[Federal Register Volume 85, Number 25 (Thursday, February 6, 2020)]
[Notices]
[Pages 6982-6986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02280]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88109; File No. SR-NYSENAT-2019-31]


Self-Regulatory Organizations; NYSE National, Inc.; Suspension of 
and Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove a Proposed Rule Change To Establish Fees for the NYSE 
National Integrated Feed

January 31, 2020.

I. Introduction

    On December 4, 2019, NYSE National, Inc. (``NYSE National'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to establish fees for the NYSE National Integrated 
Feed. The proposed rule change was immediately effective upon filing 
with the Commission pursuant to Section 19(b)(3)(A) of the Act.\3\ The 
proposed rule change was published for comment in the Federal Register 
on December 26, 2019.\4\ The Commission received two comment letters on 
the proposal.\5\ Pursuant to Section 19(b)(3)(C) of the Act,\6\ the 
Commission is hereby: (1) Temporarily suspending the proposed rule 
change; and (2) instituting proceedings to determine whether to approve 
or disapprove the proposed rule change.
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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). A proposed rule change may take 
effect upon filing with the Commission if it is designated by the 
exchange as ``establishing or changing a due, fee, or other charge 
imposed by the self-regulatory organization on any person, whether 
or not the person is a member of the self-regulatory organization.'' 
15 U.S.C. 78s(b)(3)(A)(ii). However, the Commission notes that, by 
its terms, the proposed rule change would not impose any fees for 
the NYSE National Integrated Feed until February 3, 2020. See infra 
note 7 and accompanying text.
    \4\ See Securities Exchange Act Release No. 87797 (December 18, 
2019), 84 FR 71025 (December 26, 2019) (``Notice'').
    \5\ See Letter from Tyler Gellasch, Executive Director, The 
Healthy Markets Association, to Vanessa Countryman, Office of the 
Secretary, Commission, dated January 16, 2020 (``Healthy Markets 
Letter''); Letter from Robert Toomey, Managing Director and 
Associate General Counsel, Securities Industry and Financial Markets 
Association (``SIFMA''), to Vanessa Countryman, Secretary, 
Commission, dated January 21, 2020 (``SIFMA Letter'').
    \6\ 15 U.S.C. 78s(b)(3)(C).
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II. Description of the Proposed Rule Change

    The Exchange proposes to establish fees for the NYSE National 
Integrated Feed and to make these fees operative on February 3, 
2020.\7\ According to the Exchange, the NYSE National Integrated Feed 
is a NYSE National-only market data feed that provides vendors and 
subscribers on a real-time basis with a unified view of events, in 
sequence, as they appear on the NYSE National matching engine.\8\ The 
NYSE National Integrated Feed includes depth-of-book order data, last 
sale data, security status updates (e.g., trade corrections and trading 
halts), and stock summary messages.\9\ It also includes information 
about the Exchange's best bid or offer at any given time.\10\ The 
Exchange proposes the following fees for the NYSE National Integrated 
Feed:
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    \7\ The Exchange currently does not charge any fees for the NYSE 
National Integrated Feed. See Notice, supra note 4, at 71026.
    \8\ See id.
    \9\ See id.
    \10\ See id.
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     $2,500 per month access fee, which would be charged (once 
per firm) to any data recipient that receives a data feed of the NYSE 
National Integrated Feed; \11\
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    \11\ Data recipients that only use display devices to view NYSE 
National Integrated Feed data and do not separately receive a data 
feed would not be charged an access fee. See id.
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     $1,500 per month redistribution fee, which would be 
charged (once per redistributor account) to any redistributor \12\ of 
the NYSE National Integrated Feed;
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    \12\ A redistributor would be a vendor or person that provides a 
real-time NYSE National market data product externally to a data 
recipient that is not its affiliate or wholly owned subsidiary, or 
to any system that an external data recipient uses, irrespective of 
the means of transmission or access. See id.
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     $10 per month professional per user fee and $1 per month 
non-professional per user fee, which would apply to each display device 
that has access to the NYSE National Integrated Feed; \13\
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    \13\ See id.
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     Non-display use \14\ fees:
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    \14\ Non-display use would mean accessing, processing, or 
consuming the NYSE National Integrated Feed, delivered directly or 
through a redistributor, for a purpose other than in support of a 
data recipient's display or further internal or external 
redistribution. See id. at 71026-27. As proposed, non-display use 
would include trading uses such as high frequency or algorithmic 
trading, as well as any trading in any asset class, automated order 
or quote generation and order pegging, price referencing for 
algorithmic trading or smart order routing, operations controls 
programs, investment analysis, order verification, surveillance 
programs, risk management, compliance, and portfolio management. See 
id. at 71027. One, two, or three categories of non-display use may 
apply to a data recipient. See id. Moreover, data recipients that 
receive the NYSE National Integrated Feed for non-display use would 
be required to complete and submit a non-display use declaration 
before they would be authorized to receive the feed. See id. In 
addition, if a data recipient's use of the NYSE National Integrated 
Feed data changes at any time after the data recipient submits a 
non-display use declaration, the data recipient must inform the 
Exchange of the change by completing and submitting an updated 
declaration reflecting the change of use at the time of the change. 
See id.

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[[Page 6983]]

    [cir] $5,000 per month category 1 non-display fee, which would 
apply when a data recipient's non-display use of real-time market data 
is on its own behalf;
    [cir] $5,000 per month category 2 non-display fee, which would 
apply when a data recipient's non-display use of real-time data is on 
behalf of its clients;
    [cir] $5,000 per platform per month category 3 non-display fee 
(capped at $15,000), which would apply when a data recipient's non-
display use of real-time market data is for the purpose of internally 
matching buy and sell orders within an organization, including matching 
customer orders on a data recipient's own behalf and on behalf of its 
clients; \15\
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    \15\ According to the Exchange, category 3 non-display fees 
would apply to non-display use in trading platforms, such as, but 
not limited to, alternative trading systems (``ATSs''), broker 
crossing networks, broker crossing systems not filed as ATSs, dark 
pools, multilateral trading facilities, exchanges, and systematic 
internalization systems. See id.
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     $1,000 per month non-display use declaration late fee, 
which would apply to any data recipient that is paying an access fee 
for the NYSE National Integrated Feed and that fails to complete and 
submit the annual non-display use declaration by December 31 of the 
year, and would apply beginning January 1 and for each month thereafter 
until the data recipient has completed and submitted the annual non-
display use declaration; \16\ and
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    \16\ See id.
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     $200 per month multiple data feed fee, which would apply 
to any data recipient that takes a data feed for a market data product 
in more than two locations, and would apply to each location, beyond 
the first two locations, where the data recipient receives a data 
feed.\17\
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    \17\ See id.
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    The access fees, professional user fees, and non-display fees would 
not apply to Federal agencies \18\ that subscribe to the products 
listed on the proposed fee schedule that includes such fees.\19\
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    \18\ The term ``Federal agencies'' as used in the proposed fee 
schedule would include all Federal agencies subject to the Federal 
Acquisition Regulation (``FAR''), as well as any Federal agency not 
subject to FAR that has promulgated its own procurement rules. See 
id. All Federal agencies that subscribe to the NYSE National real-
time proprietary market data products would continue to be required 
to execute the appropriate subscriber agreement, which includes, 
among other things, provisions against the redistribution of data. 
See id. at 70128.
    \19\ The proposed fee schedule lists NYSE National BBO, NYSE 
National Trades, and NYSE National Integrated Feed, and specifies 
that there would be no fees for NYSE National BBO and NYSE National 
Trades.
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    Finally, first-time subscribers \20\ would be eligible for a free 
trial by contacting the Exchange and would not be charged the access 
fee, the non-display fee, any applicable professional and non-
professional user fee, and the redistribution fee for one calendar 
month for each of the products listed on the proposed fee schedule.\21\ 
The free trial would be for the first full calendar month following the 
date a subscriber is approved to receive trial access to NYSE National 
market data.\22\ As proposed, the Exchange would provide the one-month 
free trial for a particular product to each subscriber only once.
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    \20\ A first-time subscriber would be any firm that has not 
previously subscribed to a particular product listed on the proposed 
fee schedule. See Notice, supra note 4, at 70128.
    \21\ See id.
    \22\ See id.
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III. Suspension of the Proposed Rule Change

    Pursuant to Section 19(b)(3)(C) of the Act,\23\ at any time within 
60 days of the date of filing of an immediately effective proposed rule 
change pursuant to Section 19(b)(1) of the Act,\24\ the Commission 
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') 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. As discussed below, the Commission believes a temporary 
suspension of the proposed rule change is necessary and appropriate to 
allow for additional analysis of the proposed rule change's consistency 
with the Act and the rules thereunder.
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    \23\ 15 U.S.C. 78s(b)(3)(C).
    \24\ 15 U.S.C. 78s(b)(1).
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    The Exchange proposes to adopt fees for the NYSE National 
Integrated Feed and provides various arguments to support the 
proposal's consistency with the Act. With respect to whether the 
proposed fees are reasonable, the Exchange states that exchanges in 
general function as platforms between consumers of market data and 
consumers of trading services, and that overall competition between 
exchanges will limit their overall profitability.\25\ In connection 
with these arguments, the Exchange also attaches a report by Marc 
Rysman,\26\ which finds that the introduction of the NYSE Integrated 
Feed in 2015 attracted more trading to NYSE by both subscribers and 
non-subscribers to the NYSE Integrated Feed,\27\ and concludes that 
overall competition between exchanges will limit their overall 
profitability (not margins on any particular side of the platform).\28\ 
According to the Exchange, given the conclusion in the Rysman Paper 
that exchanges are platforms for market data and transaction services, 
competition for order flow on the trading side of the platform acts to 
constrain the pricing of market data on the other side of the 
platform.\29\
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    \25\ See Notice, supra note 4, at 71030.
    \26\ See Marc Rysman, Stock Exchanges as Platforms for Data and 
Trading (December 2, 2019) (``Rysman Paper''), available at https://www.sec.gov/rules/sro/nysenat/2019/34-87797-ex3b.pdf.
    \27\ The Exchange also states that, since May 2018, when NYSE 
National relaunched trading, the Exchange has observed a direct 
correlation between the steady increase of subscribers to the NYSE 
National Integrated Feed and the increase in the Exchange's 
transaction market share volume over the same period. See Notice, 
supra note 4, at 71028. The Exchange states that, over an 18-month 
period since it commenced operations in May 2018, it has grown from 
0% to nearly 2% market share of consolidated trading volume, and the 
number of NYSE National Integrated Feed subscribers increased from 
12 to 56. See id. at 71028, 71031.
    \28\ See id. at 71030.
    \29\ See id. at 71031.
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    In addition, the Exchange argues that, due to the ready 
availability of substitutes and the low cost to move order flow to the 
substitute trading venues, an exchange setting market data fees that 
are not at competitive levels would expect to quickly lose business to 
alternative platforms with more attractive pricing.\30\ The Exchange 
argues that subscribing to the NYSE National Integrated Feed is 
optional, that its customers may choose to discontinue using the feed 
once the proposed fees are effective, and that any customers who choose 
to discontinue using the feed may choose to shift order flow away from 
the Exchange.\31\ Similarly, the Exchange argues that its market data 
pricing is constrained by the availability of numerous substitute 
platforms offering competing proprietary market data products and 
trading services.\32\
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    \30\ See id.
    \31\ See id. at 71029, 71031.
    \32\ See id. at 71031.
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    Moreover, the Exchange argues that its market data is sold in a 
competitive market and attaches a report by Charles M. Jones,\33\ which 
concludes that exchanges compete with each other in selling proprietary 
market data products, as well as with consolidated data feeds and with 
data provided by ATSs.\34\ The Exchange also more

[[Page 6984]]

specifically argues that NYSE National BBO (which includes best bid and 
offer information for NYSE National on a real-time basis), NYSE 
National Trades (which includes NYSE National last sale information on 
a real-time basis), and consolidated data feeds are substitutes for the 
NYSE National Integrated Feed and constrain the Exchange's ability to 
charge supracompetitive prices for the feed.\35\
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    \33\ See Charles M. Jones, Understanding the Market for U.S. 
Equity Market Data (August 31, 2018) (``Jones Paper''), available at 
https://www.sec.gov/rules/sro/nysenat/2019/34-87797-ex3a.pdf.
    \34\ See Notice, supra note 4, at 71029. The Jones Paper also 
states that the market for order flow and the market for market data 
are closely linked, and that an exchange needs to consider the 
negative impact on its order flow if it raises the price of market 
data. See id.
    \35\ See id. at 71032.
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    With respect to the other requirements under the Act, the Exchange 
argues that the proposed fees are equitably allocated and are not 
unfairly discriminatory because they would apply on an equal basis to 
all data recipients that choose to subscribe to the data in a manner 
that is subject to an applicable fee and because any differences among 
categories of users are justified.\36\ Specifically, the Exchange 
argues that the professional and non-professional user fee structure 
has long been used by the Exchange to reduce the price of data to non-
professional users and make it more broadly available, and that the 
non-display fee structure results in subscribers with greater uses of 
the data paying higher fees and subscribers with fewer uses of the data 
paying lower fees.\37\ For similar reasons, and because it claims 
numerous substitute market data products are available, the Exchange 
argues that the proposed fees do not impose an unnecessary or 
inappropriate burden on competition.\38\
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    \36\ See id. at 71034-36.
    \37\ See id.
    \38\ See id. at 71036.
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    With respect to the redistribution fee, the Exchange argues that 
the proposed fee is reasonable, equitable, and not unfairly 
discriminatory because vendors that would be charged the proposed fee 
would profit by re-transmitting the Exchange's market data to their 
customers.\39\ Similarly, with respect to category 3 non-display fees, 
which would be charged to each trading platform on which the customer 
uses non-display data (capped at three platforms), the Exchange argues 
that the proposal is reasonable, equitable, and not unfairly 
discriminatory because such use of data is directly in competition with 
the Exchange and the Exchange should be permitted to recoup some of its 
lost trading revenue by charging for the data that makes such 
competition possible.\40\
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    \39\ See id. at 71032.
    \40\ See id. at 71033, 71035-36.
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    Finally, with respect to the non-display use declaration late fee 
and the multiple data feed fee, the Exchange claims that these fees are 
reasonable, equitable, and not unfairly discriminatory because they 
would offset the Exchange's administrative burdens and costs associated 
with incorrect billing, late payments, and tracking data usage 
locations.\41\
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    \41\ See id. at 71033-36.
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    The Commission received two comment letters that express concerns 
regarding the proposed rule change. One commenter states that the 
Exchange does not provide sufficient information to establish that the 
proposed fees are consistent with the Act and Commission rules.\42\ 
This commenter states its belief that the Exchange's discussions 
regarding the reasonableness of the proposed fees (i.e., the comparison 
to similar fees charged by affiliated exchanges, the nature of the 
market for order flow, the availability of other data options, and the 
lack of a relation between the proposed fees and the costs of 
production) do not support a finding that the proposed fees are 
reasonable.\43\ This commenter also states that the Exchange does not 
provide any information about the costs of production for the NYSE 
National Integrated Feed, how much revenue the Exchange projects to 
generate from the proposed fees, how the proposed fees would impact 
subscribers, the competition between subscribers and non-subscribers, 
and how the proposed fees would be equitably allocated and would not 
impose any undue burden on competition.\44\ In addition, the commenter 
states that the Exchange does not provide any information about the 
latency difference between the NYSE National Integrated Feed and the 
consolidated data feed or other methods of getting comparable data.\45\ 
Moreover, this commenter questions the Exchange's assertion that market 
participants have the ability to choose whether or not to connect to 
the NYSE National Integrated Feed and believes instead that many market 
participants must buy the feed.\46\ The commenter also objects to what 
it describes as conflicting statements by the Exchange: That the NYSE 
National Integrated Feed is valuable to market participants, but that 
the feed is also not essential for market participants because it can 
be sufficiently replaced by substitutes.\47\
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    \42\ See Healthy Markets Letter, supra note 5.
    \43\ See id. at 5.
    \44\ See id. at 5-6.
    \45\ See id. at 6.
    \46\ See id. at 3-4. The commenter states that a market 
participant that does not purchase the NYSE National Integrated Feed 
would be at a competitive disadvantage to firms that have purchased 
it and questions how a non-purchasing broker could provide best 
execution to its customers. See id. at 4.
    \47\ See id. at 5.
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    Another commenter also states that the Exchange fails to provide 
the necessary information to demonstrate that the proposed fees meet 
the requirements of the Act.\48\ This commenter similarly argues that 
the NYSE National Integrated Feed is not subject to competitive forces 
because there are no available substitutes for the Exchange's depth-of-
book product.\49\ The commenter also claims that depth-of-book 
information is ``essential'' for many broker-dealers to provide 
customers with the best and most competitive order routing capabilities 
and execution quality, and that the Exchange is the exclusive purveyor 
of that information.\50\ With respect to competition by data vendors, 
the commenter argues that because any vendors must first purchase the 
data from the Exchange (subject to the Exchange's terms and pricing) 
before being able to resell such data, these vendors cannot offer a 
competing product.\51\
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    \48\ See SIFMA Letter, supra note 5, at 1.
    \49\ See id. at 2. Specifically, the commenter states that the 
Exchange cites alternatives to the NYSE National Integrated Feed 
that do not contain depth-of-book information, which the commenter 
claims are ``inferior products.'' See id.
    \50\ See id.
    \51\ See id.
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    In addition, this commenter disagrees that fees for the NYSE 
National Integrated Feed will be constrained by competition for order 
flow under the ``platform theory'' of competition.\52\ The commenter 
argues that the decision of where to trade occurs in milliseconds, 
while market data is purchased and charged monthly, independent of 
decisions on where to trade.\53\ The commenter also states that not all 
purchasers of market data execute trades solely on exchanges, which 
limits the theoretical ability to constrain market data prices by 
routing order flow to other exchanges.\54\ Moreover, the commenter 
cites a report by Lawrence R. Glosten to support its claim that 
exchanges have little incentive to reduce the prices for their own 
market data, because any theoretical increase in demand would be shared 
with other exchanges.\55\ The commenter further

[[Page 6985]]

states that the exchanges have yet to show an increase (or decrease) in 
trading volume after reducing (or increasing) a respective exchange's 
price of market data.\56\
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    \52\ See id.
    \53\ See id.
    \54\ See id.
    \55\ See id. (citing Lawrence R. Glosten, Economics of the Stock 
Exchange Business: Proprietary Market Data (January 2020), available 
at https://www.sec.gov/comments/4-729/4729-6678493-203560.pdf).
    \56\ See id.
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    Lastly, this commenter argues that the Exchange fails to provide 
supporting information for its claim that the proposed fees for the 
NYSE National Integrated Feed are based on the purported increased 
value of such data as measured by the Exchange's expanded market 
share.\57\ The commenter states that, during the same May 2018 to 
December 2019 time period that NYSE National's market share increased 
from 0% to 2.12%, the market shares of New York Stock Exchange LLC 
(``NYSE'') and NYSE Arca, Inc. decreased, but neither exchange 
responded by reducing the cost of its market data.\58\ The commenter 
thus asserts that the Exchange's proposal would ``significantly 
increase the overall cost of market data for NYSE exchanges when the 
overall market share for NYSE exchanges increased by only 0.34% from 
May 2018 to December 2019.'' \59\ The commenter believes that the 
Exchange has offered no evidence to show that competition for order 
flow constrains the price for market data and that the Exchange should 
provide additional information on the cost of its market data to 
support its proposal.\60\
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    \57\ See id.
    \58\ See id. The commenter also states that the market share of 
NYSE Chicago, Inc. decreased during this period. See id. Moreover, 
the commenter states that the market share of NYSE American LLC 
(``NYSE American'') increased during this period and that NYSE 
American similarly charges various fees for its market data 
products. See id.
    \59\ Id. at 3 (footnote omitted).
    \60\ See id.
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    When exchanges file their proposed rule changes with the 
Commission, including fee filings like the Exchange's present proposal, 
they are required to provide a statement supporting the proposal's 
basis under the Act and the rules and regulations thereunder applicable 
to the exchange.\61\ The instructions to Form 19b-4, on which exchanges 
file their proposed rule changes, specify that such statement ``should 
be sufficiently detailed and specific to support a finding that the 
proposed rule change is consistent with [those] requirements.'' \62\
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    \61\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change'').
    \62\ See id.
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    Section 6 of the Act, including Sections 6(b)(4), (5), and (8), 
require the rules of an exchange to: (1) Provide for the equitable 
allocation of reasonable fees among members, issuers, and other persons 
using the exchange's facilities; \63\ (2) perfect the mechanism of a 
free and open market and a national market system, protect investors 
and the public interest, and not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers; \64\ 
and (3) not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\65\
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    \63\ 15 U.S.C. 78f(b)(4).
    \64\ 15 U.S.C. 78f(b)(5).
    \65\ 15 U.S.C. 78f(b)(8).
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    In temporarily suspending the Exchange's proposed rule change, the 
Commission intends to further consider whether the proposal to 
establish fees for the NYSE National Integrated Feed is consistent with 
the statutory requirements applicable to a national securities exchange 
under the Act. In particular, the Commission will consider whether the 
proposed rule change satisfies the standards under the Act and the 
rules thereunder requiring, among other things, that an exchange's 
rules provide for the equitable allocation of reasonable fees among 
members, issuers, and other persons using its facilities; not permit 
unfair discrimination between customers, issuers, brokers or dealers; 
and do not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\66\
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    \66\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
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    Therefore, the Commission finds that it is appropriate in the 
public interest, for the protection of investors, and otherwise in 
furtherance of the purposes of the Act, to temporarily suspend the 
proposed rule change.\67\
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    \67\ For purposes of temporarily suspending the proposed rule 
change, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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IV. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Change

    In addition to temporarily suspending the proposal, the Commission 
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C) 
\68\ and 19(b)(2)(B) of the Act \69\ to determine whether the 
Exchange's proposed rule change should be approved or disapproved. 
Institution of proceedings does not indicate that the Commission has 
reached any conclusions with respect to any of the issues involved. 
Rather, the Commission seeks and encourages interested persons to 
provide additional comment on the proposed rule change to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule change.
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    \68\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily 
suspends a proposed rule change, Section 19(b)(3)(C) of the Act 
requires that the Commission institute proceedings under Section 
19(b)(2)(B) to determine whether a proposed rule change should be 
approved or disapproved.
    \69\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\70\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration:
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    \70\ Id. Section 19(b)(2)(B) of the Act also provides that 
proceedings to determine whether to disapprove a proposed rule 
change must be concluded within 180 days of the date of publication 
of notice of the filing of the proposed rule change. See id. The 
time for conclusion of the proceedings may be extended for up to 60 
days if the Commission finds good cause for such extension and 
publishes its reasons for so finding, or if the exchange consents to 
the longer period. See id.
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     Whether the Exchange has demonstrated how its proposed 
fees are consistent with Section 6(b)(4) of the Act, 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''; \71\
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    \71\ 15 U.S.C. 78f(b)(4).
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     Whether the Exchange has demonstrated how its proposed 
fees are consistent with Section 6(b)(5) of the Act, which requires, 
among other things, that the rules of a national securities exchange 
not be ``designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers''; \72\ and
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    \72\ 15 U.S.C. 78f(b)(5).
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     Whether the Exchange has demonstrated how its proposed 
fees are consistent with Section 6(b)(8) of the Act, which requires 
that the rules of a national securities exchange ``not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of [the Act].'' \73\
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    \73\ 15 U.S.C. 78f(b)(8).
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    As discussed in Section III above, the Exchange made various 
arguments in support of its proposal and the Commission received two 
comment letters that expressed concerns regarding the proposal, 
including in particular that the Exchange did not provide sufficient 
information to establish that the proposed fees are consistent with the 
Act and the rules thereunder.
    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the [SRO] 
that proposed the rule

[[Page 6986]]

change.'' \74\ The description of a proposed rule change, its purpose 
and operation, its effect, and a legal analysis of its consistency with 
applicable requirements must all be sufficiently detailed and specific 
to support an affirmative Commission finding,\75\ and any failure of an 
SRO to provide this information may result in the Commission not having 
a sufficient basis to make an affirmative finding that a proposed rule 
change is consistent with the Act and the applicable rules and 
regulations.\76\
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    \74\ 17 CFR 201.700(b)(3).
    \75\ See id.
    \76\ See id.
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    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposed fees are consistent with the Act, and 
specifically, with its requirements that exchange fees be reasonable 
and equitably allocated, not be unfairly discriminatory, and not impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.\77\
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    \77\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with 
respect to the concerns identified above as well as any other relevant 
concerns. Such comments should be submitted by February 27, 2020. 
Rebuttal comments should be submitted by March 12, 2020. Although there 
do not appear to be any issues relevant to approval or disapproval that 
would be facilitated by an oral presentation of views, data, and 
arguments, the Commission will consider, pursuant to Rule 19b-4, any 
request for an opportunity to make an oral presentation.\78\
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    \78\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by an SRO. See Securities 
Acts Amendments of 1975, Report of the Senate Committee on Banking, 
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th 
Cong., 1st Sess. 30 (1975).
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    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's statements in support of the proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule change.
    Interested persons are invited to submit written data, views, and 
arguments concerning the proposed rule change, 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 No. SR-NYSENAT-2019-31 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 No. SR-NYSENAT-2019-31. The 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 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. 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 publicly available. All submissions 
should refer to File No. SR-NYSENAT-2019-31 and should be submitted on 
or before February 27, 2020. Rebuttal comments should be submitted by 
March 12, 2020.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(3)(C) of the 
Act,\79\ that File No. SR-NYSENAT-2019-31, be and hereby is, 
temporarily suspended. In addition, the Commission is instituting 
proceedings to determine whether the proposed rule change should be 
approved or disapproved.
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    \79\ 15 U.S.C. 78s(b)(3)(C).
    \80\ 17 CFR 200.30-3(a)(57) and (58).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\80\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-02280 Filed 2-5-20; 8:45 am]
 BILLING CODE 8011-01-P


