82_FR_45827 82 FR 45639 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Features of the Enterprise License Set Forth at Rule 7047

82 FR 45639 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Features of the Enterprise License Set Forth at Rule 7047

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 188 (September 29, 2017)

Page Range45639-45643
FR Document2017-20886

Federal Register, Volume 82 Issue 188 (Friday, September 29, 2017)
[Federal Register Volume 82, Number 188 (Friday, September 29, 2017)]
[Notices]
[Pages 45639-45643]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-20886]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81697; File No. SR-NASDAQ-2017-095]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Expand the Features of the Enterprise License Set Forth at Rule 7047

September 25, 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 September 12, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 45640]]

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 
expand the features of the enterprise license set forth at Rule 
7047(b)(5).
    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 Exchange proposes to amend its fees at Rule 7047 to expand the 
features of the enterprise license set forth at Rule 7047(b)(5). The 
proposed changes will: (i) Allow distribution of Nasdaq Basic data to 
certain Professional Subscribers that are currently excluded from the 
license; and (ii) permit the distribution of NLS data along with Nasdaq 
Basic data without paying per user, per query, per visitor or per 
household fees. This proposal, which also includes technical and 
conforming changes, will increase the features of this Nasdaq Basic 
enterprise license without changing its fee, thereby lowering the 
overall cost of the product.
Current Fee Structure
    Nasdaq Basic provides best bid and offer and last sale information 
from the Nasdaq Market Center and the FINRA/Nasdaq Trade Reporting 
Facility (``FINRA/Nasdaq TRF''). It is a ``non-core'' product that 
provides a subset of the ``core'' last-sale data provided by securities 
information processors (``SIPs'') under the CTA Plan and the Nasdaq UTP 
Plan. Data is taken from three sources, which may be purchased 
individually or in combination: (i) Nasdaq Basic for Nasdaq, which 
contains the best bid and offer on the Nasdaq Market Center and last 
sale trade reports for Nasdaq and the FINRA/Nasdaq TRF for Nasdaq-
listed stocks; (ii) Nasdaq Basic for NYSE, which contains the best bid 
and offer on the Nasdaq Market Center and last sale trade reports for 
Nasdaq and the FINRA/Nasdaq TRF for NYSE-listed stocks; and (iii) 
Nasdaq Basic for NYSE MKT, which contains the best bid and offer on the 
Nasdaq Market Center and last sale trade reports for Nasdaq and the 
FINRA/Nasdaq TRF for stocks listed on NYSE MKT and other listing venues 
whose quotes and trade reports are disseminated on Tape B.
    User fees for Nasdaq Basic may be paid through per Subscriber 
monthly charges, per query fees, or two types of enterprise licenses: 
An internal enterprise license for Professional Subscribers at Rule 
7047(b)(4) (for $365,000 per month); and an enterprise license for Non-
Professional and Professional Subscribers with whom the broker-dealer 
has a brokerage relationship at Rule 7047(b)(5) (for $100,000 per 
month). The Exchange proposes to modify the second of these two 
enterprise licenses, at Rule 7047(b)(5), which allows the distribution 
of Nasdaq Basic, or Derived Data therefrom, to Professional and Non-
Professional Subscribers who are natural persons and with whom the 
broker-dealer has a brokerage relationship. As a current condition of 
this license, Professional Users [sic] who receive data may not use 
that data within the scope of any professional engagement or 
registration. In addition, Nasdaq must approve any electronic system 
used to distribute such data, and a separate enterprise license must be 
purchased for each such system. Broker-dealers purchasing this license 
must also report the number of Subscribers at least once per year.
    As noted above, the Exchange proposes to add NLS data as an 
additional feature to the Nasdaq Basic enterprise license at Rule 
7047(b)(5). NLS provides real-time last sale information, including 
price, volume, and time of execution, for transactions on the Nasdaq 
Market Center or reported to the FINRA/Nasdaq TRF.\3\ It is, like 
Nasdaq Basic, a non-core product that provides a subset of the core 
data provided by the SIPs under the CTA Plan and the Nasdaq UTP Plan. 
NLS was designed to ``increase[ ] the availability of NASDAQ 
proprietary market data to individual investors.'' \4\ The Exchange 
does not explicitly offer an enterprise license for NLS, but has set a 
cap of $41,500 per month for NLS for Nasdaq and NLS for NYSE/NYSE MKT.
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    \3\ See NASDAQ Rule 7039(a)-(c); see also Securities Exchange 
Act Release No. 71351 (January 17, 2014), 79 FR 4200 (Jan. 24, 2014) 
(SR-NASDAQ-2014-006) (notice of filing and immediate effectiveness 
regarding permanent approval of NLS).
    \4\ See SR-NASDAQ-2006-060 at 3 (Amendment No. 2, June 10, 2008) 
(available at http://nasdaq.cchwallstreet.com/NASDAQ/pdf/nasdaq-filings/2006/SR-NASDAQ-2006-060_Amendment_2.pdf); see also 
Securities Exchange Act Release No. 57965 (June 16, 2008), 73 FR 
35178 (June 20, 2008) (SR-NASDAQ-2006-060) (approving SR-NASDAQ-
2006-060, as amended by Amendment Nos. 1 and 2, to implement NLS on 
a pilot basis).
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Proposed Changes
    As explained above, the proposed changes will expand the features 
of the enterprise license set forth at Rule 7047(b)(5) by: (i) Allowing 
distribution of Nasdaq Basic data to certain Professional Users [sic] 
that are currently excluded from the license; and (ii) permitting the 
distribution of NLS data, along with Nasdaq Basic data, without paying 
per user, per query, per visitor or per household fees. The proposal 
will also include technical and conforming changes as described below.
    The enterprise license at Rule 7047(b)(5) currently allows 
distribution of data to Professionals in the context of a brokerage 
relationship with the broker-dealer, and explicitly prohibits 
Professionals who receive data under that license from using it within 
the scope of a professional engagement or registration. The Exchange 
proposes to loosen that restriction by allowing the broker-dealer to 
make Nasdaq Basic data available to up to and including 4,500 internal 
Subscribers operating on approved electronic system for use by 
Professionals who work for the broker-dealer and use that data to 
provide brokerage services to investors. Use of the license for 
internal Subscribers will be limited to Professionals providing 
brokerage services to investors, but will not be available to any 
Professionals involved in proprietary trading, surveillance activities, 
or performing any other function solely for the benefit of the broker-
dealer. Internal Subscribers may operate only on an approved electronic 
system to ensure that appropriate controls are in place to prevent use 
of the data by unauthorized personnel or for impermissible purposes. 
Any distribution to over 4,500 internal Subscribers, or any usage by 
Professional Users [sic] not in support of brokerage services to 
investors on an approved platform, would be subject to the applicable 
fees set forth in Rule 7047(b).
    The difference between internal distribution of Nasdaq Basic 
through the

[[Page 45641]]

newly proposed $100,000 enterprise license at Rule 7047(b)(5), and 
internal distribution under the existing $365,000 license under Rule 
7047(b)(4), is of magnitude and scope. The new license will be limited 
to 4,500 internal Professional Subscribers, whereas the number of 
internal Subscribers able to obtain data under the $365,000 enterprise 
license is not so limited.\5\ In addition, use of the data by internal 
Professional Users [sic] under the proposed license will be limited to 
the provision of brokerage services to investors, whereas use of the 
data through the $365,000 license under Rule 7047(b)(4) is not limited 
to such services. Under the proposed rule, Professional Subscribers who 
do not obtain Nasdaq Basic through internal distribution, but rather 
through their own brokerage relationship with the broker-dealer, will 
still be prohibited from using such data within the scope of any 
professional engagement.
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    \5\ The enterprise license at Rule 7047(b)(4) allows 
distribution to 16,000 internal Professional Subscribers for no 
additional cost, with an additional charge of $2 for each internal 
Professional Subscriber above that level, provided that the broker-
dealer obtains the license through an External Distributor that 
controls display of the product, and the broker-dealer obtains a 
separate license for each such External Distributor.
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    In addition to allowing distribution for up to 4,500 internal 
Subscribers, the Exchange also proposes to permit distribution of NLS 
data without paying the fees set forth in Rule 7039(b).\6\ The Exchange 
does not currently offer an enterprise license for NLS, although there 
is a maximum distributor fee for any Distributor using the per user, 
per query, per visitor or per household pricing models of $41,500 per 
month. There are no additional restrictions on the use of NLS data 
under this license, although all other fees and restrictions other than 
the fees set forth in Rule 7039(b) will continue to apply.
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    \6\ The Exchange anticipates filing changes to Rule 7039 that 
would eliminate Distributor fees under Rule 7039(c) for any firm 
paying such a fee for Nasdaq Basic, effectively eliminating all NLS 
fees with the purchase of this enterprise license.
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    The technical and conforming changes proposed by the Exchange are 
to: (i) Require broker-dealers purchasing the enterprise license at 
Rule 7047(b)(5) to report the number of Professional Subscribers on a 
monthly basis; (ii) clarify that Professional Users [sic] receiving 
Nasdaq Basic data through internal Subscribers (not in the context of 
their own brokerage relationship with the broker-dealer) are not 
prohibited from using the data within the scope of any professional 
engagement or registration; and (iii) replace references to ``NASDAQ,'' 
with all letters capitalized, with ``Nasdaq,'' in which only the first 
letter of the company is capitalized. All of these changes are 
necessary to support the primary fee changes sought by the Exchange, or 
to correct technical errors. The change in reporting is necessary to 
monitor the number of internal Subscribers receiving data. The 
clarification to the ability of Professionals to utilize Nasdaq Basic 
data is necessary to allow Professionals to effectively use the data in 
support of providing brokerage services to investors. The change from 
NASDAQ to Nasdaq is necessary to replace an older version of the 
Exchange's name.
    The purpose of the proposed changes is to make the purchase of the 
enterprise license at Rule 7047(b)(5) more attractive to broker-dealers 
by adding features without increasing fees. The cost of the license 
will remain $100,000 per month, but services will be augmented by 
allowing internal distribution to up to 4,500 Professionals and 
including distribution of NLS to private investors. The proposal will 
lower the costs to broker-dealers of distributing Nasdaq Basic and NLS, 
thereby encouraging the dissemination of such data to individual 
investors.
    The enterprise license at Rule 7047(b)(5) is optional in that 
Nasdaq is not required to offer it and broker-dealers are not required 
to purchase it. Firms can discontinue use at any time and for any 
reason, including an assessment of the fees charged.
    The proposed change does not change the cost of any other Nasdaq 
product.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \9\
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    \9\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Likewise, in NetCoalition v. Securities and Exchange Commission 
\10\ (``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.\11\ 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.'' \12\
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    \10\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \11\ Id. at 534-535.
    \12\ Id. at 537.
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    Further, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \13\
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    \13\ Id. at 539 (quoting Securities Exchange Act Release No. 
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) 
(SR-NYSEArca-2006-21)).
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    The Exchange believes that the proposal to expand the features of 
the enterprise license set forth at Rule 7047(b)(5) without increasing 
fees is an equitable allocation of reasonable dues, fees and other 
charges in accordance with Section 6(b)(4) of the Act, and not designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers in accordance with Section 6(b)(5) of the Act. As described 
above, the proposed changes will: (i) Allow distribution of Nasdaq 
Basic data to certain Professional Subscribers that are currently 
excluded from the license; and (ii) permit the distribution of NLS data 
along with Nasdaq Basic data without paying per user, per query, per 
visitor or per household fees. The proposal will provide greater value 
to the broker-dealers purchasing the enterprise license, and increase 
market transparency by lowering the cost of distributing both NLS and 
Basic to

[[Page 45642]]

investors. The proposal is an equitable allocation of reasonable dues, 
fees and other charges because the services will be the same for all 
broker-dealers that purchase the license. The services are not designed 
to permit unfair discrimination because all broker-dealers will be able 
to purchase the same license at the same price. As is the case for the 
current enterprise licenses, offering the enterprise license only to 
broker-dealers is not unfair discrimination because the license is 
primarily designed to allow data distribution to investors, and 
investors execute trades through broker-dealers. It is reasonable to 
limit use of the expanded enterprise license to internal Subscribers 
operating on approved platforms to ensure that the data is being used 
to support brokerage services for investors, rather than any other 
purpose. Moreover, enterprise license fees, 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 of 
price, it may lose market share as a result.

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 changes will effectively lower the cost to broker-
dealers to distribute NLS and Nasdaq Basic by expanding the features of 
the enterprise license set forth at Rule 7047(b)(5) without increasing 
fees. This proposal to lower costs is itself evidence of the need to 
maintain low prices is [sic] a competitive marketplace. 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.
    Market forces constrain the prices for NLS and Nasdaq Basic in two 
respects. First, market data fees are one element of the total cost of 
interacting with the Exchange and, if the price of these products were 
set above competitive levels, competition for order flow would be 
harmed. Second, the competition among broker-dealers for customers will 
provide another constraint on the cost of NLS and Nasdaq Basic.
Competition for Order Flow
    Market data fees 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 
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 broker-
dealers, 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 broker-dealer 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 broker-dealers had previously published 
their proprietary data individually, Regulation NMS encourages market 
data vendors and broker-dealers 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 broker-dealers. 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. The cost of market data is one factor in this total platform 
analysis. A supracompetitive price for NLS and Nasdaq Basic has the 
potential to impair competition for order flow, and the need to compete 
effectively for order flow will constrain its price.
Competition for Customers
    Broker-dealers that purchase NLS and Nasdaq Basic are in 
competition for customers. If the price of these products were set 
above competitive levels, the broker-dealers that purchase these 
products would be at a disadvantage relative to their competitors. As 
such, they may lower costs by curtailing their purchases of Nasdaq 
products, thereby providing a constraint on the price of NLS and Nasdaq 
Basic.
    In summary, market forces constrain the price of NLS and Nasdaq 
Basic through competition for order flow and in the competition among 
broker-dealers for customers. For these reasons, the Exchange has 
provided a substantial basis for demonstrating that the fee is 
equitable, fair, reasonable, and not unreasonably discriminatory, and 
that it is 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.

[[Page 45643]]

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.\14\
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    \14\ 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-2017-095 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-2017-095. 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-2017-095 and should 
be submitted on or before October 20, 2017.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-20886 Filed 9-28-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                                                Federal Register / Vol. 82, No. 188 / Friday, September 29, 2017 / Notices                                                 45639

                                                    B. Self-Regulatory Organization’s                       Internet Web site (http://www.sec.gov/                 2011 by the Office of Management and
                                                    Statement on Burden on Competition                      rules/sro.shtml). Copies of the                        Budget’s Office of Federal Procurement
                                                      The Exchange does not believe that                    submission, all subsequent                             Policy (OFPP). OFPP’s guidance is
                                                    the proposed rule change will impose                    amendments, all written statements                     available at http://www.whitehouse.gov/
                                                    any burden on competition that is not                   with respect to the proposed rule                      sites/default/files/omb/procurement/
                                                    necessary or appropriate in furtherance                 change that are filed with the                         memo/service-contract-inventories-
                                                    of the purposes of the Act. The                         Commission, and all written                            guidance-11052010.pdf.
                                                    Exchange believes the proposed rule                     communications relating to the                            The Service Contract Inventory
                                                    change will enhance competition by                      proposed rule change between the                       Analysis for FY2015 provides
                                                    accommodating Exchange trading of an                    Commission and any person, other than                  information based on the FY 2015
                                                    additional exchange-traded product                      those that may be withheld from the                    Inventory. Please note that the SEC’s FY
                                                    relating to physical silver.                            public in accordance with the                          2016 Service Contract Inventory data is
                                                                                                            provisions of 5 U.S.C. 552, will be                    now included in government-wide
                                                    C. Self-Regulatory Organization’s                       available for Web site viewing and                     inventory available on
                                                    Statement on Comments on the                            printing in the Commission’s Public                    www.acquisition.gov. The government-
                                                    Proposed Rule Change Received From                      Reference Room, 100 F Street NE.,                      wide inventory can be filtered to display
                                                    Members, Participants, or Others                        Washington, DC 20549, on official                      the inventory data for the SEC. The SEC
                                                      No written comments were solicited                    business days between the hours of                     has posted its plan for analyzing FY
                                                    or received with respect to the proposed                10:00 a.m. and 3:00 p.m. Copies of the                 2016 data, a link to the FY 2016
                                                    rule change.                                            filing will also be available for                      government-wide Service Contract
                                                                                                            inspection and copying at the principal                Inventory and the FY 2015 SCI Analysis
                                                    III. Date of Effectiveness of the                       office of the Exchange. All comments                   on the SEC’s homepage at http://
                                                    Proposed Rule Change and Timing for                     received will be posted without change;                www.sec.gov/about/secreports.shtml
                                                    Commission Action                                       the Commission does not edit personal                  and http://www.sec.gov/open.
                                                       Within 45 days of the date of                        identifying information from                           FOR FURTHER INFORMATION CONTACT:
                                                    publication of this notice in the Federal               submissions. You should submit only
                                                                                                                                                                   Direct questions regarding the service
                                                    Register or within such longer period                   information that you wish to make
                                                                                                                                                                   contract inventory to Vance Cathell,
                                                    up to 90 days (i) as the Commission may                 available publicly. All submissions
                                                                                                                                                                   Director Office of Acquisitions (202)
                                                    designate if it finds such longer period                should refer to File Number SR–
                                                                                                                                                                   551–8385 or CathellV@sec.gov.
                                                    to be appropriate and publishes its                     NYSEArca–2017–111 and should be
                                                                                                            submitted on or before October 20,                       Dated: September 22, 2017.
                                                    reasons for so finding or (ii) as to which
                                                    the self-regulatory organization                        2017.                                                  Brent J. Fields,
                                                    consents, the Commission will:                            For the Commission, by the Division of               Secretary.
                                                       A. By order approve or disapprove the                Trading and Markets, pursuant to delegated             [FR Doc. 2017–20879 Filed 9–28–17; 8:45 am]
                                                    proposed rule change, or                                authority.23                                           BILLING CODE 8011–01–P
                                                       B. institute proceedings to determine                Eduardo A. Aleman,
                                                    whether the proposed rule change                        Assistant Secretary.
                                                    should be disapproved.                                  [FR Doc. 2017–20887 Filed 9–28–17; 8:45 am]            SECURITIES AND EXCHANGE
                                                                                                                                                                   COMMISSION
                                                    IV. Solicitation of Comments                            BILLING CODE 8011–01–P

                                                      Interested persons are invited to                                                                            [Release No. 34–81697; File No. SR–
                                                    submit written data, views and                          SECURITIES AND EXCHANGE                                NASDAQ–2017–095]
                                                    arguments concerning the foregoing,                     COMMISSION
                                                    including whether the proposed rule                                                                            Self-Regulatory Organizations; The
                                                    change is consistent with the Act.                      [Release No. 34–81687]                                 NASDAQ Stock Market LLC; Notice of
                                                    Comments may be submitted by any of                                                                            Filing and Immediate Effectiveness of
                                                                                                            Public Availability of the Securities and              Proposed Rule Change To Expand the
                                                    the following methods:
                                                                                                            Exchange Commission’s FY 2015                          Features of the Enterprise License Set
                                                    Electronic Comments                                     Service Contract Inventory                             Forth at Rule 7047
                                                      • Use the Commission’s Internet                       AGENCY: Securities and Exchange
                                                    comment form (http://www.sec.gov/                                                                              September 25, 2017.
                                                                                                            Commission.
                                                    rules/sro.shtml); or                                                                                              Pursuant to Section 19(b)(1) of the
                                                                                                            ACTION: Notice.
                                                      • Send an email to rule-comments@                                                                            Securities Exchange Act of 1934
                                                    sec.gov. Please include File Number SR–                 SUMMARY:   In accordance with Section                  (‘‘Act’’), 1 and Rule 19b–4 thereunder,2
                                                    NYSEArca–2017–111 in the subject line.                  743 of Division C of the Consolidated                  notice is hereby given that on
                                                                                                            Appropriations Act of 2010, SEC is                     September 12, 2017, The NASDAQ
                                                    Paper Comments                                                                                                 Stock Market LLC (‘‘Nasdaq’’ or
                                                                                                            publishing this notice to advise the
                                                       • Send paper comments in triplicate                  public of the availability of the FY2016               ‘‘Exchange’’) filed with the Securities
                                                    to Secretary, Securities and Exchange                   Service Contract Inventory (SCI) and the               and Exchange Commission (‘‘SEC’’ or
                                                    Commission, 100 F Street NE.,                           FY2015 SCI Analysis. The SCI provides                  ‘‘Commission’’) the proposed rule
                                                    Washington, DC 20549–1090.
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                                                                            information on FY2016 actions over                     change as described in Items I, II, and
                                                    All submissions should refer to File                    $25,000 for service contracts. The                     III, below, which Items have been
                                                    Number SR–NYSEArca–2017–111. This                       inventory organizes the information by                 prepared by the Exchange. The
                                                    file number should be included in the                   function to show how SEC distributes                   Commission is publishing this notice to
                                                    subject line if email is used. To help the              contracted resources throughout the                    solicit comments on the proposed rule
                                                    Commission process and review your                      agency. SEC developed the inventory                    change from interested persons.
                                                    comments more efficiently, please use                   per the guidance issued on November 5,
                                                    only one method. The Commission will                                                                             1 15   U.S.C. 78s(b)(1).
                                                    post all comments on the Commission’s                     23 17   CFR 200.30–3(a)(12).                           2 17   CFR 240.19b–4.



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                                                    45640                       Federal Register / Vol. 82, No. 188 / Friday, September 29, 2017 / Notices

                                                    I. Self-Regulatory Organization’s                       contains the best bid and offer on the                availability of NASDAQ proprietary
                                                    Statement of the Terms of Substance of                  Nasdaq Market Center and last sale                    market data to individual investors.’’ 4
                                                    the Proposed Rule Change                                trade reports for Nasdaq and the FINRA/               The Exchange does not explicitly offer
                                                       The Exchange proposes to amend the                   Nasdaq TRF for Nasdaq-listed stocks;                  an enterprise license for NLS, but has
                                                    Exchange’s fees at Rule 7047 to expand                  (ii) Nasdaq Basic for NYSE, which                     set a cap of $41,500 per month for NLS
                                                    the features of the enterprise license set              contains the best bid and offer on the                for Nasdaq and NLS for NYSE/NYSE
                                                    forth at Rule 7047(b)(5).                               Nasdaq Market Center and last sale                    MKT.
                                                       The text of the proposed rule change                 trade reports for Nasdaq and the FINRA/
                                                                                                                                                                  Proposed Changes
                                                    is available on the Exchange’s Web site                 Nasdaq TRF for NYSE-listed stocks; and
                                                                                                            (iii) Nasdaq Basic for NYSE MKT, which                   As explained above, the proposed
                                                    at http://nasdaq.cchwallstreet.com/, at
                                                                                                            contains the best bid and offer on the                changes will expand the features of the
                                                    the principal office of the Exchange, and
                                                                                                            Nasdaq Market Center and last sale                    enterprise license set forth at Rule
                                                    at the Commission’s Public Reference
                                                                                                            trade reports for Nasdaq and the FINRA/               7047(b)(5) by: (i) Allowing distribution
                                                    Room.
                                                                                                            Nasdaq TRF for stocks listed on NYSE                  of Nasdaq Basic data to certain
                                                    II. Self-Regulatory Organization’s                      MKT and other listing venues whose                    Professional Users [sic] that are
                                                    Statement of the Purpose of, and                        quotes and trade reports are                          currently excluded from the license; and
                                                    Statutory Basis for, the Proposed Rule                  disseminated on Tape B.                               (ii) permitting the distribution of NLS
                                                    Change                                                     User fees for Nasdaq Basic may be                  data, along with Nasdaq Basic data,
                                                       In its filing with the Commission, the               paid through per Subscriber monthly                   without paying per user, per query, per
                                                    Exchange included statements                            charges, per query fees, or two types of              visitor or per household fees. The
                                                    concerning the purpose of and basis for                 enterprise licenses: An internal                      proposal will also include technical and
                                                    the proposed rule change and discussed                  enterprise license for Professional                   conforming changes as described below.
                                                                                                            Subscribers at Rule 7047(b)(4) (for                      The enterprise license at Rule
                                                    any comments it received on the
                                                                                                            $365,000 per month); and an enterprise                7047(b)(5) currently allows distribution
                                                    proposed rule change. The text of these
                                                                                                            license for Non-Professional and                      of data to Professionals in the context of
                                                    statements may be examined at the
                                                                                                            Professional Subscribers with whom the                a brokerage relationship with the
                                                    places specified in Item IV below. The                                                                        broker-dealer, and explicitly prohibits
                                                    Exchange has prepared summaries, set                    broker-dealer has a brokerage
                                                                                                            relationship at Rule 7047(b)(5) (for                  Professionals who receive data under
                                                    forth in sections A, B, and C below, of                                                                       that license from using it within the
                                                    the most significant aspects of such                    $100,000 per month). The Exchange
                                                                                                            proposes to modify the second of these                scope of a professional engagement or
                                                    statements.                                                                                                   registration. The Exchange proposes to
                                                                                                            two enterprise licenses, at Rule
                                                    A. Self-Regulatory Organization’s                       7047(b)(5), which allows the                          loosen that restriction by allowing the
                                                    Statement of the Purpose of, and                        distribution of Nasdaq Basic, or Derived              broker-dealer to make Nasdaq Basic data
                                                    Statutory Basis for, the Proposed Rule                  Data therefrom, to Professional and                   available to up to and including 4,500
                                                    Change                                                  Non-Professional Subscribers who are                  internal Subscribers operating on
                                                                                                            natural persons and with whom the                     approved electronic system for use by
                                                    1. Purpose                                                                                                    Professionals who work for the broker-
                                                                                                            broker-dealer has a brokerage
                                                       The Exchange proposes to amend its                   relationship. As a current condition of               dealer and use that data to provide
                                                    fees at Rule 7047 to expand the features                this license, Professional Users [sic]                brokerage services to investors. Use of
                                                    of the enterprise license set forth at Rule             who receive data may not use that data                the license for internal Subscribers will
                                                    7047(b)(5). The proposed changes will:                  within the scope of any professional                  be limited to Professionals providing
                                                    (i) Allow distribution of Nasdaq Basic                  engagement or registration. In addition,              brokerage services to investors, but will
                                                    data to certain Professional Subscribers                Nasdaq must approve any electronic                    not be available to any Professionals
                                                    that are currently excluded from the                    system used to distribute such data, and              involved in proprietary trading,
                                                    license; and (ii) permit the distribution               a separate enterprise license must be                 surveillance activities, or performing
                                                    of NLS data along with Nasdaq Basic                     purchased for each such system. Broker-               any other function solely for the benefit
                                                    data without paying per user, per query,                dealers purchasing this license must                  of the broker-dealer. Internal
                                                    per visitor or per household fees. This                 also report the number of Subscribers at              Subscribers may operate only on an
                                                    proposal, which also includes technical                 least once per year.                                  approved electronic system to ensure
                                                    and conforming changes, will increase                      As noted above, the Exchange                       that appropriate controls are in place to
                                                    the features of this Nasdaq Basic                       proposes to add NLS data as an                        prevent use of the data by unauthorized
                                                    enterprise license without changing its                 additional feature to the Nasdaq Basic                personnel or for impermissible
                                                    fee, thereby lowering the overall cost of               enterprise license at Rule 7047(b)(5).                purposes. Any distribution to over 4,500
                                                    the product.                                            NLS provides real-time last sale                      internal Subscribers, or any usage by
                                                                                                            information, including price, volume,                 Professional Users [sic] not in support of
                                                    Current Fee Structure                                   and time of execution, for transactions               brokerage services to investors on an
                                                       Nasdaq Basic provides best bid and                   on the Nasdaq Market Center or                        approved platform, would be subject to
                                                    offer and last sale information from the                reported to the FINRA/Nasdaq TRF.3 It                 the applicable fees set forth in Rule
                                                    Nasdaq Market Center and the FINRA/                     is, like Nasdaq Basic, a non-core                     7047(b).
                                                    Nasdaq Trade Reporting Facility                         product that provides a subset of the                    The difference between internal
                                                                                                                                                                  distribution of Nasdaq Basic through the
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                    (‘‘FINRA/Nasdaq TRF’’). It is a ‘‘non-                  core data provided by the SIPs under
                                                    core’’ product that provides a subset of                the CTA Plan and the Nasdaq UTP Plan.
                                                                                                                                                                     4 See SR–NASDAQ–2006–060 at 3 (Amendment
                                                    the ‘‘core’’ last-sale data provided by                 NLS was designed to ‘‘increase[ ] the
                                                                                                                                                                  No. 2, June 10, 2008) (available at http://
                                                    securities information processors                                                                             nasdaq.cchwallstreet.com/NASDAQ/pdf/nasdaq-
                                                    (‘‘SIPs’’) under the CTA Plan and the                     3 See NASDAQ Rule 7039(a)–(c); see also
                                                                                                                                                                  filings/2006/SR-NASDAQ-2006-060_Amendment_
                                                    Nasdaq UTP Plan. Data is taken from                     Securities Exchange Act Release No. 71351 (January    2.pdf); see also Securities Exchange Act Release No.
                                                                                                            17, 2014), 79 FR 4200 (Jan. 24, 2014) (SR–            57965 (June 16, 2008), 73 FR 35178 (June 20, 2008)
                                                    three sources, which may be purchased                   NASDAQ–2014–006) (notice of filing and                (SR–NASDAQ–2006–060) (approving SR–
                                                    individually or in combination: (i)                     immediate effectiveness regarding permanent           NASDAQ–2006–060, as amended by Amendment
                                                    Nasdaq Basic for Nasdaq, which                          approval of NLS).                                     Nos. 1 and 2, to implement NLS on a pilot basis).



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                                                                                Federal Register / Vol. 82, No. 188 / Friday, September 29, 2017 / Notices                                                    45641

                                                    newly proposed $100,000 enterprise                      capitalized, with ‘‘Nasdaq,’’ in which                  current regulation of the market system
                                                    license at Rule 7047(b)(5), and internal                only the first letter of the company is                 ‘‘has been remarkably successful in
                                                    distribution under the existing $365,000                capitalized. All of these changes are                   promoting market competition in its
                                                    license under Rule 7047(b)(4), is of                    necessary to support the primary fee                    broader forms that are most important to
                                                    magnitude and scope. The new license                    changes sought by the Exchange, or to                   investors and listed companies.’’ 9
                                                    will be limited to 4,500 internal                       correct technical errors. The change in                    Likewise, in NetCoalition v. Securities
                                                    Professional Subscribers, whereas the                   reporting is necessary to monitor the                   and Exchange Commission 10
                                                    number of internal Subscribers able to                  number of internal Subscribers                          (‘‘NetCoalition’’) the D.C. Circuit upheld
                                                    obtain data under the $365,000                          receiving data. The clarification to the                the Commission’s use of a market-based
                                                    enterprise license is not so limited.5 In               ability of Professionals to utilize Nasdaq              approach in evaluating the fairness of
                                                    addition, use of the data by internal                   Basic data is necessary to allow                        market data fees against a challenge
                                                    Professional Users [sic] under the                      Professionals to effectively use the data               claiming that Congress mandated a cost-
                                                    proposed license will be limited to the                 in support of providing brokerage                       based approach.11 As the court
                                                    provision of brokerage services to                      services to investors. The change from                  emphasized, the Commission ‘‘intended
                                                    investors, whereas use of the data                      NASDAQ to Nasdaq is necessary to                        in Regulation NMS that ‘market forces,
                                                    through the $365,000 license under Rule                 replace an older version of the                         rather than regulatory requirements’
                                                    7047(b)(4) is not limited to such                       Exchange’s name.                                        play a role in determining the market
                                                    services. Under the proposed rule,                         The purpose of the proposed changes                  data . . . to be made available to
                                                    Professional Subscribers who do not                     is to make the purchase of the enterprise               investors and at what cost.’’ 12
                                                    obtain Nasdaq Basic through internal                    license at Rule 7047(b)(5) more                            Further, ‘‘[n]o one disputes that
                                                    distribution, but rather through their                  attractive to broker-dealers by adding                  competition for order flow is ‘fierce.’
                                                    own brokerage relationship with the                     features without increasing fees. The                   . . . As the SEC explained, ‘[i]n the U.S.
                                                    broker-dealer, will still be prohibited                 cost of the license will remain $100,000                national market system, buyers and
                                                    from using such data within the scope                   per month, but services will be                         sellers of securities, and the broker-
                                                    of any professional engagement.                         augmented by allowing internal                          dealers that act as their order-routing
                                                       In addition to allowing distribution                 distribution to up to 4,500 Professionals               agents, have a wide range of choices of
                                                    for up to 4,500 internal Subscribers, the               and including distribution of NLS to                    where to route orders for execution’;
                                                    Exchange also proposes to permit                        private investors. The proposal will                    [and] ‘no exchange can afford to take its
                                                    distribution of NLS data without paying                 lower the costs to broker-dealers of                    market share percentages for granted’
                                                    the fees set forth in Rule 7039(b).6 The                distributing Nasdaq Basic and NLS,                      because ‘no exchange possesses a
                                                    Exchange does not currently offer an                    thereby encouraging the dissemination                   monopoly, regulatory or otherwise, in
                                                    enterprise license for NLS, although                    of such data to individual investors.                   the execution of order flow from broker
                                                    there is a maximum distributor fee for                     The enterprise license at Rule                       dealers’. . . .’’ 13
                                                    any Distributor using the per user, per                 7047(b)(5) is optional in that Nasdaq is                   The Exchange believes that the
                                                    query, per visitor or per household                     not required to offer it and broker-                    proposal to expand the features of the
                                                    pricing models of $41,500 per month.                    dealers are not required to purchase it.                enterprise license set forth at Rule
                                                    There are no additional restrictions on                 Firms can discontinue use at any time                   7047(b)(5) without increasing fees is an
                                                    the use of NLS data under this license,                 and for any reason, including an                        equitable allocation of reasonable dues,
                                                    although all other fees and restrictions                assessment of the fees charged.                         fees and other charges in accordance
                                                    other than the fees set forth in Rule                      The proposed change does not change                  with Section 6(b)(4) of the Act, and not
                                                    7039(b) will continue to apply.                         the cost of any other Nasdaq product.                   designed to permit unfair
                                                       The technical and conforming                         2. Statutory Basis                                      discrimination between customers,
                                                    changes proposed by the Exchange are                                                                            issuers, brokers, or dealers in
                                                    to: (i) Require broker-dealers purchasing                  The Exchange believes that its                       accordance with Section 6(b)(5) of the
                                                    the enterprise license at Rule 7047(b)(5)               proposal is consistent with Section 6(b)                Act. As described above, the proposed
                                                    to report the number of Professional                    of the Act,7 in general, and furthers the               changes will: (i) Allow distribution of
                                                    Subscribers on a monthly basis; (ii)                    objectives of Sections 6(b)(4) and 6(b)(5)              Nasdaq Basic data to certain
                                                    clarify that Professional Users [sic]                   of the Act,8 in particular, in that it                  Professional Subscribers that are
                                                    receiving Nasdaq Basic data through                     provides for the equitable allocation of                currently excluded from the license; and
                                                    internal Subscribers (not in the context                reasonable dues, fees and other charges                 (ii) permit the distribution of NLS data
                                                    of their own brokerage relationship with                among members and issuers and other                     along with Nasdaq Basic data without
                                                    the broker-dealer) are not prohibited                   persons using any facility, and is not                  paying per user, per query, per visitor or
                                                    from using the data within the scope of                 designed to permit unfair                               per household fees. The proposal will
                                                    any professional engagement or                          discrimination between customers,                       provide greater value to the broker-
                                                    registration; and (iii) replace references              issuers, brokers, or dealers.                           dealers purchasing the enterprise
                                                    to ‘‘NASDAQ,’’ with all letters                            The Commission and the courts have
                                                                                                                                                                    license, and increase market
                                                                                                            repeatedly expressed their preference
                                                                                                                                                                    transparency by lowering the cost of
                                                       5 The enterprise license at Rule 7047(b)(4) allows   for competition over regulatory
                                                                                                                                                                    distributing both NLS and Basic to
                                                    distribution to 16,000 internal Professional            intervention in determining prices,
                                                    Subscribers for no additional cost, with an             products, and services in the securities                   9 Securities Exchange Act Release No. 51808
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                                                    additional charge of $2 for each internal               markets. In Regulation NMS, while
                                                    Professional Subscriber above that level, provided                                                              (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
                                                    that the broker-dealer obtains the license through an   adopting a series of steps to improve the               (‘‘Regulation NMS Adopting Release’’).
                                                    External Distributor that controls display of the       current market model, the Commission                       10 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.

                                                    product, and the broker-dealer obtains a separate       highlighted the importance of market                    2010).
                                                                                                                                                                       11 Id. at 534–535.
                                                    license for each such External Distributor.             forces in determining prices and SRO
                                                       6 The Exchange anticipates filing changes to Rule                                                               12 Id. at 537.

                                                    7039 that would eliminate Distributor fees under
                                                                                                            revenues and, also, recognized that                        13 Id. at 539 (quoting Securities Exchange Act

                                                    Rule 7039(c) for any firm paying such a fee for                                                                 Release No. 59039 (December 2, 2008), 73 FR
                                                                                                              7 15   U.S.C. 78f(b).
                                                    Nasdaq Basic, effectively eliminating all NLS fees                                                              74770, 74782–83 (December 9, 2008) (SR–
                                                    with the purchase of this enterprise license.             8 15   U.S.C. 78f(b)(4) and (5).                      NYSEArca–2006–21)).



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                                                    45642                       Federal Register / Vol. 82, No. 188 / Friday, September 29, 2017 / Notices

                                                    investors. The proposal is an equitable                 need to maintain low prices is [sic] a                proprietary data. While broker-dealers
                                                    allocation of reasonable dues, fees and                 competitive marketplace. Accordingly,                 had previously published their
                                                    other charges because the services will                 the Exchange does not believe that the                proprietary data individually,
                                                    be the same for all broker-dealers that                 proposed changes will impair the ability              Regulation NMS encourages market data
                                                    purchase the license. The services are                  of members or competing order                         vendors and broker-dealers to produce
                                                    not designed to permit unfair                           execution venues to maintain their                    proprietary products cooperatively in a
                                                    discrimination because all broker-                      competitive standing in the financial                 manner never before possible. Order
                                                    dealers will be able to purchase the                    markets.                                              routers and market data vendors can
                                                    same license at the same price. As is the                 Market forces constrain the prices for
                                                                                                                                                                  facilitate production of proprietary data
                                                    case for the current enterprise licenses,               NLS and Nasdaq Basic in two respects.
                                                                                                                                                                  products for single or multiple broker-
                                                    offering the enterprise license only to                 First, market data fees are one element
                                                                                                            of the total cost of interacting with the             dealers. The potential sources of
                                                    broker-dealers is not unfair
                                                    discrimination because the license is                   Exchange and, if the price of these                   proprietary products are virtually
                                                    primarily designed to allow data                        products were set above competitive                   limitless.
                                                    distribution to investors, and investors                levels, competition for order flow would                 The markets for order flow and
                                                    execute trades through broker-dealers. It               be harmed. Second, the competition                    proprietary data are inextricably linked:
                                                    is reasonable to limit use of the                       among broker-dealers for customers will               a trading platform cannot generate
                                                    expanded enterprise license to internal                 provide another constraint on the cost of             market information unless it receives
                                                    Subscribers operating on approved                       NLS and Nasdaq Basic.                                 trade orders. As a result, the
                                                    platforms to ensure that the data is                    Competition for Order Flow                            competition for order flow constrains
                                                    being used to support brokerage services                                                                      the prices that platforms can charge for
                                                    for investors, rather than any other                       Market data fees are constrained by
                                                                                                                                                                  proprietary data products. Firms make
                                                    purpose. Moreover, enterprise license                   competition among exchanges and other
                                                                                                            entities seeking to attract order flow.               decisions on how much and what types
                                                    fees, like all market data fees, are                                                                          of data to consume based on the total
                                                    constrained by the Exchange’s need to                   Order flow is the ‘‘life blood’’ of the
                                                                                                            exchanges. Broker-dealers currently                   cost of interacting with Nasdaq and
                                                    compete for order flow, and are subject
                                                                                                            have numerous alternative venues for                  other exchanges. The cost of market data
                                                    to competition from other exchanges
                                                    and among broker-dealers for customers.                 their order flow, including self-                     is one factor in this total platform
                                                    If Nasdaq is incorrect in its assessment                regulatory organization (‘‘SRO’’)                     analysis. A supracompetitive price for
                                                    of price, it may lose market share as a                 markets, as well as internalizing broker-             NLS and Nasdaq Basic has the potential
                                                    result.                                                 dealers and various forms of alternative              to impair competition for order flow,
                                                                                                            trading systems (‘‘ATSs’’), including                 and the need to compete effectively for
                                                    B. Self-Regulatory Organization’s                       dark pools and electronic                             order flow will constrain its price.
                                                    Statement on Burden on Competition                      communication networks (‘‘ECNs’’).
                                                       The Exchange does not believe that                   Each SRO market competes to produce                   Competition for Customers
                                                    the proposed rule change will impose                    transaction reports via trade executions,                Broker-dealers that purchase NLS and
                                                    any burden on competition not                           and two FINRA-regulated TRFs compete                  Nasdaq Basic are in competition for
                                                    necessary or appropriate in furtherance                 to attract internalized transaction
                                                                                                                                                                  customers. If the price of these products
                                                    of the purposes of the Act. In terms of                 reports. The existence of fierce
                                                                                                                                                                  were set above competitive levels, the
                                                    inter-market competition, the Exchange                  competition for order flow implies a
                                                                                                            high degree of price sensitivity on the               broker-dealers that purchase these
                                                    notes that it operates in a highly
                                                    competitive market in which market                      part of broker-dealers, which may                     products would be at a disadvantage
                                                    participants can readily favor competing                readily reduce costs by directing orders              relative to their competitors. As such,
                                                    venues if they deem fee levels at a                     toward the lowest-cost trading venues.                they may lower costs by curtailing their
                                                    particular venue to be excessive, or                       The level of competition and                       purchases of Nasdaq products, thereby
                                                    rebate opportunities available at other                 contestability in the market for order                providing a constraint on the price of
                                                    venues to be more favorable. In such an                 flow is demonstrated by the numerous                  NLS and Nasdaq Basic.
                                                    environment, the Exchange must                          examples of entrants that swiftly grew                   In summary, market forces constrain
                                                    continually adjust its fees to remain                   into some of the largest electronic                   the price of NLS and Nasdaq Basic
                                                    competitive with other exchanges and                    trading platforms and proprietary data                through competition for order flow and
                                                    with alternative trading systems that                   producers: Archipelago, Bloomberg                     in the competition among broker-dealers
                                                    have been exempted from compliance                      Tradebook, Island, RediBook, Attain,                  for customers. For these reasons, the
                                                    with the statutory standards applicable                 TracECN, BATS Trading and BATS/                       Exchange has provided a substantial
                                                    to exchanges. Because competitors are                   Direct Edge. A proliferation of dark
                                                                                                                                                                  basis for demonstrating that the fee is
                                                    free to modify their own fees in                        pools and other ATSs operate profitably
                                                                                                                                                                  equitable, fair, reasonable, and not
                                                    response, and because market                            with fragmentary shares of consolidated
                                                    participants may readily adjust their                   market volume. For a variety of reasons,              unreasonably discriminatory, and that it
                                                    order routing practices, the Exchange                   competition from new entrants,                        is therefore consistent with and in
                                                    believes that the degree to which fee                   especially for order execution, has                   furtherance of the purposes of the
                                                    changes in this market may impose any                   increased dramatically over the last                  Exchange Act
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                    burden on competition is extremely                      decade.                                               C. Self-Regulatory Organization’s
                                                    limited.                                                   Each SRO, TRF, ATS, and broker-                    Statement on Comments on the
                                                       The proposed changes will effectively                dealer that competes for order flow is                Proposed Rule Change Received From
                                                    lower the cost to broker-dealers to                     permitted to produce proprietary data
                                                                                                                                                                  Members, Participants, or Others
                                                    distribute NLS and Nasdaq Basic by                      products. Many currently do or have
                                                    expanding the features of the enterprise                announced plans to do so, including                     No written comments were either
                                                    license set forth at Rule 7047(b)(5)                    NYSE, NYSE Amex, NYSE Arca, BATS,                     solicited or received.
                                                    without increasing fees. This proposal                  and IEX. This is because Regulation
                                                    to lower costs is itself evidence of the                NMS deregulated the market for


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                                                                                    Federal Register / Vol. 82, No. 188 / Friday, September 29, 2017 / Notices                                                    45643

                                                    III. Date of Effectiveness of the                          Washington, DC 20549 on official                      to approve the proposed rule change,
                                                    Proposed Rule Change and Timing for                        business days between the hours of                    disapprove the proposed rule change, or
                                                    Commission Action                                          10:00 a.m. and 3:00 p.m. Copies of the                institute proceedings to determine
                                                       The foregoing rule change has become                    filing also will be available for                     whether to disapprove the proposed
                                                    effective pursuant to Section                              inspection and copying at the principal               rule change.5 On May 5, 2017, the
                                                                                                               office of the Exchange. All comments                  Commission instituted proceedings to
                                                    19(b)(3)(A)(ii) of the Act.14
                                                                                                               received will be posted without change;               determine whether to approve or
                                                       At any time within 60 days of the
                                                                                                               the Commission does not edit personal                 disapprove the proposed rule change.6
                                                    filing of the proposed rule change, the
                                                                                                               identifying information from                          On June 23, 2017, the Exchange filed
                                                    Commission summarily may
                                                                                                               submissions. You should submit only                   Amendment No. 1 to the proposed rule
                                                    temporarily suspend such rule change if
                                                                                                               information that you wish to make                     change.7 On July 27, 2017, the
                                                    it appears to the Commission that such
                                                                                                               available publicly. All submissions                   Commission designated a longer period
                                                    action is: (i) Necessary or appropriate in
                                                                                                               should refer to File Number SR–                       for Commission action on the proposed
                                                    the public interest; (ii) for the protection
                                                                                                               NASDAQ–2017–095 and should be                         rule change.8 On August 1, 2017, the
                                                    of investors; or (iii) otherwise in
                                                                                                               submitted on or before October 20,                    Exchange filed Amendment No. 2 to the
                                                    furtherance of the purposes of the Act.
                                                                                                               2017.                                                 proposed rule change.9 On September
                                                    If the Commission takes such action, the                                                                         19, 2017, the Exchange filed
                                                    Commission shall institute proceedings                       For the Commission, by the Division of
                                                                                                               Trading and Markets, pursuant to delegated            Amendment No. 3 to the proposed rule
                                                    to determine whether the proposed rule                                                                           change.10 The Commission has received
                                                    should be approved or disapproved.                         authority.15
                                                                                                               Eduardo A. Aleman,
                                                    IV. Solicitation of Comments                               Assistant Secretary.
                                                                                                                                                                        5 See Securities Exchange Act Release No. 80265,

                                                                                                                                                                     82 FR 14778 (March 22, 2017).
                                                      Interested persons are invited to                        [FR Doc. 2017–20886 Filed 9–28–17; 8:45 am]              6 See Securities Exchange Act Release No. 80606,

                                                    submit written data, views, and                            BILLING CODE 8011–01–P                                82 FR 22042 (May 11, 2017). Specifically, the
                                                    arguments concerning the foregoing,                                                                              Commission instituted proceedings to allow for
                                                                                                                                                                     additional analysis of the proposed rule change’s
                                                    including whether the proposed rule                                                                              consistency with Section 6(b)(5) of the Act, which
                                                    change is consistent with the Act.                         SECURITIES AND EXCHANGE                               requires, among other things, that the rules of a
                                                    Comments may be submitted by any of                        COMMISSION                                            national securities exchange be ‘‘designed to
                                                    the following methods:                                                                                           prevent fraudulent and manipulative acts and
                                                                                                               [Release No. 34–81686; File No. SR–                   practices, to promote just and equitable principles
                                                    Electronic Comments                                        NYSEArca–2017–05]                                     of trade,’’ and ‘‘to protect investors and the public
                                                                                                                                                                     interest.’’ See id. at 22043.
                                                      • Use the Commission’s Internet                          Self-Regulatory Organizations; NYSE                      7 Amendment No. 1, which amended the replaced

                                                    comment form (http://www.sec.gov/                                                                                the original filing in its entirety, is available on the
                                                                                                               Arca, Inc.; Order Granting Approval of                Commission’s Web site at: https://www.sec.gov/
                                                    rules/sro.shtml); or                                       a Proposed Rule Change, as Modified                   comments/sr-nysearca-2017-05/nysearca201705-
                                                      • Send an email to rule-comments@                        by Amendment Nos. 2 and 3 Thereto,                    1822806-154288.pdf.
                                                    sec.gov. Please include File Number SR–                    To List and Trade Shares of Direxion                     8 See Securities Exchange Act Release No. 81224,

                                                    NASDAQ–2017–095 on the subject line.                       Daily Crude Oil Bull 3x Shares and                    82 FR 36030 (August 2, 2017).
                                                                                                                                                                        9 In Amendment No. 2, which amended and

                                                    Paper Comments                                             Direxion Daily Crude Oil Bear 3x                      replaced the proposed rule change, as modified by
                                                                                                               Shares Under NYSE Arca Equities Rule                  Amendment No. 1 thereto, in its entirety, the
                                                       • Send paper comments in triplicate                     8.200                                                 Exchange: (1) Supplemented its descriptions of the
                                                    to Brent J. Fields, Secretary, Securities                                                                        Funds’ investments in over-the-counter transactions
                                                    and Exchange Commission, 100 F Street                      September 22, 2017.                                   and Short-Term Investments; (2) supplemented its
                                                                                                                                                                     description of the calculation of the daily value of
                                                    NE., Washington, DC 20549–1090.                            I. Introduction                                       each Fund’s net asset value (‘‘NAV’’); (3) provided
                                                    All submissions should refer to File                                                                             information regarding the calculation and
                                                    Number SR–NASDAQ–2017–095. This                               On January 23, 2017, NYSE Arca, Inc.               dissemination of the Indicative Fund Value of the
                                                    file number should be included on the                      (‘‘Exchange’’) filed with the Securities              Funds; (4) added a representation regarding the
                                                                                                               and Exchange Commission                               dissemination of the Benchmark; (5) clarified the
                                                    subject line if email is used. To help the                                                                       information that will be made available on the
                                                    Commission process and review your                         (‘‘Commission’’), pursuant to Section                 Funds’ Web site regarding the Funds and their
                                                    comments more efficiently, please use                      19(b)(1) of the Securities Exchange Act               portfolio holdings; (6) supplemented its description
                                                    only one method. The Commission will                       of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and           of the Exchange’s surveillance procedures; (7)
                                                                                                               Rule 19b–4 thereunder,2 a proposed rule               represented that the applicability of Exchange
                                                    post all comments on the Commission’s                                                                            listing rules specified in the proposed rule change
                                                    Internet Web site (http://www.sec.gov/                     change to list and trade shares                       shall constitute continued listing requirements for
                                                    rules/sro.shtml). Copies of the                            (‘‘Shares’’) of Direxion Daily Crude Oil              listing the Shares on the Exchange; (8) clarified the
                                                    submission, all subsequent                                 Bull 3x Shares and Direxion Daily                     type of information that will be available in the
                                                                                                               Crude Oil Bear 3x Shares (individually,               Information Bulletin regarding the Funds’ portfolio
                                                    amendments, all written statements                                                                               holdings; and (9) made other technical changes.
                                                    with respect to the proposed rule                          ‘‘Fund,’’ and, collectively, ‘‘Funds’’)               Amendment No. 2 is not subject to notice and
                                                    change that are filed with the                             Under NYSE Arca Equities Rule 8.200.                  comment because it is a technical amendment that
                                                    Commission, and all written                                The proposed rule change was                          does not materially alter the substance of the
                                                                                                               published for comment in the Federal                  proposed rule change or raise any novel regulatory
                                                    communications relating to the                                                                                   issues. Amendment No. 2 to the proposed rule
                                                    proposed rule change between the                           Register on February 7, 2017.3 On                     change is available on the Commission’s Web site
                                                                                                               March 16, 2017, pursuant to Section
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                    Commission and any person, other than                                                                            at: https://www.sec.gov/comments/sr-nysearca-
                                                    those that may be withheld from the                        19(b)(2) of the Act,4 the Commission                  2017-05/nysearca201705-2161993-157780.pdf.

                                                    public in accordance with the                              designated a longer period within which                  10 In Amendment No. 3, which partially amended

                                                                                                                                                                     the proposed rule change, as modified by
                                                    provisions of 5 U.S.C. 552, will be                          15 17                                               Amendment No. 2 thereto, the Exchange made
                                                                                                                       CFR 200.30–3(a)(12).
                                                    available for Web site viewing and                           1 15 U.S.C. 78s(b)(1).
                                                                                                                                                                     representations regarding the size and liquidity of
                                                    printing in the Commission’s Public                                                                              the oil contract market. Amendment No. 3 is not
                                                                                                                 2 17 CFR 240.19b–4.
                                                                                                                                                                     subject to notice and comment because it does not
                                                    Reference Room, 100 F Street NE.,                            3 See Securities Exchange Act Release No. 79916
                                                                                                                                                                     materially alter the substance of the proposed rule
                                                                                                               (February 1, 2017), 82 FR 9608.                       change or raise any novel regulatory issues.
                                                      14 15   U.S.C. 78s(b)(3)(A)(ii).                           4 15 U.S.C. 78s(b)(2).                                                                            Continued




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Document Created: 2017-09-29 03:27:01
Document Modified: 2017-09-29 03:27:01
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 45639 

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