
[Federal Register: January 13, 2009 (Volume 74, Number 8)]
[Notices]               
[Page 1744-1746]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ja09-100]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59202; File No. SR-NYSE-2008-132]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change to Introduce a NYSE Order 
Imbalance Information Fee

January 6, 2009.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 19, 2008, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to introduce a fee for access to its NYSE 
Order Imbalance Information datafeed.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NYSE included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NYSE has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    (a) The Service.
    In June 2008, the Exchange added Order Imbalance Information to the 
NYSE OpenBook[supreg] package of products.\3\ For no additional charge, 
the Exchange decided to make available to recipients of NYSE OpenBook 
an additional datafeed containing Order Imbalance Information.
---------------------------------------------------------------------------

    \3\ See Release No. 34-59039 (December 2, 2008); File No. SR-
NYSEArca-2006-21.
---------------------------------------------------------------------------

    NYSE Order Imbalance Information is a datafeed of real-time order 
imbalances that accumulate prior to the opening of trading on the 
Exchange and prior to the close of trading on the Exchange. These 
orders are subject to execution at the market's opening or closing 
price, as the case may be, and represent issues that are likely to be 
of particular trading interest at the opening or closing.
    The Exchange distributes information about these imbalances in 
real-time at specified intervals prior to the opening and closing 
auctions. Initially, the Exchange proposes to make order imbalance 
information available at the following intervals.
    For opening order imbalances:
     Every five minutes between 8:30 a.m. EST and 9 a.m. EST.
     Every one minute between 9 a.m. EST and 9:20 a.m. EST.
     Every 15 seconds between 9:20 a.m. EST and the opening (or 
9:35 a.m. EST if the opening is delayed).
    For closing order imbalances:
     Every fifteen seconds between 3:40 p.m. EST and 3:50 p.m. 
EST.
     Every five seconds between 3:50 p.m. EST and 4 p.m. EST.
    If the Exchange were to change these intervals, it would notify 
NYSE Order Imbalance Information recipients in advance and/or post the 
changes on the Exchange's Web site.
    NYSE Order Imbalance Information also includes the imbalance 
information that the Exchange is required to disseminate under NYSE 
Rule 123C(5), as well as automated real-time streaming order imbalance 
information at specified intervals.
    After consultation with its customers, the Exchange has determined 
to make the NYSE Order Imbalance Information datafeed available as a 
stand-alone market data product, separate and apart from NYSE OpenBook. 
This would enable all investors to gain access to information regarding 
opening and closing imbalances on the Exchange, especially because the 
Exchange is not imposing end-user fees, is not requiring end-users to 
sign contracts and is making vendor receipt and use of the information 
inexpensive and very few administrative burdens (e.g., no reporting 
requirements and no end-user contracts).
    Many investors have not been able to access this data. However, as 
a result of the Commission's NYSE ArcaBook Approval Order, the Exchange 
may now bring the NYSE order Imbalance Information product to market. 
The Exchange anticipates that this will provide important information 
to millions of investors.
    In the Exchange's view, the Commission's recent ``Order Setting 
Aside Action by Delegated Authority and Approving Proposed Rule Change 
Relating to NYSE Arca Data'' (the ``NYSE ArcaBook Approval Order'') 
makes this product offering possible. In the NYSE ArcaBook Approval 
Order, the Commission strongly supported the right of SROs to expand 
their market data offerings outside of the consolidated products that 
markets offer under joint industry plans such as the CTA Plan and the 
CQ Plan. It established fee-setting standards for market data products 
for those non-core offerings. Prior to the NYSE ArcaBook Approval 
Order, the Exchange's ability to bring the NYSE Order Imbalance 
Information product to market was limited distribution to NYSE OpenBook 
subscribers only. That order affirmed the Commission's embrace of 
allowing

[[Page 1745]]

market forces to determine the fairness and reasonableness of fees for 
non-core products, such as NYSE Order Imbalance Information. As a 
result, the Exchange is now able to make this important information 
available to millions of investors, investors who do not desire to 
subscribe to NYSE OpenBook services in order to receive NYSE Order 
Imbalance Information.
    (b) The Fee. The Exchange proposes to charge recipients of the NYSE 
Order Imbalance Information datafeed $500 per month. The fee applies 
whether the recipient receives the datafeed directly from the Exchange 
or indirectly from an intermediary. The fee entitles the datafeed 
recipient to make displays of that information available to an 
unlimited number of subscribers for no extra charge. The Exchange is 
not proposing to impose an end-user or display device fee on those 
subscribers.
    The fee would allow vendors to redistribute NYSE Order Imbalance 
Information without having to differentiate between professional 
subscribers and nonprofessional subscribers, without having to account 
for the extent of access to the data, without having to procure 
contracts with its subscribers for the benefit of the Exchange and 
without having to report the number of its subscribers.
    By establishing the access fee at an inexpensive rate and declining 
to impose an end-user fee on the consumption of NYSE Order Imbalance 
Information, the Exchange seeks to enable all investors to gain access 
to information regarding opening and closing imbalances on the 
Exchange. The fee enables the investment community that has an interest 
in the receipt of order imbalance information to contribute to the 
Exchange's operating costs in a manner that is appropriate for this 
market data product.
    In setting the level of the NYSE Order Imbalance Information fee, 
the Exchange took into consideration several factors, including:
    i. Consultation with some of the entities that the Exchange 
anticipates will be the most likely to take advantage of the proposed 
product;
    ii. The contribution of market data revenues that the Exchange 
believes is appropriate for the investment community that has an 
interest in the receipt and use of order imbalance information; and
    iii. The fact that the proposed fee provides an alternative to the 
receipt of NYSE Order Imbalance Information as part of NYSE OpenBook.
    In short, the Exchange believes that the proposed NYSE Order 
Imbalance Information fee would reflect an equitable allocation of its 
overall costs to users of its facilities.
    (c) The Fee is Fair and Reasonable. The Exchange believes that $500 
access fee for NYSE Order Imbalance Information comports with the 
standard that the Commission established for determining whether market 
data fees relating to non-core market data products are fair and 
reasonable. In NYSE ArcaBook Approval Order, the Commission reiterated 
its position from its release approving Regulation NMS that it should 
``allow market forces, rather than regulatory requirements, to 
determine what, if any, additional quotations outside the NBBO are 
displayed to investors.''\4\
---------------------------------------------------------------------------

    \4\ See Regulation NMS Release, 70 FR at 37566-37567 (addressing 
differences in distribution standards between core data and non-core 
data).
---------------------------------------------------------------------------

    The Commission went on to state that:

    The Exchange Act and its legislative history strongly support 
the Commission's reliance on competition, whenever possible, in 
meeting its regulatory responsibilities for overseeing the SROs and 
the national market system. Indeed, competition among multiple 
markets and market participants trading the same products is the 
hallmark of the national market system.\5\
---------------------------------------------------------------------------

    \5\ NYSE ArcaBook Approval Order at pp 46-47.

    The Commission then articulated the standard that it will apply in 
assessing the fairness and reasonableness of market data fees for non-
---------------------------------------------------------------------------
core products, as follows:

    With respect to non-core data, * * * the Commission has 
maintained a market-based approach that leaves a much fuller 
opportunity for competitive forces to work. This market-based 
approach to non-core data has two parts. The first is to ask whether 
the exchange was subject to significant competitive forces in 
setting the terms of its proposal for non-core data, including the 
level of any fees. If an exchange was subject to significant 
competitive forces in setting the terms of a proposal, the 
Commission will approve the proposal unless it determines that there 
is a substantial countervailing basis to find that the terms 
nevertheless fail to meet an applicable requirement of the Exchange 
Act or the rules thereunder.\6\
---------------------------------------------------------------------------

    \6\ Id. at pp. 48-49.

    The Exchange believes that the proposed access fee is fair and 
reasonable by this standard or any other standard. The Exchange is 
subject to significant competitive forces and the low level at which 
the Exchange proposes to establish the NYSE Order Imbalance Information 
access fee represents, in part, a response to that competition. To 
start, the Exchange competes intensely for order flow. It competes with 
the other 10 national securities exchanges that currently trade 
equities, with electronic communication networks, with quotes posted in 
FINRA's Alternative Display Facility and Trade Reporting Facilities, 
with alternative trading systems, and with securities firms that 
primarily trade as principal with their customer order flow ``and the 
competition is fierce.'' \7\
---------------------------------------------------------------------------

    \7\ Id. at p 52.
---------------------------------------------------------------------------

    The Exchange believes that making the NYSE Order Imbalance 
Information datafeed available to vendors at $500 per month and 
allowing the vendors to redistribute that data to an unlimited number 
of their customers at no additional charge would help the Exchange to 
compete for order flow by making the Exchange's order imbalance 
information freely available to millions of investors. The Exchange 
hopes that some of those investors may favor the Exchange with order 
flow as a result of access to the imbalance information.
    In addition, the Exchange believes that no substantial 
countervailing basis exists to support a finding that the NYSE Order 
Imbalance Information access fee fails to meet the requirement of the 
Exchange Act.
    In sum, NYSE's compelling need to attract order flow imposes 
significant competitive pressure on NYSE to act equitably, fairly, and 
reasonably in setting the NYSE Order Imbalance Information access fee. 
Making that data readily available to investors is a response to that 
pressure.
    (d) Continued Distribution Through NYSE OpenBook. The Exchange 
would continue to permit NYSE OpenBook datafeed recipients to receive 
the NYSE Order Imbalance Information datafeed as part of the NYSE 
OpenBook package without having to pay the $500 fee or any other 
additional charge. Those NYSE OpenBook datafeed recipients may then 
redistribute the NYSE Order Imbalance Information to any of their 
subscribers, whether or not the subscriber also receives NYSE OpenBook 
information. The Exchange imposes no end-user charge on those 
subscribers.
    (e) Contracts. The Exchange proposes to provide the NYSE Order 
Imbalance Information datafeed available under the same contracting 
arrangement that the Commission has approved for the receipt and use of 
market datafeeds under the CTA and CQ Plans. That arrangement 
contemplates that each datafeed recipient enter into the Commission-
approved standard form of ``Agreement for Receipt and Use of Market 
Data'' that Network A uses for data redistributors and other parties 
that use the data for purposes other than

[[Page 1746]]

interrogation.\8\ Exhibit A to each of those agreements would need to 
be updated to reflect the receipt and use of NYSE Order Imbalance 
Information. The arrangement does not require an end-user of the 
information (other than a data feed recipient) to enter into any 
agreement.
---------------------------------------------------------------------------

    \8\ The Participants in the CTA and CQ Plans first submitted the 
Consolidated Vendor Form to the Commission for immediate 
effectiveness in 1990. See Release No. 34-28407 (September 6, 1990); 
55 FR 37276 (September 10, 1990) (File No. 4-281). The Commission 
approved a revised version of it in 1996 in conjunction with the 
participants' restatement of the CTA and CQ Plans. See Release No. 
34-37191 (May 9, 1996); 61 FR 24842 (May 16, 1996) (File No. SR-CTA/
CQ-96-1).
---------------------------------------------------------------------------

2. Statutory Basis
    The bases under the Securities Exchange Act of 1934 (the ``1934 
Act'') for the proposed rule change are the requirement under section 
6(b)(4) \9\ that an exchange have rules that provide for the equitable 
allocation of reasonable dues, fees and other charges among its members 
and other persons using its facilities and the requirements under 
section 6(b)(5) \10\ that the rules of an 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 Exchange believes that the proposal benefits investors by 
facilitating their prompt access to widespread, free NYSE Order 
Imbalance Information.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments regarding the proposed rule change. The Exchange has not 
received any unsolicited written comments from members or other 
interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
 Send an e-mail to rule-comments@sec.gov. Please include File 
No. SR-NYSE-2008-132 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2008-132. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also 
will be available for inspection and copying at the principal office of 
the Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSE-2008-132 and should be submitted on or before February 3, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-414 Filed 1-12-09; 8:45 am]

BILLING CODE 8011-01-P
