82 FR 21581 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Fees at Rule 7047

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 88 (May 9, 2017)

Page Range		21581-21584
FR Document		2017-09312
Federal Register, Volume 82 Issue 88 (Tuesday, May 9, 2017)
[Federal Register Volume 82, Number 88 (Tuesday, May 9, 2017)]
[Notices]
[Pages 21581-21584]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-09312]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80585; File No. SR-NASDAQ-2017-041]


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

May 3, 2017.
    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 April 20, 2017, 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 fees at Rule 7047 to 
clarify the application of Nasdaq fees to Derived Data in light of 
changing industry practices. Specifically, the proposed changes will: 
(i) Limit application of the Derived Data Distributor Fee for Nasdaq 
Basic in Rule 7047(c)(2) only to those Distributors that both create 
and distribute Derived Data; (ii) clarify that the Nasdaq Basic per 
Subscriber user fees in Rules 7047(b)(1) and (b)(2), and the 
distributor fee in Rule 7047(c)(1), cover both Nasdaq data feeds and 
Derived Data therefrom; and (iii) clarify that the enterprise licenses 
for Professional and Non-Professional Subscribers in Rules 7047(b)(4) 
and (b)(5) cover the distribution of Derived Data from Nasdaq Basic. 
The proposal is described in further detail below.
    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 clarify the 
application of Nasdaq fees to Derived Data in light of changing 
industry practices. Specifically, the proposed changes will: (i) Limit 
application of the Derived Data Distributor Fee for Nasdaq Basic in 
Rule 7047(c)(2) only to those Distributors that both create and 
distribute Derived Data; (ii) clarify that the Nasdaq Basic per 
Subscriber user fees in Rules 7047(b)(1) and (b)(2), and the 
distributor fee in Rule 7047(c)(1), cover both Nasdaq data feeds and 
Derived Data therefrom; and (iii) clarify that the enterprise licenses 
for Professional and Non-Professional Subscribers in Rules 7047(b)(4) 
and (b)(5) cover the distribution of Derived Data from Nasdaq Basic.
Nasdaq Basic
    Nasdaq Basic provides best bid and offer information from the 
Nasdaq Market Center, as well as last sale transaction reports from 
both the Nasdaq Market Center and the FINRA/Nasdaq Trade Reporting 
Facility (``TRF''). This is a subset of the ``core'' quotation and last 
sale data provided by securities information processors under the CQ/CT 
Plan and the UTP Plan. The three components of Nasdaq Basic, which may 
be purchased individually or in combination, are: (i) Nasdaq Basic for 
Nasdaq, which contains the best bid and offer on the Nasdaq Market 
Center and last sale transaction reports for Nasdaq and the FINRA/
Nasdaq TRF for Nasdaq-listed stocks; (ii) Nasdaq Basic for NYSE, which 
covers NYSE-listed stocks, and (iii) Nasdaq Basic for NYSE MKT, which 
provides data on stocks listed on NYSE MKT and other listing venues 
whose quotes and trade reports are disseminated on Tape B.
Derived Data Distributor Fee
    A Distributor \3\ of Derived Data \4\ from Nasdaq Basic may pay a 
$1,500 per month fee to disseminate such data to an unlimited number of 
Non-Professional Subscribers \5\ under Rule 7047(c)(2). If a 
Distributor elects not to pay the Derived Data Distributor Fee, the 
Distributor must pay the per Subscriber charges for Non-Professionals 
set forth in Rule 7047(b)(2). In either case, Distributors of Derived 
Data must also pay the

[[Page 21582]]

Distributor fee set forth in Rule 7047(c)(1).
---------------------------------------------------------------------------

    \3\ A ``Distributor'' is ``any entity that receives NASDAQ Basic 
data directly from NASDAQ or indirectly through another entity and 
then distributes it to one or more Subscribers.'' Nasdaq Rule 
7047(d)(1).
    \4\ ``Derived Data'' is ``pricing data or other information that 
is created in whole or in part from NASDAQ information; it cannot be 
reverse engineered to recreate NASDAQ information, or be used to 
create other data that is recognizable as a reasonable substitute 
for NASDAQ information.'' Nasdaq Rule 7047(d)(5).
    \5\ A ``Non-Professional Subscriber'' is 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 (ii) any 
commodities or futures contract market or association; engaged as an 
``investment adviser'' as that term is defined in Section 201(11) of 
the Investment Advisers Act of 1940 (whether or not registered or 
qualified under that Act); or (iii) employed by a bank or other 
organization exempt from registration under federal or state 
securities laws to perform functions that would require registration 
or qualification if such functions were performed for an 
organization not so exempt. Nasdaq Rule 7047(d)(3)(A).
---------------------------------------------------------------------------

    The Exchange has recently become aware that certain Distributors 
create Derived Data (``Primary Distributors''), and send it to other 
Distributors, which transmit the Derived Data in the same form that it 
was received to Subscribers (``Secondary Distributors''). The Exchange, 
in its initial filing for the Derived Data Distributor Fee in 2011, 
stated that the fee applied only to firms that ``derive data from 
Nasdaq Basic'' \6\--i.e., the Primary Distributors. The text of Rule 
7047(c)(2), however, does not distinguish between Primary and Secondary 
Distributors. Rule 7047(c)(2) states that ``[a] Distributor may pay 
$1,500 per month to distribute Derived Data from Nasdaq Basic,'' 
implying that all Distributors--both Primary and Secondary--may pay 
that fee. Further clarification appeared to be unnecessary at the time 
because the Exchange was not aware of the existence of Secondary 
Distributors.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 64994 (July 29, 
2011), 76 FR 47621 (August 5, 2011) (SR-NASDAQ-2011-091).
---------------------------------------------------------------------------

    In light of changing industry practice, the Exchange proposes to 
clarify the Rule to state that only Distributors that ``create and 
distribute Derived Data from Nasdaq Basic'' pay the fee, thereby 
excluding Secondary Distributors from application of Rule 7047(c)(2). 
This is a codification of Nasdaq's intent as set forth in the initial 
filing and Nasdaq's interpretation of Rule 7047(c)(2) based on that 
rule and related filings, and will not change customer fees.
User Fees for Nasdaq Basic
    Professional Subscribers \7\ to Nasdaq Basic pay per Subscriber 
monthly charges of $13.00 for Nasdaq Basic for Nasdaq, $6.50 for Nasdaq 
Basic for NYSE, and $6.50 for Nasdaq Basic for NYSE MKT under Rule 
7047(b)(1). Non-Professional Subscribers pay at the reduced monthly 
rates of $0.50, $0.25, and $0.25, respectively, under Rule 7047(b)(2).
---------------------------------------------------------------------------

    \7\ A ``Professional Subscriber'' is any Subscriber other than a 
Non-Professional Subscriber. Nasdaq Rule 7047(d)(3)(B).
---------------------------------------------------------------------------

    When the Derived Data Distributor Fee, currently set forth in Rule 
7047(c)(2) was introduced in 2011, the Exchange explained in the 
accompanying filing that the fee ``would be in lieu of non-professional 
subscriber fees,'' \8\ indicating that the monthly per Subscriber fees 
set forth in Rule 7047(b)(2) applied to Derived Data. There was no 
explicit reference to Derived Data in Rule 7047(b)(2) because the 
Exchange was not aware of instances in which Derived Data was 
distributed without a Nasdaq Basic data feed, rendering such a 
reference unnecessary.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 64994 (July 29, 
2011), 76 FR 47621 (August 5, 2011) (SR-NASDAQ-2011-091).
---------------------------------------------------------------------------

    The Exchange has recently become aware, however, that certain 
Subscribers purchase Derived Data without a Nasdaq Basic data feed. The 
Exchange proposes to clarify Rule 7047(b)(2), and the parallel rule for 
Professional Subscribers at Rule 7047(b)(1), to state that the per 
Subscriber monthly charges allow the transmission of both Nasdaq Basic 
feeds and/or any Derived Data therefrom.
    Similarly, the distributor fee for Nasdaq Basic in Rule 7047(c)(1) 
did not separately reference Derived Data because such data was not 
distributed without a Nasdaq Basic data feed. Because industry practice 
has changed, the Exchange proposes to clarify that the distributor fee 
in Rule 7047(c)(1) covers Derived Data, as well as the Nasdaq Basic 
data feed.
    These proposed changes will not change prices, but rather are a 
codification of the Exchange's original intent and its interpretation 
of these Rules based on the text of the Rules and their related 
filings, in light of changes in industry practice.
Nasdaq Basic Enterprise Licenses
    Broker-dealers may purchase two enterprise licenses for Nasdaq 
Basic in lieu of per Subscriber user fees: (i) An enterprise license 
for Professional and Non-Professional Subscribers with whom the broker-
dealer has a brokerage relationship under Rule 7047(b)(5); or (ii) an 
enterprise license for internal Professional Subscribers under Rule 
7047(b)(4). The enterprise license for Subscribers in a brokerage 
relationship was introduced in 2011,\9\ but the rule did not specify 
whether that license would cover the distribution of Derived Data. The 
enterprise license for internal Professional Subscribers, introduced in 
2014,\10\ did not explicitly reference Derived Data either.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 65526 (October 11, 
2011), 76 FR 64137 (October 17, 2011) (SR-NASDAQ-2011-130).
    \10\ See Securities Exchange Act Release No. 71507 (February 7, 
2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-2014-011).
---------------------------------------------------------------------------

    The enterprise license for internal Professional Subscribers was 
introduced as an alternative to the Nasdaq Basic user fees set forth in 
Rule 7047(b)(1), and the enterprise license for Subscribers with whom 
the broker-dealer has a brokerage relationship was designed as an 
alternative to the user fees set forth in Rule 7047(b)(1) and (b)(2). 
For the reasons set forth above, the fees set forth at Rules 7047(b)(1) 
and (b)(2) were intended to cover the distribution of Derived Data. 
Because these enterprise licenses were introduced as alternatives to 
Rules 7047(b)(1) and (b)(2), these licenses were intended to cover 
Derived Data as well. In light of a change in industry practice in 
which Derived Data is sometimes distributed without a proprietary data 
feed, the Exchange proposes to codify the original intent of the 
Exchange, and its interpretation of the Rules and related filings, and 
explicitly state that the enterprise licenses at Rules 7047(b)(4) and 
(b)(5) cover the distribution of Derived Data from Nasdaq Basic.
    In summary, the proposed changes clarify how Nasdaq Basic fees set 
forth in Rule 7047 apply to Derived Data. The first change clarifies 
that the Derived Data Distributor Fee does not apply to Secondary 
Distributors, i.e., entities that distribute, but do not create, 
Derived Data. The second change clarifies that the per Subscriber user 
fees set forth in Rule 7047(b)(1) and (b)(2), and the distributor fee 
in Rule 7047(c)(1) also allow the distribution of Derived Data. The 
third change clarifies that the enterprise licenses under Rules 
7047(b)(4) and (b)(5) cover the distribution of Derived Data. None of 
these proposed changes raise the cost of Nasdaq Basic or any other 
Nasdaq product, but rather codify the original intent and ongoing 
interpretation of Rule 7047.
    The fees for all Nasdaq Basic products--including Derived Data from 
Nasdaq Basic--are entirely optional, in that they apply only to 
Distributors or Subscribers that opt to purchase Nasdaq Basic or 
Derived Data therefrom. The proposed changes do not impact the cost of 
any Nasdaq product, including Nasdaq Basic and any Derived Data from 
Nasdaq Basic.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory

[[Page 21583]]

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.'' \13\
---------------------------------------------------------------------------

    \13\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------

    Likewise, in NetCoalition v. Securities and Exchange Commission 
\14\ (``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.\15\ 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.'' \16\
---------------------------------------------------------------------------

    \14\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \15\ See NetCoalition, at 534-535.
    \16\ 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' . . . .'' \17\
---------------------------------------------------------------------------

    \17\ 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 current proposals--(i) to limit 
application of the Derived Data Distributor Fee, (ii) clarify the 
application of Nasdaq Basic per Subscriber user fees and a distributor 
fee to Derived Data, and (iii) establish that Derived Data is included 
in the Professional and Non-Professional enterprise licenses--are 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. The proposed changes do not change any fee, but rather codify and 
clarify Nasdaq's interpretation of its rules. Moreover, fees for Nasdaq 
Basic and its associated Derived Data, like all market data fees, are 
constrained by the Exchange's need to compete for order flow, and are 
subject to competition from other exchanges and among broker-dealers 
for customers. If Nasdaq is incorrect in its assessment, there is no 
barrier to block a competitor from entering the market with 
substantially similar products.
    The Exchange believes that the proposed changes are an equitable 
allocation and not unfairly discriminatory because the Exchange will 
apply the same fees 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.
    Nasdaq Basic--and all data derived from Nasdaq Basic--is subject to 
competition from the NYSE, BATS, and other exchanges that offer similar 
products. If Nasdaq Basic were to prove unattractive to market 
participants, it is likely that the Exchange would lose market share as 
a result.
    As noted above, the proposed changes do not affect any existing 
fees, which are, in any event, constrained by market forces in three 
distinct respects. First, all fees related to Nasdaq Basic are 
constrained by the competition among exchanges and other entities in 
attracting order flow. Firms make decisions regarding this and other 
proprietary data products based on the total cost of interacting with 
the Exchange, and, because the supracompetitive pricing of any 
proprietary data product increases the total cost of interacting with 
the Exchange, such pricing would harm order flow. Second, the price of 
Nasdaq Basic is constrained by the existence of multiple substitutes 
that are offered, or may be offered, by entities that offer proprietary 
or non-proprietary data. Third, the proposed fee will be constrained by 
competition among Distributors for Subscribers.
Competition for Order Flow
    All fees related to Nasdaq Basic are constrained by competition 
among exchanges and other entities seeking to attract order flow. Order 
flow is the ``life blood'' of the exchanges. Broker-dealers currently 
have numerous alternative venues for their order flow, including 
thirteen self-regulatory organization (``SRO'') markets, as well as 
internalizing broker-dealers (``BDs'') and various forms of alternative 
trading systems (``ATSs''), including dark pools and electronic 
communication networks (``ECNs''). Each SRO market competes to produce 
transaction reports via trade executions, and two FINRA-regulated 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, and TracECN. 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, 
and the BATS exchanges. 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

[[Page 21584]]

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. Firms make decisions on how much and what types 
of data to consume based on the total cost of interacting with an 
exchange, and data fees are a factor in the total platform analysis. A 
supracompetitive increase in the fees charged for proprietary data has 
the potential to impair revenue for the exchange as a result. The 
competition for order flow will therefore constrain prices for 
proprietary data products, including charges relating to Nasdaq Basic.
Substitute Products
    The price of data derived from Nasdaq Basic is also constrained by 
the existence of multiple substitutes offered by numerous entities, 
including both proprietary data offered by other SROs or other 
entities, and non-proprietary data disseminated by Nasdaq in its 
capacity as a Securities Information Processor (``SIP'') for the 
national market system plan governing securities listed on Nasdaq as a 
national securities exchange (``Nasdaq UTP Plan'').
    The information provided through Nasdaq Basic is a subset of the 
best bid and offer and last sale data provided by the SIP. The ``core'' 
data disseminated by the SIP consists of best-price quotations and last 
sale information from all markets in U.S.-listed equities; Nasdaq Basic 
provides best bid and offer and last sale information for all U.S. 
exchange-listed stocks based on trade reports from the Nasdaq Market 
Center and the FINRA/Nasdaq Trade Reporting Facility. Many customers 
that purchase SIP data do not also purchase Nasdaq Basic. Where 
customers buy both products, they may shift the extent to which they 
purchase one or the other based on relative price changes. The SIP 
constrains the price of Nasdaq Basic because no purchaser would pay an 
excessive price for Nasdaq Basic when similar data is available from 
the SIP.
    Proprietary data sold by other exchanges also constrain the price 
of Nasdaq Basic because other exchanges, such as NYSE and BATS, also 
sell proprietary non-core data that include best bid and offer and last 
sale data. Customers would not pay an excessive price for Nasdaq Basic 
when substitute data is available from other proprietary sources, and 
customers would not typically purchase proprietary best bid and offer 
and last sale data from multiple exchanges.
Competition for Subscribers
    Distributors that disseminate data derived from Nasdaq Basic are in 
competition for Subscribers. If the price of such data were set above 
competitive levels, Distributors would be at a competitive disadvantage 
relative to their competitors, and may lower their costs by 
substituting Nasdaq data with other products, in whole or in part. 
Competition for Subscribers therefore provides another constraint on 
the cost of Derived Data.
    In summary, market forces constrain the price of Nasdaq Basic 
through competition for order flow, competition from substitute data 
products, and in the competition among Distributors for Subscribers. 
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.\18\
---------------------------------------------------------------------------

    \18\ 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 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-NASDAQ-2017-041 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2017-041. 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-2017-041 and should 
be submitted on or before May 30, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09312 Filed 5-8-17; 8:45 am]
BILLING CODE P
Federal Register / Vol. 82, No. 88 / Tuesday, May 9, 2017 / Notices 21581

Commission, and all written I. Self-Regulatory Organization’s for Professional and Non-Professional
communications relating to the Statement of the Terms of Substance of Subscribers in Rules 7047(b)(4) and
proposed rule change between the the Proposed Rule Change (b)(5) cover the distribution of Derived
Commission and any person, other than The Exchange proposes to amend the Data from Nasdaq Basic.
those that may be withheld from the Exchange’s fees at Rule 7047 to clarify Nasdaq Basic
public in accordance with the the application of Nasdaq fees to
provisions of 5 U.S.C. 552, will be Derived Data in light of changing Nasdaq Basic provides best bid and
available for Web site viewing and industry practices. Specifically, the offer information from the Nasdaq
printing in the Commission’s Public proposed changes will: (i) Limit Market Center, as well as last sale
Reference Room, 100 F Street NE., application of the Derived Data transaction reports from both the
Washington, DC 20549 on official Distributor Fee for Nasdaq Basic in Rule Nasdaq Market Center and the FINRA/
business days between the hours of 7047(c)(2) only to those Distributors that Nasdaq Trade Reporting Facility
10:00 a.m. and 3:00 p.m. Copies of the both create and distribute Derived Data; (‘‘TRF’’). This is a subset of the ‘‘core’’
filing also will be available for (ii) clarify that the Nasdaq Basic per quotation and last sale data provided by
inspection and copying at the principal Subscriber user fees in Rules 7047(b)(1) securities information processors under
and (b)(2), and the distributor fee in the CQ/CT Plan and the UTP Plan. The
office of the Exchange. All comments
Rule 7047(c)(1), cover both Nasdaq data three components of Nasdaq Basic,
received will be posted without change;
feeds and Derived Data therefrom; and which may be purchased individually
the Commission does not edit personal
(iii) clarify that the enterprise licenses or in combination, are: (i) Nasdaq Basic
identifying information from for Nasdaq, which contains the best bid
for Professional and Non-Professional
submissions. You should submit only Subscribers in Rules 7047(b)(4) and and offer on the Nasdaq Market Center
information that you wish to make (b)(5) cover the distribution of Derived and last sale transaction reports for
available publicly. All submissions Data from Nasdaq Basic. The proposal is Nasdaq and the FINRA/Nasdaq TRF for
should refer to File Number SR– described in further detail below. Nasdaq-listed stocks; (ii) Nasdaq Basic
NYSEArca–2017–44 and should be The text of the proposed rule change for NYSE, which covers NYSE-listed
submitted on or before May 30, 2017. is available on the Exchange’s Web site stocks, and (iii) Nasdaq Basic for NYSE
For the Commission, by the Division of at http://nasdaq.cchwallstreet.com, at MKT, which provides data on stocks
Trading and Markets, pursuant to delegated the principal office of the Exchange, and listed on NYSE MKT and other listing
authority.20 at the Commission’s Public Reference venues whose quotes and trade reports
Eduardo A. Aleman, Room. are disseminated on Tape B.
Assistant Secretary. II. Self-Regulatory Organization’s Derived Data Distributor Fee
[FR Doc. 2017–09311 Filed 5–8–17; 8:45 am] Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule A Distributor 3 of Derived Data 4 from
BILLING CODE P
Change Nasdaq Basic may pay a $1,500 per
month fee to disseminate such data to
In its filing with the Commission, the an unlimited number of Non-
SECURITIES AND EXCHANGE Exchange included statements Professional Subscribers 5 under Rule
COMMISSION concerning the purpose of and basis for 7047(c)(2). If a Distributor elects not to
the proposed rule change and discussed pay the Derived Data Distributor Fee,
[Release No. 34–80585; File No. SR– any comments it received on the the Distributor must pay the per
NASDAQ–2017–041] proposed rule change. The text of these Subscriber charges for Non-
statements may be examined at the Professionals set forth in Rule
Self-Regulatory Organizations; The places specified in Item IV below. The 7047(b)(2). In either case, Distributors of
NASDAQ Stock Market LLC; Notice of Exchange has prepared summaries, set Derived Data must also pay the
Filing and Immediate Effectiveness of forth in sections A, B, and C below, of
Proposed Rule Change To Amend the the most significant aspects of such 3 A ‘‘Distributor’’ is ‘‘any entity that receives

Exchange’s Fees at Rule 7047 statements. NASDAQ Basic data directly from NASDAQ or
indirectly through another entity and then
May 3, 2017.
A. Self-Regulatory Organization’s distributes it to one or more Subscribers.’’ Nasdaq
Statement of the Purpose of, and Rule 7047(d)(1).
Pursuant to Section 19(b)(1) of the Statutory Basis for, the Proposed Rule 4 ‘‘Derived Data’’ is ‘‘pricing data or other

Securities Exchange Act of 1934 Change information that is created in whole or in part from
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 NASDAQ information; it cannot be reverse
1. Purpose engineered to recreate NASDAQ information, or be
notice is hereby given that on April 20, used to create other data that is recognizable as a
2017, The NASDAQ Stock Market LLC The purpose of the proposed rule reasonable substitute for NASDAQ information.’’
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the change is to clarify the application of Nasdaq Rule 7047(d)(5).
Securities and Exchange Commission Nasdaq fees to Derived Data in light of 5 A ‘‘Non-Professional Subscriber’’ is a natural

changing industry practices. person who is not (i) registered or qualified in any
(‘‘SEC’’ or ‘‘Commission’’) the proposed capacity with the Commission, the Commodity
rule change as described in Items I, II, Specifically, the proposed changes will: Futures Trading Commission, any state securities
and III below, which Items have been (i) Limit application of the Derived Data agency, any securities exchange or association, or
Distributor Fee for Nasdaq Basic in Rule (ii) any commodities or futures contract market or
prepared by the Exchange. The association; engaged as an ‘‘investment adviser’’ as
7047(c)(2) only to those Distributors that
mstockstill on DSK30JT082PROD with NOTICES

Commission is publishing this notice to that term is defined in Section 201(11) of the
both create and distribute Derived Data;
solicit comments on the proposed rule Investment Advisers Act of 1940 (whether or not
(ii) clarify that the Nasdaq Basic per registered or qualified under that Act); or (iii)
change from interested persons. Subscriber user fees in Rules 7047(b)(1) employed by a bank or other organization exempt
and (b)(2), and the distributor fee in from registration under federal or state securities
laws to perform functions that would require
20 17 CFR 200.30–3(a)(12). Rule 7047(c)(1), cover both Nasdaq data registration or qualification if such functions were
1 15 U.S.C. 78s(b)(1). feeds and Derived Data therefrom; and performed for an organization not so exempt.
2 17 CFR 240.19b–4. (iii) clarify that the enterprise licenses Nasdaq Rule 7047(d)(3)(A).

VerDate Sep<11>2014 18:19 May 08, 2017 Jkt 241001 PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 E:\FR\FM\09MYN1.SGM 09MYN1
21584 Federal Register / Vol. 82, No. 88 / Tuesday, May 9, 2017 / Notices

proprietary products are virtually Competition for Subscribers • Send an email to rule-comments@
limitless. Distributors that disseminate data sec.gov. Please include File Number SR–
The markets for order flow and derived from Nasdaq Basic are in NASDAQ–2017–041 on the subject line.
proprietary data are inextricably linked: competition for Subscribers. If the price
A trading platform cannot generate Paper Comments
of such data were set above competitive
market information unless it receives levels, Distributors would be at a • Send paper comments in triplicate
trade orders. Firms make decisions on competitive disadvantage relative to to Secretary, Securities and Exchange
how much and what types of data to their competitors, and may lower their Commission, 100 F Street NE.,
consume based on the total cost of costs by substituting Nasdaq data with Washington, DC 20549–1090.
interacting with an exchange, and data other products, in whole or in part.
fees are a factor in the total platform Competition for Subscribers therefore All submissions should refer to File
analysis. A supracompetitive increase in provides another constraint on the cost Number SR–NASDAQ–2017–041. This
the fees charged for proprietary data has of Derived Data. file number should be included on the
the potential to impair revenue for the In summary, market forces constrain subject line if email is used. To help the
exchange as a result. The competition the price of Nasdaq Basic through Commission process and review your
for order flow will therefore constrain competition for order flow, competition comments more efficiently, please use
prices for proprietary data products, from substitute data products, and in only one method. The Commission will
including charges relating to Nasdaq the competition among Distributors for post all comments on the Commission’s
Basic. Subscribers. For these reasons, the Internet Web site (http://www.sec.gov/
Exchange has provided a substantial rules/sro.shtml). Copies of the
Substitute Products
basis demonstrating that the fee is submission, all subsequent
The price of data derived from Nasdaq equitable, fair, reasonable, and not amendments, all written statements
Basic is also constrained by the unreasonably discriminatory, and with respect to the proposed rule
existence of multiple substitutes offered therefore consistent with and in change that are filed with the
by numerous entities, including both furtherance of the purposes of the
Commission, and all written
proprietary data offered by other SROs Exchange Act.
or other entities, and non-proprietary communications relating to the
C. Self-Regulatory Organization’s proposed rule change between the
data disseminated by Nasdaq in its
Statement on Comments on the Commission and any person, other than
capacity as a Securities Information
Proposed Rule Change Received From those that may be withheld from the
Processor (‘‘SIP’’) for the national
Members, Participants, or Others public in accordance with the
market system plan governing securities
listed on Nasdaq as a national securities No written comments were either provisions of 5 U.S.C. 552, will be
exchange (‘‘Nasdaq UTP Plan’’). solicited or received. available for Web site viewing and
The information provided through printing in the Commission’s Public
III. Date of Effectiveness of the
Nasdaq Basic is a subset of the best bid Reference Room, 100 F Street NE.,
Proposed Rule Change and Timing for
and offer and last sale data provided by Commission Action Washington, DC 20549, on official
the SIP. The ‘‘core’’ data disseminated business days between the hours of
by the SIP consists of best-price The foregoing rule change has become 10:00 a.m. and 3:00 p.m. Copies of the
quotations and last sale information effective pursuant to Section filing also will be available for
from all markets in U.S.-listed equities; 19(b)(3)(A)(ii) of the Act.18 inspection and copying at the principal
At any time within 60 days of the
Nasdaq Basic provides best bid and offer office of the Exchange. All comments
filing of the proposed rule change, the
and last sale information for all U.S. received will be posted without change;
Commission summarily may
exchange-listed stocks based on trade the Commission does not edit personal
temporarily suspend such rule change if
reports from the Nasdaq Market Center identifying information from
it appears to the Commission that such
and the FINRA/Nasdaq Trade Reporting submissions. You should submit only
action is: (i) Necessary or appropriate in
Facility. Many customers that purchase information that you wish to make
the public interest; (ii) for the protection
SIP data do not also purchase Nasdaq available publicly. All submissions
of investors; or (iii) otherwise in
Basic. Where customers buy both should refer to File Number SR–
furtherance of the purposes of the Act.
products, they may shift the extent to NASDAQ–2017–041 and should be
If the Commission takes such action, the
which they purchase one or the other submitted on or before May 30, 2017.
Commission shall institute proceedings
based on relative price changes. The SIP
to determine whether the proposed rule For the Commission, by the Division of
constrains the price of Nasdaq Basic
should be approved or disapproved. Trading and Markets, pursuant to delegated
because no purchaser would pay an
excessive price for Nasdaq Basic when IV. Solicitation of Comments authority.19
similar data is available from the SIP. Interested persons are invited to Eduardo A. Aleman,
Proprietary data sold by other submit written data, views, and Assistant Secretary.
exchanges also constrain the price of arguments concerning the foregoing, [FR Doc. 2017–09312 Filed 5–8–17; 8:45 am]
Nasdaq Basic because other exchanges, including whether the proposed rule BILLING CODE P
such as NYSE and BATS, also sell change is consistent with the Act.
proprietary non-core data that include Comments may be submitted by any of
best bid and offer and last sale data.
mstockstill on DSK30JT082PROD with NOTICES

the following methods:
Customers would not pay an excessive
price for Nasdaq Basic when substitute Electronic Comments
data is available from other proprietary • Use the Commission’s Internet
sources, and customers would not comment form (http://www.sec.gov/
typically purchase proprietary best bid rules/sro.shtml); or
and offer and last sale data from
multiple exchanges. 18 15 U.S.C. 78s(b)(3)(A)(ii). 19 17 CFR 200.30–3(a)(12).

VerDate Sep<11>2014 18:19 May 08, 2017 Jkt 241001 PO 00000 Frm 00083 Fmt 4703 Sfmt 9990 E:\FR\FM\09MYN1.SGM 09MYN1
Document Created: 2018-11-08 08:41:12
Document Modified: 2018-11-08 08:41:12
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		82 FR 21581