
[Federal Register Volume 81, Number 117 (Friday, June 17, 2016)]
[Notices]
[Pages 39727-39729]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14311]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78048; File No. SR-NSX-2016-03]


Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Fee and Rebate Schedule To Adopt a Market Data Revenue 
Sharing Program

June 13, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 1, 2016, National Stock Exchange, Inc. (``NSX'' 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 comment 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 is proposing to amend Exchange Rule 16.1, Fee 
Schedule, to adopt a market data revenue (``MDR'') sharing program, add 
a definition of the term Average Daily Volume (``ADV''), and make 
ministerial changes to the Fee Schedule.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. 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 amend Rule 16.1, Fee Schedule, with the 
goal of maximizing the effectiveness of its business model and 
continuing to provide Equity Trading Permit (``ETP'') Holders \3\ a 
cost-effective execution venue. The Exchange is proposing to implement 
the MDR sharing program as a part of the Fee Schedule, add a definition 
of ``ADV'' and make ministerial changes to the Fee Schedule.
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    \3\ Exchange Rule 1.5 defines ``ETP'' as the Equity Trading 
Permit issued by the Exchange for effecting approved securities 
transactions on the Exchange's trading facilities.
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    The Exchange's proposed MDR sharing program provides for the 
issuance of a credit to ETP Holders for executing trades on the 
Exchange within two defined volume tiers. The credit is equal to a 
specified percentage of the monthly market data revenue received by the 
Exchange that is attributable to such ETP Holder's displayed quoting 
and trading activity in securities priced at $1.00 or greater on the 
Exchange. If, over the course of a calendar month, an ETP Holder 
executes an ADV of greater than or equal to 500,000, but less than 
1,500,000, shares of securities priced $1.00 or greater, then the ETP 
Holder will receive a credit of 25% of the market data revenue that the 
Exchange received that calendar month that was attributable to that ETP 
Holder's executions and displayed quotes in securities priced $1.00 or 
greater. If, over the course of a calendar month, the ETP Holder 
executes an ADV of greater than or equal to 1,500,000 shares of 
securities priced $1.00 or greater, then the ETP Holder will receive a 
credit of 50% of the market data revenue that the Exchange received 
that calendar month that was attributable to that ETP Holder's 
executions and displayed quotes in securities priced $1.00 or greater.
    In connection with the MDR sharing program, the Exchange is further 
proposing to amend the Fee Schedule to add Explanatory Note 4, which 
defines ``ADV'' as the average number of shares per day that an ETP 
Holder has executed on the Exchange in NMS securities priced at $1.00 
or greater when the Exchange is open for trading during the calendar 
month. The Exchange will not count a day as part of the month, for the 
purpose of calculating ADV, if the Exchange is not continuously open 
for trading during Regular Trading Hours \4\ on that day. For example, 
if the Exchange is open for abbreviated hours on a given day (e.g., 
until 1:00 p.m. on the day after the Thanksgiving Day holiday) or if 
the Exchange experiences a technological problem that renders the 
Exchange inoperative for part of the day, that day will not be factored 
in to the total number of days in the month when calculating ADV. If an 
ETP Holder is only eligible to trade on the Exchange for a portion of 
the month, the Exchange will calculate the ADV based on the number of 
days during the calendar month that the ETP Holder was eligible to 
trade. The Exchange notes that, for purposes of the ADV computation, an 
ETP Holder's total trading activity on the Exchange in securities 
priced at $1.00 or greater will be utilized, including executions 
resulting from non-displayed orders. Explanatory Note 4 will clarify 
how the Exchange proposes to calculate ADV for the purposes of the 
market data revenue sharing program, described below.
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    \4\ NSX Rule 1.5R.(1) defines the term ``Regular Trading Hours'' 
as ``the time between 9:30 a.m. and 4:00 p.m. Eastern Time.''
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    The Exchange proposes to add Explanatory Note 3 to the Fee Schedule 
to provide further information regarding MDR sharing.\5\ Explanatory 
Note 3 makes explicit that, assuming the minimum ADV thresholds are 
achieved,

[[Page 39728]]

an ETP Holder will receive an MDR credit (in such percentage as is 
specified above) of the MDR attributable to the ETP Holder's executions 
and displayed quotes in securities priced $1.00 or greater. Explanatory 
Note 3 also establishes that to the extent market data revenue from 
Tape ``A'', ``B'' or ``C'' securities transactions is subject to any 
adjustment by the securities information processor (``SIP''), credits 
provided to the ETP Holder in connection with the ETP Holder's quoting 
and trading in the security that is subject to MDR adjustments may be 
adjusted by the Exchange;\6\ however, the Exchange will adjust credits 
to the ETP Holder only if the adjustment would be greater than or equal 
to $250. Amounts less than $250 would be considered de minimis and 
would be an exception, based the Exchange's belief that the monetary 
value of such an adjustment is outweighed by the associated 
administrative burden both to the Exchange and to the recipient ETP 
Holder.\7\ Lastly, Explanatory Note 3 establishes that MDR credits will 
be paid on a quarterly basis.
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    \5\ The Exchange has previously implemented other iterations of 
market data revenue sharing programs pursuant to filings with the 
Commission and such prior MDR sharing programs shared up to 50% of 
trade and quote market data revenue. See Securities Exchange Act 
Release No. 66958 (May 10, 2012), 77 FR 28909 (May 16, 2012) (SR-
NSX-2012-07); Securities Exchange Act Release No. 61103 (December 3, 
2009), 74 FR 65576 (December 10, 2009) (SR-NSX-2009-07); Securities 
Exchange Act Release No. 58935 (November 13, 2008), 73 FR 69703 
(November 19, 2008) (SR-NSX-2008-19); Securities Exchange Act 
Release No. 56890 (December 4, 2007), 72 FR 70360 (December 11, 
2007) (SR-NSX-2007-13).
    \6\ Pursuant to the revenue allocation rules of Regulation NMS, 
the SIPs continuously calculate market data revenue attributable to 
each exchange on a security by security basis and distribute revenue 
to the exchanges quarterly. Fluctuations from quarter to quarter in 
quoting and trading on the Exchange, on a security by security 
basis, relative to other exchanges affects the results of the SIPs' 
continuous calculations of the MDR distribution for both the current 
quarter and prior quarters in the calendar year. The SIPs may then 
adjust the MDR distributions that the SIPs made to the Exchange for 
prior quarters in the calendar year, and the Exchange will adjust an 
ETP Holder's MDR credit received as appropriate, provided that such 
an adjustment would be in an amount of $250 or greater.
    \7\ The Exchange notes that in the past its Fee Schedule has 
included a similar de minimis exception for applying credits to ETP 
Holders for MDR adjustments in amounts less than $250. See 
Securities Exchange Act Release No. 66958 (May 10, 2012), 77 FR 
28909 (May 16, 2012) (SR-NSX-2012-07).
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    The Exchange also proposes to make the ministerial change of moving 
Explanatory Notes 1 and 2 from their current position at the end of the 
sections pertaining to transaction fees and rebates, to the end of the 
Fee Schedule where they would be more logically placed.
    Pursuant to Exchange Rule 16.1(c), the Exchange will ``provide ETP 
Holders with notice of all relevant dues, fees, assessments and charges 
of the Exchange'' through the issuance of an Information Circular and 
will post the Fee Schedule and the instant rule filing on the 
Exchange's Web site, www.nsx.com.
 2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act,\8\ in general and, in 
particular, Section 6(b)(4) of the Act,\9\ which requires that the 
rules of a national securities exchange provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities. The 
proposed rule change is also consistent with Section 6(b)(5) of the 
Act,\10\ which requires, among other things, that the rules of a 
national securities exchange not permit unfair discrimination between 
customers, issuers, brokers, or dealers, and be designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system.\11\
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ The Exchange notes that in the past it has offered, as a 
part of its Fee Schedule, similar MDR sharing programs. See fn. 5, 
supra.
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    The Exchange submits that the MDR sharing program is equitable and 
reasonable, as required by Section 6(b)(4) of the Act. The Exchange 
believes that the MDR sharing program's volume thresholds are 
reasonable because they have been set at levels that make the MDR 
sharing program cost effective for both the Exchange and ETP Holders 
and, through the issuance of MDR credits, will incentivize Exchange 
participants to add liquidity to the Exchange. This will result in 
greater price discovery and price improvement for ETP Holders. The 
Exchange's process for adjusting credits based on adjustments made by 
the SIP is also reasonable as it will ensure that the credits received 
by ETP Holders are accurate. Setting a threshold for adjusting credits 
in an amount equal to or greater than $250 is reasonable in that it 
takes into account the administrative costs to the Exchange and ETP 
Holder of processing de minimis adjustments.
    The MDR sharing program is equitable because each ETP Holder will 
be subject to the same tiers and thresholds for the MDR sharing 
program. Additionally, each ETP Holder has the same opportunity to 
enter and execute any amount of non-displayed and displayed liquidity 
on the Exchange in order to receive an MDR credit. Thus, the Fee 
Schedule provides for a streamlined and equitable MDR sharing program 
which, the Exchange believes, will operate to encourage increased 
quoting and trading by ETP Holders on the Exchange.
    The Exchange further submits that the proposed MDR sharing program 
satisfies the requirements of Section 6(b)(5) of the Act in that it 
does not permit unfair discrimination between customers, issuers, 
brokers, or dealers, is designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system. Under the 
proposed changes to the Fee Schedule, all ETP Holders executing orders 
on the Exchange will be subject to the same MDR sharing structure, and 
such changes are thereby designed to meet the requirements of the 
Section 6(b)(5) that the rules of the Exchange not permit unfair 
discrimination among ETP Holders and their customers.
    The Exchange submits that the proposal will promote just and 
equitable principles of trade by providing a streamlined MDR sharing 
program that will potentially attract more volume on the Exchange in 
displayed orders in securities priced at $1.00 and above. Incentivizing 
ETP Holders to add displayed liquidity at levels that would result in 
the MDR credit would also operate to lower the cost to those ETP 
Holders of executing trades on the Exchange by allowing them to share 
in the MDR derived from their activity. Moreover, the Exchange believes 
that incentivizing market participants to post and to access the 
liquidity on the NSX Book would inure to the benefit of all market 
participants seeking greater and better execution opportunities. In 
this regard, the proposed Fee Schedule will promote just and equitable 
principles of trade and operate to remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
under Section 6(b)(5).

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 Exchange Act. The proposed rule 
change amends the Fee Schedule, which applies uniformly to all ETP 
Holders accessing the Exchange. Moreover, the proposed MDR credits will 
enhance rather than burden competition by operating to incentivize 
increased liquidity and improve execution quality on the Exchange 
through reasonable and equitably allocated economic incentives.

[[Page 39729]]

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    The proposed rule change has taken effect upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Act \12\ and subparagraph (f)(2) of Rule 
19b-4.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4.
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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.

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-NSX-2016-03 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-NSX-2016-03. 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. Copies of the filing also will be available 
for inspection and copying at the principal office 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-NSX-2016-03 and should be 
submitted on or before July 8, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-14311 Filed 6-16-16; 8:45 am]
 BILLING CODE 8011-01-P


