82 FR 52955 - Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Access and Redistribution Fee

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 219 (November 15, 2017)

[Federal Register Volume 82, Number 219 (Wednesday, November 15, 2017)]
[Notices]
[Pages 52955-52958]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-24657]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82036; File No. SR-BX-2017-048]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to the 
Access and Redistribution Fee

November 8, 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 26, 2017, Nasdaq BX, Inc. (``BX'' 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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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend and conform BX Equities Rule 7025 
and Chapter XV, Section 3(c) of the Exchange's Options Rules, to define 
key terms; to clarify the rule language; and to clarify its application 
to Extranet Providers and Distributors in various contexts.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqbx.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

[[Page 52956]]

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 proposed rule change concerns BX Rule 7025 (the ``Equities 
Rule'') and Chapter XV, Section 3(c) of the Exchange's Options Rules 
(the ``Options Rule,'' collectively the ``Rules''), currently entitled 
``Extranet Access Fee.'' The Exchange first imposed an Extranet Access 
Fee in 2009.\3\ The Exchange last amended the Extranet Access Fee in 
January of 2015.\4\ Today, technology and the ecosystem have changed 
such that the Rules need updating and clarification. Therefore, the 
Exchange is proposing several parallel changes to the Rules.
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    \3\ See Securities Exchange Act Release No. 59307 (Jan. 28, 
2009), 74 FR 6069 (Feb. 4, 2009) (SR-BX-2009-005).
    \4\ See Securities Exchange Act Release No. 74045 (Jan. 13, 
2015); 80 FR 2766 (Jan. 20, 2015) (SR-BX-2015-003).
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    First, the Exchange is proposing to rename both Rules and to 
clarify their meaning through the use of defined terms. The Exchange is 
adding definitions of the terms Equipment Configuration and Extranet 
Provider to new subsections 7025(a) of the Equities Rule and Sec. 
3(c)(1) of the Options Rule. The Exchange is also cross-referencing the 
definition of Distributors currently set forth in Exchange Rule 
7019(b).
    The term ``Equipment Configuration'' will be defined to mean ``any 
line, circuit, router package, or other technical configuration used to 
provide a connection to the Exchange market data feeds.'' The term 
Equipment Configuration replaces the term ``Customer Premises Equipment 
Configuration'' set forth in the current rules. The Exchange believes 
that the term ``Customer Premises Equipment Configuration'' is 
ambiguous and creates confusion about the ownership and location of 
equipment through which direct access to market data feeds is provided. 
By referring instead to ``Equipment Configuration,'' the Exchange 
intends to specify that the ownership and location of the equipment is 
inconsequential to the application of access and redistribution fees. 
Rather, it is the number of configurations that matters, determining 
the number of monthly access and redistribution fees to be assessed.
    For example, if an Extranet Provider supplies market data to five 
recipients via five configurations, two of which are located in a 
single Exchange facility (such as Carteret, New Jersey) and three of 
which are located at different customer facilities, the Extranet 
Provider will be assessed access and redistribution fees of $5,000 per 
month. If an Extranet Provider supplies market data to one customer at 
two separate locations via two configurations--one within a Exchange 
facility and one located elsewhere--the Extranet Provider will be 
assessed access and redistribution fees of $2,000 per month. If an 
Extranet Provider supplies market data to four customers via four 
configurations all located within an Exchange co-location facility, the 
Extranet Provider will be assessed $4,000 per month in access and 
redistribution fees. The Exchange is proposing to define the term 
``Extranet Provider'' as ``any entity that has signed the Exchange 
Extranet Connection Agreement and that establishes a telecommunications 
connection in the Exchange's co-location facility.'' The Exchange 
requires entities to sign the Exchange Extranet Connection Agreement 
\5\ for the purpose of setting the terms and conditions for those 
entities to place equipment in the Exchange's co-location facility in 
order to establish a telecommunications connection directly to the 
Exchange and to provide its own customers with access to the Exchange 
market data feeds.
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    \5\ Available at http://www.nasdaqtrader.com/Content/AdministrationSupport/AgreementsData/NASDAQOMXExtranetAgreement.pdf.
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    Finally, in order to further enhance the clarity of the Exchange's 
rules, the Exchange is proposing to cross-reference the definition of 
``Distributor'' for purposes of this rule. Rule 7019(b) currently 
defines Distributor as:

    [A]ny entity that receives a feed or data file of Exchange data 
directly from the Exchange or indirectly through another entity and 
then distributes it either internally (within that entity) or 
externally (outside that entity). All distributors shall execute an 
Exchange distributor agreement. The Exchange itself is a vendor of 
its data feed(s) and has executed an Exchange distributor agreement 
and pays the distributor charge.

    The Exchange is proposing to renumber and rearrange the existing 
rule text of the Rules. The first two sentences of existing rule text 
will become new subsection 7025(b) of the Equities Rule and Sec. 
3(c)(1) of the Options Rule. The Exchange also proposes to improve the 
clarity of subsection 7025(b) of the Equities Rule and Sec. 3(c)(2) of 
the Options Rule by using the new definitions outlined above and by 
specifying that the monthly fees referred to are the monthly access and 
redistribution fees. As described earlier, the third sentence of 
existing rule text is being modified and moved, respectively, to 
paragraphs (1) and (A) of new subsections 7025(a) of the Equities Rule 
and Sec. 3(c)(1) of the Options Rule as the improved definition of 
``Equipment Configuration.'' The fourth and fifth sentences of existing 
rule text will move to new subsection 7025(d) of the Equities Rule and 
Sec. 3(c)(4) of the Options Rule with modest textual improvements but 
no change in application of fees. The sixth sentence of existing rule 
text will move to the final sentences of subsections 7025(b) and (c) of 
the Equities Rule and Sec. 3(c)(2) and (c)(3) of the Options Rule with 
minor textual enhancements to apply it with equal effect to Extranet 
Providers and Distributors.
    Lastly, the Exchange proposes to add new subsection 7025(c) to the 
Equities Rule and Sec. 3(c)(3) to the Options Rule to specify and 
codify that similarly situated Distributors and Extranet Providers will 
pay similar fees. Under subsection 7025(b) of the Equities Rule and 
Sec. 3(c)(2) of the Options Rule, Extranet Providers are assessed a 
monthly fee of $1,000 for each Equipment Configuration that offers 
Exchange market data feeds. Similarly, under proposed subsection 
7025(c) of the Equities Rule and Sec. 3(c)(3) of the Options Rule, the 
same $1,000 monthly fee applies to Distributors to whom the same 
Exchange market data feeds are published via a Direct Circuit 
Connection to the Exchange. The Exchange believes that, as defined, 
Extranet Providers and Distributors are similarly situated because both 
entities connect directly to the Exchange, and both provide Exchange 
market data feeds to their customers via those connections.\6\ 
Likewise, the customers of Extranet Providers and Distributors are 
similarly situated in that they receive the same Exchange market data 
feeds through similar means.
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    \6\ Proposed Rules 7025(c) and Section 3(c) of Chapter XV of the 
Otpions [sic] Rules apply only to Distributors that connect to 
Nasdaq [sic] via a Direct Circuit Connection pursuant to Rule 
7051(a). They do not apply to Distributors that are co-located with 
Nasdaq [sic] pursuant to Rule 7034 and that connect to Nasdaq [sic] 
as specified under that Rule. Nor do they apply to entities that 
connect to Nasdaq [sic] remotely via Point of Presence Connectivity 
under Rule 7051(c) as set forth in SR-NASDAQ-2017-97.
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    For example, a Distributor with two Direct Circuit Connections to 
the

[[Page 52957]]

Exchange, both of which emanate from a single Exchange co-location 
facility (such as Carteret, New Jersey) and both of which receive 
Exchange market data feeds, will be assessed access and redistribution 
fees of $2,000 per month. A Distributor with two Direct Circuit 
Connections to the Exchange that emanate from two separate locations 
and that receives Exchange market data feeds over each connection will 
be assessed access and redistribution fees of $2,000 per month. A 
Distributor with two Direct Circuit Connections to the Exchange that 
emanate from two separate locations and that receives Exchange market 
data feeds over only one of the connections will be assessed access and 
redistribution fees of $1,000 per month.
    The Exchange previously assessed and currently assesses this fee in 
its capacity as operator of Nasdaq Technology Services, which had been 
considered an Extranet Provider. The Exchange believes that defining 
Extranet Providers and codifying the fee to Distributors (other than 
Extranet Providers) is clearer to market participants. The Exchange 
also understands that Distributors, like Extranet Providers, commonly 
pass the fee on to their customers and therefore specifying that 
Distributors employing a Direct Circuit Connection also pay the fee 
will ensure consistent treatment between users enjoying the same 
benefits via Extranet Providers on the one hand and Distributors on the 
other, as described above.
2. Statutory Basis
    The Exchange believes that this 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 an equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using its facility, and to 
specify that the fees are 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 Exchange believes that the application of identical Access and 
Redistribution fees to Distributors and Extranet Providers as described 
in the proposed rule change is fair and equitable and non-
discriminatory. As stated above, Distributors and Extranet Providers 
both connect to the Exchange directly for the purpose of re-
distributing Exchange market data feeds to their own customers and both 
enjoy similar benefits in doing so. Likewise, those customers, whether 
receiving Exchange market data feeds via a Distributor or an Extranet 
Provider receive those market data feeds in a similar fashion and with 
similar benefits. Those benefits are considerable: Secure, rapid, 
reliable access to the highest quality market data feeds on the trading 
of equities and options on the Exchange.
    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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    The Exchange believes it is fair and equitable and not 
discriminatory to apply equal access and redistribution fees to 
Distributors, as it does to Extranet Providers. As stated above, 
Distributors and Extranet Providers are similarly situated in that they 
receive Exchange market data feeds directly from the Exchange and they 
redistribute that data to their own customers. Likewise, the Exchange 
believes that the customers of Extranet Providers and of Distributors 
are similarly situated in the manner in which they receive Exchange 
market data feeds.
    The Exchange believes that it is consistent with an equitable 
allocation of reasonable dues and fees and not unfairly discriminatory 
to charge the fees proposed under Rule 7025 and Section 3(c) of Chapter 
XV of the Otpions [sic] Rules to Extranet Providers and Distributors 
that are not co-located, but not to charge those same fees to 
Distributors that are co-located. First, Distributors that are co-
located already pay fees set forth in Rule 7034 which include 
connectivity and access to data. Second, if a co-located Distributor 
were to send data feeds out of the co-location facility, the feeds 
would be processed and normalized by the Distributor as opposed to by 
the Exchange; in that case, the Distributor would not be using the 
proximity for which Extranets and Direct Circuit Connection 
Distributors are being assessed fees under Rule 7025 and Section 3(c) 
of Chapter XV of the Options Rules.
    The Exchange is proposing to enhance the clarity of the language of 
the Rules to ensure that customers understand the proper application of 
the Rules as technology has changed and continues to change. The 
Exchange believes that customers support the continued evolution of its 
rules, and that regulators do and should support and facilitate this 
evolution.

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

    The Exchange believes that the proposed rule change will not impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. To the contrary, the Exchange believes that 
applying equal fees to similarly situated Extranet Providers and 
Distributors, enhancing the clarity of the Rules, and eliminating 
ambiguity imposes no burden on competition and is, in fact, pro-
competitive. Extranet Providers and Distributors benefit from having a 
more accurate and complete understanding of the Exchange's services and 
fees when determining which if any of those competing services to 
purchase voluntarily.
    The Exchange believes that the proposed rule change places no 
burden on competition because it specifies that identical fees will 
apply to all similarly situated Distributors and Extranet Providers 
that provide Exchange market data feeds to their own customers. As 
described above, such Distributors and Extranet Providers offer the 
same Exchange market data feeds in the same manner to similarly 
situated customers. The Exchange offers similar benefits to 
Distributors and Extranet Providers by offering them such access to 
Exchange market data feeds.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\10\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    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

[[Page 52958]]

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-BX-2017-048 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-BX-2017-048. 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-BX-2017-048 and should be 
submitted on or before December 6, 2017.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-24657 Filed 11-14-17; 8:45 am]
 BILLING CODE 8011-01-P