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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 10, 2003 Decided July 1, 2003
No. 02-1308
DOMESTIC SECURITIES, INC.,
PETITIONER
v.
SECURITIES AND EXCHANGE COMMISSION,
RESPONDENT
NASDAQ STOCK MARKET, INC.,
INTERVENOR
On Petition for Review of an Order of the
Securities and Exchange Commission
Warren L. Dennis argued the cause for petitioner. With
him on the briefs was Linda Lerner.
Susan S. McDonald, Senior Litigation Counsel, Securities
& Exchange Commission, argued the cause for respondent.
With her on the brief were Meyer Eisenberg, Deputy General
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
Counsel, Jacob H. Stillman, Solicitor, and John W. Avery,
Special Counsel.
Peter E. Greene argued the cause and filed the brief for
intervenor.
Before: SENTELLE, ROGERS and GARLAND, Circuit Judges.
Opinion for the Court filed by Circuit Judge SENTELLE.
SENTELLE, Circuit Judge: Under the Securities Exchange
Act of 1934, 15 U.S.C. § 78a et seq. (2000), the Securities and
Exchange Commission (SEC or Commission) must approve
any changes to the rules of the National Association of
Securities Dealers, Inc. (NASD), the private organization
responsible for self-regulation of the over-the-counter (OTC)
securities market. In 2002, the SEC issued an order approv-
ing a NASD proposal to implement a new computerized
quotation and trade execution system, known as SuperMon-
tage, for the Nasdaq Stock Market, Inc. (Nasdaq). In its
petition for review, Domestic Securities, Inc. (Domestic), an
Electronic Communications Network, challenges a feature of
the trade execution rules governing SuperMontage, arguing
that it discriminates against ECNs and harms competition.
Domestic also challenges the SEC’s approval of an Alterna-
tive Display Facility, which was designed to provide a quota-
tion display mechanism for traders who do not wish to use
SuperMontage. We hold that we lack jurisdiction over Do-
mestic’s challenge to SuperMontage’s trade execution rules
because the rules were approved in an earlier SEC order, and
Domestic failed to seek timely review of that order. We deny
Domestic’s petition for review of the ADF approval order
because the SEC’s order was supported by substantial evi-
dence and was not arbitrary or capricious.
I. Background
A. Statutory and Factual Background
In 1975, Congress enacted amendments to the Securities
Exchange Act of 1934, directing the SEC to ‘‘facilitate the
establishment of a national market system.’’ 15 U.S.C. § 78k–
1(a)(2). Specifically, Congress charged the SEC ‘‘to use
3
modern communication and data processing equipment to link
all securities markets nationwide.’’ Bradford Nat’l Clearing
Corp. v. SEC, 590 F.2d 1085, 1094 (D.C. Cir. 1978); see also
15 U.S.C. § 78k–1(a)(1)(D). In centralizing the market for
securities, Congress sought, inter alia, to promote ‘‘economi-
cally efficient execution of securities transactions’’ while main-
taining ‘‘fair competition’’ between securities brokers and
dealers. Id. § 78k–1(a)(1)(C)(i)-(ii).
NASD has played an important role in the establishment of
the national securities market. NASD is the only ‘‘national
securities association’’ registered with the SEC pursuant to
15 U.S.C. § 78o–3. As a registered national securities associ-
ation, NASD must maintain rules that, inter alia, ‘‘remove
impediments to TTT a free and open market and a national
market system, and TTT protect investors and the public
interest,’’ while permitting neither ‘‘unfair discrimination be-
tween customers, issuers, brokers, or dealers,’’ id. § 78o–
3(b)(6), nor the imposition of ‘‘any burden upon competition
not necessary or appropriate in furtherance of the purposes’’
of the Act, id. § 78o–3(b)(9). See Timpinaro v. SEC, 2 F.3d
453, 456 (D.C. Cir. 1993). In addition, NASD is a self-
regulatory organization (SRO) responsible for regulation of
the OTC securities market, 15 U.S.C. § 78s. As an SRO,
NASD must file with the Commission any proposed change to
its rules. Id. § 78s(b)(1); NASD, Inc. v. SEC, 801 F.2d 1415,
1416 (D.C. Cir. 1986). After notice and comment, the Com-
mission may approve the rule change if it finds that the
change is consistent with the Act and regulations governing
the SRO. 15 U.S.C. § 78s(b)(2)(B).
Since 1971, NASD has operated an electronic automated
quotation system–the NASD Automated Quotation system, or
‘‘Nasdaq,’’ which affords dealers the means to display and
instantaneously update their ‘‘bid’’ and ‘‘ask’’ quotations for
securities, for which they are registered with NASD as
market makers. By 1984, the Nasdaq system had evolved
from providing only price quotations to providing automatic
execution of some trades.
4
Also in the mid–1980s, Instinet developed the first Elec-
tronic Communications Network (ECN or Network), which
provided a private trade execution network for its subscrib-
ers. Subscribers, usually dealers or institutional investors,
could post ‘‘limit orders’’–orders to buy or sell a specific
number of shares of a security at a specific price; the Instinet
computer system matched those orders with the orders of
other subscribers and automatically executed the trades via
computer. Oftentimes, Instinet could provide a better price
than Nasdaq in a given security because market makers were
not required to post on Nasdaq customer limit orders that
were priced better than the market makers’ own best bid or
offer quotations for the same securities. Thus, market mak-
ers could display one set of prices for retail customers on
Nasdaq while offering more favorable prices through Instinet.
To address this discrepancy, in 1996 the SEC adopted the
‘‘order handling rules’’ (OHR or the Rules), which require a
market maker, or an ECN on its behalf, to publish in the
national market the market maker’s best-priced customer
limit orders and to provide trading access to those orders.
See 61 Fed. Reg. 48,290 (Sept. 12, 1996). The Rules brought
market makers’ best-priced limit orders into the national
market system and put ECNs in direct competition with
market makers for the business of customer limit orders. Id.
at 48,307. It also gave non-ECN subscribers access to the
best-priced limit orders displayed on an ECN. Previously,
the ECN had charged each side of a trade executed on its
system–both of whom were subscribers–an execution fee.
Recognizing this, the SEC allowed the network to continue to
impose charges for access to its system, so long as the fee
was ‘‘not structured to discourage access by non-subscriber
broker-dealers.’’ Id. at 48,314 n.272.
After the adoption of the OHR, several companies began
operating ECNs, including the petitioner, Domestic. In 1998,
the Commission adopted Regulation ATS, which, inter alia,
required each network to display all of its limit orders in the
national market system and provide trading access to those
orders. 63 Fed. Reg. 70,844, 70,865–73 (Dec. 22, 1998).
5
Regulation ATS also expressed the Commission’s view that
exchanges, such as Nasdaq, could be operated as for-profit
corporations. Id. at 70,849, 70,882–84. Nasdaq opted to
become a for-profit entity. Although NASD remains the
parent corporation of Nasdaq, the SEC has promulgated
regulations designed to ensure that NASD does not use its
regulatory authority to promote its pecuniary interest in
Nasdaq.
By the late 1990s, Nasdaq had become a virtual trading
floor for the national OTC securities market, offering sophis-
ticated computerized trade execution capabilities. ECNs’
limit orders were displayed alongside the quotations and limit
orders of Nasdaq market makers. Nasdaq’s trade execution
system permitted market participants to enter only a single
quotation on each side of the market for each security into
the system at any one time. The quotations were arranged
as a montage according to price and time. Two types of
execution were available through Nasdaq: (1) SuperSOES,
which allowed participants to execute small orders automati-
cally against the quotation of a market maker; and (2)
SelectNET, which allowed participants to route orders to a
particular market maker or ECN for non-automatic execu-
tion. The automatic execution feature of SuperSOES created
a risk of double liability for an ECN if its displayed quotation
or limit order had been executed internally–e.g., on an ECN’s
internal network–shortly before the SuperSOES automatic
execution occurred. To avoid this risk, the ECNs did not
participate in SuperSOES, but participated only in SelectNet.
Under SelectNet, ECNs received only order delivery, and
could decline to execute the order if it had already been
executed internally. Over time, some ECNs began declining
to execute orders, not because of prior internal execution, but
because the broker submitting the order had failed to pay the
ECN’s SEC-authorized access fees.
In 1999, Nasdaq proposed to implement SuperMontage, a
new trade execution system, to consolidate SuperSOES and
SelectNet and to completely integrate quote and limit order
display with order execution. SuperMontage allows partici-
pants to enter multiple quotations and orders. Participants
6
may choose either to direct an order to a specified market
maker or ECN or to have an order matched generally with
the best price available, with price ties broken by a queue
based on the time the quotation was entered. ECNs that
charge access fees are placed last in the queue at each price
level. Market participants are not required to use Super-
Montage to execute trades, but may choose to continue to use
any other method, including ECNs’ private networks.
Under SuperMontage, ECNs retain their ability to take
order delivery rather than automatic execution. An order
delivery ECN is electronically presented with an order and is
given up to thirty seconds to indicate whether or not it will
accept the order. If the ECN declines the trade, the system
automatically re-routes the order to the next participant in
the SuperMontage queue.
The feature of SuperMontage challenged by Domestic is
known as ‘‘decrementation.’’ Under the decrementation fea-
ture, when an order delivery ECN declines a trade for any
reason, the system treats the ECN’s displayed limit order as
no longer valid and automatically decrements it–or ‘‘zeroes it
out’’–removing it from the SuperMontage display. If an
ECN still wishes to trade the shares over SuperMontage at
the quoted price, it may immediately re-enter the limit order
into the SuperMontage system. The re-entered order, how-
ever, will go to the end of the queue as the most recently
entered quotation at that price.
The Commission claims that decrementation is necessary to
avoid ‘‘locked’’ or ‘‘crossed’’ markets. A locked market occurs
when the highest quoted bid price equals the lowest quoted
ask price. A crossed market occurs when the highest bid
price is greater than the lowest quoted ask price. According
to the SEC, ‘‘continued locking and crossing of the market
can negatively impact market quality’’ and requires manual,
special handling of orders by all market participants until the
quotations are unlocked or uncrossed. SuperMontage avoids
locked and crossed markets by decrementing the limit order
of an ECN that declines to execute a trade.
7
B. Proceedings Before the Commission
The SEC initially published the proposed SuperMontage
rules in December 1999. See 64 Fed. Reg. 68,125 (Dec. 6,
1999). The proposed rules were amended and re-published
several times between December 1999 and November 2000,
and with each publication the SEC solicited and received
public comments. See 65 Fed. Reg. 16,981 (Mar. 30, 2000);
65 Fed. Reg. 49,842 (Aug. 15, 2000); 65 Fed. Reg. 69,084
(Nov. 15, 2000). SuperMontage’s decrementation feature was
described in the initial notice of the proposed rules, 64 Fed.
Reg. at 68,132, and remained essentially the same throughout
the proposed rules’ several revisions, 65 Fed. Reg. at 16,986;
65 Fed. Reg. at 49,847; 65 Fed. Reg. at 69,090. Nonetheless,
neither Domestic nor any other ECN raised any concerns
about the decrementation feature while the SuperMontage
rules were under consideration.
On January 19, 2001, the SEC issued an order approving
the SuperMontage rules, including the decrementation fea-
ture. 66 Fed. Reg. 8020 (Jan. 26, 2001) (SuperMontage Ap-
proval Order). The SEC found the proposed rule to be in the
public interest and in furtherance of the Exchange Act’s goals
of competition and efficiency. The SEC, however, delayed
the implementation of SuperMontage. In response to several
commenters’ concern that SuperMontage would allow Nasdaq
to dominate the OTC market and ‘‘compete unfairly for
market order flow,’’ the SEC conditioned the implementation
of SuperMontage on NASD’s provision of an Alternative
Display Facility (ADF or Facility) that ‘‘[i]n effect, makes
participation in SuperMontage voluntary’’ for market partici-
pants. The SEC required that the ADF permit NASD
members to satisfy their obligation to display their best-
priced quotes and limit orders without participating in Super-
Montage and ‘‘provide a market neutral linkage to the Nas-
daq and other marketplaces, but not an execution service.’’
In December 2001, NASD submitted proposed rules gov-
erning the establishment and operation of an ADF. The
SEC published the proposed rules for the first time on
January 3, 2002. 67 Fed. Reg. 388. Thereafter, the proposed
8
rules were amended once and republished for comment. On
July 24, 2002, the SEC approved the amended rules, which
allowed NASD to operate the facility ‘‘on a pilot basis’’ for
nine months, until April 24, 2003. 67 Fed. Reg. 49,822 (ADF
Pilot Order). The ADF Pilot Order addressed the concerns
of several commenters regarding connectivity to the ADF.
On August 29, 2002, the SEC issued an order providing for
the implementation of SuperMontage (Implementation Or-
der). 67 Fed. Reg. 56,862 (Sept. 5, 2002). The Commission
determined that the ADF Pilot Program satisfied the condi-
tions set in the January 19, 2001 SuperMontage Approval
Order. Consequently, the Commission ordered that Super-
Montage be implemented on October 11, 2002.
On October 7, 2002, Domestic filed this petition for review
of the Implementation Order.
II. Analysis
In its petition, Domestic raises two issues. First, Domestic
challenges the decrementation feature of SuperMontage,
claiming that the SEC did not provide adequate notice that
decrementation would occur when an ECN declines an order
because the firm entering the order has not paid the ECN’s
access fees. Domestic further contends that this application
of decrementation discriminates against ECNs by harming
ECNs’ ability to compete for order flow and impairing ECNs’
right to charge reasonable access fees for their services. In
sum, Domestic claims that the SEC acted arbitrarily and
capriciously and contrary to the Securities Exchange Act’s
pro-competitive mandate when it approved the decrementa-
tion aspect of the SuperMontage rules. Second, Domestic
challenges as unsupported by substantial evidence the SEC’s
conclusion that the ADF satisfied the conditions laid out in
the SuperMontage Approval order, and claims that the ADF
does not provide an adequate alternative to SuperMontage.
Specifically, Domestic asserts that the ADF is technologically
deficient because it lacks a means by which ECNs can easily
connect to it. We consider in turn Domestic’s claims.
9
A. Decrementation
We need not examine the specifics of Domestic’s challenge
to SuperMontage’s decrementation feature because its chal-
lenge is not timely. As explained above, the SEC approved
the SuperMontage trade execution rules, including decremen-
tation, in its January 19, 2001 SuperMontage Approval Order.
Section 25(a)(1) of the Securities Exchange Act provides that
a party aggrieved by a ‘‘final order’’ of the Commission may
obtain judicial review by filing a petition for review ‘‘within
sixty days after the entry of the order.’’ 15 U.S.C.
§ 78y(a)(1). Failure to file a timely petition for review de-
prives this Court of subject matter jurisdiction. See Jordan
v. Fed. Election Comm’n, 68 F.3d 518, 518–19 (D.C. Cir.
1995); Newell v. SEC, 812 F.2d 1259, 1260 (9th Cir. 1987).
Domestic did not file the instant petition for review until
October 7, 2002, far outside the statutory sixty-day time limit.
Nonetheless, Domestic contends we have jurisdiction over its
challenge to SuperMontage’s decrementation feature for two
reasons.
First, Domestic contends that its petition for review of the
decrementation feature is timely because the SuperMontage
Approval Order was not a ‘‘final order’’ within the meaning of
15 U.S.C. § 78y(a)(1). Because the SEC conditioned imple-
mentation of SuperMontage on the approval of an ADF,
Domestic reasons that the SuperMontage Approval Order did
not become final until the Implementation Order of August
29, 2002. We disagree.
The Supreme Court applies a two-part test for determining
the finality of agency action. A final action: (1) ‘‘mark[s] the
consummation of the agency’s decisionmaking process–it must
not be of a merely tentative or interlocutory nature’’; and (2)
the action ‘‘must be one by which rights or obligations have
been determined or from which legal consequences will flow.’’
Bennett v. Spear, 520 U.S. 154, 177–78 (1997) (citations and
quotations omitted); see also Fox Television Stations, Inc. v.
FCC, 280 F.3d 1027, 1037 (D.C. Cir. 2002). The SuperMontage
Approval Order meets both prongs of the Bennett test. The
order plainly ‘‘mark[ed] the consummation of the agency’s
10
decisionmaking process’’ concerning the SuperMontage rules.
Bennett, 520 U.S. at 178. After more than one year of
considering the rules and three sets of amendments and
republications for comment, the SuperMontage Approval Or-
der mandated ‘‘that the SuperMontage proposal TTT be and
hereby is approved.’’ 66 Fed. Reg. at 8057. Nothing in the
order suggested that the SEC’s approval of the rules was
‘‘tentative or interlocutory.’’ Bennett, 520 U.S. at 178. The
SEC did not reconsider or revise the SuperMontage rules in
its later orders concerning the ADF. Moreover, the rules
finally determined the ‘‘rights and obligations’’ of Nasdaq and
of each market participant who trades on SuperMontage. Id.
Domestic contends that the SuperMontage Approval Order
was non-final because SuperMontage could not be implement-
ed until the ADF was approved. Furthermore, Domestic
argues that the ADF approval proceedings reopened the
consideration of SuperMontage’s rules. By the latter argu-
ment, Domestic seeks to invoke our ‘‘reopener doctrine,’’
which ‘‘allows judicial review where an agency has–either
explicitly or implicitly–undertaken to reexamine its former
choice.’’ Nat’l Min. Ass’n v. United States Dep’t of Interior,
70 F.3d 1345, 1351 (D.C. Cir. 1995) (quotations omitted). To
be sure, the SEC did condition the implementation of Super-
Montage on the approval of an adequate ADF. The existence
of this condition to SuperMontage’s implementation, however,
does not affect the finality of the SuperMontage Approval
Order because the condition was unrelated to the substance
of the SuperMontage rules. In the ADF approval proceed-
ings, the SEC considered the adequacy of the ADF, an entity
wholly distinct from SuperMontage. It did not explicitly or
implicitly reconsider the substance of the SuperMontage
trade execution rules, nor did the SEC’s consideration of the
ADF’s adequacy have any bearing on the SuperMontage
rules. Thus, contrary to Domestic’s contention, our reopener
doctrine is inapplicable here. In short, the only issue regard-
ing the SuperMontage rules remaining after the SuperMon-
tage Approval Order was the timing of SuperMontage’s im-
plementation. There was no question that the substance of
SuperMontage’s trade execution rules, including the decre-
11
mentation feature, would remain the same and would ulti-
mately be implemented. Consequently, we conclude that the
SuperMontage Approval Order was a final order and that
Domestic’s petition for review, insofar as it raises the decre-
mentation issue, falls outside the applicable sixty-day statuto-
ry time limit.
In the alternative, Domestic points to Raton Gas Trans-
mission Co. v. FERC, 852 F.2d 612 (D.C. Cir. 1988), in which
we noted ‘‘exceptional situations in which an objection to an
agency regulation is considered timely even after the statuto-
ry review period has ended,’’ such as ‘‘when the agency’s
action did not reasonably put aggrieved parties on notice of
the rule’s content or clearly remained unripe for judicial
review throughout the statutory review period.’’ Id. at 615
(quotation omitted). See also JEM Broad. Co. v. FCC, 22
F.3d 320, 326 (D.C Cir. 1994). Domestic contends that noth-
ing in the SuperMontage Approval Order gave adequate
notice that decrementation would occur when ECNs decline
orders because of unpaid access fees. Domestic asserts that
it only learned of this aspect of decrementation when Super-
Montage was field-tested in the summer of 2002. Consequent-
ly, Domestic reasons that it is excused from failing to file a
timely petition for review of the SuperMontage Approval
Order. We disagree.
In the SuperMontage Approval Order, the SEC explained
the operation of decrementation in depth:
If an order delivery ECN TTT declines or partially fills an
order, or fails to respond in any manner within thirty
seconds of order delivery, Nasdaq will immediately re-
route the order (or unexecuted portion thereof) to the
next Nasdaq Quoting Market Participant or UTP Ex-
change in the queue. In addition, in the case of an
order delivery ECN that has declined or partially filled
an order without immediately transmitting a revised
quote/order or that has failed to respond within 30
seconds, Nasdaq will zero out the ECN’s quotes/orders at
that price level on that side of the market.
66 Fed. Reg. at 8027 (emphasis added).
12
This straightforward discussion leaves Domestic with no
excuse for failing to raise its concern about decrementation.
As an order delivery ECN familiar with ECNs’ ability to
decline trades, Domestic was reasonably placed on notice that
an ECN’s quote would be decremented when an ECN de-
clines a trade for any reason. While the SEC did not list all
the possible reasons an ECN might decline a trade (and thus
have its quote decremented), it fairly notified ECNs that an
ECN’s quote would be decremented whenever it declines a
trade, regardless of the motivation for the declination. This
was more than enough to place Domestic on notice that if it
declined to execute an order from a dealer that left its ECN
access fees unpaid, the ECN’s quote would be decremented to
zero. Our conclusion that the SuperMontage Approval Order
gave Domestic adequate notice of the Order’s effect on order
delivery ECNs is strengthened by the fact that the SEC
included a similar discussion of decrementation in the initial
publication of the proposed rules and in each subsequent
republication of the rules. See 64 Fed. Reg. at 68,132; 65
Fed. Reg. at 16,986; 65 Fed. Reg. at 49,847; 65 Fed. Reg. at
69,090. Moreover, the SuperMontage Approval Order ex-
plained that decrementation is necessary, in the SEC’s view,
to avoid locked or crossed markets. 66 Fed. Reg. at 8046–47.
This rationale supports decrementation regardless of the
reason an ECN declines an order, including when declinations
occur because of unpaid access fees. Thus, contrary to
Domestic’s assertion, the challenged aspect of decrementation
was not ‘‘hidden’’ or ‘‘embedded in an algorithm.’’ It was a
necessary inference from the explicit text of the SuperMon-
tage Approval Order. For these reasons, RCA Global Com-
munications, Inc. v. FCC, 758 F.2d 722 (D.C. Cir. 1985),
relied on by Domestic, is inapplicable here. In RCA Global,
we held that a ‘‘fair reading’’ of the earlier order did not
‘‘permit[ ] the conclusion that [petitioner] did know or should
have known that the Commission had confronted, much less
resolved the issue RCA now petitions us to review.’’ Id. at
730–31. Here, by contrast, a reasonable reader of the Super-
Montage Approval Order could discern—without the ‘‘aid of
telepathy,’’ id. at 731—that the Commission resolved the
13
issue of decrementation for order delivery ECNs that decline
trades because of unpaid access fees. We conclude, there-
fore, that Domestic was not excused from failing to file a
timely petition for review of the SuperMontage Approval
Order.
Accordingly, we dismiss Domestic’s petition for lack of
jurisdiction insofar as it challenges the decrementation aspect
of SuperMontage.
B. ADF Approval
We have jurisdiction over Domestic’s petition insofar as it
challenges the SEC’s approval of the ADF in the SuperMon-
tage Implementation Order. We reject that challenge, and
deny that portion of the petition for review.
As explained above, the Commission required, as a condi-
tion to SuperMontage’s implementation, the creation of an
ADF to ensure that participation in SuperMontage would be
voluntary. Specifically, the SuperMontage Approval Order
required that the ADF (1) permit NASD members to satisfy
their obligation (under the OHR and Regulation ATS) to
display their best-priced quotes and limit orders without
participating in SuperMontage and (2) ‘‘provide a market
neutral linkage to the Nasdaq and other marketplaces, but
not an execution service.’’ In the Implementation Order, the
Commission concluded that the ADF satisfied the conditions
set forth in the SuperMontage Approval Order:
The ADF TTT permits registered market makers and
registered ECNs to display their best-priced quotes or
customer limit orders TTT through the NASD. ADF
market participants are required to provide other ADF
market participants with direct electronic access to their
quoteTTTT The ADF also serves as a trade reporting
and trade comparison facility. The ADF will therefore
allow market participants to satisfy their order display
and execution access obligations under the Order Han-
dling Rules and Regulation ATS.
67 Fed. Reg. at 56,862.
Domestic primarily challenges the Commission’s factual
determination that the ADF was technologically sound
14
enough to satisfy the requirements set out in the SuperMon-
tage Approval Order. The Commission’s factual determina-
tion is conclusive if it is supported by substantial evidence, 15
U.S.C. § 78y(a)(4), and not otherwise arbitrary, capricious, or
contrary to law, 5 U.S.C. § 706(2)(A) (2000). See NASD,
Inc., 801 F.2d at 1419. Moreover, we have long held that
‘‘[a]gency determinations based upon highly complex and
technical matters are entitled to great deference.’’ Appala-
chian Power Co. v. EPA, 251 F.3d 1026, 1035 (D.C. Cir. 2001)
(quotations omitted). See also Nat’l Petrochem. & Refiners
Ass’n v. EPA, 287 F.3d 1130, 1145 (D.C. Cir. 2002) (‘‘EPA is
entitled to deference in its evaluation of technologies’’); Tele-
desic, L.L.C. v. FCC, 275 F.3d 75, 84 (D.C. Cir. 2001) (extend-
ing heightened deference to FCC’s judgment involving ‘‘tech-
nology and economics’’); Ctr. for Auto Safety v. Dole, 828
F.2d 799, 803 (D.C. Cir. 1987) (‘‘the court must accord the
agency the appropriate degree of deference on such a record-
based finding involving scientific and technological data’’).
Mindful of this deference, we consider Domestic’s arguments.
We first note a crucial misconception that underlies–and
ultimately undermines–Domestic’s entire challenge to the Im-
plementation Order. Domestic incorrectly assumes that the
ADF was designed to ensure competition against SuperMon-
tage in the trade execution market. Nothing in the Super-
Montage Approval Order supports this contention. Indeed,
the Commission explained that the sole purpose of the Facili-
ty was to provide an alternative outlet in which market
participants that did not wish to use SuperMontage could
fulfill their order display and trade reporting obligations
under SEC regulations. 66 Fed. Reg. at 8024, 8049, 8053.
The ADF is an ‘‘alternative display facility,’’ not an alterna-
tive execution facility. Stripped of this argument, Domestic
is reduced to challenging the SEC’s conclusions about the
technological feasibility of the ADF.
We conclude that the SEC relied on substantial evidence in
its determination that the ADF was technologically capable of
providing a genuine alternative to SuperMontage, in which
ECNs could fulfill their order display and trade reporting
obligations. Domestic contends that the ADF was inadequate
15
at the time of approval because it did not employ the Finan-
cial Information Exchange (FIX) protocol, which Domestic
claims is the ‘‘standard industry protocol[ ] for financial mar-
ket communications.’’ Rather, the ADF employed the Ex-
change Transaction Protocol (XTP), which Domestic claims is
‘‘a somewhat obscure communications protocol.’’ Conse-
quently, Domestic reasons that it will be very expensive for
ECNs and other market participants to connect to the ADF
and to each other, thus undermining its function as an
alternative to SuperMontage. The Commission addressed
the XTP versus FIX issue in its July 24, 2002, ADF Pilot
Order, which Domestic did not challenge. Therein, the SEC
recognized that ‘‘[s]ome commenters criticized the ADF for
not employing a FIX protocol,’’ but ‘‘noted that the FIX
protocol is not commonly used by other markets at this time.’’
67 Fed. Reg. at 49,849. But in approving the ADF, the SEC
relied on the fact that ‘‘several ECNs have expressed an
interest in fulfilling their quote display obligations through
the ADF.’’ 67 Fed. Reg. at 56,862. These expressions of
interest support the SEC’s conclusion that the ADF was a
viable alternative to SuperMontage, notwithstanding the ab-
sence of FIX capability at the time of implementation. It is
therefore obvious that the Commission considered the evi-
dence and the alternatives presented to it. The making of
policy decisions and the resolution of conflicting evidence is
for the Commission, not the court. See, e.g., Diamond Wal-
nut Growers, Inc. v. NLRB, 113 F.3d 1259, 1270 (D.C. Cir.
1997) (courts ‘‘must TTT give genuine deference to [agencies’]
factual findings and TTT legal/policy decisions implicit in the
inferences drawn from those findings.’’).
In any event, NASD was obligated to provide the ADF, not
to ensure that every market participant could link to the ADF
and to each other without any cost to themselves. Domestic
does not question the ADF’s order display capacity, only its
connectivity to market participants. While reasonable minds
could differ as to whether these connectivity problems pre-
vent the ADF from fulfilling its designated functions, the
‘‘possibility of drawing two inconsistent conclusions from the
evidence does not prevent an administrative agency’s finding
16
from being supported by substantial evidence.’’ Schoenbohm
v. FCC, 204 F.3d 243, 246 (D.C. Cir. 2000). Accordingly, we
hold that the SEC’s approval of the ADF in the Implementa-
tion Order was supported by substantial evidence and was not
arbitrary and capricious.
III. Conclusion
We lack jurisdiction over Domestic’s petition insofar as it
challenges the decrementation aspect of SuperMontage, be-
cause that portion of Domestic’s petition is untimely. We
deny Domestic’s petition on the merits insofar as it challenges
the Commission’s approval of the ADF, because the Commis-
sion’s order was supported by substantial evidence. For the
foregoing reasons, the petition is dismissed in part and denied
in part.
So ordered.