81 FR 95213 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange Data Fees at Rule 7052
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 248 (December 27, 2016)
Federal Register Volume 81, Issue 248 (December 27, 2016)
| Page Range | 95213-95216 | |
| FR Document | 2016-31109 |
[Federal Register Volume 81, Number 248 (Tuesday, December 27, 2016)] [Notices] [Pages 95213-95216] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-31109] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79617; File No. SR-NASDAQ-2016-168] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange Data Fees at Rule 7052 December 20, 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 12, 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange's data fees at Rule 7052 to replace the current $500 per month fee for both internal and external distribution of short sale data with two separate fees: (1) A $750 monthly fee for the distribution of short sale data to internal users, and (2) a $1,250 monthly fee for the distribution of short sale data to external users, as described further below. [[Page 95214]] While these amendments are effective upon filing, the Exchange has designated the proposed amendments to be operative on January 1, 2017. 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. 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 replace the current $500 per month fee for both internal and external distribution of short sale data with two separate fees: (1) A $750 monthly fee for the distribution of short sale data to internal users, and (2) a $1,250 monthly fee for the distribution of short sale data to external users. Daily and Monthly Short Sale Files Nasdaq distributes two types of short sale data: (1) Daily Short Sale Volume files, and (2) Monthly Short Sale Transaction files. The Daily Short Sale Volume files reflect the aggregate number of shares executed on the Nasdaq market during regular trading hours on a daily basis. At the security level, these files show the volume for executed short sales and the total trading volume for the Nasdaq market. The files include data for Nasdaq, NYSE and regional exchange- listed securities. The Monthly Short Sale Transaction files provide a trade-by-trade record of all short sales executed on the Nasdaq execution system and reported to a consolidated tape in Nasdaq, NYSE and regional exchange- listed securities. The records include the transaction time, price and number of shares for every short sale transaction. The files are provided on a monthly basis, separated into daily files. Historical files are available from August 2005. The current fee for internal and external distribution of the Daily Short Sale Volume and Monthly Short Sale Transaction files is $500 per month. Proposed Changes The Exchange proposes to replace the current $500 per month fee for both internal and external distribution of short sale data with two separate fees: (1) a $750 monthly fee for the distribution of short sale data to internal users, and (2) a $1,250 monthly fee for the distribution of short sale data to external users. The purpose of the proposed rule change is to create a pricing system that better reflects the value of the product to our customers. External Distributors, unlike Internal Distributors, are typically compensated for the distribution of short sale data through subscription fees or other mechanisms. Some External Distributors incorporate short sale data into their own proprietary products, which they sell to downstream users. These distributors may not charge separately for the Nasdaq short sale data, but nevertheless gain value from the data by incorporating it into their product. The price increase for External Distributors reflects the additional value these distributors gain from the product. In addition, the value of the short sale data has increased over time for all distributors that have purchased short sale data over a long period of time. Short sale data is frequently used to develop trading models, conduct analyses and assess long-term risks. As time passes, long-term distributors are able to accrue a larger database, rendering the data more valuable. The proposed price increases reflect the growing value of the data over time. Purchases of the Daily Short Sale Volume and Monthly Short Sale Transaction files are entirely optional. These reports are not necessary to execute trades, but rather are typically used to develop trading models, conduct analyses and assess long-term risks. This type of activity is entirely at the discretion of the subscriber. The proposed changes do not impact or raise the cost of any other Nasdaq product. Short sale reports from the Nasdaq BX and PSX Exchanges will continue to be provided free of charge, as they have been since 2010. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\3\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\4\ 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. --------------------------------------------------------------------------- \3\ 15 U.S.C. 78f(b). \4\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- 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.'' \5\ --------------------------------------------------------------------------- \5\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting Release''). --------------------------------------------------------------------------- Likewise, in NetCoalition v. Securities and Exchange Commission \6\ (``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.\7\ 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.'' \8\ --------------------------------------------------------------------------- \6\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \7\ See NetCoalition, at 534-535. \8\ Id. at 537. --------------------------------------------------------------------------- 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'. . . .'' \9\ --------------------------------------------------------------------------- \9\ 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)). --------------------------------------------------------------------------- The Exchange believes that the proposal to replace the current fee of $500 per month for the internal and [[Page 95215]] external distribution of short sale data with a monthly fee of $750 per month for the distribution of short sale data to internal users, and a monthly fee of $1,250 for the distribution of short sale data to external users, is fair and equitable in accordance with Section 6(b)(4) of the Act, and not unreasonably discriminatory in accordance with Section 6(b)(5) of the Act. As described above, it is reasonable for external distributors to bear a higher proportion of the cost because they receive greater value from the product, and it is reasonable for Nasdaq to increase a fee for a product that has become more valuable over time. Moreover, short sale data fees, 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, such as the short sale data products produced by NYSE and BATS. The Exchange believes that the proposed change is an equitable allocation and is not unfairly discriminatory because the Exchange will apply the same fee to all similarly-situated distributors. 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 fees replace the current fee of $500 per month for the internal and external distribution of short sale data with a monthly fee of $750 per month for distribution to internal users, and a monthly fee of $1,250 for distribution to external users. If the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. Specifically, market forces constrain fees for Daily Short Sale Volume files and Monthly Short Sale Transaction files in three respects. First, all fees related to short sale data are constrained by competition among exchanges and other entities attracting order flow. Firms make decisions regarding short sale data 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, prices for short sale data are constrained by the sale of short sale data by other exchanges. Third, competition among Distributors will constrain the cost of short sale data. Competition for Order Flow Fees related to short sale data 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 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 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. Substitute Products The price of short sale data from Nasdaq is constrained by the availability of short sale data from other exchanges, such as NYSE and BATS. Short sale data is used to support various analytical tools, and Distributors would not pay an excessive price for such data when similar information is available from other sources. Competition Among Distributors Distributors provide another form of price discipline for proprietary data products. Distributors are in competition for users, and can simply refuse to purchase any proprietary data product that fails to provide sufficient value for the price. If the price of short sale data were set above competitive levels, Distributors purchasing such data would be at a disadvantage relative to their competitors, and would therefore either purchase a substitute or [[Page 95216]] forego the product altogether. This competition for customers provides another check on the price for short sale data. In summary, market forces constrain the price of short sale data through competition for order flow, competition from substitute products, and in the competition among distributors 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.\10\ --------------------------------------------------------------------------- \10\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- 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 CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NASDAQ-2016-168 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-2016-168. 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 the 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-2016-168 and should be submitted on or before January 17, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\11\ --------------------------------------------------------------------------- \11\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2016-31109 Filed 12-23-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Notices 95213
Rule 1004 of Regulation SCI. At any time within 60 days of the 10:00 a.m. and 3:00 p.m. Copies of the
Specifically, the proposal will adopt filing of the proposed rule change, the filing also will be available for
clear and objective criteria with respect Commission summarily may inspection and copying at the principal
to the designation of Members that are temporarily suspend such rule change if office of the Exchange. All comments
required to participate in the testing of it appears to the Commission that such received will be posted without change;
the Exchange’s BC/DR Plans, as well as action is: (i) Necessary or appropriate in the Commission does not edit personal
appropriate notification regarding such the public interest; (ii) for the protection identifying information from
designation. As set forth in the SCI of investors; or (iii) otherwise in submissions. You should submit only
Adopting Release, ‘‘SROs have the furtherance of the purposes of the Act. information that you wish to make
authority, and legal responsibility, If the Commission takes such action, the available publicly. All submissions
under Section 6 of the Exchange Act, to Commission shall institute proceedings should refer to File Number SR–
adopt and enforce rules (including rules to determine whether the proposed rule ISEMercury–2016–24 and should be
to comply with Regulation SCI’s should be approved or disapproved. submitted on or before January 17, 2017.
requirements relating to BC/DR testing)
IV. Solicitation of Comments For the Commission, by the Division of
applicable to their members or Trading and Markets, pursuant to delegated
participants that are designed to, among Interested persons are invited to authority.20
other things, foster cooperation and submit written data, views, and
Eduardo A. Aleman,
coordination with persons engaged in arguments concerning the foregoing,
including whether the proposed rule Assistant Secretary.
regulating, clearing, settling, processing
change is consistent with the Act. [FR Doc. 2016–31116 Filed 12–23–16; 8:45 am]
information with respect to, and
facilitating transactions in securities, to Comments may be submitted by any of BILLING CODE 8011–01–P
remove impediments to and perfect the the following methods:
mechanism of a free and open market Electronic Comments
and a national market system, and, in SECURITIES AND EXCHANGE
general, to protect investors and the • Use the Commission’s Internet COMMISSION
public interest.’’ 17 The Exchange comment form (http://www.sec.gov/
[Release No. 34–79617; File No. SR–
believes that this proposal is consistent rules/sro.shtml); or
NASDAQ–2016–168]
with such authority and legal • Send an email to rule-comments@
responsibility. sec.gov. Please include File Number SR– Self-Regulatory Organizations; The
ISEMercury–2016–24 on the subject NASDAQ Stock Market LLC; Notice of
B. Self-Regulatory Organization’s line. Filing and Immediate Effectiveness of
Statement on Burden on Competition
Paper Comments Proposed Rule Change To Amend the
The Exchange does not believe that Exchange Data Fees at Rule 7052
the proposed rule change will result in • Send paper comments in triplicate
any burden on competition that is not to Secretary, Securities and Exchange December 20, 2016.
necessary or appropriate in furtherance Commission, 100 F Street NE., Pursuant to Section 19(b)(1) of the
of the purposes of the Act, as amended. Washington, DC 20549–1090. Securities Exchange Act of 1934
To the contrary, the proposal is not a All submissions should refer to File (‘‘Act’’),1 and Rule 19b–4 thereunder,2
competitive proposal but rather is Number SR–ISEMercury–2016–24. This notice is hereby given that on December
necessary for the Exchange’s file number should be included on the 12, 2016, The NASDAQ Stock Market
compliance with Regulation SCI. subject line if email is used. To help the LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed
Commission process and review your with the Securities and Exchange
C. Self-Regulatory Organization’s comments more efficiently, please use Commission (‘‘SEC’’ or ‘‘Commission’’)
Statement on Comments on the only one method. The Commission will the proposed rule change as described
Proposed Rule Change Received From post all comments on the Commission’s in Items I, II, and III, below, which Items
Members, Participants, or Others Internet Web site (http://www.sec.gov/ have been prepared by the Exchange.
No written comments were either rules/sro.shtml). Copies of the The Commission is publishing this
solicited or received. submission, all subsequent notice to solicit comments on the
III. Date of Effectiveness of the amendments, all written statements proposed rule change from interested
Proposed Rule Change and Timing for with respect to the proposed rule persons.
Commission Action change that are filed with the
Commission, and all written I. Self-Regulatory Organization’s
Because the foregoing proposed rule communications relating to the Statement of the Terms of Substance of
change does not: (i) Significantly affect proposed rule change between the the Proposed Rule Change
the protection of investors or the public Commission and any person, other than The Exchange proposes to amend the
interest; (ii) impose any significant those that may be withheld from the Exchange’s data fees at Rule 7052 to
burden on competition; and (iii) become public in accordance with the replace the current $500 per month fee
operative for 30 days from the date on provisions of 5 U.S.C. 552, will be for both internal and external
which it was filed, or such shorter time available for Web site viewing and distribution of short sale data with two
as the Commission may designate, it has printing in the Commission’s Public separate fees: (1) A $750 monthly fee for
become effective pursuant to Section Reference Room, 100 F Street NE.,
asabaliauskas on DSK3SPTVN1PROD with NOTICES
the distribution of short sale data to
19(b)(3)(A)(iii) of the Act 18 and Washington, DC 20549, on official internal users, and (2) a $1,250 monthly
subparagraph (f)(6) of Rule 19b–4 business days between the hours of fee for the distribution of short sale data
thereunder.19 to external users, as described further
17 See
the Commission written notice of its intent to file below.
SCI Adopting Release, supra note 3 at the proposed rule change at least five business days
72350. prior to the date of filing of the proposed rule
18 15 U.S.C. 78s(b)(3)(A)(iii). 20 17 CFR 200.30–3(a)(12).
change, or such shorter time as designated by the
19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 1 15 U.S.C. 78s(b)(1).
Commission. The Exchange has satisfied this
4(f)(6) requires a self-regulatory organization to give requirement. 2 17 CFR 240.19b–4.
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While these amendments are effective into daily files. Historical files are of the Act,3 in general, and furthers the
upon filing, the Exchange has available from August 2005. objectives of Sections 6(b)(4) and 6(b)(5)
designated the proposed amendments to The current fee for internal and of the Act,4 in particular, in that it
be operative on January 1, 2017. external distribution of the Daily Short provides for the equitable allocation of
The text of the proposed rule change Sale Volume and Monthly Short Sale reasonable dues, fees and other charges
is available on the Exchange’s Web site Transaction files is $500 per month. among members and issuers and other
at http://nasdaq.cchwallstreet.com, at persons using any facility, and is not
the principal office of the Exchange, and Proposed Changes designed to permit unfair
at the Commission’s Public Reference The Exchange proposes to replace the discrimination between customers,
Room. current $500 per month fee for both issuers, brokers, or dealers.
internal and external distribution of The Commission and the courts have
II. Self-Regulatory Organization’s repeatedly expressed their preference
Statement of the Purpose of, and short sale data with two separate fees:
(1) a $750 monthly fee for the for competition over regulatory
Statutory Basis for, the Proposed Rule intervention in determining prices,
Change distribution of short sale data to internal
products, and services in the securities
users, and (2) a $1,250 monthly fee for
In its filing with the Commission, the markets. In Regulation NMS, while
the distribution of short sale data to
Exchange included statements adopting a series of steps to improve the
external users.
concerning the purpose of and basis for current market model, the Commission
The purpose of the proposed rule highlighted the importance of market
the proposed rule change and discussed
change is to create a pricing system that forces in determining prices and SRO
any comments it received on the
better reflects the value of the product revenues and, also, recognized that
proposed rule change. The text of these
to our customers. External Distributors, current regulation of the market system
statements may be examined at the
unlike Internal Distributors, are ‘‘has been remarkably successful in
places specified in Item IV below. The
typically compensated for the promoting market competition in its
Exchange has prepared summaries, set
distribution of short sale data through broader forms that are most important to
forth in sections A, B, and C below, of
subscription fees or other mechanisms. investors and listed companies.’’ 5
the most significant aspects of such
Some External Distributors incorporate Likewise, in NetCoalition v. Securities
statements.
short sale data into their own and Exchange Commission 6
A. Self-Regulatory Organization’s proprietary products, which they sell to (‘‘NetCoalition’’) the D.C. Circuit upheld
Statement of the Purpose of, and downstream users. These distributors the Commission’s use of a market-based
Statutory Basis for, the Proposed Rule may not charge separately for the approach in evaluating the fairness of
Change Nasdaq short sale data, but nevertheless market data fees against a challenge
gain value from the data by claiming that Congress mandated a cost-
1. Purpose
incorporating it into their product. The based approach.7 As the court
The purpose of the proposed rule price increase for External Distributors emphasized, the Commission ‘‘intended
change is to replace the current $500 per reflects the additional value these in Regulation NMS that ‘market forces,
month fee for both internal and external distributors gain from the product. rather than regulatory requirements’
distribution of short sale data with two In addition, the value of the short sale play a role in determining the market
separate fees: (1) A $750 monthly fee for data has increased over time for all data . . . to be made available to
the distribution of short sale data to distributors that have purchased short investors and at what cost.’’ 8
internal users, and (2) a $1,250 monthly sale data over a long period of time. Further, ‘‘[n]o one disputes that
fee for the distribution of short sale data Short sale data is frequently used to competition for order flow is ‘fierce.’
to external users. develop trading models, conduct . . . As the SEC explained, ‘[i]n the U.S.
Daily and Monthly Short Sale Files analyses and assess long-term risks. As national market system, buyers and
time passes, long-term distributors are sellers of securities, and the broker-
Nasdaq distributes two types of short able to accrue a larger database, dealers that act as their order-routing
sale data: (1) Daily Short Sale Volume rendering the data more valuable. The agents, have a wide range of choices of
files, and (2) Monthly Short Sale proposed price increases reflect the where to route orders for execution’;
Transaction files. growing value of the data over time. [and] ‘no exchange can afford to take its
The Daily Short Sale Volume files market share percentages for granted’
reflect the aggregate number of shares Purchases of the Daily Short Sale
because ‘no exchange possesses a
executed on the Nasdaq market during Volume and Monthly Short Sale
monopoly, regulatory or otherwise, in
regular trading hours on a daily basis. Transaction files are entirely optional.
the execution of order flow from broker
At the security level, these files show These reports are not necessary to
dealers’. . . .’’ 9
the volume for executed short sales and execute trades, but rather are typically The Exchange believes that the
the total trading volume for the Nasdaq used to develop trading models, proposal to replace the current fee of
market. The files include data for conduct analyses and assess long-term $500 per month for the internal and
Nasdaq, NYSE and regional exchange- risks. This type of activity is entirely at
listed securities. the discretion of the subscriber. 3 15 U.S.C. 78f(b).
The Monthly Short Sale Transaction The proposed changes do not impact 4 15 U.S.C. 78f(b)(4) and (5).
files provide a trade-by-trade record of or raise the cost of any other Nasdaq 5 Securities Exchange Act Release No. 51808
asabaliauskas on DSK3SPTVN1PROD with NOTICES
product. Short sale reports from the (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
all short sales executed on the Nasdaq (‘‘Regulation NMS Adopting Release’’).
execution system and reported to a Nasdaq BX and PSX Exchanges will 6 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
consolidated tape in Nasdaq, NYSE and continue to be provided free of charge, 2010).
regional exchange-listed securities. The as they have been since 2010. 7 See NetCoalition, at 534–535.
8 Id. at 537.
records include the transaction time, 2. Statutory Basis 9 Id. at 539 (quoting Securities Exchange Act
price and number of shares for every Release No. 59039 (December 2, 2008), 73 FR
short sale transaction. The files are The Exchange believes that its 74770, 74782–83 (December 9, 2008) (SR–
provided on a monthly basis, separated proposal is consistent with Section 6(b) NYSEArca–2006–21)).
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![95216 Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Notices
forego the product altogether. This All submissions should refer to File notice is hereby given that on December
competition for customers provides Number SR–NASDAQ–2016–168. This 15, 2016, ISE Gemini, LLC (‘‘ISE
another check on the price for short sale file number should be included on the Gemini’’ or ‘‘Exchange’’) filed with the
data. subject line if email is used. To help the Securities and Exchange Commission
In summary, market forces constrain Commission process and review your (‘‘SEC’’ or ‘‘Commission’’) the proposed
the price of short sale data through comments more efficiently, please use rule change as described in Items I, II,
competition for order flow, competition only one method. The Commission will and III, below, which Items have been
from substitute products, and in the post all comments on the Commission’s prepared by the Exchange. The
competition among distributors for Internet Web site (http://www.sec.gov/ Commission is publishing this notice to
customers. For these reasons, the rules/sro.shtml). Copies of the solicit comments on the proposed rule
Exchange has provided a substantial submission, all subsequent change from interested persons.
basis demonstrating that the fee is amendments, all written statements
equitable, fair, reasonable, and not with respect to the proposed rule I. Self-Regulatory Organization’s
unreasonably discriminatory, and change that are filed with the Statement of the Terms of Substance of
therefore consistent with and in Commission, and all written the Proposed Rule Change
furtherance of the purposes of the communications relating to the
proposed rule change between the The Exchange proposes to amend ISE
Exchange Act.
Commission and any person, other than Gemini Rule 803 at Supplementary
C. Self-Regulatory Organization’s those that may be withheld from the Material .02 in connection with
Statement on Comments on the public in accordance with the business continuity and disaster
Proposed Rule Change Received From provisions of 5 U.S.C. 552, will be recovery plans (‘‘BC/DR Plans’’) testing
Members, Participants, or Others available for Web site viewing and requirements for certain Members in
No written comments were either printing in the Commission’s Public connection with Regulation Systems
solicited or received. Reference Room, 100 F Street NE., Compliance and Integrity (‘‘Regulation
Washington, DC 20549, on official SCI’’).3
III. Date of Effectiveness of the business days between the hours of The text of the proposed rule change
Proposed Rule Change and Timing for 10:00 a.m. and 3:00 p.m. Copies of the is available on the Exchange’s Web site
Commission Action filing also will be available for at www.ise.com, at the principal office
The foregoing rule change has become inspection and copying at the principal of the Exchange, and at the
effective pursuant to Section office of the Exchange. All comments Commission’s Public Reference Room.
19(b)(3)(A)(ii) of the Act.10 received will be posted without change;
At any time within 60 days of the the Commission does not edit personal II. Self-Regulatory Organization’s
filing of the proposed rule change, the identifying information from Statement of the Purpose of, and
Commission summarily may submissions. You should submit only Statutory Basis for, the Proposed Rule
temporarily suspend such rule change if information that you wish to make Change
it appears to the Commission that such available publicly. All submissions
should refer to File Number SR– In its filing with the Commission, the
action is: (i) Necessary or appropriate in
NASDAQ–2016–168 and should be Exchange included statements
the public interest; (ii) for the protection
submitted on or before January 17, 2017. concerning the purpose of and basis for
of investors; or (iii) otherwise in
the proposed rule change and discussed
furtherance of the purposes of the Act. For the Commission, by the Division of
If the Commission takes such action, the any comments it received on the
Trading and Markets, pursuant to delegated
Commission shall institute proceedings authority.11
proposed rule change. The text of these
to determine whether the proposed rule statements may be examined at the
Eduardo A. Aleman,
should be approved or disapproved. places specified in Item IV below. The
Assistant Secretary.
Exchange has prepared summaries, set
IV. Solicitation of Comments [FR Doc. 2016–31109 Filed 12–23–16; 8:45 am]
forth in sections A, B, and C below, of
BILLING CODE 8011–01–P the most significant aspects of such
Interested persons are invited to
submit written data, views, and statements.
arguments concerning the foregoing, SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s
including whether the proposed rule COMMISSION Statement of the Purpose of, and
change is consistent with the Act. Statutory Basis for, the Proposed Rule
Comments may be submitted by any of [Release No. 34–79626; File No. SR–
ISEGemini–2016–24] Change
the following methods:
Self-Regulatory Organizations; ISE 1. Purpose
Electronic Comments
Gemini, LLC; Notice of Filing and
• Use the Commission’s Internet The Exchange proposes to amend ISE
Immediate Effectiveness of Proposed Gemini Rule 803 at Supplementary
comment form (http://www.sec.gov/
Rule Change To Amend Exchange Material .02 to conform the current rule
rules/sro.shtml); or
Rules in Connection With Business
• Send an email to rule-comments@ text regarding BC/DR Plans testing
Continuity and Disaster Recovery requirements with that of NASDAQ
sec.gov. Please include File Number SR–
Plans Testing Requirements PHLX LLC (‘‘Phlx’’) Rule 926,4 The
asabaliauskas on DSK3SPTVN1PROD with NOTICES
NASDAQ–2016–168 on the subject line.
December 20, 2016. NASDAQ Stock Market LLC (‘‘Nasdaq’’)
Paper Comments
Pursuant to Section 19(b)(1) of the
• Send paper comments in triplicate Securities Exchange Act of 1934 3 See Securities Exchange Act Release No. 73639
to Brent J. Fields, Secretary, Securities (November 19, 2014), 79 FR 72252 (December 5,
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 2014) (‘‘SCI Adopting Release’’).
and Exchange Commission, 100 F Street 4 Phlx Rule 926 is titled ‘‘The Exchange’s
NE., Washington, DC 20549–1090. 11 17 CFR 200.30–3(a)(12). Business Continuity and Disaster Recovery Plan
1 15 U.S.C. 78s(b)(1). Testing Requirements for Member Organizations
10 15 U.S.C. 78s(b)(3)(A)(ii). 2 17 CFR 240.19b–4. and PSX Participants Pursuant to Regulation SCI.’’
VerDate Sep<11>2014 20:45 Dec 23, 2016 Jkt 241001 PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 E:\FR\FM\27DEN1.SGM 27DEN1](https://thefederalregister.org/doc/81_FR_95461/page/4.svg)
Document Created: 2018-02-14 09:14:09
Document Modified: 2018-02-14 09:14:09
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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