
[Federal Register Volume 79, Number 144 (Monday, July 28, 2014)]
[Notices]
[Pages 43808-43809]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17640]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72654; File No. SR-NASDAQ-2014-034]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Instituting Proceedings To Determine Whether To Disapprove a Proposed 
Rule Change Relating to Proposed Changes To Remove From the Exchange 
Rules Fee Provisions Regarding Re-Transmission of ``Third-Party Data''

July 22, 2014.

I. Introduction

    On April 7, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``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 remove from its rules all provisions relating 
to the market data feeds that NASDAQ receives from other registered 
exchanges and other non-NASDAQ sources and then re-transmits to its co-
located firms, including the provisions setting fees for providing this 
market data to its co-located firms. The proposed rule change was 
published for comment in the Federal Register on April 28, 2014.\3\ The 
Commission received no comments on the proposal. On June 5, 2014, the 
Commission extended the time to act on the proposal until July 25, 
2014. This order institutes proceedings under Section 19(b)(2)(B) of 
the Act \4\ to determine whether to disapprove 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. 71990 (Apr. 22, 
2014), 79 FR 23389 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposal

    NASDAQ offers co-location services for clients at its co-location 
facility. NASDAQ Rule 7034 lists the services and the fees provided 
under its co-location program, which include cabinet space, electric 
power, installation and use of cables, and connectivity to various 
affiliated market centers. NASDAQ Rule 7034 also offers co-located 
clients connectivity to market data feeds from a variety of sources and 
lists the fees for these market data feeds.
    The current proposal would remove from NASDAQ's rules the 
provisions relating to all third-party market data feeds (i.e., all 
market data feeds other than NASDAQ's own market data feeds) that 
NASDAQ makes available to co-located member firms. NASDAQ does not 
propose to cease offering third-party data feeds to its co-located 
clients or to cease assessing the associated fees; it simply proposes 
to eliminate these offerings and fees from the NASDAQ rulebook.
    NASDAQ argues that this proposed change is consistent with the Act 
because third-party data feeds are not a ``facility'' of the 
Exchange.\5\ As described in the Notice,\6\ NASDAQ argues that the 
third-party data it provides to its co-located member firms are 
facilities of the exchanges that originally produce the data, not a 
facility of an exchange that receives and distributes the data as a 
voluntary service to its member firms.
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    \5\ See Section 3(a)(2) of the Act, 15 U.S.C. 78c(a)(2) 
(defining the term ``facility'' as applied to an exchange).
    \6\ See, supra, n.3.
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III. Proceedings To Determine Whether To Disapprove SR-NASDAQ-2014-034 
and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \7\ to determine whether the proposal should be 
disapproved. Institution of such proceedings is appropriate at this 
time in view of the legal and policy issues raised by the proposals. 
Institution of disapproval proceedings does not indicate that the 
Commission has reached any conclusions with respect to any of the 
issues involved. Rather, as described in greater detail below, the 
Commission seeks and encourages interested persons to provide 
additional comment on the proposal.
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    \7\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B),\8\ the Commission is providing 
notice of the grounds for disapproval under consideration. NASDAQ's 
proposal, if approved, would allow a national securities exchange to 
offer third-party market data (e.g., the proprietary data feeds of 
other exchanges in the National Market System) to member firms that are 
co-located on the exchange's premises at its trading facilities, and to 
charge fees for that market data, without Commission oversight through 
the proposed rule change process. An exchange's provision of third-
party market data feeds to co-located clients appears to be an integral 
feature of its co-location program, and co-location programs are 
subject to the rule filing process. The Commission believes that 
permitting exchanges to provide third-party data feeds to co-located 
clients without subjecting the offerings and associated fees to review 
through the Rule 19b-4 process presents a novel issue that warrants 
further consideration.
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    \8\ See id.
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    Accordingly, the Commission is instituting proceedings to allow for 
additional analysis of, and input from commenters with respect to, the 
proposed rule change's consistency with Section 3(a)(2) of the Act, 
which defines the term ``facility'' when used with respect to an 
exchange to include its premises, tangible or intangible property 
whether on the premises or not, any right to the use of such premises 
or property or any service thereof for the purpose of effecting or 
reporting a transaction on an exchange (including, among other things, 
any system of communication to or from the exchange, by ticker or 
otherwise, maintained by or with the consent of the exchange), and any 
right of the exchange to the use of any property or service; Section 
6(b)(1) of the Act, which requires that a national securities exchange 
be so organized and have the capacity to be able to carry out the 
purposes of the Act; Section 6(b)(4) of the Act, which requires that 
the rules of an exchange provide for the equitable allocation of 
reasonable dues, fees, and other charges among its members and issuers 
and other persons using its facilities; Section 6(b)(5) of the Act, 
which requires that the rules of an exchange be designed to prevent 
fraudulent and manipulative

[[Page 43809]]

acts and practices, to promote just and equitable principles of trade, 
to remove impediments to and perfect the mechanism of a free and open 
market system, and in general to protect investors and the public 
interest; and Section 6(b)(8), which requires that the rules of an 
exchange not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
concerns identified above, as well as any others they may have with the 
proposed rule change. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule change 
is inconsistent with Sections 3(a)(2), 6(b)(1), 6(b)(4), 6(b)(5), and 
6(b)(8) of the Act or any other provision of the Act, or the rules and 
regulation thereunder. Although there do not appear to be any issues 
relevant to approval or disapproval which would be facilitated by an 
oral presentation of views, data, and arguments, the Commission will 
consider, pursuant to Rule 19b-4, any request for an opportunity to 
make an oral presentation.\9\
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    \9\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule changes should be 
[approved or] disapproved by August 18, 2014. Any person who wishes to 
file a rebuttal to any other person's submission must file that 
rebuttal by September 2, 2014.
    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-2014-034 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2014-034. 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 
10:00 a.m. and 3:00 p.m. 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 publicly available. All submissions should refer to File Number 
SR-NASDAQ-2014-034 and should be submitted on or before August 18, 
2014. Rebuttal comments should be submitted by September 2, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(57).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-17640 Filed 7-25-14; 8:45 am]
BILLING CODE 8011-01-P


