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New rules may break voting stalemate over Nasdaq data processor

Wednesday, November 5, 2014 - 06:48
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A stalemate over selecting a new manager of a data processor that publishes quotes and sale prices for Nasdaq-listed stocks may be resolved because of new rules that ease voting requirements, according to a recent regulatory filing.

[NEW YORK] A stalemate over selecting a new manager of a data processor that publishes quotes and sale prices for Nasdaq-listed stocks may be resolved because of new rules that ease voting requirements, according to a recent regulatory filing.

The next vote by the 14 exchanges and the Financial Industry Regulatory Authority that are members of a committee that oversees the "securities information processor" (SIP) for Nasdaq stocks is scheduled for Wednesday.

Last week, the Securities and Exchange Commission approved rule changes the exchanges submitted in early October that eased voting requirements on fees and other issues related to the SIP that Nasdaq OMX Group Inc has traditionally managed.

The new rules might break a deadlock that has persisted after half a dozen votes and caught the SEC's attention. Nasdaq and Tradeworx, a proprietary trading firm, are vying for the contract, sources have said.

Stephen Luparello, director of the division of Trading and Markets at the SEC, said the commission is aware of the stalemate, but commission action was not contemplated. "At some point the Commission has the authority to push plan participants in one direction or another, but at this point it's theirs to choose," Luparello told Reuters last week.

The new rules do not address a conflict of interest that exists when an exchange that bids to manage the SIP also votes to select a winner. The Securities Industry and Financial Markets Association, a lobby for brokers and asset managers, complained last month about the conflict.

After a SIP malfunction sparked a three-hour trading halt in August 2013, Nasdaq said it no longer wanted to manage the SIP and demanded changes to the contract for running the processor, including the creation of a limited liability company.

An agreement to form "CTC LLC" will soon be filed in draft form with the SEC, a source at an exchange said.

Janet Angstadt, a securities lawyer at Katten Muchin Rosenman LLP in Chicago, has been the general counsel on formation of CTC, an abbreviation for Consolidated Tape C. The Nasdaq SIP processes information published on Tape C.

Ms Angstadt was formerly general counsel at NYSE Arca, an exchange operated by Intercontinental Exchange Inc, and was senior counsel at the SEC's division of market regulation.

REUTERS