[Federal Register Volume 87, Number 41 (Wednesday, March 2, 2022)]
[Notices]
[Pages 11787-11800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-04332]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94307; File No. S7-24-89]


Joint Industry Plan; Order Instituting Proceedings To Determine 
Whether To Approve or Disapprove the Fifty-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

February 24, 2022.

I. Introduction

    On November 5, 2021,\1\ certain participants in 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'') \2\ filed with the Securities 
and Exchange Commission (``SEC'' or ``Commission''), pursuant to 
Section 11A of the Securities Exchange Act of 1934 (``Act'') \3\ and 
Rule 608 of Regulation National Market System (``NMS'') thereunder,\4\ 
a proposal (the ``Proposed Amendment'') to amend the Nasdaq/UTP 
Plan.\5\ The Proposed Amendment was published for comment in the 
Federal Register on November 26, 2021.\6\
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    \1\ See Letter from Robert Books, Chair, UTP Operating 
Committee, to Vanessa Countryman, Secretary, Commission (Nov. 5, 
2021) (``Cover Letter'').
    \2\ The Plan governs the collection, processing, and 
dissemination on a consolidated basis of quotation information and 
transaction reports in Eligible Securities for its Participants. 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 (Apr. 19, 
2007), 72 FR 20891 (Apr. 26, 2007).
    \3\ 15 U.S.C 78k-1.
    \4\ 17 CFR 242.608.
    \5\ The Proposed Amendment was approved and executed by more 
than the Plan's required two-thirds of the self-regulatory 
organizations (``SROs'') that are participants of the UTP Plan. The 
participants that approved and executed the amendment (the 
``Participants'') are: Cboe BYX Exchange, Inc., Cboe BZX Exchange, 
Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe 
Exchange, Inc., Nasdaq ISE, LLC, Nasdaq PHLX, Inc., The Nasdaq Stock 
Market LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE 
Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc.. The other 
SROs that are participants in the UTP Plan are: Financial Industry 
Regulatory Authority, Inc., The Investors' Exchange LLC, Long-Term 
Stock Exchange, Inc., MEMX LLC, MIAX PEARL, LLC, and Nasdaq BX, Inc.
    \6\ See Securities Exchange Act Release No. 93618 (Nov. 19, 
2021), 86 FR 67562 (Nov. 26, 2021) (``Notice''). Comments received 
in response to the Notice are available at https://www.sec.gov/comments/s7-24-89/s72489.shtml.
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    This order institutes proceedings, under Rule 608(b)(2)(i) of 
Regulation NMS,\7\ to determine whether to approve or disapprove the 
Proposed Amendment or to approve the Proposed Amendment with any 
changes or subject to any conditions the Commission deems necessary or 
appropriate after considering public comment.
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    \7\ 17 CFR 242.608(b)(2)(i).
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II. Summary of the Proposed Amendment 8
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    \8\ The full text of the Proposed Amendment appears as 
Attachment A to the Notice. See Notice, supra note 6, 86 FR 67566-
68.
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    Under the Proposed Amendment, the Participants propose to amend the 
Plan to adopt fees for the receipt of the expanded content of 
consolidated market data pursuant to the Commission's Market Data 
Infrastructure Rule (``MDI Rule'').\9\ The Participants have submitted 
a separate amendment to implement the non-fee-related aspects of the 
MDI Rule.\10\
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    \9\ See Securities Exchange Act Release No. 90610, 86 FR 18596 
(April 9, 2021) (File No. S7-03-20) (``MDI Rule Release'').
    \10\ See Securities Exchange Act Release No. 93620 (Nov. 19, 
2021), 86 FR 67541 (Nov. 26, 2021).
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    The Participants propose a fee structure for the following three 
categories of consolidated equity market data, which collectively 
constitute the amended definition of core data, as that term is defined 
in amended Rule 600(b)(21) of Regulation NMS: \11\
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    \11\ 17 CFR 242.600(b)(26).
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    (1) Level 1 Service, which would include Top of Book Quotations, 
Last Sale Price Information, and odd-lot

[[Page 11788]]

information (as defined in amended Rule 600(b)(59)). Plan fees to 
subscribers currently are for Top of Book Quotations and Last Sale 
Price Information, as well as what is now defined as administrative 
data (as defined in amended Rule 600(b)(2)), regulatory data (as 
defined in amended Rule 600(b)(78)), and self-regulatory organization-
specific program data (as defined in amended Rule 600(b)(85)). The 
Participants propose that the fees for Level 1 Service would remain 
unchanged and that Level 1 Service would continue to include all 
information that subscribers currently receive and would add odd-lot 
information;
    (2) Depth of book data (as defined in amended Rule 600(b)(26)); and
    (3) Auction information (as defined in amended Rule 600(b)(5)).\12\
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    \12\ The Participants state that they propose to price subsets 
of data that constitute core data separately so that data subscriber 
users have flexibility in how much consolidated market data content 
they wish to purchase. For example, the Participants state that they 
understand that certain data subscribers may not wish to add depth-
of-book data or auction information, or may want to add only depth-
of-book information, but not auction information. Accordingly, 
Participants are proposing to price subsets of data to provide 
flexibility to data subscribers. However, the Participants state 
that they expect that competing consolidators would purchase all 
core data.
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Professional and Nonprofessional Fee Structure

    For each of the three categories of data described above, the 
Participants propose a Professional Subscriber Charge and a 
Nonprofessional Subscriber Charge.
    With respect to Level 1 Service, the Participants do not propose to 
change the Professional Subscriber and Nonprofessional Subscriber fees 
currently set forth in the UTP Plan. Access to odd-lot information 
would be made available to Level 1 Service Professional and 
Nonprofessional Subscribers at no additional charge.
    With respect to depth-of-book data, Professional Subscribers would 
pay $99.00 per device per month, and Nonprofessional Subscribers would 
pay $4.00 per subscriber per device per month. The Participants do not 
propose at this time to offer per-quote packet charges or enterprise 
rates for the use of depth-of-book data by either Professional 
Subscribers or Nonprofessional Subscribers.
    Finally, with respect to auction information, both Professional 
Subscribers and Nonprofessional Subscribers would pay $10.00 per device 
per month.

Non-Display Use Fees

    The Participants propose Non-Display Use Fees relating to the three 
categories of data described above: (1) Level 1 Service; (2) depth-of-
book data; and (3) auction information.
    With respect to Level 1 Service, the Participants do not propose to 
change the Non-Display Use fees currently set forth in the UTP Plan. 
Access to odd-lot information would be made available to Level 1 
Service subscribers at no additional charge.
    With respect to non-display use of depth-of-book data, subscribers 
would pay Non-Display Use Fees of $12,477.00 per month for each 
category of Non-Display Use.
    With respect to non-display auction information, subscribers would 
pay Non-Display Use fees of $1,248.00 per month for each category of 
Non-Display Use.

Access Fees

    Finally, in addition to the charges described above, the 
Participants propose to charge Access Fees to all subscribers for the 
use of the three categories of data: (1) Level 1 Service; (2) depth-of-
book data; and (3) auction information.
    With respect to Level 1 Service, the Participants do not propose to 
change the Access Fees currently set forth in the UTP Plan. Access to 
odd-lot information would be made available to Level 1 Service 
subscribers at no additional charge.
    With respect to depth-of-book data, subscribers would pay a monthly 
Access Fee of $9,850.00.
    With respect to auction information, subscribers would pay a 
monthly Access Fee of $985.00 per Network.

Clarifications Related to Expanded Content

    The Participants also propose to add clarifying language to the 
fees for UTP services regarding the applicability of various fees to 
the expanded market data content required by the MDI Rule.
    First, the Participants propose to clarify that the Per Query Fee 
will not apply to the expanded content, and will only be available for 
the receipt and use of Level 1 Service. The Participants state that, 
under the current Price List, the Per Query Fee serves as an 
alternative fee schedule to the normally applied Professional and 
Nonprofessional Subscriber Charges, and, further, that the proposed 
changes are designed to clarify that Per Query Fee is only available 
with respect to the use of Level 1 Service, and that the fees for the 
use of depth-of-book data and auction information must be determined 
pursuant to the Professional and Nonprofessional fees described above.
    Second, the Participants propose to clarify that Level 1 Service 
would include Top of Book Quotation Information, Last Sale Price 
Information, odd-lot information, administrative data, regulatory data, 
and self-regulatory organization program data. The Participants state 
that this proposed amendment would use terms defined in amended Rule 
600(b) to reflect both current data made available to data subscribers 
and the additional odd-lot information that would be included at no 
additional charge.
    Third, the Participants propose to clarify that the existing 
Redistribution Fees would apply to all three categories of core data 
(i.e., Level 1, depth-of-book, and auction information), including any 
subset thereof. According to the Participants, Redistribution Fees are 
currently charged to any entity that makes last sale information or 
quotation information available to any other entity or to any person 
other than its employees, irrespective of the means of transmission or 
access. The Participants propose to amend this description to make it 
applicable to core data, as that term is defined in amended Rule 
600(b)(21). The Participants do not propose to change the amount of the 
Redistribution Fees themselves.
    Fourth, the Participants propose that the existing Redistribution 
Fees would be charged to competing consolidators. The Participants 
argue (1) that the comparison the Commission made in the MDI Rule 
Release between self-aggregators (which would not pay Redistribution 
Fees) and competing consolidators is not appropriate in determining 
whether a redistribution fee is not unreasonably discriminatory; and 
(2) that the Participants do not believe that the Commission's 
comparison is consistent with the current long-standing practice that 
redistribution fees are charged to any entity that distributes data 
externally.\13\ The Participants state

[[Page 11789]]

that a self-aggregator, by definition, would not be distributing data 
externally and therefore would not be subject to such fees, which, 
according to the Participants, is consistent with current practice that 
a subscriber to consolidated data that only uses data for internal use 
is not charged a Redistribution Fee.
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    \13\ The Participants state that the current exclusive 
securities information processor (``SIP'') is not charged a 
Redistribution Fee. The Participants state, however, that unlike 
competing consolidators, the processor has been retained by the UTP 
Plan to serve as an exclusive SIP, is subject to oversight by both 
the UTP Plan and the Commission, and neither pays for the data nor 
engages with data subscriber customers. The Participants state that, 
by contrast, under the competing consolidator model, the UTP Plan 
would have no role in either oversight of or determining which 
entities choose to be a competing consolidator, a competing 
consolidator would need to purchase consolidated market data just as 
any other vendor would, and competing consolidators would be 
responsible for competing for data subscriber clients. Accordingly, 
the Participants argue that competing consolidators would be more 
akin to vendors than the current exclusive SIPs. The Participants 
state that if any entity that is currently an exclusive SIP chooses 
to register as a competing consolidator, such entity would be 
subject to the Redistribution Fee.
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    The Participants state that the more appropriate comparison would 
be between competing consolidators and downstream vendors, both of 
which would be selling consolidated market data directly to market data 
subscribers. The Participants state that vendors are and still would be 
subject to Redistribution Fees when redistributing data to market data 
subscribers, and that it would be unreasonably discriminatory for 
competing consolidators--which would be competing with downstream 
market data vendors for the same data subscriber customers--to not be 
charged a Redistribution Fee for exactly the same activity. The 
Participants argue that, consequently, it would be unreasonably 
discriminatory and would impose a burden on competition to not charge 
competing consolidators the Redistribution Fee.\14\
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    \14\ The Participants argue that it would be more appropriate to 
compare competing consolidators and self-aggregators with respect to 
the fees charged for receipt and use of market data from the 
Participants and to address the fees for the usage of consolidated 
market data based on their actual usage, which, the Participants 
argue, is consistent with the statutory requirements of the Act that 
the data be provided on terms that are not unreasonably 
discriminatory. The Participants state that, for instance, 
Participants have proposed to charge a data access fee to competing 
consolidators that would be the same fee to self-aggregators.
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    Third, the Participants state that the UTP Plan fee schedule 
currently permits the redistribution of UTP Level 1 Service on a 
delayed basis for $250.00 per month. The Participants propose adding a 
statement that depth-of-book data and auction information may not be 
redistributed on a delayed basis.
    Finally, the Participants propose to make non-substantive changes 
to language in the fee schedules to take into account the expanded 
content. For example, the Participants propose updating various fee 
descriptions to either add or remove a reference to UTP Level 1 
Service. Additionally, the Participants state that, while FINRA OTC 
Data will not be provided to competing consolidators, it is still being 
provided to the UTP Processor for inclusion in the consolidated market 
data made available by the UTP Processor. Accordingly, the Participants 
propose adding clarifying language to make clear that UTP Level 1 
Service obtained from the Processor will include FINRA OTC Data but 
will not include odd-lot information.

III. Summary of Comments

    The Commission has received 16 comment letters on the Proposed 
Amendment.\15\ Fourteen commenters object to the Proposed 
Amendment,\16\ and two commenters support the Proposed Amendment.\17\
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    \15\ See Letters to Vanessa Countryman, Secretary, Commission 
from Hope M. Jarkowski, General Counsel, NYSE Group, Inc. (Jan. 22, 
2022) (``NYSE Letter''); Christopher Solgan, Senior Counsel, MIAX 
Exchange Group (Jan.12, 2022) (``MIAX Letter''); Emil Framnes and 
Simon Emrich, Norges Bank Investment Management (Jan. 5, 2022) 
(``NBIM Letter''); James Angel, Ph.D., CFP, CFA, Associate Professor 
of Finance, Georgetown University (Dec. 21, 2021) (``Angel 
Letter''); Luc Burgun, President and CEO, NovaSparks S.A.S. (Dec. 
17, 2021) (``NovaSparks Letter''); Joe Wald, Managing Director, Co-
Head of Electronic Trading, BMO Capital Markets Group, BMO Capital 
Markets and Ray Ross, Managing Director, Co-Head of Electronic 
Trading, BMO Capital Markets Group (Dec. 17, 2021) (``BMO Letter''); 
Erika Moore, Vice President and Corporate Secretary, Nasdaq Stock 
Market LLC (Dec. 17, 2021) (``Nasdaq Letter''); John Ramsay, Chief 
Market Policy Officer, Investors Exchange LLC (Dec. 17, 2021) (``IEX 
Letter''); Ellen Greene, Managing Director, Equity & Options Market 
Structure, Securities Industry and Financial Markets Association and 
William C. Thum, Managing Director and Associate General Counsel, 
Asset Management Group, Securities Industry and Financial Markets 
Association (Dec. 17, 2021) (``SIFMA Letter''); Marcia E. Asquith, 
Executive Vice President, Board and External Relations, Financial 
Industry Regulatory Authority, Inc. (Dec. 17, 2021) (``FINRA 
Letter''); Patrick Flannery, Chief Executive Officer, MayStreet 
(Dec. 17, 2021) (``MayStreet Letter''); Hubert De Jesus, Managing 
Director, Global Head of Market Structure and Electronic Trading, 
BlackRock and Samantha DeZur, Director, Global Public Policy, 
BlackRock (Dec. 16, 2021) (``BlackRock Letter''); Jonathan Hill, 
CEO, Cutler Group, LP Anand Prakash, CTO, Cutler Group, LP Nader 
Sharabati, CFO, Cutler Group, LP and Doug Patterson, CCO, Cutler 
Group, LP (Dec. 16, 2021) (``Cutler Letter''); Quinton Pike, CEO, 
Polygon.io, Inc. (Nov. 30, 2021) (``Polygon.io Letter''); Allison 
Bishop, President, Proof Services LLC (Nov. 22, 2021) (``Proof 
Letter''); Adrian Griffiths, Head of Market Structure, MEMX LLC, 
(Nov. 8, 2021) (``MEMX Letter'').
    \16\ See MIAX Letter, supra note 15; NBIM Letter, supra note 15; 
Angel Letter, supra note 15; NovaSparks Letter, supra note 15; BMO 
Capital Letter, supra note 15; IEX Letter, supra note 15; SIFMA 
Letter, supra note 15; FINRA Letter, supra note 15; MayStreet 
Letter, supra note 15; BlackRock Letter, supra note 15; Cutler 
Letter, supra note 15; Polygon.io Letter, supra note 15; Proof 
Letter, supra note 15; MEMX Letter, supra note 15.
    \17\ See Nasdaq Letter, supra note 15; NYSE Letter, supra note 
15.
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A. Comments Regarding the Methodology Used To Justify the Proposed Fees

    Some commenters oppose the Proposed Amendment, arguing that the 
proposed fees are based on a flawed methodology that, inconsistent with 
the MDI Rule Release, fails to provide a cost-based justification.\18\ 
These commenters state that the proposal should bear a reasonable 
relationship to the cost of producing the market data, which, they 
argue, is the primary basis the Commission has identified for 
justifying the prices for core data fees.\19\
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    \18\ See MIAX Letter, supra note 15, at 3; IEX Letter, supra 
note 15, at 2-3. See also BMO Letter, supra note 15, at 2-3; SIFMA 
Letter, supra note 15, at 4-5 (noting that the fees charged by 
monopolistic providers, such as exclusive SIPs, to be tied to some 
type of cost-based standard in order to preclude excessive profits 
if fees are too high or underfunding or subsidization if fees are 
too low); MayStreet Letter, supra note 15, at 6; BlackRock Letter, 
supra note 15, at 2; Proof Letter, supra note 15, at 2, 3; MEMX 
Letter, supra note 15, at 18.
    \19\ See IEX Letter, supra note 15, at 1, 2-3 (stating that the 
proposal fails to establish that the fees for the data content 
underlying consolidated market data meet the statutory standards of 
being fair, reasonable, and not unreasonably discriminatory); MIAX 
Letter, supra note 15, at 3. See also BMO Letter, supra note 15, at 
2-3; SIFMA Letter, supra note 15, at 4-5 (noting that the fees 
charged by monopolistic providers, such as exclusive SIPs, need to 
be tied to some type of cost-based standard in order to preclude 
excessive profits if fees are too high or underfunding or 
subsidization if fees are too low); MayStreet Letter, supra note 15, 
at 6; BlackRock Letter, supra note 15, at 2; Proof Letter, supra 
note 15, at 2, 3; MEMX Letter, supra note 15, at 18.
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    Some commenters also state that the methodology used has resulted 
in proposed fees that are unreasonably high.\20\ In making this 
argument, some commenters object to using the current prices for the 
exchanges' proprietary data products as the basis for calculating the 
proposed core data fees,\21\ stating that such a method is inconsistent 
with the MDI Rule's goal of expanding access to consolidated data \22\ 
and with statements in the MDI Rule Release that the proposed fees 
should bear a reasonable relationship to the cost of producing the 
data.\23\
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    \20\ See MIAX Letter, supra note 15, at 3; MayStreet Letter, 
supra note 15, at 6; BlackRock Letter, supra note 15, at 2, 4-5; IEX 
Letter, supra note 15, at 4; Proof Letter, supra note 15, at 3; MEMX 
Letter, supra note 15, at 8, 11-12.
    \21\ See MIAX Letter, supra note 15, at 4; SIFMA Letter, supra 
note 15, at 4, 5; IEX Letter, supra note 15, at 4.
    \22\ See MIAX Letter, supra note 15, at 4.
    \23\ See MIAX Letter, supra note 15, at 3; SIFMA Letter, supra 
note 15, at 4, 5; IEX Letter, supra note 15, at 1, 2-3.
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    Some commenters also state that they disagree with the 
Participants' views in the proposal that a cost-based justification is 
not required because the Act does not require a showing of costs and 
that cost analysis has not been provided in past equity market data 
plan proposals.\24\ These commenters state that the Commission has 
stated that a reasonable relation to cost is a

[[Page 11790]]

primary basis for justifying core data fees.\25\ One commenter states 
that specific information, including quantitative information, should 
be provided to support the Participants' claims that the proposed fee 
is fair and reasonable because it will permit the recovery of SRO costs 
or will not result in excessive pricing or profits.\26\ Additionally, 
some commenters state that they disagree with the Participants' 
statement in the proposal that the Plan's Operating Committee ``has no 
knowledge of any costs associated with consolidated market data,'' 
stating that Participants know how much it costs to collect and 
disseminate market data because they already perform this function, 
including in connection with proprietary feeds.\27\
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    \24\ See MIAX Letter, supra note 15, at 3; SIFMA Letter, supra 
note 15, at 5;
    \25\ See IEX Letter, supra note 15, at 1, 2-3; SIFMA Letter, 
supra note 15, at 5; MIAX Letter, supra note 15, at 3 (noting that 
the vast majority of such equity market data plan fees were adopted 
prior to issuance of the Commission's staff fee guidance, and 
multiple SROs have more recently included cost based analysis when 
proposing fees for a market data product).
    \26\ See MIAX Letter, supra note 15, at 3.
    \27\ See SIFMA Letter, supra note 15, at 5; MIAX Letter, supra 
note 15, at 3; MayStreet Letter, supra note 15, at 6.
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    One commenter states that a demonstration of costs is not required 
because neither the Exchange Act nor Commission rules requires that 
market data fees to be supported by a showing of costs.\28\ The 
commenter stated that the Commission's standard for evaluating 
consolidated market data fees has not required a showing of the 
relationship between the proposed fees and the cost of producing the 
data, as illustrated by past equity market data plan proposals for 
consolidated market data fees which the commenter states were not 
justified on the basis of cost.\29\
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    \28\ See NYSE Letter, supra note 15, at 3 (stating that the 
legislative history of the 1975 amendments to the Exchange Act, and 
particularly Section 11A, reflects that Congress's principal concern 
was promoting competition between exchanges, not regulating market 
data pricing; and that economic studies have demonstrated that 
separating out the costs of producing market data from the other 
costs of operating an SRO is an impossible task that would enmesh 
the Commission in a continuous ratemaking process that would produce 
arbitrary results).
    \29\ See id. at 3-4.
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    This commenter argues that it is not clear how the Plan could 
support the fee proposals based on costs because the Operating 
Committee plays no role in the creation or dissemination of core data 
under amended Rule 603(b), and thus has no information about how each 
exchange would generate core data under that rule.\30\ The commenter 
states that, in its view, it remains impossible to separate the costs 
of producing market data from other costs of operating an exchange.\31\
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    \30\ See id. at 4.
    \31\ See id.
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    Another commenter opposes the use of cost as a basis for setting 
the proposed fees.\32\ This commenter dismisses other commenters' 
suggestions that fees should be based on costs, rather than value, 
because, according to the commenter, the Commission has not offered 
guidance with respect to such a cost-based ratemaking system,\33\ and 
because any cost allocation between joint products would therefore be 
unworkable, inherently arbitrary, and inconsistent with the 
Congressional mandate that the Commission rely on competition whenever 
possible in meeting its regulatory responsibilities.\34\ The commenter 
states that the proposed fees have been tested by competition and that 
``Commission staff have indicated that they would look at factors 
beyond the competitive environment, such as cost, only if a `proposal 
lacks persuasive evidence that the proposed fee is constrained by 
significant competitive forces.' '' \35\
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    \32\ See Nasdaq Letter, supra note 15, at 3.
    \33\ See id.
    \34\ See id.
    \35\ See id. at 5-6 (citing to ``Staff Guidance on SRO Rule 
Filings Relating to Fees'' (May 19, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees). The Staff 
Guidance on SRO Rule Filings Relating to Fees in fact states: ``If a 
Fee Filing proposal lacks persuasive evidence that the proposed fee 
is constrained by significant competitive forces, the SRO must 
provide a substantial basis, other than competitive forces, 
demonstrating that the fee is consistent with the Exchange Act. One 
such basis may be the production of related revenue and cost data, 
as discussed further below.'' See ``Staff Guidance on SRO Rule 
Filings Relating to Fees'' (May 19, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
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    Some commenters oppose the use of the value-based methodology used 
to determine the fees under the Proposed Amendment.\36\ One commenter 
states that if the objective is to have the SIPs provide a service that 
is more affordable and accessible than the data products offered by 
individual exchanges, then ``value to subscribers'' should not be sole 
determinant of SIP fees because the current fees for exchange 
proprietary data products are not a reasonable gauge of the value of 
core data offered under the Plan.\37\ One commenter states that basing 
the proposed pricing of the Plans' fees on the proprietary feeds 
pricing does not seem appropriate because exchange proprietary data 
feeds are complements to consolidated market data feeds for latency-
sensitive market participants; \38\ less-latency sensitive market 
participants find consolidated market data more useful than the 
propriety data feeds; \39\ and latency-sensitive market participants 
will not view consolidated market data under the Plans to be a credible 
substitute for the proprietary data feeds even after the MDI Rule 
reforms are implemented.\40\ Another commenter states that basing the 
proposed fees on value instead of cost does not work because the 
mandate under the Exchange Act is to price SIP data at levels that 
maximize its availability.\41\
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    \36\ See Proof Letter, supra note 15; NBIM Letter, supra note 
15; MayStreet Letter, supra note 15.
    \37\ See Proof Letter, supra note 15, at 3.
    \38\ See NBIM Letter, supra note 15, at 1-2.
    \39\ See id. at 2.
    \40\ See id. at 2.
    \41\ See MayStreet Letter, supra note 15, at 6.
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    Two commenters argue that the proposed fees are fair and reasonable 
and not unreasonably discriminatory because they are reasonably related 
to the value that subscribers gain from the data, and achieve the 
Commission's objective in Regulation NMS that prices for consolidated 
market data be set by market forces.\42\ One commenter argues that the 
pricing for exchange proprietary data feeds, including the depth-of-
book data, top-of-book data, and auction information on which the 
proposed fees are based, is constrained by competitive forces, in that 
they have a history of being constrained by direct competition and by 
platform competition among the exchanges.\43\ This commenter states 
that the pricing for exchange proprietary data feeds is constrained by 
the highly competitive markets for exchange trading and exchange market 
data.\44\ It states that the proposed fees meet the Commission's 
objective for market forces to determine the overall level of fees.\45\
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    \42\ See NYSE Letter, supra note 15, at 5; Nasdaq Letter, supra 
note 15, at 5.
    \43\ See NYSE Letter, supra note 15, at 5.
    \44\ See id. The commenter further argues that exchanges compete 
against each other as platforms, and that, as such, no exchange can 
raise its prices to supracompetitive levels on one side of the 
platform, such as market data, without losing sales on the other, 
such as trading volume. The commenter argues that given this inter-
exchange platform competition, the exchanges' filed prices for 
depth-of-book data and auction information are constrained by market 
forces. See id. at 6-7.
    \45\ See id. at 5. The commenter stated that by applying that 
established ratio to the current prices for consolidated top-of-book 
data, the fee proposals thus reflect the market forces that drive 
the pricing of depth-of-book information in relation to top-of book 
information and the value that the data has to market participants. 
Id. The ratio between such filed proprietary depth-of-book fees and 
proprietary top-of-book data therefore provides the Commission with 
a benchmark for evaluating the proposed fees, which NYSE argues are 
fair, reasonable, and not unfairly discriminatory because they are 
based on this ratio, which is reflective of market forces. See id. 
at 7.

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[[Page 11791]]

    This commenter also argues that basing fees on the value of the 
underlying data is the fairest and most economically efficient method 
for setting fees because setting fees according to the value of the 
data leads to optimal consumption: Fees that are too low do not allow 
for producers to remain profitable, while fees that are too high lead 
to underutilization.\46\ The commenter states that NMS Plans have 
historically used value as a fair and efficient basis for setting 
fees.\47\ The commenter argues that the best basis for determining the 
value of core data are the fees currently charged for proprietary data 
fees, which, according to the commenter, have been ``tested by 
competitive forces'' and therefore provide a good starting point for 
estimating the value of new core data and for setting fees at efficient 
levels.\48\ The commenter argues that the value-based methodology 
provides a substantial basis for showing that current proprietary 
fees--and, by extension, the proposed fees for new core data--are 
equitable, fair, reasonable, and not unreasonably discriminatory.\49\ 
The commenter states that exchanges cannot overprice the total prices 
of their services without potentially losing order flow and damaging 
its overall ability to compete.\50\According to this commenter, 
exchanges that produce more valuable market data generally charge 
higher fees, and those with less valuable data charge lower fees,\51\ 
so fees vary according to the underlying value of the data, as measured 
by the liquidity available at the exchange.\52\
---------------------------------------------------------------------------

    \46\ See Nasdaq Letter, supra note 15, at 2.
    \47\ See id.
    \48\ See id. at 2, 6.
    \49\ See id. at 6.
    \50\ See id. at 4.
    \51\ See id.
    \52\ See id.
---------------------------------------------------------------------------

    The commenter argues that the existence of significant competition 
provides a substantial basis for finding that the terms of an 
exchange's fee proposal are equitable, fair, reasonable, and not 
unreasonably discriminatory.\53\ The commenter states that Commission 
staff has indicated that they would look at factors beyond the 
competitive environment, such as cost, only if a proposal lacks 
persuasive evidence that the proposed fee is constrained by significant 
competitive forces.\54\ The commenter argues that, because they are 
tested by market competition, proprietary data fees provide good and 
indicative starting point for estimating the value of new core data and 
setting fees at their efficient level.\55\ This, according to the 
commenter, provides a substantial basis for showing that current 
proprietary fees--and, by extension, the proposed fees for new core 
data--are equitable, fair, reasonable, and not unreasonably 
discriminatory.\56\
---------------------------------------------------------------------------

    \53\ See id. at 5-6.
    \54\ See id. (citing to ``Staff Guidance on SRO Rule Filings 
Relating to Fees'' (May 19, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees).
    \55\ See id. at 6.
    \56\ See id.
---------------------------------------------------------------------------

    Some commenters object to the way in which the Participants used 
the fees of proprietary depth-of-book products to calculate a ratio (or 
multiplier) between those fees and the fees for proprietary top-of-book 
products and then multiplied existing SIP core top-of-book data fees by 
that multiplier to calculate the proposed depth-of-book fees for 
expanded core data under the MDI Rule.\57\ One commenter argues that 
the approach adopted is arbitrary because it presupposes that the fees 
exchanges charge for their proprietary market data are fair and 
reasonable.\58\ One commenter states that calculating the proposed fee 
levels in this manner--based on prices charged by the exchanges for 
their existing market data product--is not the right starting point for 
setting the proposed fees and inconsistent with the MDI Rule's goal of 
expanding access to consolidated data.\59\ One commenter states that 
that the exchanges' ``platform competition'' argument that competition 
for order flow constrains pricing for market data does not demonstrate 
that the fees are reasonable and mentions studies it has submitted to 
the Commission in the past that bolster their argument.\60\
---------------------------------------------------------------------------

    \57\ See MIAX Letter, supra note 15, at 4; SIFMA Letter, supra 
note 15, at 5.
    \58\ See SIFMA Letter, supra note 15, at 5.
    \59\ See MIAX Letter, supra note 15, at 4.
    \60\ See SIFMA Letter, supra note 15, at 5-6.
---------------------------------------------------------------------------

    Some commenters argue that the methodology used to calculate the 
fees does not account for the transfer of costs from the SROs to market 
participants under the decentralized consolidation model.\61\ One 
commenter states that, while the proposal leaves fees for existing core 
data elements unchanged, the profits and operating costs of the 
exclusive securities information processors should be deducted from 
these fees to reflect the new role of competing consolidators.\62\
---------------------------------------------------------------------------

    \61\ See MEMX Letter, supra note 15, at 18; MIAX Letter, supra 
note 15, at 2; BlackRock Letter, supra note 15, at 2-3; Polygon.io 
Letter, supra note 15, at 1. On the other hand, one commenter stated 
that with respect to comments that the proposal should ``back out'' 
fees for the current Processors from the proposed fee structure, the 
MDI Rule requires the current Processors to continue operating for 
at least several more years, and that therefore, there are no 
savings to back out of any proposed fee structure at this time. See 
NYSE Letter, supra note 15, at 7.
    \62\ See BlackRock Letter, supra note 15, at 2, 3-4.
---------------------------------------------------------------------------

B. Comments Regarding the Proposed Fees

1. General Comments
    Some commenters state the methodology used to calculate the 
proposed fees resulted in fees that are too high.\63\ Some commenters 
state that the proposed fees have not been shown to be fair and 
reasonable and not unreasonably discriminatory.\64\ One commenter 
states that the proposed fees for the content underlying consolidated 
market data are too high whether a cost-basis or value-basis were used 
as a justification by the Participants.\65\ This commenter states that 
the cost of SIP data is too high relative to top-of-book proprietary 
feeds, and that market participants are currently choosing the less 
expensive option of top-of-book proprietary feeds,\66\ which, according 
to the commenter, indicates that Level 1 consolidated market data is 
not priced in accordance with its value to the market.\67\ Another 
commenter challenges the methodology and compares the proposed fees to 
fees currently charged for proprietary data fees and the proposed user 
and access fees for consolidated market data under the proposal to the 
prices that a firm would pay to obtain that data from

[[Page 11792]]

proprietary data products that offer similar information.\68\ This 
commenter believes that at any given price a subscriber would be better 
off subscribing to the proprietary data fees listed instead of 
purchasing consolidated market data from the SIPs given the additional 
information included on those feeds.\69\ The commenter states that, 
because the proposed fees are generally more expensive than current 
proprietary data offering, the Proposed Amendments clearly fail the 
``fair and reasonable'' test required by the Exchange Act.\70\
---------------------------------------------------------------------------

    \63\ See BlackRock Letter, supra note 15, at 1-5; FINRA Letter, 
supra note 15, at 7; MIAX Letter, supra note 15, at 2; Angel Letter, 
supra note 15, at 9; NovaSparks Letter, supra note 15, at 1; BMO 
Letter, supra note 15, at 2-3; IEX Letter, supra note 15, at 1, 5; 
SIFMA Letter, supra note 15, at 1, 4-5; IEX Letter, supra note 15, 
at 4; MEMX Letter, supra note 15, at 11-12.
    \64\ See IEX Letter, supra note 15, 1, at 2-3; MIAX Letter, 
supra note 15, at 2; MEMX Letter, supra note 15, at 22; SIFMA 
Letter, supra note 15, at 4-5; BMO Letter, supra note 15, at 3; 
FINRA Letter, supra note 15, at 7; MayStreet Letter, supra note 15, 
at 4; BlackRock Letter, supra note 15, at 2, 6; Polygon.io Letter, 
supra note 15, at 2.
    \65\ See MayStreet Letter, supra note 15, at 6. This commenter 
states that the cost of SIP data is too high relative to top-of-book 
proprietary feeds, and that market participants are currently 
choosing the less expensive option of top-of-book proprietary feeds, 
which, according to the commenter, indicates that Level 1 
consolidated market data is not priced in accordance with its value 
to the market. See id.
    \66\ See MayStreet Letter, supra note 15, at 6-7.
    \67\ See id. at 7. The commenter states that Level 1 data should 
be priced so as to make the content available at a price that is 
competitive to proprietary top-of-book offerings, and that the fact 
that the price levels are unchanged from the current SIP prices 
reflects a failure by the Participants to accurately assess the 
value of Level 1 data. The commenter states that the value of the 
depth-of-book data should focus on greater access and availability 
of this kind of data, and adds that the Operating Committee should 
consider what price point would increase availability of depth-of-
book information, rather than charging a multiplier of proprietary 
data feeds. See id.
    \68\ See MEMX Letter, supra note 15, at 6.
    \69\ See id. at 7.
    \70\ See id. at 8.
---------------------------------------------------------------------------

    Some commenters state that the proposed fees would have an adverse 
impact on competition, and on competing consolidators in 
particular.\71\ One commenter states that, even where the proposed fees 
are lower than the fees charged for comparable proprietary data, the 
fact that other fees are higher than proprietary offerings is likely to 
reduce incentives for competing consolidators to actually offer that 
data content to their customers.\72\ Another commenter expresses 
concern that if the Proposed Amendment were approved the exchanges 
would entrench a high level of cost for market data that has no 
relation to their underlying expenses, is not subject to effective 
competitive forces, and serves as an formidable barrier to entry for 
newer firms.\73\
---------------------------------------------------------------------------

    \71\ See MIAX Letter, supra note 15, at 1, 3; 4; MEMX Letter, 
supra note 15, at 2, 9; 15-17, 21-22, 25; NBIM Letter, supra note 
15, at 2; NovaSparks Letter, supra note 15, at 1; IEX Letter, supra 
note 15, at 5; SIFMA Letter, supra note 15, at 8; FINRA Letter, 
supra note 15, at 5; MayStreet Letter, supra note 15, at 5; 
BlackRock Letter, supra note 15, at 1-4; Polygon.io Letter, supra 
note 15, at 3; Proof Letter, supra note 15, at 3; Cutler Letter, 
supra note 15, at 1.
    \72\ See MEMX Letter, supra note 15, at 9. The commenter further 
argues that it is unlikely that there will be any demand for the new 
data elements included in consolidated market data at prices that 
exceed the fees charged for proprietary data feeds today. This, the 
commenter argues, would limit the potential customer base for 
competing consolidators and inappropriately impede the viability of 
competing consolidators under the infrastructure rule. See MEMX 
Letter, supra note 15, at 17.
    \73\ See Proof Letter, supra note 15, at 1.
---------------------------------------------------------------------------

    One commenter states that the Proposed Amendment conflates the 
prices that competing consolidators and self-aggregators pay the SROs 
for the underlying NMS information, and the prices that competing 
consolidators would charge for the consolidated data they generate.\74\ 
This commenter believes the proposals do not make clear that the 
proposed fees are for the content underlying the consolidated market 
data, as opposed to the consolidated market data itself.\75\ The 
commenter argues that the Participants confuse the content of 
consolidated market data and the consolidated market data itself,\76\ 
and states that the Proposed Amendment sets prices at levels that the 
SIPs currently charge for consolidated market data.\77\
---------------------------------------------------------------------------

    \74\ See MayStreet Letter, supra note 15, at 2.
    \75\ See id.
    \76\ See id. at 3.
    \77\ See id. at 6.
---------------------------------------------------------------------------

    One commenter believes that any analysis of current SIP fees should 
include a discussion of what structural changes could be made to SIP 
fees to eliminate or reduce the incentives that firms have today to 
avoid providing SIP data to their customers.\78\ One commenter believes 
that the current proposal will favor current market data vendors who 
already pay for these fees and have large customer bases, but will not 
necessarily use the most efficient data consolidation solutions.\79\ 
This commenter believes that all of the equity market data plans should 
have a unified feed and price list because most end users today consume 
all of the plans' feeds.\80\ Another commenter states it supports the 
proposed a la carte fee structure for the expanded elements of 
consolidated data because, in the commenter's view, market participants 
should be able to select from a variety of market data products and pay 
only for the content they consume.\81\
---------------------------------------------------------------------------

    \78\ See MEMX Letter, supra note 15, at 20.
    \79\ See NovaSparks Letter, supra note 15, at 1.
    \80\ See id. at 1-2.
    \81\ See BlackRock Letter, supra note 15, at 2-3.
---------------------------------------------------------------------------

2. Fees for Top-of-Book Data
    Some commenters believe that the proposed fees for Level 1 core 
data, which include expanded content to include odd-lot quotations, are 
too high.\82\
---------------------------------------------------------------------------

    \82\ See NovaSparks Letter, supra note 15; IEX Letter, supra 
note 15; MayStreet Letter, supra note 15; BlackRock Letter, supra 
note 15; MIAX Letter, supra note 15.
---------------------------------------------------------------------------

    One commenter states that the proposed fees for top-of-book data 
should be substantially lower to allow competing consolidators to 
operate their business.\83\ This commenter states that exchanges will 
no longer have to pay for the current processors and will not have the 
burden of maintaining custom feeds in specific formats since the 
proprietary data feeds would be used by the competing consolidators to 
distribute the new SIP market data.\84\
---------------------------------------------------------------------------

    \83\ See NovaSparks Letter, supra note 15, at 1.
    \84\ See id.
---------------------------------------------------------------------------

    One commenter states that the net effect of the proposal is to make 
core data fees more expensive that proprietary data feeds, adding that 
it seems clear the purpose of the proposal is ``to protect existing 
proprietary market data fee revenues by making market data from 
competing consolidators prohibitively expensive and their business non-
viable.'' \85\ Another commenter states that the cost of SIP data is 
too high relative to top-of-book proprietary feeds and that market 
participants are choosing the less expensive option of top-of-book 
proprietary feeds.\86\ This commenter believes this indicates that 
Level 1 consolidated market data is not priced in accordance with its 
value to the market.\87\ According to the commenter, Level 1 data 
should be priced as to make the content available at a price that is 
competitive to proprietary top-of-book offerings.\88\ This commenter 
further states that the fact that the price levels are unchanged from 
the current SIP prices reflects a failure by the Participants to 
accurately assess the value of Level 1 data.\89\ Another commenter 
opposes the proposal and asks the Commission disapprove it as it 
represents an overall increase in costs, including access fees, to end 
users as well as competing consolidators, thereby making market data 
less accessible and putting competing consolidators at a 
disadvantage.\90\
---------------------------------------------------------------------------

    \85\ See IEX Letter, supra note 15, at 5.
    \86\ See MayStreet Letter, supra note 15, at 6-7.
    \87\ See id. at 7.
    \88\ See id.
    \89\ See id.
    \90\ See Cutler Letter, supra note 15, at 1-2.
---------------------------------------------------------------------------

    One commenter supports certain aspects of the proposal, including 
its a la carte fee structure, and the inclusion of odd-lot quotations 
free of charge.\91\ Moreover, some commenters expressed support for the 
proposed inclusion of odd-lot information free of charge in the 
expanded Level 1 core data,\92\ with one commenter stating that this 
would result in top-of-book information that is more comprehensive, 
which should, in turn, strengthen best execution and enhance 
transparency and price discovery.\93\
---------------------------------------------------------------------------

    \91\ See BlackRock Letter, supra note 15, at 1, 3.
    \92\ See MIAX Letter, supra note 15, at 2; BlackRock Letter, 
supra note 15, at 1, 3; MayStreet Letter, supra note 15, at 2, 3, 6.
    \93\ See BlackRock Letter, supra note 15, at 1, 3.
---------------------------------------------------------------------------

    One commenter states that the proposed Level 1 core data fees 
should be adjusted to reflect the new role of competing 
consolidators.\94\ The commenter states that the MDI Rule fundamentally 
alters the ecosystem for market data by transitioning from exclusive 
SIPs to competing consolidators and that the Commission intended that 
this change would unbundle the data fees for consolidated

[[Page 11793]]

market data from the fees for its consolidation and distribution 
because the prospective fees charged by competing consolidators would 
now include fees for aggregation of consolidated market data products 
and transmission of such products to subscribers.\95\ This commenter 
states that in leaving fees for existing core data elements unchanged, 
the Proposed Amendment fails to consider, as the Commission stated in 
the MDI Rule Release, that the effective national market system plan 
for NMS stocks will no longer be operating an exclusive SIP or 
performing aggregation and other operational functions.\96\ The 
commenter argues that the proposed fees should not have been left 
unchanged from existing core data elements fees, but rather, should 
have been reduced by at least 4%--the estimated SIP operating expenses 
excluding profits--to reflect the new role of competing consolidators, 
and deduct both SIP profits and operating costs from the price. 
According to the commenter, this 4% discount is derived directly from 
Commission estimates of SIP operating expenses ($16 million) and 
revenues ($390 million) in 2018 without any consideration of possible 
profits. The commenter adds that exclusive SIP profits should also be 
subtracted from the proposed fees for core data content, as ``any 
markup for consolidation services should transition to be within the 
purview of competing consolidators.'' \97\ According to the commenter, 
keeping core data fees the same as the proposal purports to do would 
effectively ``opaquely raise prices'' for this data content.\98\
---------------------------------------------------------------------------

    \94\ See id. at 2-4.
    \95\ See id. at 3-4.
    \96\ See id. (citing to MDI Rule Release, 86 FR at 18685).
    \97\ See id. at 4, note 12.
    \98\ See id. at 4.
---------------------------------------------------------------------------

3. Fees for Depth-of-Book Data
    Some commenters argue that the calculation used by the Participants 
to determine the proposed depth-of-book fees is flawed and inconsistent 
with the MDI Rule Release because the calculation uses exchange 
proprietary data feeds that include full order-by-order depth-of-book, 
inclusive of top-of-book information, rather than the more limited 
depth information prescribed by the MDI Rule Release.\99\ These 
commenters point out that while the proprietary market data depth-of-
book feeds used to calculate fees for the consolidated depth-of-book 
information include top-of-book data as part of those offerings, fees 
for the consolidated depth-of-book data product under the proposal do 
not include top-of-book.\100\ Consequently, some commenters argue, 
subscribers to the new core data would need to pay an additional 
surcharge to receive top-of-book data at current rates to obtain the 
same data content that is available today through proprietary 
feeds.\101\
---------------------------------------------------------------------------

    \99\ See IEX Letter, supra note 15, at 3-4; MEMX Letter, supra 
note 15, at 11-12. BlackRock Letter, supra note 15, at 4-5; FINRA 
Letter, supra note 15, at 6.
    \100\ See id.
    \101\ See IEX Letter, supra note 15, at 4; MEMX Letter, supra 
note 15, at 6, 11-12; BlackRock Letter, supra note 15, at 4-5.
---------------------------------------------------------------------------

    Some commenters question the determination of the ratio (or 
multiplier) used by the Participants to set the depth-of-book 
feeds.\102\ One commenter states that fees for depth-of-book 
information ``should be adjusted to use a multiplier of 2.94x to 
eliminate the overcharging from double counting top of book data; 
otherwise, those who subscribe to both Level 1 and depth of book data 
``would be paying twice for top of book content.'' \103\
---------------------------------------------------------------------------

    \102\ See IEX Letter, supra note 15; MEMX Letter, supra note 15; 
BlackRock Letter, supra note 15; FINRA Letter, supra note 15; Angel 
Letter, supra note 15; NovaSparks Letter, supra note 15.
    \103\ See BlackRock Letter, supra note 15, at 4-5. See also IEX 
Letter, supra note 15, at 4; MEMX Letter, supra note 15, at 6, 11-
12.
---------------------------------------------------------------------------

    Some commenters state that an additional problem with the adopted 
approach is that the proprietary depth-of-book products, such as those 
used in the calculation, are primarily structured as comprehensive 
order-by-order feeds, which do not aggregate orders at each price 
level.\104\ According to these commenters, the depth-of-book elements 
prescribed by the MDI Rule warrant a lower price because they prescribe 
only the aggregated quotes available at the next five prices beyond the 
NBBO and thus include much less content than these proprietary 
feeds.\105\ One commenter states that complete, order-by-order depth-
of-book feeds, such as those used in the calculation, are likely to be 
associated with ``additional operational costs because of increased 
message traffic with order by order data at all price levels.\106\ 
Accordingly, the commenter argues that an aggregated feed with only 
five levels of depth should have been priced at a discount relative to 
the corresponding exchange offerings to compensate for differences in 
both information content and costs.\107\ One commenter argues that the 
proposal fails to consider pricing for other proprietary data feeds 
that are aggregated by price level and would therefore serve as a more 
logical proxy for setting core data fees.\108\
---------------------------------------------------------------------------

    \104\ See IEX Letter, supra note 15, at 4; MEMX Letter, supra 
note 15, at 11-12; BlackRock Letter, supra note 15, at 4-5; FINRA 
Letter, supra note 15, at 6.
    \105\ See IEX Letter, supra note 15, at 4; MEMX Letter, supra 
note 15, at 11-12. BlackRock Letter, supra note 15, at 4-5.
    \106\ See BlackRock Letter, supra note 15, at 4-5.
    \107\ See BlackRock Letter, supra note 15, at 4-5. See also IEX 
Letter, supra note 15, at 4; MEMX Letter, supra note 15, at 11-12.
    \108\ See IEX Letter, supra note 15, at 4.
---------------------------------------------------------------------------

    One commenter states that the proposal fails to acknowledge or 
account for the fact that the proposed methodology relies on this 
commenter's equity market data fees as one of the comparison points, 
notwithstanding that, unlike the other exchanges' market data prices, 
the commenter's fees used do not include individual per user fees, but 
apply only on a per firm basis for firms subscribing to ``real time 
data.'' \109\
---------------------------------------------------------------------------

    \109\ See id. The commenter also points out that its fees do not 
vary depending on the type of use made by those firms, do not apply 
to data that is redistributed with a delay of as little as 15 
milliseconds (whereas exchanges typically require a 15-minute delay 
to avoid charges for real-time data), and were determined and 
justified based on costs. The commenter further states that, to the 
extent the commenter's fees are relevant at all, a more consistent 
approach would have been to reflect the commenter's fees as zero, 
since this particular commenter does not charge any fees on an 
individual per user basis for either of the two data products. 
According to the commenter, the latter approach would substantially 
reduce the average ratio and multiplier, and thus substantially 
reduce the fees proposed to be charged for core data. See id.
---------------------------------------------------------------------------

    Some commentators believe that the proposed fees for depth-of-book 
data should be lower than proposed. One commenter states that retail 
investors should get free or very low cost depth-of-book data because 
it is in the best interest of retail investors, the industry and the 
Commission.\110\ This commenter states that displaying depth-of-book 
data can give investors a better understanding of how prices are 
formed.\111\ The commenter believes that the ability for an investor to 
see buying and selling interests at various price levels makes it 
easier for the investor to understand what determines the price of a 
particular security by seeing the interaction of market and limit 
orders.\112\ The commenter argues that making depth-of-book data 
``cheap'' would allow brokers to give the data to retail clients for no 
or low cost, and that, this, in turn, would increase retail 
participation in the securities markets, because investors will not 
only understand markets better, but they will participate more in the 
markets.\113\ According to this commenter, if depth-of-book data is 
expensive, it will not

[[Page 11794]]

help most retail investors because they will not be able to afford to 
see it.\114\
---------------------------------------------------------------------------

    \110\ See Angel Letter, supra note 15, at 3.
    \111\ See id. at 7.
    \112\ See id.
    \113\ See id. at 8.
    \114\ See id.
---------------------------------------------------------------------------

    Another commenter states that fees for depth-of-book are 
unreasonably high.\115\ The commenter states that, while the 
Participants decided on an alternative method in establishing fees and 
sought to demonstrate that the proposed fees are ``related to the value 
of the data to subscribers,'' \116\ the proprietary depth-of-book price 
inputs used by the Participants were not properly calibrated and thus 
are over inclusive, resulting in depth-of-book fees that are 
unreasonably high.\117\
---------------------------------------------------------------------------

    \115\ See FINRA Letter, supra note 15, at 5-6.
    \116\ See id. at 5.
    \117\ See id. at 6. Specifically, the commenter states that (1) 
the proprietary depth-of-book product fees used in determining the 
ratio also include proprietary top-of-book data and auction data--
both of which would be charged separately from depth-of-book data; 
(2) the depth-of-book product fees also included order-by-order 
depth information--which is typically considered more valuable, 
instead of aggregated--resulting in a higher ratio and overstatement 
of value; and (3) the proposed depth-of-book data product fees also 
included full depth information, i.e., all prices levels (also 
typically considered more valuable), rather than just the top five 
price levels required under the MDI Rule, resulting in a higher 
ratio and fees that are not aligned with the value of the new depth-
of-book data to subscribers. The commenter argues that, as a result, 
the method employed by the Participants does not align the proposed 
fees for the new depth-of-book data to the value of the data to 
subscribers. See id.
---------------------------------------------------------------------------

    One commenter agrees with the notion that that depth-of-book data 
should be priced higher than top-of-book data.\118\ This commenter, 
however, believes that the charges for depth-of-book data from the 
Plans should be much lower than consuming the market data directly from 
the exchanges because the information provided under the Plan would 
still be a subset of what is provided by the proprietary data 
feeds.\119\ The commenter states that the 4x ratio used by the 
Participants to determine the fees for accessing depth-of-book data is 
too high.\120\
---------------------------------------------------------------------------

    \118\ See NovaSparks Letter, supra note 15, at 1.
    \119\ See id.
    \120\ See id.
---------------------------------------------------------------------------

    One commenter opposes the proposed depth-of book data fees, because 
they, as well as all other proposed fees, represent an overall increase 
in costs to end users making market data less accessible, contrary to 
``the core precept of the'' MDI Rule.\121\ Another commenter states 
that the value of the depth-of-book data should focus on greater access 
and availability of this kind of data, and that the Operating Committee 
should thus consider what price point would increase availability of 
depth-of-book information, rather than charging a multiplier of 
proprietary data feeds.\122\
---------------------------------------------------------------------------

    \121\ See Cutler Letter, supra note 15, at 1. This comment 
further states that the level of the proposed fees would make it 
difficult for such competing consolidators to offer products at 
prices competitive to those of proprietary feeds thereby placing 
competing consolidators at a disadvantage. See id.
    \122\ See MayStreet Letter, supra note 15, at 7.
---------------------------------------------------------------------------

    One commenter expresses support for the proposed and ``moderately 
priced'' non-professional rate for depth-of-book information, because, 
in the commenter's view, this aspect of the proposal ``levels the 
playing field'' for retail investors by providing them with access to 
the same information that is available to professionals traders at an 
affordable price, which, will help broaden adoption of this new 
category of data.\123\
---------------------------------------------------------------------------

    \123\ See BlackRock Letter, supra note 15, at 3, 5.
---------------------------------------------------------------------------

4. Fees for Auction Data
    Some commenters believe that the proposed auction information fee 
would result in double charging for subscribers who purchase both 
auction and depth-of-book information.\124\ According to these 
commenters, information about auction order imbalances is included with 
the proprietary depth-of-book data products used to calculate the 
depth-of-book prices; therefore the proposed depth-of-book prices 
already incorporate the fees for auction imbalance data.\125\ Thus, 
these commenters argue that the proposed fees would result in double 
charging consumers who purchase both auction and depth-of-book 
information from competing consolidators.\126\ One commenter states 
that depth-of-book pricing is also inappropriately used to derive the 
value of auction data because auction information is more closely 
aligned with top-of-book content which only provides high-level 
information about aggregate order imbalances and does not include the 
order by order details or data about multiple price levels typically 
included in proprietary depth-of-book information products.\127\ One 
commenter states that while the pricing rationale in the proposal uses 
traded volumes to arrive at a 10% multiple for auction data, this 
ratio, however, is applied to the depth-of-book feed, which conveys 
information about displayed liquidity not trading activity. According 
to the commenter, (1) it would have been more congruent with the SROs' 
proposition to use Level 1 core data as the basis for pricing auction 
content as this feed is more closely associated with trade volume, and 
(2) the fees for auction information should be set to 10% of Level 1 
core data prices.\128\
---------------------------------------------------------------------------

    \124\ See MEMX Letter, supra note 15, at 11-12. BlackRock 
Letter, supra note 15, at 4-5; FINRA Letter, note 15, at 6.
    \125\ See id.
    \126\ See BlackRock Letter, supra note 15, at 4-5; MEMX Letter, 
supra note 15, at 11-12; FINRA Letter, supra note 15, at 6.
    \127\ See BlackRock Letter, supra note 15, at 5.
    \128\ See id.
---------------------------------------------------------------------------

    Some commenters argue that the fees for auction information under 
the Proposed Amendment should be lower.\129\ One commenter states that 
retail investors should get free or moderately priced auction data 
because it is in the interests of retail investors, the industry and 
the Commission.\130\ The commenter believes that opening and closing 
auction data are important in the securities markets and that providing 
auction data to retail investors will increase retail investor 
participation in the market.\131\ The commenter also opines that it 
makes no sense for the Participants to charge professional and non-
professionals the same amount for auction data.\132\ Another commenter 
states that the filing should not be approved because the price levels 
do not contribute to a level playing field between competing 
consolidators and the current plan administrators, such that competing 
consolidators will be at a disadvantage because they will not be able 
to offer products at prices competitive with those of proprietary 
feeds.\133\
---------------------------------------------------------------------------

    \129\ See Angel Letter, supra note 15; Cutler Letter, supra note 
15; BlackRock Letter, supra note 15.
    \130\ See Angel Letter, supra note 15, at 3.
    \131\ See id. at 9.
    \132\ See id.
    \133\ See Cutler Letter, supra note 15, at 1-2.
---------------------------------------------------------------------------

5. Fees for Professional and Non-Professional Users
    Some commenters question the classification of users by 
professional or non-professional to develop the fees under the Proposed 
Amendment.\134\
---------------------------------------------------------------------------

    \134\ See Angel Letter, supra note 15; BlackRock Letter, supra 
note 15; MIAX Letter, supra note 15; Polygon.io Letter, supra note 
15.
---------------------------------------------------------------------------

    One commenter states that it is unreasonably discriminatory against 
non-professional users to pay the same as professional users for 
auction data because professionals make far more use of the data.\135\ 
The commenter states that the filing contains no justification as to 
why the Participants propose to charge professionals the same as non-
professionals for auction data.\136\
---------------------------------------------------------------------------

    \135\ See Angel Letter, supra note 15, at 9-10.
    \136\ See id. at 10.
---------------------------------------------------------------------------

    Some commenters support moderately priced or free non-professional 
user fees. One commenter supports the proposed ``moderately priced'' 
non-professional rate for depth-of-book information, because, in the

[[Page 11795]]

commenter's view, this aspect of the proposal ``levels the playing 
field'' for retail investors by providing them with access to the same 
information that is available to professionals traders at an affordable 
price, which, will help broaden adoption of this new category of 
data.\137\ Another commenter states that free or moderately priced non-
professional data, including depth-of-book and auction data, is in the 
best interest of brokers and exchanges because it may increase retail 
order flow and thus profits into the industry.\138\ The commenter 
further believes that free or moderately priced non-professional data 
is in the best interest of the Commission as well because ``[p]roviding 
better data to retail investors at low cost will reduce the amount of 
SEC resources devoted to dealing with complaints based on 
misunderstandings of market function.'' \139\
---------------------------------------------------------------------------

    \137\ See BlackRock Letter, supra note 15, at 1, 3.
    \138\ See Angel Letter, supra note 15, at 11.
    \139\ See id. at 11.
---------------------------------------------------------------------------

    Two commenters state they supported the part of the Proposed 
Amendment that consists of low non-professional user fees.\140\ One 
commenter states that it believes the proposed non-professional user 
fees were a step in the right direction, but states that the Plan would 
charge fees for professional and non-professional users that are often 
higher than the fees charged by all of the exchange combined for 
proprietary products, creating disincentives for firms to take SIP 
data.\141\ The commenter advocates for fees that would expand access to 
consolidated market data including free access to odd-lot quotation 
information as well as cheaper access to depth-of-book quotation 
information for non-professional users.\142\
---------------------------------------------------------------------------

    \140\ See MIAX Letter, supra note 15, at 2; MEMX Letter, supra 
note 15, at 3.
    \141\ See MEMX Letter, supra note 15, at 3, 18-19.
    \142\ See id. at 2.
---------------------------------------------------------------------------

    Some commenters suggest that the Participants should not categorize 
fees based on user type and suggest on ways to improve the Proposed 
Amendment as it relates to these types of user classifications. One 
commenter urges the Commission to disapprove the Proposed Amendment and 
any future amendment that maintains non-professional and professional 
user classifications because such classifications prevent competing 
consolidators from being able to offer products at competitive prices 
compared to the proprietary data feeds.\143\ One commenter recommends 
easier-to-track proxies for usage-based charges by utilizing data 
already reported by firms, such as FOCUS Reports.\144\ Another 
commenter suggests slowing down the data feeds by 15 milliseconds to 
mitigate the risk of professionals ``masquerading'' as non-
professionals utilizing the cheaper data.\145\ One commenter states 
that the proposed professional user fees are based on a flawed 
methodology that fails to provide a cost based justification, and 
results in excessive fee levels which would discourage firms from 
registering as competing consolidators and hinder the formation of the 
decentralized consolidation model that the MDI Rule seeks to 
create.\146\
---------------------------------------------------------------------------

    \143\ See Polygon.io Letter, supra note 15, at 2-3.
    \144\ See MayStreet Letter, supra note 15, at 8.
    \145\ See Angel Letter, supra note 15, at 11.
    \146\ See MIAX Letter, supra note 15, at 3.
---------------------------------------------------------------------------

    Another commenter believes that the Operating Committees should 
analyze whether it is fair and reasonable to continue to charge 
professional and non-professional user fees that exceed the fees 
charges for similar proprietary market data.\147\ This commenter argues 
that the Proposed Amendment should be disapproved because, for some 
firms, the professional fees proposed may be higher than if the firms 
purchased certain proprietary data products.\148\ However, another 
commenter responds that this analysis does not account for the fact 
that purchasers of the new data would be receiving a consolidated data 
product that aggregates all exchanges' data together to determine an 
NBBO and the five best levels of depth among all the exchanges and 
disregards that the Proposed Amendment includes much lower fees for 
non-professionals.\149\ The commenter states that it is fair, 
reasonable, and not unreasonable discriminatory for ``Wall Street to 
pay higher fees than Main Street.'' \150\
---------------------------------------------------------------------------

    \147\ See MEMX Letter, supra note 15, at 20.
    \148\ See id.
    \149\ See NYSE Letter, supra note 15, at 8.
    \150\ See id.
---------------------------------------------------------------------------

6. Fees for Non-Display Use
    Some commenters state that the proposed Non-Display Use fees are 
based on a flawed methodology that fails to provide a cost based 
justification, results in excessive fee levels which would discourage 
firms from registering as competing consolidators and hinder the 
formation of the decentralized consolidation model that the MDI Rule 
seeks to create.\151\ One commenter states that the fees in the 
Proposed Amendment, including the non-display fees, would place 
competing consolidators at a disadvantage because they will not be able 
to offer products at prices competitive with those of proprietary 
feeds.\152\
---------------------------------------------------------------------------

    \151\ See MIAX Letter, supra note 15, at 3; Polygon.io Letter, 
supra note 15, at 2-3.
    \152\ See Cutler Letter, supra note 15, at 1-2.
---------------------------------------------------------------------------

    One commenter asks that the Commission reject that Amendment and 
any future proposal that maintains display/non-display and 
professional/non-professional classifications.\153\ The commenter 
states that, if the Proposed Amendment is not rejected, competing 
consolidators will not be able to offer products at competitive prices 
to proprietary data feeds.\154\
---------------------------------------------------------------------------

    \153\ See Polygon.io Letter, supra note 15, at 2.
    \154\ See id. at 3.
---------------------------------------------------------------------------

7. Access Fees
    One commenter states that the proposed Access fees are based on a 
flawed methodology that fails to provide a cost based justification, 
and results in excessive fee levels which would discourage firms from 
registering as competing consolidators and hinder the formation of the 
decentralized consolidation model that the MDI Rule seeks to 
create.\155\ Another commenter stated that the proposed access fees are 
not fair and reasonable because they are more expensive than those fees 
charged by exchanges in the proprietary products.\156\
---------------------------------------------------------------------------

    \155\ See MIAX Letter, supra note 15, at 3.
    \156\ See MEMX, supra note 15, at 6, 8. See also Cutler Letter, 
supra note 15, at 1-2 (noting that it supports the comment letter 
written by MEMX and that the Proposed Amendment makes market data 
less accessible).
---------------------------------------------------------------------------

8. Redistribution Fees
    Two commenters suggest that the imposition of redistribution fees 
on competing consolidators would place competing consolidators at a 
competitive disadvantage.\157\ Another commenter states that by 
charging redistribution fees to competing consolidators, the filing 
creates a barrier to entry to technology solution vendors to become 
competing consolidators.\158\
---------------------------------------------------------------------------

    \157\ See NBIM Letter, supra note 15, at 2; Cutler Letter, supra 
note 15, at 1-2.
    \158\ See NovaSparks Letter, supra note 15, at 1.
---------------------------------------------------------------------------

    One commenter states that the Proposed Amendment should treat 
competing consolidators as replacements to the exclusive SIPs, not as 
data vendors.\159\ It states that subjecting competing consolidators to 
the same fees as data vendors and subscribers that receive consolidated 
market data from the exclusive SIP fails to recognize that competing 
consolidators are SIPs and not similarly situated to today's data 
vendors.\160\ This

[[Page 11796]]

commenter further states that that competing consolidators should not 
be charged redistribution fees because they are not redistributing 
consolidated market data, but generating and distributing it for the 
first time.\161\ According to this commenter, these fees for 
redistribution should not be charged by the Plan because the Plan no 
longer would govern the distribution of consolidated market data.\162\ 
The commenter states that by not recognizing competing consolidators as 
SIPs, competing consolidators are placed at a competitive disadvantage 
relative to data vendors given that they take on expenses and risks 
that data vendors do not, such as the costs for generating consolidated 
market data, disclosing operational and performance metrics, 
registering with the Commission, and complying with Rule 614 of 
Regulation NMS.\163\
---------------------------------------------------------------------------

    \159\ See MayStreet Letter, supra note 15, at 3.
    \160\ See id. at 3-4.
    \161\ See id.
    \162\ See id., at 5.
    \163\ See id.
---------------------------------------------------------------------------

    One commenter states that the proposed redistribution fee that 
would be charged to competing consolidators is inconsistent with the 
purposes and structure of the MDI Rule, and that this aspect of the 
proposal represents a ``further indication that the intent of the 
majority was to subvert the purpose of the Commission's order.'' \164\ 
Another commenter states that the redistribution fee for competing 
consolidators is inconsistent with the MDI Rule, not fair and 
reasonable, and unreasonably discriminatory.\165\ One commenter states 
that the proposal's attempt to justify the redistribution fee based on 
the current centralized model that charges fees to downstream vendors 
is unsound because, under the decentralized MDI Rule, competing 
consolidators would be ``stepping into the role that the SIPs hold 
today as the primary sources of consolidated market data.'' \166\ 
According to this commenter, to charge a redistribution fee on top of 
the other proposed fees would ``unquestionably put competing 
consolidators at a further competitive disadvantage as compared to 
aggregated proprietary data products offered by exchanges,'' thus 
targeting them in an unfair and unreasonable manner.\167\
---------------------------------------------------------------------------

    \164\ See IEX Letter, supra note 15, at 5.
    \165\ See MIAX Letter, supra note 15, at 2 (citing the MDI Rule 
Release which stated that ``imposing redistribution fees on data 
content underlying consolidated market data that will be 
disseminated by competing consolidators would be difficult to 
reconcile with the standards of being fair and reasonable and not 
unreasonably discriminatory in the new decentralized model,'' and 
that ``fees proposed by the SROs should not contain redistribution 
fees for competing consolidators because this would hinder their 
ability to compete.'').
    \166\ See id.
    \167\ See id.
---------------------------------------------------------------------------

    One commenter states the Proposed Amendment directly contradicts 
the Commission's directive in the MDI Rule that competing consolidators 
not be treated the same as market data vendors.\168\ It believes that 
Participants are attempting to undermine the Commission's authority 
over market data as enumerated in the CT Plan and MDI Rule in order to 
preserve their current revenues from proprietary and SIP data.\169\ It 
states that the Participants have taken the position that the competing 
consolidators should be charged redistribution fees just like any 
market data vendor. It believes this undermines the efforts of the MDI 
Rule.\170\ The commenter reiterates the Commission's statement in the 
MDI Rule Release that ``the Commission believes that the fees for the 
data content underlying consolidated market data should not include 
redistribution fees for competing consolidators. Competing 
consolidators will take the place of the exclusive SIPs in the 
dissemination of consolidated market data, which today do not pay 
redistribution fees for the consolidation and dissemination of SIP 
data.'' \171\ The commenter argues that by treating competing 
consolidators differently than the exclusive SIPs, the Participants are 
acting in an unreasonably discriminatory manner, effectively 
disregarding the Exchange Act mandates in addition to the Commission's 
directive in the MDI Rule.\172\ The commenter argues that imposing 
redistribution fees on competing consolidators imposes an undue burden 
on competition in contravention of the standards under Section 3(f) of 
the Exchange Act that the Commission must consider in connection with 
any Commission rulemaking or review of SRO rules.\173\
---------------------------------------------------------------------------

    \168\ See SIFMA Letter, supra note 15, at 4-5.
    \169\ See id. at 6.
    \170\ See id. at 7.
    \171\ See id.
    \172\ See id., at 8.
    \173\ See id.
---------------------------------------------------------------------------

    Two commenters state that the redistribution fees charged to 
competing consolidators are in contravention of the Commission's 
express direction in the MDI Rule and that the Proposed Amendment 
disregards the directive.\174\
---------------------------------------------------------------------------

    \174\ See FINRA Letter, supra note 15, at 5; MEMX Letter, supra 
note 15, at 21.
---------------------------------------------------------------------------

    One commenter states that, although the Commission compared 
competing consolidators to self-aggregators, a more appropriate 
comparison would be between competing consolidators and downstream 
vendors.\175\ According to this commenter, because such vendors would 
be subject to redistribution fees when redistributing data to its 
subscribers, it would impose a burden on competition and be unfair to 
vendors not to charge a redistribution fee for exactly the same 
activity to competing consolidators.\176\
---------------------------------------------------------------------------

    \175\ See NYSE Letter, supra note 15, at 7.
    \176\ See id.
---------------------------------------------------------------------------

9. Broker-Dealer Enterprise Cap
    One commenter favors expanding the broker-dealer enterprise cap 
that is part of the current fee schedule of the Plan. The commenter 
states that the Proposed Amendment provides no depth-of-book enterprise 
cap and the Level 1 enterprise caps are out of reach for most market 
Participants.\177\ In particular, this commenter recommends that 
enterprise caps be implemented at multiple tiers levels.\178\
---------------------------------------------------------------------------

    \177\ See MayStreet Letter, supra note 15, at 8.
    \178\ See id. at 8.
---------------------------------------------------------------------------

C. NMS Plan Governance

    Some commenters state that the MDI Rule should be implemented 
through the CT Plan, as opposed to the existing market data equity 
plans (i.e., the CTA/CQ, and Nasdaq/UTP Plans).\179\ One commenter 
reiterated its continued support for the provisions of the CT Plan 
overall.\180\ The commenter states that the real and potential 
conflicts of interest that currently exist relating to the provision of 
market data directly relate to the decision-making problems at the 
Plans' Operating Committees.\181\ The commenter supports expanding the 
voting representation under the CT Plan to non-SROs and having them 
participate as full voting members of the Operating Committee.\182\ The 
commenter believes the Commission cannot approve the Proposed Amendment 
given the inherent conflicts of interests of the SROs who developed the 
proposals.\183\ The commenter states that, if the Commission approved 
the Proposed Amendment, it would be giving tacit approval to the 
shortcomings in the governance structure of the current Plans.\184\
---------------------------------------------------------------------------

    \179\ See BMO Letter, supra note 15; MEMX Letter, supra note 15; 
MIAX Letter, supra note 15; IEX Letter, supra note 15; and 
Polygon.io Letter, supra note 15.
    \180\ See BMO Letter, supra note 15, at 1.
    \181\ See id. at 2.
    \182\ See id.
    \183\ See id.
    \184\ See id.
---------------------------------------------------------------------------

    This commenter also notes that the proposed fee amendments are 
explicitly stated by the Participants to be unrelated to the cost of 
providing the

[[Page 11797]]

data, but rather to subscriber value.\185\ The commenter states that 
this is a clear example of the Plan's Operating Committee failing to 
ensure that the public service mandates of the SIPs are achieved and is 
a failure in governance through the unmitigated conflicts of interest 
by voting members who just want to maximize profits.\186\ The commenter 
states that further evidence of the failure of the governance structure 
on the Operating Committee is that the fee proposals have been proposed 
while the remaining reforms of the CT Plan are stayed pending 
resolution of challenges in the D.C. Circuit.\187\ The commenter states 
that it is surprised that the proposals were filed without broader 
participation, given that certain members of the Operating Committee 
have stated publicly that the proposals contradict the Exchange Act 
standards for consolidated data which requires that the fees be fair, 
reasonable, and not unreasonably discriminatory.\188\
---------------------------------------------------------------------------

    \185\ See id.
    \186\ See id. at 2-3.
    \187\ See id. at 3.
    \188\ See id. (citing note 14 of the Notice, which states in 
part: ``FINRA, IEX, LTSE, MIAX, and MEMX have not joined in the 
decision to approve the filing of the proposed amendment, and Nasdaq 
BX is also withholding its vote at this time.'').
---------------------------------------------------------------------------

    Another commenter also encourages the Commission to consider 
whether the CT Plan is a more appropriate body for setting fees for 
consolidated market data.\189\ This commenter believes that placing the 
responsibility for setting fees in the hands of the CT Plan would allow 
SIP fees to be set by an Operating Committee that better reflects the 
constituencies impacted by this filing, including non-SRO 
representatives.\190\ A second commenter states that the fee proposals 
are ``the result of a conflicted and unbalanced voting process,'' 
adding that it agreed with the recommendation that the responsibility 
for setting the proposed fees should be placed on the CT Plan.\191\ A 
third commenter recommends that the Commission disapprove the proposal 
and reassign the responsibility for the filing to the Operating 
Committee for the CT Plan, which the commenter states would have a 
``broader set of voting stakeholders and a fairer and less conflicted 
governance structure,'' a change that, as this proposal shows, is 
``badly'' needed.\192\
---------------------------------------------------------------------------

    \189\ See MEMX Letter, supra note 15, at 23-24.
    \190\ See id.
    \191\ See MIAX Letter, supra note 15, at 5.
    \192\ See IEX Letter, supra note 15, at 5.
---------------------------------------------------------------------------

    One commenter asks the Commission to reevaluate the process that 
led to the creation of the Proposed Amendment and make substantive 
changes to avoid the amendment process being used to derail timely 
implementation of the MDI Rule.\193\
---------------------------------------------------------------------------

    \193\ See Polygon.io Letter, supra note 15, at 3.
---------------------------------------------------------------------------

D. Consideration of Other Actions Under Rule 608 of Regulation NMS

    In connection with recommending disapproval of the Proposed 
Amendment, one commenter states the Commission could consider potential 
action under Rule 608(a)(2) of Regulation NMS, which allows the 
Commission to directly propose amendments to effective national market 
system plans.\194\ The commenter states that in connection with a 
Commission disapproval of the Proposed Amendment, it would ``support 
the Commission's efforts to ensure that the newly expanded consolidated 
market data (i.e., new core data) under the Commission's Infrastructure 
Rule is disseminated in a manner consistent with the Exchange Act 
standards to ensure the investing public and all market participants 
have fair and reasonable access to it.'' \195\
---------------------------------------------------------------------------

    \194\ See SIFMA Letter, supra note 15, at 2.
    \195\ See id.
---------------------------------------------------------------------------

    One commenter believes that it would be inconsistent with the 
Exchange Act and Rule 608 for the Commission to sua sponte change any 
or all of the proposed fees, as any such change would be material to 
the Proposed Amendment.\196\ The commenter states that, in its view, if 
the Commission intends to revise the Proposed Amendment in any material 
way, it must do so through rule-making under Rule 608(b)(2), by 
providing public notice of the specific changes it proposes and giving 
the Participants and general public an opportunity to comment.\197\
---------------------------------------------------------------------------

    \196\ See NYSE Letter, supra note 15, at 8.
    \197\ See id.
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Amendment

    The Commission is instituting proceedings pursuant to Rule 
608(b)(2)(i) of Regulation NMS,\198\ and Rule 700 of the Commission's 
Rules of Practice,\199\ to determine whether to approve or disapprove 
the Proposed Amendment or to approve the Proposed Amendment with any 
changes or subject to any conditions the Commission deems necessary or 
appropriate after considering public comment. 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 Amendment to inform the Commission's 
analysis.
---------------------------------------------------------------------------

    \198\ 17 CFR 242.608.
    \199\ 17 CFR 201.700.
---------------------------------------------------------------------------

    Rule 608(b)(2) of Regulation NMS provides that the Commission 
``shall approve a . . . proposed amendment to a national market system 
plan, with such changes or subject to such conditions as the Commission 
may deem necessary or appropriate, if it finds that such . . . 
amendment is necessary or appropriate in the public interest, for the 
protection of investors and 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.'' \200\ Rule 608(b)(2) further provides that the Commission 
shall disapprove a proposed amendment if it does not make such a 
finding.\201\ Pursuant to Rule 608(b)(2)(i) of Regulation NMS,\202\ the 
Commission is providing notice of the grounds for disapproval under 
consideration:
---------------------------------------------------------------------------

    \200\ See 17 CFR 242.608(b)(2).
    \201\ See id.
    \202\ 17 CFR 242.608(b)(2)(i). See also Commission Rule of 
Practice 700(b)(2), 17 CFR 201.700(b)(2).
---------------------------------------------------------------------------

     Whether the Proposed Amendment is consistent with the 
Commission's MDI Rule; \203\
---------------------------------------------------------------------------

    \203\ See MDI Rule Release, supra note 9.
---------------------------------------------------------------------------

     Whether, consistent with Rule 608 of Regulation NMS, the 
Proposed Amendment is necessary or appropriate in the public interest, 
for the protection of investors and 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; \204\
---------------------------------------------------------------------------

    \204\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

     Whether, consistent with Rule 603(a) and 614(d)(3) of 
Regulation NMS, the Proposed Amendment provides for the distribution of 
information with respect to quotations for and transactions in NMS 
stocks on terms that are fair and reasonable and not unreasonably 
discriminatory;
     Whether modifications to the Proposed Amendment, or 
conditions to its approval, would be required to make the Proposed 
Amendment necessary or appropriate in the public interest, for the 
protection of investors and 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; \205\
---------------------------------------------------------------------------

    \205\ See id.
---------------------------------------------------------------------------

     Whether the Proposed Amendment is consistent with 
Congress's finding, in

[[Page 11798]]

Section 11A(1)(C)(iii) of the Act, that it is in the public interest 
and appropriate for the protection of investors and the maintenance of 
fair and orderly markets to ensure ``the availability to brokers, 
dealers, and investors or information with respect to quotations for 
and transactions in securities''; \206\ and
---------------------------------------------------------------------------

    \206\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

     Whether, consistent with the purposes of Section 
11A(c)(1)(B) of the Act,\207\ the Proposed Amendment's provisions are 
drafted to support the prompt, accurate, reliable, and fair collection, 
processing, distribution, and publication of information with respect 
to quotations for and transactions in NMS securities, and the fairness 
and usefulness of the form and content of such information.
---------------------------------------------------------------------------

    \207\ See 15 U.S.C. 78k-1(c)(1)(B).
---------------------------------------------------------------------------

    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a NMS plan filing is consistent with the Exchange Act 
and the rules and regulations issued thereunder . . . is on the plan 
participants that filed the NMS plan filing.'' \208\ The description of 
the NMS plan filing, 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.\209\ Any failure of the plan participants that filed the NMS 
plan filing to provide such detail and specificity may result in the 
Commission not having a sufficient basis to make an affirmative finding 
that the NMS plan filing is consistent with the Exchange Act and the 
applicable rules and regulations thereunder.\210\
---------------------------------------------------------------------------

    \208\ 17 CFR 201.700(b)(3)(ii).
    \209\ Id.
    \210\ Id.
---------------------------------------------------------------------------

V. Commission's Solicitation of Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Section 11A or any other provision of the Act, or the 
rules and regulations thereunder. 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 608(b)(2)(i) of Regulation 
NMS,\211\ any request for an opportunity to make an oral 
presentation.\212\ The Commission asks that commenters address the 
sufficiency and merit of the Participants' statements in support of the 
Proposed Amendment,\213\ in addition to any other comments they may 
wish to submit about the proposed rule changes. In particular, the 
Commission seeks comment on the following:
---------------------------------------------------------------------------

    \211\ 17 CFR 242.608(b)(2)(i).
    \212\ Rule 700(c)(ii) of the Commission's Rules of Practice 
provides that ``[t]he Commission, in its sole discretion, may 
determine whether any issues relevant to approval or disapproval 
would be facilitated by the opportunity for an oral presentation of 
views.'' 17 CFR 201.700(c)(ii).
    \213\ See Notice, supra note 6.
---------------------------------------------------------------------------

    1. In the MDI Rule Release, the Commission stated that ``the fees 
for the data content underlying consolidated market data must satisfy 
the statutory standards of being fair, reasonable and not unreasonably 
discriminatory.'' \214\ What are commenters' views as to each of the 
fees proposed?
---------------------------------------------------------------------------

    \214\ See MDI Rule Release, supra note 9, 86 FR at 18684.
---------------------------------------------------------------------------

    2. In the Cover Letter,\215\ the Participants state that ``under 
the decentralized competing consolidator model, the Operating Committee 
has no knowledge of any of the costs associated with consolidated 
market data.'' The Participants further state that, under the 
decentralized competing consolidator model described in the MDI Rule 
Release, the Plan's Operating Committee no longer has a role in either 
specifying the technology associated with exchanges providing data or 
contracting with a SIP and that each national securities exchange will 
be responsible for determining the methods of access to and format of 
data necessary to generate consolidated market data. The Participants 
also state that the Operating Committee will not have access to 
information about how each exchange would generate the data that they 
each would be required to disseminate under amended Rule 603(b). 
According to the Participants, the Operating Committee does not have 
access to any information about the cost of providing consolidated 
market data under the decentralized competing consolidator model.
---------------------------------------------------------------------------

    \215\ See Cover Letter, supra note 1.
---------------------------------------------------------------------------

    Do commenters agree with the statements that the Participants have 
made with respect to their ability, current or future, to determine the 
costs of generating consolidated market data?
    3. What are commenters' views on the Participants argument that a 
``value-based'' methodology is an appropriate basis to determine the 
fees for core data? What are commenters' views on the methodology 
proposed by the Participants?
    4. What are commenters' views on whether the comparison of 
exchanges' proprietary depth-of-book fees to the current SIP feeds is 
an appropriate means to calculate the ``value'' of consolidated market 
data? Do commenters believe that the pricing for individual exchange 
market data products can serve as an appropriate means for justifying 
the proposed fees? What are commenters' views on the prices of the 
depth-of-book feeds--whether by reference to cost or to prices set by a 
competitive market for equity market data as opposed to market power?
    5. What are commenters' views on the Participants' calculation of 
the appropriate ratio to be applied to current SIP fees to generate the 
proposed fees for content underlying consolidated market data? Were 
appropriate depth-of-book products selected for the calculation? What 
are commenters' views about the ratios and methodology used generate 
fees?
    6. Under the Proposed Amendment, the consolidated market data 
depth-of-book product would not include top-of-book data. What are 
commenters' views on basing the price of depth-of-book consolidated 
market data on the fees for proprietary products that do not include 
top-of-book data?
    7. In the Cover Letter,\216\ the Participants state that they 
reviewed the depth-of-book to top-of-book ratios of Professional device 
rates on Nasdaq (Nasdaq Basic/Nasdaq TotalView), Cboe (Cboe Full 
Depth), NYSE (BQT/NYSE Integrated), and IEX (TOPS/DEEP) to determine an 
appropriate ratio between the fees of depth-of-book core data products 
and the current Level 1 (top-of-book) data. The Participants further 
state that they believe that the 3.94x ratio represents the difference 
in value between top-of-book data and five levels of depth that would 
be required to be included in consolidated market data under amended 
Rule 603(b). What are commenters' views on setting fees under the 
Proposed Amendment based on the ratio of fees for depth-of-book and 
top-of-book proprietary data products?
---------------------------------------------------------------------------

    \216\ See Cover Letter, supra note 1.
---------------------------------------------------------------------------

    8. Under the Proposed Amendment, the consolidated market data 
depth-of-book product would include only aggregate order information at 
each price level, not order-by-order data. What are commenters' views 
on whether the price of depth-of-book consolidated market data should 
be based on the fees for proprietary products that include order-by-
order data? What are commenters' views on the selection of the 
referenced

[[Page 11799]]

proprietary data products used to price the fees in the Proposed 
Amendment, including other exchange fees considered but not selected as 
a reference for the development of pricing under the Proposed 
Amendment?
    9. Under the Proposed Amendment, the consolidated market data 
depth-of-book product would not include auction data, which would be 
sold separately. What are commenters' views on whether the price of 
depth-of-book consolidated market data should be based on the fees for 
proprietary depth-of-book products that include auction data?
    10. What are commenters' views on whether users should be 
classified as professionals and non-professionals under the Proposed 
Amendment? Should non-professional subscribers to pay the same fees as 
professional subscribers for the auction data under the Proposed 
Amendment? Why or why not? Should professionals to pay a different 
price than non-professionals for products other than auction data under 
the Proposed Amendment? Why or why not? If commenters believe that 
classification based on user type for the contents of the consolidated 
market data is appropriate, do commenters support or oppose low-cost 
non-professional user fees? Why or why not?
    11. What are commenters' views on the non-display fees in the 
Proposed Amendment?
    12. What are commenters' views on the access fees in the Proposed 
Amendment? What are commenters' views on whether the Participants 
should charge access fees? Should competing consolidators be required 
to pay access fees? Why or why not? Should access fees be treated like 
connectivity fees, market data fees, or something else? Why or why not?
    13. What are commenters' views on how the cost of purchasing 
consolidated top-of-book, depth-of-book, and auction data under the 
Proposed Amendment compares to the cost of subscribing to the existing 
proprietary data feeds that would contain similar or more data? What 
are commenters' views regarding the relationship of this comparison to 
the fees under the Proposed Amendment?
    14. The Commission stated in the MDI Rule Release that ``imposing 
redistribution fees on data content underlying consolidated market data 
that will be disseminated by competing consolidators would be difficult 
to reconcile with the standards of being fair and reasonable and not 
unreasonably discriminatory in the new decentralized model,'' \217\ and 
that ``fees proposed by the SROs should not contain redistribution fees 
for competing consolidators because this would hinder their ability to 
compete.'' \218\ What are commenters' views on the justification 
offered by the Participants in favor of charging redistribution fees to 
competing consolidators? What are commenters' views regarding competing 
consolidators being treated similarly to data vendors and charged 
redistribution fees? Would charging redistribution fees to competing 
consolidators (and thus subjecting them to the same fees as vendors and 
subscribers) place them at a competitive disadvantage to the exchanges 
offering proprietary market data for sale? Why or why not? Do 
commenters believe that imposing redistribution fees on competing 
consolidators would impose a burden on competition? Why or why not? 
What are commenters' views on the level of redistribution fees in the 
Proposed Amendment?
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    \217\ See MDI Rule Release, supra note 9, 86 FR at 18685.
    \218\ See id., 86 FR at 18682, n.1136.
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    15. What are commenters' views on the prices for Level 1 core data, 
which has been expanded to include odd-lot quotations?
    16. What are commenters' views on whether the operating costs of 
the exclusive SIPs should be deducted from the Level 1 fees in the 
Proposed Amendment to reflect the new role of competing consolidators? 
If so, how should they be taken into account? What are commenter's 
views on whether the operating costs of the exclusive SIPs should be 
taken into account in determining the fees for depth-of-book core data? 
If so, how should they be taken into account? Do commenters believe 
that the new fees for Level 1 core data should have been proposed by 
the Participants? Why or why not? What are commenters' views on how any 
new fees for Level 1 data should have been determined?
    17. Overall, what are commenters' views on the proposed prices for 
consolidated depth-of-book data? How do commenters believe the cost of 
depth-of-book data under the Plan should compare to consuming the same 
or similar data directly from the exchanges? Do commenters believe that 
the proposed price point for depth-of-book data would increase the 
availability of the information for investors? Why or why not? Do 
commenters believe that the calculation of the proposed depth-of-book 
data fee would essentially double-charge customers for top-of-book 
information that they would have to buy separately through the Level I 
feed? Why or why not? What are commenters' views on the statement in 
the Proposed Amendment that depth-of-book data may not be redistributed 
on a delayed basis?
    18. What are commenters' views on the prices for auction 
information? Do commenters believe the proposed prices for auction 
information are priced too high, too low, or at the correct level? Why 
or why not? What are commenters' views on the lack of a distinction 
between prices charged to professional and non-professional users for 
auction information? What are commenters' views on the statement in the 
Proposed Amendment that auction information may not be redistributed on 
a delayed basis?
    19. In the Cover Letter,\219\ the Participants stated that, with 
respect to the fees for auction information, they looked to the 
percentage of average dialing trading volume that occurs during an 
auction process and determined that roughly 10% of the trading volume 
takes place in auctions. The Participants stated that they therefore 
believe that charging a fee for auction data that is 10% of the fee 
charged for depth-of-book data appropriately reflects the value of 
auction information. What are commenters' views about this method for 
determining the fees for auction data?
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    \219\ See Cover Letter, supra note 1.
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    20. What are commenters' views on the lack of an enterprise fee cap 
in the proposal? Should enterprise caps have been proposed by the 
Participants for each category of data (e.g., Level 1, depth-of-book, 
auction information)? Should multiples enterprise caps have been 
proposed to reflect different size enterprises? Why or why not?
    21. What are commenters' views on the Participants' clarification 
in the Proposed Amendment that the Per Query Fee would not apply to the 
expanded market data content required by the MDI Rule and would only be 
available for the receipt and use of the Level 1 Service?
    22. In the Cover Letter, the Participants state that FINRA OTC Data 
will not be provided to competing consolidators, although it is still 
being provided to the UTP Processor for inclusion in the consolidated 
market data made available by the UTP Processor. What are commenters' 
views on the Participants' proposal to add clarifying language to make 
clear that UTP Level 1 Service obtained from the Processor would 
include FINRA OTC

[[Page 11800]]

Data but would not include odd-lot information?
    23. What are commenters' views on the belief of some market 
participants that conflicts of interest by the Participants who also 
sell proprietary data products have resulted in proposed fees that are 
not fair, reasonable, and unreasonably discriminatory? \220\ What are 
commenters' views on whether the opinions of the advisory committee 
members and SROs who did not vote in favor of the Proposed Amendment 
should have been accommodated in the Proposed Amendment?
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    \220\ See Section III.C, supra.
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    24. Should the Commission approve or disapprove the Proposed 
Amendment? Why or why not? Should the Commission approve the Proposed 
Amendment with modifications? If so, what modifications would be 
appropriate and why?
    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by March 23, 2022. Any person who wishes to file a rebuttal 
to any other person's submission must file that rebuttal by April 6, 
2022. 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 No. S7-24-89 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. S7-24-89. 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 Participants' principal offices. 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 File No. S7-24-89 and should be submitted 
on or before March 23, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\221\
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    \221\ 17 CFR 200.30-3(a)(85).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022-04332 Filed 3-1-22; 8:45 am]
BILLING CODE 8011-01-P


