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Joan C. Conley, Senior Vice President and Corporate

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Joan C. Conley, Senior Vice President and Corporate Joan C. Conley Senior Vice President and Corporate Secretary 805 KING FARM BLVD ROCKVILLE, MD 20850 VIA ELECTRONIC MAIL November 12, 2020 Ms. Vanessa Countryman Secretary U.S. Securities and Exchange Commission 100 F Street NE Washington, DC 20549 Re: Notice of filing of a National Market System Plan Regarding Consolidated Equity Market Data, Release No. 34-90096 (File No. 4-757) Dear Ms. Countryman: The Proposed National Market System (“NMS”) Plan1 is fundamentally flawed. The voting structure that the Commission ordered to be included in the Plan2 exceeds the Commission’s authority under the Securities Exchange Act of 1934 (the “Act”) as well as the Commission’s own regulations, and is arbitrary and capricious in violation of the Administrative Procedure Act (“APA”).3 As Nasdaq stated in its response to the Commission’s initial proposal to direct certain Self-Regulatory Organizations (“SROs”)4 to submit a new NMS Plan, the Order is inconsistent with the statutory authorization for the national market system under Section 11A of the Act5 and Rule 608 under Regulation NMS,6 and is in conflict with the authority granted to SROs by 1 Securities Exchange Act Release No. 90096 (October 6, 2020), 85 Fed. Reg. 64565 (October 13, 2020) (File No. 4-757). 2 See Order Directing the Exchanges and the Financial Industry Regulatory Authority to Submit a New National Market System Plan Regarding Consolidated Equity Market Data, Release No. 34-88827 (May 6, 2020), 85 Fed. Reg. 28702 (May 13, 2020) (File No. 4-757) (the “Order”). Capitalized terms used but not defined herein shall have the meanings assigned to them by the Order. 3 5 U.S.C. § 706. 4 The following SROs submitted the Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe Exchange, Inc., Investors Exchange LLC, Long Term Stock Exchange, Inc., MEMX LLC, Nasdaq BX, Inc., Nasdaq ISE, LLC, Nasdaq PHLX LLC, Nasdaq Stock Market LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., NYSE National, Inc., and Financial Industry Regulatory Authority, Inc. (“FINRA”). 5 15 U.S.C. § 78k-1. 6 17 C.F.R. § 242.608(3). The Nasdaq Stock Market, LLC November 12, 2020 Page 2 of 32 Sections 6 and 19 of the Act.7 As such, Nasdaq and others filed a petition for review in the Court of Appeals for the D.C. Circuit, seeking to vacate the Order.8 All of the statements set forth in Nasdaq’s comment letters on the Order9 and in the opening brief filed on behalf of Nasdaq and the other petitioners in the Court of Appeals, attached as Appendix B, are incorporated herein by reference.10 For all of the reasons stated therein, the Commission should disapprove the proposed Plan. At a minimum, the Commission should take no action with respect to the proposed Plan until the Court of Appeals has ruled on the legality of the Order. In addition to reiterating its prior critiques of the Order and the resulting Plan, Nasdaq also wishes to comment on the Conflict of Interest and Confidentiality provisions of the proposed Plan. The proposed Plan obeys the Commission’s directive to “include provisions designed to address the conflicts of interest of SRO members and Non-SRO Members as outlined in the Conflicts of Interest Approval Orders… [and] provisions designed to protect confidential and proprietary information from misuse as outlined in the Confidentiality Policy Approval Orders.”11 The Conflicts of Interest Approval Orders12 and Confidentiality Policy Approval Orders,13 in turn, substantively modified proposed amendments that had been filed by the current Equity Data Plans. As a result, the proposed Plan would perpetuate the arbitrary and 7 15 U.S.C. §§ 78f, 78s. 8 See The Nasdaq Stock Market LLC, et al., v. Securities and Exchange Commission, Case No. 20-1181 (D.C. Cir.). 9 See Letter from Joan Conley to Vanessa Countryman re Notice of Proposed Order Directing the Exchanges to Submit a New National Market System Plan, Securities Exchange Act Release No. 87906 (January 8, 2020), 85 FED. REG. 2164 (January 14, 2020) (File No. 4-757) (comments on proposed order) available at https://www.sec.gov/comments/4-757/4757-6892318-210936.pdf; Letter from Joan Conley to Vanessa Countryman re Notice of Proposed Order Directing the Exchanges to Submit a New National Market System Plan, Securities Exchange Act Release No. 87906 (January 8, 2020), 85 FR 2164 (January 14, 2020) (File No. 4-757) (New consolidated data plan) (February 28, 2020) (discussion of relationship of proposed Order and Market Data Infrastructure Proposal), available at https://www.sec.gov/comments/4-757/4757-6892874-211004.pdf. 10 See Appendix B, The Nasdaq Stock Market LLC, et al. v. Securities and Exchange Commission, Opening Brief for Petitioners, Case No. 20-1181 (D.C. Cir.). 11 See Order, 85 Fed. Reg. at 28730 (May 13, 2020). 12 See Consolidated Tape Association; Order Approving the Thirtieth Substantive Amendment to the Second Restatement of the CTA Plan and Twenty-Second Substantive Amendment to the Restated CQ Plan, as Modified by the Commission, Concerning Conflicts of Interest, Securities Exchange Act Release No. 88823 (May 6, 2020), 85 Fed. Reg. 28046 (May 12, 2020) (File No. SR-CTA/CQ-2019-01); Joint Industry Plan; Order Approving the Forty- Seventh Amendment to the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges, as Modified by the Commission, Concerning a Confidentiality Policy, Securities Exchange Act Release No. 88826 (May 6, 2020), 85 Fed. Reg. 28069 (May 12, 2020) (File No. S7-24-89). 13 See Consolidated Tape Association; Order Approving the Thirty-Third Substantive Amendment to the Second Restatement of the CTA Plan and Twenty-Fourth Substantive Amendment to the Restated CQ Plan, as Modified by the Commission, Concerning a Confidentiality Policy, Securities Exchange Act Release No. 88825 (May 6, 2020), 85 Fed. Reg. 28090 (May 12, 2020) (File No. SR-CTA/CQ-2019-04); Joint Industry Plan; Order Approving the Forty-Seventh Amendment to the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges, as Modified by the Commission, Concerning a Confidentiality Policy, Securities Exchange Act Release No. 88826 (May 6, 2020), 85 Fed. Reg. 28069 (File No. S7-24-89). The Nasdaq Stock Market, LLC November 12, 2020 Page 3 of 32 capricious rulemaking undertaken by the Commission when it failed to provide notice or seek comment on its own modifications to the policy language proposed by the Equity Data Plans.14 Accordingly, if the Commission approves the proposed Plan, it should exclude the unlawful Conflict of Interest and Confidentiality provisions from the proposed Plan. At a minimum, while the Commission should, for the reasons discussed above, disapprove the Plan or defer action on it, if it determines to approve it with amendments, it should publish the exact text of its intended amendments and seek comment on them before issuing any approval. The necessity of seeking comment on amendments proposed by the Commission itself is amply demonstrated by the numerous errors and potential unintended consequences visited on the current Equity Data Plans by the Commission’s hasty issuance of the Conflicts of Interest Approval Orders and Confidentiality Policy Approval Orders. Specifically, the resulting policies, as now included in the Equity Data Plans and as proposed to be included in the Plan, give rise to several concerns. If the Commission is inclined to approve the proposed Plan and to include the Conflict of Interest and Confidentiality provisions as part of the Plan, it should first publish for public comment amendments addressing those concerns. As a general matter, the Confidentiality Policy (Exhibit C to the proposed Plan) imposes unreasonable burdens and risks upon SROs, their representatives, and their senior management by failing to recognize that the entire SRO, not its voting representative, is the Plan’s Member,15 and by failing to acknowledge that senior management is ultimately responsible for all aspects of the SRO’s operation, including the participation in national market system plans and compliance with SEC Rule 608. As a result, the Policy language seems to posit that SRO representatives can and should assume sole responsibility for all things related to the Plan, without the ability to seek guidance from SRO senior management, technical advice from other SRO employees, or possibly even legal advice from corporate counsel. Even if such consultations are permitted in some circumstances, the relevant language forces SRO employees to continually evaluate whether particular information is needed by specific individuals for specific purposes. However, it is not the individual, but rather the SRO, that is responsible for compliance with the terms of the Plan and Rule 608. Moreover, it is the SRO and its officers and directors who are subject to enforcement action under Section 19(h) of the Act16 for the failure to comply with the Plan, the Act and rules thereunder. Thus, the approach taken in the Confidentiality Policy creates the risk that SROs and their officers and directors could be held accountable for the actions of an SRO representative, despite being deprived of the ability to adequately supervise him or her. 14 Notably, the language of SEC Rule 608(b)(2), 17 CFR 242.608(b)(2), purporting to allow the Commission to approve an NMS “plan or amendment with such changes…as the Commission may deem necessary or appropriate” cannot override the plain language of the Administrative Procedure Act requiring general notice of a proposed rulemaking to be published in the Federal Register and to “give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments….” 5 U.S.C.
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