81 FR 15363 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Adopting a Decommission Extension Fee for Receipt of the NYSE BBO and NYSE Trades Market Data Products
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 55 (March 22, 2016)
Federal Register Volume 81, Issue 55 (March 22, 2016)
| Page Range | 15363-15366 | |
| FR Document | 2016-06408 |
[Federal Register Volume 81, Number 55 (Tuesday, March 22, 2016)] [Notices] [Pages 15363-15366] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-06408] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77388; File No. SR-NYSE-2016-21] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Adopting a Decommission Extension Fee for Receipt of the NYSE BBO and NYSE Trades Market Data Products March 17, 2016. Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, on March 8, 2016, New York Stock Exchange LLC (``NYSE'' or the ``Exchange'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self- regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt a Decommission Extension Fee for receipt of the NYSE BBO and NYSE Trades market data products. The proposed rule change is available on the Exchange's Web site at www.nyse.com, at the principal office of the Exchange, [[Page 15364]] and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to adopt a Decommission Extension Fee for receipt of the NYSE BBO and NYSE Trades market data products,\4\ as set forth on the NYSE Proprietary Market Data Fee Schedule (``Fee Schedule''). Recipients of NYSE BBO and NYSE Trades would continue to be subject to the already existing subscription fees currently set forth in the Fee Schedule. The proposed Decommission Extension Fee would apply only to those subscribers who decide to continue to receive the NYSE BBO and NYSE Trades feeds in their legacy format for up to two months after those feeds otherwise will be distributed exclusively in the new format explained below. --------------------------------------------------------------------------- \4\ See Securities Exchange Act Release Nos. 61914 (Apr. 14, 2010), 74 FR 21077 (Apr. 22, 2010) (SR-NYSE-2010-30) (notice--NYSE BBO); 62181 (May 26, 2010), 75 FR 31488 (June 3, 2010) (SR-NYSE- 2010-30) (approval order--NYSE BBO); 59309 (Jan. 28, 2009), 74 FR 6073 (Feb. 4, 2009) (SR-NYSE-2009-04) (notice--NYSE Trades); and 59309 (Mar. 19, 2009), 74 FR 13293 (Mar. 26, 2009) (approval order-- NYSE Trades) (SR-NYSE-2009-04) and 62038 (May 5, 2010), 75 FR 26825 (May 12, 2010) (SR-NYSE-2010-22). --------------------------------------------------------------------------- NYSE Trades is an NYSE-only last sale market data feed. NYSE Trades currently allows vendors, broker-dealers and others to make available on a real-time basis the same last sale information that the Exchange reports under the Consolidated Tape Association (``CTA'') Plan for inclusion in the CTA Plan's consolidated data streams. Specifically, the NYSE Trades feed includes, for each security traded on the Exchange, the real-time last sale price, time and size information and bid/ask quotations at the time of each sale and a stock summary message. The stock summary message updates every minute and includes NYSE's opening price, high price, low price, closing price, and cumulative volume for the security.\5\ --------------------------------------------------------------------------- \5\ Id. --------------------------------------------------------------------------- NYSE BBO is an NYSE-only market data feed that allows a vendor to redistribute on a real-time basis the same best-bid-and-offer information that the Exchange reports under the Consolidated Quotation (``CQ'') Plan for inclusion in the CQ Plan's consolidated quotation information data stream. The data feed includes the best bids and offers for all securities that are traded on the Exchange and for which NYSE reports quotes under the CQ Plan. As part of the Exchange's efforts to regularly upgrade systems to support more modern data distribution formats and protocols as technology evolves, beginning March 1, 2016, NYSE BBO and NYSE Trades will both be transmitted in a new format, Exchange Data Protocol (XDP). Beginning March 1, 2016, the Exchange will transmit NYSE BBO and NYSE Trades in both the legacy format and in XDP without any additional fee being charged for providing these data feeds in both formats. The dual dissemination will remain in place until July 1, 2016, the planned decommission date of the legacy format. Beginning July 1, 2016, recipients of NYSE BBO and NYSE Trades who wish to continue to receive NYSE BBO and NYSE Trades in the legacy format will each be subject to the proposed Decommission Extension Fee of $5,000 per month. During the extension period, recipients of NYSE BBO and NYSE Trades would continue to be subject to the subscription fees currently noted in the Fee Schedule. The extension period for receiving these data feeds in the legacy format will expire on September 1, 2016, on which date distribution of NYSE BBO and NYSE Trades in the legacy format will be permanently discontinued. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,\6\ in general, and Sections 6(b)(4) and 6(b)(5) of the Act,\7\ in particular, in that it provides an equitable allocation of reasonable fees among users and recipients of the data and is not designed to permit unfair discrimination among customers, issuers, and brokers. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78f(b). \7\ 15 U.S.C. 78f(b)(4), (5). --------------------------------------------------------------------------- The Exchange believes that adopting an extension fee for subscribers of NYSE BBO and NYSE Trades who wish to receive these data feeds in the legacy format for a period of time beyond the built-in overlap period is reasonable, equitable and not unfairly discriminatory because the proposed fee would apply equally to all data recipients that currently subscribe to NYSE BBO and NYSE Trades. The Exchange believes that it is reasonable to require data recipients to pay an additional fee for taking the data feeds in the legacy format beyond the period of time specifically allotted by the Exchange for data feed customers to adapt to the new XDP format at no extra cost. To that end, the extension fee is designed to encourage data recipients to migrate to the XDP format in order to continue to receive NYSE BBO and NYSE Trades in XDP as the legacy format would no longer be available after that date. The Exchange does not intend to support the legacy format at all after September 1, 2016. The Exchange notes that NYSE BBO and NYSE Trades are entirely optional. The Exchange is not required to make NYSE BBO and NYSE Trades available or to offer any specific pricing alternatives to any customers, nor is any firm required to purchase NYSE BBO and NYSE Trades, nor is the Exchange required to offer any feed (NYSE BBO, NYSE Trades, or otherwise) in a particular format, and it is a benefit to the markets generally that NYSE update its distribution technology to make it more efficient (and at the same time eliminate less efficient forms of dissemination). Firms that do purchase NYSE BBO and NYSE Trades do so for the primary goals of using them to increase revenues, reduce expenses, and in some instances compete directly with the Exchange (including for order flow); those firms are able to determine for themselves whether NYSE BBO and NYSE Trades or any other similar products are attractively priced or not.\8\ --------------------------------------------------------------------------- \8\ See, e.g., Proposing Release on Regulation of NMS Stock Alternative Trading Systems, Securities Exchange Act Release No. 76474 (Nov. 18, 2015) (File No. S7-23-15). See also, ``Brokers Warned Not to Steer Clients' Stock Trades Into Slow Lane,'' Bloomberg Business, December 14, 2015 (Sigma X dark pool to use direct exchange feeds as the primary source of price data). --------------------------------------------------------------------------- The decision of the United States Court of Appeals for the District of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010), upheld reliance by the Securities and Exchange Commission (``Commission'') upon the existence of competitive market mechanisms to set reasonable and equitably allocated fees for proprietary market data: In fact, the legislative history indicates that the Congress intended that the market system [[Page 15365]] `evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed' and that the SEC wield its regulatory power `in those situations where competition may not be sufficient,' such as in the creation of a `consolidated transactional reporting system.' Id. at 535 (quoting H.R. Rep. No. 94-229 at 92 (1975), as reprinted in 1975 U.S.C.C.A.N. 323). The court agreed with the Commission's conclusion that ``Congress intended that `competitive forces should dictate the services and practices that constitute the U.S. national market system for trading equity securities.' '' \9\ --------------------------------------------------------------------------- \9\ NetCoalition, 615 F.3d at 535. As explained below in the Exchange's Statement on Burden on Competition, the Exchange believes that there is substantial evidence of competition in the marketplace for proprietary market data and that the Commission can rely upon such evidence in concluding that the fees established in this filing are the product of competition and therefore satisfy the relevant statutory standards. In addition, the existence of alternatives to the legacy format, such as converting to XDP as soon as possible, further ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can select such alternatives. As the NetCoalition decision noted, the Commission is not required to undertake a cost-of-service or ratemaking approach. The Exchange believes that, even if it were possible as a matter of economic theory, cost-based pricing for proprietary market data would be so complicated that it could not be done practically or offer any significant benefits.\10\ --------------------------------------------------------------------------- \10\ The Exchange believes that cost-based pricing would be impractical because it would create enormous administrative burdens for all parties and the Commission to cost-regulate a large number of participants and standardize and analyze extraordinary amounts of information, accounts, and reports. In addition, and as described below, it is impossible to regulate market data prices in isolation from prices charged by markets for other services that are joint products. Cost-based rate regulation would also lead to litigation and may distort incentives, including those to minimize costs and to innovate, leading to further waste. Under cost-based pricing, the Commission would be burdened with determining a fair rate of return, and the industry could experience frequent rate increases based on escalating expense levels. Even in industries historically subject to utility regulation, cost-based ratemaking has been discredited. As such, the Exchange believes that cost-based ratemaking would be inappropriate for proprietary market data and inconsistent with Congress's direction that the Commission use its authority to foster the development of the national market system, and that market forces will continue to provide appropriate pricing discipline. See Appendix C to NYSE's comments to the Commission's 2000 Concept Release on the Regulation of Market Information Fees and Revenues, which can be found on the Commission's Web site at http://www.sec.gov/rules/concept/s72899/buck1.htm. Finally, the prices set herein are prices for continuing to support distribution formats the Exchange has elected to retire in favor of new and more efficient distribution formats, making cost-based analyses even less relevant. --------------------------------------------------------------------------- For these reasons, the Exchange believes that the proposed fees are reasonable, equitable, and not unfairly discriminatory. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. An exchange's ability to price its proprietary market data feed products is constrained by actual competition for the sale of proprietary market data products, the joint product nature of exchange platforms, and the existence of alternatives to the Exchange's proprietary data (and in this instance, the ability of any firm to switch to the new distribution format in a time frame that eliminates the need to pay these fees entirely). The Existence of Actual Competition The market for proprietary data products is currently competitive and inherently contestable because there is fierce competition for the inputs necessary for the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with one another for listings and order flow and sales of market data itself, providing ample opportunities for entrepreneurs who wish to compete in any or all of those areas, including producing and distributing their own market data. Proprietary data products are produced and distributed by each individual exchange, as well as other entities, in a vigorously competitive market. Indeed, the U.S. Department of Justice (``DOJ'') (the primary antitrust regulator) has expressly acknowledged the aggressive actual competition among exchanges, including for the sale of proprietary market data. In 2011, the DOJ stated that exchanges ``compete head to head to offer real-time equity data products. These data products include the best bid and offer of every exchange and information on each equity trade, including the last sale.'' \11\ --------------------------------------------------------------------------- \11\ Press Release, U.S. Department of Justice, Assistant Attorney General Christine Varney Holds Conference Call Regarding NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. Abandoning Their Bid for NYSE Euronext (May 16, 2011), available at http://www.justice.gov/iso/opa/atr/speeches/2011/at-speech-110516.html; see also Complaint in U.S. v. Deutsche Borse AG and NYSE Euronext, Case No. 11-cv-2280 (D.C. Dist.) ] 24 (``NYSE and Direct Edge compete head-to-head . . . in the provision of real-time proprietary equity data products.''). --------------------------------------------------------------------------- Moreover, competitive markets for listings, order flow, executions, and transaction reports provide pricing discipline for the inputs of proprietary data products and therefore constrain markets from overpricing proprietary market data. Broker-dealers send their order flow and transaction reports to multiple venues, rather than providing them all to a single venue, which in turn reinforces this competitive constraint. As a 2010 Commission Concept Release noted, the ``current market structure can be described as dispersed and complex'' with ``trading volume . . . dispersed among many highly automated trading centers that compete for order flow in the same stocks'' and ``trading centers offer[ing] a wide range of services that are designed to attract different types of market participants with varying trading needs.'' \12\ More recently, SEC Chair Mary Jo White has noted that competition for order flow in exchange-listed equities is ``intense'' and divided among many trading venues, including exchanges, more than 40 alternative trading systems, and more than 250 broker-dealers.\13\ --------------------------------------------------------------------------- \12\ Concept Release on Equity Market Structure, Securities Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3594 (Jan. 21, 2010) (File No. S7-02-10). This Concept Release included data from the third quarter of 2009 showing that no market center traded more than 20% of the volume of listed stocks, further evidencing the dispersal of and competition for trading activity. Id. at 3598. Data available on ArcaVision show that from June 30, 2013 to June 30, 2014, no exchange traded more than 12% of the volume of listed stocks by either trade or dollar volume, further evidencing the continued dispersal of and fierce competition for trading activity. See https://www.arcavision.com/Arcavision/arcalogin.jsp. \13\ Mary Jo White, Enhancing Our Equity Market Structure, Sandler O'Neill & Partners, L.P. Global Exchange and Brokerage Conference (June 5, 2014) (available on the Commission Web site), citing Tuttle, Laura, 2014, ``OTC Trading: Description of Non-ATS OTC Trading in National Market System Stocks,'' at 7-8. --------------------------------------------------------------------------- If an exchange succeeds in competing for quotations, order flow, and trade executions, then it earns trading revenues and increases the value of its proprietary market data products because they will contain greater quote and trade information. Conversely, if an exchange is less successful in attracting quotes, order flow, and trade executions, then its market data products may be less desirable to customers in light of the diminished content and data products offered by competing venues may become more attractive. Thus, competition for quotations, order flow, and trade [[Page 15366]] executions puts significant pressure on an exchange to maintain both execution and data fees at reasonable levels. In addition, in the case of products that are also redistributed through market data vendors, such as Bloomberg and Thompson Reuters, the vendors themselves provide additional price discipline for proprietary data products because they control the primary means of access to certain end users. These vendors impose price discipline based upon their business models. For example, vendors that assess a surcharge on data they sell are able to refuse to offer proprietary products that their end users do not or will not purchase in sufficient numbers. Vendors will not elect to make available NYSE BBO or NYSE Trades in the legacy format unless their customers request it, and customers will not elect to pay the proposed fees unless NYSE BBO and NYSE Trades can provide value in the legacy formats by sufficiently increasing revenues or reducing costs in the customer's business in a manner that will offset the fees. The Exchange has provided customers with adequate notice that it intends to discontinue dissemination of the data feeds in the legacy format. Therefore, the proposed Decommission Extension Fee would only be applicable to those customers who have a need or desire to continue to take the data feeds in the legacy format beyond the period provided for migration to the XDP format. Customers who timely migrate to the XDP format to receive the data feeds would not need to receive the data feeds in the legacy format and therefore would not be subject to the Decommission Extension Fee at all. All of these factors operate as constraints on pricing proprietary data products. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) \14\ of the Act and subparagraph (f)(2) of Rule 19b-4 \15\ thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78s(b)(3)(A). \15\ 17 CFR 240.19b-4(f)(2). --------------------------------------------------------------------------- At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \16\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSE-2016-21 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2016-22. 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 Web site (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 Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2016-21 and should be submitted on or before April 12, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\17\ --------------------------------------------------------------------------- \17\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-06408 Filed 3-21-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices 15363
the Substitution is necessary and in the the Affected Contract Owners to effect Substitution Notice; and (c) before and
best interests of Contract Owners in the Substitution. after account values.
light of the impending liquidation of the 3. The Substitution will be effected at 9. Applicants will not receive, for
Existing Fund and the importance of the relative net asset values of the three years from the Substitution Date,
offering a money market fund respective shares in conformity with any direct or indirect benefits from the
investment option for the Contracts. Section 22(c) of the Act and Rule 22c– Replacement Fund, its adviser or
Applicants state that the board of 1 thereunder without the imposition of underwriter (or their affiliates), in
directors of PVC concluded that any transfer or similar charges by connection with assets attributable to
converting the Existing Fund to a applicants. The Substitution will be Contracts affected by the Substitution, at
government money market fund would effected without change in the amount a higher rate than they had received
not be a feasible option and voted to or value of any Contracts held by from the Existing Fund, its adviser or
terminate the Existing Fund and Affected Contract Owners. underwriter (or their affiliates),
liquidate its assets effective April 8, 4. The Substitution will in no way including without limitation 12b–1 fees,
2016. The Insurance Companies submit alter the tax treatment of Affected shareholder service, administrative or
that the Replacement Fund should Contract Owners in connection with other service fees, revenue sharing, or
substituted for the Existing Fund to their Contracts, and no tax liability will other arrangements.
serve as the money market investment arise for Affected Contract Owners as a For the Commission, by the Division of
option for all of the Contracts, as well result of the Substitution. Investment Management, under delegated
as for the Contract-related purposes for 5. The rights or obligations of the authority.
which the Existing Fund is currently Insurance Companies under the Robert W. Errett,
used, so that Contract Owner-initiated Contracts of Affected Contract Owners Deputy Secretary.
decisions and the Insurance Companies’ will not be altered in any way. The
[FR Doc. 2016–06411 Filed 3–21–16; 8:45 am]
obligations under the Contracts are less Substitution will not adversely affect
BILLING CODE 8011–01–P
likely to be prevented. any riders under the Contracts.
6. Affected Contract Owners will be
4. Applicants also assert that the permitted to make at least one transfer
Substitution does not entail any of the SECURITIES AND EXCHANGE
of Contract value from the subaccount
abuses that Section 26(c) was designed COMMISSION
investing in the Existing Fund (before
to prevent. Each Affected Contract the Substitution Date) or the [Release No. 34–77388; File No. SR–NYSE–
Owner has been advised of his right, Replacement Fund (after the 2016–21]
any time prior to the Substitution Date, Substitution Date) to any other available
and for at least 30 days after the investment option under the Contract Self-Regulatory Organizations; New
Substitution Date, to reallocate account without charge for a period beginning at York Stock Exchange LLC; Notice of
value under the affected Contract least 30 days before the Substitution Filing and Immediate Effectiveness of
without any cost or limitation, or Date through at least 30 days following Proposed Rule Change Adopting a
otherwise withdraw or terminate his the Substitution Date. Except as Decommission Extension Fee for
interest in accordance with the terms described in any market timing/short- Receipt of the NYSE BBO and NYSE
and conditions of his Contract. term trading provisions of the relevant Trades Market Data Products
Furthermore, Contract Owners will not prospectus, the Insurance Companies March 17, 2016.
incur any additional tax liability or any will not exercise any right they may
additional fees or expenses as a result of Pursuant to Section 19(b)(1) 1 of the
have under the Contracts to impose Securities Exchange Act of 1934 (the
the Substitution. restrictions on transfers between the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
Applicants’ Conditions: subaccounts under the Contracts, notice is hereby given that, on March 8,
including limitations on the future 2016, New York Stock Exchange LLC
Applicants agree that any order number of transfers, for a period
granting the requested relief will be (‘‘NYSE’’ or the ‘‘Exchange’’) filed with
beginning at least 30 days before the the Securities and Exchange
subject to the following conditions: Substitution Date through at least 30 Commission (the ‘‘Commission’’) the
1. The Substitution will not be days following the Substitution Date. proposed rule change as described in
effected unless the Insurance 7. All Affected Contract Owners will Items I, II, and III below, which Items
Companies determine that: (a) The be notified, at least 30 days before the have been prepared by the self-
Contracts allow the substitution of Substitution Date about: (a) The regulatory organization. The
shares of registered open-end intended substitution of the Existing Commission is publishing this notice to
investment companies in the manner Fund with the Replacement Fund; (b) solicit comments on the proposed rule
contemplated by the application; (b) the the intended Substitution Date; and (c) change from interested persons.
Substitution can be consummated as information with respect to transfers as
described in the application under set forth in Condition 6 above. In I. Self-Regulatory Organization’s
applicable insurance laws; and (c) any addition, the Insurance Companies will Statement of the Terms of Substance of
regulatory requirements in each deliver to all Affected Contract Owners, the Proposed Rule Change
jurisdiction where the Contracts are at least thirty (30) days before the The Exchange proposes to adopt a
qualified for sale have been complied Substitution Date, a prospectus for the Decommission Extension Fee for receipt
with to the extent necessary to complete Replacement Fund.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
of the NYSE BBO and NYSE Trades
the Substitution. 8. The Insurance Companies will market data products. The proposed
2. The Insurance Companies or their deliver to each Affected Contract Owner rule change is available on the
affiliates will pay all expenses and within five (5) business days of the Exchange’s Web site at www.nyse.com,
transaction costs of the Substitution, Substitution Date a written confirmation at the principal office of the Exchange,
including legal and accounting which will include: (a) A confirmation
expenses, any applicable brokerage that the Substitution was carried out as 1 15 U.S.C. 78s(b)(1).
expenses and other fees and expenses. previously notified; (b) a restatement of 2 15 U.S.C. 78a.
No fees or charges will be assessed to the information set forth in the Pre- 3 17 CFR 240.19b–4.
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‘evolve through the interplay of competitive For these reasons, the Exchange Moreover, competitive markets for
forces as unnecessary regulatory restrictions believes that the proposed fees are listings, order flow, executions, and
are removed’ and that the SEC wield its reasonable, equitable, and not unfairly transaction reports provide pricing
regulatory power ‘in those situations where discriminatory. discipline for the inputs of proprietary
competition may not be sufficient,’ such as
in the creation of a ‘consolidated
data products and therefore constrain
B. Self-Regulatory Organization’s
transactional reporting system.’ markets from overpricing proprietary
Statement on Burden on Competition market data. Broker-dealers send their
Id. at 535 (quoting H.R. Rep. No. 94–229 The Exchange does not believe that order flow and transaction reports to
at 92 (1975), as reprinted in 1975 the proposed rule change will impose multiple venues, rather than providing
U.S.C.C.A.N. 323). The court agreed any burden on competition that is not them all to a single venue, which in turn
with the Commission’s conclusion that necessary or appropriate in furtherance reinforces this competitive constraint.
‘‘Congress intended that ‘competitive of the purposes of the Act. An As a 2010 Commission Concept Release
forces should dictate the services and exchange’s ability to price its noted, the ‘‘current market structure can
practices that constitute the U.S. proprietary market data feed products is be described as dispersed and complex’’
national market system for trading constrained by actual competition for with ‘‘trading volume . . . dispersed
equity securities.’ ’’ 9 the sale of proprietary market data among many highly automated trading
As explained below in the Exchange’s products, the joint product nature of centers that compete for order flow in
Statement on Burden on Competition, exchange platforms, and the existence of the same stocks’’ and ‘‘trading centers
the Exchange believes that there is alternatives to the Exchange’s offer[ing] a wide range of services that
substantial evidence of competition in proprietary data (and in this instance, are designed to attract different types of
the marketplace for proprietary market the ability of any firm to switch to the market participants with varying trading
data and that the Commission can rely new distribution format in a time frame needs.’’ 12 More recently, SEC Chair
upon such evidence in concluding that that eliminates the need to pay these Mary Jo White has noted that
the fees established in this filing are the fees entirely). competition for order flow in exchange-
product of competition and therefore listed equities is ‘‘intense’’ and divided
satisfy the relevant statutory standards. The Existence of Actual Competition among many trading venues, including
In addition, the existence of alternatives The market for proprietary data exchanges, more than 40 alternative
to the legacy format, such as converting products is currently competitive and trading systems, and more than 250
to XDP as soon as possible, further inherently contestable because there is broker-dealers.13
ensures that the Exchange cannot set fierce competition for the inputs If an exchange succeeds in competing
unreasonable fees, or fees that are necessary for the creation of proprietary for quotations, order flow, and trade
unreasonably discriminatory, when data and strict pricing discipline for the executions, then it earns trading
vendors and subscribers can select such proprietary products themselves. revenues and increases the value of its
alternatives. Numerous exchanges compete with one proprietary market data products
As the NetCoalition decision noted, another for listings and order flow and because they will contain greater quote
the Commission is not required to sales of market data itself, providing and trade information. Conversely, if an
undertake a cost-of-service or ample opportunities for entrepreneurs exchange is less successful in attracting
ratemaking approach. The Exchange who wish to compete in any or all of quotes, order flow, and trade
believes that, even if it were possible as those areas, including producing and executions, then its market data
a matter of economic theory, cost-based distributing their own market data. products may be less desirable to
pricing for proprietary market data Proprietary data products are produced customers in light of the diminished
would be so complicated that it could and distributed by each individual content and data products offered by
not be done practically or offer any exchange, as well as other entities, in a competing venues may become more
significant benefits.10 vigorously competitive market. Indeed, attractive. Thus, competition for
the U.S. Department of Justice (‘‘DOJ’’) quotations, order flow, and trade
9 NetCoalition, 615 F.3d at 535. (the primary antitrust regulator) has
10 The Exchange believes that cost-based pricing speeches/2011/at-speech-110516.html; see also
expressly acknowledged the aggressive Complaint in U.S. v. Deutsche Borse AG and NYSE
would be impractical because it would create
enormous administrative burdens for all parties and
actual competition among exchanges, Euronext, Case No. 11–cv–2280 (D.C. Dist.) ¶ 24
the Commission to cost-regulate a large number of including for the sale of proprietary (‘‘NYSE and Direct Edge compete head-to-head . . .
participants and standardize and analyze market data. In 2011, the DOJ stated that in the provision of real-time proprietary equity data
extraordinary amounts of information, accounts, products.’’).
exchanges ‘‘compete head to head to 12 Concept Release on Equity Market Structure,
and reports. In addition, and as described below, it
is impossible to regulate market data prices in
offer real-time equity data products. Securities Exchange Act Release No. 61358 (Jan. 14,
isolation from prices charged by markets for other These data products include the best bid 2010), 75 FR 3594 (Jan. 21, 2010) (File No. S7–02–
services that are joint products. Cost-based rate and offer of every exchange and 10). This Concept Release included data from the
regulation would also lead to litigation and may information on each equity trade, third quarter of 2009 showing that no market center
distort incentives, including those to minimize traded more than 20% of the volume of listed
costs and to innovate, leading to further waste.
including the last sale.’’ 11 stocks, further evidencing the dispersal of and
Under cost-based pricing, the Commission would competition for trading activity. Id. at 3598. Data
be burdened with determining a fair rate of return, Regulation of Market Information Fees and available on ArcaVision show that from June 30,
and the industry could experience frequent rate Revenues, which can be found on the Commission’s 2013 to June 30, 2014, no exchange traded more
increases based on escalating expense levels. Even Web site at http://www.sec.gov/rules/concept/ than 12% of the volume of listed stocks by either
s72899/buck1.htm. Finally, the prices set herein are trade or dollar volume, further evidencing the
asabaliauskas on DSK3SPTVN1PROD with NOTICES
in industries historically subject to utility
regulation, cost-based ratemaking has been prices for continuing to support distribution continued dispersal of and fierce competition for
discredited. As such, the Exchange believes that formats the Exchange has elected to retire in favor trading activity. See https://www.arcavision.com/
cost-based ratemaking would be inappropriate for of new and more efficient distribution formats, Arcavision/arcalogin.jsp.
proprietary market data and inconsistent with making cost-based analyses even less relevant. 13 Mary Jo White, Enhancing Our Equity Market
Congress’s direction that the Commission use its 11 Press Release, U.S. Department of Justice, Structure, Sandler O’Neill & Partners, L.P. Global
authority to foster the development of the national Assistant Attorney General Christine Varney Holds Exchange and Brokerage Conference (June 5, 2014)
market system, and that market forces will continue Conference Call Regarding NASDAQ OMX Group (available on the Commission Web site), citing
to provide appropriate pricing discipline. See Inc. and IntercontinentalExchange Inc. Abandoning Tuttle, Laura, 2014, ‘‘OTC Trading: Description of
Appendix C to NYSE’s comments to the Their Bid for NYSE Euronext (May 16, 2011), Non-ATS OTC Trading in National Market System
Commission’s 2000 Concept Release on the available at http://www.justice.gov/iso/opa/atr/ Stocks,’’ at 7–8.
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![15366 Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices
executions puts significant pressure on At any time within 60 days of the office of the Exchange. All comments
an exchange to maintain both execution filing of such proposed rule change, the received will be posted without change;
and data fees at reasonable levels. Commission summarily may the Commission does not edit personal
In addition, in the case of products temporarily suspend such rule change if identifying information from
that are also redistributed through it appears to the Commission that such submissions. You should submit only
market data vendors, such as Bloomberg action is necessary or appropriate in the information that you wish to make
and Thompson Reuters, the vendors public interest, for the protection of available publicly. All submissions
themselves provide additional price investors, or otherwise in furtherance of should refer to File Number SR–NYSE–
discipline for proprietary data products the purposes of the Act. If the 2016–21 and should be submitted on or
because they control the primary means Commission takes such action, the before April 12, 2016.
of access to certain end users. These Commission shall institute proceedings For the Commission, by the Division of
vendors impose price discipline based under Section 19(b)(2)(B) 16 of the Act to Trading and Markets, pursuant to delegated
upon their business models. For determine whether the proposed rule authority.17
example, vendors that assess a change should be approved or Robert W. Errett,
surcharge on data they sell are able to disapproved. Deputy Secretary.
refuse to offer proprietary products that IV. Solicitation of Comments [FR Doc. 2016–06408 Filed 3–21–16; 8:45 am]
their end users do not or will not
Interested persons are invited to BILLING CODE 8011–01–P
purchase in sufficient numbers. Vendors
submit written data, views, and
will not elect to make available NYSE
arguments concerning the foregoing,
BBO or NYSE Trades in the legacy SECURITIES AND EXCHANGE
including whether the proposed rule
format unless their customers request it, COMMISSION
change is consistent with the Act.
and customers will not elect to pay the
Comments may be submitted by any of
proposed fees unless NYSE BBO and [Release No. 34–77386; File No. SR–
the following methods: NYSEMKT–2016–20]
NYSE Trades can provide value in the
legacy formats by sufficiently increasing Electronic Comments
revenues or reducing costs in the Self-Regulatory Organizations; NYSE
• Use the Commission’s Internet MKT LLC; Notice of Filing of Proposed
customer’s business in a manner that comment form (http://www.sec.gov/
will offset the fees. The Exchange has Rule Change Amending and Restating
rules/sro.shtml); or the Fifth Amended and Restated
provided customers with adequate • Send an email to rule-comments@
notice that it intends to discontinue Bylaws of the Exchange’s Ultimate
sec.gov. Please include File Number SR–
dissemination of the data feeds in the Parent Company, Intercontinental
NYSE–2016–21 on the subject line.
legacy format. Therefore, the proposed Exchange, Inc., To Implement Proxy
Decommission Extension Fee would Paper Comments Access
only be applicable to those customers • Send paper comments in triplicate March 17, 2016.
who have a need or desire to continue to Brent J. Fields, Secretary, Securities Pursuant to Section 19(b)(1) 1 of the
to take the data feeds in the legacy and Exchange Commission, 100 F Street Securities Exchange Act of 1934
format beyond the period provided for NE., Washington, DC 20549–1090. (‘‘Act’’) 2 and Rule 19b–4 thereunder,3
migration to the XDP format. Customers All submissions should refer to File notice is hereby given that, on March 2,
who timely migrate to the XDP format Number SR–NYSE–2016–22. This file 2016, NYSE MKT LLC (the ‘‘Exchange’’
to receive the data feeds would not need number should be included on the or ‘‘NYSE MKT’’) filed with the
to receive the data feeds in the legacy subject line if email is used. To help the Securities and Exchange Commission
format and therefore would not be Commission process and review your (‘‘Commission’’) the proposed rule
subject to the Decommission Extension comments more efficiently, please use change as described in Items I, II, and
Fee at all. All of these factors operate as only one method. The Commission will III below, which Items have been
constraints on pricing proprietary data post all comments on the Commission’s prepared by the self-regulatory
products. Internet Web site (http://www.sec.gov/ organization. The Commission is
C. Self-Regulatory Organization’s rules/sro.shtml). Copies of the publishing this notice to solicit
Statement on Comments on the submission, all subsequent comments on the proposed rule change
Proposed Rule Change Received From amendments, all written statements from interested persons.
Members, Participants, or Others with respect to the proposed rule
change that are filed with the I. Self-Regulatory Organization’s
No written comments were solicited Commission, and all written Statement of the Terms of Substance of
or received with respect to the proposed communications relating to the the Proposed Rule Change
rule change. proposed rule change between the The Exchange proposes to amend and
III. Date of Effectiveness of the Commission and any person, other than restate the Fifth Amended and Restated
Proposed Rule Change and Timing for those that may be withheld from the Bylaws of the Exchange’s ultimate
Commission Action public in accordance with the parent company, Intercontinental
provisions of 5 U.S.C. 552, will be Exchange, Inc. (‘‘ICE’’), to implement
The foregoing rule change is effective available for Web site viewing and proxy access. The proposed rule change
upon filing pursuant to Section printing in the Commission’s Public
asabaliauskas on DSK3SPTVN1PROD with NOTICES
is available on the Exchange’s Web site
19(b)(3)(A) 14 of the Act and Reference Room, 100 F Street NE., at www.nyse.com, at the principal office
subparagraph (f)(2) of Rule 19b–4 15 Washington, DC 20549 on official of the Exchange, and at the
thereunder, because it establishes a due, business days between the hours of Commission’s Public Reference Room.
fee, or other charge imposed by the 10:00 a.m. and 3:00 p.m. Copies of the
Exchange. filing also will be available for 17 17 CFR 200.30–3(a)(12).
inspection and copying at the principal 1 15 U.S.C. 78s(b)(1).
14 15 U.S.C. 78s(b)(3)(A). 2 15 U.S.C. 78a.
15 17 CFR 240.19b–4(f)(2). 16 15 U.S.C. 78s(b)(2)(B). 3 17 CFR 240.19b–4.
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Document Created: 2018-02-02 15:15:44
Document Modified: 2018-02-02 15:15:44
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 15363 |
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