
[Federal Register Volume 78, Number 69 (Wednesday, April 10, 2013)]
[Notices]
[Pages 21469-21475]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08326]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69300; File No. SR-NYSEMKT-2013-31]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Establishing Certain 
Fees for the NYSE MKT Trades and NYSE MKT Realtime Reference Prices 
Market Data Products

Dated: April 4, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 21, 2013, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.

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[[Page 21470]]

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

    The Exchange proposes to establish certain fees for the NYSE MKT 
Trades and NYSE MKT Realtime Reference Prices (``NYSE MKT RRP'') market 
data products. The text of the proposed rule change is available on the 
Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to establish certain fees for the NYSE MKT 
Trades and NYSE MKT RRP market data products.
Background
Current NYSE MKT Trades Basic and Broadcast Fees
    In 2010, the Securities and Exchange Commission (``SEC'' or the 
``Commission'') approved the NYSE MKT Trades data feed and certain fees 
for it.\4\ NYSE MKT Trades is a NYSE MKT-only market data feed that 
allows a vendor to redistribute on a real-time basis the same last sale 
information that the Exchange reports under the Consolidated Tape 
Association (``CTA'') Plan for inclusion in the CTA Plan's consolidated 
data streams and certain other related data elements. Specifically, 
NYSE MKT Trades includes the real-time last sale price, time, size, and 
bid/ask quotations for each security traded on the Exchange and a stock 
summary message. The stock summary message updates every minute and 
includes NYSE MKT's opening price, high price, low price, closing 
price, and cumulative volume for the security.
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    \4\ See Securities Exchange Act Release No. 62187 (May 27, 
2010), 75 FR 31500 (June 3, 2010) (SR-NYSEAmex-2010-35).
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    The Exchange currently charges NYSE MKT Trades data feed recipients 
an access fee of $750 per month, and a subscriber fee for professional 
subscribers of $10 per month per device, which may be counted, at the 
election of the vendor based on the number of ``Subscriber 
Entitlements'' \5\ (collectively, these fees are referred to in this 
filing as ``NYSE MKT Trades basic fees''). In July 2012, the Exchange 
added a fee for distribution by television broadcasters (``Broadcast 
Fee''), which is $5,000 per month.\6\ The television broadcast 
distribution method differs from the other distribution methods in that 
the data is available in a temporary, view-only mode on television 
screens.
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    \5\ See id. at 31501.
    \6\ See Securities Exchange Act Release No. 67438 (July 13, 
2012), 77 FR 42535 (July 19, 2012) (SR-NYSEMKT-2012-19).
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Current NYSE MKT RRP Fees
    The Exchange also offers NYSE MKT RRP.\7\ NYSE MKT RRP is designed 
for Web site distribution and includes the real-time last sale price 
and time for each security traded on the Exchange as well as the stock 
summary message, but does not include the size of each trade or bid/ask 
quotations.
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    \7\ See Securities Exchange Act Release No. 61403 (Jan. 22, 
2010), 75 FR 4598 (Jan. 28, 2010) (SR-NYSEAmex-2009-85).
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    The Exchange currently charges a flat fee of $10,000 per month with 
no user-based fees for NYSE MKT RRP. For that fee, the vendor may 
provide NYSE MKT RRP to an unlimited number of the 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. As an alternative to the NYSE MKT RRP flat monthly 
fee, the Exchange offers an alternative fee of $.004 for each real-time 
reference price that a vendor disseminates to its customers (``per 
query fee''), which is capped at $10,000 per month, the same amount as 
the flat fee. In order to take advantage of the per-query fee, a vendor 
must document 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 per-query fee is imposed on vendors, 
not end-users. There are currently no fees for NYSE MKT RRP that are 
specifically designed for television or mobile device distribution.
    NYSE MKT RRP was created to allow distribution of a last sale data 
product for reference purposes on Web sites at a low cost that would 
facilitate distribution to millions of retail investors and relieve 
vendors of administrative burdens.\8\ NYSE MKT RRP is an alternative to 
delayed prices and is not intended for use in trading decisions.\9\ As 
such, distribution of NYSE MKT RRP is subject to certain requirements. 
Specifically, vendors may not provide NYSE MKT RRP in a context in 
which a trading or order routing decision can be implemented unless CTA 
data is available in an equivalent manner, must label NYSE MKT RRP as 
NYSE MKT-only data, and must provide a hyperlinked notice similar to 
the one provided for CTA delayed data.\10\
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    \8\ Id.
    \9\ Id.
    \10\ See Securities Exchange Act Release No. 61144 (Dec. 10, 
2009), 74 FR 67275, 67276-77 (Dec. 18, 2009) (SR-NYSEAmex-2009-85).
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New Digital Media Offerings
    The Exchange recently created a new version of NYSE MKT Trades, 
NYSE MKT Trades Digital Media, which will allow market data vendors, 
television broadcasters, Web site and mobile device service providers, 
and others to distribute the product to their customers for viewing via 
television, Web site, and mobile devices.\11\ The NYSE MKT Trades 
Digital Media product includes access to the real-time last sale price, 
time, and size for each security traded on the Exchange as well as the 
stock summary message, but does not include access to the bid/ask 
quotation that is included with NYSE MKT Trades product under the basic 
fees or Broadcast Fee. Vendors may not provide the NYSE MKT Trades 
Digital Media product in a context in which a trading or order routing 
decision can be implemented unless CTA data is available in an 
equivalent manner, must label the product as NYSE MKT-only data, and 
must provide a hyperlinked notice similar to the one provided for CTA 
delayed data.
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    \11\ See SR-NYSEMKT-2013-30.
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    The Exchange also will offer NYSE MKT RRP Digital Media so that 
NYSE MKT RRP will be available for distribution in the same manner as 
NYSE MKT Trades Digital Media, via television, Web site, and mobile 
devices. The data elements of NYSE MKT RRP (last sale price, time, and 
stock summary message) will remain unchanged from today's NYSE MKT RRP 
product offering.
    The Exchange has established these Digital Media products in 
recognition of

[[Page 21471]]

the demand for a more seamless and easier-to-administer data 
distribution model that takes into account the expanded variety of 
media and communication devices that investors utilize today. For 
example, a television broadcaster could display the NYSE MKT Trades 
data during market-related television programming and on its Web site 
and allow its viewers to view the data via their mobile devices, 
creating a more seamless distribution model that will allow investors 
more choice in how they receive and view market data.
Proposed Digital Media Fees
    The NYSE MKT Trades Digital Media Enterprise Fee will be $5,000 per 
month, and the NYSE MKT RRP Digital Media Enterprise Fee will be $2,500 
per month. The Exchange notes that the NYSE MKT RRP Digital Media 
Enterprise Fee is lower than NYSE MKT Trades Digital Media Enterprise 
Fee because it does not include trade size data. Vendors that pay these 
fees will not be required to pay an access fee, but they will be 
required to pay the redistribution fees as described below. As with the 
current NYSE MKT RRP product and the Broadcast Fee, a vendor paying the 
Digital Media Enterprise Fee may deliver the NYSE MKT Trades and NYSE 
MKT RRP data to an unlimited number of television, Web site, and mobile 
device viewers 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.
    For NYSE MKT Trades, the television-only $5,000 Broadcast Fee 
option will no longer be available. For NYSE MKT RRP, web-only 
distribution for $10,000 per month will no longer be available. The 
Exchange does not believe that any customers would elect these options 
in light of the broader distribution offered with the new Digital Media 
Enterprise Fees and the substantially lower price for NYSE MKT RRP 
Digital Media.
    The Exchange will continue to offer the $.004 per query fee for 
NYSE MKT RRP to any vendor that so chooses, but the Exchange proposes 
to reduce the cap to $2,500, the same amount as the NYSE MKT RRP 
Digital Media Enterprise Fee. Vendors and subscribers receiving NYSE 
MKT Trades via traditional distribution methods, e.g. a Bloomberg 
terminal or a broker-dealer customer Web site that permits order entry, 
will not be eligible for Digital Media Enterprise Fees and will 
continue to pay NYSE MKT Trades basic fees.
Redistribution Fees
    The Exchange also proposes to charge a redistribution fee of $750 
per month for NYSE MKT Trades and $1,500 per month for NYSE MKT 
RRP.\12\ The redistribution fees will apply regardless of whether the 
customer is eligible for the Digital Media Enterprise Fees or NYSE MKT 
Trades basic fees.
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    \12\ A redistributor is a vendor or any other person that 
provides an NYSE MKT data product to a data recipient or to any 
system that a data recipient uses, irrespective of the means of 
transmission or access.
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Operative Date
    The Digital Media Enterprise Fees will be operative on April 1, 
2013 and the redistribution fees will be operative on May 1, 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\13\ in general, and 
Sections 6(b)(4) and 6(b)(5) of the Act,\14\ in particular, in that it 
provides an equitable allocation of reasonable fees among users and 
recipients of the data and is not designed to permit unfair 
discrimination among customers, issuers, and brokers.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4), (5).
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    The proposed NYSE MKT Trades Digital Media Enterprise Fee of $5,000 
per month and NYSE MKT RRP Digital Media Enterprise Fee of $2,500 per 
month are reasonable because they will offer a means for vendors to 
more widely distribute NYSE MKT Trades and NYSE MKT RRP data to 
investors for informational purposes at the same cost (in the case of 
NYSE MKT Trades) or a lower cost (in the case of NYSE MKT RRP) than is 
available today. Currently, NYSE MKT Trades can be distributed via 
television for a $5,000 monthly fee, but that fee does not include Web 
site or mobile device distribution. NYSE MKT RRP can be distributed 
over Web sites for a $10,000 monthly fee, but that fee does not include 
television or mobile device distribution. The Exchange believes that 
the proposed Digital Media Enterprise Fees are reasonable because in 
certain instances they are less than the fees charged by another 
exchange for a similar product.\15\ The Exchange also believes that it 
is reasonable to charge more for NYSE MKT Trades Digital Media than 
NYSE MKT RRP Digital Media because the former includes trade size data. 
The Exchange believes that the price reduction for NYSE MKT RRP coupled 
with the broader distribution options will make the product more 
attractive and result in its greater availability to investors. The 
Exchange believes that reducing the cap for the per query fee from 
$10,000 to $2,500 is reasonable because it will be equal to the 
proposed monthly NYSE MKT RRP Digital Media Enterprise Fee. The 
Exchange believes that reducing the cap for the per query fee is 
equitable and not unfairly discriminatory because it is designed to 
ensure that vendors that elect the per query fee do not pay more for 
real-time reference price data than vendors that pay a flat fee for 
unlimited use.
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    \15\ The NASDAQ Stock Market offers proprietary last sale data 
products for distribution over the Internet and television under 
alternative fee schedules that are subject to a maximum fee is 
$50,000 per month. See NASDAQ Rule 7039(b).
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    The proposed Digital Media Enterprise Fees also are equitable and 
not unfairly discriminatory because they will be applied uniformly to 
market data vendors, television broadcasters, Web site and mobile 
service providers, or any other person that distributes the data on the 
basis described in this filing. The Exchange believes that it is 
appropriate to offer a lower cost fee structure that is designed to 
facilitate broader media distribution of the NYSE MKT Trades and NYSE 
MKT RRP data for informational purposes because it will benefit 
investors generally. Moreover, the value of the data distributed 
generally in the media for informational purposes differs from when it 
is distributed in manner in which it can immediately be utilized for 
trading decisions. The Exchange believes that the data is more valuable 
in that latter context, and as such, it is fair and equitable to have 
differential pricing for it.
    In establishing the Digital Media Enterprise Fees, the Exchange 
recognizes that there is demand for a more seamless and easier-to-
administer data distribution model that takes into account the expanded 
variety of media and communication devices that investors utilize 
today. As is the case with the current NYSE MKT RRP product and the 
Broadcast Fee, the Exchange believes that the Digital Media Enterprise 
Fee will be easy to administer because vendors that purchase it will 
not have to differentiate between professional subscribers and 
nonprofessional subscribers, account for the extent of access to the 
data, or report the number of users; this is a significant reduction in 
vendors' administrative burdens and is a significant value to vendors. 
For example, a television broadcaster could display the NYSE MKT Trades 
Digital Media data during market-related television programming and on 
its Web site and allow its

[[Page 21472]]

viewers to view the data via their mobile devices, creating a more 
seamless distribution model that will allow investors more choice in 
how they receive and view market data, all without having to account 
for and/or measure who accesses the data and how much they do so. By 
easing administration, broadening distribution channels, and, in the 
case of NYSE MKT RRP, reducing prices, the Exchange believes that more 
vendors will choose to offer NYSE MKT Trades and NYSE MKT RRP, thereby 
expanding the distribution of market data for the benefit of investors.
    The proposed redistribution fees also are reasonable because they 
are comparable to other redistribution fees charged by the Exchange as 
well as other exchanges.\16\ The Exchange believes it is reasonable to 
charge redistribution fees because vendors receive value from 
redistributing the data in their business products for their customers. 
The redistribution fees also are equitable and not unfairly 
discriminatory because they will be charged on an equal basis only to 
those vendors that choose to redistribute the data.
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    \16\ For example, the Exchange and NYSE Arca, Inc. (``NYSE 
Arca'') charge redistribution fees of $2,000 per month for certain 
proprietary options market data products. See Securities Exchange 
Act Release Nos. 68005 (Oct. 9, 2012), 77 FR 63362 (Oct. 16, 2012) 
(SR-NYSEArca-2012-106), and 68004 (Oct. 9, 2012), 77 FR 62582 (Oct. 
15, 2012) (SR-NYSEMKT-2012-49). NYSE Arca charges a $3,000 per month 
redistribution fee for the NYSE Arca Integrated Feed. See Securities 
Exchange Act Release No. 66128 (Jan. 10, 2012), 77 FR 2331 (Jan. 17, 
2012) (SR-NYSEArca-2011-96). The Options Price Reporting Authority's 
Fee Schedule, available at http://www.opradata.com/pdf/fee_schedule.pdf, includes an ``Internet Service Only'' redistribution 
fee ($650/month) and standard redistribution fee ($1,500/month).
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    The decision of the United States Court of Appeals for the District 
of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 
2010), upheld the Commission's reliance upon the existence of 
competitive market mechanisms to set reasonable and equitably allocated 
fees for proprietary 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.'
    Id. at 535 (quoting H.R. Rep. No. 94-229 at 92 (1975), as reprinted 
in 1975 U.S.C.C.A.N. 323). The court agreed with the Commission's 
conclusion that ``Congress intended that `competitive forces should 
dictate the services and practices that constitute the U.S. national 
market system for trading equity securities.' '' \17\
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    \17\ NetCoalition, 615 F.3d at 535.
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    As explained below in the Exchange's Statement on Burden on 
Competition, the Exchange believes that there is substantial evidence 
of competition in the marketplace for data and that the Commission can 
rely upon such evidence in concluding that the fees established in this 
filing are the product of competition and therefore satisfy the 
relevant statutory standards.\18\ In addition, the existence of 
alternatives to NYSE MKT Trades and NYSE MKT RRP, including real-time 
consolidated data, free delayed consolidated data, and proprietary last 
sale data from other sources, as described below, further ensures that 
the Exchange cannot set unreasonable fees, or fees that are 
unreasonably discriminatory, when vendors and subscribers can elect 
such alternatives.
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    \18\ Section 916 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act of 2010 (the ``Dodd-Frank Act'') amended 
paragraph (A) of Section 19(b)(3) of the Act, 15 U.S.C. 78s(b)(3), 
to make clear that all exchange fees for market data may be filed by 
exchanges on an immediately effective basis.
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    As the NetCoalition decision noted, the Commission is not required 
to undertake a cost-of-service or ratemaking approach, and the Exchange 
incorporates by reference into this proposed rule change its 
affiliate's analysis of this topic in another rule filing.\19\
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    \19\ See Securities Exchange Act Release No. 63291 (Nov. 9, 
2010), 75 FR 70311 (Nov. 17, 2010) (SR-NYSEArca-2010-97).
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    For these reasons, the Exchange believes that the proposed fees are 
reasonable, equitable, and not unfairly discriminatory.

 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. An exchange's ability to 
price its proprietary data feed products is constrained by (1) Actual 
competition for the sale of proprietary market data products, (2) the 
existence of inexpensive real-time consolidated data and free delayed 
consolidated data, and (3) the inherent contestability of the market 
for proprietary last sale data and the joint product nature of exchange 
platforms.
The Existence of Actual Competition
    The market for proprietary data products is currently 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 and order flow and sales of market 
data itself, providing virtually limitless opportunities for 
entrepreneurs who wish to compete in any or all of those areas, 
including producing and distributing their own market data. Proprietary 
data products are produced and distributed by each individual exchange, 
as well as other entities, in a vigorously competitive market.
    Competitive markets for listings, order flow, executions, and 
transaction reports provide pricing discipline for the inputs of 
proprietary data products and therefore constrain markets from 
overpricing proprietary market data. The U.S. Department of Justice 
also has acknowledged the aggressive competition among exchanges, 
including for the sale of proprietary market data itself. In announcing 
that the bid for NYSE Euronext by NASDAQ OMX Group Inc. and 
IntercontinentalExchange Inc. had been abandoned, Assistant Attorney 
General Christine Varney stated that exchanges ``compete head to head 
to offer real-time equity data products. These data products include 
the best bid and offer of every exchange and information on each equity 
trade, including the last sale.'' \20\
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    \20\ Press Release, U.S. Department of Justice, Assistant 
Attorney General Christine Varney Holds Conference Call Regarding 
NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. Abandoning 
Their Bid for NYSE Euronext (May 16, 2011), available at http://www.justice.gov/iso/opa/atr/speeches/2011/at-speech-110516.html.
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    It is common for broker-dealers to further exploit this recognized 
competitive constraint by sending their order flow and transaction 
reports to multiple markets, rather than providing them all to a single 
market. As a 2010 Commission Concept Release noted, the ``current 
market structure can be described as dispersed and complex'' with 
``trading volume * * * dispersed among many highly automated trading 
centers that compete for order flow in the same stocks'' and ``trading 
centers offer[ing] a wide range of services that are designed to 
attract different types of market participants with varying trading 
needs.'' \21\
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    \21\ Concept Release on Equity Market Structure, Securities 
Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3594 (Jan. 21, 
2010) (File No. S7-02-10). This Concept Release included data from 
the third quarter of 2009 showing that no market center traded more 
than 20% of the volume of listed stocks, further evidencing the 
dispersal of and competition for trading activity. Id. at 3598.

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    In addition, in the case of products that are distributed through 
market data vendors, the market data vendors themselves provide 
additional price discipline for proprietary data products because they 
control the primary means of access to certain end users. These vendors 
impose price discipline based upon their business models. For example, 
vendors that assess a surcharge on data they sell are able to refuse to 
offer proprietary products that their end users do not or will not 
purchase in sufficient numbers. Internet portals, such as Google, 
impose price discipline by providing only data that they believe will 
enable them to attract ``eyeballs'' that contribute to their 
advertising revenue. Similarly, television broadcasters and Web site 
and mobile device service providers will not elect to make available 
NYSE MKT Trades or NYSE MKT RRP unless they believe it will help them 
attract or maintain viewers/customers for their television, Web site, 
or mobile device offerings. All of these operate as constraints on 
pricing proprietary data products.
Joint Platform
    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 executions 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 platforms where the order can be posted, including 
the execution fees, data quality, and price and distribution of their 
data products. The more trade executions a platform does, the more 
valuable its market data products become.
    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 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 broker-
dealer customers view the costs of transaction executions and market 
data as a unified cost of doing business with the exchange.
    Other market participants have noted that the liquidity provided by 
the order book, trade execution, core market data, and non-core market 
data are joint products of a joint platform and have common costs.\22\ 
The Exchange agrees with and adopts those discussions and the arguments 
therein. The Exchange also notes that the economics literature confirms 
that there is no way to allocate common costs between joint products 
that would shed any light on competitive or efficient pricing.\23\
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    \22\ See Securities Exchange Act Release No. 62887 (Sept. 10, 
2010), 75 FR 57092, 57095 (Sept. 17, 2010) (SR-Phlx-2010-121); 
Securities Exchange Act Release No. 62907 (Sept. 14, 2010), 75 FR 
57314, 57317 (Sept. 20, 2010) (SR-NASDAQ-2010-110); and Securities 
Exchange Act Release No. 62908 (Sept. 14, 2010), 75 FR 57321, 57324 
(Sept. 20, 2010) (SR-NASDAQ-2010-111) (``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.''); see also August 1, 2008 
Comment Letter of Jeffrey S. Davis, Vice President and Deputy 
General Counsel, NASDAQ OMX Group, Inc., Statement of Janusz Ordover 
and Gustavo Bamberger (``because market data is both an input to and 
a byproduct of executing trades on a particular platform, market 
data and trade execution services are an example of `joint products' 
with `joint costs.'''), attachment at pg. 4, available at 
www.sec.gov/comments/34-57917/3457917-12.pdf.
    \23\ See generally Mark Hirschey, Fundamentals of Managerial 
Economics, at 600 (2009) (``It is important to note, however, that 
although it is possible to determine the separate marginal costs of 
goods produced in variable proportions, it is impossible to 
determine their individual average costs. This is because common 
costs are expenses necessary for manufacture of a joint product. 
Common costs of production--raw material and equipment costs, 
management expenses, and other overhead--cannot be allocated to each 
individual by-product on any economically sound basis * * *. Any 
allocation of common costs is wrong and arbitrary.''). This is not 
new economic theory. See, e.g., F. W. Taussig, ``A Contribution to 
the Theory of Railway Rates,'' Quarterly Journal of Economics V(4) 
438, 465 (July 1891) (``Yet, surely, the division is purely 
arbitrary. These items of cost, in fact, are jointly incurred for 
both sorts of traffic; and I cannot share the hope entertained by 
the statistician of the Commission, Professor Henry C. Adams, that 
we shall ever reach a mode of apportionment that will lead to 
trustworthy results.'').
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    Analyzing the cost of market data product production and 
distribution in isolation from the cost of all of the inputs supporting 
the creation of market data and market data products will inevitably 
underestimate the cost of the data and data products. Thus, because it 
is impossible to obtain the data inputs to create market data products 
without a fast, technologically robust, and well-regulated execution 
system, system costs and regulatory costs affect the price of both of 
obtaining the market data itself and creating and distributing market 
data products. It would be equally misleading, however, to attribute 
all of an exchange's costs to the market data portion of an exchange's 
joint products. Rather, all of an 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.
    The level of competition and contestability in the market is 
evident in the numerous alternative venues that compete for order flow, 
including 12 equities 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''). Competition among trading 
platforms can be expected to constrain the aggregate return that 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 platforms may choose to pay rebates to attract orders, charge 
relatively low prices for market data products (or provide market data 
products 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 data products, 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.
Existence of Alternatives
    The large number of SROs, 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, 
ATS, and BD is currently permitted to produce proprietary data 
products, and many currently do or have announced plans to do so, 
including but not limited to the Exchange, NYSE, NYSE Arca, NASDAQ OMX, 
BATS, and Direct Edge.
    The fact that proprietary data from ATSs, BDs, and vendors can 
bypass SROs is significant in two respects. First, non-SROs can compete 
directly with SROs for the production and sale of proprietary data 
products. Second, because a single order or transaction report can 
appear in an SRO proprietary

[[Page 21474]]

product, a non-SRO proprietary product, or both, the amount of data 
available via proprietary products is greater in size than the actual 
number of orders and transaction reports that exist in the marketplace. 
Because market data users can thus find suitable substitutes for most 
proprietary market data products, a market that overprices its market 
data products stands a high risk that users may substitute another 
source of market data information for its own.
    Moreover, consolidated data provides two additional measures of 
pricing discipline for proprietary data products that are a subset of 
the consolidated data stream. First, the consolidated data is widely 
available in real-time at $1 per month for non-professional users. 
Second, consolidated data is also available at no cost with a 15- or 
20-minute delay. Because consolidated data contains marketwide 
information, it effectively places a cap on the fees assessed for 
proprietary data (such as last sale data) that is simply a subset of 
the consolidated data. The mere availability of low-cost or free 
consolidated data provides a powerful form of pricing discipline for 
proprietary data products that contain data elements that are a subset 
of the consolidated data by highlighting the optional nature of 
proprietary products.
    Those competitive pressure imposed by available alternatives are 
evident in the Exchange's proposed pricing. The Digital Media 
Enterprise Fees, which will permit broader distribution at the same 
price (in the case of NYSE MKT Trades) or a lower price (in the case of 
NYSE MKT RRP) than is available today, also are lower than the maximum 
fee for a similar product offered by another exchange\24\ and lower 
than the television distribution fee charged by CTA.\25\ The proposed 
redistribution fees also are comparable to the Exchange's and another 
exchange's similar fees.\26\
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    \24\ See supra n.15.
    \25\ See CTA Plan dated July 1, 2012, Exhibit E, Schedule A-1 at 
n.6 (television distribution fee capped at $125,000 per month in 
2010, with certain increases permitted thereafter) available at 
http://www.nyxdata.com/CTA.
    \26\ See supra n.16.
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    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 and inexpensive. 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, TrackECN, BATS Trading and Direct Edge. Today, BATS 
and Direct Edge provide certain market data at no charge on their Web 
sites in order to attract more order flow, and use revenue rebates from 
resulting additional executions to maintain low execution charges for 
their users.\27\
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    \27\ This is simply a securities market-specific example of the 
well-established principle that in certain circumstances more sales 
at lower margins can be more profitable than fewer sales at higher 
margins; this example is additional evidence that market data is an 
inherent part of a market's joint platform.
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    Further, data products are valuable to certain end users only 
insofar as they provide information that end users expect will assist 
them or their customers in tracking prices and market trends. The 
Exchange believes that the Digital Media Enterprise Fees, which will 
permit wider distribution of last sale information at either the same 
or a lower price, may encourage more vendors to choose to offer NYSE 
MKT Trades or NYSE MKT RRP over multiple communication devices and 
thereby benefit public investors and other market participants by 
providing them with more convenient ways to track prices and market 
trends during the course of the trading day. The Exchange further 
believes that only vendors that expect to derive a reasonable benefit 
from redistributing NYSE MKT Trades and NYSE MKT RRP data will choose 
to become redistributors and pay the attendant monthly fees.
    In establishing the proposed fees, the Exchange considered the 
competitiveness of the market for proprietary data and all of the 
implications of that competition. The Exchange believes that it has 
considered all relevant factors and has not considered irrelevant 
factors in order to establish fair, reasonable, and not unreasonably 
discriminatory fees and an equitable allocation of fees among all 
users. The existence of numerous alternatives to the Exchange's 
products, including real-time consolidated data, free delayed 
consolidated data, and proprietary data from other sources, ensures 
that the Exchange cannot set unreasonable fees, or fees that are 
unreasonably discriminatory, when vendors and subscribers can elect 
these alternatives or choose not to purchase a specific proprietary 
data product if its cost to purchase is not justified by the returns 
any particular vendor or subscriber would achieve through the purchase.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \28\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \29\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \28\ 15 U.S.C. 78s(b)(3)(A).
    \29\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change 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 the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \30\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \30\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEMKT-2013-31 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-NYSEMKT-2013-31. 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

[[Page 21475]]

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 on official business days between the hours of 10:00 
a.m. and 3:00 p.m. Copies of such filing also will be available for 
inspection and copying at the principal offices of NYSE. 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-NYSEMKT-2013-31, and should 
be submitted on or before May 1, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08326 Filed 4-9-13; 8:45 am]
BILLING CODE 8011-01-P


