[Federal Register Volume 83, Number 110 (Thursday, June 7, 2018)]
[Notices]
[Pages 26511-26514]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-12194]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83360; File No. SR-NYSE-2018-24]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the NYSE Proprietary Market Data Fee Schedule Regarding the NYSE 
Best Quote and Trades Market Data Feed

June 1, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on May 21, 2018, 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 self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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 the NYSE Proprietary Market Data Fee 
Schedule (``Fee Schedule'') regarding the NYSE Best Quote and Trades 
(``BQT'') market data feed. The Exchange proposes to make the fee 
change effective May 21, 2018. The proposed rule change is available on 
the Exchange's website 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.

[[Page 26512]]

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 Fee Schedule regarding the NYSE 
BQT market data feed. The NYSE BQT data feed provides best bid and 
offer and last sale information for the Exchange and its affiliates, 
NYSE Arca, Inc. (``NYSE Arca'') and NYSE American LLC (``NYSE 
American'').\4\ In connection with the re-launch of operations of 
another affiliate of the Exchange, NYSE National, Inc. (``NYSE 
National''), the Exchange recently filed a proposed rule change to 
amend the content of the NYSE BQT market data feed \5\ to include NYSE 
National BBO and NYSE National Trades market data feeds.\6\
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    \4\ See Securities Exchange Act Release No. 34-73553 (Nov. 6, 
2014), 79 FR 67491 (Nov. 13, 2014) (SR-NYSE-2014-40) (``NYSE BQT 
Approval Order'').
    \5\ See SR-NYSE-2018-22.
    \6\ See SR-NYSENat-2018-09.
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    The Exchange currently charges an access fee of $250 per month for 
the NYSE BQT data feed. The Exchange is not proposing any change to the 
access fee. The purpose of this filing is to amend footnote 5 to the 
Fee Schedule to provide that to subscribe to NYSE BQT, subscribers must 
also subscribe to, and pay applicable fees for, NYSE National BBO and 
NYSE Trades in addition to subscribing to, and paying for, NYSE BBO, 
NYSE Trades, NYSE Arca BBO, NYSE Arca Trades, NYSE American BBO and 
NYSE American Trades.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\7\ in general, and 
Sections 6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that it 
provides an equitable allocation of reasonable fees among its members, 
issuers, and other persons using its facilities and is not designed to 
permit unfair discrimination among customers, issuers, brokers, or 
dealers. The Exchange also believes that the proposed rule change is 
consistent with Section 11(A) of the Act \9\ in that it is consistent 
with (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,\10\ 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4), (5).
    \9\ 15 U.S.C. 78k-1.
    \10\ See 17 CFR 242.603.
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    The Exchange further believes that requiring market data recipients 
to separately subscribe to and pay for the eight underlying data feeds 
to NYSE BQT is reasonable because by design, NYSE BQT represents an 
aggregated and consolidated version of those existing eight data feeds. 
The Exchange notes that it is not seeking with this filing to establish 
fees relating to the underlying BBO and Trades data feeds, as those 
fees have already been established consistent with Section 19(b)(3)(A) 
of the Act \11\ and Rule 19b-4(f)(2) \12\ thereunder, and which may be 
amended from time to time. However, the Exchange believes it would be 
unfair if it did not require NYSE BQT data feed recipients to 
separately subscribe to and pay for those underlying feeds because 
otherwise, NYSE BQT data feed recipients would be receiving a data 
product that includes such underlying data at a lower cost than 
separately subscribing to the underlying data feeds. The Exchange 
therefore believes that the fee structure for NYSE BQT would not be 
lower than the cost to another party to create a comparable product, 
including the cost of receiving the underlying data feeds.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(2).
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    The Exchange further believes that the proposed NYSE BQT fee 
structure is equitable and not unfairly discriminatory because all 
vendors and subscribers that elect to purchase NYSE BQT would be 
subject to the same fees. In addition, vendors and subscribers that do 
not wish to purchase NYSE BQT may separately purchase the individual 
underlying data feed, and if they so choose, perform a similar 
aggregation and consolidation function that the Exchange performs in 
creating NYSE BQT. To enable such competition, the Exchange would 
continue to offer NYSE BQT on terms that a subscriber of the underlying 
feeds could offer a competing product if it so chooses.
    The Exchange also notes that the use of NYSE BQT is entirely 
optional. Firms have a wide variety of alternative market data products 
from which to choose, including the Exchanges' own underlying data 
products, and proprietary data products offered by the Exchange's 
competitors, and consolidated data. Moreover, the Exchange is not 
required to make any proprietary data products available or to offer 
any specific pricing alternatives to any customers.
    As explained below in the Exchange's Statement on Burden on 
Competition, the existence of alternatives to these data products 
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 ``best quote and 
trade'' market data products. If another exchange (or its affiliate) 
were to charge less to consolidate and distribute its similar product 
than the Exchange charges to consolidate and distribute NYSE BQT, 
prospective users likely would not subscribe to, or would cease 
subscribing to, NYSE BQT. In addition, the Exchange would compete with 
unaffiliated market data vendors who would be in a position to 
consolidate and distribute the same data that comprises the NYSE BQT 
feed into the vendor's own comparable market data product. If the 
third-party vendor is able to provide the exact same data for a lower 
cost, prospective users would avail themselves of that lower cost and 
elect not to take NYSE BQT.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\13\ 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. As noted above, the NYSE BQT data feed 
represents aggregated and consolidated information of eight existing 
market data feeds. Although the Exchange, NYSE Arca, NYSE American and 
NYSE National are the exclusive distributors of the underlying BBO and 
Trades feeds from which certain data elements are taken to create NYSE 
BQT, the Exchange may not be the exclusive distributor of the 
aggregated and consolidated information that comprises the NYSE BQT 
data feed. Any other market data recipient of the underlying data feeds 
would be able, if they chose, to create a data feed with the same 
information as NYSE BQT and distribute it to their clients on a level 
playing field with respect to latency and cost as compared to the 
Exchange's product.
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    \13\ 78 U.S.C. 78f(b)(8).
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    The market for proprietary data products is competitive and 
inherently

[[Page 26513]]

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.'' \14\
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    \14\ ``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 impose 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.'' \15\ More recently, former SEC Chair Mary Jo White reported 
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.\16\ And as the Commission's own Chief Administrative Law Judge 
found after considering extensive fact and expert testimony and 
documentary evidence on the subject, ``there is fierce competition for 
trading services (or `order flow')'' among exchanges, and ``the record 
evidence shows that competition plays a significant role in restraining 
exchange pricing of depth-of-book products.'' In the Matter of the 
Application of Securities Industry And Financial Markets Association 
For Review of Actions Taken By Self-Regulatory Organizations, Initial 
Decision Release No. 1015, Administrative Proceeding File No. 3-15350 
(June 1, 2016), at pp. 8 and 33.
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    \15\ 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.
    \16\ 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 website), 
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 competing 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 in light of 
the diminished content and data products offered by competing venues 
may become 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 NYSE BQT available unless their 
customers request it, and customers will not elect to pay for NYSE BQT 
unless the product 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.

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) \17\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \18\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(2).
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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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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 [email protected]. Please include 
File Number SR-NYSE-2018-24 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange

[[Page 26514]]

Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2018-24. 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 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-NYSE-2018-24, and should be submitted on 
or before June 28, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12194 Filed 6-6-18; 8:45 am]
 BILLING CODE 8011-01-P


