[Federal Register Volume 83, Number 88 (Monday, May 7, 2018)]
[Notices]
[Pages 20129-20131]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-09580]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83149; File No. S7-24-89]


Joint Industry Plan; Order of Summary Abrogation of the Forty-
Second Amendment to the Joint Self-Regulatory Organization Plan 
Governing the Collection, Consolidation and Dissemination of Quotation 
and Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges on an Unlisted Trading Privileges Basis

May 1, 2018.

I. Introduction

    Notice is hereby given that the Securities and Exchange Commission 
(``Commission''), pursuant to Section 11A of the Securities Exchange 
Act of 1934 (``Act''),\1\ and Rule 608 thereunder,\2\ is summarily 
abrogating the Forty-Second Amendment to the Joint Self-Regulatory 
Organization Plan Governing the Collection, Consolidation and 
Dissemination of Quotation and Transaction Information for Nasdaq-
Listed Securities Traded on Exchanges on an Unlisted Trading Privileges 
Basis (``Nasdaq/UTP Plan'' or ``Plan'').\3\
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ The Plan governs the collection, processing, and 
dissemination on a consolidated basis of quotation information and 
transaction reports in Eligible Securities for each of its 
Participants. This consolidated information informs investors of the 
current quotation and recent trade prices of Nasdaq securities. It 
enables investors to ascertain from one data source the current 
prices in all the markets trading Nasdaq securities. The Plan serves 
as the required transaction reporting plan for its Participants, 
which is a prerequisite for their trading Eligible Securities. See 
Securities Exchange Act Release No. 55647 (April 19, 2007), 72 FR 
20891 (April 26, 2007).
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    On March 5, 2018 \4\ the participants of the Plans 
(``Participants'') \5\ filed with the Commission a proposal to amend 
the Nasdaq/UTP Plan (``Amendment''), pursuant to Section 11A of the 
Act,\6\ and Rule 608 thereunder.\7\ The Amendment, which was effective 
upon filing pursuant to Rule 608(b)(3)(i) of Regulation NMS,\8\ 
modified the Plan's fee schedule to adopt changes to the 
Nonprofessional Subscriber Enterprise Cap and Per Query Fees.
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    \4\ See Securities Exchange Act Release No. 82938 (March 23, 
2018), 83 FR 13542 (March 29, 2018) (``Notice of Filing'').
    \5\ The Participants are: Cboe BYX Exchange; Inc.; Cboe BZX 
Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; 
Chicago Board Options Exchange, Incorporated; Chicago Stock 
Exchange, Inc.; Financial Industry Regulatory Authority, Inc.; 
Investors Exchange LLC; Nasdaq BX, Inc.; Nasdaq ISE, LLC; Nasdaq 
PHLX LLC; The Nasdaq Stock Market LLC; New York Stock Exchange LLC; 
NYSE Arca, Inc.; NYSE American LLC; NYSE National, Inc.
    \6\ 15 U.S.C. 78k-1.
    \7\ 17 CFR 242.608.
    \8\ 17 CFR 242.608(b)(3)(i).
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II. Description of the Amendment

A. Amendments to Enterprise Cap

    The Amendment modified the Plan's fee schedule to increase the 
Nonprofessional Subscriber Enterprise Cap (``Enterprise Cap'') from 
$686,400 to $1,260,000. The Participants stated that as a result of 
industry consolidation, the non-professional subscriber base for 
entities subject to the Enterprise Cap may suddenly increase, and 
whereas before two entities may have benefited slightly from the 
Enterprise Cap, a combined entity could achieve a substantial decrease 
in fees by using the Enterprise Cap. Consequently, the Participants 
stated, the increase of the Enterprise Cap was designed to maintain the 
status quo and should not have, in conjunction with the Per-Query Fee 
change described below, resulted in an increase of revenue to the Plan 
or fees for any particular entity.\9\
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    \9\ The Participants noted that very few entities take advantage 
of the Enterprise Cap.
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    In addition, the Amendment modified the Plan to remove a provision 
relating to annual increases of the Enterprise Cap after a two-thirds 
vote of the Participants. In 2014 \10\ the Participants amended the 
mechanism by which the Enterprise Cap would increase, from an automatic 
increase based on volume, to a requirement for an affirmative vote of 
the Participants. The Participants have not used this mechanism to 
increase the Enterprise Cap. The Participants believe that any future 
changes to the Enterprise Cap should be filed with the Commission and 
subject to public comment. Consequently, the Participants proposed to 
delete this provision.
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    \10\ See Securities Exchange Act Release No. 73279 (October 1, 
2014), 79 FR 60522 (October 7, 2014) (describing the history of the 
Per-Query Fees).
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B. Amendments to the Per-Query Fee

    The Participants stated that because of the increase in the 
Enterprise Cap, there could have been broker-dealers that used the 
Enterprise Cap that, without a corresponding offset, could have faced 
an increase in fees. To offset the potential fee increase, the 
Amendment modified the text of the Plan's fee schedule to reduce the 
Plan's Per-Query Fee for broker-dealers with 500,000 or more non-
professional subscribers from $.0075 to $.0025.
    The Participants stated that by implementing a tiered structure for 
Per-Query Fees, the proposal was designed to provide an offset to those 
firms most likely affected by the Enterprise Cap increase (i.e., those 
with a large non-professional subscriber base). Additionally, the 
Participants stated that the proposal would align the tiered structures 
for Network C with those of Networks A and B.
    Pursuant to Rule 608(b)(3)(i) under Regulation NMS,\11\ the 
Participants designated the Amendment as establishing or changing a fee 
or other charge collected on their behalf in connection with access to, 
or use of, the facilities contemplated by the Plan. As a result, the 
Amendment was effective upon filing with the Commission. The Amendment 
was published for comment in the Federal Register on March 29, 
2018.\12\
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    \11\ 17 CFR 242.608(b)(3)(i).
    \12\ See Notice of Filing, supra note 4.
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III. Summary of Comments

    The Commission received two comment letters in response to the 
Notice of Filing \13\ and a response thereto from the Participants.\14\ 
In its comment letter, SIFMA stated that the information provided by 
the Participants in the Amendment with respect to, among other things, 
cost, revenue, and customer data, is insufficient to permit the 
Commission to determine whether the Amendment is consistent with the 
Act.\15\ SIFMA stated that only the Participants, and not SIFMA or 
other market participants, possess the information necessary to

[[Page 20130]]

evaluate the Amendment.\16\ SIFMA also stated that, costs, and not 
revenue neutrality as the Participants suggest, is the relevant factor 
in assessing whether the Amendment is consistent with the Act.\17\
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    \13\ See letters from Melissa MacGregor, Managing Director, 
Securities Industry and Financial Markets Association (``SIFMA''), 
dated April 19, 2018 (``SIFMA Letter''), and Tyler Gellasch, 
Executive Director, Healthy Markets Association (``Healthy 
Markets''), dated April 30, 2018 (``Healthy Markets Letter''), to 
Brent J. Fields, Secretary, Commission.
    \14\ See Letter from Emily Kasparov to Brent J. Fields, 
Secretary, Commission, dated April 27, 2018 (``Participants' 
Response''). The Participants responded to the comments received on 
this Amendment, as well as on SR-CTA/CQ-2018-01, which amended the 
CTA/CQ plan in a parallel fashion.
    \15\ See SIFMA Letter, supra note 13 at 1-3. SIFMA also stated 
that absent data demonstrating a reasonable relationship between 
core data revenues and the costs of collecting and disseminating 
data, it is doubtful that maintaining the status quo with respect to 
market data fees is consistent with the Act. According to SIFMA, the 
governance structure for NMS plans is broken and market data fees 
are not restrained by competitive forces, thus maintaining the 
status quo with respect to market data fees could impose a burden on 
competition. See id. at 3.
    \16\ See id. at 1-3.
    \17\ See id. at 2.
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    Healthy Markets \18\ urged the Commission to summarily abrogate the 
Amendment on grounds that it is not appropriately justified, is 
discriminatory, and is contrary to the original purpose of the 
Enterprise Cap. Healthy Markets also stated that the Enterprise Cap 
should be eliminated as part of the broader process of modernizing the 
UTP fee schedules.
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    \18\ Healthy Markets also commented on other items that are not 
germane to the instant filing, such as broader recommendations for 
NMS Plans and Securities Information Processor Fees.
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    Specifically, Healthy Markets stated that the Participants failed 
to support their representations regarding industry consolidation and 
noted that the Amendment lacks any detailed justification or 
analysis.\19\ In addition, Healthy Markets stated that the 
Participants' representation that the Amendment may be revenue neutral 
does not demonstrate that the Amendment is consistent with the Act 
whose goal is to protect the public interest by, amongst other things, 
promoting competition, the reasonable allocation of fees, and non-
discrimination.\20\ Healthy Markets also states that the Amendment is 
discriminatory, and that it adds complexity to an already complex 
process.\21\ Lastly, Healthy Market stated that the Enterprise Cap 
should be eliminated as part of the broader process of modernizing the 
UTP fee schedules to simply allow for the non-discriminatory, 
consistent access and pricing of public market data.\22\
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    \19\ See Healthy Markets Letter, supra note 13 at 3-4.
    \20\ See id.
    \21\ See id. at 5.
    \22\ See id.
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    In response, the Participants stated that the comments received are 
misguided or incorrect, and require no further response from the 
Participants.\23\ In addition, the Participants stated that market 
participants have access to the information necessary to assess the 
impact of the Amendment on revenue,\24\ asserting that data subscribers 
can readily apply the new fee schedule to their historical usage to 
project future usage and thereby determine whether the Participants' 
representations concerning the effect on revenue hold true.\25\ The 
Participants also noted that only industry associations commented on 
the Amendment, and that individual market data subscribers could have 
commented on the Amendment had the Participants' analysis been 
incorrect.\26\
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    \23\ See Participants' Response, supra note 14 at 1-2.
    \24\ See Participants' Response, supra note 14 at 1.
    \25\ See id.
    \26\ See id.
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IV. Discussion

    Pursuant to Section 11A of the Act \27\ and Rule 608(b)(3)(iii) of 
Regulation NMS thereunder,\28\ at any time within 60 days of the filing 
of any such amendment, the Commission may summarily abrogate the 
amendment and require that the amendment be re-filed in accordance with 
paragraph (a)(1) of Rule 608 \29\ and reviewed in accordance with 
paragraph (b)(2) of Rule 608,\30\ if it appears to the Commission that 
such action is necessary or appropriate in the public interest, for the 
protection of investors, or the maintenance of fair and orderly 
markets, to remove impediments to, and perfect the mechanisms of, a 
national market system or otherwise in furtherance of the purposes of 
the Act. The Commission is concerned that the information and 
justifications provided by the Participants are not sufficient for the 
Commission to determine whether the Amendment is consistent with the 
Act. Accordingly, the Commission believes that the procedures set forth 
in Rule 608(b)(2) \31\ will provide a more appropriate mechanism for 
determining whether the Amendment is consistent with the Act.
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    \27\ 15 U.S.C. 78k-1.
    \28\ 17 CFR 242.608.
    \29\ 17 CFR 242.608(a)(1).
    \30\ 17 CFR 242.608(b)(2).
    \31\ Id.
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    The Commission believes that the Amendment raises questions as to 
whether the changes will result in fees that are fair and reasonable, 
not unreasonably discriminatory,\32\ and that will not impose an undue 
or inappropriate burden on competition under Section 11A of the 
Act.\33\
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    \32\ 17 CFR 242.603(a)(1)-(2), 17 CFR 242.608, and 15 U.S.C. 
78k-1(a)(1)(C).
    \33\ 15 U.S.C. 78k-1
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    The Commission does not believe that the Participants have provided 
sufficient information regarding, or adequate justification for, the 
changes described in the Amendment. While the Participants represent 
that they used certain data to calibrate the fee changes to achieve a 
revenue neutral outcome \34\ none of that data is provided in the 
Amendment, nor do the Participants provide any such information in 
their response.\35\ The Commission is also concerned that the 
Participants provided little information concerning the basis for, the 
anticipated revenue effects of, and the effects on market participants 
from, the Amendment. The Participants have not provided sufficient 
information for the changes to be closely scrutinized for fairness and 
reasonableness and the Amendment lacks support for the basis of, as 
well as the application and likely effect of, the fees to determine 
that the Amendment is not unreasonably discriminatory.
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    \34\ See Notice of Filing, supra note 4 at 13543.
    \35\ See Participants' Response, supra note 14.
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    In addition, the Participants did not provide information to 
support their assertion that the increase of the Enterprise Cap is 
designed to maintain the status quo and should not, in conjunction with 
the Per-Query fee changes, result in an increase of revenue to the Plan 
or of fees to any particular entity.\36\ The Participants lowered the 
Per-Query fee for firms with at least 500,000 non-professional 
accounts. However the filing does not indicate why the Participants 
chose to limit the lower fee to firms that have 500,000 non-
professional subscribers. The Participants state that the Amendment 
does not impose any burden on competition that is not necessary or 
appropriate because it is revenue neutral and maintains the status quo. 
Because the Participants did not provide the Commission with sufficient 
data to support their assertion that the fee change should not result 
in an increase of revenue to the Plan or to fees for any particular 
entity, however, the Commission is unable to evaluate the Participants' 
assertions that the Amendment does not impose any burden on competition 
that is not necessary or appropriate.
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    \36\ Id.
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V. Conclusion

    For the reasons stated above, the Commission believes it necessary 
or appropriate to summarily abrogate the Amendment and terminate its 
status as immediately effective. The Commission believes that the 
procedures set forth in Rule 608(b)(2) of Regulation NMS \37\ will 
provide a more appropriate mechanism for determining whether the 
Amendment is consistent with the Act. Therefore, the Commission 
believes that it is necessary or appropriate in the public interest, 
for the protection of investors, or the maintenance of fair and orderly 
markets, to remove impediments to, and perfect the mechanisms of, a 
national market system or otherwise in furtherance of the purposes of 
the Act, to summarily abrogate the Amendment.
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    \37\ 17 CFR 242.608(b)(2).

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[[Page 20131]]

    It is therefore ordered, pursuant to Section 11A of the Act,\38\ 
and Rule 608 thereunder,\39\ that the Forty-Second Amendment to the 
Nasdaq/UTP Plan (File No. S7-24-89) be, and hereby is, summarily 
abrogated. If the Participants choose to re-file the Amendment, they 
must do so pursuant to Section 11A of the Act and the Amendment must be 
re-filed in accordance with paragraph (a)(1) of Rule 608 of Regulation 
NMS \40\ for review in accordance with paragraph (b)(2) of Rule 608 of 
Regulation NMS.\41\
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    \38\ 15 U.S.C. 78k-1.
    \39\ 17 CFR 242.608.
    \40\ 17 CFR 242.608(a)(1).
    \41\ 17 CFR 242.608(b)(2).

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2018-09580 Filed 5-4-18; 8:45 am]
 BILLING CODE 8011-01-P


