81 FR 3225 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Market Data Fees for the NYSE Amex Options Product
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 12 (January 20, 2016)
Federal Register Volume 81, Issue 12 (January 20, 2016)
| Page Range | 3225-3229 | |
| FR Document | 2016-00900 |
[Federal Register Volume 81, Number 12 (Wednesday, January 20, 2016)] [Notices] [Pages 3225-3229] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-00900] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76889; File No. SR-NYSEMKT-2015-113] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Market Data Fees for the NYSE Amex Options Product January 13, 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 December 31, 2015, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') 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 the Substance of the Proposed Rule Change The Exchange proposes to amend the fees for NYSE Amex Options Product,\4\ as set forth on the NYSE Amex Options Proprietary Market Data Fee Schedule (``Fee Schedule''). The Exchange proposes to establish a multiple data feed fee effective January 1, 2016. The text of the proposed rule change is available on the Exchange's Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. --------------------------------------------------------------------------- \4\ See Securities Exchange Act Release Nos. 76022 (Sept. 29, 2015), 80 FR 60201 (Oct. 5, 2015) (SR-NYSEMKT-2015-68) (Notice). The single fee for the NYSE Amex Options Product set forth on the Fee Schedule is comprised of three data feeds: Amex Options Top, Amex Options Deep, and Amex Options Complex. --------------------------------------------------------------------------- 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 Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the fees for NYSE Amex Options Product,\5\ as set forth on the NYSE Amex Options Proprietary Market Data Fee Schedule (``Fee Schedule''). The Exchange proposes to establish a multiple data feed fee effective January 1, 2016. Specifically, the Exchange proposes to establish a new monthly fee, the ``Multiple Data Feed Fee,'' that would apply to data recipients that take a data feed for NYSE Amex Options Product in more than two locations. Data recipients taking NYSE Amex Options Product in more than two locations would be charged $200 per additional location per product per month. No new reporting would be required.\6\ --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release Nos. 76022 (Sept. 29, 2015), 80 FR 60201 (Oct. 5, 2015) (SR-NYSEMKT-2015-68) (Notice). The single fee for the NYSE Amex Options Product set forth on the Fee Schedule is comprised of three data feeds: Amex Options Top, Amex Options Deep, and Amex Options Complex. \6\ Data vendors currently report a unique Vendor Account Number for each location at which they provide a data feed to a data recipient. The Exchange considers each Vendor Account Number a location. For example, if a data recipient has five Vendor Account Numbers, representing five locations, for the receipt of the NYSE Amex Options Product, that data recipient will pay the Multiple Data Feed fee with respect to three of the five locations, or $600. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of section 6 of the Act,\7\ in general, and sections 6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that it provides an equitable allocation of reasonable fees among users and recipients of the data and is not designed to permit unfair discrimination among customers, issuers, and brokers. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f(b). \8\ 15 U.S.C. 78f(b)(4), (5). --------------------------------------------------------------------------- The fees are also equitable and not unfairly discriminatory because they will apply to all data recipients that choose to subscribe to NYSE Amex Options Product. The Exchange believes that it is reasonable to require data recipients to pay a modest additional fee taking a data feed for a market data product in more than two locations, because such data recipients can derive substantial value from being able to consume the product in as many locations as they want. In addition, there are administrative burdens associated with tracking each location at which a data recipient receives the product. The Multiple Data Feed Fee is designed to encourage data recipients to better manage their requests for additional data feeds and to monitor their usage of data feeds. The proposed fee is designed to apply to data feeds received in more than two locations so that each data recipient can have one primary and one backup data location before having to pay a multiple data feed fee. The Exchange notes that this pricing is consistent with similar pricing adopted in 2013 by the Consolidated Tape Association (``CTA'').\9\ The Exchange also notes that the OPRA Plan imposes a similar charge of $100 per connection for circuit connections in addition to the primary and backup connections.\10\ --------------------------------------------------------------------------- \9\ See Securities Exchange Act Release No. 70010 (July 19, 2013), 78 FR 44984 (July 25, 2013) (SR-CTA/CQ-2013-04). \10\ See ``Direct Access Fee,'' Options Price Reporting Authority Fee Schedule Fee Schedule PRA Plan at http://www.opradata.com/pdf/fee_schedule.pdf --------------------------------------------------------------------------- The Exchange notes that NYSE Amex Options Product is entirely optional. [[Page 3226]] The Exchange is not required to make NYSE Amex Options Product available or to offer any specific pricing alternatives to any customers, nor is any firm required to purchase NYSE Amex Options Product. Firms that do purchase NYSE Amex Options Product do so for the primary goals of using it 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 Amex Options Product or any other similar products are attractively priced or not. Firms that do not wish to purchase NYSE Amex Options Product have a variety of alternative market data products from which to choose,\11\ or if NYSE Amex Options Product does not provide sufficient value to firms as offered based on the uses those firms have or planned to make of it, such firms may simply choose to conduct their business operations in ways that do not use NYSE Amex Options Product or use it at different levels or in different configurations. The Exchange notes that broker-dealers are not required to purchase proprietary market data to comply with their best execution obligations.\12\ --------------------------------------------------------------------------- \11\ For example, Chicago Board Options Exchange (``CBOE'') charges, for its ``Complex Order Book Feed,'' a Distributor Fee of $3,000 per month, a Professional User Fee of $25 per month and a Non-Professional User Fee of $1 per month. See the CBOE ``Complex Order Book Feed'' product and pricing information, available at https://www.cboe.org/MDX/CSM/OBOOKMain.aspx. NASDAQ OMX PHLX LLC (``PHLX'') also offers a market data product entitled ``PHLX Orders,'' which includes order and last sale information for complex strategies and other market data, and charges a $3,000 internal monthly fee ($3,500 for external), $2,000 per Distributor and $500 per subscriber. See PHLX ``PHLX Orders'' market data product and pricing information, available at http://www.nasdaqtrader.com/Micro.aspx?id=PHLXOrders and http://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListOptions#PHLX, respectively. \12\ See FINRA Regulatory Notice 15-46, ``Best Execution,'' November 2015. --------------------------------------------------------------------------- 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 `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.' '' \13\ --------------------------------------------------------------------------- \13\ 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.\14\ In addition, the existence of alternatives to these data products, such as options data from other sources, as described below, further ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can select such alternatives. --------------------------------------------------------------------------- \14\ Section 916 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the ``Dodd-Frank Act'') amended paragraph (A) of section 19(b)(3) of the Act, 15 U.S.C. 78s(b)(3), to make clear that all exchange fees for market data may be filed by exchanges on an immediately effective basis. --------------------------------------------------------------------------- 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.\15\ --------------------------------------------------------------------------- \15\ 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. --------------------------------------------------------------------------- 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. 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 each other for options trades 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 options market data. Proprietary options 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.'' \16\ Similarly, the options markets [[Page 3227]] vigorously compete with respect to options data products.\17\ --------------------------------------------------------------------------- \16\ 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.''). \17\ See, e.g., Securities Exchange Act Release No. 67466 (July 19, 2012), 77 FR 43629 (July 25, 2012) (SR-Phlx-2012-93), which describes a variety of options market data products and their pricing. --------------------------------------------------------------------------- Moreover, competitive markets for order flow, executions, and transaction reports provide pricing discipline for the inputs of proprietary options data products and therefore constrain markets from overpricing proprietary options market data. Broker-dealers send their order flow to multiple venues, rather than providing them all to a single venue, which in turn reinforces this competitive constraint. Options markets, similar to the equities markets, are highly fragmented.\18\ --------------------------------------------------------------------------- \18\ See, e.g., Press Release, TABB Says US Equity Options Market Makers Need Scalable Technology to Compete in Today's Complex Market Structure (February 25, 2013), available at http://www.tabbgroup.com/PageDetail.aspx?PageID=16&ItemID=1231; Fragmentation Vexes Options Markets (April 21, 2014), available at http://marketsmedia.com/fragmentation-vexes-options-market/. --------------------------------------------------------------------------- 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 options 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 options market data products may be less desirable to customers using them in support of order routing and trading decisions in light of the diminished content; options data products offered by competing venues may become correspondingly more attractive. Thus, competition for quotations, order flow, and trade executions puts significant pressure on an exchange to maintain both execution and data fees at reasonable levels. In addition, in the case of products that are also redistributed through market data vendors, such as Bloomberg and Thompson Reuters, the vendors themselves provide additional price discipline for proprietary data products because they control the primary means of access to certain end users. These vendors impose price discipline based upon their business models. For example, vendors that assess a surcharge on data they sell are able to refuse to offer proprietary products that their end users do not or will not purchase in sufficient numbers. Vendors will not elect to make available NYSE Amex Options Product unless their customers request it, and customers will not elect to pay the proposed fees unless NYSE Amex Options Product can provide value by sufficiently increasing revenues or reducing costs in the customer's business in a manner that will offset the fees. All of these factors operate as constraints on pricing proprietary data products. Joint Product Nature of Exchange Platform Transaction execution and proprietary data products are complementary in that market data is both an input and a byproduct of the execution service. In fact, proprietary market data and trade executions are a paradigmatic example of joint products with joint costs. The decision of whether and on which platform to post an order will depend on the attributes of the platforms where the order can be posted, including the execution fees, data availability and quality, and price and distribution of data products. Without a platform to post quotations, receive orders, and execute trades, exchange data products would not exist. The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange's platform for posting quotes, accepting orders, and executing transactions and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the revenues it receives from both products and the joint costs it incurs. Moreover, an exchange's broker-dealer customers generally view the costs of transaction executions and market data as a unified cost of doing business with the exchange. A broker-dealer will only choose to direct orders to an exchange if the revenue from the transaction exceeds its cost, including the cost of any market data that the broker-dealer chooses to buy in support of its order routing and trading decisions. If the costs of the transaction are not offset by its value, then the broker-dealer may choose instead not to purchase the product and trade away from that exchange. There is substantial evidence of the strong correlation between order flow and market data purchases. For example, in September 2015, more than 80% of the transaction volume on each of NYSE MKT and NYSE MKT's affiliates New York Stock Exchange LLC (``NYSE'') and NYSE Arca, Inc. (``NYSE Arca'') was executed by market participants that purchased one or more proprietary market data products (the 20 firms were not the same for each market). A supra-competitive increase in the fees for either executions or market data would create a risk of reducing an exchange's revenues from both products. Other market participants have noted that proprietary market data and trade executions are joint products of a joint platform and have common costs.\19\ The Exchange agrees with and adopts those discussions and the arguments therein. The Exchange also notes that the economics literature confirms that there is no way to allocate common costs between joint products that would shed any light on competitive or efficient pricing.\20\ --------------------------------------------------------------------------- \19\ See Securities Exchange Act Release No. 72153 (May 12, 2014), 79 FR 28575, 28578 n.15 (May 16, 2014) (SR-NASDAQ-2014-045) (``[A]ll of the exchange's costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The total return that an exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products.''). See also Securities Exchange Act Release No. 62907 (Sept. 14, 2010), 75 FR 57314, 57317 (Sept. 20, 2010) (SR-NASDAQ-2010-110), and Securities Exchange Act Release No. 62908 (Sept. 14, 2010), 75 FR 57321, 57324 (Sept. 20, 2010) (SR-NASDAQ-2010-111). \20\ See generally Mark Hirschey, ``Fundamentals of Managerial Economics,'' at 600 (2009) (``It is important to note, however, that although it is possible to determine the separate marginal costs of goods produced in variable proportions, it is impossible to determine their individual average costs. This is because common costs are expenses necessary for manufacture of a joint product. Common costs of production--raw material and equipment costs, management expenses, and other overhead--cannot be allocated to each individual by-product on any economically sound basis. . . . Any allocation of common costs is wrong and arbitrary.''). This is not new economic theory. See, e.g., F.W. Taussig, ``A Contribution to the Theory of Railway Rates,'' Quarterly Journal of Economics V(4) 438, 465 (July 1891) (``Yet, surely, the division is purely arbitrary. These items of cost, in fact, are jointly incurred for both sorts of traffic; and I cannot share the hope entertained by the statistician of the Commission, Professor Henry C. Adams, that we shall ever reach a mode of apportionment that will lead to trustworthy results.''). --------------------------------------------------------------------------- Analyzing the cost of market data product production and distribution in isolation from the cost of all of the inputs supporting the creation of market data and market data products will inevitably underestimate the cost of the data and data products because it is impossible to obtain the data inputs to create market data products without a fast, technologically robust, and well-regulated execution system, and system and regulatory costs affect the price of both obtaining the market data itself and creating and distributing market data products. It would be equally misleading, however, to attribute all of an exchange's costs to the market data portion of an exchange's joint products. Rather, all of an exchange's costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The [[Page 3228]] total return that an exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products. As noted above, the level of competition and contestability in the market is evident in the numerous alternative venues that compete for order flow, including 13 options self-regulatory organization (``SRO'') markets. Three of the 13 have launched operations since December 2012.\21\ The Exchange believes that these new entrants demonstrate that competition is robust. --------------------------------------------------------------------------- \21\ See Securities Exchange Act Release Nos. 70050 (July 26, 2013), 78 FR 46622 (August 1, 2013) (approving exchange registration for Topaz Exchange, LLC) (known as ISE Gemini); 68341 (December 3, 2012), 77 FR 73065 (December 7, 2012) (approving exchange registration for Miami International Securities Exchange LLC (``Miami Exchange'')); and 75650 (August 7, 2015), 80 FR 48600 (August 13, 2015) (establishing rules governing the trading of options on the EDGX options market). --------------------------------------------------------------------------- Competition among trading platforms can be expected to constrain the aggregate return that each platform earns from the sale of its joint products, but different trading platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. For example, some platforms may choose to pay rebates to attract orders, charge relatively low prices for market data products (or provide market data products free of charge), and charge relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower rebates (or no rebates) to attract orders, setting relatively high prices for market data products, and setting relatively low prices for accessing posted liquidity. For example, BATS Global Markets (``BATS'') and Direct Edge, which previously operated as ATSs and obtained exchange status in 2008 and 2010, respectively, provided certain market data at no charge on their Web sites in order to attract more order flow, and used revenue rebates from resulting additional executions to maintain low execution charges for their users.\22\ In this environment, there is no economic basis for regulating maximum prices for one of the joint products in an industry in which suppliers face competitive constraints with regard to the joint offering. --------------------------------------------------------------------------- \22\ This is simply a securities market-specific example of the well-established principle that in certain circumstances more sales at lower margins can be more profitable than fewer sales at higher margins; this example is additional evidence that market data is an inherent part of a market's joint platform. --------------------------------------------------------------------------- Existence of Alternatives The large number of SROs that currently produce proprietary data or are currently capable of producing it provides further pricing discipline for proprietary data products. Each SRO is currently permitted to produce and sell proprietary data products, and many currently do, including but not limited to the Exchange, NYSE Arca, CBOE, C2 Options Exchange, Inc., ISE, ISE Gemini, NASDAQ, PHLX, BX, BATS and Miami Exchange. The fact that proprietary data from vendors can bypass SROs is significant in two respects. First, non-SROs can compete directly with SROs for the production and sale of proprietary data products. By way of example, BATS and NYSE Arca both published proprietary data on the Internet before registering as exchanges. Second, because a single order or transaction report can appear in an SRO proprietary product, a non-SRO proprietary product, or both, the amount of data available via proprietary products is greater in size than the actual number of orders and transaction reports that exist in the marketplace. Because market data users can find suitable substitutes for most proprietary market data products, a market that overprices its market data products stands a high risk that users may substitute another source of market data information for its own. In addition to the competition and price discipline described above, the market for proprietary data products is also highly contestable because market entry is rapid and inexpensive. The history of electronic trading is replete with examples of entrants that swiftly grew into some of the largest electronic trading platforms and proprietary data producers: Archipelago, Bloomberg Tradebook, Island, RediBook, Attain, TrackECN, BATS and Direct Edge. As noted above, BATS launched as an ATS in 2006 and became an exchange in 2008, while Direct Edge began operations in 2007 and obtained exchange status in 2010. As noted above, three new options exchanges have launched operations since December 2012.\23\ --------------------------------------------------------------------------- \23\ See supra note 21. --------------------------------------------------------------------------- In determining the proposed fees, the Exchange considered the competitiveness of the market for proprietary options data and all of the implications of that competition. The Exchange believes that it has considered all relevant factors and has not considered irrelevant factors in order to establish fair, reasonable, and not unreasonably discriminatory fees and an equitable allocation of fees among all users. The existence of numerous alternatives to the Exchange's products, including proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if the attendant fees are not justified by the returns that any particular vendor or data recipient would achieve through the purchase. 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) \24\ of the Act and subparagraph (f)(2) of Rule 19b-4 \25\ thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78s(b)(3)(A). \25\ 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) \26\ of the Act to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \26\ 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 No. SR-NYSEMKT-2015-113 on the subject line. [[Page 3229]] Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File No. SR-NYSEMKT-2015-113. 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; 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 No. SR-NYSEMKT-2015-113, and should be submitted on or before February 10, 2016. --------------------------------------------------------------------------- \27\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\27\ Robert W. Errett, Deputy Secretary. [FR Doc. 2016-00900 Filed 1-19-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 12 / Wednesday, January 20, 2016 / Notices 3225
Committee. This Sunshine Act notice is I. Self-Regulatory Organization’s product per month. No new reporting
being issued because a quorum of the Statement of the Terms of the Substance would be required.6
Commission may attend the meeting. of the Proposed Rule Change
2. Statutory Basis
The agenda for the meeting includes: The Exchange proposes to amend the The Exchange believes that the
remarks from Commissioners; a fees for NYSE Amex Options Product,4 proposed rule change is consistent with
discussion of fixed income market as set forth on the NYSE Amex Options the provisions of section 6 of the Act,7
structure and pre-trade price Proprietary Market Data Fee Schedule in general, and sections 6(b)(4) and
transparency; a discussion of a draft (‘‘Fee Schedule’’). The Exchange 6(b)(5) of the Act,8 in particular, in that
letter from the Investor as Owner proposes to establish a multiple data it provides an equitable allocation of
subcommittee regarding Financial feed fee effective January 1, 2016. The reasonable fees among users and
Accounting Standards Board proposed text of the proposed rule change is recipients of the data and is not
amendments to the Statement of available on the Exchange’s Web site at designed to permit unfair
Financial Accounting Concepts and www.nyse.com, at the principal office of discrimination among customers,
Notes to Financial Statements the Exchange, and at the Commission’s issuers, and brokers.
concerning disclosure materiality; an Public Reference Room. The fees are also equitable and not
update on crowdfunding rules; a unfairly discriminatory because they
II. Self-Regulatory Organization’s will apply to all data recipients that
discussion of NASDAQ listing Statement of the Purpose of, and
standards—shareholder approval rules; choose to subscribe to NYSE Amex
Statutory Basis for, the Proposed Rule Options Product.
subcommittee reports; and a nonpublic Change The Exchange believes that it is
administrative work session during
In its filing with the Commission, the reasonable to require data recipients to
lunch. pay a modest additional fee taking a
self-regulatory organization included
For further information, please data feed for a market data product in
statements concerning the purpose of,
contact the Office of the Secretary at more than two locations, because such
and basis for, the proposed rule change
(202) 551–5400. and discussed any comments it received data recipients can derive substantial
Dated: January 14, 2016. on the proposed rule change. The text value from being able to consume the
of those statements may be examined at product in as many locations as they
Brent J. Fields,
the places specified in Item IV below. want. In addition, there are
Secretary. administrative burdens associated with
[FR Doc. 2016–01129 Filed 1–15–16; 4:15 pm]
The Exchange has prepared summaries,
set forth in sections A, B, and C below, tracking each location at which a data
BILLING CODE 8011–01–P
of the most significant parts of such recipient receives the product. The
statements. Multiple Data Feed Fee is designed to
encourage data recipients to better
SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s manage their requests for additional
COMMISSION Statement of the Purpose of, and data feeds and to monitor their usage of
Statutory Basis for, the Proposed Rule data feeds. The proposed fee is designed
[Release No. 34–76889; File No. SR– Change to apply to data feeds received in more
NYSEMKT–2015–113] 1. Purpose than two locations so that each data
recipient can have one primary and one
Self-Regulatory Organizations; NYSE The Exchange proposes to amend the backup data location before having to
MKT LLC; Notice of Filing and fees for NYSE Amex Options Product,5 pay a multiple data feed fee. The
Immediate Effectiveness of Proposed as set forth on the NYSE Amex Options Exchange notes that this pricing is
Rule Change To Amend Market Data Proprietary Market Data Fee Schedule consistent with similar pricing adopted
Fees for the NYSE Amex Options (‘‘Fee Schedule’’). The Exchange in 2013 by the Consolidated Tape
Product proposes to establish a multiple data Association (‘‘CTA’’).9 The Exchange
feed fee effective January 1, 2016. also notes that the OPRA Plan imposes
January 13, 2016. Specifically, the Exchange proposes to a similar charge of $100 per connection
Pursuant to section 19(b)(1) 1 of the establish a new monthly fee, the for circuit connections in addition to the
Securities Exchange Act of 1934 (the ‘‘Multiple Data Feed Fee,’’ that would primary and backup connections.10
apply to data recipients that take a data The Exchange notes that NYSE Amex
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
feed for NYSE Amex Options Product in Options Product is entirely optional.
notice is hereby given that, on December
31, 2015, NYSE MKT LLC (the more than two locations. Data recipients
6 Data vendors currently report a unique Vendor
taking NYSE Amex Options Product in
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with Account Number for each location at which they
more than two locations would be
the Securities and Exchange provide a data feed to a data recipient. The
charged $200 per additional location per Exchange considers each Vendor Account Number
Commission (the ‘‘Commission’’) the
a location. For example, if a data recipient has five
proposed rule change as described in 4 See Securities Exchange Act Release Nos. 76022 Vendor Account Numbers, representing five
Items I, II, and III below, which Items (Sept. 29, 2015), 80 FR 60201 (Oct. 5, 2015) (SR– locations, for the receipt of the NYSE Amex Options
have been prepared by the self- NYSEMKT–2015–68) (Notice). The single fee for the Product, that data recipient will pay the Multiple
NYSE Amex Options Product set forth on the Fee Data Feed fee with respect to three of the five
regulatory organization. The locations, or $600.
Schedule is comprised of three data feeds: Amex
Commission is publishing this notice to Options Top, Amex Options Deep, and Amex
7 15 U.S.C. 78f(b).
tkelley on DSK4VPTVN1PROD with NOTICES
solicit comments on the proposed rule Options Complex. 8 15 U.S.C. 78f(b)(4), (5).
change from interested persons. 5 See Securities Exchange Act Release Nos. 76022 9 See Securities Exchange Act Release No. 70010
(Sept. 29, 2015), 80 FR 60201 (Oct. 5, 2015) (SR– (July 19, 2013), 78 FR 44984 (July 25, 2013) (SR–
NYSEMKT–2015–68) (Notice). The single fee for the CTA/CQ–2013–04).
1 15
NYSE Amex Options Product set forth on the Fee 10 See ‘‘Direct Access Fee,’’ Options Price
U.S.C. 78s(b)(1).
Schedule is comprised of three data feeds: Amex Reporting Authority Fee Schedule Fee Schedule
2 15 U.S.C. 78a. Options Top, Amex Options Deep, and Amex PRA Plan at http://www.opradata.com/pdf/fee_
3 17 CFR 240.19b–4. Options Complex. schedule.pdf
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![Federal Register / Vol. 81, No. 12 / Wednesday, January 20, 2016 / Notices 3227
vigorously compete with respect to revenues or reducing costs in the create a risk of reducing an exchange’s
options data products.17 customer’s business in a manner that revenues from both products.
Moreover, competitive markets for will offset the fees. All of these factors Other market participants have noted
order flow, executions, and transaction operate as constraints on pricing that proprietary market data and trade
reports provide pricing discipline for proprietary data products. executions are joint products of a joint
the inputs of proprietary options data platform and have common costs.19 The
products and therefore constrain Joint Product Nature of Exchange Exchange agrees with and adopts those
markets from overpricing proprietary Platform discussions and the arguments therein.
options market data. Broker-dealers Transaction execution and proprietary The Exchange also notes that the
send their order flow to multiple data products are complementary in that economics literature confirms that there
venues, rather than providing them all market data is both an input and a is no way to allocate common costs
to a single venue, which in turn byproduct of the execution service. In between joint products that would shed
reinforces this competitive constraint. fact, proprietary market data and trade any light on competitive or efficient
Options markets, similar to the equities executions are a paradigmatic example pricing.20
markets, are highly fragmented.18 of joint products with joint costs. The Analyzing the cost of market data
If an exchange succeeds in competing decision of whether and on which product production and distribution in
for quotations, order flow, and trade platform to post an order will depend isolation from the cost of all of the
executions, then it earns trading on the attributes of the platforms where inputs supporting the creation of market
revenues and increases the value of its the order can be posted, including the data and market data products will
proprietary options market data execution fees, data availability and inevitably underestimate the cost of the
products because they will contain quality, and price and distribution of data and data products because it is
greater quote and trade information. data products. Without a platform to impossible to obtain the data inputs to
Conversely, if an exchange is less post quotations, receive orders, and create market data products without a
successful in attracting quotes, order execute trades, exchange data products fast, technologically robust, and well-
flow, and trade executions, then its would not exist. regulated execution system, and system
options market data products may be and regulatory costs affect the price of
The costs of producing market data
less desirable to customers using them both obtaining the market data itself and
include not only the costs of the data
in support of order routing and trading creating and distributing market data
distribution infrastructure, but also the
decisions in light of the diminished products. It would be equally
costs of designing, maintaining, and
content; options data products offered misleading, however, to attribute all of
operating the exchange’s platform for
by competing venues may become an exchange’s costs to the market data
posting quotes, accepting orders, and
correspondingly more attractive. Thus, portion of an exchange’s joint products.
competition for quotations, order flow, executing transactions and the cost of
Rather, all of an exchange’s costs are
and trade executions puts significant regulating the exchange to ensure its fair
incurred for the unified purposes of
pressure on an exchange to maintain operation and maintain investor
attracting order flow, executing and/or
both execution and data fees at confidence. The total return that a
routing orders, and generating and
reasonable levels. trading platform earns reflects the
selling data about market activity. The
In addition, in the case of products revenues it receives from both products
that are also redistributed through and the joint costs it incurs. 19 See Securities Exchange Act Release No. 72153
market data vendors, such as Bloomberg Moreover, an exchange’s broker- (May 12, 2014), 79 FR 28575, 28578 n.15 (May 16,
and Thompson Reuters, the vendors dealer customers generally view the 2014) (SR–NASDAQ–2014–045) (‘‘[A]ll of the
costs of transaction executions and exchange’s costs are incurred for the unified
themselves provide additional price purposes of attracting order flow, executing and/or
discipline for proprietary data products market data as a unified cost of doing routing orders, and generating and selling data
because they control the primary means business with the exchange. A broker- about market activity. The total return that an
of access to certain end users. These dealer will only choose to direct orders exchange earns reflects the revenues it receives
to an exchange if the revenue from the from the joint products and the total costs of the
vendors impose price discipline based joint products.’’). See also Securities Exchange Act
upon their business models. For transaction exceeds its cost, including Release No. 62907 (Sept. 14, 2010), 75 FR 57314,
example, vendors that assess a the cost of any market data that the 57317 (Sept. 20, 2010) (SR–NASDAQ–2010–110),
surcharge on data they sell are able to broker-dealer chooses to buy in support and Securities Exchange Act Release No. 62908
of its order routing and trading (Sept. 14, 2010), 75 FR 57321, 57324 (Sept. 20,
refuse to offer proprietary products that 2010) (SR–NASDAQ–2010–111).
their end users do not or will not decisions. If the costs of the transaction 20 See generally Mark Hirschey, ‘‘Fundamentals of
purchase in sufficient numbers. Vendors are not offset by its value, then the Managerial Economics,’’ at 600 (2009) (‘‘It is
will not elect to make available NYSE broker-dealer may choose instead not to important to note, however, that although it is
purchase the product and trade away possible to determine the separate marginal costs of
Amex Options Product unless their goods produced in variable proportions, it is
customers request it, and customers will from that exchange. There is substantial impossible to determine their individual average
not elect to pay the proposed fees unless evidence of the strong correlation costs. This is because common costs are expenses
NYSE Amex Options Product can between order flow and market data necessary for manufacture of a joint product.
purchases. For example, in September Common costs of production—raw material and
provide value by sufficiently increasing equipment costs, management expenses, and other
2015, more than 80% of the transaction overhead—cannot be allocated to each individual
17 See, e.g., Securities Exchange Act Release No. volume on each of NYSE MKT and by-product on any economically sound basis. . . .
67466 (July 19, 2012), 77 FR 43629 (July 25, 2012) NYSE MKT’s affiliates New York Stock Any allocation of common costs is wrong and
(SR–Phlx–2012–93), which describes a variety of Exchange LLC (‘‘NYSE’’) and NYSE arbitrary.’’). This is not new economic theory. See,
options market data products and their pricing. e.g., F.W. Taussig, ‘‘A Contribution to the Theory
tkelley on DSK4VPTVN1PROD with NOTICES
18 See, e.g., Press Release, TABB Says US Equity Arca, Inc. (‘‘NYSE Arca’’) was executed of Railway Rates,’’ Quarterly Journal of Economics
Options Market Makers Need Scalable Technology by market participants that purchased V(4) 438, 465 (July 1891) (‘‘Yet, surely, the division
to Compete in Today’s Complex Market Structure one or more proprietary market data is purely arbitrary. These items of cost, in fact, are
(February 25, 2013), available at http://www. products (the 20 firms were not the jointly incurred for both sorts of traffic; and I cannot
tabbgroup.com/PageDetail.aspx?PageID=16& share the hope entertained by the statistician of the
ItemID=1231; Fragmentation Vexes Options
same for each market). A supra- Commission, Professor Henry C. Adams, that we
Markets (April 21, 2014), available at http://market competitive increase in the fees for shall ever reach a mode of apportionment that will
smedia.com/fragmentation-vexes-options-market/. either executions or market data would lead to trustworthy results.’’).
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![Federal Register / Vol. 81, No. 12 / Wednesday, January 20, 2016 / Notices 3229
Paper Comments Incident Period: 12/26/2015 through DEPARTMENT OF STATE
• Send paper comments in triplicate 12/29/2015.
Effective Date: 1/11/2016. [Public Notice: 9408]
to Secretary, Securities and Exchange
Physical Loan Application Deadline
Commission, 100 F Street NE., U.S. Department of State Advisory
Date: 3/11/2016.
Washington, DC 20549–1090. Committee on Private International
Economic Injury (EIDL) Loan
All submissions should refer to File No. Application Deadline Date: 10/11/2016. Law (ACPIL): Public Meeting on Family
SR–NYSEMKT–2015–113. This file Law
ADDRESSES: Submit completed loan
number should be included on the
applications to: U.S. Small Business The Office of the Assistant Legal
subject line if email is used. To help the
Administration, Processing And Adviser for Private International Law,
Commission process and review your
Disbursement Center, 14925 Kingsport Department of State, gives notice of a
comments more efficiently, please use
Road, Fort Worth, TX 76155. public meeting to discuss an upcoming
only one method. The Commission will
FOR FURTHER INFORMATION CONTACT: A. meeting at the Hague Conference on
post all comments on the Commission’s
Internet Web site (http://www.sec.gov/ Escobar, Office of Disaster Assistance, Private International Law (‘‘Hague
rules/sro.shtml). Copies of the U.S. Small Business Administration, Conference’’) on the topic of
submission, all subsequent 409 3rd Street SW., Suite 6050, international parentage and surrogacy.
amendments, all written statements Washington, DC 20416. The public meeting will take place on
with respect to the proposed rule SUPPLEMENTARY INFORMATION: Notice is Tuesday, February 9, 2016 from 1 p.m.
change that are filed with the hereby given that as a result of the until 4 p.m. EST. This is not a meeting
Commission, and all written Administrator’s disaster declaration, of the full Advisory Committee.
communications relating to the applications for disaster loans may be In March 2015, the Council on
proposed rule change between the filed at the address listed above or other General Affairs and Policy of the Hague
Commission and any person, other than locally announced locations. Conference decided that an Experts’
those that may be withheld from the The following areas have been Group should be convened to explore
public in accordance with the determined to be adversely affected by the feasibility of advancing work on
provisions of 5 U.S.C. 552, will be the disaster: private international law issues
available for Web site viewing and Primary Counties: Cherokee. surrounding the status of children,
printing in the Commission’s Public Contiguous Counties: including issues arising from
Reference Room, 100 F Street NE., Kansas: Crawford, Labette. international surrogacy arrangements.
Missouri: Jasper, Newton. The first meeting of the Experts’ Group
Washington, DC 20549 on official
Oklahoma: Craig, Ottawa. will be held February 15–18, 2016, in
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such The Interest Rates are: The Hague.
filing also will be available for The purpose of the public meeting is
Percent to obtain the views of concerned
inspection and copying at the principal
office of the Exchange. All comments For Physical Damage: stakeholders on matters that might be
received will be posted without change; Homeowners With Credit Avail- addressed at the upcoming Experts’
the Commission does not edit personal able Elsewhere ...................... 3.625 Group meeting. Those who cannot
identifying information from Homeowners Without Credit attend but wish to comment are
submissions. You should submit only Available Elsewhere .............. 1.813 welcome to do so by email to Michael
information that you wish to make Businesses With Credit Avail- Coffee at coffeems@state.gov.
able Elsewhere ...................... 6.000 Time and Place: The meeting will take
available publicly. All submissions Businesses Without Credit
should refer to File No. SR–NYSEMKT– place from 1 p.m. until 4 p.m. EST in
Available Elsewhere .............. 4.000
2015–113, and should be submitted on Non-Profit Organizations With
Room 9.04, State Department Annex 17,
or before February 10, 2016. Credit Available Elsewhere ... 2.625 600 19th Street NW., Washington, DC
Non-Profit Organizations With- 20522. Participants should plan to
For the Commission, by the Division of
Trading and Markets, pursuant to delegated out Credit Available Else- arrive at the North Entrance by 12:40
authority.27 where ..................................... 2.625 p.m. for visitor screening. If you are
For Economic Injury: unable to attend the public meeting and
Robert W. Errett,
Businesses & Small Agricultural would like to participate from a remote
Deputy Secretary. Cooperatives Without Credit location, teleconferencing will be
[FR Doc. 2016–00900 Filed 1–19–16; 8:45 am] Available Elsewhere .............. 4.000
available.
BILLING CODE 8011–01–P Non-Profit Organizations With-
out Credit Available Else- Public Participation: This meeting is
where ..................................... 2.625 open to the public, subject to the
capacity of the meeting room. Access to
SMALL BUSINESS ADMINISTRATION the building is strictly controlled. For
The number assigned to this disaster
[Disaster Declaration #14593 and #14594] for physical damage is 14593 6 and for pre-clearance purposes, those planning
economic injury is 14594 0. to attend should email pil@state.gov
Kansas Disaster #KS–00095 The States which received an EIDL providing full name, address, date of
AGENCY: U.S. Small Business Declaration # are Kansas, Missouri, birth, citizenship, driver’s license or
Administration. Oklahoma. passport number, and email address.
(Catalog of Federal Domestic Assistance This information will greatly facilitate
ACTION: Notice.
tkelley on DSK4VPTVN1PROD with NOTICES
Numbers 59008) entry into the building. A member of the
SUMMARY: This is a notice of an public needing reasonable
Dated: January 11, 2016.
Administrative declaration of a disaster accommodation should email pil@
Maria Contreras-Sweet, state.gov not later than February 2,
for the State of Kansas dated 1/11/2016.
Incident: Flooding. Administrator. 2016. Requests made after that date will
[FR Doc. 2016–00921 Filed 1–19–16; 8:45 am] be considered, but might not be able to
27 17 CFR 200.30–3(a)(12). BILLING CODE 8025–01–P be fulfilled. If you would like to
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Document Created: 2016-01-19 23:43:58
Document Modified: 2016-01-19 23:43:58
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| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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