Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Rule 11Ac1-1 -- Dissemination of Quotations

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1. Definitions. For the purposes of this section:
   
   
   1. The term aggregate quotation size shall mean the sum of the quotation sizes of all responsible brokers or dealers who have communicated on the floor of any exchange bids or offers for a reported security at the same price.

   2. The term association shall mean any association of brokers and dealers registered pursuant to Section 15A of the Act.

   3. The terms best bid and best offer shall mean the highest priced bid and the lowest price offer.

   4. The terms bid andoffer shall mean the bid price or the offer price most recently communicated by an exchange member or OTC market marker to any broker or dealer, or to any customer, at which it 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.

   5. The term consolidated system means the consolidated transaction reporting system, including a transaction reporting system operating pursuant to an effective national market system plan.

   6. The term covered security shall mean any reported security and any other security for which a transaction report, last sale data or quotation information is disseminated through an automated quotation system as described in Section 3(a)(51)(A)(ii).

   7. The term effective transaction reporting plan shall have the meaning provided in Rule 11Aa3-1(a)(3).

   8. The term electronic communications network, for the purposes of Rule 11Ac1-1(c)(5), shall mean any electronic system that widely disseminates to third party orders entered therein by an exchange market maker or OTC market maker, and permits such orders to be executed against in whole or in part; except that the term electronic communications network shall not include:
      1. Any system that crosses multiple orders at one or more specified times at a single price set by the ECN (by algorithm or by any derivative pricing mechanism) and does not allow orders to be crossed or executed against directly by participants outside of such times; or

      2. Any system operated by, or on behalf of, an OTC market maker or exchange market maker that executes customer orders primarily against the account of such market maker as principal, other than riskless principal.

   9. The term exchange market maker shall mean any member of a national securities exchange ("exchange") who is registered as a specialist or market maker pursuant to the rules and regulations of such exchange.

   10. The term exchange-traded security shall mean any reported security or class of covered securities listed and registered, or admitted to unlisted trading privileges, on an exchange; provided, however, That securities not listed on any exchange that are traded pursuant to unlisted trading privileges are excluded.

   11. 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.

   12. The term odd-lot shall mean an order for the purchase or sale of a reported security in an amount less than a round lot.

   13. The term OTC market maker shall mean any dealer who holds himself out as being willing to buy from and sell to its customers,or otherwise, a covered security for its own account on a regular and continuous basis otherwise than on a exchange in amounts of less than block size.

   14. The terms plan processor and effective transaction reporting plan shall have the meaning provided in Rule11Aa3-2(a)(7) .

   15. The term published aggregate quotation size shall mean the aggregate quotation size calculated by an exchange and displayed by a quotation vendor on a terminal or other display device at the time an order is presented for execution to a responsible broker or dealer.

   16. The terms published bid and published offer shall mean the bid or offer of a responsible broker or dealer for a covered security communicated by it to its exchange or association pursuant to this section and displayed by a quotation vendor on a terminal or other display device at the time an order is presented for execution to such responsible broker or dealer.

   17. The term published quotation size shall mean the quotation size of a responsible broker or dealer communicated by it to its exchange or association pursuant to this section and displayed by a quotation vendor on a terminal or other display device at the time an order is presented for execution to such responsible broker or dealer.

   18. The term quotation size, when used with respect to a responsible broker's or dealer's bid or offer for a reported security, shall mean
       
       
       1. The number of shares (or units of trading) of that reported security which such responsible broker or dealer has specified, for purposes of dissemination to quotation vendors, that it is willing to buy at the bid price or sell at the offer price comprising its bid or offer, as either principal or agent, or

       2. In the event such responsible broker or dealer has not so specified, a normal unit of trading for that reported security.

   19. 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.

   20. The term reported security means any security or class of securities for which transaction reports are collected, processed and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in listed options.
       
       
   21. The term responsible broker or dealer shall mean:
       
       
       1. When used with respect to bids or offers communicated on an exchange, any member of such exchange who communicates to another member on such exchange, at the location (or locations) designated by such exchange for trading in a covered security, a bid or offer for such covered security, as either principal or agent; provided, however, That, in the event two or more members of an exchange have communicated on such exchange bids or offers for a covered security at the same price, each such member shall be considered a "responsible broker or dealer" for that bid or offer, subject to the rules of priority and precedence then in effect on that exchange; and further provided, That for a bid or offer which is transmitted from one member of an exchange to another member who undertakes to represent such bid or offer on such exchange as agent, only the last such member who undertakes to represent such bid or offer as agent shall be considered the "responsible broker or dealer" with respect to that bid or offer; and
          
          
       2. When used with respect to bids and offers communicated by a member of an association to another broker or dealer or to a customer otherwise than on an exchange, the member communicating the bid or offer (regardless of whether such bid or offer is for its own account or on behalf of another person).
          
          
   22. The term revised bid or offer shall mean a market maker's bid or offer which supersedes its published bid or published offer.

   23. The term revised quotation size shall mean a market maker's quotation size which supersedes its published quotation size.

   24. The term specified persons, when used in connection with any notification required to be provided pursuant to paragraph (b)(3) of this section and any election (or withdrawal thereof) permitted under paragraph (b)(5) of this section, shall mean:
       
       
       1. Each quotation vendor;
          
          
       2. Each plan processor; and
          
          
       3. The processor for the Options Price Reporting Authority (in the case of a notification with respect to a subject security which is a class of securities underlying options admitted to trading on any exchange).

   25. The term subject security shall mean:
       
       
       1. With respect to an exchange:
          
          
          1. Any exchange-traded security other than a security for which the executed volume of such exchange, during the most recent calendar quarter, comprised one percent or less of the aggregate trading volume for such security as reported in the consolidated system; and
             
             
          2. Any other covered security for which such exchange has in effect an election, pursuant to paragraph (b)(5)(i) of this section, to collect, process, and make available to quotation vendors, bids, offers, quotation sizes, and aggregate quotation sizes communicated on the floor of such exchange; and

       2. With respect to a member of an association;
          
          
          1. Any exchange-traded security for which such member acts in the capacity of an OTC market maker unless the executed volume of such member, during the most recent calendar quarter, comprised one percent or less of the aggregate trading volume for such security as reported in the consolidated system; and

          2. Any other covered security for which such member acts in the capacity of an OTC market maker and has in effect an election, pursuant to paragraph (b)(5)(ii) of this section, to communicate to its association bids, offers and quotation sizes for the purpose of making such bids, offers and quotation sizes available to quotation vendors.
       
       
       
   26. The term customer means any person that is not a registered broker-dealer.

   27. The term listed option means any option traded on a registered national securities exchange or automated facility of a national securities association.

   28. The term options class means all of the put option or call option series overlying a security, as defined in Section 3(a)(10) of the Act.

   29. The term options series means the contracts in an options class that have the same unit of trade, expiration date, and exercise price, and other terms or conditions.

   30. The term trading rotation means, with respect to an options class, the time period on an exchange during which:
       
       
       1. Opening, re-opening, or closing transactions in options series in such options class are not yet completed; and

       2. Continuous trading has not yet commenced or has not yet ended for the day in options series in such options class.

2. Dissemination requirements for exchanges and associations.
   1. Every exchange and association shall establish and maintain procedures and mechanisms for collecting bids, offers, quotation sizes and aggregate quotation sizes from responsible brokers or dealers who are members of such exchange or association, processing such bids, offers and sizes, and making such bids, offers and sizes available to quotation vendors, as follows:
      
      
      1. Each exchange shall at all times such exchange is open for trading, collect, process and make available to quotation vendors the best bid, the best offer, and aggregate quotation sizes for each subject security listed or admitted to unlisted trading privileges which is communicated on any exchange by any responsible broker or dealer, but shall not include:
         
         
         1. Any bid or offer executed immediately after communication and any bid or offer communicated by a responsible broker or dealer other than an exchange market maker which is canceled or withdrawn if not executed immediately after communication; and

         2. Any bid or offer communicated during a period when trading in that security has been suspended or halted, or prior to the commencement of trading in that security on any trading day, on that exchange.

      2. Each association shall, at all times that 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 best bid, best offer, and quotation sizes communicated otherwise than on an exchange by each member of such association acting in the capacity of an OTC market maker for each subject security and the identity of that member (excluding any bid or offer executed immediately after communication), except during any period when over-the-counter trading in that security has been suspended.

   2. Each exchange shall, with respect to each published bid and published offer representing a bid or offer of a member with respect to a subject security, establish and maintain procedures for ascertaining and disclosing to other members of that exchange, upon presentation of orders sought to be executed by them in reliance upon paragraph (c)(2) of this section, the identity of each responsible broker or dealer who made such bid or offer and the quotation size associated with it.
      
      
   3. 1. If, at any time an exchange is open for trading, such exchange determines, pursuant to rules and regulations approved by the Securities and Exchange Commission pursuant to Section 19(b)(2) of the Act, that the level of trading activities or the existence of unusual market conditions is such that the exchange is incapable of collecting, processing, and making available to quotation vendors the data with respect to a subject security required to be made available pursuant to paragraph (b)(1) of this section in a manner that accurately reflects the current state of the market on such exchange, such exchange shall immediately notify all specified persons of that determination. Upon such notification, responsible brokers or dealers who are members of that exchange shall be relieved of their obligation under paragraphs (c)(2) and (d)(3) of this section and such exchange shall be relieved of its obligations under paragraphs (b)(1) and (2) of this section with respect to that security: Provided, however, That such exchange will continue, to the maximum extent practicable under the circumstances, to collect, process, and make available to quotation vendors such data for that security in accordance with paragraph (b)(1) of this section.
         
         
      2. During any period an exchange, or any responsible broker or dealer who is a member of that exchange, is relieved of any obligation imposed by this section with respect to any subject security by virtue of a notification made pursuant to paragraph (b)(3)(i) of this section, such exchange shall monitor the activity or conditions which formed the basis for such notification and shall immediately renotify all specified persons when that exchange is once again capable of collecting, processing, and making available to quotation vendors the data with respect to that security required to be made available pursuant to paragraph (b)(1) of this section in a manner that accurately reflects the current state of the market on such exchange. Upon such renotification, any exchange or responsible broker or dealer which had been relieved of any obligation imposed by this section as a consequence of the prior notification shall again be subject to such obligation.

   4. Nothing in this section shall preclude any exchange or association from making available to quotation vendors indications of interest or bids and offers with respect to a subject security at any time such exchange or association is not required to do so pursuant to paragraph (b)(1) of this section.
      
      
   5. 1. Any exchange may make an election for purposes of paragraph (a)(25)(i)(B) of this section for any covered security, by collecting, processing, and making available bids, offers, quotation sizes, and aggregate quotation sizes in that security; except that for any covered security previously listed or admitted to unlisted trading privileges on only one exchange and not traded by any OTC market maker, such election shall be made by notifying all specified persons, and shall be effective at the opening of trading on the business day following such notification.
         
         
      2. Any member of an association acting in the capacity of an OTC market maker may make an election for purposes of paragraph (a)(25)(ii)(B) of this section for any covered security, by communicating to its association bids, offers, and quotation sizes in that security; except that for any other covered security listed or admitted to unlisted trading privileges on only one exchange and not traded by any other OTC market maker, such election shall be made by notifying its association and all specified persons, and shall be effective at the opening of trading on the business day following notification.
         
         
      3. The election of an exchange or member of an association for any reported security pursuant to this paragraph (b)(5) shall cease to be in effect if such exchange or member ceases to make available or communicate bids, offers, and quotation sizes in such security.
         
         
3. Obligations of responsible brokers and dealers.
   
   
   1. Every responsible broker or dealer shall promptly communicate to its exchange or association (as the case may be), pursuant to the procedures established by that exchange or association, its bids, offers, and quotation sizes with respect to any subject security.
      
      
   2. Subject to the provisions of paragraph (c)(3) of this section, every responsible broker or dealer shall be obligated to execute any order to buy or sell a subject security, other than an odd-lot order, presented to him by another broker or dealer, or any other person belonging to a category of persons with whom such responsible broker or dealer customarily deals, at a price at least as favorable to such buyer or seller as the bid price or offer price comprising such responsible broker's or dealer's published bid or published offer (exclusive of any commission, commission equivalent or differential customarily charged by such responsible broker or dealer in connection with execution of any such order) in any amount up to its published quotation size.
      
      
   3. 1. No responsible broker or dealer shall be obligated to execute a transaction for any subject security as provided in paragraph(c)(2) of this section to purchase or sell that subject security in an amount greater than such revised quotation if:
         1. Prior to the presentation of an order for the purchase or sale of a subject security, a responsible broker or dealer has communicated to its exchange or association, pursuant to paragraph (c)(1) of this section, a revised quotation size; or

         2. At the time an order for the purchase or sale of a subject security is presented, a responsible broker or dealer is in the process of effecting a transaction in such subject security, and immediately after the completion of such transaction, it communicates to its exchange or association a revised quotation size, such responsible broker or dealer shall not be obligated by paragraph (c)(2) of this section to purchase or sell that subject security in an amount greater than such revised quotation size.
            
            
      2. No responsible broker or dealer shall be obligated to execute a transaction for any subject security as provided in paragraph (c)(2) of this section if:
         
         
         1. Before the order sought to be executed is presented, such responsible broker or dealer has communicated to its exchange or association pursuant to paragraph (c)(1) of this section, a revised bid or offer; or
            
            
         2. At the time the order sought to be executed is presented, such responsible broker or dealer is in the process of effecting a transaction in such subject security, and, immediately after the completion of such transaction, such responsible broker or dealer communicates to its exchange or association pursuant to paragraph (c)(1) of this section, a revised bid or offer: Provided, however, That such responsible broker or dealer shall nonetheless be obligated to execute any such order in such subject security as provided in paragraph (c)(2) of this section at its revised bid or offer in any amount up to its published quotation size or revised quotation size.
            
            
   4. Subject to the provisions of paragraph (b)(4) of this section:
      
      
      1. No exchange or OTC market maker may make available, disseminate or otherwise communicate to any quotation vendor, directly or indirectly, for display on a terminal or other display device any bid, offer, quotation size, or aggregate quotation size for any covered security which is not a subject security with respect to such exchange or OTC market maker; and
         
         
      2. No quotation vendor may disseminate or display on a terminal or other display device any bid, offer, quotation size, or aggregate quotation size from any exchange or OTC market maker for any covered security which is not a subject security with respect to such exchange or OTC market maker.

   5. 1. Entry of any period order for a covered security by an exchange market maker or OTC market maker in that security into an electronic communications network that widely disseminates such order shall be deemed to be:
         
         
         1. A bid or offer under this section, to be communicated to the market makerís exchange or association pursuant to paragraph (C) of this section for at least the minimum quotation size that is required by the rules of the market makerís exchange or association if the priced order is for the account of a market maker, or the actual size of the order up to the minimum quotation size required if the priced order is for the account of a customer; and
            
            
         2. A communication of a bid or offer to a quotation vendor for display on a display device for purposes of paragraph (c)(4) of this section.
            
            
      2. An exchange market maker or OTC market maker that has entered a priced order for a covered security into an electronic communications network that widely disseminates such order shall be deemed to be in compliance with paragraph (c)(5)(i)(A) of this section if the electronic communications network:
         
         
         1. 1. Provides to an exchange or association(or an exclusive processor acting on behalf of one or more exchanges or associations) the prices and sizes of the orders at the highest buy price and the lowest sell price for such security entered in, and widely disseminated by, the electronic communications network by exchange market makers and OTC market makers for the covered security, and such prices and sizes are included in the quotation data made available by the exchange, association, or exclusive processor to quotation vendors pursuant to this section; and
               
               
            2. Provides, to any broker or dealer, the ability to effect a transaction with a priced order widely disseminated by electronic communications network entered therein my an exchange market maker or OTC market maker that is:
               
               
               1. Equivalent to the ability of any broker or dealer to effect a transaction with an exchange market maker or OTC market maker pursuant to the rules of the exchange or association to which the electronic communications network supplies such bids and offers; and
                  
                  
               2. At the price of the highest priced buy order or lowest priced sell order, or better, for the lesser of the cumulative size of such priced orders entered therein by exchange market makers or OTC market makers at such price, or the size of the execution sought by the broker or dealer, for the covered security; or
                  
                  
         2. Is an alternative trading system that:
            
            
            1. Displays orders and provides the ability to effect transactions with such orders under Rule 301(b)(3); and
               
               
            2. Otherwise is in compliance with Regulation ATS, Rule 300 through Rule 303.
               
               
4. Transactions in listed options.
   
   
   1. An exchange or association:
      
      
      1. Shall not be required, under paragraph (b) of this section, to collect from responsible brokers or dealers who are members of such exchange or association, or to make available to quotation vendors, the quotation sizes and aggregate quotation sizes for listed options, if such exchange or association establishes by rule and periodically publishes the quotation size for which such responsible brokers or dealers are obligated to execute an order to buy or sell an options series that is a subject security at its published bid or offer under paragraph (c)(2) of this section;
         
         
      2. May establish by rule and periodically publish a quotation size, which shall not be for less than one contract, for which responsible brokers or dealers who are members of such exchange or association are obligated under paragraph (c)(2) of this section to execute an order to buy or sell a listed option for the account of a broker or dealer that is in an amount different from the quotation size for which it is obligated to execute an order for the account of a customer; and
         
         
      3. May establish and maintain procedures and mechanisms for collecting from responsible brokers and dealers who are members of such exchange or association, and making available to quotation vendors, the quotation sizes and aggregate quotation sizes in listed options for which such responsible broker or dealer will be obligated under paragraph (c)(2) of this section to execute an order from a customer to buy or sell a listed option and establish by rule and periodically publish the size, which shall not be less than one contract, for which such responsible brokers or dealers are obligated to execute an order for the account of a broker or dealer.
         
         

   2. If, pursuant to paragraph (d)(1) of this section, the rules of an exchange or association do not require its members to communicate to it their quotation sizes for listed options, a responsible broker or dealer that is a member of such exchange or association shall:
      
      
      1. Be relieved of its obligations under paragraph (c)(1) of this section to communicate to such exchange or association its quotation sizes for any listed option; and
         
         
      2. Comply with its obligations under paragraph (c)(2) of this section by executing any order to buy or sell a listed option, in an amount up to the size established by such exchange's or association's rules under paragraph (d)(1) of this section.
      
      
      
   3. Thirty second response. Each responsible broker or dealer, within thirty seconds of receiving an order to buy or sell a listed option in an amount greater than the quotation size established by an exchange's or association's rules pursuant to paragraph (d)(1) of this section, or its published quotation size must:
      
      
      1. Execute the entire order; or
         
         
      2. 1. Execute that portion of the order equal to at least:
            
            
            1. The quotation size established by an exchange's or association's rules, pursuant to paragraph (d)(1) of this section, to the extent that such exchange or association does not collect and make available to quotation vendors quotation size and aggregate quotation size under paragraph (b) of this section; or
               
               
            2. Its published quotation size; and
               
               
         2. Revise its bid or offer.
            
            
   4. Notwithstanding paragraph (d)(3) of this section, no responsible broker or dealer shall be obligated to execute a transaction for any listed option as provided in paragraph (c)(2) of this section if:
      
      
      1. Any of the circumstances in paragraph (c)(3) of this section exist; or
         
         
      2. The order for the purchase or sale of a listed option is presented during a trading rotation in that listed option.
         
         
5. Exemptions. The Commission may exempt from the provisions of this section, either unconditionally or on specified terms and conditions, any responsible broker or dealer, electronic communications network, exchange, or association 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 mechanism of a national market system.
   
   

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