83 FR 40591 - Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Incorporate BX Rule 7039 Into the Market Data Enterprise License Proposed by the Nasdaq Stock Market LLC

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 158 (August 15, 2018)

Page Range		40591-40595
FR Document		2018-17491

Federal Register, Volume 83 Issue 158 (Wednesday, August 15, 2018)

[Federal Register Volume 83, Number 158 (Wednesday, August 15, 2018)]
[Notices]
[Pages 40591-40595]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2018-17491]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83810; File No. SR-BX-2018-036]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Incorporate BX
Rule 7039 Into the Market Data Enterprise License Proposed by the
Nasdaq Stock Market LLC

August 9, 2018.
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 July 27, 2018, 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.
---------------------------------------------------------------------------

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

This amendment is immediately effective upon filing.\3\
---------------------------------------------------------------------------

\3\ This proposed change was initially filed on July 3, 2018,
and became immediately effective on that date. See SR-BX-2018-031,
available at http://nasdaq.cchwallstreet.com/. It was subsequently
refiled on July 17, 2018. See SR-BX-2018-034, available at http://nasdaq.cchwallstreet.com/. A firm eligible to purchase the
enterprise license proposed by Nasdaq may purchase it for the month
of July, effective on July 3, 2018, and the monthly fee for the
license will be prorated for the period July 3 through July 31,
2018. Any fees owed by the purchaser of the enterprise license for
the use of NLS Plus on July 1 and July 2, 2018, will also be
prorated accordingly.

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

[[Page 40592]]

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to incorporate BX Rule 7039 into the market
data enterprise license proposed by the Nasdaq Stock Market LLC
(``Nasdaq''), which is designed to lower fees, reduce administrative
costs, and expand the availability of Nasdaq Last Sale (``NLS'') Plus,
NLS, Nasdaq Basic and Nasdaq Depth-of-Book products.
The text of the proposed rule change is available on the Exchange's
website 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 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 incorporate BX Rule 7039 into the market
data enterprise license proposed by Nasdaq,\4\ which is designed to
lower fees, reduce administrative costs, and expand the availability of
NLS Plus, NLS, Nasdaq Basic and Nasdaq Depth-of-Book products.
---------------------------------------------------------------------------

\4\ See SR-NASDAQ-2018-058 (not yet published).
---------------------------------------------------------------------------

NLS Plus is a comprehensive data feed offered by Nasdaq that allows
distributors to access the three last sale products \5\ offered by
Nasdaq and its affiliated U.S. equity exchanges,\6\ as well as the
FINRA/Nasdaq Trade Reporting Facility (``TRF''). It provides total
cross-market volume information at the issue level, and reflects the
cumulative consolidated volume of real-time trading activity for Tape
A, B and C securities.\7\ NLS Plus provides Trade Price, Trade Size,
Sale Condition Modifiers, Cumulative Consolidated Market Volume, End of
Day Trade Summary, Adjusted Closing Price, IPO Information, and
Bloomberg ID. Additionally, pertinent regulatory information such as
Market Wide Circuit Breaker, Regulation SHO Short Sale Price Test
Restricted Indicator, Trading Action, and Symbol Directory are
included. NLS Plus may be received by itself or in combination with
NASDAQ Basic.
---------------------------------------------------------------------------

\5\ The three last sale products consist of Nasdaq Last Sale, BX
Last Sale, and PSX Last Sale. BX Last Sale consists of two data
feeds containing real-time last sale information for trades executed
on the Exchange. ``BX Last Sale for Nasdaq'' contains all
transaction reports for Nasdaq-listed securities. ``BX Last Sale for
NYSE/Amex'' contains all such transaction reports for NYSE- and
Amex-listed securities.
\6\ The Nasdaq, Inc. U.S. equity markets are the Exchange,
Nasdaq, and Nasdaq PSX.
\7\ Tape A and Tape B securities are disseminated pursuant to
the Security Industry Automation Corporation's (``SIAC'')
Consolidated Tape Association Plan/Consolidated Quotation System, or
CTA/CQS (``CTA''). Tape C securities are disseminated pursuant to
the NASDAQ Unlisted Trading Privileges (``UTP'') Plan.
---------------------------------------------------------------------------

Firms that receive NLS Plus pay the monthly administrative fees for
BX Last Sale, PSX Last Sale and NLS, and distributors pay a data
consolidation fee of $350 per month.\8\ The Exchange does not currently
charge user fees for BX Last Sale, but firms that receive NLS Plus
would be required to pay any user fees adopted by the Exchange.\9\
---------------------------------------------------------------------------

\8\ The fee applies to both Internal and External Distributors.
See Rule 7039(b)(1). ``Internal Distributors'' are Distributors that
receive NLS Plus data and then distribute that data to one or more
Subscribers within the Distributor's own entity. ``External
Distributors'' are Distributors that receive NLS Plus data and then
distribute that data to one or more Subscribers outside the
Distributor's own entity.
\9\ See Rule 7039(b)(3).
---------------------------------------------------------------------------

The Exchange proposes to incorporate any fees owed under BX Rule
7039 into the market data enterprise license proposed by Nasdaq, which
is designed to lower fees, reduce administrative costs, and expand the
availability of NLS Plus, NLS, Nasdaq Basic and Nasdaq Depth-of-Book
products. These fees include the monthly administrative fee applicable
to NLS, BX Last Sale and PSX Last Sale, a data consolidation fee for
Internal or External Distributors, and any user fees for BX Last Sale
or PSX Last Sale that may be adopted in the future.\10\
---------------------------------------------------------------------------

\10\ The Exchange also proposes a technical change to Rule
7039(b)(1) to reflect that BX administrative fees are charged on a
monthly, rather than annual, basis. See Securities Exchange Act
Release No. 79667 (December 22, 2016), 81 FR 96152 (December 29,
2016) (SR-BX-2016-071).
---------------------------------------------------------------------------

As set forth in greater detail under the Nasdaq proposal, the
market data enterprise license for display usage proposed by Nasdaq
will allow Distributors who are broker-dealers or Investment Advisers
\11\ to disseminate these products to a wide audience for a monthly fee
of $600,000, with the opportunity to lower that fee further to $500,000
per month if they contract for twelve months of service in advance. As
explained in greater detail in Nasdaq's filing, the Exchange believes
that the proposed market data enterprise license will reduce exchange
fees, lower administrative costs for distributors, and help expand the
availability of market information to investors, and thereby increase
participation in financial markets. The enterprise license is being
introduced in response to competition from other exchanges,\12\ and
demonstrates both the power and the benefits of the competitive market
to spur innovation and change.
---------------------------------------------------------------------------

\11\ ``Investment Adviser'' is defined in Section 202(a)(11) of
the Investment Advisers Act of 1940, as ``any person who, for
compensation, engages in the business of advising others, either
directly or through publications or writings, as to the value of
securities or as to the advisability of investing in, purchasing, or
selling securities, or who, for compensation and as part of a
regular business, issues or promulgates analyses or reports
concerning securities . . . .''
\12\ See, e.g., Enterprise Fee for the Cboe Equities One Feed,
available at https://markets.cboe.com/us/equities/market_data_products/bats_one/.
---------------------------------------------------------------------------

The purpose of this filing is to incorporate BX Last Sale fees into
the Nasdaq market data enterprise license as a means of lowering costs
for all three equity markets. The rationale and support for this
proposal are the same as already set forth by Nasdaq in its companion
proposal.\13\
---------------------------------------------------------------------------

\13\ See n.4.
---------------------------------------------------------------------------

The proposed market data enterprise license is optional in that no
exchange is required to offer it and distributors are not required to
purchase it. Firms can discontinue its use at any time and for any
reason, and may decide to purchase market data products individually or
substitute products from one exchange with competing products from
other exchanges.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\14\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\15\ 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

[[Page 40593]]

designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------

\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

As described above, the proposal to cover BX fees for NLS Plus
within the proposed market data enterprise license will lower fees,
reduce administrative costs, and expand the availability of market data
to retail investors, which the Exchange expects to improve transparency
for financial market participants and lead to increased participation
in financial markets. Discounts for broader dissemination of market
data information have routinely been adopted by exchanges and permitted
by the Commission as equitable allocations of reasonable dues, fees and
other charges.\16\ Distributors will be free to move from the month to
month rate to the annual rate at any time, or from the annual rate to
the monthly rate, with notice, at the expiration of the twelve month
term.
---------------------------------------------------------------------------

\16\ For example, the Commission has permitted pricing discounts
for market data under Nasdaq Rules 7023(c) and 7047(b). See also
Securities Exchange Act Release No. 82182 (November 30, 2017), 82 FR
57627 (December 6, 2017) (SR-NYSE-2017-60) (changing an enterprise
fee for NYSE BBO and NYSE Trades).
---------------------------------------------------------------------------

This proposal demonstrates the existence of an effective,
competitive market because it resulted from a need to generate
innovative approaches in response to competition from other exchanges
that offer enterprise licenses for market data.\17\ As the Commission
has recognized, ``[i]f competitive forces are operative, the self-
interest of the exchanges themselves will work powerfully to constrain
unreasonable or unfair behavior,'' \18\ and ``the existence of
significant competition provides a substantial basis for finding that
the terms of an exchange's fee proposal are equitable, fair,
reasonable, and not unreasonably or unfairly discriminatory.'' \19\ The
proposed enterprise license will be subject to significant competition
from other exchanges because each eligible distributor will have the
ability to accept or reject the license depending on whether it will or
will not lower its fees, and because other exchanges will be able to
offer their own competitive responses. As the Commission has held in
the past, the presence of competition provides a substantial basis for
a finding that the proposal will be an equitable allocation of
reasonable dues, fees and other charges.\20\
---------------------------------------------------------------------------

\17\ See n.12.
\18\ Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
\19\ Id.
\20\ Id.
---------------------------------------------------------------------------

Furthermore, the proposed enterprise license will not unfairly
discriminate between customers, issuers, brokers or dealers. The Act
does not prohibit all distinctions among customers, but only
discrimination that is unfair, and it is not unfair discrimination to
charge those distributors that are able to reach the largest audiences
of retail investors a lower fee for incremental investors in order to
encourage the widespread distribution of market data. The proposed
change to the BX rule book is designed to incorporate BX Rule 7039 into
the market data enterprise license proposed by Nasdaq. As explained in
the Nasdaq filing, the market data enterprise license will be subject
to significant competition, and that competition will ensure that there
is no unfair discrimination. Each distributor will be able to accept or
reject the license depending on whether it will or will not lower costs
for that particular distributor, and, if the license is not
sufficiently competitive, the Exchange may lose market share.
In adopting Regulation NMS, 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. The
Commission concluded that Regulation NMS--by deregulating the market in
proprietary data--would itself further the Act's goals of facilitating
efficiency and competition:

[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.\21\
---------------------------------------------------------------------------

\21\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005) (``Regulation NMS Adopting
Release'').

The Commission was speaking to the question of whether broker-
dealers should be subject to a regulatory requirement to purchase data,
such as Depth-of-Book data, that is in excess of the data provided
through the consolidated tape feeds, and the Commission concluded that
the choice should be left to them. Accordingly, Regulation NMS removed
unnecessary regulatory restrictions on the ability of exchanges to sell
their own data, thereby advancing the goals of the Act and the
principles reflected in its legislative history. If the free market
should determine whether proprietary data is sold to broker-dealers at
all, it follows that the price at which such data is sold should be set
by the market as well.
The proposed change to the BX rule book is designed to incorporate
BX Rule 7039 into the market data enterprise license proposed by
Nasdaq, and the proposed enterprise license will compete with other
enterprise licenses offered by Nasdaq, underlying fee schedules
promulgated by the Exchange, and enterprise licenses and fee structures
implemented by other exchanges. The enterprise license is a voluntary
product for which market participants can readily find substitutes.
Accordingly, both BX and Nasdaq are constrained from introducing a fee
that would be inequitable or unfairly discriminatory.

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. This proposal will eliminate BX
fees for NLS Plus as part of a market data enterprise license proposed
by Nasdaq that is intended to lower fees, reduce administrative costs,
and expand the availability of market data to retail investors, which
the Exchange expects to lead to increased participation in financial
markets. It will not impose a burden on competition not necessary or
appropriate in furtherance of the purposes of the Act, but rather will
enhance competition by introducing an innovative fee structure for
market data, lowering prices and enhancing competition.
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.
Numerous exchanges compete with each other for listings, trades, and
market data itself, providing virtually limitless opportunities for
entrepreneurs who wish to produce and distribute their own market data.
This proprietary data is produced by each individual exchange, as well
as other entities, in a vigorously competitive market.
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

[[Page 40594]]

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. Without trade executions,
exchange data products cannot exist. Moreover, data products are
valuable to many end users only insofar as they provide information
that end users expect will assist them or their customers in making
trading decisions.
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, the cost of implementing cybersecurity to protect the data
from external threats 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 and 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).\22\
---------------------------------------------------------------------------

\22\ 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).
---------------------------------------------------------------------------

It is costly for the Exchange 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 each are
subject to significant scale economies. In such cases, marginal cost
pricing is not feasible because if all sales were priced at the margin,
the Exchange would be unable to defray its platform costs of providing
the joint products. Similarly, data products cannot make use of trade
reports from the TRF without the raw material of the trade reports
themselves, and therefore necessitate the costs of operating,
regulating, and maintaining a trade reporting system, costs that must
be covered through the fees charged for use of the facility and sales
of associated data.
An exchange's broker-dealer customers view the costs of transaction
executions and of data as a unified cost of doing business with the
exchange. A broker-dealer will disfavor a particular exchange if the
expected revenues from executing trades on the exchange do not exceed
net transaction execution costs and the cost of data that the broker-
dealer chooses to buy to support its trading decisions (or those of its
customers). The choice of data products is, in turn, a product of the
value of the products in making profitable trading decisions. If the
cost of the product exceeds its expected value, the broker-dealer will
choose not to buy it. Moreover, as a broker-dealer chooses to direct
fewer orders to a particular exchange, the value of the product to that
broker-dealer decreases, for two reasons. First, the product will
contain less information, because executions of the broker-dealer's
trading activity will not be reflected in it. Second, and perhaps more
important, the product will be less valuable to that broker-dealer
because it does not provide information about the venue to which it is
directing its orders. Data from the competing venue to which the
broker-dealer is directing more orders will become correspondingly more
valuable.
Similarly, vendors provide price discipline for proprietary data
products because they control the primary means of access to end users.
Vendors impose price restraints based upon their business models. For
example, vendors that assess a surcharge on data they sell may refuse
to offer proprietary products that end users will not purchase in
sufficient numbers. Internet portals impose a discipline by providing
only data that will enable them to attract ``eyeballs'' that contribute
to their advertising revenue. Retail broker-dealers offer their retail
customers proprietary data only if it promotes trading and generates
sufficient commission revenue. Although the business models may differ,
these vendors' pricing discipline is the same: They can simply refuse
to purchase any proprietary data product that fails to provide
sufficient value. Exchanges, TRFs, and other producers of proprietary
data products must understand and respond to these varying business
models and pricing disciplines in order to market proprietary data
products successfully. Moreover, the Exchange believes that market data
products can enhance order flow by providing more widespread
distribution of information about transactions in real time, thereby
encouraging wider participation in the market by investors with access
to the internet or television. Conversely, the value of such products
to Distributors and investors decreases if order flow falls, because
the products contain less content.
In this environment, there is no economic basis for regulating
maximum prices for one of the joint products in an industry in which
suppliers face competitive constraints with regard to the joint
offering. Such regulation is unnecessary because an ``excessive'' price
for one of the joint products will ultimately have to be reflected in
lower prices for other products sold by the firm, or otherwise the firm
will experience a loss in the volume of its sales that will be adverse
to its overall profitability. In other words, an increase in the price
of data will ultimately have to be accompanied by a decrease in the
cost of executions, or the volume of both data and executions will
fall.\23\
---------------------------------------------------------------------------

\23\ Cf. Ohio v. American Express, No. 16-1454 (S. Ct. June 25,
2018), https://www.supremecourt.gov/opinions/17pdf/16-1454_5h26.pdf
(recognizing the need to analyze both sides of a two sided platform
market in order to determine its competitiveness).
---------------------------------------------------------------------------

Moreover, the level of competition and contestability in the market
is evident in the numerous alternative venues that compete for order
flow, including SRO markets, 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. It is common for broker-dealers to further 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, broker-dealers, 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 broker-dealer is currently permitted to produce
proprietary data products, and many currently do or have announced
plans to do so, including Nasdaq, NYSE, NYSE American, NYSE Arca, IEX,
and BATS/Direct Edge.

[[Page 40595]]

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.\24\
---------------------------------------------------------------------------

\24\ 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 rule-comments@sec.gov. Please include
File Number SR-BX-2018-036 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-2018-036. 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 website (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 website 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-2018-036 and should be submitted on
or before September 5, 2018.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

\25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-17491 Filed 8-14-18; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 40591

amount of the opportunity; then the 13. Any transaction fee 12 (including 16. If the Holders own in the aggregate
amount invested by each such party will break-up or commitment fees but more than 25 percent of the Shares of
be allocated among them pro rata based excluding broker’s fees contemplated by a Regulated Fund, then the Holders will
on each party’s capital available for section 17(e) of the Act, as applicable), vote such Shares as directed by an
investment in the asset class being received in connection with a Co- independent third party when voting on
allocated, up to the amount proposed to Investment Transaction will be (1) the election of trustees; (2) the
be invested by each. distributed to the participating removal of one or more trustees; or (3)
(d) The acquisition of Follow-On Regulated Funds and Affiliated all other matters under either the Act or
Investments as permitted by this Accounts on a pro rata basis based on applicable State law affecting the
condition will be considered a Co- the amounts they invested or Board’s composition, size or manner of
Investment Transaction for all purposes committed, as the case may be, in such election.
Co-Investment Transaction. If any 17. Each Regulated Fund’s chief
and subject to the other conditions set
transaction fee is to be held by the compliance officer, as defined in Rule
forth in the application.
Adviser pending consummation of the 38a–1(a)(4) under the Act, will prepare
9. The Independent Trustees of each transaction, the fee will be deposited an annual report for its Board each year
Regulated Fund will be provided into an account maintained by the that evaluates (and documents the basis
quarterly for review all information Adviser at a bank or banks having the of that evaluation) the Regulated Fund’s
concerning Potential Co-Investment qualifications prescribed in section compliance with the terms and
Transactions and Co-Investment 26(a)(1) of the Act, and the account will conditions of the application and the
Transactions, including investments earn a competitive rate of interest that procedures established to achieve such
made by other Regulated Funds and the will also be divided pro rata among the compliance.
Affiliated Accounts that the Regulated participating Regulated Funds and For the Commission, by the Division of
Fund considered but declined to Affiliated Accounts based on the Investment Management, under delegated
participate in, so that the Independent amounts they invest in such Co- authority.
Trustees may determine whether all Investment Transaction. None of the Eduardo A. Aleman,
investments made during the preceding Affiliated Accounts, the Advisers, the Assistant Secretary.
quarter, including those investments other Regulated Funds or any affiliated [FR Doc. 2018–17497 Filed 8–14–18; 8:45 am]
which the Regulated Fund considered person of the Regulated Funds or BILLING CODE 8011–01–P
but declined to participate in, comply Affiliated Accounts will receive
with the conditions of the Order. In additional compensation or
addition, the Independent Trustees will remuneration of any kind as a result of SECURITIES AND EXCHANGE
consider at least annually the continued or in connection with a Co-Investment COMMISSION
appropriateness for the Regulated Fund Transaction (other than (a) in the case
[Release No. 34–83810; File No. SR–BX–
of participating in new and existing Co- of the Regulated Funds and the 2018–036]
Investment Transactions. Affiliated Accounts, the pro rata
10. Each Regulated Fund will transaction fees described above and Self-Regulatory Organizations; Nasdaq
maintain the records required by section fees or other compensation described in BX, Inc.; Notice of Filing and
57(f)(3) of the Act as if each of the condition 2(c)(iii)(C); and (b) in the case Immediate Effectiveness of Proposed
Regulated Funds were a business of the Advisers, investment advisory Rule Change To Incorporate BX Rule
development company (as defined in fees paid in accordance with the 7039 Into the Market Data Enterprise
section 2(a)(48) of the Act) and each of agreements between the Advisers and License Proposed by the Nasdaq
the investments permitted under these the Regulated Funds or the Affiliated Stock Market LLC
conditions were approved by the Accounts).
14. The Proprietary Accounts will not August 9, 2018.
Required Majority under section 57(f) of Pursuant to Section 19(b)(1) of the
the Act. be permitted to invest in a Potential Co-
Investment Transaction except to the Securities Exchange Act of 1934
11. No Independent Trustee of a extent the demand from the Regulated (‘‘Act’’),1 and Rule 19b–4 thereunder,2
Regulated Fund will also be a director, Funds and the other Affiliated Accounts notice is hereby given that on July 27,
trustee, general partner, managing is less than the total investment 2018, Nasdaq BX, Inc. (‘‘BX’’ or
member or principal, or otherwise an opportunity. ‘‘Exchange’’) filed with the Securities
‘‘affiliated person’’ (as defined in the 15. The Advisers will each maintain and Exchange Commission (‘‘SEC’’ or
Act), of an Affiliated Account. policies and procedures reasonably ‘‘Commission’’) the proposed rule
12. The expenses, if any, associated designed to ensure compliance with the change as described in Items I, II, and
with acquiring, holding or disposing of foregoing conditions. These policies and III, below, which Items have been
any securities acquired in a Co- procedures will require, among other prepared by the Exchange. The
Investment Transaction (including, things, that the applicable Adviser will Commission is publishing this notice to
without limitation, the expenses of the be notified of all Potential Co- solicit comments on the proposed rule
distribution of any such securities Investment Transactions that fall within change from interested persons.
registered for sale under the Securities a Regulated Fund’s then-current This amendment is immediately
Act of 1933) will, to the extent not Objectives and Strategies and will be effective upon filing.3
payable by an Adviser under the given sufficient information to make its
daltland on DSKBBV9HB2PROD with NOTICES

1 15 U.S.C. 78s(b)(1).
investment advisory agreements with independent determination and
2 17 CFR 240.19b–4.
the Regulated Funds and the Affiliated recommendations under conditions 1, 3 This proposed change was initially filed on July
Accounts be shared by the Affiliated 2(a), 7 and 8. 3, 2018, and became immediately effective on that
Accounts and the Regulated Funds in date. See SR–BX–2018–031, available at http://
12 Applicants are not requesting and the staff is nasdaq.cchwallstreet.com/. It was subsequently
proportion to the relative amounts of the
not providing any relief for transaction fees refiled on July 17, 2018. See SR–BX–2018–034,
securities held or to be acquired or received in connection with any Co-Investment available at http://nasdaq.cchwallstreet.com/. A
disposed of, as the case may be. Transaction. Continued

VerDate Sep<11>2014 18:28 Aug 14, 2018 Jkt 244001 PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 E:\FR\FM\15AUN1.SGM 15AUN1

Document Created: 2018-08-15 01:25:34
Document Modified: 2018-08-15 01:25:34

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		83 FR 40591