
[Federal Register: February 2, 2010 (Volume 75, Number 21)]
[Notices]               
[Page 5363-5364]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02fe10-114]                         


[[Page 5363]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61404; File No. SR-NYSEArca-2009-108]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving 
Proposed Rule Change Modifying the NYSE Arca Realtime Reference Prices 
Service

January 22, 2010.

I. Introduction

    On December 1, 2009, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to add data elements to its ``NYSE Arca Realtime 
Reference Prices'' service and to add a usage-based fee alternative for 
that service. The proposed rule change was published for comment in the 
Federal Register on December 18, 2009.\3\ The Commission received no 
comments on the proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 61143 (December 10, 
2009), 74 FR 67290.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes several changes to the NYSE Arca Realtime 
Reference Prices service. In a recent filing,\4\ the Exchange 
established a fixed monthly fee for its NYSE Arca-only market data 
service that allows a vendor to redistribute on a real-time basis last 
sale prices of transactions that take place on the Exchange. The 
Exchange has found that the NYSE Arca Realtime Reference Prices service 
provides a low-cost service that makes real-time prices widely 
available to many millions of casual investors, provides vendors with a 
real-time substitute for delayed prices, and relieves vendors of all 
administrative burdens. The service allows internet service providers, 
traditional market data vendors, and others (``NYSE Arca-Only 
Vendors'') to make available NYSE Arca Realtime Reference Prices on a 
real-time basis.\5\ NYSE Arca Realtime Reference Prices information 
includes last sale prices for all securities that are traded on the 
Exchange.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 60002 (May 29, 
2009), 74 FR 26901 (June 4, 2009) (SR-NYSEArca-2009-32).
    \5\ The Exchange notes that it makes the NYSE Arca Realtime 
Reference Prices available to vendors no earlier than it makes those 
prices available to the processor under the CTA Plan.
---------------------------------------------------------------------------

    The Exchange proposes to make the following changes to the service 
and its fees:
a. Data Elements
    Currently, the NYSE Arca Realtime Reference Prices service includes 
only prices. It does not include the size of each trade and does not 
include bid/ask quotations. For each security, the Exchange is 
proposing to add the following data elements to the service:
     High price
     Low price
     Cumulative volume
    The Exchange states that it anticipates that it would update these 
data elements every second, though initially it would update them once 
per minute. A security's high (low) price would reflect the highest 
(lowest) price at which the security has traded on the Exchange during 
the trading session through the point in time at which it is 
disseminated. Further, the cumulative volume would reflect a security's 
aggregate volume during a trading session through the point in time at 
which it is last disseminated. The Exchange believes that adding these 
data elements would make the product more attractive to the customers 
of NYSE Arca-Only Vendors.
b. Usage-Based Fee
    Currently, the NYSE Arca Realtime Reference Prices service features 
a flat, fixed monthly vendor fee of $30,000 and no user-based fees. For 
that fee, the NYSE Arca-Only Vendor may provide unlimited NYSE Arca 
Realtime Reference Prices to an unlimited number of the NYSE Arca-Only 
Vendor's subscribers and customers without having to differentiate 
between professional subscribers and nonprofessional subscribers, 
without having to account for the extent of access to the data, and 
without having to report the number of users.
    The Exchange proposes to establish as an alternative to the fixed 
monthly fee a fee of $.004 for each real-time reference price that a 
NYSE Arca-Only Vendor disseminates to its customers. The Exchange 
proposes to limit a NYSE Arca-Only Vendor's exposure under this 
alternative fee by setting $30,000, the same amount as the proposed 
fixed monthly rate, as the maximum fee that a NYSE Arca-Only Vendor 
would have to pay for real-time reference prices that it disseminates 
in any calendar month pursuant to the per-query fee.
    In order to take advantage of the per-query fee, a NYSE Arca-Only 
Vendor must document in its Exhibit A that it has the ability to 
measure accurately the number of queries and must have the ability to 
report aggregate query quantities on a monthly basis.
    The Exchange states that it will impose the per-query fee only on 
the dissemination of real-time reference prices. NYSE Arca-Only Vendors 
may provide delayed data services in the same manner as they do today.
    The per-query charge would be imposed on NYSE Arca-Only Vendors, 
not end-users, and would be payable on a monthly basis. Because it 
would represent a new and additional alternative to the monthly fixed 
fee, NYSE Arca-Only Vendors may elect to disseminate NYSE Arca Realtime 
Reference Prices pursuant to the per-query fee rather than the fixed 
monthly fee.
c. Justification of Fees
    The Exchange believes that the fee enables internet service 
providers and traditional vendors that have large numbers of casual 
investors as subscribers and customers to contribute to the Exchange's 
operating costs in a manner that is appropriate for their means of 
distribution. According to the Exchange, adding a per-query payment 
option would reduce the costs of the service to those internet service 
providers and traditional vendors. The Exchange believes that this 
would enable NYSE Arca Realtime Reference Prices vendors to make a more 
appropriate contribution to the Exchange's operating costs.
    In establishing the per-query fee, the Exchange states that it took 
into consideration several factors, including:
    (1) the fees that Nasdaq and NYSE are charging for similar services 
and that NYSE Amex has proposed to charge;
    (2) consultation with some of the entities that currently receive 
the service or that the Exchange anticipates may commence to take 
advantage of the service;
    (3) the contribution of market data revenues that the Exchange 
believes is appropriate for entities that are most likely to take 
advantage of the proposed service;
    (4) the contribution that revenues accruing from the proposed fees 
would make to meet the overall costs of the Exchange's operations;
    (5) the savings in administrative and reporting costs that the NYSE 
Arca Realtime Reference Prices service would provide to NYSE Arca-Only 
Vendors; and
    (6) the fact that the proposed fee would provide an attractive 
alternative to existing fees under the CTA Plan and to NYSE Arca's 
monthly flat fee, an alternative that vendors would purchase

[[Page 5364]]

only if they determine that the perceived benefits outweigh the cost.
    The Exchange believes that the level of the per-query fee is 
consistent with the approach set forth in the order by which the 
Commission approved ArcaBook fees.\6\ The Exchange represents that the 
NYSE Arca Realtime Reference Prices constitute ``non-core data;'' i.e., 
the Exchange does not require a central processor to consolidate and 
distribute the product to the public pursuant to joint-SRO plans. 
Rather, the Exchange states that it distributes the product 
voluntarily. In addition, the Exchange believes that both types of the 
competitive forces that the Commission described in the NYSE Arca Order 
are present in the case of NYSE Arca Realtime Reference Prices: (i) The 
Exchange has a compelling need to attract order flow; and (ii) the 
product competes with a number of alternative products.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21) (``NYSE 
Arca Order'').
---------------------------------------------------------------------------

    The Exchange states that it must compete vigorously for order flow 
to maintain its share of trading volume, which requires the Exchange to 
act reasonably in setting market data fees for non-core products such 
as NYSE Arca Realtime Reference Prices. The Exchange hopes that NYSE 
Arca Realtime Reference Prices will enable vendors to distribute NYSE 
Arca last sale price data widely among investors, and thereby provide a 
means for promoting the Exchange's visibility in the marketplace.

III. Discussion and Commission Findings

    The Commission has reviewed carefully the proposed rule change and 
finds that the proposed rule change is consistent with the requirements 
of the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\7\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(4) of the Act,\8\ 
which requires 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 Section 6(b)(5) 
of the Act,\9\ which requires, among other things, 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, and not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \7\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission also finds that the proposed rule change is 
consistent with the provisions of Section 6(b)(8) of the Act,\10\ which 
requires that the rules of an exchange not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act. Finally, the Commission finds that the proposed rule change 
is consistent with Rule 603(a) of Regulation NMS,\11\ adopted under 
Section 11A(c)(1) of the Act, which requires an exclusive processor 
that distributes information with respect to quotations for or 
transactions in an NMS stock to do so on terms that are fair and 
reasonable and that are not unreasonably discriminatory.\12\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b)(8).
    \11\ 17 CFR 242.603(a).
    \12\ NYSE Arca is an exclusive processor of NYSE Arca depth-of-
book data under Section 3(a)(22)(B) of the Act, 15 U.S.C. 
78c(a)(22)(B), which defines an exclusive processor as, among other 
things, an exchange that distributes information with respect to 
quotations or transactions on an exclusive basis on its own behalf.
---------------------------------------------------------------------------

    Under this proposal, the Exchange would (1) add high price, low 
price, and cumulative volume data elements to its ``NYSE Arca Realtime 
Reference Prices'' service and (2) add a usage-based fee alternative of 
$.004 for each real-time reference price that a vendor disseminates to 
its customers (capped at the monthly fee level). In order to take 
advantage of the usage-based fee alternative, a vendor must document in 
its Exhibit A that it has the ability to measure accurately the number 
of queries and must have the ability to report aggregate query 
quantities on a monthly basis.
    The Commission has reviewed the proposal using the approach set 
forth in the NYSE Arca Order for non-core market data fees.\13\ In the 
NYSE Arca Order, the Commission stated that ``when possible, reliance 
on competitive forces is the most appropriate and effective means to 
assess whether the terms for the distribution of non-core data are 
equitable, fair and reasonable, and not unreasonably discriminatory.'' 
\14\ It noted that the ``existence of significant competition provides 
a substantial basis for finding that the terms of an exchange's fee 
proposal are equitable, fair, reasonable, and not unreasonably or 
unfairly discriminatory.'' \15\ If an exchange ``was subject to 
significant competitive forces in setting the terms of a proposal,'' 
the Commission will approve a 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.'' \16\
---------------------------------------------------------------------------

    \13\ See supra note 6. In the NYSE Arca Order, the Commission 
describes in great detail the competitive factors that apply to non-
core market data products. The Commission hereby incorporates by 
reference the data and analysis from the NYSE Arca Order into this 
order.
    \14\ Id. at 74781.
    \15\ Id. at 74781-82.
    \16\ Id. at 74781.
---------------------------------------------------------------------------

    There are a variety of alternative sources of information that 
impose significant competitive pressures on the Exchange in setting the 
terms for distributing its market data. The Commission believes that 
the availability of those alternatives, as well as NYSE Arca's 
compelling need to attract order flow, imposed significant competitive 
pressure on the NYSE Arca to act equitably, fairly, and reasonably in 
setting the terms of its proposal.
    Because the NYSE Arca was subject to significant competitive forces 
in setting the terms of the proposal, the Commission will approve the 
proposal in the absence of a substantial countervailing basis to find 
that its terms nevertheless fail to meet an applicable requirement of 
the Act or the rules thereunder. An analysis of the proposal does not 
provide such a basis.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NYSEArca-2009-108) is hereby 
approved.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-2109 Filed 2-1-10; 8:45 am]
BILLING CODE 8011-01-P

