
[Federal Register: June 17, 2010 (Volume 75, Number 116)]
[Notices]               
[Page 34490-34491]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17jn10-116]                         


[[Page 34490]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62258; File No. SR-BX-2010-027]

 
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Order 
Approving Proposed Rule Change To Establish New Fee for TotalView 
Service Available to Non-Professionals and to Establish an Optional 
Non-Display Usage Cap for Internal Distributors of TotalView

June 10, 2010.

I. Introduction

    On April 23, 2010, NASDAQ OMX BX, Inc. (``BX'' 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 proposed rule change to 
(i) establish a $1 per month fee for non-professional use of real-time 
quotation and order information from the BX Market Center quoting and 
trading of The NASDAQ Stock Market LLC (``Nasdaq'')-, The New York 
Stock Exchange LLC (``NYSE'')-, NYSE Amex LLC (``Amex'')- and other 
regional exchange-listed securities; and (ii) approve the creation of 
an optional non-display usage cap of $16,000 per month for internal 
distributors of BX TotalView. The proposed rule change was published 
for comment in the Federal Register on May 6, 2010.\3\ The Commission 
received no comment letters on the proposed rule change. This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 62001 (April 29, 
2010), 75 FR 25014 (May 6, 2010) (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange is proposing to establish a $1 per month fee for non-
professional subscribers to BX TotalView.\4\ BX TotalView consists of 
real-time market participant quotation information regarding the 
Exchange's trading of Nasdaq-, NYSE-, Amex- and other exchange-listed 
stocks. The new fee for the BX TotalView data product is similar to the 
fees charged by Nasdaq. Like Nasdaq TotalView, BX TotalView provides 
all displayed quotes and orders in the market, with attribution to the 
relevant market participant, at every price level, as well as total 
displayed anonymous interest at every price level.
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    \4\ Both NYSE Arca, Inc. and the New York Stock Exchange LLC 
offer full-depth products. See, e.g., Securities Exchange Act 
Release No. 53469 (March 10, 2006), 71 FR 14045 (March 20, 2006) 
(SR-PCX-2006-24) and Securities Exchange Act Release No. 44138 
(December 7, 2001), 66 FR 64895 (December 14, 2001) (SR-NYSE-2001-
42), respectively.
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    The Commission has previously only approved a fee of $20 per month 
for both BX TotalView for Nasdaq and BX TotalView for NYSE and all 
other regional exchange-listed issues combined.\5\ BX intended to 
establish these as separate fees, and charged users beginning in 
January 2010, a fee of $20 per month for BX TotalView for Nasdaq and an 
additional fee of $20 for BX TotalView for NYSE and all other regional 
exchange-listed issues. Therefore, BX is proposing to amend Rule 
7023(a)(1) to clearly establish a fee of $20 per month for BX TotalView 
for Nasdaq issues and a separate fee of $20 per month for BX TotalView 
for NYSE and all other regional exchange-listed issues, as BX 
originally intended. The Exchange has represented that all such fees 
charged exceeding the $20 combined fee as currently stated in the 
rulebook are being refunded.
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    \5\ See Securities Exchange Act Release No. 59615 (March 20, 
2009), 74 FR 14604 (March 31, 2009) (SR-BX-2009-005).
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    Rule 7023(a) is also being amended to clarify the data that is 
included in the BX TotalView Entitlement specifically includes trade 
data for executions that occur within the NASDAQ OMX BX Equities 
System. BX notes that the data included remains consistent with what 
has always been included in the BX TotalView Entitlement, as well as 
the data included in the Nasdaq TotalView Entitlement. This revision is 
intended for clarification purposes only.
    In addition, the Exchange is proposing to amend Rule 7023 to 
establish an optional $16,000 per month non-display BX TotalView fee 
cap for internal distributors, which would encompass both BX TotalView 
for Nasdaq issues and BX TotalView for NYSE and regional issues. The BX 
TotalView fee cap would not include distributor fees. The Exchange 
notes that this fee cap is substantially similar to a recent Nasdaq 
filing.\6\
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    \6\ See Securities Exchange Act Release No. 61700 (March 12, 
2010), 75 FR 13172 (March 18, 2010) (SR-NASDAQ-2010-034).
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III. Discussion and Commission Findings

    The Commission 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, it is consistent with Section 6(b)(4) of the Act,\8\ which 
requires that the rules of a national securities exchange provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among its members and issuers and other parties using its facilities, 
and Section 6(b)(5) of the Act,\9\ 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, 
and not be designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \7\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
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    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\
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    \10\ 15 U.S.C. 78f(b)(8).
    \11\ 17 CFR 242.603(a).
    \12\ BX is an exclusive processor of BX 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 data on an exclusive basis on its own behalf.
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    On December 2, 2008, the Commission issued an approval order 
(``Order'') that sets forth a market-based approach for analyzing 
proposals by self-regulatory organizations to impose fees for ``non-
core'' market data products, such as the BX TotalView data feeds.\13\ 
The Commission believes that that the proposed rule change is 
consistent with the Act for the reasons noted in the NYSE Arca Order 
and the 2009 Order approving fees for the BX TotalView data feeds.\14\
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    \13\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770 (December 9, 2008) (Order Setting Aside Action by 
Delegated Authority and Approving Proposed Rule Change Relating to 
NYSE Arca Data) (the ``NYSE Arca Order'').
    \14\ See supra notes 5 and 13.
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    The proposal before the Commission relates to fees for BX 
TotalView, which are non-core, depth of book market data

[[Page 34491]]

products. As in the Commission's NYSE Arca Order analysis, at least two 
broad types of significant competitive forces applied to BX in setting 
the terms of this proposal: (i) BX's compelling need to attract order 
flow from market participants; and (ii) the availability to market 
participants of alternatives to purchasing BX's depth-of-book order 
data. Attracting order flow is the core competitive concern of any 
national securities exchange, including BX. Attracting order flow is an 
essential part of a national securities exchange's competitive success. 
If a national securities exchange cannot attract order flow to its 
market, it will not be able to execute transactions. If a national 
securities exchange cannot execute transactions on its market, it will 
not generate transaction revenue. If a national securities exchange 
cannot attract orders or execute transactions on its market, it will 
not have market data to distribute, for a fee or otherwise, and will 
not earn market data revenue and thus not be competitive with other 
exchanges that have this ability.
    BX must compete vigorously for order flow to maintain its share of 
trading volume. This compelling need to attract order flow imposes 
significant pressure on BX to act reasonably in setting its fees for BX 
market data, particularly given that the market participants that must 
pay such fees often will be the same market participants from whom BX 
must attract order flow. These market participants particularly include 
the large broker-dealer firms that control the handling of a large 
volume of customer and proprietary order flow. Given the portability of 
order flow from one trading venue to another, any exchange that sought 
to charge unreasonably high data fees would risk alienating many of the 
same customers on whose orders it depends for competitive survival.\15\
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    \15\ See NYSE Arca Order, supra note 13, at 74783.
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    In addition to the need to attract order flow, the availability of 
alternatives to BX's TotalView data significantly affects the terms on 
which BX can distribute this market data.\16\ In setting the fees for 
its BX TotalView data, BX must consider the extent to which market 
participants would choose one or more alternatives instead of 
purchasing the Exchange's data.\17\ Of course, the most basic source of 
information generally available at an exchange is the complete record 
of an exchange's transactions that is provided in the core data 
feeds.\18\ In this respect, the core data feeds that include an 
exchange's own transaction information are a significant alternative to 
the exchange's market data product.\19\ For more specific information 
concerning depth, market participants can choose among products offered 
by the various exchanges and ECNs.\20\ The various self-regulatory 
organizations, the several Trade Reporting Facilities of FINRA, and 
ECNs that produce proprietary data are all sources of competition. In 
addition, market participants can assess depth with tools other than 
market data, such as ``pinging'' orders that search out both displayed 
and nondisplayed size at all price points within an order's limit 
price.\21\
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    \16\ See Richard Posner, Economic Analysis of Law Sec.  9.1 (5th 
ed. 1998) (discussing the theory of monopolies and pricing). See 
also U.S. Dep't of Justice & Fed'l Trade Comm'n, Horizontal Merger 
Guidelines Sec.  1.11 (1992), as revised (1997) (explaining the 
importance of alternatives to the presence of competition and the 
definition of markets and market power). Courts frequently refer to 
the Department of Justice and Federal Trade Commission merger 
guidelines to define product markets and evaluate market power. See, 
e.g., FTC v. Whole Foods Market, Inc., 502 F. Supp. 2d 1 (D.D.C. 
2007); FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109 (D.D.C. 2004). In 
considering antitrust issues, courts have recognized the value of 
competition in producing lower prices. See, e.g., Leegin Creative 
Leather Products v. PSKS, Inc., 127 S. Ct. 2705 (2007); Atlanta 
Richfield Co. v. United States Petroleum Co., 495 U.S. 328 (1990); 
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 
(1986); State Oil Co. v. Khan, 522 U.S. 3 (1997); Northern Pacific 
Railway Co. v. U.S., 356 U.S. 1 (1958).
    \17\ See NYSE Arca Order, supra note 13, at 74783.
    \18\ Id.
    \19\ Id.
    \20\ Id. at 74784.
    \21\ Id.
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    In sum, there are a variety of alternative sources of information 
that impose significant competitive pressures on BX in setting the 
terms for distributing its depth-of-book order data. The Commission 
believes that the availability of those alternatives, as well as BX's 
compelling need to attract order flow, imposed significant competitive 
pressure on BX to act equitably, fairly, and reasonably in setting the 
terms of its proposal.
    Because BX 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. Further, the Commission did not receive any comment letters 
raising concerns of a substantial countervailing basis that the terms 
of the proposal failed to meet the requirements of the Act or the rules 
thereunder.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-BX-2010-027) be, and it hereby is, 
approved.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14600 Filed 6-16-10; 8:45 am]
BILLING CODE 8010-01-P

