81_FR_88952 81 FR 88716 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Rule 7047

81 FR 88716 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Rule 7047

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 236 (December 8, 2016)

Page Range88716-88720
FR Document2016-29386

Federal Register, Volume 81 Issue 236 (Thursday, December 8, 2016)
[Federal Register Volume 81, Number 236 (Thursday, December 8, 2016)]
[Notices]
[Pages 88716-88720]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-29386]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79456; File No. SR-NASDAQ-2016-162]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Exchange's Transaction Fees at Rule 7047

December 2, 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 November 21, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's data fees at Rule 
7047 to: (i) Reduce the enterprise license fee for Nasdaq Basic from 
$350,000 to $100,000 per month for broker-dealers distributing Nasdaq 
Basic to Non-Professional and Professional Subscribers with whom the 
broker-dealer has a brokerage relationship; and (ii) eliminate a 
requirement that broker-dealers purchase other products--specifically, 
Nasdaq Last Sale and Nasdaq TotalView/OpenView--to qualify for the 
license. The Exchange also proposes a number of conforming changes: (1) 
To clarify which Subscribers may receive the data; (2) to limit the use 
of the data by Professional Subscribers; and (3) to specify that each 
electronic system used to distribute data under the enterprise license 
must be separately approved. The proposal is described in further 
detail below.
    These amendments are effective upon filing.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 88717]]

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

1. Purpose
    The purpose of the proposed rule change is to: (i) Reduce the 
enterprise license fee for Nasdaq Basic from $350,000 to $100,000 per 
month for broker-dealers distributing Nasdaq Basic to Professional and 
Non-Professional Subscribers with whom the broker-dealer has a 
brokerage relationship; and (ii) eliminate the requirement that broker-
dealers purchase other products--specifically, Nasdaq Last Sale and 
Nasdaq TotalView/OpenView--to qualify for the license. To clarify how 
to apply the proposed fee reduction, the Exchange is also proposing 
language specifying that Subscribers must be natural persons; limiting 
use of the data by Professional Subscribers to their brokerage 
relationships with the broker-dealer; and requiring that each 
electronic system used to distribute data from the enterprise license 
be separately approved by the Exchange.
Current Nasdaq Basic Enterprise License
    Nasdaq Basic provides best bid and offer and last sale information 
from the Nasdaq Market Center and from the FINRA/Nasdaq Trade Reporting 
Facility (``FINRA/NASDAQ TRF''). Data is taken from three sources, 
which may be purchased individually or in combination: (i) Nasdaq Basic 
for Nasdaq, which contains the best bid and offer on the Nasdaq Market 
Center and last sale trade reports for Nasdaq and the FINRA/Nasdaq TRF 
for Nasdaq-listed stocks; (ii) Nasdaq Basic for NYSE, which contains 
the best bid and offer on the Nasdaq Market Center and last sale trade 
reports for Nasdaq and the FINRA/Nasdaq TRF for NYSE-listed stocks; and 
(iii) Nasdaq Basic for NYSE MKT, which contains the best bid and offer 
on the Nasdaq Market Center and last sale trade reports for Nasdaq and 
the FINRA/Nasdaq TRF for stocks listed on NYSE MKT and other listing 
venues whose quotes and trade reports are disseminated on Tape B.
    Nasdaq Basic may be purchased through per-subscriber monthly 
charges, per-query fees, or, for broker-dealers, monthly enterprise 
licenses. These monthly enterprise licenses are available in two types: 
An internal license for Professional Subscribers, and a license for 
Non-Professional and Professional Subscribers with whom the broker-
dealer has a brokerage relationship.
    The second type of license, for Professional and Non-Professional 
Subscribers in a brokerage relationship with the broker-dealer, is 
currently available for $350,000 per month. To qualify for this 
license, the broker-dealer must also: (i) Distribute Nasdaq Last Sale 
for Nasdaq or Nasdaq Last Sale for NYSE/NYSE MKT via an internet-based 
electronic system approved by Nasdaq pursuant to Rule 7039(b)(2)(B), at 
a level that allows it to qualify for the fee cap provided for in Rule 
7039(b); (ii) distribute Nasdaq TotalView or Nasdaq OpenView data under 
an enterprise license pursuant to Rule 7023(c)(1); and (iii) pay the 
Distributor Fee for Nasdaq Basic under paragraph [sic] (c)(1) or for 
Nasdaq Last Sale under Rule 7039(c). The electronic system used to 
distribute Nasdaq Basic must be approved by Nasdaq, and the broker-
dealer must report the number of Subscribers at least once per calendar 
year.
Proposed Changes
    The Exchange proposes: (i) Reducing the enterprise license fee for 
Nasdaq Basic from $350,000 to $100,000 per month for broker-dealers 
distributing Nasdaq Basic to Non-Professional and Professional 
Subscribers with whom the broker-dealer has a brokerage relationship; 
and (ii) eliminating the two requirements that the purchaser distribute 
Nasdaq Last Sale for Nasdaq or Nasdaq Last Sale for NYSE/NYSE MKT at a 
level that allows it to qualify for the fee cap provided for in Rule 
7039(b), and distribute Nasdaq TotalView or Nasdaq OpenView data under 
an enterprise license pursuant to Rule 7023(c)(1). The proposed changes 
will promote the use of Nasdaq Basic by lowering its cost to investors 
and broadening the scope of its distribution to the investing public.
    The Exchange also proposes three conforming changes to clarify how 
to apply the proposed fee reduction.
    First, although the term ``Professional Subscribers'' is defined 
elsewhere in the rule to include legal entities that are not natural 
persons, the enterprise license set forth under Rule 7047(b)(5) may not 
be used to provide information to any business or other entity that is 
not a natural person. This is a clarification of current practice.
    Second, Professional Subscribers may use the data obtained through 
this license only in the context of the brokerage relationship between 
the Professional Subscriber and the broker-dealer, and may not use such 
data within the scope of any professional engagement or registration 
identified in Rule 7047(d)(3)(A). Specifically, a Professional 
Subscriber may not use that data in his or her capacity as a person who 
is: (i) Registered or qualified in any capacity with the Commission, 
the Commodity Futures Trading Commission, any state securities agency, 
or any securities exchange or association; (ii) engaged as an 
`investment adviser' as that term is defined in Section 201(11) of the 
Investment Advisers Act of 1940 (whether or not registered or qualified 
under that Act); or (iii) employed by a bank or other organization 
exempt from registration under federal or state securities laws to 
perform functions that would require registration or qualification if 
such functions were performed for an organization not so exempt.\3\ 
Professional Subscribers who use Nasdaq Basic in the course of their 
professional duties will be charged for such usage as appropriate, 
based on the service(s) used. This clarifying language does not change 
current practice.
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    \3\ The phrase ``any commodities or futures contract market or 
association'' has been deleted from this summary of Rule 
7047(d)(3)(A) as unduly repetitive. Only natural persons may be 
Subscribers under this rule. A ``commodities or futures contract 
market or association'' is not a natural person, and therefore is 
not eligible to receive information under this rule.
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    Third, if more than one electronic system is used to distribute 
information under this license, each such system must be separately 
approved by the Exchange. In addition, the approved electronic systems 
may be used to distribute information to any customer eligible to 
receive such information under this rule. Prior language limiting 
distribution to employees of the broker-dealer is deleted. Language is 
also added to clarify that the broker-dealer must pay for any Nasdaq 
Last Sale data distributed under Rule 7039(c), if the broker-dealer 
elects to distribute such data. None of these proposed modifications 
represent a change from current practice.
    The enterprise license fee is entirely optional, in that it applies 
only to broker-dealers that opt to distribute Nasdaq Basic to 
Professional and Non-Professional Subscribers as described herein.\4\ 
It does not impact or raise the cost of any other Nasdaq product, and 
in fact serves to decrease the cost of Nasdaq Basic in instances where 
a broker-dealer elects to purchase this license.
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    \4\ Nasdaq notes, moreover, that no broker-dealer may provide, 
in a context in which a trading or order-routing decision can be 
implemented, a display of any information with respect to quotations 
for or transactions in an NMS stock without also providing, in an 
equivalent manner, a consolidated display for such stock. 17 CFR 
242.603(c).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)

[[Page 88718]]

of the Act,\5\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\6\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues, and also recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \7\
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    \7\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Likewise, in NetCoalition v. Securities and Exchange Commission \8\ 
(``NetCoalition'') the D.C. Circuit upheld the Commission's use of a 
market-based approach in evaluating the fairness of market data fees 
against a challenge claiming that Congress mandated a cost-based 
approach.\9\ As the court emphasized, the Commission ``intended in 
Regulation NMS that `market forces, rather than regulatory 
requirements' play a role in determining the market data . . . to be 
made available to investors and at what cost.'' \10\
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    \8\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \9\ See NetCoalition, at 534-535.
    \10\ Id. at 537.
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    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers' . . . .'' \11\
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    \11\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
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    The Exchange believes that the proposed fee reduction and the 
elimination of conditions to qualify for the Nasdaq Basic enterprise 
license under Rule 7047(b)(5) is reasonable. The proposed changes will 
benefit the investing public by lowering the cost and increasing the 
availability of information in the marketplace. Moreover, the fees for 
Nasdaq Basic, like all proprietary data fees, are constrained by the 
Exchange's need to compete for order flow, and are subject to 
competition from other products and among broker-dealers for customers.
    The Exchange believes that the proposed fee reduction is an 
equitable allocation and is not unfairly discriminatory because the 
Exchange will apply the same fee to all similarly situated broker-
dealers. Moreover, by allocating the fee reduction to broker-dealers 
that distribute the product widely among customers, the change will 
assist in promoting a wider distribution of information to the 
investing public.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited.
    The proposed change will: (i) Reduce the enterprise license fee for 
Nasdaq Basic from $350,000 to $100,000 per month for broker-dealers 
distributing Nasdaq Basic to Non-Professional and Professional 
Subscribers with whom the broker-dealer has a brokerage relationship; 
and (ii) eliminate the requirement that broker-dealers purchase other 
products--specifically, Last Sale for Nasdaq or Last Sale for NYSE/NYSE 
MKT, and TotalView or OpenView--to qualify for the license. This will 
reduce the cost of Nasdaq Basic to investors, resulting in information 
becoming more widely available to the investing public.
    As illustrated by the proposed fee reduction, market forces 
constrain fees for Nasdaq Basic. This occurs in three distinct 
respects. First, all fees related to Nasdaq Basic are constrained by 
competition among exchanges and other entities attracting order flow. 
Firms make decisions regarding Nasdaq Basic and other proprietary data 
based on the total cost of interacting with the Exchange, and order 
flow would be harmed by the supracompetitive pricing of any proprietary 
data product. Second, the price of Nasdaq Basic is constrained by the 
existence of multiple substitutes that are offered, or may be offered, 
by entities that offer proprietary or non-proprietary data. The 
proposed price reduction itself provides evidence of the need to 
maintain low prices in a competitive marketplace. Third, competition 
among broker-dealers for customers will further constrain the cost of a 
Nasdaq Basic enterprise license.
Competition for Order Flow
    Fees related to Nasdaq Basic are constrained by competition among 
exchanges and other entities seeking to attract order flow. Order flow 
is the ``life blood'' of the exchanges. Broker-dealers currently have 
numerous alternative venues for their order flow, including thirteen 
self-regulatory organization (``SRO'') markets, as well as 
internalizing broker-dealers (``BDs'') and various forms of alternative 
trading systems (``ATSs''), including dark pools and electronic 
communication networks (``ECNs''). Each SRO market competes to produce 
transaction reports via trade executions, and two FINRA-regulated Trade 
Reporting Facilities (``TRFs'') compete to attract internalized 
transaction reports. The existence of fierce competition for order flow 
implies a high degree of price sensitivity on the part of BDs, which 
may readily reduce costs by directing orders toward the lowest-cost 
trading venues.
    The level of competition and contestability in the market for order 
flow is demonstrated by the numerous examples of entrants that swiftly 
grew into some of the largest electronic trading platforms and 
proprietary data producers: Archipelago, Bloomberg Tradebook, Island, 
RediBook, Attain, TracECN, BATS Trading and BATS/Direct Edge. A 
proliferation of dark pools and other ATSs operate profitably with 
fragmentary shares of consolidated market volume. For a variety of 
reasons, competition from new entrants, especially for order execution, 
has

[[Page 88719]]

increased dramatically over the last decade.
    Each SRO, TRF, ATS, and BD that competes for order flow is 
permitted to produce proprietary data products. Many currently do or 
have announced plans to do so, including NYSE, NYSE Amex, NYSE Arca, 
BATS, and IEX. This is because Regulation NMS deregulated the market 
for proprietary data. While BDs had previously published their 
proprietary data individually, Regulation NMS encourages market data 
vendors and BDs to produce proprietary products cooperatively in a 
manner never before possible. Order routers and market data vendors can 
facilitate production of proprietary data products for single or 
multiple BDs. The potential sources of proprietary products are 
virtually limitless.
    The markets for order flow and proprietary data are inextricably 
linked: a trading platform cannot generate market information unless it 
receives trade orders. As a result, the competition for order flow 
constrains the prices that platforms can charge for proprietary data 
products. Firms make decisions on how much and what types of data to 
consume based on the total cost of interacting with Nasdaq and other 
exchanges. Data fees are but one factor in a total platform analysis. 
If the cost of the product exceeds its expected value, the broker-
dealer will choose not to buy it. A supracompetitive increase in the 
fees charged for either transactions or proprietary data has the 
potential to impair revenues from both products. In this manner, the 
competition for order flow will constrain prices for proprietary data 
products, including charges relating to Nasdaq Basic.
Substitute Products
    The price of data derived from Nasdaq Basic is constrained by the 
existence of multiple substitutes offered by numerous entities, 
including both proprietary data offered by other SROs or other 
entities, and non-proprietary data disseminated by Securities 
Information Processors (``SIPs'').
    The information provided through Nasdaq Basic is a subset of the 
best bid and offer and last sale data provided by the SIPs. The 
``core'' data disseminated by the SIP consists of best-price quotations 
and last sale information from all markets in U.S.-listed equities; 
Nasdaq Basic provides best bid and offer and last sale information for 
all U.S. exchange-listed stocks based on trade reports from the Nasdaq 
Market Center and the FINRA/Nasdaq Trade Reporting Facility. Many 
customers that purchase SIP data do not also purchase Nasdaq Basic 
because they are closely related products. In cases where customers buy 
both products, they may shift the extent to which they purchase one or 
the other based on price changes. The SIP constrains the price of 
Nasdaq Basic because no purchaser would pay an excessive price for 
Nasdaq Basic when similar data is also available from the SIP.
    Proprietary data sold by other exchanges also constrain the price 
of Nasdaq Basic. NYSE and BATS, like Nasdaq, sell proprietary non-core 
data that include best bid and offer and last sale data. Customers do 
not typically purchase proprietary best bid and offer and last sale 
data from multiple exchanges. Other proprietary data products constrain 
the price of Nasdaq Basic because no customer would pay an excessive 
price for Nasdaq Basic when substitute data is available from other 
proprietary sources.
Competition Among Broker-Dealers for Customers
    The enterprise license at issue is sold for use by the customers of 
a broker-dealer. There is no legal or regulatory requirement that such 
customers have direct access to data feeds containing best bid and 
offer or last sale information through Nasdaq Basic. If the price of 
the enterprise license were to be set above competitive levels, the 
broker-dealer purchasing that license would be at a competitive 
disadvantage relative to broker-dealers purchasing an alternative 
product as well as broker-dealers not purchasing any comparable product 
at all. As such, the broker-dealer at a competitive disadvantage would 
either purchase a substitute or forego the product altogether. The 
competition among broker-dealers for customers thereby provides yet 
another check on the price for Nasdaq Basic.
    In summary, the proposed rule change lowers the cost of Nasdaq 
Basic and broadens its availability to the investing public. Market 
forces constrain the Nasdaq Basic enterprise license through 
competition for order flow, competition from substitute products, and 
in the competition among broker-dealers for customers. For these 
reasons, the Exchange has provided a substantial basis demonstrating 
that the fee is equitable, fair, reasonable, and not unreasonably 
discriminatory, and therefore consistent with and in furtherance of the 
purposes of the Exchange Act.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\12\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2016-162 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-NASDAQ-2016-162. 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

[[Page 88720]]

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-NASDAQ-2016-162, and should 
be submitted on or before December 29, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-29386 Filed 12-7-16; 8:45 am]
 BILLING CODE 8011-01-P



                                                88716                          Federal Register / Vol. 81, No. 236 / Thursday, December 8, 2016 / Notices

                                                to list securities on its exchange. Issuers             and Exchange Commission, 100 F Street                  (‘‘Act’’),1 and Rule 19b–4 thereunder,2
                                                have the option to list their securities on             NE., Washington, DC 20549–1090.                        notice is hereby given that, on
                                                these alternative venues based on the                   All submissions should refer to File                   November 21, 2016, The NASDAQ
                                                fees charged and the value provided by                  Number SR–NYSE–2016–69. This file                      Stock Market LLC (‘‘Nasdaq’’ or
                                                each listing. Because issuers have a                    number should be included on the                       ‘‘Exchange’’) filed with the Securities
                                                choice to list their securities on a                    subject line if email is used. To help the             and Exchange Commission (‘‘SEC’’ or
                                                different national securities exchange,                 Commission process and review your                     ‘‘Commission’’) the proposed rule
                                                the Exchange does not believe that the                  comments more efficiently, please use                  change as described in Items I, II, and
                                                proposed fee changes impose a burden                    only one method. The Commission will                   III below, which Items have been
                                                on competition.                                         post all comments on the Commission’s                  prepared by the Exchange. The
                                                                                                        Internet Web site (http://www.sec.gov/                 Commission is publishing this notice to
                                                C. Self-Regulatory Organization’s
                                                                                                        rules/sro.shtml). Copies of the                        solicit comments on the proposed rule
                                                Statement on Comments on the
                                                                                                        submission, all subsequent                             change from interested persons.
                                                Proposed Rule Change Received From
                                                Members, Participants, or Others                        amendments, all written statements                     I. Self-Regulatory Organization’s
                                                                                                        with respect to the proposed rule                      Statement of the Terms of Substance of
                                                  No written comments were solicited                    change that are filed with the
                                                or received with respect to the proposed                                                                       the Proposed Rule Change
                                                                                                        Commission, and all written
                                                rule change.                                            communications relating to the                            The Exchange proposes to amend the
                                                III. Date of Effectiveness of the                       proposed rule change between the                       Exchange’s data fees at Rule 7047 to: (i)
                                                Proposed Rule Change and Timing for                     Commission and any person, other than                  Reduce the enterprise license fee for
                                                Commission Action                                       those that may be withheld from the                    Nasdaq Basic from $350,000 to $100,000
                                                                                                        public in accordance with the                          per month for broker-dealers
                                                   The foregoing rule change is effective               provisions of 5 U.S.C. 552, will be                    distributing Nasdaq Basic to Non-
                                                upon filing pursuant to Section                         available for Web site viewing and                     Professional and Professional
                                                19(b)(3)(A) 8 of the Act and                            printing in the Commission’s Public                    Subscribers with whom the broker-
                                                subparagraph (f)(2) of Rule 19b–4 9                     Reference Room, 100 F Street NE.,                      dealer has a brokerage relationship; and
                                                thereunder, because it establishes a due,               Washington, DC 20549 on official                       (ii) eliminate a requirement that broker-
                                                fee, or other charge imposed by the                     business days between the hours of                     dealers purchase other products—
                                                Exchange.                                               10:00 a.m. and 3:00 p.m. Copies of such                specifically, Nasdaq Last Sale and
                                                   At any time within 60 days of the                    filing also will be available for                      Nasdaq TotalView/OpenView—to
                                                filing of such proposed rule change, the                inspection and copying at the principal                qualify for the license. The Exchange
                                                Commission summarily may                                office of the Exchange. All comments                   also proposes a number of conforming
                                                temporarily suspend such rule change if                 received will be posted without change;                changes: (1) To clarify which
                                                it appears to the Commission that such                  the Commission does not edit personal                  Subscribers may receive the data; (2) to
                                                action is necessary or appropriate in the               identifying information from                           limit the use of the data by Professional
                                                public interest, for the protection of                  submissions. You should submit only                    Subscribers; and (3) to specify that each
                                                investors, or otherwise in furtherance of               information that you wish to make                      electronic system used to distribute data
                                                the purposes of the Act. If the                         available publicly. All submissions                    under the enterprise license must be
                                                Commission takes such action, the                       should refer to File Number SR–NYSE–                   separately approved. The proposal is
                                                Commission shall institute proceedings                  2016–69, and should be submitted on or                 described in further detail below.
                                                under Section 19(b)(2)(B) 10 of the Act to              before December 29, 2016                                  These amendments are effective upon
                                                determine whether the proposed rule                                                                            filing.
                                                change should be approved or                              For the Commission, by the Division of
                                                                                                        Trading and Markets, pursuant to delegated                The text of the proposed rule change
                                                disapproved.                                                                                                   is available on the Exchange’s Web site
                                                                                                        authority.11
                                                IV. Solicitation of Comments                            Eduardo A. Aleman,                                     at http://nasdaq.cchwallstreet.com, at
                                                                                                        Assistant Secretary.                                   the principal office of the Exchange, and
                                                  Interested persons are invited to
                                                                                                                                                               at the Commission’s Public Reference
                                                submit written data, views, and                         [FR Doc. 2016–29389 Filed 12–7–16; 8:45 am]
                                                                                                                                                               Room.
                                                arguments concerning the foregoing,                     BILLING CODE 8011–01–P
                                                including whether the proposed rule                                                                            II. Self-Regulatory Organization’s
                                                change is consistent with the Act.                                                                             Statement of the Purpose of, and
                                                Comments may be submitted by any of                     SECURITIES AND EXCHANGE                                Statutory Basis for, the Proposed Rule
                                                the following methods:                                  COMMISSION                                             Change
                                                Electronic Comments                                                                                              In its filing with the Commission, the
                                                                                                        [Release No. 34–79456; File No. SR–
                                                  • Use the Commission’s Internet                       NASDAQ–2016–162]
                                                                                                                                                               Exchange included statements
                                                comment form (http://www.sec.gov/                                                                              concerning the purpose of and basis for
                                                rules/sro.shtml); or                                    Self-Regulatory Organizations; The                     the proposed rule change and discussed
                                                  • Send an email to rule-comments@                     NASDAQ Stock Market LLC; Notice of                     any comments it received on the
                                                sec.gov. Please include File Number SR–                 Filing and Immediate Effectiveness of                  proposed rule change. The text of these
                                                NYSE–2016–69 on the subject line.                       Proposed Rule Change To Amend the                      statements may be examined at the
                                                                                                                                                               places specified in Item IV below. The
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                                                                                                        Exchange’s Transaction Fees at Rule
                                                Paper Comments                                          7047                                                   Exchange has prepared summaries, set
                                                  • Send paper comments in triplicate                                                                          forth in sections A, B, and C below, of
                                                                                                        December 2, 2016.                                      the most significant aspects of such
                                                to Brent J. Fields, Secretary, Securities
                                                                                                          Pursuant to Section 19(b)(1) of the                  statements.
                                                  8 15 U.S.C. 78s(b)(3)(A).                             Securities Exchange Act of 1934
                                                  9 17 CFR 240.19b–4(f)(2).                                                                                      1 15   U.S.C. 78s(b)(1).
                                                  10 15 U.S.C. 78s(b)(2)(B).                              11 17   CFR 200.30–3(a)(12).                           2 17   CFR 240.19b–4.



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                                                                           Federal Register / Vol. 81, No. 236 / Thursday, December 8, 2016 / Notices                                                   88717

                                                A. Self-Regulatory Organization’s                       Subscribers in a brokerage relationship               capacity with the Commission, the
                                                Statement of the Purpose of, and                        with the broker-dealer, is currently                  Commodity Futures Trading
                                                Statutory Basis for, the Proposed Rule                  available for $350,000 per month. To                  Commission, any state securities
                                                Change                                                  qualify for this license, the broker-dealer           agency, or any securities exchange or
                                                                                                        must also: (i) Distribute Nasdaq Last                 association; (ii) engaged as an
                                                1. Purpose
                                                                                                        Sale for Nasdaq or Nasdaq Last Sale for               ‘investment adviser’ as that term is
                                                   The purpose of the proposed rule                     NYSE/NYSE MKT via an internet-based                   defined in Section 201(11) of the
                                                change is to: (i) Reduce the enterprise                 electronic system approved by Nasdaq                  Investment Advisers Act of 1940
                                                license fee for Nasdaq Basic from                       pursuant to Rule 7039(b)(2)(B), at a level            (whether or not registered or qualified
                                                $350,000 to $100,000 per month for                      that allows it to qualify for the fee cap             under that Act); or (iii) employed by a
                                                broker-dealers distributing Nasdaq Basic                provided for in Rule 7039(b); (ii)                    bank or other organization exempt from
                                                to Professional and Non-Professional                    distribute Nasdaq TotalView or Nasdaq                 registration under federal or state
                                                Subscribers with whom the broker-                       OpenView data under an enterprise                     securities laws to perform functions that
                                                dealer has a brokerage relationship; and                license pursuant to Rule 7023(c)(1); and              would require registration or
                                                (ii) eliminate the requirement that                     (iii) pay the Distributor Fee for Nasdaq              qualification if such functions were
                                                broker-dealers purchase other                           Basic under paragraph [sic] (c)(1) or for             performed for an organization not so
                                                products—specifically, Nasdaq Last Sale                 Nasdaq Last Sale under Rule 7039(c).                  exempt.3 Professional Subscribers who
                                                and Nasdaq TotalView/OpenView—to                        The electronic system used to distribute              use Nasdaq Basic in the course of their
                                                qualify for the license. To clarify how to              Nasdaq Basic must be approved by                      professional duties will be charged for
                                                apply the proposed fee reduction, the                   Nasdaq, and the broker-dealer must                    such usage as appropriate, based on the
                                                Exchange is also proposing language                     report the number of Subscribers at least             service(s) used. This clarifying language
                                                specifying that Subscribers must be                     once per calendar year.                               does not change current practice.
                                                natural persons; limiting use of the data                                                                        Third, if more than one electronic
                                                by Professional Subscribers to their                    Proposed Changes                                      system is used to distribute information
                                                brokerage relationships with the broker-                   The Exchange proposes: (i) Reducing                under this license, each such system
                                                dealer; and requiring that each                         the enterprise license fee for Nasdaq                 must be separately approved by the
                                                electronic system used to distribute data               Basic from $350,000 to $100,000 per                   Exchange. In addition, the approved
                                                from the enterprise license be separately               month for broker-dealers distributing                 electronic systems may be used to
                                                approved by the Exchange.                               Nasdaq Basic to Non-Professional and                  distribute information to any customer
                                                                                                        Professional Subscribers with whom the                eligible to receive such information
                                                Current Nasdaq Basic Enterprise License
                                                                                                        broker-dealer has a brokerage                         under this rule. Prior language limiting
                                                   Nasdaq Basic provides best bid and                   relationship; and (ii) eliminating the                distribution to employees of the broker-
                                                offer and last sale information from the                two requirements that the purchaser                   dealer is deleted. Language is also
                                                Nasdaq Market Center and from the                       distribute Nasdaq Last Sale for Nasdaq                added to clarify that the broker-dealer
                                                FINRA/Nasdaq Trade Reporting Facility                   or Nasdaq Last Sale for NYSE/NYSE                     must pay for any Nasdaq Last Sale data
                                                (‘‘FINRA/NASDAQ TRF’’). Data is taken                   MKT at a level that allows it to qualify              distributed under Rule 7039(c), if the
                                                from three sources, which may be                        for the fee cap provided for in Rule                  broker-dealer elects to distribute such
                                                purchased individually or in                            7039(b), and distribute Nasdaq                        data. None of these proposed
                                                combination: (i) Nasdaq Basic for                       TotalView or Nasdaq OpenView data                     modifications represent a change from
                                                Nasdaq, which contains the best bid and                 under an enterprise license pursuant to               current practice.
                                                offer on the Nasdaq Market Center and                   Rule 7023(c)(1). The proposed changes                    The enterprise license fee is entirely
                                                last sale trade reports for Nasdaq and                  will promote the use of Nasdaq Basic by               optional, in that it applies only to
                                                the FINRA/Nasdaq TRF for Nasdaq-                        lowering its cost to investors and                    broker-dealers that opt to distribute
                                                listed stocks; (ii) Nasdaq Basic for                    broadening the scope of its distribution              Nasdaq Basic to Professional and Non-
                                                NYSE, which contains the best bid and                   to the investing public.                              Professional Subscribers as described
                                                offer on the Nasdaq Market Center and                      The Exchange also proposes three                   herein.4 It does not impact or raise the
                                                last sale trade reports for Nasdaq and                  conforming changes to clarify how to                  cost of any other Nasdaq product, and
                                                the FINRA/Nasdaq TRF for NYSE-listed                    apply the proposed fee reduction.                     in fact serves to decrease the cost of
                                                stocks; and (iii) Nasdaq Basic for NYSE                    First, although the term ‘‘Professional            Nasdaq Basic in instances where a
                                                MKT, which contains the best bid and                    Subscribers’’ is defined elsewhere in the             broker-dealer elects to purchase this
                                                offer on the Nasdaq Market Center and                   rule to include legal entities that are not           license.
                                                last sale trade reports for Nasdaq and                  natural persons, the enterprise license
                                                                                                        set forth under Rule 7047(b)(5) may not               2. Statutory Basis
                                                the FINRA/Nasdaq TRF for stocks listed
                                                on NYSE MKT and other listing venues                    be used to provide information to any                    The Exchange believes that its
                                                whose quotes and trade reports are                      business or other entity that is not a                proposal is consistent with Section 6(b)
                                                disseminated on Tape B.                                 natural person. This is a clarification of
                                                                                                                                                                3 The phrase ‘‘any commodities or futures
                                                   Nasdaq Basic may be purchased                        current practice.
                                                                                                           Second, Professional Subscribers may               contract market or association’’ has been deleted
                                                through per-subscriber monthly charges,                                                                       from this summary of Rule 7047(d)(3)(A) as unduly
                                                per-query fees, or, for broker-dealers,                 use the data obtained through this                    repetitive. Only natural persons may be Subscribers
                                                monthly enterprise licenses. These                      license only in the context of the                    under this rule. A ‘‘commodities or futures contract
                                                monthly enterprise licenses are                         brokerage relationship between the                    market or association’’ is not a natural person, and
                                                                                                        Professional Subscriber and the broker-               therefore is not eligible to receive information
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                                                available in two types: An internal                                                                           under this rule.
                                                license for Professional Subscribers, and               dealer, and may not use such data                       4 Nasdaq notes, moreover, that no broker-dealer
                                                a license for Non-Professional and                      within the scope of any professional                  may provide, in a context in which a trading or
                                                Professional Subscribers with whom the                  engagement or registration identified in              order-routing decision can be implemented, a
                                                broker-dealer has a brokerage                           Rule 7047(d)(3)(A). Specifically, a                   display of any information with respect to
                                                                                                                                                              quotations for or transactions in an NMS stock
                                                relationship.                                           Professional Subscriber may not use that              without also providing, in an equivalent manner, a
                                                   The second type of license, for                      data in his or her capacity as a person               consolidated display for such stock. 17 CFR
                                                Professional and Non-Professional                       who is: (i) Registered or qualified in any            242.603(c).



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                                                88718                      Federal Register / Vol. 81, No. 236 / Thursday, December 8, 2016 / Notices

                                                of the Act,5 in general, and furthers the               the Nasdaq Basic enterprise license                   Basic to investors, resulting in
                                                objectives of Sections 6(b)(4) and 6(b)(5)              under Rule 7047(b)(5) is reasonable. The              information becoming more widely
                                                of the Act,6 in particular, in that it                  proposed changes will benefit the                     available to the investing public.
                                                provides for the equitable allocation of                investing public by lowering the cost                   As illustrated by the proposed fee
                                                reasonable dues, fees and other charges                 and increasing the availability of                    reduction, market forces constrain fees
                                                among members and issuers and other                     information in the marketplace.                       for Nasdaq Basic. This occurs in three
                                                persons using any facility, and is not                  Moreover, the fees for Nasdaq Basic, like             distinct respects. First, all fees related to
                                                designed to permit unfair                               all proprietary data fees, are constrained            Nasdaq Basic are constrained by
                                                discrimination between customers,                       by the Exchange’s need to compete for                 competition among exchanges and other
                                                issuers, brokers, or dealers.                           order flow, and are subject to                        entities attracting order flow. Firms
                                                   The Commission and the courts have                   competition from other products and                   make decisions regarding Nasdaq Basic
                                                repeatedly expressed their preference                   among broker-dealers for customers.                   and other proprietary data based on the
                                                for competition over regulatory                            The Exchange believes that the                     total cost of interacting with the
                                                intervention in determining prices,                     proposed fee reduction is an equitable                Exchange, and order flow would be
                                                products, and services in the securities                allocation and is not unfairly                        harmed by the supracompetitive pricing
                                                markets. In Regulation NMS, while                       discriminatory because the Exchange                   of any proprietary data product. Second,
                                                adopting a series of steps to improve the               will apply the same fee to all similarly              the price of Nasdaq Basic is constrained
                                                current market model, the Commission                    situated broker-dealers. Moreover, by                 by the existence of multiple substitutes
                                                highlighted the importance of market                    allocating the fee reduction to broker-               that are offered, or may be offered, by
                                                forces in determining prices and SRO                    dealers that distribute the product                   entities that offer proprietary or non-
                                                revenues, and also recognized that                      widely among customers, the change                    proprietary data. The proposed price
                                                current regulation of the market system                 will assist in promoting a wider                      reduction itself provides evidence of the
                                                ‘‘has been remarkably successful in                     distribution of information to the                    need to maintain low prices in a
                                                promoting market competition in its                     investing public.                                     competitive marketplace. Third,
                                                broader forms that are most important to                                                                      competition among broker-dealers for
                                                                                                        B. Self-Regulatory Organization’s
                                                investors and listed companies.’’ 7                                                                           customers will further constrain the cost
                                                   Likewise, in NetCoalition v. Securities              Statement on Burden on Competition
                                                                                                           The Exchange does not believe that                 of a Nasdaq Basic enterprise license.
                                                and Exchange Commission 8
                                                (‘‘NetCoalition’’) the D.C. Circuit upheld              the proposed rule change will impose                  Competition for Order Flow
                                                the Commission’s use of a market-based                  any burden on competition not
                                                                                                        necessary or appropriate in furtherance                  Fees related to Nasdaq Basic are
                                                approach in evaluating the fairness of
                                                                                                        of the purposes of the Act. In terms of               constrained by competition among
                                                market data fees against a challenge
                                                claiming that Congress mandated a cost-                 inter-market competition, the Exchange                exchanges and other entities seeking to
                                                based approach.9 As the court                           notes that it operates in a highly                    attract order flow. Order flow is the ‘‘life
                                                emphasized, the Commission ‘‘intended                   competitive market in which market                    blood’’ of the exchanges. Broker-dealers
                                                in Regulation NMS that ‘market forces,                  participants can readily favor competing              currently have numerous alternative
                                                rather than regulatory requirements’                    venues if they deem fee levels at a                   venues for their order flow, including
                                                play a role in determining the market                   particular venue to be excessive, or                  thirteen self-regulatory organization
                                                data . . . to be made available to                      rebate opportunities available at other               (‘‘SRO’’) markets, as well as
                                                investors and at what cost.’’ 10                        venues to be more favorable. In such an               internalizing broker-dealers (‘‘BDs’’) and
                                                   Further, ‘‘[n]o one disputes that                    environment, the Exchange must                        various forms of alternative trading
                                                competition for order flow is ‘fierce.’                 continually adjust its fees to remain                 systems (‘‘ATSs’’), including dark pools
                                                . . . As the SEC explained, ‘[i]n the U.S.              competitive with other exchanges and                  and electronic communication networks
                                                national market system, buyers and                      with alternative trading systems that                 (‘‘ECNs’’). Each SRO market competes to
                                                sellers of securities, and the broker-                  have been exempted from compliance                    produce transaction reports via trade
                                                dealers that act as their order-routing                 with the statutory standards applicable               executions, and two FINRA-regulated
                                                agents, have a wide range of choices of                 to exchanges. Because competitors are                 Trade Reporting Facilities (‘‘TRFs’’)
                                                where to route orders for execution’;                   free to modify their own fees in                      compete to attract internalized
                                                [and] ‘no exchange can afford to take its               response, and because market                          transaction reports. The existence of
                                                market share percentages for granted’                   participants may readily adjust their                 fierce competition for order flow
                                                because ‘no exchange possesses a                        order routing practices, the Exchange                 implies a high degree of price sensitivity
                                                monopoly, regulatory or otherwise, in                   believes that the degree to which fee                 on the part of BDs, which may readily
                                                the execution of order flow from broker                 changes in this market may impose any                 reduce costs by directing orders toward
                                                dealers’ . . . .’’ 11                                   burden on competition is extremely                    the lowest-cost trading venues.
                                                   The Exchange believes that the                       limited.                                                 The level of competition and
                                                proposed fee reduction and the                             The proposed change will: (i) Reduce               contestability in the market for order
                                                elimination of conditions to qualify for                the enterprise license fee for Nasdaq                 flow is demonstrated by the numerous
                                                                                                        Basic from $350,000 to $100,000 per                   examples of entrants that swiftly grew
                                                  5 15  U.S.C. 78f(b).                                  month for broker-dealers distributing                 into some of the largest electronic
                                                  6 15  U.S.C. 78f(b)(4) and (5).                       Nasdaq Basic to Non-Professional and                  trading platforms and proprietary data
                                                   7 Securities Exchange Act Release No. 51808
                                                                                                        Professional Subscribers with whom the                producers: Archipelago, Bloomberg
                                                (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
                                                                                                        broker-dealer has a brokerage                         Tradebook, Island, RediBook, Attain,
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                                                (‘‘Regulation NMS Adopting Release’’).
                                                   8 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.       relationship; and (ii) eliminate the                  TracECN, BATS Trading and BATS/
                                                2010).                                                  requirement that broker-dealers                       Direct Edge. A proliferation of dark
                                                   9 See NetCoalition, at 534–535.
                                                                                                        purchase other products—specifically,                 pools and other ATSs operate profitably
                                                   10 Id. at 537.
                                                   11 Id. at 539 (quoting Securities Exchange Act
                                                                                                        Last Sale for Nasdaq or Last Sale for                 with fragmentary shares of consolidated
                                                Release No. 59039 (December 2, 2008), 73 FR
                                                                                                        NYSE/NYSE MKT, and TotalView or                       market volume. For a variety of reasons,
                                                74770, 74782–83 (December 9, 2008) (SR–                 OpenView—to qualify for the license.                  competition from new entrants,
                                                NYSEArca–2006–21)).                                     This will reduce the cost of Nasdaq                   especially for order execution, has


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                                                                           Federal Register / Vol. 81, No. 236 / Thursday, December 8, 2016 / Notices                                              88719

                                                increased dramatically over the last                    Basic because they are closely related                C. Self-Regulatory Organization’s
                                                decade.                                                 products. In cases where customers buy                Statement on Comments on the
                                                   Each SRO, TRF, ATS, and BD that                      both products, they may shift the extent              Proposed Rule Change Received From
                                                competes for order flow is permitted to                 to which they purchase one or the other               Members, Participants, or Others
                                                produce proprietary data products.                      based on price changes. The SIP                         No written comments were either
                                                Many currently do or have announced                     constrains the price of Nasdaq Basic                  solicited or received.
                                                plans to do so, including NYSE, NYSE                    because no purchaser would pay an
                                                Amex, NYSE Arca, BATS, and IEX. This                                                                          III. Date of Effectiveness of the
                                                                                                        excessive price for Nasdaq Basic when
                                                is because Regulation NMS deregulated                                                                         Proposed Rule Change and Timing for
                                                                                                        similar data is also available from the               Commission Action
                                                the market for proprietary data. While
                                                                                                        SIP.
                                                BDs had previously published their                                                                               The foregoing rule change has become
                                                proprietary data individually,                            Proprietary data sold by other                      effective pursuant to Section
                                                Regulation NMS encourages market data                   exchanges also constrain the price of                 19(b)(3)(A)(ii) of the Act.12
                                                vendors and BDs to produce proprietary                  Nasdaq Basic. NYSE and BATS, like                        At any time within 60 days of the
                                                products cooperatively in a manner                      Nasdaq, sell proprietary non-core data                filing of the proposed rule change, the
                                                never before possible. Order routers and                that include best bid and offer and last              Commission summarily may
                                                market data vendors can facilitate                      sale data. Customers do not typically                 temporarily suspend such rule change if
                                                production of proprietary data products                 purchase proprietary best bid and offer               it appears to the Commission that such
                                                for single or multiple BDs. The potential               and last sale data from multiple                      action is: (i) Necessary or appropriate in
                                                sources of proprietary products are                     exchanges. Other proprietary data                     the public interest; (ii) for the protection
                                                virtually limitless.                                    products constrain the price of Nasdaq                of investors; or (iii) otherwise in
                                                   The markets for order flow and                       Basic because no customer would pay                   furtherance of the purposes of the Act.
                                                proprietary data are inextricably linked:                                                                     If the Commission takes such action, the
                                                                                                        an excessive price for Nasdaq Basic
                                                a trading platform cannot generate                                                                            Commission shall institute proceedings
                                                                                                        when substitute data is available from
                                                market information unless it receives                                                                         to determine whether the proposed rule
                                                trade orders. As a result, the                          other proprietary sources.
                                                                                                                                                              should be approved or disapproved.
                                                competition for order flow constrains                   Competition Among Broker-Dealers for
                                                the prices that platforms can charge for                                                                      IV. Solicitation of Comments
                                                                                                        Customers
                                                proprietary data products. Firms make                                                                           Interested persons are invited to
                                                decisions on how much and what types                       The enterprise license at issue is sold            submit written data, views, and
                                                of data to consume based on the total                   for use by the customers of a broker-                 arguments concerning the foregoing,
                                                cost of interacting with Nasdaq and                     dealer. There is no legal or regulatory               including whether the proposed rule
                                                other exchanges. Data fees are but one                  requirement that such customers have                  change is consistent with the Act.
                                                factor in a total platform analysis. If the             direct access to data feeds containing                Comments may be submitted by any of
                                                cost of the product exceeds its expected                best bid and offer or last sale                       the following methods:
                                                value, the broker-dealer will choose not                information through Nasdaq Basic. If the
                                                to buy it. A supracompetitive increase                                                                        Electronic Comments
                                                                                                        price of the enterprise license were to be
                                                in the fees charged for either                                                                                  • Use the Commission’s Internet
                                                                                                        set above competitive levels, the broker-
                                                transactions or proprietary data has the                                                                      comment form (http://www.sec.gov/
                                                                                                        dealer purchasing that license would be
                                                potential to impair revenues from both                                                                        rules/sro.shtml); or
                                                                                                        at a competitive disadvantage relative to               • Send an email to rule-comments@
                                                products. In this manner, the
                                                                                                        broker-dealers purchasing an alternative              sec.gov. Please include File Number SR–
                                                competition for order flow will
                                                constrain prices for proprietary data                   product as well as broker-dealers not                 NASDAQ–2016–162 on the subject line.
                                                products, including charges relating to                 purchasing any comparable product at
                                                                                                        all. As such, the broker-dealer at a                  Paper Comments
                                                Nasdaq Basic.
                                                                                                        competitive disadvantage would either                    • Send paper comments in triplicate
                                                Substitute Products                                     purchase a substitute or forego the                   to Brent J. Fields, Secretary, Securities
                                                   The price of data derived from Nasdaq                product altogether. The competition                   and Exchange Commission, 100 F Street
                                                Basic is constrained by the existence of                among broker-dealers for customers                    NE., Washington, DC 20549–1090.
                                                multiple substitutes offered by                         thereby provides yet another check on                 All submissions should refer to File
                                                numerous entities, including both                       the price for Nasdaq Basic.                           Number SR–NASDAQ–2016–162. This
                                                proprietary data offered by other SROs                     In summary, the proposed rule change               file number should be included on the
                                                or other entities, and non-proprietary                                                                        subject line if email is used. To help the
                                                                                                        lowers the cost of Nasdaq Basic and
                                                data disseminated by Securities                                                                               Commission process and review your
                                                                                                        broadens its availability to the investing
                                                Information Processors (‘‘SIPs’’).                                                                            comments more efficiently, please use
                                                   The information provided through                     public. Market forces constrain the
                                                                                                                                                              only one method. The Commission will
                                                Nasdaq Basic is a subset of the best bid                Nasdaq Basic enterprise license through               post all comments on the Commission’s
                                                and offer and last sale data provided by                competition for order flow, competition               Internet Web site (http://www.sec.gov/
                                                the SIPs. The ‘‘core’’ data disseminated                from substitute products, and in the                  rules/sro.shtml). Copies of the
                                                by the SIP consists of best-price                       competition among broker-dealers for                  submission, all subsequent
                                                quotations and last sale information                    customers. For these reasons, the                     amendments, all written statements
                                                from all markets in U.S.-listed equities;               Exchange has provided a substantial
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                                                                                                                                                              with respect to the proposed rule
                                                Nasdaq Basic provides best bid and offer                basis demonstrating that the fee is                   change that are filed with the
                                                and last sale information for all U.S.                  equitable, fair, reasonable, and not                  Commission, and all written
                                                exchange-listed stocks based on trade                   unreasonably discriminatory, and                      communications relating to the
                                                reports from the Nasdaq Market Center                   therefore consistent with and in                      proposed rule change between the
                                                and the FINRA/Nasdaq Trade Reporting                    furtherance of the purposes of the                    Commission and any person, other than
                                                Facility. Many customers that purchase                  Exchange Act.
                                                SIP data do not also purchase Nasdaq                                                                            12 15   U.S.C. 78s(b)(3)(A)(ii).



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                                                88720                      Federal Register / Vol. 81, No. 236 / Thursday, December 8, 2016 / Notices

                                                those that may be withheld from the                     Customer Code, ‘‘Codes’’).3 The                              the applicability of all provisions under
                                                public in accordance with the                           proposed rule change would allow an                          the Code[s]. Such interpretations are
                                                provisions of 5 U.S.C. 552, will be                     attorney arbitrator to qualify for the                       final and binding upon the parties.’’ 9 To
                                                available for Web site viewing and                      chairperson roster if he or she completes                    facilitate the fair administration of
                                                printing in the Commission’s Public                     chairperson training and serves as an                        proceedings in the FINRA forum,
                                                Reference Room, 100 F Street NE.,                       arbitrator through award on at least one                     arbitrators must possess sufficient
                                                Washington, DC 20549 on official                        arbitration. The Codes currently require                     qualifications and participate in
                                                business days between the hours of                      that an attorney must serve as arbitrator                    appropriate training 10—particularly
                                                10:00 a.m. and 3:00 p.m. Copies of such                 through award on at least two                                where an arbitrator presides over the
                                                filing also will be available for                       arbitrations in order to qualify for the                     proceeding as chairperson, with the
                                                inspection and copying at the principal                 chairperson roster.                                          authority to, among other things, direct
                                                office of the Exchange. All comments                       The proposed rule change was                              witness appearances, order the
                                                received will be posted without change;                 published for comment in the Federal                         production of documents and
                                                the Commission does not edit personal                   Register on September 6, 2016.4 The                          information, and set deadlines in a
                                                identifying information from                            public comment period closed on                              given case.11
                                                submissions. You should submit only                     September 27, 2016. The Commission                              FINRA maintains a roster of non-
                                                information that you wish to make                       received five (5) comment letters on the                     public arbitrators,12 public arbitrators,13
                                                available publicly. All submissions                     proposed amendments.5 On October 14,                         and arbitrators who are eligible to serve
                                                should refer to File Number SR–                         2016, FINRA extended the time period                         as chairperson in each of its 71 hearing
                                                NASDAQ–2016–162, and should be                          in which the Commission must approve                         locations.14 FINRA employs its
                                                submitted on or before December 29,                     the proposed rule change, disapprove                         computerized Neutral List Selection
                                                2016.                                                   the proposed rule change, or institute                       System to randomly generate lists of
                                                                                                        proceedings to determine whether to                          potential arbitrators for each proceeding
                                                  For the Commission, by the Division of
                                                                                                        approve or disapprove the proposed                           from these rosters.15 The parties then
                                                Trading and Markets, pursuant to delegated
                                                authority.13
                                                                                                        rule change to December 5, 2016.6 On                         select their arbitrators through a process
                                                                                                        November 22, 2016, FINRA responded                           of striking and ranking the names on the
                                                Eduardo A. Aleman,
                                                                                                        to the comment letters received in                           list generated by the Neutral List
                                                Assistant Secretary.                                    response to the Notice.7 This order                          Selection System.16
                                                [FR Doc. 2016–29386 Filed 12–7–16; 8:45 am]             approves the proposed rule change.                              The Codes provide that arbitrators are
                                                BILLING CODE 8011–01–P                                                                                               eligible for the chairperson roster if they
                                                                                                        II. Description of the Proposed Rule                         have completed chairperson training
                                                                                                        Change 8                                                     provided by FINRA and:
                                                SECURITIES AND EXCHANGE                                 Background                                                      • Have a law degree and are a
                                                COMMISSION                                                                                                           member of a bar of at least one
                                                                                                          FINRA arbitrators possess the broad
                                                                                                                                                                     jurisdiction, and have served as an
                                                [Release No. 34–79455; File No. SR–FINRA–               authority to ‘‘interpret and determine
                                                                                                                                                                     arbitrator through award on at least two
                                                2016–033]
                                                                                                          3 See  File No. SR–FINRA–2016–033.
                                                                                                                                                                     arbitrations administered by a self-
                                                Self-Regulatory Organizations;                            4 See  Exchange Act Release No. 78729 (Aug. 30,            regulatory organization in which
                                                Financial Industry Regulatory                           2016); 81 FR 61288 (Sept. 6, 2016) (‘‘Notice’’).             hearings were held; or
                                                                                                           5 See Letters from Steven B. Caruso, Esq., Maddox            • Have served as an arbitrator through
                                                Authority, Inc.; Order Approving                        Hargett Caruso, P.C. (Aug. 31, 2016) (‘‘Caruso               award on at least three arbitrations
                                                Proposed Rule Change To Amend Rule                      Letter’’); Ryan K. Bakhtiari, Aidikoff, Uhl and              administered by a self-regulatory
                                                12400 of the Code of Arbitration                        Bakhtiari (Sept. 9, 2016) (‘‘Bakhtiari Letter’’); Hugh
                                                                                                        Berkson, President, Public Investors Arbitration Bar         organization in which hearings were
                                                Procedure for Customer Disputes and
                                                                                                        Association (‘‘PIABA’’) (Sept. 23, 2016) (‘‘PIABA            held.17
                                                Rule 13400 of the Code of Arbitration                   Letter’’); Nicole Iannarone, Asst. Clinical Professor,          Additionally, in customer disputes,
                                                Procedure for Industry Disputes                         and Geoffrey R. Hafer, Student Intern, Investor              chairpersons must be public
                                                Relating To Broadening Chairperson                      Advocacy Clinic, Georgia State University College
                                                                                                                                                                     arbitrators.18
                                                Eligibility in Arbitration                              of Law (‘‘GSU’’) (Sept. 26, 2016) (‘‘GSU Letter’’);
                                                                                                        and David T. Bellaire, Esq., Executive Vice                     In February 2015, the Commission
                                                December 2, 2016.                                       President and General Counsel, Financial Services            approved a proposal by FINRA to
                                                                                                        Institute (‘‘FSI’’) (Sept. 27, 2016) (‘‘FSI Letter’’). The   amend its definition of ‘‘public
                                                I. Introduction                                         comment letters are available on FINRA’s Web site
                                                                                                        at http://www.finra.org, at the principal office of
                                                                                                                                                                     arbitrator,’’ 19 The amended definition
                                                   On August 18, 2016, Financial                        FINRA, at the Commission’s Web site at https://
                                                                                                        www.sec.gov/comments/sr-finra-2016-033/                         9 See FINRA Rules 12409 (Jurisdiction of Panel
                                                Industry Regulatory Authority, Inc.
                                                                                                        finra2016033.shtml, and at the Commission’s Public           and Authority to Interpret the Code) and 13413
                                                (‘‘FINRA’’) filed with the Securities and               Reference Room.                                              (Jurisdiction of Panel and Authority to Interpret the
                                                Exchange Commission (‘‘Commission’’),                      6 See Letter from Margo A. Hassan, Associate              Code).
                                                pursuant to Section 19(b)(1) of the                     Chief Counsel, FINRA, to Lourdes Gonzalez,                      10 See Notice, 81 FR 61289.

                                                Securities Exchange Act of 1934                         Assistant Chief Counsel—Sales Practices, Division               11 See FINRA Office of Dispute Resolution
                                                                                                        of Trading and Markets, Securities and Exchange              Arbitrator’s Guide (Oct. 2016), at page 31, available
                                                (‘‘Exchange Act’’) 1 and Rule 19b–4                     Commission, dated October 14, 2016.                          at http://www.finra.org/sites/default/files/
                                                thereunder,2 a proposed rule change to                     7 See Letter from Margo A. Hassan, Associate              arbitrators-ref-guide.pdf.
                                                amend Rules 12400 of the Code of                        Chief Counsel, FINRA, to Brent J. Fields, Secretary,            12 For the definition of ‘‘non-public arbitrator,’’

                                                Arbitration Procedure for Customer                      Securities and Exchange the Commission, dated                see FINRA Rules 12100(p) and 13100(p).
                                                                                                        November 22, 2016 (‘‘FINRA Letter’’). The FINRA
sradovich on DSK3GMQ082PROD with NOTICES




                                                Disputes (‘‘Customer Code’’) and Rule                   Letter is available on FINRA’s Web site at http://
                                                                                                                                                                        13 For the definition of ‘‘public arbitrator,’’ see

                                                13400 of the Code of Arbitration                                                                                     FINRA Rules 12100(u) and 13100(u).
                                                                                                        www.finra.org, at the principal office of FINRA, at             14 See FINRA Rules 12400(b) and 13400(b).
                                                Procedure for Industry Disputes                         the Commission’s Web site at https://www.sec.gov/               15 See FINRA Rules 12400(a) and 13400(a).
                                                (‘‘Industry Code’’ and, together with the               comments/sr-finra-2016-033/finra2016033.shtml,
                                                                                                                                                                        16 Id.
                                                                                                        and at the Commission’s Public Reference Room.
                                                                                                           8 The subsequent description of the proposed rule            17 See FINRA Rules 12400(c) and 13400(c).
                                                  13 17 CFR 200.30–3(a)(12).                                                                                            18 See FINRA Rule 12400(c).
                                                                                                        change is substantially excerpted from FINRA’s
                                                  1 15 U.S.C. 78s(b)(1).                                description in the Notice. See Notice, 81 FR at                 19 See Exchange Act Release No. 74383 (Feb. 26,
                                                  2 17 CFR 240.19b–4.                                   61288–61289.                                                 2015), 80 FR 11695 (Mar. 4, 2015) (Order Approving



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Document Created: 2016-12-08 00:27:15
Document Modified: 2016-12-08 00:27:15
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation81 FR 88716 

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