

[Federal Register: January 7, 2008 (Volume 73, Number 4)]
[Notices]               
[Page 1238-1239]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ja08-59]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57075; File No. SR-Phlx-2007-75]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Granting Approval of Proposed Rule Change as Modified by 
Amendments No. 1 and 2 Thereto Relating to Market Data Distribution 
Network Fees

December 31, 2007.

I. Introduction

    On September 27, 2007, the Philadelphia Stock Exchange, Inc. 
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposal to eliminate: (1) A fee assessed by the 
Exchange's wholly owned subsidiary, the Philadelphia Board of Trade 
(``PBOT''), for certain equity index values that subscribers receive 
over PBOT's Market Data Distribution Network (``MDDN''); \3\ and (2) a 
discount applicable to certain market data vendors. Phlx filed 
Amendment No. 1 to the proposed rule change on November 7, 2007. The 
proposed rule change, as amended, was published for comment in the 
Federal Register on November 28, 2007.\4\ On December 14, 2007, Phlx 
filed Amendment No. 2 to the proposed rule change.\5\ The Commission 
received no comments regarding the proposal. This order approves the 
proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The MDDN is an Internet protocol multicast network developed 
by PBOT and SAVVIS Communications.
    \4\ See Securities Exchange Act Release No. 56827 (November 20, 
2007), 72 FR 67334.
    \5\ In Amendment No. 2, Phlx corrected Exhibit 5 to the Form 
19b-4 it submitted to accurately reflect the proposed deletions and 
additions of the rule text. Phlx also clarified in footnote 1 of 
Exhibit 5 that the Administrative Fee deduction applies only to the 
per-device fee and to Index Data. Because Amendment No. 2 is 
technical in nature, it is not subject to notice and comment.
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II. Description of the Proposal

    Phlx licenses to PBOT the current and closing index values 
underlying most of Phlx's proprietary indexes, and Hapoalim Securities 
USA, Inc. licenses to PBOT the current and closing Hapoalim American 
Israeli Index\TM\ (HAI\SM\) values. PBOT distributes those values over 
the MDDN. The Exchange or its third-party designee calculates and makes 
available to PBOT a real-time value for each index every 15 seconds 
during each trading day and a closing index value at the end of the 
day. In exchange for subscriber fees paid to PBOT, market data vendors 
may receive and widely disseminate this market data to their 
subscribers.\6\
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    \6\ PBOT has contracted with several major vendors to receive 
real-time and closing index values over the MDDN and promptly 
redistribute such values.
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    Presently, subscriber fees are assessed in one of three ways: \7\ 
(a) A monthly fee of $1.00 per ``Device'' \8\ that is used by vendors 
and their subscribers to receive and re-transmit market data on a real-
time basis (``device fee''); (b) a fee of $0.0025 per request for 
snapshot data,\9\ which is essentially market data that is refreshed no 
more frequently than once every 60 seconds, or $1,500 per month for 
unlimited snapshot data requests (``snapshot fee''); \10\ or (c) an 
Enterprise License Fee of $10,000 per year or $850 per month for 
unlimited real-time data as an alternative to the device fee.\11\ All 
vendors that provide market data to 200,000 or more Devices in any 
month qualify for a 15% Administrative Fee credit for that month, to be 
deducted from the monthly Subscriber Fees that they collect and are 
obligated to pay

[[Page 1239]]

PBOT under the Vendor/Subvendor Agreement. This credit is also 
currently given to vendors paying the Enterprise License Fee.
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    \7\ See Securities Exchange Act Release No. 53790 (May 11, 
2006), 71 FR 28738 (May 17, 2006) (``Original Approval Order''). The 
applicable subscriber fees are set out in Vendor/Subvendor 
Agreements that PBOT executed with various market data vendors for 
the right to receive, store, and retransmit the current and closing 
index values transmitted over the MDDN.
    \8\ The agreements provide that ``Device'' shall mean, in case 
of each Subscriber and in such Subscriber's discretion, either any 
Terminal or any End User. Devices may be exclusively Terminals, 
exclusively End Users, or a combination of Terminals or End Users, 
and shall be reported in a manner that is consistent with the way 
the vendor identifies such Subscriber's access to vendor's data. An 
``End User'' is defined as an individual authorized or allowed by a 
vendor to access and display real-time market data that is 
distributed by PBOT over the MDDN; and a ``Terminal'' is any type of 
equipment (fixed or portable) that accesses and displays such market 
data.
    \9\ See Securities Exchange Act Release No. 55111 (January 16, 
2007), 72 FR 3188 (January 24, 2007) (increasing the snapshot fee to 
$0.0025 per request).
    \10\ The index values may also be made available by vendors on a 
delayed basis (i.e., no sooner than 20 minutes following receipt of 
the data by vendors) at no charge.
    \11\ A vendor is eligible for the Enterprise License Fee if it 
is a firm acting as a retail broker-dealer conducting a material 
portion of its business via one or more proprietary Internet Web 
sites by which the firm distributes market data to predominately 
non-professional market data users with whom the firm has a 
brokerage relationship (``Eligible Firm''). An Eligible Firm may 
also distribute market data to professional users with whom such 
firm has a brokerage relationship, provided such market data 
distribution is predominantly to non-professional users. The 
Eligible Firm's market data distribution to professional users 
cannot exceed 10%. See Securities Exchange Act Release No. 55424 
(March 8, 2007), 72 FR 12242 (March 15, 2007) (SR-Phlx-2006-63).
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    Phlx proposes to eliminate the ability to access the market data on 
a ``snapshot'' basis and consequently proposes to eliminate the 
snapshot data fee, effective January 1, 2008. The Exchange states that 
only a few vendors currently elect to use snapshot data. Consequently, 
PBOT seeks to eliminate the associated operational and accounting 
expenses of administering the snapshot data fee. Phlx is also proposing 
to eliminate the applicability of the 15% Administrative Fee credit to 
market data vendors paying the Enterprise License Fee.

III. Discussion

    After careful consideration, the Commission finds that the amended 
proposed rule change is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\12\ In particular, the Commission finds that the 
proposed rule change is consistent with section 6(b)(5) of the Act,\13\ 
which requires, among other things, that the rules of a national 
securities exchange be designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. The Commission 
also finds that the proposal is consistent with section 6(b)(4) of the 
Act,\14\ which requires the equitable allocation of reasonable dues, 
fees, and other charges among the Exchange's members and issuers and 
other persons using its facilities. The Commission also continues to 
believe that PBOT's MDDN fee structure is consistent with Rule 603 
under the Act \15\ regarding the distribution, consolidation, and 
display of information with respect to quotations for and transactions 
in NMS stocks.
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    \12\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78f(b)(4).
    \15\ 17 CFR 242.603.
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    The Commission believes that the Exchange's proposal to eliminate 
snapshot requests for index value data and the associated fee is 
consistent with the Act. The Exchange makes available the same market 
data through other means, and, in the absence of a compelling 
regulatory concern, it is a reasonable exercise of the Exchange's 
business judgment to choose the means of delivery of this data.
    With respect to Phlx's proposal to eliminate the applicability of 
the Administrative Fee credit to vendors electing to pay the Enterprise 
License Fee, the Commission believes that the rule change is 
reasonable. The Exchange represents that, unlike vendors electing to 
receive market data pursuant to the device fee, vendors electing to 
receive market data pursuant to the Enterprise License Fee are not 
required to bear the same ongoing administrative expenses. In 
particular, vendors paying the device fee must prepare and deliver to 
PBOT a detailed monthly accounting and report of Devices. By contrast, 
a vendor paying the Enterprise License Fee is required only to submit 
an initial certification, and must notify PBOT of any changes to its 
qualification, but has no requirement to submit any on-going accounting 
to PBOT.\16\ Thus, the administrative costs to a firm associated with 
monitoring its ongoing eligibility for the Enterprise License Fee 
should be substantially less than the administrative costs to a vendor 
subject to the device fee.
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    \16\ The Exchange notes that several large vendors are currently 
paying the Enterprise License Fee. To be eligible for the Enterprise 
License Fee, a vendor must certify to PBOT that it qualifies for the 
Enterprise License Fee, including that market distribution is 
predominantly to non-professional users, and must immediately notify 
PBOT if it can no longer certify its qualification.
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-Phlx-2007-75), as amended, 
be, and it hereby is, approved.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E8-9 Filed 1-4-08; 8:45 am]

BILLING CODE 8011-01-P
