81 FR 81186 - 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 Order Imbalances Market Data Product
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 222 (November 17, 2016)
Federal Register Volume 81, Issue 222 (November 17, 2016)
| Page Range | 81186-81189 | |
| FR Document | 2016-27596 |
[Federal Register Volume 81, Number 222 (Thursday, November 17, 2016)] [Notices] [Pages 81186-81189] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-27596] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79286; File No. SR-NYSE-2016-73] 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 Order Imbalances Market Data Product November 10, 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 October 28, 2016, New York Stock Exchange LLC (``NYSE'' or the ``Exchange'') filed with the Securities and Exchange Commission (``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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 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 Order Imbalances market data product. The proposed 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. 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to adopt a Decommission Extension Fee for receipt of the NYSE Order Imbalances market data product,\3\ as set forth on the NYSE Proprietary Market Data Fee Schedule (``Fee Schedule''). Recipients of NYSE Order Imbalances 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 Order Imbalances feed in its legacy format for up to two months after which the feed will be distributed exclusively in the new format explained below. --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release Nos. 59202 (January 6, 2009), 74 FR 1744 (January 13, 2009) (SR-NYSE-2008-132--Notice of Filing of Proposed Rule Change to Introduce a NYSE Order Imbalance Information Fee); and 59543 (March 9, 2009), 74 FR 11159 (March 16, 2009) (SR-NYSE-2008-132--Approval Order). See also Securities Exchange Act Release Nos. 72923 (Aug. 26, 2014), 79 FR 52079 (Sept. 2, 2014) (SR-NYSE-2014-43) (establishing fees for non-display use of NYSE Order Imbalances); and 76972 (January 26, 2016), 81 FR 5142 (February 1, 2016) (SR-NYSE-2016-08) (amending fees for NYSE Order Imbalances and NYSE Alerts). --------------------------------------------------------------------------- NYSE Order Imbalances is an NYSE-only market data feed of real-time order imbalances that accumulate prior to the opening of trading on the Exchange and prior to the close of trading on the Exchange. The Exchange distributes information about these imbalances in real-time at specified intervals prior to the opening and closing auction each day.\4\ --------------------------------------------------------------------------- \4\ See Rules 15 (Pre-Opening Indications and Opening Order Imbalance Information) and 123C (The Closing Procedures). --------------------------------------------------------------------------- As part of the Exchange's efforts to regularly upgrade systems to support more modern data distribution formats and protocols as technology evolves, [[Page 81187]] beginning October 31, 2016, NYSE Order Imbalances will be transmitted in a new format, Exchange Data Protocol (XDP). Beginning October 31, 2016, the Exchange will transmit NYSE Order Imbalances in both the legacy format and in XDP format without any additional fee being charged for providing this data feed in both formats. The dual dissemination will remain in place until February 28, 2017, the planned decommission date of the legacy format. Beginning March 1, 2017, recipients of NYSE Order Imbalances who wish to continue to receive NYSE Order Imbalances in the legacy format will be subject to the proposed Decommission Extension Fee of $5,000 per month.\5\ During the extension period, recipients of NYSE Order Imbalances would continue to be subject to the subscription fees currently noted in the Fee Schedule. The extension period for receiving this data feed in the legacy format will expire on April 28, 2017, on which date distribution of NYSE Order Imbalances in the legacy format will be permanently discontinued. --------------------------------------------------------------------------- \5\ The concept of a Decommission Extension Fee is not novel. The Exchange recently adopted a Decommission Extension Fee for receipt of the NYSE BBO and NYSE Trades market data products when the Exchange migrated those products to the XDP format. See Securities Exchange Act Release No. 77388 (March 17, 2016), 81 FR 15363 (March 22, 2016) (SR-NYSE-2016-21). --------------------------------------------------------------------------- 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 Order Imbalances who wish to receive this data feed 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 Order Imbalances. The Exchange believes that it is reasonable to require data recipients to pay an additional fee for taking the data feed 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 Order Imbalances 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 April 28, 2017. The Exchange notes that NYSE Order Imbalances is entirely optional. The Exchange is not required to make NYSE Order Imbalances available or to offer any specific pricing alternatives to any customers, nor is any firm required to purchase NYSE Order Imbalances, nor is the Exchange required to offer any feed (NYSE Order Imbalances, 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 Order Imbalances 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 Order Imbalances 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 `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\ For these reasons, the Exchange believes that the proposed fees are reasonable, equitable, and not unfairly discriminatory. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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 [[Page 81188]] 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 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 Order Imbalances in the legacy format unless their customers request it, and customers will not elect to pay the proposed fees unless NYSE Order Imbalances 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 feed 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 feed 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 feed would not need to receive the data feed 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 has become effective pursuant to Section 19(b)(3)(A) of the Act \14\ and paragraph (f) of Rule 19b-4 \15\ thereunder. 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 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 will institute proceedings to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78s(b)(3)(A). \15\ 17 CFR 240.19b-4(f). --------------------------------------------------------------------------- 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: [[Page 81189]] 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-2016-73 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-2016-73. 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 Number SR-NYSE-2016-73, and should be submitted on or before December 8, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\16\ --------------------------------------------------------------------------- \16\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-27596 Filed 11-16-16; 8:45 am] BILLING CODE 8011-01-P
![81186 Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices
promote just and equitable principles of V. Conclusion II. Self-Regulatory Organization’s
trade, to remove impediments to and Statement of the Purpose of, and
perfect the mechanism of a free and It is therefore ordered, pursuant to Statutory Basis for, the Proposed Rule
open market and a national market Section 19(b)(2) of the Act,38 that the Change
system, and, in general, to protect proposed rule changes (SR–BX–2016–
In its filing with the Commission, the
investors and the public interest. 046 and SR–NASDAQ–2016–111), as Exchange included statements
modified by their respective concerning the purpose of, and basis for,
The Commission notes that the Amendment No. 1, be, and they hereby
Exchanges believe that the proposals the proposed rule change and discussed
are, approved. any comments it received on the
related to the interaction between Post-
Only Orders and Non-Displayed Orders For the Commission, by the Division of proposed rule change. The text of these
would help to reduce the information Trading and Markets, pursuant to delegated statements may be examined at the
authority.39 places specified in Item IV below. The
leakage that can occur when a Post-Only
Brent J. Fields, Exchange has prepared summaries, set
Order re-prices to avoid locking or
Secretary.
forth in sections A, B, and C below, of
crossing the price of a Non-Displayed the most significant aspects of such
Order resting on the respective [FR Doc. 2016–27600 Filed 11–16–16; 8:45 am]
statements.
Exchange’s book.36 Specifically, under BILLING CODE 8011–01–P
the proposals, if a Post-Only Order A. Self-Regulatory Organization’s
would not lock or cross a Protected Statement of the Purpose of, and the
Quotation but would lock or cross a SECURITIES AND EXCHANGE Statutory Basis for, the Proposed Rule
Non-Displayed Order on the respective COMMISSION Change
Exchange’s Book, the Post-Only Order 1. Purpose
would be posted, ranked, and displayed [Release No. 34–79286; File No. SR–NYSE– The Exchange proposes to adopt a
at its limit price, rather than be re- 2016–73]
Decommission Extension Fee for receipt
priced. In addition, if the adjusted price of the NYSE Order Imbalances market
of a Post-Only Order would lock or Self-Regulatory Organizations; New
data product,3 as set forth on the NYSE
cross a non-displayed price on the York Stock Exchange LLC; Notice of
Proprietary Market Data Fee Schedule
respective Exchange’s Book, the Post- Filing and Immediate Effectiveness of (‘‘Fee Schedule’’). Recipients of NYSE
Only Order would be posted in the same Proposed Rule Change Adopting a Order Imbalances would continue to be
manner as a Price to Comply Order (i.e., Decommission Extension Fee for subject to the already existing
displayed at a price one minimum price Receipt of the NYSE Order Imbalances subscription fees currently set forth in
increment lower than the current Best Market Data Product the Fee Schedule. The proposed
Offer (for a buy order) or higher than the November 10, 2016.
Decommission Extension Fee would
current Best Bid (for a sell order); apply only to those subscribers who
ranked with a non-displayed price equal Pursuant to Section 19(b)(1) of the decide to continue to receive the NYSE
to the current Best Offer (for a buy Securities Exchange Act of 1934 Order Imbalances feed in its legacy
order) or the current Best Bid (for a sell (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 format for up to two months after which
order)). notice is hereby given that on October the feed will be distributed exclusively
28, 2016, New York Stock Exchange in the new format explained below.
The Commission notes that the NYSE Order Imbalances is an NYSE-
LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed
Exchanges’ proposals to discontinue only market data feed of real-time order
with the Securities and Exchange
pricing and executing Midpoint Peg imbalances that accumulate prior to the
Commission (‘‘Commission’’) the
Post-Only Orders (Nasdaq only) and opening of trading on the Exchange and
proposed rule change as described in
Orders with Midpoint Pegging when the prior to the close of trading on the
Items I, II, and III below, which Items
NBBO is crossed would reflect that the Exchange. The Exchange distributes
have been prepared by the Exchange.
midpoint of a crossed market is not a information about these imbalances in
The Commission is publishing this
clear and accurate indication of a valid real-time at specified intervals prior to
notice to solicit comments on the
price and would avoid mispriced the opening and closing auction each
proposed rule change from interested
executions. The Commission also notes day.4
persons.
that this proposed behavior is similar to As part of the Exchange’s efforts to
the rules of other exchanges.37 I. Self-Regulatory Organization’s regularly upgrade systems to support
Statement of the Terms of Substance of more modern data distribution formats
Based on the foregoing and the
the Proposed Rule Change and protocols as technology evolves,
Exchanges’ representations, the
Commission believes that the proposed The Exchange proposes to adopt a 3 See Securities Exchange Act Release Nos. 59202
rule changes, as modified by Decommission Extension Fee for receipt (January 6, 2009), 74 FR 1744 (January 13, 2009)
Amendments No. 1, are consistent with of the NYSE Order Imbalances market
(SR–NYSE–2008–132—Notice of Filing of Proposed
the Act. Rule Change to Introduce a NYSE Order Imbalance
data product. The proposed change is Information Fee); and 59543 (March 9, 2009), 74 FR
available on the Exchange’s Web site at 11159 (March 16, 2009) (SR–NYSE–2008–132—
36 The Commission notes that, in conjunction Approval Order). See also Securities Exchange Act
asabaliauskas on DSK3SPTVN1PROD with NOTICES
with these proposals, the Exchanges are adopting
www.nyse.com, at the principal office of Release Nos. 72923 (Aug. 26, 2014), 79 FR 52079
the Trade Now instruction, which is an Order the Exchange, and at the Commission’s (Sept. 2, 2014) (SR–NYSE–2014–43) (establishing
Attribute that would allow a resting Order that Public Reference Room. fees for non-display use of NYSE Order
becomes locked by an incoming Displayed Order to Imbalances); and 76972 (January 26, 2016), 81 FR
execute against the available size of the contra-side 5142 (February 1, 2016) (SR–NYSE–2016–08)
locking Order as a liquidity taker. See Securities 38 15 (amending fees for NYSE Order Imbalances and
U.S.C. 78s(b)(2).
Exchange Act Release Nos. 79281 (November 10, NYSE Alerts).
39 17 CFR 200.30–3(a)(12).
2016) (SR–BX–2016–059) and 79282 (November 10, 4 See Rules 15 (Pre-Opening Indications and
1 15 U.S.C. 78s(b)(1).
2016) (SR–NASDAQ–2016–156). Opening Order Imbalance Information) and 123C
37 See, e.g., BatsBZX Rule 11.9(c)(9). 2 17 CFR 240.19b–4. (The Closing Procedures).
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![81188 Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices
exchange’s ability to price its with ‘‘trading volume . . . dispersed Order Imbalances in the legacy format
proprietary market data feed products is among many highly automated trading unless their customers request it, and
constrained by actual competition for centers that compete for order flow in customers will not elect to pay the
the sale of proprietary market data the same stocks’’ and ‘‘trading centers proposed fees unless NYSE Order
products, the joint product nature of offer[ing] a wide range of services that Imbalances can provide value in the
exchange platforms, and the existence of are designed to attract different types of legacy formats by sufficiently increasing
alternatives to the Exchange’s market participants with varying trading revenues or reducing costs in the
proprietary data (and in this instance, needs.’’ 12 More recently, SEC Chair customer’s business in a manner that
the ability of any firm to switch to the Mary Jo White has noted that will offset the fees. The Exchange has
new distribution format in a time frame competition for order flow in exchange- provided customers with adequate
that eliminates the need to pay these listed equities is ‘‘intense’’ and divided notice that it intends to discontinue
fees entirely). among many trading venues, including dissemination of the data feed in the
exchanges, more than 40 alternative legacy format. Therefore, the proposed
The Existence of Actual Competition
trading systems, and more than 250 Decommission Extension Fee would
The market for proprietary data broker-dealers.13 only be applicable to those customers
products is currently competitive and If an exchange succeeds in competing who have a need or desire to continue
inherently contestable because there is for quotations, order flow, and trade to take the data feed in the legacy format
fierce competition for the inputs executions, then it earns trading beyond the period provided for
necessary for the creation of proprietary revenues and increases the value of its migration to the XDP format. Customers
data and strict pricing discipline for the proprietary market data products who timely migrate to the XDP format
proprietary products themselves. because they will contain greater quote to receive the data feed would not need
Numerous exchanges compete with one and trade information. Conversely, if an to receive the data feed in the legacy
another for listings and order flow and exchange is less successful in attracting format and therefore would not be
sales of market data itself, providing quotes, order flow, and trade subject to the Decommission Extension
ample opportunities for entrepreneurs executions, then its market data Fee at all. All of these factors operate as
who wish to compete in any or all of products may be less desirable to constraints on pricing proprietary data
those areas, including producing and customers in light of the diminished products.
distributing their own market data. content and data products offered by
Proprietary data products are produced competing venues may become more C. Self-Regulatory Organization’s
and distributed by each individual attractive. Thus, competition for Statement on Comments on the
exchange, as well as other entities, in a quotations, order flow, and trade Proposed Rule Change Received From
vigorously competitive market. Indeed, executions puts significant pressure on Members, Participants, or Others
the U.S. Department of Justice (‘‘DOJ’’) an exchange to maintain both execution
No written comments were solicited
(the primary antitrust regulator) has and data fees at reasonable levels.
or received with respect to the proposed
expressly acknowledged the aggressive In addition, in the case of products
that are also redistributed through rule change.
actual competition among exchanges,
including for the sale of proprietary market data vendors, such as Bloomberg III. Date of Effectiveness of the
market data. In 2011, the DOJ stated that and Thompson Reuters, the vendors Proposed Rule Change and Timing for
exchanges ‘‘compete head to head to themselves provide additional price Commission Action
offer real-time equity data products. discipline for proprietary data products
These data products include the best bid because they control the primary means The foregoing rule change has become
and offer of every exchange and of access to certain end users. These effective pursuant to Section 19(b)(3)(A)
information on each equity trade, vendors impose price discipline based of the Act 14 and paragraph (f) of Rule
including the last sale.’’ 11 upon their business models. For 19b–4 15 thereunder. At any time within
Moreover, competitive markets for example, vendors that assess a 60 days of the filing of the proposed rule
listings, order flow, executions, and surcharge on data they sell are able to change, the Commission summarily may
transaction reports provide pricing refuse to offer proprietary products that temporarily suspend such rule change if
discipline for the inputs of proprietary their end users do not or will not it appears to the Commission that such
data products and therefore constrain purchase in sufficient numbers. Vendors action is necessary or appropriate in the
markets from overpricing proprietary will not elect to make available NYSE public interest, for the protection of
market data. Broker-dealers send their investors, or otherwise in furtherance of
order flow and transaction reports to 12 Concept Release on Equity Market Structure, the purposes of the Act. If the
multiple venues, rather than providing Securities Exchange Act Release No. 61358 (Jan. 14, Commission takes such action, the
2010), 75 FR 3594 (Jan. 21, 2010) (File No. S7–02– Commission will institute proceedings
them all to a single venue, which in turn 10). This Concept Release included data from the
reinforces this competitive constraint. third quarter of 2009 showing that no market center
to determine whether the proposed rule
As a 2010 Commission Concept Release traded more than 20% of the volume of listed change should be approved or
noted, the ‘‘current market structure can stocks, further evidencing the dispersal of and disapproved.
competition for trading activity. Id. at 3598. Data
be described as dispersed and complex’’ available on ArcaVision show that from June 30, IV. Solicitation of Comments
2013 to June 30, 2014, no exchange traded more
11 Press Release, U.S. Department of Justice, than 12% of the volume of listed stocks by either Interested persons are invited to
trade or dollar volume, further evidencing the submit written data, views, and
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Assistant Attorney General Christine Varney Holds
Conference Call Regarding NASDAQ OMX Group continued dispersal of and fierce competition for arguments concerning the foregoing,
Inc. and IntercontinentalExchange Inc. Abandoning trading activity. See https://www.arcavision.com/
Their Bid for NYSE Euronext (May 16, 2011), Arcavision/arcalogin.jsp. including whether the proposed rule
available at http://www.justice.gov/iso/opa/atr/ 13 Mary Jo White, Enhancing Our Equity Market change is consistent with the Act.
speeches/2011/at-speech-110516.html; see also Structure, Sandler O’Neill & Partners, L.P. Global Comments may be submitted by any of
Complaint in U.S. v. Deutsche Borse AG and NYSE Exchange and Brokerage Conference (June 5, 2014) the following methods:
Euronext, Case No. 11–cv–2280 (D.C. Dist.) ¶ 24 (available on the Commission Web site), citing
(‘‘NYSE and Direct Edge compete head-to-head . . . Tuttle, Laura, 2014, ‘‘OTC Trading: Description of
14 15 U.S.C. 78s(b)(3)(A).
in the provision of real-time proprietary equity data Non-ATS OTC Trading in National Market System
products.’’). Stocks,’’ at 7–8. 15 17 CFR 240.19b–4(f).
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![Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices 81189
Electronic Comments SECURITIES AND EXCHANGE The Commission has not received any
COMMISSION comments on the proposed rule change.
• Use the Commission’s Internet The Commission is publishing this
comment form (http://www.sec.gov/ [Release No. 34–79293; File No. SR– notice to solicit comments on
rules/sro.shtml); or NYSEArca–2016–107] Amendment No. 2 from interested
• Send an email to rule-comments@ Self-Regulatory Organizations; NYSE
persons and is approving the proposed
sec.gov. Please include File Number SR– rule change, as modified by Amendment
Arca, Inc.; Notice of Filing of
NYSE–2016–73 on the subject line. No. 2 thereto, on an accelerated basis.
Amendment No. 2 to, and Order
Paper Comments Granting Accelerated Approval of, a II. The Exchange’s Description of the
Proposed Rule Change, as Modified by Proposed Rule Change
• Send paper comments in triplicate Amendment No. 2 Thereto, Relating To In its filing with the Commission, the
to Brent J. Fields, Secretary, Securities Listing and Trading of Shares of Exchange included statements
and Exchange Commission, 100 F Street Cumberland Municipal Bond ETF concerning the purpose of, and basis for,
NE., Washington, DC 20549–1090. under NYSE Arca Equities Rule 8.600 the proposed rule change and discussed
any comments it received on the
All submissions should refer to File DATE: November 10, 2016. proposed rule change. The Exchange
Number SR–NYSE–2016–73. This file
I. Introduction has prepared summaries, set forth in
number should be included on the sections A, B, and C below, of the most
subject line if email is used. To help the On July 26, 2016, NYSE Arca, Inc. significant parts of such statements.
Commission process and review your filed with the Securities and Exchange
comments more efficiently, please use Commission (‘‘Commission’’), pursuant A. Self-Regulatory Organization’s
only one method. The Commission will to Section 19(b)(1) of the Securities Statement of the Purpose of, and
post all comments on the Commission’s Exchange Act of 1934 (‘‘Act’’) 1 and Rule Statutory Basis for, the Proposed Rule
Internet Web site (http://www.sec.gov/ 19b–4 thereunder,2 a proposed rule Change
rules/sro.shtml). Copies of the change to list and trade shares of the 1. Purpose
submission, all subsequent Cumberland Municipal Bond ETF
(‘‘Fund’’) under NYSE Arca Equities The Exchange proposes to list and
amendments, all written statements trade shares (‘‘Shares’’) of the following
with respect to the proposed rule Rule 8.600. The proposed rule change
was published for comment in the under NYSE Arca Equities Rule 8.600,
change that are filed with the which governs the listing and trading of
Commission, and all written Federal Register on August 15, 2016.3
Managed Fund Shares: 8 Cumberland
communications relating to the On September 15, 2016, the Exchange
Municipal Bond ETF (the ‘‘Fund’’),9 a
filed Amendment No. 1 to the proposed
proposed rule change between the
rule change.4 On September 27, 2016,
Commission and any person, other than holdings in non-exchange-traded or other
pursuant to Section 19(b)(2) of the Act,5 investment company securities. Amendment No. 2
those that may be withheld from the the Commission designated a longer to the proposed rule change is available at: https://
public in accordance with the period within which to approve the www.sec.gov/comments/sr-nysearca-2016-107/
provisions of 5 U.S.C. 552, will be proposed rule change, disapprove the nysearca2016107.shtml.
8 A Managed Fund Share is a security that
available for Web site viewing and proposed rule change, or institute represents an interest in an investment company
printing in the Commission’s Public proceedings to determine whether to registered under the Investment Company Act of
Reference Room, 100 F Street NE., disapprove the proposed rule change.6 1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as
Washington, DC 20549 on official On November 8, 2016, the Exchange an open-end investment company or similar entity
that invests in a portfolio of securities selected by
business days between the hours of filed Amendment No. 2 to the proposed its investment adviser consistent with its
10:00 a.m. and 3:00 p.m. Copies of such rule change.7 investment objectives and policies. In contrast, an
filing also will be available for open-end investment company that issues
inspection and copying at the principal 1 15 U.S.C. 78s(b)(1). Investment Company Units, listed and traded on
2 17 the Exchange under NYSE Arca Equities Rule
office of the Exchange. All comments CFR 240.19b–4.
3 See Securities Exchange Act Release No. 78523
5.2(j)(3), seeks to provide investment results that
received will be posted without change; (Aug. 9, 2016), 81 FR 54155 (‘‘Notice’’).
correspond generally to the price and yield
the Commission does not edit personal performance of a specific foreign or domestic stock
4 In Amendment No. 1, which amended and
index, fixed income securities index or combination
identifying information from replaced the proposed rule change in its entirety, thereof.
submissions. You should submit only the Exchange: (1) Described additional 9 The Securities and Exchange Commission
diversification requirements that would apply to
information that you wish to make the Fund’s holdings in municipal bonds; (2)
(‘‘Commission’’) has approved listing and trading
on the Exchange of a number of actively managed
available publicly. All submissions clarified the Fund’s holdings in non-exchange- funds under Rule 8.600. See, e.g., Securities
should refer to File Number SR–NYSE– traded investment company securities; and (3) Exchange Act Release Nos. 69591 (May 16, 2013),
2016–73, and should be submitted on or corrected certain references to the regular trading 78 FR 30372 (May 22, 2013) (SR–NYSEArca–2013–
session of the Exchange. Amendment No. 1 to the 33) (order approving Exchange listing and trading
before December 8, 2016. proposed rule change is available at: https:// of International Bear ETF); 69061 (March 7, 2013),
For the Commission, by the Division of www.sec.gov/comments/sr-nysearca-2016-107/ 78 FR 15990 (March 13, 2013) (SR–NYSEArca–
nysearca2016107-1.pdf. 2013–01) (order approving Exchange listing and
Trading and Markets, pursuant to delegated 5 15 U.S.C. 78s(b)(2).
trading of Newfleet Multi-Sector Income ETF). The
authority.16 6 See Securities Exchange Act Release No. 78949,
Commission has approved for Exchange listing and
Brent J. Fields, 81 FR 68078 (Oct. 3, 2016). The Commission
asabaliauskas on DSK3SPTVN1PROD with NOTICES
trading shares of two actively managed funds of the
designated November 13, 2016, as the date by PIMCO ETF Trust that principally hold municipal
Secretary. which the Commission shall either approve or bonds. See Securities Exchange Act Release No.
[FR Doc. 2016–27596 Filed 11–16–16; 8:45 am] disapprove, or institute proceedings to determine 60981 (November 10, 2009), 74 FR 59594
BILLING CODE 8011–01–P
whether to disapprove, the proposed rule change. (November 18, 2009) (SR–NYSEArca–2009–79)
7 In Amendment No. 2, which amended and (order approving listing and trading of shares of the
replaced the proposed rule change, as modified by PIMCO Short-Term Municipal Bond Strategy Fund
Amendment No. 1 thereto, in its entirety, the and PIMCO Intermediate Municipal Bond Strategy
Exchange: (1) Described additional diversification Fund). The Commission also has approved listing
criteria that would apply to the Fund’s holdings in and trading on the Exchange of shares of the SPDR
16 17 CFR 200.30–3(a)(12). municipal bonds; and (2) clarified the Fund’s Continued
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Document Created: 2016-11-17 02:59:59
Document Modified: 2016-11-17 02:59:59
| 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 81186 |
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