Bottom

Print Add to favorites
 

Release No. 33-6189

Release No. 34-16589

February 19, 1980

 

Collection and Dissemination of Transaction Reports and Last Sale Data

ACTION: Final rules.

SUMMARY: The Commission amends and redesignates its rule governing the collection and dissemination of transaction information with respect to equity securities listed on a national securities exchange. The amendment adds explicit procedures for amending transaction reporting plans filed with and approved by the Commission pursuant to the rule and provides that no national securities exchange or association may prohibit transmission of the entire data stream of transaction reports or last sale data on a current and continuing basis for the purpose of creating a moving ticker display. The Commission also amends others of its rules to conform their references to this rule.

EFFECTIVE DATE: April 5, 1980.

FOR FURTHER INFORMATION CONTACT: Brandon Becker, Room 321, Division of Market Regulation, Securities and Exchange Commission, 500 North Capitol Street, Washington, D.C. 20549, (202) 272-2829.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission announced today that it has amended and redesignated Rule 17a-15 1 under the Securities Exchange Act of 1934 ("Act") 2 which currently governs the manner of collecting and disseminating transaction information with respect to equity securities listed or admitted to unlisted trading privileges on a national securities exchange ("exchange"). The amendments restate Rule 17a-15 in revised format, redesignate Rule 17a-15 as Rule 11Aa3-1 ("Rule") under the Act, 3 add explicit procedures for amending transaction reporting plans filed with and approved by the Commission and provide that no exchange or national securities association ("association") may prohibit retransmission of the entire data stream of transaction reports or last sale data made available through the consolidated transaction reporting system ("consolidated system") on a current and continuing basis for the purpose of creating a continuous moving ticker display ("moving ticker"). In addition, those provisions of Rule 17a-15 which currently govern the display of market information are eliminated from the Rule and are included in Rule 11Act-2 which the Commission has also adopted today. 4

expand... Table of Contents

I. Introduction and Background

A. General

On October 20, 1978, as part of its efforts to facilitate the establishment of a national market system 5 and in order to promote the widespread availability of transaction information in accordance with Section 11A(c)(1) of the Act, 6 the Commission proposed to amend Rule 17a-15 which currently governs operation of the consolidated system. 7 In determining to proposed these amendments, the Commission noted that, since the adoption of Rule 17a-15 in 1972, the Securities Acts Amendments of 1975 ("1975 Amendments") 8 had effected changes in the Act not reflected in Rule 17a-15. 9 For example, Rule 17a-15 contained procedures permitting any person whose access to transaction information disseminated pursuant to an effective transaction reporting plan is denied or limited to appeal such action to the Commission. These procedures 10 were redundant and in some technical respects inconsistent with the extensive procedures set forth in Section 11A(b)(5) of the Act which govern such denials or limitations by registered securities information processors. 11

Similarly, Rule 17a-15 indirectly imposed certain minimal display standards on vendors of market information by requiring any plan filed by an exchange, association or non-member broker-dealer pursuant to that Rule to impose these display standards on vendors. This indirect procedure had been utilized because the Commission did not directly regulate securities information processors prior to the adoption of the 1975 Amendments. However, because Section 11A(c)(1) now provides the Commission with plenary authority to regulate the manner in which vendors display transaction information this indirect regulation is no longer necessary. 12 In addition, Rule 17a-15 was limited in its application to "securities registered or admitted to unlisted trading privileges on the exchange, 13 whereas Section 11A(a)(2) permits the Commission to designate any security (other than an exempted security) as qualified for trading in the national market system. 14 In response the Commission determined to propose amendments to Rule 17a-15 which would restate the rule in revised format, address the changes in the Act discussed above and redesignate the rule as Rule 11Aa3-1 under the Act. 15

In addition, Proposed Rule 11Aa3-1 explicitly set forth the manner in which any effective transaction reporting plan could be amended. The proposal required that any proposed amendment to a plan be filed with the Commission, notice for public comment and approved by the Commission prior to effectiveness. 16 However, if the Commission found that the proposed amendment was of a technical or ministerial nature, or, if such action were necessary or appropriate in the public interest, for the protection of investors or the maintenance of fair and orderly markets, to facilitate the establishment of a national market system or otherwise in furtherance of the purposes of the Act, the Rule permitted the Commission to approve an amendment, on a temporary basis not to exceed 120 days, upon publication of notice of such amendment. 17 Rule 11Aa3-1 also required a specific statement regarding the terms of access to information made available pursuant to a plan which should conform to the general standards set forth in Section 11A(b) of the Act. 18

B. Retransmission

In addition to these procedural matters, proposed Rule 11Aa3-1 addressed one substantive matter concerning the operation of the consolidated system, those provisions of the CTA Plan which currently prohibit securities information processors from retransmitting to their subscribers, on a current and continuing basis, the data stream of transaction reports contained in the consolidated system for purposes of creating a moving ticker display ("retransmission").

1. Background of the Retransmission Prohibition

The concerns raised by retransmission primarily arise from the manner in which transaction information is disseminated through the consolidated system and the method of financing that system. Since the full implementation of the Consolidated system on April 30, 1976, transaction information has been disseminated to vendors and their subscribers by two means, a "high" speed data stream containing all transaction information disseminated through the consolidated system and two "low" speed data streams, designated Network A, which includes transaction information regarding NYSE listed securities, and Network B which includes transaction information on all other reported securities. 19 Securities information processors who are engaged in the business of disseminating transaction information ("vendors") 20 are permitted to use the transaction information they receive to create a data base from which their subscribers can, upon separate inquiry, recall transaction and other information for display on interrogation devices. In addition, transaction information is distributed over the low speed data streams for purposes of display on moving tickers via nationwide networks of low speed data transmission lines provided to CTA by Western Union ("ticker networks"). 21 The CTA Plan provides, in effect, that any moving ticker, regardless of the device on which displayed (e.g., on an interrogation device or on a separate wall unit) only be supplied data directly from these ticker networks. 22 This provision is commonly known as the retransmission prohibition.

In order to defray some of the costs of collecting, processing and disseminating transaction information, the CTA Plan requires vendor subscribers to pay a fee directly to the CTA for the receipt of transaction information. The CTA presently assesses fees on the basis of the number of display and interrogation devices used by a subscriber. 23 The highest CTA charge to a subscriber is for receiving transaction information on a ticker tape device furnished by the CTA with information supplied through a ticker network; a lesser CTA charge is imposed if transaction information is displayed on a moving ticker device furnished by a vendor (e.g., on a separate wall unit or through an interrogation device); and the smallest CTA charge is for receiving transaction information through an interrogation device upon separate inquiry, which information is supplied over the vendors communication system. 24

The retransmission prohibition has been contained in the CTA Plan since its initial filing with the Commission in 1973. In a release commenting on the Plan, the Commission determined not to object to the inclusion of the prohibition 25 noting four potentially harmful effects which might result from retransmission. First, because vendors might concentrate their marketing efforts on easily accessible, more profitable urban areas thereby leaving service to more remote, less profitable areas to the CTA, the CTA might be forced to increase its general level of charges which might in turn threaten the financial viability of the ticker networks. Second, because vendors would be free to charge rates for the provision of moving ticker displays which differ from the rates charged by the CTA, the financial viability of the ticker networks might be threatened and the dissemination of transaction information to distant locations thereby impeded. Third, there might be a deterioration of ticker reliability because vendors might not maintain sufficient back-up systems. Fourth, there might be a loss of direct regulatory oversight by the Commission because vendors were not then subject to express Commission regulation. 26

2. Reuters Request

In 1976, the Commission received a letter from Reuters Limited ("Reuters") 27 requesting the Commission to eliminate the retransmission prohibition. Reuters proposed to offer its subscribers a new service, a moving ticker in a novel format created from the high speed data stream which would not be subject to the delays and deletions to which the ticker networks are subject. The Commission published Reuters letter 28 and in response received comments from the CTA, Reuters and four vendors. 29 This commentary raised many of the concerns discussed by the Commission in its release commenting on the retransmission prohibition in the CTA Plan. 30

In addition to these concerns, commentators discussed the competitive implications of the prohibition. Reuters argued that the prohibition inhibited competition in distribution and display services by, among other matters, (1) raising the cost of entry through requiring high and low speed receptor mechanisms, (2) precluding, any competition in the distribution of transaction information for display on moving tickers, and (3) limiting innovation in the display of that information. 31 In contrast, others argued that removing the prohibition would permit Reuters to begin retransmission before other vendors and would enable Reuters to avoid certain costs already incurred by other vendors. In addition, these commentators argued that, if retransmission were permitted, those vendors which both distribute and display market information would have a marketing advantage over vendors only providing ticker display services because integrated vendors could market their services as a package with interrogation services. They also argued that the demise of the ticker networks might leave them without a source of information for their displays. 32

These commentators also argued that the removal of the retransmission prohibition would erode the present equality of access to transaction information among brokers, dealers and investors. Because of the unitary nature of the ticker networks, all moving tickers in the same network currently receive transaction information at the same time 33 and in the same format, including the deletion of certain information during periods of active trading. 34 Permitting retransmission might allow a vendor receiving the high speed data stream to display transaction information on a moving ticker prior to its display on a moving ticker fed by a low speed data stream, and possibly to include material deleted from that stream. Thus, subscribers to the various sources of transaction information would receive varying information at different times. 35

Finally, there was some dispute about whether the ticker networks were of sufficient value to employ regulatory (and possibly anti-competitive) measures to ensure their continued existence. The CTA argued that the networks were important because they provide the complete and official record of transactions and a means to supply all investors throughout the country with identical transaction information. In contrast, one vendor argued the ticker networks are outmoded, redundant with more efficient vendor systems and should ultimately be entirely replaced by the high speed data stream. 36

3. Transactions Reports Release

In the Transactions Reports Release, after reviewing the prior history of the retransmission issue, 37 the Commission

initially determined that the prohibition against retransmission may have anticompetitive effects which are not necessary or appropriate in furtherance of the purposes of the Act. The prohibition, in effect, requires that vendors providing interrogation devices which also display a moving ticker pay for the maintenance of duplicative and redundant data transmission lines and receptor mechanisms....and may impede the development of innovative moving ticker displays.... 38

The Commission therefore proposed to eliminate the retransmission prohibition. However, the Commission also concluded "that the ticker networks are an important mechanism for dissemination of market information and should be retained. They provide...a means whereby investors, brokers, and dealers can obtain current transaction information at a reasonable price" regardless of their geographic location. 39 Therefore, the Commission proposed that Rule 11Aa-3 permit exchanges and associations to impose, by means of effective transaction reporting plans, certain conditions on vendors seeking to retransmit transaction information:

(1) In order to ensure the ongoing viability of the ticker networks as a means of providing widespread dissemination of transaction information, the Commission proposed a subscriber charge condition ("Subscriber Charge Condition") which would permit the CTA to require vendors to ensure that CTA charges for the display of transaction information on moving tickers are collected. 40

(2) In response to concerns regarding equality of access to transaction information, the Commission proposed a synchronization condition ("Synchronization Condition") which would permit exchanges or associations to require vendors to ensure that "transaction reports which are retransmitted for display on moving tickers are displayed at substantially the same rate as reports distributed for display on moving tickers directly by a plan processor." 41

(3) Finally, in response to concerns regarding the accuracy and reliability of retransmitted transaction information, the Commission proposed an accuracy and reliability condition ("Accuracy and Reliability Condition") which would permit exchanges or associations to require vendors to ensure that "any securities information processor which retransmits transaction reports for display in moving tickers maintains procedures and facilities sufficient to ensure that such display is accurate and reliable." 42

II. COMMENTS RECEIVED IN RESPONSE TO THE TRANSACTIONS REPORTS RELEASE

In response to its proposal of Rule 11Aa3-1, the Commission received comments from the CTA 43 and four vendors, 44 one exchange 45 and one individual. 46 Although the commentators provided limited technical comments on the procedural provisions of the Rule, 47 virtually all of the commentary focused on retransmission. 48

A. General Comments and Subscriber Charge Condition

1. Comments

Most of the commentary concerning retransmission focused on the need to maintain the ticker networks through the retransmission prohibition and the efficacy of the Subscriber Charge Condition in ensuring the financial integrity of the networks. The CTA and Trans-Lux again argued that the retransmission prohibition furthered the goals of the Act by ensuring the ongoing viability of the ticker networks, which in turn provide widespread availability of transaction information at a reasonable cost. 49 In addition, the CTA argued that the ticker networks provide other unique benefits such as market center broadcasts of ex-dividend and other so-called administrative information, dissemination of transaction information 15 minutes delayed at a minimal charge, 50 widespread distribution of information on eligible regional securities and high reliability from beneficial duplication of CTA and vendor distribution systems, which justify the continued maintenance of the ticker networks even by means which are arguably anticompetitive. 51 To the contrary, Instinet argued that the Subscriber Charge Condition is "anticompetitive in the extreme" because it is only designed to protect the ticker networks, "the principal purposes" of which are "to advertise and encourage the buying and selling of securities...." 52

The CTA and Trans-Lux 53 further argued that the Subscriber Charge Condition would not be sufficient to maintain the viability of the ticker networks. The CTA argued that, if vendors were permitted to retransmit transaction information for display in a moving ticker, subscribers "to such retransmission services cannot be expected to passively continue payment of the CTA charges in order to subsidize CTAs nationwide networks in addition to the fees charged by retransmission vendors for their services." 54 As a result, the CTAs revenues would be reduced and the CTA would be forced to raise remaining subscriber charges or abandon the networks. 55 In addition, the CTA seemed to suggest that because most vendors would concentrate their marketing efforts on low cost, urban and eastern areas, the particular revenues lost from the networks would tend to be those providing a geographic subsidy to more remote users. 56

If retransmission were allowed, CTA further argued that preservation of the ticker networks required it to collect its full charge, including the costs of Western Union circuitry, from vendors subscribers because the existence of lower charges to subscribers to retransmission services would create a disincentive to using the ticker networks. 57 While Quotron and Reuters did not object to a Subscriber Charge Condition, they argued that the charge should be reduced to reflect cost savings to CTA resulting from vendors providing distribution services previously provided by CTA. 58

2. Commission Response

Sections 11A(a)(1)(C)(iii) and 11A(c)(1)(D) of the Act set forth as an objective of the national market system that transaction information should be made available to brokers, dealers and investors. In addition, Section 11A(c)(1)(B) of the Act specifically authorizes the Commission "to assure the prompt, accurate, reliable, and fair...distribution" of transaction information. The Act also contains broad, overriding statutory mandates to facilitate the establishment of a national market system with due regard for the necessity and propriety of any burdens on competition. 59

In balancing these goals of the Act and the often conflicting views of commentators as to whether the purposes of the Act are furthered or impaired by the retransmission prohibition, the Commission has concluded that the prohibition unnecessarily inhibits competition among vendors in the distribution and display of transaction information without offsetting benefits which are in furtherance of the purposes of the Act. 60 The prohibition inhibits entry into the field by requiring vendors to maintain decentralized processing capabilities at each ticker display site and inhibits innovation by effectively precluding innovative display formats and more timely display of transaction information. 61 However, the Commission also continues to believe that the ticker networks presently provide valuable services to the investment community and should be preserved because the networks permit brokers, dealers and investors to obtain current transaction information at reasonable prices, regardless of geographic location. 62 Therefore, while the Commission believes that the retransmission prohibition should be eliminated, it has also concluded that the Subscriber Charge Condition should be retained in order to ensure the continued existence of the networks.

As adopted, the Rule should encourage the prompt distribution of transaction information by authorizing vendors to employ existing high speed distribution systems and by providing a competitive incentive to innovate further in distribution techniques. At the same time, the Subscriber Charge Condition in the Rule permitting the CTA to continue to levy charges on retransmission subscribers should reduce or eliminate the concerns raised by the commentators that the ticker networks might be destroyed. Rather, that Condition should allow the ticker networks to provide fair and widespread distribution of transaction information at a reasonable cost to brokers, dealers and investors no matter where they are located. While the Commission understands the concern expressed by the CTA the vendor subscribers receiving retransmitted moving ticker displays might refuse to pay CTA charges equal to those imposed on subscribers to the ticker networks, the Commission has no basis to conclude that such an event would necessarily occur. Moreover, even if ticker network revenues were to decline as a result of either differential charges (as between subscribers receiving a retransmitted ticker and a CTA generated ticker) or as a result of loss of ticker subscribers, the Commission believes the CTA would be able to maintain the ticker networks because of resultant cost reductions. Finally, if retransmission were to threaten the existence of the ticker networks, the Commission would consider appropriate regulatory responses at that time.

With respect to the concern of certain commentators that, if retransmission were to result in cost savings to the CTA, vendor subscribers should pay a reduced fee to the CTA which reflects those cost savings, the Commission believes it is premature to reach any conclusion at this time. Implementation of the Subscriber Charge Condition will require the participants in the CTA to agree upon and file an amendment to the CTA Plan. 63 Such an amendment would be considered under the procedures prescribed by the Rule and would provide an opportunity for all interested parties to comment on the specific amendment in light of the Rules adoption.

B. Synchronization Condition

1. Comments

Rule 11Aa3-1(e)(2), as proposed, would have allowed an exchange or association, by means of an effective transaction reporting plan, to condition retransmission upon an undertaking by vendors to ensure that subscribers receive transaction information at substantially the same display rate (i.e., at so many transactions or characters per second) as subscribers to the ticker networks. 64 In commenting on this provision, Trans-Lux argued that it is an important objective of the Act that "all subscribers receive identical data, identically sequenced, at the identical time." 65 The CTA concurred, noting "a potential ambiguity" in the Synchronization Condition, 66 which refers to display of transaction reports at the "same rate," not the "same time," and might therefore "be read to require mere synchronization of the frequency at which any transaction reports appear...without regard to whether any such report relates to the same transaction report being displayed at the same time by any other vendor system...." 67 The CTA argued that a more stringent requirement, display of transaction information at the same time, "is essential to the Conditions objective" 68 because otherwise "a retransmission service could display a report of a particular transaction at a time significantly earlier than that at which the same report is displayed by the comparable CTA moving ticker." 69 The CTA further argued that the more stringent requirement should include a "performance standard" which would require "the simultaneous appearance of price changes on all moving tickers." 70 The CTA believed that vendor compliance with such a performance standard and the CTA surveillance of that compliance would be technically and economically difficult 71 unless retransmission were limited to the low speed data streams. 72 Moreover, the CTA argued that limiting retransmission to the low speed data streams would not destroy the benefits of allowing retransmission, notably increasing "the arena for vendor competition," 73 and ensuring that "each investor...is on an equal footing with respect to this fundamental type of information" 74 which provides investors with an important "feel for the market." 75

In contrast to the Trans-Lux and the CTA positions, Instinet, Quotron and Reuters argued that even the less stringent Synchronization Condition proposed by the Commission (i.e., that transaction information be displayed at substantially the same rate) imposes additional costs on vendors which would discourage vendor entry and innovation with respect to distribution of transaction information and would eliminate some of the benefits of retransmission. 76

Instinet argued that

the...objective of disclosure must be to disseminate transaction information just as rapidly and completely 77 as possible........................................... The spur of competition among vendors will achieve that objective. Slowing the reporting pace of vendors to the low speed pace...will achieve the opposite. 78

Reuters argued that

in effect, requiring any vendor to retransmit transaction reports at the same rate as the CTA ticker networks is like making the slowest means of retransmission, Western Union circuitry, the standard to which all vendors must slow down their display of transaction information. Such a result will foster stagnation among vendors with respect to the development of communications facilities designed to quicken the development of that system and will eliminate a significant potential area of competition among vendors. 79

Quotron argued that

it may be argued by some, that to create a display of moving ticker faster than the current displays would produce at best an unreadable blur. 80 It seems to us that this is a specious argument on two counts: 1)...A moving ticker display, posting one more transaction per second than the current ticker during a busy period will have significantly less latency the longer the duration of the busy period...and 2)...the regulatory process should not presume the outcome of technical innovation. If...a faster but readable display cannot be achieved today, the rule should be revised to permit the possibility so that there be a motive for vendors to compete on the basis of improved service. 81

2. Commission Response

The Commission proposed the Synchronization Condition in order to provide some minimal degree of synchronization in the presentation of transaction information on moving ticker displays, while still permitting vendors to utilize the advantages of high speed transmissions in terms of the content of their displays (i.e., permitting more complete data to accompany each transaction report) and the timeliness of data presentations on selective moving tickers. 82 The Commission had considered a more stringent standard, as proposed by the CTA, 83 but such a standard, as CTA recognized, is technically and economically difficult to satisfy, involves difficulties in monitoring compliance and precludes the principal benefits of retransmission. After consideration of the commentary, the Commission has determined that no Synchronization Condition should be included in the Rule. Neither the Condition as proposed nor the more stringent version suggested by the CTA can ensure that all vendor subscribers receive transaction information at the same time. Subscribers to interrogation devices, which receive transaction information over the high speed data stream, receive transaction information in certain securities more quickly than over the ticker networks and that information is more complete than that furnished subscribers to the ticker networks.

On balance, the Commission does not believe that the "feel for the market," if any, provided by the ticker networks requires that the distribution of transaction information be retarded simply to ensure simultaneous receipt of transaction information available over a moving ticker, as opposed to other more timely sources. Moreover, in light of the importance of this information to brokers, dealers and investors, the Commission does not believe it should impose regulatory restraints which preclude the dissemination of that information as promptly as possible.

C. Accuracy and Reliability Condition

1. Comments

In various comment letters prior to the Transactions Reports Release, the CTA had expressed some concern that vendors might not adequately ensure the accuracy and reliability of ticker service if allowed to retransmit transaction information. 84 In response, the Commission proposed for comment the Accuracy and Reliability Condition in Rule 11Aa3-1(f)(3) which would have permitted a transaction reporting plan to condition retransmission on vendors undertaking to ensure the accuracy and reliability of their dissemination systems.

In commenting on this provision of the rule, Instinet argued that competitive pressures alone should ensure adequate accuracy and reliability. 85 Instinet noted that "in todays competitive securities industry, no broker, dealer or institutional investor will long make use of and pay for a vendor device which does not supply an accurate and reliable display of" transaction information. 86 To the contrary, in support of the Accuracy and Reliability Condition, the CTA went so far as to suggest that

confining retransmission to the low speed lines and prohibiting vendors from combining their high and low speed services into a single information feed might be appropriate methods to achieve the reliability of vendor displays contemplated by the Accuracy and Reliability Condition. 87

2. Commission Response

The Commission understands that, at the present time, the CTA has not imposed any formal or informal accuracy or reliability standards on vendors in connection with either their interrogation device services or their moving ticker displays. To the contrary, the CTA has relied upon competitive pressures to ensure minimum levels of accuracy and reliability in the dissemination and display of market information. 88 Absent some showing of a unique need for accuracy and reliability standards with respect to retransmission for ticker displays, the Commission does not perceive any reason to permit the imposition of an Accuracy and Reliability Condition only on that type of service.

Moreover, given the apparent hesitancy of the CTA to impose accuracy and reliability standards on vendors providing information for use on interrogation devices, it would not appear that such regulation is necessary at this time. Accordingly, the Commission has eliminated the Accuracy and Reliability Condition.

In adopting the Rule without this Condition, the Commission is not suggesting that accuracy and reliability, which are explicit goals of the Act, 89 are unimportant. Rather, the Commission is deferring a decision on the necessity of such a Condition pending the submission of an actual plan amendment and a clear demonstration of a need for such standards. 90 If, in the future, the CTA determines that the level of accuracy and reliability is not sufficient to meet the purposes of the Act, the Commission is prepared to reconsider an Accuracy and Reliability Condition and an appropriate amendment to the CTA Plan. In addition, the Commission will continue to monitor vendor accuracy and reliability and is prepared to take appropriate regulatory actions to ensure achievement of the goals of the Act.

D. Other Comments on Retransmission

1. Device Only Vendors

One commentator expressed concern that, if the ticker networks are destroyed as a result of retransmission, those vendors which do not maintain any distribution system and who currently rely on the CTA to disseminate information to their display sites would not be able to obtain transaction information on reasonable terms. 91 In view of the Subscriber Charge Condition, the Commission does not believe that there is any substantial likelihood that the ticker networks would be destroyed as a result of retransmission. However, the Commission remains concerned that vendors providing only display services have a means of obtaining transaction information at potential display sites. While the CTA networks currently serve that function, in the event that the ticker networks are not available at some time in the future, the Commission expects vendors which maintain distribution systems to make available transaction information to other vendors on commercially reasonable terms. In the event that any vendor providing only display services finds it impossible to obtain information from other vendors on reasonable terms, the Commission will be prepared to exercise its authority under the Act to correct this situation.

2. Discrimination Among Securities

One commentator suggested that retransmitting vendors might seek to delete inactive stocks from their ticker displays. 92 The Commission shares this concern. However, given the current environment, in which vendors make available transaction information on all reported securities on their interrogation devices, the Commission sees no reason why vendors would choose to delete inactive stocks from a retransmitted ticker. Moreover, if this were to occur, the Commission would expect to take prompt action to correct the situation. 93

3. Date on which Retransmission Allowed

One commentator argued that the Commission should delay the effective date of permitting retransmission for three years because not all vendors are presently capable of retransmission techniques and therefore certain vendors would be at a competitive advantage with respect to other vendors who have developed their systems to permit retransmission. 94 The Commission has had the prohibition on retransmission under active consideration since August 14, 1972, 95 and solicited comment on the issue at that time and in 1976 in connection with the Reuters request. 96 More recently, in its January Statement, the Commission indicated that it would be considering the retransmission issue during 1978 97 and on October 20, 1978, 98 in the Transactions Reports Release, the Commission published its current proposal. In light of this protracted consideration of the merits of retransmission, the Commission does not believe that any vendor has been unfairly disadvantaged. However, to provide vendors with some lead time to prepare the technical means to retransmit information, the Commission has delayed the effective date of permitting retransmission until July 5, 1980.

E. Nationwide Availability and Uniform Pricing

1. Comments

In reformulating the provisions of Rule 17a-15 into proposed Rule 11Aa3-1, the Commission retained the substantive provisions of paragraph (f) of Rule 17a-15 pursuant to which any exchange or association, jointly or separately, may itself impose uniform fees for receipt of transaction information and may "require any vendor which distributes or displays transaction information to make the information it distributes or displays available to all qualified subscribers throughout the continental United States and to impose uniform charges on its subscribers (irrespective of geographic location)." 99 One commentator, Reuters, objected to the retention of that portion of paragraph (f) which would permit the CTA to require vendors to make available their services throughout the continental United States because it, in effect, would in their view preclude the use of distribution systems incapable of nationwide service. In particular, Reuters noted that its Monitor System relies on the use of coaxial cable and/or microwave channels (broad band communications) to distribute its signal and that such broad band communications facilities are available only in limited areas of the United States. Therefore, Reuters argued that the nationwide availability provision of the Rule, if implemented by the CTA, would, as a practical matter, preclude Reuters use of the Monitor system. 100

2. Commission Response

The nationwide availability provision contained in Rule 11Aa3-1(f)(2) is substantially identical to a similar provision contained in paragraph (f)(2) of Rule 17a-15. However, several factors arising since adoption of Rule 17a-15, in addition to Reuters comment, indicate that the provision as well as the corollary uniform pricing provision should no longer be retained. 101

As initially proposed in 1972, Rule 17a-15 did not include nationwide availability or uniform pricing provisions. However, in response to the proposal of Rule 17a-15, the Commission received commentary and a recommendation of the Commissions Advisory Committee on Market Disclosure suggesting, among other matters, that nationwide uniformity of pricing was desirable. 102 In light of these comments and the considerable uncertainty at that time about who would distribute transaction information and in what manner, the Commission published a revised version of Rule 17a-15 which included the nationwide availability and uniform pricing provisions. The revised version of Rule 17a-15 contained those provisions "to make clear that the imposition by...vendors of reasonable, uniform charges for distribution of...transaction information...will be permitted and that vendors may be required to make the information they distribute available throughout the continental United States to all qualified subscribers." 103

Notwithstanding this authority, the CTA did not then and has not since imposed uniform pricing and nationwide availability requirements on vendors. Although the CTA and certain vendors have apparently created geographically uniform rates for certain of their services, installation and maintenance charges in connection with these services may vary in differing locations and other services are directly priced in a non-uniform manner. Similarly, while the Commission understands that the CTA and certain vendors currently make available transaction information substantially throughout the United States, 104 the CTA and other vendors have indicated that they will not service areas which are so remote that telephonic or telegraphic linkages are not available, and certain vendors have indicated that, even if lines are available, they may not furnish service if a subscriber is too remote from maintenance centers.

Notwithstanding the current lack of absolutely uniform pricing and nationwide availability, the Commission has no basis to believe that there is inadequate dissemination of transaction information throughout the continental United States or that the more remotely distributed services are at prices which create significant disincentives to remote use. To the contrary, the Commission understands that competitive pressures and the existence of the ticker networks ensure that this essential market information is available throughout the United States on commercially reasonable terms. Thus, the Commission questions whether it is necessary to retain the nationwide availability and uniform pricing provisions of the Rule. In addition, while it may be argued that the provisions of paragraph (f)(2) contemplate that the Commission would approve enabling provisions in the CTA Plan without additional inquiry, the Commission believes that such action on its part would not be appropriate, in light of the purposes of the Act, particularly the goals of the 1975 Amendments, including the competitive implications of such an amendment. 105

In view of these concerns, the Commission has determined to remove the nationwide availability and uniform pricing provisions from paragraph (f)(2) of the Rule. The Commission emphasizes, however, that the elimination of these provisions is not meant to imply that the Commission would disapprove CTA Plan amendments requiring uniform pricing or nationwide availability. Rather, the Commission would review such a proposed amendment in light of the facts presented at that time and approve or disapprove such an amendment in accordance with the standards of the Act and the provisions of the Rule.

III. Technical Comments

In addition to the foregoing, the Commission has received a number of comments addressing technical aspects of the Rule.

A. The CTA noted that paragraph (b)(5) of Rule 11Aa3-1 as proposed provided that "any person or persons" may file with the Commission an amendment to an effective transaction reporting plan. The CTA objected to this language because it could be interpreted to permit one participant in the CTA Plan to propose an amendment to the Plan by filing the proposed amendment with the Commission notwithstanding detailed voting procedures in the Plan governing the manner in which amendments to the Plan must be approved. 106 The Rule has been changed to require "aperson or persons" proposing an amendment to an effective transaction reporting plan to do so "in accordance with the terms of such plan...." 107

B. Another commentator argued that the procedure for Commission consideration of transaction reporting plans and proposed amendments to an effective plan should more closely parallel the procedures set forth in Section 19 of the Act governing Commission review of proposed rule changes by self-regulatory organizations. 108 Specifically, this commentator suggested that the Rule should establish time limits for the Commissions consideration of plans and amendments 109 and provide that a technical amendment may become effective on filing with the Commission subject to the Commissions right summarily to abrogate such an amendment. 110

The Commission has determined, at this time, that it should not specify time periods in Rule 11Aa3-1 which may have the effect of unduly restricting the Commission in its consideration of plans or amendments filed under the Rule and commentary thereon because of its direct responsibilities to facilitate the establishment of a national market system and the evolving nature of such a system.

Similarly, the Commission does not believe it is appropriate to allow plans or amendments to become effective upon their filing with the Commission subject to later abrogation. However, Rule 11Aa3-1(c)(3) does provide that certain plan amendments may become effective, on a temporary basis, upon their publication by the Commission. While these procedures provide the Commission with a greater degree of flexibility in dealing with transaction reporting plans, the Commission expects to exercise this responsibility in a reasonable manner, consistent with its mandate under Section 11A of the Act. 111 Moreover, the Commission has recently proposed Rule 11Aa3-2 under the Act to establish generic procedures for filing and amending a national market system plan. 112 The Commission has explicitly requested comment on this issue in the release proposing that rule and believes it would be more appropriate to consider these issues in the context of that proceeding.

C. One commentator suggested that the appeal procedures pursuant to the Rule should be no "broader than those set forth" in Sections 11A(b)(5) and 19(d) of the Act. 113 The appeals procedures set forth in the Rule were designed to supplement the provisions of Sections 11A(b)(5) and 19(d) of the Act, not to be redundant with them. These sections of the Act govern appeals resulting from certain types of actions by securities information processors and self-regulatory organizations. There are other types of action which are not expressly governed by the provisions of the Act over which the Commission believes it appropriate to exercise its adjudicative authority. These types of action would be included within the appeals procedures of the Rule. Therefore, the provisions of paragraph (g) of the Rule have been retained. 114

D. One commentator recommended that vendors should be permitted to select whatever display format "they choose, rather than the CTA-approved format...." 115 The Rule does not specifically permit CTA or any other transaction reporting association to approve the display format of a vendor. However, the CTA pursuant to its individual contracts with vendors has retained that right. The CTA has indicated that it has reserved this right in order to prevent vendors from implementing misleading display formats or providing displays in violation of the requirements of Rule 17a-15. To the Commissions knowledge, the CTA has never disapproved a proposed vendor display format. 116 The Commission believes that, in light of the appeal provisions contained in Section 11A(b)(5) of the Act and the Rule, and the apparent limited extent to which the CTA has exercised its contractual authority, no Commission action is necessary at this time.

E. In addition, the Commission has made certain drafting changes to the Rule:

1. The definition of the term "transaction report" has been limited to "one or more round lots" to make clear that odd-lot broker-dealers need not report their transactions, a similar conforming amendment also has been made in Rule 11Act-1. 117

2. The definitions of the terms "interrogation device," "moving ticker" and "vendor" have been modified to refer to "last sale data" as well as "transaction reports" to make clear that those terms include interrogation devices and tickers which display, and vendors which disseminate, partial reports of transactions as well as more complete reports. 118

3. A new term, "listed equity security," has been added to the Rule to eliminate a suggested circularity in the definition of the term "reported security." 119

4. The term "vendor" has replaced the term "securities information processor" in paragraph (e) of the Rule because vendors were the only parties directly affected by paragraph (e). 120

5. The definition of "vendor" has been conformed with Section 11A(a)(1)(C)(iii) of the Act 121 to include investors. 122 A similar conforming change has been made in Rule 11Ac1-1.

6. The use of the word "execute" in the Rule as adopted has been substituted for the use of the word "effect" in the Rule as proposed to avoid the implication that the Commission intended distinctions between these words, drawn in different contexts, 123 to apply to apply to this Rule. 124

7. The Commission has changed paragraphs (b)(4)(ii) and (iii) of the Rule to make clear the Commissions intent that paragraph (b)(4)(ii) refer to intra-plan coordination and paragraph (b)(4)(iii) refer to coordination among multiple plans. 125

8. Another suggestion was that the language in paragraphs (d)(1)(i) and (ii) of the Rule apparently did not recognize that particular types of transactions are excluded from the reporting provisions of the CTA Plan. 126 Rather than trying to define all the possible transactions that might be excluded by an effective transaction reporting plan, the Commission has changed those paragraphs to recognize that a transaction reporting plan, approved by the Commission, may exclude certain types of transactions from its reporting provisions. 127

9. One commentator also argued that the term "make available" as used in the Rule might be construed to require making publicly available various private communications (e.g., confirmations to customers of sales or purchases), and that use of the term in the Rule was inconsistent with its use in Rule 11Ac1-1. 128 To eliminate such possible confusion in the Rule and for consistency with Rule 11Ac1-1, the use of the term "make available" has been conformed throughout the Rule with the use in Rule 11Ac1-1. 129

10. One commentator 130 requested further Commission definition of the terms "selective ticker" 131 and "moving ticker" 132 and another requested further definition of the term "market-minder." 133 These commentators were apparently concerned about the manner by which charges might be imposed, pursuant to a transaction reporting plan, for use of such devices under the portion of the Rule which allows imposition of "charges for the distribution of transaction reports in moving tickers." 134

The Commission has determined to provide such definitions. Rule 11Aa3-1(a)(10) defines a moving ticker as "any continuous real-time moving display of transaction reports or last sale data (other than a market minder) provided on an interrogation or other display device." Within the class of moving tickers, a "selective ticker" consists of a moving ticker which provides transaction information for only a limited number of securities and is not required to display at all times transaction information for all securities selected. In contrast to a moving ticker or selective ticker, Rule 11Aa3-1(a)(11) defines a market minder as

any service provided by a vendor on an interrogation device or other display which (i) permits real-time monitoring, on a dynamic basis, of transaction reports or last sale data with respect to a particular security, and (ii) displays the most recent transaction report or last sale data with respect to that security until such report or data has been superseded or supplemented by the display of a new transaction report or last sale data reflecting the next reported transaction in that security.

While these definitions should provide guidance to the CTA and vendors in determining whether any particular service is a moving ticker or market minder, the Commission believes that the CTA should make the initial determination, subject to discretionary Commission review, of whether a particular device is, for example, a "moving ticker." 135 In reviewing any CTA determination, the Commission may consider, among other matters, customary usage of the term within the industry, the purposes of an effective transaction reporting plan, and the purposes of the Rule in using the term. 136

IV. Text of Amendments 137

Title 17, Chapter II, of the Code of Federal Regulations is amended as follows:

PART 240-GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934

1. By revising §240.17a-15 and redesignating it as §240.11Aa3-1 to read as follows:

§240.11Aa3-1 Dissemination of transaction reports and last sale data with respect to transactions in reported securities.

(a) Definitions. For purposes of this section:

(1) The term "transaction report" shall mean a report containing the price and volume associated with a transaction involving the purchase or sale of one or more round lots of a security ("transaction").

(2) The term "transaction reporting plan" shall mean any plan for collecting, processing, making available or disseminating transaction reports with respect to transactions in reported securities filed with the Commission pursuant to, and meeting the requirements of, this section.

(3) The term "effective transaction reporting plan" shall mean any transaction reporting plan approved by the Commission pursuant to this section.

(4) The term "reported security" shall mean any listed equity security or non-listed national market system security for which a transaction reporting plan with respect to transactions in such security is required to be filed pursuant to this section.

(5) The term "listed equity security" shall mean any equity security listed and registered, or admitted to unlisted trading privileges, on a national securities exchange ("exchange").

(6) The term "non-listed national market system security" shall mean any security or class of securities which (i) is designated as qualified for trading in a national market system pursuant to Section 11A(a)(2) of the Act and the procedures established thereunder, and (ii) is not a listed equity security.

(7) The term "transaction reporting association" shall mean any person authorized to implement or administer any transaction reporting plan on behalf of persons acting jointly under paragraph (b) of this section.

(8) The term "plan processor" shall mean any exchange, national securities association ("association") or securities information processor acting as an exclusive processor with respect to any transaction reporting plan.

(9) The term "interrogation device" shall mean any securities information retrieval system capable of displaying transaction reports or last sale data, upon inquiry, on a current basis on a terminal or other device.

(10) The term "moving ticker" shall mean any continuous real-time moving display of transaction reports or last sale data (other than a market minder) provided on an interrogation or other display device.

(11) The term "market minder" shall mean any service provided by a vendor on an interrogation device or other display which (i) permits real-time monitoring, on a dynamic basis, of transaction reports or last sale data with respect to a particular security, and (ii) displays the most recent transaction report or last sale data with respect to that security until such report or data has been superseded or supplemented by the display of a new transaction report or last sale data reflecting the next reported transaction in that security.

(12) The term "vendor" shall mean any securities information processor engaged in the business of disseminating transaction reports or last sale data with respect to transactions in reported securities to brokers, dealers or investors on a real-time or other current and continuing basis, whether through an electronic communications network, moving ticker or interrogation device.

(13) The term "last sale data" shall mean any price or volume data associated with a transaction.

(b) Filing of transaction reporting plans.

(1) Every exchange shall, with respect to transactions in listed equity securities executed through its facilities, and every association shall, with respect to transactions in listed equity securities executed by its members otherwise than on an exchange, file with the Commission a transaction reporting plan.

(2) Every broker or dealer who is not a member of an exchange or association and who executes transactions in any listed equity security (a "nonmember broker or dealer") shall file with the Commission a transaction reporting plan with respect to such transactions unless transaction reports with respect to such transactions are collected, processed, and made available by an exchange or association pursuant to an effective transaction reporting plan.

(3) All exchanges, associations, and nonmember brokers and dealers are authorized to act jointly in filing a transaction reporting plan or any amendment thereto, or implementing or administering an effective transaction reporting plan.

(4) Every transaction reporting plan filed pursuant to this section shall include copies of all governing or constituent documents relating to any transaction reporting association or other entity which may be established to implement or administer the plan and shall specify, at a minimum:

(i) Reporting requirements with respect to transactions in listed equity securities for any broker or dealer subject to the plan;

(ii) The manner of collecting, processing, sequencing, making available and disseminating transaction reports and last sale data reported pursuant to such plan;

(iii) The manner such transaction reports reported pursuant to such plan are to be consolidated with transaction reports from exchanges, associations, and nonmember brokers and dealers reported pursuant to any other effective transaction reporting plan;

(iv) The applicable standards and methods which will be utilized to ensure promptness of reporting, and accuracy and completeness of transaction reports;

(v) Any rules or procedures which may be adopted to ensure that transaction reports or last sale data will not be disseminated in a fraudulent or manipulative manner;

(vi) Specific terms of access to transaction reports made available or disseminated pursuant to the plan; and

(vii) That transaction reports or last sale data made available to any vendor for display on an interrogation device identify the marketplace where each transaction was executed.

(5) Any person or persons who have filed a transaction reporting plan which has been approved by the Commission pursuant to this section may propose an amendment to such plan by filing, in accordance with the terms of such plan, the form of such proposed amendment with the Commission together with a statement of the purpose of, and the basis under the Act for, such amendment.

(c) Effectiveness of transaction reporting plans.

(1) The Commission shall publish notice of the filing of any transaction reporting plan, or any proposed amendment to any effective transaction reporting plan ("proposed amendment"), together with the terms of substance in the filing or a description of the subjects and issues involved, and shall provide interested persons an opportunity to submit written comments.

(2) No transaction reporting plan filed pursuant to this section, or amendment to an effective transaction reporting plan, shall become effective unless the Commission, having due regard for the purposes of the Act, including the public interest, the protection of investors, the maintenance of fair and orderly markets, and the need to remove impediments to, and perfect the mechanisms of, a national market system shall, after appropriate notice and opportunity for comment, by order approve such plan or amendment, with such changes or subject to such conditions as the Commission may deem necessary or appropriate.

(3) Notwithstanding the provisions of paragraph (c)(2) of this section, a proposed amendment may be put into effect upon publication of notice of such amendment, on a temporary basis not to exceed 120 days, if the Commission finds that (i) such action is necessary or appropriate in the public interest, for the protection of investors or the maintenance of fair and orderly markets, to remove impediments to, and perfect mechanisms of, a national market system or otherwise in furtherance of the purposes of the Act, or (ii) the proposed amendment involves only technical or ministerial matters.

(d) Prohibitions and reporting requirements.

(1) No broker or dealer may execute any transaction in, or induce or attempt to induce the purchase or sale of, any reported security,

(i) On or through the facilities of an exchange unless there is an effective transaction reporting plan with respect to transactions in such security executed on or through such exchange facilities; or

(ii) Otherwise than on an exchange unless there is an effective transaction reporting plan with respect to transactions in such security executed otherwise than on an exchange by such broker or dealer.

(2) No exchange or member thereof shall make available or disseminate, on a current and continuing basis, transaction reports or last sale data with respect to transactions in any reported security executed through the facilities of such exchange except pursuant to an effective transaction reporting plan filed by such exchange (either individually or jointly with other persons).

(3) No association or member thereof shall make available or disseminate, on a current and continuing basis, transaction reports or last sale data with respect to transactions in any reported security executed by a member of such association otherwise than on an exchange except pursuant to an effective transaction reporting plan filed by such association (either individually or jointly with other persons).

(4) Every broker or dealer who is a member of an exchange or association shall promptly transmit to the exchange or association of which it is a member all information required by any effective transaction reporting plan filed by such exchange or association (either individually or jointly with other exchanges and/or associations).

(e) Retransmission of transaction reports or last sale data. On and after July 5, 1980, notwithstanding any provision of any effective transaction reporting plan, no exchange or association may, either individually or jointly, by rule, stated policy or practice, transaction reporting plan or otherwise, prohibit, condition or otherwise limit, directly or indirectly, the ability of any vendor to retransmit, for display in moving tickers, transaction reports or last sale data made available pursuant to any effective transaction reporting plan; Provided, however, That an exchange or association may, by means of an effective transaction reporting plan, condition such retransmission upon appropriate undertakings to ensure that any charges for the distribution of transaction reports or last sale data in moving tickers permitted by paragraph (f) of this section are collected.

(f) Charges. Nothing in this section shall preclude any exchange or association, separately or jointly, pursuant to the terms of an effective transaction reporting plan, from imposing reasonable, uniform charges (irrespective of geographic location) for distribution of transaction reports or last sale data.

(g) Appeals. The Commission may entertain appeals in connection with the operation of any effective transaction reporting plan as follows:

(1) Any action taken or failure to act by any person in connection with an effective transaction reporting plan (other than a prohibition or limitation of access reviewable by the Commission pursuant to section 11A(b)(5) or section 19(d) of the Act) shall be subject to review by the Commission, on its own motion or upon application by any person aggrieved thereby (including but not limited to exchanges, associations, brokers, dealers, issuers, vendors, and other users of transaction reports or last sale data), filed within 30 days after such action or failure to act or within such longer period as the Commission may determine.

(2) Application to the Commission for review, or the institution of review by the Commission on its own motion, shall not operate as a stay of any such action unless the Commission determines otherwise, after notice and opportunity for hearing on the question of a stay (which hearing may consist only of affidavits or oral arguments).

(3) In any proceedings for review, if the Commission, after appropriate notice and opportunity for hearing, and upon consideration of any proceedings conducted in connection with such action or failure to act and such other evidence as it deems relevant, determines that the action or failure to act is in accord with the applicable provisions of such plan and is consistent with the public interest, the protection of investors, the maintenance of fair and orderly markets and the removal of impediments to, and perfection of the mechanisms of, a national market system, the Commission shall dismiss the proceeding. Otherwise, the Commission shall require such action with respect to the matter reviewed as the Commission deems appropriate in accordance with the public interest and the protection of investors and consistent with such plan, the maintenance of fair and orderly markets and the removal of impediments to, and perfection of the mechanisms of, a national market system.

(h) Exemptions. The Commission may exempt from the provisions of this section, either unconditionally or on specified terms and conditions, any exchange, association, broker, dealer or specified security if the Commission determines that such exemption is consistent with the public interest, the protection of investors and the removal of impediments to, and perfection of the mechanisms of, a national market system.

(Secs., 2, 3, 6, 9, 10, 15, 17 and 23, Pub. L. No. 78-291, 48 Stat. 881, 882, 885, 889, 891, 895, 897 and 901, as amended by secs. 2, 3, 4, 11, 14 and 18, Pub. L. No. 94-29, 89 Stat. 97, 104, 121, 137 and 155 (15 U.S.C. §§78b, 78c, 78f, 78i, 78j, 78o, 78q and 78w); Sec. 15A, as added by sec. 1. Pub. L. No. 75-719, 52 Stat. 1070, as amended by sec. 12, Pub. L. No. 94-29, 89 Stat. 127 (15 U.S.C. §78-3); Sec. 11A, as added by sec. 7, Pub. L. No. 94-29, 89 Stat. 111 (15 U.S.C. §78k-1).)

2. By amending paragraphs (a)(1) and (e)(5) of §240.10a-1 to read as follows:

§240.10a-1 Short sales

(a)(1) No person shall, for his own account or for the account of any other person, effect a short sale of any security registered on, or admitted to unlisted trading privileges on, a national securities exchange, if trades in such security are reported pursuant to an "effective transaction reporting plan" as defined in §240.11Aa3-1 (Rule 11Aa3-1 under the Act), and information as to such trades is made available in accordance with such plan on a real-time basis to vendors of market transaction information, (i) below the price at which the last sale thereof, regular way, was reported pursuant to an effective transaction reporting plan; or (ii) at such price unless such price is above the next preceding different price at which a sale of such security, regular way, was reported pursuant to an effective transaction reporting plan.

* * * * *

(e) * * *

(5) Any sale of a security covered by paragraph (a) of this section (except a sale to a stabilizing bid complying with §240.10b-7) by a registered specialist or registered exchange market maker for its own account on any exchange with which it is registered for such security, or by a Qualified Third Market Maker which has filed a notice for such security with the Commission on Form X-17A-16(1) §249.631 of this chapter for its own account over-the-counter, effected at a price equal to or above the last sale reported for such security pursuant to an effective transaction reporting plan; Provided, however, That any exchange, by rule, may prohibit its registered specialists and registered exchange market makers from availing themselves of the exemption afforded by this paragraph (e)(5) if that exchange determines that such action is necessary or appropriate in its market in the public interest or for the protection of investors;

* * * * *

(Secs., 10 and 23, Pub. L. No. 78-291, 48 Stat. 891 and 901, as amended by sec. 18, Pub. L. No. 94-29, 89 Stat. 155 (15 U.S.C. §§78j and 78w).)

3. By amending paragraphs (a)(4), (5), (8) and (15) and (b)(1)(ii) of §240.11Ac1-1 to read as follows:

§240.11Ac1-1 Dissemination of quotations for reported securities.

(a) * * *

(4) The term "quotation vendor" shall mean any securities information processor engaged in the business of disseminating to brokers, dealers or investors on a real-time or current and continuing basis, bids and offers made available pursuant to this section, whether distributed through an electronic communications network or displayed on a terminal or other display device.

(5) The terms "plan processor" and "effective transaction reporting plan" shall have the meaning provided in §240.11Aa3-1 (Rule 11Aa3-1 under the Act).

(6) The term "reported security" shall mean any security or class of securities for which transaction reports are collected, processed and made available pursuant to an effective transaction reporting plan.

* * * * *

(8) The terms "bid" and "offer" shall mean the bid price or the offer price most recently communicated by an exchange member or third market maker to any broker or dealer, or to any customer, at which he is willing to buy or sell one or more round lots of a reported security, as either principal or agent, but shall not include indications of interest.

* * * * *

(15) The term "specified persons," when used in connection with any notification required to be provided pursuant to paragraphs (b)(3)(i) and (b)(3)(ii) of this section, shall mean: (i) Each quotation vendor; (ii) Every plan processor and (iii) The processor for the Options Price Reporting Authority (in the case of a notification with respect to a reported security which is a class of securities underlying options admitted to trading on any exchange).

(b) * * *

(1) * * *

(ii) Every association shall, at all times last sale information with respect to reported securities is reported pursuant to an effective transaction reporting plan, collect, process and make available to quotation vendors the highest bid and lowest offer communicated otherwise than on the floor of an exchange by each member of such association acting in the capacity of a third market maker for a reported security and the identity of that member (excluding any such bid or offer which is executed immediately after communication), except during any period when over-the-counter trading in that security has been suspended; and

* * * * *

(Secs., 2, 3, 6, 9, 10, 15, 17 and 23, Pub. L. No. 78-291, 48, Stat. 881, 882, 885, 889, 891, 895, 897 and 901, as amended by secs. 2, 3, 4, 11, 14, and 18, Pub. L. No. 94-29, 89 Stat. 97, 104, 121, 137 and 155 (15 U.S.C. §§78b, 78c, 78f, 78i, 78j, 78o, 78q and 78w); Sec. 15A, as added by sec. 1, Pub. L. No. 75-719, 52 Stat. 1070, as amended by sec. 12, Pub. L. No. 94-29, 89 Stat. 127 (15 U.S.C. §78o-3); Sec. 11A as added by sec. 7, Pub. L. No. 94-29, 89 Stat. 111 (15 U.S.C. §78k-1).)

4. By amending paragraph (a)(4) of §240.12f-1 to read as follows:

§240.12f-1 Applications for permission to extend unlisted trading privileges.

(a)* * *

(4) Whether transaction information concerning such security is reported in the consolidated transaction reporting system contemplated by Rule 11Aa3-1 under the Act (§240.11Aa3-1);

* * * * *

(Secs., 12 and 23, Pub. L. No. 78-291, 48 Stat. 894 and 901, as amended by secs. 8 and 18, Pub. L. No. 94-29, 89 Stat. 117 and 155 (15 U.S.C. §§781 and 78w).)

5. By amending paragraph (e) of §240.31-1 to read as follows:

§240.31-1 Securities transactions exempt from transaction fees.

* * * * *

The following shall be exempt from section 31 of the Act:

* * *

(e) Transactions which are executed outside the United States and are not reported, or required to be reported, to a transaction reporting association as defined in §240.11Aa3-1 (Rule 11Aa3-1 under the Act) and any approved plan filed thereunder.

(Secs. 2, 3, 23 and 31, Pub. L. 78-291, 48 Stat. 881, 882, 901 and 904, as amended by secs. 2, 3, 18 and 22, 89 Stat. 97, 155 and 162 (15 U.S.C. §§78b, 78c, 78w and 78ee).)

PART 200-ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND REQUESTS

6. By amending paragraph (a)(27) of §200.30-3 to read as follows:

§200.30-3 Delegation of authority to Director of Division of Market Regulation.

* * * * *

(a)* * *

(27) To approve amendments to the joint industry plan governing the consolidated transaction reporting system declared effective by the Commission on May 10, 1974, pursuant to then Rule 17a-15, now §240.11Aa3-1 (Rule 11Aa3-1 under the Act).

* * * * *

(Pub. L. No. 87-592, 76 Stat. 394 (15 U.S.C. §§78d-1, 78d-2).)

PART 230-GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

7. By amending paragraph (e)(1) of §230.144 to read as follows:

§230.144 Persons deemed not to be engaged in a distribution and therefore not underwriters.

* * * * *

(e)* * *

(1) Sales by affiliates. If restricted or other securities are sold for the account of an affiliate of the issuer, the amount of securities sold, together with all sales of restricted and other securities of the same class for the account of such person within the preceding three months, shall not exceed the greater of (i) one percent of the shares or other units of the class outstanding as shown by the most recent report or statement published by the issuer, or (ii) the average weekly reported volume of trading in such securities on all national securities exchanges and/or reported through the automated quotation system of a registered securities association during the four calendar weeks preceding the filing of notice required by paragraph (h), or if no such notice is required the date of receipt of the order to execute the transaction by the broker or the date of execution of the transaction directly with a market maker, or (iii) the average weekly volume of trading in such securities reported through the consolidated transaction reporting system contemplated by Rule 11Aa3-1 under the Securities Exchange Act of 1934 (§240.11Aa3-1) during the four-week period specified in subdivision (ii) of this paragraph.

(Secs., 2(11), 4(1), 4(4), 19(a), 48 Stat. 74, 77, 85; Secs., 201, 203, 209, 210, 48 Stat. 904, 906, 908; Secs., 1-4, 6, 68 Stat. 683, 684; and Sec. 12, 78 Stat. 580, (15 U.S.C. §§77b(11), 77d(1), 77d(4), 77s(a)).)

8. By amending paragraph (b)(1) of §230.148 as follows:

§230.148 Persons deemed not to be underwriters of securities issued or sold in connection with bankruptcy proceedings.

* * * * *

(b)* * *

(1) Volume limitation. The amount of securities sold for the account of such person or entity during any three month period shall not exceed the greater of (i) one percent of the sum of the number of shares or other units of the class issued and outstanding and the number of shares or units of the class reserved for future issuance in respect of claims and interests filed and allowed under the plan, as shown by the most recent report or statement published by the issuer, or (ii) the average weekly reported volume of trading in such securities on all national securities exchanges and reported through the automated quotation system of a registered securities association during the four calendar weeks preceding the date of receipt of the order to execute the transaction by the broker or the date of execution of the transaction directly with a market maker, or (iii) the average weekly volume of trading in such securities reported through the consolidated transaction reporting system contemplated by Rule 11Aa3-1 under the Securities Exchange Act of 1934 (§240.11Aa3-1) during the four-week period specified in (ii) above. For the purpose of determining the limitation on the amount of securities sold, all securities of the same class sold under this rule by persons or entities acting in concert shall be aggregated.

* * * * *

Secs., 2(11), 4(1), 4(4), 19(a), 48 Stat. 74, 77, 85; Secs. 201, 203, 209, 210, 48 Stat. 904, 906, 908; Secs. 1-4, 6, 68 Stat. 683, 684; and Sec. 12, 78 Stat. 580, (15 U.S.C. §§77b(11), 77d(1), 77d(4), 77s(a)).)

* * * * *

V. Effects on Competition

Section 23(a)(2) of the Act requires the Commission, in adopting rules under the Act, to consider the anticompetitive effects of such regulation and to balance any anticompetitive impact against the regulatory benefits gained in terms of furthering the purposes of the Act. The Commission has determined that the perceived anticompetitive effects of eliminating the prohibition are outweighed by the regulatory purposes to be achieved by the prohibition and has discussed in this release the competitive impact of the retransmission prohibition. The Commissions directive under Section 11A(a) of the Act to facilitate the establishment of a national market system and its authority granted under Section 11A(c) to ensure prompt, accurate, reliable and fair collection, processing, distribution and publication of transaction information in a fair and useful format would appear to be significantly furthered by the elimination of the prohibition. For the reasons expressed in this release, the Commission finds that the rules do not impose any burden on competition which is not necessary or appropriate in furtherance of the purposes of the Act.

By the Commission.

George A. Fitzsimmons

Secretary

On March 2, 1973, various self-regulatory organizations filed with the Commission a joint industry plan ("CTA Plan" or "Plan") to govern the implementation and operation of the consolidated system. The Plan provided for the creation of the Consolidated Tape Association ("CTA") to administer the Plan and the SIAC to act as the initial processor for the consolidated system. See Securities Exchange Act Release Nos. 9924 (January 3, 1973), 9981 (February 2, 1973), 10026 (March 5, 1973), 10218 (June 13, 1973) ("First Plan Release"), 10671 (March 8, 1974) ("Second Plan Release"), 38 FR 1121, 3591, 6443 and 15999 and 39 FR 10034. The Plan was approved by the Commission on May 10, 1974. See Securities Exchange Act Release No. 10787 (May 10, 1974) ("Approval Release"), 39 FR 17799.

The Plan requires dissemination of transaction information in "eligible securities" which are defined to include: (1) stocks and long-term warrants listed or admitted to unlisted trading privileges on the American ("Amex") or New York ("NYSE") Stock Exchanges on April 30, 1976, (2) stocks and long-term warrants listed or admitted to unlisted trading privileges on any exchange which, on April 30, 1976, substantially meet either Amex or NYSE original listing requirements, (3) stocks and long-term warrants listed or admitted to unlisted trading privileges on any exchange after April 30, 1976, which substantially meet either Amex or NYSE original listing requirements and (4) any right to acquire any of the securities described in (1)-(3) which is traded on the same exchange as the eligible security, See CTA Plan, "Plan Submitted Pursuant to Rule 17a-15 of Securities Exchange Act of 1934," §VI, at 19-23, contained in File No. S7-433.

The Plan provides that the consolidated system consist, in part, of two networks of information Network A and Network B. Network A includes transaction information from all reporting markets for eligible securities listed or admitted to unlisted trading privileges on the NYSE. Network B includes transaction information for eligible securities listed or admitted to unlisted trading privileges on, or substantially meeting the listing requirements of, the Amex. The reporting markets are the Amex, Boston ("BSE"), Cincinnati ("CSE"), and Midwest ("MSE") Stock Exchanges, NYSE, Pacific ("PSE") and Philadelphia ("Phlx") Stock Exchanges and over-the-counter ("OTC") transactions by members of the National Association of Securities Dealers, Inc. ("NASD") and transactions effected through the Instinet System operated by Institutional Networks Corporation ("Instinet"). The Commission has granted the Intermountain ("ISE") and Spokane ("SSE") Stock Exchanges exemptions from the reporting requirements of Rule 17a-15. Securities Exchange Act Release Nos. 11385 (April 30, 1975) and 14651 (April 11, 1978), 40 FR 1988 and 43 FR 16852. The Commission also has granted a temporary exemption to OTC market makers with respect to OTC trading in Pacific Resources, Inc., Securities Exchange Act Release No. 16454 (December 27, 1979), 45 FR-Redesignation of the rule under Section 11A(a) of the Act, will note effect the status of these, or any other, exemptions from Rule 17a-15 which do not directly conflict with a provision of Rule 11Aa3-1. See note 137, infra.

A pilot phase of the consolidated system began operation on October 18, 1974 and the entire system became fully operational on April 30, 1976. See Transactions Reports Release, supra note 7, at 4-7, 33 n. 63, 43 FR at 50606-07, 50611 n. 63. any securities information processor engaged in the business of disseminating transaction reports or last sale data with respect to transactions in reported securities to brokers, dealers or investors on a real-time or other current and continuing basis, whether through an electronic communications network, moving ticker or interrogation device.

The CTA further argued that even if it is capable of collecting the Subscriber Charge, the only result would be that broker-dealers will pay more for transaction information because "competitive pressures" will force broker-dealers to subscribe to retransmitted data even though the data will only provide "minor" improvements over the information presently available. 1979 CTA Letter, supra note 43, at 9, n.9 cont. at 10. Even assuming that transmission services will increase total costs to the securities industry, the Commission is satisfied, at present, that, if broker-dealers are willing to subscribe to retransmission services, competitive pressures will ensure that vendor charges reasonably reflect the value of the services provided.

In finding that the ticker networks should be preserved, the Commission is not, as suggested by one commentator (see Quotron Letter, supra note 44, at 3), seeking to preserve the CTA networks per se. Rather the Commission is simply recognizing that at present ticker networks are the primary method of ensuring widespread distribution of transaction information at a nominal fee. Indeed, the Commission notes that virtually all of the benefits cited by the CTA, see, e.g., text accompanying notes 49-51, supra, as being unique to the ticker networks are also provided by vendors over their communications systems to users of interrogation devices. In the future, transaction information distribution systems which supplement or replace the ticker networks may evolve.

in any event, the need for reliability can be expected to lead CTA to insist that vendors upgrade their facilities in order to provided the requisite excess capacity needed to avoid the kind of delays initially experienced by some vendors in connection with the dissemination of quotation information.

Id. at 20 n. 15.

The Bradford Court specifically noted, 509 F.2d at 1099 n.22, that

GPM achieves the objective of expanding the securities market into a geographically nationalized operation, rather than one dominated by New York. This objective is served by allowing brokers outside New York to "compete" more effectively with those in side New York. Whether it also enhances competition in the stricter economic sense- i.e., whether it allocates resources more efficiently-is a different question. It is conceivable that concentrating the securities market in one city, albeit to the disadvantage of securities operatives located elsewhere, allocates resources most efficiently. Such a situation may well have existed prior to the advent of modern communication and data processing technology, and may even continue today. If so, GPM is actually anticompetitive and essentially subsidizes regional brokers at the expense of those located in New York.

Pursuant to the direction of the Court in Bradford, the Commission has solicited comment on the issue of NSCCs use of GPM, among other matters. See Securities Exchange Act Release Nos. 15640 and 15882 (March 14 and May 30, 1979), 44 FR 17838 and 33198. The Commissions adoption of Rule 11Aa3-1 and the deletion of paragraph (f)(2) thereof should not be construed as indicating the Commissions ultimate position on the resolution of NSCCs use of GPM or any other issues in those proceedings.

the term "make available," when used with respect to bids, offers, quotation sizes and aggregate quotation sizes supplied to quotation vendors by an exchange or association, shall mean to provide circuit connections at the premises of the exchange or association supplying such data, or at a common location determined by mutual agreement of the exchanges and associations, for the delivery of such data to quotation vendors.

See also NYSE Letter, supra note 126, at 28.

1 17 CFR §240.17a-15.

2 15 U.S.C. §§78a et seq., as amended by Pub. L. No. 94-29 (June 4, 1975), 89 Stat. 97, 1975 U.S. Code Cong. & Ad. News 97.

3 17 CFR §240.11Aa3-1.

4See Securities Exchange Act Release No. 16590 (February 19, 1980), ("Rule 11Ac1-2 Adopting Release").

5See Securities Exchange Act Release No. 14416, at 41-44, (January 26, 1978) ("January Statement"), 43 FR 4354, 4360 in which the Commission described six initiatives designed to facilitate the establishment of a national market system. One of the initiatives was considering "further action with respect to... permitting... retransmission of the entire data stream of transaction information contained in... the consolidated system on a continuous basis by securities information processors other than the Securities Industry Automation Corporation ("SIAC"), the current processor the consolidated system." Id. at 44, 43 FR at 4360 (footnote omitted).

6See Section 11A(c)(1)(B) of the Act, 15 U.S.C. §78k-1(c)(1)(B). See also Sections 2, 6(a), 6(b)(5), 9, 10, 11A(a)(1)(C), 11A(a)(2), 11A(b), 15(c), 15A(a), 15A(b)(6), 17(a) and 23(a) of the Act, 15 U.S.C. §§78b, 78f(a), 78f(b)(5), 78i, 78j, 78k-1(a)(1)(C), 78k-1(a)(2), 78k-1(b), 78o(c), 78o-3(a), 78o-3(b)(6), 78q(a) and 78w(a); Securities Exchange Act Release No. 15926, at 30-31, (June 15, 1979), 44 FR 36912, 36917.

7 Securities Exchange Act Release No. 15250 (October 20, 1978) ("Transactions Reports Release"), 43 FR 50606.

8 Pub. L. No. 94-29 (June 4, 1975), 89 Stat. 97, 1975 U.S. Code Cong. & Ad. News 97.

9 Rule 17a-15, as adopted on November 8, 1972, required every exchange and association, and every broker-dealer not an exchange or association member which executed transactions in listed securities not reported by an exchange or association pursuant to the rule, to file with the Commission a plan providing for collecting, processing and disseminating transaction information in securities registered or admitted to unlisted trading privileges on an exchange. The rule also provided that, after January 22, 1973, no person subject to its provisions could make available transaction information on a current and continuing basis except pursuant to such a plan approved by the Commission. See Securities Exchange Act Release No. 9850 (November 8, 1972) ("Adopting Release"), 37 FR 24172. See also Securities Exchange Act Release Nos. 9530 (March 8, 1972) ("First Proposal Release") and 9731 (August 14, 1972) ("Second Proposal Release"), 37 FR 5761 and 19148.

10See Rule 17a-15(i), as amended in 1974. Securities Exchange Act Release No. 11097 (November 13, 1974), 39 FR 40941.

11 For example, Section 11A(b)(5)(A) of the Act is substantively identical to Rule 17a15(i)(1) and (i)(2) but the Act requires registered securities information processors to file a notice of denial with the Commission and permits the Commission to grant stays summarily. In order to resolve these inconsistencies, the appeals provisions of the proposal were limited to actions which were not reviewable pursuant to Section 11A(b)(5) or Section 19(d) of the Act. However, the procedures of Rule 17a-15(i) were retained in the proposal of rule 11Aa3-1 in modified form because those provisions are somewhat broader in scope than the provisions of Section 11A(b)(5).

12See Section 11A(c)(1)(A) and (B). These display requirements, currently contained in Rule 17a-15, have been relocated in Rule 11Ac1-2 which was proposed simultaneously with these amendments. See Rule 17a-15(b) and Rule 11Ac1-2, Securities Exchange Act Release No. 15251 (October 20, 1978) ("Vendor Display Release"), 43 FR 50615. Rule 11Aa3-1 would, however, continue to contain the requirement that any transaction reporting plan filed pursuant to the Rule provide that transaction reports or last sale data made available to any vendor for purposes of display on interrogation devices be accompanied by a market identifier. Rule 11Aa3-1(b)(4). The Commission has adopted Rule 11Ac1-2 simultaneously with the adoption of Rule 11Aa3-1. See 11Ac1-2 Adopting Release, supra note 4.

13 Rule 17a-15(a).

14See January Statement, supra note 5, at 45-46, 43 FR at 4360-61. Since the Commission published the Transactions Reports Release, the Commission has also published for comment proposed rule 11Aa2-1 which would establish certain procedures and requirements for the designation of securities as qualified for trading in a national market system. Securities Exchange Act Release No. 15926 (June 15, 1979), 44 FR 36912. As proposed, the rule contemplates that certain securities, some of which are not presently listed on an exchange, will automatically be designated for trading in a national market system (defined as tier-one securities in that release) and that under the procedures in the rule other securities may become designated for trading in a national market system (defined as tier-two securities). Depending on the form of Rule 11Aa2-1, if and when adopted, changes may be required in Rule 11Aa3-1. If so, the Commission anticipates making conforming amendments to Rule 11Aa3-1.

15 Rule 17a-15 was adopted prior to the passage of the 1975 Amendments which specifically direct the Commission to facilitate the establishment of a national market system (Section 11A(a)(2) of the Act) and grant the Commission plenary authority: (1) to regulate, among other matters, the manner in which securities information processors collect, process, distribute or publish transaction information and (2) to ensure the availability of such information. Sections 11A(c) and 11A(a)(C)(1)(iii) of the Act. Therefore, the Commission determined to propose Rule 11Aa3-1 under Section 11A of the Act and the other sections of the Act under which Rule 17a-15 was originally promulgated. See Transactions Reports Release, supra note 7, 10-13, 43 FR 50607-08, and note 6 supra.

16 Proposed Rule 11Aa3-1(b)(5), (c)(1) and (c)(2). Since the publication of Rule 11Aa3-1 as a proposal, the Commission has also proposed Rule 11Aa3-2 which would establish generic procedures and requirements for national market system plans. See Securities Exchange Act Release No. 16410 (December 7, 1979) ("Rule 11Aa3-2 Release"), 44 FR 72606. See also Securities Exchange Act Release No. 15838 (May 18, 1972), 44 FR 30924. If Rule 11Aa3-2 is adopted, the Commission plans to conform Rule 11Aa3-1 with Rule 11Aa3-2.

17 Proposed Rule 11Aa3-1(c)(3). Cf. Section 19(b)(3) of the Act.

18 Proposed Rule 11Aa3-1(b)(4)(vi), Rule 17a-15(b)(4).

19 For a more complete description of those securities included in Networks A and B, see note 9, supra.

20 Rule 11Aa3-1(a)(12), as adopted, defines the term "vendor" to mean:

21 The ticker networks provide information to moving tickers at the rate of 900 characters per minute, the generally accepted maximum speed at which a linear wall display of this information would be readable. As a result of this speed limitation, during periods of active trading, complete transaction information cannot be disseminated with considerable delay. Therefore, the CTA has adopted procedures whereby during such periods certain information, such as a transactions volume, is deleted from the relevant low speed data stream, but not the high speed data stream. Despite these measures, the ticker networks often report transactions several minutes after they are reported on the high speed data stream. It has been argued that the flexibility of interrogation device cathode ray tube terminals would permit a vendor creating a moving ticker from the high speed data stream to avoid these delays or at least include deleted information without incurring further delays. See text accompanying notes 27-28, infra. In addition, the CTA has approved certain types of moving tickers which display transaction information only with respect to selected securities. Because the retransmission prohibition requires that these "selective" moving tickers be supplied data from the ticker networks, they are subject to the same delays and deletions as are moving tickers displaying transaction information for all securities on the networks. If vendors are permitted to retransmit data to create a selective moving ticker, such a display would not be delayed, even if information were displayed at 900 characters per minute. Transactions Reports Release, supra note 7, at 29 n.55, 43 FR at 50610 n.55. See generally id. at 7 n.12 and 15-16, 43 FR at 50609 n.12 and 50610.

22See CTA Plan, supra note 9, §VIII(b), at 28 ("Vendors will not be permitted to retransmit on a continuous basis the consolidated last sale prices received by them, except as may be incidental to the operation of approved interrogation devices or display devices."); §V(e), at 18, ("Consolidated last sale prices shall be made available to...vendors...by means of a high speed line...for the purpose of servicing approved interrogation devices...and not for the purpose of furnishing a ticker display."). The CTA does, however, provide a delayed dissemination service which is not subject to this restriction. Persons receiving this low speed data stream (which is delayed 15 minutes and so identified) are permitted to retransmit without restriction and subscribers ultimately receiving the information are required to pay subscriber charges to the CTA.

23 A subscriber pays the CTA a first unit charge for the first ticker as well as for the first interrogation device. If an interrogation device is capable of displaying a moving ticker, two fees are assessed: one for the moving ticker and one for receiving transaction and other information through the interrogation device itself. A subscriber pays an additional, lesser charge for each additional ticker or interrogation device. The fees to the CTA are in addition to the fees subscribers pay to vendors for furnishing particular ticker display or interrogation devices. Vendors are also required to pay various charges to the CTA for receipt of transaction information from the high speed data stream.

24 These CTA charges are uniform throughout the continental United States.

25See Second Plan Release, supra note 9.

26Id. at 8-10, 39 FR at 10035-36. See Transactions Reports Release, supra note 7, at 18-19, 43 FR at 50608-09. The 1975 Amendments eliminated the Commissions concern regarding its regulatory jurisdiction with respect to the retransmission issue. See id. at 12-13, 43 FR 50607.

27 Letter from Phillip Siegal, Reuters, to the Securities and Exchange Commission ("SEC"), dated February 4, 1976, and letter from Dennis J. Block, Weil, Gotshal & Manges, to Bart Friedman, Division of Market Regulation, SEC, dated February 4, 1976. These letters are contained in File No. S7-620.

28See Securities Exchange Act Release Nos. 12161 (March 3, 1976) and 12318 (April 6, 1976), 41 FR 10499 and 15924.

29See Letter from Richard Brandt, President, Trans-Lux Corporation ("Trans-Lux") to George A. Fitzsimmons, Secretary, SEC, dated March 29, 1976; Letter from M. Sumner, Securities Industry Liaison, Information Systems Division, Bunker Ramo Corporation ("Bunker Ramo"), to George A. Fitzsimmons, Secretary, SEC, dated March 31, 1976; Letter from Francis J. Palamera, Chairm