81 FR 81216 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Change Adopting a Decommission Extension Fee for Receipt of the NYSE MKT 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 | 81216-81219 | |
| FR Document | 2016-27597 |
[Federal Register Volume 81, Number 222 (Thursday, November 17, 2016)] [Notices] [Pages 81216-81219] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-27597] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79287; File No. SR-NYSEMKT-2016-100] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Change Adopting a Decommission Extension Fee for Receipt of the NYSE MKT 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, NYSE MKT LLC (``NYSE MKT'' 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 MKT 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 MKT Order Imbalances market data product,\3\ as set forth on the NYSE MKT Proprietary Market Data Fee Schedule (``Fee Schedule''). Recipients of NYSE MKT 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 MKT 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. 59743 (April 9, 2009), 74 FR 17699 (April 16, 2009) (SR-NYSEAmex-2009-11--Notice of Filing and Immediate Effectiveness of Proposed Rule Change Making Available an NYSE Amex Order Imbalance Information Datafeed); and 60385 (July 24, 2009), 74 FR 38249 (July 31, 2009) (SR-NYSEAmex- 2009-26--Order Approving Proposed Rule Change to Charge a $500 Monthly Fee to Recipients of the NYSE Amex Order Imbalance Information Datafeed). See also Securities Exchange Act Release Nos. 72020 (September 9, 2014), 79 FR 55040 (September 15, 2014) (SR- NYSEMKT-2014-72) (establishing fees for non-display use of NYSE MKT Order Imbalances); and 76911 (January 14, 2016), 81 FR 3496 (January 21, 2016) (SR-NYSEMKT-2016-05) (amending fees for NYSE MKT Order Imbalances). --------------------------------------------------------------------------- NYSE MKT Order Imbalances is an NYSE MKT-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--Equities (Pre-Opening Indications and Opening Order Imbalance Information) and 123C--Equities (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, beginning October 31, 2016, NYSE MKT Order Imbalances will be transmitted in a new format, Exchange Data Protocol [[Page 81217]] (XDP). Beginning October 31, 2016, the Exchange will transmit NYSE MKT 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 MKT Order Imbalances who wish to continue to receive NYSE MKT 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 MKT 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 MKT 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 MKT BBO and NYSE MKT Trades market data products when the Exchange migrated those products to the XDP format. See Securities Exchange Act Release No. 77389 (March 17, 2016), 81 FR 15363 (March 22, 2016) (SR-NYSEMKT-2016-37). --------------------------------------------------------------------------- 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 MKT 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 MKT 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 MKT 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 MKT Order Imbalances is entirely optional. The Exchange is not required to make NYSE MKT Order Imbalances available or to offer any specific pricing alternatives to any customers, nor is any firm required to purchase NYSE MKT Order Imbalances, nor is the Exchange required to offer any feed (NYSE MKT Order Imbalances, or otherwise) in a particular format, and it is a benefit to the markets generally that NYSE MKT 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 MKT 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 MKT 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\ --------------------------------------------------------------------------- \10\ The Exchange believes that cost-based pricing would be impractical because it would create enormous administrative burdens for all parties and the Commission to cost-regulate a large number of participants and standardize and analyze extraordinary amounts of information, accounts, and reports. In addition, and as described below, it is impossible to regulate market data prices in isolation from prices charged by markets for other services that are joint products. Cost-based rate regulation would also lead to litigation and may distort incentives, including those to minimize costs and to innovate, leading to further waste. Under cost-based pricing, the Commission would be burdened with determining a fair rate of return, and the industry could experience frequent rate increases based on escalating expense levels. Even in industries historically subject to utility regulation, cost-based ratemaking has been discredited. As such, the Exchange believes that cost-based ratemaking would be inappropriate for proprietary market data and inconsistent with Congress's direction that the Commission use its authority to foster the development of the national market system, and that market forces will continue to provide appropriate pricing discipline. See Appendix C to NYSE's comments to the Commission's 2000 Concept Release on the Regulation of Market Information Fees and Revenues, which can be found on the Commission's Web site at http://www.sec.gov/rules/concept/s72899/buck1.htm. Finally, the prices set herein are prices for continuing to support distribution formats the Exchange has elected to retire in favor of new and more efficient distribution formats, making cost-based analyses even less relevant. --------------------------------------------------------------------------- For these reasons, the Exchange believes that the proposed fees are reasonable, equitable, and not unfairly discriminatory. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance [[Page 81218]] of the purposes of the Act. An exchange's ability to price its proprietary market data feed products is constrained by actual competition for the sale of proprietary market data products, the joint product nature of exchange platforms, and the existence of alternatives to the Exchange's proprietary data (and in this instance, the ability of any firm to switch to the new distribution format in a time frame that eliminates the need to pay these fees entirely). The Existence of Actual Competition The market for proprietary data products is currently competitive and inherently contestable because there is fierce competition for the inputs necessary for the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with one another for listings and order flow and sales of market data itself, providing ample opportunities for entrepreneurs who wish to compete in any or all of those areas, including producing and distributing their own market data. Proprietary data products are produced and distributed by each individual exchange, as well as other entities, in a vigorously competitive market. Indeed, the U.S. Department of Justice (``DOJ'') (the primary antitrust regulator) has expressly acknowledged the aggressive actual competition among exchanges, including for the sale of proprietary market data. In 2011, the DOJ stated that exchanges ``compete head to head to offer real-time equity data products. These data products include the best bid and offer of every exchange and information on each equity trade, including the last sale.'' \11\ --------------------------------------------------------------------------- \11\ Press Release, U.S. Department of Justice, Assistant Attorney General Christine Varney Holds Conference Call Regarding NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. Abandoning Their Bid for NYSE Euronext (May 16, 2011), available at http://www.justice.gov/iso/opa/atr/speeches/2011/at-speech-110516.html; see also Complaint in U.S. v. Deutsche Borse AG and NYSE Euronext, Case No. 11-cv-2280 (D.C. Dist.) ] 24 (``NYSE and Direct Edge compete head-to-head . . . in the provision of real-time proprietary equity data products.''). --------------------------------------------------------------------------- Moreover, competitive markets for listings, order flow, executions, and transaction reports provide pricing discipline for the inputs of proprietary data products and therefore constrain markets from overpricing proprietary market data. Broker-dealers send their order flow and transaction reports to multiple venues, rather than providing them all to a single venue, which in turn reinforces this competitive constraint. As a 2010 Commission Concept Release noted, the ``current market structure can be described as dispersed and complex'' with ``trading volume . . . dispersed among many highly automated trading centers that compete for order flow in the same stocks'' and ``trading centers offer[ing] a wide range of services that are designed to attract different types of market participants with varying trading needs.'' \12\ More recently, SEC Chair Mary Jo White has noted that competition for order flow in exchange-listed equities is ``intense'' and divided among many trading venues, including exchanges, more than 40 alternative trading systems, and more than 250 broker-dealers.\13\ --------------------------------------------------------------------------- \12\ Concept Release on Equity Market Structure, Securities Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3594 (Jan. 21, 2010) (File No. S7-02-10). This Concept Release included data from the third quarter of 2009 showing that no market center traded more than 20% of the volume of listed stocks, further evidencing the dispersal of and competition for trading activity. Id. at 3598. Data available on ArcaVision show that from June 30, 2013 to June 30, 2014, no exchange traded more than 12% of the volume of listed stocks by either trade or dollar volume, further evidencing the continued dispersal of and fierce competition for trading activity. See https://www.arcavision.com/Arcavision/arcalogin.jsp. \13\ Mary Jo White, Enhancing Our Equity Market Structure, Sandler O'Neill & Partners, L.P. Global Exchange and Brokerage Conference (June 5, 2014) (available on the Commission Web site), citing Tuttle, Laura, 2014, ``OTC Trading: Description of Non-ATS OTC Trading in National Market System Stocks,'' at 7-8. --------------------------------------------------------------------------- If an exchange succeeds in competing for quotations, order flow, and trade executions, then it earns trading revenues and increases the value of its proprietary market data products because they will contain greater quote and trade information. Conversely, if an exchange is less successful in attracting quotes, order flow, and trade executions, then its market data products may be less desirable to customers in light of the diminished content and data products offered by competing venues may become more attractive. Thus, competition for quotations, order flow, and trade 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 MKT Order Imbalances in the legacy format unless their customers request it, and customers will not elect to pay the proposed fees unless NYSE MKT 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 81219]] 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-NYSEMKT-2016-100 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-NYSEMKT-2016-100. 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-NYSEMKT-2016-100, 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. 2016-27597 Filed 11-16-16; 8:45 am] BILLING CODE 8011-01-P
![81216 Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices
for which motions to dismiss may be V. Conclusion the proposed rule change and discussed
made before the conclusion of the case It is therefore ordered, pursuant to any comments it received on the
in chief—situations where the dispute Section 19(b)(2) of the Exchange Act,57 proposed rule change. The text of these
was previously concluded through that the proposed rule change (SR– statements may be examined at the
adjudication or arbitration and FINRA–2016–030) be, and hereby is, places specified in Item IV below. The
memorialized in an order, judgment, approved. Exchange has prepared summaries, set
award, or decision.55 This amendment forth in sections A, B, and C below, of
For the Commission, by the Division of
is consistent with the Task Force’s Trading and Markets, pursuant to delegated
the most significant aspects of such
recommendation. authority.58 statements.
Taking into consideration the Brent J. Fields, A. Self-Regulatory Organization’s
comments and FINRA’s responses, the Secretary. Statement of the Purpose of, and the
Commission believes that the proposal [FR Doc. 2016–27595 Filed 11–16–16; 8:45 am] Statutory Basis for, the Proposed Rule
is consistent with the Exchange Act. BILLING CODE 8011–01–P Change
The Commission believes that the 1. Purpose
proposal will help protect investors and
the public interest by, among other SECURITIES AND EXCHANGE The Exchange proposes to adopt a
COMMISSION Decommission Extension Fee for receipt
things, providing an additional ground
of the NYSE MKT Order Imbalances
for arbitrators to act on motions to [Release No. 34–79287; File No. SR–
market data product,3 as set forth on the
dismiss prior to the conclusion of the NYSEMKT–2016–100]
NYSE MKT Proprietary Market Data Fee
claimant’s case in chief in both
Self-Regulatory Organizations; NYSE Schedule (‘‘Fee Schedule’’). Recipients
customer and industry cases, while of NYSE MKT Order Imbalances would
preserving the ability of a non-moving MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed continue to be subject to the already
party to present evidence and testimony existing subscription fees currently set
to the arbitrators concerning the merits Change Adopting a Decommission
Extension Fee for Receipt of the NYSE forth in the Fee Schedule. The proposed
of the motion. In addition, the Decommission Extension Fee would
MKT Order Imbalances Market Data
Commission believes that the reasoning apply only to those subscribers who
Product
for the proposed new ground for decide to continue to receive the NYSE
dismissal is consistent with the November 10, 2016. MKT Order Imbalances feed in its
reasoning for an existing ground for Pursuant to Section 19(b)(1) of the legacy format for up to two months after
dismissal—that ‘‘the non-moving party Securities Exchange Act of 1934 which the feed will be distributed
previously released the claim(s) in (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 exclusively in the new format explained
dispute by a signed settlement notice is hereby given that on October below.
agreement and/or written release.’’ 56 28, 2016, NYSE MKT LLC (‘‘NYSE NYSE MKT Order Imbalances is an
Furthermore, the Commission believes MKT’’ or the ‘‘Exchange’’) filed with the NYSE MKT-only market data feed of
that FINRA’s responses, as discussed in Securities and Exchange Commission real-time order imbalances that
more detail above, appropriately (‘‘Commission’’) the proposed rule accumulate prior to the opening of
addressed commenters’ concerns and change as described in Items I, II, and trading on the Exchange and prior to the
adequately explained FINRA’s reasons III below, which Items have been close of trading on the Exchange. The
for declining to modify its proposal. prepared by the Exchange. The Exchange distributes information about
Accordingly, the Commission believes Commission is publishing this notice to these imbalances in real-time at
that the approach proposed by FINRA is solicit comments on the proposed rule specified intervals prior to the opening
appropriate and designed to protect change from interested persons. and closing auction each day.4
investors and the public interest, I. Self-Regulatory Organization’s As part of the Exchange’s efforts to
consistent with Section 15A(b)(6) of the Statement of the Terms of Substance of regularly upgrade systems to support
Exchange Act and the rules and the Proposed Rule Change more modern data distribution formats
regulations thereunder. and protocols as technology evolves,
The Exchange proposes to adopt a beginning October 31, 2016, NYSE MKT
Decommission Extension Fee for receipt Order Imbalances will be transmitted in
55 In July 2014, FINRA formed the Task Force to
of the NYSE MKT Order Imbalances a new format, Exchange Data Protocol
‘‘suggest strategies to enhance the transparency,
impartiality, and efficiency of FINRA’s securities
market data product. The proposed
dispute resolution forum for all participants.’’ See change is available on the Exchange’s 3 See Securities Exchange Act Release Nos. 59743
FINRA News Release, FINRA Announces Web site at www.nyse.com, at the (April 9, 2009), 74 FR 17699 (April 16, 2009) (SR–
Arbitration Task Force, dated July 17, 2014, principal office of the Exchange, and at NYSEAmex–2009–11—Notice of Filing and
available at http://www.finra.org/newsroom/2014/ Immediate Effectiveness of Proposed Rule Change
finra-announces-arbitration-task-force; see also
the Commission’s Public Reference
Making Available an NYSE Amex Order Imbalance
Notice, 81 FR at 54889. Room. Information Datafeed); and 60385 (July 24, 2009), 74
The Task Force ultimately found that FINRA II. Self-Regulatory Organization’s FR 38249 (July 31, 2009) (SR–NYSEAmex–2009–
Rules 12504 and 13504 appeared to be working as 26—Order Approving Proposed Rule Change to
intended to prevent the filing of frivolous motions Statement of the Purpose of, and Charge a $500 Monthly Fee to Recipients of the
to dismiss, but recommended that, in instances Statutory Basis for, the Proposed Rule NYSE Amex Order Imbalance Information
where arbitrations involve claims previously Change Datafeed). See also Securities Exchange Act Release
asabaliauskas on DSK3SPTVN1PROD with NOTICES
adjudicated by a court or arbitrated by an Nos. 72020 (September 9, 2014), 79 FR 55040
arbitration panel, respondents should be able to In its filing with the Commission, the (September 15, 2014) (SR–NYSEMKT–2014–72)
seek early dismissal. See FINRA Dispute Resolution Exchange included statements (establishing fees for non-display use of NYSE MKT
Task Force, Final Report and Recommendations of concerning the purpose of, and basis for, Order Imbalances); and 76911 (January 14, 2016),
the FINRA Dispute Resolution Task Force, dated 81 FR 3496 (January 21, 2016) (SR–NYSEMKT–
December 16, 2015, available at http:// 2016–05) (amending fees for NYSE MKT Order
57 15 U.S.C. 78s(b)(2).
www.finra.org/sites/default/files/Final-DR-task- Imbalances).
58 17 CFR 200.30–3(a)(12).
force-report.pdf; see also Notice, 81 FR at 54889. 4 See Rules 15—Equities (Pre-Opening Indications
56 See FINRA Rule 12504(a)(6)(A); FINRA Rule 1 15 U.S.C. 78s(b)(1).
and Opening Order Imbalance Information) and
13504(a)(6)(A). 2 17 CFR 240.19b–4. 123C—Equities (The Closing Procedures).
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![81218 Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices
of the purposes of the Act. An be described as dispersed and complex’’ will not elect to make available NYSE
exchange’s ability to price its with ‘‘trading volume . . . dispersed MKT Order Imbalances in the legacy
proprietary market data feed products is among many highly automated trading format unless their customers request it,
constrained by actual competition for centers that compete for order flow in and customers will not elect to pay the
the sale of proprietary market data the same stocks’’ and ‘‘trading centers proposed fees unless NYSE MKT 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 rule change.
actual competition among exchanges, that are also redistributed through
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 The foregoing rule change has become
These data products include the best bid because they control the primary means effective pursuant to Section 19(b)(3)(A)
and offer of every exchange and of access to certain end users. These of the Act 14 and paragraph (f) of Rule
information on each equity trade, vendors impose price discipline based 19b–4 15 thereunder. At any time within
including the last sale.’’ 11 upon their business models. For 60 days of the filing of the proposed rule
Moreover, competitive markets for example, vendors that assess a change, the Commission summarily may
listings, order flow, executions, and surcharge on data they sell are able to temporarily suspend such rule change if
transaction reports provide pricing refuse to offer proprietary products that it appears to the Commission that such
discipline for the inputs of proprietary their end users do not or will not action is necessary or appropriate in the
data products and therefore constrain purchase in sufficient numbers. Vendors public interest, for the protection of
markets from overpricing proprietary investors, or otherwise in furtherance of
market data. Broker-dealers send their 12 Concept Release on Equity Market Structure,
the purposes of the Act. If the
order flow and transaction reports to Securities Exchange Act Release No. 61358 (Jan. 14,
2010), 75 FR 3594 (Jan. 21, 2010) (File No. S7–02– Commission takes such action, the
multiple venues, rather than providing 10). This Concept Release included data from the Commission will institute proceedings
them all to a single venue, which in turn third quarter of 2009 showing that no market center to determine whether the proposed rule
reinforces this competitive constraint. traded more than 20% of the volume of listed change should be approved or
stocks, further evidencing the dispersal of and
As a 2010 Commission Concept Release competition for trading activity. Id. at 3598. Data disapproved.
noted, the ‘‘current market structure can 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
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Assistant Attorney General Christine Varney Holds submit written data, views, and
Conference Call Regarding NASDAQ OMX Group continued dispersal of and fierce competition for
Inc. and IntercontinentalExchange Inc. Abandoning trading activity. See https://www.arcavision.com/ arguments concerning the foregoing,
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)
Euronext, Case No. 11–cv–2280 (D.C. Dist.) ¶ 24 (available on the Commission Web site), citing
the following methods:
(‘‘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 81219
Electronic Comments SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s
COMMISSION Statement of the Purpose of, and
• Use the Commission’s Internet Statutory Basis for, the Proposed Rule
comment form (http://www.sec.gov/ Change
[Release No. 34–79282; File No. SR–
rules/sro.shtml); or
NASDAQ–2016–156] 1. Purpose
• Send an email to rule-comments@
sec.gov. Please include File Number SR– Self-Regulatory Organizations; The Nasdaq proposes to amend Rules [sic]
NYSEMKT–2016–100 on the subject NASDAQ Stock Market LLC; Notice of 4702 (Order Types) and Rule 4703
line. Filing and Immediate Effectiveness of (Order Attributes) to add a ‘‘Trade Now’’
instruction to certain order types.
Proposed Rule Change To Amend Rule
Paper Comments Nasdaq will offer this functionality
4702 and Rule 4703 To Add a ‘‘Trade
through its OUCH, RASH, FLITE, and
• Send paper comments in triplicate Now’’ Instruction to Certain Order FIX protocols. This instruction will
to Brent J. Fields, Secretary, Securities Types provide resting orders with a greater
and Exchange Commission, 100 F Street ability to receive an execution when
November 10, 2016.
NE., Washington, DC 20549–1090. that resting order is locked, e.g., the
Pursuant to Section 19(b)(1) of the price of a resting non-display buy order
All submissions should refer to File Securities Exchange Act of 1934 (the
Number SR–NYSEMKT–2016–100. This equals the price of a resting displayed
‘‘Act’’),1 and Rule 19b–4 thereunder,2 sell order on the Nasdaq book. The
file number should be included on the notice is hereby given that on November
subject line if email is used. To help the Trade Now instruction will allow
8, 2016, The NASDAQ Stock Market participants to enter an instruction to
Commission process and review your LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed have a locked resting buy (sell) order
comments more efficiently, please use with the Securities and Exchange execute against the locking sell (buy)
only one method. The Commission will Commission (‘‘SEC’’ or ‘‘Commission’’) order. Depending on the protocol used
post all comments on the Commission’s the proposed rule change as described by the participant to access the Nasdaq
Internet Web site (http://www.sec.gov/ in Items I and II below, which Items system, the participant may either
rules/sro.shtml). Copies of the have been prepared by the Exchange. specify that the order execute against
submission, all subsequent The Commission is publishing this locking interest automatically, or the
amendments, all written statements notice to solicit comments on the participant may be required to send a
with respect to the proposed rule proposed rule change from interested Trade Now instruction to the Exchange
change that are filed with the persons. once the order has become locked. As
Commission, and all written discussed in greater detail below,
communications relating to the I. Self-Regulatory Organization’s Nasdaq is offering the Trade Now
proposed rule change between the Statement of the Terms of the Substance instruction for all orders that may be
Commission and any person, other than of the Proposed Rule Change sent to the continuous Nasdaq book, and
those that may be withheld from the will not offer the instruction for orders
public in accordance with the The Exchange proposes to amend that do not execute on the continuous
provisions of 5 U.S.C. 552, will be Rule 4702 (Order Types) and Rule 4703 book.
available for Web site viewing and (Order Attributes) to add a ‘‘Trade Now’’ When a Trade Now instruction is
printing in the Commission’s Public instruction to certain order types. applied to a resting buy (sell) order, the
Reference Room, 100 F Street NE., The text of the proposed rule change order will execute against the available
Washington, DC 20549 on official is available on the Exchange’s Web site size of the locking sell (buy) order at the
business days between the hours of at http://nasdaq.cchwallstreet.com/, at locked price. The following example
10:00 a.m. and 3:00 p.m. Copies of such the principal office of the Exchange, and illustrates this scenario:
at the Commission’s Public Reference • Participant A enters a Non-Display
filing also will be available for
Room. buy order for 200 shares at $10, and
inspection and copying at the principal
specifies the Trade Now instruction;
office of the Exchange. All comments II. Self-Regulatory Organization’s • Participant B enters a Post Only sell
received will be posted without change; Statement of the Purpose of, and order for 100 shares at $10; 3
the Commission does not edit personal Statutory Basis for, the Proposed Rule • The Post Only order is posted at
identifying information from Change $10 and locks the Non-Display order;
submissions. You should submit only • The buy order will execute for 100
information that you wish to make In its filing with the Commission, the shares at $10 as the remover of liquidity.
available publicly. All submissions Exchange included statements If a buy (sell) order with the Trade
should refer to File Number SR– concerning the purpose of and basis for Now instruction is only partially
NYSEMKT–2016–100, and should be the proposed rule change and discussed executed, the unexecuted portion of that
submitted on or before December 8, any comments it received on the order remains on the Nasdaq book and
2016. proposed rule change. The text of these maintains its priority. When a Trade
statements may be examined at the Now instruction is entered through the
For the Commission, by the Division of
places specified in Item IV below. The OUCH or FLITE protocol for a resting
Trading and Markets, pursuant to delegated
asabaliauskas on DSK3SPTVN1PROD with NOTICES
authority.16 Exchange has prepared summaries, set buy (sell) order and there is no locking
Brent J. Fields, forth in sections A, B, and C below, of
3 The Exchange recently submitted a proposal to
Secretary.
the most significant aspects of such amend Nasdaq Rules 4702 and 4703 to change the
statements. way in which Post Only Orders interact with resting
[FR Doc. 2016–27597 Filed 11–16–16; 8:45 am]
Non-Display orders and preventing the execution of
BILLING CODE 8011–01–P midpoint pegged orders during a crossed market.
See Securities Exchange Act Release No. 78908
1 15 U.S.C. 78s(b)(1). (September 22, 2016), 81 FR 66702 (September 28,
16 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. 2016) (SR–NASDAQ–2016–111).
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Document Created: 2016-11-17 03:00:02
Document Modified: 2016-11-17 03:00:02
| 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 81216 |
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