Document ID: SEC-2015-1577-0001
Agency: sec
Document Type: Notice
Title: Joint Industry Plan: Consolidated Audit Trail by BATS Exchange, Inc., BATS-Y Exchange, Inc., BOX Options Exchange LLC, etc., Amendment No. 2
Posted Date: 2015-09-30T04:00Z

[Federal Register Volume 80, Number 189 (Wednesday, September 30, 2015)]
[Notices]
[Pages 58796-58797]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-24717]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75980; File No. 4-668]

Joint Industry Plan; Order Approving Amendment No. 2 to the 
National Market System Plan Governing the Process of Selecting a Plan 
Processor and Developing a Plan for the Consolidated Audit Trail by 
BATS Exchange, Inc., BATS-Y Exchange, Inc., BOX Options Exchange LLC, 
C2 Options Exchange, Incorporated, Chicago Board Options Exchange, 
Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX 
Exchange, Inc., Financial Industry Regulatory Authority, Inc., 
International Securities Exchange, LLC, ISE Gemini, LLC, Miami 
International Securities Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX 
PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., 
New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc.

September 24, 2015.

I. Introduction

    On March 6, 2015, BATS Exchange, Inc., BATS-Y Exchange, Inc., BOX 
Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board 
Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA 
Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory 
Authority, Inc., International Securities Exchange, LLC, ISE Gemini, 
LLC, Miami International Securities Exchange LLC, NASDAQ OMX BX, Inc., 
NASDAQ OMX PHLX LLC, The NASDAQ Stock Market LLC, National Stock 
Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE 
Arca, Inc. (collectively, ``SROs'' or ``Participants'') filed with the 
Securities and Exchange Commission (``Commission'' or ``SEC'') pursuant 
to Section 11A of the Securities Exchange Act of 1934 (``Act''),\1\ and 
Rule 608 thereunder,\2\ an amendment (``Amendment No. 2'') to the 
National Market System (``NMS'') Plan Governing the Process of 
Selecting a Plan Processor and Developing a Plan for the Consolidated 
Audit Trail (``Selection Plan'').\3\ Amendment No. 2 was published for 
comment in the Federal Register on June 23, 2015.\4\ The Commission 
received no comment letters on this proposal. This Order approves 
Amendment No. 2 to the Selection Plan.
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ The Selection Plan is an NMS Plan approved by the Commission 
pursuant to Section 11A of the Act and Rule 608 thereunder. See 
Securities Exchange Act Release No. 71596 (Feb. 21, 2014), 79 FR 
11152 (Feb. 27, 2014) (``Order Approving Selection Plan''); see also 
Securities Exchange Act Release No. 70892 (Nov. 15, 2013), 78 FR 
69910 (Nov. 21, 2013) (``Notice of Selection Plan'').
    \4\ See Securities Exchange Act Release No. 75193 (June 17, 
2015), 80 FR 36006 (June 23, 2015) (``Notice of Amendment No. 2'').
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II. Background and Description of the Proposal

A. Background

    The Commission adopted Rule 613 on July 11, 2012, to require the 
SROs to jointly submit an NMS plan to create, implement, and maintain a 
consolidated audit trail (``CAT NMS Plan'').\5\ In response, the SROs 
engaged in a request for proposal (``RFP'') process to help them 
develop an NMS Plan proposal and solicit bids (``Bids'') for the role 
of Plan Processor \6\ to build, operate, administer, and maintain the 
consolidated audit trail. The Selection Plan, which was approved by the 
Commission on February 21, 2014, sets forth the process by which the 
Participants will review, evaluate, and narrow down the Bids submitted 
in response to the RFP to ``Shortlisted Bids,'' and ultimately select 
the Plan Processor following Commission approval of the proposed CAT 
NMS Plan.\7\ Amendment No.1 to the Selection Plan, which the Commission 
approved on June 17, 2015, among other things, permits the SROs to vote 
to narrow the set of Shortlisted Bids to an even shorter list prior to 
Commission approval of the proposed CAT NMS Plan.\8\ The Selection 
Plan, as amended, provides that the SROs' Selection Committee will vote 
to select the Plan Processor from among the remaining bidders, using a 
two-round voting process, within two months of Commission approval of 
the proposed CAT NMS Plan.\9\
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    \5\ Securities Exchange Act Release No. 67457 (July 18, 2012), 
77 FR 45722 (Aug. 1, 2012).
    \6\ Unless otherwise noted, capitalized terms are used as 
defined in Rule 613, in the Selection Plan, or in this Order.
    \7\ See Order Approving Selection Plan, supra note 3.
    \8\ See Securities Exchange Act Release No. 75192, 80 FR 36028 
(June 23, 2015) (``Order Approving Amendment No. 1'').
    \9\ See Order Approving Selection Plan, supra note 3; Order 
Approving Amendment No. 1, supra note 8.
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B. Description of the Proposal

    Amendment No. 1 included a provision providing that no SRO shall 
vote in the process narrowing the set of Shortlisted Bidders if a Bid 
submitted by the SRO or an Affiliate of the SRO is a Shortlisted Bid or 
if the SRO or its Affiliate is included as a material subcontractor as 
part of a Bid (a

[[Page 58797]]

``Bidding Participant'' \10\).\11\ The same recusal provision exists in 
the second--but not the first--round of a two-round voting process by 
the Selection Committee \12\ to select the Plan Processor from among 
the Shortlisted Bidders.\13\ The SROs state that they included the 
recusal provision to address potential conflicts of interest in 
selecting the Plan Processor.
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    \10\ The Selection Plan defines ``Bidding Participant'' as a 
Participant that: (1) Submits a Bid; (2) is an Affiliate of an 
entity that submits a Bid; or (3) is included, or is an Affiliate of 
an entity that is included, as a Material Subcontractor as part of a 
Bid. See Notice of Selection Plan, supra note 3, Exhibit A, at 2.
    \11\ See Order Approving Amendment No. 1, supra note 8.
    \12\ The Selection Committee is composed of one senior officer 
from each Participant. See Section V.A of the Selection Plan.
    \13\ This two-round voting process would take place after any 
further narrowing of the Shortlisted Bids, if such narrowing were to 
occur pursuant to Amendment No. 1. See Order Approving Amendment No. 
1, supra note 8, at 36029 & n.21.
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    In Amendment No. 2, the SROs propose to modify the Selection Plan 
to require that an SRO that is a Bidding Participant be recused from 
voting in any round to select the Plan Processor in which a Bid from or 
including such Bidding Participant or its Affiliate is being 
considered.\14\ Amendment No. 2 therefore would extend to the first 
selection round the recusal requirement that is currently only in place 
for the second selection round and the vote, if any, that narrows the 
list of Shortlisted Bidders.
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    \14\ Notice of Amendment No. 2, supra note 4, at 36007.
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    The SROs reiterate that the Selection Plan balances the competing 
goals of ensuring all SROs participate meaningfully in the process of 
developing the CAT NMS Plan and mitigating potential conflicts of 
interest related to the involvement of a bidding SRO through 
information barriers and the voting limitations.\15\ The SROs state 
that, based on their experience with these existing measures, the 
Selection Plan adequately addresses the potential conflicts of interest 
related to bidding SROs.\16\ Nonetheless, the SROs explain that 
requiring recusal in all rounds of the selection process will further 
the SROs' goal of ensuring the fair and impartial consideration and 
selection of the CAT Plan Processor.\17\
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    \15\ Id.
    \16\ Id.
    \17\ Id.
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III. Discussion

    After careful review, the Commission finds that Amendment No. 2 is 
appropriate in the public interest, for the protection of investors and 
the maintenance of fair and orderly markets, and to remove impediments 
to, and perfect the mechanisms of, a national market system. By 
extending the aforementioned recusal requirement to both selection 
rounds, Amendment No. 2 adds an additional procedural safeguard that is 
designed to further the fairness and impartiality of the Plan Processor 
selection.

IV. Conclusion

    For the reasons discussed above, the Commission finds that 
Amendment No. 2 is appropriate in the public interest, for the 
protection of investors and the maintenance of fair and orderly 
markets, and to remove impediments to, and perfect the mechanisms of, a 
national market system, or otherwise in furtherance of the purposes of 
the Act.
    It is therefore ordered, pursuant to Section 11A of the Act,\18\ 
and the rules thereunder, that Amendment No. 2 to the Selection Plan 
be, and it hereby is, approved.
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    \18\ 15 U.S.C. 78k-1.

    By the Commission.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-24717 Filed 9-29-15; 8:45 am]
 BILLING CODE 8011-01-P