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Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES2

Share, 813 Trading Rating, 814
Quoting Share, 815 Quote Rating, 816
and Quote Credit. 817
Paragraph d of Exhibit D specifies a cap on the Net Distributable Operating Income of the CT Plan. In particular, if the Initial Allocation of Net Distributable Operating Income equals an amount greater than $4.00 multiplied by the total number of qualified Transaction Reports 818 in such Eligible Security during the calendar year, the excess amount will be subtracted from the Initial Allocation for such Eligible Security and reallocated among all Eligible Securities in direct proportion to the dollar volume of Transaction Reports disseminated by the Processors in Eligible Securities during the calendar year.819
Paragraph j of Exhibit D specifies the formula for determining the Net Distributable Operating Income for any calendar year. Generally, the Net Distributable Operating Income is equal to: 1 All cash revenues, funds, and proceeds received by the Company during such calendar year, including all revenues from A the CT Feeds and B
813 Paragraph e of Exhibit D of the CT Plan defines Trading Share as multiplying i an amount equal to fifty percent of the Security Income Allocation for the Eligible Security by ii the Members Trade Rating in the Eligible Security.
814 Paragraph f of Exhibit D of the CT Plan defines Trade Rating as taking the average of A
the Members percentage of the total dollar volume of Transaction Reports disseminated by the Processors in the Eligible Security during the calendar year, and B the Members percentage of the total number of qualified Transaction Reports disseminated by the Processors in the Eligible Security during the calendar year.
815 Paragraph g of Exhibit D of the CT Plan defines Quoting Share as multiplying A an amount equal to fifty percent of the Security Income Allocation for the Eligible Security by B the Members Quote Rating in the Eligible Security.
816 Paragraph h of Exhibit D of the CT Plan defines Quote Rating as dividing A the sum of the Quote Credits earned by the Member in such Eligible Security during the calendar year by B the sum of the Quote Credits earned by all Members in such Eligible Security during the calendar year.
817 Paragraph i of Exhibit D of the CT Plan states that a Member shall earn one Quote Credit for each second of time with a minimum of one full second multiplied by dollar value of size that an automated best bid offer transmitted by the Member to the Processors during regular trading hours is equal to the price of the National Best Bid and Offer in the Eligible Security and does not lock or cross a previously displayed automated quotation as defined under Rule 600 of Regulation NMS. The dollar value of size of a quote shall be determined by multiplying the price of a quote by its size.
818 Paragraph d of Exhibit D of the CT Plan provides that a Transaction Report with a dollar volume of: i $5,000 or more shall constitute one qualified Transaction Report and that a Transaction Report with a dollar volume of less than $5,000 shall constitute a fraction of a qualified Transaction Report that equals the dollar volume of the Transaction Report divided by $5,000.
819 See Paragraph d of Exhibit D of the CT Plan.

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FINRA quotation data and last sale information for securities classified as OTC Equity Securities under FINRAs Rule 6400 Series FINRA OTC Data A and B collectively, the Data Feeds, and C any membership fees;
less 2 6.25% of the revenue received by the Company during such calendar year attributable to the segment of the Data Feeds reflecting the dissemination of information with respect to Network C Securities and FINRA OTC Data; less 3 reasonable working capital and contingency reserves for such calendar year, as determined by the Operating Committee, and all costs and expenses of the Company during such calendar year.820
Paragraph k of Exhibit D specifies that once a new Member implements a Processor-approved electronic interface with the Processors, the Member will become eligible to receive revenue.821
Paragraph l of Exhibit D specifies that, generally, all quarterly payments or billings must be made to each eligible Member within 45 days after the end of each calendar quarter in which the Member is eligible to receive revenue.822 Additionally, the Company will cause the Administrator to provide Members with written estimates of each Members quarterly Net Distributable Operating Income within 45 calendar days of the end of the quarter, and estimated quarterly payments or billings must be based on such estimates.823
Paragraph m of Exhibit D specifies that the Company will cause the Administrator to submit to the Members a quarterly itemized statement setting forth the basis upon which Net Distributable Operating Income was calculated.824 Finally, the Company, subject to the voting requirements pursuant to Article IV, Section 4.3, will cause the Administrator to engage an independent auditor to audit the Administrators costs or other calculations.825
In the Notice, the Commission solicited comment on Article IX, including allocations to the Members,826
820 See
Paragraph j of Exhibit D of the CT Plan.
Paragraph k of Exhibit D of the CT Plan.
822 Paragraph l of Exhibit D also specifies conditions for the quarterly payments or billings to Members and interest accrual procedures.
823 See Paragraph l of Exhibit D of the CT Plan.
824 Paragraph m of Exhibit D of the CT Plan also specifies that the Net Distributable Operating Income shall be adjusted annually based solely on the quarterly itemized statement audited pursuant to the annual audit. The Company shall cause the Administrator to pay or bill Members for the audit adjustments within thirty days of completion of the annual audit.
825 See Paragraph m of Exhibit D of the CT Plan.
826 See Notice, supra note 3, 85 FR at 64572
Question 47.
821 See
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and the definition of the term Net Distributable Operating Income in paragraph j of Exhibit D to the CT
Plan.827 One commenter argues that the provision in paragraph j of Exhibit D
the CT Plan, which provides that 6.25%
of revenue received by the LLC be paid to FINRA as compensation for FINRA
OTC Data, is an antiquated revenue allocation provision that serves no ongoing purpose and should be removed.828 In response, one commenter objects to the suggestion that FINRA OTC Data be removed from the CT Plan, arguing that the suggestion is outside the scope of the Commissions proposal and related directive.829 This commenter further argues that it would be inappropriate to modify the CT Plan to restructure the data covered by the CT Plan or the revenue allocation provisions in response to that suggestion.830
While the Commission acknowledges the commenters concerns with respect to the inclusion in the CT Plan of the 6.25% revenue allocation to FINRA, the Commission believes that the provisions of the Commissions recently adopted Market Data Infrastructure Rule will ultimately resolve this issue.831 First, new Rule 614 does not include OTC
data within the definition of core data to be disseminated by the effective NMS
plans for equity market data.832 And second, Rule 614e specifically requires the effective NMS plans for equity market data to file an amendment conforming the plans to the new consolidation model under the Market Data Infrastructure Rule.833 Thus, when the CT Plan becomes the effective NMS
plan for dissemination of equity market data under the Market Data Infrastructure Rule, the CT Plan will no longer include OTC data within the definition of core data, and no revenue allocation of CT Plan revenues 827 See
id. at 64573 Question 54.
Letter I, supra note 20, at 31. This commenter also briefly describes a history of the revenue allocation formula and shares its previous proposals for modifying the revenue allocation formula. See id. at 2930. In particular, the commenter states that it i favors revising the revenue allocation formula to reward exchanges that display quotes that result in an execution; and ii proposes removing the Over-the-Counter Bulletin Board OTCBB data from the Nasdaq SIP to lower costs. See id. at 30.
829 See Letter from Marcia E. Asquith, Executive Vice President, Board and External Relations, FINRA Nov. 24, 2020 FINRA Letter II, at 4.
830 See FINRA Letter II, supra note 829, at 46
emphasizing that there are important benefits of including OTC equities data in the data feeds provided under the UTP Plan.
831 See Market Data Infrastructure, Securities Exchange Act Release No. 90610 Dec. 9, 2020, 86
FR 18596 File No. S70320 Final Rule.
832 See id. at 1861415.
833 See id. at 18681.
828 Nasdaq
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