81 FR 21921 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rules 7015(g)(1) and 7034

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 71 (April 13, 2016)

[Federal Register Volume 81, Number 71 (Wednesday, April 13, 2016)]
[Notices]
[Pages 21921-21924]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-08425]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77552; File No. SR-NASDAQ-2016-053]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rules 7015(g)(1) and 7034

April 7, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 6, 2016, The NASDAQ Stock Market LLC (``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Access Services fees at Rule 
7015(g)(1) to reduce the fee assessed for MITCH Wave Ports located at 
Mahwah, NJ. The Exchange is also proposing to amend Rule 7034 to: (i) 
Reduce monthly fees assessed for NYSE Equities market data 
connectivity; and (ii) make technical changes to the description of 
market data connectivity options under the rule. While these amendments 
are effective upon filing, the Exchange has designated the proposed 
amendments to be operative on April 1, 2016.\3\
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    \3\ The Commission notes that the substance of this filing is 
identical to the substance of SR-NASDAQ-2016-047, which was filed 
March 29, 2016, and withdrawn on April 6, 2016. This filing replaced 
SR-NASDAQ-2016-047, thus, the fee changes were effective upon filing 
but have been operative since April 1, 2016.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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 these 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to reduce certain fees 
under Rules 7015 and 7034, and to make technical changes to the 
description of market data connectivity options under Rule 7034.

[[Page 21922]]

Rule 7015 Changes
    The Exchange is proposing to reduce the fee assessed for MITCH Wave 
Port at Mahwah, NJ monthly subscriptions. The Exchange provides Multi-
cast ITCH (``MITCH'') Wave Ports to clients co-located at other third-
party data centers, including the New York Stock Exchange`s (``NYSE'') 
data center located in Mahwah, NJ, through which the Exchange's 
TotalView ITCH market data is distributed after delivery to those data 
centers via a wireless network.
    The wirelessly-delivered TotalView ITCH market data arrives at 
Exchange-owned cabinets located at these third-party data centers, to 
which the co-location clients may cross-connect to the MITCH Wave Ports 
in those data centers to receive TotalView ITCH.\4\ The wireless 
network that the Exchange uses to connect its data center with third-
party data centers is provided and maintained by third-party vendors.
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    \4\ Subscription to MITCH Wave Ports is entirely optional. Co-
location clients that opt to subscribe to MITCH Wave Ports will 
continue to be fee liable for the applicable market data fees as 
described in Rules 7019, 7023, and 7026.
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    The Exchange incurs costs in leasing towers and equipment to 
connect to third-party data centers, such as Mahwah, NJ, through its 
third party vendors and the Exchange recoups these costs through the 
fees it assesses. The Exchange has recently reduced such vendor cost 
for connectivity to Mahwah, NJ by switching to an alternative vendor 
that assesses the Exchange a lower fee for such connectivity and is 
accordingly proposing to reduce the monthly charge assessed to 
subscribers for a MITCH Wave Port at Mahwah, NJ from $12,500 per month 
to $10,000 per month.
Rule 7034 Changes
    The Exchange is proposing to amend Rule 7034 to: (i) Reduce monthly 
fees assessed for NYSE Equities market data connectivity; and (ii) make 
technical changes to the description of market data connectivity 
options under the rule. Rule 7034 provides the charges assessed by the 
Exchange for co-location services. Rule 7034(b) provides the various 
connectivity options for co-location services. The Exchange offers 
multicast Market Data feeds that are delivered to the Exchange's data 
center located in Carteret, NJ via a wireless network.\5\ The Exchange 
offers connectivity to data feeds provided by NYSE, BATS (including 
Direct Edge), and CME, which are delivered wirelessly by third party 
vendors from those market's [sic] data centers to the Exchange's 
Carteret, NJ data center. Specifically, the NYSE Equities data feeds 
under Rule 7034(b) are wirelessly delivered to Carteret, NJ from NYSE's 
Mahwah, NJ data center, the BATS and Direct Edge data feeds are 
wirelessly delivered to Carteret, NJ from BATS's Secaucus, NJ data 
center, and the CME data feeds are wirelessly delivered to Carteret, NJ 
from CME's Aurora, IL data center.
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    \5\ Subscription to the connectivity options under Rule 7034(b) 
is entirely optional. To receive a particular data feed, a 
participant must subscribe to the connectivity under Rule 7034(b) 
and also have a subscription to the data feed with the applicable 
exchange.
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    The first change the Exchange proposes is to reduce the recurring 
monthly fee assessed for connectivity to NYSE Equities data feeds, 
which are transmitted from the Mahwah, NJ data center to the Exchange's 
data center in Carteret, NJ. As discussed above, the Exchange recently 
reduced its vendor costs by switching to an alternative vendor that 
assesses the Exchange a lower fee for such connectivity. Because of the 
reduced vendor costs realized for connectivity to Mahwah, NJ, the 
Exchange is able to reduce the charges assessed for services that 
require wireless connectivity to Mahwah, NJ.
    Currently, the Exchange assesses a recurring monthly fee of $12,500 
for connectivity to NYSE Equities Arca Integrated feed and the for the 
NYSE Equities Open Book feed. As a consequence of the reduced vendor 
costs, the Exchange is proposing to reduce the charge it assesses as a 
recurring monthly fee for each of these services from $12,500 to 
$10,000.
    The second change the Exchange proposes is to make technical 
corrections to the rule text under Rule 7034(b) concerning NYSE 
Equities Open Book connectivity and BATS Multicast PITCH connectivity. 
NYSE recently combined Open Book data with NYSE BBO, NYSE Trades, and 
NYSE Order Imbalances data to form the ``NYSE Integrated'' data 
feed,\6\ which the Exchange began to offer on November 16, 2015. 
Accordingly, the Exchange is [sic] updated the rule text under Rule 
7034(b) to accurately reflect this change.
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    \6\ See Securities Exchange Act Release No. 76485 (November 20, 
2015), 80 FR 74158 (November 27, 2015) (SR-NYSE-2015-57).
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    The Exchange is also correcting rule text concerning BATS Multicast 
PITCH connectivity that was inadvertently introduced when the rule text 
was adopted.\7\ Specifically, the Exchange is correcting the spelling 
of ``Multicast'' in the rule and is correcting the name of the BATS BZX 
exchange, which is currently spelled ``BZY.'' \8\
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    \7\ See Securities Exchange Act Release No. 73562 (January 25, 
2013), 78 FR 6842 (January 31, 2013) (SR-NASDAQ-2012-119)
    \8\ For a description of Bats Global Markets, Inc.'s exchanges, 
see http://www.batstrading.com/about/.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among members and issuers and other persons using any facility 
or system which the Exchange operates or controls, and is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest; and are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \11\ Likewise, in 
NetCoalition v. Securities and Exchange Commission \12\ 
(``NetCoalition'') the DC Circuit upheld the Commission's use of a 
market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\13\ As the court emphasized, the Commission ``intended in 
Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market

[[Page 21923]]

data . . . to be made available to investors and at what cost.'' \14\
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    \11\ See Securities Exchange Act Release No. 51808 at 37499 
(June 9, 2005) (``Regulation NMS Adopting Release'').
    \12\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \13\ See NetCoalition, at 534.
    \14\ Id. at 537.
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    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \15\
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    \15\ Id. at 539 (quoting ArcaBook Order, 73 FR at 74782-74783).
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Fee Reductions
    The Exchange believes that proposed reduction in the monthly 
recurring fees assessed under Rules 7015 and 7034(b) are [sic] 
reasonable because they [sic] will allow the Exchange to align the fees 
assessed for the connectivity more closely with the costs incurred by 
the Exchange in offering the connectivity. As discussed above, the 
Exchange realized a reduction in its vendor costs. Vendors supply 
wireless connectivity from the Exchange's data center to the data 
centers of other markets. Vendor costs are not the only costs to the 
Exchange in offering such connectivity; however, the reduced vendor 
cost for wirelessly connecting to Mahwah, NJ has allowed the Exchange 
to reduce the monthly fee assessed for connectivity to Mahwah, NJ by 
$2,500.
    The Exchange notes that the proposed reduced monthly recurring fees 
are also reasonable because they are in-line with other fees assessed 
for similar connectivity, with differences in cost being reflective of 
the differences in the relative cost of offering the services. For 
example, the proposed reduced fees assessed under Rule 7034(b) for 
connectivity to the NYSE Equities feeds, although higher as reflection 
of the increased costs the Exchange incurs in offering the 
connectivity, are consistent with BATS Multicast PITCH BZX and BYX data 
feed connectivity under Rule 7034(b), which has a monthly recurring fee 
of $7,500. With respect to the costs incurred, the Exchange notes that 
the distance, and hence the wireless network equipment required, is 
greater between Mahwah, NJ and Carteret, NJ in contrast to the distance 
between Secaucus, NJ and Carteret, NJ, which is reflected in the fees 
that vendors charge the Exchange for such connectivity.
    The Exchange believes that the proposed reduced fees are an 
equitable allocation and are not unfairly discriminatory because the 
Exchange will apply the same fee to all similarly situated co-location 
clients that voluntarily select these service options. The Exchange 
also notes that co-location clients will continue to have other 
connectivity options to receive the underlying data feeds, including 
fiber optic connectivity.
Fee Clarifications
    The Exchange believes that the proposed clarifying changes to Rule 
7034(b) serve to protect investors and the public interest because they 
remove misspelled and inaccurate rule text, which will serve to avoid 
investor confusion, and will not alter what is currently provided under 
the rule.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited.
    In this instance, the proposed changes to the charges assessed co-
location clients for wireless connectivity do not impose a burden on 
competition because the Exchange is reducing the monthly fees assessed 
for such connectivity as a reflection of the Exchange's reduced vendor 
costs. Such a proposal is reflective of healthy competition among 
markets and may promote other exchanges to likewise reduce their costs 
and/or reduce the fees that they assess for similar connectivity.
    Although the Exchange does not believe that the proposed changes 
will be unattractive to market participants, if they were it is likely 
that the Exchange will lose subscribers as a result. Accordingly, the 
Exchange does not believe that the proposed changes will impair the 
ability of members or competing order execution venues to maintain 
their competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\16\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2016-053 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 Number SR-NASDAQ-2016-053. 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

[[Page 21924]]

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 
such filing also will be available for inspection and copying at the 
principal offices 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-NASDAQ-2016-053, and should be submitted on or before 
May 4, 2016.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08425 Filed 4-12-16; 8:45 am]
 BILLING CODE 8011-01-P