMS. 

1158Historically, the Commission has stated that 

one method for assessing the fairness and 

reasonableness of fees charged by an exclusive 

processor, as defined in Exchange Act Section 

3(a)(22)(B), is to show a reasonable relation to the 

costs. See Market Information Concept Release, 

supra note 22, at 70627 (‘‘[T]he 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.’’). 

See also Proposing Release at 16770, note 439 and 

accompanying text. Several exchanges have filed 

proposed connectivity fees and have provided 

information about costs related to such connectivity 

to demonstrate compliance with statutory 

standards. Cf. Securities Exchange Act Release Nos. 

86626 (Aug. 9, 2019), 84 FR 41793 (Aug. 15, 2019) 

(SR–IEX–2019–07); 87875 (Dec. 31, 2019), 85 FR 

770 (Jan. 7, 2020) (SR–MIAX–2019–51); 87876 (Dec. 

31, 2019), 85 FR 757 (Jan. 7, 2020) (SR–PEARL– 

2019–36); 87877 (Dec. 31, 2019), 85 FR 738 (Jan. 7, 

2020) (SR–EMERALD–2019–39); 88161 (Feb. 11, 

2020), 85 FR 8968 (Feb. 18, 2020) (SR–BOX–2020– 

03). 

1159See, e.g., SIFMA Letter; Nasdaq Letter IV; 

Cboe Letter; NYSE Letter II; BlackRock Letter; 

Fidelity Letter; State Street Letter; Schwab Letter; 

ICI Letter; MFA Letter; Citadel Letter; Virtu Letter; 

AHSAT Letter; Proof Trading Letter; Wharton 

Letter; ACTIV Financial Letter; Clearpool Letter; 

STANY Letter II. 

1160See, e.g., STANY Letter II; NYSE Letter II; 

Cboe Letter; Schwab Letter; IDS Letter I; ACTIV 

Financial Letter. 

1161See STANY Letter II; IDS Letter I; ACTIV 

Financial Letter. 

1162See NYSE Letter II; Cboe Letter. 

1163See supra note 649 and accompanying text. 

Regulation NMS competing consolidator 

alternative eliminated the use of 

effective national market system plans, 

and the Commission expressed concerns 

about the lack of competitive forces in 

setting data fees because each SRO 

would be establishing its own 

individual fees for NMS information. 

The Commission stated that payment of 

every SRO’s fees would be mandatory 

and would afford little room for 

competitive forces to influence the level 

of fees. Further, the Commission stated 

that such a model would require it to 

review ‘‘at least ten separate fees’’ for 

the individual SROs and that it was 

unlikely that any SRO would 

voluntarily propose to lower its own 

fees. The Commission also had stated 

that the fees established under the 

Equity Data Plans reflected broad 

industry consensus and that such 

‘‘consensus underlying a single fee for a 

Network’s stream of data would be 

lost’’ 1154 in the competing consolidator 

model that it was then analyzing. 

In contrast, the decentralized 

consolidation model that the 

Commission proposed, and as adopted, 

retains the effective national market 

system plan structure. The Commission 

believes today, as it did when it was 

considering Regulation NMS, that 

elimination of the use of an effective 

national market system plan(s) would 

not further the goals of the national 

market system because the Commission 

still believes that the effective national 

market system plan structure is the 

appropriate method for developing, 

operating, and regulating the national 

market system. The suggestion that the 

Commission eliminate the effective 

national market system plan(s) structure 

and allow the SROs to develop 

individual fees for their data content 

that is used to develop consolidated 

market data was dismissed by the 

Commission when it considered the 

competing consolidator proposal in the 

context of Regulation NMS. The 

Commission believes that the same 

shortcomings, described above, will 

occur similarly today if the plan(s) were 

not developing the fees for the data 

underlying consolidated market data. 

(c) Comments on Fees for Consolidated 

Market Data 

There will be several fee components 

related to the collection, consolidation 

and dissemination of consolidated 

market data and consolidated market 

data products. The effective national 

market system plan(s) will propose and 

file with the Commission, pursuant to 

Rule 608, the fees for the data content 

underlying consolidated market data. 

The fees for the data content underlying 

consolidated market data must satisfy 

the statutory standards of being fair, 

reasonable and not unreasonably 

discriminatory.1155 As described further 

below, the Commission has historically 

assessed fees for data such as the data 

content underlying consolidated market 

data using a reasonably related to cost 

standard. 

Further, the SROs will have to 

develop and propose their own fees for 

connectivity. Individual SRO 

connectivity fees must be filed with the 

Commission pursuant to Section 19(b) 

of the Exchange Act and Rule 19b–4 

thereunder and satisfy the statutory 

requirements under Sections 6 and 15A 

of the Exchange Act.1156 Connectivity to 

all of the SROs for purposes of receiving 

the data content underlying 

consolidated market data is necessary 

under Rule 603(b) and the SROs are the 

sole providers of such access. Because 

of the mandatory nature of connectivity 

to all of the SROs for purposes of 

providing the information necessary to 

generate consolidated market data,1157

the Commission believes that one 

method for demonstrating that such fees 

are fair and reasonable and not 

unreasonably discriminatory is by 

demonstrating that they are reasonably 

related to costs.1158

Finally, competing consolidators will 

establish fees for their consolidated 

market data products. These fees will be 

disclosed on Exhibit G of Form CC. 

Competing consolidators’ fees for their 

services related consolidated market 

data products may include fees for 

aggregation and generation of 

consolidated market data products and 

transmission of such products to 

subscribers. Competing consolidators’ 

fees may include the fees for the data 

content underlying consolidated market 

data as well as fees for connectivity to 

the SROs, or the fees for data content 

underlying consolidated market data 

may be charged directly to the end 

users. 

The Commission received several 

comments on the anticipated fees for the 

data content underlying consolidated 

market data.1159 Some commenters 

stated that understanding the 

anticipated fees for data content 

underlying consolidated market data is 

necessary to analyzing the implications 

of the decentralized consolidation 

model 1160 and necessary to evaluating 

whether entities would decide to make 

the business decision to act as a 

competing consolidator.1161 Two 

commenters argued that the failure to 

describe anticipated fees violates the 

APA by denying commenters the ability 

to assess the proposal and impairing the 

Commission in its ability to conduct a 

cost-benefit analysis.1162

The Commission disagrees. Fees 

proposed by the plan(s) for the data 

content underlying consolidated market 

data will be a fixed cost that will be 

imposed on all competing consolidators 

and self-aggregators. These entities can 

develop business plans on whether to 

enter this business based on other 

information, such as the technology that 

will be necessary to aggregate, generate, 

and disseminate consolidated market 

data, and their expected subscribers. 

The Commission believes that there is 

sufficient information available to 

potential entrants to assess the costs and 

benefits of acting as a competing 

consolidator.1163

Further, in the Proposing Release, the 

Commission described the anticipated 

new fees for the data underlying 

consolidated market data as needing to 

reflect the following: (i) That 

consolidated market data includes new 

content described above, including 

depth of book data, auction information, 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18685 

1164See supra Section II.B. 

1165See AHSAT Letter (‘‘The Commission should 

take care that SROs do not design their fee structure 

to unduly target competing consolidators in 

practice, especially when SROs are likely to operate 

their own competing consolidators . . . In this way 

profit-motivated SROs that are allowed to charge 

competing consolidators might find ways to make 

them uneconomic, thereby eliminating the 

competitiveness presented by the new consolidated 

data feeds.’’). 

1166See infra note 1172 and accompanying text. 

1167See BlackRock Letter; Fidelity Letter; State 

Street Letter; ICI Letter; Virtu Letter; SIFMA Letter. 1168See BlackRock Letter; ICI Letter. 1169See Schwab Letter; ICI Letter; SIFMA Letter; 

AHSAT Letter. One commenter argued that current 

market data fees have no relationship to cost and 

that the proposal provided no mechanism to 

connect SIP fees to cost. See Proof Trading Letter. 1170See Nasdaq Letter IV at 9, 22. 1171 Id. 1172Currently, 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. See 15 U.S.C. 78k– 

1(c)(1)(C). See also 17 CFR 242.603(a)(1). 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. See 15 U.S.C. 78k– 

1(c)(1)(D). See also 17 CFR 242.603(a)(2). As 

competing consolidators will be securities 

information processors, Exchange Act Section 

11(A)(c)(1)(C) will continue to apply. Similarly, 

self-aggregators are broker-dealers, SROs, or RIAs 

(i.e., others) and thus Exchange Act Section 

11A(c)(1)(D) will continue to apply. 

1173See 15 U.S.C. 78k–1(c). See also Rules 

603(a)(1) and (2), 608 of Regulation NMS, 17 CFR 

242.603(a)(1) and (2), 608; Bloomberg Order, supra 

note 22, at 11–12. 1174Bloomberg Order, supra note 22, at 15; cf. 17 

CFR 201.700, Rule of Practice 700 (providing that 

the burden of demonstrating that a proposed rule 

change satisfies statutory standards is on the selfregulatory organization that proposed the rule 

change). 

1175See Proposing Release, 85 FR at 16770. 

1176Market Information Concept Release, supra 

note 22, at 70627. An ‘‘exclusive processor’’ is 

defined in Section 3(a)(22)(B) of the Exchange Act 

and includes 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 

quotations or transactions on or effected or made by 

means of any facility of such exchange or 

quotations distributed or published by means of any 

electronic system operated or controlled by such 

association. 

1177See Securities Exchange Act Release No. 

59039 (Dec. 2, 2008), 73 FR 74770, 74782 (Dec. 9, 

2008) (File No. SR–NYSEArca–2006–21). 

1178Bloomberg Order, supra note 22, at 15 & n. 

63. 

1179See Proposing Release, 85 FR at 16770. 

and additional information on orders of 

sizes smaller than 100 shares; 1164 (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. 

In addition, the Commission believes 

that the fees for the data content 

underlying consolidated market data 

should not include redistribution fees 

for competing consolidators.1165

Competing consolidators will take the 

place of the exclusive SIPs in the 

dissemination of consolidated market 

data, which today do not pay 

redistribution fees for the consolidation 

and dissemination of SIP data. The 

Commission believes imposing 

redistribution fees on data content 

underlying consolidated market data 

that will be disseminated by competing 

consolidators would be difficult to 

reconcile with statutory standards of 

being fair and reasonable and not 

unreasonably discriminatory in the new 

decentralized model.1166 Under the new 

decentralized consolidation model, selfaggregators also will directly receive the 

data content necessary for generating 

consolidated market data from the SROs 

and, because by definition they are 

limited to using the data for internal 

purposes, would not be subject to fees 

for redistributing such consolidated 

market data. If the plan(s) proposed to 

impose redistribution fees on the data 

content underlying consolidated market 

data, the Commission would be 

concerned that competing consolidators 

could be subject to unreasonable 

discrimination as they would be 

required to pay higher fees for such data 

than self-aggregators would pay for the 

same data. The Equity Data Plans have 

not imposed redistribution fees on the 

exclusive SIPs and the Commission 

believes that such plan(s) should not 

impose such fees on the entities that 

will distribute consolidated market data 

in the decentralized consolidation 

model, i.e., competing consolidators. 

Several commenters stated that the 

Commission should scrutinize SRO fees 

for market data.1167 Some commenters 

requested the Commission review 

market data fees to help to ensure that 

they are fair and reasonable,1168 while a 

few stated that market data fees should 

be cost-based.1169 One commenter, 

however, stated that the proposal 

establishes a rate-making board and 

would impose cost-based regulation on 

the sale of consolidated market data.1170

This commenter stated that the proposal 

failed to provide guidance on how to 

determine the cost of market data 

especially in light of exchange practices 

of allocating costs across products.1171

In the Proposing Release, the 

Commission explained that it seeks to 

ensure that consolidated market data is 

widely available for reasonable fees.1172

The Commission must assess the 

proposed fees for data content 

underlying consolidated market data 

and determine whether they are fair and 

reasonable, and not unreasonably 

discriminatory.1173 To do this, the 

Commission must have ‘‘sufficient 

information before it to satisfy its 

statutorily mandated review function’’— 

that the fees meet the statutory 

standard.1174 The Commission stated 

that fees for consolidated SIP data can 

be shown to be fair and reasonable if 

they are reasonably related to costs.1175

The Commission cited the Market 

Information Concept Release, in which 

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.’’ 1176 The 

Commission later explained in the 

context of approving an SRO fee filing 

that, because core data must be 

purchased, their fees are less sensitive 

to competitive forces; 1177 therefore, 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.’’ 1178 The Commission then stated 

that the proposal did not change the 

mandatory nature of the provision of the 

data necessary to generate consolidated 

market data by the SROs.1179

These standards have been previously 

articulated by the Commission; they are 

not new. The Commission was not 

proposing a ‘‘new cost-based 

regulation’’ or a new ‘‘rate-making 

board.’’ The Equity Data Plans have 

been establishing fees for SIP data for 

many years. The Commission proposed 

to utilize the current plan mechanism 

for establishing fees, subject to 

applicable statutory standards and 

18686 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1180See supra notes 1173–1179 and 

accompanying text. 

1181See AHSAT Letter at 2. 

1182See Clearpool Letter at 3 (‘‘It will therefore be 

important for the Commission to ensure that robust 

safeguards are in place under the new regime to 

control market data costs and prevent exchanges 

from just increasing market data prices to make up 

for any loss of revenue due to the proposed 

requirement to provide the new core data to 

competing consolidators.’’). 

1183See Governance Order, supra note 1128. 

1184See Effective-Upon-Filing Adopting Release, 

supra note 17. 

1185 Governance Order, supra note 1128. 

1186See Clearpool Letter; Schwab Letter; Fidelity 

Letter; Nasdaq Letter IV; Citadel Letter. 

1187See Schwab Letter at 6. 

1188See Effective-Upon-Filing Adopting Release, 

supra note 17. 

1189See Fidelity Letter at 8. 

1190See Nasdaq Letter IV at 29. 

1191 ICI Letter at 11. 

1192See infra Section III.H.2. 

1193See supra note 1172 and accompanying text. 

In the Market Information Concept Release, the 

Commission said that ‘‘the total amount of market 

information revenues should remain reasonably 

related to the cost of market information.’’ Market 

Information Concept Release, supra note 22, at 28. 

1194See Proposing Release, 85 FR at 16770; supra 

note 1172 and accompanying text. See also supra 

note 1158. 

1195AHSAT Letter at 2. 

1196 Id. 

regulatory requirements.1180 Under Rule 

603(b), the SROs are required to make 

available all data that is necessary to 

generate consolidated market data. The 

Commission has determined that it is 

necessary to disseminate this data 

within the national market system. The 

Commission believes that consolidated 

market data will significantly enhance 

the ability of market participants to 

trade competitively and efficiently and 

will indirectly benefit investors, even if 

they do not directly consume all of the 

new data elements of consolidated 

market data, by facilitating executing 

broker-dealers’ access to information. 

One commenter cautioned the 

Commission to ensure that fee 

structures are not designed to unduly 

target competing consolidators in 

practice, especially if one or more SROs 

become competing consolidators.1181

All fees for the data underlying 

consolidated market data must satisfy 

the statutory standards, including not 

being unreasonably discriminatory. A 

fee that unduly ‘‘targets’’ competing 

consolidators in an unfair or 

unreasonable manner would not satisfy 

statutory requirements. 

One commenter stated that it hoped 

that in a new competitive model that 

overall costs for broker-dealers would be 

lower. The commenter, however, stated 

that broker-dealers would still need to 

purchase proprietary data to get 

information that is not included in 

consolidated market data. Therefore, the 

commenter suggested that the 

Commission ensure that safeguards are 

in place to keep exchanges from 

increasing market data prices to recoup 

revenue lost from the requirement to 

provide new core data to competing 

consolidators.1182 The Commission will 

analyze fees for data content underlying 

consolidated market data consistent 

with the standards set forth above. The 

new governance structure required by 

the Governance Order,1183 as well as the 

recently adopted Effective-Upon-Filing 

Amendments,1184 will provide 

additional opportunities for interested 

market participants to participate in 

establishing effective national market 

system plan fees. In the Governance 

Order, the Commission stated that ‘‘a 

more diverse set of perspectives from 

full voting members of the operating 

committee of the New Consolidated 

Data Plan would improve the 

governance structure of the SIPs and 

help to ensure that the [O]perating 

[C]ommittee benefits from these views 

before it takes action or files plan 

amendments with the 

Commission.’’ 1185 Further, pursuant to 

the Effective-Upon-Filing Amendments, 

fees established and proposed by the 

effective national market system plan(s) 

are no longer effective upon filing but 

must be published for public comment 

and approved by the Commission before 

they can take effect. 

Several commenters discussed 

whether market data fees would be 

lower in a decentralized consolidation 

model.1186 One commenter suggested 

that if competitive forces fail to 

materialize and drive fees for 

consolidated market data down that the 

Commission should adopt a rule to 

enable it to review consolidated market 

data fees for fairness, reasonableness, 

and non-discriminatory pricing.1187

Another commenter stated that the New 

Consolidated Data Plan, the EffectiveUpon-Filing Amendments,1188 the 

Commission’s continued scrutiny of 

exchange fee proposals, and public 

disclosure of SRO costs were necessary 

predicates to control market data 

costs.1189 Fees for the data content 

underlying consolidated market data 

must be filed with the Commission 

pursuant to Rule 608 and must satisfy 

statutory standards. 

In addition, one commenter stated 

that the Commission failed to analyze 

how exchanges have incentives to cut 

trading fees in order to win market share 

and increase market data revenues. The 

commenter stated that the proposal 

would eliminate the incentive to reduce 

trading fees. Further, this commenter 

argued that the Commission failed to 

consider the all-in price of trading.1190

However, another commenter stated that 

market data fees comprise ‘‘a largerthan-ever share’’ of overall transaction 

costs and urged the Commission to 

ensure that any new fees are consistent 

with the Exchange Act.1191

The Commission is not considering 

the proposed fees for data content 

underlying consolidated market data in 

this release; they have not been 

developed or filed with the 

Commission, as required pursuant to 

Rule 608. The effective national market 

system plan(s) will have to develop and 

file such proposed fees with the 

Commission pursuant to Rule 608 

within 150 days of the effectiveness of 

Rule 614, as noted above 1192 and they 

must satisfy statutory standards.1193

As discussed above, the Commission 

believes that there will be downward 

pressure on the fees for the data content 

underlying consolidated market data as 

compared to fees for proprietary data. 

The proposed new fees for the data 

content underlying consolidated market 

data, while needing to reflect additional 

new content, will be evaluated by the 

Commission for compliance with 

statutory standards and one way to 

assess compliance is to show they are 

reasonably related to costs.1194 In 

addition, proposed SRO connectivity 

fees will have to satisfy statutory 

standards in a similar manner to reflect 

the mandatory nature of such 

connectivity. Finally, the fees 

established by competing consolidators 

for their consolidated market data 

products will be subject to competitive 

market forces in the aggregation and 

transmission of such data. 

One commenter stated its ‘‘strong 

opinion’’ that ‘‘the regulated privilege of 

order protection [pursuant to Rule 611] 

be accompanied by a requirement to 

openly disseminate information 

regarding those orders at no revenue to 

the SRO or liquidity provider.’’ 1195 This 

commenter stated that this could lead to 

‘‘higher net transaction fees or even 

order placement fees,’’ but the 

commenter said that ‘‘competitive forces 

are working better with respect to net 

transaction fees than market data 

fees.’’ 1196 In the alternative, the 

commenter suggested that competing 

consolidators pay the SROs their 

marginal cost to disseminate data but 

also acknowledged that marginal costs 

may be difficult to calculate. Further, 

the commenter stated that ‘‘[t]he 

marginal cost is likely to strictly focus 

on the modest networking costs of an 

additional multicast recipient, and to 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18687 

1197 Id. 

1198See Fidelity Letter; State Street Letter; 

Schwab Letter; SIFMA Letter; Committee on Capital 

Markets Letter; ACTIV Financial Letter at 3. 

1199See Committee on Capital Markets Regulation 

Letter at 3. 

1200See supra note 1174 and accompanying text. 

1201See Proposing Release, 85 FR at n. 616 and 

accompanying text. 

1202See, 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/ 

data-insights/stock-quotes-and-trade-data-one-sizedoesnt-fit-all. The NYSE proposed offering different 

levels of services based on the needs of market 

participants (‘‘NYSE SIP Tiers Proposal’’). The 

Operating Committee could develop different 

products that utilize consolidated market data 

components and propose the relevant fees for such 

products. See also Feb. NYSE Letter. 

1203As described above, the Commission is 

adopting a new definition of consolidated market 

data products, which will allow competing 

consolidators to develop market data product 

offerings that contain all consolidated market data 

or subset thereof. See Rule 600(b)(20); Section 

II.B.2. 

1204See NYSE Letter II at 4. 

1205See id. 

1206See NYSE SIP Tiers Proposal, supra note 

1202. 

1207 Id. 

1208 Id. 

1209See Governance Order, supra note 1128. 

1210See Effective-Upon-Filing Adopting Release, 

supra note 17. 

1211See MEMX Letter at 8. 

1212See id. 

1213See Nasdaq Letter IV at 37. See also id. at 39– 

40 and 60, n. 149 (stating that the proposal fails to 

address how the revenue allocation formula 

adopted as part of Regulation NMS and the new 

Continued 

exclude SRO software development or 

broader marketplace costs.’’ 1197

This comment relates to a future 

proposed fee amendment. The 

Commission has not proposed to modify 

the revenue formula or set fees for data 

content underlying consolidated market 

data. 

(d) Comments on Transparency of 

Market Data Fees 

Several commenters stated that there 

should be enhanced transparency 

around market data fees.1198 One 

commenter suggested that the 

Commission require exchanges to 

publicly disclose, on a periodic basis, 

the cost of the equity market data 

content that they sell to competing 

consolidators in order to allow the 

Commission and the public to ensure 

that the fees for this data are fair and 

reasonable.1199

The Commission has reviewed these 

comments and reiterates that any fees 

for data content underlying 

consolidated market data, including 

subsets of consolidated market data, 

will be set pursuant to fees that will be 

proposed and filed by the effective 

national market system plan(s) pursuant 

to Rule 608.1200

(e) Comments on Fees for Different 

Consolidated Market Data Offerings 

In the Proposing Release, the 

Commission stated that the plan(s) 

would develop and file with the 

Commission 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 and 

could also develop fees for data content 

underlying other consolidated market 

data offerings that contain subsets of the 

components of consolidated market 

data.1201 The Commission believed that 

the effective national market system 

plan(s) could develop different fees for 

data content underlying market data 

offerings that contain subsets of the data 

content underlying consolidated market 

data based upon the needs of market 

participants and cited a NYSE proposal 

to develop different levels of SIP data 

products.1202 Thus, in addition to 

developing a fee for data content 

underlying a consolidated market data 

offering that contains all of the data 

content underlying consolidated market 

data,1203 the plan could develop a fee 

for data content underlying a 

consolidated market data offering that 

contains only TOB information, 

regulatory data, and administrative data, 

or the plan could develop a fee for 

depth of book data, regulatory data, and 

administrative data but not auction 

information. As described, the proposed 

new fee schedule would include 

proposed new fees for the data content 

underlying consolidated market data, as 

well as any proposed new fees for 

consolidated market data offerings that 

reflect only a subset of consolidated 

market data. 

One commenter challenged the view 

that the plan(s) would develop different 

fees for different subsets of the data 

content underlying consolidated market 

data.1204 The commenter stated that the 

Commission could not assume that the 

Operating Committee would develop 

such fees.1205 The Commission notes 

that this commenter had developed a 

proposal similar to the suggestion for 

SIP data.1206 The commenter had 

acknowledged in its proposal that a 

‘‘one-size-fits-all’’ SIP data product was 

not meeting the needs of market 

participants 1207 and recommended that 

the Operating Committee establish 

different content products that would be 

designed to serve the needs to specific 

types of investors.1208 The Commission 

believes that the Operating Committee 

will consider the needs of investors and 

the different use cases for consolidated 

market data when developing the 

proposed fees for the data content 

underlying consolidated market data. 

The Commission recently has taken 

steps to help to ensure that the needs of 

investors are considered in the national 

market system in addition to the 

adopted rules. For example, the New 

Consolidated Data Plan is required to 

contain a new governance structure that 

has a broader representation of market 

participants involved in the operation of 

the plan,1209 and the Commission 

adopted amendments to the filing and 

review process for plan fees.1210

One commenter, however, suggested 

that competing consolidators, not the 

Operating Committee, should be able to 

develop competing products that 

contain consolidated market data.1211

This commenter said that competing 

consolidators could develop products to 

satisfy the needs of market 

participants.1212 Competing 

consolidators will develop consolidated 

market data products that their end 

users desire. However, the Commission 

believes that the Operating Committee 

of the effective national market system 

plan(s) needs to develop the fees 

associated with the data content 

underlying any consolidated market 

data product or subset thereof. The 

Operating Committee is well-situated to 

develop and propose such fees. 

However, competing consolidators 

could convey their subscribers’ market 

data needs to the Operating Committee 

and suggest new offerings as necessary, 

as could any person. Further, competing 

consolidators could communicate via 

the public comment process for effective 

national market system plan(s)’ 

proposed data content underlying 

consolidated market data fees that must 

be filed with the Commission pursuant 

to Rule 608. 

(f) Comments on Collection of Fees for 

Data Content Underlying Consolidated 

Market Data and Allocation of Revenues 

The effective national market system 

plan(s) would be responsible for 

collecting the fees for the data content 

underlying consolidated market data 

and underlying any consolidated market 

data offerings that contain subsets of the 

components of consolidated market 

data. The effective national market 

system plan(s) also would be 

responsible for allocating revenues 

among the SRO participants. 

One commenter stated that the 

Commission failed to address the 

revenue allocation formula in the 

Proposing Release and how it would 

work under the decentralized 

consolidation model, if at all.1213 The 

18688 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

framework for disseminating and pricing market 

data would work together, and that abandoning the 

revenue allocation formula would be arbitrary and 

capricious and therefore violate the APA). 

1214Regulation NMS Adopting Release, supra 

note 7, at 37561–62. 

1215See supra note 1124. 

1216See IDS Letter I at 12. 

1217 Id. 

1218See supra Section III.B.9(b). 

1219See supra Section III.E.2(e). 

1220The SROs currently submit timestamped data 

under the Equity Data Plans and the National 

Market System Plan Governing the Consolidated 

Audit Trail (‘‘CAT NMS Plan’’). See, e.g., CTA Plan, 

supra note 10, at Section VI.(c); Nasdaq UTP Plan, 

supra note 10, at Section VIII; CAT NMS Plan at 

Sections 6.3(d), 6.8, available at https://

www.catnmsplan.com/sites/default/files/2020–02/ 

CAT-2.0-Consolidated-Audit-Trail-LLC%20PlanExecuted_%28175745081%29_%281%29.pdf (last 

accessed Nov. 27, 2020). See also 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 was 

Exhibit A to the CAT NMS Plan Approval Order. 

However, the limited liability company agreement 

of a new limited liability company named 

Consolidated Audit Trail, LLC now serves as the 

CAT NMS Plan. See Securities Exchange Act 

Release No. 87149 (Sept. 27, 2019), 84 FR 52905 

(Oct. 3, 2019). 

1221See NYSE Letter II at 21. 

1222See id. 

commenter stated these issues are 

needed to evaluate the proposed rules 

and that failure to address the revenue 

allocation formula was arbitrary and 

capricious. The revenue allocation 

formula was adopted in Regulation 

NMS, and the Commission stated that 

‘‘the language added to the Plans by the 

Allocation Amendment can be adjusted 

in the future pursuant to the normal 

process of Commission approved 

amendments.’’ 1214 The Commission 

believes that the Operating Committee is 

best placed to evaluate whether and, if 

so, how the revenue allocation formula 

needs to be amended to reflect the new 

content of data that is included in the 

definition of consolidated market data 

as well as the new responsibilities of the 

primary listing exchanges in collecting 

and calculating Regulatory Data. Any 

plan amendment would be developed 

by the Operating Committee and filed 

with the Commission pursuant to Rule 

608. 

(g) Comments on Accounts and Audits 

As proposed, the plan(s) would be 

responsible for overseeing accounts and 

conducting audits for purposes of 

billing, among other things. The plan(s) 

generally would also have to develop a 

harmonized approach to data billing 

protocols, including with respect to any 

unified MISU policy.1215

One commenter stated that the 

proposal did not specify how 

contracting for data would occur under 

the plan(s), including who would enter 

into contracts with, collect fees from, 

and resolve disputes with 

customers.1216 This commenter 

questioned whether ‘‘(a) the SROs 

would charge data fees to the competing 

consolidators and then the competing 

consolidators would pass through the 

cost of data to their customers, (b) the 

SROs would charge competing 

consolidators’ customers directly for the 

SROs data, or (c) the NMS Plans would 

charge data fees to the competing 

consolidators and their customers.’’ 1217

As stated in the Proposing Release, 

the effective national market system 

plan(s) would charge the fees for the 

data content underlying consolidated 

market data, collect the revenue, oversee 

accounts and billing, and develop 

billing protocols, including any MISU 

policies. The proposal set forth the 

responsibilities of the effective national 

market system plan(s) as to billing. The 

SROs would not be responsible for 

charging competing consolidators or 

their customers directly for consolidated 

market data. 

The Commission believes that the 

licensing, billing, and audit processes 

under the decentralized consolidation 

model could be similar to existing 

processes that are in place under the 

Equity Data Plans. For example, while 

today the Equity Data Plans provide a 

data feed to market participants, the fees 

and billing for that data are not based 

simply upon the receipt of the data feed. 

Rather, broker-dealers and other market 

participants who receive SIP data are 

billed based upon both the type of user 

(e.g., professional vs. non-professional) 

and specific use cases for the data (e.g., 

display vs. non-display). Purchasers of 

SIP data provide the administrator of 

the Equity Data Plans with information 

and attestations about the number and 

type of users and specific use cases, and 

the administrator (or its auditor) audit 

and assess this information to determine 

appropriate billing for SIP data 

purchasers. 

As discussed above, the SROs can 

comply with their obligation under Rule 

603(b) to make all data necessary to 

generate consolidated market data 

available by providing their existing 

proprietary data feeds that contain this 

information to competing consolidators 

and self-aggregators.1218 These data 

feeds may contain information that goes 

beyond what is necessary to generate 

consolidated market data, but 

competing consolidators and selfaggregators will not be billed based 

upon the data feed that they receive. 

Similar to the current billing, reporting 

and audit processes, the administrator 

of the effective national market system 

plan(s) could be expected to license and 

bill and, when required, employ an 

audit process to assess the usage of the 

data content made available to 

competing consolidators and selfaggregators under Rule 603(b) for billing 

purposes.1219

(h) Comments on Timestamps 

As proposed, Rule 614(e)(1)(ii) 

required that the amendment to the 

effective national market system plan(s) 

for NMS stocks include provisions 

requiring the application of timestamps 

by the SRO participants on all 

consolidated market data, at the time 

the consolidated market data 

component was generated by the SRO 

participant and at the time the SRO 

participant made the consolidated 

market data available to competing 

consolidators and self-aggregators.1220

One commenter stated that the 

proposal would require the effective 

national market system plan(s) 

participants to apply timestamps to 

consolidated market data even though 

they were not consolidating and 

disseminating consolidated market 

data.1221 The Commission has modified 

the language of Rule 614(e)(1)(ii) to 

require the SRO participants to apply 

timestamps to all information with 

respect to quotations for and 

transactions in NMS stocks that is 

necessary to generate consolidated 

market data and not to consolidated 

market data as the proposed rule 

required. Specifically, the timestamps 

applied by the SROs must be to the 

individual components of data content 

underlying consolidated market data, 

i.e., all of the individual components of 

data content underlying core data, 

regulatory data, administrative data, 

self-regulatory organization-specific 

program data, and additional elements 

defined as ‘‘consolidated market data.’’ 

This commenter also criticized the 

proposal for underestimating the 

burdens of adding timestamps.1222 The 

Commission disagrees with the 

commenter regarding the burden of 

adding timestamps. The SROs currently 

add timestamps to all elements of 

consolidated market data and thus, the 

Commission does not believe that 

ensuring that timestamps are applied in 

a consistent manner going forward 

would impose significant, if any, costs 

to the SROs. Timestamps are important 

for market participants as they provide 

the ability to measure latency and 

ensure accurate sequencing of data. The 

application of timestamps may also 

incentivize the SROs to make available 

their consolidated market data as 

quickly as possible. Therefore, the 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18689 

1223SRO timestamps will also assist market 

participants in their ability to assess latencies in the 

provision of consolidated market data. Under Rule 

614(d)(3), competing consolidators are required to 

make available consolidated market data products 

that include timestamps assigned by the SROs as 

well as competing consolidators. Competing 

consolidators will be required to timestamp the data 

underlying consolidated market data at specific 

intervals: (1) Upon receipt from an SRO at the SRO 

data center, (2) upon receipt at its aggregation 

mechanism, and (3) upon dissemination of 

consolidated market data to customers. See supra 

Section III.C.8(a) and the discussion of Rule 

614(d)(4). 

1224See Clearpool Letter at 9. 

1225TD Ameritrade Letter at 13. This commenter 

asked several questions about the expectations on 

broker-dealers in response to the annual report. See 

id. at 13–14. As discussed above, the annual report 

will not be a report on individual competing 

consolidators but rather a report on the operational 

status of the whole decentralized consolidation 

model. 

1226See Data Boiler Letter I at 64 (‘‘How CC beat 

their competition among peers, and the overall 

industry rely less on Exchanges’ PP and SAs’ 

services are the best key performance indicators 

(KPIs).’’). 

1227See NYSE Letter II at 28. 

1228The term ‘‘primary listing exchange’’ is 

defined in Rule 600(b)(68). 

1229See Data Boiler Letter I at 64. 

1230See NYSE Letter II at 28. 

application of timestamps needs to be 

consistent and reliable.1223

(i) Comments on Annual Assessment 

As proposed, Rule 614(e)(1)(iii) 

required the amendment to the effective 

national market system plan(s) for NMS 

stocks to reflect that the participants are 

required 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. The Equity Data Plans 

play an important role in governing the 

operation of the national market system. 

The Commission believes that the 

effective national market system plan(s) 

for NMS stocks should continue in this 

important role by monitoring the overall 

performance of the provision of 

consolidated market data by competing 

consolidators to seek to ensure that the 

decentralized consolidation model is 

operating soundly and is therefore 

adopting this provision, as proposed, 

with one modification. 

As described in the Proposing 

Release, the plan must assess several 

key factors of the operation of the 

decentralized consolidation model, 

including: (1) The speed of competing 

consolidators in receiving, calculating, 

and disseminating consolidated market 

data products; (2) the reliability of the 

transmission of consolidated market 

data products; and (3) a detailed cost 

analysis of the provision of consolidated 

market data products. The effective 

national market system plan(s) would 

base their assessments on the 

information made publicly available by 

competing consolidators, including the 

information that each competing 

consolidator is required to make 

available under Rule 614. 

One commenter supported requiring 

the filing of a proposed plan 

amendment to mandate an annual 

assessment and suggested that the 

annual assessment be made public to 

further assist broker-dealers in selecting 

competing consolidators.1224 One 

commenter stated that ‘‘the Proposal 

does not indicate whether the results of 

particular assessments will be made 

publicly available to firms and what, if 

any, actions broker-dealers will be 

required to make in response to such 

assessments.’’ 1225 One commenter 

suggested that the annual report not 

review individual competing 

consolidator performance ‘‘in silo’’ by 

also reviewing at the competition.1226

The Commission is adopting the rule, 

with the addition that the annual report 

would be made publicly available by the 

Commission. The Commission believes 

that the annual report should be made 

publicly available to provide 

transparency to investors as to the 

operation of the national market system. 

The Commission believes that the 

annual report can assist the Commission 

in monitoring and evaluating the 

operation of the national market system 

and decentralized consolidation model. 

The annual report, however, is not an 

assessment of individual competing 

consolidators but of the overall 

performance of the provision of 

consolidated market data by competing 

consolidators. Market participants that 

want to evaluate the individual 

performance of a competing 

consolidator can utilize the individual 

competing consolidator’s disclosures on 

its Form CC and the monthly 

performance metrics published by each 

competing consolidator. 

Another commenter stated that the 

SROs would incur costs associated with 

assessing competing consolidators 

although the effective national market 

system plan(s) would not have a role in 

selecting or monitoring competing 

consolidators.1227 The SROs currently 

incur costs in overseeing the national 

market system and some of these costs 

may change in the decentralized 

consolidation model, including the new 

costs associated with conducting an 

assessment and developing the annual 

report. The Commission does not 

believe that the costs should be overly 

burdensome. As stated above, the 

Operating Committee can use public 

reports of competing consolidator 

performance as well as any pertinent 

information that the plan(s) believe 

would be useful to assess competing 

consolidators and develop the annual 

report. Further, the Commission 

believes that the Operating Committee is 

well-suited to perform this assessment. 

The SROs will be making the data 

content underlying consolidated market 

data available to competing 

consolidators and establishing the 

necessary connectivity to competing 

consolidators, and as stated, the 

effective national market system plan(s) 

will continue to have important 

responsibilities in developing, 

operating, and regulating the national 

market system. The Commission 

believes that the Operating Committee 

should develop the annual report as a 

means to monitor the overall 

performance of competing consolidators 

and to seek to ensure that the national 

market system is operating soundly. 

(j) Comments on List of Primary Listing 

Exchanges 

Finally, proposed Rule 614(e)(1)(iv) 

required the amendment to the effective 

national market system plan(s) for NMS 

stocks to include a list of the primary 

listing exchanges for each NMS 

stock.1228 The primary listing exchanges 

will be required to collect, calculate, 

and make available regulatory data to 

competing consolidators and selfaggregators. Therefore, each primary 

listing exchange must be identified to 

determine who is responsible for 

collecting, calculating, and making 

regulatory data available. One 

commenter agreed with developing a 

list identifying the primary listing 

exchange.1229 One commenter suggested 

that the Commission develop this 

list.1230 The Commission believes that 

the plan(s) are best suited to develop the 

list and to ensure that it is kept current 

and readily accessible. The Commission 

is modifying the language of Rule 

614(e)(1)(iv) to require that the plan(s) 

develop, maintain, and publish the list. 

The Commission believes that the list of 

primary listing exchanges should be 

maintained and published so that 

market participants will know which 

exchange is responsible for providing 

regulatory data. Further, competing 

consolidators and self-aggregators will 

need to know which exchange will be 

making regulatory data available. 

(k) Regulation SCI 

The Commission is modifying Rule 

614(e) to accommodate the new 

definition of SCI competing 

18690 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1231See infra Section III.F. 1232See Proposing Release, 85 FR at 16785–89. 1233See Securities Exchange Act Release No. 

73639 (Nov. 19, 2014), 79 FR 72252 (Dec. 5, 2014) 

(‘‘SCI Adopting Release’’), at 72252–56 for a 

discussion of the background of Regulation SCI. 

1234See Rule 1000. 

1235See Proposing Release, 85 FR at 16786 

(quoting SCI Adopting Release, supra note 1233, at 

72275). 

1236 In addition, the Commission proposed to 

revise the definition of ‘‘critical SCI system’’ to 

account, among other things, for the systems of 

OPRA’s plan processor, since the competing 

consolidator model will not apply with respect to 

trading in options. See Proposing Release, 85 FR at 

16786–87. The Commission is adopting the revision 

to the definition of ‘‘critical SCI system’’ as 

proposed. See infra notes 1315–1316 and 

accompanying text. 

1237See Proposing Release, 85 FR at 16789. 

1238See Cboe Letter at 26; Nasdaq Letter IV at 35– 

36; Data Boiler Letter I at 57; STANY Letter II at 

6; FINRA Letter at 4, n. 14; MEMX Letter at 8; 

Fidelity Letter at 3, 10; Clearpool Letter at 9. 

1239See FINRA Letter at 4, n. 14; MEMX Letter 

at 8; Fidelity Letter at 3, 10. See also Clearpool 

Letter at 9; STANY Letter II at 6. 

1240See Cboe Letter at 26; Nasdaq Letter IV at 35– 

36; Data Boiler Letter I at 57; STANY Letter II at 

6. 

1241See NYSE Letter II at 15; ACTIV Financial 

Letter at 2; IDS Letter I at 13; STANY Letter II at 

6–7; Angel Letter at 19–21. See also TD Ameritrade 

Letter at 13; Nasdaq Letter III at 4. 

1242See also supra notes 626–629 and 641–649 

and accompanying text (discussing commenters’ 

views that a lack of sufficient economic incentives 

for potential competing consolidators and the costs 

to become a competing consolidator outweigh the 

benefits). 

1243See supra note 1233 and accompanying text; 

Cboe Letter at 26; Nasdaq Letter IV at 35–36; 

Clearpool Letter at 9; Data Boiler Letter I at 57; 

FINRA Letter at 4, n. 14; MEMX Letter at 8; Fidelity 

Letter at 10. See also IntelligentCross Letter at 5, 

BlackRock Letter at 5; ACS Execution Services 

Letter at 5; Temple University Letter at 1–2. 

1244See Proposing Release, 85 FR at 16808–09, 

16836–38, 16845–48 (discussing paperwork 

burdens, costs, and benefits of complying with 

consolidator classification under 

Regulation SCI. Specifically, new 

paragraph (v) of Rule 614(e) will require 

the participants to the effective national 

market system plan(s) for NMS stocks to 

file with the Commission an 

amendment that requires the plan(s) to 

calculate and publish on a monthly 

basis the consolidated market data gross 

revenues for NMS stocks as specified 

by: (1) Listed on the NYSE; (2) listed on 

Nasdaq; and (3) listed on exchanges 

other than NYSE or Nasdaq. The 

Commission believes that the plan(s) are 

best suited to calculate and publish this 

information because, as noted above, the 

effective national market system plan(s) 

will charge the fees for the data content 

underlying consolidated market data, 

collect the revenue, and oversee 

accounts and billing. Competing 

consolidators will use the calculation 

and publication of consolidated market 

data gross revenues to assess whether 

they have reached the 5% threshold 

described in Rule 1000 for SCI 

competing consolidators. As discussed 

below, the Commission believes that 

competing consolidators that reach 

these thresholds should be held to 

higher systems resiliency and integrity 

standards as required under Regulation 

SCI than competing consolidators that 

are below this threshold.1231

F. Systems Capability: Amendment to 

Rule 1000 of Regulation SCI To Expand 

‘‘SCI Entities’’ Definition To Include 

‘‘SCI Competing Consolidator’’; 

Adoption of Rule 614(d)(9): Systems 

Integrity 

In the Proposing Release, the 

Commission stated its preliminary belief 

that competing consolidators should be 

subject to the requirements of 

Regulation SCI.1232 The Commission 

adopted Regulation SCI in November 

2014 to strengthen the technology 

infrastructure of the U.S. securities 

markets, reduce the occurrence of 

systems issues in those markets, 

improve their resiliency when 

technological issues arise, and establish 

an updated and formalized regulatory 

framework, thereby helping to ensure 

more effective Commission oversight of 

such systems.1233 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.1234

As the Commission stated in the 

Proposing Release, competing 

consolidators, as sources of 

consolidated market data, would serve 

an important role in the national market 

system. The Commission explained that, 

as it had stated when adopting 

Regulation SCI, ‘‘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.’’ 1235 For these reasons, 

Regulation SCI applies to both the 

exclusive providers of consolidated 

market data (i.e., the plan processors) 

and to proprietary market data systems, 

and is not limited to applicable systems 

of plan processors, but rather also 

includes the market data systems of any 

SCI entity, including SCI SROs. Taking 

into consideration the role of competing 

consolidators as providers of 

consolidated market data feeds that are 

likely to be widely used and relied upon 

by market participants, the Commission 

proposed to apply Regulation SCI to 

competing consolidators by including 

them within the definition of ‘‘SCI 

entity’’ and requested public 

comment.1236 In particular, among other 

things, the Commission requested 

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.1237

A number of commenters supported 

applying the requirements of Regulation 

SCI to competing consolidators in some 

form.1238 In particular, a few 

commenters supported application of 

Regulation SCI to competing 

consolidators as proposed.1239 Others 

argued that competing consolidators 

should be considered to have ‘‘critical 

SCI systems’’ like the exclusive SIPs and 

thus subject to higher requirements than 

proposed.1240 Some commenters, 

however, expressed concern that the 

costs of SCI compliance would be a 

barrier to entry and could deter entities 

from seeking to become competing 

consolidators.1241 Similarly, several 

commenters, although not citing 

Regulation SCI specifically, expressed 

general skepticism about the ability to 

attract new entrants to register as 

competing consolidators, citing among 

other factors, potential lack of economic 

incentives.1242

The Commission continues to believe 

that competing consolidators, as 

providers of consolidated market data 

products, will serve an important role in 

the national market system. Thus, 

consistent with the views of many 

commenters, the Commission believes 

that it is important to impose 

requirements to help ensure that the 

technology systems of competing 

consolidators are reliable and resilient, 

consistent with the policy goals of 

Regulation SCI.1243 The Commission is 

cognizant that Regulation SCI entails 

compliance burdens for new 

entrants 1244 and, in particular, that 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18691 

Regulation SCI). See also Nasdaq Letter III at 4; 

NYSE Letter II at 15; Schwab Letter at 7; TD 

Ameritrade Letter at 13; ACTIV Financial Letter at 

2; IDS Letter I at 13; STANY Letter II at 6–7; Angel 

Letter at 19–21. 

1245See Nasdaq Letter III at 4; NYSE Letter II at 

15; Schwab Letter at 7; TD Ameritrade Letter at 13; 

ACTIV Financial Letter at 2; IDS Letter I at 13; 

Angel Letter at 19–21. 

1246As discussed in the Proposing Release, 

Regulation SCI would, among other things, require 

SCI entities, which would now include SCI 

competing consolidators (as discussed below), 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. See 17 

CFR 242.1001 (Rule 1001) of Regulation SCI. 

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. See Rules 1002–1007 of 

Regulation SCI. 

1247See infra Section III.H for a discussion of the 

initial transition period. 

1248See FINRA Letter at 4, n. 14; MEMX Letter 

at 8; Fidelity Letter at 3, 10. See also Clearpool 

Letter at 9; STANY Letter II at 6. 

1249See supra notes 1244–1245 and 

accompanying text. 

1250See infra note 1268 and accompanying text 

(discussing that SCI competing consolidators will 

not be required to comply with Regulation SCI until 

one year after the compliance date of Rule 

614(d)(3)). 

1251The definition of ‘‘SCI entity’’ under Rule 

1000 of Regulation SCI would be amended to 

include ‘‘SCI competing consolidators.’’ 

1252See Rule 1000 of Regulation SCI (definition 

of ‘‘SCI ATS’’). As discussed further below, for 

those competing consolidators, that are either (i) 

newly registered and operating during the initial 

transition period, or (ii) do not otherwise satisfy the 

SCI entity definition (because they are below the 

five percent threshold for an SCI competing 

consolidator), a more tailored set of safeguards 

would apply. 

1253See Rule 1000 of Regulation SCI. 

1254See Proposing Release, 85 FR at 16789 

(requesting comment on whether a threshold test 

would be appropriate for competing consolidators 

subject to Regulation SCI and, if so, what such a 

threshold test should be). 1255See Data Boiler Letter I at 57 (arguing that 

because compliance with Regulation SCI would be 

a possible barrier to entry, the Commission should 

adopt a threshold of ten percent for requiring 

compliance and arguing also that those below the 

threshold should be encouraged to voluntarily 

adopt SCI as ‘‘best practices’’). See also infra note 

1263 and accompanying text. 

1256Further, while the Commission believes that 

the competing consolidator model is designed to 

result in multiple viable sources of consolidated 

market data, the Commission believes that adopting 

a threshold will ensure that, if the market is largely 

reliant on a small number of competing 

consolidators for the distribution of consolidated 

market data, such competing consolidators will be 

subject to the safeguards of Regulation SCI. The 

Commission believes that this could arise if only a 

small number of entities register as competing 

consolidators, if certain competing consolidators 

dominate the market, or if competing consolidators 

subsequently exit the market resulting in a 

concentration of competing consolidators. See also 

infra notes 1315–1316 and accompanying text 

(discussing ‘‘critical SCI systems’’ and competing 

consolidators). 

1257The adopted five percent threshold is 

consistent with the threshold level in the ‘‘Fair 

Access’’ rule (Rule 301(b)(5)) of Regulation ATS, as 

well as one of the volume threshold levels in the 

definition of SCI ATS in Rule 1000 of Regulation 

SCI. 

those costs could serve as a barrier to 

entry for potential competing 

consolidators and deter some potential 

entities from becoming competing 

consolidators, as noted by several 

commenters.1245 The Commission is 

adopting a two-pronged approach to 

competing consolidators with respect to 

Regulation SCI, as described more fully 

below. The Commission estimates that 

under this approach, due to the 

threshold levels being adopted, the 

requirements of Regulation SCI 1246 will 

apply to most competing consolidators 

following an initial transition 

period.1247 In addition, the Commission 

is adopting a tailored set of operational 

capability and resiliency obligations 

designed to help ensure that the 

provision of consolidated market data 

products is prompt, accurate, and 

reliable, that is applicable to all 

competing consolidators during the 

transition period and to competing 

consolidators that are below the adopted 

threshold thereafter. 

First, the Commission believes that 

the inclusion of certain competing 

consolidators in the definition of ‘‘SCI 

entity’’ is appropriate. Several 

commenters supported the 

Commission’s proposal to apply the 

requirements of Regulation SCI to all 

competing consolidators, emphasizing 

the importance of ensuring the 

resiliency and reliability of the 

infrastructure for market data 

dissemination.1248 However, in 

recognition of the more limited role that 

certain competing consolidators may 

play in the securities markets and to 

address the concerns of other 

commenters who believed that the 

compliance costs of Regulation SCI 

would be burdensome to potential 

competing consolidators and could pose 

a significant barrier to entry for some 

potential competing consolidators, the 

Commission has made certain 

modifications from the proposal.1249

The Commission is adopting a 

definition of ‘‘SCI competing 

consolidator’’ that will subject 

competing consolidators to Regulation 

SCI, after a one-year transition period 

(as discussed below) (‘‘SCI CC Phase-In 

Period’’),1250 if they are above the 

adopted threshold.1251 This approach is 

similar to that taken regarding the 

definition of ‘‘SCI ATS,’’ which applies 

Regulation SCI to those ATSs that meet 

certain volume thresholds and thus 

were determined by the Commission to 

play a significant role in the securities 

markets.1252

Specifically, an ‘‘SCI competing 

consolidator’’ will be defined in Rule 

1000 of Regulation SCI to mean ‘‘any 

competing consolidator, as defined in 

§ 242.600 which during at least four of 

the preceding six calendar months, 

accounted for five percent (5%) or more 

of consolidated market data gross 

revenue paid to the effective national 

market system plan or plans required 

under § 242.603(b) for NMS stocks (1) 

listed on the New York Stock Exchange 

LLC, (2) listed on The Nasdaq Stock 

Market LLC, or (3) listed on national 

securities exchanges other than the New 

York Stock Exchange LLC or The 

Nasdaq Stock Market LLC, as reported 

by such plan or plans pursuant to the 

terms thereof.’’ 1253

In the Proposing Release, the 

Commission requested comment on 

whether it would be appropriate to set 

a threshold to determine which 

competing consolidators should be 

subject to Regulation SCI.1254 The 

Commission received one comment 

addressing the threshold inquiries, 

which expressed support for the 

adoption of a threshold.1255 The 

Commission believes that adopting a 

threshold to determine which 

competing consolidators are subject to 

Regulation SCI is responsive both to 

commenters who emphasized the 

importance of ensuring the resiliency, 

reliability, and integrity of the 

infrastructure for market data 

dissemination, as well as commenters 

that expressed concerns about barriers 

to entry. In adopting a threshold in the 

definition of ‘‘SCI competing 

consolidator,’’ the Commission believes 

it is establishing a reasonable scope for 

the application of Regulation SCI to 

competing consolidators. 

The adopted threshold level is 

designed to identify those entities 

which, if they were to experience a 

systems issue, could potentially affect a 

substantial number of market 

participants and impact a broad swath 

of the national market system.1256 The 

Commission believes that the 5% 

threshold level is reasonable for 

assessing materiality both generally and 

in the context of competing 

consolidated market data providers.1257

Specifically, the Commission believes 

that the adopted threshold level is not 

18692 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1258Basing the threshold on a measure of the 

consolidated market data gross revenue paid to the 

plan, rather than number of subscribers, will reflect 

the value of the consolidated market data as 

determined by the plan’s fees and thus account for 

those competing consolidators that may have fewer 

subscribers but pay higher fees due to having 

mainly professional subscribers who typically trade 

at significantly higher volumes than retail 

customers, as well as those competing consolidators 

that may have a relatively high number of retail 

subscribers that pay lower fees. 

1259Competing consolidators not subject to 

Regulation SCI will be subject to Rule 614(d)(9), as 

discussed below. 

1260As discussed below, the Commission is also 

requiring the amendment to the effective national 

market system plan(s) to include a provision that 

requires the plan(s) to calculate and publish 

information relating to the consolidated market data 

gross revenues on a monthly basis. 

1261Should pricing for consolidated market data 

become more granular than exists today (e.g., by 

moving from a per-tape basis to a per-listing 

exchange basis), reconsideration of the adopted 

thresholds may be appropriate. 

1262For context, annual tape revenues reported by 

the CTA and Nasdaq UTP plans in 2019 were as 

follows: $162.9 million, $95.8 million, and $130.7 

million, Tapes A, B, C, respectively. Thus, Tape A 

accounted for 41.8% of total revenues, Tape B 

accounted for 24.6% of total revenues, and Tape C 

accounted for 33.6% of total revenues. Five percent 

of these annual figures divided by 12 (i.e., per 

month) yield monthly figures as follows: $679,000, 

$399,000, and $545,000, for Tapes A, B, and C, 

respectively. As illustrated by these figures, the 

notional value of the threshold level in the 

definition of SCI competing consolidator will vary 

for NMS stocks (i) listed on the NYSE, (ii) listed on 

Nasdaq, or (iii) listed on national securities 

exchanges other than the NYSE or Nasdaq. 

However, based on these 2019 figures, the threshold 

level for each tape represents over 1% of total 

monthly revenues across all tapes ($324,500). 

Specifically, the threshold for Tape A represents 

approximately 2.1% of total monthly revenues, the 

threshold for Tape B represents approximately 

1.2% of total monthly revenues, and the threshold 

for Tape C represents approximately 1.7% of total 

monthly revenues. See CTA, SIP Revenue 

Allocation Summary, Q1 2020 Quarterly Revenue 

Disclosure, available at https://www.ctaplan.com/ 

publicdocs/ctaplan/CTA_Quarterly_Revenue_

Disclosure_1Q2020.pdf (last accessed Nov. 27, 

2020); UTP, SIP Revenue Allocation Summary, Q1 

2020 Quarterly Revenue Disclosure, available at 

http://www.utpplan.com/DOC/UTP_Revenue_

Disclosure_Q12020.pdf (last accessed Nov. 27, 

2020). 1263See Data Boiler Letter I at 57 (arguing that 

those below the threshold should be encouraged to 

voluntarily adopt SCI as ‘‘best practices’’). The 

commenter did not provide further detail as to how 

it believed this threshold should be measured (e.g., 

total subscribers) or provide any rationale as to why 

this would be an appropriate threshold level. 

1264See infra note 1271 (discussing the time 

period before a competing consolidator would be 

subject to Regulation SCI). 

1265This time measurement period is drawn from 

the current measurement period in the definition of 

‘‘SCI ATS.’’ See Rule 1000 of Regulation SCI 

(definition of ‘‘SCI ATS’’). This measurement 

period is also consistent with the measurement 

period in 17 CFR 242.301(b)(6) (Rule 301(b)(6) of 

Regulation ATS). 

1266See supra Section III.E. 

1267National securities exchanges are subject to 

the requirements of Regulation SCI because they are 

SCI entities. See Rule 1000 of Regulation SCI. As 

discussed above, an exchange affiliated competing 

consolidator may qualify for a conditional 

exemption from certain requirements otherwise 

applicable to national securities exchanges. See 

supra Section III.C.7(a)(iv). If an exchange qualifies 

for such an exemption, during the SCI CC PhaseIn Period and, subsequent to such period, if it does 

not exceed the threshold in the definition of ‘‘SCI 

competing consolidator’’ in Rule 1000 of Regulation 

so high so as to exclude competing 

consolidators for which a systems issue 

could have a significant impact on 

market participants or the national 

market system as a whole and, at the 

same time, provides an opportunity for 

a competing consolidator to enter and 

grow its business prior to incurring the 

costs of compliance with Regulation SCI 

if it were to exceed the threshold 

level.1258 Notably, during this time 

competing consolidators will be subject 

to the requirements of Rule 614(d)(9) of 

Regulation NMS, as discussed below. 

The Commission recognizes that this 

threshold ultimately represents a matter 

of judgment by the Commission relating 

to the application of Regulation SCI to 

a new decentralized consolidation 

model and a new category of regulated 

entity. In the exercise of this judgment, 

the Commission has sought to identify 

a threshold level designed to ease 

barriers to entry for competing 

consolidators during the SCI CC PhaseIn Period and for new competing 

consolidators thereafter.1259

The adopted thresholds describe plan 

revenues by reference to current Tapes 

A, C, and B, respectively.1260 Although 

it is possible that the existing definition 

of tapes may be modified postimplementation, the thresholds 

acknowledge that listing exchange 

status has been, and may continue to be, 

relevant as the plan(s) develop pricing 

for data content underlying 

consolidated market data because Tape 

A, C, and B encompass securities listed 

on NYSE, Nasdaq, and national 

securities other than NYSE and Nasdaq, 

respectively.1261 Accordingly, this 

threshold is designed to help ensure 

that any competing consolidator that 

might have material market share for the 

securities in current Tapes A, B, or C 

(where a significant number of market 

participants rely on it for such market 

data, for example, if a competing 

consolidator were to focus or specialize 

in stocks listed on a particular 

exchange), is subject to the requirements 

of Regulation SCI, even if its market 

share in stocks listed across all national 

securities exchanges is not as 

significant.1262

Although one commenter suggested 

that the Commission adopt a ten percent 

threshold for compliance with 

Regulation SCI,1263 the Commission 

believes that such a threshold could 

exclude competing consolidators for 

which a systems issue or cybersecurity 

incident could have a significant impact 

on market participants or the national 

market system as a whole. As noted 

above, the numerical thresholds in the 

definition of ‘‘SCI competing 

consolidator’’ reflect an assessment by 

the Commission of the likely economic 

consequences of the specific numerical 

threshold included in the definition. 

The Commission believes that the 

time measurement period for calculating 

the threshold (‘‘during at least four of 

the preceding six calendar months’’), is 

appropriate for evaluating the market 

share of a competing consolidator, 

because it provides a new entrant time 

to develop their business prior to having 

to incur the costs of complying with 

Regulation SCI,1264 and it provides a 

long enough period of data on revenue 

and subscriber levels to evaluate 

reasonably a competing consolidator’s 

significance to the market.1265 It also 

mitigates a possible barrier to entry for 

some new competing consolidators. 

Further, the Commission believes that 

this time measurement period will help 

to ensure that competing consolidators 

meeting the definition of SCI competing 

consolidator are those that have 

sustained gross revenue levels at the 

threshold warranting the protections of 

Regulation SCI and is less likely to 

result in competing consolidators 

moving in and out of the scope of the 

definition than if the Commission were 

to adopt a shorter measurement period. 

The adopted definition of ‘‘SCI 

competing consolidator’’ also provides 

that consolidated market data gross 

revenue paid to the effective national 

market system plan or plans required 

under § 242.603(b) for NMS stocks (1) 

listed on the NYSE; (2) listed on 

Nasdaq; or (3) listed on exchanges other 

than NYSE or Nasdaq will be ‘‘as 

reported by such plan or plans pursuant 

to the terms thereof.’’ Competing 

consolidators will need information 

regarding the consolidated market data 

gross revenues to assess whether they 

meet the 5% threshold and are required 

to comply with Regulation SCI. 

Accordingly, as discussed above, Rule 

614(e) will provide that the amendment 

to the effective national market system 

plan(s) will have to include a provision 

that requires the plan(s) to calculate and 

publish total consolidated market data 

gross revenues for NMS stocks (1) listed 

on the NYSE, (2) listed on Nasdaq, and 

(3) listed on national securities 

exchanges other than the NYSE or 

Nasdaq, on a monthly basis.1266

As noted above, the requirements of 

Regulation SCI will not apply to any 

competing consolidator 1267 during an 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18693 

SCI, its exchange-affiliated competing consolidator 

would be subject to the requirements of Rule 

614(d)(9) of Regulation NMS and not subject to the 

requirements of Regulation SCI. 

1268Rule 614(d)(3) requires competing 

consolidators to make consolidated market data 

products available to subscribers on a consolidated 

basis on terms that are not unreasonably 

discriminatory. See infra note 1356 and 

accompanying text. 

1269See infra Section III.H (discussing the 

transition period and compliance dates). 

1270See Rule 1000 of Regulation SCI (paragraph 

(b) of definition of ‘‘SCI competing consolidator’’). 

1271After the SCI CC Phase-In Period discussed 

above has passed (i.e., after which paragraph (c) of 

the definition of SCI competing consolidator will no 

longer apply), any new competing consolidator 

would have at least ten months, at a minimum, 

before it would be subject to Regulation SCI, 

because the time measurement period within 

paragraph (a) of the definition of SCI competing 

consolidator (that a competing consolidator will be 

subject to Regulation SCI only if they meet the 

numerical threshold ‘‘during at least four of the 

preceding six calendar months’’) would occur prior 

to the start of the six-month ‘‘grace’’ period. For 

example, if a competing consolidator began 

operating in January of a year after the initial oneyear SCI CC Phase-In Period, the earliest it would 

satisfy the thresholds in paragraph (a) of the 

definition of SCI competing consolidator for the 

first time would be May 1st of that year (i.e., if such 

competing consolidator satisfied the threshold 

requirement in each of January, February, March 

and April). It would then have six months from that 

time to become fully compliant with Regulation 

SCI, and thus would have to comply with the 

requirements of Regulation SCI by November 1st. 

1272See Cboe Letter at 25–26; Nasdaq Letter IV at 

35–36; Data Boiler Letter I at 57; STANY Letter II 

at 6. 

1273See Proposing Release, 85 FR at 16786. 

1274 Id. at 16786–87. 

1275See Nasdaq Letter IV at 35–36; Cboe Letter at 

25–26. See also Nasdaq Letter IV at 8. 1276See Nasdaq Letter IV at 35–36; Cboe Letter at 

25–26; see, however, e.g., Committee on Capital 

Markets Regulation Letter at 3 (‘‘[W]ith multiple 

competing consolidators, there will no longer be a 

single point for failure capable of inducing stock 

market-wide paralysis, strengthening market 

resiliency.’’). See also NYSE Letter II at 24; FINRA 

Letter at 4. 

1277SCI Adopting Release at 72277. 

1278Some commenters also argued that the 

Commission’s proposal not to apply the standards 

for critical SCI systems to competing consolidators 

was based on the assumption that there will be 

multiple competing consolidators that enter the 

market. These commenters expressed doubt as to 

whether this would be the case. See Nasdaq Letter 

IV at 35–36; Cboe Letter at 25. See also Angel Letter 

at 20–21. However, the Commission notes that the 

second prong of the definition of ‘‘critical SCI 

systems’’ provides a catch-all for systems that 

‘‘[p]rovide 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.’’ See Rule 1000 of Regulation SCI 

(definition of ‘‘critical SCI system’’). As discussed 

above, the competing consolidator model is 

designed to result in multiple viable sources of 

consolidated market data, would not be initiated 

until a transition period is complete, and thus 

should not result in a single point of failure. 

However, the second prong of the definition of 

‘‘critical SCI systems’’ would apply in the event that 

availability of alternatives were significantly 

limited or nonexistent in the future. 

initial period of one year after the 

compliance date of Rule 614(d)(3) of 

Regulation NMS.1268 Instead, during 

this SCI CC Phase-In Period, competing 

consolidators will be subject to the 

requirements adopted in Rule 614(d)(9) 

of Regulation NMS, as discussed below, 

which includes requirements similar to 

some of the key provisions of Regulation 

SCI. The Commission believes that this 

phase-in period will mitigate the 

concerns raised by some commenters 

regarding potential barriers to entry by 

allowing potential competing 

consolidators to enter the market and 

develop their business and subscriber 

base, without requiring them to 

immediately shoulder the costs and 

burdens of Regulation SCI as SCI 

entities. At the same time, applying the 

requirements of Rule 614(d)(9) of 

Regulation NMS provides that 

competing consolidators are 

immediately subject to certain 

obligations to help ensure the reliability 

and resiliency of their systems during 

the SCI CC Phase-In Period. In addition, 

during this initial period, the plan 

processors would still be required to 

operate and would be SCI entities, 

subject to the requirement of Regulation 

SCI.1269

In addition, the Commission believes 

that it is appropriate to provide 

competing consolidators who enter the 

market after the SCI CC Phase-In Period 

and meet the revenue threshold in the 

definition of ‘‘SCI competing 

consolidators’’ for the first time, a 

period of time before they are required 

to comply with the requirements of 

Regulation SCI. Thus, Rule 1000 

provides that an SCI competing 

consolidator will not be required to 

comply with the requirements of 

Regulation SCI until six months after 

satisfying the threshold in the definition 

of SCI competing consolidator for the 

first time.1270 The Commission believes 

that this six-month ‘‘grace’’ period is 

appropriate and necessary to allow an 

SCI competing consolidator the time 

needed to take steps to meet the 

requirements of the rules, rather than 

requiring compliance immediately upon 

meeting the threshold level. The 

Commission also believes that this 

additional period for compliance should 

give a new competing consolidator 

entrant the opportunity to initiate and 

develop its business by allowing 

additional time before a new competing 

consolidator must incur the costs 

associated with compliance with the 

requirements of Regulation SCI.1271

Some commenters argued that 

competing consolidators should not 

only be subject to the standard 

requirements of Regulation SCI but 

should be held to the heightened 

requirements imposed on ‘‘critical SCI 

systems.’’ 1272 As the Commission stated 

in the Proposing Release, under the 

current consolidation model, because 

the exclusive SIPs represent single 

points of failure, they are all subject to 

heightened requirements as ‘‘critical SCI 

systems.’’ 1273 However, the competing 

consolidator model is designed to result 

in multiple viable sources of 

consolidated market data, and the 

competing consolidator model would 

not be initiated until a transition period 

is complete. Accordingly, the 

Commission believes that including 

systems of such competing 

consolidators within the scope of 

‘‘critical SCI systems’’ is unnecessary, 

because any individual competing 

consolidator would no longer be the 

sole source of a consolidated market 

data product, as each SIP is today for its 

respective securities.1274 Some 

commenters argued that, even with 

multiple competing consolidators, due 

to product differentiation, certain 

consolidators would become uniquely 

important to market participants and 

such participants would not be able to 

readily switch to another competing 

consolidator in the event of a systems 

issue.1275 As such, commenters argued 

that each competing consolidator could 

become a single point of failure for its 

customers.1276 However, in adopting the 

definition of ‘‘critical SCI systems,’’ the 

Commission explained that the 

definition is designed to ‘‘identify those 

SCI systems that are critical to the 

operation of the markets, including 

those systems that represent single 

points of failure in the securities 

markets,’’ and that the systems included 

in this category are those that, if they 

were to experience systems issues 

‘‘would be the most likely to have a 

widespread and significant impact on 

the securities markets.’’ 1277 The 

Commission does not dispute that a 

systems issue at an individual SCI 

competing consolidator could have a 

significant impact on its subscribers, but 

the Commission does not believe that 

such a systems issue would have the 

same type of widespread impact on the 

national market system that the 

Commission had contemplated in its 

definition of ‘‘critical SCI system.’’ 1278

Second, during the one-year SCI CC 

Phase-In Period and, subsequently, for 

competing consolidators that are not SCI 

competing consolidators, the 

Commission believes that a more 

tailored approach is appropriate, and is 

adopting a framework that imposes 

requirements similar to some of the key 

provisions of Regulation SCI on these 

18694 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1279See supra note 1271 and accompanying text. 

While one commenter suggested that competing 

consolidators that do not meet the threshold level 

should be encouraged to voluntarily adopt SCI as 

‘‘best practices,’’ see Data Boiler Letter I at 56, the 

Commission believes that because of the 

importance of ensuring the reliable delivery of core 

market data to market participants in the securities 

markets, a more appropriate approach is to include 

in Rule 614(d)(9) requirements similar to some of 

the core provisions of Regulation SCI for competing 

consolidators that are not SCI competing 

consolidators. 

1280Although competing consolidators that are 

not SCI entities would not be subject to the 

requirements of Regulation SCI, because of the 

similarities between the provisions of Rule 

614(d)(9) and certain parallel provisions in 

Regulation SCI (as described herein), the 

Commission notes that competing consolidators can 

look to the Regulation SCI Adopting Release in 

certain cases for further explanation and guidance 

regarding these provisions. See generally SCI 

Adopting Release, supra note 1233. See also SCI 

Adopting Release at 72289–92 (for a discussion of 

17 CFR 242.1001(a)(1) (Rule 1001(a)(1)) of 

Regulation SCI). 

1281See infra notes 1295–1297 and accompanying 

text (discussing the definitions of systems 

disruption and systems intrusion). 

1282See 17 CFR 242.614(d)(9)(ii)(A)(1) (Rule 

614(d)(9)(ii)(A)(1)) of Regulation NMS. 

1283 In assessing whether its consolidated market 

data systems meet the security standard of Rule 

614(d)(9)(ii)(A)(1), a relevant consideration would 

be whether any other systems provide vulnerable 

points of entry to a competing consolidator’s 

consolidated market data systems, heightening the 

risk of a systems intrusion. 

1284However, as discussed below, the 

Commission is incorporating into the general 

policies and procedures requirement the minimum 

element that relates directly to market data in 17 

CFR 242.1001(a)(2)(v) (Rule 1001(a)(2)(v)) of 

Regulation SCI. 

1285 17 CFR 242.614(d)(9)(ii)(A)(1). See also 17 

CFR 242.1001(a)(2)(vi) (Rule 1001(a)(2)(vi)) of 

Regulation SCI. 

1286Rule 1001(a)(2)(v) of Regulation SCI. 

1287See, e.g., FINRA Letter at 4. 

1288See 17 CFR 242.614(d)(9)(ii)(A)(2) (Rule 

614(d)(9)(ii)(A)(2)) of Regulation NMS. 

entities. The Commission believes that 

this two-pronged approach will help 

ensure that the automated systems of 

competing consolidators have adequate 

levels of capacity, integrity, resiliency, 

availability, and security to maintain 

operational capability, while at the same 

time allowing all competing 

consolidators to grow their business for 

an initial transition period and 

subsequently, affording new entrants a 

similar opportunity to do so, taking into 

consideration their functions, potential 

risks, and the costs and burdens 

associated with the various 

requirements of Regulation SCI.1279

For those competing consolidators 

that (i) are newly registered and 

operating during the initial SCI CC 

Phase-In Period, or (ii) subsequently, do 

not satisfy the SCI entity definition 

because they are below the five percent 

SCI competing consolidator threshold, 

new paragraph (d)(9) of Rule 614 will 

apply. The provisions of Rule 614(d)(9) 

will subject competing consolidators 

that are not SCI competing consolidators 

to certain, but not all, obligations that 

are similar to those that apply to SCI 

entities.1280 Paragraph (d)(9)(i) of Rule 

614 contains certain definitions 

applicable to Rule 614(d)(9), which are 

discussed below.1281 Paragraph (d)(9)(ii) 

of Rule 614 relates to the obligations of 

competing consolidators with respect to 

policies and procedures. Specifically, 

competing consolidators will be 

required to establish, maintain, and 

enforce written policies and procedures 

reasonably designed to ensure: That 

their systems involved in the collection 

and consolidation of consolidated 

market data, and dissemination of 

consolidated market data products, have 

levels of capacity, integrity, resiliency, 

availability, and security adequate to 

maintain the competing consolidator’s 

operational capability and promote the 

maintenance of fair and orderly markets; 

and the prompt, accurate, and reliable 

dissemination of consolidated market 

data products.1282 Paragraph 

(d)(9)(ii)(A)(1) of Rule 614 mirrors the 

broad policies and procedures 

obligation relating to capacity, integrity, 

resiliency, availability, and security in 

Rule 1001(a)(1) of Regulation SCI, 

which is core to ensuring the 

operational capability and resiliency of 

competing consolidators.1283

This rule does not follow the 

Regulation SCI approach of requiring 

minimum elements that are required for 

the operational capability policies and 

procedures of SCI entities.1284 For 

competing consolidators that do not 

meet the definition of SCI competing 

consolidator and pose less risk to the 

markets as discussed above, the 

Commission believes it is appropriate to 

take a more flexible approach for the 

required policies and procedures under 

17 CFR 242.614(d)(9)(ii) (Rule 

614(d)(9)(ii)). The rule affords these 

competing consolidators the flexibility 

to design and tailor their policies and 

procedures based on their own 

assessment of their policies and 

procedures obligations relating to 

capacity, integrity, resiliency, 

availability, and security in paragraph 

(d)(9)(ii)(A)(1). Importantly, paragraph 

(d)(9)(ii)(A)(1) of Rule 614 incorporates 

into the general policies and procedures 

provision the requirement that a 

competing consolidator’s policies and 

procedures be reasonably designed to 

ensure the ‘‘prompt, accurate, and 

reliable dissemination of consolidated 

market data products.’’ 1285

Rule 1001(a)(2)(v) of Regulation SCI, 

which relates to BC/DR plans, 

specifically requires SCI entities to have 

BC/DR plans that ‘‘include maintaining 

backup and recovery capabilities 

sufficiently resilient and geographically 

diverse and that are reasonably designed 

to achieve next business day resumption 

of trading and two-hour resumption of 

critical SCI systems following a widescale disruption.’’ 1286 Like the other 

minimum elements enumerated in Rule 

1001(a)(2) of Regulation SCI, the 

Commission is not adopting this 

requirement for competing 

consolidators who do not meet the 

thresholds in the definition of SCI 

competing consolidator. 

Some commenters noted the impact 

that the impairment of a competing 

consolidator’s data could have on its 

subscribers and stated the importance 

for subscribers to retain backup 

competing consolidators.1287 Competing 

consolidators that are not SCI entities 

may choose to adhere voluntarily with 

the provisions in Regulation SCI related 

to BC/DR plans. Many market 

participants that receive consolidated 

market data products from a competing 

consolidator, whether an SCI competing 

consolidator or not, will take steps to 

assess the reliability and resilience of 

the competing consolidator, such as 

understanding the backup capabilities 

of a competing consolidator, as well as 

reviewing contract terms, due diligence, 

and monitoring. After such an 

assessment and evaluating the needs of 

their business and their customers, 

some market participants may choose to 

maintain connections to backup 

competing consolidators (i.e., from a 

secondary source) that would be able to 

immediately provide such market 

participants with consolidated market 

data if their primary competing 

consolidator was unable to do so. 

Paragraph (d)(9)(ii)(A)(2) of Rule 614 

provides that the policies and 

procedures under paragraph 

(d)(9)(ii)(A)(1) will be deemed to be 

reasonably designed if they are 

consistent with current industry 

standards, which would 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. 

Compliance with such current industry 

standards, however, will not be the 

exclusive means to comply with the 

requirements of paragraph (d)(9)(ii)(A) 

of Rule 614.1288 This provision mirrors 

the safe harbor relating to industry 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18695 

1289See SCI Adopting Release at 72298–03 

(discussing Rule 1001(a)(4) of Regulation SCI). 

Concurrent with the adoption of Regulation SCI, 

Commission staff issued guidance providing 

examples of industry standards. See Staff Guidance 

on Current SCI Industry Standards (Nov. 19, 2014), 

available at http://www.sec.gov/rules/final/2014/ 

staff-guidance-current-sci-industry-standards.pdf. 

1290See 17 CFR 242.614(d)(9)(ii)(B) (Rule 

614(d)(9)(ii)(B)) of Regulation NMS. 

1291See SCI Adopting Release at 72291–92 

(discussing Rule 1001(a)(3) of Regulation SCI). 

1292See Rule 614(d)(9)(ii)(B) of Regulation NMS. 

The Commission notes that Rule 614(d)(9) does not 

define responsible personnel, as it believes it is 

likely that a competing consolidator would define 

this and other key terms in its policies and 

procedures, which pursuant to paragraph 

(d)(9)(ii)(A)(1) must be reasonably designed. The 

Commission also notes that competing 

consolidators may look to the definitions of this and 

other terms in Rule 1000 of Regulation SCI as 

guidance in developing their own definitions. 

1293See SCI Adopting Release at 72314–16 

(discussing Rule 1001(c) of Regulation SCI). 

1294See Rule 614(d)(9)(iii) of Regulation NMS. 

1295See Rule 614(d)(9)(i) of Regulation NMS. 1296See id. 1297See Rule 1000 of Regulation SCI. 1298See Securities Exchange Act Release No. 

69077 (Mar. 8, 2013), 78 FR 18084, 03 (Mar. 25, 

2013) (Regulation SCI Proposing Release describing 

examples of systems compliance issues). 1299See SCI Adopting Release at 72287 

(describing the definition of ‘‘systems compliance 

issue), 72304 (discussing the requirement to have 

policies and procedures to achieve systems 

compliance). 

1300See 17 CFR 242.614(d)(9)(iii)(A) (Rule 

614(d)(9)(iii)(A)) of Regulation NMS. 

1301See SCI Adopting Release at 72316–17 

(discussing Rule 1002(a) of Regulation SCI). See 

also SCI Adopting Release at 72315–16 (discussing 

the triggering standard for SCI event obligations). 

1302See 17 CFR 242.614(d)(9)(iii)(B) (Rule 

614(d)(9)(iii)(B)) of Regulation NMS. 

1303See SCI Adopting Release at 72331–36 

(discussing Rule 1002(c) of Regulation SCI). 

1304The Commission expects that there are 

various methods by which a competing 

consolidator may publicly disseminate this 

information including, but not limited to, a 

Continued 

standards in 17 CFR 242.1001(a)(4) 

(Rule 1001(a)(4)) of Regulation SCI.1289

Competing consolidators will also be 

required to review periodically the 

effectiveness of the policies and 

procedures required by paragraph 

(d)(9)(ii)(B) of Rule 614 and take prompt 

action to remedy deficiencies in such 

policies and procedures.1290 This 

requirement in paragraph (d)(9)(ii)(B) of 

Rule 614 mirrors the requirement for 

periodic review found in 17 CFR 

242.1001(a)(3) (Rule 1001(a)(3)) of 

Regulation SCI.1291

In addition, competing consolidators 

will be required to establish, maintain, 

and enforce reasonably designed written 

policies and procedures that include the 

criteria for identifying responsible 

personnel, the designation and 

documentation of responsible 

personnel, and escalation procedures to 

inform quickly responsible personnel of 

potential systems disruptions and 

systems intrusions; and periodically 

review the effectiveness of the policies 

and procedures, and take prompt action 

to remedy deficiencies.1292 This 

paragraph (d)(9)(ii)(C) of Rule 614 

maintains the framework found in 17 

CFR 242.1001(c) (Rule 1001(c)) of 

Regulation SCI that requires an SCI 

entity to have policies and procedures, 

including escalation procedures, for 

identifying and designating responsible 

personnel who are responsible for 

assessing whether systems disruptions 

or systems intrusions have in fact 

occurred.1293

Paragraph (d)(9)(iii) of Rule 614 

relates to the obligations of competing 

consolidators with respect to systems 

disruptions and systems intrusions.1294

These provisions are similar to the SCI 

event obligations found in 17 CFR 

242.1002 (Rule 1002) of Regulation SCI, 

with certain changes as discussed 

below. Systems disruption is defined in 

17 CFR 242.614(d)(9)(i) (Rule 

614(d)(9)(i)) to mean an event in a 

competing consolidator’s systems 

involved in the collection and 

consolidation of consolidated market 

data, and dissemination of consolidated 

market data products, that disrupts, or 

significantly degrades, the normal 

operation of such systems.1295 Systems 

intrusion is defined in Rule 614(d)(9)(i) 

to mean any unauthorized entry into a 

competing consolidator’s systems 

involved in the collection and 

consolidation of consolidated market 

data and dissemination of consolidated 

market data products.1296 These 

definitions mirror the definitions of 

those terms in Regulation SCI but are 

narrower in that they only focus on a 

competing consolidator’s consolidated 

market data systems.1297

As a general matter, Rule 614(d)(9)(iii) 

only covers systems disruptions and 

systems intrusions and, unlike Rule 

1002 of Regulation SCI, does not cover 

systems compliance issues. The 

Commission believes that this is 

appropriate as the regulatory framework 

for competing consolidators is largely 

limited to broad operational principles 

and targeted disclosures. One of the 

goals of imposing obligations related to 

systems compliance issues on SCI 

entities was to address past instances in 

which self-regulatory rule filings filed 

by some SCI entities were inconsistent 

with how their technology systems 

operated in practice.1298 Systems 

compliance issues were included within 

the scope of Regulation SCI to help 

ensure an SCI entity’s operational 

compliance with its own rules and 

governing documents (i.e., to prevent 

systems from operating in a manner 

inconsistent with the rules and 

governing documents of an entity).1299

In contrast, competing consolidators 

will not have similar requirements (e.g., 

to file detailed rule filings) with respect 

to the operation of their automated 

systems. 

Under paragraph (d)(9)(iii)(A) of Rule 

614, competing consolidators will be 

required to, upon responsible personnel 

having a reasonable basis to conclude 

that a systems disruption or systems 

intrusion of consolidated market data 

systems has occurred, begin to take 

appropriate corrective action which 

must include, at a minimum, mitigating 

potential harm to investors and market 

integrity resulting from the event and 

devoting adequate resources to remedy 

the event as soon as reasonably 

practicable.1300 This provision mirrors 

the corrective action obligations of SCI 

entities found in 17 CFR 242.1002(a) 

(Rule 1002(a)) of Regulation SCI, 

including the obligations of responsible 

personnel in assessing whether or not a 

systems issue has occurred.1301

In addition, promptly upon 

responsible personnel having a 

reasonable basis to conclude that a 

systems disruption (other than a system 

disruption that has had, or the 

competing consolidator reasonably 

estimates would have, no or a de 

minimis impact on the competing 

consolidator’s operations or on market 

participants) has occurred, a competing 

consolidator will be required to 

disseminate publicly information 

relating to the event (including the 

system(s) affected and a summary 

description); and, when known, 

promptly publicly disseminate 

additional information relating to the 

event (including a detailed description, 

an assessment of those potentially 

affected, a description of the progress of 

corrective action, and when the event 

has been or is expected to be resolved); 

and until resolved, provide regular 

updates with respect to such 

information.1302 These requirements in 

paragraph (d)(9)(iii)(B) of Rule 614 are 

broadly similar to 17 CFR 242.1002(c) 

(Rule 1002(c))’s information 

dissemination provisions in Regulation 

SCI with several important 

distinctions.1303 First, unlike in 

Regulation SCI, the dissemination of 

information requirement in paragraph 

(d)(9)(iii)(B) of Rule 614 is not limited 

to dissemination to ‘‘members or 

participants,’’ as is the case for SCI 

entities in Rule 1002(c) of Regulation 

SCI. Instead, competing consolidators 

are required to disseminate ‘‘publicly’’ 

this information.1304 The Commission 

18696 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

‘‘systems status’’ web page of the competing 

consolidator that is easily and clearly locatable from 

the competing consolidator’s home web page and 

accessible at no cost to the public, or a messaging 

service that anyone can subscribe to without cost 

that will provide, without delay, alerts to 

subscribers regarding the competing consolidator’s 

systems status. 

1305For example, paragraph (d)(9)(iii)(B) of Rule 

614 requires only ‘‘an assessment of those 

potentially affected’’ by an event, while Rule 

1002(c) of Regulation SCI requires an SCI entity’s 

‘‘current assessment of the types and number of 

market participants potentially affected by’’ an 

event. 

1306See Proposing Release, 85 FR at 16777, 

16781, 16783–84 (explaining that the required 

information on Form CC and published 

performance metrics will help the Commission and 

market participants to evaluate the resiliency and 

technological reliability of a competing 

consolidator’s systems); see also supra Sections 

III.C.7(c) and (d). 

1307See 17 CFR 242.614(d)(9)(iii)(C) (Rule 

614(d)(9)(iii)(C)) of Regulation NMS. 

1308Rule 614(d)(9)(iii)(B) does not require 

competing consolidators to publicly disseminate 

information relating to systems intrusions. 

However, Rule 614(d)(9)(iii)(C) requires information 

relating to a system intrusion to be filed with the 

Commission on Form CC, which will be publicly 

available, though competing consolidators may seek 

confidential treatment for such information. See 

supra note 1052 and accompanying text. 

1309Regulation SCI contains a detailed framework 

that SCI entities must follow to notify the 

Commission about SCI events, including prescribed 

timelines to provide the Commission with initial 

report, updates, and final reports regarding SCI 

events. See 17 CFR 242.1002 (Rule 1002 of 

Regulation SCI). 

1310See supra Sections III.C.7(c) and (d). 

1311As stated in the Proposing Release and 

discussed above, the requirements to provide 

information on Form CC and publish performance 

metrics are designed to facilitate the Commission’s 

oversight of competing consolidators and help 

ensure the resiliency and technological reliability of 

a competing consolidator’s systems. See Proposing 

Release, 85 FR at 16777, 16781, 16783–84; see also 

supra Sections III.C.7(c) and (d). 

1312See 17 CFR 242.1002(c)(2) (Rule 1002(c)(2)) 

of Regulation SCI; SCI Adopting Release at 72334. 

1313See Rule 614(d)(9)(iv) of Regulation NMS. 

believes this is appropriate because, as 

discussed above, market participants 

will be looking to the reliability and 

resilience of respective competing 

consolidators in deciding which 

competing consolidator(s) to use as its 

source of consolidated market data 

products. By requiring public 

dissemination of any systems issues, all 

market participants, whether or not they 

are ‘‘members or participants’’ of the 

competing consolidator, will be able to 

access this information and use it, in 

combination with the competing 

consolidators’ published performance 

metrics, in assessing the reliability and 

resilience of the various competing 

consolidators they may be considering. 

In addition, the public dissemination 

requirement in paragraph (d)(9)(iii)(B) of 

Rule 614 contains a simplified 

framework when compared to Rule 

1002(c) of Regulation SCI 1305 and only 

applies to systems disruptions. The 

Commission believes that this 

streamlined approach is appropriate to 

limit burdens for these competing 

consolidators (as compared to the 

parallel requirements for SCI competing 

consolidators), and the Commission 

believes that the new requirements for 

competing consolidators described 

above that will require public disclosure 

of metrics and other information—such 

as information on system availability, 

network delay statistics, data quality, 

and systems issues—help to achieve 

some of the same goals of public 

transparency and help to ensure the 

resiliency of competing consolidators’ 

systems as the information 

dissemination provisions of Regulation 

SCI.1306 Similar to Regulation SCI’s 

requirements for systems disruptions, 

paragraph (d)(9)(iii)(B) of Rule 614 

includes a provision that exempts 

information dissemination for a ‘‘system 

disruption that has had, or the 

competing consolidator reasonably 

estimates would have, no or a de 

minimis impact on the competing 

consolidator’s operations or on market 

participants.’’ 

Concurrent with public dissemination 

of information relating to a systems 

disruption, competing consolidators 

will also be required to provide the 

Commission notification of such event, 

including the information required to be 

publicly disseminated.1307 In addition, 

competing consolidators will be 

required to notify the Commission 

promptly upon responsible personnel 

having a reasonable basis to conclude 

that a systems intrusion (other than a 

system intrusion that has had, or the 

competing consolidator reasonably 

estimates would have, no or a de 

minimis impact on the competing 

consolidator’s operations or on market 

participants) has occurred. Notifications 

regarding systems disruptions and 

systems intrusions that competing 

consolidators must provide to the 

Commission under this provision 

include information relating to the event 

(including the system(s) affected and a 

summary description); when known, 

additional information relating to the 

event (including a detailed description, 

an assessment of those potentially 

affected, a description of the progress of 

corrective action and when the event 

has been or is expected to be resolved); 

and until resolved, regular updates with 

respect to such information. This is the 

same information that paragraph 

(d)(9)(iii)(B) of Rule 614 will require 

competing consolidators to disseminate 

publicly for systems disruptions.1308

Paragraph (d)(9)(iii)(C) of Rule 614 does 

not require competing consolidators to 

adhere to the detailed framework for 

notifying the Commission of SCI events 

under Regulation SCI.1309 Rather, the 

rule requires competing consolidators to 

provide, concurrent with public 

dissemination of information relating to 

a systems disruption, or promptly upon 

responsible personnel having a 

reasonable basis to conclude that a nonde minimis systems intrusion has 

occurred, the Commission notification 

of such event and, until resolved, 

updates of such event. 

The Commission believes that this 

streamlined Commission notification 

requirement via Form CC, in 

combination with other requirements 

for competing consolidators that require 

disclosure of other information on Form 

CC and through performance 

metrics,1310 help to achieve the goal of 

keeping the Commission informed of 

the nature and frequency of issues that 

occur affecting the systems of competing 

consolidators that are not SCI 

entities.1311

Unlike the information that is filed 

with the Commission on Form SCI, 

which is treated as confidential subject 

to applicable law, Form CC, including 

any information about systems 

disruption and systems intrusions, will 

be publicly available. The Commission 

recognizes that information regarding 

systems intrusions may be sensitive, 

and making such information publicly 

available could compromise the security 

of the systems or an investigation into 

the systems intrusion. Because Rule 

614(d)(9) does not otherwise require 

public dissemination of such events, 

Form CC will permit competing 

consolidators to seek confidential 

treatment of Commission notifications 

related to systems intrusions. Unlike 

Rule 614(d)(9), Regulation SCI requires 

public dissemination of information 

relating to systems intrusions. However, 

the Commission similarly recognized 

the potentially sensitive nature of 

information relating to systems 

intrusions and provided a limited 

exception allowing SCI entities to delay 

dissemination of any information about 

a systems intrusion if dissemination 

would compromise the security of SCI 

systems or an investigation into the 

systems intrusion.1312

Section 242.614(d)(9)(iv) (Rule 

614(d)(9)(iv)) will require competing 

consolidators to participate in the 

industry- or sector-wide coordinated 

testing of BC/DR plans required of SCI 

entities pursuant to paragraph (c) of 17 

CFR 242.1004 (Rule 1004) of Regulation 

SCI.1313 Section 242.1004(c) (Rule 

1004(c)) of Regulation SCI relates to the 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18697 

1314See SCI Adopting Release at 72354–55 

(discussing Rule 1004(c) of Regulation SCI). 

1315See Proposing Release, 85 FR at 16786–87. 

1316But see supra notes 1272–1278 and 

accompanying text (discussing commenters 

concerns that competing consolidators would not 

have critical SCI systems under Regulation SCI, 

unlike plan processors today). 

1317The 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 1220, at Section 1.1. 

1318The 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. 

1319The 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. 

1320 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. 

1321See FINRA Letter at 11; TD Ameritrade Letter 

at 15; Fidelity Letter at 11; Data Boiler Letter I at 

64–65. 

1322See FINRA Letter at 12. 

1323See id. 

1324Fidelity Letter at 11. 

1325See Proposing Release, 85 FR at 16794. 

1326See FINRA Letter at 12. 

1327See id. at n. 50. 

1328TD Ameritrade at 15. Finally, another 

commenter suggested that instead of receiving data 

from competing consolidators, CAT should directly 

access the ‘‘real-time analytical platform’’ of SROs 

and competing consolidators in order to analyze 

and monitor trading in real-time, stating that 

‘‘CAT’s ‘T+5 Regulatory Access’ is too late. . . .’’ 

Data Boiler Letter I at 64. As described above, 

Section 6.5(a)(ii) of the CAT NMS Plan requires the 

Central Repository to collect (from a SIP or 

pursuant to a NMS plan) all data, including SIP 

data. This requires the Central Repository to collect 

consolidated data, not individual SRO feeds for the 

Central Repository to consolidate. Therefore, the 

Commission believes this comment is beyond the 

scope of the present rulemaking. 

1329 17 CFR 242.613(a)(1)(v) (Rule 613(a)(1)(v)) 

provides that the CAT NMS Plan must include ‘‘the 

flexibility and scalability of the systems used by the 

central repository to collect, consolidate, and store 

consolidated audit trail data, including the capacity 

of the consolidated audit trail to efficiently 

incorporate, in a cost effective manner, 

improvements in technology, additional capacity, 

additional order data, information about additional 

securities or transactions, changes in regulatory 

requirements, and other developments.’’ See also 

CAT NMS Plan, supra note 1220, at Appendix D, 

Section 1.1. (stating ‘‘The Central Repository must 

be designed and sized to ingest, process, and store 

large volumes of data. The technical infrastructure 

needs to be scalable, adaptable to new requirements 

and operable within a rigorous processing and 

control environment.’’). 

coordination of BC/DR testing required 

by Rule 1004 of Regulation SCI on an 

industry- or sector-wide basis with other 

SCI entities.1314 Because the 

consolidated market data, in total, 

provided by competing consolidators is 

essential to testing the systems of SCI 

entities, and because the SCI entities 

and their members or participants who 

are designated to participate in the 

testing required by Rule 1004 of 

Regulation SCI may rely on different 

competing consolidators to supply 

consolidated market data products, the 

Commission believes that it is 

appropriate that all competing 

consolidators be required to participate 

in the industry- or sector-wide testing 

required by paragraph (c) or Rule 1004 

of Regulation SCI. 

Finally, the Commission proposed 

certain changes to Rule 1000 of 

Regulation SCI’s definition of ‘‘critical 

SCI system.’’ 1315 These changes are 

being adopted as proposed. First, the 

Commission proposed to revise the 

phrase ‘‘the provision of consolidated 

market data’’ in paragraph (1)(v) of the 

definition of ‘‘critical SCI systems’’ to 

‘‘the provision of market data by a plan 

processor.’’ In addition, to avoid 

confusion with the term ‘‘consolidated 

market data,’’ that phrase was replaced 

with ‘‘market data’’ in the definition of 

‘‘critical SCI systems.’’ The Commission 

did not receive any comment on the 

proposed revisions to the definition of 

‘‘critical SCI system’’ and is adopting 

these changes to such definition as 

proposed for the reasons set forth in the 

proposal.1316

G. Effects on the National Market 

System Plan Governing the 

Consolidated Audit Trail 

In the Proposing Release, the 

Commission described the anticipated 

effect on the CAT NMS Plan. 

Specifically, the CAT NMS Plan 

requires the Central Repository 1317 to 

‘‘collect (from a SIP 1318 or pursuant to 

an NMS Plan 1319) and retain on a 

current and continuing basis . . . all 

data, including the following 

(collectively, ‘SIP Data’).’’ 1320 Because 

consolidated market data includes 

information beyond what is provided in 

SIP data—such as orders in new round 

lot sizes, depth of book data, and 

auction information—the scope of the 

consolidated market data collected and 

retained by the Central Repository 

would increase. In addition, the Central 

Repository may have to collect the data 

from a different source. 

The Commission received four 

comments on the effect of the 

decentralized consolidation model on 

the CAT NMS Plan.1321 One commenter 

stated that significant changes to the 

content or source of data collected by 

CAT, such as those proposed, could 

impact the CAT implementation 

timeline, especially if the changes occur 

while CAT implementation is still in 

progress.1322 Therefore, the commenter 

recommended that the expanded 

content in consolidated market data and 

the decentralized consolidation model 

be implemented after CAT has been 

fully implemented.1323 Another 

commenter suggested that the 

Commission review the choice of 

competing consolidator as the Central 

Repository’s source of consolidated 

market data.1324

Additionally, in response to a 

question raised by the Commission in 

the Proposing Release asking whether 

CAT should receive consolidated 

market data from one, all, or a subset of 

competing consolidators,1325 one 

commenter noted its preliminary belief 

that the Central Repository should 

receive only consolidated market data 

from one competing consolidator with a 

connection to an additional competing 

consolidator as a back-up source of data 

in the event of a systems disruption at 

the selected competing consolidator.1326

The commenter also stated that whether 

CAT uses a single or multiple 

competing consolidators would raise 

concerns about increased 

complexity.1327 Another commenter 

expressed concern about conflicting 

data produced by competing 

consolidators. Assuming CAT takes in 

data from every competing consolidator, 

the commenter asked how CAT would 

handle conflicting data it received from 

the competing consolidators and how 

industry participants would be expected 

to respond to such conflicting data.1328

The Commission does not believe that 

implementation of the amendments 

discussed herein should be delayed 

until CAT has been fully implemented. 

The systems used by the Central 

Repository must be adaptable to permit 

incorporation of improved technologies, 

additional order data, and changes in 

regulatory requirements; 1329 therefore, 

the Central Repository should be 

capable of incorporating the changes 

added by the amendments discussed 

herein. The Commission expects the 

CAT NMS Plan Operating Committee to 

develop plans for the necessary changes 

to the Central Repository. As discussed 

in the following section, there will be a 

transition period for switching from the 

exclusive SIPs to the decentralized 

consolidation model. During this time, 

the CAT NMS Plan Operating 

Committee can integrate the necessary 

18698 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1330See CAT NMS Plan, supra note 1220, at 

Article IV. 

1331Proposing Release, 85 FR at 16794. 

1332See supra Section II.C.2(c). Data about OTC 

equity securities is not included in consolidated 

market data. Therefore, as stated in the Proposing 

Release, the Central Repository may have to obtain 

this data from a different source. Proposing Release, 

85 FR at 16794. 

1333The Proposing Release described how the 

SROs may use existing proprietary data feeds to 

provide consolidated market data but that they also 

may decide to develop new dedicated data feeds. 

1334Proposing Release, 85 FR at 16795. 1335NYSE Letter II at 15–16. 1336 Id. at 16. The commenter also said that the 

Commission has not considered what would 

happen if the initial implementation phase does not 

create sufficient competition. Id. at 13. 

changes into the Central Repository 

requirements in a manner consistent 

with its change management policies. 

With respect to the comment stating 

that the Central Repository should only 

receive consolidated market data from a 

single competing consolidator, with a 

connection to a back-up competing 

consolidator in the event of a systems 

disruption, and the comment asking 

how CAT would reconcile conflicting 

data across all of the competing 

consolidators, the Commission is not 

requiring the Central Repository to 

subscribe to multiple competing 

consolidators. Whether CAT uses a 

single competing consolidator or 

multiple competing consolidators to 

receive all of consolidated market data 

is a choice that should be made by the 

CAT NMS Plan Operating Committee in 

its management of CAT in order to 

comply with its obligations under the 

CAT NMS Plan.1330 In addition, the 

CAT NMS Plan Operating Committee 

has the experience and is well 

positioned to determine the best and 

most reliable sources of data while at 

the same time minimizing any costs that 

may be associated with multiple 

sources. In response to the commenter 

suggesting that the Commission review 

the Operating Committee’s selection of 

a competing consolidator for the Central 

Repository, the CAT NMS Plan 

Operating Committee will have to select 

a competing consolidator that would 

allow it to comply with its obligations 

under the CAT NMS Plan, which is 

subject to Commission oversight. 

Notwithstanding the modification to 

allow competing consolidators to 

develop consolidated market data 

products that may not contain all 

elements of consolidated market data, 

the Commission believes that because 

Section 6.5(a)(ii) of the CAT NMS Plan 

requires the Central Repository to 

collect and retain ‘‘all data’’ from ‘‘a SIP 

or pursuant to an NMS Plan,’’ the 

Central Repository will be required to 

collect and retain all elements of 

consolidated market data. In the 

Proposing Release, the Commission 

stated that ‘‘the Central Repository 

would be required to collect and retain 

consolidated market data’’ and that ‘‘the 

scope of the consolidated data collected 

and retained by the CAT Central 

Repository would be expanded’’ as a 

result of the proposed amendments.1331

The requirement in Section 6.5(a)(ii) 

that the Central Repository collect and 

retain ‘‘all data’’ from ‘‘a SIP or pursuant 

to an NMS Plan’’ requires the Central 

Repository to collect and retain all 

elements of consolidated market data. 

Moreover, the Commission is not 

reducing the scope of information that 

is required to be collected and retained 

by the Central Repository. Therefore, the 

Central Repository must continue to 

collect and retain ‘‘all data’’ that it 

currently collects and retains, such as 

information regarding quotations and 

transactions in OTC equity securities 

that it collects pursuant to the Nasdaq 

UTP Plan.1332

H. Transition Period and Compliance 

Dates 

1. Proposal 

In the Proposing Release, the 

Commission stated that a transition 

period would be necessary to 

implement the decentralized 

consolidation model. The Commission 

described the following things that 

would have to occur to implement the 

decentralized consolidation model: (1) 

The SROs may need development time 

to create new separate data feeds for 

consolidated market data; 1333 (2) the 

SROs would need to make adjustments 

to their data collection and processing 

systems to integrate regulatory data into 

their new or existing data feeds; (3) 

firms intending to act as competing 

consolidators or self-aggregators would 

need time to register, develop or modify 

systems, establish pricing, and make 

other preparations; and (4) market 

participants would need some period of 

time for implementation and testing of 

any new data feeds, and would need a 

consistent and reliable source of 

consolidated market data as these 

changes are being implemented. The 

Commission stated that, during the 

transition period, the exclusive SIPs 

should continue their operations until 

such time as the Commission considers 

and approves an effective national 

market system plan amendment that 

would effectuate a cessation of their 

operations as exclusive SIPs. 

The Commission stated that to 

approve this plan amendment, the 

Commission would need to consider the 

operational readiness of competing 

consolidators and self-aggregators and 

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 

regulatory obligations, such as under 

Rules 603(c) and Rule 611 under 

Regulation NMS and best execution. 

The Commission would also consider 

the state of the market and the general 

readiness of the competing consolidator 

infrastructure. The Commission stated 

that considerations could include: (1) 

The status of registration, testing, and 

operational capabilities of multiple 

competing consolidators, selfaggregators, and market participants; (2) 

capabilities of competing consolidators 

to provide monthly performance metrics 

and other data required to be published 

pursuant to proposed Rules 614(d)(5) 

and (6); and (3) the consolidated market 

data products offered by competing 

consolidators.1334 The Commission 

requested comment on various aspects 

of the proposed transition period, 

including, but not limited to, the time 

period for SROs to make necessary 

changes to provide data content 

necessary for consolidated market data 

to competing consolidators and selfaggregators, the time period for brokerdealers to make any necessary changes, 

and how long the transition period 

should last. 

2. Final Rule and Response to 

Comments 

The Commission received several 

comments on the proposed transition 

period. One commenter described the 

proposed transition period as 

‘‘undefined and indefinite’’ and in 

violation of the APA and as granting 

‘‘unchecked decision-making authority 

outside the rulemaking process’’ to the 

Commission because market 

participants would not be able to 

comment on the Commission’s 

evaluation of whether the decentralized 

consolidation model is ready to be 

implemented.1335 This commenter 

stated that the Commission failed to 

define how it would determine 

‘‘operational readiness’’ necessary to 

terminate the transition period and did 

not consider what would happen if no 

competing consolidators register.1336

Further, the commenter stated that the 

Commission did not place specific 

parameters around the transition period 

and that potential entrants and market 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18699 

1337 Id. at 16. The commenter also stated that the 

inability to earn returns during the transition period 

despite the need to make substantial investments to 

become a competing consolidator or self-aggregator 

would make the failure of the decentralized 

consolidation model more likely. Id. 1338 IDS Letter I at 8. 1339 Id. at 9. 1340RBC Letter at 7. 1341See Clearpool Letter at 5; RBC Letter at 2. 1342See Clearpool Letter at 5. 1343See id. 1344See id. at 5–6. 1345See RBC Letter at 2. 

1346Section 36(a)(1) of the Exchange Act 

authorizes the Commission, subject to certain 

limitations, to conditionally or unconditionally 

exempt any person, security, or transaction, or any 

class thereof, from any provision of the Exchange 

Act or rule thereunder, if necessary or appropriate 

in the public interest and consistent with the 

protection of investors. 15 U.S.C. 78mm(a)(1). The 

Commission will monitor the implementation of 

these amendments during the transition period and 

may exercise this exemptive authority, for example, 

to provide exemptions from the deadlines and 

compliance dates set forth below. 

1347See supra note 1126 and accompanying text. 

The Operating Committee could also propose a 

revised revenue allocation formula for the fees 

collected for the data content underlying 

consolidated market data, and exchanges would 

propose any connectivity fees they intend to charge 

for the data content underlying consolidated market 

data during this time period through the Section 

19(b) rule filing process. 

1348See 17 CFR 242.608(b)(2)(i) (Rule 

608(b)(2)(i)). 

1349See id. 

1350See id. 

1351See 17 CFR 242.608(b)(2)(ii) (Rule 

608(b)(2)(ii)). 

participants would incur substantial 

costs and expenses while the 

Commission waits to see whether 

competing consolidators will 

emerge.1337 Similarly, another 

commenter stated that the proposed 

transition period incorrectly assumes 

that competing consolidators would 

form before the Commission approves 

the NMS plan amendment, explaining 

that market participants would ‘‘have no 

incentive to expend the millions of 

dollars, time, and effort to create a 

competing consolidator before the 

Commission approves the NMS 

plan.’’ 1338 This commenter also stated 

that the lack of a time limit on when the 

model would be implemented would 

result in competing consolidators, selfaggregators, and SROs incurring 

substantial costs to prepare only to be 

‘‘left in limbo’’ during a potential 

unlimited delay.1339 One other 

commenter requested clarification on 

the data that exclusive SIPs would be 

required to produce before competing 

consolidators have registered, and 

whether exclusive SIPs would be 

required to continue operating if they 

decide not to register as competing 

consolidators.1340

Two commenters offered suggestions 

for the timing of the implementation of 

the decentralized consolidation 

model.1341 One of the commenters said 

that the proposal should be 

implemented in three phases.1342 The 

first phase would establish the 

decentralized consolidation model 

within one year of the approval of the 

proposed amendments.1343 In the 

second phase, which would be 

implemented within six months of the 

implementation of the first phase, core 

data would be enhanced to include 

depth of book data, auction information, 

and aggregated odd-lots. The third 

phase would address the proposed 

definitions of round lot and protected 

quote and would be completed within 

six months of the completion of the 

second phase.1344 Another commenter 

stated that the proposed changes to the 

content and speed of consolidated 

market data should be accomplished 

closely in time.1345

The transition period will be an 

important phase in the implementation 

of the decentralized consolidation 

model and the expansion of NMS 

information. Several events during the 

transition period will serve as public 

benchmarks and provide market 

participants with information as to the 

timing of implementation. During this 

period, there would be at least two 

effective national market system plan(s) 

amendments submitted. One is required 

under Rule 614(e) and must be 

submitted within 150 days of Rule 614’s 

effectiveness; the other would be filed 

later to terminate operations of the 

exclusive SIPs. Each of these 

amendments will be filed pursuant to 

Rule 608 and subject to public comment 

that will inform Commission action. 

The Commission, however, is 

providing additional details regarding 

the transition to the decentralized 

consolidation model and the expansion 

of NMS information, including the 

sequence of key implementation steps, 

to provide greater clarity to market 

participants and respond to certain 

concerns raised by commenters. 

Specifically, as discussed further below, 

the Commission believes today’s 

amendments should be implemented in 

three phases to facilitate an orderly 

transition, to avoid unnecessary stress 

on the functioning of the market, and to 

avoid unnecessary and duplicative 

programming and development by the 

existing exclusive SIPs, SROs, and other 

market participants. The phased 

approach also establishes finite time 

limits for the steps in the transition 

process based on discrete periods of 

time from key implementation 

milestones, which addresses comments 

regarding the uncertainty around the 

details of the proposed transition 

period.1346

Phase One. During the first phase of 

the transition period, the fees for data 

content underlying consolidated market 

data will be filed with the Commission, 

and competing consolidator 

infrastructure will be developed and 

tested. 

Plan amendments. The first key 

milestone will be the amendment to the 

effective national market system plan(s) 

required under Rule 614(e), which must 

include the fees proposed by the plan(s) 

for data underlying consolidated market 

data.1347 The proposed amendment 

must be filed with the Commission 

within 150 days of the effectiveness of 

Rule 614. Within 90 days of the date of 

publication of the proposed 

amendment, or within such longer 

period as to which the plan participants 

consent, the Commission shall, by 

order, approve or disapprove the 

amendment, or institute proceedings to 

determine whether the amendment 

should be disapproved.1348 Such 

proceedings shall include notice of the 

grounds for disapproval under 

consideration and opportunity for 

hearing and shall be concluded within 

180 days of the date of publication of 

notice of the plan or amendment. At the 

conclusion of such proceedings the 

Commission shall, by order, approve or 

disapprove the plan or amendment.1349

The time for conclusion of such 

proceedings may be extended for up to 

60 days (up to 240 days from the date 

of notice publication) if the Commission 

determines that a longer period is 

appropriate and publishes the reasons 

for such determination or the plan 

participants consent to the longer 

period.1350 The time for conclusion of 

proceedings to determine whether a 

proposed amendment should be 

disapproved may be extended for an 

additional period up to 60 days beyond 

the period set forth in paragraph (b)(2)(i) 

of Rule 608 (up to 300 days from the 

date of notice publication) if the 

Commission determines that a longer 

period is appropriate and publishes the 

reasons for such determination or the 

plan participants consent to the longer 

period.1351

Initial Registration and Review 

Period. The next step in the first phase 

of the transition period—the registration 

of an initial ‘‘first wave’’ of competing 

consolidators—will commence on the 

date the Commission approves the 

amendments to the effective national 

market system plan(s) required under 

Rule 614(e), including the fees for the 

SRO data content necessary to generate 

18700 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1352The compliance date for Rule 614(a), which 

provides the Form CC registration process 

requirements for competing consolidators, will thus 

be the date of the Commission’s approval of the 

amendments to the effective national market system 

plan(s) required under Rule 614(e). 

1353See infra note 1360 and accompanying text. 

1354As discussed above, some commenters 

questioned whether enough competing 

consolidators would enter the market to make the 

decentralized consolidation model viable. See 

supra Section III.B.3. The Commission believes that 

implementing a first wave of registrations to 

encourage entities that wish to act as competing 

consolidators will help to ensure that sufficient 

numbers of entities enter the market. See infra notes 

2142–2144 and accompanying text. 

1355The compliance date for the amendments to 

Rule 603(b), which require SROs to make available 

all data content necessary to generate consolidated 

market data to competing consolidators and selfaggregators, will thus be 180 calendar days from the 

date of the Commission’s approval of the 

amendments to the effective national market system 

plan(s) required under Rule 614(e). 

1356The compliance date for Rule 614(d)(3), 

which requires competing consolidators to make 

consolidated market data products available to 

subscribers on a consolidated basis on terms that 

are not unreasonably discriminatory, will thus be 

270 days from the date of the Commission’s 

approval of the amendments to the effective 

national market system plan(s) required under Rule 

614(e). 

1357As discussed below, the transition to the new 

round lot sizes would occur later. The consolidated 

market data products offered by competing 

consolidators during the initial parallel operation 

period would be based on the current definition of 

round lot. In addition, the new revenue allocation 

formula would be coded and tested during phase 

two. 

1358The Proposing Release describes in detail 

how the various components of regulatory data are 

currently calculated and disseminated, including 

the specific obligations of the primary listing 

exchanges and the existing SIPs, as well as how 

these processes and responsibilities will be 

modified under the decentralized consolidation 

model. See Proposing Release, 85 FR at 16732–33, 

16759–63. See also supra Section II.H.2. 

consolidated market data.1352 Thus, fees 

for the SRO data content necessary to 

generate consolidated market data will 

be established prior to competing 

consolidator registration. The 

Commission believes that sequencing 

the approval of the amendments to the 

effective national market system plan(s) 

to precede competing consolidator 

registration will address concerns raised 

by several commenters that 

understanding the fees for data content 

underlying consolidated market data is 

necessary for competing consolidators 

and self-aggregators to develop business 

plans and decide whether to enter the 

market in these capacities. It will also 

allow competing consolidators to 

understand plan data costs for 

customers relative to proprietary data so 

that they can better assess anticipated 

market demand. 

The registration period for the first 

wave of competing consolidators will 

begin on the date that the plan 

amendments are approved by the 

Commission and will continue for 90 

days. Pursuant to Rule 614(a)(1)(v), the 

initial Forms CC filed during this period 

will become effective, unless declared 

ineffective by the Commission, after the 

90 calendar day Commission review 

period set forth in Rule 614(a)(1)(iii). 

The Commission believes that 

establishing a first wave process for the 

initial competing consolidators will 

provide incentives for entities to register 

because only those competing 

consolidators that register during the 

first wave will be permitted to 

participate in the testing period 

discussed below. All other competing 

consolidators will have to wait until the 

Commission approves the second plan 

amendment to terminate the operation 

of the exclusive SIPs.1353 The 

Commission believes that allowing the 

entities that register during the first 

wave to operate during the testing 

period will help ease the transition to 

the decentralized consolidation model 

and limit the potential for systems or 

other operational problems within the 

national market system.1354

Development period. Starting with the 

approval of the plan amendments, and 

simultaneous with the 180 day 

registration and review period, there 

will be a development period. During 

this time, the SROs would develop the 

capacity to make the data content 

necessary to generate consolidated 

market data available from their data 

centers. SROs will be required to make 

the data content necessary to generate 

consolidated market data available to 

competing consolidators and selfaggregators 180 calendar days after the 

approval of the plan amendments.1355

Similarly, competing consolidators and 

self-aggregators would develop the 

capacity to receive the SRO data content 

and generate consolidated market data 

products during this period. 

Testing period. Following the 

development period, there will be a 90 

day testing period. During this time, 

competing consolidators and selfaggregators will implement the 

technological changes made during the 

development period and test capacity 

with the SROs and potential customers. 

Phase One Go-Live. Following the 

development and testing periods, there 

will be an initial go-live period where 

competing consolidators can go live on 

a rolling basis and begin to provide 

consolidated market data products to 

subscribers.1356

Phase Two. Initial Parallel Operation 

Period. Following the phase one go-live, 

the decentralized consolidation model 

will run in parallel to the existing 

exclusive SIP model for an initial 

parallel operation period of 180 

calendar days. During this initial 

parallel operation period, the exclusive 

SIPs will continue to provide the market 

data required under the current effective 

national market system plan(s). The 

Commission believes that requiring the 

existing exclusive SIPs to continue 

disseminating the same data that they 

currently do will prevent the imposition 

of unnecessary costs—namely, any 

change to the data content the SIPs 

currently disseminate—on the existing 

exclusive SIPs immediately prior to 

their retirement. Nothing in the rules 

would prevent competing consolidators 

from providing market data to their 

subscribers during the initial parallel 

operation period.1357 This will enable 

competing consolidators to earn returns 

and recoup their development costs 

during the transition period. 

With respect to regulatory data during 

the initial parallel operation period, the 

existing SIPs will be required to 

continue to calculate and generate the 

regulatory data that they do currently— 

such as LULD price bands and messages 

regarding the triggering of a marketwide circuit breaker—and will provide 

this information to the primary listing 

exchanges, who will in turn make this 

information available to competing 

consolidators and self-aggregators.1358

Similarly, the primary listing exchanges 

will continue to calculate and generate 

regulatory data as currently required— 

such as messages regarding the 

triggering of a short sale circuit breaker 

and trading halt and pause messages— 

and will make this information available 

to competing consolidators and selfaggregators. The Commission believes 

that this approach, which maintains the 

current status quo regarding the party 

that calculates and generates regulatory 

data during the initial parallel operation 

period, will avoid the potential 

confusion and market disruption that 

could result from multiple parties—i.e., 

the primary listing exchanges and the 

existing SIPs—generating this 

information. In addition, it would avoid 

the imposition of unnecessary costs on 

the existing SIPs immediately prior to 

their retirement that would be 

associated with other approaches, such 

as shifting the calculation and 

generation of all regulatory data to the 

primary listing exchanges at an earlier 

stage and requiring the existing SIPs to 

develop the capacity to pass this 

information through to market 

participants. Furthermore, the primary 

listing exchanges would develop and 

test the capacity to calculate and 

generate LULD price bands, marketwide circuit breaker trigger messages, 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18701 

1359See supra Section II.H (describing the 

regulatory data elements that primary listing 

exchanges will be required to provide to competing 

consolidators and self-aggregators pursuant to these 

amendments). 

1360See supra note 1334 and accompanying text. 

1361Aside from the difference in the timing of 

registration, the registration process and other 

requirements of Rule 614 will be the same for 

competing consolidators that do not register during 

the first wave. 

1362See Cboe Letter at 3; NYSE Letter II at 9–10; 

Nasdaq Letter II at 35–36, 49; STANY Letter II at 

6. Another commenter stated that the existence of 

multiple consolidators is not a unique solution 

compared to an exclusive SIP distributing 

consolidated market data from multiple locations. 

See Citadel Letter at 5. 

1363See Cboe Letter at 3. 

1364See NYSE Letter II at 26. 

1365See NYSE Letter II at 8–9, n. 26. 

1366See Cboe Letter at 23 (stating the competing 

consolidator model and distributed SIP model 

could produce the same geographic latency 

benefits). 

1367 Id. at 23. 

1368 Id. at 24–25. 

1369See id. at 25 (stating that market participants 

would have to code and connect to competing 

consolidators). 

1370See id. See also note 892 and accompanying 

text. 

1371See Data Boiler Letter I at 66. 

and other regulatory messages currently 

generated by the existing SIPs—the 

calculation and generation of which will 

be shifted to the primary listing 

exchanges pursuant to these 

amendments 1359—during the initial 

parallel operation period and prior to 

the retirement of the existing SIPs. After 

the initial parallel operation period 

ends, the SIPs and competing 

consolidators will continue to run in 

parallel operation as the Operating 

Committee and the Commission 

consider the retirement of the exclusive 

SIPs in the next phase. 

Continuing parallel operation and 

retirement of the exclusive SIPs. At the 

end of the initial parallel operation 

period, the Operating Committee of the 

effective national market system plan(s), 

in consultation with market participants 

including SROs, broker-dealers, 

vendors, and others that consume 

market data, will evaluate the 

performance of the decentralized 

consolidation model during the initial 

parallel operation period. Within 90 

days of the end of the initial parallel 

operation period, the Operating 

Committee will make a recommendation 

to the Commission as to whether the 

exclusive SIPs should be 

decommissioned. The Commission will 

consider an effective national market 

system plan amendment to effectuate a 

cessation of the operations of the 

exclusive SIPs and, if consistent with 

the requirements of Rule 608 and the 

Exchange Act, approve such an 

amendment. Such an approval order 

will facilitate the final completion of the 

transition over to the new decentralized 

consolidation model. 

The Commission does not agree with 

the comment that the proposal failed to 

define the ‘‘operational readiness’’ of 

the decentralized consolidation model 

that would be necessary to approve the 

cessation of operations of the exclusive 

SIPs or that the Commission has 

reserved for itself ‘‘unchecked decisionmaking authority’’ over the 

implementation of the decentralized 

consolidation model. As discussed 

above,1360 the Commission described in 

the Proposing Release the elements that 

the Commission would consider that 

would inform its decision to approve 

the plan amendment to terminate the 

centralized consolidation model and 

operation of the exclusive SIPs and 

allow the decentralized consolidation 

model to operate on its own and 

solicited comment on what additional 

factors it should consider in reaching 

this decision. Furthermore, as stated 

above, the termination of the exclusive 

SIPs would be effectuated through the 

plan amendment process under Rule 

608 and subject to public comment that 

will inform Commission action. 

Phase Three. 

Registration of additional competing 

consolidators. Following the cessation 

of the operation of the exclusive SIPs, 

other entities interested in becoming a 

competing consolidator but that did not 

register during the initial ‘‘first wave’’ 

period described above, may register as 

competing consolidators.1361

Round lot testing and 

implementation. For a period of 90 days 

starting with the date of the cessation of 

the operation of the exclusive SIPs, the 

changes necessary to implement the 

new round lot sizes will be tested. At 

the end of the 90 day test period, the 

new round lot sizes will be 

implemented. The Commission believes 

that sequencing this step after the 

parallel operation period is important to 

avoid either: (1) Potential confusion and 

market disruption that could result from 

two different round lot structures 

operating at the same time; or (2) 

imposing reprogramming costs on the 

exclusive SIPs for a limited time period 

prior to their retirement. 

I. Alternatives to the Centralized 

Consolidation Model 

In the proposal, the Commission 

identified several alternative approaches 

to the centralized consolidation model 

that had been suggested both by 

Roundtable respondents and by several 

exchanges. These suggestions include 

the distributed SIP model, a single SIP 

for all exchange-listed securities, and a 

low-latency dedicated connection to 

existing exclusive SIP feeds. 

1. Distributed SIP Alternative 

Several commenters suggested that 

the distributed SIP alternative would 

address the issues that the Commission 

was trying to address, while retaining 

the resiliency of the centralized 

consolidation model.1362 One 

commenter stated that the Commission 

should implement a distributed SIP 

model to reduce geographic latency 

instead of the decentralized 

consolidation model, which the 

commenter stated would reduce the 

resiliency of critical market 

infrastructure.1363 Another commenter 

said that the Commission only 

considered the distributed SIP using 

information from the Market Data 

Roundtable and that market participants 

had implemented undefined changes 

that rendered the Commission’s 

consideration outdated.1364 This 

commenter also suggested that a 

distributed SIP model, with competing 

SIPs, would be subject to the oversight 

of the effective national market system 

plan(s).1365 One commenter described 

current exclusive SIP latencies and 

suggested that the introduction of a 

distributed SIP model would solve 

geographic latencies by allowing market 

participants to receive market data from 

the exclusive SIPs at the location where 

it is produced.1366 This commenter 

stated that competing consolidators 

would be unlikely to offer 

improvements in processor latency. 

This commenter provided statistics that 

geographic latency accounts for 96% of 

overall exclusive SIP latency, and 

therefore, the potential, hypothetical 

latency reduction from a competing 

consolidator with the ‘‘best-in-class 

technology’’ would be at most 4%.1367

Further, the commenter stated that ‘‘it is 

short sighted to view SIP architecture as 

purely a latency issue’’ as the exclusive 

SIPs have been ‘‘incredibly resilient and 

have an uptime of close to 100%.’’ 1368

The commenter said that a distributed 

SIP would provide significant resiliency 

benefits and would be easier for market 

participants to implement.1369 The 

commenter stated that the distributed 

SIP would provide the benefits of the 

competing consolidator model but 

without adding resilience concerns.1370

Other commenters disagreed. One 

commenter stated that a distributed SIP 

would not solve the latency issue.1371

Another commenter stated that it agreed 

with the Commission that the 

distributed SIP would increase costs 

and complexity and would not address 

18702 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1372See MEMX Letter at 8. 1373The Commission notes that the Equity Data 

Plans started considering the distributed SIP model 

in early 2018 and have not submitted any 

recommendations to the Commission for 

consideration. 

1374See RBC Letter. 

1375 Id. 

1376NYSE Letter II at 26. Despite the changes 

discussed by the commenter to reduce latency in 

the transmission and aggregation of SIP data, there 

is currently no competition in the market for 

consolidated market data. See NYSE Letter II at 10– 

11. This commenter also stated that the 

Commission did not consider whether the changes 

to data content or the creation of a decentralized 

consolidation model independently would have 

been sufficient to achieve the Commission’s goals. 

As discussed throughout, the amendments to the 

content of NMS information and the means by 

which it is disseminated are designed to better 

facilitate competition, to help ensure the prompt, 

accurate, reliable, and fair collection of information 

and to help ensure the fairness and usefulness of 

NMS information. The amendments to the content 

of NMS information and the amendments to adopt 

content and latency differentials in a 

competitive manner.1372

In the Proposing Release, the 

Commission explained that a 

distributed SIP alternative was 

suggested as one possible means to 

reduce geographic latency. 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. The benefit of the distributed 

SIP alternative was that consolidated 

market data would not have to travel 

multiple locations (from an exchange at 

one location to an exclusive SIP at a 

second location for consolidation and 

dissemination to a subscriber that may 

be at a third location) before reaching 

subscribers. 

Although the distributed SIP model 

could reduce the geographic latency 

inherent in the centralized 

consolidation model, the Commission 

believes that this model does not 

adequately address the problems with 

the existing model. Specifically, while 

the plan proposed pursuant to the 

Governance Order will be required to 

comply with requirements designed to 

mitigate conflicts of interest, it will not 

eliminate them. The SROs will retain 

sufficient voting power to act jointly on 

behalf of any new NMS data plan, for 

regulatory purposes. Further, the 

exchanges will continue to be permitted 

to sell proprietary data in a new 

decentralized consolidation model. 

Therefore, the Commission believes that 

the distributed SIP model lacks the 

incentives offered by the competing 

consolidator approach. The lack of 

incentives may prevent the regular 

upgrade of technology and product 

offerings and would perpetuate the need 

for end-users to obtain market data from 

multiple sources.1373 The distributed 

SIP model would continue to allow a 

single SIP to have exclusive rights to the 

dissemination of market data for the 

NMS stocks on a consolidated tape. The 

Commission does not believe that it is 

necessary for the exchanges to continue 

to control the consolidation and 

dissemination of consolidated market 

data. Further, because such a model 

lacks competition, the Commission 

believes the distributed SIP model 

would be less likely to incorporate 

technological enhancements improving 

latency and to make available more 

comprehensive and relevant product 

and service offerings. Furthermore, the 

end-users would still have to obtain 

market data from multiple SIPs because, 

as it is today, the data would not be 

consolidated across the exclusive SIPs. 

One commenter suggested a 

distributed SIP model that would allow 

for competition among SIPs subject to 

the oversight of the effective national 

market system plan(s). The 

decentralized consolidation model with 

competing consolidators is a similar 

proposal without the direct oversight of 

competing consolidators by the effective 

national market system plan(s). The 

Commission believes that the role and 

functions of the plans as outlined above 

is appropriate for the decentralized 

consolidation model. Further, this 

model would continue to suffer from 

conflicts of interest by allowing the 

effective national market system plan(s) 

controlled by the exchanges to oversee 

the dissemination of consolidated 

market data by competing consolidators. 

As to the comment regarding the 

provision of different market data 

products offered based on investors’ 

needs, the Commission acknowledged 

this suggestion in the proposal. Further, 

the Commission stated that such an idea 

could be implemented in a 

decentralized consolidation model. The 

Commission stated that the Operating 

Committee could develop different 

levels of fees for different consolidated 

market data products based on the 

needs of investors. The commenter, 

however, now states that the 

Commission cannot assume that the 

Operating Committee would create such 

a product. The Commission believes 

that if the commenter and the Operating 

Committee believe that such products 

would be useful to investors, then they 

would consider developing them in the 

decentralized consolidation model. 

2. Single SIP Alternative 

The Commission also discussed 

another suggestion to address latency 

concerns by combining the exclusive 

SIPs into a single exclusive SIP for all 

exchange-listed securities. The 

Commission stated that this alternative 

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, 

and could eliminate certain 

inefficiencies in having two separate 

exclusive SIPs for SIP data. The 

Commission also stated that having a 

single administrator and exclusive SIP 

could ease these burdens and introduce 

benefits such as a less complex 

infrastructure and greater 

standardization. 

One commenter stated that a single 

dedicated SIP could satisfy the 

requirements of the decentralized 

consolidation model.1374 However, the 

commenter acknowledged that the 

proposal’s ‘‘use of competition to 

maintain fair prices and enhance the 

quality and speed’’ is a reasonable 

approach.1375

In the Proposing Release, the 

Commission stated that it believed that 

the single SIP alternative suffered 

several key shortcomings: (1) 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; and (2) 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 did not receive any 

comments offering any persuasive 

reason as to why this conclusion was 

inadequate. Therefore, the Commission 

continues to believe that the 

decentralized consolidation model is an 

appropriate means to modernize the 

national market system and address the 

deficiencies of the current model. 

3. Other Alternatives 

Several commenters offered views on 

alternatives to the decentralized 

consolidation model. One commenter 

stated that the Proposing Release’s 

consideration of alternatives did not 

evaluate the ‘‘current state of market 

data infrastructure.’’ 1376 This 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18703 

a decentralized consolidation model address 

different but related issues that together are 

necessary to update and modernize the national 

market system. 

1377See NYSE Letter II at 25. 

1378See id. 

1379See id. 

1380See supra Section III.E.2(a). 

1381See NYSE Letter II at 26. 

1382See id. This commenter, however, stated that 

the Operating Committee may not implement a fee 

schedule with different consolidated market data 

products that could meet the demand of investors. 

1383See supra Section III.E.2(c). 

1384RBC Letter at 5–6. 

1385 44 U.S.C. 3501 et seq. 

1386 44 U.S.C. 3507; 5 CFR 1320.11. 

1387As explained above, exchanges that wish to 

rely upon an exemption from certain exchange 

provisions for affiliated competing consolidators 

will be required to register with the Commission on 

Form CC. See supra Section III.C.7(a)(iv). 

commenter stated that market 

participants had implemented changes 

to render the consideration of 

alternatives outdated. 

The commenter stated that the 

Commission failed to consider whether 

the changes addressed in the 

Governance Order, along with discreet 

changes in the Proposing Release, 

would be sufficient to achieve the 

Commission’s goals in the Proposing 

Release.1377 The commenter stated that 

the Commission did not explain why 

the governance changes would be 

insufficient and how the Commission 

could come to such a conclusion before 

the governance changes are 

implemented.1378 This commenter 

stated that the Commission’s failure to 

consider alternatives would violate the 

APA.1379 The Governance Order 

addresses the governance structure of 

the Equity Data Plans and particularly 

concerns about conflicts of interest and 

the allocation of voting power with 

respect to these Plans. It does not 

address the content of NMS information 

and the means by which it is 

disseminated in the national market 

system.1380

The commenter also stated that the 

Commission failed to consider an 

alternative that it had set forth in 

response to the Governance Order.1381

Specifically, this commenter stated that 

it had proposed creating different levels 

of SIP data products to match the 

demands of different types of 

customers.1382 The Commission 

believes that the Operating Committee 

should consider the commenter’s 

proposal for different levels of fees for 

the data content underlying 

consolidated market data.1383

Finally, one commenter suggested 

that a single dedicated SIP could also 

improve core data content and reduce 

latency but stated that the ‘‘[p]roposal’s 

use of competition to maintain fair 

prices and enhance quality and speed is 

an approach that we believe is 

reasonable.’’ 1384 The Commission 

agrees. The decentralized consolidation 

model will introduce price and latency 

competition into the national market 

system. 

IV. Paperwork Reduction Act 

Certain provisions of the rules and 

rule amendments that the Commission 

is adopting contain ‘‘collections of 

information requirements’’ within the 

meaning of the Paperwork Reduction 

Act of 1995 (‘‘PRA’’).1385 The 

Commission published a notice 

requesting comment on the collection of 

information requirements in the 

Proposing Release and submitted 

relevant information to the Office of 

Management and Budget (‘‘OMB’’) for 

review in accordance with the PRA and 

its implementing regulations.1386 The 

title of the new collection of information 

is ‘‘Market Data Infrastructure and Form 

CC.’’ 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. The Commission 

has applied for an OMB Control Number 

for this collection of information. 

The Commission requested comment 

on the collection of information 

requirements in the Proposing Release. 

The Commission received comments on 

the estimates for the collection of 

information requirements included in 

the Proposing Release, which are 

discussed below. 

A. Summary of Collection of 

Information 

The rules and rule amendments 

include collection of information 

requirements within the meaning of the 

PRA. 

1. Registration Requirements and Form 

CC 

Under Rule 614(a)(1)(i), each 

competing consolidator is required to 

register with the Commission by filing 

Form CC electronically in accordance 

with the instructions contained on the 

form.1387 To file a Form CC, a 

competing consolidator needs to access 

the Commission’s EFFS and register 

each individual who will access EFFS 

on behalf of the competing consolidator. 

Rule 614(a)(1)(ii) requires any reports 

required under Rule 614 to be filed 

electronically on Form CC, include all 

of the information as prescribed in Form 

CC, and contain an electronic signature. 

Rule 614(a)(2)(i) requires competing 

consolidators to amend an effective 

Form CC and Rule 614(a)(3) requires a 

competing consolidator to provide 

notice of its cessation of operations on 

Form CC. 

2. Competing Consolidators’ Public 

Posting of Form CC 

Rule 614(c) requires each competing 

consolidator to make public on its 

website a direct URL hyperlink to the 

Commission’s website that contains 

Form CC. 

3. Competing Consolidator Duties and 

Data Collection 

Rule 614(d)(1) through (3) requires 

competing consolidators to collect from 

the SROs quotation and transaction 

information for NMS stocks, calculate 

and generate a consolidated market data 

product, and make the consolidated 

market data product available on terms 

that are not unreasonably 

discriminatory to subscribers. Rule 

614(d)(4) requires competing 

consolidators to timestamp the 

information they collect from the SROs 

pursuant to Rule 614(d)(1) upon receipt, 

upon receipt by its aggregation 

mechanism, and upon dissemination to 

subscribers. 

4. Recordkeeping 

Rule 614(d)(7) requires 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. Rule 

614(d)(8) requires each competing 

consolidator, upon request of any 

representative of the Commission to 

furnish promptly to such representative 

copies of any documents required to be 

kept and preserved by it. 

5. Reports and Reviews 

Rule 614(d)(5) requires each 

competing consolidator, within 15 

calendar days after the end of month, to 

publish prominently on its website 

monthly performance metrics, as 

defined by the effective national market 

system plan(s) for NMS stocks. 

Rule 614(d)(6) requires a competing 

consolidator, within 15 calendar days 

after the end of each month, to publish 

prominently on its website certain 

detailed information about its 

operations. 

6. Amendment to the Effective National 

Market System Plan(s) for NMS Stocks 

Rule 614(e) directs the participants of 

the effective national market system 

plan(s) for NMS stocks to file with the 

18704 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

Commission an amendment to such 

plan(s) within 150 days of the 

effectiveness of Rule 614. 

7. Collection and Dissemination of 

Information by National Securities 

Exchanges and National Securities 

Associations 

Rule 603(b) requires every national 

securities exchange on which an NMS 

stock is traded and national securities 

association to make available to all 

competing consolidators and selfaggregators all information with respect 

to quotations for and transactions in 

NMS stocks, including all data 

necessary to generate consolidated 

market data, in the same manner and 

using the same methods, including all 

methods of access and using the same 

format, as such exchange or association 

makes available any information with 

respect to quotations for and 

transactions in NMS stocks to any 

person. Accordingly, the SROs will be 

required to collect and make available to 

competing consolidators and selfaggregators the information necessary to 

generate consolidated market data. In 

addition, the primary listing exchanges 

are required to collect and make 

available pursuant to Rule 603(b) 

regulatory data as defined in Rule 

600(b)(78). 

B. Proposed Use of Information 

1. Registration Requirements and Form 

CC 

The information collected under Rule 

614(a)(1) and (2) and Form CC are used 

for purposes of registering competing 

consolidators. The information collected 

on Form CC will be used to help ensure 

that a competing consolidator’s 

disclosures comply with the 

requirements of Rule 614. The 

information on Form CC would be 

publicly available and therefore could 

be used by market participants to 

evaluate the services offered by 

competing consolidators. 

2. Competing Consolidators’ Public 

Posting of Form CC 

The collection of information under 

Rule 614(c)—which requires each 

competing consolidator to make public 

on its website a direct URL hyperlink to 

the Commission’s website that contains 

the documents enumerated in 

paragraphs (b)(2)(ii) through (v), 

including each effective initial Form CC, 

each order of ineffective initial Form 

CC, each Form CC amendment to an 

effective Form CC, and each notice of 

cessation (if applicable)—will help to 

ensure that such information is readily 

available to the public. 

3. Competing Consolidator Duties and 

Data Collection 

The information collected under 

Rules 614(d)(1) through (3) constitutes 

the main obligations of competing 

consolidators: To collect data content 

underlying consolidated market data 

and to calculate and disseminate a 

consolidated market data product, 

which will be used by market 

participants for trading. Widespread 

availability of consolidated market data 

promotes fair and efficient markets and 

facilitates the ability of brokers and 

dealers to trade more effectively and to 

provide best execution to their 

customers. 

The information collected under Rule 

614(d)(4) would help subscribers to 

determine a competing consolidator’s 

realized latency and would assist 

subscribers in choosing a competing 

consolidator or in deciding whether a 

chosen competing consolidator 

continues to meet their latency 

demands. 

4. Recordkeeping 

The Commission will use the 

information collected under Rules 

614(d)(7) and (8) in its oversight of 

competing consolidators. 

5. Reports and Reviews 

The information collected under 

Rules 614(d)(5) and (6) will provide 

transparency with respect to the 

services and performance of a 

competing consolidator and allow 

market participants to evaluate the 

merits of a competing consolidator. 

6. Amendment to the Effective National 

Market System Plan(s) for NMS Stocks 

Rule 614(e) requires the participants 

to the effective national market system 

plan(s) for NMS stocks to file an 

amendment with the Commission, 

pursuant to Rule 608, that includes 

several provisions. First, Rule 614(e)(1) 

requires that the amendment conform 

the plan(s) to reflect the provision of 

information with respect to quotations 

for and transactions in NMS stocks by 

the SROs to competing consolidators 

and self-aggregators and define the 

monthly performance metrics that 

competing consolidators must publish 

pursuant to Rule 614(d)(5). The 

information collected pursuant to this 

Rule 614(e)(1) will help to ensure that 

the plan(s) accurately reflect the new 

market data dissemination model and 

will inform market participants of the 

operation of the plan(s). In addition, the 

information that is collected pursuant to 

Rule 614(e)(1) will facilitate the 

Commission’s oversight of the plan(s). 

Finally, the information collected will 

inform competing consolidators of the 

monthly performance metrics that they 

are required to develop. 

Second, Rule 614(e)(2) requires that 

the plan(s) be amended to require the 

application of timestamps by the SROs 

to all of the information that is 

necessary to generate consolidated 

market data, including the time the 

information was generated by the 

applicable SRO and the time the SRO 

made the information available to 

competing consolidators and selfaggregators. Timestamps help to 

measure latencies and sequence 

information. The timestamp information 

collected will be used by competing 

consolidators and self-aggregators to 

sequence information properly and 

measure latencies relating to the 

collection, consolidation, and 

generation of consolidated market data. 

Third, Rule 614(e)(3) provides that the 

plan(s) must be amended to reflect that 

the plan(s) must conduct an assessment 

of competing consolidator performance 

and develop an annual report of such 

assessment to be provided to the 

Commission. The information collection 

will assist the Commission in 

overseeing the operation of the national 

market system. 

Fourth, Rule 614(e)(4) provides that 

the plan(s) must be amended to provide 

for the development, maintenance, and 

publication of a list that identifies the 

primary listing exchange for each NMS 

stock. This information collection will 

help to identify which primary listing 

exchange is responsible for making 

Short Sale Circuit Breaker information 

available pursuant to Rule 201(b)(3). 

Finally, Rule 614(e)(5) provides that 

the plan(s) must be amended to include 

a requirement to calculate and publish 

on a monthly basis the consolidated 

market data gross revenues for NMS 

stocks as specified by (1) listed on the 

New York Stock Exchange (NYSE); (2) 

listed on Nasdaq; and (3) listed on 

exchanges other than NYSE or Nasdaq. 

This information will be used to 

determine whether a competing 

consolidator is subject to Regulation 

SCI. 

7. Collection and Dissemination of 

Information by National Securities 

Exchanges and National Securities 

Associations 

The information collected pursuant to 

Rule 603(b) promotes fair and efficient 

markets and facilitates the ability of 

brokers and dealers to trade more 

effectively and to provide best execution 

to their customers. This information 

will be used by competing consolidators 

to develop consolidated market data 

products for market participants and by 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18705 

1388At the time of the Proposing Release, these 

national securities exchanges were: Cboe BYX 

Exchange, Inc.; Cboe BZX Exchange, Inc.; Cboe 

EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; 

Cboe Exchange, Inc.; Investors Exchange LLC; LongTerm Stock Exchange, Inc.; Nasdaq BX, Inc.; 

Nasdaq ISE, LLC; Nasdaq PHLX LLC; Nasdaq Stock 

Market LLC; New York Stock Exchange LLC; NYSE 

American LLC; NYSE Arca, Inc.; NYSE Chicago, 

Inc.; and NYSE National, Inc. In addition, there will 

be one primary listing exchange for each NMS stock 

responsible for making regulatory data available 

and such primary listing exchange would be 

identified in the effective national market system 

plan(s). 

1389See NYSE Letter II at 17; Nasdaq Letter IV at 

25. 

1390See NYSE Letter II at 17. 

1391 Id. 

1392 Id. 

1393 Id. 

self-aggregators to develop consolidated 

market data that they need to make 

trading decisions. 

In addition, the primary listing 

exchanges are required to collect and 

make available pursuant to Rule 603(b) 

regulatory data as defined in Rule 

600(b)(78). The information collected is 

necessary for compliance with Federal 

securities laws. 

C. Respondents 

The collection of information titled 

Market Data Infrastructure and Form CC 

will apply to competing consolidators 

and the national securities exchanges 

and national securities associations. The 

below table summarizes the 

Commission’s initial and adopted 

estimates of the number of respondents 

for each collection of information 

requirement: 

Collection of information Applicable respondents Initial 

estimate 

Estimate for 

adopted 

rules 

Registration Requirements and Form CC .................... Entities that register pursuant to Rule 614 to act as 

competing consolidators.

8 8 

Competing Consolidators’ Public Posting of Form CC Entities that register pursuant to Rule 614 to act as 

competing consolidators.

12 8 

Competing Consolidator Duties and Data Collection ... Entities that register pursuant to Rule 614 to act as 

competing consolidators.

12 8 

Recordkeeping .............................................................. Entities that register pursuant to Rule 614 to act as 

competing consolidators.

12 8 

Reports and Reviews ................................................... Entities that register pursuant to Rule 614 to act as 

competing consolidators.

12 8 

Amendment to the Effective National Market System 

Plan(s) for NMS Stocks.

National securities exchanges and national securities 

associations that are participants to the effective 

national market system plan(s) for NMS stocks.

17 19 

Collection and Dissemination of Information by National Securities Exchanges and National Securities 

Associations.

National securities exchanges and national securities 

associations on which NMS stocks are traded.

17 17 

1. Initial Estimate 

In the Proposing Release, the 

Commission estimated that there would 

be 12 persons who may decide to 

perform the functions of a competing 

consolidator and would have to comply 

with the information collections under 

Rule 614. In addition, the Commission 

estimated that the 16 national securities 

exchanges and one national securities 

association (the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’)) 

that are members of the effective 

national market system plan(s) would 

have to comply with the information 

collection under Rule 614(e).1388

Furthermore, the Commission estimated 

that the 16 national securities exchanges 

that trade NMS stocks and one national 

securities association would have to 

comply with the information collection 

under Rule 603(b). 

(a) Comments Received on Initial 

Estimates 

Two commenters suggested that the 

estimated number of competing 

consolidators was unsupported.1389 One 

commenter argued that the different 

categories of competing consolidators 

identified by the Commission may not 

become competing consolidators for 

varying reasons.1390 Specifically, this 

commenter stated that large brokerdealers that currently aggregate 

proprietary market data would likely 

become self-aggregators, rather than 

competing consolidators, due to 

increased operational costs and 

regulatory scrutiny.1391 The commenter 

stated that the proposal lacked analysis 

to support the conclusion that existing 

SROs would become competing 

consolidators and that existing SROs 

would be subject to ‘‘substantial 

infrastructure costs’’ and additional 

regulatory requirements.1392 Finally, the 

commenter stated that there was no 

evidence that the SROs that operate the 

exclusive SIPs would become 

competing consolidators because SROaffiliated competing consolidators 

would be subject to Section 19(b) of the 

Exchange Act while other competing 

consolidators would not.1393

18706 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1394 In the Proposing Release, the Commission 

described potential competing consolidators 

associated with SROs. As discussed above, the 

Commission is exempting exchanges from certain 

provisions of the Exchange Act related to the 

operation of affiliated competing consolidators. See 

supra Section III.C.7(a)(iv). One condition of the 

exemption is a requirement that such exchange 

affiliated competing consolidator file a Form CC. 

Accordingly, the adopted PRA includes paperwork 

collection estimates for the filing of Form CC by 

exchange affiliated competing consolidators. 

1395The Commission estimated this number 

based on its knowledge of the different types of 

entities that currently collect and disseminate NMS 

information as well as from information received at 

the Roundtable and the comment file. 

1396Currently, these national securities exchanges 

are: Cboe BYX Exchange, Inc.; Cboe BZX Exchange, 

Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX 

Exchange, Inc.; Cboe Exchange, Inc.; Investors 

Exchange LLC; Long-Term Stock Exchange, Inc.; 

MEMX LLC; MIAX Pearl, LLC; Nasdaq BX, Inc.; 

Nasdaq ISE, LLC; Nasdaq PHLX LLC; Nasdaq Stock 

Market LLC; New York Stock Exchange LLC; NYSE 

American LLC; NYSE Arca, Inc.; NYSE Chicago, 

Inc.; and NYSE National, Inc. 

1397As noted above, the primary listing exchange 

for each NMS stock responsible for making 

regulatory data available would be identified in the 

effective national market system plan(s). 

1398 In the Proposing Release, the Commission 

preliminarily estimated that 12 respondents would 

decide to perform the functions of a competing 

consolidator, which included four SROs that would 

not be required to file Form CC. Therefore, the 

Commission estimated that eight respondents 

would be subject to the registration requirements of 

Rule 614 and Form CC. 

1399The Commission based this estimate on the 

number of hours necessary to complete Form SIP 

because Form CC was generally based on Form SIP 

and incorporated many of the provisions of Form 

(b) Estimate for the Adopted Rules 

The Commission believes that the 

estimate of 12 persons who could 

decide to perform the functions of a 

competing consolidator should be 

adjusted downwards to eight persons. 

This revision reflects reductions in (1) 

the estimated number of competing 

consolidators associated with SROs 

from four, as proposed, to one; 1394 and 

(2) the estimated number of competing 

consolidators that would be brokerdealers that aggregate market data for 

internal uses from two, as proposed, to 

one. While the actual number of entities 

that decide to register as a competing 

consolidator is unknown at this time 

because this is a new type of entity, the 

Commission believes that for purposes 

of estimating the paperwork collection 

costs and burdens that eight is a 

reasonable number.1395 Of that number, 

the Commission estimates that eight of 

those persons will have to file a Form 

CC to register with the Commission as 

a competing consolidator. All 

competing consolidators will have to 

comply with the other information 

collections described above under Rule 

614. 

The Commission notes that there are 

18 national securities exchanges 1396

and one national securities association 

that are participants in the effective 

national market system plan(s) for NMS 

stocks and would have to comply with 

the information collection under Rule 

614(e). The Commission estimates that 

there are 16 national securities 

exchanges (the securities exchanges that 

trade NMS stocks) and one national 

securities association that would have to 

comply with the information collection 

under Rule 603(b).1397

D. Total Initial and Annual Reporting 

and Recordkeeping Burden 

1. Registration Requirements and Form 

CC 

Competing consolidators are required 

to register pursuant to Rule 614 and 

Form CC. In addition, competing 

consolidators are required to file 

amendments to Form CC pursuant to 

Rule 614(a)(2). 

(a) Initial Burden and Costs 

The Commission’s adopted estimates 

for initial burdens and costs have been 

slightly revised from the proposal. The 

tables below summarize these changes. 

Proposed 

estimates 

Adopted 

estimates 

Completion of the Initial Form CC: Number of Respondents: 

Number of Respondents Subject to the Registration Requirements of Rule 614 and Form 

CC.

8 1398 ........................... 8. 

Completion of the Initial Form CC: Number of Hours: 

Number of Hours Needed for Each Respondents to complete an Initial Form CC ............. 200 1399 ....................... 200. 

Number of Hours Needed for Each CC to Access EFFS ..................................................... 0.3 1400 ........................ 0.3. 

Total Number of Hours for Each Respondent to Complete Form CC and Access 

EFFS.

200.3 1401 .................... 200.3. 

Completion of the Initial Form CC: Total One-Time Initial Registration Burden: 

Total Burden Hours (Number of Respondents × Number of Hours to Complete Form CC 

and Access EFFS).

8 Respondents × 200.3 

Hours = 1,602.4.

8 Respondents × 200.3 

Hours = 1,602.4. 

Total Cost to Register All Respondents (Total Number of Hours × Hourly Rate) 1402 ......... 1,602.4 Hours × $467 

= $748,320.80.

1,602.4 Hours × $467 

= $748,320.80. 

Completion of the Initial Form CC: Digital Signing of Form CC: 

Number of Individuals from Each Respondent Signing Form CC ........................................ 2 .................................. 2. 

Cost of Obtaining a Digital ID ............................................................................................... $25 .............................. $25. 

Total Cost of Digitally Signing Form CC for All Respondents (Number of Signers × 

Cost of Digital ID × Number of Respondents).

2 Signers × $25 × 8 

Respondents = $400.

2 Signers × $25 × 8 

Respondents = 

$400. 

Completion of the Amendments to Form CC: 

Number of Amendments Expected to be Filed During First Year of Form CC Effectiveness 1403.2 .................................. 2. 

Total Estimated Number of Burden Hours per Amendment per Respondent ............... 6.0 ............................... 6.0. 

Total Cost Associated with Amendments During First Year of Form CC Effectiveness 

(Number of Amendments × Number of Hours per Amendment × Number of Respondents × Attorney Hourly Rate).

2 Amendments × 6 

Hours × 8 Respondents × $467 = 

$44,832.

2 Amendments × 6 

Hours × 8 Respondents × $467 = 

$44,832. 

(i) Proposed Estimates—Initial Burden 

and Costs 

In the Proposing Release, the 

Commission preliminarily estimated the 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18707 

SIP. The Commission estimated that completing 

Form SIP, which includes 20 exhibits, would take 

400 hours. See Securities Exchange Act Release No. 

63347 (Nov. 19, 2010), 75 FR 77306 (Dec. 10, 2010) 

(‘‘The Commission calculated in 2008 that Form SIP 

takes 400 hours to complete.’’). Form CC includes 

nine exhibits, and the Commission estimates that 

completing proposed Form CC would take 200 

hours, which is half the time for Form SIP. 

1400The Commission estimated that each 

competing consolidator would initially designate 

two individuals to access EFFS, with each 

application to access EFFS taking 0.15 hours for a 

total of 0.3 hours per competing consolidator. 

1401 200 hours to complete an initial form CC + 

0.3 hours to access EFFS = 200.3 hours. 

1402The Commission estimated that competing 

consolidators would, as a general matter, prepare 

Form CC internally and not use external service 

providers to complete the form. The Commission 

also stated that Form CC would likely be prepared 

by an attorney. The Commission based this estimate 

on the $467 hourly rate as of May 2019 for an 

assistant general counsel × 200.3 hours × 8 

respondents. The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead. Burden estimates may vary to the extent 

that competing consolidators utilize external 

service providers or outside counsel. The 

Commission preliminarily believed that competing 

consolidators would use in-house counsel and not 

use external service providers or outside counsel to 

file the Form CC. 

1403The Commission preliminarily estimated that 

competing consolidators would file two 

amendments—one Material Amendment and one 

Annual Report—during its first year after the 

effectiveness of its Form CC. 

1404See ACTIV Financial Letter. 

1405See supra note 1394. 

1406 In addition, on an ongoing basis, each 

competing consolidator may add one individual to 

access EFFS. For example, a competing 

consolidator may have to add an individual to 

access EFFS to account for staffing changes. The 

Commission estimated that the ongoing burden 

would be 0.15 hours per competing consolidator. 

1407The Commission considered the hour burden 

estimates for Form SDR when estimating the hour 

burdens for amendments to Form CC. As noted in 

the Proposing Release, when Form SDR was 

adopted in 2015, the Commission estimated the 

hour burden for amendments to be roughly 3% of 

the initial burden. Securities Exchange Act Release 

No. 74246, supra note 1038, at 14522. In that 

release, the initial burden was calculated to be 400 

hours per respondent and 12 hours per respondent 

for amendments. The Commission used a similar 

ratio to estimate the burdens for filers of Form CC 

because filers of Form SDR, like filers of Form CC, 

are required to file amendments annually as well 

as when certain information on Form SDR becomes 

inaccurate. Form SDR: General Instructions for 

Preparing and Filing Form SDR, available at https:// 

www.sec.gov/about/forms/formsdr.pdf (last 

accessed Nov. 27, 2020). Thus, the Commission 

estimated that the annual burden of filing one 

amendment on Form CC will be 3% of the 200 hour 

initial burden, or 6 hours. 

1408See supra note 1402. As with the initial Form 

CC, the Commission believed the competing 

consolidators would conduct this work internally. 

1409See id. 

1410See id. The Commission estimated that no 

competing consolidators would cease operations in 

the first three years of the rule’s effectiveness. 

number of respondents who would be 

subject to the registration requirements 

of Rule 614 and Form CC (8), the 

number of hours for each to complete 

Form CC (200) and the number of hours 

for each to access EFFS (0.3). Based on 

these, the Commission estimated a onetime initial registration burden for all 

competing consolidators is 

approximately 1,602.4 burden hours 

and a total cost to register all competing 

consolidators would be $748,320.80. 

In addition to this, the Commission 

estimated the total cost for respondents 

to obtain digital IDs to access EFFS for 

the purposes of signing the Form CC at 

approximately $400 for all respondents. 

Finally, the Commission estimated 

the total burden of filing amending 

Form CC in the first year after 

effectiveness at a total of 96 hours (for 

a total cost of $44,832). 

(ii) Comments/Responses on Initial 

Burden and Costs 

One commenter stated that the ‘‘legal 

requirements would be overly 

burdensome and have little impact on 

the utility of . . . service to the 

marketplace’’ and requested the 

Commission to reduce the legal cost 

burdens by adopting a formal regulated 

entity lite regime limited to 10 hours of 

legal work.1404

The Commission is not imposing a 

minimum level of costs, legal or 

otherwise, on competing consolidators. 

The estimates are those costs that the 

Commission believes that an entity may 

bear when registering as a competing 

consolidator. The Commission 

acknowledges that competing 

consolidators will have to bear certain 

regulatory and legal costs to be 

registered. 

(iii) Adopted Estimates—Initial Burden 

and Costs 

The Commission believes that, for 

reasons discussed above, the initial 

burden hour estimate included in the 

Proposing Release continues to be an 

appropriate estimate. The number of 

competing consolidators and the 

estimates do not need to be modified 

because the Commission is adjusting the 

total number of competing consolidators 

down from 12 to eight.1405 Therefore, 

the initial burden hour estimates, which 

were calculated using eight competing 

consolidators, remains the same. 

(b) Ongoing Burden and Costs 

(i) Proposed Estimates—Ongoing 

Burden and Costs 

Rule 614(a)(2) requires competing 

consolidators to amend Form CC prior 

to the implementation of material 

changes to pricing, connectivity, or 

products offered as well as annually to 

correct information that has become 

inaccurate or incomplete for any reason. 

These amendments represent the 

ongoing annual burdens of Form CC and 

proposed Rule 614(a)(2).1406 The 

Commission estimated that the ongoing 

annual burden for complying with the 

amendment requirements would be 

approximately 6.15 burden hours for 

each competing consolidator per 

amendment 1407 (for a total of 

$2,872.05), and approximately 49.2 

burden hours for all competing 

consolidators per amendment (for a total 

of $22,976.40).1408

The Commission estimated that 

competing consolidators would have 

one Material Amendment per year and 

together with the Annual Report, the 

Commission estimated that respondents 

would be required to file on average a 

total of two amendments per year. The 

Commission estimated that each 

respondent would have an average 

annual burden of 12.3 hours (for a total 

of $5,744.10) for a total estimated 

average annual burden for all competing 

consolidators of 98.4 hours (for a total 

of $45,952.80).1409 In addition, the 

Commission estimated that obtaining a 

digital ID for an individual who signs 

the Form CC would cost approximately 

$25 each year or approximately $200 for 

all respondents. The Commission 

estimated that each respondent will 

have an average annual cost of 

$5,769.10 ($5,744.10 + $25), and for all 

respondents, a total estimated annual 

cost of $46,152.80 ($5,769.10 * 8). 

Rule 614(a)(3) would require a 

competing consolidator that ceases to 

act as such to file an amendment to 

Form CC 90 calendar days prior to 

cessation of operations. The 

Commission described a competing 

consolidator’s notice of cessation of 

acting as a competing consolidator on 

Form CC as substantially similar to its 

most recently filed Form CC, and 

therefore, since the form would already 

be complete, the burden would not be 

as great as the burden of filing an 

application for registration on Form CC. 

The Commission based its estimates for 

a notice of cessation on the estimates for 

filing an amendment on Form CC. The 

Commission estimated that the one-time 

burden of filing a Form CC notice of 

cessation would be approximately 2 

burden hours (for a total of $934).1410

(ii) Comments/Responses on Ongoing 

Burden and Costs 

One commenter stated that competing 

consolidators would amend their fees 

18708 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1411See IDS Letter I at 15 (‘‘In a truly competitive 

market, competing consolidators would amend 

their fees more often than once a year, as they 

responded to market forces.’’). 

1412 36 annual burden hours = [(6 annual burden 

hours per amendment) × (6 amendments per year)]. 

The Commission monetized this amount to be 

$16,812. The Commission based this estimate on 

the $467 hourly rate as of May 2019 for an assistant 

general counsel × 36 hours. The Commission 

derived this estimate based on per hour figures from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2013, modified by 

Commission staff to account for an 1,800-hour 

work-year and inflation, and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead. 

1413 288 annual burden hours = [(6 annual burden 

hours per amendment) × (6 amendments per year) 

× (8 competing consolidators)]. The Commission 

monetized this amount to be $133,632. The 

Commission based this estimate on the $467 hourly 

rate as of May 2019 for an assistant general counsel 

× 36 hours × 8 competing consolidators. The 

Commission derived this estimate based on per 

hour figures from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead. 

1414See supra note 1394. 

1415The Commission based this estimate on a 

full-time Programmer Analyst spending 

approximately 0.5 hours to publicly post the URL 

hyperlink per competing consolidator. The 

Commission estimated the monetized initial burden 

for this requirement to be $120.50. The Commission 

derived this estimate based on per hour figures from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2013, modified by 

Commission staff to account for an 1,800-hour 

work-year and inflation, and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead: Programmer Analyst at $241 for 0.5 

hours = 0.5 initial burden hours per competing 

consolidator and $120.50. 

1416The Commission estimated the monetized 

initial aggregate burden for this requirement to be 

$1,446. The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead: [(Programmer Analyst at $241 for 0.5 

hours) × (12 competing consolidators)] = 6 initial 

burden hours across the competing consolidators 

and $1,446. 

1417The Commission estimated the monetized 

initial aggregate burden for this requirement to be 

$964. The Commission derived this estimate based 

on per hour figures from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead: [(Programmer 

Analyst at $241 for 0.5 hours) × (8 competing 

consolidators)] = 4 initial burden hours across the 

competing consolidators and $964. 

1418The Commission based this estimate on a 

full-time Programmer Analyst spending 

approximately 0.25 hours to check the 

Commission’s website when the competing 

consolidator submits an amendment to effective 

Form CCs to ensure that the Commission’s direct 

URL hyperlink that the competing consolidator has 

posted to its own website remains valid. Since the 

Commission estimated that a competing 

consolidator would file two amendments per year, 

the Commission estimated that each competing 

consolidator would incur a burden of 0.5 hours per 

year. [(0.25 hours) × (2 amendments per year)] = 0.5 

hours per year to check the URL hyperlink. The 

Commission estimated the monetized annual 

burden for this requirement to be $120.50. The 

Commission derived this estimate based on per 

hour figures from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead: Programmer 

Analyst at $241 for 0.5 hours = 0.5 annual burden 

hours per competing consolidator and $120.50. 

more than once a year.1411 An 

amendment to competing consolidator 

fees would require an amendment to a 

competing consolidator’s Form CC. The 

Commission has considered this 

comment and is amending its ongoing 

estimate that a competing consolidator 

will file five amendments a year, plus 

the annual report, for a total of six 

amendments per year. The Commission 

believes this estimate is reasonable 

based upon a review of amendments of 

the fee schedules of the SROs. 

(iii) Adopted Estimates—Ongoing 

Burden and Costs 

The Commission is amending its 

ongoing burden hour estimate that a 

competing consolidator will file two 

amendments per year. Based on the 

comments received, the Commission 

now estimates that a competing 

consolidator will file six amendments 

per year. 

The Commission preliminarily 

estimated that the annual burden of 

filing one amendment on Form CC 

would be six hours per competing 

consolidator. Since the Commission 

now estimates that a competing 

consolidator will file six amendments in 

a year, the Commission estimates that 

the annual burden hours incurred per 

competing consolidator to file six 

amendments per year would be 36 

hours,1412 for a total estimated average 

annual burden for all competing 

consolidators of 288 hours.1413 The 

Commission is adopting its annual 

external cost estimates as proposed.1414

Finally, the Commission is adopting the 

ongoing burden estimate for filing a 

notice of cessation on Form CC as 

proposed. 

2. Competing Consolidators’ Public 

Posting of Form CC 

Rule 614(c) requires 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, order of 

ineffective initial Form CC, amendments 

to effective Form CCs, and notice of 

cessation (if applicable). 

(a) Initial Burden and Costs 

(i) Proposed Estimates—Initial Burden 

and Costs 

In the Proposing Release, the 

Commission estimated an initial burden 

of 0.5 hours per competing consolidator 

to publicly post the Commission’s direct 

URL hyperlink to its website upon filing 

of the initial Form CC,1415 for an 

aggregate initial burden of 

approximately six hours for the 

competing consolidators to post 

publicly the direct URL hyperlink to the 

Commission’s website on their own 

respective websites.1416

(ii) Comments/Responses on Initial 

Burden and Costs 

The Commission did not receive any 

comments on its initial burden hour 

estimate for the competing consolidators 

to publicly post the direct URL 

hyperlink to the Commission’s website 

on their own respective websites. 

(iii) Adopted Estimates—Initial Burden 

and Costs 

The Commission is adopting the 

initial burden hour per competing 

consolidator estimate as proposed 

without any changes. However, the 

Commission is revising its aggregate 

initial burden hour estimate. As 

discussed above, eight competing 

consolidators would be required to file 

amendments to effective Form CCs. The 

Commission now estimates an aggregate 

initial burden of approximately four 

hours for the competing consolidators to 

publicly post the direct URL hyperlink 

to the Commission’s website on their 

own respective websites.1417

(b) Ongoing Burden and Costs 

(i) Proposed Estimates—Ongoing 

Burden and Costs 

For the ongoing burden and costs, the 

Commission estimated that each 

competing consolidator would check 

the Commission’s website whenever it 

files amendments to effective Form CCs 

to ensure that the Commission’s direct 

URL hyperlink that the competing 

consolidator has posted to its own 

website remains valid. Further, the 

Commission estimated that a competing 

consolidator will file two amendments 

per year, which would result in each 

competing consolidator incurring an 

ongoing burden of 0.25 hours per 

amendment, or 0.5 hours per year, to 

ensure that it has posted the correct 

direct URL hyperlink to the 

Commission’s website on its own 

website,1418 for an aggregate annual 

burden of approximately six hours for 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18709 

1419The Commission estimated the monetized 

aggregate annual burden for this requirement to be 

$1,446.00. The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead: [(Programmer Analyst at $241 for 0.5 

hours) × (12 competing consolidators)] = 6 annual 

burden hours across the competing consolidators 

and $1,446.00. 

1420Specifically, the commenter stated, ‘‘In a 

truly competitive market, competing consolidators 

would amend their fees more often than once a 

year, as they responded to market forces.’’ IDS 

Letter I at 15. 

1421See supra Section IV.D.1(b)(iii). 

1422See supra note 1418. 

1423The Commission bases this estimate on a fulltime Programmer Analyst spending approximately 

0.25 hours to check the Commission’s website when 

the competing consolidator submits an amendment 

to effective Form CCs to ensure that the 

Commission’s direct URL hyperlink that the 

competing consolidator has posted to its own 

website remains valid. Since the Commission 

estimates that a competing consolidator would file 

six amendments per year, the Commission 

estimates that each competing consolidator would 

incur a burden of 1.5 hours per year. (0.25 hours) 

× (6 amendments per year) = 1.5 hours per year to 

check the URL hyperlink. The Commission 

estimated the monetized annual burden for this 

requirement to be $361.50. The Commission derives 

this estimate based on per hour figures from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2013, modified by 

Commission staff to account for an 1,800-hour 

work-year and inflation, and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead: Programmer Analyst at $241 for 1.5 

hours = 1.5 annual burden hours per competing 

consolidator and $361.50. 

1424The Commission estimates the monetized 

aggregate annual burden for this requirement to be 

$2,892. The Commission derives this estimate based 

on per hour figures from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead: [(Programmer 

Analyst at $241 for 1.5 hours) × (8 competing 

consolidators)] = 12 annual burden hours across the 

competing consolidators and $2,892. 

1425 Data Boiler Letter I at 46; Data Boiler Letter 

II at 1; IDS Letter I at 13. 

1426 Data Boiler Letter I at 46; Data Boiler Letter 

II at 1. 

1427 IDS Letter I at 13, n. 38. 

1428 Id. 

the competing consolidators to do 

so.1419

(ii) Comments/Responses on Ongoing 

Burden and Costs 

As discussed above, one commenter 

stated that competing consolidators 

would amend their fees more than once 

a year.1420 An amendment to fees would 

require an amendment to a competing 

consolidator’s Form CC. The 

Commission has considered this 

comment and is amending its ongoing 

estimate after a review of amendments 

of the fee schedules of the SROs. 

(iii) Adopted Estimates—Ongoing 

Burden and Costs 

As described above,1421 the 

Commission is amending its ongoing 

estimate that a competing consolidator 

will file two amendments per year. The 

Commission now estimates that a 

competing consolidator will file six 

amendments per year. The Commission 

believes a competing consolidator will 

file five amendments a year, plus the 

annual report, for a total of six 

amendments per year. The Commission 

believes this estimate is reasonable 

based upon a review of amendments of 

the fee schedules of the SROs. Because 

the Commission believes that a 

competing consolidator will incur an 

ongoing burden of 0.25 hours per 

amendment to ensure that it has posted 

the correct direct URL hyperlink to the 

Commission’s website on its own 

website,1422 the Commission now 

estimates that a competing consolidator 

will incur a total of 1.5 hours per year 

to ensure that it has posted the correct 

direct URL hyperlink to the 

Commission’s website,1423 for an 

aggregate annual burden of 

approximately 12 hours for all 

competing consolidators to do so.1424

The Commission is adopting the 

ongoing burden estimate as amended. 

3. Competing Consolidator Duties and 

Data Collection 

Rules 614(d)(1) through (3) require 

competing consolidators to collect from 

the SROs quotation and transaction 

information for NMS stocks, calculate 

and generate a consolidated market data 

product, and make the consolidated 

market data product available to 

subscribers on a consolidated basis on 

terms that are not unreasonably 

discriminatory. Rule 614(d)(4) requires 

competing consolidators to timestamp 

the information with respect to 

quotations and transactions in NMS 

stocks that they collect from the SROs 

pursuant to Rule 614(d)(1) upon receipt, 

upon receipt by the aggregation 

mechanism, and upon dissemination to 

subscribers. The Commission estimated 

that five types of entities would register 

to become competing consolidators and 

would have to build systems, or modify 

existing systems, to comply with Rules 

614(d)(1) through (4): (1) Market data 

aggregation firms, (2) broker-dealers that 

currently aggregate market data for 

internal uses, (3) the existing exclusive 

SIPs (CTA/CQ and Nasdaq UTP SIPs), 

(4) entities that would be entering the 

market data aggregation business for the 

first time (‘‘new entrants’’), and (5) 

SROs. The Commission estimated that, 

apart from the SRO category, two 

respondents from each category would 

register to become a competing 

consolidator; the Commission estimated 

that four SROs would register to become 

competing consolidators. 

(a) Comments on Initial Burden and 

Costs and Annual Burden and Costs 

Generally 

The Commission received two 

comments that believed the 

Commission’s initial or ongoing burdens 

and costs associated with the operation 

of competing consolidators were too 

low.1425 One commenter said the 

Commission’s estimated initial and 

ongoing costs associated with 

competing consolidators should be 

comparable to those of the CAT.1426 The 

Commission considered this comment 

and disagrees with its assessment 

because the CAT is a different system in 

function and differs greatly in scope 

than the systems to be used by 

competing consolidators. Unlike the 

systems to be operated by competing 

consolidators, which would collect 

trade and quote information in NMS 

stocks from the SROs, and consolidate 

and disseminate such information to 

subscribers, the CAT must collect 

information for the entire lifecycle of an 

order (receipt/origination, routing, 

receipt of a routed order, modification 

or cancellation, and execution), in both 

NMS stocks and options from SROs as 

well as broker-dealers, and consolidate 

and store such information in a 

queryable database made available to 

regulators. 

The other commenter stated that the 

cost that NYSE incurred to build its 

‘‘NMS network’’ inside one data center 

to provide access to SIAC’s NMS feeds 

‘‘was substantially greater than the 

Commission’s estimation for networks 

that would extend to four data 

centers.’’ 1427 The commenter said that 

NYSE’s capital expenditure costs to 

build the NMS network were estimated 

to be $3.8 million, with ongoing costs of 

$215,000 per year.1428 The Commission 

considered this comment and believes 

the NMS network costs are informative 

but are not directly applicable to the 

costs to be incurred by competing 

consolidators to build or upgrade 

systems to comply with Rules 614(d)(1) 

through (4) because the NMS network is 

not a system that consolidates market 

data and its costs include the 

transmission of options information, 

which competing consolidators would 

not be collecting, consolidating, or 

disseminating. However, upon further 

consideration, the Commission believes 

that it is likely that competing 

consolidators would incur higher 

18710 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1429See supra Section III.C.8(a)(ii). See also supra 

Sections II.B.2; III.C.1(b). 

1430See supra notes 878–880 and accompanying 

text. See also infra Section V.C.1(c). 

1431The Commission estimated the monetized 

initial burden for this requirement to be $293,750. 

Based on discussions with a market participant, the 

Commission reached the following estimates: [(Sr. 

Programmer at $332/hour for 350 hours) + (Sr. 

Systems Analyst at $285/hour for 300 hours) + 

(Compliance Manager at $310/hour for 100 hours) 

+ (Director of Compliance at $489/hour for 50 

hours) + (Compliance Attorney at $366/hour for 100 

hours)] = 6 months (900 burden hours) to upgrade 

existing systems to comply with Rules 614(d)(1) 

through (4). The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead. 

1432This estimate was based on discussions with 

a market participant and the Commission’s 

understanding of hardware costs. 1433The Commission used the monthly market 

data access and redistribution fees currently 

charged by the CTA/CQ SIP and Nasdaq UTP SIP 

as the basis of this estimate ($14,000). 1434This estimate was based on an estimated 

$48,500 in initial co-location fees as calculated from 

NYSE Price List 2020, multiplied by four exchange 

data centers. The Commission described that the 

market data aggregators would already be co-located 

at the four exchange data centers, which could 

lower the estimate. See NYSE Price List 2020, 

available at https://www.nyse.com/publicdocs/ 

nyse/markets/nyse/NYSE_Price_List.pdf (last 

accessed Nov. 27, 2020). 

1435 $414,250 = [($206,250 in initial external costs 

to modify systems to comply with Rules 614(d)(1) 

through (4)) + ($14,000 for the first month of market 

data costs) + ($194,000 in initial co-location costs 

at four exchange data centers)]. 

1436The Commission estimated the monetized 

initial burden for this requirement to be $587,500. 

Based on discussions with a market participant, the 

Commission reached the following estimates: [(Sr. 

Programmer at $332/hour for 350 hours) + (Sr. 

Systems Analyst at $285/hour for 300 hours) + 

(Compliance Manager at $310/hour for 100 hours) 

+ (Director of Compliance at $489/hour for 50 

hours) + (Compliance Attorney at $366/hour for 100 

hours)] × [(2 market data aggregation firms)] = 1,800 

initial burden hours across the market data 

aggregation firms. 

1437The Commission estimated that the market 

data aggregation firms would incur the following 

initial external costs: [($206,250 to modify systems 

to comply with Rules 614(d)(1) through (4)) + 

($14,000 to purchase market data) + ($194,000 to 

co-locate within four exchange data centers)] × [(2 

market data aggregation firms)] = $828,500. 

1438 IDS Letter I at 13, n. 38. 

1439The Commission estimated the monetized 

initial burden for this requirement to be $697,150. 

These estimates were initially based on discussions 

with a market participant, modified as discussed 

above: [(Sr. Programmer at $332/hour for 1,050 

hours) + (Sr. Systems Analyst at $285/hour for 900 

technology-related burden hours and 

external costs associated with building 

as well as operating systems to collect, 

consolidate, and disseminate 

consolidated market data than the 

Commission estimated in the proposal. 

The Commission is increasing its 

estimates accordingly. 

As adopted, Rules 614(d)(1) through 

(3) does not require competing 

consolidators to sell a full consolidated 

market data product.1429 Competing 

consolidators that decide to offer a 

limited consolidated market data 

product may incur fewer burden hours 

and costs to build and maintain a 

system that does not have to aggregate 

and disseminate a full consolidated 

market data product. However, the 

Commission believes that there will 

continue to be demand for a full 

consolidated market data product, 

which will incentivize some competing 

consolidators to meet this demand.1430

Therefore, the Commission is not 

reducing its estimated burden hours and 

external costs for competing 

consolidators to implement and 

maintain systems to comply with Rules 

614(d)(1) through (4) to reflect this 

change to the data they must make 

available. The Commission 

acknowledges that these burden hours 

and external costs reflect an upper 

bound and as incurred may be lower 

than these estimates for those competing 

consolidators that sell a limited 

consolidated market data product. 

(b) Initial Burden and Costs for Market 

Data Aggregation Firms 

(i) Proposed Estimates—Initial Burden 

and Costs 

In the Proposing Release, the 

Commission estimated that each market 

data aggregation firm would incur 900 

initial burden hours 1431 and $206,250 

in external costs 1432 to modify its 

systems to comply with Rules 614(d)(1) 

through (4). Additionally, the 

Commission estimated that an existing 

market data aggregator would incur 

initial external costs of $14,000 to 

purchase market data from the 

SROs,1433 and an additional initial 

external cost of $194,000 to co-locate at 

four exchange data centers,1434 for a 

total initial external cost of $414,250 per 

existing market data aggregator,1435 and 

an aggregate estimate for two market 

data aggregators of 1,800 initial burden 

hours 1436 and $828,500 in initial 

external costs.1437

(ii) Comments/Responses on Initial 

Burden and Costs 

In response to the commenter that 

believed that the estimated costs 

incurred by potential competing 

consolidators to build or upgrade 

systems to comply with proposed Rules 

614(d)(1) through (4) should be 

increased,1438 the Commission is 

modifying its initial burden and cost 

estimates for market data aggregators, as 

discussed below. 

(iii) Adopted Estimates—Initial Burden 

and Costs 

The Commission is increasing its 

estimated initial costs and associated 

burden hours for market data 

aggregators to modify their systems to 

comply with Rules 614(d)(1) through 

(4). The Commission preliminarily 

believed that market data aggregators 

would not have to extensively modify 

their systems to comply with Rules 

614(d)(1) through (4) because the 

systems used by these firms already 

collect, consolidate, and disseminate 

more extensive proprietary market data 

than the data that is provided by the 

exclusive SIPs. However, the 

Commission now understands that these 

are small firms for which scaling out 

their hardware and personnel needs will 

be a significant undertaking. Most of 

these firms would have to spend 

substantial time coding for the new 

technical changes and would likely not 

have all of the components required to 

comply with Rules 614(d)(1) through 

(4). Additionally, the Commission 

initially believed that competing 

consolidators would build aggregation 

systems in a single data center; 

however, the Commission now believes 

that competing consolidators may build 

systems for aggregating data in more 

than one data center. The Commission 

believes market data aggregators would 

likely incur external costs greater than 

the Commission’s estimate to buy new 

technology (for example, hardware and 

network infrastructure). 

The Commission is increasing its 

estimated burden hours for Sr. 

Programmers and Sr. Systems Analysts 

employed by market data aggregation 

firms by three times. The Commission 

initially believed that competing 

consolidators would build aggregation 

systems in a single data center; 

however, the Commission now believes 

that competing consolidators may build 

systems for aggregating data in more 

than one data center, so the Commission 

is increasing the hours for these 

technical job categories by three times 

because competing consolidators may 

potentially build aggregation systems in 

three data centers. The Commission is 

also increasing its estimated external 

costs to be incurred by market data 

aggregation firms to purchase new 

technology to upgrade their systems to 

comply with Rules 614(d)(1) through (4) 

by three times for the same reason. The 

Commission estimates that each market 

data aggregation firm would incur 2,200 

initial burden hours to modify its 

systems to comply with Rules 614(d)(1) 

through (4),1439 and initial external 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18711 

hours) + (Compliance Manager at $310/hour for 100 

hours) + (Director of Compliance at $489/hour for 

50 hours) + (Compliance Attorney at $366/hour for 

100 hours)] = 2,200 initial burden hours to upgrade 

existing systems to comply with Rules 614(d)(1) 

through (4). The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead. 

1440This estimate was originally based on 

discussions with a market participant and the 

Commission’s understanding of hardware costs. 

The Commission has increased this estimated cost 

by three times because the Commission believes 

competing consolidators may potentially build 

aggregation systems in three data centers. 

1441This estimate is based on an estimated 

$48,500 in initial co-location fees as calculated from 

NYSE Price List 2020, multiplied by four exchange 

data centers. The Commission believes that the 

market data aggregators would already be co-located 

at the four exchange data centers, which may lower 

this estimate. See NYSE Price List 2020, supra note 

1434. 

1442As it did in the Proposing Release, the 

Commission is using the monthly market data 

access and redistribution fees charged by the CTA/ 

CQ SIP and Nasdaq UTP SIP as the basis of this 

estimate ($14,000). 

1443The Commission estimated that each market 

data aggregation firm would incur the following 

initial external costs: [($618,750 to modify systems 

to comply with Rules 614(d)(1) through (4)) + 

($14,000 to purchase market data) + ($194,000 to 

establish co-location connectivity within four 

exchange data centers)] = $826,750. 

1444The Commission estimated the monetized 

initial burden for this requirement to be $1,394,300. 

These estimates were initially based on discussions 

with a market participant, modified as discussed 

above: [(Sr. Programmer at $332/hour for 1,050 

hours) + (Sr. Systems Analyst at $285/hour for 900 

hours) + (Compliance Manager at $310/hour for 100 

hours) + (Director of Compliance at $489/hour for 

50 hours) + (Compliance Attorney at $366/hour for 

100 hours)] × [(2 market data aggregation firms)] = 

4,400 initial burden hours across the market data 

aggregation firms. 

1445The Commission estimated that market data 

aggregation firms would incur the following initial 

external costs: [($618,750) to modify systems to 

comply with Rules 614(d)(1) through (4)) + ($14,000 

to purchase market data) + ($194,000 to establish 

co-location connectivity within four exchange data 

centers)] × [(2 market data aggregation firms)] = 

$1,653,500. 

1446The Commission estimated the monetized 

initial burden for this requirement to be $293,750. 

The Commission reached the following hourly 

estimates: [(Sr. Programmer at $332/hour for 350 

hours) + (Sr. Systems Analyst at $285/hour for 300 

hours) + (Compliance Manager at $310/hour for 100 

hours) + (Director of Compliance at $489/hour for 

50 hours) + (Compliance Attorney at $366/hour for 

100 hours)] = 6 months (900 burden hours) to 

upgrade existing systems to comply with Rules 

614(d)(1) through (4). The Commission derived this 

estimate based on discussions with a market 

participant and per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for a 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead. 

1447This estimate was based on discussions with 

a market participant and the Commission’s 

understanding of hardware costs. 

1448The Commission used the monthly market 

data access and redistribution fees currently 

charged by the CTA/CQ SIP and Nasdaq UTP SIP 

as the basis of this estimate ($14,000). 

1449This estimate was based on an estimated 

$48,500 in initial co-location fees as calculated from 

NYSE Price List 2020, multiplied by four exchange 

data centers. See NYSE Price List 2020, supra note 

1434. 

1450 $414,250 = [($206,250 in initial external costs 

to modify systems to comply with Rules 614(d)(1) 

through (4)) + ($14,000 for the first month of market 

data costs) + ($194,000 in initial co-location costs 

at four exchange data centers)]. 

1451The Commission estimates the monetized 

initial burden for this requirement to be $587,500. 

Based on discussions with a market participant, the 

Commission reached the following estimates: [(Sr. 

Programmer at $332/hour for 350 hours) + (Sr. 

Systems Analyst at $285/hour for 300 hours) + 

(Compliance Manager at $310/hour for 100 hours) 

+ (Director of Compliance at $489/hour for 50 

hours) + (Compliance Attorney at $366/hour for 100 

hours)] × [(2 broker-dealers)] = 1,800 initial burden 

hours across the broker-dealers. 

1452The Commission preliminarily estimates that 

broker-dealers would incur the following initial 

external costs: [($206,250 to modify systems to 

comply with Rules 614(d)(1) through (4)) + ($14,000 

to purchase market data) + ($194,000 to co-locate 

within four exchange data centers) × (2 brokerdealers)] = $828,500. 

1453 IDS Letter I at 13, n. 38. 

costs of $618,750 to purchase the 

necessary technology to effect such 

modifications,1440 $194,000 to establish 

co-location connectivity to the exchange 

data centers,1441 and $14,000 to 

purchase market data from the 

exchanges,1442 for a total external cost to 

each market data aggregator of 

$826,750.1443 The Commission 

estimates that the total initial burden 

hours for two market data aggregators 

would be 4,400 burden hours,1444 and 

that total initial external costs would be 

$1,653,500 for two market data 

aggregators to modify their systems to 

comply with Rules 614(d)(1) through 

(4).1445

(c) Initial Burden and Costs for BrokerDealers That Aggregate Market Data 

(i) Proposed Estimates—Initial Burden 

and Costs 

In the Proposing Release, the 

Commission estimated that each brokerdealer that aggregates market data for 

internal uses that chooses to become a 

competing consolidator would incur 

burden hours to upgrade its systems to 

comply with Rules 614(d)(1) through (4) 

as well as external costs associated with 

such upgrades, including co-location 

fees at the exchange data centers and the 

cost of market data. Specifically, the 

Commission estimated that each brokerdealer would incur 900 initial burden 

hours 1446 and $206,250 in external 

costs 1447 to modify its systems to 

comply with Rules 614(d)(1) through 

(4). Additionally, the Commission 

estimated that a broker-dealer would 

incur initial external costs of $14,000 to 

purchase market data from the 

SROs,1448 and an additional initial 

external cost of $194,000 to co-locate 

itself at four exchange data centers,1449

for a total initial external cost of 

$414,250 per broker-dealer,1450 and an 

aggregate estimate of 1,800 initial 

burden hours 1451 and $828,500 in 

initial external costs.1452

(ii) Comments/Responses on Initial 

Burden and Costs 

In response to the commenter that 

believed that the estimated costs 

incurred by potential competing 

consolidators to build or upgrade 

systems to comply with proposed Rules 

614(d)(1) through (4) should be 

increased,1453 the Commission is 

modifying its initial burden and cost 

estimates for broker-dealers that 

aggregate market data, as discussed 

below. 

(iii) Adopted Estimates—Initial Burden 

and Costs 

The Commission is increasing its 

estimated initial costs and associated 

burden hours for broker-dealers that 

aggregate market data for internal use to 

modify their systems comply with Rules 

614(d)(1) through (4). The Commission 

preliminarily believed that the initial 

burden hour and external cost estimates 

for these broker-dealers to modify their 

systems to comply with Rules 614(d)(1) 

through (4) would be similar to market 

data aggregation firms because, for both 

types of respondents, the scope of the 

systems changes and costs associated 

with becoming competing consolidators 

would be comparable. The Commission 

continues to believe this assumption is 

valid and is increasing its estimates for 

these broker-dealers as it is doing for 

market data aggregation firms. Most of 

these firms would have to spend 

substantial time coding for the new 

technical changes and would likely not 

have all of the components required to 

comply with Rules 614(d)(1) through 

(4). Additionally, the Commission 

initially believed that competing 

consolidators would build aggregation 

systems in a single data center; 

however, the Commission now believes 

that competing consolidators may build 

systems for aggregating data in more 

than one data center. The Commission 

18712 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1454The Commission estimated the monetized 

initial burden for this requirement to be $697,150. 

These estimates were initially based on discussions 

with a market participant, modified as discussed 

above: [(Sr. Programmer at $332/hour for 1,050 

hours) + (Sr. Systems Analyst at $285/hour for 900 

hours) + (Compliance Manager at $310/hour for 100 

hours) + (Director of Compliance at $489/hour for 

50 hours) + (Compliance Attorney at $366/hour for 

100 hours)] = 2,200 initial burden hours to upgrade 

existing systems to comply with Rules 614(d)(1) 

through (4). The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead. 

1455This estimate was originally based on 

discussions with a market participant and the 

Commission’s understanding of hardware costs. 

The Commission has increased this estimated cost 

by three times because the Commission believes 

competing consolidators may potentially build 

aggregation systems in three data centers. 

1456This estimate is based on an estimated 

$48,500 in initial co-location fees as calculated from 

NYSE Price List 2020, multiplied by four exchange 

data centers. See NYSE Price List 2020, supra note 

1434. 

1457As it did in the Proposing Release, the 

Commission is using the monthly market data 

access and redistribution fees charged by the CTA/ 

CQ SIP and Nasdaq UTP SIP as the basis of this 

estimate ($14,000). 

1458The Commission estimated that a brokerdealer that aggregates market data would incur the 

following initial external costs: [($618,750 to 

modify systems to comply with Rules 614(d)(1) 

through (4)) + ($14,000 to purchase market data) + 

($194,000 to establish co-location connectivity 

within four exchange data centers)] = $826,750. 

1459The Commission estimated the monetized 

initial burden for this requirement to be $697,150. 

These estimates were initially based on discussions 

with a market participant, modified as discussed 

above: [(Sr. Programmer at $332/hour for 1,050 

hours) + (Sr. Systems Analyst at $285/hour for 900 

hours) + (Compliance Manager at $310/hour for 100 

hours) + (Director of Compliance at $489/hour for 

50 hours) + (Compliance Attorney at $366/hour for 

100 hours)] × [(1 broker-dealer that aggregates 

market data)] = 2,200 total initial burden hours. 

1460The Commission estimated that brokerdealers that aggregate market data would incur the 

following total initial external costs: [($618,750) to 

modify systems to comply with Rules 614(d)(1) 

through (4)) + ($14,000 to purchase market data) + 

($194,000 to establish co-location connectivity 

within four exchange data centers)] × [(1 brokerdealer that aggregates market data)] = $826,750. 

1461 In the Proposing Release, the Commission 

doubled its initial burden hour and external cost 

estimates for a market data aggregation firm to reach 

its initial burden hour and external cost estimates 

for an exclusive SIP. 

1462Based on discussions with a market 

participant, the Commission reached the following 

estimates for a market data aggregation firm: [(Sr. 

Programmer at $332/hour for 350 hours) + (Sr. 

Systems Analyst at $285/hour for 300 hours) + 

(Compliance Manager at $310/hour for 100 hours) 

+ (Director of Compliance at $489/hour for 50 

hours) + (Compliance Attorney at $366/hour for 100 

hours)] = 6 months (900 burden hours) to upgrade 

existing systems to comply with Rules 614(d)(1) 

through (4). The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for a 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead. As noted above, the Commission 

increased this initial burden hour estimate for the 

exclusive SIPs. Therefore, the Commission 

estimated that each exclusive SIP will incur 1,800 

initial burden hours to upgrade its existing systems 

to comply with Rules 614(d)(1) through (4) (or 

$587,500, as monetized). 

1463As noted above, the Commission estimated 

the initial external cost estimates to comply with 

Rules 614(d)(1) through (4) to be higher for 

exclusive SIPs than for market data aggregation 

firms. The Commission estimated that each 

exclusive SIP will incur $412,500 in initial external 

costs to modify its systems to comply with Rules 

614(d)(1) through (4). 

1464The Commission used the monthly market 

data access and redistribution fees currently 

charged by the CTA/CQ SIP and Nasdaq UTP SIP 

as the basis of this estimate ($14,000). 

1465This estimate was based on an estimated 

$48,500 in initial co-location fees as calculated from 

NYSE Price List 2020, multiplied by four exchange 

data centers. See NYSE Price List 2020, supra note 

1434. 

1466The Commission estimated that each 

exclusive SIP would incur the following initial 

external costs: [($412,500 to modify systems to 

comply with Rules 614(d)(1) through (4)) + ($14,000 

to purchase market data) + ($194,000 to co-locate 

within four exchange data centers)] = $620,500. 

1467Based on discussions with a market 

participant, the Commission reached the following 

estimates for a market data aggregation firm: [(Sr. 

Programmer at $332/hour for 350 hours) + (Sr. 

Systems Analyst at $285/hour for 300 hours) + 

(Compliance Manager at $310/hour for 100 hours) 

+ (Director of Compliance at $489/hour for 50 

hours) + (Compliance Attorney at $366/hour for 100 

hours)] = 900 initial burden hours across the market 

data aggregation firms. As noted above, the 

Commission increased this initial burden hour 

estimate to apply to the exclusive SIPs. Therefore, 

the Commission preliminarily estimated that each 

exclusive SIP will incur 1,800 initial burden hours 

to upgrade its existing systems to comply with 

Rules 614(d)(1) through (4) (or $587,500, as 

monetized). The aggregate initial burden hour 

estimate for two exclusive SIPs would be [(1,800 

initial burden hours) × (2 exclusive SIPs)] = 3,600 

initial burden hours. 

1468The Commission preliminarily estimated that 

the exclusive SIPs would incur the following initial 

external costs: [($412,500 to modify systems to 

comply with Rules 614(d)(1) through (4)) + ($14,000 

to purchase market data) + ($194,000 to co-locate 

within four exchange data centers)] × [(2 exclusive 

SIPs)] = $1,241,000. 

1469 IDS Letter I at 13, n. 38. 

believes broker-dealers that aggregate 

market data would likely incur external 

costs greater than the Commission’s 

estimate to buy new technology (for 

example, hardware and network 

infrastructure). The Commission is also 

revising its total initial burden hour and 

external cost estimates across all brokerdealers that aggregate market data to 

reflect a reduction in the number of 

potential competing consolidators that 

are broker-dealers that aggregate market 

data. 

As it did for its market data 

aggregation firm estimates, the 

Commission is increasing its estimated 

burden hours for Sr. Programmers and 

Sr. Systems Analysts by three times as 

well as its estimated external costs to be 

incurred by broker-dealers that 

aggregate market data to purchase new 

technology to upgrade their systems to 

comply with Rules 614(d)(1) through 

(4). The Commission estimates that each 

broker-dealer that aggregates market 

data would incur 2,200 initial burden 

hours to modify its systems to comply 

with Rules 614(d)(1) through (4),1454

and initial external costs of $618,750 to 

purchase the necessary technology to 

effect such modifications,1455 $194,000 

to establish co-location connectivity to 

the exchange data centers,1456 and 

$14,000 to purchase market data from 

the exchanges,1457 for a total external 

cost to each broker-dealer that 

aggregates market data of $826,750.1458

The Commission estimates that the total 

initial burden hours for one brokerdealers that aggregates market data 

would be 2,200 burden hours,1459 and 

that total initial external costs would be 

$826,750 for one broker-dealer that 

aggregates market data to modify its 

systems to comply with Rules 614(d)(1) 

through (4).1460

(d) Initial Burden and Costs for 

Exclusive SIPs 

(i) Proposed Estimates—Initial Burden 

and Costs 

In the Proposing Release, the 

Commission estimated that the 

exclusive SIPs may have to make a 

greater scope of changes to become 

competing consolidators than market 

data aggregation firms. For this reason, 

the Commission estimated initial 

burden hour and external cost estimates 

that were higher than those estimated 

for market data aggregation firms.1461

Specifically, the Commission estimated 

that each exclusive SIP would incur 

1,800 initial burden hours 1462 and 

$412,500 in external costs 1463 to modify 

its systems to comply with Rules 

614(d)(1) through (4). Additionally, the 

Commission estimated that an exclusive 

SIP would incur initial external costs of 

$14,000 to purchase market data from 

the SROs,1464 and an additional initial 

external cost of $194,000 to co-locate 

itself at four exchange data centers,1465

for a total initial external cost of 

$620,500 per existing exclusive SIP,1466

and an aggregate estimate of 3,600 

initial burden hours 1467 and $1,241,000 

in initial external costs.1468

(ii) Comments/Responses on Initial 

Burden and Costs 

In response to the commenter that 

believed that the estimated costs 

incurred by potential competing 

consolidators to build or upgrade 

systems to comply with proposed Rules 

614(d)(1) through (4) should be 

increased,1469 the Commission is 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18713 

1470See supra note 1461. 

1471The Commission estimated the monetized 

initial burden for this requirement to be $1,394,300. 

These estimates were initially based on discussions 

with a market participant, modified as discussed 

above: [(Sr. Programmer at $332/hour for 2,100 

hours) + (Sr. Systems Analyst at $285/hour for 

1,800 hours) + (Compliance Manager at $310/hour 

for 200 hours) + (Director of Compliance at $489/ 

hour for 100 hours) + (Compliance Attorney at 

$366/hour for 200 hours)] = 4,400 initial burden 

hours to upgrade existing systems to comply with 

Rules 614(d)(1) through (4). The Commission 

derived this estimate based on per hour figures from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2013, modified by 

Commission staff to account for an 1,800-hour 

work-year and inflation, and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead. 

1472This estimate was originally based on 

discussions with a market participant and the 

Commission’s understanding of hardware costs. 

The Commission has increased this estimated cost 

by three times because the Commission believes 

competing consolidators may potentially build 

aggregation systems in three data centers. 

1473This estimate is based on an estimated 

$48,500 in initial co-location fees as calculated from 

NYSE Price List 2020, multiplied by four exchange 

data centers. See NYSE Price List 2020, supra note 

1434. 

1474As it did in the Proposing Release, the 

Commission is using the monthly market data 

access and redistribution fees charged by the CTA/ 

CQ SIP and Nasdaq UTP SIP as the basis of this 

estimate ($14,000). 

1475The Commission estimated that each 

exclusive SIP would incur the following initial 

external costs: [($1,237,500 to modify systems to 

comply with Rules 614(d)(1) through (4)) + ($14,000 

to purchase market data) + ($194,000 to establish 

co-location connectivity within four exchange data 

centers)] = $1,445,500. 

1476The Commission estimated the monetized 

initial burden for this requirement to be $1,394,300. 

These estimates were initially based on discussions 

with a market participant, modified as discussed 

above: [(Sr. Programmer at $332/hour for 2,100 

hours) + (Sr. Systems Analyst at $285/hour for 

1,800 hours) + (Compliance Manager at $310/hour 

for 200 hours) + (Director of Compliance at $489/ 

hour for 100 hours) + (Compliance Attorney at 

$366/hour for 200 hours)] × [(2 exclusive SIPs)] = 

8,800 initial burden hours across the exclusive SIPs. 

1477The Commission estimated that the exclusive 

SIPs would incur the following initial external 

costs: [($1,237,500 to modify systems to comply 

with Rules 614(d)(1) through (4)) + ($14,000 to 

purchase market data) + ($194,000 to establish colocation connectivity within four exchange data 

centers)] × [(2 exclusive SIPs)] = $2,891,000. 

1478Based on discussions with a market 

participant, the Commission reached the following 

estimates for a market data aggregation firm: [(Sr. 

Programmer at $332/hour for 350 hours) + (Sr. 

Systems Analyst at $285/hour for 300 hours) + 

(Compliance Manager at $310/hour for 100 hours) 

+ (Director of Compliance at $489/hour for 50 

hours) + (Compliance Attorney at $366/hour for 100 

hours)] = 6 months (900 burden hours) to upgrade 

existing systems to comply with Rules 614(d)(1) 

through (4). The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead. As noted above, the Commission 

increased this initial burden hour estimate to apply 

to the new entrants. Therefore, the Commission 

estimated that each new entrant would incur 3,600 

initial burden hours to build systems to comply 

with Rules 614(d)(1) through (4) (or $1,175,000, as 

monetized). 

1479As noted above, the Commission increased its 

initial external cost estimates for market data 

aggregation firms to apply to new entrants. In 

particular, the Commission estimated that each new 

entrant will incur $825,000 in initial external costs 

to build systems to comply with Rules 614(d)(1) 

through (4). 

1480The Commission used the monthly market 

data access and redistribution fees currently 

charged by the CTA/CQ SIP and Nasdaq UTP SIP 

as the basis of this estimate ($14,000). 

1481This estimate was based on an estimated 

$48,500 in initial co-location fees as calculated from 

NYSE Price List 2020, multiplied by four exchange 

data centers. See NYSE Price List 2020, supra note 

1434. 

1482The Commission estimated that each new 

entrant would incur the following initial external 

costs: [($825,000 to build systems to comply with 

Rules 614(d)(1) through (4)) + ($14,000 to purchase 

market data) + ($194,000 to co-locate within four 

exchange data centers)] = $1,033,000. 

modifying its initial burden and cost 

estimates for the exclusive SIPs, as 

discussed below. 

(iii) Adopted Estimates—Initial Burden 

and Costs 

The Commission is increasing its 

estimated initial costs and associated 

burden hours for exclusive SIPs that 

choose to become competing 

consolidators to upgrade their systems 

to comply with Rules 614(d)(1) through 

(4). The Commission preliminarily 

believed that the exclusive SIPs would 

have to make a greater scope of changes 

to become competing consolidators than 

market data aggregation firms. For this 

reason, the Commission preliminarily 

estimated initial burden hour and 

external cost estimates that were higher 

than those estimated for market data 

aggregation firms.1470 The Commission 

continues to believe that exclusive SIPs 

will have to make greater changes to 

their systems than market data 

aggregation firms to comply with Rules 

614(d)(1) through (4). However, like 

market data aggregation firms, exclusive 

SIPs will have to spend substantial time 

coding for the new technical changes 

and would likely not have all of the 

components required to comply with 

Rules 614(d)(1) through (4). 

Additionally, the Commission initially 

believed that competing consolidators 

would build aggregation systems in a 

single data center; however, the 

Commission now believes that 

competing consolidators may build 

systems for aggregating data in more 

than one data center. The Commission 

believes exclusive SIPs would likely 

incur external costs greater than the 

Commission’s estimate to buy new 

technology (for example, hardware and 

network infrastructure). 

As it did for its market data 

aggregation firm estimates, the 

Commission is increasing its estimated 

burden hours for Sr. Programmers and 

Sr. Systems Analysts employed by each 

exclusive SIP by three times, as well as 

its estimated external costs to be 

incurred by the exclusive SIPs to 

purchase new technology to upgrade 

their systems to comply with Rules 

614(d)(1) through (4). The Commission 

estimates that each exclusive SIP would 

incur 4,400 initial burden hours to 

modify its systems to comply with Rules 

614(d)(1) through (4),1471 and initial 

external costs of $1,237,500 to purchase 

the necessary technology to effect such 

modifications,1472 $194,000 to establish 

co-location connectivity to the exchange 

data centers,1473 and $14,000 to 

purchase market data from the 

exchanges,1474 for a total external cost to 

each exclusive SIP of $1,445,500.1475

The Commission estimates that the total 

initial burden hours for two exclusive 

SIPs would be 8,800 burden hours,1476

and that total initial external costs 

would be $2,891,000 for two exclusive 

SIPs to modify their systems to comply 

with Rules 614(d)(1) through (4).1477

(e) Initial Burden and Costs for New 

Entrants 

(i) Proposed Estimates—Initial Burden 

and Costs 

In the Proposing Release, the 

Commission estimated that each new 

entrant would incur 3,600 initial burden 

hours 1478 and $825,000 in external 

costs 1479 to build systems to comply 

with Rules 614(d)(1) through (4). 

Additionally, the Commission estimated 

that a new entrant would incur initial 

external costs of $14,000 to purchase 

market data from the SROs,1480 and an 

additional initial external cost of 

$194,000 to co-locate itself at four 

exchange data centers,1481 for a total 

initial external cost of $1,033,000 per 

new entrant,1482 and an aggregate 

estimate of 7,200 initial burden 

18714 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1483Based on discussions with a market 

participant, the Commission reached the following 

estimates for a market data aggregation firm: [(Sr. 

Programmer at $332/hour for 350 hours) + (Sr. 

Systems Analyst at $285/hour for 300 hours) + 

(Compliance Manager at $310/hour for 100 hours) 

+ (Director of Compliance at $489/hour for 50 

hours) + (Compliance Attorney at $366/hour for 100 

hours)] = 900 initial burden hours. As noted above, 

the Commission increased the per market data 

aggregation firm initial burden hour estimate to 

apply to the new entrants. The Commission 

estimated that each new entrant would incur 3,600 

initial burden hours to build systems to comply 

with Rules 614(d)(1) through (4) (or $1,175,000, as 

monetized). [(3,600 burden hours) × (2 new 

entrants] = 7,200 hours (or $2,350,000 as 

monetized). 

1484The Commission estimated that each new 

entrant would incur the following initial external 

costs: [($825,000 to build systems to comply with 

Rules 614(d)(1) through (d)(4)) + ($14,000 to 

purchase market data) + ($194,000 to co-locate 

within four exchange data centers) × (2 new 

entrants)] = $1,033,000. [($1,033,000 in initial 

external costs) × (2 new entrants)] = $2,066,000. 

1485 IDS Letter I at 13, n. 38. 

1486The Commission’s assumption is supported 

by a commenter, which stated, ‘‘The incumbent 

SIPs, the Securities Industry Automation 

Corporation (‘SIAC’) and Nasdaq UTP, will have a 

significant competitive advantage over new entrants 

should they chose [sic] to transition to Competing 

Consolidators. For example, the incumbent SIPs 

will benefit from utilizing the existing 

infrastructure, which was funded by industry 

participants, to transform to a Competing 

Consolidator.’’ MIAX Letter p. 2–3. 

1487The Commission estimated the monetized 

initial burden for this requirement to be $2,788,600. 

These estimates were initially based on discussions 

with a market participant, modified as discussed 

above: [(Sr. Programmer at $332/hour for 4,200 

hours) + (Sr. Systems Analyst at $285/hour for 

3,600 hours) + (Compliance Manager at $310/hour 

for 400 hours) + (Director of Compliance at $489/ 

hour for 200 hours) + (Compliance Attorney at 

$366/hour for 400 hours)] = 8,800 initial burden 

hours to build systems to comply with Rules 

614(d)(1) through (4). The Commission derived this 

estimate based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead. 

1488This estimate was originally based on 

discussions with a market participant and the 

Commission’s understanding of hardware costs. 

The Commission has increased this estimated cost 

by three times because the Commission believes 

competing consolidators may potentially build 

aggregation systems in three data centers. 

1489This estimate is based on an estimated 

$48,500 in initial co-location fees as calculated from 

NYSE Price List 2020, multiplied by four exchange 

data centers. See NYSE Price List 2020, supra note 

1434. 

1490As it did in the Proposing Release, the 

Commission is using the monthly market data 

access and redistribution fees charged by the CTA/ 

CQ SIP and Nasdaq UTP SIP as the basis of this 

estimate ($14,000). 

1491The Commission estimated that each new 

entrant would incur the following initial external 

costs: [($2,475,000 to build systems to comply with 

Rules 614(d)(1) through (4)) + ($14,000 to purchase 

market data) + ($194,000 to establish co-location 

connectivity within four exchange data centers)] = 

$2,683,000. 

1492The Commission estimated the monetized 

initial burden for this requirement to be $5,577,200. 

These estimates were initially based on discussions 

with a market participant, modified as discussed 

above: [(Sr. Programmer at $332/hour for 4,200 

hours) + (Sr. Systems Analyst at $285/hour for 

3,600 hours) + (Compliance Manager at $310/hour 

for 400 hours) + (Director of Compliance at $489/ 

hour for 200 hours) + (Compliance Attorney at 

$366/hour for 200 hours)] × [(2 new entrants)] = 

17,600 initial burden hours across the new entrants. 

1493The Commission estimated that the new 

entrants would incur the following initial external 

costs: [($2,475,000 to build systems to comply with 

Rules 614(d)(1) through (4)) + ($14,000 to purchase 

market data) + ($194,000 to establish co-location 

connectivity within four exchange data centers)] × 

[(2 new entrants)] = $5,366,000. 

1494See supra note 1394. 

1495Based on discussions with a market 

participant, the Commission reached the following 

estimates for a market data aggregation firm: [(Sr. 

Programmer at $332/hour for 350 hours) + (Sr. 

Systems Analyst at $285/hour for 300 hours) + 

(Compliance Manager at $310/hour for 100 hours) 

+ (Director of Compliance at $489/hour for 50 

hours) + (Compliance Attorney at $366/hour for 100 

hours)] = 6 months (900 burden hours) to upgrade 

existing systems to comply with Rules 614(d)(1) 

through (4). The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead. As it did for its new entrant estimates, 

the Commission increased this initial burden hour 

estimate to apply to the SROs. Therefore, the 

Commission estimated that each SRO will incur 

3,600 initial burden hours to build systems to 

comply with Rules 614(d)(1) through (4) (or 

$1,175,000, as monetized). 

1496As it did for its new entrant estimates, the 

Commission increased its initial external cost 

estimates for market data aggregation firms to apply 

to the SROs. Therefore, the Commission estimated 

that each SRO will incur $825,000 in initial 

external costs to build systems to comply with 

Rules 614(d)(1) through (4). 

hours 1483 and $2,066,000 in initial 

external costs.1484

(ii) Comments/Responses on Initial 

Burden and Costs 

In response to the commenter that 

believed that the estimated costs 

incurred by potential competing 

consolidators to build or upgrade 

systems to comply with proposed Rules 

614(d)(1) through (4) should be 

increased,1485 the Commission is 

modifying its initial burden and cost 

estimates for new entrants, as discussed 

below. 

(iii) Adopted Estimates—Initial Burden 

and Costs 

The Commission is increasing its 

estimated initial costs and associated 

burden hours for new entrants that 

choose to become competing 

consolidators to build systems to 

comply with Rules 614(d)(1) through 

(4). The Commission preliminarily 

estimated initial burden hour and 

external cost estimates for new entrants 

that are higher than those estimated for 

the potential entities, other than SROs, 

that may choose to become competing 

consolidators. Because new entrants 

would be wholly new to the business of 

consolidating market data, the 

Commission continues to believe that 

new entrants would incur substantially 

higher burden hours and external costs 

to build new systems to comply with 

Rules 614(d)(1) through (4) than 

potential competing consolidators that 

already collect and aggregate market 

data.1486 Additionally, the Commission 

initially believed that competing 

consolidators would build aggregation 

systems in a single data center; 

however, the Commission now believes 

that competing consolidators may build 

systems for aggregating data in more 

than one data center. The Commission 

is increasing its estimated initial burden 

hours for new entrants to build systems 

to comply with Rules 614(d)(1) through 

(4). The Commission also believes new 

entrants would likely incur external 

costs greater than the Commission’s 

estimate to buy new technology (for 

example, hardware and network 

infrastructure). 

As it did for its market data 

aggregation firm estimates, the 

Commission is increasing its estimated 

burden hours for Sr. Programmers and 

Sr. Systems Analysts by three times for 

new entrants, as well as its estimated 

external costs to be incurred by new 

entrants to purchase new technology to 

upgrade their systems to comply with 

Rules 614(d)(1) through (4). The 

Commission estimates that each new 

entrant would incur 8,800 initial burden 

hours to build systems to comply with 

Rules 614(d)(1) through (4),1487 and 

initial external costs of $2,475,000 to 

purchase the necessary technology to 

build such systems,1488 $194,000 to 

establish co-location connectivity to the 

exchange data centers,1489 and $14,000 

to purchase market data from the 

exchanges,1490 for a total external cost to 

each new entrant of $2,683,000.1491 The 

Commission estimates that the total 

initial burden hours for two new 

entrants would be 17,600 burden 

hours,1492 and that total initial external 

costs would be $5,366,000 for two new 

entrants to build systems to comply 

with Rules 614(d)(1) through (4).1493

(f) Initial Burden and Costs for SROs 1494

(i) Proposed Estimates—Initial Burden 

and Costs 

In the Proposing Release, the 

Commission estimated that each SRO 

would incur 3,600 initial burden 

hours 1495 and $825,000 in external 

costs 1496 to build systems to comply 

with Rules 614(d)(1) through (4). 

Additionally, the Commission estimated 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18715 

1497The Commission used the monthly market 

data access and redistribution fees currently 

charged by the CTA/CQ SIP and Nasdaq UTP SIP 

as the basis of this estimate ($14,000). 1498This estimate was based on an estimated 

$48,500 in initial co-location fees as calculated from 

NYSE Price List 2020, multiplied by four exchange 

data centers. See NYSE Price List 2020, supra note 

1434. 

1499The Commission estimated that each SRO 

would incur the following initial external costs: 

[($825,000 to build systems to comply with Rules 

614(d)(1) through (4)) + ($14,000 to purchase 

market data) + ($194,000 to co-locate within four 

exchange data centers)] = $1,033,000. 

1500Based on discussions with a market 

participant, the Commission reached the following 

estimates for a market data aggregation firm: [(Sr. 

Programmer at $332/hour for 350 hours) + (Sr. 

Systems Analyst at $285/hour for 300 hours) + 

(Compliance Manager at $310/hour for 100 hours) 

+ (Director of Compliance at $489/hour for 50 

hours) + (Compliance Attorney at $366/hour for 100 

hours)] = 900 initial burden hours. As it did for its 

new entrant estimates, the Commission increased 

the per market data aggregation firm initial burden 

hour estimate to apply to the SROs. Therefore, the 

Commission estimated that each SRO would incur 

3,600 initial burden hours to upgrade its existing 

systems to comply with Rules 614(d)(1) through (4) 

(or $1,175,000, as monetized). [(3,600 burden hours) 

× (4 SROs)] = 14,400 hours (or $4,700,000 as 

monetized). 

1501The Commission estimated that each SRO 

would incur the following initial external costs: 

[($825,000 to build systems to comply with Rules 

614(d)(1) through (4)) + ($14,000 to purchase 

market data) + ($194,000 to co-locate within four 

exchange data centers)] = $1,033,000. [($1,033,000 

in initial external costs) × (4 SROs)] = $4,132,000. 

1502 IDS Letter I at 13. 

1503See supra note 1394. 

1504The Commission estimates the monetized 

initial burden for this requirement to be $2,788,600. 

These estimates were initially based on discussions 

with a market participant, modified as discussed 

above: [(Sr. Programmer at $332/hour for 4,200 

hours) + (Sr. Systems Analyst at $285/hour for 

3,600 hours) + (Compliance Manager at $310/hour 

for 400 hours) + (Director of Compliance at $489/ 

hour for 200 hours) + (Compliance Attorney at 

$366/hour for 400 hours)] = 8,800 initial burden 

hours to build systems to comply with Rules 

614(d)(1) through (4). The Commission derived this 

estimate based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead. 

1505This estimate was originally based on 

discussions with a market participant and the 

Commission’s understanding of hardware costs. 

The Commission has increased this estimated cost 

by three times because the Commission believes 

competing consolidators may potentially build 

aggregation systems in three data centers. 1506This estimate is based on an estimated 

$48,500 in initial co-location fees as calculated from 

NYSE Price List 2020, multiplied by four exchange 

data centers. See NYSE Price List 2020, supra note 

1434. 1507As it did in the Proposing Release, the 

Commission is using the monthly market data 

access and redistribution fees charged by the CTA/ 

CQ SIP and Nasdaq UTP SIP as the basis of this 

estimate ($14,000). 1508The Commission estimates that each SRO 

would incur the following initial external costs: 

[($2,475,000 to build systems to comply with Rules 

614(d)(1) through (4)) + ($14,000 to purchase 

market data) + ($194,000 to establish co-location 

connectivity within four exchange data centers)] = 

$2,683,000. 

1509The Commission estimates the total 

monetized initial burden for this requirement to be 

$2,788,600. These estimates were initially based on 

discussions with a market participant, modified as 

discussed above: [(Sr. Programmer at $332/hour for 

4,200 hours) + (Sr. Systems Analyst at $285/hour 

for 3,600 hours) + (Compliance Manager at $310/ 

hour for 400 hours) + (Director of Compliance at 

$489/hour for 200 hours) + (Compliance Attorney 

at $366/hour for 400 hours)] × [(1 SRO)] = 8,800 

total initial burden hours. 

1510The Commission estimates that SROs would 

incur the following total initial external costs: 

[($2,475,000 to build systems to comply with Rules 

614(d)(1) through (4)) + ($14,000 to purchase 

market data) + ($194,000 to establish co-location 

connectivity within four exchange data centers)] × 

[(1 SRO)] = $2,683,000. 

that an SRO would incur initial external 

costs of $14,000 to purchase market data 

from the SROs,1497 and an additional 

initial external cost of $194,000 to colocate itself at four exchange data 

centers,1498 for a total initial external 

cost of $1,033,000 per SRO,1499 and an 

aggregate estimate of 14,400 initial 

burden hours 1500 and $4,132,000 in 

initial external costs.1501

(ii) Comments/Responses on Initial 

Burden and Costs 

In response to the commenter that 

believed that the estimated costs 

incurred by potential competing 

consolidators to build or upgrade 

systems to comply with proposed Rules 

614(d)(1) through (4) should be 

increased,1502 the Commission is 

modifying its initial burden and cost 

estimates for SROs, as discussed below. 

(iii) Adopted Estimates—Initial Burden 

and Costs 

The Commission is increasing its 

estimated initial costs and associated 

burden hours for SROs that choose to 

become competing consolidators to 

build systems to comply with Rules 

614(d)(1) through (4).1503 The 

Commission initially believed and 

continues to believe that these entities 

would have to build new systems to 

comply with Rules 614(d)(1) through (4) 

and thus would incur initial burden 

hours that are similar to new entrants. 

Because SROs that do not operate 

exclusive SIPs would be wholly new to 

the business of consolidating market 

data, these entities would likely incur 

substantially higher burden hours and 

external costs to build new systems to 

comply with Rules 614(d)(1) through (4) 

than potential competing consolidators 

that already collect and aggregate 

market data. Additionally, the 

Commission initially believed that 

competing consolidators would build 

aggregation systems in a single data 

center; however, the Commission now 

believes that competing consolidators 

may build systems for aggregating data 

in more than one data center. The 

Commission is increasing its estimated 

initial burden hours for SROs to build 

systems to comply with Rules 614(d)(1) 

through (4). The Commission also 

believes that SROs would likely incur 

external costs greater than the 

Commission’s estimate to buy new 

technology (for example, hardware and 

network infrastructure). The 

Commission is also revising its total 

initial burden hour and external cost 

estimates across these entities to reflect 

a reduction in the number of such 

competing consolidators. 

As it did for its market data 

aggregation firm estimates, the 

Commission is increasing its estimated 

burden hours for Sr. Programmers and 

Sr. Systems Analysts by three times for 

SROs, as well as its estimated external 

costs to be incurred by SROs to 

purchase new technology to build 

systems to comply with Rules 614(d)(1) 

through (4). The Commission estimates 

that each SRO would incur 8,800 initial 

burden hours to build systems to 

comply with Rules 614(d)(1) through 

(4),1504 and initial external costs of 

$2,475,000 to purchase the necessary 

technology to build such systems,1505

$194,000 to establish co-location 

connectivity to the exchange data 

centers,1506 and $14,000 to purchase 

market data from the exchanges,1507 for 

a total external cost to each SRO of 

$2,683,000.1508 The Commission 

estimates that the total initial burden 

hours for one SRO would be 8,800 

burden hours 1509 and that total initial 

external costs would be $2,683,000 for 

one SRO to build systems to comply 

with Rules 614(d)(1) through (4).1510

(g) Ongoing Burden and Costs for 

Competing Consolidators 

(i) Proposed Estimates—Ongoing 

Burden and Costs 

In the Proposing Release, the 

Commission estimated that once a 

competing consolidator’s system had 

been built, all types of entities that 

could become a competing 

consolidators (i.e., existing market data 

aggregation firms, broker-dealers that 

aggregate market data, exclusive SIPs, 

new entrants, and SROs) would incur 

annual ongoing burden hours and 

external costs to operate and maintain 

their systems to comply with Rules 

614(d)(1) through (4) and that the 

annual ongoing burdens would be 

similar for all types of competing 

consolidators because such systems 

would likely be similar in nature. 

Therefore, the Commission estimated 

the same annual ongoing burden hours 

18716 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1511The Commission estimated that once a 

competing consolidator’s infrastructure was in 

place, the burden of operating and maintaining the 

infrastructure would be less than the burdens 

associated with establishing the infrastructure. The 

Commission estimated the monetized initial burden 

for this requirement to be $176,250. The 

Commission derived this estimate based on per 

hour figures from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead: [(Sr. Programmer 

at $332 for 210 hours) + (Sr. Systems Analyst at 

$285 for 180 hours) + (Compliance Manager at $310 

for 60 hours) + (Director of Compliance at $489 for 

30 hours) + (Compliance Attorney at $366 for 60 

hours)] = 540 burden hours per entity and $176,250. 

1512This estimate was based on the initial 

external cost estimate for a market data aggregation 

firm to modify its systems to comply with Rules 

614(d)(1) through (4), but reduced because the 

Commission estimated that once a competing 

consolidator’s infrastructure was in place, the 

burden of operating and maintaining the 

infrastructure would be less than the burdens 

associated with establishing the infrastructure. 

1513The Commission used the monthly market 

data access and redistribution fees currently 

charged by the CTA/CQ SIP and Nasdaq UTP SIP 

as the basis of this estimate ($14,000), multiplied 

by 12 months. 

1514This estimate was based on an estimated 

$95,890 in monthly co-location fees as calculated 

from NYSE Price List 2020, multiplied by four 

exchange data centers over 12 months. The 

Commission estimated that the market data 

aggregators would already be co-located at the four 

exchange data centers, which may lower this 

estimate for this category of respondent. See NYSE 

Price List 2020, supra note 1434. 

1515 $4,894,445 = [($123,725 to operate and 

maintain systems to comply with Rules 614(d)(1) 

through (4)) + ($168,000 in monthly market data 

fees over 12 months) + ($4,602,720 to co-locate 

within four exchange data centers over 12 months)]. 

1516The Commission estimated the monetized 

annual ongoing burden for this requirement to be 

$352,500. The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead: [(Sr. Programmer at $332 for 210 hours) 

+ (Sr. Systems Analyst at $285 for 180 hours) + 

(Compliance Manager at $310 for 60 hours) + 

(Director of Compliance at $489 for 30 hours) + 

(Compliance Attorney at $366 for 60 hours)] × [(2 

market data aggregation firms/broker-dealers that 

currently aggregate market data/exclusive SIPs/new 

entrants)] = 1,080 annual ongoing burden hours and 

$352,500. 

1517The Commission estimated that the market 

data aggregation firms/broker-dealers that currently 

aggregate market data for their own usage/exclusive 

SIPs/new entrants would incur the following 

aggregate annual ongoing external costs: [($123,725 

to operate and maintain systems to comply with 

Rules 614(d)(1) through (4)) + ($168,000 in monthly 

market data fees over 12 months) + ($4,602,720 to 

co-locate within four exchange data centers over 12 

months)] × [(2 entities)] = $9,788,890. 

1518The Commission estimated the monetized 

initial burden for this requirement to be $353,500. 

The Commission derived this estimate based on per 

hour figures from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead: [(Sr. Programmer 

at $332 for 210 hours) + (Sr. Systems Analyst at 

$285 for 180 hours) + (Compliance Manager at $310 

for 60 hours) + (Director of Compliance at $489 for 

30 hours) + (Compliance Attorney at $366 for 60 

hours)] × [(4 SROs)] = 2,160 annual ongoing burden 

hours across the SROs and $705,000. 

1519The Commission estimated that the SROs 

would incur the following initial external costs: 

[($123,725 to operate and maintain systems to 

comply with Rules 614(d)(1) through (4)) + 

($168,000 in monthly market data fees over 12 

months) + ($4,602,720 to co-locate within four 

exchange data centers over 12 months)] × [(4 SROs)] 

= $19,577,780 across the SROs. 

1520One commenter stated that the costs to the 

industry may be significantly higher than the 

ongoing annual costs incurred by each competing 

consolidator because the proposal did not explain 

the fees the competing consolidators would charge 

investors. See Cboe Letter at 24. 

1521 IDS Letter I at 13, n. 38. 

1522The Commission estimates the monetized 

annual ongoing burden for this requirement to be 

$418,290. These estimates were based on 

and external costs for the five types of 

entities that the Commission anticipated 

may choose to become competing 

consolidators. 

Competing consolidators would incur 

annual ongoing burden hours and 

external costs to operate and maintain 

their modified systems to comply with 

Rules 614(d)(1) through (4). Specifically, 

the Commission estimated that each 

entity would incur 540 annual ongoing 

burden hours 1511 and $123,725 in 

annual ongoing external costs 1512 to 

operate and maintain its systems to 

comply with Rules 614(d)(1) through 

(4). 

Further, the Commission estimated 

that each competing consolidator would 

incur annual ongoing external costs of 

$168,000 to purchase market data from 

the SROs,1513 and an additional annual 

ongoing external cost of $4,602,720 to 

co-locate itself at four exchange data 

centers,1514 for a total annual ongoing 

external cost of $4,894,445 per 

entity.1515 In the Proposing Release, the 

Commission estimated that there would 

be two entities per category of potential 

competing consolidators for existing 

market data aggregators, broker-dealers 

that currently aggregate market data, 

exclusive SIPs, and new entrants, and 

that for each of these categories, the 

aggregate estimates would amount to 

estimate of 1,080 annual ongoing 

burden hours 1516 and $9,797,530 in 

annual ongoing external costs.1517 In 

addition, the Commission estimated that 

there would be four SROs that would 

become a competing consolidator and 

that the SROs would incur an aggregate 

estimate of 2,160 annual ongoing 

burden hours 1518 and $19,577,780 in 

annual ongoing external costs.1519

(ii) Comments/Responses on Ongoing 

Burden and Costs 1520

No commenters suggested changes to 

the Commission’s estimated ongoing 

burden hours and external costs that 

competing consolidators would incur in 

maintaining and operating their systems 

to comply with Rules 614(d)(1) through 

(4). However, one commenter noted that 

the NYSE’s ongoing costs associated 

with the NMS network are $215,000 per 

year,1521 which is less than the burden 

hours and external costs the 

Commission preliminarily estimated a 

competing consolidator would incur for 

operating and maintaining a system to 

comply with Rules 614(d)(1) through 

(4). As noted earlier, the Commission 

does not believe that the NMS network 

costs are directly applicable to the 

burden hour and cost estimates 

applicable to competing consolidators to 

build and operate systems to comply 

with Rules 614(d)(1) through (4). 

However, the Commission believes it is 

reasonable to increase its ongoing 

burden hour and external cost estimates 

to operate systems to collect, 

consolidate, and disseminate 

consolidated market data. As it did for 

its initial burden hour and external cost 

estimates, the Commission is increasing 

its estimated ongoing burden hours for 

Sr. Programmers and Sr. Systems 

Analysts by three times because 

competing consolidators may 

potentially build aggregation systems in 

three data centers, so they consequently 

must maintain these systems, as well as 

its estimated external costs associated 

with operating and maintaining systems 

by three times, for the same reason. 

(iii) Adopted Estimates—Annual 

Ongoing and Costs 

The Commission continues to believe 

that all types of competing consolidators 

would incur similar ongoing, annual 

burdens once their systems have been 

built because such systems would likely 

be similar in nature. As it did for its 

revised initial burden hour and external 

cost estimates, the Commission is 

increasing by three times its estimated 

ongoing burden hours for Sr. 

Programmers and Sr. Systems Analysts 

and external ongoing technology cost 

estimates because competing 

consolidators may potentially build 

aggregation systems in three data 

centers, and would have to maintain 

these systems. The Commission is also 

revising its total ongoing burden hour 

and external cost estimates to reflect a 

reduction in the number of potential 

broker-dealers that aggregate market 

data for internal uses and SRO 

competing consolidators. 

The Commission estimates that each 

competing consolidator would incur 

1,320 ongoing, annual burden hours 1522

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18717 

discussions with a market participant, modified as 

discussed above: [(Sr. Programmer at $332/hour for 

630 hours) + (Sr. Systems Analyst at $285/hour for 

540 hours) + (Compliance Manager at $310/hour for 

60 hours) + (Director of Compliance at $489/hour 

for 30 hours) + (Compliance Attorney at $366/hour 

for 60 hours)] = 1,320 ongoing, annual burden hours 

per competing consolidator to operate and maintain 

systems to comply with Rules 614(d)(1) through (4). 

The Commission derived this estimate based on per 

hour figures from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead. 

1523This estimate was originally based on 

discussions with a market participant and the 

Commission’s understanding of hardware costs. 

The Commission has increased this estimated cost 

by three times because the Commission believes 

that competing consolidators would have to 

maintain aggregation systems in three data centers. 

1524This estimate was based on an estimated 

$95,890 in monthly co-location fees as calculated 

from NYSE Price List 2020, multiplied by four 

exchange data centers over 12 months. 

1525As it did in the Proposing Release, the 

Commission used the monthly market data access 

and redistribution fees currently charged by the 

CTA/CQ SIP and Nasdaq UTP SIP as the basis of 

this estimate ($14,000), multiplied by 12 months. 

1526The Commission estimates that each market 

data aggregation firm/broker-dealer that aggregates 

market data/exclusive SIP/new entrant/SRO would 

incur the following ongoing, annual external costs: 

[($371,175 to operate and maintain systems to 

comply with Rules 614(d)(1) through (4)) + 

($168,000 to purchase market data) + ($4,602,720 

for co-location connectivity within four exchange 

data centers)] = $5,141,895. 

1527The Commission estimates the total 

monetized annual ongoing burden for this 

requirement to be $836,580. These estimates were 

based on discussions with a market participant, 

modified as discussed above: [(Sr. Programmer at 

$332/hour for 630 hours) + (Sr. Systems Analyst at 

$285/hour for 540 hours) + (Compliance Manager 

at $310/hour for 60 hours) + (Director of 

Compliance at $489/hour for 30 hours) + 

(Compliance Attorney at $366/hour for 60 hours)] 

× [(2 market data aggregation firms/exclusive SIPs/ 

new entrants] = 2,640 total ongoing, annual burden 

hours to operate and maintain systems to comply 

with Rules 614(d)(1) through (4) for each of these 

categories of competing consolidator. The 

Commission derived this estimate based on per 

hour figures from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead. 

1528The Commission estimates the total annual 

ongoing external cost for market data aggregation 

firms/exclusive SIPs/new entrants would be: 

[($371,175 to operate and maintain systems to 

comply with Rules 614(d)(1) through (4)) + 

($168,000 to purchase market data) + ($4,602,720 

for co-location connectivity within four exchange 

data centers)] × [(2 market data aggregation firms/ 

exclusive SIPs/new entrants)] = $10,283,790 for 

each of these categories of competing consolidator. 

1529The Commission estimates the total 

monetized annual ongoing burden for this 

requirement to be $418,290. These estimates were 

based on discussions with a market participant, 

modified as discussed above: [(Sr. Programmer at 

$332/hour for 630 hours) + (Sr. Systems Analyst at 

$285/hour for 540 hours) + (Compliance Manager 

at $310/hour for 60 hours) + (Director of 

Compliance at $489/hour for 30 hours) + 

(Compliance Attorney at $366/hour for 60 hours)] 

× [(1 broker-dealer that aggregates market data/ 

SRO)] = 1,320 total ongoing, annual burden hours 

to operate and maintain systems to comply with 

Rules 614(d)(1) through (4) for each of these 

categories of competing consolidator. The 

Commission derived this estimate based on per 

hour figures from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead. 

1530The Commission estimates the total annual 

ongoing external cost for broker-dealers that 

aggregate market data/SROs would be: [($371,175 to 

operate and maintain systems to comply with Rules 

614(d)(1) through (4)) + ($168,000 to purchase 

market data) + ($4,602,720 for co-location 

connectivity within four exchange data centers)] × 

[(1 broker-dealer that aggregates market data/SRO)] 

= $5,141,885 for each of these categories of 

competing consolidator. 

1531The Commission based this estimate on the 

$218 hourly rate as of May 2019 for a paralegal × 

40 hours. The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead. 

1532See Security Based Swap Data Repository 

Registration, Duties, and Core Principles, Securities 

Exchange Act Release No. 74246 (Feb. 11, 2015), 80 

FR 14438 (Mar. 19, 2015) at 14541. 

and external costs of $371,175 to 

operate and maintain its systems to 

comply with Rules 614(d)(1) through 

(4),1523 as well as external ongoing, 

annual external costs of $4,602,720 for 

co-location connectivity to the exchange 

data centers,1524 and $168,000 to 

purchase market data from the 

exchanges,1525 for a total ongoing, 

annual external cost to each competing 

consolidator of $5,141,895.1526

The Commission estimates that the 

total ongoing, annual external burden 

hours to be incurred by market data 

aggregation firms, exclusive SIPs and 

new entrants would be 2,640 burden 

hours,1527 for each of these categories of 

competing consolidator, as well as total 

ongoing, annual external costs of 

$10,283,790,1528 for each of these 

categories of competing consolidator. 

The Commission estimates that the 

total ongoing, annual external burden 

hours to be incurred by broker-dealers 

that aggregate market data and SROs 

would be 1,320 burden hours,1529 for 

each of these categories of competing 

consolidator, as well as total ongoing, 

annual external costs of $5,141,885,1530

for each of these categories of competing 

consolidator. 

4. Recordkeeping 

Rule 614(d)(7) requires each 

competing consolidator to keep and 

preserve at least one copy of all 

documents made or received by it in the 

course of its business and in the 

conduct of its business. These 

documents must be kept for a period of 

no less than five years, the first two 

years in an easily accessible place. Rule 

614(d)(8) requires each competing 

consolidator to furnish promptly these 

documents to any representative of the 

Commission upon request. 

(a) Initial Burden and Costs 

(i) Proposed Estimates—Initial Burden 

and Costs 

In the Proposing Release, the 

Commission estimated that these 

requirements would create an initial 

burden of 40 hours (for a total cost of 

$8,720),1531 for a total initial burden of 

480 hours for all respondents (for a total 

cost of $104,640). These estimates were 

based on the Commission’s experience 

with recordkeeping costs and consistent 

with prior burden estimates for similar 

provisions.1532

(ii) Comments/Responses on Initial 

Burden and Costs 

The Commission did not receive any 

comments on the estimated initial 

burdens and costs of Rules 614(d)(7) 

and (8). 

(iii) Adopted Estimates—Initial Burden 

and Costs 

The Commission is revising its 

preliminary estimates to account for the 

downward estimate from 12 competing 

consolidators to 8 competing 

consolidators. The Commission 

estimates that the initial burden of 40 

hours (for a total cost of $8,720) for a 

total initial burden of 320 hours for all 

respondents (for a total cost of $69,760) 

is reasonable based upon the 

Commission’s experiences with 

estimating similar provisions. 

(b) Ongoing Burden and Costs 

(i) Proposed Estimates—Ongoing 

Burden and Costs 

The Commission estimated that the 

ongoing annual burden of recordkeeping 

in accordance with Rules 614(d)(7) and 

(8) would be 20 hours per respondent 

(for a total cost of $4,360) and a total 

ongoing annual burden of 240 hours for 

all respondents (for a total cost of 

$52,320). 

(ii) Comments/Responses on Ongoing 

Burden and Costs 

The Commission did not receive any 

comments on the estimated ongoing 

burdens and costs of Rules 614(d)(7) 

and (8). 

18718 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1533This figure was based on the estimated initial 

paperwork burden for 17 CFR 242.606(a) (Rule 

606(a)), which requires each broker or dealer to 

make publicly available on a website a quarterly 

report on its routing of non-directed orders in NMS 

stocks that are submitted on a held basis and of 

non-directed orders that are customer orders in 

NMS securities. See Securities Exchange Act 

Release No. 84528 (Nov. 2, 2018), 83 FR 58338 

(Nov. 19, 2018) (‘‘Order Handling Disclosure 

Release’’). In the Proposing Release, the 

Commission converted the 10 hour estimate for a 

quarterly report to an estimate for a monthly report. 

In addition, the Commission added the burden of 

posting the required information to the website. The 

Commission estimated the monetized initial burden 

for this requirement to be $80,507. The Commission 

derived this estimate based on per hour figures from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2013, modified by 

Commission staff to account for an 1,800-hour 

work-year and inflation, and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead: [(Sr. Programmer at $332 per hour for 

160 hours) + (Sr. Database Administrator at $342 

per hour for 20 hours) + (Sr. Business Analyst at 

$275 per hour for 20 hours) + (Attorney at $417 per 

hour for 4 hours) + (Sr. Operations Manager at $366 

per hour for 20 hours) + (Systems Analyst at $263 

per hour for 16 hours) + ($308.50 blended rate for 

Sr. Systems Analyst and Sr. Programmer for 6 

hours)] = 246 initial burden hours per competing 

consolidator and $80,507. 

1534The Commission estimated that each 

competing consolidator would incur an initial 

external cost of $800 for an external website 

developer to create the website. 

1535The Commission estimated the monetized 

initial aggregate burden for this requirement to be 

$966,804. The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead: [(Sr. Programmer at $332 per hour for 160 

hours) + (Sr. Database Administrator at $342 per 

hour for 20 hours) + (Sr. Business Analyst at $275 

per hour for 20 hours) + (Attorney at $417 per hour 

for 4 hours) + (Sr. Operations Manager at $366 per 

hour for 20 hours) + (Systems Analyst at $263 per 

hour for 16 hours) + ($308.50 blended rate for Sr. 

Systems Analyst and Sr. Programmer for 6 hours)] 

× [(12 competing consolidators)] = 2,952 initial 

aggregate burden hours across the competing 

consolidators and $966,804. 

1536 $9,600 = ($800 for an external website 

developer to create the website) × (12 competing 

consolidators). 

1537This figure was based on the estimated initial 

paperwork burden for Rule 606(a), which requires 

each broker or dealer to make publicly available on 

a website a quarterly report on its routing of nondirected orders in NMS stocks that are submitted 

on a held basis and of non-directed orders that are 

customer orders in NMS securities. See Order 

Handling Disclosure Release, supra note 1533. In 

the Proposing Release, the Commission converted 

the 10 hour estimate for a quarterly report to an 

estimate for a monthly report. In addition, the 

Commission added the burden of posting the 

required information to the website. The 

Commission estimated the monetized initial burden 

for this requirement to be $80,507. The Commission 

derived this estimate based on per hour figures from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2013, modified by 

Commission staff to account for an 1,800-hour 

work-year and inflation, and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead: [(Sr. Programmer at $332 per hour for 

160 hours) + (Sr. Database Administrator at $342 

per hour for 20 hours) + (Sr. Business Analyst at 

$275 per hour for 20 hours) + (Attorney at $417 per 

hour for 4 hours) + (Sr. Operations Manager at $366 

per hour for 20 hours) + (Systems Analyst at $263 

per hour for 16 hours) + ($308.50 blended rate for 

Sr. Systems Analyst and Sr. Programmer for 6 

hours)] = 246 initial burden hours per competing 

consolidator and $80,507. 

1538The Commission estimated that each 

competing consolidator would incur an initial 

external cost of $800 for an external website 

developer to create the website. 

1539The Commission estimates the monetized 

initial aggregate burden for this requirement to be 

$644,056. The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead: [(Sr. Programmer at $332 per hour for 160 

hours) + (Sr. Database Administrator at $342 per 

hour for 20 hours) + (Sr. Business Analyst at $275 

per hour for 20 hours) + (Attorney at $417 per hour 

for 4 hours) + (Sr. Operations Manager at $366 per 

hour for 20 hours) + (Systems Analyst at $263 per 

hour for 16 hours) + ($308.50 blended rate for Sr. 

Systems Analyst and Sr. Programmer for 6 hours)] 

× [(8 competing consolidators)] = 1,968 initial 

aggregate burden hours across the competing 

consolidators and $644,056. 

1540 $6,400 = ($800 for an external website 

developer to create the website) × (8 competing 

consolidators). 

1541This figure was based on the estimated 

ongoing paperwork burden for Rule 606(a), which 

requires each broker or dealer to make publicly 

available on a website a report on a quarterly basis. 

In the Paperwork Reduction Act discussion for Rule 

606(a), the Commission established that the average 

annual burden for a broker-dealer to comply with 

Rules 606(a)(1)(i) through (iii) would be 10 hours. 

See Order Handling Disclosure Release, supra note 

1533. In the Proposing Release, the Commission 

converted the 10 hour estimate for a quarterly 

report to an estimate for a monthly report. In 

addition, the Commission added the burden of 

updating the website. The Commission estimated 

the monetized annual burden for this requirement 

to be $3,768.50. The Commission derived this 

estimate based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead: [(Sr. Business Analyst at $275 per hour 

for 5 hours) + (Attorney at $417 per hour for 5 

hours) + ($308.50 blended rate for Sr. Systems 

Analyst and Sr. Programmer for 1 hour)] × [(12 

months)] = 132 initial burden hours per competing 

consolidator and $45,222. 

(iii) Adopted Estimates—Ongoing 

Burden and Costs 

The Commission is revising its 

preliminary estimates to account for the 

downward estimate from 12 competing 

consolidators to eight competing 

consolidators. The Commission 

estimates that the ongoing burden of 20 

hours (for a total cost of $4,360) for a 

total initial burden of 160 hours for all 

respondents (for a total cost of $34,880) 

is reasonable based upon the 

Commission’s experiences with 

estimating similar provisions. 

5. Reports and Reviews 

Rules 614(d)(5) and (6) requires 

competing consolidators to produce 

monthly reports on performance metrics 

and systems issues. 

(a) Initial Burden and Costs 

(i) Proposed Estimates—Initial Burden 

and Costs 

The Commission estimated that the 

average one-time, initial burden to 

program systems to produce the 

monthly reports required by Rules 

614(d)(5) and (6), including keeping the 

information publicly posted and free 

and accessible (in downloadable files 

under Rule 614(d)(5)), would be 246 

hours per competing consolidator (for a 

total cost of $80,507) 1533 and $800 in 

external costs.1534 The Commission 

estimated that the total initial burden 

would be 2,952 hours (for a total cost of 

$966,804) 1535 and a total initial external 

cost of $9,600.1536

(ii) Comments/Responses on Initial 

Burden and Costs 

The Commission did not receive any 

comments on the estimated initial 

burdens and costs of Rules 614(d)(5) 

and (6). 

(iii) Adopted Estimates—Initial Burden 

and Costs 

The Commission is revising its 

preliminary estimates to account for the 

downward estimate from 12 competing 

consolidators to eight competing 

consolidators. The Commission 

estimates that the initial burden of 246 

hours per competing consolidator (for a 

total cost of $80,507) 1537 and $800 in 

external costs.1538 The Commission 

estimates that the total initial burden 

would be 1,968 hours (for a total cost of 

$644,056) 1539 and a total initial external 

cost of $6,400.1540

(b) Ongoing Burden and Costs 

(i) Proposed Estimates—Ongoing 

Burden and Costs 

The Commission estimated that each 

competing consolidator would incur an 

average burden of 11 hours to prepare 

and make publicly available a monthly 

report in the format required by Rules 

614(d)(5) and (6) (for a total cost of 

$3,768.50), or a burden of 132 hours per 

year (for a total cost of $45,222).1541

Once a report is posted on an internet 

website, the Commission estimated that 

there would not be an additional burden 

to allow the report to remain posted for 

the period of time specified in the rules. 

The Commission estimated the total 

burden per year for all competing 

consolidators to comply with the 

monthly reporting requirement in Rules 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18719 

1542The Commission estimated the monetized 

annual aggregate burden for this requirement to be 

$542,664. The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead: [(Sr. Business Analyst at $275 per hour 

for 5 hours) + (Attorney at $417 per hour for 5 

hours) + ($308.50 blended rate for Sr. Systems 

Analyst and Sr. Programmer for 1 hour)] × [(12 

competing consolidators)] × [(12 months)] = 1,584 

aggregate burden hours across the competing 

consolidators and $542,664. 

1543This figure was based on the estimated 

ongoing paperwork burden for Rule 606(a), which 

requires each broker or dealer to make publicly 

available on a website a report on a quarterly basis. 

In the Paperwork Reduction Act discussion for Rule 

606(a), the Commission established that the average 

annual burden for a broker-dealer to comply with 

Rules 606(a)(1)(i) through (iii) would be 10 hours. 

See Order Handling Disclosure Release, supra note 

1533, at 58388. In the Proposing Release, the 

Commission converted the 10 hour estimate for a 

quarterly report to an estimate for a monthly report. 

In addition, the Commission added the burden of 

updating the website. The Commission estimated 

the monetized annual burden for this requirement 

to be $3,768.50. The Commission derived this 

estimate based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead: [(Sr. Business Analyst at $275 per hour 

for 5 hours) + (Attorney at $417 per hour for 5 

hours) + ($308.50 blended rate for Sr. Systems 

Analyst and Sr. Programmer for 1 hour)] × [(12 

months)] = 132 initial burden hours per competing 

consolidator and $45,222. 

1544The Commission estimates the monetized 

annual aggregate burden for this requirement to be 

$361,776. The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead: [(Sr. Business Analyst at $275 per hour 

for 5 hours) + (Attorney at $417 per hour for 5 

hours) + ($308.50 blended rate for Sr. Systems 

Analyst and Sr. Programmer for 1 hour)] × [(8 

competing consolidators)] × [(12 months)] = 1,056 

aggregate burden hours across the competing 

consolidators and $361,776. 

1545Currently, under the Equity Data Plans, the 

SROs attach timestamps to quotation information 

and transaction information provided to the 

exclusive SIPs. See, e.g., Nasdaq UTP Plan, supra 

note 10, at Section VIII; CQ Plan, supra note 10, at 

Section VI; CTA Plan, supra note 10, at Section VI. 

1546The Commission estimated the monetized 

burden for this requirement to be $130,860. The 

Commission derived this estimate based on per 

hour figures from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead: [(Attorney at $417 

for (420 × 17) hours)]. 

1547See NYSE Letter II at 28. 

1548The Commission reduced the initial burden 

hours by three-fourths to develop this estimate. 

614(d)(5) and (6) to be 1,584 hours (for 

a total cost of $542,664).1542

(ii) Comments/Responses on Ongoing 

Burden and Costs 

The Commission did not receive any 

comments on the estimated ongoing 

burdens and costs of Rules 614(d)(5) 

and (6). 

(iii) Adopted Estimates—Ongoing 

Burden and Costs 

The Commission is revising its 

preliminary estimates to account for the 

downward estimate from 12 competing 

consolidators to eight competing 

consolidators. The Commission 

estimates that each competing 

consolidator would incur an average 

burden of 11 hours to prepare and make 

publicly available a monthly report in 

the format required by Rules 614(d)(5) 

and (6) (for a total cost of $3,768.50), or 

a burden of 132 hours per year (for a 

total cost of $45,222).1543 Once a report 

is posted on an internet website, the 

Commission estimates that there would 

not be an additional burden to allow the 

report to remain posted for the period of 

time specified in the rules. The 

Commission estimates the total burden 

per year for all competing consolidators 

to comply with the monthly reporting 

requirement in Rules 614(d)(5) and (6) 

to be 1,056 hours (for a total cost of 

$361,776).1544

6. Amendment to the Effective National 

Market System Plan(s) for NMS Stocks 

Rule 614(e) requires the participants 

to the effective national market system 

plan(s) for NMS stocks to file an 

amendment with the Commission, 

pursuant to Rule 608, that includes 

several specified provisions, including 

an amendment that conforms the plan(s) 

to reflect the provision of information 

necessary to generate consolidated 

market data by the SROs to competing 

consolidators, the application of certain 

timestamps by the SROs, assessment of 

competing consolidator performance 

and the provision of an annual report, 

the development of a list that identifies 

the primary listing exchange for each 

NMS stock and the calculation and 

publication of gross revenues. 

(a) Proposed Estimates—Initial Burden 

and Costs 

In the Proposing Release, the 

Commission estimated that the 

amendment to the effective national 

market system plan(s) would impose a 

one-time burden and cost. Specifically, 

the Commission estimated that it would 

take the participants to the effective 

national market system plan(s) 

approximately 420 hours to prepare the 

amendment. The preliminary estimate 

included 210 hours for an SRO to 

comply with the timestamps 

requirement, including a review and 

any applicable change to technical 

systems and rules. Each SRO already 

employs some form of timestamping, 

and the Commission did not necessarily 

expect that the burden to comply with 

the timestamp requirement would be 

particularly burdensome.1545 The 

preliminary estimate also included 105 

hours for the participants to compose 

the form of annual report on competing 

consolidator performance. Finally, the 

preliminary estimate includes 20 hours 

for the participants to compile and 

confirm the primary listing exchange for 

each NMS stock. The initial burden 

hours for all respondents would be 420 

hours × 17 (for a total cost of 

$2,977,380).1546

(b) Comments/Responses on Initial 

Burden and Costs 

One commenter stated that the SROs 

would continue to incur costs 

associated with the effective national 

market system plan, such as 

implementing the application of 

timestamps and assessing competing 

consolidators and developing an annual 

report.1547 This commenter, however, 

did not provide comment on the 

Commission’s preliminary estimates. 

(c) Adopted Estimates 

The Commission is modifying the 

estimates for the initial burden and 

costs to the SROs to file the amendment 

required pursuant to Rule 614(e) to 

eliminate the multiplication of the 

burden by each SRO because the 

respondents would file this amendment 

jointly, rather than individually, in 

connection with their status as 

participants in the effective national 

market system plan(s). Hence, the initial 

burden hours for all respondents would 

be 420 hours (for a total cost of 

$175,140). 

In addition, the Commission now 

believes that there would be ongoing 

burden and costs related to the 

amendment, including 245 hours for 

maintaining the required timestamps, 

conducting assessments of competing 

consolidators, preparing an annual 

report, maintaining the list of the 

primary listing exchange for each NMS 

stock, and calculating gross revenues. 

For the required timestamps, the 

Commission believes that the ongoing 

burden for such requirement to be 

minimal once the initial timestamping 

process is established. The Commission 

estimates that the ongoing burden for 

timestamping to be 50 hours.1548 The 

Commission estimates the ongoing 

burden for reviewing competing 

18720 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1549The Commission estimates that the ongoing 

burden for developing the annual report will be the 

same as the initial burden. 

1550The Commission reduced the initial burden 

estimate by half because the primary listing 

exchange for an NMS stock does not typically 

change. Accordingly, the Commission believes that 

the ongoing burden of monitoring and updating the 

list to be minimal. 

1551For example, the primary listing exchanges 

currently calculate LULD price bands and related 

information to generate synthetic LULD price 

bands. See Nasdaq, Equity Trader Alert #2016–79: 

NASDAQ Announces Improved Protections for 

Equity Markets Coming Out of Halts (‘‘Leaky 

Bands’’) (Apr. 12, 2016), available at https://

www.nasdaqtrader.com/TraderNews.aspx?id=

ETA2016-79; NYSE, Trader Update: NYSE and 

NYSE MKT: Enhanced Limit Up Limit Down 

Procedures (Aug. 1, 2016), available at https://

www.nyse.com/trader-update/history#

110000029205; Securities Exchange Act Release No. 

34–78435 (July 28, 2016), 81 FR 51239 (Aug. 3, 

2016) (SR–FINRA–2016–028). 

1552The Commission based its estimate on the 

burden hour estimate provided in connection with 

the adoption of Regulation SHO because the 

requirements are similar to what a national 

securities exchange or national securities 

association would need to do to comply with 

proposed Rule 603(b). See Commission, Supporting 

Statement for the Paperwork Reduction Act 

Information Collection Submission for Rule 201 and 

Rule 200(g) of Regulation SHO (Sept. 5, 2019). 

1553The Commission estimated the monetized 

initial burden for this requirement to be $70,865. 

The Commission derived this estimate based on per 

hour figures from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead: [(Compliance 

Manager at $310 for 105 hours) + (Attorney at $417 

for 70 hours) + (Sr. Systems Analyst at $285 for 20 

hours) + (Operations Specialist at $137 for 25 

hours)] = 220 initial burden hours and $70,865. 

1554See FINRA Letter at 3–4. 

1555See NYSE Letter II at 20–21. 

1556See supra note 826 and accompanying text. 

1557See supra Section II.B. 

1558See supra Section II.H.2(a). 

consolidator performance and 

developing the annual report to be 105 

hours.1549 The Commission estimates 

the ongoing burden for maintaining the 

list of the primary listing exchange for 

each NMS stock to be 10 hours 

annually.1550 Finally, the Commission 

estimates the ongoing burden for 

calculating gross plan revenues to be 

minimal. The Equity Data Plans already 

calculate and publish revenue figures so 

the Commission believes that 

establishing a new calculation and 

publication process to be 80 hours. 

7. Collection and Dissemination of 

Information by National Securities 

Exchanges and National Securities 

Associations 

Rule 603(b) requires every national 

securities exchange on which an NMS 

stock is traded and national securities 

association to make available to all 

competing consolidators and selfaggregators all information with respect 

to quotations for and transactions in 

NMS stocks, including all data 

necessary to generate consolidated 

market data, in the same manner and 

using the same methods, including all 

methods of access and using the same 

formats, as such exchange or association 

makes available any information with 

respect to quotations for and 

transactions in NMS stocks to any 

person. Accordingly, the SROs would be 

required to collect the information 

necessary to generate proposed 

consolidated market data, which would 

be required to be made available under 

proposed Rule 603(b). The respondents 

to this collection of information are the 

16 national securities exchanges on 

which NMS stocks are traded and the 

one national securities association. The 

new data elements of consolidated 

market data that the national securities 

exchanges and national securities 

associations collect and must make 

available include auction information, 

depth of book data, round lot data, 

regulatory data (including LULD price 

bands), and administrative data. The 

national securities exchanges and 

national securities associations 

currently collect and/or calculate all 

data necessary to generate consolidated 

market data and provide such data 

necessary to the exclusive SIPs and to 

subscribers of the proprietary data 

feeds.1551 Therefore, as discussed 

below, the Commission believes that the 

amendments to 603(b) impose minimal 

initial and ongoing burdens on these 

respondents, including any changes to 

their systems, because they already 

collect such data. 

(a) Initial Burden and Costs 

(i) Proposed Estimates—Initial Burden 

and Costs 

The Commission estimated that a 

national securities exchange on which 

an NMS stock is traded or national 

securities association will require an 

average of 220 1552 initial burden hours 

of legal, compliance, information 

technology, and business operations 

personnel time to prepare and 

implement a system to collect the 

information necessary to generate 

consolidated market data (for a total cost 

per exchange or association of 

$70,865).1553

(ii) Comments/Responses on Initial 

Burden and Costs 

One commenter noted that SROs 

could incur ‘‘significant cost increases’’ 

to connect and transmit data to 

competing consolidators and selfaggregators but did not provide specific 

comment on the Commission’s 

proposed estimates.1554 Another 

commenter argued that the Commission 

did not consider how primary listing 

exchanges responsible for calculating 

and disseminating certain regulatory 

data (such as LULD bands) would obtain 

from the other exchanges the 

information needed to perform these 

calculations, including failing to 

consider the added costs to the 

exchanges.1555

(iii) Adopted Estimates—Initial Burden 

and Costs 

The Commission continues to believe 

the initial burden and costs it estimated 

in the Proposing Release are accurate 

based on the information it has. First, 

the Commission does not agree that the 

costs of transmitting data to competing 

consolidators and self-aggregators that 

the SROs already generate and provide 

to proprietary subscribers would be 

significant. Specifically, as explained 

above, the Commission does not believe 

that the cost to provide connectivity to 

the ADF would be significant because 

there is a low volume of trades and no 

quotes reported to the ADF meaning the 

connectivity options would not need to 

support much data capacity. 

Additionally, FINRA could seek to 

recoup costs for connectivity by 

proposing connectivity fees pursuant to 

Section 19(b) of the Exchange Act.1556

Furthermore, the Commission’s 

modification of certain elements of the 

definition of consolidated market 

data,1557 the data necessary for the 

generation of which each national 

securities exchange and national 

securities association will need to make 

available to competing consolidators 

and self-aggregators, will not increase 

costs because the national securities 

exchanges and national securities 

association already collect and/or 

calculate all data necessary to create the 

adopted definition of consolidated 

market data. Therefore, the Commission 

is adopting the estimates for the initial 

burden and costs as proposed. 

Additionally, as explained in detail 

above,1558 the Commission does not 

believe that collecting, calculating, or 

providing regulatory data will impose 

significant burdens or costs on primary 

listing exchanges, since primary listing 

exchanges already obtain the necessary 

data from other exchanges and generate 

and provide certain regulatory 

information today. In addition, they can 

be reimbursed for the costs of providing 

regulatory data through fees established 

by the effective national market system 

plan(s). Therefore, the Commission is 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18721 

1559The Commission estimated the monetized 

ongoing, annual burden for this requirement to be 

$128,064. The Commission derived this estimate 

based on per hour figures from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work-year and 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead: [(Compliance Manager at $310 for 192 

hours) + (Attorney at $417 for 48 hours) + (Sr. 

Systems Analyst at $285 for 96 hours)] = 336 initial 

burden hours and $128,064. 

1560See FINRA Letter at 3–4. 

1561See NYSE Letter II at 20–21. 

1562See infra Section V.C.1(c)(iv). 

1563See supra note 826 and accompanying text. 

1564See supra Section II.B. 

1565See supra Section II.H.2(a). 

adopting the estimates for the initial 

burden and costs as proposed. 

(b) Ongoing Burden and Costs 

(i) Proposed Estimates—Ongoing 

Burden and Costs 

The Commission estimated that each 

national securities exchange on which 

an NMS stock is traded and national 

securities association would incur an 

annual average burden on an ongoing 

basis of 396 hours to collect the 

information necessary to generate 

consolidated market data required by 

Rule 603(b) (for a total cost per 

exchange or association of 

$128,064).1559

(ii) Comments/Responses on Ongoing 

Burden and Costs 

One commenter noted that SROs 

could incur ‘‘significant cost increases’’ 

to maintain connectivity to competing 

consolidators and self-aggregators but 

did not provided specific comment on 

the Commission’s proposed 

estimates.1560 Another commenter 

argued that the Commission did not 

consider how primary listing exchanges 

responsible for calculating and 

disseminating certain regulatory data 

(such as LULD bands) would obtain 

from the other exchanges the 

information needed to perform these 

calculations, including failing to 

consider the added costs to the 

exchanges.1561

(iii) Adopted Estimates—Ongoing 

Burden and Costs 

Similar to the initial burden and 

costs, the Commission continues to 

believe the ongoing burden and costs 

are accurate based on the information it 

has. First, the Commission does not 

agree that the costs of maintaining 

connectivity to transmit data to 

competing consolidators and selfaggregators that the SROs already 

generate and provide to proprietary 

subscribers would be significant 

because the Commission believes that 

many competing consolidators and selfaggregators will be firms that already 

subscribe to SRO proprietary feeds, and 

thus, the SROs will likely not have a 

large amount of new data connections to 

service.1562 Specifically, as explained 

above, the Commission does not believe 

that the cost to maintain connectivity to 

the ADF would be significant because 

there is a low volume of trades and no 

quotes reported to the ADF meaning the 

connectivity options would not need to 

support much data capacity. 

Additionally, FINRA could seek to 

recoup costs for maintaining 

connectivity by proposing connectivity 

fees pursuant to Section 19(b) of the 

Exchange Act.1563 Furthermore, the 

Commission’s modification of certain 

elements of the definition of 

consolidated market data,1564 the data 

necessary for the generation of which 

each national securities exchange and 

national securities association will need 

to make available to competing 

consolidators and self-aggregators, will 

not increase ongoing costs because the 

national securities exchanges and 

national securities association already 

collect and/or calculate all data 

necessary to create the adopted 

definition of consolidated market data. 

Therefore, the Commission is adopting 

the estimates for the initial burden and 

costs as proposed. 

Additionally, as explained in detail 

above,1565 the Commission does not 

believe that collecting, calculating, or 

providing regulatory data will impose 

significant ongoing burdens or costs on 

primary listing exchanges, since 

primary listing exchanges already obtain 

the necessary data from other exchanges 

and generate and provide certain 

regulatory information today. In 

addition, they can be reimbursed for the 

costs of providing regulatory data 

through fees established by the effective 

national market system plan(s). 

Therefore, the Commission is adopting 

the estimates for the ongoing burden 

and costs as proposed. 

E. Collection of Information Is 

Mandatory 

The collection of information 

discussed above is a mandatory 

collection of information. 

F. Confidentiality 

1. Registration Requirements and Form 

CC 

Pursuant to Rule 614(b)(2), the 

Commission would make public via 

posting on the Commission’s website 

each: (i) Effective initial Form CC, as 

amended; (ii) order of ineffectiveness of 

a Form CC; (iii) filed Form CC 

Amendment; and (iv) notice of 

cessation. 

2. Competing Consolidator Duties and 

Data Collection and Maintenance 

The collection of information under 

Rules 614(d)(1) through (3) would be 

public. 

3. Competing Consolidators’ Public 

Posting of Form CC 

The collection of information under 

Rule 614(c) would be available to the 

public. 

4. Recordkeeping 

The collection of information relating 

to recordkeeping would be available to 

the Commission and its staff and to 

other regulators. 

5. Reports and Reviews 

The collection of information 

regarding reports and reviews under 

Rules 614(d)(5) and (6) relates to 

information that would be published on 

competing consolidator websites. 

6. Amendment to the Effective National 

Market System Plan(s) for NMS Stocks 

The amendment to the effective 

national market system plan(s) for NMS 

stocks would be required to be filed 

with the Commission pursuant to Rule 

608. Once filed, the Commission will 

publish the amendment for public 

comment. The timestamps applied by 

the SROs would be made available to 

competing consolidators and their 

subscribers. The annual report of 

competing consolidator performance 

would be submitted to the Commission. 

The list of the primary listing market for 

each NMS stock would be available to 

the public. 

7. Collection and Dissemination of 

Information by National Securities 

Exchanges and National Securities 

Associations 

Rule 603(b) would require national 

securities exchanges and national 

securities associations to collect and 

provide information to the competing 

consolidators and self-aggregators, not 

to the Commission. Therefore, no 

assurances of confidentiality are 

necessary because the information will 

be made available to the public for a fee 

from the competing consolidators. 

G. Revisions to Current Regulation SCI 

Burden Estimates and Adoption of Rule 

614(d)(9) 

1. Proposed Estimates—Burden and 

Costs 

The Commission proposed to expand 

the definition of ‘‘SCI entities’’ under 

18722 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1566See Rule 1000 of Regulation SCI. 

1567Rule 1001(a) of Regulation SCI requires each 

SCI entity to establish, maintain, and enforce 

written policies and procedures for systems 

capacity, integrity, resiliency, availability, and 

security. 17 CFR 242.1001(b) (Rule 1001(b)) requires 

each SCI entity to establish, maintain, and enforce 

written policies and procedures to ensure that its 

SCI systems operate in a manner that complies with 

the Exchange Act, the rules and regulations 

thereunder, and the SCI entity’s rules and governing 

documents, as applicable. Rule 1001(c) requires 

each SCI entity to establish, maintain, and enforce 

written policies and procedures for the 

identification, designation, and documentation of 

responsible SCI personnel and escalation 

procedures. Rule 1002(a) requires each SCI entity to 

begin to take appropriate corrective action upon any 

responsible SCI personnel having a reasonable basis 

to conclude that an SCI event has occurred. 17 CFR 

242.1002(b) (Rule 1002(b)) requires each SCI entity 

to notify the Commission of certain SCI events. Rule 

1002(c) requires each SCI entity, with certain 

exceptions, to disseminate information about SCI 

events to affected members or participants and 

disseminate information about major SCI events to 

all members or participants. 17 CFR 242.1003(a) 

(Rule 1003(a)) requires each SCI entity to notify the 

Commission of material systems changes quarterly. 

17 CFR 242.1003(b) (Rule 1003(b)) requires each 

SCI entity to conduct annual SCI reviews. Rule 

1004 requires each SCI entity to designate certain 

members or participants for participation in 

functional and performance testing of the SCI 

entity’s business continuity and disaster recovery 

plans and to coordinate such testing with other SCI 

entities. Rules 1005 and 1007 set forth 

recordkeeping requirements for SCI entities. Rule 

1006 requires, with certain exceptions, that each 

SCI entity electronically file required notifications, 

reviews, descriptions, analysis, or reports to the 

Commission on Form SCI. For a complete analysis 

of Regulation SCI under the PRA, see SCI Adopting 

Release, supra note 1037, at 18141; Proposed 

Collection; Comment Request; Extension: 

Regulation SCI, Form SCI; SEC File No. 270–653, 

OMB Control No. 3235–0703, 83 FR 34179 (‘‘2018 

PRA Extension’’). For further details regarding the 

requirements of Regulation SCI, see SCI Adopting 

Release, supra note 1233. 

1568See 2018 PRA Extension, supra note 1567, at 

34180. 

1569 Id. 

1570See Proposing Release, 85 FR at 16808. 

1571See 2018 PRA Extension, supra note 1567. 

The Commission estimated that six of the 12 

entities that may register as competing 

consolidators were already SCI entities. Thus, the 

Commission estimated that there would be an 

average of approximately 50 SCI entities each year. 

1572 Id. The burden estimates for SCI entity 

respondents included initial burdens for new SCI 

entities and ongoing burdens for all SCI entities. 

1573 Id. 

1574The ongoing paperwork burden estimates in 

the PRA Extension do not distinguish between 

different categories of SCI entities but rather 

provide an average for all SCI entities. 

1575See Proposing Release, 85 FR at 16809. 

1576See 2018 PRA Extension, supra note 1567. 

1577See IDS Letter I at 13 and STANY Letter II 

at 6–7. See supra note 1572. 

1578 IDS Letter I at 13. 

Regulation SCI 1566 to include 

competing consolidators, which would 

subject them to the requirements of 

Regulation SCI. The rules under 

Regulation SCI impose ‘‘collection of 

information’’ requirements within the 

meaning of the PRA.1567

In 2018, there were an estimated 42 

entities that met the definition of SCI 

entity and were subject to the collection 

of information requirements of 

Regulation SCI (‘‘respondents’’).1568 At 

that time, an estimate of approximately 

two entities would become SCI entities 

each year, one of which would be an 

SRO. Accordingly, under these 

estimates, over the following three 

years, there would be an average of 

approximately 44 SCI entities each 

year.1569

In the Proposing Release, the 

Commission estimated that there would 

be 12 competing consolidators that 

would be subject to Regulation SCI as 

SCI entities.1570 The Commission noted 

that some of these entities may already 

be SCI entities and subject to the 

requirements of Regulation SCI. While 

the Commission estimated that the 

number of respondents would increase 

as a result of the proposal, the 

Commission estimated that its prior 

paperwork burden estimates per entity 

under Regulation SCI generally would 

be applicable to the new competing 

consolidators because they would be 

subject to the same requirements and 

burdens as other SCI entities.1571 At the 

same time, the Commission 

acknowledged that burden estimates 

also should take into account the extent 

to which the entities that may register 

to become competing consolidators 

already comply with the requirements 

of Regulation SCI. 

In particular, the Commission 

estimated that two of the estimated 12 

competing consolidators may be the 

existing exclusive SIPs, which are 

currently subject to Regulation SCI as 

plan processors. Because these entities 

are responsible for collecting, 

consolidating, and disseminating 

proposed consolidated market data 

products to market participants and 

thus would be operating a substantially 

similar business and performing a 

similar function in their role as 

competing consolidators, the 

Commission estimated that the current 

ongoing burden estimates for existing 

SCI entities would be applicable and 

there would be no material change in 

the estimated paperwork burdens for 

these entities under Regulation SCI.1572

The Commission also estimated that 

four of the entities that may register to 

become competing consolidators may be 

either: (i) An SRO currently subject to 

Regulation SCI; or (ii) an entity affiliated 

with an SCI SRO, formerly subject to 

Regulation SCI. The burden estimates 

for SCI entity respondents include both 

initial burdens for new SCI entities and 

ongoing burdens for all SCI entities.1573

Because the SRO entities that would 

become competing consolidators are 

current SCI entities and are already 

required to implement the requirements 

of Regulation SCI with regard to SCI 

systems that they operate in their role as 

SCI SROs, the Commission estimated 

that these entities would not have initial 

burdens equivalent to those estimated 

for new SCI entities. At the same time, 

the Commission estimated that these 

SROs may be a national securities 

association and/or equities national 

securities exchanges that do not 

currently operate an exclusive SIP. 

Because these entities would be entering 

an entirely new business and 

performing a new function with new 

SCI systems, unlike the current 

exclusive SIPs who may register to 

become competing consolidators, the 

Commission estimated that the SRO 

entities would have some initial burden 

that would be a percentage of that 

which entirely new SCI entities would 

have. In particular, the Commission 

estimated that the initial burdens for 

existing SCI SROs who register as 

competing consolidators would be 50 

percent of the estimated initial burdens 

for entirely new SCI entities. The 

Commission also estimated that the 

ongoing paperwork burden estimates for 

all SCI entities would be applicable to 

these entities as well.1574

The Commission estimated that the 

remaining six estimated competing 

consolidators may be entities that are 

not currently subject to Regulation SCI, 

such as market data aggregation firms, 

broker-dealers that currently aggregate 

market data for internal uses, and 

entities that would be entering the 

market data aggregation business for the 

first time.1575 The Commission 

estimated that these entities would have 

the same estimated initial paperwork 

burdens as those estimated for new SCI 

entities and the same ongoing 

paperwork burdens as all other SCI 

entities.1576

2. Comments/Responses on Burden and 

Costs 

Two commenters stated that the 

Commission underestimated the costs of 

compliance with Regulation SCI.1577

One commenter stated that such 

compliance would require the 

development of technology 

environments for production, disaster 

recovery, development/quality 

assurance, and customer testing, and as 

such, the initial costs would greatly 

exceed the Commission’s estimates, 

possibly by three to four times the 

amount.1578 Competing consolidators 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18723 

1579See SCI Adopting Release at 72273. 

1580See STANY Letter II at 6–7. 

1581As described in detail above, an ‘‘SCI 

competing consolidator’’ means any competing 

consolidator, as defined in § 242.600 which, during 

at least four of the preceding six calendar months, 

accounted for five percent (5%) or more of 

consolidated market data gross revenue paid to the 

effective national market system plan or plans 

required under § 242.603(b), for NMS stocks (1) 

listed on the NYSE, (2) listed on Nasdaq, or (3) 

listed on national securities exchanges other than 

the NYSE or Nasdaq. 

1582See supra note 1570. 

1583While the burden estimates are not being 

revised, the Commission notes that it has revised 

the number of entities that may become competing 

consolidators that are not currently subject to 

Regulation SCI. Specifically, the Commission 

estimates that there will be 4 entities not currently 

subject to Regulation SCI that will meet the 

definition of ‘‘SCI competing consolidator’’ and 

become subject to Regulation SCI, as compared to 

the 6 that the Commission estimated would become 

subject to Regulation SCI previously. 

1584See Rule 614(d)(9)(ii)(A)(1) of Regulation 

NMS. 

1585See Rule 614(d)(9)(ii)(B) of Regulation NMS. 

may choose to develop four separate 

environments in the interest of 

resiliency and redundancy as suggested 

by this commenter, however, Regulation 

SCI does not prescribe this approach. 

While Regulation SCI does require SCI 

entities to maintain business continuity 

and disaster recovery plans which 

would include the development of 

technology environments for disaster 

recovery, the Commission included 

paperwork burdens related to this 

requirement in its estimates. In contrast, 

non-production systems are excluded 

from the scope of Regulation SCI 1579

and as such, burden estimates related to 

such systems are excluded from the 

Commission’s burden estimates. 

Further, as discussed in the Proposing 

Release, the Commission believes that 

the burdens for competing consolidators 

that are subject to Regulation SCI would 

be the same as those the Commission 

has previously estimated for other SCI 

entities (or a percentage thereof if 

already an SCI entity or an affiliate 

thereof as described above), as the 

requirements are the same for all SCI 

entities. The Commission’s 2018 burden 

estimates were based on the 

Commission’s experience over three 

years subsequent to Regulation SCI’s 

adoption in 2014 including, for 

example, Commission staff’s experience 

in conducting examinations of SCI 

entities and receiving and reviewing 

notifications and reports required by 

Regulation SCI. For these reasons, the 

Commission does not agree with the 

assertions of this commenter that the 

estimates of initial burdens were 

underestimated. 

Another commenter stated that the 

Commission underestimated the 

ongoing cost of compliance with 

Regulation SCI, citing a reference to 

$68,710 of initial costs and $21,810 of 

ongoing costs.1580 These estimates, 

however, were of non-paperwork related 

costs and were given in regard to a 

potential alternative that the 

Commission had considered of not 

extending all of the requirements of 

Regulation SCI to competing 

consolidators, but instead only 

imposing a broad policies and 

procedures requirement. 

3. Adopted Estimates—Burden and 

Costs 

As described above, while the 

Commission had proposed to apply the 

requirements of Regulation SCI to all 

competing consolidators, it has 

determined to adopt a two-pronged 

approach and, following the SCI CC 

Phase-In Period, will apply the 

requirements of Regulation SCI to those 

competing consolidators that meet the 

5% gross revenue threshold (‘‘SCI 

competing consolidators’’).1581 During 

the SCI CC Phase-In Period, and 

subsequently, for those competing 

consolidators that do not meet the 5% 

revenue threshold, a more tailored set of 

resiliency requirements substantially 

similar to certain of the key provisions 

in Regulation SCI will apply. 

As discussed above, the Commission 

now estimates that there would be eight 

persons who could decide to perform 

the functions of a competing 

consolidator. In the Proposing Release, 

the Commission estimated that all 12 of 

the estimated competing consolidators 

would subject to Regulation SCI as SCI 

entities.1582 However, in light of the 

reduction of the estimated competing 

consolidators to eight and the 5% 

revenue threshold that the Commission 

is adopting in the definition of ‘‘SCI 

competing consolidator,’’ the 

Commission now estimates that seven 

competing consolidators will meet this 

definition and be subject to the 

requirements of Regulation SCI. The 

Commission estimates that one 

competing consolidator will not meet 

the 5% revenue threshold test in the 

definition and will instead be subject to 

the streamlined requirements of Rule 

619(d)(9). Of the seven competing 

consolidators subject to the 

requirements of Regulation SCI, the 

Commission believes: Two may be the 

existing exclusive SIPs, which are 

currently subject to Regulation SCI as 

plan processors; one may be an existing 

SCI SRO or entity affiliated with an SCI 

SRO that is subject to Regulation SCI; 

and four may be entities not currently 

subject to Regulation SCI, such as 

market data aggregation firms, brokerdealers that currently aggregate market 

data for internal uses, and entities that 

would be entering the market data 

aggregation business for the first time. 

The Commission is adopting the burden 

estimates as proposed for the seven 

competing consolidators in these 

categories that will be subject to the 

requirements of Regulation SCI.1583

The Commission estimates that one of 

the eight competing consolidators will 

not meet the definition of ‘‘SCI 

competing consolidator’’ and will be 

subject to the requirements of paragraph 

(d)(9) of Rule 619. 

(a) Summary of Collection of 

Information 

The provisions under Rule 619(d)(9) 

impose ‘‘collection of information’’ 

requirements within the meaning of the 

PRA. Paragraph (d)(9)(ii) of Rule 614 

requires competing consolidators to 

establish, maintain, and enforce written 

policies and procedures reasonably 

designed to ensure: That their systems 

involved in the collection, 

consolidation, and dissemination of 

consolidated market data have levels of 

capacity, integrity, resiliency, 

availability, and security adequate to 

maintain the competing consolidator’s 

operational capability and promote the 

maintenance of fair and orderly markets; 

and the prompt, accurate, and reliable 

dissemination of consolidated market 

data.1584 Competing consolidators will 

also be required to periodically review 

the effectiveness of the policies and 

procedures required by paragraph 

(d)(9)(ii)(B) of Rule 614, and take 

prompt action to remedy deficiencies in 

such policies and procedures. Paragraph 

(d)(9)(ii)(C) of Rule 614 will require 

competing consolidators to establish, 

maintain, and enforce reasonably 

designed written policies and 

procedures that include the criteria for 

identifying responsible personnel, the 

designation and documentation of 

responsible personnel, and escalation 

procedures to quickly inform 

responsible personnel of potential 

systems disruptions and systems 

intrusions; and periodically review the 

effectiveness of the policies and 

procedures, and take prompt action to 

remedy deficiencies.1585 Under 

paragraph (d)(9)(iii)(A) of Rule 614, 

competing consolidators will be 

required to, upon responsible personnel 

having a reasonable basis to conclude 

that a systems disruption or systems 

intrusion of systems involved in the 

collection, consolidation, and 

dissemination of consolidated market 

data has occurred, begin to take 

18724 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1586See Rule 614(d)(9)(iii)(A) of Regulation NMS. 

1587See Rule 614(d)(9)(iii)(B) of Regulation NMS. 

1588See Rule 614(d)(9)(iii)(C) of Regulation NMS. 

appropriate corrective action.1586 The 

Commission believes that competing 

consolidators will likely work to 

develop a written process for ensuring 

they are prepared to comply with the 

corrective action requirement and are 

likely also to periodically review this 

process. Rule 614(d)(9)(iii)(B) will 

require that promptly upon responsible 

personnel having a reasonable basis to 

conclude that a systems disruption 

(other than a de minimis system 

disruption) has occurred, a competing 

consolidator will be required to publicly 

disseminate information relating to the 

event; when known, promptly publicly 

disseminate additional information 

relating to the event; and until resolved, 

provide regular updates with respect to 

such information.1587 Concurrent with 

public dissemination of information 

relating to a systems disruption, 

competing consolidators will also be 

required to provide the Commission 

notification of such event, including the 

information required to be publicly 

disseminated.1588 In addition, 

competing consolidators will be 

required to notify the Commission upon 

responsible personnel having a 

reasonable basis to conclude that a 

systems intrusion (other than a de 

minimis system intrusion) has occurred. 

Notifications regarding systems 

disruptions and systems intrusions that 

competing consolidators must provide 

to the Commission under this provision 

include information relating to the 

event; when known, additional 

information relating to the event; and 

until resolved, regular updates with 

respect to such information. Rule 

614(d)(9)(iv) will require competing 

consolidators to participate in the 

industry- or sector-wide coordinated 

testing of BC/DR plans required of SCI 

entities pursuant to paragraph (c) of 

Rule 1004 of Regulation SCI. The 

Commission believes this requirement 

will involve notifying market 

participants and scheduling the 

coordinated testing. 

(b) Use of Information 

Paragraph (d)(9)(ii) of Rule 614 should 

help to advance the goal of promoting 

Commission review and oversight of 

market data infrastructure by requiring 

a competing consolidator to have 

policies and procedures that are 

reasonably designed to ensure its 

operational capability, including the 

ability to maintain effective operations; 

minimize or eliminate the effect of 

performance degradations; and help 

ensure the prompt, accurate, and 

reliable dissemination of consolidated 

market data. Because a competing 

consolidator’s operational capability can 

have the potential to impact market 

participants who rely on such 

competing consolidators for market 

data, the Commission believes that these 

policies and procedures will help 

promote the maintenance of fair and 

orderly markets. 

The requirement in paragraph 

(d)(9)(ii)(C) of Rule 614 to establish 

policies and procedures that include the 

designation and documentation of 

responsible personnel should help make 

it clear to all employees of the 

competing consolidator who the 

designated responsible personnel are for 

purposes of the escalation procedures 

and so that Commission staff can easily 

identify such responsible personnel in 

the course of its inspections and 

examinations and other interactions 

with competing consolidators. The 

Commission also believes that 

escalation procedures to quickly inform 

responsible personnel of potential 

systems disruptions and systems 

intrusions helps ensure that the 

appropriate person(s) are provided 

notice of potential systems issues so that 

any appropriate actions can be taken in 

accordance with the requirements of 

Rule 614(d)(9) without unnecessary 

delay. 

Rule 614(d)(9)(iii)(A) should help 

facilitate competing consolidators’ 

responses to systems disruptions and 

systems intrusions, including taking 

appropriate steps necessary to remedy 

the problem or problems causing such 

event and mitigate the negative effects 

of the event, if any, on market 

participants and the securities markets 

more broadly. 

Rule 614(d)(9)(iii)(B) should help to 

advance the Commission’s goal of 

promoting fair and orderly markets by 

publicly disseminating information 

about systems disruptions, allowing 

market participants to use such 

information to evaluate the event’s 

impact on their trading and other 

activities and develop an appropriate 

response, as well as to evaluate the 

performance of various competing 

consolidators. 

Rule 614(d)(9)(iii)(C) provides for a 

framework for reporting of systems 

disruptions and systems intrusions, 

which ensures the Commission’s review 

and oversight of market data 

infrastructure and fosters cooperation 

between the Commission and competing 

consolidators in responding to such 

events. The Commission also believes 

that the aggregated data from the 

reporting of systems disruptions and 

systems intrusions, in combination with 

filings from SCI competing 

consolidators under Regulation SCI, 

enhances its ability to comprehensively 

analyze the nature and types of various 

systems issues and identify more 

effectively areas of persistent or 

recurring problems across the systems of 

all competing consolidators. 

Rule 614(d)(9)(iv) should assist the 

Commission in maintaining fair and 

orderly markets in a BC/DR scenario 

following a wide-scale disruption. 

(c) Collection of Information Is 

Mandatory 

The collection of information 

discussed above is a mandatory 

collection of information. 

(d) Confidentiality 

The Commission expects that the 

written policies and procedures, 

processes, criteria, standards, or other 

written documents developed or revised 

by competing consolidators pursuant to 

Rule 614(d)(9) will be retained by 

competing consolidators in accordance 

with, and for the periods specified in, 

applicable recordkeeping requirements. 

Should such documents be made 

available for examination or inspection 

by the Commission and its 

representatives, they would be kept 

confidential subject to the provisions of 

applicable law. In addition, the 

information submitted to the 

Commission that is filed on Form CC is 

public, as discussed in detail above. The 

information publicly disseminated by 

competing consolidators pursuant to 

Rule 614(d)(9)(iii)(B) is not confidential. 

(e) Respondents 

As described above, the Commission 

estimates that, following the SCI CC 

Phase-In Period, one of the eight 

competing consolidators will not meet 

the definition of ‘‘SCI competing 

consolidator’’ and will be subject to the 

requirements of paragraph (d)(9) of Rule 

619. 

(f) Total Initial and Annual Reporting 

and Recordkeeping Burden 

As described in detail above, the 

requirements under Rule 614(d)(9) are 

substantially similar to a subset of the 

requirements of Regulation SCI. In 

particular, these provisions largely 

mirror the requirements of Regulation 

SCI Rules 1001(a)(1), (a)(2)(vi), (a)(3) 

and (4), and (c), 1002(a) and (c), and 

1004(c). Accordingly, the Commission 

believes that its 2018 burden estimates 

for these rules would be applicable to 

the corresponding requirements under 

Rule 619(d)(9). With regard to the 

Commission notification provision in 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18725 

1589See 2018 PRA Extension, supra note 1567. 

1590 15 U.S.C. 78c(f). 

1591 15 U.S.C. 78w(a)(2). 

1592Here, market participants may include 

investors, including retail investors. Market 

participants that do not receive the additional 

content from expanded consolidated market data 

may benefit indirectly if the broker-dealers that 

handle their orders subscribe to the expanded 

content. The extent to which particular kinds of 

market participants will incur benefits or costs from 

these final rules is discussed more fully in the 

relevant parts of Section V.C. 

1593Here and throughout, the phrase ‘‘gains from 

trade’’ refers to a situation in which two market 

participants would each be better off if they 

exchanged their respective property. It captures the 

idea of a potential welfare benefit that could be 

realized if trade was allowed and possible. 

Generally, in this release the relevant property will 

be securities and cash. Market participants that post 

the orders that are traded against would also benefit 

from realizing additional gains from trade. 

1594See infra Section V.C.1 for a complete 

discussion of related costs. 

1595See infra Section V.C.2(b) for an analysis of 

the impact on data fees. 

paragraph (d)(9)(ii)(C), as described 

above, the Commission believes that 

this provision is significantly more 

streamlined than the requirements 

under Rule 1002(b), and therefore 

competing consolidators would incur 

only a small portion of the estimated 

burdens for Rule 1002(b). Considering 

its prior burden estimates for the 

Regulation SCI rules, the Commission 

estimates that the one competing 

consolidator subject to the requirements 

of Rule 619(d)(9) following the SCI CC 

Phase-In Period will have initial and 

ongoing burdens that are approximately 

33% of the burdens estimated for 

compliance with all of the provisions of 

Regulation SCI.1589 This estimate of 

33% includes the paperwork burdens 

estimated for Rules 1001(a)(1), (a)(2)(vi), 

(a)(3) and (4), and (c), 1002(a) and (c), 

and 1004(c) of Regulation SCI, with the 

addition of an incremental burden 

associated with notifying the 

Commission of systems disruptions and 

systems intrusions on Form CC, as 

compared to the burden estimates for all 

of the requirements of Regulation SCI 

that will be applicable to SCI competing 

consolidators. 

V. Economic Analysis 

A. Introduction and Market Failures 

1. Introduction 

Section 3(f) of the Exchange Act 

requires the Commission, whenever it 

engages in rulemaking and is required to 

consider or determine whether an action 

is necessary or appropriate in the public 

interest, to consider, in addition to the 

protection of investors, whether the 

action would promote efficiency, 

competition, and capital formation.1590

In addition, Section 23(a)(2) of the 

Exchange Act requires the Commission, 

when making rules under the Exchange 

Act, to consider the impact such rules 

would have on competition.1591

Exchange Act Section 23(a)(2) prohibits 

the Commission from adopting any rule 

that would impose a burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. 

The Commission believes that the 

economic benefits of the amendments 

justify the costs. The amendments will 

generally enhance the consolidated 

market data content, reduce the latency 

of consolidated market data, and 

improve the dissemination of 

consolidated market data. This will 

reduce information asymmetries that 

exist between market participants who 

subscribe to proprietary DOB and other 

proprietary products and market 

participants who only subscribe to SIP 

data, and may allow some market 

participants who subscribe to 

proprietary DOB products to replace 

them with potentially cheaper 

consolidated market data feeds. 

Improvements to the content and 

latency of consolidated market data 

from the amendments may also help 

market participants that currently rely 

on SIP data to make more informed 

trading decisions, which will facilitate 

their ability to trade competitively and 

improve their execution quality, and 

will facilitate best execution. 

The Commission perceives three main 

benefits from the new round lot 

definition and the expanded content of 

consolidated market data, which as 

noted above includes ‘‘core data.’’ First, 

the expanded content of consolidated 

market data will enable market 

participants 1592 that currently only 

subscribe to SIP data to get additional 

content from expanded consolidated 

market data and to experience increased 

gains from trade by allowing them to 

take advantage of trading opportunities 

they may not have been aware of due to 

the lack of information in existing SIP 

data.1593 Second, the expanded content 

of consolidated market data may also 

allow these market participants to make 

more informed trading decisions and 

improve their order routing and order 

execution capabilities, potentially 

lowering investor transaction costs. 

Finally, the changes in the definition of 

the round lot will result in a narrower 

NBBO in some higher priced stocks, 

which may improve execution quality. 

A narrower NBBO could also affect the 

amount of price improvement that 

trading venues, including ATSs, 

exchanges, and internalizers could offer. 

Changes in the NBBO could also affect 

other Commission and SRO rules. 

Market participants should benefit from 

these changes independently of any 

benefits from the decentralized 

consolidation model. 

The Commission recognizes that there 

are costs to expanding the content of 

consolidated market data. They include 

costs to new competing consolidators 

related to upgrading existing 

infrastructure in order to handle the 

dissemination of the increased message 

traffic; costs relating to upgrading 

software and trading systems that 

consume consolidated market data; 

costs relating to market participants 

receiving consolidated market data from 

technological investments required to 

handle increased content and message 

traffic.1594 Expanding consolidated 

market data will also result in transfers 

among various market participants, 

including transfers from the current 

beneficiaries of asymmetric information 

associated with the uneven distribution 

of market data to market participants 

who currently do not have access to the 

additional information contained in 

proprietary DOB products and other 

proprietary products. SROs will have 

costs associated with the dissemination 

of data content underlying consolidated 

market data. 

With respect to the introduction of the 

decentralized consolidation model, the 

Commission believes that the risk of too 

few competing consolidators operating 

in the market and precluding any of the 

potential benefits from materializing is 

low, and in any event, certain benefits 

from opening up the market to 

competitive forces will materialize even 

with few competing consolidators 

because the market will now be open to 

new entrants, i.e., benefits from the 

threat of entry. The potential economic 

benefits of the decentralized 

consolidation model will include a 

reduction in the latency (as measured at 

the location of market participants using 

the data) and content differential that 

exists between SIP data and proprietary 

data feeds, improvements in innovation 

and efficiency in the consolidated 

market data delivery space, and an 

increase in market resiliency. Moreover, 

because today’s market participants 

need to subscribe to both the exclusive 

SIPs and proprietary data feeds to 

receive the same content that will be 

included in consolidated market data, 

the Commission expects the fees for 

consolidated market data will likely be 

lower than fees that market participants 

pay for equivalent data today.1595

Finally, subscribers choosing to receive 

a subset of consolidated market data 

18726 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1596See infra Section V.C.2(d). 

1597Many of the potential competing 

consolidators have already invested in this 

infrastructure for the existing business services that 

they provide (e.g., proprietary data aggregation 

services), which may reduce their implementation 

costs. 

1598See infra Section V.C.2(d) for a discussion of 

the related costs. 

1599This includes the indirect benefits of 

improved competition in the executing brokerdealer business and potential increases in market 

liquidity from additional market makers. 

1600The expanded content of core data will 

improve the completeness and accessibility of 

Consolidated Audit Trail Data, which will facilitate 

more efficient regulatory activities using 

Consolidated Audit Trail Data. See infra Section 

V.C.4(c)(ii). 

1601See infra Section V.C.4 for additional 

discussion of the related costs. 

1602As explained in more detail below, because 

in certain circumstances the Commission may not 

have, and in certain cases cannot reasonably obtain, 

data that may inform the Commission on certain 

economic effects, the Commission is unable to 

quantify certain economic effects. Further, in 

certain circumstances, it may not be practicable to 

quantify the economic effects due to the number 

and type of assumptions necessary, which render 

any such quantification unreliable. 

1603See supra Section II. 

1604See supra Section III. 

1605A number of commenters agreed that the 

SROs have a conflict of interest. See, e.g., 

Wellington Letter at 1; IEX Letter at 2; Fidelity 

Letter at 3. See also Proposing Release, 85 FR at 

Section III.A. and n. 267 (describing an exchangeled initiative to enhance the SIPs). While the new 

Equity Data Plan, required to be filed pursuant to 

the Governance Order, is required to be designed 

to address these conflicts of interest, it would not 

eliminate them. 

1606See Governance Order, supra note 1128 at 

Section II.B.1. Commenters agreed that the 

improvements to the SIPs have not kept pace with 

the improvements in proprietary feeds. See, e.g., 

State Street Letter at 2 (‘‘Over time, improvements 

have been made to the SIPs, but those 

improvements have not kept pace with the 

alternative data feeds that the industry can and is 

often required to access’’); Wellington Letter at 1. 

1607See id. 

1608See id.; see also Proposing Release, 85 FR at 

n. 25. The Commission did not receive comments 

disagreeing with this characterization of the 

relationship between the exclusive SIPs and TOB 

feeds. 

1609See Governance Order, supra note 1128, at 

Section II.B.1. 

will likely pay the same or lower fees 

than they do today for equivalent data, 

depending on the fee schedule of the 

effective market system plan(s). 

At the same time, the introduction of 

the decentralized consolidation model 

will impose direct costs on potential 

competing consolidators and SROs.1596

Potential competing consolidators (such 

as SROs, exclusive SIPs, and current 

market data aggregators) will incur 

registration and compliance costs and 

implementation and incremental 

infrastructure costs.1597 SROs will incur 

costs as part of their SRO functions, 

which include costs to file amendments 

to the effective national market system 

plan(s) and to collect and disseminate 

the data content underlying new 

elements of consolidated market data to 

competing consolidators. 

The final rule will also impose 

indirect costs on the existing exclusive 

SIPs, certain market participants and 

investors, and on SROs.1598 The existing 

exclusive SIPs will incur a loss in 

revenue as they lose their role as the 

exclusive distributors of consolidated 

market data. The SROs might incur 

indirect costs depending on how they 

choose to provide the data content 

underlying consolidated market data. 

Finally, certain market participants will 

incur direct or indirect implementation 

costs and switching costs to use the 

consolidated market data products. 

The Commission believes that the 

interaction of expanding consolidated 

market data and implementing a 

decentralized consolidation model 

together should produce some benefits, 

including less expensive alternatives to 

proprietary DOB products for market 

participants; potential new entrants into 

the broker-dealer, market making, and 

other latency sensitive trading 

businesses; 1599 expansion of business 

opportunities for market data 

aggregators; improved regulatory 

oversight from the Consolidated Audit 

Trail; 1600 and enhancements to the 

quality of service provided by data 

vendors. Further, as noted above, the 

Commission believes that the adopted 

rule will facilitate best execution and 

reduce information asymmetries. These 

changes might impose certain costs, 

such as potentially lower revenues for 

SROs; potentially higher costs for the 

implementation of the Consolidated 

Audit Trail; potentially higher costs for 

certain market data vendors.1601 Some 

of these benefits and costs will result 

from transfers among various market 

participants. 

On balance, the amendments are 

necessary and appropriate in the public 

interest and do not impose a burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. 

Wherever possible, the Commission 

has quantified the likely economic 

effects of the adopted rules. The 

Commission is providing both a 

qualitative assessment and quantified 

estimates of the economic effects of the 

adopted rule where feasible. The 

Commission has incorporated data and 

other information provided by 

commenters to assist it in the analysis 

of the economic effects of the adopted 

rules.1602

2. Market Failures 

The Commission is amending Rules 

600 and 603 and adopting new Rule 614 

of Regulation NMS under the Exchange 

Act to increase the availability and 

improve the dissemination of 

information regarding quotations for 

and transactions in NMS stocks to 

market participants. First, the 

Commission is defining the terms 

‘‘consolidated market data,’’ 

‘‘consolidated market data product,’’ 

‘‘core data,’’ ‘‘regulatory data,’’ 

‘‘administrative data,’’ and ‘‘selfregulatory organization-specific program 

data,’’ and enhancing the content of core 

data to include certain odd-lot quote 

information, certain depth of book data, 

and information on orders participating 

in auctions.1603 Second, the 

Commission is introducing a 

decentralized consolidation model 

whereby competing consolidators will 

assume responsibility for the collection, 

consolidation, and dissemination 

functions currently performed by the 

exclusive SIPs,1604 and self-aggregators 

will be able to generate consolidated 

market data for their own use, and the 

use of their broker-dealer and registered 

investment advisor affiliates. 

The Commission understands that 

there is an inherent conflict of interest 

in that the exchanges, as voting 

members of the Equity Data Plan 

Operating Committees, may not be 

incentivized to improve the content or 

latency of SIP data.1605 For example, 

certain exchanges have developed 

proprietary data products with reduced 

latency and expanded content (i.e., 

proprietary DOB products), while not 

taking similar action on these 

committees to enhance the data 

products offered by the Equity Data 

Plans.1606 These proprietary DOB 

products have evolved to be considered 

competitive necessities by many market 

participants and are offered at 

premiums to exclusive SIP products.1607

Similarly, some exchanges have 

developed limited TOB data products, 

offering them at a discount compared to 

the SIP data, while the exclusive SIPs 

have not developed less expensive SIP 

products.1608 The exchanges have 

continued to develop and enhance their 

proprietary market data businesses— 

which generate revenue that, unlike SIP 

data revenues, do not have to be shared 

with the other SROs—while remaining 

responsible for the governance and 

operation of the Equity Data Plans, 

including content, infrastructure, and 

pricing, as well as data consolidation 

and dissemination.1609

The Commission believes that there 

are two additional factors related to the 

Equity Data Plan processors that may 

impede improvements to the 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18727 

1610See Proposing Release, 85 FR at n. 21 and 

accompanying text. 

1611See infra Section V.B.2(b). 

1612See Proposing Release, 85 FR at n. 42. 

1613Commenters agreed with this assessment. 

See, e.g., BestEx Research Letter at 1 (‘‘SIP operators 

have little incentive to provide better content at 

more competitive prices with lower latency because 

it may cannibalize their own direct feed business’’) 

and 4 (‘‘The bigger the differences in content 

between direct data feeds and SIP, the more power 

exchanges have in setting their own prices for 

market data.’’). 

1614See supra Sections I.A and I.B. 

1615See supra Section II.C.2(c); see also id.; 

Proposing Release, 85 FR at Section III.C.1(a); infra 

Section V.B.2(c). A number of commenters agreed 

that market participants may not be able to rely on 

the SIP to trade competitively. See, e.g., DOJ Letter 

at 2 (‘‘[P]articipants that rely solely on SIP Data 

could be at a competitive disadvantage to those that 

rely on multiple sources of market information, 

including Prop Data’’); MFA Letter at 2; BlackRock 

Letter at 2; Wellington Letter at 1; IntelligentCross 

Letter at 4. 

1616See supra Section II.C.2(b); see also 

Proposing Release, 85 FR at Section III.C.1(a). 

1617Only limited auction-related information is 

currently included in SIP data. See supra Section 

II.G; see also Proposing Release, 85 FR at Section 

III.C.3(a). 

1618See infra Section V.B.2(b). 

1619A number of commenters agreed that brokerdealers need to purchase proprietary DOB feeds in 

order to trade competitively. See, e.g., Clearpool 

Letter at 2 (‘‘[B]roker-dealers are compelled to 

purchase the exchanges’ proprietary data feeds both 

to provide competitive execution services to clients 

and to meet best execution obligations due to the 

content of the information contained in proprietary 

data feeds, as well as the lack of latency in those 

feeds, both important considerations for brokers’’); 

State Street Letter at 2; Better Markets Letter at 1; 

T. Rowe Price Letter at 1. Commenters also agreed 

that there is a disparity between the content and 

latency of the SIP data feeds and proprietary market 

data. See, e.g., Committee on Capital Markets 

Regulation Letter at 2. 

1620See supra notes 26–28 and accompanying 

text; infra Sections V.B.3(e), V.B.2(f). For example, 

one commenter stated ‘‘[w]e observe increasing 

concentration in the financial industry—in the asset 

manager space, the broker/dealer community, and 

in the liquidity provider/market maker space. There 

are barriers to entry based on necessary scale to be 

able to absorb the fixed costs of infrastructure, 

market data and connectivity,’’ and that 

‘‘algorithmic executions by broker/dealers cannot in 

general be competitive if they do not use direct 

feeds.’’ See NBIM Letter at 3. Additionally, there are 

indicia that exchanges may not be subject to robust 

competition with respect to market data. See infra 

Section V.B.3(b). 

1621See Nasdaq Letter IV at 34. 

dissemination of SIP data. First, 

pursuant to Regulation NMS, each 

exclusive SIP has exclusive rights to 

collect trade and quotation data related 

to NMS stocks from multiple SROs and 

then aggregate and disseminate market 

data to market participants.1610 This 

structure may further impede 

improvements in the dissemination of 

SIP data 1611 because Equity Data Plan 

participants that govern exclusive SIPs 

do not have incentives to innovate due 

to the lack of competition in 

dissemination of SIP data. 

Second, the exclusive SIPs are either 

SROs themselves or affiliates of 

SROs.1612 This gives the SROs a dual 

role in that they serve as both existing 

plan processors and as entities selling 

directly their own proprietary market 

data products that can reach market 

participants faster than SIP data, or as 

affiliates of entities that do so. As 

discussed in the Proposing Release, this 

may create an additional conflict of 

interest that could provide incentives 

making the Equity Data Plan 

participants that oversee the Equity Data 

Plans reluctant to improve the content 

and latency of the SIP data, because a 

divergence in the usefulness of SIP data 

provided by the exclusive SIPs as 

compared to the proprietary data feeds 

increases the value of the proprietary 

market data products.1613

The Commission is concerned that 

Regulation NMS and the Equity Data 

Plans have not kept pace with the needs 

of market participants as markets, 

trading systems, and technologies have 

changed dramatically. While the 

exchanges have developed individual 

proprietary data products to meet the 

needs of some market participants, the 

Commission believes that there should 

be improvement to, and modernization 

of, the national market system to fulfill 

the goals of Section 11A of the Exchange 

Act and to meet the current core data 

needs of all market participants. The 

Commission is concerned that the lack 

of modernization to the content and 

dissemination of SIP data compared to 

proprietary data feeds has contributed to 

the development of a two-tiered system 

in which certain market participants 

who are able to afford, and choose to 

pay for, the exchanges’ relatively more 

expensive proprietary DOB data feeds 

and associated connectivity and 

transmission offerings receive more 

content-rich data faster than those who 

do not receive these data feeds.1614

Some market participants are unable 

to rely solely on SIP data to trade 

competitively and execute investor 

orders in today’s markets.1615 SIP data 

currently does not include some 

important data elements such as odd-lot 

quotations (except to the extent that 

odd-lot quotations are aggregated into 

round lots pursuant to exchange 

rules),1616 depth of book data, and 

information about orders participating 

in auctions.1617 Moreover, there is a 

substantial latency differential between 

market data provided via the exclusive 

SIPs and proprietary data products 

delivered by the exchanges directly to 

market participants or to market data 

aggregators as part of exchange 

proprietary data feeds.1618 The latency 

and content disparity between SIP data 

feeds and proprietary DOB data 

products has the effect of increasing the 

market participants’ demand for 

proprietary products to the extent that 

some brokers-dealers stated they view 

acquiring such products as a 

competitive necessity.1619 Additionally, 

market participants have stated that the 

higher prices charged for some exchange 

proprietary DOB feeds and associated 

connectivity and transmission limits the 

number of broker-dealers accessing 

these feeds and places those that do not 

subscribe at a competitive disadvantage 

relative to other market participants 

willing and able to spend the money to 

access these feeds.1620

One commenter stated that all of the 

additional information provided by the 

proprietary feeds is already available to 

everyone who needs it.1621 While the 

Commission acknowledges that the 

option to subscribe to proprietary 

market data is available to all market 

participants, the Commission is 

concerned that the national market 

system needs improvement to fulfill the 

goals of Section 11A of the Exchange 

Act and to meet the current core data 

needs, including data content and 

latency, of all market participants. The 

Commission is concerned a two-tiered 

system has developed in which market 

participants that do not receive 

proprietary DOB feeds may be affected 

in their efforts to seek best execution 

and otherwise effectively compete with 

market participants that receive 

proprietary DOB data feeds. The 

Commission believes that consolidated 

market data must reflect all information 

that is important for a broad cross 

section of investors and market 

participants and must do so in a manner 

that is latency-sensitive. 

B. Baseline 

The Commission has assessed the 

likely economic effects of the final 

amendments, including benefits, costs, 

and effects on efficiency, competition, 

and capital formation, against a baseline 

that consists of the existing regulatory 

process for collecting, consolidating, 

and disseminating market data, and the 

structure of the markets for SIP data 

products and for connectivity and 

trading services. 

1. Current Regulatory Process for Equity 

Data Plans and SIP Data 

The current regulatory framework for 

SIP data relies upon a centralized 

consolidation model, whereby the SROs 

provide certain quotation and 

transaction information for each NMS 

stock to a single exclusive SIP, which 

then consolidates this data and makes it 

18728 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1622See Proposing Release, 85 FR at Section II.A. 

1623 Id. 

1624See infra Section V.B.2(a). See also Proposing 

Release, 85 FR at Section II.C.1. 

1625See Proposing Release, 85 FR at Section II.A. 

1626See Proposing Release, 85 FR at Section 

III.C.2. 

1627Under the Governance Order, the Operating 

Committee of the New Consolidated Data Plan 

would include non-SRO members. See Governance 

Order, supra note 1128. 

1628The Nasdaq UTP Plan contains the 

description of its approach to the selection and 

evaluation of the processor. See Nasdaq UTP Plan, 

supra note 10, at 10. The CTA/CQ Plan does not 

contain a similar provision. See CTA Plan, supra 

note 10; CQ Plan, supra note 10. Historically, 

exchanges or exchange affiliates had always been 

selected to be plan processors. 

1629See Proposing Release, 85 FR at Section II.A. 

and n. 43. 

1630See Proposing Release, 85 FR at Section II.A. 

1631See Proposing Release, 85 FR at Section 

III.C.2. 

1632See Proposing Release, 85 FR at n. 51 and 

accompanying text; Proposing Release, 85 FR at 

Section IV.A. 

1633See Proposing Release, 85 FR at Section III.C. 

1634A number of commenters agreed with this 

statement. See, e.g., Clearpool Letter at 11; IEX 

Letter at 5–6; Virtu Letter at 2; DOJ Letter at 2. See 

also supra notes 1615, 1619 and accompanying text. 

1635Commenters agreed with this assessment. 

See, e.g., MEMX Letter at 2 (acknowledging that 

‘‘information asymmetries exist between market 

participants consuming consolidated data 

disseminated through the’’ exclusive SIP feeds and 

‘‘market participants consuming proprietary data 

feeds directly from national securities exchanges’’); 

Clearpool Letter at 15; Schwab Letter at 3. 

1636See Proposing Release, 85 FR at Section 

VI.B.2(a). The Commission believes that when 

market participants purchase proprietary data feeds 

to replace SIP data, they also almost always 

purchase SIP data as a back-up system to 

proprietary data. See also Proposing Release, 85 FR 

at n. 101. 

1637See Proposing Release, 85 FR at n. 140. In 

addition to using proprietary DOB feeds for nondisplay purposes, these firms may also use 

proprietary DOB feeds for display purposes for their 

employees and clients. 

1638As of the fourth quarter of 2019, there were 

approximately 2–3 million non-professional 

subscribers and approximately 0.3 million 

professional subscribers across the UTP and CTA/ 

CQ SIPs. Additionally, there were approximately 

300 non-display vendor use cases at each of the 

exclusive SIPs. See, e.g., CTA Plan, Q2 2020 CTA 

Tape A & B Quarterly Population Metrics, available 

at https://www.ctaplan.com/publicdocs/ctaplan/ 

CTAPLAN_Population_Metrics_2Q2020.pdf; 

Nasdaq UTP Plan, Q2 2020 UTP Quarterly 

Population Metrics, available at https://

www.utpplan.com/DOC/UTP_2020_Q2_Stats_with_

Processor_Stats.pdf. The Commission understands 

that there is an overlap in subscribers across the 

exclusive SIPs. 

1639See Proposing Release, 85 FR at Section 

VI.B.2(a). Commenters agreed that many retail 

investors only view core data. See, e.g., Schwab 

Letter at 2; MEMX Letter at 3. Retail investors may 

also view proprietary TOB feeds that contain less 

content than the SIP. See infra note 1651. 

1640One retail broker stated that it ‘‘currently 

offers depth of book products at a reasonable cost 

for those investors who find the data useful. 

Providing this data from separate feeds in specific 

circumstances for investors allows clients to choose 

what data beyond a national best bid and national 

best offer (‘‘NBBO’’) is important and useful to them 

and avoids overwhelming amounts of information.’’ 

See TD Ameritrade Letter at 6. 

available to market participants.1622

This SIP data includes what historically 

has commonly been referred to as core 

data, as well as certain regulatory data 

related to Commission and SRO rules 

and NMS plan requirements.1623

As discussed in more detail 

below,1624 SIP data currently includes 

transaction information for both round 

lot and odd-lot-sized transactions as 

well as quotation information for round 

lot top of book quotes for each SRO. 

Additionally, several exchanges, 

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.1625 Thus, SIP data lacks 

information on odd-lot quotations at 

prices better than the best bid and offer 

and on depth of book quotations (i.e., 

limit orders resting at exchanges at 

prices outside of the bid and offer). 

Additionally, only limited auctionrelated information is included in SIP 

data.1626

Currently, the Operating Committees 

of the Equity Data Plans, which are 

governed exclusively by the SROs,1627

select the exclusive SIPs to consolidate 

and disseminate market data to market 

participants. The selection process for 

the exclusive SIPs is organized through 

a bidding process, and once selected, an 

exclusive SIP has exclusive rights to 

consolidate and disseminate market 

data for a given Equity Data Plan.1628

Currently, SIAC (a NYSE affiliate) is the 

exclusive SIP for the CTA and CQ Plans, 

and Nasdaq Stock Market LLC is the 

exclusive SIP for the UTP Plan. 

Each exclusive SIP is physically 

located in a different data center.1629

The exchanges’ and FINRA’s primary 

data centers are also located in different 

locations. Each exchange and FINRA 

must transmit its quotation and 

transaction information 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 exclusive SIPs do not 

compete with each other in the 

collection, consolidation, or 

dissemination of SIP data. 

2. Current Process for Collecting, 

Consolidating, and Disseminating 

Market Data 

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 

directly to market participants via 

proprietary data feeds.1630 Proprietary 

data feeds may include SIP data 

elements and a variety of additional 

data elements and can vary in content 

from proprietary TOB products to 

proprietary DOB products.1631 In 

addition, in connection with proprietary 

data feed products, the exchanges offer 

various connectivity services (e.g., colocation at primary data centers, fiber 

optic connectivity, wireless 

connectivity, and point-of-presence 

connectivity at third-party data centers), 

which may result in higher speed 

transmissions.1632 Typically, 

proprietary data 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 consolidates 

such data with the proprietary data of 

the other exchanges. This section 

describes the current content of SIP data 

and proprietary data feeds, current 

process of data dissemination, and 

current process for costs of generating 

SIP data and proprietary data feeds. 

(a) Current Content of SIP Data and 

Proprietary Data Feeds 

As discussed in the Proposing 

Release,1633 today SIP data does not 

include some of the content that certain 

market participants rely on when 

handling customer orders and 

trading.1634 This difference in content 

creates significant information 

asymmetries between market 

participants who rely solely on SIP data 

and market participants who also rely 

on proprietary data feeds.1635

A certain portion of market 

participants do not rely solely on SIP 

data to trade competitively in today’s 

markets and instead purchase 

proprietary data from SROs to 

supplement or even replace SIP 

data.1636 In particular, the Commission 

understands that approximately 50 to 

100 firms purchase all of the proprietary 

DOB feeds from the exchanges and do 

not rely on the SIP data for their 

trading.1637 Conversely, the number of 

users of the SIP data is much larger (in 

the millions),1638 suggesting that many 

users rely on the exclusive SIPs alone. 

The Commission believes that a large 

portion of retail investors rely solely on 

SIP data for trading decisions.1639

However, some retail investors may use 

data derived from proprietary feeds 

from one or more exchanges in order to 

obtain additional data beyond the 

NBBO.1640

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18729 

1641See Proposing Release, 85 FR at Section II.A. 1642See Rule 602 of Regulation NMS. 1643See 17 CFR 242.601 (Rule 601) of Regulation 

NMS. 1644The national best bid and offer are 

constructed from the best bid and offer prices across 

all exchanges in which the quoted size is at least 

one round lot. See Proposing Release, 85 FR at 

Section III.C.1. 

1645The best bids and offers on an exchange are 

determined by the best prices in which the quoted 

size is at least one round lot. Some exchanges 

aggregate odd-lot orders at better prices into round 

lots and report such aggregated orders as their best 

bid or offer at the least aggressive price of the 

aggregated orders. Typically, the best bids and 

offers on each exchange are protected quotes under 

NMS Rule 611 and cannot be traded-through. See 

Proposing Release, 85 FR at Section III.C.1(a). 

1646See Proposing Release, 85 FR at n. 38. 

1647See id. at n. 39. 

1648See id. at n. 40. 

1649See id. at n. 41. 

1650See, e.g., Proposing Release, 85 FR at n. 19 

(for Nasdaq Global Data Products, Real-Time— 

NYSE Proprietary Market Data, and Cboe Equities 

Offerings, all describing low-latency DOB data 

products). Commenters agreed with this description 

of the market. See, e.g., DOJ Letter at 2; Committee 

on Capital Markets Regulation Letter at 2. 

1651Examples of such proprietary TOB products 

include NYSE BBO, Nasdaq Basic, and Cboe One 

Feed. See Proposing Release, 85 FR at n. 19. 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 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, (Oct. 24, 

2018) (‘‘TD Ameritrade Letter 2018’’), available at 

https://www.sec.gov/comments/4-729/4729- 

4560068176205.pdf at 5–8 (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). 

1652See Proposing Release, 85 FR at n. 335. IEX 

and MEMX make proprietary data available but do 

not charge for it. See, e.g., IEX, Market Data, 

available at https://iextrading.com/trading/marketdata/ (last accessed Jan. 8, 2020); MEMX Fee 

Schedule, available at https://

info.memxtrading.com/fee-schedule/ (last accessed 

Nov. 18, 2020). See also Ramsay Letter II. Long 

Term Stock Exchange does not offer a proprietary 

data feed, but makes information on the order book 

available on its website. See, e.g., LTSE 

Connectivity Guide, available at https://

assets.ctfassets.net/cchj2z2dcfyd/1Jp5V4TWZXzhl

8QmBWD3Ed/2f926fa4c55f6f489cceb8b77fe8e685/ 

LTSE_Connectivity_Guide.pdf (last accessed Nov. 

18, 2020). 

1653See 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 

(Retrieved from Factiva database). Commenters 

agreed that odd-lot quotes make up a significant 

portion of trading interest, especially in higher 

priced stocks. See, e.g., Cboe Letter at 6; Healthy 

Markets Letter I at 3; Clearpool Letter at 11–12; 

IntelligentCross Letter at 3; IEX Letter at 3–4; ICI 

Letter at 7. 

1654See Proposing Release, 85 FR at Section 

III.C.1(a). Exchange rules specify how the 

aggregation process works in different terms and 

with different levels of specificity, 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. See Proposing 

Release, 85 FR at nn. 157, 158, 789. 

1655See Proposing Release, 85 FR at n. 163. 

Commenters agreed that the absence of odd-lot 

quote information reduces the usefulness of the SIP. 

See, e.g., BlackRock Letter at 3. 

1656See supra note 241. Similar staff analysis in 

the Proposing Release examining a different time 

period also showed that odd-lot trades account for 

a significant proportion of transactions. See 

Proposing Release, 85 FR at 16813. 

1657See supra note 240. The staff analysis found 

that for the 500 top tickers by dollar volume, oddlot quotes represented a significant price 

improvement over the exclusive SIP quotes. This 

analysis further found that as the price of the stock 

increased, the duration-weighted amount by which 

the odd-lot quote improved on the SIP quote 

increased as well. Similar staff analysis in the 

Proposing Release examining a different time 

period found similar results. See Proposing Release, 

85 FR at Section III.C.1(b). Analysis by one 

commenter also observed that there are frequently 

odd-lot limit orders priced better than the NBBO 

and that this is more common in higher priced 

stocks. See JP Morgan Memo to File at 2. 

As described in the Proposing 

Release,1641 SIP data consists of certain 

quotation 1642 and transaction data 1643

that the SROs are required to provide to 

the exclusive SIPs for consolidation and 

dissemination to the public on the 

consolidated tapes. Specifically, the SIP 

data includes: (1) An NBBO; 1644 (2) the 

best bids and best offers from each 

SRO; 1645 and (3) information on trades 

such as prices and sizes. The SIP data 

also includes certain regulatory data, 

such as information required by the 

LULD Plan,1646 information relating to 

regulatory halts and MWCBs,1647

information regarding short sale circuit 

breakers,1648 and other data, such as 

data relating to retail liquidity programs, 

market and settlement conditions, the 

financial condition of the issuer, OTC 

equities, last sale prices for corporate 

bonds, and information about 

indices.1649

The exchanges separately sell their 

individual market data directly to 

market participants via proprietary data 

feeds. For example, the exchanges have 

developed proprietary DOB products 

that provide greater content (e.g., oddlot quotations, orders at prices above 

and below the best prices, and 

information about orders participating 

in auctions, including auction order 

imbalances) at lower latencies,1650

relative to the exclusive SIPs, for certain 

segments of the data market, such as 

automated trading systems. They have 

also developed proprietary TOB 

products that provide data that is 

generally limited to the highest bid and 

lowest offer and last sale price 

information and are typically priced 

lower than the SIP data for another 

segment of the data market that is less 

sensitive to latency (e.g., retail or nonprofessional investors and wealth 

managers that access market data 

visually).1651 Proprietary data feeds are 

available as part of exchanges’ standard 

offerings. Most exchanges offer for sale 

as part of their proprietary DOB 

products the complete set of orders at 

prices above and below the best prices 

(e.g., depth of book data), complete oddlot quotation information, and 

information about orders participating 

in auctions, including auction order 

imbalances (for listing exchanges).1652

One notable gap between SIP data and 

proprietary DOB data is that SIP data 

does not include complete odd-lot 

quotation information even though oddlots represent a large share of all trades 

in the U.S. stock market and can 

represent economically significant 

trading opportunities at prices that are 

better than the prices of displayed and 

disseminated round lots.1653 While 

several exchanges aggregate odd-lot 

orders into round lots and report such 

aggregated orders as quotation 

information to the exclusive SIPs,1654

market participants must purchase 

proprietary data feeds, available from 

the exchanges, to see the odd-lot 

quotations that are priced at or better 

than the best bid or offer.1655

Odd-lot transactions make up a 

significant proportion of transaction 

volume in NMS stocks, including ETPs, 

and a significant proportion of odd-lot 

trades occur at prices better than the 

prevailing NBBO, especially in higher 

priced stocks. In May 2020, 

approximately 45% of all trades 

executed on exchanges and 

approximately 10% of all volume 

executed on exchange in corporate 

stocks and ETFs were odd-lot sized and 

that 40% of those transactions 

(representing approximately 35% of all 

odd-lot volume) occurred at a price 

better than the NBBO.1656 Additionally, 

a significant portion of quotation and 

trading activity occurs in odd-lots, 

particularly for frequently traded, highpriced tickers, and as stock prices rise, 

the difference in spreads calculated 

using the different feeds also rises, 

indicating that odd-lots are more likely 

to set the best quote as stock prices 

rise.1657

A number of commenters also 

submitted analyses examining the 

occurrence of odd-lot trades. 

Commenter analyses generally observed 

that odd-lot trades occur frequently in 

higher priced stocks and that their 

frequency has increased over time, 

along with an increase in the average 

18730 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1658Analysis from a number of commenters 

observed that odd-lot trades are more prevalent in 

high priced stocks. See, e.g., BestEx Research Letter 

at 6; Capital Group Letter at 3; Nasdaq Letter III at 

11; RBC Letter at 5. Additional commenter analysis 

observed that the percentage of odd-lot trades has 

increased over time, especially in high priced 

stocks. See, e.g., BestEx Research Letter at 6; 

Healthy Markets Letter I at 11–12. Analysis from 

one commenter also observed that the frequency of 

odd-lot trades also increased off-exchange. See 

Healthy Markets Letter I at 11–12. Commenters also 

observed that the average stock price has increased 

over time. See, e.g., Cboe Letter at 6 (‘‘The average 

price of a stock included in the S&P 500 Index was 

$44.86 at the end of 2005, compared to $140.47 at 

the end of 2019’’); Virtu Letter at 3; Citadel Letter 

at 3. Other commenters also agreed that odd-lot 

trading has increased over time, especially in high 

priced stocks. See, e.g., Fidelity Letter at 4; ACS 

Execution Services Letter at 2; Angel Letter at 13. 

1659See, e.g., Nasdaq Letter IV at 16; Schwab 

Letter at 4; Citadel Letter at 3. 

1660See TD Ameritrade Letter at 6–7. 

1661See id. 

1662See supra note 1657. See also, e.g., Nasdaq 

Letter IV at 16; JP Morgan Memo to File at 2. 

1663See, e.g., Nasdaq Letter IV at 16; Schwab 

Letter at 4 (‘‘In the first quarter of 2020, a total of 

1.87 million, or 23 percent, of Schwab customers’ 

limit orders for stocks priced higher than $100 are 

for fewer than 100 shares’’); Citadel Letter at 3. One 

commenter also stated that retail investors tend to 

trade in lots smaller than 100 shares. See Schwab 

Letter at 4. 

1664Commenters agreed that odd-lot information 

has become important for trading decisions. See, 

e.g., ACS Execution Services Letter at 2; Clearpool 

Letter at 11–12; IntelligentCross Letter at 4. A 

panelist at the Roundtable also stated that odd-lot 

quotation data is needed to make effective decisions 

in trading applications and to fill client orders 

effectively. See Proposing Release, 85 FR at n. 173 

and accompanying text. 

1665See Proposing Release, 85 FR at Section 

III.C.2. 

1666Commenters agreed that decimalization led to 

a decline in top of book liquidity. See, e.g., Schwab 

Letter at 3; ACS Execution Services Letter at 2. 

1667See Proposing Release, 85 FR at Section 

III.C.2(d). 

1668See Proposing Release, 85 FR at n. 270. 

Commenters stated that top of book information is 

insufficient and market participants pay for 

proprietary feeds to access depth of book 

information. See, e.g., ICI Letter at 9. 

1669See supra note 387. Similar staff analysis in 

the Proposing Release examining a different time 

period found similar results. See Proposing Release, 

85 FR at Section III.C.2(d). Commenters also 

referenced analysis that observed there was 

significant liquidity beyond the top of book. See, 

e.g., RBC Comment Letter at 4–5 (referencing an 

analysis RBC had previously submitted to the 

Commission); IEX Letter at 5 (referencing an 

academic study by Tolga Cenesizoglu and Gunnar 

Grass, Bid- and ask-side liquidity in the NYSE limit 

order book, 38 J. Fin. Mkts. 14 (2018)). 

1670Several commenters agreed that depth of 

book information is useful in routing and placing 

orders effectively. See, e.g., Clearpool Letter at 14; 

IntelligentCross Letter at 4; IEX Letter at 5; Schwab 

Letter at 3; Angel Letter at 9. 

1671See infra Section V.C.1(c)(ii). Commenters 

agreed that depth of book information helps with 

placing market orders and accessing liquidity 

beyond the top of book. See, e.g., ICI Letter at 8– 

9; Schwab Letter at 3; ACS Execution Services 

Letter at 4–5; IEX Letter at 5. 

1672One commenter believes that depth of book 

information would be valuable for retail investors 

in less liquid stocks and for placing limit orders. 

See Angel Letter at 1–9. 

1673That is, a marketable order so large that it 

executes against all the volume at the top of the 

book and then executes against orders behind the 

top of the book. See Craig W. Holden and Stacey 

Jacobsen, Liquidity Measurement Problems in Fast 

Competitive Markets, 69 J. Fin. 1760, at Table I 

(2014) (showing that 3.3% of orders clear outside 

the NBBO). This does not necessarily mean that 

limit orders outside the NBBO are irrelevant. There 

are limitations to using the observation of trades at 

prices outside the NBBO at the time of trade 

execution as an indicator for orders that executed 

at prices outside of the NBBO at the time of trade 

order (specifically, these events are not necessarily 

the same thing). Additionally, instead of submitting 

a large marketable order that ‘‘walks the book’’, 

market participants may split a larger marketable 

order into smaller child orders, with some smaller 

stock price.1658 Commenter analysis 

also observed that odd-lot limit orders 

occur frequently in higher priced 

stocks.1659

One commenter stated that odd-lot 

trade frequency is not a valid proxy for 

passive order interest because trade size 

is often determined by the liquiditytaking order and is often a result of 

algorithmic ‘‘pinging.’’ 1660 This 

commenter conducted an analysis and 

concluded that it is small liquiditytaking orders that are driving the 

increase in odd-lot trades.1661 This 

commenter did not observe an increase 

in the size of passive retail investor 

orders but did find a decrease in their 

execution size. The Commission 

acknowledges that algorithmic 

‘‘pinging’’ could account for a portion of 

the odd-lot trading volume that occurs 

but also believes that odd-lot-sized limit 

orders can represent a significant source 

of liquidity, especially in higher priced 

stocks. This commenter’s analysis was 

limited to the orders of retail investors, 

while the staff analysis discussed above 

and the analyses submitted by other 

commenters, which observed that oddlot limit orders are a significant source 

of liquidity (especially in high-priced 

stocks), contained the orders of other 

types of traders.1662 Additionally, 

analyses from other commenters also 

observed that a significant portion of 

retail limit orders are smaller than 100 

shares, and that this is more common in 

higher priced stocks.1663

Information on odd-lot quotes can 

help with the optimal placement and 

routing of orders across markets.1664

Odd-lot quotation data can help market 

participants improve trading strategies 

and lower execution costs by allowing 

them to take advantage of odd-lot quotes 

that are available at prices better than 

the NBBO, possibly on a different 

exchange than where the NBBO is 

located. Odd-lot quotation data can also 

help market participants place limit 

orders at prices at or inside the NBBO. 

SIP data is unable to differentiate 

between individual round lot quotes 

and odd-lot quotes that were aggregated 

by the exchanges to be a round lot 

quote. 

Another gap between SIP data and 

proprietary DOB data is that SIP data 

currently lacks quotation information in 

NMS stocks beyond the top of book 1665

even though the decimalization of 

securities pricing in 2001 led to a 

dispersion of quoted volume away from 

the top of book.1666 Consequently, the 

NBBO shown in SIP data became less 

informative and some market 

participants have come to view depth of 

book data as necessary to their efforts to 

trade competitively and to provide best 

execution to customer orders.1667

Market participants interested in such 

depth of book data must rely upon the 

proprietary DOB products offered by the 

exchanges that include varying degrees 

of depth data.1668

Staff analyzed depth of book 

quotations for corporate stocks using 

data from the week of May 4, 2020 and 

found that there is a substantial amount 

of quotation volume at several levels 

below the best bid.1669 The analysis also 

found that 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. Additionally, the analysis 

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 recognizes that 

market participants have diverse market 

data needs. Depth of book data can 

assist SORs and electronic trading 

systems with the optimal placement of 

orders across markets.1670 Specifically, 

depth of book data can help market 

participants improve trading strategies 

and lower execution costs by placing 

liquidity taking orders that are larger 

than the displayed best bid or best offer 

and achieve queue priority for liquidity 

providing orders that post at prices 

away from the best bid or offer.1671 At 

the same time, the depth of book data 

may be less valuable to a certain 

segment of market participants (e.g., 

some retail or non-professional 

customers).1672 For example, a relatively 

small portion of marketable orders 

execute at prices outside the NBBO 

indicating that some market participants 

submitting marketable orders do not 

find ‘‘walking the book’’ useful.1673

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18731 

orders executing against liquidity providing orders 

at the top of the book and others later executing 

against liquidity providing orders that were behind 

the top of book when the first child orders 

executed. See infra Section V.B.3(e). 

1674See supra note 466 for staff analysis; see also 

Proposing Release, 85 FR at Section III.C.3(c) and 

n. 348. Commenters agreed that an increase in the 

portion of total trading volume executed in opening 

and closing auctions makes them important 

liquidity events. See, e.g., Cboe Letter at 21; 

Clearpool Letter at 15; MEMX Letter at 5–6; IEX 

Letter at 6; Fidelity Letter at 5; Schwab Letter at 5; 

ACS Execution Services Letter at 2; Angel Letter at 

8; Data Boiler Letter I at 31. A number of 

commenters attributed the growth in auction 

volume to the increase in passive investing. See, 

e.g., Schwab Letter at 5 (‘‘The growth of passive 

investing and exchange-traded funds (ETF) has 

contributed to the growth in auctions relative to 

other trading.’’); SIFMA Letter at 5. See also 

Proposing Release, 85 FR at 16735. 

1675Commenters agreed with this assessment. 

See, e.g., Clearpool Letter at 15; MEMX Letter at 5– 

6. 

1676See ICI Letter at 9. 

1677See Clearpool Letter at 15. 

1678See, e.g., ICI Letter at 9 (‘‘Auction 

information, which includes imbalance levels 

between buy and sell orders, allows funds to decide 

whether to participate, and if so, to determine 

direction, order size and timing.’’); BlackRock Letter 

at 2 (‘‘Auction information telegraphs the direction 

and magnitude of price moves at the end of the 

day.’’); MEMX Letter at 6. 

1679See NYSE Rule 15. 

1680See Proposing Release, 85 FR at n. 333; see 

also UTP Plan, UTP Participant Input Specification 

(Dec. 3, 2019), available at http://

www.utpplan.com/DOC/UtpBinaryInputSpec.pdf. 

1681See, e.g., NYSE, TAQ NYSE Order 

Imbalance—Quick Reference Card, available at 

https://www.nyse.com/publicdocs/nyse/data/TAQ_

NYSE_Order_Imbalance_QRC.pdf (last accessed 

Jan. 8, 2020). 

1682See NYSE, Real-Time Data Imbalances, 

available at https://www.nyse.com/market-data/ 

real-time/imbalances (last accessed Jan. 8, 2020) 

(describing the NYSE Order Imbalances product). 

1683The Nasdaq Net Order Imbalance Indicator is 

a feature of Nasdaq’s BookViewer proprietary data 

feed product rather than a stand-alone product. See 

Nasdaq, Net Order Imbalance Indicator, available at 

https://data.nasdaq.com/NOII.aspx (last accessed 

Jan. 8, 2020). 

1684See T. Rowe Price Letter at 2. 

1685For example, price efficiency may be limited 

if there is a delay in incorporating imbalance 

information observed in proprietary DOB feeds into 

the quote and trade prices shown by the exclusive 

SIP. See infra Section V.D.1. Price efficiency is 

greater when prices reflect current information 

faster. 

1686See Proposing Release, 85 FR at Sections I, 

II.A; see also DOJ Letter at 2. 

1687See Proposing Release, 85 FR at Section II.A. 

1688 Id. 

1689See Data Boiler Letter I at 39. 

1690See supra note 397; see also Robert P. 

Bartlett, III and Justin McCrary, How Rigged Are 

Stock Markets? Evidence from Microsecond 

Timestamps at 45 (2017), 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.’’). 

Another gap between SIP data and 

proprietary DOB data is that SIP data 

includes only limited auction-related 

information. Auctions are important 

liquidity events, accounting for 

approximately 7% of daily equity 

trading volume.1674 Closing auctions 

generate prices that are used for a 

variety of market purposes, including 

setting benchmark prices for index 

rebalances and for determining NAV 

prices for mutual funds and ETFs.1675

Auctions are important for the 

implementation of passive investment 

strategies. For example, one commenter 

stated that mutual funds and ETFs that 

utilize passive index-tracking strategies 

actively participate in closing 

auctions.1676 One commenter stated that 

reopening auctions play an important 

role in connection with security-specific 

or market-wide events, such as a limit 

up-limit down or other regulatory 

halt.1677 Auction imbalance information 

and indicative prices can help facilitate 

order placement in auctions and predict 

price movements.1678

Today, some NYSE auction data, such 

as pre-opening indicators,1679 are 

disseminated through the CTA/CQ SIP, 

and no auction information generated 

by the other primary listing exchanges 

is distributed through the exclusive 

SIPs, except very limited LULD 

information related to auction collar 

messages.1680 Thus while the 

exchanges’ proprietary data includes 

detailed information on several aspects 

of their auctions, only a small subset of 

the auction-related information is 

included in SIP data.1681

While all listing exchanges make 

auction information available to market 

participants through proprietary data 

feeds, only some exchanges offer this 

information through specialized feeds 

for a lower price than full DOB 

products. For instance, NYSE Order 

Imbalances is an example of such a 

proprietary auction data product offered 

by NYSE,1682 while Nasdaq does not 

offer such a specialized product.1683

One commenter observed another gap 

in information between the exclusive 

SIPs and proprietary market data. This 

commenter observed that when marketwide circuit breakers tripped, 

proprietary feeds continued to 

disseminate information, such as 

information on quotes, during the halt 

while the exclusive SIPs provided 

updates that were not in real-time.1684

Currently, the gap in information 

between data in the exclusive SIP and 

proprietary DOB products may limit the 

current level of price efficiency if 

market participants with access to 

proprietary DOB products do not 

incorporate this information into prices 

observed by exclusive SIP subscribers 

quickly enough through their trading or 

quoting activity.1685 However, the 

Commission does not know the extent 

of this possible effect because it does 

not know how quickly market 

participants that subscribe to 

proprietary DOB products incorporate 

the information contained in these feeds 

into the information contained in the 

exclusive SIP. 

(b) Current Process for Dissemination of 

SIP Data and Proprietary Data Feeds 

Today, SIP data is 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 the consolidated market 

data to market participants who are 

often in different locations.1686 The 

SROs typically transmit their market 

data through fiber optic cables to the 

SIPs.1687

Typically, proprietary data is 

transmitted directly from each exchange 

to the data center of the subscriber and 

does not first travel to a centralized 

consolidation location. Furthermore, 

unlike the standardized transmission of 

SIP data over fiber optic cable, 

proprietary data is frequently 

transmitted using low-latency wireless 

connectivity (e.g., microwave signals) or 

other forms of connectivity (often 

provided by the exchanges) that are 

faster than fiber.1688 As stated by one 

commenter, data transmission via 

microwave signals is much faster than 

via fiber optic cables, because 

‘‘microwave signals travel at the speed 

of light through air, rather than over 

fiber, which can attenuate signals.’’ 1689

There is a significant latency 

differential between SIP data and the 

proprietary market data products that 

are delivered directly to market 

participants or to market data 

aggregators who generally have better 

connectivity, communications, and 

aggregation technology than the 

SIPs.1690 Specifically, the centralized 

consolidation model has three sources 

of latency: (a) Geographic latency; (b) 

aggregation or consolidation latency; 

and (c) transmission or communication 

latency. The latency differentials 

between SIP data and proprietary data, 

are meaningful, and market participants 

believe these differentials impact their 

18732 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1691See Proposing Release, 85 FR at n. 412 and 

accompanying text; Martin Scholtus et al., Speed, 

Algorithmic Trading, and Market Quality around 

Macroeconomic News Announcements, 38 J. 

Banking & Fin. 89 (2014) (‘‘This paper documents 

that speed is crucially important for high-frequency 

trading strategies based on U.S. macroeconomic 

news releases. Using order-level data on the highly 

liquid S&P 500 ETF traded on Nasdaq from January 

6, 2009, to December 12, 2011, we find that a delay 

of 300 ms or more significantly reduces returns of 

news-based trading strategies.’’); Grace Hu et al., 

Early peek advantage? Efficient price discovery with 

tiered information disclosure, 126 J. Fin. Econ. 399 

(2017) (‘‘Calibrating the speed of price discovery at 

a finer scale, we find that the first 200 milliseconds 

at 9:54:58 accounts for 89% of the one-second 

return at 9:54:58 on negative news days, and 85% 

of the one-second return at 9:54:58 on positives 

news days. In other words, most of the price 

discovery happens during the first 200 

milliseconds, faster than the blink of an eye.’’); 

Tarun Chordia et al., Low Latency Trading on 

Macroeconomic Announcements, 31 Rev. Fin. Stud. 

4650 (2018) (‘‘Specifically, trading in the direction 

of the announcement surprise results in average 

dollar profits (across market participants) of 

$19,000 per event for SPY and roughly $50,000 per 

event for ES. This translates to roughly $15 million 

in cumulative profits on average each year, which 

is trivial relative to about $4.7 trillion traded in SPY 

and $35.8 trillion notional value traded in ES in 

2012. The $15 million is also trivial compared with 

the cost of price discovery in U.S. markets, which 

at 0.67% of the market capitalization (French 2008) 

amounted to roughly $100 billion in 2006.’’). 

1692See Proposing Release, 85 FR at Section IV.A. 

The hub-and-spoke model of the exclusive SIPs 

exacerbates this geographic latency. See supra note 

676. See also MEMX Letter at 6. 

1693See Proposing Release, 85 FR at n. 396. 

1694See Proposing Release, 85 FR at Section IV.A. 

1695 Id. 

1696See Proposing Release, 85 FR at Section IV.A. 

1697See NYSE Letter II at 10, 11. 

1698 Id. 

1699See Proposing Release, 85 FR at n. 410. 

1700NYSE Letter II at 10–11. 

1701Academic literature examines the effects of 

trading speed on revenues, adverse selection, and 

liquidity. See, e.g., Matthew Baron et al., Risk and 

Return in High-Frequency Trading, 54 J. Fin. & 

Quantitative Analysis 993 (2019) (testing the 

connection between high frequency trading 

(‘‘HFT’’) latency and trading performance; the 

authors find that relative latency matters and that 

‘‘HFT firms exhibit large, persistent cross-sectional 

differences in performance, with trading revenues 

disproportionally accumulating to a few firms.’’ 

Furthermore, when HFT firms use their relative 

latency advantages to trade on news to create shortterm arbitrage opportunities, they generate adverse 

selection on slower traders.); Bruno Biais et al., 

Equilibrium fast trading, 116 J. Fin. Econ. 292 

(2015) (arguing that fast trading technology 

‘‘provides advance access to value-relevant 

information, which creates adverse selection, 

lowering welfare,’’ and ‘‘generates a negative 

externality’’); Thierry Foucault et al., Toxic 

Arbitrage, 30 Rev. Fin. Stud. 1053 (2017) (providing 

evidence that ‘‘[a]rbitrage opportunities due to 

asynchronicities in the adjustment of prices to news 

are toxic because they expose dealers to the risk of 

trading with arbitrageurs at stale quotes.’’ The 

authors then claim that these toxic arbitrage 

opportunities that come with higher trading speed 

impair market liquidity.). 

1702The exchanges, as a subset of SROs, sell 

proprietary data feeds to market participants. 

ability to trade and their order execution 

quality.1691

Geographic latency refers to the time 

it takes for data to travel from one 

physical location to another. Greater 

distances usually equate to greater 

geographic latency, though geographic 

latency is also affected by the mode of 

data transmission. 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.1692 The record 

in this rulemaking suggests that the 

geographic latency of SIP data may be 

up to a millisecond.1693

Aggregation or consolidation latency 

refers to the amount of time an 

exclusive SIP takes to aggregate the 

multiple sources of SRO market data 

into SIP data and includes the time it 

takes to calculate the NBBO. This 

latency reflects the time interval 

between when an exclusive SIP receives 

data from an SRO and when it 

disseminates consolidated data to the 

end-user. Even though in recent years 

the exclusive SIPs made improvements 

to address aggregation latency, the 

proposal stated that the related latency 

differential remains; as mentioned 

above, in the second quarter of 2019, for 

Tapes A and B average quote feed and 

average trade feed aggregation latencies 

were 69 and 139 microseconds, 

respectively.1694 In the same time 

period, the Tape C aggregation latency 

was an average of 16.9 microseconds for 

quotes and 17.5 microseconds for 

trades.1695 Notably, these latency 

differentials remain even though the 

Equity Data Plans’ Operating 

Committees have made some 

improvements to certain aspects of the 

exclusive SIPs and related 

infrastructure, including improvements 

to address aggregation latency.1696

One commenter pointed out that the 

CTA SIP has implemented 

improvements to its processing, which 

at the time that the commenter expected 

to bring the aggregation time down to 

‘‘under 20 microseconds.’’ 1697 While 

these improvements will likely reduce 

the aggregation latency of the CTA SIP, 

20 microseconds of aggregation latency 

will continue to be meaningfully slower 

than current market practice in the 

aggregation of proprietary data feeds, 

and only about as fast as the UTP SIP 

is currently. 

Transmission latency 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 also 

varies 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.1698 Fiber optics are generally 

more reliable than wireless networks 

since the data signal is less affected by 

weather. The modes of transmission for 

SIP data are typically slower than the 

modes of transmission used for 

proprietary data. In the Proposing 

Release, the Commission stated that 

each of the CTA/CQ Plan participants 

must transmit its data through 

connectivity options that have a roundtrip latency of at least 280 

microseconds.1699 One of the 

commenters said that ‘‘[i]n 2019, the SIP 

Operating Committee authorized two 

improvements to the CTA SIP’’ and that 

this change ‘‘will reduce what the 

Commission refers to as CTA SIP data 

‘transmission’ latency, i.e., the time 

interval between when the data is sent 

and when it is received, by over 140 

microseconds.’’ 1700

The Commission believes that the 

benefits of greater speed on the 

timescales at which the market 

currently measures latency have mostly 

to do with being faster than one’s 

competitors. In some situations small 

latency differentials that leave enough 

time for certain market participants to 

observe and react to information before 

other, slower market participants can be 

as costly to slower market participants 

as larger latency differentials.1701 For 

example, a market participant may use 

market data to anticipate price 

movements and then place limit orders 

ahead of the price movement. In doing 

so, the market participant will end up 

in a queue of limit orders placed in the 

book, in order of time priority. If other 

market participants react the same way, 

then this market participant’s quote will 

be behind the quotes in the queue of 

those who reacted faster. If the market 

participant increases its reaction time 

but still does not end up faster than the 

trader who placed the order directly in 

front of it in the queue, then the market 

participant’s quote will have the exact 

same priority that it had at the slower 

reaction time. 

Currently, some market participants 

obtain proprietary data feeds from many 

SROs.1702 Of these market participants, 

some prefer to have consolidated 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18733 

1703As mentioned below, even when obtaining 

consolidated market data from market data 

aggregators, market participants also have to pay 

data fees directly to the exchanges. See infra 

Section V.B.2(c). 

1704Market participants who consolidate market 

data independently may use other market data 

aggregators’ products and services such as software. 

1705See, e.g., Roundtable Day One Transcript at 

128–29 (Mark Skalabrin, Redline Trading 

Solutions). 

1706BestEx Research Letter at 8. 

1707Companies that normalize market data take in 

raw data delivered in a variety of protocols and, 

using feed handlers, normalize it into a single 

protocol different from the one used by the original 

venue. This way a data user can receive one feed 

using one streaming protocol. See Vela’s Definitive 

Guide to Market Data, available at https://

info.tradevela.com/definitive-guide-to-market-data#

normalisation. 

1708See, e.g., Angel Letter at 20; NYSE Letter II 

at 24; FINRA Letter at 4. 

1709Roundtable Day One Transcript at 140 (Mark 

Skalabrin, Redline Trading Solutions). 

1710See, e.g., Nasdaq Letter IV at 8. 

1711For example, NYSE describes their order-byorder message feed, NYSE Integrate Feed, as a 

‘‘high-performance product.’’ See https://

www.nyse.com/market-data/real-time/integratedfeed (last accessed Sept. 21, 2020). 

1712As an example of such costs, see What Types 

of Financial Market Data Providers Are There?, 

Exegy Blog, available at https://www.exegy.com/ 

2019/07/types-financial-market-data-providers/ 

(last accessed Sept. 21, 2020), stating that 

‘‘[e]xchanges are the most expensive provider 

option,’’ because data directly from the exchange 

comes raw and in whatever format the exchange 

uses, and this leaves the end user of the data with 

the task of ‘‘maintaining, transporting and 

processing the data.’’ Because firms that are the 

most sophisticated users of market data consume 

data directly from the exchange, these are costs they 

incur. 

1713The market participants at this level are a 

subset of all market participants using proprietary 

data (see supra Section V.B.2(a)). Much of the text 

discusses market participants who use proprietary 

data feeds; the different levels on the continuum 

consist of differences in how those feeds are used 

even within the set of market participants who use 

proprietary data. 

1714See Vela, supra note 1707, stating that the use 

of ‘‘. . . normalized feed of data from a vendor, 

however, can add latency, which may make it less 

suitable for latency-sensitive applications . . .’’ 

proprietary data. There are two ways 

these market participants can obtain 

consolidated data. First, market 

participants may independently create 

consolidated data by purchasing 

individual exchange proprietary market 

data products and consolidating that 

information for their own use. 

Second, market participants may 

obtain consolidated data from market 

data aggregators, which are mostly firms 

that purchase direct access to exchange 

data,1703 consolidate the data, and 

disseminate the data (after various 

levels of processing) to market 

participants.1704 Additionally, some 

market data aggregators do not purchase 

direct access to exchanges. Instead, they 

provide hardware and software for 

market data aggregation to the parties 

that have contractual relationships to 

purchase or license the market data 

enabling market participants to 

outsource the significant hardware, 

software, and personnel expertise that is 

required to consolidate the proprietary 

feeds directly. Many of the most 

sophisticated market participants in the 

market use these products, and despite 

the fact that they create an additional 

chain link between market participants 

and proprietary feeds, the Commission 

believes that these firms generally 

deliver data to market participants faster 

than the exclusive SIPs.1705

Market participants who subscribe to 

SIP data also have two different ways of 

obtaining their data. They can either 

directly get SIP data feeds from the 

exclusive SIPs or, as stated by a 

commenter,1706 they can get SIP data 

from a third party aggregator in a 

normalized form.1707 The least latency 

sensitive market participants are the 

most likely to receive SIP data in this 

normalized form. 

Some commenters stated that the 

need for backup data feeds is an 

important cost in obtaining access to 

market data.1708 The Commission 

believes that today, many market 

participants use the exclusive SIPs as a 

backup, and maintain a subscription to 

the exclusive SIP feeds despite using 

proprietary data for trading decisions 

partly for this reason. The exclusive 

SIPs themselves maintain a 

geographically diverse backup system 

consistent with Regulation SCI. One 

participant in the Market Data 

Roundtable stated that the exclusive 

SIPs are ‘‘expensive for a backup 

feed.’’ 1709

(c) Current State of Utilization of Market 

Data 

One commenter stated that the 

introduction of different levels of 

quality in core data consolidation and 

dissemination would introduce new 

‘‘tiers’’ into the market beyond the two 

tiers of those who use proprietary DOB 

feeds and those who do not.1710 The 

Commission does not believe that 

differing tiers of market data access 

sophistication and technology represent 

changes to the market, given current 

market practice. Market participants 

have different levels of sophistication in 

receiving and processing real time 

market data, because of differences in 

the cost of maintaining data processing 

systems and in the data needs of various 

trading and investment strategies. More 

sophisticated firms use advanced data 

access methods and technologies, and 

generally seek to reduce latency and 

improve the way in which the data can 

be used. Other market participants trade 

latency for lower costs, and this has 

resulted in a continuum of different 

levels of latency and processing quality 

in the market. 

The most competitive executing 

broker-dealers, market makers, and 

traders using highly latency sensitive 

strategies define market practice at the 

highest-cost, lowest-latency end of the 

continuum. These market participants 

typically invest significantly more 

resources in reducing latency and 

increasing processing speed than any 

other kind of market participant. This 

group typically purchases co-location 

services at all major data centers, along 

with the highest capacity connectivity 

services and the most raw and 

unprocessed exchange proprietary data 

feeds.1711 Many market participants in 

this group maintain their competitive 

advantage by performing all major steps 

related to data connection and 

processing within their own business. 

That is, they arrange connectivity, 

software, hardware, and transmission 

necessary to receive and process market 

data on their own without employing 

the services of outside vendors. As a 

result, there are highly significant 

technological, infrastructure, and 

personnel costs to building and 

maintaining such a system for data 

processing.1712 Therefore, the 

Commission believes that there are 

relatively few market data users at this 

level.1713

Market participants that seek to 

reduce the costs of maintaining this 

high level of capability in market data 

access make a variety of cost saving 

adjustments. For example, market 

participants may decide to employ 

vendors to assist in the most difficult or 

sophisticated aspects of the process, 

such as microwave transmission and 

hardware. These market participants 

may also use software vendors to 

aggregate proprietary data, and may also 

employ vendors to assist in connecting 

to the data feeds. While using such 

vendors can reduce cost, this can 

sometimes come at the expense of 

adding latency.1714 This can happen 

because market participants may base 

their competitive advantage on the 

development of technology, which 

might be superior to what is available 

from vendors, or because the level of 

customizability and specialization to the 

specific use case available from thirdparty vendors is reduced, compared to 

developing these technologies ‘‘inhouse.’’ 

18734 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1715See Exegy blog, supra note 1712, describing 

the affordability of API data feed options and the 

possibility that customization is reduced relative to 

less processed options. See also NBIM Letter at 4, 

stating that broker-dealers who do not perform the 

aggregation ‘‘in-house’’ will not be ‘‘consistently 

competitive.’’ This commenter also states that 

‘‘[t]his does not preclude using third-party 

technology to do the data aggregation, as long as it 

is done in-house to avoid incremental latency.’’ 

1716For a discussion of the differences in price 

between exclusive SIPs and proprietary feeds, see 

supra Section V.B.2(c). 

1717See infra Section V.B.3(e). 

1718See T. Rowe Price Letter at 1. 

1719For example, one commenter suggested that 

exclusive SIP feeds play an important role in the 

activities of some broker-dealers. See Bestex 

Research Letter at 3. 

1720One commenter stated that the exclusive SIPs 

are ‘‘. . . the primary feed for retail investors.’’ See 

Schwab Letter at 2. 

1721See infra Section V.B.3(e) for a discussion of 

the need for sophisticated use of market data to 

achieve high quality execution. 

1722Nasdaq Letter IV at 8. 

1723For additional details on the uses of 

proprietary data to be competitive, see infra Section 

V.B.3(e). 

1724While these market participants are less 

numerous than, for example, retail investors, this 

does not mean that their role in the market is less 

significant. For additional insight on this point, see 

note 1794, which discusses Commission analysis 

that showed that 91.6% of the message volume on 

exchanges in a sample week came from just 50 

firms. Each of these firms maintained a connection 

to at least all but one exchange of the 11 exchanges 

in the sample, which correlates with a relatively 

high level of sophistication in trading. The fact that 

the percentage of orders that comes from these firms 

is so high indicates their significance. 

1725See supra Section V.B.1. 

1726Once an exclusive SIP is selected, upgrades 

to that processor’s SIP infrastructure are mandated 

and funded by the Operating Committee of the 

relevant Equity Data Plan. This comes out of SIP 

revenues distributed to the SROs. 

1727The market data revenue allocation formula 

is summarized at, e.g., UTP Plan, Summary of 

Market Data Revenue Allocation Formula, available 

at http://www.utpplan.com/DOC/Revenue_

Allocation_Formula.pdf (last accessed Jan. 8, 2020). 

FINRA rebates a portion of the SIP revenue it 

receives back to broker-dealer internalizers and 

ATSs based on the trade volume they report. See 

FINRA Rule 7610B. One Roundtable commenter 

estimated that from 2013 to 2017, through the 

Nasdaq/UTP plan, the FINRA/Nasdaq TRF gave 83 

percent of SIP revenue it received to broker-dealers. 

See Letter from Thomas Wittman, Executive Vice 

President, Head of Global Trading and Market 

Services and CEO, Nasdaq Stock Exchange, to Brent 

J. Fields, Secretary, Commission, at 19 (Oct. 25, 

2018). 

Further cost-savings are possible by 

not purchasing co-location services at 

all major exchanges, and increasing the 

number of data access functions 

outsourced. Some market participants 

may obtain their entire market data feed 

from a third-party aggregator in the form 

of a pre-aggregate feed, saving money 

but surrendering significant ability 

customize the data feed.1715

Additionally, some market participants 

may use the exclusive SIPs instead of 

proprietary feeds for some use cases. For 

example, proprietary feeds might only 

be used for actual order routing 

decisions, while the exclusive SIPs are 

used to fill other data needs. Because of 

the substantial difference in price 

between exclusive SIP and proprietary 

feeds, this method may represent a 

substantial cost savings.1716 While the 

benefits of speed and quality of 

processing may be diminished for those 

market participants utilizing these more 

low-cost options, there continue to be 

trading and order routing strategies for 

which these approaches are sufficient. 

However, as acknowledged 

elsewhere,1717 execution using these 

data aggregation methods may 

experience higher execution costs on 

average. 

One commenter argued that the 

exclusive SIP feeds could not be used to 

route orders electronically, stating that 

‘‘[d]ue to its limited content and higher 

latency, the usage of SIP data is 

adequate only for investors that visually 

consume NMS information (e.g., 

humans looking at quotes on a 

screen).’’ 1718 While the Commission 

agrees that many users of display feeds 

use the exclusive SIPs (as discussed in 

the text below), the Commission 

believes that there are likely a few nondisplay users of the exclusive SIP data 

who route orders based on exclusive SIP 

feeds as well.1719

At the bottom of the continuum are 

those market participants for which 

latency sensitivity is not an issue. These 

include market participants that use 

human traders who obtain market data 

through display feeds, and retail 

investors.1720 Such market participants 

frequently outsource the entire data 

aggregation and dissemination process, 

including the production of the visual 

display, to third-party vendors. These 

market participants also often rely on 

the exclusive SIP feeds or TOB feeds 

instead of the DOB feeds. Since latency 

sensitivity is not an issue, the primary 

benefit for this type of user of DOB feeds 

as compared to SIP or TOB feeds is the 

additional available data. Because of the 

challenges in obtaining high execution 

quality using only display feeds and per 

quote feeds,1721 many market 

participants in this last level route their 

orders to a broker-dealer at a higher 

level of capability in market data access 

for execution. Market participants who 

engage in this type of behavior include 

investment funds and retail investors. 

Sometimes broker-dealers working on 

behalf of clients route orders to a 

different broker for execution. 

One commenter stated ‘‘. . . the 

Commission fails to consider that 

proprietary market data is neither 

necessary nor relevant to the business 

models and trading or investment 

strategies of many, if not most, ordinary 

investors and market participants.’’ 1722

While the Commission acknowledges 

that this final tier of consumers of 

market data, which includes most retail 

investors, might currently rely solely on 

the SIPs for their own use (and this use 

might include visual display), the 

Commission disagrees that proprietary 

data does not matter to most market 

participants. The Commission continues 

to believe that the market participants 

described as using proprietary data 

feeds in this section do indeed need 

those feeds to be competitive with their 

peers 1723 and that these participants 

represent a significant segment of the 

market.1724 Many market participants, 

in routing orders to the exchanges, rely 

on the more sophisticated users of 

market data to execute orders on their 

behalf. In other words, while not every 

individual market participant uses 

proprietary data feeds, nearly all orders 

entered into the National Market 

System, including retail orders, touch a 

component (typically the order router of 

the executing broker) that uses 

proprietary data in order to reduce 

execution costs and improve execution 

quality. The Commission therefore 

disagrees with this comment that 

proprietary data is not relevant to the 

business models of most market 

participants because the systems by 

which a broad range of market 

participants access exchange trading 

(namely, the network of brokers through 

which orders are routed) find 

proprietary data feeds, including their 

content and speed, relevant to their 

business models. 

(d) Current Costs of Generating SIP Data 

and Proprietary Data Feeds 

As mentioned above,1725 currently the 

exclusive SIPs consolidate and 

disseminate SIP data to market 

participants. The data fees that 

exclusive SIPs charge to market 

participants for obtaining SIP data are 

set by the Operating Committees of the 

Equity Data Plans, subject to notice and 

comment, and Commission approval. A 

portion of the SIP data revenues is used 

to pay for the cost of maintaining and 

administering the exclusive SIP,1726 and 

the remaining funds are distributed to 

the SRO members proportionately to 

their trading and quoting activity.1727 In 

the case of the UTP SIP, there is an 

additional FINRA cost for the oversight 

of the OTC markets that is also taken out 

of the exclusive SIP’s revenues before 

distributing funds to the plan 

participants. 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18735 

1728See Governance Order, supra note 1128. 

1729See, e.g., CTA Plan, Q2 2020 CTA Quarterly 

Revenue Disclosure, available at https://

www.ctaplan.com/publicdocs/ctaplan/CTA_

Quarterly_Revenue_Disclosure_2Q2020.pdf; Nasdaq 

UTP Plan, Q2 2020 UTP Quarterly Revenue 

Disclosure, available at https://www.utpplan.com/ 

DOC/UTP_Revenue_Disclosure_Q22020.pdf; see 

also Letter from Charles M. Jones, Robert W. Lear 

Professor of Finance and Economics, Columbia 

Business School, to Brent J. Fields, Secretary, 

Commission, 15–16 (Oct. 21, 2018) (‘‘Jones Letter’’). 

1730 Id. 

1731 Id. 

1732See supra note 1638. 

1733Operating expenses for the Nasdaq UTP Plan 

represent support costs, paid to the SIP, and are a 

pre-determined amount agreed upon by the Nasdaq 

UTP Plan’s SRO participants. The Nasdaq UTP SIP 

costs do not include the costs of the exchanges 

generating the data they send to the Nasdaq UTP 

SIP. The UTP Plan also incurs administrative costs 

and other miscellaneous expenses, which together 

totaled around $3.6 million. 

1734See CTA Plan, Schedule of Market Data 

Charges (Jan. 1, 2015), available at https://

www.ctaplan.com/publicdocs/ctaplan/

notifications/trader-update/Schedule%20Of%20

Market%20Data%20Charges%20-%20January%20

1,%202015.pdf. 

1735See NYSE Proprietary Data Products, Market 

Data Pricing (Oct. 16, 2020), at 3, available at 

https://www.nyse.com/publicdocs/nyse/data/ 

NYSE_Market_Data_Pricing.pdf. 

1736While all of the fees are for non-display 

purposes, the data content in the CTA/CQ SIP data 

is different from the NYSE Integrated Feed. The 

NYSE Integrated Feed is a full DOB feed and 

provides an order-by-order view of events in the 

NYSE equities market, whereas the CTA/CQ nondisplay feed provides consolidated SIP data for 

Tape A and Tape B securities. See supra Section 

V.B.2(a) (discussing the difference in content 

between SIP data and proprietary DOB feeds). See 

also NYSE, Real-Time Integrated Feed, available at 

https://www.nyse.com/market-data/real-time/ 

integrated-feed (last accessed Nov. 23, 2020); CTA, 

Consolidated Tape Association, available at https:// 

www.ctaplan.com/index (last accessed Nov. 23, 

2020). 

1737See SIFMA Letter 2018. 

1738SIFMA’s study submitted in connection with 

the Roundtable contained analysis examining the 

change in fees that some broker-dealers paid for 

CTA SIP data between 2010 and 2018. The analysis 

showed that CTA SIP fees for most categories of 

data increased by an average of 5% between 2010 

and 2018. However, the change in the total amount 

each broker-dealer spent on CTA SIP data varied 

based on the type of broker-dealer. The analysis 

found that the average amount of money spent on 

CTA SIP data by retail broker-dealers declined by 

4% between 2010 and 2017, but the average amount 

spent by institutional broker-dealers increased by 

7%. See id. at 21–28. 

1739See Proposing Release, 85 FR at n. 140. 

1740See infra Section V.B.2(e). The Commission 

estimates are based on NYSE and Cboe BYX’s Form 

1 filings and UTP and CTA/CQ revenue metrics. 

NYSE’s Form 1 filings disclose $968 million as its 

net revenues in 2018. NYSE’s revenues from the SIP 

redistribution is approximately $47 million. Note 2 

to the exchange’s financial statements states that 

NYSE collects market data revenues from the 

exclusive SIPs and ‘‘to a lesser extent for (sic) New 

York Stock Exchange proprietary data products,’’ 

indicating that the approximately $47 million in 

revenues from SIP data could be a benchmark for 

their proprietary market data revenues. NYSE Form 

1, available at https://www.sec.gov/Archives/edgar/ 

vprr/1900/19003689.pdf (last accessed Jan. 29, 

2020). Similarly, Cboe BYX Form 1 filings report 

$58 million in net revenues. Of this $58 million, 

$26 million were market data revenue— 

approximately $21 million from SIP data revenues 

and $5 million from proprietary market data 

revenues. Cboe BYX Form 1, available at https://

www.sec.gov/Archives/edgar/vprr/1900/ 

19003669.pdf (last accessed Jan. 29, 2020). 

1741See supra Section V.B.2(b). 

1742Some exchanges charge redistribution fees or 

their equivalents to market data aggregators and 

separately, one or more data fees (based on different 

use cases such as professional or non-professional, 

display or non-display) to market participants who 

purchase the exchanges’ data from market data 

aggregators. See Virtu Letter I at 16–79 (Exhibit 

‘‘A,’’ lists of data and connectivity fees by several 

exchanges). 

Exclusive SIP revenues from data fees 

totaled more than $430 million in 

2017.1728 There are three broad 

categories of SIP data fees: Access fees, 

content fees, and distribution/ 

redistribution fees.1729 An access fee is 

a flat monthly fee for physical 

connectivity to SIP data and does not 

depend on the type of market 

participant (e.g., market data vendor vs. 

institutional broker). 

There are three categories of content 

fees that depend on how market 

participants access SIP data. First, if SIP 

data is displayed for market participants 

on computer screens or other devices, 

the market participant is charged a 

display fee (a professional or a nonprofessional subscriber fee depending 

on the type of market participant). 

These fees can be per screen displaying 

the data, per user as part of the multi 

instance single user (MISU) program, 

and per application where multiple 

applications can run on one screen. 

Second, if SIP data is not displayed on 

computer screens and instead is directly 

sent to an automated system such as a 

trading algorithm or a SOR, then the 

market participant is charged a nondisplay fee. Display and non-display 

fees are monthly fees and entitle the 

subscriber to an unlimited amount of 

real-time market information during the 

month. In 2018, around 65% to 75% of 

total SIP revenue was accounted for by 

professional and non-professional 

display fees, and around 8% to 13% of 

revenue was accounted for by nondisplay fees.1730 A third type of content 

fee is the query quote fee, which are fees 

collected from market participants 

accessing SIP data on a per quote basis. 

Under the per-query fee structure, 

subscribers are required to pay an 

amount for each request for a packet of 

real-time market information. Around 

4% to 10% of total SIP revenue is 

accounted for by quote query fees in 

2018.1731 Finally, exclusive SIPs charge 

distribution/redistribution fees when 

the market data is delivered to a user 

other than the initial purchaser. 

Based on the exclusive SIPs’ public 

disclosures, as of fourth quarter of 2018 

there were approximately 2–3 million 

non-professional subscription use cases 

and approximately 0.3 million 

professional subscription use cases 

across the UTP and CTA/CQ SIPs. 

Additionally, there were approximately 

300 non-display vendor use cases at 

each of the exclusive SIPs.1732 The 

Nasdaq UTP SIP operating expenses 

totaled around $7 million in 2017.1733

The CTA/CQ SIP operating expenses 

totaled around $8.8 million in 2018. 

There is a substantial difference 

between the fees market participants 

pay for SIP data and the fees they pay 

for proprietary DOB data products. For 

instance, monthly non-display fees for 

data (not including connectivity fees) 

charged by the CTA/CQ SIP is $2,000 

for Network A and $1,000 for Network 

B,1734 while monthly non-display fees 

charged by NYSE for its NYSE 

Integrated Feed (not including 

connectivity fees) is $20,000,1735 which 

is an order of magnitude larger than the 

SIP data fee.1736 Additionally, 

proprietary data feed fees have 

increased over the past decade. For 

instance, SIFMA estimates that between 

2010 and 2018 data fees charged by 

some exchanges went up by three orders 

of magnitude or more.1737 In 

comparison, SIP data fees went up by 

5% during the same time period.1738

Based on Commission staff experience, 

the Commission understands that the 

number of subscribers to proprietary 

market data is relatively small.1739 The 

Commission understands that the 

number of subscribers of proprietary 

market data and proprietary market data 

revenues vary across exchanges and that 

some exchanges obtain a larger 

percentage than other exchanges of their 

total market data revenue from 

proprietary data products (as opposed to 

revenue from SIP data products). For 

example, the Commission estimates that 

in 2018, NYSE collected approximately 

5% of its net revenues from selling 

proprietary market data products. On 

the other hand, according to the 

Commission’s estimates, Cboe BYX 

collected approximately 9% of its 

revenues from selling proprietary 

market data products.1740

As mentioned above,1741 market 

participants who purchase proprietary 

data feeds from multiple SROs may 

choose to self-aggregate multiple data 

feeds, or, alternatively, they can 

purchase already consolidated data from 

market data aggregators. The exchanges 

charge a data fee to any market 

participant that purchases exchanges’ 

data from market data aggregators.1742

18736 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1743See, e.g., Roundtable Day One Transcript at 

128–29 (Mark Skalabrin, Redline Trading 

Solutions). 

1744See Letter from Brad Katsuyama, CEO, 

Investors Exchange LLC, to Brent J. Fields, 

Secretary, Commission, at Table 7 (Jan. 29, 2019) 

(‘‘Katsuyama Letter II’’) (10Gb fiber connectivity). 

1745See NYSE price list 2020, supra note 1434. 

1746See Nasdaq, Price List—Trading 

Connectivity, available at https://

www.nasdaqtrader.com/Trader.aspx?id=

PriceListTrading2 (last accessed Dec. 19, 2019). 

1747When taking this $63 million into account, 

total SIP revenues shared by SROs were 

approximately $390 million in 2018, which is 

consistent with the $430 million estimate for 2017 

provided in the Proposed Governance Order (which 

also included the amount paid to the plan 

processor). See supra note 1728 and accompanying 

text. This estimate is also consistent with the $387 

million estimate for 2017. See Jones Letter, supra 

note 1729 at 25. 

1748See Commission, National Securities 

Exchange Periodic Amendments to Form 1 

(Modified June 20, 2019), available at https://

www.sec.gov/rules/national-securities-exchangesamendments.htm (providing links to exchanges’ 

Form 1 filings). 

1749See supra note 1729. 

1750See, e.g., Nasdaq Letter IV at 3. 

1751See, e.g., Nasdaq Letter IV at 11; TD 

Ameritrade Letter at 12. 

Therefore, these fees are effectively a 

part of the total price that a market 

participant must pay when purchasing 

data from a market data aggregator. In 

some cases, these fees may be so high 

that some market participants cannot 

afford to self-aggregate proprietary feeds 

from all exchanges or purchase market 

data aggregator products.1743 The 

Commission believes that more active 

market makers and some sophisticated 

broker-dealers including a number of 

HFT firms and some of the larger banks 

with proprietary data feed trading desks 

either self-aggregate or purchase 

aggregation services or products from 

third-party vendors. 

The Commission understands that the 

data fees the exchanges charge to market 

participants that purchase the 

exchanges’ data from market data 

aggregators may account for a significant 

portion of the total price market 

participants pay for the market data 

aggregators’ data products. However, the 

Commission does not have information 

on the pricing of market data 

aggregators’ data and cannot break down 

market data product prices between the 

direct data fees charged by the 

exchanges and the fees charged by 

market data aggregators for their 

services. The Commission stated this 

lack of information in the Proposing 

Release and did not receive the 

information in the comment letters. 

The exchanges also charge fees for 

various connectivity services they offer 

(e.g., co-location, fiber connectivity, and 

wireless connectivity). Connectivity 

services permit a customer to access an 

exchange’s proprietary market data and/ 

or its trading and execution systems as 

well as SIP data. The purchase and use 

of certain connectivity services is 

necessary to directly access an 

exchange’s market data and to directly 

participate in that market, at least for 

those market participants that represent 

the vast majority of trading activity on 

exchanges. Additionally, these 

connectivity services may be needed in 

order to take advantage of the reduced 

latencies offered by the proprietary data 

feeds, including when market 

participants prefer the contents of SIP 

data consolidated from the proprietary 

data feeds—rather than delivered by an 

exclusive SIP—to avoid additional 

latencies. 

Connectivity fees can be substantial. 

For instance, the annual fiber 

connectivity fees per port at the 

exchanges’ primary data centers are 

$90,000 at Cboe, $120,000 at Nasdaq, 

and $168,000 at NYSE.1744 Co-location 

services may have two components: An 

initial fee and an ongoing monthly fee 

based on the kilowatt (kW) usage. For 

example, at NYSE, an initial fee for a 

dedicated high-density cabinet that 

consumes 9kW per month is $5,000, and 

an ongoing monthly fee per kW is 

$1,050.1745 At Nasdaq, an initial fee is 

$3,500, and an ongoing monthly fee is 

$4,500.1746 Thus, for a year of colocation in a dedicated cabinet with 

9kW power, these fees add up to over 

$118,000 for NYSE and over $57,000 for 

Nasdaq. 

(e) Current Aggregate Exchange 

Revenues From Selling Market Data and 

Connectivity 

The Commission estimates that in 

2018 the exchanges earned a total 

revenue of approximately $941 million 

from selling both proprietary and SIP 

market data products and connectivity 

services in the equities market. In 

addition, the Commission estimates that 

the exchanges earned approximately 

$596 million of this $941 million 

revenue from selling market data 

products and approximately $345 

million of this revenue from selling 

connectivity services. With respect to 

the revenue from market data products, 

the Commission estimates that in 2018 

the exchanges earned approximately 

$327 million of the $596 million 

revenue from equity SIP data and 

approximately $269 million from selling 

proprietary data products. Further, 

approximately $63 million of the $327 

million equity SIP revenue in 2018 was 

distributed to FINRA.1747

The Commission’s estimates above are 

mainly based on revenue information 

that the exchanges filed as part of their 

Form 1 filings.1748 In addition, the 

Commission used SIP revenue 

information disclosed by the CTA/CQ 

Plans and the Nasdaq UTP Plan in their 

quarterly revenue disclosures.1749

Furthermore, because revenue 

information provided by some 

exchanges in their Form 1 filings is not 

sufficiently detailed for this calculation, 

the Commission had to make certain 

assumptions in order to derive these 

estimates. First, the Form 1 filings for 

NYSE and NYSE MKT combine revenue 

from connectivity fees with revenue 

from market data fees. For these 

exchanges, the Commission derived the 

revenue earned from connectivity fees 

by assuming that the revenue that these 

exchanges earn from proprietary data is 

slightly smaller than the revenue that 

they earn from SIP data (based on notes 

in their Form 1 filings that indicate that 

SIP revenue exceeds proprietary data 

revenue). Second, the Form 1 filing for 

Nasdaq combines revenue from 

connectivity fees with revenue from 

transaction fees. The Commission 

derived the revenue that Nasdaq earned 

from connectivity fees by assuming that 

Nasdaq’s revenues from connectivity 

fees and transaction fees were in the 

same proportion to one another as 

NYSE’s revenues from these two 

business lines. Third, Form 1 filings for 

exchanges that offer trading in both 

equities and options provide revenue 

information for these two asset classes 

combined. For these exchanges, the 

Commission assumed that their 

combined revenues from market data 

fees and connectivity fees in the equities 

market and in the options market were 

in the same proportion to one another 

as the market data and connectivity 

revenues that these exchanges would 

have earned in each of these markets 

based on their dollar volume market 

share (as compared to the dollar volume 

market share of the exchanges that trade 

only equities or only options). 

(f) Current State of National Best Bid or 

Offer Dissemination 

Some commenters characterized the 

current process for dissemination of the 

NBBO as being based on a universally 

trusted source in the form of the 

exclusive SIPs, upon which all market 

participants heavy rely.1750 Commenters 

also suggested that the introduction of 

‘‘multiple NBBOs’’ into the market 

would be a significant departure from 

current market practice.1751 The 

Commission disagrees with this 

characterization of the relevant baseline 

for the final amendments. As mentioned 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18737 

1752See Proposing Release, 85 FR at 16845. 1753While they will likely all arrive within 

roughly a millisecond of each other, this is still a 

meaningful discrepancy in today’s markets. 1754See supra Section V.B.2(b) for a discussion of 

the types of latencies. 1755See supra Section V.B.2(b) for discussion of 

the value of speed in trading and data access. In 

that section, the Commission discussed the value of 

being faster than one’s competitors. One way in 

which this is relevant is that if a competitor’s order 

executes against the NBBO before some other 

competitor, then the second competitor’s order will 

arrive at the trading center based on information 

about the NBBO that is no longer true at the time 

that the order arrives. 

1756See MEMX Letter at 6 stating that because 

inherent geographic differences ‘‘. . . market 

participants may each have a different view of 

market data and events based on where they are 

located and the technologies and 

telecommunication techniques used.’’ 1757See supra Section III.B.10(d). Also, FINRA 

Rule 4554 requires that ATSs report the NBBO in 

effect at the time of order execution and the 

timestamp of when the ATS captured the effective 

NBBO. 1758See Regulation NMS Adopting Release, 70 FR 

at 37523, note 215. 

1759 17 CFR 242.611(b)(8) (Rule 611(b)(8)) 

provides a one-second ‘‘window’’ prior to a 

transaction, which allows a trading center to trade 

at any price equal to or better than the least 

aggressive best bid or best offer displayed at another 

trading center during the previous second. 

1760See Regulation NMS Adopting Release, 70 FR 

at 37523. 

1761See Proposing Release, 85 FR at Section II.A, 

for discussion of these issues in the Proposing 

Release. 

1762See supra note 1726 and accompanying text. 

1763See supra note 1727. 

1764See supra Section V.A.2. 

1765See supra Section IV.A. 

1766See Harold Demsetz, Why Regulate Utilities?, 

11 J.L. & Econ. 55 (1968) (‘‘Demsetz (1968)’’). 

1767See infra note 1797 and accompanying text. 

1768See, e.g., Oliver E. Williamson, Franchise 

Bidding for Natural Monopolies—in General and 

with Respect to CATV, 7 Bell J. Econ. 73 (1976) 

(discussing why bidding for monopolies may not 

work well); Robin A. Prager, Firm behavior in 

franchise monopoly markets, 21 Rand J. Econ. 211 

(1990). 

in the Proposing Release,1752 today, at 

any given instant of time, there can be 

differences between various market 

participants in what they observe to be 

the prevailing NBBO. These differences 

arise because of the geographic 

dispersion of the exchange data centers 

and the differences in latency between 

consolidated market feeds produced by 

the SIPs and those produced through 

the use of proprietary data feeds. 

Furthermore, the amount of time that 

typically elapses before the differences 

are corrected is meaningful to market 

participants. 

Geographic latency means that even if 

all market participants relied on the 

exclusive SIPs, there would still be 

differences in what market participants 

observed to be the prevailing quote. For 

example, suppose the CTA/CQ SIP 

receives an update about the prevailing 

NBBO in a given stock. That 

information must still be disseminated 

to the various broker-dealers at the 

different data centers. At a minimum, 

there will be broker-dealers located in 

Mahwah, Secaucus and Carteret who 

will all be interested in seeing the new 

quote. The exclusive SIP distributes the 

quote to each of the data centers at the 

same time, but since these are in 

different locations, the quotes will 

arrive at different times.1753 Therefore, 

as many as three different quotes for the 

same stock could be observed to be the 

NBBO in that stock at these three 

locations at a given instant in time, at 

least for market participants who are 

latency-sensitive enough to detect such 

differences. 

On top of this basic geographic 

latency source of differing NBBOs, the 

latency differential that exists between 

NBBOs obtained from the exclusive SIP 

and NBBOs produced by consolidating 

proprietary feeds 1754 further contributes 

to the discrepancies in market views 

possessed by market participants. 

Market participants have adapted to 

this state of affairs. For example, some 

of the concern in the market about 

obtaining fast market data is directly 

connected to the existence of multiple 

NBBOs.1755 Market participants often 

use co-location in order to be closer to 

the trading center and thereby receive 

updates with less delay than they would 

experience if they were located 

elsewhere, in order to prevent 

themselves from acting on stale NBBO 

quotes that may be different from the 

NBBO prevailing at the trading 

center.1756 In addition, the inspection 

and enforcement conducted by SROs 

with regard to best execution obligations 

has evolved to consider this 

phenomenon. Specifically, SRO 

inspections typically request data from 

a broker-dealer in evaluating whether a 

violation has occurred.1757 Also, the 

Commission has stated that for the 

Order Protection Rule a trading center 

‘‘. . . will be assessed based on the 

times that orders and quotations are 

received, and trades are executed, at 

that trading center.’’ 1758 This statement 

reflects the fact that the inevitable 

latency differential between two trading 

centers means that there may be 

multiple NBBOs in the market 

depending on which trading center one 

is at. Also, the lookback provision of 

Rule 611 1759 recognizes that an 

observed NBBO may not be the current 

prevailing NBBO.1760 As detailed above, 

the potential for multiple NBBOs has 

been understood and dealt with for 

some time, and therefore should not be 

problematic for market participants. 

3. Competition Baseline 

This section discusses, as it relates to 

this rulemaking, the current state of the 

market for core and SIP data products, 

the market for proprietary data 

products, the market for connectivity 

services, and the market for trading 

services as well as broker-dealers’ 

competitive strategies for trading 

services. 

(a) Current Structure of Market for Core 

and SIP Data Products 

Under the Equity Data Plans, SIP data 

is collected, consolidated, processed, 

and disseminated by the exclusive 

SIPs.1761 Equity Data Plan Operating 

Committees, which are composed of the 

SROs, set the fees the exclusive SIPs 

charge for SIP data.1762 Any revenue 

earned by the exclusive SIPs, after 

deducting their operating costs and 

FINRA’s OTC oversight costs, is split 

among the SROs. FINRA rebates a 

portion of the exclusive SIP revenue it 

receives back to broker-dealers based on 

the trade volume it reports.1763 The 

nature of the Equity Data Plan Operating 

Committee’s responsibilities can create 

a conflict of interest for the SROs, as 

discussed above.1764

Each Equity Data Plan selects a single 

exclusive SIP through a bidding process 

to be the exclusive distributor of the 

plan’s data.1765 This grants the SIP a 

monopoly franchise in the distribution 

of the plan’s data, which means that the 

SIPs are not subject to competitive 

forces that would produce more 

efficient outcomes. The Commission 

acknowledges that some economic 

theory would point to the opposite 

conclusion, but does not believe that it 

applies here. In particular, a paper by 

Demsetz would predict that the current 

monopolistic structure is most 

efficient.1766 In industries where there 

are economies of scale, a monopoly 

franchise structure may lead to the most 

efficient means of production. This 

profile applies to the distribution of core 

data because of the high fixed costs.1767

Demsetz (1968) argues that just because 

an industry has a monopolistic provider 

of a service does not mean that it is not 

subject to competitive forces. In 

particular, Demsetz (1968) argues that if 

the monopolistic provider of a service is 

subject to competition in the bidding 

process it could provide sufficient 

competitive incentives to achieve a 

competitive outcome. However, many 

theories provide examples of situations 

in which the monopoly franchise 

structure is less efficient than other 

structures.1768 The Commission does 

not believe that the exclusive SIP 

bidding process provides sufficient 

18738 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1769See UTP Operating Committee Selects 

Nasdaq as Processor Announcement, Jordan & 

Jordan, available at, https://www.jandj.com/sites/ 

default/files/library/UTP_SIP_Processor_

Announced_2014.pdf. 

1770The feeds produced by market data 

aggregators offer additional features, such as lower 

latency, but usually cost more than SIP data. See 

Roundtable Day One Transcript at 126–29 (Mark 

Skalabrin, Redline Trading Solutions). 

1771See Proposing Release, 85 FR at Sections 

III.D, III.E. One commenter agreed, stating that 

because the exclusive SIPs are the sole source of 

such messages, many market participants must 

purchase both proprietary and exclusive SIP feeds. 

See MEMX Letter at 3. 

1772 In the equity markets, the top of book feeds 

offered by the SROs are usually cheaper than SIP 

data. However, they may only contain information 

from one exchange, or one exchange family. See, 

e.g., Nasdaq Basic, supra note 1651; CBOE One, 

supra note 9 at n. 19; NYSE BQT, https://

www.nyse.com/market-data/real-time/nyse-bqt; TD 

Ameritrade Letter 2018, supra note 1651 (stating 

that the lower cost of exchange TOB products, 

coupled with costs associated with the process to 

differentiate between retail professionals and nonprofessionals imposed by the SIP Plans, and 

associated audit risk, favors retail broker-dealer use 

of exchange TOB products). 

1773See Vendor Display Rule, Rule 603 of 

Regulation NMS; Proposing Release, 85 FR at 

Section IV.B.2(a). 

1774For example, 17 CFR 242.611(a) (Rule 611(a)) 

of Regulation NMS requires trading centers to 

establish policies and procedures to prevent tradethroughs. In order to prevent trade-throughs, 

executing broker-dealers need to be able to view the 

protected quotes on all exchanges. They can fulfill 

this requirement by using SIP data, proprietary data 

feeds offered by the SROs, or a combination of both. 

1775See supra Section V.B.1. 

1776Pursuant to Section 19(b) of the Exchange Act 

and Rule 19b–4 thereunder, SROs must file with the 

Commission proposed rules, in which they set 

prices for their direct feed data. Those prices can 

vary depending on the type of end user. 

1777The Commission understands that certain 

entities from the list of market data vendors 

published on Nasdaq’s website currently perform 

the market data aggregator function. See Proposing 

Release, 85 FR at n. 516. This list does not provide 

a lower bound on the number of such entities 

because the list includes firms that the Commission 

believes are unlikely to perform high-speed data 

aggregation. The list is also not an upper bound 

because the Commission does not believe that all 

firms performing market data aggregation are listed. 

While the Commission does not have the number 

of data aggregators, the Commission has analyzed 

the effects on such parties qualitatively. The 

Commission does not have this information because 

data aggregators are not required to register with the 

Commission and/or identify themselves as data 

aggregators. Additionally, the Commission 

requested this information and did not receive any 

comments providing estimates of the number of 

data aggregators. While Commission does not have 

quantitative information, the Commission does 

have the insights discussed in this section and 

believes that these insights are sufficient to support 

our analysis in this section. 

1778See, e.g., Paul M. Romer, Endogenous 

Technological Change, 98 J. Pol. Econ. S71–102 

(1990) (pointing out that information is 

fundamentally distinct from other goods because it 

has a fixed cost of discovery and a near zero cost 

of replication). 

competitive incentives for two reasons. 

First, the bidding process could be 

subject to conflicts of interest since 

some of the SROs voting to select the 

exclusive SIP are also bidding to be the 

SIP. Second, the contracts are not bid 

out regularly, so there may not be a 

significant chance that the current 

exclusive SIP will be replaced. 

Therefore, the Commission does not 

believe that the bidding process for 

exclusive SIPs is likely to produce the 

most efficient outcome and subject the 

exclusive SIPs to competitive forces. 

In the Proposing Release, the 

Commission stated that historically 

there were not a large number of bidders 

for SIP tenders, and listed this as one of 

three reasons why the Commission does 

not believe that the exclusive SIP 

bidding process provides sufficient 

competitive incentives in the above 

discussion. Since then, the Commission 

has come to understand that there were 

11 bidders for the UTP tender offer in 

2014.1769 Based on this new 

understanding, the Commission no 

longer believes that the process bidding 

for SIP tenders may be hindered by the 

number of bidders. However, the first 

two reasons discussed, namely, conflicts 

of interest and lack of regular new 

bidding on the contract, are sufficient 

reasons for the Commission to continue 

to believe that the bidding process may 

not be adequately competitive. Thus, 

the Commission continues to believe 

that the conclusions of Demsetz (1968) 

do not apply in this case, as discussed 

above. 

The exclusive SIPs have significant 

market power in the market for core and 

aggregated market data products and are 

monopolistic providers of certain 

information, which means that for all 

such products they would have the 

market power to charge 

supracompetitive prices. Fees for core 

data are paid by a wide range of market 

participants, including investors, 

broker-dealers, data vendors, and others. 

One reason the exclusive SIPs have 

significant market power is that, 

although some market data products are 

comparable to SIP data and could be 

used by some core data subscribers as 

substitutes for SIP data in certain 

situations, these products are not perfect 

substitutes and are not viable substitutes 

across all use cases. For example, as 

mentioned above, some market data 

aggregators buy direct depth of book 

feeds from the exchanges and aggregate 

them to produce products similar to SIP 

data.1770 However, these products do 

not provide market information that is 

critical to some subscribers and only 

available through the exclusive SIPs, 

such as LULD plan price bands and 

administrative messages.1771

Additionally, some SROs offer TOB data 

feeds, which may be considered by 

some to be viable substitutes for SIP 

data for certain applications.1772

However, broker-dealers typically rely 

on the SIP data to fulfill their 

obligations under Rule 603 of 

Regulation NMS, i.e., the ‘‘Vendor 

Display Rule,’’ which requires a brokerdealer to show a consolidated display of 

market data in a context in which a 

trading or order routing decision can be 

implemented.1773

The purchase of SIP data or 

proprietary market data from all 

exchanges, either directly or indirectly, 

is necessary for all market participants 

executing orders in NMS stocks.1774

SROs have significant influence over the 

prices of most market data products. For 

example, the exchanges individually set 

the pricing of the TOB data feeds that 

they sell to market data aggregators and 

broker-dealers that self-aggregate who in 

turn generate consolidated data. At the 

same time, SROs collectively, as 

participants in the national market 

system plans, decide what fees to set for 

SIP data.1775 Although market data 

aggregators might compete with the 

exclusive SIPs by offering products that 

provide consolidated data, they 

ultimately derive their data from the 

exchanges’ direct proprietary data feeds, 

whose prices are set by the exchanges, 

a subset of SROs.1776

Regarding the level of competition 

among non-SRO market data aggregators 

that sell consolidated data to market 

participants, the Commission currently 

does not have an estimate of the number 

of players in this market and does not 

know how specialized these players 

are.1777

The production of both core data and 

proprietary data feeds involves 

relatively high fixed costs and low 

variable costs.1778 Fixed costs are 

composed of, among others, costs to set 

up infrastructure, regulatory approval 

costs, software development costs, 

administrative costs and overhead costs, 

while variable costs include costs to 

contract with and establish connectivity 

to each customer. Importantly, fixed 

costs of the production of both core data 

and proprietary data feeds are not 

specific to the production of data but 

also support the exchanges’ other 

services such as intermediating trade. In 

such markets, the firms have additional 

incentives to increase the number of 

their customers in order to spread the 

fixed cost across a larger base of 

consumers. 

(b) Current Structure of Market for 

Proprietary Market Data Products 

In addition to SIP data, the exchanges 

voluntarily disseminate proprietary data 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18739 

1779See supra Section V.B.2(a) for details on 

these proprietary feeds. 

1780Some commenters agreed that fees have 

increased. See, e.g., Virtu Letter at 2; Clearpool 

Letter at 2. 

1781See SIFMA Letter; see also Virtu Letter I at 

4 (discussing double ‘‘dipping’’ on fees by the 

exchanges). 

1782See Nasdaq Letter IV at 29. 

1783See Eric Budish, et al., Will the Market Fix 

the Market? A Theory of Stock Exchange 

Competition and Innovation, (Univ. of Chi., Becker 

Friedman Inst. for Econ., Working Paper No. 2019– 

72, May 2019), available at https://ssrn.com/ 

abstract=3391461 (Retrieved from SSRN Elsevier 

database). 

1784Nasdaq submitted estimates for Nasdaq’s 

increase in revenue from exchange and nonexchange data products of 78.4% over the period 

from 2010 and 2018, and an increase of 62.4% for 

revenue from connectivity services from 2010 to 

2018. See Nasdaq Letter IV at 29. 

1785According to its 2014 Form 1 filing, NYSE 

collected approximately $138 million as market 

data revenues, covered under the ‘‘data services 

fees’’ income statement line item. According to the 

notes to NYSE’s financial statements, these market 

data revenues include proprietary data revenues, 

SIP data revenues, and revenues from connectivity 

services. NYSE’s same revenue line item increased 

to approximately $236 million by the end of 2018. 

Whereas during this same time period, the revenues 

NYSE collected from the exclusive SIPs went from 

approximately $40 million to approximately $47 

million. Nasdaq’s 2014 Form 1 filing discloses 

approximately $206 million in ‘‘information 

services’’ line item in its income statement. 

According to the footnotes to its financial 

statements, this line item includes Nasdaq’s market 

data revenues and redistributed SIP revenues but 

does not include connectivity service revenues. In 

its 2018 Form 1 filing, Nasdaq disclosed $242 

million in revenues under the same information 

services line item. During the same time period, 

Nasdaq’s SIP data revenues went up from 

approximately $76 million to $85 million, a smaller 

revenue increase relative to its market data 

revenues. 

1786See, e.g., SIFMA Letter at 2 (‘‘[W]e do not 

believe that the SIPs currently provide the 

necessary data to market participants at the 

requisite speed to efficiently trade in today’s high 

speed and automated marketplace. As a result, 

many broker-dealers, asset managers and other 

market participants are forced to purchase 

proprietary data feeds from individual exchanges to 

create a consolidated and robust view of the market, 

while additionally bearing the economic burden of 

having to purchase consolidated data from the SIPs. 

This results in an enormous cost burden on the 

marketplace and creates a two-tiered market for 

market data by limiting access to critical market 

data at the fastest speeds to those who can afford 

to pay the exorbitant fees charged for it by the 

exchanges.’’); MFA Letter at 2 (‘‘Today, the current 

exclusive SIP model and content of core data does 

not serve the needs of investors, many of whom 

must subscribe to the exchanges’ proprietary market 

data feeds at considerable additional cost to trade 

effectively, while others are forced to rely on 

inferior information and outdated technology.’’); 

State Street Letter at 2 (‘‘. . . regulatory obligations 

and customer expectations related to best 

execution, transaction cost analysis, transparency 

and market competition generated further need for 

data that is unavailable on the SIPs. As a result, 

market participants have become increasingly 

dependent on proprietary data feeds marketed by 

the exchanges outside of the SIPs.’’); Capital Group 

Letter at 2 (‘‘Over the last 15 years, the discrepancy 

in data elements and latency between proprietary 

feeds and the consolidated tape has expanded such 

that the SIP is no longer a realistic tool for 

institutional investors or broker-dealers in meeting 

their respective best execution obligations when 

routing orders.’’). See also 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.’’). 

1787These points are supported by some 

commenters. See, e.g., BestEx Research Letter at 2, 

4 (‘‘. . . exchanges do not compete on market data 

fees since each is an exclusive provider of their 

own, indispensable content.’’) and DOJ Letter at 4, 

stating that characteristics of proprietary data feeds 

‘‘. . . would tend to indicate that Prop Data 

products lack substitutes, which would in turn 

enable the exchanges to exercise market power in 

determining their pricing of these products because 

they are the only data provider in their own 

markets.’’ 

1788See Eric Budish et al., supra note 1783. See 

also Glosten, Economics of the Stock Exchange 

Business: Proprietary Market Data, (Jan. 2020), 

available at: https://ssrn.com/abstract=3533525 

(Retrieved from SSRN Elsevier database). 

1789See, e.g., Nasdaq Letter IV at 48. 

1790See supra Section V.B.2(b). 

1791Nasdaq Letter IV at 29. 

and charge fees for this data.1779

Proprietary data fees have increased 

over the past decade.1780 SIFMA 

estimates that, for some broker-dealers, 

data fees charged by some exchanges 

went up by three orders of magnitude or 

more between 2010 and 2018.1781 One 

commenter disagreed with this estimate 

by comparing it to a separate estimate 

obtained for increases in market data 

revenue of 78.4% for Nasdaq over the 

same period (including both revenue 

from exchange data and non-exchange 

data products).1782 The Commission 

does not believe there is necessarily any 

contradiction from the contrast in these 

estimates, since fees for some brokerdealers for market data are not the same 

thing as Nasdaq revenue for market data 

products, because the latter of these 

contains revenue from all broker-dealers 

as well as market participants who are 

not broker-dealers who purchase data 

from Nasdaq, and it is possible that not 

all these entities purchase the same set 

of data products. Correspondingly, 

exchanges’ revenues from selling 

proprietary data and connectivity 

services also increased over the last 

several years. For example, Budish, et 

al. (2019) observe that exchanges earn 

significant revenues from selling 

proprietary data (a range of $555.4– 

$623.0M in 2015 by their estimate), as 

well as connectivity services (a range of 

$436.8–$484.8M in 2015 by their 

estimate).1783 According to NYSE’s 

Form 1 filings, its revenues from data 

services (including connectivity 

revenues but excluding SIP data 

revenues) increased approximately 93% 

from 2014 to 2018. Similarly, Nasdaq’s 

Form 1 filings show an approximately 

21% increase in their revenues from 

data services (excluding revenues from 

connectivity services and SIP data 

revenues).1784 On the other hand, 

during the same period, revenues 

distributed back to NYSE by the 

exclusive SIPs increased approximately 

18% and the revenues distributed back 

to Nasdaq increased approximately 

12%. The exchanges’ differences in 

their reporting of these numbers make it 

difficult to compare revenue numbers 

across exchanges. However, for both of 

these exchanges, their revenues from the 

proprietary data and connectivity 

business have been growing faster than 

the revenues they collect from SIP 

data.1785

Indicia that exchanges may not be 

subject to robust competition include 

that many broker-dealers state that even 

in the face of increasing proprietary data 

fees they feel compelled to buy 

proprietary data to be able to provide 

competitive trading strategies for their 

clients.1786 Additionally, some 

academic research suggests that each 

particular exchange’s proprietary data 

has no substitutes for some uses of the 

data and no perfect substitutes for any 

uses.1787 For example, Budish et al. 

(2019) conclude that each exchange has 

market power with respect to the data 

products (and the speed technology) 

specific to that particular exchange 

because of a lack of substitutes for many 

applications of their data.1788

A commenter stated that there is 

competition between exchanges for 

proprietary data products as part of their 

overall competition for order flow.1789

While it is true that exchanges compete 

for order flow, they are the sole source 

of data from their own exchange. Many 

market participants use a full view of 

the market in order to route orders 

effectively, regardless of whether or not 

they end up sending the order to any 

particular exchange. The Commission 

understands that some market 

participants may combine the exclusive 

SIPs with proprietary feeds in order 

form a complete view of the market, but 

this comes with disadvantages, as 

discussed elsewhere in this release.1790

This commenter also stated in 

reference to the question of competition 

in the provision of proprietary data that 

‘‘the Commission’s analysis is 

incomplete and flawed because it fails 

to appropriately analyze competition 

between trading platforms, and never 

considers the all-in price of trading in 

its discussion.’’ 1791 The Commission 

does not believe that its analysis 

presented on this issue is incomplete or 

18740 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1792The relevant analysis was presented in the 

Proposing Release, 85 FR at Section VI.B.3(b). See 

Proposing Release, 85 FR at Section VI.B.3(d) for a 

discussion of trading services and the market for 

their provision. 

1793See Nasdaq Letter IV at 30. 

1794Based on the sample of audit trail data made 

available to the Commission by FINRA, firms that 

are connected to all exchanges account for 76.6% 

of the message volume (there are 37 such firms out 

of a total of 327 firms in the sample). Firms that 

are connected to at least all but one of the 

exchanges account for 91.6% of the message 

volume (there are 50 such firms). The FINRA data 

sample covers the week of December 5, 2016, and 

includes messages sent to 11 exchanges (NYSE 

National and Chicago Stock Exchange are not part 

of this sample). 

1795See Proposing Release, 85 FR at Sections 

III.C.2.(a), II.A. 

1796See Proposing Release, 85 FR at Section II.A. 

1797Wholesalers are broker-dealers that pay retail 

brokers for sending their clients’ orders to the 

wholesaler to be filled internally (as opposed to 

sending the trade orders to an exchange). Typically, 

a wholesaler promises to provide price 

improvement relative to the NBBO for filled orders. 

1798As of November 23, 2020, 34 NMS stock 

ATSs are operating pursuant to an initial Form 

ATS–N. A list of NMS stock ATSs, including access 

to initial Form ATS–N filings that are effective, can 

be found at https://www.sec.gov/divisions/ 

marketreg/form-ats-n-filings.htm. 

1799See Proposing Release, 85 FR at n. 660. 

1800See Letter from Edward T. Tilly, Chairman 

and Chief Executive Officer, Cboe, to Brent J. Fields, 

Secretary, Commission (May 25, 2018), at n. 9. 

1801See Securities Exchange Act Release No. 

76474 (Nov. 18, 2015), 80 FR 80998, 81112 (Dec. 

28, 2015) (Regulation of NMS Stock Alternative 

Trading Systems Proposing Release). 

1802 Id. 

1803 Data sources: TAQ and FINRA’s OTC 

Transparency Data weekly summaries (https://

otctransparency.finra.org/otctransparency/ 

AtsDownload). Due to FINRA’s weekly aggregation, 

the actual sample is 03/30/2020 through 06/26/2020 

(i.e., the last two working days of March are 

included, and the last two working days of June are 

excluded). 

1804See Commission, Fast Answers: Market 

Maker (modified Mar. 17, 2000), available at http:// 

www.sec.gov/answers/mktmaker.html. 

1805See Laura Tuttle, OTC Trading: Description 

of Non-ATS OTC Trading in National Market 

System Stocks, Securities and Exchange 

Commission (Mar. 2014), available at http://

www.sec.gov/dera/staff-papers/white-papers/otctrading-white-paper-03-2014.pdf. 

1806See BestEx Research Letter at 3. 

flawed for not including the all-in cost 

of trading because market data and 

trading services, although related, are 

not the same thing.1792 For example, it 

is conceivable that market participants 

may want data from an exchange even 

if they never route orders to that 

exchange. In such a case, the cost of 

trading on that exchange is not even 

relevant to that market participant. 

Therefore, whether exchanges face 

robust competition in the market for 

their proprietary data products can be 

determined by considering the indicia 

discussed above (among other things) 

and without consideration of other costs 

of trading, which include not only other 

SRO products, but often products and 

services provided by additional thirdparty vendors. Because of these 

considerations, the Commission also 

does not believe that the metric offered 

by one commenter 1793 produced by 

dividing one exchange group’s total 

revenue by its total dollar trading 

volume is necessarily relevant to the 

question of robust competition and 

pricing in the market for proprietary 

data products. Specifically, this revenue 

includes revenue across all businesses, 

not just market data, and the value of 

considering this revenue on a per trade 

basis at this exchange group is unclear. 

(c) Current Structure of Market for 

Connectivity Services 

Exchanges are exclusive providers of 

their own connectivity services, and for 

many market participants, effective 

trading strategies require connection to 

many if not all of the exchanges, making 

their demand for these connectivity 

services less elastic (i.e., less sensitive to 

price changes). The Commission 

examined data on exchange orders that 

shows that large broker-dealers (as 

measured, for example, by the number 

of messages sent to exchanges) connect 

to all or almost all exchanges.1794 This 

is consistent with Roundtable 

participants’ stated view that in order to 

avoid a competitive disadvantage, 

market participants have little choice 

but to purchase direct connectivity 

services from multiple SROs.1795

As mentioned above, the exchanges 

offer different connectivity options to 

transmit market data to market 

participants. These options may include 

fiber optics connections, wireless 

microwave connections, and laser 

transmission, all of which vary in 

speeds and reliability.1796 The fastest 

and more reliable connections (e.g., 

laser transmission) offer market 

participants an advantage over other 

market participants with slower or less 

reliable connections. Therefore, the 

Commission believes that the exchanges 

have incentives to offer multiple levels 

of connectivity and exchanges can 

charge higher prices for the fastest 

connections. 

(d) Current Structure of the Market for 

Trading Services in NMS Stocks 

The market for trading services is 

served by exchanges, ATSs, and 

liquidity providers. The market relies on 

competition to supply investors with 

execution services at efficient prices. 

These trading venues, which compete to 

match traders with counterparties, 

provide a framework for price 

negotiation and disseminate trading 

information. The market for trading 

services in NMS stocks currently 

consists of 16 national securities 

exchanges, as well as off-exchange 

trading venues including 

wholesalers 1797 and 34 NMS stock 

alternative trading systems.1798

Since the adoption of Regulation NMS 

in 2005, the market for trading services 

has become more fragmented. The 

number of exchanges increased from 

eight in 2005 to 16 exchanges operating 

today.1799 Additionally, the market 

shares of individual exchanges became 

less concentrated, with a shift in market 

shares from some of the bigger and older 

exchanges to the newer ones.1800 For 

instance, from 2005 to 2013, there was 

a decline in the market share of trading 

volume for exchange-listed stocks on 

NYSE.1801 At the same time, there was 

an increase in the market share of newer 

national securities exchanges such as 

NYSE Arca, Cboe BYX, and Cboe 

BZX.1802

Additionally, the proportion of NMS 

stocks trading off-exchange (which 

includes both internalization and ATS 

trading) increased; for example, as of 

July 2020, ATSs alone comprised 

approximately 10 percent of 

consolidated dollar volume, and other 

off-exchange volume totaled 

approximately 23 percent of 

consolidated dollar volume.1803 Aside 

from trading venues, exchange market 

makers provide trading services in the 

securities market. These firms stand 

ready to buy and sell a security ‘‘on a 

regular and continuous basis at a 

publicly quoted price.’’ 1804 Exchange 

market makers quote both buy and sell 

prices in a security held in inventory, 

for their own account, for the business 

purpose of generating a profit from 

trading with a spread between the sell 

and buy prices. Off-exchange market 

makers also stand ready to buy and sell 

out of their own inventory, but they do 

not quote buy and sell prices.1805

Trading venues can rely on the SIP, 

proprietary feeds, or a combination of 

both to determine the NBBO for the 

purposes of trade execution. One 

commenter observed that over one third 

of ATSs exclusively rely on the SIP 

when determining trade prices and that 

other ATSs used the SIP as a backup 

and in place of the direct feeds from 

some exchanges.1806

All of these developments increased 

the competitiveness of the market for 

trading services in NMS stocks. 

However, the Commission recognizes 

that while the market is more 

competitive, the actual level of 

competition that any given trading 

venue faces may depend on multiple 

factors including the liquidity of a stock 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18741 

1807 ‘‘Child order’’ refers to a smaller order that 

was a piece of a larger ‘‘parent’’ order. 

1808See, e.g., Clearpool Letter at 2 (‘‘. . . of all the 

issues relating to the costs of trading, the trend 

toward higher market data fees has had the most 

negative impact on the securities markets. It 

remains increasingly difficult for many brokerdealers to compete in the current market 

environment due, in part, to issues related to the 

costs associated with trading.’’). 

1809 In addition to such data, the Commission 

believes that there are also ongoing significant 

personnel and technological costs to producing a 

sophisticated, competitive SOR. 

1810Some commenters supported the idea that 

proprietary data is important in order to be 

competitive in offering executing brokerage 

services. See, e.g., Healthy Markets Letter I at 5; T. 

Rowe Price Letter at 1. 

1811See BestEx Research Letter at 3. 

1812See BestEx Research Letter at 4. 

1813See supra Section V.A.2. for a discussion of 

these conflicts of interest. 

1814See Nasdaq Letter IV at 49. 

1815See supra Section III.I. 

as well as the type of trading venue and 

market participant engaging in the trade. 

(e) Broker-Dealers’ Competitive 

Strategies for Trading Services 

While many market participants use 

market data to make investment 

decisions, not all market participants 

are equally competitive in how they 

trade based on this data. Some brokerdealers and other latency sensitive 

traders utilize sophisticated routing 

tools to strategically decide how to fill 

an order, including when and where to 

submit the order, how to split a larger 

order (i.e., into how many pieces, or 

‘‘child orders’’ 1807), how large the child 

order sizes should be, and what order 

type(s) should be used, e.g., whether to 

use a market order, limit order, or some 

other order type. The strategies 

employed by broker-dealers and other 

latency sensitive traders in this regard 

are designed to secure the best possible 

execution price(s) for an order. For 

example, the methodologies utilized in 

trading orders can impact the price of 

the stock being purchased or sold in a 

manner that can increase or decrease its 

execution cost. Commenters stated that 

the trend towards higher proprietary 

data fees has had a negative impact on 

the market, such as making it more 

difficult for broker-dealers to 

compete.1808

Broker-dealers in particular compete 

with each other to provide the lowest 

possible execution costs for their clients 

(i.e., high execution quality) as quickly 

as possible. 

An example of routing tools as noted 

above is an SOR. SORs 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. SORs help to determine 

how to quickly access (‘‘take’’) available 

market liquidity before other market 

participants, and help to determine how 

to strategically place limit orders to 

optimize queue priority across various 

limit order books among exchanges. The 

ability to optimize queue priority 

facilitates the ability for a broker to 

‘‘capture the quoted’’ spread, i.e., buy 

on the bid or sell on the offer, while also 

potentially benefitting from exchange 

rebates paid to liquidity providers. 

The Commission understands that 

data beyond the NBBO with minimal 

latency are important inputs 1809 to 

strategies designed to optimize the 

ability to access market liquidity and 

minimize execution costs. Further, the 

Commission understands that 

competing with the most effective SORs 

is more difficult without possessing 

real-time market data while minimizing 

data latency,1810 and that those traders 

who do not access trading tools that 

utilize comprehensive market data with 

low-latency experience higher execution 

costs on average. 

One commenter stated that the 

association of broker-dealers with 

proprietary data feeds represents 

behavior that is ‘‘largely windowdressing,’’ and that broker-dealers still 

rely heavily on the SIP.1811 This 

commenter also stated that many 

broker-dealers have ‘‘. . . layers of 

market data normalization and 

aggregation by third-party vendors’’ 

which further increase the latency of the 

data as it is used.1812 To the extent this 

it is the case that any current subscriber 

of proprietary data feeds does not, in 

fact, make good use of them according 

to the most competitive standards, the 

Commission believes it represents a 

further way in which more capable 

users of market data are separated from 

less capable users of market data, and 

not an indication that proprietary 

market data feeds are of no real 

advantage to any broker-dealer. 

C. Economic Effects of the Rule 

1. Consolidated Market Data 

The Commission believes that the 

enhancements to consolidated data will 

result in numerous beneficial economic 

effects. These economic effects derive 

from codifying the definition of core 

data, from redefining the round lot, and 

from expanding the content of core data. 

The change will have the benefit of 

mitigating the influence of existing 

conflicts of interest inherent in the 

existing exclusive SIP model.1813 The 

change reduces the divergence between 

exchanges’ proprietary DOB products 

and current SIP data because it 

establishes data elements that 

competing consolidators can include in 

their consolidated market data products. 

One commenter stated that the claim 

that the expansion of core data mitigates 

conflicts of interest fails to consider the 

fact that the Governance Order gives 

some non-SRO market participants 

voting power on the effective national 

market system plan(s) Operating 

Committee.1814 This commenter stated 

that the non-SROs would have a conflict 

of interest and that this needs to be 

considered when discussing any 

conflicts mitigated by the rules. The 

Commission disagrees with this 

commenter’s assessment. It is not clear 

how the introduction of non-SRO votes 

to the Operating Committee and their 

associated interests are relevant to the 

question of whether or not the 

expansion of core data will mitigate the 

conflicts of interests of the SRO 

members of the Operating Committee. 

As discussed above,1815 the Governance 

Order will reduce, but not eliminate the 

conflicts of interest of the SROs on the 

Operating Committee. The potential for 

further mitigation of the influence of 

those conflicts remains and the 

Commission continues to believe that 

the expansion of core data will have that 

benefit. 

(a) Definitions of Consolidated Market 

Data, Core Data, Administrative Data, 

and Regulatory Data 

The Commission’s definitions of 

‘‘consolidated market data,’’ 

‘‘consolidated market data product,’’ 

‘‘core data,’’ ‘‘regulatory data,’’ 

‘‘administrative data,’’ and ‘‘selfregulatory organization-specific program 

data’’ under Regulation NMS will 

specify the quotation and transaction 

information in NMS stocks that can be 

collected, consolidated, and 

disseminated under rules of the national 

market system and pursuant to an 

effective national market system plan(s). 

This definition will codify the 

dissemination of certain current SIP 

data elements, and will include some 

additional data elements, but will not 

include some data that the exclusive 

SIPs currently disseminate. This section 

discusses the secondary economic 

effects of this expansion to consolidated 

market data that will come from 

codifying the inclusion of some current 

SIP data in ‘‘consolidated market data,’’ 

while subsequent sections discuss the 

economic effects of the new round lot 

definition and expanding the content of 

core data. These secondary effects are 

18742 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1816See supra Section II.C.2(c). 1817Commenters agreed that regulatory data is 

highly relevant and important to all types of market 

participants. See, e.g., IEX Letter at 7; MEMX Letter 

at 6. 1818See infra Section V.C.2(d)(ii) and supra 

Section IV.D.6(c) for a discussion of these costs. 

Below in Section V.C.1(c)(iv), the Commission also 

discusses the costs of including data elements to the 

definition of ‘‘core data’’ that are not currently in 

SIP data. 

1819See supra Section II.C.2(c) and Proposing 

Release, 85 FR at Section III.B. 1820One commenter agreed, stating that not 

including quotation and transaction data for OTC 

equities in consolidated market data would increase 

both the costs to provide the data and the costs of 

market participants to acquire it. See FINRA Letter 

at 11. 1821See supra Section II.C.2(c) and Proposing 

Release, 85 FR at Section III.C. 1822See FINRA Letter at 9, 11. 

1823See FINRA Letter at 11. 

1824See supra Section II.C.2(c). 

1825Competing consolidators will not be 

restricted from also offering data elements from 

SRO proprietary data. See supra note 220 and 

accompanying text. 

1826See supra Section II.C.2(c) (discussing fees 

for information related to OTC equities) and infra 

Section V.C.2(b)(i) (discussing fees for consolidated 

market data). 

1827See supra Section II.D.2. 

1828See supra Section II.E.2(b). Several exchanges 

already aggregate odd-lot orders into round lots and 

report such aggregated odd-lot orders as quotation 

information to the exclusive SIPs. See Proposing 

Release, 85 FR at nn. 157–58. 

1829See supra Section II.E.2(a). 

1830The Vendor Display Rule will require brokerdealers to show, in the context of which a trading 

or order-routing decision can be implemented, a 

consolidated display that includes quotes derived 

from the new round lot size. See supra Section 

II.D.2(b) and infra Section V.C.1(b)(vii). 

providing flexibility to the Equity Data 

Plans for including new data elements, 

requiring that regulatory data will 

continue to be provided in the 

decentralized consolidation model, cost 

to update the national market system 

plan(s), and costs to obtain data that is 

currently in SIP data but will not be 

included in consolidated market data, 

such as data on information related to 

OTC equities, certain corporate bonds, 

and indices.1816

The Commission believes the 

definitions of ‘‘self-regulatory 

organization-specific program data,’’ 

‘‘regulatory data’’ and ‘‘administrative 

data,’’ along with the ability for the 

Equity Data Plan(s) to add elements to 

these proposed definitions, will 

promote regulatory efficiency by 

providing flexibility for consolidated 

market data to include data elements 

beyond those explicitly defined as 

‘‘consolidated market data.’’ It provides 

a mechanism for the participants in the 

national market system plan(s) to 

propose to add additional data 

elements, such as elements similar to 

current retail liquidity programs. This 

will allow for organic change in 

consolidated market data that may 

become useful due to future market and 

regulatory developments. Further, while 

the underlying data content of 

‘‘regulatory data’’ is currently included 

in disseminated SIP data, the definition 

of ‘‘regulatory data’’ will help ensure 

that market participants continue to 

have access to this information as part 

of consolidated market data.1817

The Commission recognizes that the 

Equity Data Plan(s) will incur one-time 

initial implementation costs in ensuring 

the plans are consistent with the 

proposed definitions of ‘‘consolidated 

market data,’’ ‘‘core data,’’ 

‘‘administrative data,’’ ‘‘regulatory 

data,’’ and ‘‘self-regulatory organizationspecific program data,’’ but the plans 

will not incur significant ongoing costs 

as a result of the codification of these 

five definitions.1818 These initial 

implementation costs will come from 

the Operating Committees needing to 

draft revisions to their respective plans 

that are consistent with the proposed 

definitions. 

The Commission believes that not 

including some data elements that the 

exclusive SIPs currently transmit 1819 in 

the definition of ‘‘consolidated market 

data’’ may have some costs to those 

market participants who would want to 

arrange to get this data elsewhere.1820

The UTP SIP offers quotation and 

transaction feeds for OTC equities, and 

the CTA Plan permits the dissemination 

of ‘‘concurrent use’’ data related to 

corporate bonds and indexes.1821 Under 

the amendments, these data elements 

will not be defined as consolidated 

market data or core data elements. 

However, the amendments will not 

preclude the provision of these data 

elements by the SROs via proprietary 

data products to market participants and 

investors who wish to receive them. 

One commenter stated that not 

including quotation and transaction 

data for OTC equities in consolidated 

market data may reduce market 

participant access to this data and 

would increase both the costs to the 

SRO to provide the data and the costs 

of market participants to acquire it.1822

This commenter also stated that, 

because OTC equities may become 

listed and become NMS stocks and vice 

versa, not providing this data in the 

same feed as core data could result in 

a disruption of market data when a 

security switches between being listed 

and unlisted and investors or market 

participants are not subscribed to both 

services providing core data and data for 

delisted issuers.1823 The Commission 

acknowledges that not including 

information related to OTC equities in 

consolidated market data may 

potentially increase the costs of FINRA 

providing this data and market 

participants to acquire the data. The 

Commission also acknowledges that this 

could prove disruptive to market 

participants not receiving both 

information related to OTC equities and 

core data if a security switches between 

being listed and unlisted. However, the 

extent of these effects is uncertain and 

would depend on the fees FINRA 

charges for the data.1824 Market 

participants may still receive both of 

these data elements in the same data 

feed because competing consolidators 

would be able to offer a product that 

contains both information related to 

OTC equities as well consolidated 

market data.1825 The degree to which 

competing consolidators offer this 

product will depend on the fees FINRA 

charges for this data as well as the fees 

for consolidated market data offerings 

set by the NMS plan.1826

(b) Effects of New Round Lot Definition 

The final amendments will reduce the 

number of shares included in the 

definition of a round lot for NMS stocks 

for which the prior calendar month’s 

average closing price on the primary 

listing exchange was greater than 

$250.00.1827 Higher priced stocks will 

be grouped into tiers based on their 

price and stocks in higher price tiers 

will have fewer shares in their 

definition of a round lot. In addition, 

part of the definition of core data will 

require that the best bid and offer and 

national best bid and offer include oddlots that, when aggregated, are equal to 

or greater than a round lot and that such 

aggregation shall occur across multiple 

prices and shall be disseminated at the 

least aggressive price of all such 

aggregated odd-lots.1828 Round lot 

quotes will be protected quotations 

subject to the trade-through prevention 

requirements of Rule 611 and the locked 

and crossed markets restrictions of Rule 

610(d).1829

For stocks priced above $250, the new 

round lot definition will result in the 

inclusion of quotes at better prices in 

core data that were previously excluded 

from being reported because they 

consisted of too few shares. This will 

make these quotes visible to anyone 

who subscribes to core data, thereby 

improving transparency.1830 This will 

also mechanically narrow NBBO 

spreads for most stocks with prices 

greater than $250, which will affect 

other Commission or SRO rules and 

regulations. This section discusses the 

effects of the new round lot definition 

on: The NBBO, market participants, the 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18743 

1831Commenters agreed that the new round lot 

size would tighten spreads. See, e.g., Nasdaq Letter 

III at 11, 15; ICI Letter at 6; BestEx Research Letter 

at 6; CBOE Letter at 5. 

1832See supra Section II.D.2(a). 1833See Proposing Release, 85 FR at Table 4. 

1834Since the source used for this SIP NBBO is 

an exclusive SIP itself, this quote includes quotes 

the exchanges produce by aggregating or ‘‘rolling 

up’’ odd-lots to obtain a round lot-sized quote. 

1835See Proposing Release, 85 FR at Table 1. 

internalization of retail order flow, and 

on trading venues. Additionally, this 

section discusses the effects of the 

monthly calculation to determine the 

round lot size, the costs of the new 

round lot definition, and the effects of 

the new round lot definition on other 

rules and regulations. 

(i) Effects on the NBBO 

The new round lot definition will 

change the average spread between the 

NBBO for many stocks with prices 

above $250 because the NBBO will now 

be calculated based off of the smaller 

round lot size. Because odd-lot shares 

exist in these stocks at prices that are 

better than the national best bid and 

offer (i.e., at prices higher than the 

national best bid and prices lower than 

the national best offer), the new national 

best bid and offer will be at a higher/ 

lower price because fewer odd-lot 

shares will need to be aggregated 

together (possibly across multiple price 

levels) to form a round lot. This will 

result in a quoted spread that is 

calculated based off of the NBBO being 

narrower for these stocks.1831 The 

reduction in spreads will be greater in 

higher priced stocks because stocks in 

higher priced tiers will have fewer 

shares included in the definition of a 

round lot.1832

The Commission believes that market 

participants relying on new core data 

will see a significant improvement in 

the NBBO for stocks that fall into the 

higher priced round lot tiers. Table 3 

confirms this belief by updating the 

analysis from the Proposing Release to 

account for the new round lot tier 

structure.1833 Specifically, Table 3 

shows the percentage of instances in a 

sample of market data when the NBBO 

provided at the time by an exclusive 

SIP 1834 was inferior to the price of an 

NBBO determined by the new definition 

of a round lot in the final amendments. 

For instance, the table shows that for 

stocks with prices between $1,000.01 

and $10,000, the new round lot 

definition caused a quote to be 

displayed that improved on the current 

round lot quote 47.7% of the time. The 

frequency of this narrower NBBO is 

lower for lower priced stocks. For 

example, the new round lot definition 

resulted in a quote being displayed that 

improved on the current round lot quote 

26.6% of the time in the $250.01–$1000 

tier. This analysis shows that, within 

each round lot tier the new round lot 

definition will improve the quoted 

spread in a significant number of 

instances. 

TABLE 3—INSTANCES OF SMALLER NBBO 

Round lot tier 1 2

Instances of smaller NBBO (%) 3

Best bid Best ask Best bid or 

best ask 

1. $0–$250 (100 shares) ............................................................................................................. n/a n/a n/a 

2. $250.01–$1,000 (40 shares) ................................................................................................... 16.3 16.5 26.6 

3. $1000.01–$10,000 (10 shares) ............................................................................................... 40.2 34.6 47.7 

4. $10,000.01+ (1 share) ............................................................................................................. n/a n/a n/a 

1Tier based on the stock’s prior month’s average closing price in April 2020. 

2Twelve stocks trade in round lots different than 100 shares and are included in the table. Six stocks are in the $0–250 tier and currently trade 

in 10 share lots, 2 stocks are in the $250.01–$1,000 tier and trade in 10 share lots, 3 stocks are in the $1000.01 to $10,000 tier, and 1 stock is 

in the $10,000.01+ tier. In the $1000.01 to $10,000 tier, 1 stock trades in 1 share lots and 2 stocks trade in 10 share lots. In the $10,000.01+ 

tier, 1 stock trades in 1 share lots. 3Overall frequency of smaller NBBO quotes during May 2020 for the new round lot tier criteria (source: Direct feeds) versus the current 100 

share round lot criteria (source: SIP). The denominator consists of hourly snapshots from 10:30 a.m. to 3:30 p.m. for each trading day in May 

2020. The numerator is the total number of snapshots with smaller NBBO quotes. 

The effects of instances of narrower 

NBBOs under the new round lot 

definition depends on the trading 

volume of stocks in the tiers affected by 

the change. The Commission believes 

that, in particular, for securities with a 

significant amount of dollar trading 

volume, there will be significant 

changes to (tightening of) the quoted 

spread displayed under the new round 

lot definition. Table 4 accounts for the 

new round lot definition, showing the 

number of NMS stocks that would be in 

each round lot tier based on monthly 

average closing prices in September of 

2020, as well as the percent of overall 

average daily volume (‘‘ADV’’) and 

notional value (‘‘$ADV’’) of each price 

group during one week of trading in 

October of 2020.1835 It shows that while 

most stocks, approximately 98.5%, will 

remain unaffected by the new round lot 

definitions, around 28.1% of the dollar 

trading volume currently is in stocks 

that will have a new round lot 

definition. 

TABLE 4—ROUND LOT TIER NUMBER OF STOCKS AND TRADING VOLUME

Round lot tier 1

Number of 

stocks in 

round lot tier 

Percent of 

ADV, by price 

group 2

Percent of 

$ADV, by 

price group 2

1. $0–$250 (100 shares) ............................................................................................................. 9,023 97.12 71.93 

2. $250.01–$1,000 (40 shares) ................................................................................................... 117 2.79 23.24 

3. $1000.01–$10,000 (10 shares) ............................................................................................... 16 0.09 4.82 

4. $10,000.01+ (1 share) ............................................................................................................. 1 0.00 0.02 

1Tier based on the stock’s prior month’s average closing price in September 2020. 

2Percent of ADV and Percent of $ADV are based on trading volume between October 5–9, 2020. 

18744 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1836See Proposing Release, 85 FR at Table 5. 

1837See Proposing Release, 85 FR at 16824, 

16830–1. 

1838See NYSE Letter II at 6. 

1839The round lot tiers for these twelve was based 

on the stocks’ prior month’s average closing price 

in September 2020. The analysis for these twelve 

stocks used the same data source and methodology 

as the analysis in Tables 4 and 6, but was based on 

trading occurring between October 5–9, 2020. 

Because the new round lot size will be protected, 

this analysis also examines the change in the 

protected quotes under the final amendments. 

1840Commenters agreed that the new round lot 

definition would improve transparency. See, e.g., 

Schwab Letter at 4; CBOE Letter at 5. The Vendor 

Display Rule will require broker-dealers to show, in 

the context of which a trading or order-routing 

decision can be implemented, a consolidated 

display that includes quotes derived from the new 

round lot size. See supra Section II.D.2(b) and infra 

Section V.C.1(b)(vii). 

1841See supra note 1593. 

1842 It will also benefit market participants who 

post odd-lot quotes at prices superior to the NBBO 

because market participants that rely exclusively on 

SIP data may now be able to see some of these 

quotes and trade against them. 

1843Currently, some information about odd-lot 

quotes ends up in core data through certain 

exchanges rolling up odd-lot quotes into round lots. 

But even in this case, the rolled up quote is reported 

to the exclusive SIPs at the worst price out of all 

the odd-lots that were rolled up to produce the 

quote, so the full amount of price improvement 

The Commission believes that the size 

of the change in the spread, conditional 

on the NBBO being smaller, will also be 

substantial. Table 5 confirms this belief 

by updating the analysis from the 

Proposing Release that quantifies the 

average change in the spread offered by 

the best quote under the new round lot 

definition, conditional on the event that 

the NBBO is smaller in the first 

place.1836 The table shows, for example, 

that the new round lot definition in the 

$250.01–$1000 tier could yield a 7 basis 

point reduction in the spread 

(conditional on the NBBO being 

smaller). Because the average quoted 

half spread is 24 basis points, this 

represents a significant reduction in the 

half spread. In the case of the $1000.01 

to $10,000 tier, the difference of 13 basis 

points represents an even more 

significant fraction of the 23 basis point 

average half spread. 

TABLE 5—SIZE OF CHANGE IN NBBO 

Round lot tier 1 2

Best bid: 

Average 

price change 

($) 3

Best ask: 

Average 

price change 

($) 3

Average 

difference 

in quoted 

half spread 

(%) 4

SIP: Average 

quoted percent 

half spread 

(%) 

1. $0–$250 (100 shares) ................................................................................. n/a n/a n/a n/a 

2. $250.01–$1,000 (40 shares) ....................................................................... 0.64 0.89 0.07 0.24 

3. $1000.01–$10,000 (10 shares) ................................................................... 2.48 2.81 0.13 0.23 

4. $10,000.01+ (1 share) ................................................................................. n/a n/a n/a n/a 

1Tier based on the stock’s prior month’s average closing price in April 2020. 

2Twelve stocks trade in round lots different than 100 shares and are excluded. 

3 Conditional on a the instance of a smaller quote, stock-day average price improvement is calculated using MIDAS data, which consists of 

hourly snapshots from 10:30 a.m. to 3:30 p.m. for each trading day in May 2020. Calculation is based on the difference between the best bid/ 

best ask calculated under the new round lot tier definition (source: Direct feeds) compared to the NBBO based on the current 100 share round 

lot criteria (source: SIP) 4 Conditional on a the instance of a smaller quote (bid or ask), stock-day average difference in percent quoted half spread is calculated by SIP 

NBBO quoted percent half spread minus the new percent quoted half spread under the proposed round lot tier criteria. Quoted half spread is defined by: Quoted half-spread = QSit = 100 * (Askit¥Bidit)/(2*Mit), where M is the midpoint between the best bid and best ask. 

In the Proposing Release, the 

Commission qualitatively discussed that 

the change in round lot size could cause 

the NBBO and protected quotes to 

widen for the twelve stocks that 

currently have a round lot size less than 

100 shares.1837 However, one 

commenter stated that the Commission 

did not analyze the effects of the change 

in round lot size and protected quotes 

on these twelve stocks.1838 In response 

to this comment, the Commission 

quantitatively analyzed the effects of the 

revised definition of round lot size on 

these stocks using data from one week 

of trading in October 2020 and 

confirmed that the NBBO would widen 

in some of these stocks.1839 The analysis 

showed that the round lot size will not 

change for four of these stocks, so their 

NBBO will not change. However, for 

eight of these stocks the round lot size 

would increase. In these 8 stocks, the 

analysis showed that, on average, the 

NBBO would widen 97.1% of the time 

under the new round lot definition. In 

the instances in which the NBBO was 

wider, the Commission found that the 

NBBO half-spread increased by an 

average of 3.66% in these stocks. 

(ii) Effects on Market Participants 

For stocks priced above $250, the new 

round lot definition will result in the 

inclusion of quotes at better prices in 

core data that were previously excluded 

from being reported because they 

consisted of too few shares. This will 

make these quotes visible to anyone 

who subscribes to core data, thereby 

improving transparency.1840 The 

Commission believes that this will 

create an economic benefit for market 

participants who currently rely 

exclusively on SIP data to obtain market 

information, such as many retail 

investors. These market participants 

will benefit from being able to see 

information on these smaller quotes at 

better prices before they send in their 

orders, which may improve their trading 

decisions and order execution quality 

by providing an opportunity to realize 

gains from trade,1841 as discussed below 

in this section.1842 This may also 

improve price efficiency. This is 

because certain odd-lot information not 

currently disseminated as part of SIP 

data will be made available as part of 

core data; therefore market participants 

who use SIP data who previously did 

not use the information contained in 

these odd-lot quotes will be able to 

incorporate this information into their 

trading decisions. These trading 

decisions are integral to how market 

prices are formed. Also, the change may 

affect order routing and the share of 

order flow received by each exchange, 

since more market participants who rely 

on core data will be aware of quotes at 

better prices that are currently in oddlot sizes, and these may not be on the 

same exchange as the one that has the 

best 100 share quote. 

The Commission believes that 

changing the round lot definition to 

include smaller-size orders in stocks 

priced higher than $250 will benefit 

market participants who would have 

traded with price-improving odd-lot 

quotes in these stocks but do not do so 

because they cannot see information on 

odd-lot quotes.1843 Under the final 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18745 

available on that exchange is still not visible to 

market participants relying solely on exclusive SIPs 

for market data. 

1844Commenters agreed that the new round lot 

definition would show more odd-lot trading 

interest. See, e.g., CBOE Letter at 6; BlackRock 

Letter at 3. 

1845This benefit would apply to both market 

participants who are routing their own orders and 

market participants whose orders are being routed 

by a broker-dealer, provided the broker-dealer does 

not do not already obtain information on odd-lots 

from proprietary feeds. 

1846Battalio, Corwin, and Jennings (2016) 

examined the frequency of trading at inferior prices 

as compared to available unprotected odd-lot 

quotes in a sample of 10 high-priced stocks during 

one week in 2015. They found that there was an 

unprotected odd-lot limit order available at a better 

price for 2.52% of the trades that occurred. See 

Robert Battalio et al, Unrecognized Odd Lot 

Liquidity Supply: A Hidden Trading Cost for High 

Priced Stocks, 12 J. Trading 35 (2016). A commenter 

also referenced this study and stated that 

unprotected odd-lot quotes at prices better than the 

NBBO at other exchanges get traded through. See 

BlackRock Letter at 4. 

1847For a discussion of order execution quality 

and the provision of execution services by brokerdealers, see supra Section V.B.3(e). 

1848For additional discussion of the price 

efficiency point, see infra Section V.D.1. 

1849For example, currently a market participant, 

relying on SIP data, may submit an order to the 

exchange with the exclusive SIP NBBO and in the 

process, trade at an inferior price to an odd-lot 

quote that the market participant was not aware of 

on another exchange. If the market participant 

would have preferred to route to the priceimproving odd-lot quote, then under the updates to 

core data the market participant will send the order 

to the exchange with the smaller, price improving 

quote. 

1850See, e.g., ICI Letter at 7; AHSAT Letter at 5. 

It will also improve the accuracy of Rule 605 

statistics. See infra Section V.C.1(b)(vii). 

1851See supra Section V.C.1(b)(i) and discussion 

in this section. 

1852See, e.g., Clearpool Letter at 11–12; STANY 

Letter II at 3; TD Ameritrade Letter at 10. 

1853See infra Section V.C.1(b)(v). 

1854Commenters agreed that the new round lot 

tiers would not add significant complexity. See, 

e.g., MEMX Letter at 4 (‘‘Once tiers are required, 

although technology changes will be needed to 

implement the tiering structure, MEMX does not 

believe that there is significant additional 

complexity associated with supporting differing 

numbers of tiers.’’); IEX Letter at 4. 

1855See supra Section V.C.1(b)(i). 

1856The Commission estimates that 

approximately 98.5% of NMS stocks will have a 

round lot size of 100 shares. See supra Table 4. 

1857See supra Section II.C.2(e). One commenter 

stated that showing the number of shares rather 

than the number of round lots would reduce 

confusion with different size round lot tires. See 

CBOE Letter at 13–14. 

1858See infra Section V.C.1(b)(v). 

amendments, these market participants 

will be able to see these quotes in core 

data, and make a decision about 

whether to trade based on this newly 

visible, improved price.1844 This may 

benefit market participants, including 

many retail investors, because they will 

be able to realize the gains from trade 

that are available in this situation and 

are not currently occurring because of 

the lack of information. Also, some 

market participants may wish to 

exchange an odd-lot quantity of a stock 

by posting a limit order for an odd-lot 

amount. Currently, this order’s price is 

not visible to market participants who 

rely solely on SIP data, and thus there 

may be delays in getting this limit order 

filled, since such market participants 

would not send market orders in. Thus, 

adding smaller-size quotes in core data 

for certain stocks will result in a benefit 

to both the market participants who 

would submit the market orders and the 

market participants who post the oddlot quotes they execute against. 

The magnitude of this benefit 

depends on the amount of additional 

trading generated by the inclusion of 

odd-lot information. In particular, the 

Commission believes that to the extent 

many market participants who rely 

solely on SIP data and lack information 

on odd-lot quotes would have traded 

frequently against odd-lot quotes had 

they known about them, the benefit will 

be large. However, if it is uncommon for 

market participants who would trade 

frequently against odd-lot quotes to rely 

solely on SIP data and to lack 

information on odd-lot quotes, then the 

Commission believes that the associated 

economic benefit from including 

smaller-size quotes in core data for 

certain stocks will be small. The 

Commission believes it is not possible 

to observe this willingness to trade with 

existing market data. 

The Commission believes that the 

new round-lot definition will benefit 

market participants by improving order 

routing in stocks priced higher than 

$250, provided that they do not already 

obtain information on odd-lots from 

proprietary feeds.1845 Currently, market 

participants who rely on core data are 

not aware of odd-lot quotes available at 

other exchanges that exist at prices that 

are better than the national best bid and 

offer (e.g., the exchange with the best 

priced 100 share quote may not be the 

exchange with the best priced odd-lot 

quote).1846 The new round lot definition 

will make more of these quotes in 

higher priced stocks visible to market 

participants that subscribe to core data, 

which will improve order routing and 

may improve order execution quality 

and facilitate best execution for these 

market participants.1847

The Commission believes that the 

new round lot definition may improve 

price efficiency for stocks priced above 

$250.1848 The wider availability of 

information about odd-lot quotes may 

mean that more market participants 

(who currently rely solely on SIP data) 

will incorporate the information 

contained in those quotes into their 

trading decisions. This may have the 

effect of improving the efficiency with 

which this information becomes 

reflected in prices. 

The Commission believes that the 

new round lot definition may cause 

changes to order flow as market 

participants change their trading 

strategies to take advantage of newly 

visible quotes.1849 This may mean that 

there would be changes to the share of 

order flow each exchange receives as a 

result of this rule. The Commission is 

uncertain about the magnitude of this 

effect. 

As observed by commenters,1850 the 

new round lot definition will also 

improve transaction cost analysis and 

best execution analysis in higher priced 

stocks, which are benchmarked against 

the NBBO. A smaller round lot size will 

improve these analyses because it will 

increase the accuracy of the NBBO, 

which will now better reflect smaller 

sized odd-lot quotes that may be 

available at better prices, possibly on 

another exchange.1851

Some commenters stated that new 

round lot tiers would increase 

complexity and create confusion among 

investors.1852 The Commission 

acknowledges that the new round lot 

tiers may initially increase complexity 

when they are first implemented.1853

However, after the new round lot tiers 

are implemented, the Commission does 

not believe they will significantly 

increase the complexity of the market or 

create confusion for a number of 

reasons.1854 First, market participants 

already trade in stocks with round lot 

sizes other than 100 shares.1855 Second, 

most NMS stocks will have a round lot 

size of 100 shares under the new round 

lot tier definitions.1856 Third, core data 

will be distributed with the size of the 

NBBO and best quotes from each 

exchange given in shares and not 

number of round lots.1857 Currently, the 

SIPs indicate size as the number of 

round lots available at the NBBO and 

each exchange’s best quote, so investors 

need to convert round lot size to share 

size for stocks with round lots other 

than 100 shares. Under the final 

amendments, investors will observe the 

number of shares available and will not 

need to make this conversion. Fourth, 

the Commission expects that brokerdealers and other market participants 

will modify or develop their systems to 

automatically keep track of the different 

round-lot changes.1858

Commenters stated that the reduced 

round lot sizes would cause less 

liquidity to be available at the new 

NBBO in higher priced round lot tiers 

18746 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1859See, e.g., TD Ameritrade Letter at 7–8, 10; 

AHSAT Letter at 5; Nasdaq Letter III at 12. 

1860See, e.g., TD Ameritrade Letter at 8. The 

round lot tier sizes the commenter was referring to 

in the Proposing Release were based on a $1,000 

notional size. The adopted round lot tiers are based 

on a larger $10,000 notional size, which should 

significantly decrease the frequently of a marketable 

order being larger than the notional value of the 

adopted round lot tiers compared to the round lot 

tiers in the Proposing Release. See supra Section 

II.D.2(a). 

1861See BestEx Research Letter at 6. 

1862See supra Section II.D.2(a). Several 

commenters stated that the Commission did not 

conduct analysis to determine the notional value of 

the proposed round lot tiers. See, e.g., Nasdaq Letter 

V at 4–5; Angel Letter at 13–14. In developing the 

notional value for the adopted round lot tiers, the 

Commission considered its estimate of the average 

trade size in 2019 and commenter analysis on the 

size of trades and orders. See supra note 269 and 

accompanying text. 

1863See Virtu Letter at 3–4 (stating that data from 

2019 to present show that the vast majority (over 

75%) of all trades are still for less than $10,000); 

Angel Letter at 17 (‘‘[T]he median trade size is 

roughly $10,000.’’); IntelligentCross Letter at 3 

(‘‘[T]he notional value of the median trade today is 

about $2,000.’’). 

1864See infra Section V.C.1(b)(iii). 

1865 It is also possible that a retail internalizer 

could execute part of the order and route the rest 

to an exchange, where it could execute against the 

NBBO or walk the book. 

1866One commenter observed that the average 

retail trade size between 2007 and the present is 

around $14,581. See Virtu Letter at 3–4. The 

minimum notional size at the NBBO on a single 

exchange in the higher priced round lot tiers will 

be $10,000. If more than one exchange were at the 

NBBO, then an order would need to execute at the 

available liquidity at those exchanges before 

walking the book. 

1867See supra Section V.C.1(b)(i). 

1868See, e.g., Schwab Letter at 4–5; SIMFA Letter 

at 9–10. 

1869See Schwab Letter at 4–5. 

1870See supra note 1846. 

1871See TD Ameritrade Letter at 9. 

1872See T. Rowe Price Letter at 3. 

1873See supra Section V.B.3(e). 

1874See supra note 1862 and accompanying text. 

and that more marketable orders would 

have to walk the book and execute at 

prices outside the NBBO.1859 One of 

these commenters stated that the round 

lot tier structure in the Proposing 

Release would cause many retail 

investors’ marketable orders to walk the 

book, which could lead to confusion 

and disappointment among retail 

investors because they are not used to 

having their orders walk the book.1860

The Commission acknowledges that the 

smaller round lot size could lead to a 

smaller number of shares at the NBBO 

for most stocks in higher priced round 

lot tiers. However, this effect will 

depend on how market participants 

adjust their order submissions. For 

example, as observed by a commenter, 

orders pegged to the NBBO will remain 

at the NBBO.1861 If this represents a 

significant portion of orders at the 

NBBO, then the number of shares at the 

NBBO may not change significantly. 

If the size at the NBBO decreases in 

a stock in a higher priced round lot tier, 

then it could increase the frequency 

with which marketable orders walk the 

book. The adopted round lot tier sizes 

are based on a notional value of 

$10,000. Staff analysis estimated that 

the average notional trade size in 2019 

was $8,068 (excluding auctions).1862

Commenter analysis also observed that 

a significant portion of trading occurred 

at or below $10,000.1863 The 

Commission acknowledges that these 

estimates indicate that if the available 

liquidity at the NBBO is close to the 

$10,000 notional value, then there could 

be an increase in the frequency with 

which orders walk the book in the 

higher priced round lot tiers. However, 

as discussed above in this section, it is 

not entirely clear how investor orders 

and the size at the NBBO will change. 

Therefore, it is also uncertain how 

frequently orders will walk the book 

under the new round lot tiers. Even if 

the size at the NBBO declines, the 

Commission does not believe it will 

cause a significant increase in the 

frequency that retail investors’ 

marketable orders walk the book and 

lead to confusion among retail investors 

for two reasons. First, currently most 

retail investor marketable orders execute 

off-exchange at retail internalizers and 

do not execute on an exchange and walk 

the limit order book.1864 Because retail 

internalizers may offer price 

improvement, it is possible that the 

retail internalizer could fill the entire 

order at a price that is equal to or better 

than the NBBO.1865 Second, even if a 

retail marketable order was routed to an 

exchange, it may not be greater than the 

notional size of the NBBO at an 

exchange in a higher priced round lot 

tier.1866 Additionally, even if the size at 

the NBBO is smaller and a marketable 

order walks the book or a retail 

internalizer does not execute the whole 

order at the NBBO, the Commission 

does not believe that the average price 

at which it executes will decrease, i.e., 

transaction costs will not increase, 

because the NBBO will be at a better 

price.1867

As observed by commenters, 

protecting the smaller round lot quotes 

in higher priced stocks will benefit 

retail investors by better protecting their 

limit orders.1868 One commenter 

observed that 23 percent of its 

customers’ limit orders for stocks priced 

higher than $100 are less than 100 

shares.1869 Under the new round lot 

tiers, retail investors will benefit 

because a greater portion of their oddlot sized orders in higher priced stocks 

will be protected and not tradedthrough.1870

One commenter stated that the 

smaller round lot size in higher priced 

stocks would disadvantage the limit 

orders of retail traders because it would 

make it easier for low-latency 

professional traders to step ahead of 

them with less risk.1871 The 

Commission disagrees with this 

commenter. Currently low-latency 

professional traders that receive 

proprietary feeds that contain all odd-lot 

information do not need to submit a 

round lot sized order to step ahead of 

retail limit orders. These traders can 

submit an odd-lot-sized order to step 

ahead of the retail investor’s order at a 

lower price and the retail investor may 

not observe it if the retail investor only 

receives SIP data. With the smaller 

round-lot size in higher priced stocks, 

retail investors who only receive core 

data would be better able to observe if 

a smaller order steps ahead of their 

order at a better price and may be able 

to adjust their limit order in response. 

One commenter stated that protecting 

smaller round lot quotes would 

negatively impact the trading of 

institutional investors because market 

participants would post smaller 

displayed quotes and institutional 

investors with larger orders would have 

to slice their trading activity into 

smaller increments to avoid signaling 

their trading interest.1872 The 

Commission does not believe that 

protecting the smaller round lot size in 

higher priced stocks will negatively 

impact the trading of institutional 

investors. It is already common practice 

for institutional investors’ parent orders 

to be sliced into smaller child 

orders.1873 Additionally, because the 

round lot tiers are based on a notional 

value, $10,000, which is larger than the 

average trade size, $8,068 (excluding 

auctions),1874 the Commission does not 

believe that market participants are 

likely to significantly reduce the size of 

their displayed limit orders and 

institutional investors’ orders will not 

have to be sliced into smaller sizes than 

they already are. Additionally, the 

Commission believes that protecting the 

smaller round lot sizes in higher priced 

stocks could benefit smaller odd-lotsized child limit orders that 

institutional investors submit. Because 

more of these orders would now be 

observable in core data, they may be 

more likely to execute against the 

marketable orders of market participants 

who rely on SIP data and were not 

previously able to observe these orders, 

as described above in this section. 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18747 

1875See, e.g., STANY Letter at 4; Nasdaq Letter 

IV at 2; Data Boiler Letter I at 81. 

1876The Commission estimates that 

approximately 98.5% of NMS stocks will have a 

round lot size of 100 shares. See supra Table 4. 

1877See supra Section V.B.2(a). 

1878See supra Section II.D.2(a). 

1879See supra note 1797 for a discussion of 

wholesalers and retail internalization. 

1880Commenters agreed that a protected smaller 

round lot quote could affect the ability of 

internalizer to provide price improvement to retail 

investors. See, e.g., Virtu Letter at 5. 

1881This improvement may not be transparent to 

the retail investor. The price improvement metrics 

reported by retail broker-dealers do not take into 

account odd-lot quotes priced better than the 

NBBO. Even if a retail investor receives a better 

execution price from the new round lot definition, 

it might not show up as price improvement in retail 

wholesaler price improvement metrics if the NBBO 

also narrowed as a result of the new round lot size 

and now reflects odd-lot quotes that are priced 

better than the NBBO based on the current round 

lot size. One commenter stated retail wholesalers’ 

price improvement metrics, along with Rule 605 

statistics, are not accurate because they do not take 

into account odd-lots quotes that are priced better 

than the NBBO. See Healthy Markets Letter I at 6– 

17. 

1882See TD Ameritrade Letter at 8, 10. 

1883See Best Ex Research Letter at 6 (‘‘A tighter 

NBBO will reduce execution costs for all market 

participants—both retail and institutional 

investors—no matter where executions take 

place.’’). 

1884The NBBO based off the new round-lot 

definition will be relevant to the spread considered 

by the wholesalers, because, among other things, it 

would be used for Rule 605 execution statistics. See 

infra Section V.C.1(b)(v) for further discussion of 

Rule 605 statistics. 

Commenters stated that the Proposing 

Release did not consider the effects the 

smaller round lot size could have on the 

options market, where the standard 

options contract size is 100 shares.1875

The Commission does not believe the 

new round lot tier sizes will have a 

significant impact on the options market 

for a number of reasons. First, the new 

round lot size will not change the size 

of the options contract. Second, most 

NMS stocks will still have a round lot 

size of 100 shares under the new round 

lot tier definitions.1876 Third, even for 

stocks that are in a higher priced round 

lot tier, the smaller round lot may not 

have a significant impact on quoting in 

the options market because the round 

lot definition will not change market 

maker quoting obligations in the options 

market. Fourth, because there is already 

a significant presence of odd-lot quotes 

better than the NBBO in higher priced 

stocks,1877 the best prices in these 

stocks are already frequently smaller 

than 100 shares. Therefore, the change 

in the round lot size may not have a 

significant impact on arbitrage 

opportunities between the options and 

equity markets for stocks in the higher 

priced round lot tiers. Fifth, the options 

markets already have standard options 

contracts on stocks with a round lot size 

less than 100 shares, so there are already 

conventions for dealing with options in 

which the round lot size in the equity 

market is not 100 shares.1878

(iii) Effects on Internalization of Retail 

Order Flow 

The Commission believes that the 

change in the round lot size may have 

an effect on wholesalers in the retail 

order flow internalization business. 

Currently, some wholesalers,1879 by 

arranging to execute orders on behalf of 

retail broker-dealers, offer superior 

prices relative to the existing NBBO (i.e., 

price improvement) to retail investors. 

As part of this arrangement, the 

wholesaler typically agrees that some 

percentage of the broker-dealer’s orders 

will execute at prices better than the 

NBBO and/or agrees to certain 

execution quality metrics. The 

Commission expects that the new 

definition of a round lot will, at times, 

make the NBBO narrower for the 

affected stocks because the new 

definition will include orders that are at 

superior prices to the 100 share NBBO 

at a size less than 100 shares. As a 

result, it may become more difficult for 

the retail execution business of 

wholesalers to provide price 

improvement and other execution 

quality metrics at levels similar to those 

provided under the 100 share round lot 

definition today.1880

By the same mechanism, retail 

investors might or might not experience 

an improvement in execution quality, as 

measured by execution prices, from 

these wholesalers.1881 Assuming that 

the NBBO has narrowed and 

wholesalers continue to agree to provide 

the same amount of price improvement 

off of the narrower spread, retail 

investors will receive better execution 

prices. One commenter stated that retail 

investors will not receive better 

execution prices under the new round 

lot sizes because wholesalers already 

offer price improvement to retail 

investors that exceeds the potential 

improvements in the NBBO from the 

new round lot size.1882 However, 

another commenter stated that all 

investors, including retail, would 

experience reduced execution costs 

from a tighter NBBO no matter where 

the execution took place.1883 The 

Commission is uncertain whether the 

execution quality retail investors receive 

from wholesalers will change if the 

NBBO narrows for securities in the 

smaller round lot tiers because the effect 

of the amendments on retail execution 

quality would depend on how the 

change in the NBBO compared to the 

current price improvement offered by 

wholesalers, as well as on changes in 

the degree of price improvement 

wholesalers will offer in stocks with 

tighter NBBOs, which is uncertain. 

To the extent that retail wholesalers 

are held to the same price improvement 

standards by retail broker-dealers in a 

narrower spread environment, the 

profitability of the retail execution 

business for wholesalers might decline. 

In particular, less ‘‘spread profit’’ would 

be available to the wholesaler in a 

narrower NBBO. This is, in part, 

because the wholesaler may often keep 

a portion of the spread profit that is not 

given as price improvement to the 

investor who submitted the order. 

Therefore, if the NBBO has narrowed 

and the same price improvement must 

still be provided, less revenue will be 

left for the wholesaler.1884 To the extent 

this happens, it will be a transfer from 

the wholesaler to retail investors. As 

such, any impact on wholesaler 

profitability depends on the same 

factors as the impact on retail execution 

quality. 

To make up for lower revenue per 

order filled in a narrower spread 

environment, wholesalers may respond 

by changing how they conduct their 

business in a way that may affect retail 

broker-dealers. There are several 

possibilities, including but not limited 

to, reducing per order costs associated 

with their internalization programs, 

such as reducing any payments for order 

flow or reducing the agreed upon 

metrics for price improvement. In the 

event that wholesalers reduce payments 

for order flow, retail broker-dealers may 

respond by changing certain aspects of 

their business. The Commission is 

uncertain as to how wholesalers may 

respond to the change in the round lot 

definition, and, in turn, how retail 

broker-dealers may respond to those 

changes, and the Commission is 

uncertain as to the extent of these 

effects. 

The effect of lost revenue for 

wholesalers discussed above may be 

reduced if wholesalers currently use 

proprietary feeds to trade, to the extent 

they already see and respond to odd-lot 

quotations inside the NBBO and 

currently provide execution quality to 

customers based upon the superior oddlot quotations. 

(iv) Effects on Trading Venues 

The Commission believes that 

changes in the NBBO caused by the new 

round lot definitions may also affect 

other trading venues, including 

18748 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1885See supra Section V.C.1(c)(iv) for additional 

discussion of effects on exchange rules. 

1886For example, the apparent price improvement 

over the NBBO calculated based off core data that 

is offered by a midpoint crossing network will be 

reduced as a result of changes to the NBBO. 

1887See Virtu Letter at 5. 

1888Commenters agreed that a monthly 

calculation strikes an appropriate balance. See MFA 

Letter at 10; Data Boiler I at 25. 

1889One commenter stated more frequent updates 

could impose a higher administrative burden. See 

NovaSparks Letter at 1. 1890See, e.g., Nasdaq Letter IV at 17; MFA Letter 

at 12–13. 1891See Nasdaq Letter IV at 17. 1892See id. 1893The Commission estimates that 

approximately 98.5% of NMS stocks will have a 

round lot size of 100 shares. See supra Table 4. 1894See infra Section V.C.1(b)(vi) (discussing the 

implementation costs for these systems). 

1895This will happen more in high-priced stocks 

where the new round lot definition will have more 

of an effect. 

1896The Commission estimates that 

approximately 98.5% of NMS securities will have 

a round lot size of 100 shares. See supra Table 4. 

1897This conclusion is contingent on the 

assumption that competing consolidators will 

choose to offer a per query service to market 

participants so that this arrangement may continue. 

Because a significant portion of market participants 

(particularly retail investors) access SIP data on a 

per query basis, the Commission believes that it is 

likely the Equity Market Data Plans will continue 

to charge fees on a per query basis and some 

competing consolidators will also offer a per query 

service in order to meet the demand of market 

participants. 

exchanges and ATSs.1885 Exchanges and 

ATSs have a number of order types that 

are based off of the national best bid and 

offer.1886 Changes in the NBBO may 

affect how these order types perform 

and could also affect other orders they 

interact with. Some ATS matching 

engines also derive their execution 

prices based off of price improvement 

measured against the NBBO. Changes in 

the NBBO from the new round lot 

definition may affect execution prices 

on these platforms. Overall, the 

Commission believes that these 

interactions may affect relative order 

execution quality among different 

trading platforms, but it is uncertain of 

the magnitude of these effects. 

Changes in relative execution quality 

may in turn affect the competitive 

standing among different trading 

venues, with trading venues that 

experience an improvement/decline in 

execution quality attracting/losing order 

flow. However, the Commission is 

uncertain of the magnitude of these 

effects. 

One commenter stated that protecting 

the smaller round lot size could affect 

order flow to exchanges and other 

trading venues.1887 The narrower 

protected NBBO in higher priced round 

lot tiers could cause more order flow to 

be routed to exchanges in these stocks. 

Because off-exchange trading venues 

would not be able to trade-through the 

NBBO, a narrower protected NBBO 

would limit the price range in which 

off-exchange trading venues could 

execute trades and cause more orders to 

be routed to exchanges in order to not 

trade through a protected quote. 

(v) Effects of Monthly Round Lot 

Calculation 

The Commission believes that the use 

of the previous calendar month’s 

average closing price on the primary 

listing exchange to determine the round 

lot tier for a given stock balances certain 

tradeoffs that should be considered 

when selecting such a benchmark.1888

The Commission is balancing a more 

up-to-date stock price estimate against 

the costs imposed on market 

participants from having to frequently 

make updates to systems and practices 

to account for changes to a stock’s round 

lot tier. A more recent average (e.g., the 

past week’s average closing price) may 

better reflect the stock’s current price 

level, and thereby lead to the stock 

being placed in the correct tier more 

frequently. However, such a recent 

estimate may be more volatile and thus 

more prone to causing frequent changes 

to the stock’s status, especially if the 

stock’s price level is close to a round lot 

tier cutoff point. This could impose a 

greater burden because it would require 

more frequent adjustments from market 

participants, including SROs and 

competing consolidators, to account for 

what a stock’s round-lot tier is and what 

the NBBO for that stock would be given 

its tier.1889

Commenters stated that updating of a 

stock’s round lot size each month could 

create confusion.1890 One commenter 

stated that only updating a stock’s 

round lot size monthly could create 

confusion because it could lead to a 

stock’s current price not reflecting its 

round lot tier, especially during months 

of extreme volatility or if a stock splits 

its shares.1891 This commenter also 

stated that it could create confusion and 

uncertainty at the end of each month if 

a stock’s price is close to a threshold 

and could also create confusion 

comparing Rule 605 statistics if a stock 

changed round lot tiers.1892 The 

Commission does not believe that the 

updating a stock’s round lot tier each 

month will create significant confusion. 

Most NMS stocks will still have a round 

lot size of 100 shares under the new 

round lot tier definitions.1893 In 

response to comments, the Commission 

estimated that between August 2019 and 

August 2020, on average, only 17 stocks 

would change round lot tiers each 

month, which means that most stock’s 

current prices would be reflective of 

their current round lot tiers. 

Additionally, primary listing exchanges 

will publish data on each stock’s round 

lot size and the Commission expects 

market participants will modify or 

develop systems to automatically keep 

track of a stock’s round lot size.1894

(vi) Costs of New Round Lot Definition 

The Commission believes that the 

new round lot definition will impose 

two types of implementation costs on 

market participants: (1) One associated 

with upgrading systems to account for 

additional message traffic and (2) to 

modify and reprogram systems to 

account for the new round lot 

definition. 

The Commission believes that market 

participants who currently rely solely 

on core data to obtain NBBO feeds will 

incur some infrastructure investment 

costs as a result of the change in the 

definition of a round lot. This is because 

the change will likely lead to more 

frequent updates to the NBBO and this 

will likely result in an increase in 

message traffic for NBBO feeds.1895

Because most NMS stocks will still have 

a round lot size of 100 shares,1896 the 

Commission does not believe the 

increase in message traffic will be 

significant. Therefore, the Commission 

does not believe that the system 

upgrades required by the new round lot 

definition will be significant. However, 

the Commission is unable to estimate 

the associated costs because it does not 

have access to information about the 

infrastructure expenses a broker-dealer 

incurs to process market data and 

because of the likelihood that such costs 

vary substantially according to the 

existing infrastructure of broker-dealers. 

Additionally, for certain core data use 

cases, the costs described in the 

preceding paragraph are likely to be 

minimal. Many broker-dealers, when 

accessing data for the purposes of visual 

display, currently obtain NBBO quotes 

from the exclusive SIPs with a ‘‘per 

query’’ use case. This use case is set up 

so that a quote is only sent when it is 

asked for. The Commission believes that 

this setup has very little technological 

cost associated with it and that 

furthermore whatever cost there is to 

receiving such a feed will not be 

impacted by increasing the number of 

times the NBBO is updated over a given 

time period. Thus, the Commission 

believes that for those broker-dealers 

who rely on per query use cases for their 

quotes, the upgrade costs resulting from 

changing the round lot definition will 

be minimal.1897

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18749 

1898See, e.g., MEMX Letter at 4; Fidelity Letter at 

6; STANY Letter at 4; Nasdaq Letter IV at 17; MFA 

Letter at 12–13; Angel Letter at 17. 1899See MFA Letter at 12–13. This commenter 

stated that Rule 604 does not require a broker-dealer 

to display a customer’s limit order if it is an oddlot size. 1900See id. 1901 In the Proposing Release, the Commission 

stated that it did not have detailed information on 

the operation of exchange matching engines and 

believed that the $140,000 from the Tick Size Pilot 

may provide some sense of the level of cost 

associated with the changes SROs, ATSs, and other 

off-exchange trading venues would have to make. 

See Proposing Release, 85 FR at Section VI.C.1(c)(i). 

1902See id. 

1903See Nasdaq Letter IV at 17. This commenter 

also estimated it would cost an additional $800,000 

to $1.2 million to modify its systems to account for 

the changes in locked and crossed markets as a 

result of the changes in order protection. See 

Nasdaq Letter IV at 19. 

1904See supra Section II.E.1. 1905See, e.g.; MEMX Letter at 4; BestEx Research 

Letter at 6–9. 1906See MEMX Letter at 4. 1907The Commission is also deleting the 

reference to ‘‘The Nasdaq Stock Market, Inc.’’ from 

the definition of protected bid or offer and believes 

that this change will have no economic effects. As 

explained above, Nasdaq is now a national 

securities exchange and is thus otherwise bound by 

the definition. See supra note 361. 

1908The Commission discussed many of these 

changes in the Proposing Release. See Proposing 

Release, 85 FR at Section III.C.1(d)(i). 1909One commenter stated that the Commission 

failed to include analysis of how the change in the 

round lot definition affected Rule 201 of Regulation 

SHO. See NYSE Letter II at 8. This commenter is 

mistaken. The Commission did qualitatively 

analyze the effects of the round lot definition on 

Rule 201 of Regulation SHO. See Proposing Release, 

85 FR at Section VI.C.1(c)(iii). 

Trading venues and broker-dealers 

will experience implementation costs 

from having to modify and reprogram 

their systems, including matching 

engines and SORs, to account for the 

changes in the new round lot definition. 

Commenters stated that there would be 

implementation costs for market 

participants to develop systems to 

monitor and account for changes in a 

stock’s round lot size.1898 One 

commenter observed that broker-dealers 

would need to make changes to their 

order routing systems and systems that 

display customer orders each month to 

account for changes in the round lot 

size.1899 This commenter also stated 

that regulators would need to modify 

their surveillance systems each month 

to account for changes in a stock’s 

round lot size.1900

In the Proposing Release the 

Commission estimated that the 

implementation cost for a trading venue 

to update its systems, including its 

matching engine, to account for the new 

round lot definition and changes in the 

Order Protection Rule would be similar 

to the estimated costs of an exchange 

modifying its systems to implement the 

Tick Size Pilot, which, based upon the 

input from commenters, the 

Commission estimated to be around 

$140,000.1901 The Commission also 

estimated in the Proposing Release that 

the implementation cost for a brokerdealer to update its systems, including 

its SOR, would be $9,000.1902 One 

commenter stated that the Commission 

significantly underestimated the costs 

for a trading venue to update its systems 

and estimated that its costs to modify its 

trading venue to account for the changes 

in round lot size and order protection 

would be between $3.4 and $4 

million.1903 The Commission agrees and 

believes that the estimates from the 

Proposing Release underestimated the 

implementation costs for modifying 

trading venue and broker-dealer systems 

to account for the new round lot 

definition and changes in the Order 

Protection Rule, which created a 

separate NBBO and PBBO.1904 However, 

the Commission also believes, as 

suggested by commenters, that the new 

round lot definition under the final 

amendments will require significantly 

less system modifications compared to 

the Proposing Release.1905 For example, 

one commenter stated that if the new 

round lot definitions were protected 

then trading venues and broker-dealers 

will be able to rely on existing 

technology to continue to operate 

without significant changes to current 

execution and routing logic compared to 

having to build new logic and workflow 

to account for a separate NBBO and 

PBBO.1906 Additionally the Commission 

believes that many broker-dealer and 

trading venue systems already account 

for different round lot sizes and will not 

need to make extensive modifications to 

account for a changing round lot size 

each month. Therefore, although the 

implementation costs estimated in the 

Proposal Release may have 

underestimated the costs to modify 

systems to account for a separate NBBO 

and PBBO, the Commission believes 

they provide an appropriate sense of the 

level of cost associated with the 

implementation costs of modifying 

systems related to the new round lot 

definition under the final amendments, 

including building or modifying 

systems to account for the monthly 

change in a securities round lot size. 

The Commission estimates that a 

trading venue will incur an initial 

implementation cost of approximately 

$140,000 and a broker-dealer will incur 

an initial implementation cost of 

approximately $9,000 to modify its 

systems to account for the new round 

lot definition. However, these costs will 

vary substantially according to the 

existing infrastructure of the brokerdealer or trading venue. 

(vii) Other Rules and Regulations 

The amendments to the definition of 

round lot and resulting mechanical 

changes to the NBBO spread, affect how 

other rules and regulations operate.1907

In particular, this change affects which 

orders determine the reference price for 

numerous rules, including rules under 

the Exchange Act, SRO rules, and 

effective national market system 

plans.1908 Specifically, the Commission 

believes that the changes to the NBBO 

may present changes to the benchmark 

prices used in Regulation SHO, LULD, 

retail liquidity programs, market maker 

obligations, and certain exchange order 

types and recognizes that the change in 

the benchmark price may result in 

economic effects. Further, changing the 

NBBO will alter the estimation 

mechanics for Rule 605 metrics, 

resulting in implementation costs. In 

addition, the round lot definition will 

result in economic effects through its 

impact on the 17 CFR 242.606 (Rule 

606) compliance. Finally, although the 

new round lot definition may alter the 

requirements of some rules, such as 

Rules 602, 604, and 610(c), the 

Commission believes that the economic 

effects of the changes are uncertain and 

depend on current practices of handling 

odd-lot-sized orders. If broker-dealers 

already include odd-lot-sized orders 

when complying with the provisions of 

these rules, then the new round lot 

definition may not produce any 

economic effects related to these rules. 

For the Short Sale Circuit Breaker, the 

reference bid for the execution of a short 

sale transaction could be higher for 

stocks in the higher priced round lot 

tiers under the final amendments than 

it is currently, potentially slightly 

increasing the burdens on short 

selling.1909 Currently, after the Short 

Sale Circuit Breaker triggers, short sales 

can only execute at prices greater than 

the national best bid. While short sales 

are currently permitted to execute 

against any odd-lot quotations that exist 

above the national best bid, the new 

round lot definition will reduce the 

instances of such odd-lot quotations in 

higher priced stocks. Therefore, the final 

amendments may result in a higher 

national best bid and thus result in a 

slightly higher benchmark price for 

short sale executions in stocks priced 

more than $250, reducing the fill rate of 

short sales or increasing the time to fill 

for short sales. 

In addition, a potentially higher 

national best bid (or lower national best 

offer) price could marginally affect the 

trigger of the Short Sale Circuit Breaker. 

18750 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1910See supra Section V.C.1(b)(i). 

1911See Proposing Release, 85 FR at Section 

III.C.1(d)(i). 

1912A commenter agreed that the smaller round 

lot size would cause a decrease in the number of 

orders showing price improvement in Rule 605 

statistics. See Nasdaq Letter IV at 19. 

1913 In the hypothetical case of a stock in which 

there are often valuable odd-lot quotes, brokerdealers trading in this stock can currently use these 

odd-lot quotes to improve on the NBBO, and this 

improvement might be reflected in Rule 605 

statistics. Under the new round lot definition, if this 

stock is priced over $250 per share, then some of 

these odd-lot quotes could end up being defined as 

round lots under the new definition and thereby 

end up the basis for the NBBO. With these quotes 

as the NBBO, the broker-dealer will no longer 

appear to be improving over the NBBO in its 

execution, and Rule 605 statistics may appear to 

indicate a decrease in execution quality. However, 

they will, in fact, merely be reflecting a more 

accurate picture of the market circumstances at the 

time of execution. One commenter agreed that Rule 

605 statistics may not be accurate because they do 

not include information on odd-lot quotes priced 

better than the NBBO. See Healthy Markets Letter 

at 15. One commenter agreed that the new round 

lot size would improve the accuracy of Rule 605 

statistics and that this would improve transaction 

cost analysis for funds that rely upon these statistics 

to analyze broker-dealer execution quality. See ICI 

Comment Letter at 7. 

1914See supra Section V.C.1(b)(i) for a discussion 

of the effect of changes to the NBBO on order types 

and for a discussion related to changes to round lot 

size for stocks with round lots of less than 100 

shares. 

In particular, the final amendments 

could result in slight delays in or a 

reduction in the number of Short Sale 

Circuit Breaker triggers, or it could have 

the opposite effect in the nine stocks 

whose round lot size will increase. In 

particular, a national best bid that 

includes smaller round lots could result 

in a higher-priced execution relative to 

a national best bid that does not include 

smaller round lots. This higher-priced 

execution could be above the price that 

would trigger the Short Sale Circuit 

Breaker whereas an execution on a 100- 

share quote would have triggered the 

circuit breaker. This could delay the 

trigger if the price continues downward, 

such that the circuit breaker still 

triggers, or the circuit breaker may not 

trigger at all if the price rebounds after 

such an execution. On the other hand, 

in the eight stocks that will have a larger 

round lot size, and lower priced 

national best bid, it could have the 

opposite effect on circuit breaker 

triggers: Triggering sooner and more 

often.1910

The Commission believes that the 

economic effects of the potential impact 

on the Short Sale Circuit Breaker are 

unlikely to be significant. These effects 

should not create implementation costs, 

and the Short Sale Circuit Breaker 

should continue to function consistent 

with its stated purpose. Notably, if the 

adopted rule will result in not triggering 

as many Short Sale Circuit Breakers, it 

could reduce ongoing compliance costs 

in situations in which the price 

rebounds despite the lack of a price test 

on short sales. 

Similarly, a potentially higher bid 

price or lower offer price could affect 

the trigger of a Limit State under the 

LULD Plan. A lower-priced national 

best offer or a high-priced national best 

bid could result in that quote being 

more likely to touch a price band, thus 

triggering a Limit State, when it 

otherwise would not have. Depending 

on whether the quote would have 

otherwise rebounded, this could 

increase the number of Limit States and/ 

or Trading Pauses or could merely 

trigger such Limit States or Trading 

pauses sooner. As in the case of the 

Short Sale Circuit Breaker, the effects 

should not create implementation costs, 

and LULD should continue to function 

consistent with its stated purposes. In 

addition, the economic effects of this 

potential marginal change depends 

largely on how often odd-lot quotations 

lead price declines or lead price 

increases. 

As discussed in the Proposing 

Release,1911 a number of Rule 605 

execution quality statistics are 

benchmarked to the NBBO. Under the 

final amendments, the NBBO will be 

based on the tiered, price-based round 

lot sizes, which means any Rule 605 

execution quality statistics that rely on 

the NBBO as a benchmark will reflect 

the modified definition of the NBBO. 

This could cause certain execution 

quality statistics to change in higher 

priced stocks. As discussed above, the 

Commission believes that the NBBO 

will become narrower for some stocks in 

higher price tiers. This could cause 

execution quality statistics that are 

measured against the NBBO to change 

because they will be measured against 

the new, narrower NBBO. For example, 

execution quality statistics on price 

improvement for higher priced stocks 

may show a reduction in the number of 

shares of marketable orders that 

received price improvement because 

price improvement will be measured 

against a narrower NBBO.1912 However, 

the Commission believes that some of 

these changes may cause some Rule 605 

statistics to more accurately reflect 

actual execution quality because the 

NBBO based on the new definition for 

round lots may now take into account 

more liquidity that the current NBBO 

ignores.1913 The Commission believes 

that these effects will be larger for stocks 

in higher price tiers because their new 

round lot definition will include fewer 

shares. 

In addition, the NBBO midpoint in 

stocks priced higher than $250 could be 

different under the adopted rules than it 

otherwise would be, resulting in 

changes in the estimates for Rule 605 

statistics calculated using the NBBO 

midpoint, such as effective spreads. In 

particular, at times when bid odd-lot 

quotations exist within the current 

NBBO but no odd-lot offer quotations 

exist (and vice versa), the midpoint of 

the NBBO resulting from the rule will be 

higher than the current NBBO midpoint. 

For example, if the NBB is $260 and the 

national best offer is $260.10, the NBBO 

midpoint is $260.05. Under the adopted 

rules a 40 share buy quotation at 

$260.02 will increase the NBBO 

midpoint to $260.06. Using this new 

midpoint, effective spread calculations 

for buy orders will be lower but will be 

higher for sell orders. More broadly, the 

adopted rules will have these effects 

whenever the new round lot bids do not 

exactly balance the new round lot offers. 

However the Commission does not 

know to what extent or direction that 

odd-lot imbalances in higher priced 

stocks currently exist, so it is uncertain 

of the extent or direction of the change. 

Finally, the Commission recognizes 

that the new round lot definitions could 

force market centers (or their third-party 

service providers) to revise their 

processes for estimating the Rule 605 

execution statistics. Such changes will 

result in implementation costs. 

The Commission recognizes that the 

NBBO serves as a benchmark in SRO 

rules in addition to Exchange Act rules 

and effective national market system 

plans. For example, the NBBO acts as a 

benchmark for various retail liquidity 

programs on exchanges, for exchange 

market maker obligations, for some 

order types, and for potentially many 

other purposes.1914 As such, including 

smaller quotes in the NBBO will change 

how these rules operate and these 

changes could have economic effects. 

For example, having to post more 

aggressive limit orders into retail 

liquidity programs could reduce the 

already low volume by reducing the 

liquidity available but could result in 

better prices for those retail investors 

able to execute against that liquidity. In 

addition, a narrower NBBO could 

effectively increase some market maker 

obligations, which could improve 

execution quality for investors and/or 

provide a disincentive to being a market 

maker on the margin. Alternatively, the 

exchanges with such retail liquidity 

programs, order types, or market maker 

obligations could elect to propose rule 

changes to maintain the current 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18751 

1915See Proposing Release, 85 FR at Section 

III.C.1. for a discussion of how the definition 

impacts Rule 606. 

1916See Proposing Release, 85 FR at n. 227 for a 

discussion of the benefits of 606(b)(3). 

1917See NYSE Letter II at 6–7. 

1918See supra Section V.C.1(b)(ii). 

1919See supra Section V.C.1(b)(vi). 

1920See supra Section V.C.1(b)(ii). 

1921One commenter stated that market makers 

would need to make adjustments to their systems 

to display customer limit orders in the new round 

lot sizes under Rule 604. See MFA Letter at 12–13. 

These costs are included in the costs to adjust 

systems to the new round lot size. See supra 

Section V.C.1(b)(vi). 

1922See NYSE Letter II at 7–8. 

1923See infra Section V.C.1(c)(iv). 

1924See infra Section V.C.2(b)(i). 

1925Commenters agreed that the expansion of 

core data would reduce information asymmetries. 

See, e.g., BestEx Research Letter at 2; Better Markets 

Letter at 2–3; BlackRock Letter at 2; Capital Group 

Letter at 2. See infra note 2404 and accompanying 

text for a discussion of commenter stating that 

allowing competing consolidators to offer 

customized products containing subsets of 

expanded core data would increase information 

asymmetries. 

1926Commenters agreed that the expansion of 

core data would improve market efficiency and 

price discovery. See, e.g., Better Markets Letter at 

2–3; ICI Letter at 5. 

1927Commenters agreed that the additional 

information in core data would facilitate best 

execution. See, e.g., Clearpool Letter at 11; DOJ 

Letter at 4; IntelligentCross Letter at 2; SIMFA 

Letter at 3–4. 

1928Commenters agreed that the expanded 

content of core data could reduce some market 

participants’ dependence on proprietary data feeds. 

See, e.g., Clearpool Letter at 11; BlackRock Letter 

at 2; DOJ Letter at 4. 

1929See infra Section V.C.2(b) (discussing 

potential fees for consolidated market data). 

Commenters agreed the expanded content of core 

data could lower costs for some market participants 

who currently subscribe to proprietary DOB feeds 

and switch to consolidated market data. See, e.g., 

Virtu Letter at 5. 

operation of these rules. Such proposals 

could mitigate any follow-on economic 

effects (both benefits and costs) but 

would require exchanges to incur the 

expenses associated with proposing 

amendments to their rules. 

As discussed in the Proposing 

Release,1915 the definition of round lot 

could result in an increase in the 

number of indications of interest in 

higher priced stocks that will be 

required to be included in 606(b)(3) 

reports. Depending on the number of 

potential indications of interest 

included as a result of the final 

amendments, the Commission believes 

that these changes could increase the 

benefits of 17 CFR 242.606(b)(3) (Rule 

606(b)(3)) with little to no effect on 

costs.1916 In particular, the inclusion 

could result in clients receiving 

information on order routing for more of 

their orders, with the resulting benefits. 

Further, because the incremental cost of 

adding orders to the reports is low, the 

Commission does not expect that adding 

indications of interest to the reports will 

significantly increase costs. 

One commenter stated that the 

Commission did not examine the effects 

of the new rules on Rule 603(b), the 

Vendor Display Rule.1917 The new 

round lot definition will require brokerdealers to show a consolidated display 

that includes the NBBO derived from 

the new round lot size in higher priced 

stocks. This will allow investors to see 

odd-lot quote information that may not 

previously have been included in the 

NBBO under the current round lot 

definition, which may improve their 

trading decisions and order routing and 

execution quality.1918 Broker-dealers 

may also incur implementation costs in 

order to adjust their systems.1919

The new round lot definition would 

also affect the requirements regarding 

the size of orders that need to be 

collected and made available under 

Rules 602(a) and (b) and 604(a)(1) and 

(2). However, it is unclear whether this 

will have any economic effects, because 

it would depend on the current 

practices for handling odd-lot orders. 

For example, exchanges may already 

have procedures to collect and make 

available their best bids and offers to 

vendors, regardless of the size of those 

best bids and offers. Further, brokerdealers may already treat all bids and 

offers as firm quotes regardless of size 

and may already display all customer 

limit orders regardless of size. To the 

extent that these practices are in place, 

there will be no economic effect from 

these changes. To the extent that these 

practices are not in place, the final 

amendments will increase transparency 

in higher priced stocks by requiring 

broker-dealers and trading venues to 

include smaller sized orders that meet 

the new round lot definition under 

these rules.1920 Broker-dealers and 

trading venues may also incur 

implementation costs in order to adjust 

their systems.1921

One commenter stated that the 

Commission did not consider the 

burden that applying Rule 610(c) to the 

new round lot definition would have on 

market participants and competition, 

including trading centers that display 

quotes.1922 The Commission does not 

believe that applying the new round lot 

definition to Rule 610(c) create a 

significant burden for market 

participants, including trading centers 

that display quotes, or have a significant 

impact on competition. The 

Commission believes that exchanges 

may already pay the same rebates or 

charge the same access fees regardless of 

order size. Therefore, it does not expect 

the new round lot definition to affect 

these fees. 

(c) Expanded Core Data Content 

The Commission is adopting 

amendments to include certain 

information on odd-lot quotes at and 

inside the NBBO, certain depth of book 

data, and information on orders 

participating in auctions in the 

definition of core data. This section 

discusses the economic effects of 

expanding the core data content 

separately for each additional core data 

element and then discusses the 

additional costs that may accrue to 

market participants from the combined 

new core data elements, although 

competing consolidators will not be 

required to offer consolidated market 

products that include all of the content 

of expanded core data and market 

participants may choose not to take in 

all of the new core data elements in 

every instance.1923 The economic effects 

discussed in this section depend on the 

fees for data content underlying core 

data charged by the effective national 

market system plan(s) for NMS stocks 

and the competing consolidators. The 

fees for data content underlying new 

core data are discussed later, in Section 

V.C.2(b). 

The Commission believes that 

expanding the content of core data to 

include information on odd-lot quotes at 

and inside the NBBO, depth of book 

information, and auction information 

will provide benefits to market 

participants that previously only relied 

on the SIP and choose to receive the 

new core data elements if the fees are 

lower as part of consolidated market 

data than fees for equivalent data 

today.1924 Expanding core data will 

reduce information asymmetries 

between these market participants and 

market participants that subscribe to 

proprietary DOB feeds.1925 A reduction 

in information asymmetry may, in turn, 

enhance market efficiency and price 

discovery if it leads to information that 

was previously only contained in 

proprietary DOB feeds being impounded 

into prices quicker.1926 The additional 

information contained in expanded core 

data will also allow these market 

participants to improve order routing 

and will help facilitate best execution, 

which may reduce their transaction 

costs.1927 The additional content of 

expanded core data could make 

consolidated market data a reasonable 

alternative to exchange proprietary data 

feeds for some market participants,1928

potentially lowering their costs.1929

One commenter stated that it is 

unclear whether the expanded content 

18752 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1930See Nasdaq Letter IV at 33, 38 (‘‘the Proposed 

Rule replaces ‘‘only pay for what you need’’ with 

a feed that is simultaneously providing too much 

and too little to be optimal for anyone—too much 

data for the retail investor and too little for 

sophisticated traders’’). 

1931See Nasdaq Letter IV at 38. 

1932See Nasdaq Letter IV at 34. 

1933See Proposing Release, 85 FR at Section 

VI.C.1. 

1934For example, expanded core data will not 

contain complete order-by-order information or full 

depth of book information. 

1935See infra Section V.C.1(c)(ii). Commenters 

agreed that five levels of depth is sufficient for 

many market participants. See, e.g., State Street 

Letter at 2–3; Capital Group Letter at 3; Fidelity at 

4. 

1936See supra note 28 (discussing commenters’ 

views that the cost of proprietary DOB products 

currently inhibits the purchase of, and the 

widespread dissemination of, the data elements that 

will be contained in expanded core data). See also 

Roundtable Day One Transcript at 128–29 (Mark 

Skalabrin, Redline Trading Solutions) (stating that 

some customers do not purchase exchange 

proprietary DOB products because of the cost, 

explaining ‘‘we sell to various customers, leading 

firms that have lots of money and really imbed this 

technology, but also to startup brokers and small 

firms trying to integrate in the market. And not all 

of them use direct feeds. And it was mentioned 

before that some people just don’t buy the direct 

feeds. Some people can do without it. And we deal 

with them in that decision process. It’s not a 

mystery why they don’t use the direct feeds; it’s 

solely cost.’’). 

1937See infra Section V.C.2(b)(i) (discussing fees 

for consolidated market data). 

1938See infra Sections V.C.1(c)(i), V.C.1(c)(ii), and 

V.C.1(c)(iii). Commenters agreed that core data that 

included odd-lot information, auction information, 

and five levels of depth would be useful to market 

participants. See, e.g., Better Markets Letter at 3 

(‘‘These information taken together amount would 

fill a significant gap that currently exists in the SIP 

data.’’); ICI Letter at 4; State Street Letter at 2–3. 

1939See infra Section V.C.4(a). Commenters 

agreed that the additional information contained in 

expanded core data would make consolidated 

market data a viable alternative to proprietary DOB 

feeds. See, e.g., SIFMA Letter at 7; T Rowe Price 

Letter at 2; Clearpool Letter at 11. 

1940See infra Section V.C.2(b)(ii). 

1941See supra Sections II.A and II.C.2(a). See also 

infra Sections V.C.1(c)(i), V.C.1(c)(ii), and 

V.C.1(c)(iii). 

1942See infra Sections V.C.2(b), V.C.4(a). 

1943See supra III.C.8(a). 

1944See infra Section V.C.2(b)(i) (discussing fees 

for consolidated market data). 

1945See supra note 1936 and accompanying text. 

1946See, e.g., Nasdaq Letter IV at 33, 38; TD 

Ameritrade Letter at 2, 15. 

1947See, e.g., Nasdaq Letter IV at 33; TD 

Ameritrade Letter at 5. 

of core data would be useful to any set 

of investors and that the Proposing 

Release did not provide any analysis on 

this point.1930 This commenter 

questioned whether there would be 

demand for the expanded content of 

core data, stating that it would 

simultaneously provide ‘‘too much and 

too little to be optimal for anyone—too 

much data for the retail investor and too 

little for sophisticated traders.’’ 1931 This 

commenter also stated that expanding 

the content of core data would provide 

no real benefits because all of the 

information is already available to 

everyone who needs it.1932 The 

Commission disagrees with this 

commenter and believes there would be 

demand for the expanded content of 

core data. Although the Commission did 

not quantify the number of market 

participants that would subscribe to the 

expanded content of core data, the 

Commission did provide a qualitative 

analysis of how certain market 

participants might subscribe to and 

could benefit from the expanded 

content of core data.1933 Although 

expanded core data will not contain all 

of the data contained in proprietary 

DOB feeds, the Commission believes 

that it will contain data that will be 

useful for market participants.1934 For 

example, although the DOB data 

contained in expanded core data will 

only contain five levels of depth, the 

Commission believes, and commenters 

agree, that including five levels of depth 

in expanded core data will provide a 

benefit to market participants, including 

allowing them to improve their order 

routing.1935 The Commission believes 

that there are market participants who 

would subscribe to proprietary DOB 

feeds, but do not currently do so 

because of the cost.1936 Because the 

Commission anticipates that the total 

fees for a consolidated market data 

product containing all the elements of 

expanded core data are likely to be less 

expensive than equivalent proprietary 

data feeds,1937 the Commission believes 

that there would be demand from these 

market participants for a consolidated 

market data product that contains all the 

elements of expanded core data because 

it will reduce information asymmetries 

between these market participants and 

market participants that subscribe to 

proprietary DOB feeds.1938

Additionally, if a consolidated market 

data product containing all data 

elements is offered at reduced latency, 

then some market participants that 

currently rely on aggregated proprietary 

DOB feeds may use it as a substitute for 

proprietary feeds.1939 Furthermore, 

there are likely market participants that 

may only benefit by taking 

subcomponents of expanded core data 

or products that competing 

consolidators offer that may be derived 

from the expanded content of core data, 

such as products that detail the bestpriced odd-lot quotes or DOB imbalance 

measures. Therefore, to the extent that 

the individual components of expanded 

core data are less expensive than 

equivalent data from proprietary 

feeds,1940 there will be demand for 

competing consolidators to also offer 

consolidated market data products that 

contain a subset of consolidated market 

data. Even if market participants do not 

directly benefit from any of the 

expanded content of core data, they may 

benefit indirectly if the broker-dealers 

that handle their orders subscribe to the 

expanded content.1941 While the 

Commission believes there will be 

demand for the expanded content of 

core data, the Commission remains 

unable to quantify the number of market 

participants who will subscribe to the 

expanded content of core data because 

it does not have information on the 

number of market participants that 

would subscribe to proprietary DOB 

feeds, but do not do so because of the 

cost, or information on the number of 

market participants that currently 

subscribe to proprietary DOB feeds but 

might switch to expanded core data if 

the cost is lower.1942

Because competing consolidators will 

not be required to offer a consolidated 

market data product that contains all of 

the data elements of consolidated 

market data,1943 there is a risk that a 

consolidated market data product 

containing all of the data elements of 

expanded core data will not be offered 

by any competing consolidator. The 

Commission believes this risk is low 

because there is likely to be sufficient 

demand for such a product from market 

participants. As discussed above in this 

section, because the fees for a 

consolidated market data product 

containing all of the data elements of 

core data are likely to be lower than fees 

for equivalent data from proprietary 

feeds today,1944 the Commission 

believes that there will be demand from 

market participants for a consolidated 

market data product containing all of 

the elements of expanded core data.1945

Because there will be demand for the 

data and because the competing 

consolidator market is subject to 

competitive forces, the Commission 

believes that one or more competing 

consolidators will be incentivized to 

offer a consolidated market product 

containing all of the data elements. 

Commenters stated that expanding the 

content of core data would provide no 

benefit to retail investors.1946

Commenters stated that depth of book 

and auction data is not useful for most 

retail investors and is likely to cause 

confusion.1947 The Commission 

disagrees with these commenters. The 

Commission acknowledges that many 

retail investors may not directly view 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18753 

1948See, e.g., Schwab Letter at 1, 3. 

1949See infra Sections V.C.1(c)(i), V.C.1(c)(ii), 

V.C.1(c)(iii). 

1950See supra Section II.C.2(b). 

1951Market participants may choose not to 

subscribe to this element, as well as other aspects 

of expanded core data. See infra Section 

V.C.1(c)(iv). 

1952See supra Section V.C.1(b)(ii). 

1953See supra Section V.C.1(b). 

1954One commenter stated that including all oddlot quotes at prices better than the protected BBO 

in core data would provide investors with valuable 

information. See CBOE Letter at 15. 

1955See infra Sections V.C.2(b) and V.C.4(a). 

1956See infra Section V.C.1(c)(iv). 

1957See supra Section V.C.1(c). 

1958See infra Section V.C.2(b). 

1959See supra Section V.C.1(b)(ii). 

1960The Commission estimates that 

approximately 98.5% of NMS stocks will have a 

round lot size of 100 shares. See supra Table 4. 

the entire content of expanded core 

data, but believes that retail investors 

will benefit from the expansion of the 

content of core data. Competing 

consolidators could offer customized 

products derived from the expanded 

content of core data that retail brokers 

may be able offer to their clients, who 

may be able to utilize the data to 

achieve some of the benefits discussed 

below without the retail broker taking in 

the additional message traffic from the 

full content of expanded core data. For 

example, competing consolidators could 

offer measures summarizing DOB or 

auction imbalances, or a feed that gives 

information on the best priced odd-lot 

quotes. Additionally, the Commission 

believes, as suggested by commenters, 

that retail brokers may allow some 

sophisticated retail investors to directly 

utilize the expanded content of core 

data and realize the benefits discussed 

below.1948 Furthermore, retail investors 

may indirectly benefit if their executing 

broker-dealer uses expanded core data 

and did not previously receive this 

information from proprietary feeds. 

Additionally, retail investors may also 

indirectly benefit from other market 

participants utilizing expanded core 

data because they would be better able 

to observe and interact with retail 

investor orders, possibly leading to 

additional gains from trade.1949

(i) Effects of Addition of Information on 

Odd-Lot Quotes at and Inside the NBBO 

This section discusses the economic 

effects of expanding the content of core 

data to include information on odd-lot 

quotes that are priced at or more 

aggressively than the NBBO to the 

definition of core data.1950 For market 

participants who currently do not 

receive information on odd-lot quotes 

and choose to receive this aspect of 

expanded core data,1951 the Commission 

generally believes that the economic 

effects will be similar to many of the 

effects discussed above regarding 

including smaller sized odd-lot quotes 

in the definition of a round lot.1952

However, these benefits may be greater 

because these market participants will 

receive significantly more information 

on odd-lot quotes, since they will 

receive aggregated information on all 

odd-lot quotes priced better at or better 

than the NBBO for all NMS stocks, 

rather than just information on the 

smaller subset of quotes that will be 

included in the new round lot definition 

for stocks priced greater than $250.1953

More specifically, the inclusion of oddlot quote information in core data will 

improve transparency and reduce 

information asymmetry between market 

participants who already receive this 

information through proprietary DOB 

feeds and market participants who 

choose to subscribe to this aspect of core 

data and previously did not receive this 

information.1954 This could potentially 

lead to these market participants being 

able to reduce their execution costs, 

make more informed trading decisions, 

facilitate best execution, as well as 

realize gains from trade. Including oddlot quotes in core data may also cause 

changes in order flow to exchanges and 

off-exchange trading venues, as well as 

improvements in price efficiency. It may 

also benefit some market participants 

that currently subscribe to proprietary 

DOB feeds to receive data on odd-lot 

quotes because it may allow these 

market participants to receive this 

information through expanded core 

data, potentially at lower cost.1955

However there may also be costs to 

market participants who choose to 

receive this data because they may need 

to upgrade their infrastructure in order 

to handle the additional message traffic 

contained in the odd-lot 

information.1956 There could also be 

costs to market participants who 

currently receive information about 

odd-lot quotes from proprietary feeds 

and benefit from existing information 

asymmetries. 

The Commission recognizes that 

many market participants, including 

many retail brokers-dealers (and their 

clients), may choose not to receive all of 

the information on odd-lot quotes 

priced at or better than the NBBO that 

is contained in expanded core data.1957

However, the Commission believes that 

there are some market participants that 

currently do not receive information on 

odd-lot quotes but may choose to 

receive this information from expanded 

core data if it is available at a cheaper 

price than equivalent proprietary 

data.1958 If these market participants 

subscribe to this element of core data, 

then the Commission believes they will 

receive many of the benefits (and incur 

many of the costs) discussed below. 

Even if market participants do not 

directly receive all of the odd-lot 

information in expanded core data, they 

could realize some of the benefits if 

competing consolidators offer products 

that are derived from or contain some of 

the odd-lot information in expanded 

core data. For example, competing 

consolidators could offer a product that 

only contains information on the best 

priced odd-lot on each exchange. 

Because such a product would not 

significantly increase message traffic 

compared to receiving all the odd-lot 

information in expanded core data, 

many market participants, including 

many retail broker-dealers (who may 

offer it to their clients), may be able to 

utilize such a product and gain 

additional information about odd-lot 

quotes that would allow them to lower 

their execution costs and potentially 

realize additional gains from trade. Even 

if market participants do not receive any 

additional information on odd-lot 

quotes contained in expanded core data, 

they could still benefit if the brokerdealers handling their orders use the 

information. If a broker-dealer 

previously did not have access to oddlot information, then a broker-dealer 

receiving the additional information 

may help facilitate best execution of its 

clients’ orders. Even if a broker-dealer 

previously received the data from 

proprietary feeds and now receives it 

from core data, customers of the brokerdealer may benefit if the broker-dealer 

indirectly passes on any cost savings 

from switching data sources to its 

clients. 

Adding information on odd-lot quotes 

that are priced at or more aggressively 

than the NBBO to the definition of core 

data will significantly increase 

transparency for market participants 

that do not currently receive 

information on odd-lot quotes, such as 

market participants that rely exclusively 

on SIP data, and choose to receive this 

element of expanded core data. Even 

though the new round lot definition 

would expand information on odd-lots 

that may be priced better than the 

current NBBO in some stocks,1959 most 

stocks would not be affected by the new 

round lot definition.1960 Additionally, 

the analysis in Table 1 shows that a 

substantial amount of odd-lot 

transaction volume in stocks above $250 

would not be included in the new round 

lot definition. The addition of odd-lot 

information to expanded core data will 

18754 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1961One commenter agreed that displaying oddlot information would reveal greater liquidity in a 

stock. See RBC Letter at 5. 

1962For a discussion of order execution quality 

and the provision of execution services by brokerdealers, see supra Section V.B.3(e). 

1963Adding information on odd-lot quotes priced 

at or better than the NBBO to expanded core data 

may benefit those market participants who already 

obtain odd-lot information by providing them with 

alternatives to proprietary feeds. For a discussion of 

this effect, see infra Section V.C.4(a). Also, the 

Commission understands that some market 

participants who use proprietary feeds as their main 

source of market data also use the SIP feeds as a 

backup. For such market participants, adding 

information on odd-lot quotes priced at or better 

than the NBBO to expanded core data may improve 

the value of a core data feed as a backup if they 

choose to subscribe to the additional information 

contained in expanded core data. 

1964See infra Section V.C.2(b). 

1965For further discussion of new entrants to the 

competitive order routing business, see infra 

Section V.C.4(b). 

1966For additional discussion of the price 

efficiency point, see infra Section V.D.1. 

1967See TD Ameritrade Letter at 4–5. 

make information on these additional 

odd-lot quotes that are priced at or 

better than the NBBO available to 

market participants who previously did 

not observe this information and who 

will choose to subscribe to this element 

of expanded core data. This would 

reduce information asymmetry between 

these market participants and market 

participants who currently receive this 

information through proprietary DOB 

feeds. 

Market participants who choose to 

receive the odd-lot quotes from 

expanded core data and currently do not 

receive this information could realize a 

benefit from additional gains from trade. 

Some of these market participants may 

have traded with a price-improving oddlot quote but did not because they 

cannot see information on odd-lot 

quotes. Under the final amendments, 

these market participants would be able 

to see these quotes if they receive oddlot information from expanded core 

data, and make a decision about 

whether to trade based on this newly 

visible trading interest.1961 This may 

benefit these market participants or 

their clients because they will be able to 

realize the gains from trade that are 

available in this situation and are not 

currently occurring because of the lack 

of information. Market participants that 

post the odd-lot quotes that these 

market participants trade against would 

also benefit from realizing additional 

gains from trade. 

The magnitude of this benefit 

depends on the amount of additional or 

improved trading generated by the 

inclusion of odd-lot information. In 

particular, the Commission believes that 

to the extent market participants who 

rely solely on SIP data and lack 

information on odd-lot quotes choose to 

receive the odd-lot information in 

expanded core data and would have 

traded frequently against odd-lot quotes 

had they known about them, the benefit 

will be large. However, if these market 

participants would not have frequently 

traded against odd-lot quotes but for a 

lack information, then the Commission 

believes that the associated economic 

benefit from including odd-lot quotes in 

core data will be small. The 

Commission believes it is not possible 

to observe this willingness to trade with 

existing market data. 

Market participants who choose to 

receive the odd-lot quotes, or their 

clients, may benefit from making more 

informed trading decisions by utilizing 

the data to improve their strategies 

related to order routing and order 

placement, provided that they do not 

already obtain information on odd-lots 

from proprietary feeds. For instance, 

market participants who wish to fill an 

order at the best possible price, 

including at sizes of less than 100 

shares, will be better able to do so 

because odd-lot quotes at prices better 

than the NBBO will be visible to them. 

Additionally, these market participants 

may be able to improve the placement 

of their limit orders by being able to see 

odd-lot quotes at or inside the NBBO at 

multiple exchanges in order to evaluate 

which exchange’s queue would provide 

their limit order with the highest 

execution priority. The use of this 

information may improve order 

execution quality and facilitate best 

execution for these market participants 

or their clients.1962 The Commission 

believes that many of the market 

participants who utilize such strategies 

already have access to full odd-lot 

information via proprietary feeds; for 

these market participants, this portion 

of the final amendments may not 

improve their strategies related to order 

routing.1963

Also, the Commission believes that 

some market participants might start 

running these order routing strategies if 

the data were available to them at prices 

that are lower than the cost of obtaining 

this data through proprietary feeds.1964

These market participants might 

currently find that the value of 

attempting such strategies without 

information on odd-lots is too low to 

justify running the strategies, but they 

might find that access to data on such 

orders through the updates to expanded 

core data will enable them to run such 

strategies effectively. To the extent that 

such market participants exist, the 

inclusion of odd-lot quotes in core data 

will be a benefit to them as well.1965

The Commission believes that adding 

information on odd-lot quotes priced at 

or better than the NBBO to expanded 

core data may improve price efficiency. 

The wider availability of information 

about odd-lot quotes may mean that 

market participants who currently do 

not receive this information and 

subscribe to this element of expanded 

core data will incorporate the 

information contained in those quotes 

into their trading decisions. This may 

have the effect of improving the 

efficiency with which this information 

becomes reflected in prices.1966

One commenter stated that adding 

information on unprotected odd-lot 

quotations to core data would create 

confusion for retail investors.1967 The 

Commission disagrees with this 

commenter. As discussed above in this 

section, the Commission believes that 

many retail brokers will not directly 

offer their clients all of the odd-lot 

information contained in expanded core 

data and, therefore, their clients will not 

be confused by it. If a retail broker does 

directly offer all of the information to 

any of its clients, the Commission 

believes that any client receiving the 

information will likely be a 

sophisticated retail investor and not 

confused. Additionally, if competing 

consolidators develop products for retail 

brokers to offer to their clients (i.e., 

retail investors) that contain subsets of 

the odd-lot information in expanded 

core data, the Commission believes that 

competing consolidators and the data 

vendors or broker-dealers that supply 

the information to retail investors will 

do so in way that does not create 

confusion. 

The Commission believes that adding 

information on odd-lot quotes priced at 

or better than the NBBO to expanded 

core data may cause changes to order 

flow as market participants that do not 

currently receive this information and 

choose to subscribe to it change their 

trading strategies to take advantage of 

newly visible quotes. This may mean 

that there will be changes to the share 

of order flow each exchange and offexchange trading center receives as a 

result of this rule. The Commission is 

uncertain about the magnitude of this 

effect. 

The addition of odd-lot quote 

information to expanded core data will 

increase the total message traffic in 

expanded core data, and this increase in 

message traffic will be accompanied by 

costs to market participants to set up the 

infrastructure required to handle this 

new level of traffic. Additionally, 

competing consolidators and SROs may 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18755 

1968See supra Sections II.C.2(a) and III.C.8(a)(ii). 

1969See, e.g., Nasdaq Letter IV at 33; TD 

Ameritrade Letter at 5. 

incur implementation costs related to 

receiving and generating the 

information necessary to process and 

disseminate consolidated market data. 

However, market participants are not 

required to receive (or display) the oddlot quotes contained in expanded core 

data, and competing consolidators will 

not be required to disseminate all of the 

information in consolidated market 

data, including odd-lot quotes contained 

in expanded core data, so they will not 

incur these costs unless they choose to 

receive or disseminate this information, 

respectively.1968 These costs are 

discussed below in Section V.C.1(c)(iv). 

The addition of information on all 

odd-lot quotes priced at or better than 

the NBBO to core data may negatively 

affect certain trading strategies, but the 

associated costs are likely to be small. 

First, the Commission believes that 

there may be traders who currently 

attempt not to display their orders to 

wide public view by posting them in 

odd-lot sizes, in pursuit of trading 

strategies that take advantage of a 

market’s limited knowledge of odd-lot 

size quotes. The Commission 

understands that certain traders (ones 

who are the most likely to recognize any 

advantage being sought in this manner) 

obtain proprietary feeds and so 

currently can see these odd-lot quotes. 

This means that this strategy cannot be 

used to hide quotes from users of 

proprietary DOB feeds. To the extent 

that it is necessary to hide the quotes 

from such users in order for the strategy 

to work, the benefits of such a trading 

strategy are likely to be minimal. If this 

is the case, then to the extent that the 

addition of odd-lot quotes to core data 

makes this strategy more difficult, the 

Commission believes that the cost to 

these traders of losing such an 

opportunity will also be minimal. On 

the other hand, if there is some benefit 

to posting quotes in odd-lot sizes to hide 

them from view (or at least from the 

view of market participants that do not 

observe these odd-lot quotes) despite 

the fact that users of proprietary DOB 

feeds can still see the quotes, the 

Commission believes that to the extent 

that the addition of odd-lot quotes to 

core data makes this strategy more 

difficult, there may be a cost to the 

traders who use such a strategy. The 

Commission cannot observe whether an 

odd-lot quote is being used to hide the 

order or not. 

Second, there may be costs to those 

traders who currently enjoy the position 

of being among the traders who can see 

odd-lot quotes via proprietary data 

feeds. The Commission believes that 

odd-lot quotes are more easily taken 

advantage of by those traders who can 

see the quotes. Currently, this advantage 

is available only to those traders who 

purchase proprietary data feeds. The 

Commission believes that this gives 

these traders an advantage over other 

traders by improving their order 

execution costs. Under the changes to 

core data, this advantage is likely to be 

reduced. If this were to happen, it will 

be because other traders will obtain the 

advantage as well and may take 

advantage of these quotes before the 

current direct feed subscribers do. To 

the extent that this happens, this cost to 

current direct feed subscribers from 

losing this advantage represents a 

transfer to the traders who can see the 

liquidity currently in odd-lots. The 

Commission is uncertain about the size 

of the loss in advantageous trading 

opportunities to traders who subscribe 

to the proprietary data. To quantify this 

requires knowing (among other things) 

when an odd-lot quote is traded with by 

a participant who had access to full 

odd-lot information and when it was 

traded with by a participant who did 

not know the quote was there, and this 

is not observable from available market 

data. 

It can sometimes happen that a 

market becomes locked or crossed in 

odd-lot orders. As a result of the final 

amendments, information on all odd-lot 

quotes priced at or better than the NBBO 

will now be included in expanded core 

data, and these locked and crossed oddlot orders will now be visible to 

subscribers of expanded core data that 

chose to receive odd-lot information. 

The economic effects of having these 

locked or crossed quotes visible to 

market participants who receive this 

data will be minor. In particular, to the 

extent that these crosses and locks in 

odd-lot sizes represent a profitable 

trading opportunity to those market 

participants who do not receive odd-lot 

information, being able to observe the 

occurrence of these events as a result of 

the receiving odd-lot quotes in 

expanded core data will be a benefit to 

these market participants. Also, to the 

extent that market participants who 

currently subscribe to proprietary feeds 

are able to profit from being the only 

market participants to observe crossed 

or locked odd-lots, the change will 

represent a cost to them. To the extent 

these market participants can profit 

from exploiting those market 

participants who cannot see the crosses 

or locks, this change will represent a 

transfer from those who currently trade 

on this information to those who 

acquire the information through new 

core data and are able to use it 

effectively. It is also possible that 

traders avoid sending orders because of 

the risk of being exploited if they cross 

or lock the market. To the extent that 

this happens and that the expansion of 

core data addresses this concern, the 

increase in trading that will result will 

represent a benefit to both sides of the 

trade. The Commission believes that 

some crossed or locked odd-lot quotes 

represent traders who are not aware at 

the time they post their quote that the 

quote could be filled by a marketable 

order elsewhere. To the extent this 

happens it represents a cost to this 

trader since the posted order is exposed 

to the risk that it will be executed with 

a marketable order at a price inferior to 

what is available on the market to the 

trader who posted the order. The final 

amendments will reduce this cost for 

market participants who receive odd-lot 

information because they will now be 

able to observe and trade with odd-lot 

orders available at better prices. 

(ii) Effects of Addition of Depth of Book 

Information 

The Commission is adding certain 

depth of book information to the 

definition of core data, which will result 

in this information becoming available 

to anyone who subscribes to this 

element of core data. The Commission 

believes that this information could be 

useful in trading, and therefore 

disseminating this information as an 

element of core data could have the 

effect of causing changes to the trading 

strategies of those market participants 

who currently rely solely on SIP data 

and will choose to buy depth of book 

information. This could potentially lead 

to improvements in order routing for 

these market participants or their clients 

and reductions in their execution costs 

and facilitate best execution. Adding 

certain depth of book information to the 

definition of core data may also lead to 

changes in order flow to trading venues, 

improvements in price efficiency of 

markets, and gains from trade that are 

not currently being realized. Market 

participants that choose to receive the 

depth of book data may experience 

implementation costs from having to 

upgrade infrastructure to account for the 

increase in message traffic from the 

data. 

Some commenters stated that most 

market participants do not need depth 

of book information.1969 However, other 

commenters believed that including 

depth of book data in core data would 

18756 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1970See, e.g., Clearpool Letter at 14; Healthy 

Markets Letter I at 3; DOJ Letter at 2–4. 

1971See supra Section V.C.1(c). 

1972See infra Section V.C.2(b). 

1973See supra Section V.B.2(a). Even if a brokerdealer previously received the data from proprietary 

feeds and now receives it from core data, clients of 

the broker-dealer may benefit if the broker-dealer 

indirectly passes on any cost savings from 

switching data to its clients. 

1974See infra Sections V.C.2(b)(i) and V.C.4(a). 1975See Nasdaq Letter IV at 33. 1976Commenters agreed that five levels of depth 

is sufficient for many market participants. See, e.g., 

State Street Letter at 2–3; Capital Group Letter at 3; 

Fidelity at 4. In addition, the staff analysis 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. 

See supra note 387. See also supra Section II.F.2(b). 1977See Lawrence E. Harris and Venkatesh 

Panchapagesan, The Information Content of the 

Limit Order Book: Evidence from NYSE Specialist 

Trading Decisions, 8 J. Fin. Mkts. 25 (2005); 

Jonathan Brogaard et al., Price Discovery without 

Trading: Evidence from Limit Orders, 74 J. Fin. 

1621–58 (2019); Shmuel Baruch, Who Benefits from 

an Open Limit-Order Book?, 78 J. Bus 1267 (2005) 

(presenting some theoretical results showing that 

liquidity takers benefit more from an open limit 

order book). 

1978See Proposing Release, 85 FR at Section 

III.C.2(c) (describing how market participants have 

stated that they believe they need depth of book 

information in order to run their businesses). See 

also supra Section V.B.2(a) (discussing the value of 

depth of book information). 

1979See, e.g., Schwab Letter at 1, 3 (‘‘providing 

depth-of-book data on the consolidated feed will 

give Main Street investors a critical look at market 

sentiment with regard to an individual security and 

pricing information for the size of the order they 

want to place’’); Angel Letter at 8. 

1980Commenters agreed including depth of book 

information in core data would help lower 

execution costs. See, e.g., RBC Letter at 4; ICI Letter 

at 8–9. 

1981See infra Section V.C.1(c)(iv). 

1982For a discussion of order execution quality 

and the provision of execution services by brokerdealers, see supra Section V.B.3(e). 

be useful for market participants.1970

The Commission recognizes that many 

market participants, including many 

retail investors, may choose not to 

receive all of the DOB information 

contained in expanded core data.1971

However, the Commission believes that 

there are some market participants that 

currently do not receive DOB 

information but may choose to receive 

this information from expanded core 

data if it is available at a lower price 

than equivalent proprietary DOB 

feeds.1972 If these market participants 

subscribe to this element of core data, 

then the Commission believes they will 

receive many of the benefits (and incur 

many of the costs) discussed below. 

Even if market participants do not 

directly receive all of the DOB 

information in expanded core data, they 

could realize some of the benefits if 

competing consolidators offer products 

that are derived from or contain some of 

the DOB information in expanded core 

data. For example, competing 

consolidators could offer a product that 

contains only information on the price 

and size available at the next best round 

lot price outside the NBBO. Because 

such a product would not significantly 

increase message traffic compared to 

receiving all DOB information in 

expanded core data, many market 

participants, including many retail 

brokers (who may offer it to their 

clients), may be able to utilize such a 

product and gain additional information 

that would allow them to lower their 

execution costs. Even if market 

participants do not receive any 

additional DOB information contained 

in expanded core data, they may still 

benefit indirectly from including depth 

of book information in core data if the 

broker-dealers handling their orders use 

the information. If a broker-dealer 

previously did not have access to DOB 

information, then its clients may benefit 

if a broker-dealer uses the DOB 

information in expanded core data 

when handling customer orders, which 

may improve their execution 

quality.1973 Additionally, the 

Commission believes that the depth of 

book information in expanded core data 

may benefit market participants who 

substitute it for proprietary DOB feeds if 

it is available at lower cost 1974 The 

Commission is not able to quantify the 

number of market participants who will 

directly utilize the depth of book 

information in core data because it 

would depend on the future fees the 

Equity Market Data Plan establishes for 

the additional content of core data. 

One commenter stated that it was 

unclear if five levels of depth would be 

useful to any investors at all.1975

However, the Commission believes, and 

commenters agree, that including five 

levels of depth in expanded core data 

will benefit market participants.1976 The 

Commission acknowledges that market 

participants that substitute expanded 

core data for proprietary DOB feeds will 

not receive as much depth of book 

information and may experience a 

reduction from the benefits they receive 

from such information. However the 

Commission believes that these market 

participants will only substitute 

expanded core data for proprietary DOB 

data if the money they save exceeds the 

value of the reduction in benefits from 

not receiving the additional information 

contained in proprietary DOB feeds. 

The Commission believes that adding 

the depth of book information as an 

element of core data will benefit market 

participants who previously relied 

exclusively on SIP data and who choose 

to receive this element of expanded core 

data. Academic research has found 

evidence that valuable trading 

information can be obtained from the 

full depth of a limit order book.1977 As 

noted in the Proposing Release, some 

market participants also believe that 

depth of book information is 

valuable.1978 Currently, only traders 

who subscribe to exchanges’ proprietary 

data feeds can receive this information. 

As a result of the final amendments, 

additional depth of book information 

will become available to anyone who 

subscribes to these elements of core 

data. The Commission believes that 

market participants, including, as 

suggested by commenters, some retail 

investors,1979 that currently rely solely 

on SIP data could use the additional 

depth of book information to improve 

trading strategies and to lower execution 

costs.1980 To the extent that the 

advantage of having this information 

depends on other traders not having it, 

this economic effect will represent a 

transfer from the current users of depth 

of book information to those market 

participants who will now get access to, 

and will be able to utilize, this 

information.1981 In particular, a more 

widespread dissemination of depth of 

book information may cause market 

prices to adjust to this information more 

rapidly as more people react to this 

information. Once market prices settle 

to a level that reflects this information, 

the opportunity to profit from having 

additional depth of book information 

may be lost. 

The Commission believes that market 

participants who use strategies related 

to order routing, order placement, and 

order execution, may benefit from the 

new depth of book information, 

provided that currently they do not 

already obtain this information via 

proprietary data feeds. For instance, 

market participants may seek to get 

priority in the queue at a particular 

price level behind the top of book by 

posting a limit order. Such a strategy 

may benefit from being able to see the 

depth at these price levels at multiple 

exchanges in order to evaluate which 

exchange’s queue would provide the 

order with the highest execution 

priority. To the extent this is the case, 

the Commission believes that market 

participants who previously did not 

have access to additional depth of book 

information will benefit by being able to 

better run such strategies. This could 

improve order execution quality for 

these market participants (or their 

clients).1982 The Commission believes 

that many of the market participants 

who utilize such strategies already have 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18757 

1983The inclusion of depth of book information 

may benefit those market participants who already 

use depth of book information by providing 

alternatives to proprietary feeds. For a discussion of 

this effect, see infra Section V.C.1(c)(iv). Also, the 

Commission understands that some market 

participants who use proprietary feeds as their main 

source of market data also use the exclusive SIP 

feeds as a backup. For such market participants, the 

expansion of DOB information may improve the 

value of a core data feed as a backup. 

1984The Commission requested comment on 

market participants who run order routing strategies 

without access to DOB information but did not 

receive information from commenters that would 

help quantify the number of market participants 

that use such strategies. The Commission believes 

that it is possible that the inclusion of this 

information in the definition of core data, along 

with reductions in the latency differential that will 

result from the decentralized consolidation model, 

may benefit market participants who do not 

currently run these strategies but who will choose 

to start running them as a result of the changes. For 

more discussion on this possibility, see infra 

Section V.C.4(b). 

1985See infra Section V.C.2(b)(i) for a discussion 

of consolidated market data fees and Section 

V.C.4(b) for a discussion of market participants who 

may start running such strategies. 

1986One commenter stated that this information 

‘‘should be essential’’ to the Commission’s analysis, 

yet did not provide such information. See Nasdaq 

Letter IV at 47. The Commission requested 

comment on this issue but did not receive 

information to help determine these effects, which 

is unobservable in the current market. 

1987For further discussion of this point, see infra 

Section V.D.1. 

1988A commenter agreed that including depth of 

book information in core data would improve price 

discovery. See RBC Letter at 4. 

1989See supra note 1673. 

1990See id. 

1991See Nikolaus Hautsch and Ruihong Huang, 

Limit Order Flow, Market Impact and Optimal 

Order Sizes: Evidence from NASDAQ TotalViewITCH Data, at 10, Table 3 (Aug. 22, 2011), available 

at https://papers.ssrn.com/sol3/papers.cfm?

abstract_id=1914293 (Retrieved from SSRN Elsevier 

database). 

1992The Commission requested comment on to 

what extent any benefits of including depth of book 

information in core data depend on the degree to 

which orders walk the book. No commenters 

provided information on the willingness of market 

participants to walk the book if they received the 

new DOB information from expanded core data. 

1993See supra Sections II.C.2(a) and III.C.8(a)(ii). 

access to full depth of book information 

via subscriptions to proprietary feeds; 

for these traders the additional core data 

will not produce a direct benefit.1983

The Commission is unable to quantify 

the number of market participants who 

currently run these types of strategies 

without using depth of book 

information because the Commission 

does not have access to information on 

specific strategies utilized by individual 

traders in the market.1984

Also, the Commission believes that 

there may be market participants that 

would start running these order routing 

strategies if the data were available to 

them at prices lower than the current 

prices for equivalent data in proprietary 

feeds.1985 These market participants 

might currently find that the value of 

attempting such strategies without DOB 

data is too low to justify them, but that 

access to additional DOB data through 

these elements of the new definition of 

core data will enable them to run such 

strategies effectively. To the extent that 

such market participants exist, the 

additional DOB data will be a benefit to 

them as well. 

The revision in trading strategies 

discussed above may result in changes 

to the decisions traders make about 

where to route their orders among the 

various trading venues. Market 

participants may find that depth of book 

information suggests trading 

opportunities on exchanges to which 

they would not have otherwise routed 

their orders. The Commission is 

uncertain about the magnitude of this 

effect or which trading venues may gain 

or lose order flow as a result. The 

Commission cannot determine how 

many market participants may choose to 

change routing strategies as a result of 

the new depth of book information, nor 

to what extent the new depth of book 

information will cause market 

participants to change where they route 

their orders.1986

Also, the Commission believes that 

the more widespread dissemination of 

depth of book information may result in 

more efficient pricing.1987 As more 

traders take advantage of information 

contained in the depth of book data, 

prices will reflect this information more 

quickly.1988 Therefore, more widespread 

dissemination of depth of book 

information may lead to pricing that 

better reflects available information. The 

size of this effect depends on the 

willingness and ability of market 

participants who currently rely solely 

on SIP data to make use of the 

information in the new depth of book 

data, which is unobservable. 

The Commission believes that there 

may be gains from trade that will be 

realized as a result of adding this depth 

of book information as an element of 

core data. The possibility for this benefit 

to materialize relies on the extent to 

which there exist market participants 

who will be willing to send orders that 

‘‘walk the book’’ 1989 but currently do 

not do so because they do not see what 

is beyond the top of the book. This 

situation represents a current economic 

inefficiency because there are potential 

gains from trade that are not realized 

because of a lack of information. This 

would benefit both the market 

participant walking the book and the 

market participants who posted orders 

behind the BBO that will be filled as a 

result of the trade. 

Relatively few orders actually execute 

at prices outside the NBBO,1990 which 

implies that trading against quotes away 

from the NBBO on a single exchange, 

using a single marketable order, does 

not occur frequently. In addition, an 

analysis of a sample of trading in ten 

stocks on the Nasdaq exchange found 

that an average of 0.65% of market 

orders walked through the best 

displayed price level for these ten 

stocks.1991 Therefore, the Commission 

believes that there may be limited 

benefits from additional DOB 

information in the particular 

hypothetical case of market participants 

who currently rely solely on SIP data for 

market information and who will 

submit market orders to trade against 

limit orders beyond the top of the book 

on a single exchange when the depth of 

book information is available in core 

data. However, the size of the benefit 

depends on the willingness of market 

participants to walk the book after 

receiving the new DOB information, as 

well as their trading interest, and this is 

unobservable in the current market.1992

The addition of depth of book 

information to expanded core data will 

increase the total message traffic in 

expanded core data, and this increase in 

message traffic will be accompanied by 

costs to market participants to set up the 

infrastructure required to handle this 

new level of traffic. Additionally, 

competing consolidators and SROs may 

incur implementation costs related to 

receiving and generating the 

information necessary to process and 

disseminate consolidated market data. 

However, market participants are not 

required to receive (or display) the DOB 

information contained in expanded core 

data, and competing consolidators will 

not be required to disseminate all of the 

information in consolidated market 

data, including DOB information 

contained in expanded core data, so 

they will not incur these costs unless 

they choose to receive or disseminate 

this information.1993 These costs are 

discussed below in Section V.C.1(c)(iv). 

(iii) Effects of Addition of Auction 

Information 

The Commission is adding ‘‘auction 

information’’ as an element of core data. 

This will result in all auction 

information currently disseminated by 

exchanges via proprietary data feeds 

being made available to subscribers of 

these elements of core data feeds. This 

will have effects that include changes to 

market participants’ trading strategies, 

gains from trade as a result of new 

18758 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

1994See, e.g., TD Ameritrade at 5; Nasdaq Letter 

IV at 33; Data Boiler Letter at 31. 1995See, e.g., CBOE Letter at 21; Angel Letter at 

8; SIFMA Letter at 7; Virtu Letter at 5. 1996See supra Section V.B.2(a). 1997See id. 1998Market participants who currently receive 

auction information through proprietary feeds may 

switch to using the auction information contained 

in expanded core if it is available at lower cost than 

equivalent data from proprietary feeds. See infra 

Section V.C.2(b). 

1999Since the cost to integrate multiple auction 

feeds into a single feed is a fixed cost in producing 

a market data feed, the Commission believes that 

there would still be a benefit from the rule in the 

form of competing consolidator integrated auction 

feeds, which could be cheaper for market 

participants than integrating the feeds themselves. 

2000See Proposing Release, 85 FR at nn. 344–46. 

Commenters agreed auction information is useful 

for predicting price movements and placing orders 

in closing auctions. See supra note 1678. 

2001Commenters agreed that including auction 

information in core data may promote more 

informed and effective trading in auctions. See, e.g., 

Clearpool Letter at 15. 

2002One commenter agreed that including auction 

information in core data would level the playing 

field for investors. See Virtu Letter at 5. 

Commenters also agreed that including auction 

information in core data would reduce information 

asymmetry between subscribers of SIP data and 

proprietary DOB feeds. See, e.g., IntelligentCross 

Letter at 4; Clearpool Letter at 15. One commenter 

stated including auction information in core data 

would benefit retail investors by reducing 

information asymmetry between retail investors and 

more informed market participants. See Angel 

Letter at 8 (‘‘Retail investors should be properly 

informed with appropriate information about the 

indicative auction price and the trading imbalance. 

Otherwise, we will be at a serious disadvantage to 

other better informed players.’’). 2003Commenters stated that the costs of 

proprietary data feeds prevent some market 

participants from competing in auctions. See, e.g., 

ICI Letter at 9–10; SIFMA Letter at 7. 2004Commenters agreed that including auction 

information in core data would result in more 

market participants participating in auctions. See, 

e.g., BlackRock Letter at 2; ICI Letter at 9–10. 2005See, e.g., BlackRock Letter at 2; 

IntelligentCross Letter at 4. 2006Commenters agreed that adding auction 

information to core data would improve price 

discovery. See, e.g., BlackRock Letter at 2; ICI Letter 

at 9–10; Data Boiler Letter at 31. 

participation in auctions, potential 

improvements to price discovery in 

auctions, changes to order routing 

decisions, and a significant reduction in 

the value of dedicated proprietary 

auction feeds. 

Several commenters stated that 

auction information may only be useful 

to sophisticated investors who already 

receive it and that including it in core 

data may not benefit most market 

participants.1994 However, other 

commenters stated that investors, 

including retail investors, would benefit 

from including auction information in 

expanded core data.1995 The 

Commission disagrees with the first set 

of commenters. The Commission 

believes including auction information 

in core data would expand its 

availability and allow more market 

participants to receive the benefits 

described below. Even if market 

participants do not directly access 

auction information, including it in core 

data may indirectly benefit market 

participants. If broker-dealers that do 

not currently receive auction 

information utilize the auction 

information included in core data to 

improve their handling of customer 

orders that participate in opening and 

closing auctions, it may improve their 

execution quality. More participation in 

closing auctions could also improve the 

price efficiency of closing prices, which 

could lead to better trading outcomes for 

market participants that rely on closing 

prices resulting from closing auctions, 

but do not participate directly in closing 

auctions. 

As discussed above, some auction 

information is currently available to 

market participants through specialized 

feeds,1996 and also a limited set of 

auction information is available through 

the current SIP feeds.1997 The 

availability of these feeds enables access 

to a limited set of auction information 

for some market participants without 

having to subscribe to full DOB feeds. 

To the extent that any market 

participants find these specialized 

auction feeds sufficient for their trading 

needs, the Commission believes that the 

addition of all auction information as an 

element of core data will have a limited 

effect on these market participants.1998

To the extent that those market 

participants make up a large share of the 

market participants who would be 

interested in using additional auction 

information, the Commission believes 

that the effect of adding auction 

information may be limited.1999 The 

Commission believes that the extent of 

this limitation is reduced by the fact 

that not all auction information is 

available to market participants through 

such feeds. The Commission does not 

have data on the number of market 

participants with these proprietary feed 

subscriptions. 

The Commission believes that auction 

information contains insights useful to 

market participants in devising and 

executing trading strategies.2000

Therefore, the Commission believes that 

adding this information as an element of 

core data will benefit those market 

participants (including retail investors) 

who currently do not access such 

information, as well as their clients. To 

the extent that these market participants 

can use this auction information, the 

addition of this information as an 

element of core data will enable them to 

produce better trading strategies and 

lower execution costs for their own 

orders and for their clients’ orders, as 

well as facilitate best execution.2001 To 

the extent that the advantages of 

possessing auction information come 

from exploiting the trading decisions of 

market participants who lack this 

information, this effect will represent a 

transfer from those market participants 

who currently have auction information 

to those market participants who would 

obtain access to it through this rule and 

are able to exploit it to improve their 

trading strategies.2002 The Commission 

believes that this auction information 

could potentially be used across all 

trading venues, including exchange 

auctions, continuous exchange trading, 

and off-exchange venues. 

The Commission believes that the 

addition of auction information as an 

element of core data will result in 

increased participation in auctions, 

which may allow market participants to 

realize potential gains from trade. 

Commenters suggested that there are 

market participants who do not 

currently trade in auctions because they 

do not access auction data due to the 

cost of proprietary feeds.2003 To the 

extent that such market participants 

exist, including auction information in 

core data will allow these market 

participants to access this information, 

which may allow them to gain insights 

about trading opportunities that induce 

them to trade in auctions.2004

Commenters stated that an increase in 

auction participation will also increase 

auction liquidity.2005 The Commission 

agrees and believes that increased 

auction liquidity will also result in 

increased trading during auctions, 

which could benefit both sides of the 

trade, thus resulting in an economic 

benefit. To the extent that market 

participants who start trading in 

auctions as a result of gaining access to 

auction information possess insights 

beyond what can be inferred from 

auction information, increasing the 

number of participants in auctions as 

described above should improve price 

discovery in the auction process.2006

The Commission believes that those 

who do not participate in auctions 

because they do not access auction 

information are unlikely to possess 

insights beyond what can be inferred 

from auction information. This is 

because any market participant who has 

such insights would find it worthwhile 

to purchase auction information and 

participate in the auction so as to 

exploit the value of the insights. 

Therefore, the size of this effect depends 

on the number of market participants 

who currently possess such insights 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18759 

2007Similarly, if auction imbalance information 

indicated a market participant’s order would be 

more likely to execute in an auction at a better 

price, then the market participant may choose to 

have the order participate in the auction instead of 

continuous trading. 

2008See infra Section V.C.4(a) (discussing effects 

on exchange proprietary revenue). 

2009See Proposing Release, 85 FR at n. 335. 

2010See supra Section III.C.8(a)(ii). 

2011See infra Section V.C.2(a) for a discussion of 

the technological capabilities of firms the 

Commission believes are most likely to become 

competing consolidators. It is possible that the new 

definition of core data will make consolidation 

more difficult for core data than it is currently, and 

that this added difficulty will result in additional 

latency. However, the Commission believes that the 

risk of this is minimal, again because of the 

technological capabilities of competing 

consolidators and the market forces that will be in 

effect in the decentralized consolidation model. 

2012See supra Section V.B.2(a). 

2013See infra Sections V.C.2(a) and V.C.2(f). 

2014See FINRA Letter at 3–4. See supra Section 

III.B.9(e). 

2015As discussed above, this new regulatory data 

will consist of all the same messages as current 

regulatory data distributed through the exclusive 

SIPs. See supra Sections II.H and II.I. See also 

Proposing Release, 85 FR at Section III.D. 

relative to those who do not who start 

participating in auctions as a result of 

this rule and the size of their resultant 

auction trades. Both of these effects are 

unobservable in the current market. 

Further, the Commission believes that 

the addition of auction information as 

an element of core data may affect the 

order routing decisions of market 

participants who currently do not have 

access to auction information. For 

example, some off-exchange trading 

venues cross market-on-close orders 

before the closing auction takes place 

and later settle the trades at the closing 

auction price. To the extent auction 

information is made available prior to 

the applicable cut-off time, if any, for 

the submission of closing orders to offexchange venues, having access to 

auction imbalance information may 

affect market participants’ decision to 

route a closing order to either an offexchange venue or to the closing 

auction on the primary listing exchange. 

For example, a market participant who 

gets access to auction information 

through a subscription to these elements 

of new core data might decide not to 

route the order to an off-exchange venue 

so as to be able to participate in the 

auction using the new information 

available. Additionally, this auction 

information could also affect decisions 

made during the time when auction 

information is disseminated about 

whether an order should participate in 

continuous market trading or an 

auction. For example, if auction 

imbalance information indicates that an 

order would have a low probability of 

executing in an auction (or would be 

likely to execute at a worse price than 

if the order executed during continuous 

trading), then a market participant may 

decide the order should participate in 

continuous market trading, instead of 

the auction, to increase the chance the 

order is filled (or executed at a better 

price).2007 However, the overall effect of 

auction information on order routing 

decisions is uncertain and likely will 

vary based on market conditions. 

The Commission believes that the 

value of dedicated proprietary auction 

feeds will be substantially reduced as a 

result of the addition of auction 

information to core data, and that this 

will result in a loss of revenue for those 

exchanges who offer such feeds.2008 The 

Commission believes that the value of 

any existing data product that provides 

only auction data 2009 that is not 

currently in the exclusive SIP feeds will 

be substantially reduced because of the 

loss of revenue from these dedicated 

auction feeds. The Commission expects 

that many market participants who are 

executing a trade, either for themselves 

or for a client, have, and will continue 

to have, a subscription to core data. 

(iv) General Costs to Expanding 

Consolidated Data 

The Commission believes that there 

are four potential costs to adding the 

new core data elements, which are 

common across all these elements. The 

first potential cost is the cost to the new 

competing consolidators that will be 

necessary to implement or upgrade 

existing infrastructure and software in 

order to handle the dissemination of the 

additional core data message traffic. The 

second potential cost is the cost to SROs 

to implement system changes required 

in order to make regulatory data and 

other data needed to generate 

consolidated market data available to 

competing consolidators. The third cost 

is the technological investments market 

participants might have to make in 

order to receive the new core data 

message traffic. The fourth cost is the 

cost to users of certain kinds of trading 

strategies that may currently be relying 

on the fact that this data is not widely 

distributed today. 

The Commission believes that the cost 

for firms that wish to become competing 

consolidators to implement or upgrade 

infrastructure to handle the 

dissemination of odd-lot quotes, depth 

of book information, and auction 

information will be limited. Competing 

consolidators will not be required to 

disseminate all of the information in 

consolidated market data, including the 

additional data elements contained in 

expanded core data, so they will not 

incur these costs unless they choose to 

disseminate this information.2010 As 

discussed in more detail below,2011 the 

Commission believes that the new 

competing consolidators will likely be 

firms that already have the 

technological infrastructure necessary to 

process full depth of book data and to 

generate the NBBO using this data. 

Therefore, for these firms, processing 

the new message traffic resulting from 

the additional content of expanded core 

data may add only a minimal cost to 

becoming a competing consolidator. 

However, for a firm that does not 

currently subscribe to, or process data 

from, exchange proprietary feeds, the 

additional message volume will increase 

the cost of becoming a competing 

consolidator if they choose to offer a 

consolidated market data product that 

includes the additional data elements 

contained in expanded core data. In 

particular, if the existing exclusive SIPs 

should decide to enter the competing 

consolidator business and choose to 

offer a consolidated market data product 

containing this data, they may incur 

such costs as they do not currently 

disseminate full depth of book data. 

These costs are included in the 

estimated costs for competing 

consolidators discussed below in 

Section V.C.2(d)(i). 

The Commission believes that there 

will be some infrastructure investment 

required on the part of SROs to provide 

the information necessary to process 

and disseminate consolidated market 

data. The Commission believes that the 

infrastructure investment required by 

most SROs to provide the elements 

necessary to generate core data will be 

limited, because most SROs currently 

provide all elements of the new 

definition of core data over their 

proprietary feed infrastructure.2012 In 

addition, the Commission believes that 

many competing consolidators and selfaggregators will be firms that already 

subscribe to these feeds,2013 and thus, 

the SROs will likely not have a large 

amount of new data connections to 

service and therefore will not need to 

invest in infrastructure to handle them. 

However, as discussed by a commenter, 

FINRA may incur higher infrastructure 

investment costs in order to make data 

from the ADF available to competing 

consolidators and self-aggregators 

because it currently only provides this 

data to the SIPs.2014 Additionally, 

exchanges, particularly primary 

markets, may incur some infrastructure 

costs related to the dissemination of 

new regulatory data.2015 Currently, the 

18760 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2016See FINRA Letter at 3. 

2017As discussed below, an SRO would incur 

costs, which could include costs related to 

expanding connectivity and making sure the data is 

delivered at similar speeds to its other proprietary 

feeds, if it developed a separate feed to distribute 

the data necessary to generate consolidate market 

data. However the Commission does not believe 

that an SRO is likely to develop a separate feed and 

incur the costs. See infra Section V.C.2(d)(v). 

2018See supra Section III.B.6. 

2019The Commission believes that the addition of 

information on odd-lots quotes that are priced at or 

more aggressively than the NBBO and the addition 

of DOB information, in particular, may substantially 

increase message traffic. See Proposing Release, 85 

FR at n. 294. Commenters agreed that the expansion 

of new core data, especially the inclusion of DOB 

would significantly increase message traffic. See, 

e.g., Virtu Letter at 5; STANY Letter II at 3. 

2020See, e.g., Virtu Letter at 5; TD Ameritrade 

Letter at 5. 2021A market participant that has obligations 

under Rule 603(c) will have to receive all data 

necessary to generate consolidated market data to 

comply with the rule. The specific cost associated 

with some of this data is discussed below. See infra 

Section V.C.2(d). 2022See infra note 2290 and accompanying text. 2023See, e.g., STANY Letter II at 3. 2024See infra Sections V.C.2(c)(ii) and 

V.C.2(c)(iii). 

2025See supra Section V.B.2(b). 

2026See infra Section V.C.2(c)(iii). 

2027See Nasdaq Letter IV at 31. 

new regulatory data component to 

consolidated market data is distributed 

through the SIPs. In order for this 

information to be distributed through 

the new decentralized consolidation 

model, the rule requires the exchanges 

to provide a feed to competing 

consolidators and self-aggregators that 

contains the regulatory data. The 

Commission believes that the 

infrastructure and operational processes 

to provide such a feed are currently not 

completely in place and will require 

investment on the part of exchanges. 

These costs are included in the 

estimated costs for SROs discussed 

below in Section V.C.2(d)(ii). 

One commenter stated that requiring 

each SRO to connect and transmit data 

to a large number of competing 

consolidators and self-aggregators could 

significantly increase costs for SROs.2016

The Commission disagrees with this 

commenter. As discussed above, the 

Commission does not believe that SROs 

will need to add significant connectivity 

to account for competing consolidators 

and self-aggregators, because the 

Commission believes that most market 

participants who will become 

competing consolidators and selfaggregators already subscribe to 

exchange proprietary data feeds.2017

The Commission believes that there 

will be costs for infrastructure 

investment in order for market 

participants to receive the new odd-lot, 

DOB, and auction information 

components of core data. However, 

because market participants will not be 

required to receive the additional 

information in core data, the 

infrastructure investment costs will be 

limited to those market participants that 

choose to receive it.2018 Adding these 

components to core data will 

substantially increase the total message 

traffic in core data,2019 and this increase 

in message traffic will be accompanied 

by costs to market participants to set up 

the infrastructure required to handle 

this new level of traffic. Commenters 

stated that this will require significant 

infrastructure upgrades to receive the 

data.2020 The Commission 

acknowledges that some market 

participants will require significant 

infrastructure upgrades to receive the 

additional elements of core data. 

However, the Commission notes that the 

final amendments will not require 

market participants to receive (or 

display) the complete set of 

consolidated market data, and 

competing consolidators will not be 

required to deliver all proposed 

consolidated market data for each data 

product they offer.2021 Therefore, most 

market participants who do not want to 

incur the costs associated with the 

expanded core data message traffic due 

to additional odd-lot information, depth 

of book information, or auction 

information will be able to choose not 

to receive any such additional 

information. Thus, market participants 

who do not wish to incur the cost of the 

infrastructure investments necessary to 

receive the new core data will not. For 

those market participants who do wish 

to incur the cost, the Commission is 

unable to estimate the associated costs 

because the costs would vary across 

market participants and depend on each 

market participant’s existing 

infrastructure.2022

Some commenters stated that the 

increase in message traffic from 

expanding core data will increase the 

latency of core data.2023 The 

Commission does not believe that 

expanding the content of core data will 

increase the latency of core data when 

it is combined with the decentralized 

consolidation model. The Commission 

believes that competing consolidators 

will develop technology to handle the 

expanded content of core data and to 

reduce the latency of aggregating and 

transmitting core data.2024 The 

Commission understands that third 

party market data aggregators aggregate 

and disseminate proprietary DOB feeds 

(which contain additional message 

traffic) at lower latencies than the 

exclusive SIPs and expects that 

competing consolidators would use 

similar technology to aggregate and 

disseminate the expanded content of 

core data at lower latencies than the 

exclusive SIPs.2025 Furthermore, the 

decentralized consolidation model will 

also reduce geographical latency by 

eliminating the extra hop that the 

exclusive SIPs currently experience.2026

As discussed above, market participants 

may also need to expand their 

bandwidth and invest in additional 

technology and infrastructure to handle 

receiving the additional content in core 

data. The increase in message traffic 

could increase the latency of market 

participants receiving expanded core 

data if they do not make these 

investments. However, the Commission 

believes that for those market 

participants who choose to receive the 

entire content of consolidated market 

data, these market participants will 

make the investments in technology to 

receive the data and not add latency. 

The Commission believes that adding 

the odd-lot quote, depth of book, and 

auction information to core data may 

impose a cost on traders who rely on 

strategies that take advantage of the fact 

that the information in odd-lot quote, 

depth of book, and auction data is not 

widely distributed (i.e., those traders 

who are beneficiaries of existing 

informational asymmetries). To the 

extent that some of the value of odd-lot 

quote, depth of book, and auction 

information lies in the fact that they 

currently are not observed by a number 

of market participants, the Commission 

believes that the dissemination of this 

data will adversely impact the 

profitability of such trading strategies. 

For traders using trading strategies 

based on depth of book information, the 

magnitude of the cost caused by the 

proposed amendments will depend on 

the extent to which the five aggregated 

levels of depth approximate the 

information contained in the full depth 

of book information. To the extent that 

these strategies exploit the lack of 

information on the part of exclusive SIPreliant traders, this cost will represent a 

partial transfer to traders who currently 

rely solely on SIP data. The Commission 

is unable to estimate the size of this 

effect, since it does not have a method 

for detecting the use of such trading 

strategies from market data or 

determining what the profit on such 

strategies would be if they could be 

detected. 

One commenter stated that the 

Commission did not evaluate the effects 

of the potential changes in these trading 

strategies, including its effects on 

liquidity on ‘‘lit’’ markets.2027 The 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18761 

2028See infra Section V.C.4(a). 

2029See Nasdaq Letter IV at 7 (‘‘Expropriating the 

proprietary market data products that Nasdaq and 

others have spent years developing would rob them 

of the fruits of their labors and dash their incentives 

to develop new and innovative data products going 

forward.’’). 

2030For commenters’ views regarding current 

retail core data costs see, e.g., Angel Letter at 11 

(stating retail ‘‘nonprofessional’’ investors pay 

almost nothing in direct fees for market data and 

that most of the data costs are picked up by 

‘‘professional’’ users as a result of the good price 

discrimination in the current system that favors 

retail investors); Nasdaq Letter IV at 38. For 

commenters’ views regarding cost increases to retail 

investors from the expansion of core data content, 

see, e.g., Nasdaq Letter IV at 38; TD Ameritrade 

Letter at 2, 14–15; Angel Letter at 24. 

2031See Nasdaq Letter IV at 38. 

2032Retail investors may not directly pay for 

market data, but the costs of retail investors 

accessing market data may be indirectly passed on 

through the fees charged by retail broker-dealers. 

2033See infra Section V.C.2(b) for a detailed 

discussion of these fees. 

2034Commenters agreed that there is uncertainty 

about the potential market for competing 

consolidators. See, e.g., Nasdaq Letter IV at 8. 

2035Competing consolidators will need to have 

systems and connections in place to receive data 

content from all SROs and then to disseminate the 

consolidated market data to a variety of market 

participants who will purchase their products. See 

Continued 

Commission does not believe that 

changes in these trading strategies will 

have a significant effect on the liquidity 

on exchanges because increased 

competition from new market makers 

and broker-dealers that receive the 

expanded content of core data (which 

contribute to the reduction in the profits 

of those traders who are beneficiaries of 

existing informational asymmetries) will 

offset any liquidity reduction that may 

have occurred from changes in the 

trading strategies of those traders who 

are beneficiaries of existing 

informational asymmetries.2028

However, the Commission is unable to 

estimate the size of this effect because 

it cannot estimate the extent to which 

the profitability of such trading 

strategies will be affected. 

One commenter stated that one cost 

the Commission did not consider in the 

expansion of core data was that, to the 

extent that the definition of core data 

continues to be updated in the future 

Commission rulemaking to include 

more proprietary data in it, exchanges 

will have less incentive to innovate and 

provide new or improved proprietary 

data products.2029 The Commission 

agrees that to the extent this happens, 

the incentive to innovate will be 

reduced. However, the Commission 

does not believe that the incentive to 

innovate will be entirely removed. The 

final rules do not include all proprietary 

data elements in consolidated market 

data and do not contemplate any 

updates to core data (except for 

additions to auction data information). 

Therefore, exchanges may be able to 

expect that some amount of revenue 

could be collected on new proprietary 

data products developed. To the extent 

that the Commission does not change 

the definition of core data in the future 

to include any new data products after 

such products are made available, the 

exchanges may be able to collect a 

significant amount of revenue on such 

products and therefore will continue to 

have strong incentives to innovate. To 

the extent that the Commission 

frequently changes the definition of core 

data to include new products developed 

by exchanges soon after they are made 

available, exchanges may not be able to 

collect significant revenue from them 

and their incentives to innovate will 

weaken. In the event that exchange 

incentives to innovate are weak, the lost 

innovation may represent a significant 

cost to the market. 

Commenters stated that retail 

investors currently receive core data at 

little or no cost and that the expansion 

of core data content would increase 

costs for retail investors.2030 One of 

these commenters stated that currently 

retail investors who do not use depthof-book data and auction data do not 

pay for it, but that the proposed rule 

will replace this with a single feed that 

is too much data for the retail 

investor.2031 The Commission believes 

that there is uncertainty regarding the 

cost of market data that retail investors 

will pay.2032 One factor would be the 

data content that retail investors receive. 

If retail brokers supply retail investors 

with some of the additional content 

from expanded core data, then their 

costs could increase but still be lower 

than the current cost of receiving 

equivalent data from SIP and 

proprietary feeds. However, even if 

retail brokers do not supply retail 

investors with any additional content 

from expanded core data, there are 

reasons that the overall cost of market 

data for retail investors could stay at 

similar rates or decrease relative to the 

fees charged by the current exclusive 

SIPs, including, among other things, the 

fees set by the Equity Data Plan(s) and 

whether they establish fees for data 

content underlying consolidated market 

data offerings that use subsets of 

consolidated market data (i.e., for only 

TOB data, DOB data, etc.), as well as the 

different products offered by competing 

consolidators and how they allocate 

fixed costs.2033

2. Decentralized Consolidation Model 

This section focuses on the economic 

effects pertaining to the decentralized 

consolidation model. We first discuss 

the relevant broad economic 

considerations and economic benefits 

and costs of the decentralized 

consolidation model with regards to 

competing consolidators, then we 

address economic benefits and costs for 

self-aggregators, and finally we 

conclude with the discussion of 

conforming changes. 

(a) Broad Economic Considerations 

About the Decentralized Consolidation 

Model 

The economic analysis of the effects 

of the decentralized consolidation 

model assumes that upon the 

introduction of the model, a sufficient 

number of competing consolidators will 

enter the market so that competitive 

market forces will have a significant 

effect on their behavior. Several factors 

affect the reasonableness of this 

assumption: Barriers to entry into the 

competing consolidator space, fees for 

data content, uncertainty regarding 

connectivity charges for data underlying 

consolidated market data, potential size 

of the market for consolidated market 

data products, and competing 

consolidators’ ability to offer 

differentiated products. While the 

Commission recognizes uncertainty in 

these factors 2034 and that certain 

economic impacts depend on this 

assumption, the Commission believes 

that the risk of too few competing 

consolidators entering the market, and 

thus, precluding any potential benefits 

from materializing is low. Further, the 

Commission will consider the state of 

the market and the general readiness of 

the competing consolidator 

infrastructure in determining whether to 

approve a national market system plan 

amendment that will effectuate a 

cessation of the operation of the existing 

exclusive SIPs. 

(i) Factors 

(a) Barriers to Entry 

The first factor that will affect the 

number of competing consolidators is 

the barriers to entry. Potential entrants 

into the competing consolidator 

business could incur two types of 

barriers to entry: Business 

implementation costs that emerge from 

the technical necessities of becoming a 

competing consolidator and regulatory 

compliance costs. The business 

implementation costs will include 

creation or modification of technical 

systems to receive, consolidate, and 

disseminate consolidated market 

data.2035 Potential entrants will also 

18762 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

supra Section V.C.1(b)(vi) and infra Section 

V.C.2(d). One commenter agreed that infrastructure 

costs would serve as a barrier to entry for potential 

competing consolidators. See NYSE Letter II at 15 

(‘‘[t]he significant costs required to develop, test, 

and support these technologies—costs that even 

existing data processors would incur—would serve 

as a barrier to entry for the competing consolidator 

market.’’). As discussed in detail in this section and 

below in Section V.C.2(d), the Commission believes 

that the costs for potential competing consolidators 

to develop and implement their systems will vary 

based on the type of entity that becomes a 

competing consolidator, but for some types of 

entities, these costs could be significantly higher 

and pose a larger barrier to entry. 

2036See supra Sections III.C.7 and III.C.8 

(discussing the requirements of Rule 614). See also 

supra Section III.F (discussing the requirements of 

Rule 614(d)(9) and Regulations SCI). New entrants 

will face both initial implementation and ongoing 

costs to comply with these regulatory requirements. 

See infra Sections V.C.2(d) and V.C.2(e)(ii) 

(discussing these costs). 

2037See supra Sections IV.D.3 and IV.G. See also 

infra Sections V.C.2(d) and V.C.2(e)(ii). 

2038See infra Section V.C.2(d). 

2039See id. See also infra Sections V.C.3 (for costs 

associated with Form CC); V.C.2(e)(ii) (for costs 

associated with Rule 614(d)(9) and Regulation SCI). 

2040Although potential competing consolidators 

will initially be subject to the lower costs of Rule 

614(d)(9) rather than Regulation SCI, which will 

lower the initial barriers to entry, the Commission 

expects that many competing consolidators will 

eventually be SCI competing consolidators and that 

potential competing consolidators will take the 

higher costs of eventually becoming an SCI 

competing consolidator into account when deciding 

to enter the market. Rule 614(d)(9), which includes 

requirements similar to some of the key provisions 

of Regulation SCI, will apply to all competing 

consolidators (except competing consolidators 

affiliated with exchanges that do not operate under 

the limited exemptive relief) during the initial 

transition period and smaller competing 

consolidators that do not meet the market data 

revenue threshold for SCI competing consolidators 

thereafter. All competing consolidators that meet 

the consolidated market data revenue threshold for 

SCI competing consolidators, after the initial 

transition period, will be subject to Regulation SCI. 

See infra Section V.C.2(e)(ii) (discussing these 

costs). See also supra Section IV.G.3 (discussing 

number of competing consolidators subject to 

Regulation SCI). 

2041Based on Commission staff experience, the 

Commission understands that existing exclusive 

SIPs’ protocols for receiving direct data from 

exchanges are not standardized and introduce 

additional operational complexities. However, as 

the operators of exclusive SIPs, the exchanges, have 

figured out how to aggregate direct feeds for the 

purposes of their exchange matching engines, so 

they have the technology that would be deployable 

in the new decentralized consolidation model. If 

the exclusive SIPs determine to register as 

competing consolidators and to operate their 

competing consolidators using the existing 

infrastructure of the exclusive SIPs, then they may 

incur costs in order to reimburse each Plan’s 

Participants for the costs they paid to build the 

exclusive SIP’s systems. However, any 

determinations regarding payments to Participants 

or the disposition of the assets of the exclusive SIPs 

would be made by the Participants of the Equity 

Data Plans, subject to Rule 608. See supra note 979 

and accompanying text. 

2042See supra Section V.C.1(b)(vi) and infra 

Section V.C.2(d). 

2043See supra Section IV.D.3 and infra Section 

V.C.2(d). 

2044See supra Section III.H. 

2045The Commission believes that the exclusive 

SIPs that become competing consolidators will 

likely surpass the 5% revenue threshold and will 

be required to comply with Regulation SCI at the 

end of the transition period, as described in the 

amendments. Their compliance costs associated 

with Regulation SCI may decrease, because the 

systems of an exclusive SIP that became a 

competing consolidator would no longer be 

considered critical SCI systems, which have stricter 

requirements and higher costs than other SCI 

systems. For example a critical SCI system needs to 

maintain backup systems that are designed to allow 

them to resume operations within two hours of a 

system outage (SCI entities only have the 

requirement to resume operations the day following 

a system outage). See infra V.C.2(e)(ii). 

need to satisfy the regulatory 

compliance requirements of Rule 614 to 

become competing consolidators, and 

many competing consolidators may 

need to eventually satisfy the regulatory 

requirements of Regulation SCI.2036

Both the business implementation and 

regulatory compliance costs will differ 

based on the entrant type.2037 The 

Commission believes that the barriers to 

entry will vary based on whether the 

potential competing consolidator is: A 

market data aggregation firm or a brokerdealer that currently aggregates market 

data for internal uses, one of the existing 

exclusive SIPs (which are operated by 

SROs), an SRO that does not operate an 

exclusive SIP, or a new entrant without 

experience aggregating market data. The 

business implementation costs will also 

vary based on the elements of 

consolidated market data the competing 

consolidator chooses to offer in their 

products. 

The Commission believes that the 

existing market data aggregation firms 

and some broker-dealers that currently 

aggregate market data for internal uses 

could face low barriers to entry to 

become competing consolidators. 

Because they currently collect, 

consolidate, and, in some cases, 

disseminate market data to their 

customers, much like competing 

consolidators would, the Commission 

believes that firms and broker-dealers 

that currently aggregate proprietary 

market data would not have to 

extensively modify their systems. 

However, the Commission believes that 

each of these firms and broker-dealers 

would incur costs to expand their 

bandwidth and purchase hardware to 

receive information that is not currently 

disseminated in the exchange 

proprietary market data feeds, such as 

the regulatory data and administrative 

data.2038 Further, current market data 

aggregators and broker-dealers that 

currently aggregate market data for 

internal uses would incur new 

compliance costs to satisfy the 

regulatory compliance requirements to 

become competing consolidators, 

including costs associated with Form 

CC, as well as costs to comply with Rule 

614(d)(9) and likely eventually 

Regulation SCI.2039 These regulatory 

costs would initially be lower, but they 

could become large and therefore may 

affect entry and the benefits of the 

decentralized consolidation model.2040

The Commission believes that barriers 

to entry for a potential competing 

consolidator that is affiliated with an 

exchange—which could be one of the 

exclusive SIPs—would depend on 

several factors. In addition, both 

business implementation and regulatory 

compliance costs would be relatively 

lower for the existing exclusive SIPs 

than for the other competing 

consolidators that are affiliated with 

exchanges. 

The barriers to entry from business 

implementation costs to operate a 

competing consolidator would be 

relatively low for an exclusive SIP. 

Because the systems used by the 

exclusive SIPs already collect 

information in quotations and 

transactions from the SROs as well as 

aggregate and disseminate it, the 

exclusive SIPs would not have to make 

as extensive modifications to their 

systems as the other competing 

consolidators that are affiliated with 

exchanges.2041 However, they would 

still incur costs to expand their 

bandwidth and connections to consume 

and disseminate consolidated market 

data as well as to transmit it with lower 

latency, and to program feed handlers to 

receive and normalize the different 

formats of the data feeds developed by 

the exchanges.2042 On the other hand, 

the Commission believes that other 

competing consolidators that are 

affiliated with exchanges would likely 

have to build at least some new systems 

to process expanded core data, and thus, 

could incur relatively high initial 

implementation costs, though they may 

be able to keep their costs lower by 

leveraging some of their existing 

systems.2043

The barriers to entry from regulatory 

compliance costs would also be 

relatively lower for an exclusive SIP. 

Because the exclusive SIPs currently 

operate critical SCI systems,2044 they 

will not bear any initial compliance 

costs associated with Rule 614(d)(9) and 

their ongoing compliance costs 

associated with Regulation SCI will not 

increase.2045 SROs that do not operate 

exclusive SIPs are also already SCI 

entities. However, because these SROs 

do not have direct experience operating 

in the consolidated market data 

business, they may need to incur initial 

costs in order for their competing 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18763 

2046See id. 2047A competing consolidator affiliated with an 

exchange may be a facility of the exchange and 

subject to Section 19(b) of the Exchange Act and 

Rule 19b–4 thereunder. If a competing consolidator 

that is affiliated with an exchange chooses to act 

under the limited exemptive relief, then the 

competing consolidator could do so pursuant to the 

conditions of the exemption and without having to 

operate under the denial of access provisions in 

Section 19(d) of the Exchange Act, the provisions 

of Regulation SCI related to an SRO (it would still 

be subject to the provisions of Regulation SCI 

related to competing consolidators), or without 

filing proposed rule changes with the Commission 

under Section 19(b) of the Exchange Act and Rule 

19b–4 thereunder. Additionally, a competing 

consolidator that is affiliated with an exchange that 

chooses to operate under the limited exemptive 

relief would be exempt from the requirements of 

Section 6(b) of the Exchange Act (it would still be 

subject to the requirement in Rule 614(d)(3) to make 

consolidated market data products available to 

subscribers on terms that are not unreasonably 

discriminatory). See supra Section III.C.7(a)(iv). 

2048See id. 

2049A competing consolidator operating under 

the exemption would bear the regulatory 

compliance costs associated with Rule 614, 

including the costs associated with Form CC 

because the exemption requires the competing 

consolidator be registered as a competing 

consolidator under Rule 614 and be in compliance 

with the disclosure and other substantive regulatory 

requirements applicable to competing consolidators 

in Rule 603, Rule 614 and Form CC. Under the 

exemption, the exchange would also not be 

permitted to link the pricing for services of the 

affiliated competing consolidator to activities on, or 

other services performed by, the exchange. See id. 

See also infra Sections V.C.2(d) and V.C.3 for 

discussions of the regulatory compliance costs. 

2050Rule filings under Section 19(b) would be 

subject to a notice and comment process and 

Commission consideration. Fee changes could be 

immediately effective upon filing under Section 

19(b)(3), but the Commission would have the 

authority to abrogate such fee changes. 

2051See supra Section III.C.1(b) and infra Section 

V.C.2(d)(i). 

2052See NYSE Letter II at 15. 

2053See, e.g., CTA Plan Professional Subscriber 

Agreement, available at https://www.ctaplan.com/ 

publicdocs/ctaplan/notifications/trader-update/ 

Professional%20Subscriber%20Agreement.pdf; 

UTP Plan Subscriber Agreement, available at http:// 

www.utpplan.com/DOC/subagreement.pdf; Nasdaq 

Global Subscriber Agreement, available at: http://

www.nasdaqtrader.com/content/ 

AdministrationSupport/AgreementsData/ 

subagreemstandalone.pdf; ICE Data Services and 

Software Services Agreement, available at: https:// 

www.theice.com/publicdocs/agreements/ICE_Data_

Services_Agreement.pdf. 

2054See infra Section V.C.2(b) for a discussion on 

the economic analysis of data content, 

consolidation and dissemination, and connectivity 

fees. 

2055See infra Section V.C.2(a)(i)e for a discussion 

on the potential dimensions of product 

differentiation by competing consolidators. 

consolidator systems to be compliant 

with Rule 614(d)(9).2046

The other regulatory costs that the 

competing consolidators that are 

affiliated with exchanges would incur 

would vary based on whether they 

chose to operate under the provisions of 

the limited exemptive relief from the 

rule filing requirements of Section 19(b) 

of the Exchange Act and Rule 19b–4 

thereunder, the denial of access 

provisions in Section 19(d) of the 

Exchange Act, the requirements in 

Section 6(b) of the Exchange Act, and 

from Regulation SCI in regard to their 

competing consolidators.2047 However, 

the Commission believes that a 

competing consolidator that is affiliated 

with an exchange would choose to 

operate under the provisions of the 

limited exemptive relief because then 

they would not need to file rule changes 

(including new products and fee 

changes) related to their competing 

consolidator functions with the 

Commission under Section 19(b) of the 

Exchange Act.2048 If these competing 

consolidators operate under the 

exemption, then they would still incur 

the other regulatory compliance costs 

associated with Rule 614.2049 If these 

competing consolidators did not operate 

under the exemption, then they would 

need to comply with certain rules 

applicable to SROs, including the 

provisions of Regulation SCI and the 

requirements of Section 6(b), and to file 

all rule changes with the Commission 

under the Section 19(b) process, which 

would impose significant regulatory 

barriers in terms of making adjustments 

to their products and fees compared to 

other competing consolidators, 

potentially placing them at a 

competitive disadvantage.2050 It would 

also create higher initial barriers to 

entry because the competing 

consolidator operations would need to 

be filed and approved by the 

Commission under Section 19(b) of the 

Exchange Act before they could begin 

operating. 

The Commission anticipates that new 

entrants without prior experience in the 

market data aggregation business may 

become competing consolidators but 

that they would have the highest 

barriers to entry because they would 

incur both infrastructure and 

compliance costs. The new entrants 

would incur high infrastructure costs to 

build new systems to receive, 

consolidate, and disseminate 

consolidated market data; including 

costs to program feed handlers to be 

able to receive and normalize exchange 

data in different formats, and purchase 

bandwidth and connections to 

exchanges and co-location. These costs 

increase the fixed costs of participating 

as a competing consolidator in the 

market, further contributing to the 

barriers to entry. New entrants may also 

have the highest compliance costs 

among all potential entrants, because 

they would have to build compliance 

systems from scratch to satisfy both 

Rule 614(d)(9), and later potentially 

Regulation SCI, as well as the other 

requirements of Rule 614, including 

Form CC. Therefore, the Commission 

believes that there may be a limited 

number of firms that could enter the 

market data aggregation business for the 

first time. 

The business implementation 

compliance costs will vary based on the 

elements of consolidated market data 

the competing consolidator chooses to 

offer in their products. Specifically, 

potential entrants that seek to specialize 

in offering data products to clients who 

do not wish to receive the full 

consolidated market data could save on 

ongoing costs and potentially also on 

initial infrastructure costs.2051 The 

initial cost savings would vary across 

the entrant types listed above depending 

on the extent to which the entrant has 

already built the infrastructure 

necessary to aggregate and distribute 

data similar to consolidated market 

data. For example, current data 

aggregators choosing to specialize are 

likely to see a small reduction in 

barriers to entry from this change while 

firms without prior experience are likely 

to see a significant reduction in barriers 

to entry. 

One commenter stated that the 

Commission did not consider the risks 

of the potential liability that a 

competing consolidator may incur for 

any performance failures, which are a 

significant barrier to entry.2052 The 

Commission believes that these 

potential liability concerns are not a 

significant barrier to entry for competing 

consolidators. Competing consolidators 

could attempt to limit their potential 

liability from systems issues through 

contractual agreements with their 

subscribers, similar to provisions that 

data providers currently include in their 

subscriber agreements.2053

b. Effective National Market System 

Plan(s) Fees for Data Content 

Underlying Consolidated Market Data 

Another factor that would affect the 

number of competing consolidators 

relates to the fees that the effective 

national market system plan(s) would 

set for the consolidated market data 

content.2054 If these fees are set too high 

or have the effect of limiting product 

differentiation,2055 they could limit the 

opportunities for competing 

consolidators to build profitable 

businesses. 

The Commission recognizes 

uncertainty in these fees. The fees 

developed by the effective national 

market system plan(s) for the data 

18764 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2056See Proposing Release, 85 FR at 16837. 

2057See infra Section V.C.2(b)(ii) for further 

discussion of the impact of providing discounts 

based on scope of data content. 

2058See, e.g., NYSE Letter II at 14. 

2059See supra Section III.H for a discussion of the 

steps during the transition period. 

2060See infra Section V.C.2(b) for a discussion in 

the impact on data fees. 

2061See infra Section V.C.2(a)(i)e for a discussion 

on competing consolidators’ differentiation. 

2062See Proposing Release, 85 FR at n. 1019. 

2063One commenter stated that the Commission 

may need to consider ways ‘‘to avoid the imposition 

of fees that are substantially disproportionate to the 

cost of providing these connectivity methods.’’ See 

IEX Letter at 8. As discussed below, connectivity 

fees competing consolidators might pay to the 

exchanges to receive data content underlying 

consolidated market data will have to be filed with 

the Commission as part their fee schedules and 

must continue to meet statutory standards. See infra 

Section V.C.2(b)(i)c and note 2171. 

2064See, e.g., IDS Letter I at 3. 

2065To calculate these numbers the Commission 

uses estimates of the current revenues from 

consolidation and dissemination of SIP data as well 

as estimates of potential revenues from market 

participants switching from proprietary data to 

consolidated market data products as a proxy for 

the potential revenue size for the new competing 

consolidator business. See infra notes 2072, 2074, 

2075, 2076, and 2077 for the calculations of these 

numbers and the various assumptions that went 

into those calculations. 

2066See Nasdaq Letter IV at 29 for a discussion 

on Nasdaq’s connectivity and market data revenue 

numbers. See also Proposing Release, 85 FR at 

16816. 

2067These are estimates for the end of 2018, 

because the main connectivity information used in 

these calculations is provided by one of the 

commenters for 2018. See Nasdaq Latter IV at 29. 

2068See infra Section V.C.4(b) for a discussion on 

potential new entrants into the broker-dealer, 

market maker, and other latency sensitive 

businesses. 

2069Potential demand for consolidated market 

data under the amendments is unlikely to be 

smaller than the current demand from market 

participants who rely on SIP data because market 

participants will continue to need the NBBO and 

last sale information to comply with the Vendor 

Display Rule. The Commission believes that the 

potential demand for consolidated market data 

might be larger than the current demand from 

market participants who rely on SIP data, because 

a portion of the current proprietary data users might 

switch to using consolidated market data and, 

additionally, there might be new entry into the 

broker-dealer, market maker, or other latency 

sensitive businesses, as discussed below in Section 

V.C.4(b). One of the commenters agreed that some 

of the current proprietary data users might switch 

to using consolidated market data. According to the 

commenter, a portion of those market participants 

newly choosing to use consolidated market data 

could become self-aggregators and others could be 

served by competing consolidators. See Nasdaq 

Letter IV at 25. See also supra Section V.C.1(c) for 

a discussion on the benefits of expanded core data 

content. 

content underlying consolidated market 

data offerings would be proposed by the 

Operating Committee(s) of the national 

market system plan(s) and filed with the 

Commission.2056 Because such fees 

depend on future action by the effective 

national market system plan(s), the 

Commission cannot be certain of the 

level of those fees or whether such fees 

would provide discounts for those end 

users who wish to receive subsets of 

consolidated market data (e.g., different 

prices for different levels of data content 

or different core data component) or 

based on usage categories (e.g., 

professional, non-professional, nondisplay).2057 As discussed further 

below, the fees developed by the 

Operating Committee of the effective 

national market system plan(s) must be 

fair and reasonable and not 

unreasonably discriminatory. 

Some commenters said that the 

uncertainty over fees for data content 

underlying consolidated market data 

offerings will make it difficult for 

potential competing consolidators to 

estimate the economic value of this new 

business opportunity, and therefore, 

enter the market.2058 While there is 

uncertainty surrounding the currently 

unknown levels of data content fees, 

potential competing consolidators can 

judge the value of the business 

opportunity. Potential competing 

consolidators will see, and be able to 

comment on, the newly proposed data 

content fees before they will have to 

decide whether to register as competing 

consolidators.2059 During the transition 

period, the new data content fees 

proposed by the effective national 

market system plan(s) will be available 

for potential competing consolidators to 

review and comment on before the 

registration date for the initial 

competing consolidator wave expires. 

This will give competing consolidators 

adequate time to evaluate this 

information and the potential business 

opportunity. 

Additionally, the Commission 

believes that there will likely be 

different levels of fees for data content 

underlying consolidated market data 

offerings either based on usage category 

(e.g., professional, non-professional, 

non-display) or based on the scope of 

data content market participants use or 

a combination of both.2060 In either 

case, the Commission believes that the 

differential pricing of consolidated 

market data will expand differentiation 

opportunities for the potential 

competing consolidator, as discussed 

below.2061

c. Connectivity 

Another factor affecting the number of 

competing consolidators is the 

uncertainty regarding connectivity 

charges for data underlying 

consolidated market data and their 

effects on the viability of the 

decentralized model. Each exchange’s 

data connectivity fees will continue to 

be set forth in the exchange’s fee 

schedules and must continue to meet 

statutory standards.2062 Connectivity 

fees for the provision of data content 

underlying consolidated market data 

would be a fixed input cost for 

competing consolidators, and, therefore, 

the level of connectivity fees for data 

content underlying consolidated market 

data may affect the economies of scale 

and the resulting number of competing 

consolidators.2063 To the extent that 

some competing consolidators choose to 

offer data products with narrower data 

content than the entirety of consolidated 

market data, they could lower their 

connectivity costs because they could 

likely use connectivity options with 

narrower data transmission bandwidths. 

d. Potential Size of the Market for 

Consolidated Market Data Products 

Another important factor in assessing 

whether competing consolidators might 

face profitable business opportunities is 

the size of the market for consolidation 

and dissemination services. The size of 

the market will limit the aggregate 

revenue that competing consolidators 

will be able to collect from market 

participants. The size of the market can 

only support the number of competing 

consolidators that keep aggregate costs 

at or below the aggregate revenue. 

Commenters stated that the size of 

this market is not large enough to 

support enough competing 

consolidators for sufficient competition 

and that the Proposing Release did not 

adequately analyze potential revenue 

streams for competing consolidators.2064

The Commission believes that the size 

of the market is large enough to sustain 

several competing consolidators, 

because the Commission estimates that 

the potential annual revenues for 

competing consolidators will range from 

approximately $78 million to $97 

million.2065 This is large enough to 

support several competing 

consolidators. The Commission is able 

to estimate the current revenues from 

consolidation and dissemination of SIP 

data because of some new information 

provided by one commenter.2066

The Commission believes these 

estimates are a lower bound 2067 and are 

based on the current SIP market 

conditions. They do not take into 

account any demand expansion from 

potential new entrants into the brokerdealer, market maker, and other latency 

sensitive businesses 2068 nor from 

market participants who currently rely 

exclusively on SIP data choosing to 

spend more on data to receive 

additional consolidated data.2069 The 

Commission cannot address these 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18765 

2070See supra note 2065 for additional caveats. 

2071See supra Section V.B.2(d) for a discussion 

on the current exclusive SIP’s operating expenses. 

2072The Commission estimates the UTP operating 

expenses to be approximately $7.4 million as of the 

end of 2018, based on an estimated 6% rate of 

increase. This rate of increase is calculated as the 

change of information services revenues Nasdaq 

reported in its 2018 and 2019 Form 1 filings and 

the Commission assumes that a similar rate of 

increase applies to Nasdaq’s SIP operating 

expenses. Nasdaq’s Form 1 filings describe that its 

market data revenues (excluding connectivity 

revenues), including from SIP data, are recorded 

under the information services item of its 

consolidated income statement. According to its 

2018 and 2019 Form 1 filings, Nasdaq’s information 

services revenues increased from approximately 

$230 million at the end of 2017 to approximately 

$243 million at the end of 2018, an approximately 

6% increase. See 2018 Nasdaq Form 1 filing, 

available at https://www.sec.gov/Archives/edgar/ 

vprr/1800/18002770.pdf (last accessed Sept. 7, 

2020); 2019 Nasdaq Form 1 filing, available at 

https://www.sec.gov/Archives/edgar/vprr/1900/ 

19003684.pdf (last accessed Sept. 7, 2020). 2073One commenter stated that ‘‘[t]he primary 

ability needed to act as a self-aggregator is technical 

skill.’’ See AHSAT Letter at 3. The Commission 

believes that it is very unlikely for the market 

participants that currently receive data from SIP 

data normalizers to choose to become a selfaggregator under the amendments given the 

substantial investment and costs needed to become 

a self-aggregator. Thus, under the amendments, 

these market participants will likely purchase their 

market data from competing consolidators, and not 

self-aggregate. See supra Section V.B.2(c) for a 

discussion of the different levels of technical 

expertise and sophistication market participants 

have. See supra Section V.B.2(b) for a discussion of 

SIP data normalizers and their subscribers. 

2074For this estimation, the Commission is using 

the publicly available SIP revenue information. The 

total SIP data revenues in 2018 were approximately 

$164 million for Tape A, $94 million for Tape B, 

and $132 million for the UTP SIP. Of these 

revenues, 10% for Tape A, 9% for Tape B, and 12% 

for UTP were revenues from non-display users. The 

Commission believes that market participants who 

purchase data from SIP data normalizers are 

unlikely to be non-display users, thus the SIP 

revenues from non-display users should be 

excluded from this calculation. In 2018, the total 

SIP data revenues without non-display users is 

approximately $349 million. The 6% margin over 

these data revenues will indicate an approximately 

$21 million potential annual revenue that might be 

available for competing consolidators. See infra 

note 2191 for the CTA and UTP Plans’ Q2 2020 

Quarterly Revenue Disclosures. 

2075Today the exchanges operating the exclusive 

SIPs offer connectivity products that bundle SIP 

connectivity with other exchange connectivity 

services. It is not possible to tell how much of the 

connectivity fees cover SIP connectivity and how 

much of them cover connectivity services for other 

exchange products such as proprietary data feeds. 

For example, one exchange stated that ‘‘users can 

connect to Regulation NMS equities and options 

feeds disseminated by the SIP using either of the 

co-location local area networks. Users do not pay 

an additional charge to connect to the NMS feeds: 

It comes with their connection to the local area 

network.’’ See NYSE’s Notice of Filing of Proposed 

Rule Change to Amend the Exchange’s Price List 

Related to Co-location Services, available at https:// 

www.sec.gov/rules/sro/nyse/2019/34-86865.pdf 

(last accessed Sept. 8, 2020). For this reason, the 

Commission’s estimates include several 

assumptions. 

2076Neither of the exchanges operating the 

exclusive SIPs disclose their connectivity revenues 

as a separate item on their Form 1 filings. However, 

one of the commenters disclosed its connectivity 

revenues to be $167.6 million in 2018. See Nasdaq 

Letter IV at 29. To estimate the portion of this 

connectivity revenue that comes from subscribers of 

SIP data, the Commission uses the ratio of nondisplay SIP data revenues with respect to that the 

exchange’s overall market data revenues (excluding 

connectivity fees). The Commission uses a revenue 

ratio based on non-display SIP data revenues within 

the overall market data revenues, because nondisplay data subscribers are the most likely 

connectivity purchasers for SIP data. Nasdaq’s 

information services revenues (which covers its 

market data revenues, excluding its connectivity 

revenues) at the end of 2018 were approximately 

$243 million. See supra note 2072 for Nasdaq’s 

2019 Form 1 filings. In the same time period, its 

total non-display SIP revenues were approximately 

$9 million. See infra note 2191 for the CTA and 

UTP Plans’ Q2 2020 Quarterly Revenue Disclosure. 

In other words, Nasdaq’s total non-display SIP data 

revenues were approximately 4% of its overall 

market data revenues, excluding the connectivity 

revenues. For the lower bound estimation, the 

Commission assumed that the other exchange 

operating an exclusive SIP has the same amount of 

connectivity revenue from SIP data as Nasdaq ($6.4 

million), bringing the lower bound of the total SIP 

data connectivity revenues that might be available 

to competing consolidators to approximately $13 

million ($6.4 million times 2). 2077For the upper bound estimates, the 

Commission calculates the following numbers. 

Continued 

omissions because it does not have 

sufficient information to estimate the 

size of this potential demand expansion. 

As a result, these numbers 

underestimate the potential market size 

for competing consolidators. In 

addition, the estimates contained in this 

section are associated with significant 

additional uncertainty, especially in 

terms of connectivity revenues.2070 The 

potential revenue estimate is based on 

the current exclusive SIPs’ revenues 

combined with certain market data 

aggregators’ and certain exchanges’ 

revenues that the Commission believes 

could be available for competing 

consolidators under the amendments. 

Specifically, the four components of 

these estimated potential revenues are: 

Current exclusive SIP operating 

expenses (approximately $16 million), 

fees paid to the current SIP data 

normalizers (approximately $21 

million), SIP data connectivity fees paid 

to the exchanges operating the exclusive 

SIPs (approximately $13 million to $18 

million), and data processing and 

connectivity fees (approximately $28 

million to $42 million) from proprietary 

data users switching to using 

consolidated market data products. 

The first component of the estimated 

potential revenues for competing 

consolidators is the operating expenses 

the current exclusive SIPs collect for 

their consolidation and dissemination 

services. The SIP data consolidation and 

dissemination fees currently paid to the 

exclusive SIPs could be paid to 

competing consolidators under the Rule, 

and thus, could be a potential source of 

income for the new competing 

consolidator business. As discussed 

above, UTP operating expenses totaled 

around $7 million in 2017 and CTA 

operating expenses totaled around $8.8 

million in 2018.2071 Together, the 

Commission estimates the exclusive 

SIPs’ operating expenses to be 

approximately $16 million at the end of 

2018.2072

The second component of the 

estimated potential revenues for 

competing consolidators is the overall 

fees market participants pay to market 

data aggregators that are SIP data 

normalizers. Current SIP data 

normalizers take in raw data provided 

by the two exclusive SIPs and create a 

combined single data feed to their 

subscribers. Under the Rule, with the 

cessation of the exclusive SIPs, these 

subscribers will likely purchase 

consolidated market data products from 

competing consolidators.2073 The fees 

that market participants currently pay to 

the SIP data normalizers might be 

comparable to what market participants 

could pay to competing consolidators 

under the amendments, and thus could 

be another potential source of income 

for the new competing consolidator 

business. Based on its knowledge and 

expertise, the Commission believes that 

current SIP data normalizers operate on 

a price schedule where they charge 6% 

over the current SIP data fees. This 

pricing schedule and 2018 total SIP data 

fees indicate an estimated potential 

revenue of approximately $21 million to 

be available for competing 

consolidators.2074

The third component of the estimated 

potential revenues for competing 

consolidators is the current SIP data 

connectivity fees paid to the exchanges 

operating the exclusive SIPs. As 

discussed above, the exchanges 

operating the exclusive SIPs charge 

connectivity fees to SIP data users who 

directly connect to the exchanges to 

receive SIP data. Under the Rule, market 

participants who will use consolidated 

market data products and who will not 

self-aggregate will likely pay 

connectivity fees to competing 

consolidators instead of the exchanges. 

The SIP data connectivity fees that 

market participants currently pay to the 

exchanges might be paid to competing 

consolidators under the amendments, 

and thus, could be another potential 

source of revenue for the new 

competing consolidator business.2075

The Commission estimates that the 2018 

SIP data connectivity revenues range 

from approximately $13 2076 million to 

$18 million.2077

18766 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

First, the Commission estimates Nasdaq’s 

connectivity revenues the same way, approximately 

$6.4 million in 2018. Second, the Commission 

assumed that, in 2018, NYSE had the same amount 

of total connectivity revenue as Nasdaq ($167.6 

million). See supra note 2072 for NYSE’s 2019 

Form 1 filings. To estimate the portion of this 

connectivity revenue that comes from subscribers of 

SIP data, the Commission similarly used the ratio 

of non-display SIP data revenues with respect to 

that the exchange’s overall market data revenues 

(excluding connectivity fees). In 2018, NYSE’s nondisplay data revenue from the SIPs were 

approximately $5 million and its overall market 

data revenue for the same period (excluding the 

connectivity revenues) were approximately $68 

million ($236 million overall data services revenues 

minus the $167.6 million connectivity revenues). 

This indicates an approximately 7% revenue ratio. 

The Commission, then, estimated that NYSE’s SIP 

data connectivity revenues in 2018 were 

approximately $12 million (7% × $167.6 million). 

This brings the upper bound of the total SIP data 

connectivity revenues that might be available to 

competing consolidators to approximately $18 

million ($6.4 million plus $12 million). 

2078See infra Section V.C.4(a) for additional 

discussion of this point, including how the 

expanded content of core data will be part of the 

reason firms may switch. These details were also 

discussed in the Proposing Release 85 FR at 16853. 

2079Specifically, those exchanges are NYSE, 

NYSE American, NYSE Arca, Nasdaq, Nasdaq BX, 

PSX, Cboe BYX, Cboe BZX, Cboe EDGA, and Cboe 

EDGX. 

2080See Katsuyama Letter II; Letter from John 

Ramsay, Chief Market Policy Officer, Investors 

Exchange LLC, to Brent J. Fields, Secretary, 

Commission (Feb. 4, 2019). 

2081See supra Section V.B.3(c) for discussion of 

connectivity services. 

2082This estimate follows a similar methodology 

as in note 2076. The Commission assumed that a 

given percentage of total proprietary data feed 

revenue comes from customers who also make up 

the same percentage of proprietary data 

connectivity revenue. The Commission estimates 

that 10 to 15 proprietary data customers, each with 

2 non-display use cases, represent approximately 

$21.9 million to $32.9 million in proprietary data 

revenue. Using the revenue numbers from Section 

V.B.2(e), the Commission estimates that this is 

approximately between 8% and 12% of total 

exchange proprietary data revenue ($21.9 million/ 

$269.0 million; $32.9 million/$269.0 million). The 

assumption that these customers make up the same 

percentage of total exchange connectivity revenue 

yields that these customers are responsible for 

between $26.6 million and $40.0 million of total 

exchange connectivity revenue (8% × $327 million; 

12% × $327 million). In this calculation, the 

connectivity revenue that pertains to the exclusive 

SIPs is subtracted from total connectivity revenue 

to produce the base of proprietary data connectivity 

revenue. The conservative estimate of the upper 

bound on SIP connectivity revenue discussed in 

note 2077 of $18 million was used in both cases (10 

and 15 switching users) to yield $327 million for 

proprietary connectivity revenue. 

2083See infra Sections V.C.2(d) and V.C.2(e)(ii) 

for a discussion about the ongoing cost potential 

competing consolidators might incur. See also infra 

note 2256 for the total direct cost numbers. 

2084See, e.g., NYSE Letter II at 17; Nasdaq Letter 

IV at 8, 24; Nasdaq Letter V at 7; STANY Letter at 

7; IDS Letter I at 15. 

2085One commenter stated that they would 

expect some of their ‘‘members to consider 

becoming self-aggregators pursuant to the 

Proposal.’’ See FIA PTG Letter at 1–2. 

2086See infra Section V.C.4(a) for a discussion on 

some market participants’ potential switch to 

consolidated market data. 

2087See supra note 2073. 

2088See supra Section III.D for a discussion on 

the market participants that can be self-aggregators 

and the conditions under which they can share 

data. 

2089One commenter said that ‘‘many non-brokerdealer market participants subscribe directly to 

proprietary data feeds from exchanges’’ and that 

they will likely want to use consolidated market 

data. See MFA Letter at 3. One asset manager 

commented that they would expect much of their 

‘‘use case for direct feeds would be eliminated if the 

SEC’s rule is implemented as proposed, and if there 

is a competitive consolidated tape offering with the 

processor physically located in the same data center 

as the broker/dealers’’ they employ as agents. See 

NBIM Letter at 4. 

Finally, the Commission also believes 

that a number of firms may switch from 

using proprietary data feeds to using 

consolidated market data products 

provided by competing 

consolidators.2078 The Commission 

believes that a reasonable range of firms 

who could switch to using consolidated 

market data products from using 

proprietary data feeds is 10 to 15. A 

typical firm using non-display feeds 

typically requires feeds from 10 

exchanges,2079 which the Commission 

estimates would cost approximately 

$1.1 million per year, per use case.2080

The Commission also believes that the 

typical broker-dealer firm would have 2 

use cases, so that the total spent on 

these proprietary data feeds would be 

$2.2 million. Using the 6% fee charged 

by normalizers discussed above, the 

Commission believes that there is 

between approximately $1.3 million and 

$2 million in revenue available to 

competing consolidators from this 

market segment. 

If these 10 to 15 firms switch from 

using proprietary market data obtained 

from direct connections to the 

exchanges to using a competing 

consolidator, then they will no longer 

pay connectivity fees to the exchanges 

for their data access.2081 As in the case 

of connectivity fees for the exclusive 

SIPs, the Commission believes that the 

connectivity fees for the proprietary 

feed connections to which these market 

participants cease to subscribe 

represents potential revenue for 

competing consolidators. The 

Commission estimates that the 

connectivity fees associated with these 

10 to 15 dropped connections total 

approximately $27 million to $40 

million.2082

The Commission believes that even 

though the $78 to $97 million estimated 

potential annual revenue is an 

underestimate, it is still large enough to 

support multiple competing 

consolidators. The estimated ongoing 

costs per competing consolidator range 

from $6.6 million to $8 million 

(including the ongoing Regulation SCI 

costs),2083 leaving substantial room for 

profits for multiple competing 

consolidators even after incurring initial 

costs. 

Finally, some commenters argued that 

most market participants interested in 

consolidated market data might become 

self-aggregators, which might shrink the 

customer base available to competing 

consolidators preventing the emergence 

of a healthy competing consolidator 

market.2084 While acknowledging that 

some market participants might become 

self-aggregators,2085 the Commission 

believes the market will still support 

multiple competing consolidators. A 

variety of market participants will likely 

demand the entirety or a subset of 

consolidated market data, including 

market participants who currently rely 

on SIP data as well as market 

participants who might switch from the 

exchanges’ proprietary data feeds to 

consolidated market data.2086 However, 

only a small portion of these are 

permitted to and will likely choose to be 

self-aggregators. For instance, few, if 

any, of the market participants who 

currently rely only on SIP data will 

become self-aggregators under the 

amendments because of the extensive 

investment and technical expertise that 

is needed to become a selfaggregator.2087 Additionally, of the 

market participants who might switch 

from using the exchanges’ proprietary 

data to consolidated market data, only 

certain market participants and with 

certain limitations are permitted to selfaggregate under the amendments.2088

Other market participants who are not 

permitted to self-aggregate but who are 

consumers of the exchanges’ proprietary 

data will need to subscribe to a 

competing consolidator if they switch to 

using consolidated market data.2089 On 

the other hand, the Commission 

acknowledges that while the number of 

potential self-aggregators might be small 

their overall trading volume might be 

large, because these market participants 

are also likely some of the highest 

trading-volume broker-dealers and 

registered investment advisors. 

e. Competing Consolidators’ Ability To 

Offer Differentiated Products 

The last factor that may affect the 

reasonableness of the assumption that a 

sufficient number of competing 

consolidators will enter the market is 

the ability to offer differentiated 

products, determined by the demand for 

differentiated products and the 

feasibility of supplying differentiated 

products. The greater the ability to offer 

differentiated products, the more 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18767 

2090Some commenters agreed. See, e.g., Angel 

Letter at 3, 19; NBIM Letter at 2. See also supra 

Section V.B.3(a). 

2091Several commenters agreed with the 

Commission. See, e.g., BestEx Research Letter at 5; 

NYSE Letter II at 9; IEX Letter at 9; MEMX Letter 

at 5. 

2092See infra Section V.C.2(b) for a discussion on 

the relationship between differentiation and prices. 

2093Several commenters agreed with the 

Commission that investors have diverse market data 

needs. See, e.g., IEX Letter at 9; MEMX Letter at 5; 

NYSE Letter II at 9; Angel Letter at 9. 

2094See infra Section V.C.2(a)(i)e for a discussion 

of the influence of fees on the ability to 

differentiate. 

2095See, e.g., NYSE Letter II at 4; Data Boiler 

Letter I at 79. 

2096See NYSE Letter II at 4; Nasdaq Letter IV at 

25. 

2097See Data Boiler Letter I at 79. 

2098See infra Section V.C.2(b)(ii) for further 

discussion of these fees. 

2099See supra Section V.C.2(a)(i)b for a 

discussion on the potential new fee structures 

under the amendments. 

2100See supra Section V.C.2(b) for an additional 

discussion on differentiated products and data fees. 

competing consolidators are likely to 

register until no economic incentives 

are left for new entry. In fact, the ability 

to differentiate may be necessary to 

ensure multiple competing 

consolidators can serve the market for 

the following reasons. As discussed 

above, the production of consolidated 

data involves relatively higher fixed 

costs (e.g., connectivity to the 

exchanges, data storage, technical 

infrastructure needed to process large 

amounts of data), and lower variable 

costs (e.g., costs of delivering the 

processed data to each customer).2090 In 

such markets, the firms have additional 

incentives to increase the number of 

their customers in order to spread the 

fixed cost across a larger base of 

consumers. Without differentiation, the 

fixed cost nature of the market, and 

resulting economies of scale, could 

result in only one competing 

consolidator, because the largest 

competing consolidator would be able 

to offer the most competitive price. 

The Commission believes that 

differentiation will likely be possible 

both because market participants 

demand different market data products 

and services and because competing 

consolidators will have the incentives 

and ability to offer differentiated 

products to service those diverse needs. 

Market participants’ demand for 

consolidated market data products is 

heterogeneous because there are many 

different investor types (e.g., retail 

investors, small banks, market 

participants focused on value 

investment) that have differing 

investment strategies, and therefore, 

different data needs.2091

Additionally, competing 

consolidators will have the incentives 

and ability to differentiate their 

products to meet their customers’ 

diverse needs. The Commission believes 

that competing consolidators will have 

strong incentives to offer differentiated 

products because of its potential 

implications for their survival in the 

market place.2092 By offering products 

that are responsive to each type of 

customer’s specific needs, competing 

consolidators can specialize and reduce 

their costs with this specialization. They 

can then pass these costs savings on to 

their customers as lower consolidation 

and dissemination fees and as a result 

capture market share. For example, 

competing consolidators could meet 

investors’ diverse demand by offering 

different data products that range from 

the entirety of consolidated market data 

to subsets of consolidated market data 

such as top of book products.2093 In 

addition, some competing consolidators 

could differentiate themselves by 

specializing in lower latency data for a 

segment of the market where trading 

strategies require high speed data 

access. Other competing consolidators 

could target data users who might prefer 

not to have the lowest latency product 

if the higher latency products came with 

a lower price or additional analytics. 

Competing consolidators could offer a 

range of user interfaces and analytics 

(e.g., various ways to display 

consolidated data, or provide 

forecasting services) that appeal to 

different data users or could even offer 

an analytical environment to customize 

analytics (e.g., offer software tools 

allowing market participants to analyze 

and summarize consolidate data). 

Differentiation along these dimensions 

will allow competing consolidators to 

offer different services at potentially 

different prices to different types of end 

users. 

Competing consolidators will also 

have the ability to differentiate because 

the amendments do not restrict the type 

or variety of products they can offer, 

which will be determined by 

competitive forces. Additionally, the 

amendments do not require competing 

consolidators to offer the entirety of 

consolidated data, potentially allowing 

them some fixed cost savings (e.g., on 

their connectivity and processing costs) 

if they offer narrower data content than 

the entirety of consolidated market data. 

However, there is some uncertainty 

about the extent to which competing 

consolidators can differentiate, because 

how fees are set by the effective national 

market system plan(s) might affect the 

feasibility to offer such diverse 

products.2094 For example, while with 

differentiation competing consolidators 

can save on costs and lower their 

consolidation and dissemination fees, in 

the absence of differential prices for 

data content, competing consolidators’ 

differentiated products will have 

smaller corresponding price differences 

from their customers’ perspective. This 

is because the biggest component of the 

overall data fees (i.e., data content, 

consolidation and dissemination, and 

connectivity fees) that the market 

participants pay will likely be data 

content fees that will go to the effective 

national market system plan(s). Thus, 

cost savings passed onto customers in 

terms of lower consolidation and 

dissemination fees will make a limited 

difference when customers are 

comparing overall data fees. As a result, 

potential competing consolidators will 

have a narrower price band within 

which to differentiate themselves and 

price their products. 

Some commenters expressed concern 

that competing consolidators will not 

offer differentiated products.2095 Some 

commenters said that market 

participants’ ability to receive 

differentiated products depends on the 

choices of the Operating Committee(s) 

of the national market system plan(s) 

and competing consolidators, and that, 

the absence of differentiation will 

recreate the status quo.2096 Another 

commenter stated that competing 

consolidators will not differentiate 

because this business will rely on 

economies of scale (i.e., achieving cost 

savings by increasing their scale), not on 

economies of scope (i.e., achieving cost 

savings by increasing their product 

offerings).2097 The Commission believes 

that competing consolidators will offer 

differentiated products for two reasons. 

First, while the Commission cannot 

be certain of whether such fees would 

provide discounts for those who wish to 

receive subsets of consolidated market 

data or based on usage categories,2098

the Commission believes that some form 

of differential pricing for consolidated 

market data is the most likely outcome 

as discussed above.2099 With differential 

pricing for the data content underlying 

consolidated market data, competing 

consolidators will have greater 

opportunity to offer differentiated 

products to market participants.2100

Likewise, exchanges continuing to offer 

connectivity at different latencies with 

different corresponding prices would 

further promote product differentiation 

by competing consolidators. This is 

because differential connectivity fees 

will lead to different fixed costs for 

competing consolidators (e.g., 

18768 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2101See Data Boiler Letter I at 56. 

2102See infra Section V.C.2(a)(ii)a for a discussion 

on the probability and potential results of having 

a single competing consolidator operate in the 

market. 

2103One of the commenters did not ‘‘find any 

fault’’ with the Commission’s assessment over the 

potential competitive outlook of the competing 

consolidator market. The commenter stated that 

‘‘[t]he Department finds no fault with the SEC’s 

preliminary determination that the risk is low that 

either no new SIP Data consolidators enter or only 

very few enter.’’ See DOJ Letter at 5. 

2104See infra Section V.C.2(b). 

2105See infra Section V.C.2(c). 

2106 Id. 

2107See infra Section V.C.2(e)(ii) for a discussion 

on the heightened requirements for ‘‘critical SCI 

systems’’ versus standard requirements for ‘‘SCI 

systems.’’ 

2108See, e.g., Nasdaq Letter IV at 2, 3, 23, 24, 47; 

NYSE Letter II at 13, 16; TechNet Letter II at 2; 

Angel Letter at 20; IDS Letter I at 3, 7. See also 

supra note 615. 

2109See, e.g., ACTIV Financial Letter at 1; McKay 

Letter at 2; NovaSparks Letter at 1; MIAX Letter at 

1 for an expression of their interest in registering 

as competing consolidators. 

2110See NovaSparks Letter at 1. 

2111See infra Section V.C.2(a)(ii)a for a discussion 

on conflicting profit incentives of some potential 

competing consolidators. 

competing consolidators specialized in 

serving higher latency customers can 

purchase slower or lower capacity 

connectivity products and lower their 

fixed costs), and thus, different 

consolidation and dissemination and 

connectivity fees can be charged to their 

customers. Finally, competing 

consolidators are not required to 

consolidate and disseminate the entirety 

of consolidated market data, for 

example if they want to concentrate on 

a customer segment that prefers 

narrower data content. All of these— 

differential data content fees, the 

exchanges’ differential connectivity 

fees, and the lack of a requirement to 

process and provide the entire data 

content of consolidated market data— 

will allow a larger price band over 

which potential competing 

consolidators can differentiate and price 

their products to serve their customers’ 

diverse needs. On the other hand, this 

differentiation can still take place, in a 

more limited way, even if the effective 

national market system plan(s) do not 

implement any differential data content 

fees. 

Second, the Commission believes 

that, for competing consolidators, scale 

and differentiation and specialization 

are complements not substitutes, as 

suggested by one of the commenters.2101

Competing consolidators could expand 

their scale and market share to be able 

to spread their fixed costs over a larger 

set of customers than they otherwise 

would, by relying on their differentiated 

product offerings, similar to how the 

third party data aggregators operate 

today. For example, current third party 

data aggregators can be focused on more 

or less latency sensitive segments of the 

market and use this differentiation as a 

way to reach a larger set of customers 

than they otherwise would. The 

Commission believes that this business 

model will carry over into the new 

competing consolidator business, and 

could similarly differentiate across a 

variety of product characteristics such 

as latency, data content, analytics, and 

user interfaces. 

Finally, in the absence of 

differentiation, the market might end up 

with only one competing 

consolidator; 2102 however, the 

Commission believes this is a low 

probability outcome for the reasons 

discussed above. 

(ii) Risk of Few Competing Consolidator 

Registrants 

As discussed in the previous section, 

there are several factors that may affect 

the number of competing consolidators 

entering the market. These factors 

determine the number of competing 

consolidators, which in turn determines 

the level of competition and ultimately 

the magnitude of benefits from the final 

amendments. While the Commission 

recognizes uncertainty in some of these 

factors, the Commission believes that it 

is reasonable to assume that there will 

be a sufficient number of competing 

consolidators to achieve the benefits of 

the rulemaking and that the risk that the 

anticipated benefits of the amendments 

will not materialize because of 

insufficient competition among 

competing consolidators is low.2103

The assumption that there will be a 

sufficient number of competing 

consolidators entering the market affects 

some economic effects of the 

decentralized consolidation model. 

Generally, many of the benefits and 

competitive considerations below 

depend on this assumption. For 

example, the Commission believes that 

competition among competing 

consolidators will lead to lower fees 

paid by market participants for 

consolidated market data products,2104

larger gains in efficiency in the delivery 

of consolidated market data products 

and market data communication 

innovations,2105 as well as a reduction 

in data consolidation and dissemination 

latencies.2106 In addition, some of the 

costs discussed below also depend on 

this assumption. For example, after the 

transition ends, the decentralized 

consolidation model will decrease 

regulatory compliance costs imposed by 

Regulation SCI on existing exclusive 

SIPs that may register as competing 

consolidators, by changing their systems 

from ‘‘critical SCI systems’’ to ‘‘SCI 

systems.’’ 2107

Some commenters questioned the 

Commission’s assumption that there 

will be a sufficient number of competing 

consolidators and argued that there is 

not sufficient industry support for 

competing consolidators.2108 On the 

other hand, several commenters 

indicated an interest in becoming a 

potential competing consolidator 2109

and one commenter predicted that 

several of the other current market 

participants will come forward to 

become one.2110

The Commission continues to believe 

that the risk that the anticipated benefits 

of the amendments will not materialize 

because the likelihood of insufficient 

competition among competing 

consolidators is low. Specifically, based 

on its analysis, as well as its experience 

and judgment, the Commission believes 

that there will initially be at least two 

competing consolidators and entry into 

the competing consolidator market 

space will likely continue until no 

economic incentives are left for any new 

competing consolidators to enter. The 

Commission believes that the most 

likely outcome is three or more 

competing consolidators with at least 

one competing consolidator that is not 

affiliated with either one of the 

exchanges currently operating the 

exclusive SIPs or an exchange that has 

sufficient proprietary data revenue that 

would create conflicting profit 

incentives.2111 The Commission 

believes that this scenario will likely 

lead to vigorous competition and, as a 

result, will be enough for the predicted 

benefits to materialize. 

a. Likelihood of Zero or One Competing 

Consolidator 

In this section, the Commission 

analyzes the likelihood of zero or one 

competing consolidators registering and 

believes that the risk of either of these 

outcomes is low because of the strong 

incentives to enter. As such, and also 

because of the transition period 

requirements, the risk that the 

amendments will not achieve their 

benefits because only one or no 

competing consolidators register is low. 

One commenter stated that the EU has 

been attempting to create a market for 

competing consolidators, but ‘‘no 

consolidators have signed up. By 

declaring that the risk of few or zero 

consolidators is low, the Commission 

appears to be signaling ignorance of the 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18769 

2112See Angel Letter at 20. 

2113The Commission does not believe that lack of 

potential consolidated tape providers (the EU 

equivalent of competing consolidators) in Europe 

has any implications for the U.S. markets or the 

predictions of the amendments because the 

regulatory framework within which the European 

market participants operate is very different from 

the U.S. Most significantly, the relevant European 

regulation, MiFID II, ‘‘does not mandate the 

establishment of a CT [consolidated tape] in the EU 

and does not oblige trading venues and APAs 

[approved public arrangements] to submit 

transaction data to a CTP [consolidated tape 

provider] for consolidation. The latter solution is 

the one chosen by the legislation in the US.’’ Under 

the European regulatory framework, both the 

supply of and demand for market data would be 

uncertain, making it an economic calculation very 

different from the one the potential competing 

consolidators will make in the U.S. See European 

Securities and Markets Authority, MiFID II/MiFIR 

Review Report No. 1, at 35, available at https://

www.esma.europa.eu/sites/default/files/library/ 

mifid_ii_mifir_review_report_no_1_on_prices_for_ 

market_data_and_the_equity_ct.pdf (last accessed 

Sept. 1, 2020). For additional discussion on how the 

European market data framework is different from 

the one in the U.S., see Philip Stafford, EU-backed 

study calls for new body to track equities trades, 

FINANCIAL TIMES (Oct. 7, 2020), available at 

https://www.ft.com/content/616acec6-cfc4-44d4- 

95c0-6053a041e0d7. 

2114See, e.g., Equity Markets Association Letter at 

2; NYSE Letter II at 24; Nasdaq Letter IV at 5. The 

two exchanges operating the exclusive SIPs stated 

that the exclusive SIP model performs very well 

and does not need to be replaced with the 

decentralized consolidation model. 

2115One commenter said that its letter discusses 

‘‘the significance of establishing a level playing 

field by ensuring fair and equal access to exchanges 

and the need to extend these principles to the legs 

of the market data distribution system over which 

an exchange (or an exchange affiliate) may exercise 

direct or indirect control.’’ See McKay Letter at 2. 

See also ACTIV Financial Letter at 2; MIAX Letter 

at 1. 

2116See, e.g., ACTIV Financial Letter at 1; McKay 

Letter at 2; NovaSparks Letter at 1; MIAX Letter at 

1 for an expression of their interest in registering 

as competing consolidators. One market participant 

submitted a comment letter to an NYSE filing fee 

where the market participant stated that ‘‘Virtu 

plans to establish a competing consolidator to 

provide competitive market data products.’’ See 

letter from Douglas A. Cifu, Chief Executive Officer, 

Virtu Financial, to Vanessa A. Countryman, 

Secretary, Commission, dated Aug. 28, 2020, 

available at https://www.sec.gov/comments/sr-nyse2020-05/srnyse202005-7707480-222891.pdf. See 

also IEX Letter at 2, 3. 

2117One of the commenters, an exchange, 

expressed an interest in becoming a competing 

consolidator. See MIAX Letter at 1. Additionally, in 

the past, the same exchange was an active 

contender to run one of the exclusive SIPs. The 

announcement made by the law firm conducting 

the tender offer stated that ‘‘The UTP Operating 

Committee short-listed four firms as the finalists for 

the RFP bid: CenturyLink, MIAX Technologies, 

Nasdaq and Thesys Technologies’’ available at 

https://www.jandj.com/sites/default/files/library/ 

UTP_SIP_Processor_Announced_2014.pdf (last 

accessed Sept. 7, 2020). 

2118See supra Section III.H for a discussion on 

details of the transition period. 

2119The requirements of Regulation SCI will not 

apply to competing consolidators during an initial 

phase in period after the effective date of this 

rulemaking. See supra Section III.F for a discussion 

of the amendments to Rule 1000 of Regulation SCI. 

2120Throughout this section, ‘‘entry by an 

exchange operating an exclusive SIP’’ refers to 

either the exchange or one of its affiliates becoming 

a competing consolidator. 

2121See infra Section V.C.2(d) for a discussion of 

the indirect costs of the decentralized consolidation 

model. 

2122See supra Section III.H for a discussion on 

the transition and initial registration period. 

2123See supra note 2109. 

2124One commenter stated that ‘‘[o]ne possibility 

is that only two consolidators will emerge (the 

Continued 

experience of other countries.’’ 2112 The 

Commission does recognize the risk of 

no entry, but believes that strong 

incentives to enter render this risk low 

and that the European experience is not 

relevant to the U.S. because the 

regulatory framework in Europe is very 

different from that in the U.S.2113

There is some risk of no entity 

entering the new competing 

consolidator business for two reasons 

and if no entity enters as a competing 

consolidator, none of the Commission’s 

predicted benefits will materialize. 

First, the potential registrants with some 

of the lowest entry barriers are also the 

same market participants who expressed 

a strong preference to maintain the 

current status quo.2114 Second, potential 

registrants who expressed interest in 

becoming competing consolidators also 

expressed some concern about not being 

able to compete with any potential 

competing consolidators affiliated with 

the exchanges operating the exclusive 

SIPs, because they might not be 

competing on a level playing field.2115

However, the Commission believes 

that this risk is low. Even if the two 

exchanges operating the exclusive SIPs 

choose not to become competing 

consolidators, there are several other 

potential entrants that stated that they 

are interested in becoming a competing 

consolidator.2116 For example, one or 

more of the exchanges that do not 

currently operate an exclusive SIP have 

incentives to, and are likely to, enter the 

new competing consolidator 

business.2117 Entry into the competing 

consolidator business would provide 

these exchanges new data processing 

and dissemination, as well as 

connectivity, revenues. Additionally, 

being an entrant in the first wave could 

give a competing consolidator some first 

mover advantage—even if small—to 

capture a part of the market that is 

currently served by the exclusive SIPs. 

The incentive to have a first mover 

advantage will only be available to 

competing consolidators during the 

initial registration period. In particular, 

the provision that temporarily precludes 

registration once the initial registration 

period closes would provide an 

incentive to register early, during the 

initial registration period.2118

Furthermore, entry costs are going to be 

lowest during this initial transition 

period,2119 making it more attractive to 

register before this temporary relief 

expires. 

In the unlikely event that only a 

single competing consolidator enters the 

market, very few of the Commission’s 

benefit predictions may materialize. The 

Commission believes that market 

participants may receive some benefits 

such as a degree of latency reduction 

and some cost savings from only 

needing to connect to a single data 

provider instead of the two exclusive 

SIPs. However, overall, most of the 

predicted benefits depend on the new 

competing consolidator business being a 

competitive market, and therefore, will 

not likely materialize if only a single 

competing consolidator registers. 

The Commission believes that a single 

competing consolidator scenario is also 

a low probability outcome. The 

Commission believes that both of the 

exchanges operating the exclusive SIPs 

have strong incentives to enter 2120 the 

new competing consolidator market 

because under the amendments, the 

exclusive SIPs will no longer be the 

exclusive consolidators and 

disseminators of market data and this 

will lead to potential revenue losses for 

the exchanges operating the exclusive 

SIPs.2121 The exchanges operating the 

exclusive SIPs will be incentivized to 

enter during the initial registration 

period to start recouping some or all of 

their potential losses, because 

competing consolidators that do not 

enter during the initial wave will not be 

able to register and operate until the 

Commission opens up the registration 

process again.2122 Additionally, the two 

exchanges operating the exclusive SIPs 

have entry costs, profit potentials, and 

economic interests similar to each other. 

Thus, neither exchange may leave the 

new consolidated market data business 

entirely to the other one and not pursue 

the chance to recoup some or all of their 

potential losses from no longer having 

the exclusive rights to consolidate and 

disseminate market data. Finally, as 

mentioned above, there are several other 

market participants who already have 

expressed an interest in becoming a 

competing consolidator, expanding the 

potential pool of initial entrants.2123

b. Likelihood of Two Competing 

Consolidators and Impact on Benefits 

The Commission believes that the 

likelihood that only two market 

participants enter as competing 

consolidators is slightly higher than the 

likelihood of zero or one.2124 This will 

18770 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

current operators of the CTA and UTP plans).’’ See 

Angel Letter at 20. 2125The Commission believes an outcome of two 

competing consolidators, where one or both are 

unaffiliated with either of the exchanges operating 

the exclusive SIPs, is a very low probability one. 

This is because, as discussed above, the 

Commission believes that in such a situation both 

of the exchanges operating the exclusive SIPs will 

have incentives to enter. Thus it is unlikely that this 

would be a two competing consolidator scenario. 

2126See, e.g., ACTIV Financial Letter at 1; McKay 

Letter at 2; NovaSparks Letter at 1; MIAX Letter at 

1 for the risks the commenters state about 

competing consolidators’ ability to compete on 

level playing field. 

2127One commenter stated that just having SIAC 

and Nasdaq UTP as competing consolidators will 

not create a very competitive market because it 

‘‘will do little to encourage innovation or price 

competition as intended by the Proposal.’’ See 

MIAX Letter at 4. 

2128One commenter agreed. See Angel Letter at 

21. 

2129For a competing consolidator affiliated with 

an exchange that has a proprietary data revenue 

stream, there could be conflicting profit incentives 

as described in Section V.C.2(a)(ii)b. The degree of 

this conflicting profit incentive will depend on the 

size of the proprietary data stream relative to the 

exchange’s overall revenues. 

most likely happen if two competing 

consolidators affiliated with the 

exchanges operating the exclusive SIPs 

file to be the two initial entrants,2125

because the disclosure of their identities 

will potentially deter other potential 

competing consolidators from 

registering. The exclusive SIPs have a 

lot of experience in data consolidation 

and dissemination, which might deter 

other potential competing consolidators 

from entering. Additionally, while 

several commenters expressed an 

interest in becoming competing 

consolidators, they also listed several 

issues they see as potential risks.2126

Most of those risks were about the 

exchanges operating the exclusive SIPs 

not creating a level playing field for 

competing consolidators that are not 

affiliated with them. To the extent that 

any potential competing consolidator 

believes that they cannot compete with 

the exchanges operating the exclusive 

SIPs, they might not register as 

additional competing consolidators, 

leaving the market with only two 

competing consolidators where both are 

affiliated with the exchanges operating 

the exclusive SIPs. 

In the event that the consolidated 

market data business is served by only 

two competing consolidators that are 

both affiliated with the exchanges 

operating the exclusive SIPs, some of 

the economic benefits of the competing 

consolidator model may be limited. In 

particular, while this result could 

produce lower gains in delivery 

efficiency, innovation, and latency 

differentials and less competitive 

pressure on data processing and 

delivery fees, it could bring some degree 

of competition and corresponding 

benefits relative to the exclusive SIP 

model. 

If the only competing consolidators to 

enter are the exchanges operating the 

exclusive SIPs, the outcome could be 

lower gains in data delivery efficiency 

and innovation, and smaller reductions 

in data consolidation and dissemination 

latencies. This may be the case 

primarily because competing 

consolidators that are affiliated with the 

exchanges operating the exclusive SIPs 

would have conflicting profit 

incentives. For a portion of the market 

participants, new consolidated market 

data and proprietary data could be close 

substitutes. Thus for competing 

consolidators serving those market 

participants, the consolidated market 

data business may cannibalize profits 

from their parent company’s proprietary 

data business. In that case, these 

competing consolidators would have to 

weigh their potential revenue gains from 

the competing consolidator business 

against their parent company’s potential 

losses from the proprietary data 

business. This prospect would reduce 

these competing consolidators’ 

incentives to compete in this new 

business line.2127 Under this scenario, if 

the market is being served only by two 

competing consolidators both affiliated 

with the exchanges operating the 

exclusive SIPs, market participants 

would lack a consolidated market data 

product vendor without conflicting 

profit incentives. 

Additionally, if there are only two 

competing consolidators both with 

conflicting profit incentives, there may 

not be strong downward competitive 

pressure on data processing and 

delivery fees. The Commission’s 

prediction about any downward 

pressure on data processing and 

delivery fees depends on the strength of 

competition among competing 

consolidators. Having just two 

competing consolidators—both 

affiliated with an exchange, with similar 

economic incentives, and a shared 

history of serving the whole SIP data 

market without competing with each 

other—could soften competition. 

Specifically, these two competing 

consolidators might explore 

opportunities to differentiate in ways 

that limit competition, such as offering 

products in different sets of stocks or 

capturing completely different segments 

of the market. If market participants 

would not see these two competing 

consolidators’ products as viable 

substitutes, they would not be able to 

switch between them. And this would 

remove most of the competitive pressure 

on data processing and delivery fees. 

However, even the scenario with only 

two competing consolidators affiliated 

with the exchanges operating the 

exclusive SIPs will bring some degree of 

competition and corresponding benefits 

relative to the exclusive SIP model. 

Unlike the exclusive SIPs today, the 

exchange-affiliated competing 

consolidators will operate under a threat 

of competition from each other and from 

other potential entrants if an economic 

opportunity presents itself. In 

particular, the exchange-affiliated 

competing consolidators will still have 

an economic incentive to target each 

other’s customers by introducing new 

data products serving those customers’ 

needs. In addition, there will likely be 

some latency benefits from being able to 

get a consolidated feed from a single 

competing consolidator instead of the 

two exclusive SIPs. Additionally, 

market participants might see some 

decline in their consolidation and 

dissemination costs for equivalent 

data.2128 Finally, if an economic 

opportunity emerges, perhaps because 

of supra-competitive prices charged by 

the existing competing consolidators 

that are affiliated with the exchanges 

operating the exclusive SIPs, another 

market participant might register to 

become a new competing consolidator, 

and try to capture those customers with 

product offerings at lower prices. 

c. Likelihood of Three or More 

Competing Consolidators With at Least 

One Unaffiliated Third Party Registrant 

and Impact on Benefits 

The Commission believes that the 

most likely scenario for the new data 

consolidation business is for there to be 

three or more entrants, where at least 

one of the newly registered competing 

consolidators is not affiliated with 

either one of the exchanges operating an 

exclusive SIP or an exchange with a 

proprietary data revenue stream enough 

to create conflicting profit 

incentives.2129 The Commission 

believes that this scenario will likely 

lead to vigorous competition and, as a 

result, will be enough for the predicted 

benefits to materialize. 

The Commission believes that in 

addition to the exchanges operating a 

current exclusive SIP, there are several 

market participants, such as current 

third party data aggregators or other 

intermediary product and/or service 

providers or exchanges that do not 

currently operate an exclusive SIP that 

would have the capability and 

incentives to enter the newly created 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18771 

2130One commenter said that ‘‘[t]he Commission 

cites only a handful of entities who sought to 

become data processors in the context of a 

guaranteed monopoly.’’ See NYSE Letter II at 19. 

The Commission agrees and notes that for the 2014 

UTP SIP tender 11 intent to bid letters were 

submitted. Similarly, for the CAT SIP tender over 

30 intent to bid letters were submitted. See 2014 

UTP SIP tender processor selection announcement, 

available at https://www.jandj.com/sites/default/ 

files/library/UTP_SIP_Processor_Announced_

2014.pdf (last accessed Aug. 12, 2020); 2017 CAT 

SIP tender processor selection announcement, 

available at https://financialservices.house.gov/ 

uploadedfiles/11.30.2017_mike_beller_

testimony.pdf (last accessed Aug. 12, 2020). 

2131See, e.g., McKay Letter at 2; ACTIV Financial 

Letter at 1; NovaSparks Letter at 1; MIAX Letter at 

1 for an expression of their interest in registering 

as competing consolidators. See also letter from 

Douglas A. Cifu, Chief Executive Officer, Virtu 

Financial, to Vanessa A. Countryman, Secretary, 

Commission, dated Aug. 28, 2020, available at 

https://www.sec.gov/comments/sr-nyse-2020-05/ 

srnyse202005-7707480-222891.pdf. 

2132See, e.g., McKay Letter at 1 note 1; ACTIV 

Financial Letter at 1 note 1; NovaSparks Letter at 

1; MIAX Letter at 1. 

2133One of the commenters said that while it 

would like to contemplate being a competing 

consolidator, any contender would need a large 

customer base that the commenter believes it does 

not have. According to the commenter, the big 

market data aggregators with an existing large 

customer base are the ones that can achieve this. 

The Commenter said that ‘‘[d]ominated (sic) market 

data aggregators, like Bloomberg and Refinitiv, 

would most likely spread their fixed cost to large 

customer base in quickest time.’’ See Data Boiler 

Letter I at 84; Data Boiler Letter II at 1. 

2134See supra note 1777. Companies that 

normalize market data take in raw data delivered 

in a variety of protocols and, using feed handlers, 

normalize into single protocol different from the 

one used by the original venue. This way a data 

user can receive one feed using one streaming 

protocol. See Vela blog, available at https://

info.tradevela.com/definitive-guide-to-market-data#

normalisation (last accessed Sept. 17, 2020). 

2135See infra Section V.C.2(c) for a discussion on 

the benefits of the decentralized consolidation 

model. 

2136See Nasdaq Letter IV at 23, 24. 

2137See supra Section V.C.2(b) for a discussion of 

fees as one of the factors to influence the strength 

of competition in the competing consolidator 

business. 

2138 In a market, more efficient companies have 

lower production costs and therefore can lower 

their prices relative to and capture market share 

from higher cost, thus more inefficient, companies. 

competing consolidator business.2130

Some of the commenters already 

expressed an interest in doing so.2131

Several current market participants, 

such as third party data aggregators or 

other intermediary product and/or 

service providers in the market data 

space, have the technical 

capabilities,2132 customer base,2133 and 

incentives a new entrant would need. 

Some of the potential competing 

consolidators that might register to enter 

this new business line are some of the 

most technically sophisticated industry 

participants. These market participants 

are currently operating in adjacent 

markets (e.g., proprietary data 

aggregation business), making entry into 

the new consolidated data business 

easier. Others currently serve as 

normalizers of the SIP data for retail 

investors.2134 They are experienced in 

market data processing and 

dissemination, and already serve a 

portion of the market. 

These potential competing 

consolidators also have the incentives to 

enter this new competing consolidator 

business. For an exchange that does not 

currently operate an exclusive SIP, 

competing consolidator business would 

provide an opportunity to get new data 

consolidation and dissemination as well 

as connectivity revenues. For a third 

party data aggregator, it would be a 

chance to build upon its existing 

business. For example, if a current third 

party data aggregator’s main revenue 

source is its normalized SIP data 

products, then registering as a 

competing consolidator would be the 

most direct way for this data aggregator 

to continue receiving its revenue stream. 

Even if a current third party data 

aggregator is mainly focused on the 

proprietary data aggregation business, 

becoming a competing consolidator 

would be a new revenue source and 

would not create the same conflicting 

profit incentives described above. 

The Commission believes that if three 

or more competing consolidators enter 

the market where at least one of them 

is not affiliated with either one of the 

exchanges operating the exclusive SIPs 

or an exchange with sufficient 

proprietary data revenue to create 

conflicting profit incentives, this 

scenario will lead to vigorous 

competition and will be enough for the 

predicted benefits to materialize. The 

conflicting profit incentives described 

above stem from a competing 

consolidator’s proprietary data 

customers switching to use consolidated 

market data products if the data content 

and speed of the latter become a viable 

substitute for them. The conflicting 

profit incentives would stem from the 

fact that the exchange would have data 

content revenues to lose as a result of its 

competing consolidator’s customers 

switching from proprietary data to 

consolidated market data. But if an 

exchange does not have significant data 

content revenues to lose, they would not 

have such a conflicting profit incentive. 

A competing consolidator’s revenues 

will mainly come from its data 

processing, dissemination, and 

connectivity services, irrespective of the 

data content it disseminates. Without 

conflicting profit incentives, such a 

competing consolidator will focus on 

expanding its revenue base by 

aggressively pursuing consolidated 

market data product clients and 

capturing an ever larger market share. 

As part of this pursuit, this competing 

consolidator would have an incentive to 

innovate to gain efficiency and speed in 

data processing and delivery, reduce its 

costs, and potentially pass on some of 

these cost savings to its clients to gain 

market share. Therefore, even if some of 

the potential competing consolidators 

have conflicting profit incentives, if at 

least one other competing consolidator 

is free from this conflict, competition 

will intensify. 

Overall, the Commission believes that 

there will initially be at least two 

competing consolidators and entry into 

the competing consolidator market 

space will likely continue until no 

economic incentives are left for new 

entry. The Commission believes that the 

most likely outcome is three or more 

competing consolidators with at least 

one competing consolidator that is not 

affiliated with either one of the 

exchanges operating the exclusive SIPs 

or with an exchange with a proprietary 

data revenue stream that creates 

conflicting profit incentives. As the 

number of competitors increase, the 

level of competition among them will 

intensify until no economic incentive is 

left for new entry. As discussed 

below,2135 intensifying competition will 

benefit market participants. 

One commenter stated that the 

Commission did not consider a possible 

scenario of ‘‘a relatively large number of 

high-cost consolidators charging high 

prices for NMS information.’’ 2136 As 

discussed above,2137 the Commission 

believes that a large number of high-cost 

competing consolidators will not be an 

equilibrium outcome, because while 

competing consolidators will have an 

incentive to differentiate and capture 

different segments of the market, they 

can also offer each other’s products if 

they see an economic opportunity to do 

so. If a large number of high-cost 

competing consolidators enter this new 

business line, over time the more 

efficient of those will capture market 

share from the less efficient ones.2138

This is because more efficient 

competing consolidators will have 

lower costs and therefore the ability to 

charge lower prices to market 

participants and increase their market 

share. The ability to differentiate will 

not change this dynamic, because even 

as competing consolidators differentiate, 

this real threat of competition will 

discipline prices and efficiency in the 

consolidated market data space and will 

drive out inefficient competing 

consolidators. 

18772 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2139See NYSE Letter II at 15, 16; IDS Letter I at 

8, 9. See Proposing Release, 85 FR at 16794–95 for 

a discussion of the transition period. 

2140See IDS Letter I at 8. 

2141See NYSE Letter II at 16. 

2142See supra Section III.H for a discussion on 

the three phases of the transition period. 

2143See supra note 1356 for a discussion on the 

length of time it might take to reach this point in 

the transition to the decentralized consolidation 

model. 

2144See supra Section III.C.7(i)(ii) for a discussion 

on the disclosure of an initial Form CC filer’s 

identity. 

2145See IDS Letter I at 9. 

2146See supra Section III.C.7(g)(ii) for a 

discussion on the requirements to file a notice of 

cessation. 

2147Several commenters agree. See, e.g., NYSE 

Letter II at 19–20; STANY Letter II at 5. 

2148The economic effect of more market 

participants purchasing expanded core data is 

discussed above in Section V.C.1(c). 

Some commenters questioned the 

likelihood of any potential competing 

consolidators entering the market 

because of the uncertainty associated 

with the proposed transition period.2139

One commenter questioned whether 

market participants would have 

incentives to make large investments 

before the effective national market 

system plan(s) sets data content fees.2140

Another commenter stated that potential 

entrants would have to make large 

investments ‘‘but would have no ability 

to earn any returns on those 

investments—or estimate when or if 

such returns would be realized—until 

after the Commission has elected to 

transition to the decentralized 

model.’’ 2141

The Commission believes that three 

aspects of the adopted transition period, 

discussed above,2142 addresses the 

issues raised by the commenters. First, 

potential competing consolidators will 

be able to see and comment on the data 

content fees before deciding whether to 

register and become a competing 

consolidator. This will eliminate some 

of the uncertainties about the potential 

value of the new competing 

consolidator business. Second, in phase 

one, following the development and 

testing periods, potential competing 

consolidators will be able to start 

operating and earn revenues as soon as 

they complete their test period. Thus 

competing consolidators would not be 

making large investments to earn 

potential future returns at an uncertain 

time.2143 Finally, the Commission will 

implement an initial registration period 

with the following two features 

designed to encourage entry into the 

new competing consolidator business 

space. The first feature is the limited 

initial registration period, which limits 

market participants’ ability to enter the 

competing consolidator market until 

after the exclusive SIPs are retired, if 

they miss the first wave. This feature 

could encourage entry because being in 

the initial wave of competing 

consolidators could help market 

participants achieve a first mover 

advantage and capture some market 

share. However, the registration 

requirements for potential competing 

consolidators are the same whether they 

enter during the initial registration 

period or after the exclusive SIPs are 

retired. If a potential competing 

consolidator enters in the second wave, 

they will miss the opportunity to have 

a first mover advantage, but otherwise 

will go through the same registration 

process. The second feature is the 

disclosure of market participants’ 

identities shortly after their filing of a 

Form CC.2144 This feature, in 

combination with the first one, could 

encourage entry because once potential 

competing consolidators start to register, 

these disclosures will signal that there 

are market participants interested in 

becoming competing consolidators in 

addition to revealing their identities. 

This could encourage other potential 

competing consolidators to register 

instead of adopting a wait-and-see 

approach. 

Lastly, one commenter stated that the 

Commission ‘‘fails to consider the 

possibility that, once the new model 

was in place, sufficient numbers of 

competing consolidators could cease 

operations, resulting in a system that is 

not viable.’’ 2145 The Commission 

acknowledges that after the new model 

is established, there might be some ongoing entry and exit of competing 

consolidators, an expected economic 

dynamic just like in every other market 

place. However, the Commission 

believes that there is no reason for the 

economic conditions of the market to 

change drastically to lead to a wave of 

competing consolidator exits and a 

consolidated market data space without 

enough competition for two reasons. 

First, demand for consolidated market 

data products is not likely to 

dramatically decline over time, because 

market participants need certain 

consolidated market data products for 

regulatory compliance. Second, supply 

by competing consolidators is also 

unlikely to decline dramatically because 

as discussed above,2146 a competing 

consolidator is required to provide 90 

calendar days’ notice of its cessation of 

operations. This advance notice will 

provide enough time for new competing 

consolidators to enter the market or 

existing competing consolidators to 

expand their products and services to 

meet any unmet demand stemming from 

a competing consolidator’s exit. 

(b) Analysis of the Impact on Data Fees 

The introduction of the decentralized 

consolidation model is likely to reduce 

the fees market participants will pay for 

consolidated market data. When 

comparing data fees for the consolidated 

market data with current data fees, this 

economic analysis holds data content 

constant. In other words, the fee 

comparison in this analysis is between 

what market participants will pay under 

the amendments versus what they 

currently would have to pay to access 

the same content. Specifically, the 

analysis finds that the amendments are 

likely to reduce, and unlikely to 

increase, fees paid for the equivalent of 

consolidated market data as well as the 

fees paid for the equivalent current SIP 

content. This effect on fees underlies the 

potential for many of the benefits and 

costs discussed above in Section V.C.1 

and below in Section V.D.1 to be 

realized. 

(i) Fees for Consolidated Market Data 

Content 

The Commission believes that the 

total fees for the equivalent of 

consolidated market data (i.e., data 

content, consolidation and 

dissemination, and connectivity fees) 

are likely to decline because of the 

amendments, but recognizes uncertainty 

about how the effective national market 

system plan(s) will set the fees for data 

content underlying consolidated market 

data offerings 2147 and how SROs will 

set the fees for connectivity necessary to 

receive the data content underlying 

consolidated market data as well as how 

the competing consolidators will price 

their services. As a result of lower fees, 

some market participants will choose to 

purchase more market data content than 

they purchase today, such as purchasing 

the expanded core data. The likelihood 

of this outcome will depend on the 

difference between total fees for 

consolidated market data and current 

total fees for equivalent data 

content.2148

The Commission believes that three 

sets of fees may be affected as a result 

of this rule: Fees for data content 

underlying consolidated market data 

offerings, fees for the consolidation and 

dissemination of consolidated market 

data products, and fees for the 

connectivity services necessary to 

receive the data content underlying 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18773 

2149The first two fees are currently bundled into 

a single fee, which covers SROs’ data and the 

exclusive SIPs’ operations such as consolidation 

and dissemination of data. The amendments will 

unbundle these two components and will allow 

competing consolidators to provide the data 

consolidation and dissemination services. Under 

the rule, the fee for data content will be set by the 

effective national market system plan(s). See supra 

Section III.E.2(c) and Proposing Release, 85 FR at 

n. 96 for a discussion on the amendments to the 

provision regulating effective national market 

system plan(s) fee filings. Within 150 days of the 

effectiveness of Rule 614, the Operating 

Committee(s) of the effective national market 

system plan(s) will be required to propose the data 

content fees for the SROs’ data required to create 

consolidated market data and will then file the 

proposed fees with the Commission for 

consideration pursuant to Rule 608. See supra 

Section III.H.1. Competing consolidators will likely 

charge a second fee for their consolidation and 

dissemination services, which could also include 

associated costs for data access at exchanges and 

transmission of data between data centers. The fees 

for data consolidation and dissemination will be 

determined by competition among competing 

consolidators. Finally, SROs currently charge 

connectivity fees for both exclusive SIP and 

proprietary data feeds. Under the amendments, 

SROs could charge connectivity fees to competing 

consolidators and self-aggregators, which must be 

consistent with statutory standards. Currently, 

connectivity fees are charged to the market 

participants that connect to the exchange and not 

to end users. See Proposing Release, 85 FR at n. 

1017. Competing consolidators could charge 

connectivity fees to end users, which will be subject 

to competitive forces. 

2150The Operating Committee(s) of the effective 

national market system plan(s) will have to propose 

the data content fees for the SROs’ data required to 

create consolidated market data and will then file 

the proposed fees with the Commission for 

consideration pursuant to Rule 608, within 150 

days of the effectiveness of Rule 614. See supra 

Section III.H.2. 

2151For the purposes of this section, the 

Commission assumes that the Operating Committee 

of the effective national market system plan(s) will 

set fees for data content underlying consolidated 

market data offerings that are reasonably related to 

costs. See III.E.2(c) for a discussion of the statutory 

standards for fees on the data content underlying 

consolidated market data. See also supra note 21. 

2152See supra Section III.B.6. These statutory 

standards include Section 6(b)(4) of the Exchange 

Act and Section 11A(c)(1)(D) and Rule 603(a) under 

Regulation NMS. 

2153See Effective-Upon-Filing Adopting Release, 

supra note 17. 

2154See supra Section III.B.6 and Section 

III.E.2(c). 

2155See supra Section III.E.2(c); see also notes 

1175 and 1178. 

2156See supra Section V.B.2(d); see, e.g., AHSAT 

Letter at 1; Better Markets Letter at 4. 

2157 In a comment letter, IEX provided data that 

the SRO markups on proprietary data may be large. 

In particular, IEX compared its own costs of 

providing proprietary market data with the fees 

charged by other exchanges for comparable 

produces and found markups of 900–1,800 percent. 

See Katsuyama Letter II; Letter from John Ramsay, 

Chief Market Policy Officer, Investors Exchange 

LLC, to Brent J. Fields, Secretary, Commission (Feb. 

4, 2019) (discussing the ‘‘all-in’’ cost to trade 

concept advocated by other exchanges). 

Additionally, in a letter submitted in advance of the 

Market Data Roundtable, one commenter stated that 

‘‘[t]he Exchanges have formulated pricing schemes 

that layer in redundant costs and fees which raises 

the true cost of market data well above the costs of 

producing and distributing the data’’ and that ‘‘the 

Exchanges impose multiple synthetic access fees for 

participants to physically connect to obtain the 

required data; these costs bear no relation to the 

Exchanges’ actual cost of the connectivity.’’ See 

letter from Douglas A. Cifu, Chief Executive Officer, 

Virtu Financial, to Brent J. Fields, Secretary, 

Commission, dated Oct. 23, 2018, at 3, 5, available 

at https://www.sec.gov/comments/4-729/4729- 

4558490-176196.pdf. 

2158Currently, fees for SIP data and proprietary 

data are generally charged based on the number and 

type of end user of the data. For example, the CTA/ 

CQ Plan Schedule of Charges distinguishes fees by 

professional and nonprofessional subscribers and 

the number of devices. See CTA Plan, Schedule of 

Market Data Charges, supra note 1734; Proposing 

Release, 85 FR at n. 1511. The Nasdaq UTP Plan, 

Exhibit 2 provides separate fees for nonprofessionals and per device fees. See Proposing 

Release, 85 FR at n. 13 for Nasdaq UTP Plan. 

Similar user distinctions are made in proprietary 

data products. See Nasdaq, Price List—U.S. 

Equities, available at www.nasdaqtrader.com/ 

Trader.aspx?id=DPUSdata#tv (last accessed Jan. 30, 

2020) (showing Nasdaq TotalView usage fees, 

which provide fees for professional and nonprofessional subscribers); NYSE Proprietary Market 

Data Fees (as of Nov. 4, 2019), available at https:// 

www.nyse.com/publicdocs/nyse/data/NYSE_

Market_Data_Fee_Schedule.pdf (showing the NYSE 

Integrated Feed fee schedule, which distinguishes 

between professional and non-professional users). 

2159See Proposing Release, 85 FR at 16839. See 

also supra Section I.B. 

2160Several commenters supported this 

statement, some of whom stated that the fees for the 

exchanges’ proprietary data makes it hard for them 

to fulfill their regulatory requirements. See, e.g., 

AHSAT Letter at 1; Better Markets Letter at 4. But 

another commenter stated that this statement 

represents an ‘‘apples-to-oranges’’ comparison, 

because a DOB feed contains more information than 

the exclusive SIP feeds. See Nasdaq Letter IV at 49. 

The Commission is aware that there is more 

information in the DOB feeds than the SIP feeds; 

the comparison in this statement is of the SIP data 

fees to the proprietary data fees to explain how the 

two current data content components’ underlying 

consolidated market data are priced. This is because 

today any market participant that wants to get data 

content equivalent to consolidated market data 

would have to pay for certain DOB feeds as well 

as the SIP data feeds. 

consolidated market data from the 

SROs.2149

d. Data Content Fees 

The Commission believes that the fees 

for the data content used to create 

consolidated market data are unlikely to 

increase and actually will likely be 

lower than today’s fees for equivalent 

data,2150 because the effective national 

market system plan(s) would have to 

satisfy the statutory standards that apply 

to such data. In addition, fees for data 

content underlying consolidated market 

data will be subject to a notice and 

comment period and Commission 

approval. As discussed above, the fees 

for the data content underlying 

consolidated market data must be fair, 

reasonable and not unreasonably 

discriminatory. One method for 

demonstrating compliance with such 

requirements is that fees are reasonably 

related to costs; this has been the 

principal method discussed by the 

Commission for analyzing the fairness 

and reasonableness of such fees for core 

data since the Market Information 

Concept Release.2151

The Commission believes that the fees 

for consolidated market data will likely 

be subject to downward pressure. 

Specifically, the new data content 

underlying consolidated market data 

(i.e., depth of book data, auction 

information, and odd-lot information) 

are currently elements of proprietary 

data products, which are assessed under 

the statutory standards that apply to 

proprietary data and are effective on 

filing.2152 However, fees for data content 

underlying consolidated market data 

will be developed and proposed by the 

effective national market system plan(s) 

and will be subject to notice and 

comment.2153 As stated above,2154 the 

fees for the data content underlying 

consolidated market data must satisfy 

the statutory standards of being fair, 

reasonable, and not unreasonably 

discriminatory. The Commission has 

historically analyzed fees for 

consolidated SIP data generated under 

the national market system plans using 

a standard under which fees are 

reasonably related to cost, while its 

analysis of proprietary data fees has not 

been limited in this manner.2155

Under such methodology, data 

content fees are likely to decrease 

because between 2010 and 2018, the 

proprietary data feed portion of the 

current fees for equivalent data appears 

to have increased at a rate that seems 

unlikely to have been based on 

costs.2156 To the extent that the 

exchanges have generally not attempted 

to justify their proprietary data fees on 

a cost basis but instead relied on other 

justifications, their fees seem to have 

outpaced their costs.2157

The Commission believes that fees for 

content equivalent to the data content of 

consolidated market data will not 

increase because the downward 

pressure on fees noted above will not 

permit the fees for consolidated market 

data to be greater than the sum of the 

current fees for individual data 

components. Currently, market 

participants who want to access content 

equivalent to the data content of 

consolidated market data need to 

separately purchase SIP data and 

additional data elements from each 

exchange via proprietary data feeds.2158

As discussed in the Proposing 

Release,2159 the Commission 

understands that SRO proprietary feeds 

for depth of book data are more 

expensive than the exclusive SIP 

feeds.2160 The Commission believes that 

18774 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2161See supra Section III.B.9(b) for a discussion 

on how the SROs will provide the data content 

underlying consolidated market data. 

2162See supra Section V.C.1(c)(iv). 

2163See id. 

2164One commenter agreed with the 

Commission’s assessment however did not provide 

any analysis or data. See BlackRock Letter at 5. See 

also infra Section V.C.4(a) for a discussion of the 

likely effects of the rule on the revenues exchanges 

receive for proprietary data. 

2165Some commenters agreed. See, e.g., 

IntelligentCross Letter at 5. 

2166Several commenters agreed. See, e.g., DOJ 

Letter at 5; MFA Letter at 2; AHSAT Letter at 1. See 

also supra Section V.A.2. 2167See infra Section V.C.2(c) for a discussion on 

the benefits of the decentralized consolidation 

model. 

2168One of the commenters agreed that some of 

the current proprietary data users might switch to 

using consolidated market data products. According 

to the commenter, a portion of those could become 

self-aggregators and others could be served by 

competing consolidators. See Nasdaq Letter IV at 

25. See also infra Section V.C.4(a) for a discussion 

on the effects of the amendments on exchanges’ 

proprietary data feeds. 

2169See infra Section V.C.4(b) for a discussion on 

new potential entrants into the market maker, 

broker-dealer, and other latency sensitive trading 

businesses. 

a combination of these data elements, in 

the form of consolidated market data, is 

unlikely to be priced more than the sum 

of its parts. 

Finally, the Commission would not 

expect fees for content equivalent to the 

data content of consolidated market data 

to be higher, because under the 

amendments the SROs are not required 

to incur significant new costs by 

creating a separate dedicated data feed 

and connectivity system. The 

amendments allow the SROs to use their 

existing proprietary data and 

connectivity infrastructure to provide 

the data content underlying 

consolidated market data.2161 This 

provision will likely reduce the SROs’ 

implementation costs, further limiting 

the probability that the fees proposed by 

the effective national market system 

plan(s) for the data content underlying 

consolidated market data will be higher 

than the current fees for equivalent 

data.2162 In addition, the Commission 

does not believe that the rule will 

significantly increase SRO costs 

specifically for distributing data.2163

However, the exchanges could shift the 

allocation of fixed exchange costs to 

consolidated market data from some of 

their proprietary data.2164 The 

Commission lacks the necessary 

information to ascertain those impacts. 

e. Consolidation and Dissemination 

Fees 

The Commission believes that data 

consolidation and dissemination fees for 

consolidated market data products will 

be lower than consolidation and 

dissemination fees market participants 

currently pay to receive equivalent data 

for two reasons.2165

First, to receive data equivalent to 

consolidated market data today, market 

participants would have to pay 

separately for a portion of exclusive 

SIPs’ cost to perform consolidation and 

dissemination of market data and a fee 

for consolidation and dissemination of 

additional data content underlying 

consolidated market data that are 

available via third-party providers of 

proprietary market data, who face 

competitive pressures. As discussed 

above,2166 exclusive SIPs are not 

constrained by competition and thus 

have lower incentives to reduce their 

costs. By comparison, the Commission 

expects that competition among 

competing consolidators will put 

downward pricing pressure on these 

service fees, because competing 

consolidators will have incentives to 

undertake investments intended to 

lower costs and improve quality in the 

provision of consolidated market data 

products. Competing consolidators will 

be competing over market share. Unlike 

in today’s world of exclusive SIPs, 

under the amendments, a competing 

consolidator’s inefficiencies or lack of 

desirable products could lead to its 

clients switching to another 

consolidated data vendor and that 

competing consolidator losing market 

share or even getting driven out of the 

market. The Commission recognizes that 

the stronger the competition among 

competing consolidators, the harder it 

would be for any given competing 

consolidator to increase its 

consolidation and dissemination fees 

and make supra-competitive profits 

from these services.2167

Second, the fixed costs of the 

competing consolidators could be 

spread out among its subscribers, 

including subscribers to services 

provided by the competing 

consolidators that are not covered by the 

fees established by the effective national 

market system plan(s) such as, for 

example, proprietary data customers 

that might be purchasing their data from 

competing consolidators that also sell 

consolidated market data products. 

Consolidation and dissemination fees 

that competing consolidators will 

charge for equivalent data are expected 

to cover several associated costs, 

including fixed costs of hardware and 

software, processing to take in data, 

processing for consolidation (including 

compiling the NBBO and protected 

quotes), distribution of the data, and 

connectivity fees paid to exchanges to 

acquire the data for consolidation. The 

variable costs of the competing 

consolidators will be minor in 

comparison because additional data 

users will have a minimal impact on the 

costs of competing consolidators. 

Because having more subscribers could 

help competing consolidators spread 

out their fixed costs, any increase in the 

number of subscribers of current market 

data aggregators who would become 

competing consolidators would reduce 

the consolidation and dissemination 

fees of those aggregators in equivalent 

data. For example, some market 

participants who currently use 

proprietary data might switch to using 

consolidated market data products.2168

Additionally, as discussed below, the 

availability of the new consolidated 

market data might allow new entry into 

the market making, broker-dealer, and 

other trading businesses.2169 This would 

expand the potential subscriber pool, 

giving competing consolidators a chance 

to further spread their fixed costs. For 

these reasons, the Commission believes 

that the competition among competing 

consolidators will lead to lower 

consolidation and dissemination fees for 

consolidated market data products as 

compared to these fees for equivalent 

data today. 

f. Connectivity Fees 

The Commission believes that 

connectivity fees charged by competing 

consolidators for consolidated market 

data products will also be lower than 

connectivity fees market participants 

would currently have to pay to receive 

equivalent data. To receive data 

equivalent to consolidated market data 

today, market participants currently 

have to pay separately a connectivity fee 

to the exchanges to access SIP data and 

a connectivity fee to the exchanges or 

market data aggregators to access 

additional data elements that are not 

part of SIP data but that will be part of 

consolidated market data. Under the 

rule, the Commission expects that 

market participants will pay only one 

connectivity fee for consolidated market 

data products (unless they choose to 

have a back-up competing consolidator), 

set by a competing consolidator, and 

this connectivity fee will be subject to 

competition among competing 

consolidators. Competing consolidators 

will have the ability to sell potentially 

substitutable data products via their 

connectivity, subjecting their 

connectivity products to competition. 

By contrast, current exchange 

connectivity fees may not be as 

competitive because an exchange has 

sole control over its own connectivity 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18775 

2170Several commenters agreed. See, e.g., Virtu 

Letter at 2; SIFMA Letter at 4; IEX Letter at 5–6. 

2171For example, under Section 6(b)(4) of the 

Exchange Act, the rules of an exchange must 

‘‘provide for the equitable allocation of reasonable 

dues, fees, and other charges among its members 

and issuers and other persons using its facilities.’’ 

2172See, e.g., BlackRock Letter at 5; Cboe Letter 

at 23–24; Angel Letter at 21; TD Ameritrade Letter 

at 2; Healthy Markets Letter I at 4; STANY Letter 

II at 5; Nasdaq Letter III at 8; Nasdaq Letter IV at 

8; Data Boiler Letter I at 2. 

2173See TD Ameritrade Letter at 2. 

2174See Healthy Markets Letter I at 4. 

2175See Nasdaq Letter III at 8. 

2176See STANY Letter II at 5. 2177Several commenters agreed. See, e.g., BestEx 

Research Letter at 4; Fidelity Letter at 9; Committee 

on Capital Markets Regulation Letter at 3; 

Wellington Letter at 1; Intelligent Cross at 5. 2178See BlackRock Letter at 5. 

2179See supra Section V.B.3(b) for a discussion 

on the current market structure for proprietary 

market data. 

2180See Nasdaq Letter IV at 2, 25, 26; Angel Letter 

at 23. 

2181See Nasdaq Letter IV at 25. 

2182See Angel Letter at 23. 

2183See supra Section V.C.2(b)(i)c for a 

discussion on connectivity fees and their potential 

impact on competing consolidators. 

charge for its proprietary market 

data.2170 Therefore, the Commission 

believes that connectivity fees that will 

be charged by competing consolidators 

for consolidated market data products 

will be lower than the connectivity fees 

for equivalent data today. 

The Commission recognizes that 

SROs will charge connectivity fees to 

competing consolidators and selfaggregators. The exchanges could 

continue to set connectivity fees for data 

feeds as part of their SRO fee schedules, 

and these fees must continue to meet 

statutory standards.2171 The exchanges’ 

connectivity fees are not currently based 

on the number of end users, and 

therefore the Commission believes that 

the connectivity fees for consolidated 

market data products would not be 

directly passed through to the end users. 

SRO connectivity fees would be fixed 

costs incurred by self-aggregators and by 

competing consolidators, a cost the 

latter could spread out among their end 

users as a part of the consolidation and 

dissemination as well as connectivity 

fees. 

g. Response to Comments on Fees for 

Consolidated Market Data 

Several commenters stated that the 

decentralized consolidation model is 

unlikely to reduce data costs, including 

because of the richer core data content 

and the additional upkeep costs 

introduced by the decentralized 

consolidation model.2172 One 

commenter said that the uncertainty 

around data reliability and fees did not 

provide assurances that the market data 

costs would decline after adoption of 

these amendments.2173 Another 

commenter stated that given the 

potential data and technology input 

costs, competition alone cannot lower 

prices.2174 Another commenter said that 

there will be a speed race among 

competing consolidators and, as a 

result, as their costs go up their prices 

will go up.2175 One other commenter 

expressed sympathy for the idea of 

introducing competitive forces, but said 

that the release did not provide any 

proof that introducing competition from 

competing consolidators and selfaggregators will lower data fees and 

latency.2176

The Commission disagrees with these 

comments and believes that competition 

among competing consolidators will 

likely decrease consolidated market data 

costs for equivalent data.2177 First, as 

discussed above, the Commission agrees 

that there is uncertainty around data 

content fees. However, for the reasons 

explained above, the Commission 

believes that the overall data fees (i.e., 

data content, consolidation and 

dissemination, and connectivity fees) 

will likely be lower for equivalent data. 

One commenter’s statement about 

potential fee increases due to ‘‘richer 

core data content’’ 2178 makes an 

accurate comparison to baseline SIP 

data fees difficult, because current SIP 

data fees bundle data content and 

consolidation and dissemination fees. 

While data content portion of the SIP 

data fees might go up because of the 

richer content of consolidated market 

data, consolidation and dissemination 

portion of SIP data fees could approach 

zero, as the exclusive SIPs will be 

discontinued. Thus the overall outcome 

is unclear, making comparisons to the 

current SIP data fees very difficult. A 

more accurate way to examine the data 

fees is by breaking them down into the 

three fee components (i.e., data content, 

consolidation and dissemination, and 

connectivity) while holding data 

content constant, as in the 

Commission’s analysis above. As a 

result of that analysis, the Commission 

concludes that the overall data fees (i.e., 

data content, consolidation and 

dissemination, and connectivity fees) 

will likely be lower for equivalent data. 

Second, the Commission understands 

that competing consolidators will have 

input and technology costs, but as 

discussed above, these are mostly fixed 

costs that competing consolidators will 

spread over their customer base. 

Competitive pressure will encourage 

competing consolidators to always look 

for ways to reduce their costs and try to 

capture market share by passing some or 

all of these cost savings onto their 

customers. Additionally, the 

Commission believes that this same 

competitive dynamic will be unchanged 

even if competing consolidators charge 

different consolidation and 

dissemination prices for different 

products, such as higher prices for 

lower latency products, as suggested by 

one of the commenters. On the other 

hand, current market participants whose 

trading strategies require low-latency 

data need to buy proprietary data and 

the exchanges may not be subject to 

robust competition in their proprietary 

data business.2179 Similarly, the 

exclusive SIPs are not under 

competitive pressure and are unlikely to 

be focused on cost saving measures, as 

the competing consolidators will. 

Some commenters stated that the 

Commission’s belief about multiple 

competing consolidators offering 

differentiated products is in conflict 

with its predictions about the overall 

fees for consolidated market data 

potentially being lower than today for 

equivalent data.2180 One commenter 

said that ‘‘if the Commission’s 

prediction of 12 consolidators were 

correct, the fixed costs associated with 

the two exclusive SIPs would be 

supplemented with the fixed costs 

associated with 12 consolidators, likely 

resulting in a substantial increase in 

industry fixed costs. Such an increase in 

fixed costs would ultimately have to be 

borne by industry participants, 

including investors, and ultimately 

recovered from consumers of market 

data.’’ 2181 Another commenter relied on 

an academic article to make the point 

that competition could increase prices 

when product differentiation is 

possible.2182 The Commission does not 

believe the commenters’ conclusions 

necessarily follow for the new 

competing consolidator business. 

First, the Commission does not 

believe that the market having several 

competing consolidators will lead to 

higher fixed costs for equivalent data 

and thus higher consolidated market 

data prices. What the competing 

consolidators’ fixed costs will be is 

uncertain, because a portion of those 

fixed costs will be the connectivity fees 

that the SROs will file with the 

Commission and those are yet to be 

proposed.2183 Additionally, even if the 

fixed costs end up being higher, that 

would not immediately imply higher 

consolidated market data prices because 

the demand for consolidated market 

data products might be higher as a result 

of some market participants potentially 

choosing to buy consolidated market 

data products instead of proprietary 

18776 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2184See infra Section V.C.4(a) for a discussion on 

the impact of the amendments on proprietary data 

business. 

2185See infra Section V.C.4(b) for a discussion on 

the impact of the amendments on new entrants into 

broker-dealer, market making, and other latency 

sensitive businesses. 

2186See Yongmin Chen and Michael H. Riordan, 

Price-Increasing Competition, 39 Rand J. Econ. 

1042, 1056 (2008). See also, supra Section 

V.C.2(a)(ii) for a discussion of the potential 

scenarios for the number of competing consolidator 

registrants. 

2187See supra Section V.C.2(a)(ii)b for a 

discussion on the potential softening of competition 

if the only two registrants for the new competing 

consolidator business are exchange-affiliated 

competing consolidators. 

2188Several commenters agreed. See, e.g., BestEx 

Research Letter at 2–3; State Street Letter at 2; 

BlackRock Letter at 1. 

2189Some commenters agreed. See, e.g., MEMX 

Letter at 5. 

2190See supra Section V.B.2(c). 

2191See CTA Plan, Q2 2020 CTA Quarterly 

Revenue Disclosure, available at https://

www.ctaplan.com/publicdocs/ctaplan/CTA_

Quarterly_Revenue_Disclosure_2Q2020.pdf; Nasdaq 

UTP Plan, Q2 2020 UTP Quarterly Revenue 

Disclosure, available at https://www.utpplan.com/ 

DOC/UTP_Revenue_Disclosure_Q22020.pdf. 

2192One of the round table participants said that 

‘‘there are many different types of market data 

consumers, from major Wall Street banks and 

market makers to retail online brokerages and 

media companies across the world and all have 

differing data needs.’’ (See Oliver Albers speech on 

page 107, available at https://www.sec.gov/ 

spotlight/equity-market-structure-roundtables/ 

roundtable-market-data-market-access-102518- 

transcript.pdf). Another round table participant 

stated that ‘‘[e]xchanges offer a variety of data 

products to meet the diverse needs of market 

participants.’’ (See James Brooks’ speech on page 

177, available at https://www.sec.gov/spotlight/ 

equity-market-structure-roundtables/roundtablemarket-data-market-access-102518-transcript.pdf). 

data feeds 2184 and potential new entry 

into the broker-dealer, market making, 

and other latency sensitive 

businesses.2185 Finally, the Commission 

believes that, unlike in the current 

centralized consolidation model, 

competitive pressures will make it 

harder for competing consolidators to 

raise their prices to supra-competitive 

levels under the decentralized 

consolidation model. At any given 

point, competing consolidators are 

unlikely to have exactly the same 

incremental costs. Some of them might 

have cost advantages over the others, 

which will allow them to pass these cost 

advantages to customers in terms of 

lower prices and to compete over each 

other’s customer segments. Those 

competing consolidators with a cost 

advantage will increase their market 

share by pushing out the higher cost 

competing consolidators from the 

market. Eventually the market will 

reach a stable level of competition 

where individual competing 

consolidators cannot raise their prices to 

supra-competitive levels without risking 

a loss of their customers to a competitor. 

Second, the Commission does not 

believe that the comment about 

competition potentially leading to price 

increases in a market with product 

differentiation applies to the competing 

consolidator business. The comment 

relies on an academic paper that 

examines prices and competition under 

a duopoly market structure. The 

academic paper does not examine or try 

to understand potential price outcomes 

under a different market structure, such 

as one with several competing firms— 

the most likely outcome for the 

competing consolidator business.2186

Therefore, it is hard to extrapolate the 

paper’s arguments from a duopoly 

market to a market with more than two 

competitors because the competitive 

dynamics and the resulting price effects 

in a duopoly market might be very 

different from the competitive dynamics 

and the resulting price effects in a 

market with several competitors. The 

Commission acknowledges that 

competition may not be very strong if 

the new competing consolidator 

business ends up with two competing 

consolidators, especially if both of them 

are affiliated with the exchanges that 

currently operate an exclusive SIP.2187

However, even in such a market, this 

academic paper’s predictions will not 

necessarily be applicable because the 

two competing consolidators will have 

the ability to target each other’s 

customers if they see an economic 

opportunity to do so. On the other hand, 

the paper cited by the commenter 

examines a research question motivated 

by empirical observations in industries 

such as the anti-ulcer drug market. 

Competitors in those markets have a 

hard time offering each other’s products, 

given potential patent and other 

restrictions. However, in the 

consolidated market data business, 

firms can offer perfectly or partially 

substitutable products as well as each 

other’s differentiated products if an 

economic opportunity to do so exists. 

For example, as discussed above, an 

economic opportunity may exist if an 

inefficient competing consolidator 

charges prices above competitive levels. 

Unlike a brand name drug 

manufacturer, competing consolidators 

will maintain the ability to compete 

over the same customer segments, even 

as they differentiate their products. And 

this ability to compete will create a 

threat of competition that will 

discipline competing consolidators’ 

prices. 

(ii) Fees for the Content of Current SIP 

Data 

The Commission also considers the 

effect of the rule on fees market 

participants currently pay for SIP data 

content versus what they would pay for 

equivalent content under the 

decentralized consolidation model. The 

Commission recognizes that a 

significant proportion of market 

participants currently purchase only SIP 

data and/or the unconsolidated 

equivalent of SIP data.2188 Under this 

rule and conditional on fees for 

consolidated market data, while some of 

these market participants will choose to 

purchase more data than they purchase 

today, other market participants may 

choose to continue to purchase content 

equivalent to current SIP data (e.g., 

NBBO and TOB).2189 The Commission 

believes that data fees paid for 

equivalent data could be similar to 

current SIP data fees or could be lower 

than current SIP data fees. Whether the 

fees are the same or lower depends on 

several factors: The data content fee 

structure proposed by the effective 

national market system plan(s) for NMS 

stocks, how competing consolidators 

allocate their costs of processing (i.e., 

receiving, consolidating, and 

disseminating) consolidated market 

data, and any connectivity fees charged 

by competing consolidators for 

consolidated market data products. 

a. Data Content Fees 

The Commission believes that the 

data content fee structure proposed by 

the effective national market system 

plan(s) for NMS stocks under the 

decentralized consolidation model is an 

important factor in determining whether 

total data fees (i.e., the sum of data 

content fees, consolidation and 

dissemination fees, and connectivity 

fees) for the equivalent of current SIP 

data could be similar or lower under 

this rule.2190 Until the effective national 

market system plan(s) propose fees for 

data content underlying consolidated 

market data offerings, the Commission 

is unable to determine the extent to 

which this fee structure would charge 

lower fees for end users who wish to 

receive subsets of consolidated market 

data from competing consolidators. 

The Commission also understands 

that the current SIP data content fees are 

different for different use cases.2191 In 

the 2018 SEC roundtable, several 

exchanges agreed that their many 

different types of market participants 

and that one type of data product does 

not meet everybody’s needs.2192 The 

amendments will not change the market 

reality that market participants have 

diverse data needs. Thus the 

Commission believes that the effective 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18777 

2193One commenter agreed that different types of 

investor place different values on market data and 

therefore the market data pricing schemes should 

take this into account. See Angel Letter at 9, 11, and 

27. 

2194See Nasdaq Letter IV at 47; NYSE Letter II at 

4. 

2195See NYSE Letter II at 4. 

2196See Proposing Release, 85 FR at 16840–41 for 

a discussion on the uncertainty about data content 

fees. 

2197One commenter stated that the distinction 

between professional and non-professional users 

and the corresponding price differences between 

those categories should be retained under the 

amendments. See Angel Letter at 9. Within 150 

days of the effectiveness of Rule 614, the Operating 

Committee(s) of the effective national market 

system plan(s) will be required to propose the data 

content fees for the SROs’ data required to create 

consolidated market data and will then file the 

proposed fees with the Commission for 

consideration pursuant to Rule 608. See supra 

Section III.H.1. Thus the Commission is uncertain 

about the potential data content fee structure the 

effective national market system plan(s) will 

propose. 

2198One commenter said that ‘‘[u]sage categories 

are complex and lack standardization in 

terminology across exchanges, leading to excessive 

audits and subjective interpretations about 

compliance with contractual agreements.’’ See 

BlackRock Letter at 6. 

2199See NYSE Letter II at 20. 

2200The Commission has issued an order to 

modernize the governance of the data plans. See 

Proposing Release, 85 FR at n. 8. 

2201See Proposing Release, 85 FR at Section 

VI.C.2(a). 

2202See supra Section V.C.2(b)(i). 

2203See Proposing Release, 85 FR at Section 

V.C.2(b)(i). 

2204See, e.g., NYSE Letter II at 20; Angel Letter 

at 24; TD Ameritrade Letter at 4. 

national market systems plan(s) will 

likely take this market reality into 

account when proposing the fee 

schedule for data content underlying 

consolidated market data by, for 

example, proposing different fees based 

on the scope of data content a market 

participant consumes or usage category 

or a combination of both.2193

Two commenters 2194 emphasized the 

uncertainty around the potential 

national market system plan(s) fee 

schedules, with one commenter stating 

that ‘‘the Commission cannot assume 

that the operating committee of an NMS 

plan would create such a [top of book] 

product, or whether the costs of such a 

product would meet the needs of market 

participants who do not want or cannot 

consume the full consolidated market 

data.’’ 2195 Indeed the Commission does 

not assume that the Operating 

Committee of an effective national 

market system plan will create a 

differential pricing structure that might 

satisfy the needs of market participants 

who will continue to purchase data 

content equivalent to the current SIP 

data.2196 However, the Commission 

believes that this is a likely outcome 

based on market realities. The effective 

national market system plan(s) may 

choose different price levels based on 

usage category because that is the 

current fee practice for the exclusive 

SIPs. Thus it is possible this pricing 

method will carry over into the new 

market under the amendments.2197 On 

the other hand, it is also possible that 

the effective national market system 

plan(s) will choose different price levels 

based on the scope of data content 

market participants consume,2198

especially because competing 

consolidators are not required to offer 

the entire data content of consolidated 

market data. As a result, the 

Commission acknowledges that the 

amendments could decrease or keep at 

similar rates the content fees for the 

equivalent of SIP data.2199 The outcome 

is dependent on the effective national 

market system data plan(s)’ fee 

proposals.2200

b. Consolidation and Dissemination 

Fees 

The fees for data consolidation and 

dissemination depend on how 

competing consolidators allocate fixed 

costs among subscribers receiving 

different subsets of data. As discussed 

in the Proposing Release,2201 the 

Commission expects competing 

consolidators to offer a menu of 

products and services, regardless of the 

data content fee structure of the 

effective national market system plan(s). 

Competing consolidators could elect to 

charge lower consolidation and 

dissemination fees to subscribers 

receiving subsets of data compared to 

fees charged to subscribers receiving the 

entirety of consolidated market data. In 

fact, the Commission believes that 

competitive pressure could result in 

such a fee structure. Additionally, some 

competing consolidators can specialize 

in serving market participants that 

prefer to consume subsets of 

consolidated market data. In such a 

case, these specialized competing 

consolidators might be able to lower 

some of their fixed costs (e.g., by signing 

up for a smaller, and therefore, cheaper 

connectivity port to take in only a 

subset of consolidated market data) and 

pass those cost savings in terms of lower 

consolidation and dissemination fees. 

Overall, the data consolidation and 

dissemination component of total fees 

charged to those who purchase content 

equivalent to SIP data could be lower 

than this component of current SIP data 

fees today. 

c. Connectivity Fees 

The fees for connectivity services paid 

by end users seeking to purchase only 

what was previously SIP data may 

decline for some users but could stay 

the same for others. Currently, some SIP 

data users connect to the exchanges that 

are the administrators of exclusive SIPs 

and pay connectivity fees to access the 

SIP data. These connectivity fees are 

paid directly to the exchanges and do 

not go to the exclusive SIPs. There are 

also SIP data users that do not connect 

to the exchanges and thus do not pay 

SRO connectivity fees for SIP data, but 

may pay fees to other market data 

service providers. Under this rule, 

subscribers may be charged a 

connectivity fee by competing 

consolidators when they subscribe to 

consolidated market data products. The 

Commission acknowledges that there is 

uncertainty over whether the competing 

consolidator connectivity fees would be 

similar to or smaller than what SIP data 

users currently pay in connectivity fees. 

The overall connectivity fees under this 

rule may be similar if competing 

consolidators charge connectivity fees 

similar to what the current SIP data 

normalizers charge. As discussed 

above 2202 and in the Proposal 2203 and 

given the potential connectivity options 

available, the Commission believes 

competing consolidators will be under 

competitive pressure, and as such, they 

may offer a range of connectivity fees, 

including based on market participants’ 

scope of data content and speed choice. 

In that case, SIP data subscribers who 

currently pay connectivity fees to the 

exchanges may see their connectivity 

fees decline. 

d. Response to Comments on Fees for 

the Content of Current SIP Data 

Several commenters argued that data 

fees for retail investors will go up and 

that those investors will effectively be 

subsidizing benefits incurred by selfaggregators or other market participants 

who use larger data content or the 

entirety of consolidated market data.2204

The Commission acknowledges that 

market participants who would like to 

purchase a narrower data content that is 

equivalent to the current SIP data might 

pay fees similar to the current SIP data 

fees. This is because it is uncertain 

whether the effective national market 

system plan(s) will implement a fee 

schedule that has different fees based on 

the scope of data content a market 

participant consumes or usage 

categories, whether competing 

consolidators will allocate their fixed 

costs taking into account consolidation 

and dissemination bandwidth their 

customers use based on their data 

content consumption or usage category, 

18778 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2205See supra Section V.C.2(b)(ii) for a discussion 

on the reasons why data fees for investors who 

would like to purchase data content equivalent to 

the current SIP data might pay lower fees than the 

current SIP data fees. 

2206See supra Section V.B.2(b) for a discussion 

on the current process for dissemination of market 

data. 

2207See supra SectionV.B.3(a) for a discussion on 

why the SIP bidding process is not necessarily 

competitive. 

2208See supra Section V.A.2 for a discussion of 

the problems with the current process and infra 

Section V.D.2 for a discussion of the effect of the 

amendments on competition. 

2209See, e.g., STANY Letter II at 5; Healthy 

Markets Letter I at 4; TD Ameritrade Letter at 2; 

Kubitz Letter at 1. 

2210See, e.g., DOJ Letter at 3–4; IntelligentCross 

Letter at 4–5; Better Markets Letter at 3; Clearpool 

Letter at 7; MEMX Letter at 8; Committee on Capital 

Markets Regulation Letter at 3; FIA PTG Letter at 

1; Steinmetz Letter (comment on entire proposal). 

2211See Section V.C.2(b) for an analysis of the 

potential for a reduction in the fees associated with 

of data consolidation and dissemination. See also, 

e.g., BestEx Research Letter at 4; Fidelity Letter at 

9; Committee on Capital Markets Regulation Letter 

at 3; Wellington Letter at 1; RBC Letter at 6. 

2212See supra Section V.C.2(b) for a discussion of 

why data fees might decline for some participants. 

2213One commenter agreed. See Angel Letter at 

21. See also supra V.C.2(b) for a discussion of why 

competing consolidator fees for consolidation and 

dissemination are likely to be lower than current 

SIP fees for the same services. 

2214One commenter agreed. See BlackRock Letter 

at 5. 

2215See, e.g., TD Ameritrade Letter at 2; Healthy 

Markets Letter I at 4; STANY Letter II at 5; Data 

Boiler Letter I at 2. 

2216See, e.g., BestEx Research Letter at 4; Fidelity 

Letter at 9; Committee on Capital Markets 

Regulation Letter at 3; Wellington Letter at 1; RBC 

Letter at 6. 

2217See supra Section V.C.2(b) for an analysis of 

the amendments’ impact on data fees. 

2218One commenter agreed. See State Street 

Letter at 3. 

2219See supra Section V.A.2. 

2220See id. 

and at what level competing 

consolidators will charge connectivity 

fees. Despite this uncertainty, as 

discussed above, the Commission 

believes that there are several reasons 

why market participants who would 

like to purchase a narrower data content 

that is equivalent to the current SIP data 

might pay lower fees than the current 

SIP data fees.2205 The Commission does 

not have enough information to 

determine whether these fees will be 

lower or similar. 

(c) Benefits of the Decentralized 

Consolidation Model Pertaining to 

Competing Consolidators 

As discussed above,2206 currently SIP 

data is collected, consolidated, and 

disseminated to market participants 

through a centralized consolidation 

model with an exclusive SIP for each 

NMS stock. The amendments will 

discontinue the centralized model, and 

instead will introduce a decentralized 

consolidation model. Even though the 

current exclusive SIPs are selected 

through a bidding process,2207 the 

Commission believes that a competitive 

marketplace is more capable of 

producing the benefits that come from 

competitive forces than the process of 

soliciting bids for exclusive 

contracts.2208 In particular, the 

Commission believes that the 

decentralized consolidation model will 

have four potential benefits for market 

participants. First, the Commission 

believes that the decentralized 

consolidation model offers the potential 

for gains in efficiency in the delivery of 

consolidated market data products to 

emerge over time. Second, the 

Commission believes that the model 

will promote innovation in market data 

delivery in the future, in a way that the 

current centralized consolidation model 

has not. Third, the Commission expects 

that the new model will significantly 

reduce content and latency differentials 

that currently exist between SIP data 

and proprietary data products. Finally, 

the Commission believes that the 

decentralized consolidation model will 

potentially increase market resiliency. 

The Commission acknowledges that 

some commenters raised issues about 

the potential benefits of the 

decentralized consolidation model 

predicted in the Proposing Release.2209

However, other commenters stated that 

the decentralized consolidation model 

will bring potential benefits and agreed 

with the Commission’s earlier 

predictions.2210 The analysis responds 

to the comments below. 

(i) Gains in Efficiency, Such as Cost 

Savings 

The Commission believes that 

introducing competition into the 

provision of consolidated market data 

products and dissemination services 

will likely reduce costs and lower prices 

for those services, and create incentives 

for innovating on product offerings 

more tailored to the needs of the 

consumers.2211 It is therefore the 

Commission’s expectation that the 

decentralized consolidation model will 

result in a meaningful increase in 

investments intended to lower costs 

and/or improve quality in the provision 

of consolidated market data products. 

This represents an economic benefit for 

the national market system, some of 

which will be kept by competing 

consolidators as profit, and some of 

which will be received by market 

participants in the form of lower fees for 

competing consolidator services. 

Some market participants may benefit 

as a result of the introduction of the 

decentralized consolidation model if 

they experience a lower price for 

consolidated market data relative to 

today’s price for consolidated market 

data, holding data content constant.2212

Additionally, market participants 

could potentially save on the cost of 

consolidated market data because they 

will only need to subscribe to one 

competing consolidator instead of two 

exclusive SIPs (i.e., UTP and CTA/ 

CTQ). To the extent market participants 

can subscribe to one competing 

consolidator, they could save money by 

not having to pay the costs of processing 

consolidated market data to two 

SIPs.2213 To the extent that some market 

participants that receive consolidated 

market data products from competing 

consolidators that are not SCI entities 

choose to retain a back-up connection to 

a second competing consolidator, their 

cost savings could be lower. Finally, the 

amendments could improve efficiency 

in the consumption of market data 

because purchasers could receive 

consolidated market data products for 

all NMS stocks on one feed instead of 

three.2214

Several commenters raised issues 

about the prediction that the new 

decentralized consolidation model will 

lead to declines in market data costs.2215

On the other hand, several commenters 

said that the decentralized 

consolidation model will lead to more 

efficient and lower cost market data 

products.2216 As discussed in detail 

above, the Commission agrees with the 

second group of commenters and 

believes that competition will likely 

improve quality and lower market data 

costs.2217

(ii) Innovation in Data Delivery 

Second, the Commission believes that 

the decentralized consolidation model 

will enable consolidated market data 

delivery to continue to keep up with 

market data communication innovations 

in the future, in a way that the current 

centralized consolidation model has 

not.2218 This represents an improvement 

over the current system for 

dissemination of SIP data, in which the 

lack of competitors reduces the 

incentives of the exchanges that govern 

the exclusive SIPs to innovate.2219 The 

Commission believes that the current 

system of disseminating SIP data 

through exclusive SIPs, which are 

managed by the Equity Data Plans’ 

Operating Committees, is not well 

suited to keep up with the pace of 

innovation in data processing and 

communication in the market.2220 The 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18779 

2221Several commenters agreed. See, e.g., State 

Street Letter at 3; ACS Execution Services Letter at 

5. 

2222See infra Section V.D.1. 

2223Several commenters agreed. See, e.g., 

BlackRock Letter at 5–6; AHSAT Letter at 3. 

2224See Nasdaq Letter IV at 9. 

2225See Nasdaq Letter IV at 9. 

2226See WFE Letter at 1. 

2227See supra Section V.C.2(b) for a discussion 

on competing consolidators’ consolidation and 

dissemination prices. 

2228Several commenters agreed with the 

Proposal’s predictions on latency reduction as a 

result of the decentralized consolidation model. 

See, e.g., IntelligentCross Letter at 4; DOJ Letter at 

3–4; AHSAT Letter at 3; Wellington Letter at 1; 

BlackRock Letter at 5. See also supra Section 

V.B.2(b) for information on current latency 

differentials. 

2229Several commenters stated that they are 

interested in registering as competing consolidators. 

See, e.g., McKay Letter at 2; ACTIV Financial Letter 

at 1; NovaSparks Letter at 1. See also Press Release, 

Miami Int’l Holdings, Miami Int’l Holdings 

Announces That It Is Evaluating Registration as a 

Competing Consolidator (Nov. 18, 2020), available 

at https://www.miaxoptions.com/sites/default/files/ 

press_release-files/MIAX_Press_Release_

11182020.pdf. 

2230See supra Section V.C.2(a) for a discussion of 

the factors affecting the decision to become a 

competing consolidator. 

2231The Commission believes that if the existing 

exclusive SIPs choose to become competing 

consolidators in the decentralized consolidation 

model, the competition with other competing 

consolidators will incentivize them to improve their 

connectivity, transmission, consolidation, and 

distribution speeds to the levels of other competing 

consolidators. 

2232See supra Section V.B.2(b) for a discussion 

on the latency differentials between SIP data and 

proprietary data feeds. 

2233See id. 

2234See supra Section V.C.2(a); V.C.2(a)(ii). 

2235See supra Section V.B.2(b). 

2236Several commenters agreed. See, e.g., Cboe 

Letter at 23; Nasdaq Letter IV at 49; STANY Letter 

II at 6. 

2237One commenter agreed and provided a 

technical explanation for these speed differentials. 

See, e.g., Data Boiler Letter I at 39. See also supra 

Section V.B.2(b) for a discussion on the current 

process for dissemination of SIP data and 

proprietary data feeds. 

2238Some commenters agreed. See, e.g., ICI Letter 

at 10. 

decentralized consolidation model will 

place the task of determining the 

method of consolidation and 

dissemination to free market forces, 

which the Commission believes will 

make it easier to innovate rapidly and 

maintain competitive parity with other 

market participants.2221 The end result 

of this improved efficiency in 

investment decisions by consolidators 

will be to improve the quality and 

reliability of market data consolidation 

and dissemination services, which will 

result in market participants having 

better data to make trading 

decisions.2222 The Commission believes 

this will lead to better trading decisions, 

lower execution costs, and will help 

reduce information asymmetries 

between market participants that 

currently solely rely on SIP data and 

market participants who purchase the 

exchanges’ proprietary data 

products.2223

One commenter disagreed, stating that 

the Commission is actually replacing 

competition with ‘‘a governmentsupervised rate-setting board.’’ 2224 The 

same commenter said that ‘‘[t]he 

Commission would no longer permit 

competition to determine the prices of 

market data or to spur innovation.’’ 2225

Another commenter said that market 

data ‘‘should remain subject to market 

forces.’’ 2226 The Commission disagrees 

with this characterization of the 

amendments. Under the amendments, 

the exchanges can continue to sell their 

proprietary data feeds by filing their fee 

schedules with the Commission, like 

they do today. In addition, similar to 

today, the effective national market 

system plan(s) will file data content fees 

with the Commission for market data. 

Finally, as mentioned above, unlike the 

exclusive SIPs, competing 

consolidators’ consolidation and 

dissemination fees will be determined 

by market forces.2227

(iii) Reduce Latency Differentials 

Third, the Commission expects that 

the new model will significantly reduce 

the various types of content and latency 

differentials between data that is 

currently SIP data and data currently 

included in proprietary data 

products.2228

The Commission’s belief that there 

will be a significant reduction in the 

latency differential between 

consolidated market data products and 

proprietary data feeds is based upon the 

Commission’s assumption that the 

business practices of current market 

data aggregators, some of which 

expressed interest in becoming 

competing consolidators,2229 will serve 

as a model for how competing 

consolidators will operate under the 

decentralized consolidation model.2230

Current market data aggregators have 

achieved connectivity, transmission, 

consolidation, and distribution speeds 

that are meaningfully faster than SIP 

data even as they process larger 

amounts of data than SIP data.2231

Therefore, the Commission believes that 

competition among competing 

consolidators will keep market data 

consolidation and distribution speeds 

close to the processing speeds achieved 

in the market data aggregation space 

currently.2232

The Commission believes that all 

forms of latency discussed previously— 

geographic, consolidation, and 

transmission latency 2233—have the 

potential to be the source of these 

reductions in the latency differential. 

The Commission understands that the 

existing market data aggregator business 

does not rely on the single-instance 

consolidator model but instead 

produces a separate consolidated feed at 

each data center. This has the potential 

to substantially reduce geographic 

latency for data centers that are not colocated with one of the existing 

exclusive SIPs because it means new 

information at a data center can be used 

immediately at that data center instead 

of being returned to the processing 

center first. The Commission therefore 

expects that the decentralized 

consolidation model will serve to 

substantially reduce geographic latency 

in the same way for market participants. 

For instance, the existing market data 

aggregators already have infrastructure 

in place to consolidate market data in 

the described way. And if the existing 

exclusive SIPs become competing 

consolidators, they will also have to 

produce separate consolidated feeds at 

each data center to be able to compete 

with other competing consolidators. 

Therefore, the Commission believes that 

the geographic latency reduction in the 

decentralized consolidation model can 

be achieved even if one existing market 

data aggregator enters the competing 

consolidator business. The benefit of the 

decentralized consolidation model with 

regard to geographic latency will not 

rely heavily on the assumption that a 

large number of consolidators would 

enter the market.2234 Importantly, as 

discussed above,2235 geographic latency 

is the biggest cause of latency 

differentials between current SIP data 

distributed by exclusive SIPs and 

current proprietary data feeds.2236

Also, the Commission understands 

that many current market data 

aggregators rely on wireless 

communications to receive data from 

various exchange data centers, using 

fiber connections as a backup in case of 

bad weather. As discussed above,2237

wireless communications are faster than 

current transmission methods for SIP 

data. To the extent that the business 

practices of current market data 

aggregators serve as a model for 

competing consolidators, the 

Commission expects the decentralized 

consolidation model to reduce 

consolidation and transmission latency 

as well.2238 Additionally, some 

competing consolidators could achieve 

lower consolidation and transmission 

latency by processing subsets of 

consolidated market data for market 

18780 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2239One commenter agreed and said that ‘‘[l]ow 

latency proprietary traders with independent 

decision engines in different data centers will 

always be the fastest actors in the system; however, 

lessening the information asymmetry between these 

actors and other market participants has great 

value.’’ See Capital Group Letter at 4. 

2240One commenter agreed and stated that ‘‘[r]ace 

conditions are impossible to solve. Even if you’re 

fastest by a picosecond, you are still first.’’ See 

Nasdaq Letter III at 5. For a discussion of the effect 

of speed differentials on trading, see also Don 

Bollerman, A NYSE Speed Bump You Weren’t 

Aware Of, IEX available at https://www.sec.gov/ 

comments/10-222/10222-395.pdf (last accessed Jan. 

8, 2020). 

2241See, e.g., Nasdaq Letter IV at 36; Cboe Letter 

at 23; Citadel Letter at 5; Nasdaq Letter III at 5; 

STANY Letter II at 6; Data Boiler Letter II at 1; 

NBIM Letter at 6. 

2242See, e.g., Nasdaq Latter IV at 49; Cboe Letter 

at 23; Citadel Letter at 5; STANY Letter II at 6. 

2243See, e.g., Nasdaq Letter IV at 41; Proof 

Trading Letter at 1. 

2244See, e.g., Nasdaq Letter IV at 8; Healthy 

Markets Letter I at 3–4; Data Boiler Letter II at 1. 

2245Several commenters agreed. See, e.g., DOJ 

Letter at 3–4; IntelligentCross Letter at 4; 

Wellington Management Letter at 1; BlackRock 

Letter at 5. 

2246Several commenters agreed. See, e.g., 

BlackRock Letter at 5; Wellington Letter at 1. 

Additionally, one commenter stated that 

‘‘[g]eographic latency could be addressed either 

through a distributed SIP or competing 

consolidators, therefore agreeing with the 

Commission. See Nasdaq Letter IV at 49. 

2247See supra Section V.B.3(e) for discussion of 

latency and execution quality. 

2248See infra Section V.C.4(b) for this discussion. 

2249Some commenters agreed. See, e.g., Capital 

Group Letter at 4; AHSAT Letter at 3. 

2250See Angel Letter at 19. 

2251See infra Section V.C.2(e)(i) for a discussion 

of how Regulation SCI could also contribute to 

market resiliency. 

participants that prefer narrower data 

content than the entirety of consolidated 

market data. The Commission believes 

that the effect of the decentralized 

consolidation model on the 

consolidation and transmission 

latencies depends on robust competition 

among competing consolidators going 

forward. 

The Commission believes that to the 

extent that the benefits of faster access 

to market data come from the ability to 

engage in more timely participation in 

the provision of liquidity, this effect 

represents an economic benefit to the 

equity market generally because it will 

provide more fair and equal access to 

market data and will reduce information 

asymmetries among market 

participants.2239 In particular, to the 

extent that the existing advantages of 

having access to fast proprietary data 

feeds are derived from trading strategies 

exploiting differentials in the speed of 

access to market data (i.e., exploiting 

traders in the market who currently rely 

solely on slower SIP data), this benefit 

would represent a transfer from current 

users of faster proprietary data to the 

users of consolidated market data 

products in the decentralized 

consolidation model that will now also 

have access to faster data.2240

In order for both economic benefits 

and transfers to be realized, at least 

some market participants that are new 

users of fast and more content-rich 

consolidated market data products will 

need to possess the technological 

capability to take advantage of the speed 

improvements the decentralized 

consolidation model is likely to provide. 

It is the Commission’s understanding 

that such technological capabilities are 

costly to acquire, and this fact could 

reduce the amount of benefit and the 

degree to which individual market 

participants can profit (through the 

transfers mentioned above) from the 

decrease in data latency. 

Several commenters disagreed with 

the Proposing Release’s predictions on 

latency reduction.2241 Some 

commenters stated that the existence of 

multiple competing consolidators will 

not reduce latency much because 

processing times are already 

minuscule.2242 Other commenters 

argued that additional latency gains are 

unlikely to improve outcomes for retail 

and long-term investors.2243 Other 

commenters argued that competing 

consolidators will be an extra hop on 

the data delivery chain and market 

participants receiving data from 

competing consolidators will always be 

slower than self-aggregators or 

proprietary data users who receive 

market data directly from the 

exchanges.2244

The Commission believes that the 

decentralized consolidation model will 

reduce latency rates for market data and 

will bring consolidated market data 

products’ latency rates more in line with 

the latency rates of proprietary data 

feeds. This latency reduction could 

come from all forms of latency, 

including geographic latency.2245 Even 

if the potential gains from processing 

speeds are small, competing 

consolidators could achieve larger 

latency reductions by decreasing 

geographic latency. Unlike the exclusive 

SIPs, competitive forces will incentivize 

competing consolidators to respond to 

market participants’ needs. For 

example, for market participants whose 

trading strategies depend on low-latency 

data, some competing consolidators 

could create an instance of consolidated 

market data in every data center, 

significantly reducing geographic 

latency.2246 Furthermore, while retail 

and long term investors might have less 

latency sensitive trading strategies, even 

small gains in speed can be meaningful 

for improving execution quality, a 

benefit to investors.2247 Finally, the 

Commission expects the introduction of 

the decentralized consolidation model 

to reduce data latency for market 

participants who currently rely on SIP 

data but will switch to using 

consolidated market data products, 

because competing consolidators will be 

incentivized to provide faster data 

products than the exclusive SIPs. The 

Commission discusses the full details of 

the relationship between selfaggregators and competing consolidators 

with respect to latency below.2248 This 

then will lead to a reduction in 

information asymmetry caused by 

current large latency differences among 

investors using SIP data versus 

proprietary data feeds.2249

One other commenter disagreed with 

the Commission’s assessment of the 

decentralized consolidation model’s 

latency benefits, stating that 

‘‘[c]competing consolidators will create 

a costly arms race in speed.’’ 2250 The 

Commission believes that there is 

already demand for fast data in the 

market and the introduction of the 

decentralized consolidation model will 

not affect market participants’ demand 

for faster data. However, the new model 

will affect the supply of market data 

speeds available to market participants. 

Hence, with the amendments, market 

participants who currently rely on SIP 

data will have other data options that 

are faster than SIP data and that are 

potentially a closer substitute to 

proprietary data feeds. 

(iv) Market Resiliency 

Fourth, the Commission believes that 

the decentralized consolidation model 

will eliminate the single point of failure 

in market data consolidation and 

dissemination step and potentially 

increase market resiliency. However, the 

Commission acknowledges that the 

provision of data content underlying 

consolidated market data will continue 

to be a single point of failure, in that one 

of the exchanges could experience a 

systems issue leading to a market-wide 

effect just like they could today if they 

experience a systems issue when 

delivering their data content to the 

exclusive SIPs. 

Under the amendments, with the 

availability of multiple competing 

consolidators, there could be multiple 

copies of consolidated market data, 

which will contribute to market 

resiliency.2251 Some commenters stated 

that having multiple competing 

consolidators will reduce the 

probability of market-wide failures and 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18781 

2252See, e.g., BlackRock Letter at 5; Committee on 

Capital Markets Regulation Letter at 3; Clearpool 

Letter at 7–8; BestEx Research Letter at 5. See also 

Section III.C.2. 

2253See, e.g., NYSE Letter II at 24; Nasdaq Letter 

IV at 7, 8, 36; Cboe Letter at 23–24, 25; TechNet 

Letter II at 2; Data Boiler Letter II at 4. 

2254See supra Section III.C.2. 

2255See Nasdaq Letter IV at 35. 

2256These costs do not include the costs of 

compliance with Regulation SCI, which are 

discussed below. See infra Section V.C.2(e)(ii). The 

direct cost of compliance with Regulation SCI (i.e., 

PRA plus non-PRA costs) is approximately between 

$1 million and $2.4 million in ongoing costs and 

is approximately between $300,000 and $3 million 

in one-time costs, depending on entity type. 

Therefore, the total direct cost of the decentralized 

consolidation model, including the costs of 

compliance with Regulation SCI is approximately 

between $6.6 million and $8 million in ongoing 

costs and is approximately between $2 million and 

$8.4 million in one-time costs, depending on entity 

type. However, these costs could be lower for some 

competing consolidators that choose not to take in 

and offer the entirety of consolidated market data 

as well as for some that do not have to comply with 

Regulation SCI. 

2257See Proposing Release, 85 FR at Section 

V.D.2; supra Section IV.D.3. 

2258 Direct costs cited in this section are 

quantified from estimates in the PRA. See supra 

Section IV. 

2259See supra Section IV.D.1(b)(iii); supra note 

1412. 

2260See supra Section IV.D.1(a). 

2261These costs are composed of labor costs of 

$418,290, external costs of $371,175 to operate and 

maintain systems to comply with Rules 614(d)(1) 

through (4), external costs of $168,000 to purchase 

market data from the SROs, and an additional 

annual ongoing external cost of $4,602,720 to colocate itself at four exchange data centers. See supra 

Section IV.D.3(g)(iii). 

2262See supra Section IV.D.2(b)(iii); supra note 

1423. 

2263See supra Section IV.D.4(b)(iii). 

2264See supra Section IV.D.5(b)(iii); supra note 

1543. 

instead increase market resiliency.2252

The Commission agrees. Currently, each 

exclusive SIP consolidates and 

disseminates unique market data and if 

either or both of the exclusive SIPs 

experience a systems problem the whole 

market is affected. However, under the 

amendments, with multiple competing 

consolidators serving the market, no 

single competing consolidator’s systems 

issue will be a market-wide problem. At 

most, it will affect all of its customers 

or some of its customers if others 

retained a back-up competing 

consolidator. 

Other commenters stated that 

competing consolidators will move the 

market from single point of failure to 

multiple points of failure and reduce 

resiliency.2253 The Commission agrees 

that with multiple competing 

consolidators, each of their systems 

issues might cause problems for a 

certain portion of the market 

participants. However, that will still 

decrease the probability of market-wide 

failures in data consolidation and 

dissemination because all competing 

consolidators would have to have a 

simultaneous systems issue for there to 

be a market-wide failure in data 

consolidation and dissemination. That 

is unlike today, when a single exclusive 

SIP’s systems issue can create a marketwide failure in data consolidation and 

dissemination. Additionally, with 

multiple competing consolidators, 

market participants will have a choice if 

they decide to retain a back-up 

competing consolidator based on their 

business needs. However, currently, for 

market participants that primarily rely 

on SIP data there is no secondary backup consolidator option. Thus, as 

discussed above,2254 the Commission 

does not believe that the decentralized 

consolidation model reduces resiliency. 

Finally, one commenter expressed 

concerns about low-cost providers being 

less resilient.2255 The Commission 

believes that low cost data providers 

would not necessarily be less resilient 

and, if any are less resilient, that would 

not necessarily lead to lower resiliency 

in the market because market 

participants could review competing 

consolidators’ monthly disclosures and 

decide whether to retain a backup 

consolidator. First, any low cost 

competing consolidators that are above 

the five percent (5%) market data 

revenue threshold will be subject to 

Regulation SCI with geographically 

diverse backup requirements. Second, 

all competing consolidators are required 

to publicly disclose, on a monthly basis, 

their system availability and 

performance statistics. In a competitive 

market, this will encourage competing 

consolidators to invest in their systems 

to make sure that they have high rates 

of system ‘‘up-time.’’ Additionally, it 

will give market participants 

information to anticipate their backup 

needs and decide whether they need to 

get a backup consolidator based on their 

data providers’ system availability and 

performance statistics. 

(d) Costs of the Decentralized 

Consolidation Model 

The Commission believes that the 

amendments are likely to have direct 

costs on potential competing 

consolidators and SROs, and indirect 

costs on existing exclusive SIPs, certain 

market participants and investors, and 

SROs. As explained below, the 

Commission estimates that the direct 

costs to each potential competing 

consolidator will be between 

approximately $5.6 million in ongoing 

annual costs, and total one-time costs of 

up to between approximately $1.7 

million and $5.7 million, depending on 

entity type.2256 Further, the Commission 

estimates that SROs will jointly have 

approximately $175,000 in direct onetime costs and approximately $102,000 

in ongoing costs for the amendments to 

the effective national market system 

plan(s). Each SRO will also incur 

approximately $71,000 in one-time 

direct costs and approximately $128,000 

in ongoing costs for the collection and 

dissemination of information. The 

Commission expects, however, that the 

amendments that introduce a 

decentralized consolidation model will 

have additional indirect costs. Some of 

these direct and indirect costs are likely 

to be passed on to investors in terms of 

the prices they will pay. 

(i) Direct Costs to Potential Competing 

Consolidators 

As mentioned in the Proposing 

Release and discussed above,2257 the 

Commission believes that five types of 

entities may register to become 

competing consolidators and will have 

to build systems, or modify existing 

systems, that comply with the rules: (1) 

Market data aggregation firms, (2) 

broker-dealers that currently aggregate 

market data for internal uses, (3) the 

existing exclusive SIPs, (4) new 

entrants, and (5) SROs. The Commission 

estimates that all direct ongoing annual 

costs and some one-time costs will be 

common among all competing 

consolidators and that some one-time 

costs will vary depending on entity 

type. 

For purposes of the PRA,2258 the 

Commission estimates that direct 

ongoing costs for each competing 

consolidator will be approximately 

$5.63 million and consist of the 

following costs: Costs of $16,812 to 

amend Form CC prior to the 

implementation of material changes to 

pricing, connectivity, or products as 

well as to correct inaccurate or 

incomplete information; 2259 costs of 

$50 to obtain digital IDs for the 

purposes of signing the Form CC 

annually,2260 costs of approximately 

$5.56 million associated with operating 

and maintaining a competing 

consolidator system; 2261 costs of $362 

to ensure that it has posted the correct 

direct URL hyperlink to the 

Commission’s website on its own 

website; 2262 costs of $4,360 of 

recordkeeping; 2263 and costs of $45,222 

to prepare and make publicly available 

a monthly report.2264

The Commission estimates that direct 

one-time costs that are common across 

all competing consolidators will be 

18782 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2265See supra Section IV.D.1(a); supra note 1402. 

2266See supra Section IV.D.1(a). 

2267See id. 

2268See supra Section IV.D.2(a)(iii). 

2269See supra Section IV.D.4(a)(iii). 

2270See supra Section IV.D.5(a)(iii). 

2271See supra Sections IV.D.3(b)(iii), 

IV.D.3(c)(iii). 

2272 Id. 

2273See supra Section IV.D.3(d)(iii). 

2274 Id. 

2275The Commission believes that competing 

consolidators that are affiliated with exchanges will 

choose to operate under the provisions of the 

exemption. See supra Section V.C.2(a)(i)a. 

2276See supra Section IV.D.3(e)(iii). 

2277 Id. 

2278The commenter also stated that ‘‘the capital 

expenditure costs to build the NMS network were 

estimated at $3.8 million, and the ongoing costs to 

maintain and operate the NMS network are 

estimated to be $215,000 annually.’’ See IDS Letter 

I at 13. The Commission believes this is informative 

but not directly applicable to the costs that 

potential competing consolidators could incur 

when building or modifying their systems to 

operate as a competing consolidator for two 

reasons. First, unlike the potential competing 

consolidators with one of their main functions 

being data consolidation, the NMS network is not 

a system that consolidates market data. Second, the 

NMS network costs include the transmission of 

options data, which competing consolidators will 

not consolidate or disseminate. 

2279See MIAX Letter at 2–3. 

2280See Proposing Release, 85 FR at 16843 for a 

discussion on the costs to becoming a competing 

consolidator. 

2281See supra note 2256 for a discussion on costs 

including the costs to comply with Regulation SCI. 

2282See supra Section IV.D.6(c). 

2283See supra Section IV.D.7(a)(iii); supra note 

1553. 

2284See supra Section IV.D.7(b)(iii); supra note 

1559. 

2285See NYSE Letter II at 28. 

2286This ongoing direct cost number is calculated 

using the PRA ongoing burden hours for 

maintaining the required timestamps, conducting 

assessments of competing consolidators, preparing 

an annual report, maintaining the list of the primary 

listing exchange for each NMS stock, and 

calculating gross revenues (Attorney at $417 for 245 

hours equals $102,165). See supra Section IV.D.6(c). 

$189,342 and consist of the following 

costs: Costs $93,540 to complete an 

initial Form CC; 2265 costs of $50 to 

obtain digital IDs the purposes of 

signing the initial Form CC; 2266 costs of 

$5,604 to file material amendments to 

Form CC; 2267 costs of $121 to publicly 

post the Commission’s direct URL 

hyperlink to its website upon filing of 

the initial Form CC; 2268 costs of $8,720 

to keep and preserve at least one copy 

of all documents made or received by it 

in the course of its business and in the 

conduct of its business; 2269 costs of 

$80,507 to produce the monthly reports 

and costs of $800 for an external website 

developer to create the website that will 

post and keep the monthly reports.2270

The Commission estimates that the 

total direct costs to each market data 

aggregation firm or each broker-dealer 

that currently aggregate market data for 

internal uses that will decide to register 

as a competing consolidator will 

include approximately $5.63 million in 

ongoing annual costs, as discussed 

above, and total one-time costs of 

approximately $1.71 million. The onetime costs are composed of labor costs 

of $697,150; 2271 external costs of 

$618,750 to modify its systems to 

comply with Rules 614(d)(1) through 

(4), external costs of $14,000 to 

purchase market data from the SROs, an 

additional initial external cost of 

$194,000 to co-locate itself at four 

exchange data centers; 2272 as well as 

$189,342 in costs that are common to all 

competing consolidators, as described 

above. 

The Commission estimates that the 

total direct costs to each existing 

exclusive SIP that will decide to enter 

as a competing consolidator will 

include $5.63 million in ongoing annual 

costs, as discussed above, and total onetime costs of approximately $3 million. 

The one-time costs per existing 

exclusive SIP are composed of labor 

costs of $1,394,300; 2273 external costs of 

$1,237,500 to modify its systems to 

comply with Rules 614(d)(1) through 

(4), external costs of $14,000 to 

purchase market data from the SROs, an 

additional initial external cost of 

$194,000 to co-locate itself at four 

exchange data centers; 2274 as well as 

$189,342 in costs that are common to all 

competing consolidators, as described 

above. 

The Commission estimates that the 

total direct costs to each new entrant 

that is not an SRO or a data aggregator, 

in the competing consolidator space and 

to each SRO that will decide to enter as 

a competing consolidator will include 

approximately $5.63 million in ongoing 

annual costs, as discussed above, and 

total one-time costs of approximately 

$5.66 million.2275 The one-time costs 

are composed of labor costs of 

$2,788,600,2276 external costs of 

$2,475,000 to build its systems to 

comply with Rules 614(d)(1) through 

(4), external costs of $14,000 to 

purchase market data from the SROs, an 

additional initial external cost of 

$194,000 to co-locate itself at four 

exchange data centers; 2277 as well as 

$189,342 in costs that are common to all 

competing consolidators, as described 

above. 

One commenter stated that the 

Proposing Release underestimates the 

direct costs to become a competing 

consolidator. The commenter said that 

‘‘[t]he Commission estimates that 

potential competing consolidators 

would incur ‘total one time costs of up 

to between approximately $897,000 and 

$2.40 MM, depending on entity type.’ 

Even the higher end of that range is a 

fraction of what ICE believes it would 

cost to build the necessary 

infrastructure to be a competing 

consolidator.’’ 2278 On the other hand, 

one commenter stated that the existing 

exclusive SIPs would have a 

competitive advantage over other 

potential competing consolidators, 

‘‘because they would not incur the 

upfront capital expenditures to build a 

Competing Consolidator model.’’ 2279

While acknowledging that some 

potential competing consolidators might 

incur lower costs than others to become 

a competing consolidator, the 

Commission is revising up its cost 

estimates from the Proposing 

Release.2280 The Commission estimates 

that the direct costs to each potential 

competing consolidator will be between 

approximately $5.6 million in ongoing 

annual costs, and total one-time costs of 

up to between approximately $1.7 

million and $5.7 million, depending on 

entity type.2281

(ii) Direct Costs to SROs 

Separately, the Commission estimates 

that the SROs will jointly have 

approximately $175,000 in direct onetime costs and approximately $102,000 

in ongoing costs for the amendments to 

the effective national market system 

plan(s).2282 These costs include the 

costs SROs will incur when conducting 

an assessment of competing 

consolidator performance and 

developing an annual report of such 

assessment to be provided to the 

Commission. Additionally, each SRO 

will incur approximately $71,000 in 

one-time direct costs 2283 and 

approximately $128,000 in ongoing 

costs for the collection and 

dissemination of information necessary 

to generate consolidated market data 

required by Rule 603(b).2284

One commenter mentioned that the 

amendments will ‘‘require the SROs to 

continue to incur costs associated with 

managing an NMS plan while 

overseeing and reporting on competing 

consolidators.’’ 2285 The requirement 

that the SROs conduct an assessment of 

and report on competing consolidators’ 

performance is new and the 

Commission did not include ongoing 

direct costs from this requirement to the 

SROs in the Proposing Release. 

However, with the amendments, the 

Commission revises its estimates to 

include $102,165 of ongoing direct costs 

jointly incurred by the SROs.2286 The 

SROs and the Operating Committee will 

have access to information made 

publicly available by competing 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18783 

2287See NYSE Letter II at 20–21. 2288See supra Section III.D.2(a) for a discussion 

on the scope of the definition of self-aggregator. 2289This does not apply to CTA/CQ Plan that, as 

discussed above, is paid differently. See supra 

Section V.B.2(d). 2290See Data Boiler Letter I at 79–80. 

2291See, e.g., MayStreet, Market Data, available at 

http://maystreet.com/products/market-data/ (last 

accessed Jan. 2, 2020). 

2292One commenter stated that ‘‘NYSE’s TAQ 

product is licensed to the academic community at 

a steep discount to its true cost.’’ See Wharton 

Letter at 2. 

2293See, e.g., Angel Letter at 20; NYSE Letter II 

at 24; FINRA Letter at 4. 

2294See Angel Letter at 20. 

2295See NYSE Letter II at 24; Nasdaq Letter IV at 

8, 36. 

consolidators, which could be used as 

part of their assessment of competing 

consolidators. The SROs can mitigate 

some of their costs by using this 

information. 

The commenter also stated that the 

Commission ‘‘also places on exchanges 

the costs of calculating and 

disseminating certain regulatory data 

(such as LULD bands) to competing 

consolidators and self-aggregators.’’ 2287

The commenter said that the cost to 

obtain data from other exchanges 

needed to perform these calculations 

should be considered by the 

Commission. The Commission disagrees 

that calculation of the regulatory data 

required by this rule will impose any 

major new data costs on the exchanges 

and the Commission’s estimates of the 

costs to collect and disseminate this 

certain regulatory data are included in 

the estimates of direct costs to the SROs. 

The national securities exchanges 

currently aggregate market data obtained 

from the exclusive SIPs and from 

proprietary data feeds to perform several 

exchange functions, including order 

handling and execution, order routing, 

and regulatory compliance. Therefore, if 

they continue to use the same 

proprietary data for their regulatory data 

calculations, there would not be major 

new costs. To the extent they can use 

the new consolidated market data to 

perform the regulatory data calculations, 

the exchanges can become selfaggregators 2288 and benefit from 

potentially lower data content costs. 

(iii) Indirect Costs to the Exclusive SIPs 

The Commission believes that the 

amendments may impose a substantial 

cost for existing exclusive SIPs in terms 

of loss of data processing revenues 

because exclusive SIPs will no longer be 

exclusive consolidators and 

disseminators of market data, and at 

least one of the exclusive SIPs—Nasdaq 

UTP—will no longer be paid out of the 

plan for its processing costs.2289 The 

Commission believes that the exclusive 

SIPs’ loss of revenue will be mitigated 

by the opportunity to become competing 

consolidators. If the exclusive SIPs 

decide to become competing 

consolidators, they will compete for 

business with each other and with other 

competing consolidators. This 

competition may lead to revenue that is 

lower than their current revenues. This 

potential decrease in revenue will 

represent a transfer of resources to other 

competing consolidators and to market 

participants potentially increasing 

social welfare. On the other hand, if the 

exclusive SIPs decide to become 

competing consolidators, their 

experience with this market may give 

them a competitive advantage and help 

mitigate their potential revenue losses. 

The exclusive SIPs have the benefit of 

having been in this business for a long 

time. They have significant connectivity 

to market participants and vendors and 

can leverage their existing customer 

base and established relationships with 

vendors and purchasers at firms. 

Additionally, as mentioned below, the 

CTA SIP received some improvements 

from recent investments. 

(iv) Direct and Indirect Costs to Certain 

Market Participants and Investors 

The Commission believes that the 

amendments are likely to have indirect 

costs—such as potentially paying for 

unused data content and 

implementation costs of switching from 

SIP or proprietary data to consolidated 

market data—to certain market 

participants and investors. 

First, the Commission believes that 

there will be an implementation cost for 

market participants to switch from using 

current exclusive SIP providers or 

proprietary data feeds to using 

competing consolidators. This cost is 

likely to vary among types of market 

participants; for instance, existing 

purchasers of proprietary DOB data 

products are likely to assume limited 

additional costs while new customers of 

consolidated market data products from 

competing consolidators will need, for 

example, to establish new connectivity 

and integrate a larger set of data into 

their operations. This implementation 

cost will include administrative costs 

for subscribing to a new provider of the 

data, as well as any infrastructure 

investments that may be needed to 

handle the data as delivered by the 

competing consolidator. One of the 

commenters stated that the cost to 

replace or integrate a new data feed 

might be approximately $1 million and 

that ‘‘[s]maller firms would try to do the 

same at lower cost.’’ 2290 The 

Commission is uncertain whether the 

cost number mentioned in this comment 

letter covers costs to get this new feed 

from a competing consolidator or from 

the exchanges directly. The Commission 

believes that the ultimate size of these 

costs will likely vary by market 

participant. For example, for market 

participants that currently use 

proprietary data feeds and that will 

continue to use their existing systems 

and infrastructure after switching to 

consolidated market data, these costs 

are likely lower. On the other hand, for 

market participants who need to build 

brand new systems and infrastructure to 

be able to receive consolidated market 

data, these costs could be higher and 

closer to the number the commenter 

states. 

Additionally, one of the current 

exclusive SIPs, SIAC, processes and 

disseminates the academic TAQ dataset. 

If SIAC discontinues its SIP business, 

there may be interruptions to the 

availability of this data, which will 

create a cost for both the academic 

community and investors that otherwise 

benefit from academic and regulatory 

use of this dataset and the research 

derived from it. On the other hand, 

other data vendors also provide 

comprehensive historical data products 

and that may become more readily or 

more affordably available from 

competing consolidators, especially 

because competing consolidators do not 

have to take in all data content 

underlying consolidated market data 

and offer a data product with the 

entirety of consolidated market data.2291

The Commission is uncertain and 

acknowledges the possibility that TAQ 

may no longer be available and 

consolidated market data products may 

not be affordable to the academic 

community.2292 The Commission is 

unable to quantify the incremental 

social welfare cost of the interruption of 

availability of the TAQ dataset. 

Some commenters stated that the 

decentralized consolidation model will 

increase costs for market participants 

because they would have to contract 

with a backup competing consolidator 

to avoid disruptions should their 

primary competing consolidator 

experience a disruption.2293 One 

commenter said that ‘‘[i]n a world of 

multiple consolidators, business 

continuity concerns will force many 

market participants to subscribe to more 

than one consolidator as a backup.’’ 2294

Other commenters stated that in absence 

of a backup, a competing consolidator’s 

customers would be significantly 

impacted by a disruption of their 

original data source.2295

18784 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2296One commenter said that some of the ATSs 

use SIP data ‘‘as a backstop’’ to their proprietary 

data feeds. See BestEx Research Letter at 3. 

2297One commenter said that ‘‘[t]he existence of 

multiple SIP vendors will allow firms to choose the 

best offering for their purposes and others as 

backstops, reducing the reliance on a single SIP 

feed vendor.’’ See BestEx Research Letter at 5. 

2298See NYSE Letter II at 21. 2299The fees for consolidated market data content 

will be established by the effective national market 

system plan(s) and file with the Commission under 

Rule 608. Each SRO will have to file with the 

Commission any proposed new fees for 

connectivity to its individual data that underlies 

consolidated market data pursuant to Section 19(b) 

of the Exchange Act and Rule 19b–4 thereunder and 

any proposed connectivity fee must satisfy the 

statutory standards. See Proposing Release, 85 FR 

at 16769, n. 433. 

2300See supra Section III.B.9. See also supra note 

795 for a discussion on how competing 

consolidators and self-aggregators are permitted to 

choose among the data feed options offered by the 

SROs to provide consolidated market data. 

2301None of the commenters indicated that they 

would provide a dedicated core data feed instead 

of using their existing proprietary data 

infrastructure. 

2302See supra Section III.B.9(b). 

2303See NYSE Letter II at 10–11. 

2304See id. at 13. 

2305See Nasdaq Letter IV at 29. 

Under the amendments, market 

participants will not be required to 

incur the costs of retaining a back-up 

competing consolidator, though some 

may choose to do so after evaluating the 

needs of their business and their 

customers. Currently, many market 

participants that rely on proprietary 

data use SIP data as their back-up 2296

and market participants that rely on SIP 

data do not have a back-up option 

besides the exclusive SIPs’ 

geographically diverse back-up system 

as required by Regulation SCI. Under 

amendments, market participants 

subscribing to ‘‘SCI competing 

consolidators’’ will similarly benefit 

from the requirements that those 

competing consolidators have 

geographically diverse backup and 

recovery capabilities, pursuant to 

Regulation SCI. 

On the other hand, market 

participants that will receive 

consolidated market data products from 

competing consolidators that are not SCI 

entities might decide to maintain a 

connection to a back-up competing 

consolidator (i.e., from a secondary 

source) based on their business needs. 

The Commission is uncertain what costs 

may be associated with the need for 

backup competing consolidators in the 

decentralized consolidation model, but 

does not believe they are necessarily 

higher than costs to maintain backups 

today. This is because the new 

competing consolidator business might 

generate a secondary market where 

some competing consolidators compete 

to provide backup options, which might 

lower backup costs.2297 For example, 

some competing consolidators might 

provide a backup option with narrower 

data content and higher latency, similar 

to the current SIP data. But unlike the 

exclusive SIPs providing the current SIP 

data, these competing consolidators 

would be under competitive pressure 

and would be more likely to provide 

cheaper backup data and connectivity 

options than the SIP data. New backup 

costs will likely differ for different 

market participants and will be affected 

by the new competitive competing 

consolidator market as well as the new 

market data fees, both of which will 

have pricing decisions to make about 

the provision of backup services. The 

costs may also depend on decisions 

competing consolidators may make 

regarding the resiliency of their own 

products and what backup requirements 

would be necessary for their customers 

in light of such decisions. 

(v) Indirect Costs to SROs 

One commenter said that the 

Proposing Release ‘‘requires SROs to 

‘make available’ to every competing 

consolidator and self-aggregator ‘all data 

necessary to generate consolidated 

market data’—but does not make clear 

how SROs would be compensated for 

the cost of delivering such market data 

information.’’ 2298 The Proposing 

Release discusses that the SROs will 

receive data content fees and 

connectivity fees as well as how the 

various fees will need to be filed.2299 As 

discussed above, the SROs are allowed 

to provide their core data to competing 

consolidators and self-aggregators via 

the existing proprietary data feeds, a 

combination of proprietary data feeds, 

or a newly developed core data feed.2300

While the SROs are not required to, if 

they choose to offer core data via a 

newly developed core data feed, they 

might incur some development costs to 

provide that new data feed. However, 

the Commission believes that the SROs 

may not have an incentive to develop a 

dedicated core data feed because they 

could incur costs of doing so.2301 For 

example, if an SRO developed a 

dedicated core data feed, the SRO 

would have to take steps to ensure that 

any proprietary data feed is not made 

available on a more timely basis (i.e., by 

any time increment that could be 

measured by the SRO) than a core data 

feed. This means that if the core data 

feed were slower than the proprietary 

data feeds, the exchange would need to 

throttle any order-by-order proprietary 

data feeds.2302 An exchange lowering its 

proprietary data speeds might also 

increase the number of market 

participants that might switch from 

using the exchange’s proprietary data 

feeds to consolidated market data, 

providing an incentive for exchanges to 

not create a slower dedicated core data 

feed. 

One commenter said that one of the 

exchanges ‘‘invested $4 million to build 

a new, dedicated network for 

consolidated tape data that will allow 

exchanges and subscribers to access 

CTA SIP data more quickly’’ 2303 and 

that this investment is undermined with 

the discontinuation of the centralized 

consolidation model.2304 The 

Commission understands that the 

commenter was planning to recover that 

investment cost with future revenue. 

The Commission acknowledges that the 

final amendments will impose a cost for 

SROs from losing SIP data content and 

access fees. However, the Commission 

believes that this loss of revenue will be 

offset by the data content and access 

fees paid to SROs by competing 

consolidators. Additionally, the 

exclusive SIPs’ loss of consolidation and 

dissemination revenue will be mitigated 

by the opportunity to become competing 

consolidators. 

One commenter stated that the rules 

would ‘‘eliminate’’ the incentive for 

exchanges to compete for order flow in 

order to increase the amount of time 

that exchange offers the NBBO and thus 

increase its share of the equity plan(s) 

revenues, because the rule eliminates 

the exclusive SIPs.2305 The Commission 

disagrees with this commenter’s 

description of the effects of the rule. 

Nothing about the final rules prohibits 

the national market system plan(s) from 

continuing to share NMS data revenues 

according to rules that reward 

exchanges for time during which the 

exchange has the NBBO quote. Further, 

any changes to the revenue allocation 

formula can be adopted as Plan 

amendments, which would then have to 

be filed with the Commission pursuant 

to Rule 608 and would be subject to 

notice and comment and Commission 

review. Therefore, the Commission does 

not believe that these rules will effect 

exchange incentives to compete for 

order flow in the way described by this 

commenter. 

(vi) Multiple NBBOs 

Finally, the Commission recognizes 

that the decentralized consolidation 

model may result in multiple NBBO 

quotes observed by different market 

participants due to different aggregation 

methods used by competing 

consolidators. However, currently 

market participants may already observe 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18785 

2306See supra Sections V.B.2(b), V.B.2(f). 

2307See supra Section III.B.10(b) for a discussion 

of the comments on complexity and confusion 

resulting from multiple NBBOs. 

2308See, e.g., Joint CRO Letter at 2 (‘‘Moreover, 

we are surprised and concerned by the 

Commission’s limited analysis of the Proposal’s 

potential downstream impacts on the regulation of 

U.S. markets, particularly those resulting from 

multiple competing consolidators and selfaggregators, as this analysis appears incomplete.’’). 

2309See, e.g., Nasdaq Letter IV at 3 (‘‘A 

particularly worrisome result is that product 

differentiation among competing consolidators will 

render a single ‘‘gold source’’ National Best Bid and 

Offer (‘‘NBBO’’) a relic of the past.’’); Angel Letter 

at 18–19. 

2310See, e.g., Nasdaq Letter IV at 37 (‘‘Even with 

these changes, the risk of differential treatment 

among similarly situated market participants will 

increase because an NBBO that applies to one 

market participant will simply not apply to another, 

creating a risk of uneven enforcement of the 

Exchange Act by introducing the subjective review 

of which NBBO to apply.’’), Joint CRO Letter at 4 

(‘‘Throughout the Proposal, hundreds of questions 

are posed to commenters, but none solicited 

feedback from SROs on the Proposal’s impact on 

surveillance, any increased risk to investor 

protection, or whether reprogramming our systems 

to accommodate the proposed rules would create 

any burdens or complications for us.’’). 

2311See, e.g., Nasdaq Letter IV at 20; NYSE Letter 

II at 24. 

2312See, e.g., TD Ameritrade Letter at 12. 

2313See, e.g., Fidelity Letter at 10; TechNet Letter 

II at 2. 

2314See, e.g., Nasdaq Letter IV at 3. 

2315See supra Section V.B.2(f). 

2316See supra Section V.B.2(f) for a discussion of 

these adaptations to deal with multiple NBBOs. 

2317See supra Section V.B.2(f) for additional 

discussion of this point. 

2318See supra Section III.B.10(d) for a discussion 

of the comments on impact of multiple NBBOs on 

surveillance and enforcement. 

2319See supra Section V.B.2(f). 

2320See supra Section V.B.2(f), discussing current 

market practice with respect to obtaining NBBOs. 

2321See supra Section III.F. Competing 

consolidators that are affiliated with exchanges that 

do not operate under the limited exemptive relief 

would be subject to Regulation SCI. However, the 

Continued 

multiple NBBO quotes.2306 Therefore, 

the Commission believes that the 

decentralized consolidation model will 

result in no meaningful difference with 

respect to the existence of multiple 

NBBOs. 

Several commenters disagreed with 

this conclusion, raising concerns related 

to the possibility of multiple NBBOs 

being observed as a result of the final 

rules.2307 In particular, commenters 

expressed the view that there would be 

significant costs to the market as a result 

of this possibility and expressed 

concern that these costs were not 

discussed in the Commission’s 

proposal.2308 These commenters stated 

that the emergence of multiple NBBOs 

would complicate market structure; 2309

hinder market surveillance and 

enforcement by SROs, including by 

adding reprogramming costs for 

surveillance systems and creating the 

likelihood of uneven enforcement; 2310

decrease the accuracy and 

standardization of Rule 605 

statistics; 2311 introduce new sources of 

differing NBBOs through differences in 

NBBO calculation method among 

competing consolidators; 2312 confuse 

investors, including retail investors, 

who might see more than one NBBO for 

the same stock at the same time; 2313

and complicate and increase the cost of 

compliance with best execution 

obligations.2314

The Commission continues to believe 

that the possibility of multiple NBBOs 

resulting from the decentralized 

consolidation model does not represent 

a significant cost. In the case of each 

specific issue raised, the potential 

difficulties that multiple NBBOs could 

create are already handled by the market 

(including SROs) today, because of the 

fact that multiple NBBOs at a given 

instant in time are a staple of today’s 

financial markets.2315

Specifically, the Commission does not 

believe that the potential for multiple 

NBBOs as a result of the decentralized 

consolidation model will complicate 

market structure. The market today has 

already developed adaptations to deal 

with the fact that meaningful differences 

in the observations of market 

participants about the prevailing NBBO 

can emerge.2316 As a result, the market 

structure in place today will be able to 

handle the potential multiple NBBOs 

resulting from the decentralized 

consolidation model in much the same 

way as it handles existing multiple 

NBBOs today. 

The Commission believes that the 

decentralized consolidation model will 

not increase costs or impair the 

evenness of enforcement and 

surveillance by SROs. The fact that 

order routing decisions made at the 

same time but at different data centers 

will necessarily be based on different 

observations of the market is understood 

by SROs today, and surveillance 

programs and enforcement inspections 

already take this into account.2317 In 

fact, such programs already deal with 

the even larger discrepancy in market 

snapshots that emerge from the use of 

proprietary data feeds as a substitute for 

SIP data feeds in the routing of 

orders.2318

The Commission does not believe that 

the decentralized consolidation model 

will contribute to confusion or a lack of 

standardization in the calculation of 

Rule 605 statistics. In the process of 

calculating Rule 605 statistics, firms 

must use the quote prevailing at the 

time the order is received. As discussed 

above, it is inevitable even today that 

different market centers will have 

different quotes in the space of small 

but meaningful time intervals given the 

amount of time it takes new quotes to 

travel to the geographically dispersed 

data centers where orders are 

received.2319 This remains true even if 

all market participants are using only a 

single source for the NBBO. 

The Commission does not believe that 

it is possible to ‘‘calculate’’ the NBBO in 

more than one way. That is, we do not 

believe that, for a given set of quotes in 

the market at a given instant in time, it 

is possible to arrive at different 

conclusions as to what is the NBBO 

depending on different methods for 

determining the NBBO. Therefore, 

differences in aggregation methodology 

employed by competing consolidators 

and self-aggregators are unlikely to 

introduce further differences in the 

NBBO perceived by the various market 

participants by offering alternative 

‘‘calculations’’ of the NBBO for a given 

moment in time. 

The Commission does not believe the 

decentralized consolidation model will 

cause confusion for investors through 

the propagation of multiple NBBOs. 

Those investors who have the 

technology and sophistication to detect 

differences in the NBBOs produced by 

different competing consolidators are, 

today, already aware of the potential for 

such differences and how to deal with 

them. On the other hand, those 

investors who typically do not have 

such latency-sensitive concerns (such as 

retail investors) are unlikely to detect 

differences in quotes, even if they are 

looking at multiple competing 

consolidator feeds. 

The Commission does not believe that 

the decentralized consolidation model 

will complicate and increase the cost of 

complying with best execution 

obligations through the propagation of 

multiple NBBOs. Since multiple NBBOs 

from different competing consolidators 

and self-aggregators will not represent a 

change from current market practice,2320

the Commission does not believe this 

introduces changes to the cost of 

compliance with best execution 

obligations. 

(e) Economic Effects of Competing 

Consolidators Being Subject to 

Regulation Systems Compliance and 

Integrity 

During the initial transition period all 

competing consolidators will be subject 

to the requirements of Rule 614(d)(9), 

which include requirements 

substantially similar to some of the key 

provisions of Regulation SCI.2321 After 

18786 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

Commission believes that all competing 

consolidators that are affiliated with exchanges will 

choose to operate under the limited exemptive 

relief for competitive reasons. See supra Section 

V.C.2(a)(i)a. 

2322See id. 

2323See supra Section IV.G. 

2324See SCI Adopting Release, supra note 1233, 

at 72404. 

2325See supra Section III.F. 

2326More specifically, the benefits discussed in 

this section are not measuring a change from the 

baseline but are discussing the benefits that will 

continue to apply to market participants from the 

requirements of Rule 614(d)(9) and the addition of 

the definition of SCI competing consolidator to 

Regulation SCI. 2327As discussed in detail above, the Commission 

believes that some entities who will become 

competing consolidators are already subject to 

Regulation SCI. The Commission believes that 

many of the benefits described below will not apply 

to these entities, because they already are required 

to have systems that meet the requirements for 

Regulation SCI. Instead, the Commission believes 

that many of the benefits from the requirements of 

Rule 614(d)(9) and the addition of the definition of 

SCI competing consolidator to Regulation SCI will 

come from new entities who become competing 

consolidators who are not currently subject to 

Regulation SCI. See supra Section IV.F.4. 

2328Commenters agreed that applying Regulation 

SCI to competing consolidators would improve 

their resiliency and reliability. See, e.g., Clearpool 

Letter at 9; MEMX Letter at 8; Fidelity Letter at 10. 2329See supra Section III.F. 

the initial transition period, competing 

consolidators that are below the five 

percent (5%) market data revenue 

threshold will continue to be subject to 

Rule 614(d)(9), while competing 

consolidators above the threshold will 

be ‘‘SCI competing consolidators’’ and 

will be subject to the requirements of 

Regulation SCI.2322 The Commission 

expects that, under this approach, the 

requirements of Regulation SCI will 

apply to most competing consolidators 

following the initial transition 

period.2323

The Commission believes that the 

requirements of Rule 614(d)(9) and 

Regulation SCI will help prevent market 

disruptions due to one or more 

competing consolidators’ systems issues 

or cybersecurity incidents and reduce 

the severity and duration of any effects 

that may result if a systems issue or 

cybersecurity incident were to occur for 

a competing consolidator. The 

requirements of Rule 614(d)(9) will also 

impose direct and indirect costs on 

various entities. The requirements of 

Regulation SCI will also impose 

additional direct and indirect costs on 

competing consolidators that meet the 

threshold for being an SCI competing 

consolidator, as well as some indirect 

costs on other market participants 

because of their specific business 

relationships with SCI competing 

consolidators. However, competing 

consolidators will not need to incur the 

incremental costs associated with being 

an SCI competing consolidator until the 

end of the initial one year transition 

period or until they meet the threshold 

requirements for being an SCI 

competing consolidator. 

(i) Benefits To Expanding Regulation 

SCI To Include Competing 

Consolidators 

Currently, the exclusive SIPs are SCI 

entities and the benefits discussed in 

Regulation SCI currently apply to them 

and to market participants.2324 Because 

many of the requirements of Rule 

614(d)(9) are similar to the requirements 

of Regulation SCI and because 

competing consolidators that meet the 

five percent (5%) market data revenue 

threshold will be SCI entities,2325 the 

Commission believes that the benefits of 

Regulation SCI will apply to competing 

consolidators and will continue to apply 

to market participants, i.e., maintain the 

status quo, if the exclusive SIPs cease 

operating as exclusive plan processors. 

This section discusses the benefits that 

will apply to competing consolidators 

and will continue to apply to market 

participants from the requirements of 

Rule 614(d)(9) and the addition of the 

definition of SCI competing 

consolidator to Regulation SCI.2326

The Commission believes that at least 

three benefits from Regulation SCI will 

continue to apply to market participants 

from the requirements of Rule 614(d)(9) 

and the addition of the definition of SCI 

competing consolidator to Regulation 

SCI.2327 First, the requirements of Rule 

614(d)(9) and the addition of the 

definition of SCI competing 

consolidator to Regulation SCI will help 

prevent market disruptions due to one 

or more competing consolidators’ 

systems issues or cybersecurity 

incidents. Second, they will help reduce 

the severity and duration of any effects 

that may result if a systems issue or 

cybersecurity incident were to occur for 

one of these competing consolidators. 

This may also help prevent potential 

catastrophic events that might start out 

as a minor systems problem but then 

quickly spread across the national 

market system, potentially causing 

damage to market participants, 

including investors. Third, they will 

help ensure effective Commission 

oversight of competing consolidators’ 

systems. 

First, the requirements of Rule 

614(d)(9)(ii) and the addition of the 

definition of SCI competing 

consolidator to Regulation SCI will help 

prevent market disruptions by 

strengthening the infrastructure and 

improving the resiliency of the systems 

of new competing consolidators who are 

not currently SCI entities.2328 The 

Commission believes that some 

potential new competing consolidators 

may already have policies and 

procedures in place to maintain and test 

critical systems. However, the 

Commission believes that requirements 

of Rule 614(d)(9)(ii) and the addition of 

the definition of SCI competing 

consolidator to Regulation SCI will 

strengthen these policies and 

procedures, which will help improve 

the robustness of critical systems. 

Second, the requirements of Rule 

614(d)(9)(iii) and the addition of the 

definition of SCI competing 

consolidator to Regulation SCI will help 

reduce the severity and duration of any 

effects that may result if a systems issue 

or cybersecurity incident were to occur 

for one of the new competing 

consolidators who are not currently SCI 

entities. For example, Rule 614(d)(9)(iii) 

and Rule 1002(a) of Regulation SCI, will 

require a competing consolidator to 

notify the public and take corrective 

action if a system disruption, system 

intrusion, or cybersecurity incident 

occurs. This may reduce the length of 

these events and thus reduce the 

negative effects of those interruptions 

on the competing consolidator and 

market participants. 

Additionally, Rule 1001(a)(2) of 

Regulation SCI, which, among other 

things, will require an SCI competing 

consolidator to maintain geographically 

diverse backup and recovery systems 

that are reasonably designed to achieve 

next business day resumption and will 

help SCI competing consolidators 

restore their systems more quickly in 

the event of a disruption. The 

Commission acknowledges that Rule 

614(d)(9) does not contain this 

geographically diverse backup 

requirement. Therefore, competing 

consolidators will not be subject to the 

requirement during the initial one year 

transition period and competing 

consolidators below the SCI threshold 

level will not be subject to it thereafter. 

Lack of a geographically diverse backup 

may reduce the reliability of a 

competing consolidator’s systems. 

However, as discussed above, because of 

competitive pressures, competing 

consolidators that are not subject to 

Regulation SCI may still choose to 

develop robust backup systems in order 

to attract subscribers.2329 Additionally, 

the Commission believes most 

competing consolidators will meet the 

threshold to be SCI competing 

consolidators. Therefore, the 

Commission does not believe that the 

lack of a requirement for a geographical 

diverse backup system under Rule 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18787 

2330As discussed above, market participants who 

subscribe to a competing consolidator that is not an 

SCI entity (or that does not have a sufficiently 

resilient backup system) may choose to subscribe to 

another competing consolidator as a backup in 

order to ensure they can still operate if their 

competing consolidator experiences a system 

disruption. See id. Market participants may incur 

additional costs for this. See supra Section V.C.2(d). 

2331Regulation SCI requires SCI entities to notify 

the Commission immediately upon any responsible 

SCI personnel having a reasonable basis to conclude 

that an SCI event has occurred. Similarly, Rule 

614(d)(9)(iii)(C) requires competing consolidators to 

promptly notify the Commission upon responsible 

personnel having a reasonable basis to conclude 

that a system disruption or systems intrusion has 

occurred. The requirement for immediate or prompt 

notification, as applicable, does not apply to such 

events that a competing consolidator reasonably 

estimates would have no, or a de minimis, impact 

on the competing consolidator’s operations or on 

market participants. See e.g., Rule 614(d)(9)(iii)(B)– 

(C); Regulation SCI Rule 1002(b)(5). 

2332An SCI competing consolidator will be 

required to notify the Commission on Form SCI, 

and a competing consolidator that is not an SCI 

competing consolidator will be required to notify 

the Commission on Form CC. Additionally, each 

quarter SCI competing consolidators will be 

required to submit a report to the Commission on 

Form SCI of systems disruptions or systems 

intrusions that had no or a de minimis impact. 

2333The systems of the exclusive SIPs are 

‘‘critical SCI systems’’ and are subject to heightened 

requirements. For example a critical SCI system 

needs to maintain backup systems that are designed 

to allow them to resume operations within two 

hours of a system outage (SCI entities only have the 

requirement to resume operations the day following 

a system outage). See Proposing Release, 85 FR at 

Section IV.B.2(f). 

2334See supra Section V.C.2(a) for a discussion of 

this assumption. 

2335 Direct compliance costs will include both 

costs that included in the PRA burden estimates as 

well as compliance costs that are not reflected in 

the PRA (‘‘non-PRA’’). See supra Section IV.D (for 

a discussion of the PRA burden estimates). 

2336See supra Section IV.G.3. 

2337See id. 

2338See supra note 1567. Two commenters stated 

that the Commission underestimated the costs of 

Regulation SCI in the Proposing Release. See IDS 

Letter I at 13 and STANY Letter II at 6–7. As 

discussed in detail above, the Commission 

disagrees with these commenters and believes it did 

not underestimate the costs associated with 

Regulation SCI. See supra Section IV.G.2. 

614(d)(9) will significantly increase the 

risk of market participants being 

exposed to a competing consolidator 

system disruption.2330

The requirement for competing 

consolidators to establish procedures to 

disseminate information about system 

disruptions to responsible personnel, 

competing consolidator subscribers, the 

public, and the Commission will help 

reduce the duration and severity of any 

system distributions that do occur for 

one of the new competing consolidators 

who are not currently SCI entities. The 

procedures will help these competing 

consolidators quickly provide the 

affected parties with critical information 

in the event that it experiences a system 

disruption. This could allow the 

affected parties to respond more quickly 

and more appropriately to the incident, 

which could help shorten the duration 

and reduce the effects of a system event. 

This could also potentially help prevent 

an event that might start out as a minor 

systems issue from becoming a 

catastrophic problem that quickly 

spreads across the national market 

system, potentially causing damage to 

market participants, including investors. 

Additionally, the requirement, under 

Rule 614(d)(9)(iv) and Rule 1004(c) of 

Regulation SCI, for a competing 

consolidator to conduct testing of its 

business continuity and disaster 

recovery plans with its designated 

participants and other industry SCI 

entities will help detect and improve 

the coordination of responses to system 

issues that could affect multiple market 

participants in the NMS stock market. 

This testing will help prevent these 

system disruptions from occurring and 

help reduce the severity of their effects, 

if they do occur. 

Third, Rule 614(d)(9) and the addition 

of the definition of SCI competing 

consolidator to Regulation SCI will help 

ensure effective Commission oversight 

of new competing consolidators who are 

not currently SCI entities. Both 

Regulation SCI and Rule 614(d)(9)(iii)(C) 

will require a competing consolidator to 

notify the Commission 2331 and provide 

the Commission with updates if it 

experiences a systems disruption or 

systems intrusion that has more than a 

de minimis impact.2332 Each quarter, an 

SCI competing consolidator will have to 

inform the Commission of any planned 

material changes to its SCI systems and 

the security of indirect SCI systems. 

Each year an SCI competing 

consolidator also will have to provide 

the Commission with an SCI review of 

their compliance with Regulation SCI. 

This information will help ensure 

effective Commission oversight by 

enhancing the Commission’s review of 

these competing consolidators and 

helping make the Commission aware of 

potential areas of weakness in the 

competing consolidator’s systems that 

may pose risk to the entity or the market 

as a whole. 

Additionally, the Commission 

believes that an exclusive SIP that 

becomes a competing consolidator may 

realize an incremental benefit relative to 

the baseline from lower SCI-related 

costs.2333 Because the Commission 

assumes that enough competing 

consolidators will enter the market to 

provide for multiple viable sources of 

consolidated market data products,2334

the Commission believes that an 

exclusive SIP will not need to incur the 

additional costs associated with being 

subject to the heightened requirements 

applicable to ‘‘critical SCI systems’’ if it 

chooses to operate a competing 

consolidator after the initial transition 

period. 

(ii) Costs of Expanding Regulation SCI 

To Include Competing Consolidators 

Competing consolidators will incur 

both direct and indirect compliance 

costs related to Rule 614(d)(9) and the 

addition of the definition of SCI 

competing consolidator to Regulation 

SCI.2335 Although all competing 

consolidators will initially be subject to 

Rule 614(d)(9) during the initial 

transition period, the Commission 

believes that, after the transition period, 

many competing consolidators will be 

above the SCI competing consolidator 

threshold and eventually need to bear 

the higher costs Regulation SCI.2336

Because Regulation SCI imposes some 

indirect requirements on other market 

participants interacting with SCI entities 

(e.g., vendors providing SCI systems to 

SCI entities), those market participants 

will also incur indirect costs from SCI 

competing consolidators. 

Competing consolidators will incur 

initial and ongoing direct PRA and nonPRA compliance costs related to Rule 

614(d)(9) and Regulation SCI. These 

costs will vary based on whether the 

competing consolidator is an SCI 

competing consolidator or whether it is 

subject to the provisions of Rule 

614(d)(9).2337

The Commission believes that the 

2018 estimates of initial PRA costs for 

new SCI entities and ongoing PRA costs 

for all SCI entities under Regulation SCI 

are largely applicable to SCI competing 

consolidators because the requirements 

are the same for all SCI entities and 

because the 2018 burden estimates were 

based on the Commission’s experience 

over three years subsequent to 

Regulation SCI’s adoption in 2014 

including, for example, Commission 

staff’s experience in conducting 

examinations of SCI entities and 

receiving and reviewing notifications 

and reports required by Regulation 

SCI.2338 The 2018 SCI PRA Extension 

includes estimates distinguishing 

between new versus existing SCI 

entities. The Commission believes that, 

using the same new versus existing SCI 

entity framework, entrants that could 

become SCI competing consolidators 

can be divided into three groups: The 

existing exclusive SIPs; entrants that are 

existing SCI entities but with no direct 

experience operating in the 

consolidated market data business and 

needing to perform a new function with 

18788 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2339See supra note 1572 and accompanying text. 

2340These cost estimates are based on the 2018 

SCI PRA Extension. See 2018 SCI PRA Extension, 

supra note 1567. See also supra Section IV.G 

discussing PRA burden estimates related to 

compliance with Regulation SCI and supra note 

1573 and accompanying text. 

2341See supra note 1575 and accompanying text. 

2342See supra Section IV.G. 

2343See supra Section III.F. 

2344See supra note 1589 and accompanying text 

(discussing the PRA burden estimates for Rule 

614(d)(9)). 

2345SCI Adopting Release, supra note 1233, at nn. 

1943–44. 

2346 Id. at nn. 1945–46. 

2347See supra Section III.F. 

2348SCI Adopting Release, supra note 1233, at 

634. 2349See supra Section III.F. 2350SCI Adopting Release, supra note 1233, at 

nn.1943–44. 

2351The Commission believes that the initial 

implementation costs for these entities to comply 

with Regulation SCI will approximately be the 

difference between their initial PRA and non-PRA 

costs under Rule 614(d)(9)(iv) and the initial PRA 

and non-PRA burdens based on their entity type, as 

described above in this section. 

new SCI systems (e.g., a national 

securities association or national 

securities exchanges that do not 

currently operate an exclusive SIP); and 

entrants that are not currently subject to 

Regulation SCI (e.g., third-party 

aggregators that are not currently subject 

to Regulation SCI). The Commission 

estimates that the exclusive SIPs will 

not have any initial PRA costs related to 

Regulation SCI from becoming a 

competing consolidator because they are 

already SCI entities and would be 

operating a substantially similar 

business and performing a similar 

function in their role as competing 

consolidators.2339 Because they would 

be entering an entirely new business 

and performing a new function with 

new SCI systems, SCI entities without 

direct experience operating in the 

consolidated market data business will 

each incur an initial PRA cost of 

approximately $326,000, which is 

approximately 50% of the Commission’s 

initial cost estimates for an entirely new 

SCI entity.2340 SCI competing 

consolidators that are not currently 

subject to regulation SCI will each incur 

an initial PRA cost of approximately 

$625,000, which is the same estimated 

initial paperwork cost as those 

estimated for new SCI entities.2341 The 

Commission estimates that all SCI 

competing consolidators will each incur 

ongoing annual PRA costs of 

approximately $804,000, which is the 

same as the ongoing costs for existing 

SCI entities estimated in the 2018 SCI 

PRA Extension.2342

Although the requirements of Rule 

614(d)(9) are similar to some of the key 

provisions of Regulation SCI, Rule 

614(d)(9) does not contain all of the 

provisions of Regulation SCI and will 

have lower compliance costs than 

Regulation SCI.2343 For example, Rule 

614(d)(9) does not contain a provision 

similar to the requirement for 

geographically diverse backup and 

recovery capabilities that is contained in 

Rule 1001(a)(2) of Regulation SCI. 

Therefore, the Commission estimates 

that the requirements of Rule 614(d)(9) 

will have initial and ongoing PRA costs 

that are approximately 33% of the PRA 

costs for compliance with all of the 

provisions of Regulation SCI.2344 The 

Commission estimates that competing 

consolidators that are below the SCI 

competing consolidator threshold will 

each incur initial PRA costs of 

approximately $217,000 and ongoing 

annual PRA costs of approximately 

$268,000. 

As SCI entities, SCI competing 

consolidators will also incur direct nonPRA related compliance costs. In 2014, 

the Regulation SCI adopting release 

estimated that an SCI entity will incur 

an initial non-PRA cost of between 

approximately $320,000 and $2.4 

million.2345 Additionally, an SCI entity 

will incur an annual ongoing non-PRA 

cost of between approximately $213,600 

and $1.6 million.2346 The Commission 

believes that similar to the PRA cost 

estimates, these non-PRA related costs 

are also largely applicable to SCI 

competing consolidators. But the 

Commission is uncertain about the 

actual level of costs SCI competing 

consolidators will incur, because these 

costs could differ based on the type of 

potential entrant that becomes an SCI 

competing consolidator. The 

Commission believes that there are two 

reasons why SCI competing 

consolidators’ non-PRA costs are likely 

to be on the lower end of these cost 

estimates. 

First, these cost estimates include 

costs of having part of an SCI entity’s 

system be a ‘‘critical SCI system,’’ and 

therefore be subject to certain 

heightened resilience and information 

dissemination provisions of Regulation 

SCI. SCI competing consolidators’ 

systems are not included within the 

scope of ‘‘critical SCI systems.’’ 2347 The 

Commission believes that if SCI 

competing consolidators’ systems are 

subject to the standard requirements of 

Regulation SCI, they will not have to 

incur compliance costs of the 

heightened requirements for ‘‘critical 

SCI systems.’’ To the extent that the 

incremental costs of being subject to the 

heightened requirements for ‘‘critical 

SCI systems’’ versus the standard 

requirements for ‘‘SCI systems’’ is small, 

these cost savings will be low. 

Second, among all of the SCI entities, 

SCI competing consolidators have 

relatively simpler systems and fewer 

functions, and thus will have 

compliance costs closer to the lower end 

of the above non-PRA cost estimates. 

The above non-PRA cost estimates 

provide an average for all SCI entities, 

without distinguishing between 

different categories of SCI entities. 

However, the Regulation SCI adopting 

release explains that compliance costs 

will depend on the complexity of SCI 

entities’ systems and they would be 

higher for SCI entities with more 

complex systems.2348 SCI competing 

consolidators will likely have simpler 

systems and fewer functions relative to 

some of the other SCI entities, such as 

exchanges. As a result, the Commission 

believes that SCI competing 

consolidators’ compliance costs are 

likely to be on the lower end of the 

average non-PRA cost estimates for all 

SCI entities. 

Because Rule 614(d)(9) does not 

contain all of the provisions of 

Regulation SCI, the Commission 

believes that Rule 614(d)(9) will have 

lower initial and ongoing non-PRA 

compliance costs than Regulation 

SCI.2349 Similar to the PRA cost 

estimates, the Commission estimates 

that the requirements of Rule 619(d)(9) 

will have initial and ongoing non-PRA 

costs that are approximately 33% of the 

non-PRA costs for compliance with all 

of the provisions of Regulation SCI. The 

Commission estimates that competing 

consolidators below the SCI competing 

consolidator threshold will each incur 

an initial non-PRA cost of between 

approximately $107,000 and 

$800,000.2350 Additionally, competing 

consolidators below the SCI competing 

consolidator threshold will also each 

incur an annual ongoing non-PRA cost 

of between approximately $71,000 and 

$533,000. The Commission is uncertain 

about the actual level of costs competing 

consolidators below the SCI competing 

consolidator threshold will incur, 

because these costs could differ based 

on the state of the systems of the entrant 

that becomes a competing consolidator. 

Should a competing consolidator meet 

the threshold to become an SCI entity 

after the initial transition period, there 

would be additional costs at that time in 

order to comply with Regulation SCI, 

which will vary depending on the type 

of competing consolidator.2351

Additionally, the Commission 

believes that some competing 

consolidators’ subscribers associated 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18789 

2352See supra Section III.F. 

2353See SCI Adopting Release at n. 2065. 

2354Some commenters agreed. See, e.g., MEMX 

Letter at 7; NYSE Letter II at 18. See also supra 

Section III.D. 2355See supra Section III.D.2 for a definition of 

a self-aggregator. 

2356See infra Section V.C.4. 

2357See supra note 795 for a discussion on 

competing consolidators’ and self-aggregators’ 

permission to choose the feeds through which they 

receive the data content underlying consolidated 

market data from the SROs. 

2358See supra note 795 for a discussion on the 

competing consolidators’ and self-aggregators’ 

option to choose how they receive consolidated 

market data or a subset of it. 

2359See, e.g., NYSE Letter II at 23; Nasdaq Letter 

IV at 8; FINRA Letter at 8. 

with the testing of business continuity 

and disaster recovery plans will incur 

Regulation SCI-related connectivity 

costs. Rule 1004 of Regulation SCI sets 

forth the requirements for testing an SCI 

entity’s business continuity and disaster 

recovery plans with its designated 

members or participants. Rule 

614(d)(9)(iv) requires competing 

consolidators that are not affiliated with 

exchanges that do not meet the 

threshold requirements for being an SCI 

competing consolidator to participate in 

the testing outlined in Rule 1004 of 

Regulation SCI. Competing 

consolidators and their designated 

subscribers would be subject to these 

same costs.2352 The Regulation SCI 

adopting release estimated connectivity 

costs as part of these business 

continuity and disaster recovery plans 

to be approximately $10,000 per SCI 

entity member or participant.2353 The 

Commission believes that these 

connectivity cost estimates will also be 

applicable to competing consolidators’ 

designated subscribers. 

The Commission believes that 

competing consolidators and various 

other market participants will incur 

certain indirect costs related to 

compliance requirements for SCI 

competing consolidators. The 

Commission believes that the costs to 

comply with Regulation SCI discussed 

above will also fall on third-party 

vendors employed by SCI competing 

consolidators to provide services used 

in their SCI systems. Regulation SCI 

requires that any system provided by a 

vendor to an SCI entity and used by that 

entity in its SCI system must also 

comply with Regulation SCI 

requirements. The Commission believes 

that all costs discussed above for 

competing consolidators to comply with 

Regulation SCI will also fall on thirdparty vendors employed by competing 

consolidators in the course of providing 

consolidated market data. Examples of 

such vendors may include 

communications firms employed by SCI 

competing consolidators to transport 

data from exchanges to the SCI 

competing consolidator’s aggregation 

servers at various data centers. If many 

third-party vendors are employed by 

SCI competing consolidators in their 

consolidated market data business, the 

size of this cost may be significant. 

Additionally, the Commission 

believes there is the potential for these 

costs to cause vendors to end certain 

existing business relationships with 

market participants who become SCI 

competing consolidators. It is possible 

that third-party vendors will not want to 

incur the costs that SCI competing 

consolidators may impose to assure that 

the SCI competing consolidator can 

comply with Regulation SCI 

requirements, and as a result be 

unwilling to provide services to the SCI 

competing consolidator’s consolidated 

market data business. To the extent that 

this occurs, SCI competing 

consolidators will incur costs from 

having to find new vendors, form a new 

business relationship, and adapt their 

systems to the infrastructure of the new 

vendor. SCI competing consolidators 

may also elect to perform the relevant 

functions internally. To the extent that 

SCI competing consolidators either find 

new vendors or perform the functions 

internally, it will represent an increased 

inefficiency in the market, since 

presumably the current market data 

vendors are the most efficient means of 

performing these functions. 

The Commission believes that the 

technology supporting some of the 

services provided by vendors to current 

data aggregators (notably 

communications, such as microwave 

transmission) require significant 

expertise in order to be competitive and 

are difficult to replicate. To the extent 

this is the case, and to the extent that 

Regulation SCI requirements prevent 

SCI competing consolidators from using 

these vendors, the ability of SCI 

competing consolidators to provide 

consolidated market data in a manner 

that rivals current third-party 

aggregation practices may be 

significantly reduced. 

(f) Economic Effects of the Decentralized 

Consolidation Model Pertaining to SelfAggregators 

As discussed above a number of 

market participants currently purchase 

proprietary data products from the 

exchanges and consolidate this data for 

their internal use or regulatory 

compliance.2354 To permit selfaggregation under the decentralized 

consolidation model, the Commission 

defines a new type of market data user, 

self-aggregators.2355

Market participants that currently 

effectively self-aggregate and that decide 

to become self-aggregators under the 

decentralized consolidation model will 

have two choices. First, they may decide 

to limit the use of exchange data to the 

creation of consolidated market data, in 

which case they will be charged for data 

content underlying consolidated market 

data pursuant to the fee schedules of the 

effective national market system plan(s) 

for NMS stocks. In this case, market 

participants will likely benefit from 

lower data fees as compared to current 

fees they pay for proprietary data and 

connectivity products.2356

Second, they may decide they need 

data beyond the scope of consolidated 

market data, in which case they will be 

additionally charged for the proprietary 

data and connectivity services pursuant 

to the individual exchange fee 

schedules. In this case, the potential 

price gain will be limited to the price 

decline for the portion of the data 

corresponding to the consolidated 

market data. The Commission is 

uncertain about the extent of this effect. 

Market participants that currently 

effectively act as self-aggregators and 

that will choose to become selfaggregators under the decentralized 

consolidation model may incur some 

costs switching from proprietary data to 

consolidated market data. They could 

incur these costs especially if the 

exchanges provide components of the 

consolidated market data with feeds and 

connections other than what these 

market participants currently use and 

market participants choose to receive 

the data via those new feeds and 

connections.2357 Market participants 

could also incur some costs even if they 

choose to use their existing proprietary 

feeds and connections to receive 

consolidated market data, but, they do 

not currently consume all proprietary 

data needed to create consolidated 

market data.2358 However, since these 

market participants already have the 

infrastructure to receive proprietary data 

products from the exchanges, the 

Commission expects these costs to be 

minimal. Additionally, self-aggregators 

may choose not to receive the entirety 

of consolidated market data, which 

could mitigate some of these costs. 

Some commenters stated that the 

introduction of a self-aggregator 

category will maintain the latency gap 

between different market 

participants.2359 One comment said that 

‘‘the Proposal would continue this twotiered structure—with participants that 

can afford to act as self-aggregators able 

to obtain and use that data faster than 

18790 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2360See NYSE Letter II at 23. 

2361See Nasdaq Letter IV at 8. 

2362See FINRA Letter at 8. 

2363See Clearpool Letter at 10. 

2364See infra Section V.C.4(b). 

2365See, e.g., Angel Letter at 20; NYSE Letter II 

at 24; FINRA Letter at 4. 

2366See supra Section IV.D. See also supra 

Section V.C.2(d). 

2367See supra Section IV.D. 

2368See supra Section IV.D. 

2369See, e.g., NYSE Letter II at 20–21; Joint CRO 

Letter at 3. 

2370A competing consolidator that is affiliated 

with an exchange that is operating under the 

provisions of the limited exemptive relief will need 

to be registered as a competing consolidator under 

Rule 614 and be in compliance with the disclosure 

and other substantive regulatory requirements 

applicable to competing consolidators in Rule 603, 

Rule 614, and Form CC. See supra Section 

III.C.7(a)(iv). The Commission believes that 

competing consolidators that are affiliated with 

exchanges will choose to operate under the 

provisions of the exemption. See supra Section 

V.C.2(a)(i)a. 

those relying on competing 

consolidators.’’ 2360 Another commenter 

said that even having multiple 

competing consolidators would not 

reduce the latency gap because 

competing consolidators ‘‘would not be 

able to distribute consolidated data as 

quickly as the direct exchange feeds and 

their customers would not be able to 

consume it as quickly as selfaggregators.’’ 2361 Another commenter 

stated that receiving data from 

competing consolidators will be a ‘‘twostep process’’ and can never be as fast 

as getting data directly from the 

exchanges, a ‘‘one-step process.’’ 2362 On 

the other hand, one commenter said that 

self-aggregators might enjoy a minor 

latency advantage and that they do not 

‘‘believe this latency advantage would 

be material and therefore should not be 

an issue.’’ 2363 The Commission 

discusses the relationship between selfaggregators and competing consolidators 

and the related latency below.2364

Some commenters stated that the 

decentralized consolidation model will 

increase costs for market participants 

because they would have to contract 

with a backup competing consolidator 

to avoid disruptions should their 

primary competing consolidator 

experience a disruption.2365 The 

Commission believes these issues apply 

to self-aggregators as well, in that selfaggregators may wish to obtain a backup 

feed in addition to their self-aggregated 

feed. To the extent this is the case the 

Commission believes that the primary 

means of obtaining a backup feed is 

likely to be through a competing 

consolidator, and as such the discussion 

of the associated costs discussed in 

Section V.C.2(d)(iv) applies to selfaggregators as well. 

(g) Other Conforming Changes 

The Commission is adopting 

conforming changes for some of the 

previous Commission or SRO rules and 

regulations, which themselves can have 

economic effects. This section discusses 

the conforming changes and 

corresponding economic effects. 

(i) Amendments to Regulation SHO 

As described in Proposal section 

III.D.1, the Commission is adopting 

amendments to Regulation SHO to 

adjust the process of determining 

whether a Short Sale Circuit Breaker has 

been triggered and disseminating such 

trigger information. First, the primary 

listing exchange will decide how to 

obtain the consolidated data necessary 

to determine whether a Short Sale 

Circuit Breaker should be triggered. 

Second, the primary listing exchange 

will be responsible for notifying 

competing consolidators and selfaggregators rather than a single plan 

processor. The first change allows the 

primary listing exchange to select the 

most cost-effective means of fulfilling its 

responsibilities. The second change 

could entail some compliance costs for 

competing consolidators but is 

necessary to ensure that all competing 

consolidators are on a level playing 

field. The resulting compliance costs for 

exchanges are included in the 

Commission’s general compliance 

estimate above.2366 The resulting 

compliance costs for competing 

consolidators are included in the 

Commission’s estimate of the general 

costs to becoming a competing 

consolidator above.2367

In addition, the Commission defines 

‘‘primary listing exchange’’ in 

Regulation NMS and amends the 

definition of ‘‘listing market’’ in 

Regulation SHO to refer to the new 

definition of primary listing exchange. 

The Commission believes that this 

change will have no direct economic 

effects, other than harmonizing 

Regulation SHO with Regulation NMS. 

(ii) Effective Changes to Responsibilities 

Under the Limit Up Limit Down Plan 

and Market Wide Circuit Breaker Rules 

The definition of ‘‘regulatory data’’ 

requires the primary listing exchange to 

be the entity responsible for monitoring, 

calculating, and disseminating certain 

information necessary to implement the 

LULD Plan and the MWCB rules. These 

functions are currently the 

responsibility of a single exclusive SIP, 

however, the Commission requires that 

the primary listing exchanges be 

responsible for disseminating 

information regarding Price Bands and 

Limit States and the primary listing 

exchange with the largest portion of S&P 

500 Index stocks be responsible for 

determining whether an MWCB has 

been triggered. While the Commission 

believes that these amendments could 

result in implementation and ongoing 

costs for primary listing markets that 

currently do not operate a SIP, these 

amendments ensure a single set of Price 

Bands and a consistent message that 

MWCBs have triggered. As discussed 

above, the Commission believes that the 

additional cost of calculating the 

information necessary to implement the 

LULD Plan and MWCB rules would not 

be burdensome and these costs are 

included in the general compliance cost 

the Commission has estimated for SROs 

above.2368

Some commenters said that the 

Commission overlooks additional costs 

imposed on SROs from these additional 

responsibilities and latency 

differentials.2369 The Commission 

acknowledged in the Proposing Release 

that the amendments might lead to some 

implementation and ongoing costs for 

the primary listing exchanges that do 

not operate an exclusive SIP. 

Additionally, the Commission does not 

believe that the decentralized 

consolidation model would make it 

more difficult for SROs to conduct their 

market surveillance with respect to the 

LULD Plan and MWCB rules, because 

there are currently latency differentials 

to consider when SROs conduct market 

surveillance. The amendments will not 

bring significant changes to this market 

reality. 

3. Economic Effects of Form CC 

As discussed above in Section III.C.7, 

Rule 614 will prohibit a person, other 

than an SRO, from acting as a competing 

consolidator unless that person files 

with the Commission an initial Form CC 

and the initial Form CC has become 

effective.2370 Rule 614 will require the 

public disclosure of Form CC, which 

itself will require disclosures regarding 

a competing consolidator’s services, 

fees, and operations, as well as metrics 

related to the performance of the 

competing consolidator. As a result, 

Rule 614 will provide transparency 

regarding the services and performance 

of competing consolidators for investors 

who might purchase the products and 

services of a competing consolidator. 

The Commission believes that the 

information contained in Form CC and 

the resulting transparency will help 

market participants make betterinformed decisions about which 

competing consolidator to subscribe to 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18791 

2371Commenters agreed the public disclosure of 

the information contained in Form CC and 

performance metrics would help investors evaluate 

competing consolidators and decide which one to 

subscribe to. See, e.g., Clearpool Letter at 9; ACS 

Execution Services Letter at 6. 

2372See supra Section III.C.7(a)(ii). Competing 

consolidators will also need to include on their 

websites a hyperlink to the Commission’s website 

containing information their Form CCs. See supra 

Section III.C.7(j) 2373See Data Boiler Letter I at 55. 

2374See supra Section III.C.8(e)(ii). 

2375See supra Sections IV.D.1(a); IV.D.1(b)(iii); 

V.C.2(d); supra note 1402. 

in order to achieve their trading or 

investment objectives.2371

Additionally, the Commission 

believes that the process for the 

Commission to declare an initial Form 

CC ineffective will improve the quality 

of information the Commission receives 

from competing consolidators, which 

will allow the Commission to better 

protect investors from potentially 

incomprehensible or incomplete 

disclosures that would misinform 

market participants about the operations 

and services of a competing 

consolidator. 

(a) Public Disclosure of Form CC and 

Other Competing Consolidator 

Information 

Form CC will require competing 

consolidators to publicly disclose four 

sets of information on the Commission 

website.2372 First, Form CC will require 

competing consolidators to disclose 

general information, along with contact 

information. Second, Form CC will 

require competing consolidators to 

disclose information regarding their 

business organizations. Third, Form CC 

will require competing consolidators to 

disclose information regarding their 

operational capabilities. Fourth, Form 

CC will require competing consolidators 

to disclose information regarding their 

services and fees. Rule 614 also includes 

requirements for amendments to Form 

CC under defined circumstances and a 

notice of cessation of operations at least 

90 calendar days before the date the 

competing consolidator ceases to 

operate as a competing consolidator. 

Form CC, any amendments to it, and 

any notices of cessation will be made 

public via posting on the Commission’s 

website. Rule 614(d)(5) also has a 

disclosure requirement about competing 

consolidators’ performance metrics on 

their own websites. Additionally, Rule 

614(d)(6) will require competing 

consolidators to disclose operational 

information on their websites related to 

vendor alerts, data quality and systems 

issues, and clock drift in the clocks they 

use to create timestamps. Generally, 

these requirements promote 

transparency and competition among 

competing consolidators and effective 

regulatory oversight within a 

streamlined approach to avoid 

significant barriers to entry. 

The business organization disclosures 

will give market participants a window 

into the ownership as well as the 

organizational structures of competing 

consolidators. The Commission believes 

that this information will help market 

participants make better-informed 

decisions about which competing 

consolidator to subscribe to as well as 

how to avoid any potential conflicts of 

interest. For example, if a broker-dealer 

is considering subscribing to a 

competing consolidator for consolidated 

data and any other potential additional 

services such as analytics, they may 

search for a competing consolidator that 

is not owned by a competitor or an 

affiliate of a competitor in the brokerdealer space. Purchases of data and 

additional market intelligence services 

between two competitors could 

potentially create conflicts of interest. 

Thus, the required disclosure of a 

competing consolidator’s business 

organization—which will, for example, 

clarify the ownership information—will 

provide transparency on its potential 

conflicts of interest. 

The information on operational 

capabilities will provide market 

participants detailed information about 

each competing consolidator’s product 

portfolio and technical capabilities. 

Since market participants vary in their 

data and technical capability needs, 

information on competing 

consolidators’ operational capabilities 

will allow market participants to make 

better-informed purchase decisions. For 

example, market participants who trade 

frequently and who need robust backup 

systems might choose competing 

consolidators with those capabilities. 

Whereas other market participants who 

have longer term investment strategies 

with potentially less frequent trades 

might prefer competing consolidators 

with less aggressive backup systems. 

Form CC disclosures will facilitate a 

better match between market 

participants’ needs and competing 

consolidators’ offerings, and will also 

help to ensure consistent disclosures 

between competing consolidators. 

One commenter stated that the 

disclosure of ‘‘all procedures’’ in the 

operational capability section of Form 

CC could disclose a competing 

consolidator’s proprietary tech, or 

‘‘secret sauce,’’ which could discourage 

innovation.2373 The Commission 

disagrees with this commenter and does 

not believe that the disclosures required 

on Form CC will discourage innovation 

because the disclosures are not detailed 

enough to give away a competing 

consolidator’s proprietary information 

or ‘‘secret sauce.’’ 2374

With the consistent disclosures on 

services and fees, market participants 

will be able to compare and contrast the 

various services provided and the 

corresponding fees asked by competing 

consolidators. Market participants may 

then make better purchase decisions, 

based on their individual needs. 

Additionally, the service and fee 

transparency resulting from these 

disclosures will promote competition in 

similar products and/or services across 

different competing consolidators, 

which may result in similar prices, and 

will help to protect market participants 

from unfair and unreasonable prices. 

The Commission believes that the 

requirement for competing 

consolidators to amend Form CC prior 

to implementing material changes to 

their pricing, products, or connectivity 

options will provide transparency into 

changes in the operations of competing 

consolidators and better inform 

subscribers and other market 

participants about significant changes in 

the fees and services offered by a 

competing consolidator. This will allow 

subscribers to a competing consolidator 

to better evaluate if it will continue to 

serve their business needs. 

Additionally, it will facilitate effective 

oversight by the Commission. 

Similarly, the Commission believes 

that the requirement for a notice of 

cessation will also benefit subscribers to 

the competing consolidator, because it 

will give them advanced notice before 

the competing consolidator ceases to 

operate. Thus those subscribers will 

have more time to find another 

competing consolidator to supply them 

with consolidated market data. 

The fact that the information on Form 

CC will be in a single location instead 

of dispersed across the competing 

consolidators’ own websites should aid 

market participants by introducing only 

minimal search costs when evaluating 

and comparing potential competing 

consolidators to decide which one best 

suits their business interests. 

As discussed above,2375 the 

Commission believes the rule will cause 

each competing consolidator to incur 

approximately $93,540 in 

implementation compliance cost in 

order to collect the information required 

to fill out and file an initial Form CC as 

well as $16,812 in ongoing costs in 

order to file amendments to an effective 

Form CC. One commenter believes the 

18792 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2376See ACTIV Financial Letter at 3. 

2377See supra Sections IV.D.1 and V.C.2(d)(i) for 

discussions of cost estimates for competing 

consolidators related to Form CC. See also supra 

Section V.C.2(a)(i) for discussions of competing 

consolidator barriers to entry. 

2378As discussed further below, those competing 

consolidators that are existing SCI entities are 

already required to use EFFS to make Form SCI 

filings, and therefore would not incur the access 

costs discussed here. See infra Section V.E.5. 2379See supra Section V.C.2(e)(i). 

costs associated with Form CC are 

overly burdensome and will present a 

serious barrier to entry for potential 

competing consolidators.2376 The 

Commission disagrees with this 

commenter. While the Commission 

acknowledges that the costs associated 

with preparing and filing an initial 

Form CC and amendments to an 

effective Form CC may pose a minor 

barrier to entry for potential competing 

consolidators, the Commission does not 

believe that the costs associated with 

Form CC are large enough to pose a 

serious barrier to entry.2377

Competing consolidators will also 

experience implementation costs 

because initial Form CC and any 

amendments to Form CC will be filed 

electronically with the Commission. 

The Commission believes that requiring 

Form CC to be filed electronically will 

reduce filing costs compared to 

requiring the competing consolidator to 

file paper forms. 

To file a Form CC, competing 

consolidators will need to access 

EFFS.2378 Each competing consolidator 

will have to file an application and 

register each individual who will access 

EFFS on behalf of the competing 

consolidator. The Commission believes 

that each competing consolidator will 

initially designate two individuals to 

access EFFS, with each application 

taking 0.15 hours for a total of 0.3 hours 

per competing consolidator. On an 

ongoing basis, each competing 

consolidator will add one individual to 

access EFFS for amendments, adding 

0.15 hours per competing consolidator. 

To make a submission into EFFS, the 

competing consolidator must download 

a proprietary viewer. 

Because EFFS is not available to the 

public, when the Commission makes an 

effective Form CC available to the 

public, the Commission will transform 

the data into an unstructured format, 

meaning that it is not machine-readable. 

Market participants that seek to use the 

Form CC data to evaluate and compare 

competing consolidators will bear the 

costs of locating, comparing, and 

evaluating the information on the 

Commission’s website and take steps to 

put the information ‘‘side by side’’ for 

comparison purposes. 

The Commission believes that the 

public disclosure of performance 

metrics and additional information will 

introduce transparency to the operations 

of competing consolidators. These 

metrics should allow subscribers and 

potential subscribers to better evaluate 

the performance and current and future 

capabilities of a competing consolidator. 

Market participants, based on their 

individual needs, will be able to review 

competing consolidators’ performance 

statistics and choose ones that will best 

serve their trading needs. While the 

requirements to post the monthly 

performance metrics and operational 

information on websites will introduce 

transparency, they will not completely 

eliminate costs incurred when market 

participants want to compare competing 

consolidators because collecting the 

information will involve market 

participants expending some resources 

to go to each competing consolidator’s 

website. 

Competing consolidators will also 

incur implementation and ongoing 

compliance costs in order to setup and 

maintain systems required to calculate 

and produce the information for the 

performance metrics as well as other 

information the competing consolidator 

will be required to post to its website. 

Each month, competing consolidators 

will be required to post the monthly 

performance metrics and operational 

information on their own websites. 

Excluding the cost of preparing the 

information, the Commission estimates 

an average competing consolidator will 

incur a one-time cost of $2,651 (6 hours 

(for website development) × $308.50 per 

hour (blended rate for a senior systems 

analyst ($285) and senior programmer 

($332)) + $800 for an external website 

developer to develop the web page = 

$2,651) for posting the required 

information to a website, and will incur 

an ongoing annual cost of up to $3,702 

(1 hour (for website updates) × $308.50 

per hour (blended rate for a senior 

systems analyst ($285) and senior 

programmer ($332)) × 12 monthly 

postings = $3,702) to update the 

relevant web page each month. Because 

the monthly performance metrics and 

operational information may be posted 

in any format the competing 

consolidator finds most convenient, 

market participants that seek to use the 

data to evaluate and compare competing 

consolidators will bear the costs of 

locating, comparing, and evaluating the 

information on each competing 

consolidator’s website. 

The Commission believes that the 

operational information that competing 

consolidators will be required to 

publicly disclose on their websites will 

create a mechanism for market 

participants to hold competing 

consolidators accountable for any 

systems issues they may experience. 

One strong accountability mechanism 

market participants have is their 

purchasing power. The disclosure 

requirements will alert market 

participants to any system breaches or 

any data quality or systems issues a 

competing consolidator experiences. 

Market participants could hold 

competing consolidators accountable by 

abandoning competing consolidators 

that repeatedly experience system issues 

and gravitating toward competing 

consolidators that demonstrate more 

reliable systems through their 

disclosures. This demand shift could 

cause competing consolidators with less 

reliable systems to exit the market. 

In addition to the requirements of 

Rule 614(d)(9) and Regulation SCI 

promoting competing consolidators to 

develop resilient systems,2379 the 

requirement that competing 

consolidators publicly disclose 

information on systems issues as well as 

performance metrics regarding system 

availability could also encourage 

competing consolidators to make 

investments that will ensure the 

resiliency of their systems. These 

disclosures will help market 

participants determine which 

competing consolidators have more 

reliable systems. Competing 

consolidators who display more reliable 

systems with greater system availability 

will attract more subscribers. This 

should incentivize competing 

consolidators to invest in better backup 

systems or other technology that will 

improve the resiliency of their systems 

and increase their system uptime. 

The Commission believes that 

information from the disclosures in 

Form CC and the performance metrics 

and operational information competing 

consolidators will provide on their 

websites will promote effective 

regulatory oversight of competing 

consolidators and increased investor 

protection by providing the Commission 

and relevant SROs with information 

about competing consolidators. With 

this information, the Commission and 

the SROs could identify competing 

consolidators that are not properly 

complying with the final amendments 

or parts of them. The Commission and 

SROs, then, could utilize this 

information to help prioritize 

examinations and possibly help identify 

potential issues. 

The Commission believes that the 

public disclosure of the information in 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18793 

2380A commenter agreed the public disclosure of 

Form CC and monthly performance metrics would 

enhance competition between competing 

consolidators. See Clearpool Letter at 9. 

2381See infra Section V.D.2 discussing the 

potential effects of the proposal on competition. 

2382See supra Section III.F. 

2383See supra Section V.C.2(e)(i). 

2384See infra Section V.D.2 (discussing the 

potential effects of the proposal on competition). 

2385See supra Section V.C.2(c) discussing the 

effect of the decentralized consolidation model on 

consolidated market data latency. 

2386Commenters agreed that switching to new 

consolidated market data would come with this 

expense of losing some data compared to the 

proprietary data feeds. One commenter stated that 

it would be unable to remain competitive even after 

the final amendments are in place without 

continuing to purchase proprietary data feeds. See 

Virtu Letter at 2. See also Clearpool Letter at 3, 

supporting the idea that there may be broker-dealers 

who will still need proprietary feeds. 

Form CC on the Commission’s website 

and the public disclosure of 

performance metrics and operational 

information on competing 

consolidators’ websites could also 

increase competition between 

competing consolidators and also 

expose some competing consolidators to 

certain competitive effects.2380 If the 

public disclosures show that certain 

competing consolidators have higher 

fees or poorer performance, it may result 

in those competing consolidators losing 

subscribers and earning lower revenues. 

Similarly, competing consolidators who 

display lower prices or superior system 

performance may be able to attract more 

subscribers and earn more revenue. The 

public disclosure of the fee and 

performance information on the 

Commission and competing 

consolidator websites will facilitate 

competing consolidator comparison and 

will also promote competition. Greater 

competition between competing 

consolidators could in turn incentivize 

competing consolidators to innovate— 

particularly in terms of their 

technology—so that they can attract 

more subscribers.2381

As discussed above, Rule 

614(d)(9)(iii)(C) will require a 

competing consolidator that is not an 

SCI competing consolidator to notify the 

Commission and provide the 

Commission with updates on Form CC 

if it experiences a systems disruption or 

intrusion.2382 The Commission believes 

that this information will help ensure 

more effective Commission oversight of 

competing consolidators by helping 

make the Commission aware of 

potential areas of weakness in the 

competing consolidator’s systems that 

may pose a risk to the entity or the 

market as a whole.2383

(b) Commission Review and Process for 

Declaring Initial Form CC Ineffective 

The Commission believes that the 

process of reviewing an initial Form CC 

will allow the Commission to evaluate, 

among other things, the completeness 

and comprehensibility of a competing 

consolidators’ disclosures and, if 

necessary, declare the Form CC 

ineffective. To be a consolidated market 

data provider, a competing consolidator 

is required to have a Form CC that has 

become effective pursuant to Rule 

614(a)(1)(v). Thus, for competing 

consolidators that submit low quality 

and potentially inaccurate data, the 

Commission’s review and declaration of 

their Form CC ineffective could start an 

iterative cycle of increasingly better 

information provision, until the 

competing consolidator can have an 

effective Form CC. The Commission 

believes that this public disclosure and 

review process will improve the quality 

of information the Commission receives 

from competing consolidators, which 

will allow the Commission to better 

protect investors from potentially 

incomprehensible or incomplete 

disclosures that will misinform market 

participants about the operations of the 

competing consolidator. Additionally, 

an entity cannot operate as a competing 

consolidator without an effective Form 

CC. The Commission’s review will be 

designed to ensure that the competing 

consolidators serving the investors will 

be the ones that meet the Commission’s 

qualification requirements. 

The Commission believes that the 

filing requirements of Form CC and the 

Commission review period could 

impose costs on competing 

consolidators. The Commission believes 

that declaring a Form CC ineffective 

could impose costs on a competing 

consolidator—such as delaying the start 

of operations while the competing 

consolidator refiles its Form CC—and 

could impose costs on individual 

market participants and the overall 

market for competing consolidators 

resulting from a potential reduction in 

competition. However, competing 

consolidators and market participants 

will not incur these costs unless the 

competing consolidator filed a deficient 

Form CC. Therefore, the Commission 

believes that a competing consolidator 

will be incentivized to file Form CC 

disclosures that are complete and 

comprehensive to avoid bearing the 

costs of refiling a Form CC filing or of 

having its Form CC declared ineffective. 

The Commission recognizes that the 

registration process will create 

uncertainty about whether the form will 

be declared ineffective. This uncertainty 

may create a disincentive for entities to 

become competing consolidators, which 

could potentially reduce competition in 

the competing consolidator market.2384

4. Economic Effects From the 

Interaction of Changes to Core Data and 

the Decentralized Consolidation Model 

The Commission believes that the 

final amendments would have a number 

of economic effects that are only 

possible as a result of a combination of 

the expanded content of core data and 

latency reductions due to the 

introduction of the decentralized 

consolidation model.2385 Specifically, 

the Commission believes that the 

combination of these factors would 

affect proprietary data feed business; 

market participants who choose to 

engage in market making, smart order 

routing, and other latency sensitive 

trading businesses; the Consolidated 

Audit Trail; and data vendor business. 

(a) Economic Effects on the Proprietary 

Data Feed Business 

The Commission believes that the 

expanded content of core data and 

latency reduction due to the 

introduction of the decentralized 

consolidation model could make 

consolidated market data a reasonable 

alternative to exchange proprietary data 

feeds for some market participants. This 

would have the effect of providing these 

market participants with a potentially 

lower cost option (relative to proprietary 

feeds) for low-latency, high-content 

market data. The lower cost of either 

self-aggregating consolidated market 

data or obtaining a competing 

consolidator’s data feed will come at the 

expense of losing the full set of data 

currently available via proprietary feeds, 

because the consolidated market data 

definition does not include all data 

elements currently available via 

proprietary data feeds.2386 Nevertheless, 

some market participants may find that 

the expanded content of core data 

makes the trade-off worth it and may 

choose to drop their proprietary feed 

subscriptions in favor of the 

consolidated market data. 

This effect will represent a transfer 

from exchanges who sell proprietary 

data feeds to the market participants 

who would save money by either selfaggregating consolidated market data or 

subscribing to a competing 

consolidator’s data feed. In the latter 

case, a portion of the benefit is also 

transferred to the competing 

consolidator in the form of additional 

business. The Commission believes that 

a transfer from the exchanges to market 

participants may help market 

participants enhance their product and 

18794 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2387See supra Section V.C.2(c). 

2388See supra note 1134. 

2389See Data Boiler Letter I at 2. For further 

support that proprietary fees could increase, see 

Clearpool Letter at 3. 

2390See supra Section V.B.2(b). 

2391More generally, the final rule could enable 

some reduction in the latency differential between 

current market participants to the extent that such 

market participants would be willing to make the 

necessary technology and personnel investments to 

take advantage of the latency reductions provided 

by the decentralized consolidation model. Thus, 

while some differences in latency may remain, the 

barriers to entry for market participants to compete 

in the latency sensitive businesses at various levels 

of sophistication and competitiveness would be 

reduced. See also Sections V.B.2(f) and V.C.4(b) for 

further discussion of this point. 

2392See Nasdaq Letter IV at 30. 

service offerings to their customers. 

Additional business and revenues for 

competing consolidators may enhance 

competing consolidators’ efforts to offer 

higher quality products and a wider 

range of product offerings.2387

It is possible that changes to the 

pricing and customer base of core and 

proprietary data feeds may not have a 

uniform impact across all exchanges. 

Some exchanges currently have more 

proprietary feed revenue than others, 

and some exchanges may currently rely 

more on revenue from SIP data fees than 

other exchanges. To the extent that an 

exchange receives a large share of 

revenue from its proprietary feed 

business, the impact of these potential 

reductions in proprietary feed 

subscriptions could be large for that 

exchange. To the extent that an 

exchange receives only a small portion 

of its revenue from proprietary feed 

subscriptions, the impact of these 

potential reductions in subscriptions 

could be small for that exchange. 

The Commission also notes that the 

exchanges’ revenues from connectivity 

services may increase or decrease, 

depending on any new data 

connectivity fees that the exchanges 

may propose for data content use cases. 

The connectivity fees for consolidated 

market data must be fair and reasonable 

and not unreasonably 

discriminatory.2388 If these new 

connectivity fees are higher than current 

fees, there is a possibility that the 

exchanges’ overall revenue from 

connectivity services would increase. It 

is also possible that exchanges could 

lose revenue from existing customers 

reducing the number of ports or the 

amount of bandwidth they purchase as 

they switch to competing consolidators 

for some use cases. The overall effect on 

the exchanges’ connectivity revenues is 

uncertain, and the impact on 

connectivity revenues could differ 

across different exchanges. 

The Commission believes that these 

competitive pressures on the exchange 

proprietary feed and connectivity 

business could also have the effect of 

causing the exchanges to lower the fees 

they charge for these services in an 

effort to stay competitive with the 

consolidated market data. This effect 

represents a transfer from the exchanges 

to the customers of these services. To 

the extent that existing customers of 

these services invest the money saved 

from lower fees in new products (such 

as expanding brokerage services) this 

effect will also have benefit of 

encouraging the creation of new 

products and services. To the extent that 

the lower fees for these services enable 

new market participants to subscribe to 

these feeds and offer the services that 

these feeds are required for (such as 

high quality execution brokerage 

services), this effect will also represent 

a benefit in the form of new competition 

in the broker-dealer business. 

One commenter stated that the final 

amendments would have the effect of 

increasing proprietary data fees, because 

‘‘demand is inelastic.’’ 2389 The 

Commission acknowledges that if some 

market participants no longer purchase 

proprietary data feeds after the rule is 

implemented, those who continue to 

purchase proprietary data feeds are 

likely to value those feeds more than the 

ones who no longer make these 

purchases. This means that the 

exchanges could infer that their 

remaining proprietary customers might 

actually be willing to pay more for the 

data then their old customer base, and 

consequently attempt to increase 

proprietary fees. However, the 

Commission believes that the need to 

remain competitive against new 

consolidated market data could 

overwhelm the effect of knowing that 

remaining customers might be willing to 

pay more. If this is the case, then the 

exchanges will instead lower their 

prices for proprietary data. 

If exchanges increase proprietary fees 

as a result of these potential insights 

into the demand elasticity of the 

remaining customer base after the rules 

are implemented, it will result in a 

transfer from those market participants 

who continue to purchase proprietary 

data to the exchanges, while any market 

participants who stop purchasing 

proprietary data as a result of the fee 

increases will represent an economic 

cost. The Commission is uncertain as to 

whether fees will increase or decrease 

for proprietary data. 

The Commission believes, however, 

that if a small latency differential 

between competing consolidator feeds 

and the proprietary data feeds remains, 

then the above effects are likely to be 

small, owing to the nature of high speed 

competition.2390 However, this 

limitation would only be for the case 

where current subscribers to proprietary 

data feeds switch to using a competing 

consolidator feed. In the case of those 

proprietary feed subscribers who 

become self-aggregators, the 

Commission believes that it is unlikely 

that this would result in a latency 

differential compared to receiving 

proprietary data.2391 It is also possible 

that the data that would remain 

exclusive to proprietary feeds would 

also reduce the incentives for market 

participants to switch to using 

consolidated market data only, further 

reducing the size of the above effects. 

In the event that proprietary data feed 

subscribers are willing to switch to 

receiving new consolidated market data 

products and a latency differential 

remains between these feeds and feeds 

provided by competing consolidators, 

the effects discussed in this section 

would apply only to those market 

participants who become selfaggregators. The Commission believes 

that the set of current subscribers of 

proprietary feeds willing to become selfaggregators may be smaller than the set 

of current subscribers willing to switch 

to using a competing consolidator, as it 

is possible that subscribing to a 

competing consolidator would be more 

convenient or less costly. To the extent 

this is the case, the size of the effects 

described in this section will be 

reduced. Furthermore, these selfaggregators may continue to enjoy a 

latency advantage over customers of 

competing consolidators. 

To the extent that the changes to 

proprietary feed subscriptions described 

above are realized, the exchanges would 

have corresponding losses in revenue or 

profit from the provision of proprietary 

data. Since the Commission is unable to 

determine how many broker-dealers or 

other market participants would no 

longer want to use proprietary data 

feeds as a result of this rule, it is unable 

to determine the size of this potential 

reduction in revenue or profit. 

One commenter stated that if the 

exchanges’ revenues from market data 

are reduced, the price of trading services 

would likely increase, because the loss 

of revenue ‘‘will have to be offset.’’ 2392

The Commission disagrees with this 

commenter because a reduction in total 

revenue in and of itself does not 

necessarily make it optimal for a firm to 

increase its prices. The Commission 

expects that prices are set to optimize 

the amount of profit the firm can extract 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18795 

2393See Nasdaq Letter IV at 30. 2394See supra Section V.B.3(d) for a discussion of 

competition in the market for trading services. 2395See supra Section V.B.3(b) for a discussion of 

the market for proprietary data products. 2396See supra Section V.B.3(d). 2397See Nasdaq Letter IV at 50. 

2398One commenter stated that the rule would 

encourage participation in equity markets. See IEX 

Letter at 9. 2399One commenter said it would enhance 

competition, although not completely eliminate the 

two-tiered structure of the data market. See Virtu 

Letter at 2. 2400These would be broker dealers who have not 

entered these businesses because, currently, the 

only way to obtain the benefits associated with the 

new, expanded core data and decentralized 

consolidation model is to subscribe to proprietary 

data feeds. 2401See supra Section V.B.2(b). 2402This is because the Commission believes that 

self-aggregators will use substantially the same 

technology and methods to perform the selfaggregation function, including the same vendors 

for such technology, as are used today by those 

market participants who aggregate the proprietary 

data feeds. 

2403For related discussion on latency advantages, 

see supra note 2391. 

2404See Nasdaq Letter IV at 48. 

from the market, and given that this has 

been done an increase in prices today 

would not increase profit. A reduction 

in revenue by itself does not change any 

of these considerations. All firms must 

balance a loss in customers against an 

increase in the revenue received per 

customer when considering a price 

increase, and in order for it to be 

optimal to increase prices, something 

about this balance must change. Thus, 

the Commission does not believe that a 

reduction in total revenue for exchanges 

will necessarily make it optimal for 

them to adjust any of their fees, 

including fees for trading services. 

This commenter also added that this 

scenario of increases in trading fees 

would follow ‘‘if the all-in price of 

trading is already at the competitive 

level. . . .’’ 2393 It is not clear that this 

assumption is met in the market today. 

The Commission has discussed above 

the competition that exists in the market 

for trading services,2394 and separately, 

discussed indicia that the market for 

proprietary data may not be subject to 

robust competition.2395

To the extent that exchanges would 

find it profitable to increase their 

trading fees following the 

implementation of this rule, the 

Commission believes that the market for 

trading services is subject to 

competition, as discussed above, and, as 

a result, any potential for fees to 

increase will be constrained by this 

competition.2396

A commenter stated that without 

profit from selling market data, 

exchanges would lack the funds 

necessary to finance improvements to 

their trading systems, including 

innovations in order types.2397 The 

Commission disagrees because it 

believes the exchanges only fund 

improvements and innovations in their 

trading businesses that have a positive 

net present value, because this would be 

consistent with the behavior of any firm 

seeking to maximize profit. While the 

Commission acknowledges that 

alternative sources of funding to 

internally held cash may be more 

expensive (or less convenient) sources 

of financing, the Commission 

nevertheless believes that the exchanges 

will continue to be able to finance their 

best investment opportunities, which 

are the same projects the exchanges 

finance today. This is because such 

opportunities will represent a profit 

opportunity to both the exchanges and 

potential sources of financing. 

(b) New Entrants Into the Market 

Making, Broker-Dealer and Other 

Latency Sensitive Trading Businesses 

The Commission believes that the 

final amendments may lead to new 

market participants entering the market 

making, smart order routing brokerdealer, and other latency sensitive 

trading businesses.2398 This is because 

the final amendments may help to 

reduce the information asymmetries 

between those who choose to rely on 

proprietary data feeds and those who 

rely on the feeds from the exclusive 

SIPs.2399 For instance, it is possible that 

currently there are broker-dealers who 

might want to compete in the business 

of sophisticated order routing but 

choose not to because of the cost of the 

market data necessary to be competitive. 

To the extent that the final amendments 

make consolidated market data a viable 

data product for smart order routing, the 

Commission believes that these changes 

could induce these broker-dealers to 

enter the business.2400 This would have 

the benefit of increasing competition in 

the sophisticated order routing brokerdealer business. 

The Commission believes that access 

to this new, faster consolidated market 

data could encourage new entrants into 

the automated market maker business. 

This would not only improve the 

competitiveness of this business but 

also may increase liquidity in the 

corresponding markets. 

If these new entrants use a competing 

consolidator, and if a small latency 

differential between competing 

consolidator feeds and the proprietary 

data feeds remains, then this effect of 

encouraging new entrants is likely to be 

small.2401 If instead these potential new 

entrants were to become selfaggregators, then this effect of 

encouraging new entrants is not likely 

to be small, because the Commission 

believes that there is unlikely to be a 

significant latency differential between 

being a self-aggregator and using 

proprietary data feeds.2402 However, if 

self-aggregation is required to be a new 

entrant in these businesses, the number 

of potential new entrants could be 

small, since using a competing 

consolidator may be more convenient or 

less costly than self-aggregating.2403 It is 

also possible that potential participants 

in the sophisticated SOR, automated 

market making, and other latency 

sensitive trading businesses may find 

that they cannot compete effectively 

without using the data that would 

remain exclusive to proprietary feeds. 

To the extent this is the case, the effects 

discussed above would be further 

limited. 

One commenter stated that the final 

amendments would create new 

information asymmetries because of the 

possibility that competing consolidators 

could customize their products, which 

would lead to differences in information 

between their customers. This 

commenter stated that this is in 

contradiction to the claim that 

information asymmetries will be 

reduced.2404 The Commission does not 

believe that the possibility of a 

reduction in information asymmetry in 

the market is negated by the potential 

for product differentiation by competing 

consolidators. New consolidated market 

data, aggregated in a decentralized 

consolidation model, will present the 

opportunity for improvement in the 

quality of market data received today for 

those market participants capable of 

exploiting these improvements. These 

improvements are relative to the 

exclusive SIP feeds today. For these 

market participants who can take full 

advantage of expanded core data and 

the decentralized consolidation model, 

the improvements to their utilization of 

market data are likely to be more 

significant than the differences that 

might emerge between competing 

consolidators product offerings that 

improve over the current exclusive SIP 

feeds. Thus, such market participants 

will represent a reduction in 

information asymmetries between users 

of core data and users of proprietary 

data. On the other hand, the 

Commission believes that those market 

participants who elect to use any low 

cost, or display feed, options offered by 

competing consolidators are likely to be 

participants who currently do not make 

use of sophisticated market data access. 

Thus, for these market participants, 

18796 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2405See supra Section V.C.1 for a discussion of 

the benefits of the expanded content of core data 

to market participants. 

2406See supra Section V.B.2(c). 

2407See Nasdaq Letter IV at 8 (‘‘Finally, the 

Commission ignores the likelihood that different 

consolidators will provide differing levels of 

service, replacing an allegedly two-tiered market 

with a multi-tiered market. Even if multiple 

competing consolidators end up racing against each 

other to produce unique or superior data products 

or to distribute data more quickly, they would 

likely charge premiums for better products and 

faster services. If so, whatever concerns the SEC 

may have now about market participants needing to 

pay high costs to access the best and fastest data 

will not be solved by its Proposal; to the contrary, 

the Proposal would only make this problem 

worse.’’). 

2408See, e.g., FINRA Letter at 8, NYSE Letter II 

at 23. 

2409See supra Section V.B.2(c), where additional 

details of the various approaches are described. 

2410See supra Section V.B.2(c). 

2411For example, the Commission believes that 

retail investors have no need for sub-millisecond 

improvements in latency, but do need timely and 

complete market data in order to make investment 

decisions. 

2412See supra Section V.B.2(c). 

2413Furthermore, the Commission believes it is 

likely that at least some competing consolidators 

will provide all core data in their product offerings. 

See supra Section V.C.1(c) for additional discussion 

of this point. 

2414 It is the Commission’s understanding that 

much of the infrastructure necessary to selfaggregate data today can be purchased from thirdparty vendors, so that in practice, the experience of 

purchasing the lowest latency access to 

consolidated market data may be similar whether 

the market participant choose to use a competing 

consolidator or to self-aggregate new consolidated 

market data. 

2415See, e.g., NBIM Letter at 4 (‘‘In our 

experience, therefore, broker/dealers that do not 

undertake data aggregation in-house, and do not use 

the fastest connectivity available, will in general not 

be consistently competitive. This does not preclude 

using third-party technology to do the data 

aggregation, as long as it is done in-house to avoid 

incremental latency.’’). 

information asymmetries with respect to 

latency will be no worse than they are 

currently, though these market 

participants may still benefit from the 

expanded content.2405

In addition, many of the differences 

between competing consolidator 

products (and their use by market 

participants) will be driven by 

differences in what those market 

participants find most useful for their 

trading needs, and differences in the 

ability to process and take advantage of 

new consolidated market data products 

distributed by competing consolidators, 

and these differences exist today.2406

One commenter stated that the 

decentralized consolidation model 

would exacerbate the differences in 

advantage and information between 

market participants and perpetuate a 

‘‘multi-tiered’’ market structure. The 

commenter pointed out the likelihood 

that different competing consolidators 

would likely develop products with 

different levels of performance and 

charge different prices for them. This 

commenter concluded that this would 

result in the promotion of even more 

tiers of separation in market data access 

than the two tiers separating those who 

can afford proprietary data and those 

who cannot.2407 Commenters also stated 

the rule would not reduce the difference 

that currently exists between those who 

access market data in a fast, 

sophisticated manner and those who do 

not. Specifically, these commenters 

stated that the self-aggregator option 

available in the final rules will enable 

the advantages of the fastest users of 

market data to remain, because these 

self-aggregators would inevitably have a 

significant speed advantage over 

competing consolidators.2408

The Commission disagrees with these 

commenters, and believes that the rule 

will reduce the differences between 

existing tiers of market data access, and 

that the self-aggregator option is 

essential in producing this outcome. 

This is because the distinctions between 

market data access capabilities that exist 

today are driven by more than just the 

price and availability of data (as 

explained further below), and so to the 

extent such differences remain they will 

not be a result of these rules. 

Additionally, the final rules will likely 

reduce one of the key cost barriers for 

market participants interested in selfaggregation, thereby reducing the 

advantage held by those market 

participants that can afford and choose 

to pay for it today. 

In the context of market data access 

broadly, there exist many differences in 

the approaches taken to obtain, process, 

and use market data.2409 These 

differences arise because of 

differentiation across many aspects of 

the market data access processes, and 

the Commission does not expect these 

differences to go away as a result of 

these rules. Furthermore (and as 

explained above 2410), it is the 

Commission’s understanding that some 

of these differences exist because the 

strategies employed by market 

participants do not all require exactly 

the same level of sophistication in 

market data processing to run 

effectively, as such some participants 

will be unwilling to change how they 

consume real time data even if given the 

opportunity to do so.2411 What this 

means is that any discussion of multiple 

tiers of market data access must be 

understood within the context of the 

complex differences in data use across 

market participants that exist today. 

At the same time, there are market 

participants, within each of the levels of 

sophistication for market data access 

described above,2412 who may be able to 

significantly improve their ability to 

compete as a result of the rule, both at 

their current level of capability and 

beyond. This is because core data will 

now be delivered according to the 

decentralized consolidation model, 

which introduces an incentive structure 

that will likely result in improvements 

to latency; and because core data will 

now contain additional content.2413 To 

the extent that these rules result in 

greater affordability of high quality 

market data, firms may find they are 

able to use the savings obtained from 

substituting away from proprietary feeds 

to invest in the technology and 

personnel necessary to increase the 

level of sophistication at which they use 

market data. These investments may 

take the form of purchasing the highest 

quality, lowest latency aggregation 

technology from a competing 

consolidator (which may be priced at a 

premium compared to lower performing 

products) or investing in the 

infrastructure necessary to selfaggregate.2414 In either case, market 

participants have a greater opportunity 

to improve their quality of market data 

access, and therefore, the 

competitiveness at each level of market 

participation may be increased. 

Also, the Commission does not 

believe that the self-aggregator option 

will further solidify the advantages held 

by sophisticated users of market data. 

To the contrary, the Commission 

continues to believe that the selfaggregator option assists in promoting 

the ability of a wider array of market 

participants to improve their access to 

market data. The Commission believes 

that the advantages of self-aggregators 

today come in part from the significant 

costs to self-aggregation, which prevent 

other market participants from 

becoming self-aggregators themselves 

and thereby preserves self-aggregators as 

the only market participants with such 

high quality information. To the extent 

that it happens that self-aggregation is 

necessary in order to obtain the 

maximum possible latency 

advantages,2415 the exclusive advantage 

this offers will be reduced, because, 

whereas today one must purchase 

proprietary data feeds in order to 

employ this methodology of selfaggregation, under the final rule, the 

end user can purchase consolidated 

market data and employ this 

methodology through the self-aggregator 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18797 

2416This of course depends on the extent to 

which the end user finds the content of new core 

data a viable substitute for proprietary data. 

2417These costs are the costs discussed in moving 

along the continuum of market data utilization 

methods in Section V.B.2(c). Also, market 

participants may be able to improve their use of 

market data under the final rules even if they 

currently utilize proprietary market data, because 

they may be able to substitute new core data for 

proprietary data. If they do switch, the likely cost 

savings they will obtain may enable them to invest 

in other aspects of the data access process, thereby 

improving their ability to compete with more 

sophisticated market participants. 

2418See Nasdaq Letter IV at 41. 

2419See supra Section V.B.2(c). 2420See supra note 1220. 

2421See id. 

2422The Central Repository is the repository 

responsible for the receipt, consolidation, and 

retention of all information reported to the CAT. 

See CAT NMS Plan, supra note 1220, at Section 1.1. 

2423See id. The Operating Committee is the 

governing body of the CAT NMS Plan. 

2424See id. at Sections 6.3 and 6.4. 

2425See id. at Section 6.8. 

2426See id. at Section 6.5. 

2427See id. at Section 6.5(c)(ii). 

2428See id. at Section 6.5(g); CAT NMS Plan 

Approval Order, supra note 1220, at 84833–34. 

2429See 17 CFR 242.613(f) (Rule 613(f)) of 

Regulation NMS. 

option.2416 This has the effect of 

reducing the costs to employ such 

technology, because the fees for new 

consolidated market data will likely be 

lower than the fees for proprietary data. 

Thus, rather than institutionalizing the 

advantages enjoyed by current users of 

the self-aggregation methodology, we 

expect the self-aggregator option in the 

decentralized consolidation model will 

reduce the barriers to entry into this 

level of market data access for other 

market participants. 

While the final rules will not 

eliminate levels of sophistication in the 

utilization of market data, it will likely 

reduce the cost of moving between 

levels.2417 With lower costs to increase 

sophistication, the information 

asymmetry between the two tiers of 

market data access, of those who can 

afford and choose to purchase 

proprietary data and those who do not, 

will be reduced. This may lead to new 

entrants into the market making, 

executing broker-dealer, and latency 

sensitive trading businesses. 

One commenter stated that the rule 

would put ‘‘retail investors who 

subscribe to a competing consolidator at 

a disadvantage relative to those traders 

who can afford to self-aggregate and 

generate their own ‘NBBO’ more quickly 

than retail investors reliant on third 

parties to obtain the NBBO.’’ 2418 The 

Commission disagrees that retail 

investors in particular would be put at 

a disadvantage compared to selfaggregators as a result of the rule. As 

discussed above,2419 currently, retail 

investors typically access the market 

using display and per quote feeds, 

which are not competitive in terms of 

speed with typical market data feeds. 

Investors who use such feeds 

understand that it is not possible to 

compete on speed and make their 

investment decisions based on other 

kinds of strategies. Thus, differences 

measured in microseconds, even if they 

resulted from this rule, would be 

meaningless to retail investors at the 

moment when they are making 

investment or trading decisions. 

Furthermore, retail investors, like many 

professional investors, do not execute 

their own trades but instead leave that 

function to their broker-dealer. For 

example, retail broker-dealers route 

their customers’ orders to exchanges, 

ATSs, or wholesalers, the latter of 

which may route the order to the 

exchanges itself. Once the order has 

reached such market participants, the 

execution decisions are made in a much 

more sophisticated fashion (and 

microsecond differences matter), but 

crucially, these players will be able to 

exploit the fastest competing 

consolidator or self-aggregator options 

available on behalf of their retail clients. 

At this level of market data access, the 

Commission believes that that market 

participants will make decisions about 

what sort of competing consolidator 

product to use (or whether to selfaggregate) based off of competitive 

business considerations, that the final 

rules will make the options available 

cheaper than today, and that this will all 

work to the benefit of retail investors 

when these market participants work on 

their behalf to execute orders. 

(c) Effects From the Interaction With the 

Consolidated Audit Trail 

(i) CAT Baseline 

Section 242.613 (Rule 613) of 

Regulation NMS requires the national 

securities exchanges and national 

securities associations (‘‘SROs’’) to 

jointly develop and file with the 

Commission a national market system 

plan to create, implement and maintain 

a consolidated audit trail (‘‘CAT’’).2420

At the time of adoption, and even today, 

trading data was and is inconsistent 

across the self-regulatory organizations 

and certain market activity is difficult to 

compile because it is not aggregated in 

one, directly accessible consolidated 

audit trail system. The goal of Rule 613 

was to require the SROs to create a 

system that provides regulators with 

more timely access to a sufficiently 

comprehensive set of trading data, 

enabling regulators to more efficiently 

and effectively reconstruct market 

events, monitor market behavior, and 

identify and investigate misconduct. 

Rule 613 thus aims to modernize a 

reporting infrastructure to oversee the 

trading activity generated across 

numerous markets in today’s national 

market system. 

On November 15, 2016, the 

Commission approved the national 

market system plan required by Rule 

613 (‘‘CAT NMS Plan’’ or ‘‘Plan’’) that 

was filed by the self-regulatory 

organizations.2421 In the CAT NMS 

Plan, the SROs described the numerous 

elements they proposed to include in 

the CAT, including, (1) requirements for 

the plan processor responsible for 

building, operating and maintaining the 

Central Repository,2422 (2) requirements 

for the creation and functioning of the 

Central Repository, (3) requirements 

applicable to the reporting of CAT Data 

by SROs and their members. ‘‘CAT 

Data’’ is defined in the CAT NMS Plan 

as ‘‘data derived from Participant Data, 

Industry Member Data, SIP Data, and 

such other data as the Operating 

Committee may designate as ‘CAT Data’ 

from time to time.’’ 2423

The CAT NMS Plan requires SROs 

and their members to record and report 

various data regarding orders by 8:00 

a.m. the day following an order 

event.2424 The Plan requires industry 

members to record timestamps for order 

events in millisecond or finer 

increments with a clock 

synchronization standard of within 50 

milliseconds.2425 The CAT NMS Plan 

Processor, FINRA CAT, is then required 

to process the order data into a uniform 

format, link the entire lifecycle of each 

order, and combine it with other CAT 

Data such as SIP Data.2426 The Plan 

Processor is also required to store CAT 

Data to allow the ability to return results 

of queries on the status of order books 

at varying time intervals.2427 Regulators, 

such as the Commission and SROs will 

use the resulting CAT Data only for 

regulatory purposes such as 

reconstructing market events, 

monitoring market behavior, and 

identifying and investigating 

misconduct.2428 At this time, the 

Commission has little information about 

what specific data, in addition to CAT 

Data, such as proprietary depth of book 

and auction data, the SROs currently 

intend to include in their enhanced 

surveillance systems.2429

(ii) Economic Effects on CAT 

The Commission recognizes that the 

final rules could affect the Consolidated 

Audit Trail, resulting in benefits to 

investors from improved regulatory 

18798 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2430See supra Section IV.B.5 for a more detailed 

discussion of how the proposal would alter the 

requirements of the Consolidated Audit Trail NMS 

Plan. 

2431See CAT NMS Plan Approval Order, supra 

note 1220, at 84802–803. 

2432The Commission believes the final rules will 

not affect the accuracy or timeliness of CAT Data. 

The Commission does not believe that the proposal 

would alter the accuracy of timestamps of trades 

and quotes. While some competing consolidators 

might offer data that more accurately represents the 

data observed by certain market participants at the 

time of an order event, the Commission does not 

expect that all market participants would observe 

the exact same data at that order event, much like 

the case today. In addition, industry member clock 

synchronization and timestamps on the order 

events in CAT Data are not fine enough for the 

latency improvements to affect the accuracy of 

assigning an order event to the consolidated market 

data likely observed at the time of the order event. 

Finally, the order data in CAT is not required to be 

reported until 8:00 a.m. the day following an order 

event. Hence, because latency improvements from 

the proposal would be measured in microseconds, 

the Commission does not believe that the final rules 

will improve the timeliness of CAT Data. 

2433See supra Section V.C.1(b)(i) for data 

showing that odd-lot quotes in higher priced 

securities often improve upon the current NBBO. 

2434See CTA, Technical Documents, available at 

https://www.ctaplan.com/tech-specs (last accessed 

Jan. 30, 2020) (showing the SIP tech specs version 

history, which identifies the changes over the 

years); UTP Data Feed Services Specification, 

available at http://www.utpplan.com/DOC/ 

UtpBinaryOutputSpec.pdf (showing the SIP tech 

specs version history, which identifies the changes 

over the years). 

2435See supra Sections II.C.2(c) and V.C.1(a) for 

a discussion of these potential costs. 

oversight, costs to CAT from potentially 

switching from a current SIP to a 

competing consolidator, costs to CAT 

from integrating consolidated market 

data into the CAT Data model, and costs 

to SROs of updating their enhanced 

surveillance systems to use consolidated 

market data provided by the CAT.2430

Specifically, the Plan Processor for the 

Consolidated Audit Trail, FINRA CAT, 

is required to incorporate all data from 

SIPs or pursuant to an NMS plan into 

the Consolidated Audit Trail. If the 

Commission were to approve these 

amendments, the CAT NMS Plan 

Operating Committee could choose to 

purchase such data from a different 

entity and would be required to 

purchase the expanded consolidated 

data. 

The Commission believes that the 

incorporation of the expanded data into 

CAT will improve regulatory oversight 

to the benefit of investors. As explained 

in the Approval order for the 

Consolidated Audit Trail, the expected 

benefits of the CAT include 

‘‘improvements in regulatory activities 

such as the analysis and reconstruction 

of market events, in addition to market 

analysis and research . . . , as well as 

market surveillance, examinations, 

investigations, and other enforcement 

functions,’’ and derive from 

improvements in four data qualities: 

Accuracy, completeness, accessibility, 

and timeliness.2431 Accuracy refers to 

whether the data about a particular 

order or trade is correct and reliable. 

Completeness refers to whether a data 

source represents all market activity of 

interest to regulators, and whether the 

data is sufficiently detailed to provide 

the information regulators require. 

Accessibility refers to how the data is 

stored, how practical it is to assemble, 

aggregate, and process the data, and 

whether all appropriate regulators could 

acquire the data they need. Timeliness 

refers to when the data is available to 

regulators and how long it would take 

to process before it could be used for 

regulatory analysis. 

The Commission believes that the 

expanded consolidated data from the 

final rules could improve the 

completeness and accessibility of CAT 

Data.2432 In particular, the final rules 

will improve the completeness of CAT 

Data because CAT Data would contain 

quotes smaller than 100 shares, depth of 

book information, and auction 

information. While the CAT will 

contain query functionality capable of 

recreating limit order books, the depth 

of book information will allow 

regulators to see the displayed order 

books that others see around the time of 

the order events. While the Commission 

does not know if SROs plan to 

incorporate depth of book and auction 

information into their enhanced 

surveillance systems or other regulatory 

activities using CAT Data, the proposal 

will improve the accessibility of 

consolidated market data for SRO and 

Commission CAT-related uses because 

SROs would have access to such data in 

a standardized format through the 

Consolidated Audit Trail instead of 

through the variety of formats currently 

used in proprietary data. The final rules 

will also improve accessibility because 

the SROs and Commission would have 

such data on the same system as CAT 

Data. 

The Commission believes that the 

improvements in completeness and 

accessibility would facilitate more 

efficient regulatory activities using CAT 

Data that will benefit investors. In 

particular, the final rules could make 

broad-based market reconstructions 

using CAT Data more efficient by 

increasing the depth of information that 

could be incorporated into such 

reconstructions with current CAT Data. 

The Commission believes that depth of 

book information, quote information in 

sizes less than 100 shares, and auction 

information are all valuable in a broadbased market reconstruction. Further, 

the improvements would allow for more 

targeted surveillances and risk-based 

examinations using current CAT Data. 

For example, the depth of book 

information will be valuable when 

building surveillances to detect spoofing 

or in investigating spoofing because 

spoofing often involves creating a false 

impression of depth at prices outside of 

the best bid or offer. In addition, the 

auction information will facilitate 

auction market reconstruction to 

evaluate manipulation concerns and 

inform policy. Quote information in 

sizes less than 100 shares will facilitate 

analysis by regulators of broker-dealers’ 

best execution practices by providing 

potential execution prices that are better 

than the current NBBO in stocks priced 

over $250.2433

The Commission recognizes that the 

interaction between the final rules and 

the Consolidated Audit Trail could also 

create additional costs. Such additional 

costs are likely to be borne by SROs and 

their members. These costs could 

include switching costs, additional data 

costs, and data storage and processing 

costs. The proposal will result in 

switching costs if the Central Repository 

has to obtain the data from a different 

source. The source of the switching 

costs could be from changing data input 

formats and technical specifications, 

which would require one-time 

implementation costs. The Commission 

recognizes that the SIP technical 

specifications change a few times a year 

such that the switching costs associated 

with the proposal would be the costs in 

excess of the regular costs incurred 

when the SIP technical specifications 

change.2434 The Commission at this 

time, cannot judge whether switching 

data providers would result in higher or 

lower on-going data intake costs but 

data intake costs presumably could be 

factored into the selection of a 

competing consolidator. Also, in order 

to continue to receive certain quotation 

and transaction data for OTC equities 

currently included in the SIP feeds, 

CAT would have to obtain such data 

from a different source, and would have 

to incur any associated costs in doing 

so.2435 The Commission recognizes that 

increasing the amount of data managed 

and analyzed by CAT will increase the 

costs of data storage and processing to 

integrate the expanded data with other 

CAT Data. However, the Commission 

does not expect the final rules to 

substantially increase the costs of 

operating the CAT because any marginal 

increase in cost associated with 

consolidated market data will be 

dwarfed by the processing costs already 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18799 

2436See infra Section V.D.2 for a discussion of the 

interaction between the proposal and CAT on 

competition among competing consolidators. 

2437One commenter stated that this information 

‘‘should be essential’’ to the Commission’s analysis. 

See Nasdaq Letter IV at 47. The Commission 

requested comment on the costs of market data 

vendors and the effect of new core data on their 

products and did not receive any. Data vendors are 

not required to disclose information to the 

Commission about the costs of their business at a 

level of detail sufficient to improve the 

Commission’s understanding beyond what is said 

here. The assertions the Commission does make in 

this section about the effect of the rule on market 

data vendors do not depend on this information. 

2438See supra Sections V.C.1(b), V.C.1(c). 

2439 Id. 

2440 Id. 

2441 Id. 

2442See supra Section V.C.4(b). 

incurred by CAT, which includes 

processing for all options quotation 

activity among other order lifecycle 

events and is significantly larger in size 

than consolidated market data. 

The Commission recognizes that the 

final rules will result in SROs incurring 

costs to integrate additional CAT Data 

into their surveillances. Even if the 

SROs would otherwise include depth of 

book and auction information in the 

CAT-related surveillances, they would 

incur costs in changing their 

surveillances to use the data in CAT 

rather than using data from proprietary 

feeds. 

The Commission also considered 

whether the requirements in CAT will 

impose costs as a result of CAT’s effect 

on the competition among competing 

consolidators. Because the Commission 

does not believe CAT will significantly 

affect the competition among competing 

consolidators,2436 it will not impose 

additional costs resulting from this 

effect. 

The Commission believes that CAT 

implementation milestones will not be 

impacted by the final rules given that 

sufficient lead time will be available 

and integration efforts could be 

scheduled as part of standard release 

planning. The Commission believes that 

switching market data providers and 

expanding consolidated market data 

within CAT will require limited 

resources relative to the current 

implementation activities. Further, any 

resources devoted by SROs to updating 

their surveillances are separate from the 

efforts to implement CAT. 

(d) Effects on Data Vendors 

The Commission believes that the 

final amendments would have an effect 

on the broad financial data services 

industry. To the extent that the 

amendments lead to cheaper (relative to 

proprietary data feeds) and higher 

content consolidated market data 

products, the Commission expects that 

costs to data vendors would go down 

and the ability of such vendors to grow 

their customer base would increase. It is 

also possible that data vendors may 

increase the range and quality of 

products they offer using the new 

expanded core data and that new firms 

enter the data vendor business. To the 

extent that the risk of price increases for 

core data is realized instead, the 

Commission believes these businesses 

could potentially face higher costs, 

which when passed on to clients could 

cause their customer base to shrink. In 

the event that these outcomes are 

severe, it is possible that some data 

vendors could exit the market. The 

Commission is uncertain about the 

potential size and scope of these effects 

because it is unable to determine both 

the role of these costs in producing the 

products supplied by the data services 

industry and the extent to which the 

enhanced quality of new core data could 

play a role in the quality of their 

products.2437

D. Impact on Efficiency, Competition, 

and Capital Formation 

1. Efficiency 

The Commission believes that the 

adopted amendments will have a 

number of different effects on efficiency. 

In particular, the Commission believes 

that the amendments will lead to more 

efficient gains from trade, improve the 

efficiency of order execution for some 

market participants, improve price 

efficiency, and affect how efficiently 

core data is distributed. The rest of this 

section discusses these different effects 

of the amendments on efficiency. 

As discussed above, the Commission 

believes that the expansion of core data 

under the final amendments would 

increase transparency for market 

participants who do not currently access 

proprietary DOB feeds and allow them 

to more easily find liquidity that they 

can trade against.2438 Currently, some of 

these market participants may not trade 

because they cannot see the quotes 

available to them, either through a lack 

of information about odd-lots, depth of 

book, or auction information. The 

Commission believes that the final 

amendments will alleviate some of this 

information shortage and will allow 

traders to more easily find 

counterparties. This may result in more 

voluntary trades occurring between 

market participants, which could lead to 

more efficient gains from trade, since 

these are trades which currently do not 

take place only because of a lack of 

information.2439 However, if the 

inclusion of additional odd-lot, depth of 

book, or auction information does not 

induce additional voluntary trading 

from market participants who do not 

currently access proprietary DOB feeds, 

then the final amendments may not 

produce more efficient gains from 

trade.2440

The Commission believes that the 

expansion of core data could also 

improve the efficiency with which some 

market participants, or their brokerdealers, execute orders. As discussed 

above, by adding odd-lot, depth of book, 

and auction information to core data, 

the final amendments will reduce 

information asymmetry between brokerdealers and other market participants 

who subscribe to proprietary data feeds 

and users of current SIP data. This 

could improve the ability of brokerdealers and other market participants 

who currently do not have access to this 

information to trade against those 

market participants who do. As a result, 

this could improve the efficiency with 

which they execute their orders by 

allowing them to select a better trading 

venue or method of executing their 

order. Furthermore, for market 

participants who currently rely on 

exclusive SIPs for their order 

executions, the reduction in latency 

provided by the decentralized 

consolidation model could reduce the 

risk that their orders are picked off, 

which could reduce their adverse 

selection costs. This could potentially 

reduce their transaction costs and allow 

them to more efficiently achieve their 

investment or trading objectives or those 

of their clients.2441

As discussed previously, the 

Commission believes that there is some 

potential for new broker-dealers to 

become competitive in the market for 

sophisticated order execution as a result 

of this rule because they may be able to 

use the expanded content and lower 

latency of core data to develop SORs or 

other tools that allow them to compete 

more effectively with broker-dealers 

who currently base order execution 

decisions off of proprietary DOB 

data.2442 To the extent that this 

happens, the clients of these brokerdealers could see their orders executed 

more efficiently and their execution 

costs reduced. 

The current lack of certain odd-lot 

quote, depth of book, and auction 

information in SIP data could affect 

price efficiency. The gap in information 

between data provided by exclusive 

SIPs and proprietary data products may 

cause prices in some securities to be less 

efficient, i.e., to deviate further from 

fundamental values, if market 

18800 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2443See supra Section V.B.2(a). 

2444See Proposing Release, 85 FR at n. 390. 

2445See supra Section V.C.2(c). 

2446See id. 

2447One commenter stated that this information 

‘‘should be essential’’ to the Commission’s analysis. 

See Nasdaq Letter IV Letter at 47. The Commission 

continues believe there is uncertainty in its 

conclusion, but does not believe this precludes the 

conclusion entirely. 

2448See, e.g., Kira R. Fabrizio et al., Do Markets 

Reduce Costs? Assessing the Impact of Regulatory 

Restructuring on US Electric Generation Efficiency, 

97 Am. Econ. Rev. 1250 (2007). 

2449See, e.g., Severin Borenstein, The Trouble 

with Electricity Markets: Understanding California’s 

Restructuring Disaster, 16 J. Econ. Persp. 191 

(2002). 

2450See supra Section V.B.3(a) discussing SIPs 

market power. 

2451See supra Section V.C.2(b). However, the 

Commission also acknowledges the possibility that 

fees for the consolidation and distribution of 

consolidated market data may remain the same or 

increase, because consolidated market data will 

contain more information and/or there might not be 

enough competition among competing 

consolidators. 

2452Several studies found evidence of efficiency 

gains and technological improvements from 

restructuring in the public utilities sector. In the 

electricity industry, for example, the introduction of 

competition to the electricity generation services 

created strong incentives to become more cost 

efficient and technologically advanced to improve 

operating performance. If a plant could not become 

efficient enough to compete, it would lose business 

and have to exit the market. Craig and Savage 

(2013) establish a 9% increase in efficiency in 

investor-owned electricity plants in response to the 

restructuring and increasing competition in the 

electricity sector. Similarly, Davis and Wolfram 

(2012) argue that electricity market restructuring is 

associated with a 10 percent increase in operating 

performance for nuclear plants generating 

electricity. The authors state that increasing 

competition led to managers focusing more 

attention on financial costs of outages. See J. Dean 

Craig and Scott J. Savage, Market Restructuring, 

Competition and the Efficiency of Electricity 

Generation: Plant-level Evidence from the United 

States 1996 to 2006, 34 Energy J. 1 (2013); Lucas 

W. Davis and Catherine D. Wolfram, Deregulation, 

Consolidation, and Efficiency: Evidence from US 

Nuclear Power, Am. Econ. J. Applied Econ. 194 

(2012). 

2453The Commission acknowledges that market 

participants may subscribe to more than one 

competing consolidator for different core data 

products or as a backup feed. 

participants with access to proprietary 

data products do not incorporate this 

information into prices quickly enough 

through their trading or quoting activity. 

However, the Commission does not 

know the extent of this possible effect, 

but it believes the effect could be larger 

in less actively traded securities where 

the gap in information between SIP data 

and proprietary data products is larger. 

The Commission believes that, to the 

extent that there is information in the 

new core data elements that is not 

currently reflected in market prices, the 

final amendments may improve price 

efficiency.2443 In particular, the 

introduction of odd-lot quote, depth of 

book, and auction information into core 

data could result in the information 

becoming impounded in prices more 

rapidly and accurately as a result of the 

more widespread dissemination of this 

information. As the Commission 

understands that the most sophisticated 

traders already have access to this 

information and likely already compete 

to profit from it, the Commission 

expects that the size of this gain in price 

efficiency would be small because this 

information is already impounded 

quickly into prices. 

Finally, under the current rule, the 

exclusive SIPs operate like public 

utilities in their consolidation and 

distribution of the NMS stock data.2444

The changes will unbundle the data fees 

for consolidated market data from the 

fees for its consolidation and 

distribution.2445 The decentralized 

consolidation model will subject the 

fees charged by competing consolidators 

for the consolidation and distribution of 

consolidated market data to 

competition. The Commission believes 

that the decentralized consolidation 

model will lead to consolidated market 

data being distributed in a timelier, 

efficient, and cost-effective manner. The 

Commission believes that the changes to 

the consolidation and distribution of 

consolidated data is economically 

similar to the restructuring of public 

utilities and may have an impact on the 

efficiency with which the consolidation 

and distribution is carried out. In 

particular, as discussed above, the 

decentralized consolidation model is 

anticipated to produce better investment 

to lower costs and improve quality in 

the consolidation and distribution of 

consolidated market data, as well as 

promote better price competition (all of 

which translates into a more efficient 

allocation of capital) than the bidding 

process currently in place.2446

The Commission acknowledges the 

uncertainty in this conclusion.2447 The 

literature on the economics of 

restructuring public utilities does not 

provide clear guidance. Some papers 

show efficiency gains from regulatory 

restructuring,2448 yet others claim no 

efficiency gains or efficiency declines 

after regulatory restructuring of public 

utilities.2449 The likely impact of the 

adopted changes rests on the strengths 

and weaknesses of the existing 

exclusive SIP model. 

The Commission believes that the 

existing exclusive SIP model has an 

important weakness: It does not provide 

sufficient competitive incentives.2450

SIPs have significant market power in 

the market for core and aggregated 

market data products and, as a result, do 

not need to compete to capture demand 

for their products. The Commission 

believes that the adoption of the 

decentralized consolidation model will 

open up the consolidation and 

distribution services to data 

consolidators that will need to 

vigorously compete to capture some 

demand for the data they provide. This 

need to compete for market share will 

create incentives to reduce costs. As 

discussed above, the Commission 

believes that this competition could 

incentivize competing consolidators to 

pass on some of those cost savings to 

customers by charging lower service 

fees in order to capture market 

share.2451 The focus to capture market 

share might also lead to technological 

improvements for competing 

consolidators to be able to differentiate 

themselves in the eyes of the customers 

and generate demand.2452 The 

Commission believes that these 

improvements in data provision 

technology and the introduction of 

competitive forces on fees for the 

consolidation and distribution of 

consolidated market data could result in 

a more efficient allocation of capital. 

Additionally, the decentralized 

consolidation model could allow market 

participants to receive consolidated 

market data more efficiently. Instead of 

having to receive separate consolidated 

market data feeds from two exclusive 

SIP plan processors, UTP and CTA/CQ 

Plans, market participants will have the 

option to receive all of their 

consolidated market data from one 

competing consolidator.2453 This could 

allow market participants to achieve 

efficiencies in the design and in making 

modifications to their systems for the 

intake of consolidated market data 

because they will only have to configure 

their systems to intake consolidated 

market data from one source. 

2. Competition 

As discussed previously, the 

Commission believes this rule will have 

a substantial impact on competition. 

The Commission identifies seven 

markets or areas of the market for which 

the rule would have a substantial 

impact on competition. The 

Commission acknowledges that the 

seven markets or areas may not be a 

comprehensive list of all markets or 

areas for which the rule might have an 

impact on competition. However, the 

Commission believes that competition 

in these seven markets or areas are most 

likely to be impacted substantially by 

this rule. 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18801 

2454See supra Section V.B.3(a). 

2455The Commission assumes that enough 

competing consolidators will enter the market in 

order to make it competitive. See supra Section 

V.C.2(a). 

2456See supra Sections V.C.2(a); V.C.2(b); 

V.C.2(c). 

2457See supra Sections V.C.2(a); V.C.2(d). 

2458See supra Section V.C.2(a). 

2459See Nasdaq Letter IV at 48. See also Nasdaq 

Letter IV at 32, describing proprietary data products 

as competitive. 

2460See supra Section V.B.3(a) (discussing the 

exclusive nature of the SIP processors). 

2461See supra Section V.C.2(e)(ii) for a discussion 

of costs related to Regulation SCI and Rule 

614(d)(9). See supra Section V.C.2(a)(i)a for 

additional discussion of other factors affecting the 

barriers to entry for competing consolidators. 

2462SROs that do not operate an exclusive SIP 

could also be at a competitive disadvantage relative 

to an SRO that operates an exclusive SIP that 

became a competing consolidator, because they 

would face higher initial SCI related costs than an 

exclusive SIP would if it became a competing 

consolidator. See supra Section VI.C.2(a)(i)b.; supra 

Section V.C.2(e)(ii). 

2463The Commission believes that competing 

consolidators affiliated with exchanges will choose 

to operate under the provisions of the exemption. 

See supra Section V.C.2(a)(i)a for additional 

discussion of the impact of the limited exemptive 

relief on barriers to entry. 

2464See supra Section V.C.3. 

First, the adopted rule fosters a 

competitive environment for the 

consolidation and dissemination of 

consolidated market data to replace the 

centralized consolidation model, which 

is not currently subject to competitive 

pressures.2454 Under the final 

amendments multiple competing 

consolidators will be able to distribute 

consolidated market data products to 

market participants. The Commission 

believes that, since market participants 

could freely select the competing 

consolidator that charged the lowest 

distribution fee or offered better quality 

(i.e., lower latency, a more reliable 

system), the competing consolidators 

will be subject to competitive forces and 

the marketplace for the consolidation 

and dissemination of consolidated 

market data products will be 

competitive if enough competing 

consolidators enter the market.2455 As 

discussed above, the Commission 

believes that this introduction of 

competition could reduce the prices 

competing consolidators charge for the 

consolidation and distribution of 

consolidated market data products and 

improve the quality of consolidated 

market access.2456 The Commission 

recognizes the risk that there could be 

too few competing consolidators to 

realize these benefits fully, in which 

case the adopted competitive changes 

may have a number of costs,2457

including higher prices for the 

consolidation and dissemination of 

consolidated market data products, 

which could increase the overall prices 

market participants pay for consolidated 

market data.2458

One commenter stated that the above 

characterization of the effects of the 

amendments on competition 

represented a ‘‘false dichotomy’’ 

because the current marketplace already 

has competition in the form of 

competing exchanges, and notes that the 

Commission failed to analyze a 

comparison with this feature.2459 This 

commenter stated that exchanges 

compete for order flow, and that the sale 

of proprietary data products is part of 

this competition, which offers trading 

services and data in return for the ‘‘allin costs’’ of trading. This commenter 

stated that since exchanges compete for 

order flow, it is incorrect for the 

Commission to say that there is no 

competition today, and that there will 

be competition after the final 

amendments are implemented. The 

Commission disagrees that the above 

characterization is a false dichotomy. 

The market for the consolidation and 

dissemination of core data today does 

not have competition, but rather, 

exclusive processors in the form of the 

exclusive SIPs, from which all core data 

must originate.2460 Because the final 

amendments are designed to expand the 

content and improve the dissemination 

of core data, the appropriate comparison 

is to the manner in which core data is 

processed today, not to the competition 

between exchanges for trading services. 

The Commission recognizes that Rule 

614(d)(9) and the addition of the 

definition of SCI competing 

consolidator to Regulation SCI could 

impact competitive dynamics in the 

competing consolidator market. If the 

exclusive SIPs become competing 

consolidators, they could gain a 

competitive advantage over other 

competing consolidators with respect to 

Regulation SCI compliance because they 

would face lower barriers to entry since 

they are currently SCI entities and 

already incur many of these costs.2461

Comparatively, the Commission 

believes the costs associated with Rule 

614(d)(9), along with the costs 

associated with later potentially being 

an SCI competing consolidator, could 

raise the barriers to entry for firms 

seeking to become competing 

consolidators who are not already 

exclusive SIPs.2462 Therefore, Rule 

614(d)(9) and the addition of the 

definition of SCI competing 

consolidator to Regulation SCI could 

result in fewer firms seeking to become 

competing consolidators, which could 

lead to less competition in the 

competing consolidator market. Less 

competition and less innovation would 

reduce the incentives of competing 

consolidators to reduce the costs and 

improve the speed and quality of their 

consolidated market data aggregation 

and dissemination services. 

Additionally, after the initial transition 

period, the Commission believes that 

the lower burdens associated with Rule 

614(d)(9) could potentially give a 

competing consolidator below the SCI 

competing consolidator threshold a 

competitive advantage over SCI 

competing consolidators because it 

would have lower compliance costs. 

However, the Commission does not 

believe that this competitive advantage 

will be significant because a competing 

consolidator with market share below 

the threshold that gained market share 

would become an SCI competing 

consolidator after it crossed the 

threshold. 

The limited exemptive relief from the 

rule filing requirements of Section 19(b) 

of the Exchange Act and Rule 19b–4 

thereunder, Section 19(d), the 

requirements of Section 6(b), and from 

Regulation SCI provided to competing 

consolidators affiliated with exchanges 

will reduce the regulatory burdens that 

would otherwise be faced by such an 

entity in becoming a competing 

consolidator.2463 As a result, SROs and 

their affiliates may find it less 

burdensome to operate a competing 

consolidator, and therefore may be more 

likely to enter the market, which will 

promote competition in the provision of 

consolidated market data. 

Additionally, the Commission 

believes that the public disclosure of the 

information in Form CC and the 

performance metrics and operational 

information competing consolidators 

will provide on their websites would 

enhance competition between 

competing consolidators.2464 The public 

disclosure of competing consolidator 

fees and performance metrics will allow 

market participants to more easily 

compare competing consolidators and 

select the ones that charged the lowest 

fees or offered the best performance. 

This could enhance competition 

between competing consolidators. For 

example, if the public disclosures show 

that certain competing consolidators 

have higher fees or poor performance, it 

may result in those competing 

consolidators losing subscribers and 

earning lower revenues. Similarly, 

competing consolidators who display 

lower prices or superior system 

performance may be able to attract more 

subscribers and earn more revenue. 

This, in turn, could enhance 

18802 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2465See supra Section III.C.8(e)(ii) for additional 

discussion about Form CC disclosures. 

2466See supra Sections III.C.7, V.C.3. 

2467See CAT NMS Plan, supra note 1220, at 

Section 6.8. 

2468However, consolidated market data would 

not be a perfect substitute for the proprietary data 

feeds because it would not contain all the 

information in proprietary data feeds. For example, 

the expanded core data would not include full 

depth of book information or information on all 

odd-lots. See supra Section V.C.4. 

2469See supra Section V.C.4(a). 

2470For discussion of Regulation SCI 

requirements on competition, see supra Section 

V.C.2(a)(i)a. 

2471See supra Section V.C.2(a)(ii). 

2472The Commission acknowledges that fewer 

competitors could decrease or increase efficiency in 

the market data aggregator business. On the one 

hand, fewer competitors could reduce the 

incentives for market data aggregators to innovate, 

which could reduce efficiency. On the other hand, 

fewer competitors could also improve efficiency if 

the firms that exited the market did not aggregate 

market data as efficiently as the firms that 

remained. 

2473As discussed above, consolidated market data 

would not be a perfect substitute for proprietary 

data feeds, so there would still be demand for 

proprietary data. Since not all firms’ aggregate 

proprietary data themselves, there would still be a 

demand for third-party aggregators to perform this 

function. 

competition by incentivizing competing 

consolidators to lower fees and/or 

innovate and make investments in their 

systems in order to improve system 

performance in order to attract more 

subscribers. The Commission 

acknowledges that the public disclosure 

of Form CC could harm competition by 

making firms reluctant to enter the 

competing consolidator market and 

reducing the incentives of competing 

consolidators to innovate if it discloses 

certain information that a competing 

consolidator might view as a ‘‘trade 

secret’’ or giving it a competitive 

advantage. However, the Commission 

believes that these effects are not likely 

to occur because the disclosures on 

Form CC are not detailed enough to 

allow other market participants to 

reproduce a competing consolidator’s 

‘‘trade secret.’’ 2465 Additionally, the 

delayed public disclosure of material 

amendments to Form CC should prevent 

another competing consolidator from 

replicating a competing consolidator’s 

innovations before it has a chance to 

implement them.2466

The Commission recognizes that the 

registration process for Form CC could 

create uncertainty about whether a Form 

CC would be declared ineffective. This 

could potentially harm competition in 

the market for competing consolidators 

by raising the barriers to entry and 

creating a disincentive for entities to 

become competing consolidators. 

However, the Commission believes that 

these effects will not be significant 

because the Commission will not 

declare a Form CC ineffective without 

notice and opportunity for hearing. 

Additionally, entities whose Form CC is 

declared ineffective will still have the 

opportunity to file a new Form CC with 

the Commission. 

The Commission considered the effect 

of the interaction between the proposal 

and the CAT NMS Plan on competition 

among competing consolidators, but 

believes that this interaction will not 

have a significant effect on the 

competitive landscape. In particular, the 

Commission considered two effects: 

First, the effect in the event that there 

is a bias toward an exchange-operated 

competing consolidator over other 

competing consolidators and second, 

any competitive advantage for the 

competing consolidator selected for the 

CAT NMS Plan. In relation to any bias, 

the Commission notes that the CAT 

NMS Plan will be only one of many 

potential customers of the competing 

consolidator, so this bias is not likely to 

affect the market unless the selection 

produces a competitive advantage. In 

particular, a competing consolidator 

could enjoy a competitive advantage 

only if broker-dealers believe that 

market surveillances would be less 

likely to appear to show violations if the 

broker-dealers made trading decisions 

using the same data used in SRO 

surveillances. However, the latency 

differences across the competing 

consolidators are likely to measure in 

the microseconds while the clock 

synchronization requirements for 

industry members in the CAT NMS Plan 

is 50 milliseconds for electronic order 

flow.2467 Therefore, the Commission 

does not believe the CAT’s choice of 

competing consolidator will confer any 

regulatory value on the competing 

consolidator or their broker dealer 

clients. 

Second, the Commission believes that 

the expanded content and reduced 

latency of consolidated market data will 

make it a more viable substitute for 

proprietary data feeds.2468 The 

Commission believes that this will 

increase competition between 

consolidated market data and exchange 

proprietary data feeds. These 

competitive pressures could lead to 

lower prices for proprietary data feeds 

and may reduce the data costs that 

market participants pay, at the expense 

of the SROs who charge the fees.2469

The Commission recognizes the risk that 

Rule 614(d)(9) and the extension of 

Regulation SCI to include competing 

consolidators could lead to less 

competition in the competing 

consolidator market,2470 which could 

reduce the incentives of competing 

consolidators to reduce the cost and 

improve the speed and quality of 

consolidated market data. However, the 

Commission believes that the risk that 

there will be insufficient competition 

among competing consolidators is 

low.2471 To the extent there is not 

sufficient competition among competing 

consolidators, it could make 

consolidated market data less of a viable 

substitute for proprietary data feeds, 

which would reduce the competitive 

pressures consolidated market data 

would impose on proprietary data feeds. 

Third, the Commission expects the 

new decentralized consolidation model 

for consolidated market data to create 

competitors to market data aggregators 

for two reasons. First, the potential 

revenues from becoming a competing 

consolidator may cause new firms to 

enter the market for the consolidation 

and distribution of market data. Second, 

some market participants who currently 

use market data aggregators that do not 

choose to become competing 

consolidators may switch to getting 

consolidated market data products from 

a competing consolidator. This could 

have two effects: The competition could 

lead to lower prices and higher quality 

in the market data aggregator business, 

but it could also lead to fewer market 

data aggregators if the competition from 

the consolidated market data system 

makes it no longer viable for some 

market data aggregators to offer their 

services to market participants who still 

wish to use proprietary data feeds.2472

The latter could lead to higher prices in 

the market data aggregator space.2473 In 

addition, some of these market data 

aggregators may choose to become 

competing consolidators, which could 

have two effects: It could cause market 

data aggregators to leave the proprietary 

feed aggregation space thereby reducing 

the competition in that space, or it 

could cause market data aggregators to 

use the economies of scale and the 

additional profits they may derive from 

being a competing consolidator to 

improve their offerings as a market data 

aggregator of proprietary feeds. 

Depending on which effect dominates, 

competition in the market data 

aggregator space could increase or 

decrease, which in turn could lead to 

lower or higher prices, respectively. The 

Commission recognizes that subjecting 

competing consolidators that fall above 

the market data revenue threshold to the 

requirements of Regulation SCI could 

diminish the ability of market data 

aggregators who become SCI competing 

consolidators to compete in the market 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18803 

2474See supra Section III.F. 

2475See supra Section V.C.2(e)(ii). 

2476See supra Section V.C.4(b). 

2477See supra Sections V.B.3(e), V.C.4(b). 

2478See supra Section V.C.4(a). One commenter 

stated that it was ‘‘not clear how such competition 

could occur, given that the Proposal is to authorize 

the NMS Plan to set all fees, including fees for 

proprietary data products, which contain core 

data.’’ See Nasdaq Letter IV at 48. The amendments 

do not authorize the effective national market 

system plan(s) to set fees for proprietary data 

products, but instead for the data content 

underlying consolidated market data. 

2479 In addition to adjusting fees, SROs could also 

redesign their proprietary market data product lines 

to try and increase revenue. However, it is possible 

that demand for these new products would not be 

sufficient to offset the decline in revenues from 

proprietary market data. 

2480See supra Section V.C.4(a). 

2481See supra Section V.B.3(b). 

2482See, e.g., Nasdaq Letter IV at 4. 

2483See supra Section V.C.4(a) for additional 

discussion of the potential for trading fees to 

increase. 

2484See NYSE Letter II at 22. 

2485See Proposing Release, 85 FR at 16860. 

2486See NYSE Letter II ant 22. 

2487See Proposing Release, 85 FR at 16860. 

2488See Nasdaq Letter IV at 50. 

2489See Proposing Release, 85 FR at 16860. 

data aggregator space.2474 If a market 

data aggregator becomes an SCI 

competing consolidator, the 

requirements of being an SCI entity 

could also extend to their aggregation of 

proprietary market data.2475 These 

requirements could raise their costs, 

which could reduce their ability to 

compete with other market data 

aggregators that are not competing 

consolidators. 

Fourth, the Commission expects that 

the expanded content and reduced 

latency of core market data provided by 

this final rule may increase competition 

in the broker-dealer business by 

improving the ability of some brokerdealers who currently access core data 

to execute orders.2476 It is the 

Commission’s understanding that some 

broker-dealers that do not subscribe to 

all of the current proprietary DOB feeds 

rely solely on the exclusive SIPs today 

and that this makes them uncompetitive 

in the market for offering execution 

services to the most transaction-costsensitive market participants. The new 

decentralized consolidation model with 

expanded core data will reduce the 

latency and expand the information 

delivered to broker-dealers who 

subscribe to core data, possibly without 

raising data prices. This in turn would 

allow broker-dealers that subscribe to 

consolidated data to improve their order 

execution services and compete more 

effectively with broker-dealers who 

subscribe to proprietary DOB feeds. This 

will lead to greater competition between 

broker-dealers, which could benefit 

investors by resulting in lower prices for 

and higher quality of broker-dealer 

execution services.2477

Fifth, the Commission believes that 

the final rule could affect competition 

between exchanges. As discussed above, 

the final enhancements to core data 

could increase competition between 

consolidated market data and 

proprietary data feeds, which could lead 

to exchanges charging lower fees for 

proprietary market data.2478 If these 

lower fees do not result in more 

subscribers to proprietary market data, it 

would lead to a decline in revenues 

from proprietary market data for 

SROs.2479 Additionally, the 

amendments could affect competition in 

the market for exchange data 

connectivity. If some current subscribers 

to proprietary market data decide to 

only receive consolidated market data 

products from competing consolidators, 

they could also reduce the exchange 

connectivity services that they currently 

use. In turn, this could reduce the 

revenue that some exchanges earn from 

connectivity services. Additionally, new 

connectivity fees may be proposed for 

core data use cases, which could 

potentially increase or decrease the 

revenue exchanges earn from 

connectivity.2480 It is the Commission’s 

understanding that revenues from 

proprietary market data and 

connectivity services are a substantial 

portion of overall revenues for many 

exchanges.2481 It is also the case that 

changes to the fees set by the effective 

national market system plan(s) for 

consolidated market data may result in 

lower revenues redistributed back to the 

exchanges, further contributing to a loss 

of revenue. It is possible that an 

exchange group could close some or all 

of its exchanges if the revenues from 

consolidated market data did not 

increase and revenues from proprietary 

market data and connectivity services 

were to decline to a level that a given 

exchange or exchange group is no longer 

able to cover operating expenses. The 

Commission is unable to quantify the 

likelihood that an exchange will cease 

operating because it would depend on 

the fees and revenue allocation for 

consolidated market data. However, the 

Commission believes that it is unlikely 

exchanges will be forced to leave the 

market. 

Even if an exchange were to exit, the 

Commission does not believe this would 

significantly impact competition in the 

market for trading services because the 

market is served by multiple 

competitors, including off-exchange 

trading venues. Consequently, if an 

exchange were to exit the market, 

demand is likely to be swiftly met by 

existing competitors. The Commission 

recognizes that small exchanges may 

have unique business models that are 

not currently offered by competitors, but 

the Commission believes a competitor 

could create similar business models if 

demand were adequate, and if they did 

not do so, it seems likely new entrants 

would do so if demand were sufficient. 

One commenter stated that exchanges 

might be forced to increase fees for 

trading services in order to offset losses 

that might result from changes to core 

data fees.2482 The Commission does not 

believe that the final amendments are 

likely to result in an increase in trading 

service fees, because losing revenue 

does not necessarily make it optimal for 

a firm to increase its fees. The 

Commission has discussed this point in 

the context of lost revenue specifically 

in proprietary data fees above,2483 and 

believes that the same logic applies to 

the case of lost revenue from changes to 

core data fees as well. 

A commenter stated that the 

Commission did not consider the 

impact of ‘‘changes to market data fees’’ 

on SRO funding.2484 The Commission 

acknowledges that if NMS data plan fees 

change such that revenue to SROs 

decline, then this could be an additional 

source of revenue loss to SROs from this 

rule. This would be in addition to the 

loss in proprietary data and connectivity 

discussed here, and the Commission 

believes the above discussion of the 

consequences of such losses, which was 

included in the Proposing Release,2485

adequately analyzes the potential effects 

of SROs losing revenue, including from 

effective national market system plan 

data revenue. Furthermore, in response 

to this commenter’s concern that the 

Commission does not recognize that 

there will be a ‘‘reduction in funding 

from proprietary feeds,’’ 2486 this 

discussion of the effect of the loss of 

proprietary data revenue above, which 

was included in the Proposing 

Release,2487 analyzes such possibilities 

and their effects. 

A commenter stated that the 

Commission failed to consider the 

possibility that SROs would be unable 

to perform their regulatory 

responsibilities if they were to lose 

revenue as a result of these final 

amendments.2488 The Commission 

believes that this possibility is covered 

in the above discussion, which was 

included in the Proposing Release,2489

through the discussion of the potential 

for exchanges to exit. 

Sixth, the Commission believes that 

the final rule will affect competition 

18804 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2490 In this context the term traders could refer to 

either proprietary traders executing orders on their 

own behalf or broker-dealers executing orders on 

behalf of their customers. 

2491Traders who currently subscribe to 

proprietary DOB feeds may also subscribe to the 

exclusive SIPs as part of their backup systems. 

However, the Commission believes that these 

traders primarily rely on proprietary DOB feeds 

when making trading decisions because proprietary 

DOB feeds contain more information and have 

lower latency than the exclusive SIPs. For 

additional details and discussion about methods of 

market data access, see supra Section V.B.2(c). 

2492See supra Section V.C.4(a). 

2493See supra Section V.C.2(c). 

2494 Id. 

2495Broker-dealer subscribers could potentially 

pass along the cost savings from the reduction in 

off-exchange trading venue fees to investors either 

directly, if they reduced fees for investors who were 

clients of the broker-dealer, or indirectly, if they 

reduced fees for institutional clients, such as 

mutual funds, who, in turn, passed along the cost 

savings to their end investors. 

2496See supra Sections V.C.1(b), V.C.1(c), V.D.1. 

2497See supra Section V.D.1. 

2498See supra Sections V.C.1(b), V.C.1(c), V.D.1. 

2499See Yakov Amihud and Haim Mendelson, 

Asset Pricing and the Bid—Ask Spread, 17 J. Fin. 

Econ. 223 (1986). 

2500See supra Section II.F.1. 

2501See supra Section II.D. 

between traders.2490 The Commission 

believes that traders will be affected 

differently based on the type of market 

data they use when making trading 

decisions. For the purposes of this 

discussion, traders who subscribe to 

different types of market data can 

broadly be grouped into three 

categories: (1) Traders who use 

proprietary DOB feeds received directly 

from the SROs and self-aggregate, (2) 

traders who use market data aggregators 

to aggregate proprietary DOB feeds, and 

(3) traders who use core data (currently 

from the exclusive SIPs and, under the 

final rule, competing consolidators).2491

The Commission believes that under the 

final rule the core data would be of 

higher quality, and thus the value to 

traders from acquiring proprietary DOB 

data would decrease.2492 As a result, it 

might be harder for traders who use 

proprietary DOB feeds (both selfaggregators and traders who use market 

data aggregators) to generate profits and 

the competition between those traders 

would increase. For traders who use 

core data, the Commission believes that 

the competition between those traders 

will increase because the final 

amendments will reduce the latency 

and expand the information included in 

core data, which will allow those 

traders to devise better trading strategies 

with bigger profit potential. The 

Commission believes that the most 

substantial change in competition will 

occur between traders who use 

proprietary DOB feeds (both selfaggregators and traders who use market 

data aggregators) and traders who use 

core data. As described, the final rule 

expands the information and reduces 

the latency of core data, thereby closing 

the gap between core data and 

proprietary DOB feeds. This will allow 

traders who use core data to compete on 

a more level playing field with traders 

who use proprietary DOB feeds. This 

will lead to a transfer of profits from 

traders who use proprietary DOB feeds 

to traders who use consolidated market 

data. 

Seventh, the Commission believes 

that the rule changes will affect 

competition between off-exchange 

trading venues and exchanges in the 

market for trading services. As 

discussed above, the Commission 

believes that the amendments will 

reduce the latency of core data.2493 This 

could improve the competitive positions 

of some off-exchange trading venues in 

the market for trading services. Offexchange trading venues that currently 

rely on the exclusive SIPs to calculate 

the NBBO will benefit from the latency 

reductions in the distribution of core 

data provided by the competing 

consolidators.2494 These venues will 

now receive a more timely view of the 

NBBO, which could improve the 

execution quality of trades that take 

place on these venues. This could make 

them more attractive venues to trade on 

and they could attract more order flow, 

from both exchanges and other offexchange venues. Off-exchange trading 

venues that currently subscribe to 

proprietary data feeds could also see 

their competitive positions improve. If 

the new core data represents an 

alternative to the proprietary data feeds 

for their order executions, they could 

substitute core data for proprietary data, 

which could lower their costs. Offexchange trading venues might be able 

to pass along these cost reductions as 

reduced fees to subscribers, which 

could improve their competitive 

position relative to exchanges and other 

off-exchange trading venues. Reductions 

in the fees charged by these offexchange trading venues could in turn 

potentially benefit investors if brokerdealers who subscribe to these venues 

passed along these cost savings by, in 

turn, reducing their fees.2495

3. Capital Formation 

The Commission believes the final 

rule will have a modest impact on 

capital formation. However, the 

Commission is unable to quantify the 

effects on capital formation because, as 

discussed above, it is unable to quantify 

the additional gains from trade and the 

effects of improvements in order routing 

that may be realized from the rule.2496

However, in the section below the 

Commission provides a qualitative 

description of the effects it believes the 

rule will have on capital formation. 

As discussed above, the Commission 

believes that the addition of information 

about odd-lot quotes, depth of book, and 

auction information to core data may 

result in more voluntary trades 

occurring between market participants, 

which could lead to more efficient gains 

from trade.2497 Improved gains from 

trade may result in a more efficient 

allocation of capital, which would 

improve capital formation. 

Additionally, the Commission 

believes that the final amendments will 

improve order execution for market 

participants who currently rely upon 

SIP data, which may lower their 

transaction costs.2498 Lower transaction 

costs could reduce firms’ cost of raising 

capital.2499 This, in turn could improve 

capital formation. 

E. Alternatives 

The Commission considered potential 

alternatives to the adopted rules that 

broadly fall into two categories: 

Introduce the decentralized 

consolidation model and make 

alternative changes to the core data 

definition, and maintain the new core 

data definition in the adopted rules and 

consider alternative models of SIP 

competition. 

1. Introduce Decentralized 

Consolidation Model With Addition of 

Full Depth of Book to Core Data 

Definition 

The Commission considered an 

alternative that would introduce the 

decentralized consolidation model and 

expand core data more than the adopted 

rules to include information on 

quotations and aggregate size at all 

prices in the limit order book (‘‘full 

depth of book’’), including information 

on aggregated odd-lot sizes at each 

depth of book level, instead of the depth 

of book information contained in the 

adopted rule, i.e., five round lot price 

levels from the NBBO.2500 Under this 

alternative, the definition of a round lot 

would remain the same as in the 

adopted rules, which means the costs 

and benefits associated with the changes 

in the round lot definition, including 

changes in the NBBO would be similar 

to the adopted rule.2501

Relative to the adopted rule, full 

depth of book information would 

provide market participants who 

currently do not access proprietary DOB 

feeds, as well as market participants 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18805 

2502This alternative could increase costs relative 

to the adopted rule for market participants that 

access full depth of book information and execute 

trading that earn profits at the expense of other 

market participants who do not access this 

information. As discussed above, this cost would 

represent a partial transfer from traders who 

currently have access to depth of book to those who 

do not. See supra Section V.C.1(c)(iv). 

2503See Proposing Release, 85 FR at n. 284–85. 

2504See supra Section V.C.1(c)(ii). 

2505 Including full depth of book information in 

core data would not make it a perfect substitute for 

all proprietary DOB feeds. For example, some 

proprietary DOB feeds contain more detailed 

information than full depth of information, such as 

messages on individual orders. 

2506See supra Section V.C.2(b). 

2507More broadly, this could have differential 

effects between exchanges who derive significant 

revenue from proprietary data feeds and those who 

derive significant revenue primarily from SIP 

revenue. These effects would also depend on the 

effective national market system plan(s) fees for 

consolidated market data offerings as well as their 

method for allocating revenue received from 

consolidated market data among the SROs. See 

supra Section V.C.4(a). 

2508See supra Section V.C.2(d). 

2509See also Proposing Release, 85 FR at Section 

IV.C.2 for a discussion about a single SIP 

alternative. 

2510See Proposing Release, 85 FR at Section 

IV.C.1(a). 

2511Several commenters agreed. See, e.g., NYSE 

Letter II at 26; Nasdaq IV Letter at 36, 49; Cboe 

Letter at 25 for a discussion on the advantages of 

the distributed SIP alternative and how the 

commenters believe the Commission did not 

properly consider it. 

2512See supra Section V.C.2(c). See also 

Proposing Release, 85 FR at Section IV.C.1. 

2513One commenter agreed. See MEMX Letter at 

8. See also supra Sections V.C.2, V.D.2. 

who currently access proprietary DOB 

feeds and would have switched to using 

consolidated market data under the 

adopted rule, with additional 

information on liquidity provision 

across more price levels. To the extent 

that these market participants can 

utilize full depth of book information, 

the Commission believes that this 

alternative could result in increased 

benefits to such market participants 

relative to the adopted rule.2502 Certain 

commenters on the Roundtable stated 

that without full depth of book 

information, broker-dealers may not be 

able to provide best execution to their 

clients,2503 indicating that full depth of 

book information would provide 

valuable information to market 

participants. However, as discussed 

above, the Commission believes that the 

marginal benefit of including additional 

information on price levels further away 

from the best quotes may decrease as the 

price level moves away from the best 

quote because orders at these price 

levels are less likely to execute.2504

Relative to the adopted rules, the 

inclusion of full depth of book 

information in core data would increase 

the ability of market participants to use 

it as a substitute for proprietary DOB 

feeds.2505 Currently, market participants 

interested in full depth of book data rely 

on proprietary DOB feeds offered by 

exchanges, which provide varying 

degrees of the depth of book 

information. To the extent that there are 

market participants who utilize full 

depth of book information via 

proprietary DOB feeds in trading, this 

alternative could increase the benefits 

for some of these market participants 

relative to the adopted rules by 

potentially reducing their data costs if 

they would switch to using core data 

under this alternative but would not 

have done so under the adopted rules. 

Subscribers of proprietary DOB feeds 

would realize these cost savings if they 

switched to receiving consolidated 

market data through a competing 

consolidator product or if they 

registered as a self-aggregator.2506

The Commission believes that the 

alternative to include full depth of the 

book in core data would result in greater 

costs for exchanges than would the 

adopted rules. To the extent that the 

alternative results in fewer market 

participants subscribing to proprietary 

DOB data or purchasing connectivity 

services from the exchanges than under 

the adopted rules, exchanges’ business 

for their proprietary feeds and 

connectivity services could be less 

profitable.2507 Additionally, to the 

extent that not all exchanges sell full 

depth of book, certain exchanges would 

incur additional costs to set up systems 

and produce full depth of book 

information to be included in the core 

data. However, the Commission is 

unable to quantify this cost because it 

lacks information on the modifications 

exchanges would need to make to their 

systems in order to provide full depth 

of book information. 

Compared to the adopted 

amendments, this alternative could 

result in additional costs for competing 

consolidators to create infrastructure 

and expand capacity to distribute full 

depth of book information.2508 The costs 

are likely to vary substantially according 

to the existing infrastructure of the 

entity seeking to be a competing 

consolidator. The Commission believes 

that these incremental costs for market 

data aggregators and existing exclusive 

SIPs will be small, because they already 

work with proprietary DOB data. 

Additionally, including full depth of 

book information would require market 

participants who subscribed to core data 

and wished to receive the additional 

depth of book information to make more 

extensive upgrades to their systems than 

under the adopted rules. However, the 

Commission is unable to estimate the 

associated costs because it does not 

have access to information about the 

infrastructure expenses a market 

participant incurs to process market 

data and because of the likelihood that 

such costs vary substantially according 

to the existing infrastructure of the 

market participant. To the extent that 

some market participants who subscribe 

to the exclusive SIPs do not need full 

depth of book information, they would 

not need to expand their own 

proprietary technology or that of a thirdparty vendor to process the full depth of 

the book data. Therefore, this alternative 

would not result in additional costs for 

these market participants compared to 

the adopted rules. 

2. Introduce Changes in Core Data and 

Introduce a Distributed SIP Model 

The Commission considered an 

alternative that would expand the core 

data as proposed and would introduce 

a distributed SIP model whereby the 

current exclusive SIP processors would 

establish multiple instances of their 

systems in multiple data centers.2509 As 

the Roundtable panelists 2510 stated this 

alternative would achieve a similar 

reduction in exclusive SIP geographic 

latency to the adopted rule by allowing 

firms to consume data under the current 

structure without making any changes 

or to consume data at the nearest 

exclusive SIP instance depending on the 

firms’ latency concerns.2511 However, 

this alternative would still provide 

exclusive rights to one operator to 

provide exclusive SIP services for a 

given tape. 

The Commission believes that this 

alternative would produce lower 

benefits compared to the decentralized 

consolidation model.2512 The 

Commission believes that under this 

alternative, the exclusive SIPs would 

not be subject to the same competitive 

forces that competing consolidators may 

be subject to under the decentralized 

consolidation model.2513 This lack of 

competition would reduce the 

incentives to innovate and would not 

improve efficiency or reduce the 

transmission and aggregation latencies 

of core data as much as the proposal. If 

core data does not achieve the same 

overall latency reduction as under the 

adopted rule, then market participants 

would be less likely to substitute using 

core data for proprietary data than they 

would be under the adopted rule. This 

could mean that the potential decline in 

profits from exchanges’ proprietary data 

18806 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2514See supra Section V.C.4(a). 

2515See supra Section V.C.2(d). 

2516See supra Section V.B.2. 

2517See supra Section V.C.2(c). 

2518See Nasdaq Letter IV at 45. 

2519See, e.g., Cboe Letter at 25; Nasdaq Letter IV 

at 36; Data Boiler Letter I at 66–67. 

2520See supra Section V.C.2(c)(iv) for a 

discussion on the resiliency benefits of the 

decentralized consolidation model. 

2521See, e.g., Clearpool Letter at 4; ACS Execution 

Services Letter at 5–6. 

2522See Clearpool Letter at 4. 

2523See supra Section V.C.2(b). 

2524See supra Section V.C.2(a). 

2525One commenter preferred a similar 

alternative to the proposed requirement that all 

competing consolidators be SCI entities. This 

commenter believed that even if a firm’s systems 

met the standards of Regulation SCI, demonstrating 

compliance with Regulation SCI would be costly 

and overly burdensome and act as a barrier to entry 

for firms seeking to become competing 

consolidators. See ACTIV Financial Letter at 2. As 

discussed above, the Commission agrees that the 

costs of Regulation SCI would serve as a barrier to 

entry to new competing consolidators. As discussed 

above, the Commission has adopted Rule 614(d)(9) 

that will apply to all competing consolidators 

during the initial one year transition period and 

competing consolidators below a threshold 

thereafter. The Commission believes that Rule 

614(d)(9) will be less costly than Regulation SCI 

and will lower the barriers to entry for new 

competing consolidators. See supra Section III.F 

and Section V.C.2(e)(i). 

2526Under this alternative, the Commission 

would also exempt competing consolidators 

affiliated with exchanges from the requirements of 

Regulation SCI if they complied with the provisions 

of Rule 614(d)(9), so they would not face higher 

regulatory burdens and be placed at a competitive 

disadvantage relative to competing consolidators 

that are not affiliated with exchanges. 

2527See supra Section V.C.2(e)(i). 

2528For example, under this alternative, larger 

competing consolidators would not have the 

requirements to have geographically diverse backup and recovery capabilities. See supra Sections 

III.F and V.C.2(e)(i). 

fees may not be as large as they would 

be under the proposal.2514

Under this alternative, the exclusive 

SIPs would still need to make upgrades 

to their systems to account for the 

expansion of core data and would still 

need to install systems in multiple data 

centers. The Commission believes that 

the costs of these SIP system upgrades 

would be similar to those under the 

adopted rule for the exclusive SIPs that 

registers to become a competing 

consolidator.2515 However, under this 

alternative, market participants may 

experience higher costs to access 

consolidated market data compared to 

the adopted rule. Instead of having the 

option to receive all consolidated 

market data from one competing 

consolidator, as they would under the 

adopted rule, market participants would 

still need to receive data from both 

exclusive SIP plan processors.2516 This 

means that under this alternative, the 

total price market participants would 

pay to access consolidated market data 

may be greater than under the adopted 

rule because it would include the costs 

of the two plan processors to aggregate 

and transmit the data. Under the 

adopted rule, the total price market 

participants would pay to receive 

consolidated market data may only 

include the costs of one processor, 

because market participants would have 

the option to receive all of their 

consolidated market data products from 

one competing consolidator.2517

One commenter stated that the 

Commission relies on a limited set of 

information when examining potential 

solutions to the latency differential 

between the proprietary and SIP data 

feeds and ‘‘does not consider any other 

approaches to resolving its latency 

concerns.’’ 2518 Commenters also 

emphasized that a distributed SIP 

alternative would introduce much less 

regulatory disruption and would create 

a more resilient market than the one 

with competing consolidators.2519 The 

Commission disagrees with the first 

comment because the Commission 

considered a Distributed SIP alternative 

in its Proposing Release. However, as 

mentioned above, the Commission 

believes this alternative would produce 

lower benefits compared to the 

decentralized consolidation model 

because it lacks the competitive 

incentives achieved in the decentralized 

consolidation model. Additionally, the 

Commission disagrees with the second 

comment and believes that the 

decentralized consolidation model will 

increase market resiliency, as discussed 

above.2520

3. Require Competing Consolidators’ 

Fees Be Subject to the Commission’s 

Approval 

The Commission considered an 

alternative to the decentralized 

consolidation model that would require 

competing consolidators’ fees to be 

subject to the Commission’s regulatory 

approval. Some commenters supported 

this alternative 2521 and one commenter 

stated its recommendation ‘‘that the 

Commission should scrutinize 

competing consolidator fees, and fee 

changes, in a manner similar to the 

process for review and approval of 

proposed rule changes currently filed by 

SROs.’’ 2522

The Commission believes that, 

relative to the adopted rule, this 

alternative would potentially reduce the 

risk and uncertainty surrounding the 

total price of consolidated market data. 

This alternative would provide for 

Commission review and approval of the 

fees of competing consolidators. 

Therefore, compared to the 

amendments, this alternative could 

reduce the risk that market participants 

are exposed to unreasonably high fees, 

which could reduce the risk that some 

market participants or data vendors 

would no longer provide services in the 

equity market because the price of 

consolidated market data products 

becomes too high.2523

The Commission believes, however, 

that this alternative would impose 

additional regulatory burdens on the 

competing consolidator business 

compared to the adopted rule, and may 

inhibit competing consolidators from 

being able to respond effectively and 

quickly to free market forces. These 

burdens would reduce the incentive for 

firms to become competing 

consolidators and lead to less robust 

competition in the decentralized 

consolidation model than under the 

adopted rule.2524 With less competitive 

forces to discipline competing 

consolidators’ service fees, competing 

consolidators would have less incentive 

to innovate in their consolidating 

business. Moreover, less competing 

consolidators in the market would 

reduce the extent to which the pricing 

is based on market forces. Finally, the 

Commission believes that under the 

amendments, there will be a 

competitive market for consolidated 

market data products with several 

competing consolidators operating. 

Thus, competitive forces will constrain 

the prices competing consolidators can 

charge without the need to impose 

additional regulatory burdens on the 

competing consolidator business. 

4. Do Not Extend Regulation SCI To 

Include Competing Consolidators 

The Commission considered an 

alternative that would not extend 

Regulation SCI to include SCI 

competing consolidators.2525 Under this 

alternative, there would be no SCI 

competing consolidators and the 

Commission would have required all 

competing consolidators to be subject to 

the provisions of Rule 614(d)(9).2526 The 

Commission believes that this 

alternative would reduce some of the 

benefits as well as some of the costs 

compared to the adopted rules.2527

The Commission believes that this 

alternative could result in larger 

competing consolidators, that would 

have met the threshold for SCI 

competing consolidators under the 

adopted rules, producing systems that 

would be less secure and resilient than 

they would be under the adopted rules 

because they would not be subject to all 

of the requirements of being an SCI 

competing consolidator.2528 If these 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18807 

2529 Id. 

2530See supra Section V.C.3(a). 

2531See supra Section V.C.2(e)(ii). 

2532See id. 

2533See supra Section V.C.2(a)(ii). 

2534One commenter stated that an XBRL 

requirement would be acceptable, as would the 

proposed EFFS filing location. See Data Boiler 

Letter I at 96 (‘‘We are good with XBRL if that is 

needed.’’) and 50 (‘‘EFFS is fine, no further 

comment.’’). 

2535The Commission estimates that 3 of the 

estimated 8 competing consolidators that will be 

subject to Form CC filing requirements under Rule 

614(a)(1) under the adopted rules are already SCI 

entities. See supra Section IV.G.3. These entities 

currently use EFFS to file Form SCI. 

2536See supra Section III.C.7(b). 

2537One commenter expressed that XBRL would 

be acceptable, but also stated that website 

publication would be acceptable. See Data Boiler 

Letter I at 96 (‘‘We are good with XBRL if that is 

needed.’’) and 53 (‘‘We are okay with the publishing 

requirement.’’). 

2538See supra Section III.C.8(c). 

competing consolidators produce less 

secure and resilient systems compared 

to if they were SCI competing 

consolidators, then there could be a 

greater risk of more market disruptions 

due to systems issues in competing 

consolidators compared to the adopted 

rules.2529 Additionally, if one of these 

competing consolidators does 

experience a systems issue, it could 

result in more severe and longer 

disruptions compared to the adopted 

rules. However, the increase in 

competing consolidator systems issues 

compared to the adopted rules may not 

be significant. Under this alternative, 

competing consolidators would still be 

subject to the requirements of Rule 

614(d)(9) and would need to establish 

policies and procedures to ensure that 

their systems have levels of capacity, 

integrity, resiliency, availability, and 

security adequate to maintain 

operational capability. They would also 

still need to post information on 

systems issues on their websites as well 

as monthly reports containing statistics 

on their capacity and systems 

availability.2530 This would place 

competitive pressure on competing 

consolidators to ensure that their 

systems are reliable and resilient. 

Otherwise, they could lose subscribers 

to competing consolidators that had 

more reliable and resilient systems. 

The Commission believes that this 

alternative would result in lower costs 

for larger competing consolidators 

compared to the adopted rule. Under 

this alternative, these competing 

consolidators would not incur the costs 

that are associated with being an SCI 

competing consolidator that are 

discussed above.2531 Instead, these 

competing consolidators would have to 

bear the lower costs associated with 

Rule 614(d)(9).2532

The Commission believes that these 

lower costs could result in more firms 

becoming competing consolidators and 

could increase competition in the 

competing consolidator market 

compared to the adopted rules. 

Although, under the adopted rules, 

competing consolidators will initially be 

subject to the lower costs of Rule 

614(d)(9), the Commission believes that 

many competing consolidators will 

eventually meet the market data revenue 

threshold for SCI competing 

consolidators and be subject to the 

higher costs associated with Regulation 

SCI. The lower costs under this 

alternative may result in more firms 

becoming competing consolidators 

compared to the adopted rules, which 

could increase competition. An increase 

in competition may increase the benefits 

from the decentralized consolidation 

model. However, these effects may not 

be significant because the Commission 

believes that the risk under the adopted 

rules that the anticipated benefits of the 

decentralized consolidation model will 

not materialize because of insufficient 

competition among competing 

consolidators is low.2533 To the extent 

these effects do occur, it could lower the 

costs and increase the speed and quality 

of consolidated market data products 

compared to the adopted rule. This, in 

turn, could make consolidated market 

data products a more viable substitute 

for proprietary data feeds and result in 

greater competition between 

consolidated market data and 

proprietary data feeds compared to the 

adopted rules. 

5. Require Competing Consolidators To 

Submit Form CC in the EDGAR System 

Using the Inline XBRL Format 

The Commission considered the 

alternative of requiring competing 

consolidators to submit Form CC using 

the Commission’s EDGAR system and 

using the Inline XBRL format.2534

Relative to the adopted rules, these 

requirements could benefit market 

participants by facilitating retrieval, 

aggregation, and comparison of 

disclosed information across competing 

consolidators. The requirements could 

also allow a competing consolidator to 

efficiently benchmark key aspects of its 

operations (e.g., operational capabilities 

or fee structures) against the rest of the 

potential competing consolidator 

population. 

However, many potential competing 

consolidators may not be familiar with 

Inline XBRL and thus could incur 

increased costs if they were required to 

learn Inline XBRL and apply Inline 

XBRL tags to their Form CC disclosures, 

compared to the adopted rules’ 

requirement to submit Form CC and 

various exhibits through EFFS—a 

system with which some of the 

competing consolidators subject to Form 

CC filing requirements may already be 

familiar.2535 For the reasons discussed 

above, the Commission is requiring 

Form CC to be filed through EFFS.2536

6. Require Competing Consolidators To 

Submit Monthly Disclosures in the 

EDGAR System Using the Inline XBRL 

Format 

The Commission considered the 

alternative of requiring competing 

consolidators to submit their monthly 

performance metrics and operational 

information using the Commission’s 

EDGAR system and using the Inline 

XBRL format.2537 Relative to the 

adopted rules, this alternative could 

benefit market participants by having 

the monthly information of each 

competing consolidator in a centralized 

location. Additionally, the alternative 

could facilitate retrieval, aggregation, 

and comparison of disclosed 

information across competing 

consolidators and time periods. 

However, competing consolidators 

would incur increased costs to file the 

information with the Commission 

compared to the adopted rules’ 

requirement to post the monthly 

information on the competing 

consolidator’s website without a format 

requirement. The difference in costs 

would likely vary across competing 

consolidators, depending on the systems 

and processes they currently have in 

place, such as for internal reporting, 

posting of website updates, and 

submission of regulatory filings, and the 

manner in which competing 

consolidators currently maintain data 

required for the additional disclosures. 

In addition, similar to submitting Form 

CC information on EDGAR using the 

Inline XBRL format, competing 

consolidators would be required to 

incur the additional costs of learning 

Inline XBRL under the alternative when 

compared to the adopted rules. For the 

reasons discussed above, the 

Commission is requiring monthly 

disclosures to be posted on competing 

consolidator websites without a format 

requirement.2538

7. Prescribing the Format of NMS 

Information 

The Commission considered an 

alternative in which it would prescribe 

a single format that SROs would use to 

provide NMS information to competing 

18808 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

2539See Proposing Release, 85 FR at n. 428. 

2540See supra Section V.B.2(b). 

2541See Proposing Release, 85 FR at Sections 

III.C, III.D. 

2542See supra Section V.C.2(c). 2543 5 U.S.C. 601 et seq. 2544 5 U.S.C. 603(a). 2545 5 U.S.C. 551 et seq. 

2546Although Section 601(b) of the RFA defines 

the term ‘‘small entity,’’ the statute permits agencies 

to formulate their own definitions. The Commission 

has adopted definitions for the term ‘‘small entity’’ 

for purposes of Commission rulemaking in 

accordance with the RFA. Those definitions, as 

relevant to this proposed rulemaking, are set forth 

in 17 CFR 240.0–10 (Rule 0–10). 

2547See 5 U.S.C. 605(b). 

2548See 17 CFR 240.0–10(e). Paragraph (e) of Rule 

0–10 states that the term ‘‘small business,’’ when 

referring to an exchange, means any exchange that 

has been exempted from the reporting requirements 

of Rule 601 of Regulation NMS, 17 CFR 242.601, 

and is not affiliated with any person (other than a 

natural person) that is not a small business or small 

organization as defined in Rule 0–10. Under this 

standard, none of the exchanges subject to the 

amendments to Rule 600 or 603(b) or to Rule 614 

are ‘‘small entities’’ for the purposes of the RFA. 

See Proposing Release, 85 FR at n. 1219. 

2549See, e.g., Securities Exchange Act Release No. 

62174 (May 26, 2010), 75 FR 32556, 32605 n. 416 

(June 8, 2010) (‘‘FINRA is not a small entity as 

defined by 13 CFR 121.201.’’). 

2550See supra note 2546. 

2551 17 CFR 240.0–10(g). 

consolidators and self-aggregators. Each 

SRO would still be required to make all 

methods of access available to 

competing consolidators and selfaggregators as such SRO makes available 

to any other person.2539 Each SRO 

would still be able to offer proprietary 

data products in other formats. 

By prescribing the format, the 

Commission could better ensure 

consistency of the data. Compared to the 

adopted rule, a standard format could 

reduce the costs for competing 

consolidators and self-aggregators to 

aggregate the data to create consolidated 

market data. However, the Commission 

believes that these costs may not be 

significantly reduced. As discussed 

above, the SROs currently use a variety 

of formats for their proprietary data 

feeds and some broker-dealers, market 

data aggregators, and the exclusive SIPs 

are already adept and experienced in 

aggregating and normalizing the data 

across different formats.2540 Therefore, 

some potential competing consolidators 

and self-aggregators may not experience 

significant cost reductions relative to 

the adopted rule if the Commission 

required that SROs provide NMS 

information in a prescribed format. 

Requiring a single format for SROs to 

deliver NMS information to competing 

consolidators and self-aggregators 

would also increase the costs to SRO’s 

compared to the adopted rule. SROs 

would incur a greater cost to conform 

their existing data to a format they do 

not already use. It could also increase 

the costs of exchanges making future 

changes to their data because they may 

need to make alterations to both their 

proprietary data products and to data in 

the standard format they would supply 

to competing consolidators and selfaggregators, assuming the changes 

would need to be included in 

consolidated market data. Additionally, 

compared to the adopted rule, this 

increased cost could reduce the 

likelihood that the effective national 

market systems plan(s) for NMS stocks 

or SROs introduce additional elements 

into consolidated data in the future.2541

Requiring the SROs to deliver data to 

competing consolidators and selfaggregators in a single format could also 

impact the latency between 

consolidated market data and aggregated 

proprietary DOB feeds. On one hand, 

receiving all of the data in a single 

format should expedite the aggregation 

and normalization process for 

consolidated data. This could 

potentially reduce the latency 

differential between consolidated 

market data and aggregated proprietary 

data feeds compared to the adopted 

rule. However, it is possible that the 

format of certain proprietary data feeds 

may allow for faster aggregation initially 

than the single format specified by the 

Commission because of certain SROs’ 

existing familiarity with its format. If 

this occurred, it could increase the 

latency differential compared to the 

amendments. 

In addition, if the SROs are required 

to transform their existing data to a 

different format, it could hinder the 

timeliness of the data competing 

consolidators receive compared to data 

delivered via the proprietary feeds. Any 

changes in the timeliness with which 

the competing consolidators receive the 

data or any difference in latency 

between consolidated core data and 

proprietary data feeds would affect the 

viability of consolidated core data as a 

substitute for proprietary data feeds and 

affect many of the benefits of the 

decentralized consolidation model.2542

If the latency differential is reduced, 

more market participants may substitute 

consolidated market data for proprietary 

data feeds and the benefits of the 

decentralized consolidation model 

could increase compared to the 

amendments. If competing consolidators 

receive less timely data or the latency 

differential increases, fewer market 

participants would switch to 

consolidated market data and the 

benefits would be smaller than under 

the adopted rule. 

VI. Regulatory Flexibility Certification 

The Regulatory Flexibility Act 

(‘‘RFA’’) 2543 requires Federal agencies, 

in promulgating rules, to consider the 

impact of those rules on small entities. 

Section 603(a) 2544 of the Administrative 

Procedure Act,2545 as amended by the 

RFA, generally requires the Commission 

to undertake a regulatory flexibility 

analysis of all proposed rules to 

determine the impact of such 

rulemaking on ‘‘small entities.’’ 2546

Section 605(b) of the RFA states that 

this requirement shall not apply to any 

proposed rule or proposed rule 

amendment which, if adopted, would 

not have a significant economic impact 

on a substantial number of small 

entities. The Commission certified in 

the Proposing Release, pursuant to 

Section 605(b) of the RFA, that the 

proposed rules would not, if adopted, 

have a significant economic impact on 

a substantial number of small 

entities.2547 The Commission received 

no comments on this certification. 

The amendments to Rules 600 and 

603 and the new Rule 614 apply to 

national securities exchanges registered 

with the Commission under Section 6 of 

the Exchange Act, national securities 

associations registered with the 

Commission under Section 15A of the 

Exchange Act, and competing 

consolidators. None of the exchanges 

registered under Section 6 that will be 

subject to the proposed amendments are 

‘‘small entities’’ for the purposes of the 

RFA.2548 There is only one national 

securities association, and the 

Commission has previously stated that 

it is not a small entity as defined by 13 

CFR 121.201.2549 For purposes of the 

Commission rulemaking in connection 

with the RFA2550 as it relates to 

competing consolidators, a small entity 

includes a SIP that (1) Had gross 

revenues of less than $10 million during 

the preceding fiscal year (or in the time 

it has been in business, if shorter); (2) 

Provided service to fewer than 100 

interrogation devices or moving tickers 

at all times during the preceding fiscal 

year (or in the time that it has been in 

business, if shorter); and (3) Is not 

affiliated with any person (other than a 

natural person) that is not a small 

business or small organization under 

this section.2551

Based on the Commission’s 

information about the 10 potential 

entities the Commission estimates may 

become competing consolidators, the 

Commission believes that all such 

entities will exceed the thresholds 

defining ‘‘small entities’’ set out above. 

Competing consolidators will be 

participating in a sophisticated business 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18809 

2552See supra note 1491 and accompanying text. 

2553See supra note 1526 and accompanying text. 

2554 5 U.S.C. 801 et seq. 

that requires significant resources to 

compete effectively. For example, as 

noted above, the Commission estimates 

that new entrants to the competing 

consolidator market—entities without 

prior experience in the business of 

collecting, consolidating, and 

disseminating market data—will incur 

initial startup costs of $2,683,000,2552

and each competing consolidator will 

incur total ongoing annual costs of 

$5,141,895 per entity.2553 While other 

competing consolidators may emerge 

and seek to register as competing 

consolidators with the Commission, the 

Commission does not believe that any 

such entities would be ‘‘small entities’’ 

as defined in 17 CFR 240.0–10(g). 

Accordingly, the Commission believes 

that any such registered competing 

consolidators will exceed the thresholds 

for ‘‘small entities’’ set forth in 17 CFR 

240.0–10. 

For the reasons described above, the 

Commission certifies that the 

amendments to Rules 600 and 603 and 

the new Rule 614 will not have a 

significant economic impact on a 

substantial number of small entities. 

VII. Other Matters 

Pursuant to the Congressional Review 

Act,2554 the Office of Information and 

Regulatory Affairs has designated these 

rules as a ‘‘major rule,’’ as defined by 5 

U.S.C. 804(2). If any of the provisions of 

these final rules, or the application 

thereof to any person or circumstance, 

is held to be invalid, such invalidity 

shall not affect other provisions or 

application of such provisions to other 

persons or circumstances that can be 

given effect without the invalid 

provision or application. 

VIII. Statutory Authority 

Pursuant to the Exchange Act, and 

particularly Sections 3(b), 5, 6, 11A, 15, 

17, and 23(a) thereof, 15 U.S.C. 78c, 78e, 

78f, 78k–1, 78o, 78q, and 78w(a), the 

Commission is amending §§ 240.3a51–1, 

240.13h–1, 242.105, 242.201, 242.204, 

242.600, 242.602, 242.603, 242.611, and 

242.1000 of chapter II of title 17 of the 

Code of Federal Regulations and adopts 

Rule 614, as set forth below. 

List of Subjects 

17 CFR Part 240 

Brokers, Dealers, Registration, 

Securities. 

17 CFR Parts 242 and 249 

Brokers, Reporting and recordkeeping 

requirements, Securities. 

Text of the Amendments 

For the reasons stated in the 

preamble, the Commission is amending 

title 17, chapter II of the Code of Federal 

Regulations as follows: 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 1. The authority citation for part 240 

continues to read in part as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 

78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 

78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 78q, 

78q–1, 78s, 78u–5, 78w, 78x, 78dd, 78ll, 

78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b– 

3, 80b–4, 80b–11, and 7201 et seq., and 8302; 

7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 

U.S.C. 1350; Pub. L. 111–203, 939A, 124 Stat. 

1376 (2010); and Pub. L. 112–106, sec. 503 

and 602, 126 Stat. 326 (2012), unless 

otherwise noted. 

* * * * * 

§ 240.3a51–1 [Amended] 

■ 2. Amend § 240.3a51–1 by, in 

paragraph (a) introductory text, 

removing the text ‘‘§ 242.600(b)(48)’’ 

and adding in its place ‘‘§ 242.600(b)(55) 

of this chapter’’. 

§ 240.13h–l [Redesignated as § 240.13h–1 

and Amended] 

■ 3. Section 240.13h–l is redesignated 

as § 240.13h–1 and amended in 

paragraph (a)(5) by removing the text 

‘‘Section 242.600(b)(47)’’ and adding in 

its place ‘‘§ 242.600(b)(54)’’. 

PART 242—REGULATIONS M, SHO, 

ATS, AC, NMS, AND SBSR AND 

CUSTOMER MARGIN REQUIREMENTS 

FOR SECURITY FUTURES 

■ 4. The authority citation for part 242 

continues to read as follows: 

Authority: 15 U.S.C. 77g, 77q(a), 77s(a), 

78b, 78c, 78g(c)(2), 78i(a), 78j, 78k–1(c), 78l, 

78m, 78n, 78o(b), 78o(c), 78o(g), 78q(a), 

78q(b), 78q(h), 78w(a), 78dd–1, 78mm, 80a– 

23, 80a–29, and 80a–37. 

§ 242.105 [Amended] 

■ 5. Amend § 242.105 by: 

■ a. In paragraph (b)(1)(i)(C), removing 

the text ‘‘§ 242.600(b)(23)’’ and adding 

in its place ‘‘§ 242.600(b)(30)’’; and 

■ b. In paragraph (b)(1)(ii), removing the 

text ‘‘§ 242.600(b)(68)’’ and adding in its 

place ‘‘§ 242.600(b)(77)’’. 

§ 242.201 [Amended] 

■ 6. Amend § 242.201 by: 

■ a. In paragraph (a)(1), removing the 

text ‘‘§ 242.600(b)(48)’’ and adding in its 

place ‘‘§ 242.600(b)(55)’’; 

■ b. In paragraph (a)(2), removing the 

text ‘‘§ 242.600(b)(23)’’ and adding in its 

place ‘‘§ 242.600(b)(30)’’; 

■ c. In paragraph (a)(3), removing the 

text ‘‘the term ‘‘listing market’’ as 

defined in the effective transaction 

reporting plan for the covered security’’ 

and adding in its place ‘‘the term 

‘‘primary listing exchange’’ as defined 

in § 242.600(b)(68)’’; 

■ d. In paragraph (a)(4), removing the 

text ‘‘§ 242.600(b)(43)’’ and adding in its 

place ‘‘§ 242.600(b)(50)’’; 

■ e. In paragraph (a)(5), removing the 

text ‘‘§ 242.600(b)(51)’’ and adding in its 

place ‘‘§ 242.600(b)(58)’’; 

■ f. In paragraph (a)(6), removing the 

text ‘‘§ 242.600(b)(59)’’ and adding in its 

place ‘‘§ 242.600(b)(67)’’; 

■ g. In paragraph (a)(7), removing the 

text ‘‘§ 242.600(b)(68)’’ and adding in its 

place ‘‘§ 242.600(b)(77)’’; 

■ h. In paragraph (a)(9), removing the 

text ‘‘§ 242.600(b)(82)’’ and adding in its 

place ‘‘§ 242.600(b)(95)’’; 

■ i. In paragraph (b)(1)(ii), removing the 

text ‘‘by a plan processor’’; and 

■ j. In paragraph (b)(3): 

■ i. Removing the text ‘‘notify the single 

plan processor responsible for 

consolidation of information for the 

covered security pursuant to 

§ 242.603(b)’’ and adding in its place 

‘‘make such information available as 

provided in § 242.603(b)’’. 

■ ii. Removing the last sentence of the 

paragraph. 

§ 242.204 [Amended] 

■ 7. In § 242.204, paragraph (g)(2) is 

amended by removing the text 

‘‘§ 600(b)(68) of Regulation NMS (17 

CFR 242.600(b)(68))’’ and adding in its 

place ‘‘§ 242.600(b)(77) (Rule 600(b)(77) 

of Regulation NMS)’’. 

■ 8. Amend § 242.600 by: 

■ a. Redesignating paragraphs (b)(73) 

through (87) as paragraphs (b)(86) 

through (100); 

■ b. Adding new paragraph (b)(85); 

■ c. Redesignating paragraph (b)(72) as 

paragraph (b)(84); 

■ d. Adding new paragraphs (b)(82) and 

(83); 

■ e. Redesignating paragraphs (b)(69) 

through (71) as paragraphs (b)(79) 

through (81); 

■ f. Adding new paragraph (b)(78); 

■ g. Redesignating paragraphs (b)(60) 

through (68) as paragraphs (b)(69) 

through (77); 

■ h. Revising newly redesignated 

paragraph (b)(70); 

■ i. Adding new paragraph (b)(68); 

■ j. Redesignating paragraphs (b)(52) 

through (59) as paragraphs (b)(60) 

through (67); 

■ k. Adding new paragraph (b)(59); 

18810 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

■ l. Redesignating paragraphs (b)(20) 

through (51) as paragraphs (b)(27) 

through (58); 

■ m. Revising newly redesignated 

paragraph (b)(50); 

■ n. Adding new paragraph (b)(26); 

■ o. Redesignating paragraphs (b)(16) 

through (19) as paragraphs (b)(22) 

through (25); 

■ p. Adding new paragraphs (b)(19), 

(20), and (21); 

■ q. Redesignating paragraphs (b)(14) 

and (15) as paragraphs (b)(17) and (18); 

■ r. Adding new paragraph (b)(16); 

■ s. Redesignating paragraphs (b)(4) 

through (13) as paragraphs (b)(6) 

through (15); 

■ t. Adding new paragraph (b)(5); 

■ u. Redesignating paragraphs (b)(2) and 

(3) as paragraphs (b)(3) and (4); and 

■ v. Adding new paragraph (b)(2). 

The additions and revisions read as 

follows: 

§ 242.600 NMS security designation and 

definitions. 

(b) * * * 

(2) Administrative data means 

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 

§ 242.603(b) or the technical 

specifications thereto as of April 9, 

2021. 

* * * * * 

(5) Auction information means 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 

auctions, including opening, reopening, 

and closing auctions, and publicly 

disseminated during the time periods 

and at the time intervals provided in 

such rules and plans. 

* * * * * 

(16) Competing consolidator means a 

securities information processor 

required to be registered pursuant to 

§ 242.614 (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 a consolidated market data 

product for dissemination to any 

person. 

* * * * * 

(19) Consolidated market data means 

the following data, consolidated across 

all national securities exchanges and 

national securities associations: 

(i) Core data; 

(ii) Regulatory data; 

(iii) Administrative data; 

(iv) Self-regulatory organizationspecific program data; and 

(v) Additional regulatory, 

administrative, or self-regulatory 

organization-specific program data 

elements defined as such pursuant to 

the effective national market system 

plan or plans required under 

§ 242.603(b). 

(20) Consolidated market data 

product means any data product 

developed by a competing consolidator 

that contains consolidated market data 

or data components of consolidated 

market data. For purposes of this 

paragraph (b)(20), data components of 

consolidated market data include the 

enumerated elements, and any 

subcomponent of the enumerated 

elements, of consolidated market data in 

paragraph (b)(19) of this section. All 

consolidated market data products must 

reflect data consolidated across all 

national securities exchanges and 

national securities associations. 

(21) Core data means: 

(i) The following information with 

respect to quotations for, and 

transactions in, NMS stocks: 

(A) Quotation sizes; 

(B) Aggregate quotation sizes; 

(C) Best bid and best offer; 

(D) National best bid and national best 

offer; 

(E) Protected bid and protected offer; 

(F) Transaction reports; 

(G) Last sale data; 

(H) Odd-lot information; 

(I) Depth of book data; and 

(J) Auction information. 

(ii) For purposes of the calculation 

and dissemination of core data by 

competing consolidators, as defined in 

paragraph (b)(16) of this section, and the 

calculation of core data by selfaggregators, as defined in paragraph 

(b)(84) of this section, the best bid and 

best offer, national best bid and national 

best offer, protected bid and protected 

offer, and depth of book data shall 

include odd-lots that when aggregated 

are equal to or greater than a round lot; 

such aggregation shall occur across 

multiple prices and shall be 

disseminated at the least aggressive 

price of all such aggregated odd-lots. 

(iii) Competing consolidators shall 

represent the quotation sizes of the 

following data elements, if disseminated 

in a consolidated market data product as 

defined in paragraph (b)(20) of this 

section, as the number of shares 

rounded down to the nearest multiple of 

a round lot: The best bid and best offer, 

national best bid and national best offer, 

protected bid and protected offer, depth 

of book data, and auction information. 

(iv) Competing consolidators shall 

attribute the following data elements, if 

disseminated in a consolidated market 

data product as defined in paragraph 

(b)(20) of this section, to the national 

securities exchange or national 

securities association that is the source 

of each such data element: Best bid and 

best offer, national best bid and national 

best offer, protected bid and protected 

offer, transaction reports, last sale data, 

odd-lot information, depth of book data, 

and auction information. 

* * * * * 

(26) Depth of book data means all 

quotation sizes at each national 

securities exchange and on a facility of 

a national securities association at each 

of the next five prices at which there is 

a bid that is lower than the national best 

bid and offer that is higher than the 

national best offer. For these five prices, 

the aggregate size available at each 

price, if any, at each national securities 

exchange and national securities 

association shall be attributed to such 

exchange or association. 

* * * * * 

(50) National best bid and national 

best offer means, with respect to 

quotations for an NMS stock, the best 

bid and best offer for such stock that are 

calculated and disseminated on a 

current and continuing basis by a 

competing consolidator or calculated by 

a self-aggregator and, for NMS securities 

other than NMS stocks, 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; provided, 

that in the event two or more market 

centers transmit to the plan processor, a 

competing consolidator or a selfaggregator identical bids or offers for an 

NMS security, the best bid or best offer 

(as the case may be) shall be determined 

by ranking all such identical bids or 

offers (as the case may be) 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). 

* * * * * 

(59) Odd-lot information means: 

(i) Odd-lot transaction data 

disseminated pursuant to the effective 

national market system plan or plans 

required under § 242.603(b) as of April 

9, 2021; and 

(ii) Odd-lots at a price greater than or 

equal to the national best bid and less 

than or equal to the national best offer, 

aggregated at each price level at each 

national securities exchange and 

national securities association. 

* * * * * 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18811 

(68) Primary listing exchange means, 

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). 

* * * * * 

(70) Protected bid or protected offer 

means a quotation in an NMS stock that: 

(i) Is displayed by an automated 

trading center; 

(ii) Is disseminated pursuant to an 

effective national market system plan; 

and 

(iii) Is an automated quotation that is 

the best bid or best offer of a national 

securities exchange, or the best bid or 

best offer of a national securities 

association. 

* * * * * 

(78) Regulatory data means: 

(i) 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 § 242.603(b), 

including, at a minimum: 

(A) Information regarding Short Sale 

Circuit Breakers pursuant to § 242.201; 

(B) Information regarding Price Bands 

required pursuant to the Plan to 

Address Extraordinary Market Volatility 

(LULD Plan); 

(C) Information relating to regulatory 

halts or trading pauses (news 

dissemination/pending, LULD, MarketWide Circuit Breakers) 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. 

(ii) 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 selfaggregators pursuant to the effective 

national market system plan or plans 

required under § 242.603(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. 

(iii) For purposes of paragraph 

(b)(78)(i)(C) of this section, 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 selfregulatory organization rules related to 

Market-Wide Circuit Breakers, has 

occurred, and immediately inform the 

other primary listing exchanges of all 

such declines. 

* * * * * 

(82) Round lot means: 

(i) For any NMS stock for which the 

prior calendar month’s average closing 

price on the primary listing exchange 

was $250.00 or less per share, an order 

for the purchase or sale of an NMS stock 

of 100 shares; 

(ii) For any NMS stock for which the 

prior calendar month’s average closing 

price on the primary listing exchange 

was $250.01 to $1,000.00 per share, an 

order for the purchase or sale of an NMS 

stock of 40 shares; 

(iii) For any NMS stock for which the 

prior calendar month’s average closing 

price on the primary listing exchange 

was $1,000.01 to $10,000.00 per share, 

an order for the purchase or sale of an 

NMS stock of 10 shares; 

(iv) For any NMS stock for which the 

prior calendar month’s average closing 

price on the primary listing exchange 

was $10,000.01 or more per share, an 

order for the purchase or sale of an NMS 

stock of 1 share; and 

(v) For any NMS stock for which the 

prior calendar month’s average closing 

price is not available, an order for the 

purchase or sale of an NMS stock of 100 

shares. 

(83) Self-aggregator means a broker, 

dealer, national securities exchange, 

national securities association, or 

investment adviser registered with the 

Commission that receives information 

with respect to quotations for and 

transactions in NMS stocks, including 

all data necessary to generate 

consolidated market data, and generates 

consolidated market data solely for 

internal use. A self-aggregator may make 

consolidated market data available to its 

affiliates that are registered with the 

Commission for their internal use. 

Except as provided in the preceding 

sentence, a self-aggregator may not 

disseminate or otherwise make available 

consolidated market data, or 

components of consolidated market 

data, as provided in paragraph (b)(20) of 

this section, to any person. 

* * * * * 

(85) Self-regulatory organizationspecific program data means: 

(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 § 242.603(b) as of April 

9, 2021; and 

(ii) Other self-regulatory organizationspecific information with respect to 

quotations for or transactions in NMS 

stocks as specified by the effective 

national market system plan or plans 

required under § 242.603(b). 

* * * * * 

§ 242.602 [Amended] 

■ 9. Amend § 242.602 by: 

■ a. In paragraph (a)(5)(i), removing the 

text ‘‘§ 242.600(b)(77)’’ and adding in its 

place ‘‘§ 242.600(b)(90)’’ and 

■ b. In paragraph (a)(5)(ii), removing the 

text ‘‘§ 242.600(b)(77)’’ and adding in its 

place ‘‘§ 242.600(b)(90)’’. 

■ 10. Amend § 242.603 by revising 

paragraph (b) to read as follows: 

§ 242.603 Distribution, consolidation, and 

display of information with respect to 

quotations for and transactions in NMS 

stocks. 

* * * * * 

(b) Dissemination of information. 

Every national securities exchange on 

which an NMS stock is traded and 

national securities association shall act 

jointly pursuant to one or more effective 

national market system plans for the 

dissemination of consolidated market 

data. Every national securities exchange 

on which an NMS stock is traded and 

national securities association shall 

make available to all competing 

consolidators and self-aggregators its 

information with respect to quotations 

for and transactions in NMS stocks, 

including all data necessary to generate 

consolidated market data, in the same 

manner and using the same methods, 

including all methods of access and the 

same format, as such national securities 

exchange or national securities 

association makes available any 

information with respect to quotations 

for and transactions in NMS stocks to 

any person. 

* * * * * 

§ 242.611 [Amended] 

■ 11. Amend § 242.611 by, in paragraph 

(c), removing the text ‘‘§ 242.600(b)(31)’’ 

and adding in its place 

‘‘§ 242.600(b)(38)’’. 

■ 12. Add § 242.614 to read as follows: 

§ 242.614 Registration and responsibilities 

of competing consolidators. 

(a) Competing consolidator 

registration—(1) Initial Form CC—(i) 

Filing and effectiveness requirement. No 

person, other than a national securities 

exchange or a national securities 

association: 

18812 Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 

(A) May receive directly, pursuant to 

an effective national market system 

plan, from a national securities 

exchange or national securities 

association information with respect to 

quotations for and transactions in NMS 

stocks; and 

(B) Generate a consolidated market 

data product for dissemination to any 

person unless the person files with the 

Commission an initial Form CC and the 

initial Form CC has become effective 

pursuant to paragraph (a)(1)(v) of this 

section. 

(ii) Electronic filing and submission. 

Any reports to the Commission required 

under this section shall be filed 

electronically on Form CC (17 CFR 

249.1002), include all information as 

prescribed in Form CC and the 

instructions thereto, and contain an 

electronic signature as defined in 

§ 240.19b–4(j) of this chapter. 

(iii) Commission review period. The 

Commission may, by order, as provided 

in paragraph (a)(1)(v)(B) of this section, 

declare an initial Form CC filed by a 

competing consolidator ineffective no 

later than 90 calendar days from the 

date of filing with the Commission. 

(iv) Withdrawal of initial Form CC 

due to inaccurate or incomplete 

disclosures. During the review by the 

Commission of the initial Form CC, if 

any information disclosed in the initial 

Form CC is or becomes inaccurate or 

incomplete, the competing consolidator 

shall promptly withdraw the initial 

Form CC and may refile an initial Form 

CC pursuant to paragraph (a)(1) of this 

section. 

(v) Effectiveness; ineffectiveness 

determination. (A) An initial Form CC 

filed by a competing consolidator will 

become effective, unless declared 

ineffective, no later than the expiration 

of the review period provided in 

paragraph (a)(1)(iii) of this section and 

publication pursuant to paragraph 

(b)(2)(i) of this section. 

(B) The Commission shall, by order, 

declare an initial Form CC ineffective 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. If the Commission declares an 

initial Form CC ineffective, the 

competing consolidator shall be 

prohibited from operating as a 

competing consolidator. An initial Form 

CC declared ineffective does not prevent 

the competing consolidator from 

subsequently filing a new Form CC. 

(2) Form CC amendments. A 

competing consolidator shall amend a 

Form CC: 

(i) Prior to the implementation of a 

material change to the pricing, 

connectivity, or products offered 

(‘‘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’’). 

(3) Notice of cessation. A competing 

consolidator shall notice its cessation of 

operations on Form CC at least 90 

calendar days prior to the date the 

competing consolidator will cease to 

operate as a competing consolidator. 

The notice of cessation shall cause the 

Form CC to become ineffective on the 

date designated by the competing 

consolidator. 

(4) Date of filing. For purposes of 

filings made pursuant to this section: 

(i) The term business day shall have 

the same meaning as defined in 

§ 240.19b–4(b)(2) of this chapter. 

(ii) If the conditions of this section 

and Form CC are otherwise satisfied, all 

filings submitted electronically on or 

before 5:30 p.m. Eastern Standard Time 

or Eastern Daylight Saving Time, 

whichever is currently in effect, on a 

business day, shall be deemed filed on 

that business day, and all filings 

submitted after 5:30 p.m. Eastern 

Standard Time or Eastern Daylight 

Saving Time, whichever is currently in 

effect, shall be deemed filed on the next 

business day. 

(b) Public disclosures. (1) Every Form 

CC filed pursuant to this section shall 

constitute a ‘‘report’’ within the 

meaning of sections 11A, 17(a), 18(a), 

and 32(a) of the Act (15 U.S.C. 78k–1, 

78q(a), 78r(a), and 78ff(a)), and any 

other applicable provisions of the Act. 

(2) The Commission will make public 

via posting on the Commission’s 

website: 

(i) Identification of each competing 

consolidator that has filed an initial 

Form CC with the Commission and the 

date of filing; 

(ii) Each effective initial Form CC, as 

amended; 

(iii) Each order of ineffective initial 

Form CC; 

(iv) Each Form CC amendment. The 

Commission will make public the 

entirety of any Form CC amendment no 

later than 30 calendar days from the 

date of filing thereof with the 

Commission; and 

(v) Each notice of cessation. 

(c) Posting of hyperlink to the 

Commission’s website. Each competing 

consolidator shall make public via 

posting on its website a direct URL 

hyperlink to the Commission’s website 

that contains the documents 

enumerated in paragraphs (b)(2)(ii) 

through (v) of this section. 

(d) Responsibilities of competing 

consolidators. Each competing 

consolidator shall: 

(1) Collect from each national 

securities exchange and national 

securities association, either directly or 

indirectly, any information with respect 

to quotations for and transactions in 

NMS stocks as provided in § 242.603(b) 

that is necessary to create a consolidated 

market data product, as defined in 

§ 242.600(b)(20). 

(2) Calculate and generate a 

consolidated market data product, as 

defined in § 242.600(b)(20), from the 

information collected pursuant to 

paragraph (d)(1) of this section. 

(3) Make a consolidated market data 

product, as defined in § 242.600(b)(20), 

as timestamped as required by 

paragraph (d)(4) of this section and 

including the national securities 

exchange and national securities 

association data generation timestamp 

required to be provided by the national 

securities exchange and national 

securities association participants by 

paragraph (e)(2) of this section, available 

to subscribers on a consolidated basis 

on terms that are not unreasonably 

discriminatory. 

(4) Timestamp the information 

collected pursuant to paragraph (d)(1) of 

this section upon: 

(i) Receipt from each national 

securities exchange and national 

securities association; 

(ii) Receipt of such information at its 

aggregation mechanism; and 

(iii) Dissemination of a consolidated 

market data product to subscribers. 

(5) Within 15 calendar days after the 

end of each month, 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 

information in paragraphs (d)(5)(i) 

through (v) of this section. All 

information 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. 

(i) Capacity statistics; 

(ii) Message rate and total statistics; 

(iii) System availability; 

(iv) Network delay statistics; and 

(v) Latency statistics for the following, 

with distribution statistics up to the 

99.99th percentile: 

(A) When a national securities 

exchange or national securities 

association sends an inbound message 

to a competing consolidator network 

Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18813 

and when the competing consolidator 

network receives the inbound message; 

(B) When the competing consolidator 

network receives the inbound message 

and when the competing consolidator 

network sends the corresponding 

consolidated message to a subscriber; 

and 

(C) 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. 

(6) Within 15 calendar days after the 

end of each month, publish prominently 

on its website the information in 

paragraphs (d)(6)(i) through (v) of this 

section. All information 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. 

(i) Data quality issues; 

(ii) System issues; 

(iii) Any clock synchronization 

protocol utilized; 

(iv) For the clocks used to generate 

the timestamps described in paragraph 

(d)(4) of this section, the clock drift 

averages and peaks, and the number of 

instances of clock drift greater than 100 

microseconds; and 

(v) Vendor alerts. 

(7) 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. 

Competing consolidators shall keep all 

such documents for a period of no less 

than five years, the first two years in an 

easily accessible place. 

(8) 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. 

(9) Each competing consolidator that 

is not required to comply with the 

requirements of §§ 242.1000 through 

242.1007 regarding systems compliance 

and integrity (Regulation SCI) shall 

comply with the following: 

(i) Definitions. For purposes of this 

paragraph (d)(9), the following 

definitions shall apply: 

Systems disruption means an event in 

a competing consolidator’s systems 

involved in the collection and 

consolidation of consolidated market 

data, and dissemination of consolidated 

market data products, that disrupts, or 

significantly degrades, the normal 

operation of such systems. 

Systems intrusion means any 

unauthorized entry into a competing 

consolidator’s systems involved in the 

collection and consolidation of 

consolidated market data, and 

dissemination of consolidated market 

data products. 

(ii) Obligations relating to policies 

and procedures. (A)(1) Establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

ensure: That its systems involved in the 

collection and consolidation of 

consolidated market data, and 

dissemination of consolidated market 

data products have levels of capacity, 

integrity, resiliency, availability, and 

security adequate to maintain the 

competing consolidator’s operational 

capability and promote the maintenance 

of fair and orderly markets; and the 

prompt, accurate, and reliable 

dissemination of consolidated market 

data products. 

(2) Such policies and procedures shall 

be deemed to be reasonably designed if 

they are consistent with current 

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. Compliance 

with such current industry standards, 

however, shall not be the exclusive 

means to comply with the requirements 

of this paragraph (d)(9)(ii)(A); 

(B) Periodically review the 

effectiveness of the policies and 

procedures required by paragraph 

(d)(9)(ii)(A) of this section, and take 

prompt action to remedy deficiencies in 

such policies and procedures; and 

(C) Establish, maintain, and enforce 

reasonably designed written policies 

and procedures that include the criteria 

for identifying responsible personnel, 

the designation and documentation of 

responsible personnel, and escalation 

procedures to quickly inform 

responsible personnel of potential 

systems disruptions and systems 

intrusions; and periodically review the 

effectiveness of the policies and 

procedures, and take prompt action to 

remedy deficiencies. 

(iii) Systems disruptions or systems 

intrusions. (A) Upon responsible 

personnel having a reasonable basis to 

conclude that a systems disruption or 

systems intrusion has occurred, begin to 

take appropriate corrective action which 

shall include, at a minimum, mitigating 

potential harm to investors and market 

integrity resulting from the event and 

devoting adequate resources to remedy 

the event as soon as reasonably 

practicable. 

(B) Promptly upon responsible 

personnel having a reasonable basis to 

conclude that a systems disruption 

(other than a system disruption that has 

had, or the competing consolidator 

reasonably estimates would have, no or 

a de minimis impact on the competing 

consolidator’s operations or on market 

participants) has occurred, publicly 

disseminate information relating to the 

event (including the system(s) affected 

and a summary description); when 

known, promptly publicly disseminate 

additional information relating to the 

event (including a detailed description, 

an assessment of those potentially 

affected, a description of the progress of 

corrective action and when the event 

has been or is expected to be resolved); 

and until resolved, provide regular 

updates with respect to such 

information. 

(C) Concurrent with public 

dissemination of information relating to 

a systems disruption pursuant to 

paragraph (d)(9)(iii)(B) of this section, or 

promptly upon responsible personnel 

having a reasonable basis to conclude 

that a systems intrusion (other than a 

system intrusion that has had, or the 

competing consolidator reasonably 

estimates would have, no or a de 

minimis impact on the competing 

consolidator’s operations or on market 

participants) has occurred, provide the 

Commission notification and, until 

resolved, updates of such event. 

Notifications required pursuant to this 

paragraph (d)(9)(iii)(C) shall include 

information relating to the event 

(including the system(s) affected and a 

summary description); when known, 

additional information relating to the 

event (including a detailed description, 

an assessment of those potentially 

affected, a description of the progress of 

corrective action and when the event 

has been or is expected to be resolved); 

and until resolved, regular updates with 

respect to such information. 

Notifications relating to systems 

disruptions and systems intrusions 

pursuant to this paragraph (d)(9)(iii)(C) 

shall be submitted to the Commission 

on Form CC. 

(iv) Coordinated testing. Participate in 

the industry- or sector-wide coordinated 

testing of business recovery and disaster 

recovery plans required of SCI entities 

pursuant to § 242.1004(c). 

(e) Amendment of the effective 

national market system plan(s) for NMS 

stocks. The participants to the effective 

national market system plan(s) for NMS 

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stocks shall file with the Commission, 

pursuant to § 242.608, an amendment 

that includes the following provisions 

within 150 calendar days from June 8, 

2021: 

(1) Conforming the effective national 

market system plan(s) for NMS stocks to 

reflect provision of information with 

respect to quotations for and 

transactions in NMS stocks that is 

necessary to generate consolidated 

market data by the national securities 

exchange and national securities 

association participants to competing 

consolidators and self-aggregators; 

(2) The application of timestamps by 

the national securities exchange and 

national securities association 

participants on all information with 

respect to quotations for and 

transactions in NMS stocks that is 

necessary to generate consolidated 

market data, including the time that 

such information was generated as 

applicable by the national securities 

exchange or national securities 

association and the time the national 

securities exchange or national 

securities association made such 

information available to competing 

consolidators and self-aggregators; 

(3) Assessments of competing 

consolidator performance, including 

speed, reliability, and cost of data 

provision and the provision of an 

annual report of such assessment to the 

Commission, and the Commission will 

make the annual report publicly 

available on the Commission’s website; 

(4) The development, maintenance, 

and publication of a list that identifies 

the primary listing exchange for each 

NMS stock; and 

(5) The calculation and publication on 

a monthly basis of consolidated market 

data gross revenues for NMS stocks as 

specified by: 

(i) Listed on the New York Stock 

Exchange (NYSE); 

(ii) Listed on Nasdaq; and 

(iii) Listed on exchanges other than 

NYSE or Nasdaq. 

■ 13. Amend § 242.1000 by: 

■ a. In the definition of ‘‘Critical SCI 

systems,’’ removing the text 

‘‘consolidated market data’’ in 

paragraph (1)(v) and adding in its place 

‘‘market data by a plan processor’’. 

■ b. In the definition of ‘‘Plan 

processor,’’ removing the text 

‘‘§ 242.600(b)(59)’’ and adding in its 

place ‘‘§ 242.600(b)(67)’’. 

■ c. Adding in alphabetical order the 

definition of ‘‘SCI competing 

consolidator’’. 

■ d. In the definition of ‘‘SCI entity,’’ 

removing ‘‘or exempt clearing agency 

subject to ARP’’ and adding ‘‘exempt 

clearing agency subject to ARP, or SCI 

competing consolidator’’ in its place. 

The addition reads as follows: 

§ 242.1000 Definitions. 

* * * * * 

SCI competing consolidator means: 

(1) Any competing consolidator, as 

defined in § 242.600, which, during at 

least four of the preceding six calendar 

months, accounted for five percent (5%) 

or more of consolidated market data 

gross revenue paid to the effective 

national market system plan or plans 

required under § 242.603(b), for NMS 

stocks: 

(i) Listed on the New York Stock 

Exchange LLC; 

(ii) Listed on The Nasdaq Stock 

Market LLC; or 

(iii) Listed on exchanges other than 

the New York Stock Exchange LLC or 

The Nasdaq Stock Market LLC, as 

reported by such plan or plans pursuant 

to the terms thereof. 

(2) Provided, however, that such SCI 

competing consolidator shall not be 

required to comply with the 

requirements of this section and 

§§ 242.1001 through 242.1007 

(Regulation SCI) until six months after 

satisfying any of paragraph (1) of this 

definition, as applicable, for the first 

time; and 

(3) Provided, however, that such SCI 

competing consolidator shall not be 

required to comply with the 

requirements of Regulation SCI prior to 

one year after the compliance date for 

§ 242.614(d)(3). 

* * * * * 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 14. The general authority citation for 

part 249 continues to read in part as 

follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 1350; 

Sec. 953(b), Pub. L. 111–203, 124 Stat. 1904; 

Sec. 102(a)(3), Pub. L. 112–106, 126 Stat. 309 

(2012); Sec. 107, Pub. L. 112–106, 126 Stat. 

313 (2012), and Sec. 72001, Pub. L. 114–94, 

129 Stat. 1312 (2015), unless otherwise 

noted. 

* * * * * 

■ 15. Add § 249.1002 to read as follows: 

§ 249.1002 Form CC, for application for 

registration as a competing consolidator or 

to amend such an application or 

registration. 

This form shall be used for 

application for registration as a 

competing consolidator, pursuant to 

section 11A of the Securities Exchange 

Act of 1934 (15 U.S.C. 78k-1) and 

§ 242.614 of this chapter, or to amend 

such an application or registration. 

By the Commission. 

Dated: December 9, 2020. 

Vanessa A. Countryman, 

Secretary. 

Note: The form in the following appendix 

will not appear in the Code of Federal 

Regulations. 

Appendix A—Form CC 

BILLING CODE 8011–01–P 

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ER09AP21.001</GPH>

United States 

Securities and Exchange Commission 

Washington, DC 20549 

FORM CC 

INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACTS MAY 

CONSTITUTE CRIMINAL VIOLATIONS. 

Section I - Form Filing Information 

Page 1 of __ File No: FORMCC-[acronym]-YYYY-#### 

{Name of Competing Consolidator} is making the filing pursuant to Rule 614 under the 

Securities Exchange Act of 1934 

Submission Type (select one) 

□ Rule 614(a)(l) Initial Form CC 

□ Rule 614(a)(l)(iv) Withdrawal oflnitial Form CC 

□ Rule 614(a)(2)(i) Material Amendment 

□ Rule 614(a)(2)(ii) 

□ Rule 614(a)(3) 

Annual Report 

Notice of Cessation 

o Date competing consolidator will cease to operate (mm/dd/yyyy) 

D Rule 614(d)(9) System Disruption or System Intrusion Notification 

o Update to Prior Notification 

Section II - General Information 

□ Check Box if there is a change in information previously filed. 

1) Legal name of applicant: ___________________ _ 

2) DBA if operating under a different name than above: _________ _ 

3) Primary Street Address (Do not use a P.O. Box) 

4) Street: _________________________ _ 

5) City ____________ , State _____ Zip Code ___ _ 

6) Mailing Address: □ Same as above 

Street: ----------------------------

City _____________ , State _____ Zip Code ___ _ 

7) Business Telephone(###) __ -__ _ 

8) Provide the website URL of the registrant: __________ _ 

9) Is the applicant affiliated with a national securities exchange registered with the Commission (yes/no) 
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(a) If Yes, provide full name of the national securities exchange: __________ _ 

10) Is the applicant a broker-dealer or affiliated with a broker-dealer registered with the Commission 

(yes/no) 

(a) If yes, provide the full name of the registered broker-dealer as stated on Form BD: 

(b) SEC File No: ___ _ 

(c) CRDNo: ___ _ 

11) If applicant is a successor (within the definition of Rule 12b-2 under the Securities Exchange Act of 

1934) to a previously registered competing consolidator, please complete the following: 

(a) Date of Succession: mm/dd/yyyy 

(b) Full name/address of predecessor registrant: ___________ _ 

12) Legal Status (select one): 

a. Sole Proprietorship 

b. Corporation 

c. Partnership 

d. Limited Liability Company 

e. Other (Specify): _________ _ 

If other than a sole proprietor, please provide the following: 

f. Date entity obtained legal status(~, date of incorporation) (mm/dd/yyyy). 

g. State/country of formation: {pick list} 

h. Statute under which entity was organized _________ _ 

Section III: Business Organization 

□ All Exhibits-Consolidated Document Attachment: The competing consolidator may 

choose to provide a consolidated document containing all Exhibits or individual documents 

for each Exhibit. If providing individual documents, use the attachment buttons in the 

Exhibit Table. If providing a consolidated document, please use the attachment buttons here: 

13) Attach as Exhibit A to this application a list of any person as defined in Section 3 ( a )(9) 

of the Securities Exchange Act of 1934 (see also Section 3(a)(l9) of the Securities Exchange Act 

of 1934) who owns 10 percent or more of applicant's stock or who, either directly or indirectly, 

through agreement or otherwise, in any other manner, may control or direct the management or 
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ER09AP21.003</GPH>

policies of the competing consolidator. Include the full name and title of each such person and 

attach a copy of the agreement or, if there is none written, describe the agreement or basis upon 

which such person exercises or may exercise such control or direction. Alternatively, if 

applicant is a broker-dealer, or is affiliated with a broker-dealer, you may provide the Schedule 

A of Form BD relating to direct owners and executive officers. If the applicant is an affiliate of a 

national securities exchange, you may provide Exhibit K of Form 1 relating to owners, 

shareholders, or partners that are not also members of the exchange. 

□ In lieu of filing this Exhibit A (or providing Schedule A of Form BD or Exhibit K of Form 

1, whichever may be applicable), [ name of entity] certifies that the information 

requested under this Exhibit is available at the Internet website below and is accurate as 

of the date of this filing. URL ---------------------

14) Attach as Exhibit B to this application a list of the present officers, directors, governors 

( and, in the case of an applicant that is not a corporation, the members of all standing committees 

grouped by committee), or persons performing functions similar to any of the foregoing, of the 

competing consolidator. For each person provide (a) Name (last, first, middle); (b) Title (if any) 

and area of responsibility; ( c) Length of time each present officer, director, or governor has held 

the same office or position, and ( d) Any other business affiliations in the securities industry or 

securities information processing industry. Alternatively, if applicant is a broker-dealer, or is 

affiliated with a broker-dealer, you may provide the Schedule B of Form BD relating to indirect 

owners. If the applicant is an affiliate of a national securities exchange, you may provide Exhibit 

J of Form 1 relating to officers, governors, members of all standing committees, or persons 

performing similar functions. 

□ In lieu of filing this Exhibit B (or providing Schedule B of Form BD or Exhibit J 

of Form 1, whichever may be applicable), [ name of entity] certifies that the information 
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ER09AP21.004</GPH>

requested under this Exhibit is available at the Internet website below and is accurate as of 

the date of this filing. URL ___________________ _ 

15) Attach as Exhibit C to this application a narrative or graphic description of the 

organizational structure of the applicant. Note: If the securities information processing activities 

of the competing consolidator are conducted primarily by a division, subdivision, or other 

segregable entity within the applicant corporation or organization, describe the relationship of 

such division, subdivision, or other segregable entity within the overall organizational structure 

and attach as part of this Exhibit only such description as applies to the division, subdivision, or 

other segregable entity. 

16) Attach as Exhibit D to this application a list of all affiliates ( within the definition of Rule 

12b-2 under the Securities Exchange Act of 1934) of the competing consolidator and indicate the 

general nature of the affiliation. 

Section IV: Operational Capability 

17) Attach as Exhibit E to this application a narrative description of each consolidated 

market data product, service or function, including connectivity and delivery options for the 

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. 

Section V - Services and Fees 

18) Attach as Exhibit F to this application a description of all consolidated market data 

products that are provided to subscribers. 

19) Attach as Exhibit G to this application a description and identification of any fees or 

charges for use of the competing consolidator with respect to any consolidated market data 
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ER09AP21.005</GPH>

product services, including the types of fees(~, subscription, connectivity), the structure of the 

fee (~, fixed, variable), variables that impact the fees, pricing differentiation among the types 

of subscribers, and range of fees (high and low). 

20) Attach as Exhibit H to this application a description of any co-location and related 

services, the terms and conditions for co-location, connectivity, and related services, including 

connectivity and throughput options offered. Describe 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. 

21) Attach as Exhibit I to this application a narrative description, or the functional 

specifications, of each consolidated market data product service or function, including 

connectivity and delivery options for the subscribers. 

Section VI: Commission Notification of Systems Disruption or Systems Intrusion Events 

A. Notification Type(s) (select all that apply) 

□ Systems disruption 

□ Systems intrusion 

□ Confidential treatment is requested pursuant to Rule 24b-2(g). 

B. General Information Required for 614(d)(9) filings. 

1) Date/time systems disruption/systems intrusion event occurred: mm/dd/yyyy hh:mm am/pm 

2) Duration of: hh:mm, or days 

3) Please provide the date and time when a responsible personnel had reasonable basis to conclude 

the systems disruption/systems intrusion event occurred: 

mm/dd/yyyy hh:mm am/pm 

4) Has the systems disruption/systems intrusion event been resolved? yes/no 

a) If yes, provide date and time ofresolution: mm/dd/yyyy hh:mm am/pm 

5) Is the investigation of the event closed? yes/no 

(a) If yes, provide date of closure: mm/dd/yyyy 

6) Name(s) of system(s): 

C. Attach as Exhibit J to this filing all other information regarding the systems disruption or 

systems intrusion as required by Rule 614(d)(9). Information required pursuant to the rule 

regarding systems disruption and systems intrusion shall include information relating to the event 
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ER09AP21.006</GPH>

(including the system(s) affected and a summary description) and, when known, additional 

information relating to the event (including a detailed description, an assessment of those 

potentially affected, a description of the progress of corrective action and when the event has 

been or is expected to be resolved). 

Section VII: Contact Information 

Provide the following information of the contact employee at {the name of the competing 

consolidator} prepared to respond to questions for this submission: 

First Name: Last Name: 

Title: 

Email: Telephone: 

Section VIII: Signature Block and Consent to Service 

The {Entity Name} consents that service of any civil action brought by, or notice of any 

proceeding before, the SEC in connection with the competing consolidator's activities may be 

given by registered or certified mail or email to the competing consolidator's contact employee 

at the primary street address or email address, or mailing address if different, given in Section II 

above. The undersigned, being first duly sworn, deposes and says that he/she has executed this 

form on behalf of, and with the authority of, said competing consolidator. The undersigned and 

{Entity Name} represent that the information and statements contained herein, including 

exhibits, schedules, or other documents attached hereto, and other information filed herewith, all 

of which are made a part hereof, are current, true, and complete. 

Date { auto fill} 

By: -----------

(Digital signature) 

Form CC General Instructions: 

{Entity Name} 

Title -------------
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ER09AP21.007</GPH>

A. Use of the Form 

Form CC is the form a competing consolidator must file to notify the Securities and 

Exchange Commission ("SEC" or "Commission") of its activities pursuant to Rule 614 of 

Regulation NMS, §242.614 et seq. Filings submitted pursuant to Rule 614 shall be filed in an 

electronic format through an electronic form filing system ("EFFS"), a secure website operated 

by the Commission. Documents attached as exhibits filed through the EFFS system must be in a 

text-searchable format without the use of optical character recognition. If, however, a portion of 

a Form CC submission(~, an image or diagram) cannot be made available in a text-searchable 

format, such portion may be submitted in a non-text searchable format. 

B. Need for Careful Preparation of the Completed Form, Including Exhibits 

A competing consolidator must provide all of the information required by Form CC, 

including the exhibits, and must provide disclosure information that is accurate, current, and 

complete. The information in the exhibits must be provided in a clear and comprehensible 

manner. A filing that is incomplete or similarly deficient may be returned to the competing 

consolidator. Any filing so returned shall for all purposes be deemed not to have been filed with 

the Commission. See also Rule 0-3 under the Securities Exchange Act of 1934 (17 CFR 240.0-

3). 

C. When to Use the FORM CC 

Form CC is comprised of 6 types of submissions to the Commission required pursuant to 

Rule 614 of Regulation NMS. In filling out the Form CC, a competing consolidator shall select 

the type of filing and provide all information required by Rule 614 of Regulation NMS. The 

types of submissions are: 

1) Rule 614(a)(l) Initial Form CC: Prior to commencing operations, a competing 

consolidator shall file an initial Form CC and the initial Form CC must become 

effective. 
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2) Rule 614(a)(l)(iv) Withdrawal oflnitial Form CC. During the review by the 

Commission of the initial Form CC, if any information disclosed in the initial 

Form CC is or becomes inaccurate or incomplete, the competing consolidator 

shall promptly withdraw the initial Form CC and may refile an initial Form CC 

pursuant to paragraph (a)(l). 

3) Rule 614(a)(2)(i) Material Amendment: The competing consolidator shall file an 

amendment on Form CC prior to implementing a material change to the pricing, 

connectivity, or products offered of the competing consolidator. 

4) Rule 614(a)(2)(ii) Annual Report: The competing consolidator shall file an 

Annual Report on Form CC correcting any information contained in the initial 

Form CC or in any previously filed amendment that has been rendered inaccurate 

or incomplete for any reason, and that has not previously been reported to the 

SEC, no later than 30 calendar days after the end of each calendar year in which 

the competing consolidator has operated. Competing consolidators filing the 

Annual Report must file a complete form, including all pages and answers to all 

items, together with all exhibits. The competing consolidator must indicate which 

items have been amended since the last Annual Report. 

5) Rule 614(a)(3) Notice of Cessation: The competing consolidator shall file a 

notice of cessation of operations at least 90 calendar days prior to the date upon 

ceasing to operate as a competing consolidator. 

6) Rule 614(d)(9) Systems Disruption and System Intrusion Notification: Any 

competing consolidator that is not an SCI competing consolidator shall file 

notifications of systems disruption and system intrusion pursuant to Rule 

614(d)(9). 

D. Documents Comprising the Completed Form 
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ER09AP21.009</GPH>

The completed form filed with the Commission shall consist of Form CC, responses to all 

applicable items, and any exhibits required in connection with the filing. Each filing shall be 

marked on Form CC with the initials of the competing consolidator, the four-digit year, and the 

number of the filing for the year (~, F ormCC-acronym-YYYY-XXX). 

E. Contact Information; Signature; and Filing of Completed Form 

Each time a competing consolidator submits a filing to the Commission on Form CC, the 

competing consolidator must provide the contact information required by Section VI of Form 

CC. The contact employee must be authorized to receive all contact information, 

communications and mailings and must be responsible for disseminating that information within 

the competing consolidator's organization. 

In order to file Form CC through the EFFS, a competing consolidator must request access 

to the Commission's External Application Server. Initial requests will be received by contacting 

the Division of Trading & Markets at (202) 551-5777. An email will be sent to the requestor that 

will provide a link to a secure website where basic profile information will be requested. 

A duly authorized individual of the competing consolidator shall electronically sign the 

completed Form CC as indicated in Section VIII of the form. 

F. Paperwork Reduction Act Disclosure 

Form CC requires a competing consolidator subject to Rule 614 of Regulation NMS to 

provide the Commission with certain information regarding the operation of the competing 

consolidator, material and other changes to the operation of the competing consolidator, and 

notice upon ceasing operation of the competing consolidator. 

An agency may not conduct or sponsor, and a person is not required to respond to, a 

collection of information unless it displays a currently valid control number. Sections 3(b), 

1 lA(a), 1 lA(c), 15(c), 17(a), 23(a) and 36(a) authorize the Commission to collect information on 
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ER09AP21.010</GPH>

this Form CC from competing consolidators that are subject to Rule 614. See 15 U.S.C. 78c(b), 

78k-l(a), 78k-l(c), 78o(c), 78q(a), 78w(a) and 78mm(a). 

It is estimated that a competing consolidator will spend approximately 200.3 hours 

completing the initial operation report on Form CC, approximately 6.15 hours preparing each 

amendment to Form CC, and approximately two (2) hours preparing a cessation of operations 

report on Form CC. Any member of the public may direct to the Commission any comments 

concerning the accuracy of the burden estimate on the facing page of Form CC and any 

suggestions for reducing this burden. 

Form CC is designed to enable the Commission to determine whether a competing 

consolidator subject to Rule 614 of Regulation NMS is in compliance with Rule 614 and other 

Federal securities laws. It is mandatory that a competing consolidator subject to Rule 614 file an 

initial Form CC, file an amendment to Form CC prior to making a material change, file Annual 

Reports to Form CC to reflect changes not previously reported, and file notice on Form CC upon 

ceasing operation of the competing consolidator. It is mandatory that a competing consolidator 

that is not an SCI competing consolidator file with the Commission information pertaining to 

systems disruptions and system intrusions pursuant to Rule 614. 

All reports provided to the Commission on Form CC are subject to the provisions of the 

Freedom oflnformation Act, 5 U.S.C. 522 ("FOIA") and the Commission's rules thereunder (17 

CFR 200.80(b)(4)(iii)). 

This collection of information has been reviewed by the Office of Management and 

Budget ("OMB") in accordance with the clearance requirements of 44 U.S.C. 3507. The 

applicable Privacy Act system ofrecords is SEC-2 and the routine uses of the records are set 

forth at 40 FR 39255 (August 27, 1975) and 41 FR 5318 (February 5, 1976). 

G. Definitions 
Federal Register / Vol. 86, No. 67 / Friday, April 9, 2021 / Rules and Regulations 18825 

■ 16. Amend Form SCI (referenced in 

§ 249.1900) to read as follows: 

Note: The text of Form SCI does not, and 

the amendments will not, appear in the Code 

of Federal Regulations. 


ER09AP21.011</GPH> ER09AP21.012</GPH>

Unless the context requires otherwise, all terms used in this form have the same meaning 

as in the Securities Exchange Act of 1934, as amended, and in the rules and regulations of the 

Commission thereunder. 

United States 

Securities and Exchange Commission 

Washington, DC 20549 

Form SCI 

Page1of __ _ File No. SCI-{name}-YYYY-### 

SCI Notification and Reporting by: {SCI entity name} 

Pursuant to Rules 1002 and 1003 of Regulation SCI under the Securities Exchange Act of 1934 

□ Initial 

□ Withdrawal 

SECTION I: Rule 1002 - Commission Notification of SCI Event 

A. Submission Type (select one only) 

□ Rule 1002(b)(1) Initial Notification of SCI event 

□ Rule 1002(b)(2) Notification of SCI event 

□ Rule 1002(b)(3) Update of SCI event: #### 

□ Rule 1002(b)(4) Final Report of SCI Event 

□ Rule 1002(b)(4) Interim Status Report of SCI event 

If filing a Rule 1002(b)(1) or Rule 1002(b)(3) submission, please provide a brief description: 

B. SCI Event Type(s) (select all that apply) 

□ Systems compliance issue 

□ Systems disruption 

□ Systems intrusion 
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C. General Information Required for (b)(2) filings. 

1) Has the Commission previously been notified of the SCI event pursuant to 1002(b)(1)? yes/no 

2) Date/time SCI event occurred: mm/dd/yyyy hh:mm am/pm 

3) Duration of SCI event: hh:mm, or days 

4) Please provide the date and time when a responsible SCI personnel had reasonable basis to 

conclude the SCI event occurred: 

mm/dd/yyyy hh:mmam/pm 

5) Has the SCI event been resolved? yes/no 

a) If yes, provide date and time of resolution: mm/dd/yyyy 

6) Is the investigation of the SCI event closed? yes/no 

a) If yes, provide date of closure: mm/dd/yyyy 

hh:mmam/pm 

7) Estimated number of market participants potentially affected by the SCI event: #### 

8) Is the SCI event a major SCI event (as defined in Rule 1000)? yes/no 

D. Information about impacted systems: 

Name(s) ofsystem(s): 

Type(s) ofsystem(s) impacted by the SCI event (check all that apply): 

□ Trading 

□ Market data 

D Clearance and settlement 

D Market regulation 

□ Indirect SCI systems (please describe): 

D Order routing 

D Market surveillance 

Are any critical SCI systems impacted by the SCI event (check all that apply)? Yes/No 

1) Systems that directly support functionality relating to: 

□ Clearance and settlement systems of clearing agencies 

□ Openings, reopenings, and closings on the primary listing market 

□ Trading halts □ Initial public offerings 

□ The provision of market data by a plan processor □ Exclusively-listed securities 

2) □ Systems that provide 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 (please describe): 

SECTION II: Periodic Reporting (select one only) 

A. Quarterly Reports: For the quarter ended: mm/dd/yyyy 
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ER09AP21.014</GPH> ER09AP21.015</GPH>

□ Rule 1002(b)(5)(ii): Quarterly report of systems disruptions and systems intrusions with no or a 

de minimis impact. 

□ Rule 1003(a)(1): Quarterly report of material systems changes 

□ Rule 1003(a)(2): Supplemental report of material systems changes 

B. SCI Review Reports 

□ Rule 1003(b)(3): Report of SCI review, together with any response by senior management 

Date of completion of SCI review: mm/ dd/yyyy 

Date of submission of SCI review to senior management: mm/dd/yyyy 

SECTION III: Contact Information 

Provide the following information of the person at the {SCI entity name} prepared to respond to questions 

for this submission: 

First Name: 

Title: 

Email: 

Telephone: 

Additional Contacts (Optional) 

First Name: 

Title: 

Email: 

Telephone: 

First Name: 

Title: 

Email: 

Telephone: 

SECTION IV: Signature 

Last Name: 

Fax: 

Last Name: 

Fax: 

Last Name: 

Fax: 

Confidential treatment is requested pursuant to Rule 24b-2(g). Additionally, pursuant to the 

requirements of the Securities Exchange Act of 1934, {SCI Entity name} has duly caused this 

{notification}{report} to be signed on its behalf by the undersigned duly authorized officer: 

Date: 

By(Name) Title~----------~ 

"Digitally Sign and Lock Form" 
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Exhibit 1: 

Rule 1002(b)(2) 

Notification of SCI Event 

Add/Remove/View 

Exhibit 2: 

Rule 1002(b)(4) 

Final or Interim Report of SCI 

Event 

Add/Remove/View 

Exhibit 3: 

Rule 1002(b)(5)(ii) 

Quarterly Report of De 

Minimis SCI Events 

Add/Remove/View 

Exhibit 4: 

Rule 1003 (a) 

Quarterly Report of Systems 

Changes 

Add/Remove/View 

Exhibit 5: 

Rule 1003(b)(3) 

Report of SCI review 

Add/Remove/View 

Exhibit 6: 

Optional Attachments 

Add/Remove/View 

Within 24 hours of any responsible SCI personnel having a reasonable basis to conclude 

that the SCI event has occurred, the SCI entity shall submit a written notification pertaining 

to such SCI event to the Commission, which shall be made on a good faith, best efforts basis 

and include: 

(a) a description of the SCI event, including the system(s) affected; and 

(b) to the extent available as of the time of the notification: the SCI entity's current 

assessment of the types and number of market participants potentially affected by the 

SCI event; the potential impact of the SCI event on the market; a description of the steps 

the SCI entity has taken, is taking, or plans to take, with respect to the SCI event; the 

time the SCI event was resolved or timeframe within which the SCI event is expected to 

be resolved; and any other pertinent information known by the SCI entity about the SCI 

event. 

When submitting a final report pursuant to either Rule 1002(b)(4)(i)(A) or Rule 

1002(b)(4)(i)(B)(6), the SCI entity shall include: 

(a) a detailed description of: the SCI entity's assessment of the types and number of 

market participants affected by the SCI event; the SCI entity's assessment of the impact 

of the SCI event on the market; the steps the SCI entity has taken, is taking, or plans to 

take, with respect to the SCI event; the time the SCI event was resolved; the SCI entity's 

rule(s) and/or governing document(s), as applicable, that relate to the SCI event; and 

any other pertinent information known by the SCI entity about the SCI event; 

(b) a copy of any information disseminated pursuant to Rule 1002(c) by the SCI entity 

to date regarding the SCI event to any of its members or participants; and 

(c) an analysis of parties that may have experienced a loss, whether monetary or 

otherwise, due to the SCI event, the number of such parties, and an estimate of the 

aggregate amount of such loss. 

When submitting an interim report pursuant to Rule 1002(b)(4)(i)(B)(!), the SCI entity 

shall include such information to the extent known at the time. 

The SCI entity shall submit a report, within 30 calendar days after the end of each calendar 

quarter, containing a summary description of systems disruptions and systems intrusions 

that have 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, including the SCI systems and, for 

systems intrusions, indirect SCI systems, affected by such SCI events during the applicable 

calendar quarter. 

When submitting a report pursuant to Rule 1003(a)(1), the SCI entity shall provide a report, 

within 30 calendar days after the end of each calendar quarter, describing completed, 

ongoing, and planned material changes to its 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. An SCI entity shall establish reasonable 

written criteria for identifying a change to its SCI systems and the security of indirect SCI 

systems as material and report such changes in accordance with such criteria. 

When submitting a report pursuant to Rule 1003(a)(2), the SCI entity shall provide a 

supplemental report of a material error in or material omission from a report previously 

submitted under Rule 1003(a)(1). 

The SCI entity shall provide a report of the SCI review, together with any response by senior 

management, within 60 calendar days after its submission to senior management of the SCI 

entity. 

This exhibit may be used in order to attach other documents that the SCI entity may wish to 

submit as part of a Rule 1002(b)(1) initial notification submission or Rule 1002(b)(3) update 

submission. 
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GENERAL INSTRUCTIONS FOR FORM SCI 

A. Use of the Form 

Except with respect to notifications to the Commission made pursuant to Rule 1002(b)(l) 

or updates to the Commission made pursuant to Rule 1002(b)(3), any notification, review, 

description, analysis, or report required to be submitted pursuant to Regulation SCI under the 

Securities Exchange Act of 1934 ("Act") shall be filed in an electronic format through an 

electronic form filing system ("EFFS"), a secure website operated by the Securities and 

Exchange Commission ("Commission"). Documents attached as exhibits filed through the EFFS 

system must be in a text-searchable format without the use of optical character recognition. If, 

however, a portion of a Form SCI submission ( e.g., an image or diagram) cannot be made 

available in a text-searchable format, such portion may be submitted in a non-text searchable 

format. 

B. Need for Careful Preparation of the Completed Form, Including Exhibits 

This form, including the exhibits, is intended to elicit information necessary for 

Commission staff to work with SCI self-regulatory organizations, SCI alternative trading 

systems, plan processors, exempt clearing agencies subject to ARP, and competing consolidators 

(collectively, "SCI entities") to ensure the capacity, integrity, resiliency, availability, security, 

and compliance of their automated systems. An SCI entity must provide all the information 

required by the form, including the exhibits, and must present the information in a clear and 

comprehensible manner. A filing that is incomplete or similarly deficient may be returned to the 

SCI entity. Any filing so returned shall for all purposes be deemed not to have been filed with 

the Commission. See also Rule 0-3 under the Act (17 CFR 240.0-3). 

C. When to Use the Form 
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Form SCI is comprised of six types of required submissions to the Commission pursuant 

to Rules 1002 and 1003. In addition, Form SCI permits SCI entities to submit to the 

Commission two additional types of submissions pursuant to Rules 1002(b )(1) and 1002(b )(3); 

however, SCI entities are not required to use Form SCI for these two types of submissions to the 

Commission. In filling out Form SCI, an SCI entity shall select the type of filing and provide all 

information required by Regulation SCI specific to that type of filing. 

The first two types of required submissions relate to Commission notification of certain 

SCI events: 

(1) "Rule 1002(b )(2) Notification of SCI Event" submissions for notifications regarding 

systems disruptions, systems compliance issues, or systems intrusions (collectively, "SCI 

events"), other than any systems disruption or systems intrusion 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; and 

(2) "Rule 1002(b)(4) Final or Interim Report of SCI Event" submissions, of which there 

are two kinds (a final report under Rule 1002(b)(4)(i)(A) or Rule 1002(b)(4)(i)(B)Q); or an 

interim status report under Rule 1002(b)(4)(i)(B)Q)). 

The other four types of required submissions are periodic reports, and include: 

(1) "Rule 1002(b )( 5)(ii)" submissions for quarterly reports of systems disruptions and 

systems intrusions which have 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 ("de minimis SCI 

events"); 

(2) "Rule 1003(a)(l)" submissions for quarterly reports of material systems changes; 

(3) "Rule 1003(a)(2)" submissions for supplemental reports of material systems changes; 

and 

( 4) "Rule 1003(b )(3)" submissions for reports of SCI reviews. 
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Required Submissions for SCI Events 

For 1002(b)(2) submissions, an SCI entity must notify the Commission using Form SCI 

by selecting the appropriate box in Section I and filling out all information required by the form, 

including Exhibit 1. 1002(b )(2) submissions must be submitted within 24 hours of any 

responsible SCI personnel having a reasonable basis to conclude that an SCI event has occurred. 

For 1002(b)(4) submissions, if an SCI event is resolved and the SCI entity's investigation 

of the SCI event is closed within 30 calendar days of the occurrence of the SCI event, an SCI 

entity must file a final report under Rule 1002(b)(4)(i)(A) within five business days after the 

resolution of the SCI event and closure of the investigation regarding the SCI event. However, if 

an SCI event is not resolved or the SCI entity's investigation of the SCI event is not closed 

within 30 calendar days of the occurrence of the SCI event, an SCI entity must file an interim 

status report under Rule 1002(b)(4)(i)(B)(l) within 30 calendar days after the occurrence of the 

SCI event. For SCI events in which an interim status report is required to be filed, an SCI entity 

must file a final report under Rule 1002(b)(4)(i)(B)G) within five business days after the 

resolution of the SCI event and closure of the investigation regarding the SCI event. For 

1002(b)(4) submissions, an SCI entity must notify the Commission using Form SCI by selecting 

the appropriate box in Section I and filling out all information required by the form, including 

Exhibit 2. 

Required Submissions for Periodic Reporting 

For 1002(b )( S)(ii) submissions, an SCI entity must submit quarterly reports of systems 

disruptions and systems intrusions which have 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. The 

SCI entity must select the appropriate box in Section II and fill out all information required by 

the form, including Exhibit 3. 
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For 1003(a)(l) submissions, an SCI entity must submit its quarterly report of material 

systems changes to the Commission using Form SCI. The SCI entity must select the appropriate 

box in Section II and fill out all information required by the form, including Exhibit 4. 

Filings made pursuant to Rule 1002(b)(5)(ii) and Rule 1003(a)(l) must be submitted to 

the Commission within 30 calendar days after the end of each calendar quarter (i.e., March 31st, 

June 30th, September 30th and December 31 st) of each year. 

For 1003(a)(2) submissions, an SCI entity must submit a supplemental report notifying 

the Commission of a material error in or material omission from a report previously submitted 

under Rule 1003(a). The SCI entity must select the appropriate box in Section II and fill out all 

information required by the form, including Exhibit 4. 

For 1003(b )(3) submissions, an SCI entity must submit its report of its SCI review, 

together with any response by senior management, to the Commission using Form SCI. A 

1003(b)(3) submission is required within 60 calendar days after the report of the SCI review has 

been submitted to senior management of the SCI entity. The SCI entity must select the 

appropriate box in Section II and fill out all information required by the form, including Exhibit 

5. 

Optional Submissions 

An SCI entity may, but is not required to, use Form SCI to submit a notification pursuant 

to Rule 1002(b )(1 ). If the SCI entity uses Form SCI to submit a notification pursuant to Rule 

1002(b)(l), it must select the appropriate box in Section I and provide a short description of the 

SCI event. Documents may also be attached as Exhibit 6 if the SCI entity chooses to do so. An 

SCI entity may, but is not required to, use Form SCI to submit an update pursuant to Rule 

1002(b)(3). Rule 1002(b)(3) requires an SCI entity to, until such time as the SCI event is 

resolved and the SCI entity's investigation of the SCI event is closed, provide updates pertaining 

to such SCI event to the Commission on a regular basis, or at such frequency as reasonably 
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ER09AP21.021</GPH>

requested by a representative of the Commission, to correct any materially incorrect information 

previously provided, or when new material information is discovered, including but not limited 

to, any of the information listed in Rule 1002(b)(2)(ii). If the SCI entity uses Form SCI to 

submit an update pursuant to Rule 1002(b )(3), it must select the appropriate box in Section I and 

provide a short description of the SCI event. Documents may also be attached as Exhibit 6 if the 

SCI entity chooses to do so. 

D. Documents Comprising the Completed Form 

The completed form filed with the Commission shall consist of Form SCI, responses to 

all applicable items, and any exhibits required in connection with the filing. Each filing shall be 

marked on Form SCI with the initials of the SCI entity, the four-digit year, and the number of the 

filing for the year(~, SCI Name-YYYY-XXX). 

E. Contact Information; Signature; and Filing of the Completed Form 

Each time an SCI entity submits a filing to the Commission on Form SCI, the SCI entity 

must provide the contact information required by Section III of Form SCI. Space for additional 

contact information, if appropriate, is also provided. 

All notifications and reports required to be submitted through Form SCI shall be filed 

through the EFFS. In order to file Form SCI through the EFFS, SCI entities must request access 

to the Commission's External Application Server by completing a request for an external 

account user ID and password. Initial requests will be received by contacting (202) 551-5777. 

An e-mail will be sent to the requestor that will provide a link to a secure website where basic 

profile information will be requested. A duly authorized individual of the SCI entity shall 

electronically sign the completed Form SCI as indicated in Section IV of the form. In addition, a 

duly authorized individual of the SCI entity shall manually sign one copy of the completed Form 

SCI, and the manually signed signature page shall be preserved pursuant to the requirements of 

Rule 1005. 
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F. Withdrawals of Commission Notifications and Periodic Reports 

If an SCI entity determines to withdraw a Form SCI, it must complete Page 1 of the Form 

SCI and indicate by selecting the appropriate check box to withdraw the submission. 

G. Paperwork Reduction Act Disclosure 

This collection of information will be reviewed by the Office of Management and Budget 

in accordance with the clearance requirements of 44 U.S.C. 3507. An agency may not conduct 

or sponsor, and a person is not required to respond to, a collection of information unless it 

displays a currently valid control number. The Commission estimates that the average burden to 

respond to Form SCI will be between one and 125 hours, depending upon the purpose for which 

the form is being filed. Any member of the public may direct to the Commission any comments 

concerning the accuracy of this burden estimate and any suggestions for reducing this burden. 

Except with respect to notifications to the Commission made pursuant to Rule 1002(b)(l) 

or updates to the Commission made pursuant to Rule 1002(b)(3), it is mandatory that an SCI 

entity file all notifications, reviews, descriptions, analyses, and reports required by Regulation 

SCI using Form SCI. The Commission will keep the information collected pursuant to Form SCI 

confidential to the extent permitted by law. Subject to the provisions of the Freedom of 

Information Act, 5 U.S.C. 522 ("FOIA"), and the Commission's rules thereunder (17 CFR 

200.80(b)(4)(iii)), the Commission does not generally publish or make available information 

contained in any reports, summaries, analyses, letters, or memoranda arising out of, in 

anticipation of, or in connection with an examination or inspection of the books and records of 

any person or any other investigation. 

H. Exhibits 

List of exhibits to be filed, as applicable: 

Exhibit 1: Rule 1002(b)(2) - Notification of SCI Event. Within 24 hours of any responsible SCI 

personnel having a reasonable basis to conclude that the SCI event has occurred, the SCI entity 
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ER09AP21.023</GPH>

shall submit a written notification pertaining to such SCI event to the Commission, which shall 

be made on a good faith, best efforts basis and include: (a) a description of the SCI event, 

including the system(s) affected; and (b) to the extent available as of the time of the notification: 

the SCI entity's current assessment of the types and number of market participants potentially 

affected by the SCI event; the potential impact of the SCI event on the market; a description of 

the steps the SCI entity has taken, is taking, or plans to take, with respect to the SCI event; the 

time the SCI event was resolved or timeframe within which the SCI event is expected to be 

resolved; and any other pertinent information known by the SCI entity about the SCI event. 

Exhibit 2: Rule 1002(b)(4)-Final or Interim Report of SCI Event. When submitting a final 

report pursuant to either Rule 1002(b)(4)(i)(A) or Rule 1002(b)(4)(i)(B)(l), the SCI entity shall 

include: (a) a detailed description of: the SCI entity's assessment of the types and number of 

market participants affected by the SCI event; the SCI entity's assessment of the impact of the 

SCI event on the market; the steps the SCI entity has taken, is taking, or plans to take, with 

respect to the SCI event; the time the SCI event was resolved; the SCI entity's rule(s) and/or 

governing document(s), as applicable, that relate to the SCI event; and any other pertinent 

information known by the SCI entity about the SCI event; (b) a copy of any information 

disseminated pursuant to Rule 1002( c) by the SCI entity to date regarding the SCI event to any 

of its members or participants; and ( c) an analysis of parties that may have experienced a loss, 

whether monetary or otherwise, due to the SCI event, the number of such parties, and an estimate 

of the aggregate amount of such loss. When submitting an interim report pursuant to Rule 

1002(b )( 4)(i)(B)Q), the SCI entity shall include such information to the extent known at the 

time. 

Exhibit 3: Rule 1002(b)(5)(ii)- Quarterly Report of De Minimis SCI Events. The SCI entity 

shall submit a report, within 30 calendar days after the end of each calendar quarter, containing a 

summary description of systems disruptions and systems intrusions that have had, or the SCI 
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ER09AP21.024</GPH>

entity reasonably estimates would have, no or a de minimis impact on the SCI entity's operations 

or on market participants, including the SCI systems and, for systems intrusions, indirect SCI 

systems, affected by such SCI events during the applicable calendar quarter. 

Exhibit 4: Rule 1003(a) - Quarterly Report of Systems Changes. When submitting a report 

pursuant to Rule 1003(a)(l), the SCI entity shall provide a report, within 30 calendar days after 

the end of each calendar quarter, describing completed, ongoing, and planned material changes 

to its 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. An SCI entity shall establish reasonable written criteria for identifying a change to 

its SCI systems and the security of indirect SCI systems as material and report such changes in 

accordance with such criteria. When submitting a report pursuant to Rule 1003(a)(2), the SCI 

entity shall provide a supplemental report of a material error in or material omission from a 

report previously submitted under Rule 1003(a); provided, however, that a supplemental report is 

not required if information regarding a material systems change is or will be provided as part of a 

notification made pursuant to Rule 1002(b ). 

Exhibit 5: Rule 1003(b)(3)-Report of SCI Review. The SCI entity shall provide a report of the 

SCI review, together with any response by senior management, within 60 calendar days after its 

submission to senior management of the SCI entity. 

Exhibit 6: Optional Attachments. This exhibit may be used in order to attach other documents 

that the SCI entity may wish to submit as part of a Rule 1002(b )( 1) initial notification submission 

or Rule 1002(b )(3) update submission. 

I. Explanation of Terms 

Critical SCI systems means any SCI systems of, or operated by or on behalf of, an SCI entity 

that: (a) directly support functionality relating to: (1) clearance and settlement systems of 

clearing agencies; (2) openings, reopenings, and closings on the primary listing market; (3) 
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trading halts; ( 4) initial public offerings; ( 5) the provision of market data by a plan processor; or 

(6) exclusively-listed securities; or (b) provide 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. 

Indirect SCI systems means any systems of, or operated by or on behalf of, an SCI entity that, if 

breached, would be reasonably likely to pose a security threat to SCI systems. 

Major SCI event means an SCI event that has had, or the SCI entity reasonably estimates would 

have: (a) any impact on a critical SCI system; or (b) a significant impact on the SCI entity's 

operations or on market participants. 

Responsible SCI personnel means, 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). 

SCI entity means an SCI self-regulatory organization, SCI alternative trading system, plan 

processor, exempt clearing agency subject to ARP, or competing consolidator. 

SCI event means an event at an SCI entity that constitutes: (a) a systems disruption; (b) a 

systems compliance issue; or ( c) a systems intrusion. 

SCI review means 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) a risk assessment with respect to such 

systems of an SCI entity; and (b) 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. 

SCI systems 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 
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[FR Doc. 2020–28370 Filed 4–8–21; 8:45 am] 

BILLING CODE 8011–01–C 


ER09AP21.026</GPH>

trading, clearance and settlement, order routing, market data, market regulation, or market 

surveillance. 

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. 

Systems Disruption means an event in an SCI entity's SCI systems that disrupts, or significantly 

degrades, the normal operation of an SCI system. 

Systems Intrusion means any unauthorized entry into the SCI systems or indirect SCI systems 

of an SCI entity.