
[Federal Register Volume 80, Number 228 (Friday, November 27, 2015)]
[Notices]
[Pages 74158-74164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30077]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76485; File No. SR-NYSE-2015-57]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Establishing Fees for the NYSE Integrated Feed

November 20, 2015.
    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 November 5, 2015, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. 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\ 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

    The Exchange proposes to establish fees for the NYSE Integrated 
Feed. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to establish the fees for the NYSE Integrated 
Feed in the NYSE Proprietary Market Data Fee Schedule (``Fee 
Schedule'').\3\ The Exchange proposes to make the NYSE Integrated Feed 
available without charge starting on November 16, 2015. The Exchange 
proposes to establish the following fees for the NYSE Integrated Feed 
operative on January 1, 2016:
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    \3\ The proposed rule change establishing the NYSE Integrated 
Feed was immediately effective on January 23, 2015. See Securities 
Exchange Act Release No. 74128 (Jan. 23, 2015), 80 FR 4951 (Jan. 29, 
2015) (SR-NYSE-2015-03).
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    1. Access Fee. For the receipt of access to the NYSE Integrated 
Feed, the Exchange proposes to charge $7,500 per month.
    2. User Fees. The Exchange proposes to charge a Professional User 
Fee (Per User) of $70 per month and a Non-Professional User Fee (Per 
User) of $16 per month. These user fees would apply to each display 
device that has access to the NYSE Integrated Feed.
    3. Non-Display Use Fees. The Exchange proposes to establish non-
display fees for the NYSE Integrated Feed using the same non-display 
use fee structure established for the Exchange's other market data 
products.\4\ Non-display use would mean accessing, processing, or 
consuming the NYSE Integrated Feed delivered via direct and/or 
Redistributor \5\ data feeds for a purpose other than in support of a 
data recipient's display or further internal or external redistribution 
(``Non-Display Use''). Non-Display Use would include any trading use, 
such as high frequency or algorithmic trading, and would also include 
any trading in any asset class, automated order or quote generation 
and/or order pegging, price referencing for algorithmic trading or 
smart order routing, operations control programs, investment analysis, 
order verification, surveillance programs, risk management, compliance, 
and portfolio management.
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    \4\ See Securities Exchange Act Release Nos. 69278 (April 2, 
2013), 78 FR 20973 (April 8, 2013) (SR-NYSE-2013-25) and 72923 (Aug. 
26, 2014), 79 FR 52079 (Sept. 2, 2014) (SR-NYSE-2014-43).
    \5\ ``Redistributor'' means a vendor or any person that provides 
a real-time NYSE 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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    Under the proposal, for Non-Display Use of NYSE Integrated Feed, 
there would be three categories of, and fees applicable to, data 
recipients. One, two or three categories of Non-Display Use may apply 
to a data recipient.
     Under the proposal, the Category 1 Fee would be $20,000 
per month and would apply when a data recipient's Non-Display Use of 
the NYSE Integrated Feed is on its own behalf, not on behalf of its 
clients.
     Under the proposal, Category 2 Fees would be $20,000 per 
month and would apply to a data recipient's Non-Display Use of the NYSE 
Integrated Feed on behalf of its clients.
     Under the proposal, Category 3 Fees would be $20,000 and 
would apply to a data recipient's Non-Display Use of the NYSE 
Integrated Feed for the purpose of internally matching buy and sell 
orders within an organization, including matching customer orders for 
data recipient's own behalf and/or on behalf of its clients. This 
category would apply to Non-Display Use in trading platforms, such as, 
but not restricted to, alternative trading systems (``ATSs''), broker 
crossing networks, broker crossing systems not filed as ATSs, dark 
pools, multilateral trading facilities, exchanges and systematic 
internalization systems. Category 3 Fees would be capped at $60,000 per 
month for each data recipient for the NYSE Integrated Feed.

[[Page 74159]]

    Non-Display Use fees for NYSE Integrated Feed include, for 
customers also paying access fees for NYSE BBO, NYSE Trades, NYSE 
OpenBook and NYSE Order Imbalances, the Non-Display Use for such 
products when declared within the same category of use.
    The description of the three non-display use categories is set 
forth in the Fee Schedule in endnote 1 and that endnote would be 
referenced in the NYSE Integrated Feed fees on the Fee Schedule. The 
text in the endnote would remain unchanged.
    Data recipients that receive the NYSE Integrated Feed for Non-
Display Use would be required to complete and submit a Non-Display Use 
Declaration before they would be authorized to receive the feed.\6\ A 
firm subject to Category 3 Fees would be required to identify each 
platform that uses the NYSE Integrated Feed on a Non-Display Use basis, 
such as ATSs and broker crossing systems not registered as ATSs, as 
part of the Non-Display Use Declaration.
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    \6\ Data recipients are required to complete and submit the Non-
Display Declaration with respect to each market data product on the 
Fee Schedule that includes Non-Display Fees. See Securities Exchange 
Act Release Nos. 74870 (May 5, 2015), 80 FR 26962 (May 11, 2015) 
(SR-NYSE-2015-20) (NYSE OpenBook) and 74872 (May 5, 2015), 80 FR 
26975 (May 11, 2015) (SR-NYSE-2015-21) (NYSE Order Imbalances) and 
74861 (May 4, 2015), 80 FR 26599 (May 8, 2015) (SR-NYSE-2015-22) 
(NYSE Trades and NYSE BBO).
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    4. Non-Display Declaration Late Fee. Data recipients that receive 
the NYSE Integrated Feed for Non-Display Use would be required to 
complete and submit a Non-Display Use Declaration before they would be 
authorized to receive the feed. Beginning in 2017, NYSE Integrated Feed 
data recipients would be required to submit, by January 31st of each 
year, the Non-Display Use Declaration that applies to all real-time 
NYSE market data products that include Non-Display Use fees.\7\ The 
Exchange proposes to charge a Non-Display Declaration Late Fee of 
$1,000 per month to any data recipient that pays an Access Fee for NYSE 
Integrated Feed that has failed to complete and submit a Non-Display 
Use Declaration. Specifically, with respect to the Non-Display Use 
Declaration due by January 31st of each year beginning in 2017, the 
Non-Display Declaration Late Fee would apply to data recipients that 
fail to complete and submit the Non-Display Use Declaration by the 
January 31st due date, and would apply beginning February 1st and for 
each month thereafter until the data recipient has completed and 
submitted the annual Non-Display Use Declaration. The Exchange also 
proposes to apply current endnote 2 on the Fee Schedule to the Non-
Display Declaration Late Fee for NYSE Integrated Feed, but proposes to 
modify endnote 2 to the Fee Schedule so that it is clear that the Non-
Display Declaration Late Fee applies to the NYSE Integrated Feed 
beginning February 1st of 2017 and each year thereafter with respect to 
the Non-Display Use Declaration due by January 31st each year.\8\
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    \7\ Id.
    \8\ The second sentence of endnote 2 to the Fee Schedule refers 
to a late fee for the Non-Display Use Declarations due September 1, 
2014 that have not been submitted by July 1, 2015. This sentence is 
not applicable to the NYSE Integrated Feed because NYSE Integrated 
Feed was not available as of the September 1, 2014 due date and 
because data recipients of the NYSE Integrated Feed will have to 
complete and submit a Non-Display Declaration before they can 
receive the feed. The Exchange proposes to modify the second 
sentence so that it applies only to NYSE OpenBook, NYSE BBO, NYSE 
Trades and NYSE Order Imbalances and not to the NYSE Integrated 
Feed. The Exchange proposes to modify the third sentence so that it 
is clear that it applies to all market data products, including the 
NYSE Integrated Feed, to which Non-Display Use fees apply.
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    In addition, if a data recipient's use of the NYSE Integrated Feed 
data changes at any time after the data recipient submits a Non-Display 
Use Declaration, the data recipient must inform the Exchange of the 
change by completing and submitting at the time of the change an 
updated declaration reflecting the change of use.
    5. Redistribution Fee. For redistribution of the NYSE Integrated 
Feed, the Exchange proposes to establish a fee of $4,000 per month.
    The Exchange notes that the three existing data feed products--NYSE 
OpenBook, NYSE Trades, and NYSE Order Imbalances--would continue to be 
available to vendors and subscribers separately, in each case at the 
same prices at which they are currently available.\9\
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    \9\ See Fee Schedule.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\10\ in general, and 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4), (5).
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    The Exchange believes it is equitable and not unfairly 
discriminatory to make the NYSE Integrated Feed available free of 
charge through December 31, 2015 because providing it at no charge 
would provide an opportunity for vendors and subscribers to determine 
whether the NYSE Integrated Feed suits their needs without incurring 
fees. Other exchanges provide or have provided market data products 
free for a certain period of time.\12\
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    \12\ For example, NYSE Arca, Inc. (``NYSE Arca''), an affiliate 
of the Exchange, offered ArcaBook for Arca Options-Complex, and NYSE 
MKT LLC (``NYSE MKT''), an affiliate of the Exchange, offered 
ArcaBook for Amex Options-Complex, without charge between May 1, 
2014 and October 31, 2014. See Securities Exchange Act Release Nos. 
72074 (May 1, 2014), 79 FR 26277 (May 7, 2014) (NYSEArca 2014-51) 
and 72075 (May 1, 2014), 79 FR 26290 (May 7, 2014) (NYSEMKT 2014-
40). The NASDAQ Stock Market, Inc. (``NASDAQ'') provides a 30-day 
free trial related to NASDAQ TotalView. See NASDAQ Rule 7023(e).
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    The fees for the NYSE Integrated Feed are reasonable because they 
represent not only the value of the data available from three existing 
data feeds but also the value of receiving the data on an integrated 
basis. Receiving the data on an integrated basis provides greater 
efficiencies and reduced errors for vendors and subscribers that 
currently choose to integrate the data themselves after receiving it 
from the Exchange. Some vendors and subscribers may not have the 
technology or resources to integrate the separate data feeds in a 
timely and/or efficient manner, and thus the integration feature of the 
product may be valuable to them.
    Moreover, the fees are equitably allocated and not unfairly 
discriminatory because vendors and subscribers may choose to continue 
to receive some or all of the data through the existing separate feeds 
at current prices, or they can choose to pay for the NYSE Integrated 
Feed in order to received integrated data, or they can choose a 
combination of the two approaches, thereby allowing each vendor or 
subscriber to choose the best business solution for itself.
    The Exchange believes the proposed monthly Access Fee of $7,500 and 
monthly Redistribution Fee of $4,000 for NYSE Integrated Feed are 
reasonable because they are comparable to the total of the same types 
of fees for NYSE OpenBook, NYSE Trades, and NYSE Order Imbalances. The 
monthly Access Fee for NYSE OpenBook is $5,000, for NYSE Trades is 
$1,500 and for NYSE Order Imbalances is $500.\13\ The monthly 
Redistribution Fee for NYSE

[[Page 74160]]

OpenBook is $3,000 and for NYSE Trades is $1,000.\14\
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    \13\ The Access Fee for Managed Non-Display Services only for 
NYSE OpenBook is $2,500 per month, for NYSE Trades is $750 per month 
and for NYSE Order Imbalances is $250 per month. Managed Non-Display 
Services will not be offered for NYSE Integrated Feed.
    \14\ There are no Redistribution or User fees charged for NYSE 
Order Imbalances.
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    The Exchange believes that 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 to those vendors that 
choose to redistribute the data. Also, the proposed redistribution fee 
for NYSE Integrated Feed is reasonable because it is comparable to the 
redistribution fees that are currently charged by other exchanges.\15\
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    \15\ 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). Distributors of NASDAQ-listed security depth entitlements 
pay a Monthly External Distributor Fee of $2,500. See NASDAQ Rule 
7019(b).
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    The proposed monthly Professional User Fee (Per User) of $70 and 
monthly Non-Professional User Fee (Per User) of $16 are reasonable 
because they are comparable to the total of the per user fees for NYSE 
OpenBook and NYSE Trades. The monthly Professional User Fee (Per User) 
for NYSE OpenBook is $60 and for NYSE Trades, it is $4. The monthly 
Non-Professional User Fee (Per User) for NYSE OpenBook is $15 and for 
NYSE Trades, it is $0.20.
    The Exchange believes that having separate Professional and Non-
Professional User fees for the NYSE Integrated Feed is reasonable 
because it will make the product more affordable and result in greater 
availability to Professional and Non-Professional Users. Setting a 
modest Non-Professional User fee is reasonable because it provides an 
additional method for Non-Professional Users to access the NYSE 
Integrated Feed by providing the same data that is available to 
Professional Users. The Exchange believes that the proposed fees are 
equitable and not unfairly discriminatory because they will be charged 
uniformly to recipient firms and Users. The fee structure of 
differentiated Professional and Non-Professional fees applies to the 
user fees applicable to NYSE OpenBook and NYSE Trades and has long been 
used by the Exchange in order to reduce the price of data to Non-
Professional Users and make it more broadly available.\16\ Offering the 
NYSE Integrated Feed to Non-Professional Users with the same data 
available to Professional Users results in greater equity among data 
recipients.
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    \16\ See e.g., Securities Exchange Act Release No. 59544 (March 
9, 2009), 74 FR 11162 (March 16, 2009) (SR-NYSE-2008-131) 
(establishing the $15 Non-Professional User Fee (Per User) for NYSE 
OpenBook). See e.g., Securities Exchange Act Release No. 20002, File 
No. S7-433 (July 22, 1983), 48 FR 34552 (July 29, 1983) 
(establishing nonprofessional fees for CTA data); NASDAQ Rules 
7023(b), 7047.
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    The Exchange believes the proposed Non-Display Use fees are 
reasonable, equitable and not unfairly discriminatory because they 
reflect the value of the data to the data recipients in their profit-
generating activities and do not impose the burden of counting non-
display devices. After gaining further experience with the non-display 
fee structure, the Exchange believes that the proposed Non-Display Use 
fees reflect the significant value of the non-display data to data 
recipients, which purchase such data on an entirely voluntary basis. 
Non-display data can be used by data recipients for a wide variety of 
profit-generating purposes, including proprietary and agency trading 
and smart order routing, as well as by data recipients that operate 
order matching and execution platforms that compete directly with the 
Exchange for order flow. The data also can be used for a variety of 
non-trading purposes that indirectly support trading, such as risk 
management and compliance. While some of these non-trading uses do not 
directly generate revenues, they can nonetheless substantially reduce 
the recipient's costs by automating such functions so that they can be 
carried out in a more efficient and accurate manner and reduce errors 
and labor costs, thereby benefiting end users. The Exchange believes 
that charging for non-trading uses is reasonable because data 
recipients can derive substantial value from such uses, for example, by 
automating tasks so that they can be performed more quickly and 
accurately and less expensively than if they were performed manually.
    Data can be processed much faster by a non-display device than it 
can be by a human being processing information that he or she views on 
a data terminal. Non-display devices also can dispense data to multiple 
computer applications as compared with the restriction of data to one 
display terminal. While non-display data has become increasingly 
valuable to data recipients who can use it to generate substantial 
profits, it has become increasing difficult for them and the Exchange 
to accurately count non-display devices. The number and type of non-
display devices, as well as their complexity and interconnectedness, 
have grown in recent years, creating administrative challenges for 
vendors, data recipients, and the Exchange to accurately count such 
devices and audit such counts. Unlike a display device, such as a 
Bloomberg terminal, it is not possible to simply walk through a trading 
floor or areas of a data recipient's premises to identify non-display 
devices. During an audit, an auditor must review a firm's entitlement 
report to determine usage. While display use is generally associated 
with an individual end user and/or unique user ID, a non-display use is 
more difficult to account for because the entitlement report may show a 
server name or Internet protocol (``IP'') address or it may not. The 
auditor must review each IP or server and further inquire about 
downstream use and quantity of servers with access to data; this type 
of counting is very labor-intensive and prone to inaccuracies.
    Market data technology and usage has evolved to the point where it 
is no longer practical, nor fair and equitable, to simply count non-
display devices. The administrative costs and difficulties of 
establishing reliable counts and conducting an effective audit of non-
display devices have become too burdensome, impractical, and non-
economic for the Exchange, vendors, and data recipients. Indeed, some 
data recipients dislike the burden of having to comply with count-based 
audit processes, and the Exchange's non-display pricing policies are a 
direct response to such complaints as well as a further competitive 
distinction between the Exchange and other markets. The Exchange 
believes that the proposed fee structure for non-display use is 
reasonable, equitable, and not unfairly discriminatory in light of 
these developments.
    The Non-Display Use fees for the NYSE Integrated Feed are 
reasonable because they represent the extra value of receiving the data 
for Non-Display Use on an integrated basis. The Exchange believes that 
the proposed fees directly and appropriately reflect the significant 
value of using NYSE Integrated Feed on a non-display basis in a wide 
range of computer-automated functions relating to both trading and non-
trading activities and that the number and range of these functions 
continue to grow through innovation and technology developments.\17\
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    \17\ See also Exchange Act Release No. 69157, March 18, 2013, 78 
FR 17946, 17949 (March 25, 2013) (SR-CTA/CQ-2013-01) (``[D]ata feeds 
have become more valuable, as recipients now use them to perform a 
far larger array of non-display functions. Some firms even base 
their business models on the incorporation of data feeds into black 
boxes and application programming interfaces that apply trading 
algorithms to the data, but that do not require widespread data 
access by the firm's employees. As a result, these firms pay little 
for data usage beyond access fees, yet their data access and usage 
is critical to their businesses.'').

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[[Page 74161]]

    The Exchange believes that it is reasonable to require annual 
submissions of the Non-Display Use Declaration so that the Exchange 
will have current and accurate information about the use of the NYSE 
Integrated Feed and can correctly assess fees for the uses of the NYSE 
Integrated Feed. The annual submission requirement is equitable and not 
unfairly discriminatory because it will apply to all users.
    The Exchange believes that it is reasonable to impose a late fee in 
connection with the submission of the Non-Display Use Declaration. In 
order to correctly assess fees for the non-display use of NYSE 
Integrated Feed, the Exchange needs to have current and accurate 
information about the use of NYSE Integrated Feed. The failure of data 
recipients to submit the Non-Display Use Declaration on time leads to 
potentially incorrect billing and administrative burdens, including 
tracking and obtaining late Non-Display Use Declarations and correcting 
and following up on payments owed in connection with late Non-Display 
Use Declarations. The purpose of the late fee is to incent data 
recipients to submit the Non-Display Use Declaration promptly to avoid 
the administrative burdens associated with the late submission of Non-
Display Use Declarations. The Non-Display Declaration Late Fee is 
equitable and not unfairly discriminatory because it will apply to all 
data recipients that choose to subscribe to the NYSE Integrated Feed.
    In addition, the proposed fees are reasonable when compared to fees 
for comparable products, including the NYSE Arca Integrated Feed,\18\ 
offered by NYSE Arca and Nasdaq TotalView-Itch,\19\ offered by NASDAQ. 
Specifically, the fees for NYSE Arca Integrated Feed, which like NYSE 
Integrated Feed, includes depth of book, trades, and order imbalances 
data for the NYSE Arca market, and a security status message, consist 
of an Access Fee of $3,000 per month, a Professional User Fee (Per 
User) of $40 per month a Non-Professional User Fee (Per User) of $20 
per month, Non-Display Fees of $7,000 per month for each of Categories 
1, 2 and 3, and a Redistribution Fee of $3,000 per month. The fees are 
also equitable and not unfairly discriminatory because they will apply 
to all data recipients that choose to subscribe to the NYSE Integrated 
Feed.
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    \18\ See NYSE Arca Integrated Feed, http://www.nyxdata.com/page/1084 (last visited June 8, 2015) (data feed that provides a unified 
view of events, in sequence as they appear on the NYSE Arca matching 
engine, including depth of book, trades, order imbalance data, and 
security status messages).
    \19\ See NASDAQ TotalView-ITCH, http://www.nasdaqtrader.com/Trader.aspx?id=Totalview2 (last visited June 8, 2015) (displays the 
full order book depth for NASDAQ market participants and also 
disseminates the Net Order Imbalance Indicator (NOII) for the NASDAQ 
Opening and Closing Crosses and NASDAQ IPO/Halt Cross).
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    The Exchange also notes that the NYSE Integrated Feed is entirely 
optional. The Exchange is not required to make the NYSE Integrated Feed 
available or to offer any specific pricing alternatives to any 
customers, nor is any firm required to purchase the NYSE Integrated 
Feed. Firms that purchase the NYSE Integrated Feed would do so for the 
primary goals of using it to increase revenues, reduce expenses, and in 
some instances compete directly with the Exchange (including for order 
flow); those firms are able to determine for themselves whether the 
NYSE Integrated Feed or any other similar products are attractively 
priced or not.
    Firms that do not wish to purchase the NYSE Integrated Feed at the 
new prices have a variety of alternative market data products from 
which to choose,\20\ or if the NYSE Integrated Feed does not provide 
sufficient value to firms as offered based on the uses those firms have 
or planned to make of it, such firms may simply choose to conduct their 
business operations in ways that do not use the NYSE Integrated Feed. 
The Exchange notes that broker-dealers are not required to purchase 
proprietary market data to comply with their best execution 
obligations.\21\ Similarly, there is no requirement in Regulation NMS 
or any other rule that proprietary data be utilized for order routing 
decisions, and some broker-dealers and ATSs have chosen not to do 
so.\22\
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    \20\ See supra notes 19-20.
    \21\ See In the Matter of the Application of Securities Industry 
And Financial Markets Association For Review of Actions Taken by 
Self-Regulatory Organizations, Release Nos. 34-72182; AP-3-15350; 
AP-3-15351 (May 16, 2014).
    \22\ For example, Goldman Sachs Execution and Clearing, L.P. 
disclosed in 2014 that it was not using proprietary market data in 
connection with Sigma X, its ATS. See response to Question E3, 
available at http://www.goldmansachs.com/media-relations/in-the-news/current/pdf-media/gsec-order-handling-practices-ats-specific.pdf. By way of comparison, IEX has disclosed that it uses 
proprietary market data feeds from all registered stock exchanges. 
See http://www.iextrading.com/about/.
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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 reliance by the Securities and Exchange Commission 
(``Commission'') 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.' '' \23\
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    \23\ 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 proprietary market 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. In addition, the existence of 
alternatives to these data products, such as consolidated data and 
proprietary 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 
select such alternatives.
    As the NetCoalition decision noted, the Commission is not required 
to undertake a cost-of-service or ratemaking approach. The Exchange 
believes that, even if it were possible as a matter of economic theory, 
cost-based pricing for non-core market data would be so complicated 
that it could not be done practically or offer any significant 
benefits.\24\
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    \24\ The Exchange believes that cost-based pricing would be 
impractical because it would create enormous administrative burdens 
for all parties and the Commission, to cost-regulate a large number 
of participants and standardize and analyze extraordinary amounts of 
information, accounts, and reports. In addition, and as described 
below, it is impossible to regulate market data prices in isolation 
from prices charged by markets for other services that are joint 
products. Cost-based rate regulation would also lead to litigation 
and may distort incentives, including those to minimize costs and to 
innovate, leading to further waste. Under cost-based pricing, the 
Commission would be burdened with determining a fair rate of return, 
and the industry could experience frequent rate increases based on 
escalating expense levels. Even in industries historically subject 
to utility regulation, cost-based ratemaking has been discredited. 
As such, the Exchange believes that cost-based ratemaking would be 
inappropriate for proprietary market data and inconsistent with 
Congress's direction that the Commission use its authority to foster 
the development of the national market system, and that market 
forces will continue to provide appropriate pricing discipline. See 
Appendix C to NYSE's comments to the Commission's 2000 Concept 
Release on the Regulation of Market Information Fees and Revenues, 
which can be found on the Commission's Web site at http://www.sec.gov/rules/concept/s72899/buck1.htm.

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[[Page 74162]]

    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 market data feed products is constrained by 
actual competition for the sale of proprietary market data products, 
the joint product nature of exchange platforms, and the existence of 
alternatives to the Exchange's proprietary data.
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 for the creation of proprietary data and strict 
pricing discipline for the proprietary products themselves. Numerous 
exchanges compete with one another for listings and order flow and 
sales of market data itself, providing ample 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. Indeed, 
the U.S. Department of Justice (``DOJ'') (the primary antitrust 
regulator) has expressly acknowledged the aggressive actual competition 
among exchanges, including for the sale of proprietary market data. In 
2011, the DOJ 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.'' \25\
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    \25\ 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; see 
also Complaint in U.S. v. Deutsche Borse AG and NYSE Euronext, Case 
No. 11-cv-2280 (D.C. Dist.) ] 24 (``NYSE and Direct Edge compete 
head-to-head . . . in the provision of real-time proprietary equity 
data products.'').
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    Moreover, 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. Broker-dealers send their order 
flow and transaction reports to multiple venues, rather than providing 
them all to a single venue, which in turn reinforces this competitive 
constraint. 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.'' \26\ More recently, SEC Chair Mary Jo White has noted that 
competition for order flow in exchange-listed equities is ``intense'' 
and divided among many trading venues, including exchanges, more than 
40 alternative trading systems, and more than 250 broker-dealers.\27\
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    \26\ 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. Data 
available on ArcaVision show that from June 30, 2013 to June 30, 
2014, no exchange traded more than 12% of the volume of listed 
stocks by either trade or dollar volume, further evidencing the 
continued dispersal of and fierce competition for trading activity. 
See https://www.arcavision.com/Arcavision/arcalogin.jsp.
    \27\ Mary Jo White, Enhancing Our Equity Market Structure, 
Sandler O'Neill & Partners, L.P. Global Exchange and Brokerage 
Conference (June 5, 2014) (available on the Commission Web site), 
citing Tuttle, Laura, 2014, ``OTC Trading: Description of Non-ATS 
OTC Trading in National Market System Stocks,'' at 7-8.
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    If an exchange succeeds in its competition for quotations, order 
flow, and trade executions, then it earns trading revenues and 
increases the value of its proprietary market data products because 
they will contain greater quote and trade information. Conversely, if 
an exchange is less successful in attracting quotes, order flow, and 
trade executions, then its market data products may be less desirable 
to customers using them in support of order routing and trading 
decisions in light of the diminished content; data products offered by 
competing venues may become correspondingly more attractive. Thus, 
competition for quotations, order flow, and trade executions puts 
significant pressure on an exchange to maintain both execution and data 
fees at reasonable levels.
    In addition, in the case of products that are also redistributed 
through market data vendors, such as Bloomberg and Thompson Reuters, 
the 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. Vendors will not elect to make available NYSE Integrated Feed 
unless their customers request it, and customers will not elect to pay 
the proposed fees unless NYSE Integrated Feed can provide value by 
sufficiently increasing revenues or reducing costs in the customer's 
business in a manner that will offset the fees. All of these factors 
operate as constraints on pricing proprietary data products.
Joint Product Nature of Exchange 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, proprietary market data and trade 
executions are a paradigmatic example of joint products with joint 
costs. The decision of 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 availability and quality, 
and price and distribution of data products. Without a platform to post 
quotations, receive orders, and execute trades, exchange data products 
would not exist.
    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 platform for posting quotes, 
accepting orders, and executing transactions 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 generally view the 
costs of transaction executions and

[[Page 74163]]

market data as a unified cost of doing business with the exchange. A 
broker-dealer will only choose to direct orders to an exchange if the 
revenue from the transaction exceeds its cost, including the cost of 
any market data that the broker-dealer chooses to buy in support of its 
order routing and trading decisions. If the costs of the transaction 
are not offset by its value, then the broker-dealer may choose instead 
not to purchase the product and trade away from that exchange. There is 
substantial evidence of the strong correlation between order flow and 
market data purchases. For example, in September 2015, more than 80% of 
the transaction volume on each of NYSE and NYSE's affiliates NYSE Arca 
and NYSE MKT was executed by market participants that purchased one or 
more proprietary market data products (the 20 firms were not the same 
for each market). A supra-competitive increase in the fees for either 
executions or market data would create a risk of reducing an exchange's 
revenues from both products.
    Other market participants have noted that proprietary market data 
and trade executions are joint products of a joint platform and have 
common costs.\28\ 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.\29\
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    \28\ See Securities Exchange Act Release No. 72153 (May 12, 
2014), 79 FR 28575, 28578 n.15 (May 16, 2014) (SR-NASDAQ-2014-045) 
(``[A]ll 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 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).
    \29\ 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 because it is 
impossible to obtain the data inputs to create market data products 
without a fast, technologically robust, and well-regulated execution 
system, and system and regulatory costs affect the price of both 
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.
    As noted above, the level of competition and contestability in the 
market is evident in the numerous alternative venues that compete for 
order flow, including 11 equities self-regulatory organization 
(``SRO'') markets, as well as various forms of ATSs, including dark 
pools and electronic communication networks (``ECNs''), and 
internalizing broker-dealers. SRO markets compete to attract order flow 
and produce transaction reports via trade executions, and two FINRA-
regulated Trade Reporting Facilities compete to attract transaction 
reports from the non-SRO venues.
    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 trading 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. For example, BATS Global Markets (``BATS'') and Direct Edge, 
which previously operated as ATSs and obtained exchange status in 2008 
and 2010, respectively, provided certain market data at no charge on 
their Web sites in order to attract more order flow, and used revenue 
rebates from resulting additional executions to maintain low execution 
charges for their users.\30\ 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.
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    \30\ 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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Existence of Alternatives
    The large number of SROs, ATSs, and internalizing broker-dealers 
that currently produce proprietary data or are currently capable of 
producing it provides further pricing discipline for proprietary data 
products. Each SRO, ATS, and broker-dealer is currently permitted to 
produce and sell proprietary data products, and many currently do or 
have announced plans to do so, including but not limited to the 
Exchange, NYSE MKT, NYSE Arca, NASDAQ OMX, BATS, and Direct Edge.
    The fact that proprietary data from ATSs, internalizing broker-
dealers, 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. By way of example, BATS and NYSE 
Arca both published proprietary data on the Internet before registering 
as exchanges. Second, because a single order or transaction report can 
appear in an SRO proprietary 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. With respect to NYSE Integrated Feed, 
competitors offer close substitute products.\31\ Because market data 
users can 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.
---------------------------------------------------------------------------

    \31\ See supra notes 19-20.
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    Those competitive pressures imposed by available alternatives are 
evident in the Exchange's proposed pricing.
    In addition to the competition and price discipline described 
above, the market for proprietary data products is

[[Page 74164]]

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. As 
noted above, BATS launched as an ATS in 2006 and became an exchange in 
2008, while Direct Edge began operations in 2007 and obtained exchange 
status in 2010.
    In setting the proposed fees for the NYSE Integrated Feed, 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 proprietary data from other sources, and 
continued availability of the Exchange's separate data feeds at a lower 
price, 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 the attendant fees are not justified by the 
returns that any particular vendor or data recipient 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) \32\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \33\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \32\ 15 U.S.C. 78s(b)(3)(A).
    \33\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \34\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \34\ 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-NYSE-2015-57 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2015-57. 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-NYSE-2015-57, and should be 
submitted on or before December 18, 2015.
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    \35\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-30077 Filed 11-25-15; 8:45 am]
 BILLING CODE 8011-01-P


