81 FR 94442 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Market Data Section of Its Fee Schedule To Adopt Fees for EDGX Summary Depth and Amend Fees for EDGX Depth

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 247 (December 23, 2016)

Page Range		94442-94448
FR Document		2016-30941

Federal Register, Volume 81 Issue 247 (Friday, December 23, 2016)

[Federal Register Volume 81, Number 247 (Friday, December 23, 2016)]
[Notices]
[Pages 94442-94448]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2016-30941]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79595; File No. SR-BatsEDGX-2016-73]

Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Market Data Section of Its Fee Schedule To Adopt Fees for
EDGX Summary Depth and Amend Fees for EDGX Depth

December 19, 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 December 6, 2016, Bats EDGX Exchange, Inc. (``EDGX'' 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 Exchange has designated the proposed rule change as one
establishing or changing a member due, fee, or other charge imposed by
the Exchange under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-
4(f)(2) thereunder,\4\ which

[[Page 94443]]

renders the proposed rule change effective upon filing with the
Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange filed a proposal to amend the Market Data section of
its fee schedule to: (i) Adopt fees for a new market data product
called EDGX Summary Depth; and (ii) amend the fees for EDGX Depth.
The text of the proposed rule change is available at the Exchange's
Web site at www.batstrading.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 parts of such
statements.

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

1. Purpose
The Exchange proposes to amend the Market Data section of its fee
schedule to: (i) Adopt fees for a new market data product called EDGX
Summary Depth; and (ii) amend the fees for EDGX Depth.
EDGX Summary Depth
EDGX Summary Depth is a data feed that will provide aggregated two-
sided quotations for all displayed orders entered into the System \5\
for up to five (5) price levels for securities traded on the Exchange
and for which the Exchange reports quotes under the Consolidated Tape
Association (``CTA'') Plan or the Nasdaq/UTP Plan.\6\ EDGX Summary
Depth will also contain the individual last sale information, Market
Status, Trading Status, and Trade Break messages. The individual last
sale information will include the price, size, and time of execution.
The last sale message will also include the cumulative number of shares
executed on the Exchange for that trading day. The Exchange intends to
begin to offer EDGX Summary Depth on January 3, 2017.\7\
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\5\ ``System'' is defined as the ``the electronic communications
and trading facility designated by the Board through which
securities orders of Users Are consolidated for ranking, execution
and, when applicable, routing away.'' See Exchange Rule 1.5(cc).
\6\ See Exchange Rule 13.8(f).
\7\ See Reminder: Bats Global Markets to Introduce Bats Summary
Depth Feeds on January 3, 2017, http://cdn.batstrading.com/resources/release_notes/2017/Reminder-Bats-Global-Markets-to-Introduce-Bats-Summary-Depth-Feeds-on-Jan-3-2017.pdf.
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The Exchange now proposes to amend its fee schedule to incorporate
fees for distribution of EDGX Summary Depth to subscribers.\8\ The
proposed fees include the following, each of which are described in
detail below: (i) Distribution Fees for both Internal and External
Distributors; \9\ (ii) Usage Fees for both Professional \10\ and Non-
Professional \11\ Users; (iii) an Enterprise Fee; and (iv) a Digital
Media Enterprise Fee.
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\8\ The Exchange notes that its affiliated exchanges, Bats EDGA
Exchange, Inc. (``EDGA''), Bats BZX Exchange, Inc. (``BZX'') and
Bats BYX Exchange, Inc. (``BYX'', together with the Exchange, EDGA
and BZX, the ``Bats Exchanges''), also intent to file proposed rule
changes with Commission to adopt similar fees for their respective
Summary Depth market data product.
\9\ A ``Distributor'' is defined as ``any entity that receives
the Exchange Market Data product directly from the Exchange or
indirectly through another entity and then distributes it internally
or externally to a third party.'' See the Exchange's fee schedule
available at http://www.bats.com/us/equities/membership/fee_schedule/edgx/. An ``Internal Distributor'' is defined as ``a
Distributor that receives the Exchange Market Data product and then
distributes that data to one or more Users within the Distributor's
own entity.'' Id. An ``External Distributor'' is defined as ``a
Distributor that receives the Exchange Market Data product and then
distributes that data to a third party or one or more Users outside
the Distributor's own entity.'' Id.''
\10\ A ``Professional User'' is defined as ``any User other than
a Non-Professional User.'' See the Exchange's fee schedule available
at http://www.bats.com/us/equities/membership/fee_schedule/edgx/.
\11\ A ``Non-Professional User'' is defined as ``a natural
person who is not: (i) Registered or qualified in any capacity with
the Commission, the Commodity Futures Trading Commission, any state
securities agency, any securities exchange or association, or any
commodities or futures contract market or association; (ii) engaged
as an ``investment adviser'' as that term is defined in Section
202(a)(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.'' Id.
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Distribution Fees. As proposed, each Internal Distributor that
receives EDGX Summary Depth shall pay a fee of $5,000 per month. The
Exchange does not propose to charge any User fees for EDGX Summary
Depth where the data is received and subsequently internally
distributed to Professional or Non-Professional Users. In addition, the
Exchange proposes to charge also External Distributors that receive
EDGX Summary Depth a fee of $2,500 per month.
User Fees. The Exchange proposes to charge External Distributors
that redistribute EDGX Summary Depth different fees for their
Professional Users and Non-Professional Users. The Exchange will assess
a monthly fee for Professional Users of $5.00 per User. Non-
Professional Users will be assessed a monthly fee of $0.15 per User.
The Exchange does not propose to charge per User fees to Internal
Distributors.
External Distributors that receive EDGX Summary Depth will be
required to count every Professional User and Non-Professional User to
which they provide EDGX Summary Depth, the requirements for which are
identical to that currently in place for other market data products
offered by the Exchange.\12\ Thus, the External Distributor's count
will include every person and device that accesses the data regardless
of the purpose for which the individual or device uses the data.
External Distributors must report all Professional and Non-Professional
Users in accordance with the following:
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\12\ See Securities Exchange Act Release Nos. 74282 (February
18, 2015); 80 FR 9487 (February 23, 2015) (SR-EDGX-2015-09)
(proposing fees for the Bats One Feed); 75397 (July 8, 2015), 80 FR
41104 (July 14, 2015) (SR-EDGX-2015-28) (proposing user fees for the
EDGX Top and Last Sale data feeds); and 75788 (August 28, 2015), 80
FR 53364 (September 3, 2015) (SR-EDGX-2015-38) (proposing fees for
EDGX Book Viewer).
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In connection with an External Distributor's distribution
of EDGX Summary Depth, the Distributor should count as one User each
unique User that the Distributor has entitled to have access to EDGX
Summary Depth. However, where a device is dedicated specifically to a
single individual, the Distributor should count only the individual and
need not count the device.
The External Distributor should identify and report each
unique User. If a User uses the same unique method to gain access to
EDGX Summary Depth, the Distributor should count that as one User.
However, if a unique User uses multiple methods to gain access to EDGX
Summary Depth (e.g., a single User has multiple passwords and user
identifications), the External Distributor should report all of those
methods as an individual User.

[[Page 94444]]

External Distributors should report each unique individual
person who receives access through multiple devices as one User so long
as each device is dedicated specifically to that individual.
If an External Distributor entitles one or more
individuals to use the same device, the External Distributor should
include only the individuals, and not the device, in the count.
Each External Distributor will receive a credit against its monthly
Distribution Fee for EDGX Summary Depth equal to the amount of its
monthly Usage Fees up to a maximum of the Distribution Fee for EDGX
Summary Depth. For example, an External Distributor will be subject to
a $2,500 monthly Distribution Fee where they receive EDGX Summary
Depth. If that External Distributor reports User quantities totaling
$2,500 or more of monthly usage of EDGX Summary Depth, it will pay no
net Distribution Fee, whereas if that same External Distributor were to
report User quantities totaling $1,500 of monthly usage, it will pay a
net of $1,000 for the Distribution Fee. External Distributors will
remain subject to the per User fees discussed above.
Enterprise Fee. The Exchange also proposes to establish a $30,000
per month Enterprise Fee that will permit a recipient firm who receives
EDGX Summary Depth from an External Distributor to receive the data for
an unlimited number of Professional and Non-Professional Users. For
example, if a recipient firm had 15,000 Professional Users who each
receive EDGX Summary Depth at $5.00 per month, then that recipient firm
will pay $75,000 per month in Professional Users fees. Under the
proposed Enterprise Fee, the recipient firm will pay a flat fee of
$30,000 for an unlimited number of Professional and Non-Professional
Users for EDGX Summary Depth. A recipient firm must pay a separate
Enterprise Fee for each External Distributor that controls the display
of EDGX Summary Depth if it wishes such User to be covered by an
Enterprise Fee rather than by per User fees. A recipient firm that pays
the Enterprise Fee will not have to report its number of such Users on
a monthly basis. However, every six months, a recipient firm must
provide the Exchange with a count of the total number of natural person
users of each product, including both Professional and Non-Professional
Users. Lastly, the proposed Enterprise Fee would be counted towards the
Distribution Fee credit described above, under which an External
Distributor receives a credit towards its Distribution Fee equal to the
amount of its monthly EDGX Summary Depth User fees.
Digital Media Enterprise Fee. The Exchange proposes to adopt a
Digital Media Enterprise Fee of $7,500 per month for EDGX Summary
Depth. As an alternative to proposed User fees discussed above, a
recipient firm may purchase a monthly Digital Media Enterprise license
to receive EDGX Summary Depth from an External Distributor to
distribute to an unlimited number of Professional and Non-Professional
Users for viewing via television, Web sites, and mobile devices for
informational and non-trading purposes only without having to account
for the extent of access to the data or the report the number of Users
to the Exchange. Lastly, the proposed Digital Media Enterprise Fee
would be counted towards the Distribution Fee credit described above,
under which an External Distributor receives a credit towards its
Distribution Fee equal to the amount of its monthly EDGX Summary Depth
User fees.
EDGX Depth
EDGX Depth is an uncompressed market data feed that provides depth-
of-book quotations and execution information based on equity orders
entered into the System.\13\ Currently, the Exchange charges fees for
both internal and external distribution of EDGX Depth. The cost of EDGX
Depth for an Internal Distributor is currently $1,500 per month. The
Exchange also separately charges an External Distributor of EDGX Depth
a flat fee of $2,500 per month. The Exchange does not currently charge
Internal and External Distributors separate display User fees. The
Exchange also charges a fee for Non-Display Usage \14\ by Trading
Platforms \15\ by which subscribers to EDGX Depth are charged a fee of
$5,000 per month. This fee is assessed in addition to existing
Distribution fees. The Exchange now proposes to amend its fee schedule
to incorporate Usage Fees for both Professional and Non-Professional
Users and an Enterprise Fee for EDGX Depth. Each of these changes are
described in detail below.
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\13\ See Exchange Rule 13.8(a).
\14\ The term ``Non-Display Usage'' is defined as ``any method
of accessing a Market Data product that involves access or use by a
machine or automated device without access or use of a display by a
natural person or persons.'' See the Exchange's fee schedule
available at http://www.bats.com/us/equities/membership/fee_schedule/edgx/.
\15\ The term ``Trading Platform'' is defined as ``any execution
platform operated as or by a registered National Securities Exchange
(as defined in Section 3(a)(1) of the Exchange Act), an Alternative
Trading System (as defined in Rule 300(a) of Regulation ATS), or an
Electronic Communications Network (as defined in Rule 600(b)(23) of
Regulation NMS).'' See the Exchange's fee schedule available at
http://www.bats.com/us/equities/membership/fee_schedule/edgx/.
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User Fees. The Exchange proposes to charge Internal and External
Distributors that redistribute EDGX Depth different fees for their
Professional Users and Non-Professional Users.\16\ The Exchange will
assess a monthly fee for Professional Users of $40.00 per User. Non-
Professional Users will be assessed a monthly fee of $5.00 per User.
Distributors that receive EDGX Depth will be required to count every
Professional User and Non-Professional User to which they provide EDGX
Depth, the requirements for which are identical to that set forth above
for EDGX Summary Depth and as currently in place for other market data
products offered by the Exchange.\17\
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\16\ The Exchange notes that, unlike as proposed for EDGX
Summary Depth described above, both Internal and External
Distributors of EDGX Depth would be charged the same User fee for
their Professional and Non-Professional Users.
\17\ See supra note 12 and accompanying text.
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Enterprise Fee. The Exchange also proposes to establish a $100,000
per month Enterprise Fee that will permit an Internal Distributor,
External Distributor, or a recipient firm who receives EDGX Depth from
an External Distributor to receive the data for an unlimited number of
Professional and Non-Professional Users. For example, if a recipient
firm had 15,000 Professional Users who each receive EDGX Depth at
$40.00 per month, then that recipient firm will pay $600,000 per month
in Professional Users fees. Under the proposed Enterprise Fee, the
recipient firm will pay a flat fee of $100,000 for an unlimited number
of Professional and Non-Professional Users for EDGX Depth. Like
proposed above for EDGX Summary Depth, a recipient firm must pay a
separate Enterprise Fee for each External Distributor that controls the
display of EDGX Depth if it wishes such User to be covered by an
Enterprise Fee rather than by per User fees. A recipient firm that pays
the Enterprise Fee will not have to report its number of such Users on
a monthly basis. However, every six months, a recipient firm must
provide the Exchange with a count of the total number of natural person
users of each product, including both Professional and Non-Professional
Users.
Implementation Date
The Exchange intends to implement the proposed fee change on
January 3, 2017.

[[Page 94445]]

2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\18\ in general, and
furthers the objectives of Section 6(b)(4),\19\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its members and other recipients of
Exchange data. The Exchange believes that the proposed rates are
equitable and non-discriminatory in that they apply uniformly to all
recipients of Exchange data. The Exchange believes the proposed fees
are competitive with those charged by other venues and, therefore,
reasonable and equitably allocated to recipients. The Exchange also
believes it is reasonable to charge different rates for EDGX Depth and
EDGX Summary Depth as both products different levels of content (e.g.,
EDGX Depth contains quotations for all individual orders while EDGX
Summary Depth contains the aggregation quotation information for all
orders up to five (5) price levels). Lastly, the Exchange also believes
that the proposed fees are reasonable and non-discriminatory because
they will apply uniformly to all recipients of Exchange data.
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\18\ 15 U.S.C. 78f.
\19\ 15 U.S.C. 78f(b)(4).
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The Exchange also believes that the proposed rule change is
consistent with Section 11(A) of the Act \20\ in that it supports (i)
fair competition among brokers and dealers, among exchange markets, and
between exchange markets and markets other than exchange markets and
(ii) the availability to brokers, dealers, and investors of information
with respect to quotations for and transactions in securities.
Furthermore, the proposed rule change is consistent with Rule 603 of
Regulation NMS,\21\ which provides that any national securities
exchange that distributes information with respect to quotations for or
transactions in an NMS stock do so on terms that are not unreasonably
discriminatory. In adopting Regulation NMS, the Commission granted
self-regulatory organizations and broker-dealers increased authority
and flexibility to offer new and unique market data to the public. It
was believed that this authority would expand the amount of data
available to consumers, and also spur innovation and competition for
the provision of market data.
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\20\ 15 U.S.C. 78k-1.
\21\ 17 CFR 242.603.
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In addition, the proposed fees would not permit unfair
discrimination because all of the Exchange's customers and market data
vendors will be subject to the proposed fees on an equivalent basis.
EDGX Summary Depth and EDGX Depth are distributed and purchased on a
voluntary basis, in that neither the Exchange nor market data
distributors are required by any rule or regulation to make this data
available. Accordingly, Distributors and Users can discontinue use at
any time and for any reason, including due to an assessment of the
reasonableness of fees charged. Firms have a wide variety of
alternative market data products from which to choose, such as similar
proprietary data products offered by other exchanges and consolidated
data. Moreover, the Exchange is not required to make any proprietary
data products available or to offer any specific pricing alternatives
to any customers.
In addition, the fees that are the subject of this rule filing are
constrained by competition. As explained below in the Exchange's
Statement on Burden on Competition, the existence of alternatives to
EDGX Summary Depth and EDGX Depth further ensures that the Exchange
cannot set unreasonable fees, or fees that are unreasonably
discriminatory, when vendors and subscribers can elect such
alternatives. That is, the Exchange competes with other exchanges (and
their affiliates) that provide similar market data products. If another
exchange (or its affiliate) were to charge less to distribute its
similar product than the Exchange charges to consolidate and distribute
EDGX Summary Depth and EDGX Depth, prospective Users likely would not
subscribe to, or would cease subscribing to, EDGX Summary Depth and
EDGX Depth.
The Exchange notes that the Commission is not required to undertake
a cost-of-service or rate-making approach. The Exchange believes that,
even if it were possible as a matter of economic theory, cost-based
pricing for non-core market data would be so complicated that it could
not be done practically.\22\
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\22\ The Exchange believes that cost-based pricing would be
impractical because it would create enormous administrative burdens
for all parties, including the Commission, to cost-regulate a large
number of participants and standardize and analyze extraordinary
amounts of information, accounts, and reports. In addition, it is
impossible to regulate market data prices in isolation from prices
charged by markets for other services that are joint products. Cost-
based rate regulation would also lead to litigation and may distort
incentives, including those to minimize costs and to innovate,
leading to further waste. Under cost-based pricing, the Commission
would be burdened with determining a fair rate of return, and the
industry could experience frequent rate increases based on
escalating expense levels. Even in industries historically subject
to utility regulation, cost-based ratemaking has been discredited.
As such, the Exchange believes that cost-based ratemaking would be
inappropriate for proprietary market data and inconsistent with
Congress's direction that the Commission use its authority to foster
the development of the national market system, and that market
forces will continue to provide appropriate pricing discipline. See
Appendix C to NYSE's comments to the Commission's 2000 Concept
Release on the Regulation of Market Information Fees and Revenues,
which can be found on the Commission's Web site at http://www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities
Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200
(December 17, 2014) (SR-NYSE-2014-64) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change to Establish an
Access Fee for the NYSE Best Quote and Trades Data Feed, Operative
December 1, 2014).
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EDGX Summary Depth
Distribution Fee. The Exchange believes that the proposed
Distribution Fees are also reasonable, equitably allocated, and not
unreasonably discriminatory. The fees for Members and non-Members are
uniform except with respect to reasonable distinctions with respect to
internal and external distribution. The Exchange believes that the
Distribution Fees for EDGX Summary Depth are reasonable and fair in
light of alternatives offered by other market centers. For example,
EDGX Summary Depth provides investors with alternative market data and
competes with similar market data product currently offered by the New
York Stock Exchange, Inc. (``NYSE'') and the Nasdaq Stock Market LLC
(``Nasdaq'').\23\ Specifically, the NYSE charges an access fee of
$5,000 per month for NYSE OpenBook-Aggregated,\24\ which is more than
the External Distribution fee proposed herein for EDGX Summary Depth.
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\23\ See Nasdaq Rule 7023(a)(1)(C) (describing Nasdaq TotalView
is a depth-of-book data feed that includes all orders and quotes
from all Nasdaq members displayed in the Nasdaq Market Center as
well as the aggregate size of such orders and quotes at each price
level in the execution functionality of the Nasdaq Market Center).
See also Nasdaq Book Viewer, a description of which is available at
https://data.nasdaq.com/Book Viewer.aspx. See NYSE OpenBook
available at http://www.nyxdata.com/openbook (providing real-time
view of the NYSE limit order book).
\24\ See NYSE Market Data Pricing dated November 2016 available
at http://www.nyxdata.com/. Nasdaq charges distribution fees ranging
from $375 for 1-39 subscribers to $75,000 for more than 250
subscribers. See Nasdaq Rule 7023(b)(4).
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User Fees. The Exchange believes that implementing the Professional
and Non-Professional User fees for EDGX Summary Depth are equitable and
reasonable because they will result in greater availability to
Professional and Non-Professional Users. Moreover, introducing a modest
Non-Professional User fee for EDGX Summary Depth is reasonable because
it provides an additional method for retail investors to

[[Page 94446]]

access EDGX Summary Depth data by providing the same data that is
available to Professional Users. The Exchange believes that the
proposed fees are equitable and not unfairly discriminatory because
they will be charged uniformly to recipient firms and Users. The fee
structure of differentiated Professional and Non-Professional fees is
utilized by the Exchange for the Bats One Feed and has long been used
by other exchanges for their proprietary data products, and by the
Nasdaq UTP and the CTA and CQ Plans in order to reduce the price of
data to retail investors and make it more broadly available.\25\
Offering EDGX Summary Depth to Non-Professional Users with the same
data available to Professional Users results in greater equity among
data recipients.
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\25\ See Securities Exchange Act Release Nos. 74285 (February
18, 2015), 80 FR 9828 (February 24, 2015) (SR-BATS-2015-11); 74283
(February 18, 2015), 80 FR 9809 (February 24, 2015) (SR-EDGA-2015-
09); 74282 (February 17, 2015), 80 FR 9487 (February 23, 2015) (SR-
EDGX-2015-09); and 74284 (February 18, 2015), 80 FR 9792 (February
24, 2015) (SR-BYX-2015-09) (``Initial BATS One Feed Fee Filings'').
See also, e.g., Securities Exchange Act Release No. 20002, File No.
S7-433 (July 22, 1983) (establishing nonprofessional fees for CTA
data); and Nasdaq Rules 7023(b), 7047.
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In addition, the proposed fees are reasonable when compared to
similar fees for comparable products offered by the NYSE and Nasdaq.
Specifically, NYSE offers NYSE OpenBook for a monthly fee of $60.00 per
professional subscriber and $15 per non-professional subscriber.\26\
Nasdaq offers Nasdaq TotalView-Aggregated for a monthly fee of $70.00
per professional subscriber and $14 per non-professional
subscriber.\27\ The Exchange's proposed per User Fees for EDGX Summary
Depth are less than the NYSE and Nasdaq fees.
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\26\ See NYSE Market Data Pricing dated November 2016 available
at http://www.nyxdata.com/.
\27\ See Nasdaq Rule 7023(b)(2).
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Enterprise Fee. The proposed Enterprise Fee for EDGX Summary Depth
is equitable and reasonable as the fees proposed are less than the
enterprise fees currently charged for Nasdaq TotalView-Aggregated.
Nasdaq charges an enterprise fee of $100,000 per month for Nasdaq
TotalView-Aggregated,\28\ which is far greater than the proposed
Enterprise Fee of $30,000 per month for EDGX Summary Depth. In
addition, the Enterprise Fee proposed by the Exchange could result in a
fee reduction for recipient firms with a large number of Professional
and Non-Professional Users. If a recipient firm has a smaller number of
Professional Users of EDGX Summary Depth, then it may continue using
the per User structure and benefit from the per User Fee reductions. By
reducing prices for recipient firms with a large number of Professional
and Non-Professional Users, the Exchange believes that more firms may
choose to receive and to distribute EDGX Summary Depth, thereby
expanding the distribution of this market data for the benefit of
investors.
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\28\ See Nasdaq Rule 7023(c)(2) (stating that a distributor that
is also a broker-dealer pays a monthly fee of $100,000 for the right
to provide Nasdaq TotalView and for display usage for internal
distribution, or for external distribution to both professional and
non-professional subscribers with whom the firm has a brokerage
relationship.) Nasdaq also charges an enterprise fee of $25,000 to
provide Nasdaq TotalView to an unlimited number of non-professional
subscribers only. See Nasdaq Rule 7023(c)(1).
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The Exchange further believes that the proposed Enterprise Fee is
reasonable because it will simplify reporting for certain recipients
that have large numbers of Professional and Non-Professional Users.
Firms that pay the proposed Enterprise Fee will not have to report the
number of Users on a monthly basis as they currently do, but rather
will only have to count natural person users every six months, which is
a significant reduction in administrative burden. Finally, the Exchange
believes that it is equitable and not unfairly discriminatory to
establish an Enterprise Fee because it reduces the Exchange's costs and
the Distributor's administrative burdens in tracking and auditing large
numbers of Users.
Digital Media Enterprise Fee. The Exchange believes that the
proposed Digital Media Enterprise Fee for EDGX Summary Depth provides
for an equitable allocation of reasonable fees among recipients of the
data and is not designed to permit unfair discrimination among
customers, brokers, or dealers. In establishing the Digital Media
Enterprise Fee, the Exchange recognizes that there is demand for a more
seamless and easier-to-administer data distribution model that takes
into account the expanded variety of media and communication devices
that investors utilize today. The Exchange believes the Digital Media
Enterprise Fee will be easy to administer because data recipients that
purchase it would not be required to differentiate between Professional
and Non-Professional Users, account for the extent of access to the
data, or report the number of Users. This is a significant reduction on
a recipient firm's administrative burdens and is a significant value to
investors. For example, a television broadcaster could display EDGX
Summary Depth data during market-related programming and on its Web
site or allow viewers to view the data via their mobile devices,
creating a more seamless distribution model that will allow investors
more choice in how they receive and view market data, all without
having to account for and/or measure who accesses the data and how
often they do so.
The proposed Digital Media Enterprise Fee is equitable and
reasonable because it will also enable recipient firms to more widely
distribute data from EDGX Summary Depth to investors for informational
purposes at a lower cost than is available today. For example, a
recipient firm may purchase an Enterprise license in the amount of
$30,000 per month for to receive EDGX Summary Depth from an External
Distributor for an unlimited number of Professional and Non-
Professional Users, which is greater than the proposed Digital Media
Enterprise Fee. The Exchange also believes the amount of the Digital
Media Enterprise Fee is reasonable as compared to the existing
enterprise fees discussed above because the distribution of EDGX
Summary Depth data is limited to television, Web sites, and mobile
devices for informational purposes only, while distribution of EDGX
Summary Depth data pursuant to an Enterprise license contains no such
limitation. The Exchange also believes that the proposed Digital Media
Enterprise Fee is equitable and reasonable because it is less than
similar fees charged by other exchanges.\29\
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\29\ Nasdaq offers proprietary data products for distribution
over the internet and television under alternative fee schedules
that are subject to maximum fee of $50,000 per month. See Nasdaq
Rule 7039(b). The NYSE charges a Digit Media Enterprise fee of
$40,000 per month for the NYSE Trade Digital Media product. See
Securities Exchange Act Release No. 69272 (April 2, 2013), 78 FR
20983 (April 8, 2013) (SR-NYSE-2013-23).
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EDGX Depth
User Fees. The Exchange believes that implementing the Professional
and Non-Professional User fees for EDGX Depth are equitable and
reasonable because they will result in greater availability to
Professional and Non-Professional Users. Moreover, introducing a modest
Non-Professional User fee for EDGX Depth is reasonable because it
provides an additional method for retail investors to access EDGX Depth
data by providing the same data that is available to Professional
Users. The Exchange believes that the proposed fees are equitable and
not unfairly discriminatory because they will be charged uniformly to
recipient firms and Users. The fee structure of differentiated
Professional and Non-Professional fees is utilized by the

[[Page 94447]]

Exchange and has long been used by other exchanges for their
proprietary data products, and by the Nasdaq UTP and the CTA and CQ
Plans in order to reduce the price of data to retail investors and make
it more broadly available.\30\ Offering EDGX Depth to Non-Professional
Users with the same data available to Professional Users results in
greater equity among data recipients. The Exchange also believes it is
equitable, reasonable, and not unfairly discriminatory to charge User
fees to Internal Distributors, as such fees are currently charged by
NYSE and Nasdaq.\31\
---------------------------------------------------------------------------

\30\ See supra note 24.
\31\ See supra notes 24 and 25 (not limiting the application of
user fees to external distribution only).
---------------------------------------------------------------------------

In addition, the proposed fees are reasonable when compared to
similar fees for comparable products offered by the NYSE and Nasdaq.
Specifically, NYSE offers NYSE OpenBook Ultra for a monthly fee of
$60.00 per professional subscriber and $15 per non-professional
subscriber.\32\ Nasdaq offers Nasdaq TotalView-ITCH for a monthly fee
of $70.00 per professional subscriber and $14 per non-professional
subscriber.\33\ The Exchange's proposed per User Fees for EDGX Depth
are less than the NYSE and Nasdaq fees.
---------------------------------------------------------------------------

\32\ See supra note 25.
\33\ See supra note 26.
---------------------------------------------------------------------------

Enterprise Fee. The proposed Enterprise Fee for EDGX Depth is
equitable and reasonable as compared to the enterprise fees currently
charged for Nasdaq TotalView-ITCH. Nasdaq charges an enterprise fee of
$100,000 per month for Nasdaq TotalView-ITCH,\34\ which is equal to the
proposed Enterprise Fee of $100,000 per month for EDGX Depth. In
addition, the Enterprise Fee proposed by the Exchange could result in a
fee reduction for recipient firms with a large number of Professional
and Non-Professional Users. If a recipient firm has a smaller number of
Professional Users of EDGX Depth, then it may continue using the per
User structure and benefit from the per User Fee reductions. By
reducing prices for recipient firms with a large number of Professional
and Non-Professional Users, the Exchange believes that more firms may
choose to receive and to distribute EDGX Depth, thereby expanding the
distribution of this market data for the benefit of investors.
---------------------------------------------------------------------------

\34\ See supra note 27.
---------------------------------------------------------------------------

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

The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. The
Exchange's ability to price EDGX Depth and EDGX Summary Depth is
constrained by: (i) Competition among exchanges, other trading
platforms, and Trade Reporting Facilities (``TRF'') that compete with
each other in a variety of dimensions; (ii) the existence of
inexpensive real-time consolidated data and market-specific data and
free delayed data; and (iii) the inherent contestability of the market
for proprietary data.
The Exchange and its market data products are subject to
significant competitive forces and the proposed fees represent
responses to that competition. To start, the Exchange competes
intensely for order flow. It competes with the other national
securities exchanges that currently trade equities, with electronic
communication networks, with quotes posted in FINRA's Alternative
Display Facility, with alternative trading systems, and with securities
firms that primarily trade as principal with their customer order flow.
In addition, EDGX Summary Depth and EDGX Depth compete with a
number of alternative products. For instance, EDGX Summary Depth and
EDGX Depth do provide a complete picture of all trading activity in a
security. Rather, the other national securities exchanges, the several
TRFs of FINRA, and Electronic Communication Networks (``ECN'') that
produce proprietary data all produce trades and trade reports. Each is
currently permitted to produce last sale information products, and many
currently do, including Nasdaq and NYSE. In addition, market
participants can gain access to EDGX last sale and depth-of-book
quotations, though integrated with the prices of other markets, on
feeds made available through the SIPs.
In sum, the availability of a variety of alternative sources of
information imposes significant competitive pressures on Exchange data
products and the Exchange's compelling need to attract order flow
imposes significant competitive pressure on the Exchange to act
equitably, fairly, and reasonably in setting the proposed data product
fees. The proposed data product fees are, in part, responses to that
pressure. The Exchange believes that the proposed fees would reflect an
equitable allocation of its overall costs to users of its facilities.
In addition, when establishing the proposed fees, the Exchange
considered the competitiveness of the market for proprietary data and
all of the implications of that competition. The Exchange believes that
it has considered all relevant factors and has not considered
irrelevant factors in order to establish fair, reasonable, and not
unreasonably discriminatory fees and an equitable allocation of fees
among all Users. The existence of alternatives to EDGX Depth and EDGX
Summary Depth, including existing similar feeds by other exchanges,
consolidated data, and proprietary data from other sources, ensures
that the Exchange cannot set unreasonable fees, or fees that are
unreasonably discriminatory, when vendors and subscribers can elect
these alternatives or choose not to purchase a specific proprietary
data product if its cost to purchase is not justified by the returns
any particular vendor or subscriber would achieve through the purchase.
Lastly, the Exchange represents that the increase in pricing of
EDGX Depth and the proposed pricing of the EDGX Summary Feed would
continue to enable a competing vendor to create a competing product to
the Exchange's Bats One Feed on the same price and latency basis as the
Exchange. The Bats One Feed is a data feed that disseminates, on a
real-time basis, the aggregate BBO of all displayed orders for
securities traded on each of the Bats Exchanges and for the Bats
Exchanges report quotes under the CTA Plan or the Nasdaq/UTP Plan. The
Bats One Feed also contains the individual last sale information for
the Bats Exchanges (collectively with the aggregate BBO, the ``Bats One
Summary Feed''). In addition, the Bats One Feed contains optional
functionality which enables recipients to receive aggregated two-sided
quotations from the Bats Exchanges for up to five (5) price levels

[[Page 94448]]

(``Bats One Premium Feed'').\35\ The Exchange uses the following data
feeds to create the Bats One Feed, each of which are available to
vendors: EDGX Depth, EDGA Depth, BYX Depth, and the BZX Depth.
---------------------------------------------------------------------------

\35\ See Exchange Rule 13.8(b). See also Securities Exchange Act
Release No. 73918 (December 23, 2014), 79 FR 78920 (December 31,
2014) (File Nos. SR-EDGX-2014-25; SR-EDGA-2014-25; SR-BATS-2014-055;
SR-BYX-2014-030) (Notice of Amendments No. 2 and Order Granting
Accelerated Approval to Proposed Rule Changes, as Modified by
Amendments Nos. 1 and 2, to Establish a New Market Data Product
called the Bats One Feed) (``Bats One Approval Order'').
---------------------------------------------------------------------------

When adopting the Bats One Feed, the Exchange represented that a
vendor could create a competing product based in the data feed used to
construct the Bats One Feed on the same cost and latency basis as the
Exchange.\36\ Therefore, the Exchange designed the pricing of these
products so that their aggregate cost is not greater than the Bats One
Feed, thereby enabling a vendor to create a competing product to the
Bats One Feed on the same cost basis as the Exchange. However, the
Exchange now proposes to increase the cost of EDGX Depth, which when
combined with the proposed increases by its affiliates for their depth
products, would cause their aggregate cost to be higher than the Bats
One Premium Feed.\37\ However, to ensure that a vendor could continue
to create a competing product to the Bats One Premium Feed at no
greater cost, that vendor could now utilize EDGX Summary Depth, as well
as the Summary Depth feeds of EDGA, BZX, and BYX to create a competing
product to the Bats One Premium Feed for less cost and on the same
latency basis as the Exchange.\38\ The Exchange has designed the
content and pricing of EDGX Summary Depth, and related products by its
affiliates, so that a vendor could utilize those feeds, in lieu of the
Bats Exchange's existing depth-of-book products, to construct a
competing product on the same cost and latency basis as the Exchange.
The pricing the Exchange and its affiliates propose to charge for
Summary Depth feeds would be lower than the cost to obtain the Bats One
Premium Feed.\39\ Such pricing would continue to enable a vendor to
receive each of the Bats Exchange's Summary Depth feeds and offer a
similar product to the Bats One Premium Feed on a competitive basis and
at no greater cost than the Exchange.
---------------------------------------------------------------------------

\36\ Id.
\37\ The Exchange notes that a vendor seeking to create a
product to compete with the Bats One Summary Feed may continue to
utilize each of the Bats Exchange's Top and Last Sale data feeds,
the aggregate cost of which is less than the Bats One Summary Feed.
\38\ While the proposed EDGX Summary Depth feed does not contain
the symbol summary or consolidated volume data included in the Bats
One Feed, a vendor could include this information in a competing
product as this information is easily derivable from the proposed
feeds or can be obtained from the securities information processors
on the same terms as the Exchange.
\39\ While the aggregate cost of each of the Bats Exchange's
Summary Depth Products equals the cost of the Bats One Premium Feed,
the cost of the Bats One Feed continues to be greater because
subscribers are required to pay an additional $1,000 aggregation
fee. See the Exchange's fee schedule available at http://www.bats.com/us/equities/membership/fee_schedule/edgx/.
---------------------------------------------------------------------------

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

The Exchange has neither solicited nor received written comments on
the proposed rule change.

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

The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \40\ and paragraph (f) of Rule 19b-4
thereunder.\41\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

\40\ 15 U.S.C. 78s(b)(3)(A).
\41\ 17 CFR 240.19-b4(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BatsEDGX-2016-73 on the subject line.

Paper Comments

Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BatsEDGX-2016-73. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BatsEDGX-2016-73, and should
be submitted on or before January 13, 2017.
---------------------------------------------------------------------------

\40\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-30941 Filed 12-22-16; 8:45 am]
BILLING CODE 8011-01-P

94442 Federal Register / Vol. 81, No. 247 / Friday, December 23, 2016 / Notices

them to easily access midpoint liquidity pursuant to Section 19(b)(3)(A) of the Commission and any person, other than
available on the Exchange and other Act 16 and paragraph (f)(6) of Rule 19b– those that may be withheld from the
trading venues. The Exchange notes that 4 thereunder,17 the Exchange has public in accordance with the
routing through the Exchange is designated this rule filing as non- provisions of 5 U.S.C. 552, will be
voluntary and those seeking to access controversial. The Exchange has given available for Web site viewing and
midpoint liquidity on other trading the Commission written notice of its printing in the Commission’s Public
venues may do so directly and without intent to file the proposed rule change, Reference Room, 100 F Street NE.,
the involvement of the Exchange. along with a brief description and text Washington, DC 20549 on official
Therefore, the Exchange believes the of the proposed rule change at least five business days between the hours of
proposal removes impediments to and business days prior to the date of filing 10:00 a.m. and 3:00 p.m. Copies of such
perfects the mechanism of a free and of the proposed rule change, or such filing also will be available for
open market and a national market shorter time as designated by the inspection and copying at the principal
system, and, in general, protects Commission. office of the Exchange. All comments
investors and the public interest. At any time within 60 days of the received will be posted without change;
filing of the proposed rule change, the the Commission does not edit personal
B. Self-Regulatory Organization’s
Commission summarily may identifying information from
Statement on Burden on Competition
temporarily suspend such rule change if submissions. You should submit only
The Exchange does not believe that it appears to the Commission that such information that you wish to make
the proposed rule change will result in action is: (1) Necessary or appropriate in available publicly. All submissions
any burden on competition that is not the public interest; (2) for the protection should refer to File Number SR–
necessary or appropriate in furtherance of investors; or (3) otherwise in BatsBYX–2016–41, and should be
of the purposes of the Act, as amended. furtherance of the purposes of the Act. submitted on or before January 13, 2017.
The Exchange provides routing services If the Commission takes such action, the For the Commission, by the Division of
in a highly competitive market in which Commission shall institute proceedings Trading and Markets, pursuant to delegated
participants may avail themselves of a to determine whether the proposed rule authority.18
wide variety of routing options offered should be approved or disapproved. Eduardo A. Aleman,
by self-regulatory organizations, Assistant Secretary.
alternative trading systems, other IV. Solicitation of Comments
[FR Doc. 2016–30947 Filed 12–22–16; 8:45 am]
broker-dealers, market participants’ own Interested persons are invited to
BILLING CODE 8011–01–P
proprietary routing systems, and service submit written data, views, and
bureaus. System enhancements, such as arguments concerning the foregoing,
the changes proposed in this rule filing, including whether the proposed rule SECURITIES AND EXCHANGE
do not burden competition, but rather change is consistent with the Act. COMMISSION
encourage competition because they are Comments may be submitted by any of
designed to attract additional order flow the following methods: [Release No. 34–79595; File No. SR–
to the Exchange through enhanced BatsEDGX–2016–73]
midpoint routing functionality. Such Electronic Comments
• Use the Commission’s Internet Self-Regulatory Organizations; Bats
changes are intended to offer investors
comment form (http://www.sec.gov/ EDGX Exchange, Inc.; Notice of Filing
higher quality and better value than
and Immediate Effectiveness of a
services offered by others. Encouraging rules/sro.shtml); or
• Send an email to rule-comments@ Proposed Rule Change To Amend the
competitors to provide higher quality
sec.gov. Please include File Number SR– Market Data Section of Its Fee
and better value is the essence of a well-
BatsBYX–2016–41 on the subject line. Schedule To Adopt Fees for EDGX
functioning competitive marketplace.
Summary Depth and Amend Fees for
Therefore, the Exchange does not Paper Comments EDGX Depth
believe the proposed rule change will
result in any burden on intermarket • Send paper comments in triplicate December 19, 2016.
competition that is not necessary or to Secretary, Securities and Exchange Pursuant to Section 19(b)(1) of the
appropriate in furtherance of the Commission, 100 F Street NE., Securities Exchange Act of 1934
purposes of the Act. Washington, DC 20549–1090. (‘‘Act’’),1 and Rule 19b–4 thereunder,2
All submissions should refer to File notice is hereby given that, on December
C. Self-Regulatory Organization’s Number SR–BatsBYX–2016–41. This
Statement on Comments on the 6, 2016, Bats EDGX Exchange, Inc.
file number should be included on the (‘‘EDGX’’ or ‘‘Exchange’’) filed with the
Proposed Rule Change Received From subject line if email is used. To help the
Members, Participants, or Others Securities and Exchange Commission
Commission process and review your (‘‘SEC’’ or ‘‘Commission’’) the proposed
No comments were solicited or comments more efficiently, please use rule change as described in Items I, II,
received on the proposed rule change. only one method. The Commission will and III below, which Items have been
post all comments on the Commission’s prepared by the Exchange. The
III. Date of Effectiveness of the
Internet Web site (http://www.sec.gov/ Exchange has designated the proposed
Proposed Rule Change and Timing for
rules/sro.shtml). Copies of the rule change as one establishing or
Commission Action
submission, all subsequent changing a member due, fee, or other
Because the foregoing proposed rule amendments, all written statements charge imposed by the Exchange under
change does not: (A) Significantly affect
mstockstill on DSK3G9T082PROD with NOTICES

with respect to the proposed rule Section 19(b)(3)(A)(ii) of the Act 3 and
the protection of investors or the public change that are filed with the Rule 19b–4(f)(2) thereunder,4 which
interest; (B) impose any significant Commission, and all written
burden on competition; and (C) by its communications relating to the 18 17 CFR 200.30–3(a)(12).
terms, become operative for 30 days proposed rule change between the 1 15 U.S.C. 78s(b)(1).
from the date on which it was filed or 2 17 CFR 240.19b–4.

such shorter time as the Commission 16 15 U.S.C. 78s(b)(3)(A). 3 15 U.S.C. 78s(b)(3)(A)(ii).

may designate it has become effective 17 17 CFR 240.19b–4. 4 17 CFR 240.19b–4(f)(2).

VerDate Sep<11>2014 18:33 Dec 22, 2016 Jkt 241001 PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 E:\FR\FM\23DEN1.SGM 23DEN1

Document Created: 2016-12-23 12:29:33
Document Modified: 2016-12-23 12:29:33

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		81 FR 94442