82 FR 51894 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Fees at Rule 7058
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 215 (November 8, 2017)
Federal Register Volume 82, Issue 215 (November 8, 2017)
| Page Range | 51894-51897 | |
| FR Document | 2017-24254 |
[Federal Register Volume 82, Number 215 (Wednesday, November 8, 2017)] [Notices] [Pages 51894-51897] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-24254] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82003; File No. SR-NASDAQ-2017-113] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Fees at Rule 7058 November 2, 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 October 20, 2017, The Nasdaq Stock Market LLC (``Nasdaq'' or ``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange's fees at Rule 7058 to: (i) Offer to waive fees under this Rule for 30 days for any new, prospective, or returning purchaser of either QView or the Latency Optics add-on service; and (ii) remove language offering a subscription to TradeInfo for up to five users at no additional cost to subscribers of the Latency Optics add-on service. 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 7058 to: (i) Offer to waive fees under this Rule for 30 days for any new, prospective, or returning purchaser of either QView or the Latency Optics add-on service; and (ii) remove language offering a subscription to TradeInfo for up to five users at no additional cost to subscribers of the Latency Optics add-on service, along with conforming changes. The purposes of the proposed changes are to: (i) Encourage new, prospective, and returning purchasers of either QView or the Latency Optics add-on service to examine these products more closely and thereby increase the number of customers for this product; and (ii) remove a rarely used fee provision in order to render the Latency Optics subscription easier to administer. Current Products QView QView is a web-based tool designed to provide a subscribing member with the ability to track its trading activity on the Exchange through both real-time and historical order and execution summaries, available on a daily or a monthly basis. The QView dashboard allows the member to view a summary of its executions and open orders, [[Page 51895]] including, but not limited to: The number of executions and their dollar value; executions by symbol; total volume; whether an order has been added or removed; whether the order is for a buy or a sell; whether an order is open; and information related to routing strategies. QView also includes ranking and market share statistics, such as how the subscribing member firm ranks in Nasdaq market activity as compared to other Nasdaq participants. QView data may be segregated by individual Market Participant Identifiers (MPIDs) or ports. QView was developed to work in conjunction with TradeInfo (discussed below) to allow the QView purchaser to view specific order and execution information provided by the QView dashboard interface. As set forth in Rule 7058(a), members may subscribe to QView for a fee of $600 per month. Latency Optics A member that subscribes to QView may also purchase the Latency Optics add-on service, which provides the member with the ability to monitor three types of latency for order messages and compare that latency to the average on the Nasdaq system: \3\ (1) Roundtrip time between order entry and receipt of acknowledgement; (2) roundtrip time between order entry and the time that the order appears on the TotalView ITCH multicast feed; and (3) the roundtrip time between the entry of an order cancellation request and the time that the message in reply is received by the client device. Data is displayed graphically and in table format, and may be segregated by MPID or ports. Subscribers may also set hourly or end-of-day alert notifications. --------------------------------------------------------------------------- \3\ The service measures the historical latency of the member firm's order messages sent to and from the Nasdaq Market Center through the member firm's OUCH ports and received on ITCH ports. See Securities Exchange Act Release No. 68617 (January 10, 2013), 78 FR 3480 (January 16, 2013) (SR-NASDAQ-2013-15) [sic]. OUCH ports are used for order entry; multicast ITCH ports are used for the dissemination of ITCH multicast feeds. --------------------------------------------------------------------------- As set forth in Rule 7058(b), the Latency Optics add-on is available for a fee of $2,900 per month. TradeInfo TradeInfo is a web-based tool that allows a member to see the status of orders, executions, cancels and breaks, generate reports for download, and cancel or correct open orders. As set forth in Rule 7015(f), TradeInfo is complementary as part of the Nasdaq workstation or may be purchased separately for a fee of $95 per user per month. Under Rule 7058(b), a purchaser of the Latency Optics add-on may obtain TradeInfo for up to 5 users at no additional cost. Proposed Changes The Exchange proposes to: (i) Introduce a fee waiver for 30 days for any new, prospective or returning purchaser of either QView or the Latency Optics add-on service to encourage testing and dissemination of the product; and (ii) remove a rarely used provision of Rule 7058 that offers subscribers of the Latency Optics add-on service a subscription to TradeInfo for up to five users at no additional cost. The Exchange proposes to initiate the new fee waiver program to foster interest in QView or the Latency Optics add-on service and encourage sales for both products. The waiver will be available only once per customer for any version of either product. New versions will be announced by the Exchange on www.nasdaqtrader.com. The Exchange also proposes to remove a rarely used provision of Rule 7058 that offers subscribers of the Latency Optics add-on service a subscription to TradeInfo for up to five users at no additional cost. As stated in Rule 7015(f), TradeInfo is complementary as part of the Nasdaq workstation. Because TradeInfo is already available free of charge with the Nasdaq workstation, customers have expressed little interest in this discount, and that provision has been rarely, if ever, used. As such, the Exchange proposes to eliminate that provision.\4\ --------------------------------------------------------------------------- \4\ As a conforming change, the Exchange proposes to delete an obsolete reference to a free trial period that expired in September 2013. In addition, a comma is added after the phrase ``In addition,'' in Rule 7058(b) to correct a grammatical error. --------------------------------------------------------------------------- The proposed changes do not affect 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,\5\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\6\ in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \5\ 15 U.S.C. 78f(b). \6\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- The fee waiver proposal is an equitable allocation of reasonable dues, fees and other charges because it will reduce fees for new, prospective, and returning purchasers of QView or Latency Optics, while not disadvantaging continuing subscribers because their fees will not change. Moreover, the additional subscriptions resulting from the fee waiver will increase market transparency, and, as the total number of subscribers increases, the additional subscriptions will decrease the likelihood of future fee increases as a result of rising fixed costs. Removal of the provision in Rule 7058(b) allowing a free subscription to TradeInfo for five users is an equitable allocation of reasonable dues, fees and other charges because all members will be charged the same fees for the same product. Moreover, the proposed change will have little substantive impact on fees because the discount was rarely, if ever, used. This proposed change will not permit unfair discrimination between customers, issuers, brokers, or dealers because the proposal will remove a basis for price differentiation among customers that currently exists.\7\ --------------------------------------------------------------------------- \7\ Availability of QView, the Latency Optics add-on service and TradeInfo is already limited to members of the Exchange, which is not unfair discrimination because the information provided solely concerns a member firm's trading activity on the Exchange. --------------------------------------------------------------------------- In adopting Regulation NMS,\8\ the Commission granted SROs and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. Regulation NMS--deregulating the market in proprietary data--furthers the Act's goals of facilitating efficiency and competition: --------------------------------------------------------------------------- \8\ See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005) (``Regulation NMS Adopting Release''). --------------------------------------------------------------------------- [E]fficiency is promoted when broker-dealers who do not need the data beyond the prices, sizes, market center identifications of the NBBO and consolidated last sale information are not required to receive (and pay for) such data. The Commission also believes that efficiency is promoted when broker-dealers may choose to receive (and pay for) additional market data based on their own internal analysis of the need for such data.\9\ --------------------------------------------------------------------------- \9\ Id. --------------------------------------------------------------------------- Nasdaq believes that QView, the Latency Optics add-on and TradeInfo--which provide members with the ability to track order flow, observe latency and obtain order data--is precisely the sort of market data product that the Commission envisioned when it adopted Regulation NMS. [[Page 51896]] 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\ ``No 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\ --------------------------------------------------------------------------- \10\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \11\ See NetCoalition, at 534-535. \12\ Id. at 537. \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)). --------------------------------------------------------------------------- Data products such as QView, the Latency Optics add-on and TradeInfo are a means by which exchanges compete to attract order flow. To the extent that exchanges are successful in such competition, they earn trading revenues and also enhance the value of their data products by increasing the amount of data they are able to provide. The need to compete for order flow places substantial pressure upon exchanges to keep their fees for both executions and data reasonable.\14\ --------------------------------------------------------------------------- \14\ See Sec. Indus. Fin. Mkts. Ass'n (SIFMA), Initial Decision Release No. 1015, 2016 SEC LEXIS 2278 (ALJ June 1, 2016) (finding the existence of vigorous competition with respect to non-core market data). --------------------------------------------------------------------------- Fees for QView, the Latency Optics add-on and TradeInfo are optional in that they apply only to firms that elect to purchase these products, which, like all proprietary data products, they may cancel at any time. For all of the reasons set forth above, the Exchange has provided a substantial basis demonstrating that the proposed fee is equitable, fair, reasonable and not unreasonably discriminatory, and therefore consistent with and in furtherance of the purposes of the Act. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule changes will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Introduction of the proposed fee waiver will enhance competition by increasing customer familiarity with the product, thereby leading to more informed purchase decisions. Further, the product itself enhances competition by promoting transparency, and the increased use of the product generated by the fee waiver will increase the amount of information available to the market. Moreover, removal of the provision in 7058(b) allowing a free subscription to TradeInfo for five users will enhance competition by simplifying the fee structure for these products. The market for data products is extremely competitive and firms may freely choose alternative venues and data vendors based on the aggregate fees assessed, the data offered, and the value provided. Exchanges compete with each other for listings, trades, and market data itself. Transaction execution and proprietary data products are complementary in that market data is both an input and a byproduct of the execution service. In fact, market data and trade execution are a paradigmatic example of joint products with joint costs. The decision whether and on which platform to post an order will depend on the attributes of the platform where the order can be posted, including the execution fees, data quality and price, and distribution of its data products. The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange's transaction execution platform and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the revenues it receives from both products and the joint costs it incurs. Moreover, the operation of the exchange is characterized by high fixed costs and low marginal costs. This cost structure is common in content distribution industries such as software, where developing new software typically requires a large initial investment (and continuing large investments to upgrade the software), but once the software is developed, the incremental cost of providing that software to an additional user is typically small, or even zero (e.g., if the software can be downloaded over the internet after being purchased).\15\ In Nasdaq's case, it is costly to build and maintain a trading platform, but the incremental cost of trading each additional share on an existing platform, or distributing an additional instance of data, is very low. Market information and executions are each produced jointly (in the sense that the activities of trading and placing orders are the source of the information that is distributed) and are each subject to significant scale economies. --------------------------------------------------------------------------- \15\ See William J. Baumol and Daniel G. Swanson, ``The New Economy and Ubiquitous Competitive Price Discrimination: Identifying Defensible Criteria of Market Power,'' Antitrust Law Journal, Vol. 70, No. 3 (2003). --------------------------------------------------------------------------- Competition among trading platforms can be expected to constrain the aggregate return each platform earns from the sale of its joint products. The level of competition and contestability in the market is evident in the numerous alternative venues that compete for order flow, including SRO markets, as well as internalizing BDs and various forms of alternative trading systems (``ATSs''), including dark pools and electronic communication networks (``ECNs''). Each SRO market competes to produce transaction reports via trade executions, and two FINRA- regulated TRFs compete to attract internalized transaction reports. It is common for BDs to further and exploit this competition by sending their order flow and transaction reports to multiple markets, rather than providing them all to a single market. Competitive markets for order flow, executions, and transaction reports provide pricing discipline for the inputs of proprietary data products. The large number of SROs, TRFs, BDs, and ATSs that currently produce proprietary data or are currently capable of producing it provides further pricing discipline for proprietary data products. Each SRO, TRF, ATS, and BD is currently permitted to produce proprietary data products, and many currently do or have announced plans to do so, including Nasdaq, NYSE, NYSE MKT, NYSE Arca, and the BATS exchanges. Firms make decisions regarding market data based on the total cost of interacting with the Exchange, and an ``excessive'' price for one product has the potential to impair revenues from all products. If the price of QView, the Latency Optics add-on or TradeInfo were to become unattractive to member firms,\16\ those firms would opt not to purchase the product, or may reduce [[Page 51897]] their purchases of other products sold by the Exchange. --------------------------------------------------------------------------- \16\ Only member firms can purchase QView, the Latency Optics add-on, and TradeInfo. --------------------------------------------------------------------------- For all of the reasons set forth above, the Exchange does not believe that the proposed rule changes will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.\17\ --------------------------------------------------------------------------- \17\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number SR-NASDAQ-2017-113 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASDAQ-2017-113. 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASDAQ-2017-113 and should be submitted on or before November 29, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\18\ --------------------------------------------------------------------------- \18\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-24254 Filed 11-7-17; 8:45 am] BILLING CODE 8011-01-P
![51894 Federal Register / Vol. 82, No. 215 / Wednesday, November 8, 2017 / Notices
by the participant.26 Therefore, the rule changes are consistent with Rule purchaser of either QView or the
Commission finds that the proposed 17Ad–22(e)(6)(iv) under the Act.29 Latency Optics add-on service; and (ii)
rule changes are designed to help ensure remove language offering a subscription
III. Conclusion
that the Clearing Agencies maintain to TradeInfo for up to five users at no
sufficient financial resources to cover On the basis of the foregoing, the additional cost to subscribers of the
their credit exposure to each participant Commission finds that the proposed Latency Optics add-on service.
with a high degree of confidence, rule changes are consistent with the The text of the proposed rule change
consistent with Rule 17Ad–22(e)(4)(i) requirements of the Act and in is available on the Exchange’s Web site
under the Act.27 particular with Section 17A(b)(3)(F) 30 at http://nasdaq.cchwallstreet.com/, at
of the Act and the rules and regulations the principal office of the Exchange, and
C. Consistency With Rule 17Ad– thereunder. at the Commission’s Public Reference
22(e)(6)(iv) It is therefore ordered, pursuant to Room.
Rule 17Ad–22(e)(6)(iv) under the Act Section 19(b)(2) of the Act, that
proposed rule changes SR–DTC–2017– II. Self-Regulatory Organization’s
requires that each covered clearing
016, SR–NSCC–2017–016, or SR–FICC– Statement of the Purpose of, and
agency that is a CCP to establish,
2017–020 be, and hereby are, Statutory Basis for, the Proposed Rule
implement, maintain and enforce
APPROVED.31 Change
written policies and procedures
reasonably designed to cover its credit For the Commission, by the Division of In its filing with the Commission, the
exposures to its participants by Trading and Markets, pursuant to delegated Exchange included statements
establishing a risk-based margin system authority.32 concerning the purpose of and basis for
that, at a minimum, uses reliable Eduardo A. Aleman, the proposed rule change and discussed
sources of timely price data and uses Assistant Secretary. any comments it received on the
procedures and sound valuation models [FR Doc. 2017–24257 Filed 11–7–17; 8:45 am] proposed rule change. The text of these
for addressing circumstances in which BILLING CODE 8011–01–P
statements may be examined at the
pricing data are not readily available or places specified in Item IV below. The
reliable.28 Exchange has prepared summaries, set
As described above, the Framework SECURITIES AND EXCHANGE forth in sections A, B, and C below, of
provides that NSCC and FICC, each a COMMISSION the most significant aspects of such
CCP, would perform due diligence on statements.
[Release No. 34–82003; File No. SR–
each Pricing Vendor prior to NASDAQ–2017–113] A. Self-Regulatory Organization’s
engagement, and at least annually Statement of the Purpose of, and
thereafter, to assess the reliability of Self-Regulatory Organizations; The Statutory Basis for, the Proposed Rule
such Pricing Vendor. The Framework Nasdaq Stock Market LLC; Notice of Change
also describes how NSCC and FICC Filing and Immediate Effectiveness of
would select two Pricing Vendors for Proposed Rule Change To Amend the 1. Purpose
each security in case one becomes Exchange’s Fees at Rule 7058 The Exchange proposes to amend its
unavailable, unreliable, or otherwise fees at Rule 7058 to: (i) Offer to waive
unusable. In the event that both Primary November 2, 2017.
fees under this Rule for 30 days for any
and Secondary Pricing Vendors become Pursuant to Section 19(b)(1) of the new, prospective, or returning
unavailable, unreliable, or unusable, the Securities Exchange Act of 1934 purchaser of either QView or the
Framework provides that NSCC and (‘‘Act’’),1 and Rule 19b–4 thereunder,2 Latency Optics add-on service; and (ii)
FICC would assign each affected notice is hereby given that on October remove language offering a subscription
security its last available price. The 20, 2017, The Nasdaq Stock Market LLC to TradeInfo for up to five users at no
Framework would further provide that, (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the additional cost to subscribers of the
if the last available price is unavailable, Securities and Exchange Commission Latency Optics add-on service, along
unreliable, or otherwise unusable for a (‘‘SEC’’ or ‘‘Commission’’) the proposed with conforming changes. The purposes
security, NSCC and FICC would rule change as described in Items I, II, of the proposed changes are to: (i)
establish a price for that security based and III, below, which Items have been Encourage new, prospective, and
on valuation models (where applicable) prepared by the Exchange. The returning purchasers of either QView or
and in accordance with the policies and Commission is publishing this notice to the Latency Optics add-on service to
procedures that support the Framework. solicit comments on the proposed rule examine these products more closely
By setting forth how NSCC and FICC change from interested persons. and thereby increase the number of
would select Pricing Vendors that can I. Self-Regulatory Organization’s customers for this product; and (ii)
provide timely and reliable pricing data, Statement of the Terms of Substance of remove a rarely used fee provision in
and how NSCC and FICC would price the Proposed Rule Change order to render the Latency Optics
securities when pricing data is not subscription easier to administer.
The Exchange proposes to amend the
readily available or reliable, the
Exchange’s fees at Rule 7058 to: (i) Offer Current Products
Commission finds that the proposed
to waive fees under this Rule for 30 days
QView
for any new, prospective, or returning
26 See the GSD Rulebook of FICC, Rule 4— QView is a web-based tool designed
Clearing Fund and Loss Allocation; the MBSD 29 Id. to provide a subscribing member with
ethrower on DSK3G9T082PROD with NOTICES
Clearing Rules of FICC, Rule 4—Clearing Fund and
Loss Allocation; Rules and Procedures of NSCC,
30 15 U.S.C. 78q–1(b)(3)(F). the ability to track its trading activity on
Procedure XV—Clearing Fund Formula and Other 31 In approving the Proposed Rule Changes, the the Exchange through both real-time
Matters; By-Laws and Organizational Certificate of Commission considered the proposals’ impact on and historical order and execution
DTC, Rule 4—Participants Fund and Participants efficiency, competition, and capital formation. 15
Investment, available at http://dtcc.com/legal/rules- U.S.C. 78c(f). summaries, available on a daily or a
and-procedures. 32 17 CFR 200.30–3(a)(12). monthly basis. The QView dashboard
27 17 CFR 240.17Ad–22(e)(4)(i). 1 15 U.S.C. 78s(b)(1). allows the member to view a summary
28 17 CFR 240.17Ad–22(e)(6)(iv). 2 17 CFR 240.19b–4. of its executions and open orders,
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![Federal Register / Vol. 82, No. 215 / Wednesday, November 8, 2017 / Notices 51895
including, but not limited to: The TradeInfo for up to 5 users at no because their fees will not change.
number of executions and their dollar additional cost. Moreover, the additional subscriptions
value; executions by symbol; total resulting from the fee waiver will
Proposed Changes
volume; whether an order has been increase market transparency, and, as
added or removed; whether the order is The Exchange proposes to: (i) the total number of subscribers
for a buy or a sell; whether an order is Introduce a fee waiver for 30 days for increases, the additional subscriptions
open; and information related to routing any new, prospective or returning will decrease the likelihood of future fee
strategies. QView also includes ranking purchaser of either QView or the increases as a result of rising fixed costs.
and market share statistics, such as how Latency Optics add-on service to
the subscribing member firm ranks in encourage testing and dissemination of Removal of the provision in Rule
Nasdaq market activity as compared to the product; and (ii) remove a rarely 7058(b) allowing a free subscription to
other Nasdaq participants. QView data used provision of Rule 7058 that offers TradeInfo for five users is an equitable
may be segregated by individual Market subscribers of the Latency Optics add- allocation of reasonable dues, fees and
Participant Identifiers (MPIDs) or ports. on service a subscription to TradeInfo other charges because all members will
QView was developed to work in for up to five users at no additional cost. be charged the same fees for the same
conjunction with TradeInfo (discussed The Exchange proposes to initiate the product. Moreover, the proposed change
below) to allow the QView purchaser to new fee waiver program to foster will have little substantive impact on
view specific order and execution interest in QView or the Latency Optics fees because the discount was rarely, if
information provided by the QView add-on service and encourage sales for ever, used. This proposed change will
dashboard interface. both products. The waiver will be not permit unfair discrimination
As set forth in Rule 7058(a), members available only once per customer for any between customers, issuers, brokers, or
may subscribe to QView for a fee of version of either product. New versions dealers because the proposal will
$600 per month. will be announced by the Exchange on remove a basis for price differentiation
www.nasdaqtrader.com. among customers that currently exists.7
Latency Optics The Exchange also proposes to
A member that subscribes to QView remove a rarely used provision of Rule In adopting Regulation NMS,8 the
may also purchase the Latency Optics 7058 that offers subscribers of the Commission granted SROs and broker-
add-on service, which provides the Latency Optics add-on service a dealers increased authority and
member with the ability to monitor subscription to TradeInfo for up to five flexibility to offer new and unique
three types of latency for order messages users at no additional cost. As stated in market data to the public. It was
and compare that latency to the average Rule 7015(f), TradeInfo is believed that this authority would
on the Nasdaq system: 3 (1) Roundtrip complementary as part of the Nasdaq expand the amount of data available to
time between order entry and receipt of workstation. Because TradeInfo is consumers, and also spur innovation
acknowledgement; (2) roundtrip time already available free of charge with the and competition for the provision of
between order entry and the time that Nasdaq workstation, customers have market data. Regulation NMS—
the order appears on the TotalView expressed little interest in this discount, deregulating the market in proprietary
ITCH multicast feed; and (3) the and that provision has been rarely, if data—furthers the Act’s goals of
roundtrip time between the entry of an ever, used. As such, the Exchange facilitating efficiency and competition:
order cancellation request and the time proposes to eliminate that provision.4
that the message in reply is received by [E]fficiency is promoted when broker-
The proposed changes do not affect dealers who do not need the data
the client device. Data is displayed the cost of any other Nasdaq product.
graphically and in table format, and may beyond the prices, sizes, market center
be segregated by MPID or ports. 2. Statutory Basis identifications of the NBBO and
Subscribers may also set hourly or end- The Exchange believes that its consolidated last sale information are
of-day alert notifications. proposal is consistent with Section 6(b) not required to receive (and pay for)
As set forth in Rule 7058(b), the of the Act,5 in general, and furthers the such data. The Commission also
Latency Optics add-on is available for a objectives of Sections 6(b)(4) and 6(b)(5) believes that efficiency is promoted
fee of $2,900 per month. of the Act,6 in particular, in that it when broker-dealers may choose to
provides for the equitable allocation of receive (and pay for) additional market
TradeInfo
reasonable dues, fees and other charges data based on their own internal
TradeInfo is a web-based tool that among members and issuers and other analysis of the need for such data.9
allows a member to see the status of persons using any facility, and is not
orders, executions, cancels and breaks, Nasdaq believes that QView, the
designed to permit unfair Latency Optics add-on and TradeInfo—
generate reports for download, and discrimination between customers,
cancel or correct open orders. which provide members with the ability
issuers, brokers, or dealers. to track order flow, observe latency and
As set forth in Rule 7015(f), TradeInfo The fee waiver proposal is an
is complementary as part of the Nasdaq obtain order data—is precisely the sort
equitable allocation of reasonable dues, of market data product that the
workstation or may be purchased fees and other charges because it will
separately for a fee of $95 per user per Commission envisioned when it
reduce fees for new, prospective, and adopted Regulation NMS.
month. Under Rule 7058(b), a purchaser returning purchasers of QView or
of the Latency Optics add-on may obtain Latency Optics, while not 7 Availability of QView, the Latency Optics add-
disadvantaging continuing subscribers
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3 The service measures the historical latency of on service and TradeInfo is already limited to
the member firm’s order messages sent to and from members of the Exchange, which is not unfair
4 As a conforming change, the Exchange proposes discrimination because the information provided
the Nasdaq Market Center through the member
firm’s OUCH ports and received on ITCH ports. See to delete an obsolete reference to a free trial period solely concerns a member firm’s trading activity on
Securities Exchange Act Release No. 68617 (January that expired in September 2013. In addition, a the Exchange.
10, 2013), 78 FR 3480 (January 16, 2013) (SR– comma is added after the phrase ‘‘In addition,’’ in 8 See Securities Exchange Act Release No. 51808
NASDAQ–2013–15) [sic]. OUCH ports are used for Rule 7058(b) to correct a grammatical error. (June 9, 2005), 70 FR 37496 (June 29, 2005)
5 15 U.S.C. 78f(b). (‘‘Regulation NMS Adopting Release’’).
order entry; multicast ITCH ports are used for the
dissemination of ITCH multicast feeds. 6 15 U.S.C. 78f(b)(4) and (5). 9 Id.
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![51896 Federal Register / Vol. 82, No. 215 / Wednesday, November 8, 2017 / Notices
In NetCoalition v. Securities and B. Self-Regulatory Organization’s over the internet after being
Exchange Commission 10 Statement on Burden on Competition purchased).15 In Nasdaq’s case, it is
(‘‘NetCoalition’’) the D.C. Circuit upheld The Exchange does not believe that costly to build and maintain a trading
the Commission’s use of a market-based the proposed rule changes will impose platform, but the incremental cost of
approach in evaluating the fairness of any burden on competition not trading each additional share on an
market data fees against a challenge necessary or appropriate in furtherance existing platform, or distributing an
claiming that Congress mandated a cost- of the purposes of the Act. Introduction additional instance of data, is very low.
based approach.11 As the court of the proposed fee waiver will enhance Market information and executions are
emphasized, the Commission ‘‘intended competition by increasing customer each produced jointly (in the sense that
in Regulation NMS that ‘market forces, familiarity with the product, thereby the activities of trading and placing
rather than regulatory requirements’ leading to more informed purchase orders are the source of the information
play a role in determining the market decisions. Further, the product itself that is distributed) and are each subject
data . . . to be made available to enhances competition by promoting to significant scale economies.
investors and at what cost.’’ 12 ‘‘No one transparency, and the increased use of Competition among trading platforms
disputes that competition for order flow the product generated by the fee waiver can be expected to constrain the
is ‘fierce.’ . . . As the SEC explained, will increase the amount of information aggregate return each platform earns
‘[i]n the U.S. national market system, available to the market. Moreover, from the sale of its joint products. The
buyers and sellers of securities, and the removal of the provision in 7058(b) level of competition and contestability
broker-dealers that act as their order- allowing a free subscription to in the market is evident in the
routing agents, have a wide range of TradeInfo for five users will enhance numerous alternative venues that
choices of where to route orders for competition by simplifying the fee compete for order flow, including SRO
execution’; [and] ‘no exchange can structure for these products. markets, as well as internalizing BDs
afford to take its market share The market for data products is and various forms of alternative trading
percentages for granted’ because ‘no extremely competitive and firms may systems (‘‘ATSs’’), including dark pools
exchange possesses a monopoly, freely choose alternative venues and and electronic communication networks
regulatory or otherwise, in the execution data vendors based on the aggregate fees (‘‘ECNs’’). Each SRO market competes to
of order flow from broker assessed, the data offered, and the value produce transaction reports via trade
dealers’. . . .’’ 13 provided. Exchanges compete with each executions, and two FINRA-regulated
other for listings, trades, and market TRFs compete to attract internalized
Data products such as QView, the data itself. Transaction execution and
Latency Optics add-on and TradeInfo transaction reports. It is common for
proprietary data products are BDs to further and exploit this
are a means by which exchanges complementary in that market data is
compete to attract order flow. To the competition by sending their order flow
both an input and a byproduct of the and transaction reports to multiple
extent that exchanges are successful in execution service. In fact, market data markets, rather than providing them all
such competition, they earn trading and trade execution are a paradigmatic to a single market. Competitive markets
revenues and also enhance the value of example of joint products with joint for order flow, executions, and
their data products by increasing the costs. The decision whether and on transaction reports provide pricing
amount of data they are able to provide. which platform to post an order will discipline for the inputs of proprietary
The need to compete for order flow depend on the attributes of the platform data products. The large number of
places substantial pressure upon where the order can be posted, SROs, TRFs, BDs, and ATSs that
exchanges to keep their fees for both including the execution fees, data currently produce proprietary data or
executions and data reasonable.14 quality and price, and distribution of its
are currently capable of producing it
Fees for QView, the Latency Optics data products.
provides further pricing discipline for
add-on and TradeInfo are optional in The costs of producing market data
proprietary data products. Each SRO,
that they apply only to firms that elect include not only the costs of the data
TRF, ATS, and BD is currently
to purchase these products, which, like distribution infrastructure, but also the
costs of designing, maintaining, and permitted to produce proprietary data
all proprietary data products, they may products, and many currently do or
operating the exchange’s transaction
cancel at any time. have announced plans to do so,
execution platform and the cost of
For all of the reasons set forth above, regulating the exchange to ensure its fair including Nasdaq, NYSE, NYSE MKT,
the Exchange has provided a substantial operation and maintain investor NYSE Arca, and the BATS exchanges.
basis demonstrating that the proposed confidence. The total return that a Firms make decisions regarding
fee is equitable, fair, reasonable and not trading platform earns reflects the market data based on the total cost of
unreasonably discriminatory, and revenues it receives from both products interacting with the Exchange, and an
therefore consistent with and in and the joint costs it incurs. Moreover, ‘‘excessive’’ price for one product has
furtherance of the purposes of the Act. the operation of the exchange is the potential to impair revenues from all
characterized by high fixed costs and products. If the price of QView, the
10 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. low marginal costs. This cost structure Latency Optics add-on or TradeInfo
2010). is common in content distribution were to become unattractive to member
11 See NetCoalition, at 534–535.
12 Id. at 537.
industries such as software, where firms,16 those firms would opt not to
developing new software typically purchase the product, or may reduce
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13 Id. at 539 (quoting Securities Exchange Act
Release No. 59039 (December 2, 2008), 73 FR requires a large initial investment (and
74770, 74782–83 (December 9, 2008) (SR– continuing large investments to upgrade 15 See William J. Baumol and Daniel G. Swanson,
NYSEArca–2006–21)). the software), but once the software is ‘‘The New Economy and Ubiquitous Competitive
14 See Sec. Indus. Fin. Mkts. Ass’n (SIFMA),
developed, the incremental cost of Price Discrimination: Identifying Defensible Criteria
Initial Decision Release No. 1015, 2016 SEC LEXIS of Market Power,’’ Antitrust Law Journal, Vol. 70,
2278 (ALJ June 1, 2016) (finding the existence of
providing that software to an additional No. 3 (2003).
vigorous competition with respect to non-core user is typically small, or even zero 16 Only member firms can purchase QView, the
market data). (e.g., if the software can be downloaded Latency Optics add-on, and TradeInfo.
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![Federal Register / Vol. 82, No. 215 / Wednesday, November 8, 2017 / Notices 51897
their purchases of other products sold rules/sro.shtml). Copies of the Commission is publishing this notice to
by the Exchange. submission, all subsequent solicit comments on the proposed rule
For all of the reasons set forth above, amendments, all written statements change from interested persons.
the Exchange does not believe that the with respect to the proposed rule
I. Self-Regulatory Organization’s
proposed rule changes will impose any change that are filed with the
Commission, and all written Statement of the Terms of Substance of
burden on competition not necessary or
communications relating to the the Proposed Rule Change
appropriate in furtherance of the
purposes of the Act. proposed rule change between the The Exchange is filing a proposal to
Commission and any person, other than amend the MIAX Options Fee Schedule
C. Self-Regulatory Organization’s
those that may be withheld from the (the ‘‘Fee Schedule’’).
Statement on Comments on the public in accordance with the
Proposed Rule Change Received From provisions of 5 U.S.C. 552, will be The text of the proposed rule change
Members, Participants, or Others available for Web site viewing and is available on the Exchange’s Web site
No written comments were either printing in the Commission’s Public at http://www.miaxoptions.com/rule-
solicited or received. Reference Room, 100 F Street NE., filings, at MIAX’s principal office, and
Washington, DC 20549, on official at the Commission’s Public Reference
III. Date of Effectiveness of the Room.
business days between the hours of
Proposed Rule Change and Timing for
10:00 a.m. and 3:00 p.m. Copies of the II. Self-Regulatory Organization’s
Commission Action
filing also will be available for Statement of the Purpose of, and
The foregoing rule change has become inspection and copying at the principal Statutory Basis for, the Proposed Rule
effective pursuant to Section office of the Exchange. All comments Change
19(b)(3)(A)(ii) of the Act.17 received will be posted without change.
At any time within 60 days of the Persons submitting comments are In its filing with the Commission, the
filing of the proposed rule change, the cautioned that we do not redact or edit Exchange included statements
Commission summarily may personal identifying information from concerning the purpose of and basis for
temporarily suspend such rule change if comment submissions. You should the proposed rule change and discussed
it appears to the Commission that such submit only information that you wish any comments it received on the
action is: (i) Necessary or appropriate in to make available publicly. All proposed rule change. The text of these
the public interest; (ii) for the protection submissions should refer to File statements may be examined at the
of investors; or (iii) otherwise in Number SR–NASDAQ–2017–113 and places specified in Item IV below. The
furtherance of the purposes of the Act. should be submitted on or before Exchange has prepared summaries, set
If the Commission takes such action, the November 29, 2017. forth in sections A, B, and C below, of
Commission shall institute proceedings For the Commission, by the Division of the most significant aspects of such
to determine whether the proposed rule Trading and Markets, pursuant to delegated statements.
should be approved or disapproved. authority.18
A. Self-Regulatory Organization’s
IV. Solicitation of Comments Eduardo A. Aleman, Statement of the Purpose of, and
Assistant Secretary. Statutory Basis for, the Proposed Rule
Interested persons are invited to
[FR Doc. 2017–24254 Filed 11–7–17; 8:45 am] Change
submit written data, views, and
BILLING CODE 8011–01–P
arguments concerning the foregoing, 1. Purpose
including whether the proposed rule
change is consistent with the Act. The Exchange proposes to amend the
SECURITIES AND EXCHANGE
Comments may be submitted by any of list of MIAX Select Symbols 3 contained
COMMISSION
the following methods: in the Priority Customer Rebate Program
[Release No. 34–81998; File No. SR–MIAX– (the ‘‘Program’’) 4 of the Exchange’s Fee
Electronic Comments 2017–45] Schedule to 1. delete the symbol
• Use the Commission’s Internet ‘‘SUNE’’ associated with SunEdison,
comment form (http://www.sec.gov/ Self-Regulatory Organizations; Miami Inc. (‘‘SunEdison’’) and 2. replace the
rules/sro.shtml); or International Securities Exchange LLC; symbol ‘‘BBRY’’ with ‘‘BB’’ associated
• Send an email to rule-comments@ Notice of Filing and Immediate with BlackBerry Limited
sec.gov. Please include File Number SR– Effectiveness of a Proposed Rule
(‘‘BlackBerry’’).
NASDAQ–2017–113 on the subject line. Change To Amend Its Fee Schedule
The Exchange initially created the list
Paper Comments November 2, 2017. of MIAX Select Symbols on March 1,
Pursuant to Section 19(b)(1) of the 2014,5 and has added and removed
• Send paper comments in triplicate Securities Exchange Act of 1934
to Secretary, Securities and Exchange option classes from that list since that
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
Commission, 100 F Street NE., notice is hereby given that on October 3 The term ‘‘MIAX Select Symbols’’ means
Washington, DC 20549–1090. 30, 2017, Miami International Securities options overlying AAL, AAPL, AIG, AMAT, AMD,
All submissions should refer to File Exchange LLC (‘‘MIAX Options’’ or AMZN, BA, BABA, BBRY, BIDU, BP, C, CAT, CBS,
Number SR–NASDAQ–2017–113. This ‘‘Exchange’’) filed with the Securities CELG, CLF, CVX, DAL, EBAY, EEM, FB, FCX, GE,
file number should be included on the GILD, GLD, GM, GOOGL, GPRO, HAL, HTZ, INTC,
and Exchange Commission IWM, JCP, JNJ, JPM, KMI, KO, MO, MRK, NFLX,
subject line if email is used. To help the (‘‘Commission’’) the proposed rule
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NOK, NQ, ORCL, PBR, PFE, PG, QCOM, QQQ, RIG,
Commission process and review your change as described in Items I, II, and S, SPY, SUNE, T, TSLA, USO, VALE, VXX, WBA,
comments more efficiently, please use III below, which Items have been WFC, WMB, WY, X, XHB, XLE, XLF, XLP, XOM,
only one method. The Commission will and XOP.
prepared by the Exchange. The 4 See section 1)a)iii) of the Fee Schedule for a
post all comments on the Commission’s complete description of the Program.
Internet Web site (http://www.sec.gov/ 18 17 CFR 200.30–3(a)(12). 5 See Securities Exchange Act Release No. 71700
1 15 U.S.C. 78s(b)(1). (March 12, 2014), 79 FR 15188 (March 18, 2014)
17 15 U.S.C. 78s(b)(3)(A)(ii). 2 17 CFR 240.19b–4. (SR–MIAX–2014–13).
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Document Created: 2017-11-08 01:20:32
Document Modified: 2017-11-08 01:20:32
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 82 FR 51894 |
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