[Federal Register Volume 82, Number 237 (Tuesday, December 12, 2017)]
[Notices]
[Pages 58470-58473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26689]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82227; File No. SR-CboeBZX-2017-007]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Applicable 
to Its Equity Options Platform

December 6, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 58471]]

(``Act''),\1\ and Rule 19b 4 thereunder,\2\ notice is hereby given that 
on November 28, 2017, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
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 Exchange has designated 
the proposed rule change as one establishing or changing a member due, 
fee, or other charge imposed by the Exchange under Section 
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ 
which renders the proposed rule change effective upon filing with the 
Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the Market Data section of 
its fee schedule applicable to its equity options platform (``BZX 
Options'') to adopt fees for receipt of historical market data.
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.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 the Market Data section of its BZX 
Options fee schedule to adopt fees for historical market data. The 
Exchange proposes to begin providing historical data to data recipients 
upon request for a fee. The Exchange currently provides historical data 
upon request on an ad hoc basis, but proposes to begin charging a fee 
due to the infrastructure costs of storing and providing such data. 
Similar to what it does today, the Exchange proposes to provide a data 
recipient with the requested historical data on an external hard drive 
provided by the Exchange. As an alternative means to obtain historical 
data, the Exchange provides market participants with access to a 
database from which they can download data that is up to 3 months old. 
As proposed, the Exchange will offer historical data from the 
Exchange's PITCH data feed for a fee of $500 per month of data accessed 
by any individual user. The Exchange's databases will contain up to 90 
days of data at any point in time. For data that the Exchange provides 
on an external hard drive to a market participant the proposed cost is 
$2,500 per 1 terabyte (TB) drive generated by the Exchange. Historical 
data would be provided to data recipients for internal use only, and 
thus, no redistribution will be permitted. The proposed rates are 
identical to the rates it charges for historical data on its equity 
trading platform (``BZX Equities'').\5\
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    \5\ See Cboe BZX U.S. Equities Exchange Fee Schedule available 
at http://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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    Historical data provided by the Exchange can be used for a variety 
of purposes. For instance, data recipients may use historical data to 
back-test certain trading strategies. As another example, data 
recipients that provide market information through public websites or 
develop dynamic stock tickers, portfolio trackers, price/time graphs 
and other visual systems can use historical data for such purposes.
    The Exchange proposes to implement the proposed change to its fee 
schedule on January 2, 2018.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\6\ in general, and 
furthers the objectives of Section 6(b)(4),\7\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its members and other recipients of 
Exchange data. The Exchange believes that the proposed rates are 
equitable and non-discriminatory in that they apply uniformly to all 
recipients of Exchange data. The Exchange believes the proposed fees 
are competitive with those charged by other venues and, therefore, 
reasonable and equitably allocated to recipients. The Exchange also 
believes that the proposed fees are reasonable and non-discriminatory 
because they will apply uniformly to all recipients of Exchange data. 
Furthermore, the proposed rates are identical to the rates the Exchange 
charges for historical data on BZX Equities,\8\ which have been 
previously filed with the Commission and subject to notice and 
comment.\9\
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ See Cboe BZX U.S. Equities Exchange Fee Schedule available 
at http://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \9\ See Securities Exchange Act Release Nos. 61885 (April 9, 
2010), 75 FR 20018 (April 16, 2010) (SR-BATS-2010-002).
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    The Exchange also believes that the proposed rule change is 
consistent with Section 11(A) of the Act \10\ in that it supports (i) 
fair competition among brokers and dealers, among exchange markets, and 
between exchange markets and markets other than exchange markets and 
(ii) the availability to brokers, dealers, and investors of information 
with respect to quotations for and transactions in securities. 
Furthermore, the proposed rule change is consistent with Rule 603 of 
Regulation NMS,\11\ which provides that any national securities 
exchange that distributes information with respect to quotations for or 
transactions in an NMS stock do so on terms that are not unreasonably 
discriminatory. In adopting Regulation NMS, the Commission granted 
self-regulatory organizations and broker-dealers increased authority 
and flexibility to offer new and unique market data to the public. It 
was believed that this authority would expand the amount of data 
available to consumers, and also spur innovation and competition for 
the provision of market data.
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    \10\ 15 U.S.C. 78k-1.
    \11\ See 17 CFR 242.603.
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    In addition, the proposed fees would not permit unfair 
discrimination because all of the Exchange's customers and market data 
vendors will be subject to the proposed fees on an equivalent basis. 
Historical data is distributed and purchased on a voluntary basis, in 
that neither the Exchange nor market data distributors are required by 
any rule or regulation to make this data available. Accordingly, 
Distributors and Users can discontinue use at any time and for any 
reason, including due to an assessment of the reasonableness of fees 
charged. Firms have a wide variety of alternative market data products 
from which to choose, such as similar proprietary data products offered 
by other exchanges and consolidated data. Moreover, the Exchange is not 
required to make any

[[Page 58472]]

proprietary data products available or to offer any specific pricing 
alternatives to any customers.
    In addition, the fees that are the subject of this rule filing are 
constrained by competition. As explained below in the Exchange's 
Statement on Burden on Competition, the existence of alternatives to 
historical data further ensures that the Exchange cannot set 
unreasonable fees, or fees that are unreasonably discriminatory, when 
vendors and subscribers can elect such alternatives. That is, the 
Exchange competes with other exchanges (and their affiliates) that 
provide similar market data products. If another exchange (or its 
affiliate) were to charge less to distribute its similar product than 
the Exchange charges to distribute historical data, prospective Users 
likely would not subscribe to, or would cease subscribing to, the 
Exchange's historical data.
    The Exchange notes that the Commission is not required to undertake 
a cost-of-service or rate-making 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.\12\
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    \12\ The Exchange believes that cost-based pricing would be 
impractical because it would create enormous administrative burdens 
for all parties, including the Commission, to cost-regulate a large 
number of participants and standardize and analyze extraordinary 
amounts of information, accounts, and reports. In addition, 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 website at http://www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities 
Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200 
(December 17, 2014) (SR-NYSE-2014-64) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change to Establish an 
Access Fee for the NYSE Best Quote and Trades Data Feed, Operative 
December 1, 2014).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
Exchange's ability to price historical data is constrained by: (i) 
Competition among exchanges, other trading platforms, and Trade 
Reporting Facilities (``TRF'') that compete with each other in a 
variety of dimensions; (ii) the existence of inexpensive real-time 
consolidated data and market-specific data and free delayed data; and 
(iii) the inherent contestability of the market for proprietary data.
    The Exchange and its market data products are subject to 
significant competitive forces and the proposed fees represent 
responses to that competition. To start, the Exchange competes 
intensely for order flow. It competes with the other national 
securities exchanges that currently trade equities, with electronic 
communication networks, with quotes posted in FINRA's Alternative 
Display Facility, with alternative trading systems, and with securities 
firms that primarily trade as principal with their customer order flow.
    The availability of a variety of alternative sources of information 
imposes significant competitive pressures on Exchange data products and 
the Exchange's compelling need to attract order flow imposes 
significant competitive pressure on the Exchange to act equitably, 
fairly, and reasonably in setting the proposed data product fees. The 
proposed data product fees are, in part, responses to that pressure. 
The Exchange believes that the proposed fees would reflect an equitable 
allocation of its overall costs to users of its facilities.
    In addition, when establishing the proposed fees, the Exchange 
considered the competitiveness of the market for proprietary data and 
all of the implications of that competition. The Exchange believes that 
it has considered all relevant factors and has not considered 
irrelevant factors in order to establish fair, reasonable, and not 
unreasonably discriminatory fees and an equitable allocation of fees 
among all Users. The existence of alternatives to historical data, 
including existing similar feeds by other exchanges, consolidated data, 
and proprietary data from other sources, ensures that the Exchange 
cannot set unreasonable fees, or fees that are unreasonably 
discriminatory, when vendors and subscribers can elect these 
alternatives or choose not to purchase a specific proprietary data 
product if its cost to purchase is not justified by the returns any 
particular vendor or subscriber would achieve through the purchase.

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

    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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and paragraph (f) of Rule 19b-4 
thereunder.\14\ 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 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f).
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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 [email protected]. Please include 
File Number SR-CboeBZX-2017-007 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-CboeBZX-2017-007. 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 website (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

[[Page 58473]]

provisions of 5 U.S.C. 552, will be available for website 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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CboeBZX-2017-007 and should 
be submitted on or before January 2, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26689 Filed 12-11-17; 8:45 am]
BILLING CODE 8011-01-P


