
[Federal Register Volume 82, Number 3 (Thursday, January 5, 2017)]
[Notices]
[Pages 1381-1383]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31936]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79701; File No. SR-NASDAQ-2016-175]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 7022(d)

December 29, 2016.
    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 December 15, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 7022(d) to increase the monthly 
fee for Nasdaq's Daily List and Fundamental Data report from $1,500 to 
$1,750.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.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 aspects of such 
statements.

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

1. Purpose
    The purpose of the proposed rule change is to amend Rule 7022(d) to 
increase the monthly fee for Nasdaq's Daily List and Fundamental Data 
report from $1,500 to $1,750. The Daily List provides important 
corporate action data--including new listings, delistings, symbol and 
name changes, and dividends--for the Nasdaq Stock Market and the Mutual 
Fund Quotation Service (``MFQS'') to the trading and market data 
community. Specifically, the Daily List is comprised of the following 
four data sets:
     Nasdaq Equity Data: Provides advance notification of new 
listings, delistings, corporate name changes, trading symbol changes, 
market tier changes, and Financial Status Indicator changes that occur 
on all tiers of the Nasdaq Stock Market.
     Mutual Fund Data: Provides advance notification of new 
listings, delistings, corporate name changes and fund identifier 
changes for mutual funds, money market funds and unit investment trusts 
that report via MFQS.
     Dividends: Provides advance notification of cash 
dividends, stock dividends, and stock splits for Nasdaq securities.
     Next Day Ex-Date: Summarizes the securities with dividend 
adjustments to be applied to the previous closing price on the next 
business day.
    In addition, Nasdaq recently enhanced the Daily List by adding (i) 
a tick pilot indicator that provides information about the status of 
each security under the Tick Size Pilot Program \3\ and (ii) a flag to 
identify securities that are exchange-traded funds (``ETFs'') and 
exchange-traded managed funds (``ETMFs'').
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    \3\ Order Approving the National Market System Plan to Implement 
a Tick Size Pilot Program by BATS Exchange, Inc., BATS Y-Exchange, 
Inc., Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX 
Exchange, Inc., Financial Industry Regulatory Authority, Inc., 
NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, The Nasdaq Stock Market 
LLC, New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc., 
as Modified by the Commission, For a Two-Year Period, Securities 
Exchange Act Release No. 74892 (May 6, 2015), 80 FR 27514 (May 13, 
2015) (File No. 4-657).
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    Daily List files are available via secured Web site or secured file 
transfer protocol server and are posted and updated intraday. The Daily 
List also includes access to historical Daily List data dating back to 
either 1998 or 1999 (depending on the information).
    The Fundamental Data report provides a summary file of the prior 
day's trading activity for all Nasdaq-listed issues. Specifically, the 
report includes the following elements:
     Security Master Information: Issue Name, Issue Symbol, 
Issue Type, Issue Class, Listing Market Tier, Total Shares Outstanding, 
Public Float and Nasdaq Index Membership.
     Consolidated Market Statistics: Daily High Price, Daily 
Low Price, Daily Last Sale Price, Daily Share Volume, 52 Week High 
Price, 52 Week Low Price, Year-To-Date Volume
     Nasdaq Market Center Statistics: Nasdaq Official Closing 
Price and Nasdaq Closing Bid/Ask Quotation Prices.
    Like the Daily List, Fundamental Data files are available via 
secured Web site or secured file transfer protocol server. The 
information is provided on a T+1 basis.
    Current fees for the Daily List and Fundamental Data were 
established in 2013.\4\ Since that time, Nasdaq has implemented the 
enhancements to the Daily List product described above. Additionally, 
in 2014 Nasdaq introduced several enhancements to the MFQS portion of 
the Daily List product: A new ``test Symbol Flag'' field to clearly 
delineate MFQS test instruments from production instruments; a new 
``Symbol Reuse Flag'' to alert market data vendors that a previously 
used MFQS symbol is being issued to a new MFQS instrument; and a new 
``Instrument Registration'' field to clearly identify the U.S. 
regulatory agent responsible for oversight of a given MFQS instrument. 
Accordingly, to the extent that the proposed price increase exceeds the 
rate of overall inflation during the preceding four years, Nasdaq 
believes that it is warranted in light of the increased value of the 
product to market participants. Moreover, as discussed below, Nasdaq 
believes that the price of the product is constrained by market forces, 
such that any increase in the price of the product that was not 
reasonable in light of the product's value would be met with a 
competitive response.
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    \4\ Securities Exchange Act Release No. 68636 (January 11, 
2013), 78 FR 3940 (January 17, 2013) (SR-NASDAQ-2013-009).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\6\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges

[[Page 1382]]

among members and issuers and other persons using any facility, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues, and also recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \7\
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    \7\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Likewise, in NetCoalition v. Securities and Exchange Commission \8\ 
(``NetCoalition''), the D.C. Circuit upheld the Commission's use of a 
market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\9\ As the court emphasized, the Commission ``intended in 
Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market data . . . to be 
made available to investors and at what cost.'' \10\
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    \8\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \9\ See NetCoalition, at 534-535.
    \10\ Id. at 537.
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    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \11\
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    \11\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
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    Nasdaq believes that periodically it must adjust prices to reflect 
more accurately the value of its products and the investments made to 
enhance them. Given that the fee for the Daily List and Fundament Data 
product has not been adjusted for four years, Nasdaq believes that it 
is an appropriate time to adjust the fee to more accurately reflect its 
value, as well as the investments made to enhance it through the 
addition of additional data to the product.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem overall fee levels associated with 
interacting with a particular venue to be excessive. In such an 
environment, the Exchange must continually adjust its fees to remain 
competitive. Because competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing and data consumption practices, the Exchange believes 
that the degree to which fee changes in this market may impose any 
burden on competition is extremely limited.
    In this instance, the proposed change to the fee for the Daily List 
and Fundamental Data product does not impose a burden on competition 
because the product is completely voluntary and is not necessary in 
order to interact with the Exchange. Thus, if the fee proposed herein 
is disproportionate to the value provided by this product, it is likely 
that the Exchange will lose sales. Moreover, to the extent that market 
participants use the product in order to enhance their participation 
with the Exchange, an excessive fee may encourage them to route orders 
to other venues. Accordingly, the Exchange does not believe that the 
proposed changes will impair the ability of members or competing order 
execution venues to maintain their competitive standing in the 
financial markets.
    Specifically, market forces constrain fees for the Daily List and 
Fundamental Data product in three respects. First, fees related to data 
products that support interaction with an exchange are constrained by 
competition among exchanges and other entities attracting order flow. 
Nasdaq believes that firms make decisions regarding order routing and 
consumption of proprietary data based on the total cost of interacting 
with the Exchange, and order flow could be harmed by the 
supracompetitive pricing of any proprietary data product. Second, 
prices for the data are constrained by the potential for other 
exchanges and non-exchange data distributors to create products that 
replicate the Daily List and Fundamental Data product. Third, 
competition among Distributors constrains the cost of the data.
Competition for Order Flow
    Fees related to this product are constrained by competition among 
exchanges and other entities seeking to attract order flow. Order flow 
is the ``life blood'' of exchanges. Broker-dealers currently have 
numerous alternative venues for their order flow, including self-
regulatory organization (``SRO'') markets, internalizing broker-dealers 
(``BDs''), and various forms of alternative trading systems (``ATSs''), 
including dark pools and electronic communication networks (``ECNs''). 
Each SRO market competes to produce quotation information and 
transaction reports, and two FINRA-regulated Trade Reporting Facilities 
(``TRFs'') compete to attract internalized transaction reports. The 
existence of fierce competition for order flow implies a high degree of 
price sensitivity on the part of BDs, which may readily reduce costs by 
directing orders toward the lowest-cost trading venues.
    The level of competition and contestability in the market for order 
flow is demonstrated by the numerous examples of entrants that swiftly 
grew into some of the largest electronic trading platforms and 
proprietary data producers: Archipelago, Bloomberg Tradebook, Island, 
RediBook, Attain, TracECN, BATS Trading and BATS/Direct Edge. A 
proliferation of dark pools and other ATSs operate profitably with 
fragmentary shares of consolidated market volume. For a variety of 
reasons, competition from new entrants, especially for order execution, 
has increased dramatically over the last decade.
    Each SRO, TRF, ATS, and BD that competes for order flow is 
permitted to produce proprietary data products. Many currently do or 
have announced plans to do so, including NYSE, NYSE Amex, NYSE Arca, 
BATS, and IEX. This is because Regulation NMS deregulated the market 
for proprietary data. While BDs had previously published their 
proprietary data individually, Regulation NMS encourages market data 
vendors and BDs to produce proprietary products cooperatively in a 
manner never before possible. Order routers and market data vendors can 
facilitate production of proprietary data products for single or 
multiple BDs. The potential sources of proprietary products are 
virtually limitless.
    The markets for order flow and proprietary data are inextricably 
linked:

[[Page 1383]]

A trading platform cannot generate market information unless it 
receives trade orders. As a result, the competition for order flow 
constrains the prices that platforms can charge for proprietary data 
products. Firms make decisions on how much and what types of data to 
consume based on the total cost of interacting with Nasdaq and other 
exchanges. Data fees are but one factor in a total platform analysis. 
If the cost of the product exceeds its expected value, the broker-
dealer will choose not to buy it. A supracompetitive increase in the 
fees charged for either transactions or proprietary data has the 
potential to impair revenues from both products. In this manner, the 
competition for order flow constrains prices for proprietary data 
products.
Substitute Products
    The price of the data contained in the Daily List and Fundamental 
Data product is constrained by the ability of a data vendor to obtain 
the information necessary to create and sell competing products. Nasdaq 
does not have unique access to the information that is provided through 
the product, and market participants do not have an unqualified need 
for the information provided. Therefore, the price that Nasdaq can 
charge for the product is constrained by the ability of market 
participants to reduce their demand for the product and the ability of 
competitors to enter the market and profitably undercut any 
supracompetitive price increase.
Competition Among Distributors
    Distributors provide another form of price discipline for 
proprietary data products. Distributors are in competition for users, 
and can simply refuse to purchase any proprietary data product that 
fails to provide sufficient value for the price. If the price of this 
product were set above competitive levels, Distributors could determine 
whether the product was sufficiently attractive to their own customers 
to warrant incurring the costs associated with purchasing it for 
distribution. Since distributors are in competition with one another to 
attract customers, they must continually evaluate their cost base and 
the value of their product offering to customers to determine whether 
they allow them to maximize profitability. This competition for 
customers provides another check on the price for proprietary data 
products such as the Daily List and Fundamental Data.
    In summary, market forces constrain the price of the product 
through competition for order flow, competition from substitute 
products, and in the competition among distributors for customers. For 
these reasons, the Exchange has provided a substantial basis 
demonstrating that the fee is equitable, fair, reasonable, and not 
unreasonably discriminatory, and therefore consistent with and in 
furtherance of the purposes of the Exchange Act.

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

    No written comments were either solicited or received.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act.\12\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2016-175 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-2016-175. 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 such 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-NASDAQ-2016-175, and should 
be submitted on or before January 26, 2017.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31936 Filed 1-4-17; 8:45 am]
 BILLING CODE 8011-01-P


