
[Federal Register Volume 77, Number 129 (Thursday, July 5, 2012)]
[Notices]
[Pages 39752-39757]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16376]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67297; File No. SR-NASDAQ-2012-063]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Applicable to a New Version of the NASDAQ TotalView-ITCH Equities Depth 
Feed and Related Distributor and Administration Fees

June 28, 2012.
    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 June 15, 2012, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by Nasdaq. 
The Commission is publishing this notice to solicit comments on the 
proposed rule from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to establish fees for a new optional delivery 
mechanism for Nasdaq Depth data (defined below). Specifically, Nasdaq 
proposes to establish Distributor and Administration fees for a 
hardware-based version of Nasdaq TotalView-ITCH data and is not 
offering a new market data product.
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.\3\
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    \3\ Changes are marked to the rule text that appears in the 
electronic Nasdaq Manual found at http://nasdaqomx.cchwallstreet.com.
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* * * * *

7026. Distribution Models

    (a)-(b) No change.
    (c) [Reserved] Hardware-Based Delivery of Nasdaq Depth data
    (1) The charges to be paid by Distributors for processing Nasdaq 
Depth data sourced from a Nasdaq hardware-based market data format 
shall be:

[[Page 39753]]



----------------------------------------------------------------------------------------------------------------
  Hardware-based delivery of Nasdaq depth
                    data                                                 Monthly fee
----------------------------------------------------------------------------------------------------------------
Internal Only Distributor..................  $25,000 per Distributor.
External Only Distributor..................  $2,500 per Distributor.
Internal and External Distributor..........  $27,500 per Distributor.
Managed Data Solution Administration Fee...  $3,000 = 1 Subscriber.
                                             $3,500 = 2 Subscribers.
                                             $4,000 = 3 Subscribers.
                                             $500 for each additional Subscriber.
----------------------------------------------------------------------------------------------------------------

    (2) ``Hardware-Based Delivery'' means that a distributor is 
processing data sourced from a Nasdaq hardware coded market data 
format such as TotalView-ITCH FPGA.
    (3) Distributors of Nasdaq Depth data also are subject to the 
market data fees as set forth in this rule, Nasdaq Rule 7019(b) and 
Nasdaq Rule 7023.
* * * * *

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

    In its filing with the Commission, Nasdaq 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. Nasdaq 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
    Nasdaq is proposing to amend Nasdaq Rule 7026 (Distribution Models) 
to establish Distributor and Administration fees for an optional 
hardware-based delivery of Nasdaq Depth-of-Book data, defined in Nasdaq 
Rule 7023 to include TotalView, OpenView, and NASDAQ Level 2 
(collectively, ``Nasdaq Depth data''). This new delivery option of the 
Nasdaq TotalView-ITCH equities depth feed uses field-programmable gate 
array (``FPGA'') technology. In offering a hardware-delivery mechanism, 
Nasdaq is serving those customers requiring a predictable latency 
profile throughout the trading day. By taking advantage of hardware 
parallelism, FPGA technology is capable of processing more data packets 
during peak market conditions without the introduction of variable 
queuing latency.
    The proposed Distributor fee for utilizing the optional hardware-
based delivery of Nasdaq Depth data is $25,000 for internal only 
distribution, $2,500 for external only distribution and $27,500 for 
internal and external distribution. The optional Managed Data Solution 
(``MDS'') Administration fee is tiered based upon the number of 
subscribers, starting at $3,000 as outlined above. There will be no 
change in Nasdaq Depth data subscriber fees as a result of these other 
fee changes.
    This new pricing option is available to all firms, regardless of 
how they choose to access the hardware-based version of Nasdaq Depth 
data, and is in response to industry demand, as well as due to changes 
in the technology to distribute and consume market data. Distributors 
opting to pay for the hardware-based delivery of Nasdaq Depth data 
would still be fee liable for the applicable market data fees, as 
described in Nasdaq Rule 7026, Nasdaq Rule 7019(b) and Nasdaq Rule 
7023.
    Competition for depth data is considerable and the Exchange 
believes that this proposal clearly evidences such competition. The 
Exchange is offering a new pricing model in order to keep pace with 
changes in the industry and evolving customer needs as new technologies 
emerge and products continue to develop and change. It is entirely 
optional and is geared towards attracting new customers, as well as 
retaining existing customers.
    The proposed fees are based on pricing conventions and distinctions 
that exist in Nasdaq's current fee schedule, and the fee schedules of 
other exchanges. These distinctions (e.g., internal versus external 
distribution, as well as for MDS) for the proposed optional Distributor 
and Administration fees for hardware-based delivery of Nasdaq Depth 
data are based on a careful analysis of empirical data and the 
application of time-tested pricing principles already accepted by the 
Commission and discussed in greater depth in the Statutory Basis 
section below. Also, the costs associated with the hardware-based 
delivery system for Nasdaq Depth data are higher than a software-based 
solution since it involves the expense of hiring personnel to create 
and maintain the product, as well as creating, shipping, installing and 
maintaining the new equipment and codebase. Because it uses a distinct 
technology, the overall costs of creation and maintenance of the 
hardware-based version of TotalView-ITCH are higher than the software-
based version. From a messaging perspective, the data content and 
sequencing will be identical on both the hardware- and software-based 
versions of the TotalView-ITCH product.
    The proposed hardware-based delivery of Nasdaq Depth data is 
completely optional. Nasdaq is offering this new delivery mechanism for 
the Nasdaq TotalView-ITCH product, which uses FPGA technology, and is 
designed to deliver Nasdaq direct data content in a predictable manner 
throughout the trading day.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\4\ in general, and with Section 
6(b)(4) of the Act,\5\ in particular, in that it provides an equitable 
allocation of reasonable fees among users and recipients of Nasdaq 
data. In adopting Regulation NMS, the Commission granted self-
regulatory organizations and broker-dealers increased authority and 
flexibility to offer new and unique market data to the public. It was 
believed that this authority would expand the amount of data available 
to consumers, and also spur innovation and competition for the 
provision of market data.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
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    The Commission concluded that Regulation NMS--by deregulating the 
market in proprietary data--would itself further the Act's goals of 
facilitating efficiency and competition:

    [E]fficiency is promoted when broker-dealers who do not need the 
data beyond the prices, sizes, market center identifications of the 
NBBO and consolidated last sale information are not required to 
receive (and pay for) such data. The Commission also believes that 
efficiency is promoted when broker-dealers may choose to receive 
(and pay for) additional market data based on their own internal 
analysis of the need for such data.\6\
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    \6\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496 (June 29, 2005).

By removing ``unnecessary regulatory restrictions'' on the ability of 
exchanges to sell their own data, Regulation NMS

[[Page 39754]]

advanced the goals of the Act and the principles reflected in its 
legislative history. If the free market should determine whether 
proprietary data is sold to broker-dealers at all, it follows that the 
price at which such data is sold should be set by the market as well. 
Nasdaq Depth data is precisely the sort of market data product that the 
Commission envisioned when it adopted Regulation NMS.
    On July 21, 2010, President Barack Obama signed into law H.R. 4173, 
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 
(``Dodd-Frank Act''), which amended Section 19 of the Act. Among other 
things, Section 916 of the Dodd-Frank Act amended paragraph (A) of 
Section 19(b)(3) of the Act by inserting the phrase ``on any person, 
whether or not the person is a member of the self-regulatory 
organization'' after ``due, fee or other charge imposed by the self-
regulatory organization.'' As a result, all SRO rule proposals 
establishing or changing dues, fees, or other charges are immediately 
effective upon filing regardless of whether such dues, fees, or other 
charges are imposed on members of the SRO, non-members, or both. 
Section 916 further amended paragraph (C) of Section 19(b)(3) of the 
Exchange Act to read, in pertinent part, ``At any time within the 60-
day period beginning on the date of filing of such a proposed rule 
change in accordance with the provisions of paragraph (1) [of Section 
19(b)], the Commission summarily may temporarily suspend the change in 
the rules of the self-regulatory organization made thereby, if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of this title. If the Commission takes 
such action, the Commission shall institute proceedings under paragraph 
(2)(B) [of Section 19(b)] to determine whether the proposed rule should 
be approved or disapproved.''
    Nasdaq believes that these amendments to Section 19 of the Act 
reflect Congress' intent to allow the Commission to rely upon the 
forces of competition to ensure that fees for market data are 
reasonable and equitably allocated. Although Section 19(b) had formerly 
authorized immediate effectiveness for a ``due, fee or other charge 
imposed by the self-regulatory organization,'' the Commission adopted a 
policy and subsequently a rule stipulating that fees for data and other 
products available to persons that are not members of the self-
regulatory organization must be approved by the Commission after first 
being published for comment. At the time, the Commission supported the 
adoption of the policy and the rule by pointing out that unlike 
members, whose representation in self-regulatory organization 
governance was mandated by the Act, non-members should be given the 
opportunity to comment on fees before being required to pay them, and 
that the Commission should specifically approve all such fees. Nasdaq 
believes that the amendment to Section 19 reflects Congress' conclusion 
that the evolution of self-regulatory organization governance and 
competitive market structure have rendered the Commission's prior 
policy on non-member fees obsolete. Specifically, many exchanges have 
evolved from member-owned not-for-profit corporations into for-profit 
investor-owned corporations (or subsidiaries of investor-owned 
corporations). Accordingly, exchanges no longer have narrow incentives 
to manage their affairs for the exclusive benefit of their members, but 
rather have incentives to maximize the appeal of their products to all 
customers, whether members or non-members, so as to broaden 
distribution and grow revenues. Moreover, we believe that the change 
also reflects an endorsement of the Commission's determinations that 
reliance on competitive markets is an appropriate means to ensure 
equitable and reasonable prices. Simply put, the change reflects a 
presumption that all fee changes should be permitted to take effect 
immediately, since the level of all fees are constrained by competitive 
forces.
    The decision of the United States Court of Appeals for the District 
of Columbia Circuit in NetCoaliton v. SEC, No. 09-1042 (D.C. Cir. 
2010), although reviewing a Commission decision made prior to the 
effective date of the Dodd-Frank Act, upheld the Commission's reliance 
upon competitive markets to set reasonable and equitably allocated fees 
for market data. ``In fact, the legislative history indicates that the 
Congress intended that the market system `evolve through the interplay 
of competitive forces as unnecessary regulatory restrictions are 
removed' and that the SEC wield its regulatory power `in those 
situations where competition may not be sufficient,' such as in the 
creation of a `consolidated transactional reporting system.' 
NetCoaltion, at 15 (quoting H.R. Rep. No. 94-229, at 92 (1975), as 
reprinted in 1975 U.S.C.C.A.N. 321, 323). The court's conclusions about 
Congressional intent are therefore reinforced by the Dodd-Frank Act 
amendments, which create a presumption that exchange fees, including 
market data fees, may take effect immediately, without prior Commission 
approval, and that the Commission should take action to suspend a fee 
change and institute a proceeding to determine whether the fee change 
should be approved or disapproved only where the Commission has 
concerns that the change may not be consistent with the Act.
    For the reasons stated above, Nasdaq believes that the proposed 
fees are fair and equitable, and not unreasonably discriminatory. As 
described above, the proposed fees are based on pricing conventions and 
distinctions that exist in Nasdaq's current fee schedule, and the fee 
schedules of other exchanges. These distinctions (e.g., internal versus 
external distribution and hardware-based versus software-based system 
for delivering Nasdaq Depth data) are based on principles of fairness 
and equity that have helped for many years to maintain fair, equitable, 
and not unreasonably discriminatory fees, and that apply with equal or 
greater force to the current proposal. The Distributor and 
Administration fees for the optional hardware-based delivery of Nasdaq 
Depth data are based on careful analysis of empirical data and the 
application of time-tested pricing principles already accepted by the 
Commission for many years.
    As described in greater detail below, if Nasdaq has calculated 
improperly and the market deems the proposed fees to be unfair, 
inequitable, or unreasonably discriminatory, firms can diminish or 
discontinue the use of their data because the proposed fee is entirely 
optional to all parties. Firms are not required to purchase Nasdaq 
Depth data or to utilize any specific pricing alternative if they do 
choose to purchase Nasdaq Depth data. Nasdaq is not required to make 
depth data available or to offer specific pricing alternatives for 
potential purchases. Nasdaq can discontinue offering a pricing 
alternative (as it has in the past) and firms can discontinue their use 
at any time and for any reason (as they often do), including due to 
their assessment of the reasonableness of fees charged. Nasdaq 
continues to create new pricing policies aimed at increasing fairness 
and equitable allocation of fees among users, and Nasdaq believes this 
is another useful step in that direction.

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

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is not

[[Page 39755]]

necessary or appropriate in furtherance of the purposes of the Act, as 
amended. Notwithstanding its determination that the Commission may rely 
upon competition to establish fair and equitably allocated fees for 
market data, the NetCoaltion court found that the Commission had not, 
in that case, compiled a record that adequately supported its 
conclusion that the market for the data at issue in the case was 
competitive. For the reasons discussed above, Nasdaq believes that the 
Dodd-Frank Act amendments to Section 19 materially alter the scope of 
the Commission's review of future market data filings, by creating a 
presumption that all fees may take effect immediately, without prior 
analysis by the Commission of the competitive environment. Even in the 
absence of this important statutory change, however, Nasdaq believes 
that a record may readily be established to demonstrate the competitive 
nature of the market in question.
    There is intense competition between trading platforms that provide 
transaction execution and routing services and proprietary data 
products. Transaction execution and proprietary data products are 
complementary in that market data is both an input and a byproduct of 
the execution service. In fact, market data and trade execution are a 
paradigmatic example of joint products with joint costs. The decision 
whether and on which platform to post an order will depend on the 
attributes of the platform where the order can be posted, including the 
execution fees, data quality and price and distribution of its data 
products. Without the prospect of a taking order seeing and reacting to 
a posted order on a particular platform, the posting of the order would 
accomplish little. Without trade executions, exchange data products 
cannot exist. Data products are valuable to many end users only insofar 
as they provide information that end users expect will assist them or 
their customers in making trading decisions.
    The costs of producing market data include not only the costs of 
the data distribution infrastructure, but also the costs of designing, 
maintaining, and operating the exchange's transaction execution 
platform and the cost of regulating the exchange to ensure its fair 
operation and to maintain investor confidence. The total return that a 
trading platform earns reflects the revenues it receives from both 
products and the joint costs it incurs. Moreover, an exchange's 
customers view the costs of transaction executions and of data as a 
unified cost of doing business with the exchange. A broker-dealer will 
direct orders to a particular exchange only if the expected revenues 
from executing trades on the exchange exceed net transaction execution 
costs and the cost of data that the broker-dealer chooses to buy to 
support its trading decisions (or those of its customers). The choice 
of data products is, in turn, a product of the value of the products in 
making profitable trading decisions. If the cost of the product exceeds 
its expected value, the broker-dealer will choose not to buy it. 
Moreover, as a broker-dealer chooses to direct fewer orders to a 
particular exchange, the value of the product to that broker-dealer 
decreases, for two reasons. First, the product will contain less 
information, because executions of the broker-dealer's orders will not 
be reflected in it. Second, and perhaps more important, the product 
will be less valuable to that broker-dealer because it does not provide 
information about the venue to which it is directing its orders. Data 
from the competing venue to which the broker-dealer is directing orders 
will become correspondingly more valuable.
    Thus, a super-competitive increase in the fees charged for either 
transactions or data has the potential to impair revenues from both 
products. ``No one disputes that competition for order flow is 
`fierce'.'' NetCoalition at 24. However, the existence of fierce 
competition for order flow implies a high degree of price sensitivity 
on the part of broker-dealers with order flow, since they may readily 
reduce costs by directing orders toward the lowest-cost trading venues. 
A broker-dealer that shifted its order flow from one platform to 
another in response to order execution price differentials would both 
reduce the value of that platform's market data and reduce its own need 
to consume data from the disfavored platform. Similarly, if a platform 
increases its market data fees, the change will affect the overall cost 
of doing business with the platform, and affected broker-dealers will 
assess whether they can lower their trading costs by directing orders 
elsewhere and thereby lessening the need for the more expensive data.
    Analyzing the cost of market data distribution in isolation from 
the cost of all of the inputs supporting the creation of market data 
will inevitably underestimate the cost of the data. Thus, because it is 
impossible to create data without a fast, technologically robust, and 
well-regulated execution system, system costs and regulatory costs 
affect the price of market data. It would be equally misleading, 
however, to attribute all of the exchange's costs to the market data 
portion of an exchange's joint product. Rather, all of the exchange's 
costs are incurred for the unified purposes of attracting order flow, 
executing and/or routing orders, and generating and selling data about 
market activity. The total return that an exchange earns reflects the 
revenues it receives from the joint products and the total costs of the 
joint products.
    Competition among trading platforms can be expected to constrain 
the aggregate return each platform earns from the sale of its joint 
products, but different platforms may choose from a range of possible, 
and equally reasonable, pricing strategies as the means of recovering 
total costs. For example, some platform may choose to pay rebates to 
attract orders, charge relatively low prices for market information (or 
provide information free of charge) and charge relatively high prices 
for accessing posted liquidity. Other platforms may choose a strategy 
of paying lower rebates (or no rebates) to attract orders, setting 
relatively high prices for market information, and setting relatively 
low prices for accessing posted liquidity. In this environment, there 
is no economic basis for regulating maximum prices for one of the joint 
products in an industry in which suppliers face competitive constraints 
with regard to the joint offering. This would be akin to strictly 
regulating the price that an automobile manufacturer can charge for car 
sound systems despite the existence of a highly competitive market for 
cars and the availability of after-market alternatives to the 
manufacturer-supplied system.
    The market for market data products is competitive and inherently 
contestable because there is fierce competition for the inputs 
necessary to the creation of proprietary data and strict pricing 
discipline for the proprietary products themselves. Numerous exchanges 
compete with each other for listings, trades, and market data itself, 
providing virtually limitless opportunities for entrepreneurs who wish 
to produce and distribute their own market data. This proprietary data 
is produced by each individual exchange, as well as other entities, in 
a vigorously competitive market.
    Broker-dealers currently have numerous alternative venues for their 
order flow, including ten self-regulatory organization (``SRO'') 
markets, as well as internalizing broker-dealers (``BDs'') and various 
forms of alternative trading systems (``ATSs''), including dark pools 
and electronic communication networks (``ECNs''). Each SRO market 
competes to produce transaction reports via trade executions, and two 
FINRA-regulated Trade Reporting Facilities (``TRFs'') compete to 
attract internalized

[[Page 39756]]

transaction reports. Competitive markets for order flow, executions, 
and transaction reports provide pricing discipline for the inputs of 
proprietary data products.
    The large number of SROs, TRFs, BDs, and ATSs that currently 
produce proprietary data or are currently capable of producing it 
provides further pricing discipline for proprietary data products. Each 
SRO, TRF, ATS, and BD is currently permitted to produce proprietary 
data products, and many currently do or have announced plans to do so, 
including Nasdaq, NYSE, NYSE Amex, NYSEArca, and BATS.
    Any ATS or BD can combine with any other ATS, BD, or multiple ATSs 
or BDs to produce joint proprietary data products. Additionally, order 
routers and market data vendors can facilitate single or multiple 
broker-dealers' production of proprietary data products. The potential 
sources of proprietary products are virtually limitless.
    The fact that proprietary data from ATSs, BDs, and vendors can by-
pass SROs is significant in two respects. First, non-SROs can compete 
directly with SROs for the production and sale of proprietary data 
products, as BATS and Arca did before registering as exchanges by 
publishing proprietary book data on the Internet. Second, because a 
single order or transaction report can appear in an SRO proprietary 
product, a non-SRO proprietary product, or both, the data available in 
proprietary products is exponentially greater than the actual number of 
orders and transaction reports that exist in the marketplace.
    Market data vendors provide another form of price discipline for 
proprietary data products because they control the primary means of 
access to end users. Vendors impose price restraints based upon their 
business models. For example, vendors such as Bloomberg and Thomson 
Reuters that assess a surcharge on data they sell may refuse to offer 
proprietary products that end users will not purchase in sufficient 
numbers. Internet portals, such as Google, impose a discipline by 
providing only data that will enable them to attract ``eyeballs'' that 
contribute to their advertising revenue. Retail broker-dealers, such as 
Schwab and Fidelity, offer their customers proprietary data only if it 
promotes trading and generates sufficient commission revenue. Although 
the business models may differ, these vendors' pricing discipline is 
the same: They can simply refuse to purchase any proprietary data 
product that fails to provide sufficient value. Nasdaq and other 
producers of proprietary data products must understand and respond to 
these varying business models and pricing disciplines in order to 
market proprietary data products successfully.
    In addition to the competition and price discipline described 
above, the market for proprietary data products is also highly 
contestable because market entry is rapid, inexpensive, and profitable. 
The history of electronic trading is replete with examples of entrants 
that swiftly grew into some of the largest electronic trading platforms 
and proprietary data producers: Archipelago, Bloomberg Tradebook, 
Island, RediBook, Attain, TracECN, BATS Trading and Direct Edge. A 
proliferation of dark pools and other ATSs operate profitably with 
fragmentary shares of consolidated market volume.
    Regulation NMS, by deregulating the market for proprietary data, 
has increased the contestability of that market. While broker-dealers 
have previously published their proprietary data individually, 
Regulation NMS encourages market data vendors and broker-dealers to 
produce proprietary products cooperatively in a manner never before 
possible. Multiple market data vendors already have the capability to 
aggregate data and disseminate it on a profitable scale, including 
Bloomberg, and Thomson Reuters.
    The court in NetCoalition concluded that the Commission had failed 
to demonstrate that the market for market data was competitive based on 
the reasoning of the Commission's NetCoalition order because, in the 
court's view, the Commission had not adequately demonstrated that the 
depth-of-book data at issue in the case is used to attract order flow. 
Nasdaq believes, however, that evidence not before the court clearly 
demonstrates that availability of data attracts order flow. For 
example, as of July 2010, 92 of the top 100 broker-dealers by shares 
executed on Nasdaq consumed Level 2/NQDS and 80 of the top 100 broker-
dealers consumed TotalView. During that month, the Level 2/NQDS-users 
were responsible for 94.44% of the orders entered into Nasdaq and 
TotalView users were responsible for 92.98%.
    Competition among platforms has driven Nasdaq continually to 
improve its platform data offerings and to cater to customers' data 
needs. For example, Nasdaq has developed and maintained multiple 
delivery mechanisms (IP, multi-cast, and compression) that enable 
customers to receive data in the form and manner they prefer and at the 
lowest cost to them. Nasdaq offers front end applications such as its 
``Bookviewer'' to help customers utilize data. Nasdaq has created new 
products like TotalView Aggregate to complement TotalView ITCH and 
Level 2/NQDS, because offering data in multiple formatting allows 
Nasdaq to better fit customer needs. Nasdaq offers data via multiple 
extranet providers, thereby helping to reduce network and total cost 
for its data products. Nasdaq has developed an online administrative 
system to provide customers transparency into their data feed requests 
and streamline data usage reporting. Nasdaq has also expanded its 
Enterprise License options that reduce the administrative burden and 
costs to firms that purchase market data.
    Despite these enhancements and a dramatic increase in message 
traffic, Nasdaq's fees for market data have remained flat. In fact, as 
a percent of total customer costs, Nasdaq data fees have fallen 
relative to other data usage costs--including bandwidth, programming, 
and infrastructure--that have risen. The same holds true for execution 
services; despite numerous enhancements to Nasdaq's trading platform, 
absolute and relative trading costs have declined. Platform competition 
has intensified as new entrants have emerged, constraining prices for 
both executions and for data.
    The vigor of competition for depth information is significant and 
the Exchange believes that this proposal clearly evidences such 
competition. Nasdaq is offering a new pricing model in order to keep 
pace with changes in the industry and evolving customer needs. It is 
entirely optional and is geared towards attracting new customers, as 
well as retaining existing customers.
    The Exchange has witnessed competitors creating new products and 
innovative pricing in this space over the course of the past year. 
Nasdaq continues to see firms challenge its pricing on the basis of the 
Exchange's explicit fees being higher than the zero-priced fees from 
other competitors such as BATS. In all cases, firms make decisions on 
how much and what types of data to consume on the basis of the total 
cost of interacting with Nasdaq or other exchanges. Of course, the 
explicit data fees are but one factor in a total platform analysis. 
Some competitors have lower transactions fees and higher data fees, and 
others are vice versa. The market for this depth information is highly 
competitive and continually evolves as products develop and change.

[[Page 39757]]

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) \7\ of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or 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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2012-063 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2012-063. This 
file number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, 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 offices 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-NASDAQ-2012-063, and should 
be submitted on or before July 26, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-16376 Filed 7-3-12; 8:45 am]
BILLING CODE 8011-01-P


