83 FR 4092 - Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Fees at Rule 7023
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 19 (January 29, 2018)
Federal Register Volume 83, Issue 19 (January 29, 2018)
| Page Range | 4092-4097 | |
| FR Document | 2018-01534 |
[Federal Register Volume 83, Number 19 (Monday, January 29, 2018)] [Notices] [Pages 4092-4097] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-01534] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82567; File No. SR-BX-2018-005] Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Fees at Rule 7023 January 23, 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 January 18, 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. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its fees at Rule 7023 to modify the fee schedule for BX TotalView to reflect substantial enhancements to this product since the current BX TotalView fees were set in 2010. 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 [[Page 4093]] 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 adjust the fee schedule for BX TotalView to reflect substantial enhancements to this product since the current non-display usage fees and enterprise license fees were set in 2010.\3\ Specifically, the Exchange proposes to: (i) Introduce a monthly non- display usage \4\ fee of $55 per Professional Subscriber \5\ for BX TotalView based upon Direct Access; and (ii) increase the monthly enterprise license fee for non-display usage of BX TotalView based upon Direct Access from $16,000 to $20,000. --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release No. 62001 (April 29, 2010), 75 FR 25014 (May 6, 2010) (SR-BX-2010-027). \4\ Non-Display usage is any method of accessing Exchange information that does not involve the display of such data on a screen or other mechanism designed for access or use by a natural person or persons. Non-Display usage applies to automated order generation and program trading, algorithmic trading and order routing, and back office processes such as surveillance, order verification, and risk management. See Id. (establishing a Non- Display usage cap for internal distributors of BX TotalView). \5\ A ``Subscriber'' is any access that a distributor of data entitlement package(s) provides to: (1) Access the information in the data entitlement package(s); or (2) communicate with the distributor so as to cause the distributor to access the information in the data entitlement package(s). See BX Rule 7023(c). --------------------------------------------------------------------------- BX TotalView BX TotalView, like Nasdaq and PSX TotalView, is a real-time market data feed that provides access to every displayed quote and order at every price level in Nasdaq-, NYSE-, NYSE American-, NYSE Arca-, CBOE-, and IEX-listed securities. The product also provides anonymous interest and administrative messages relating to trading halts and symbol directory messages.\6\ --------------------------------------------------------------------------- \6\ Symbol directory messages include basic security data such as the market tier and Financial Status Indicator. --------------------------------------------------------------------------- BX TotalView is available for a monthly per Subscriber fee of $20 for either display or non-display usage of Nasdaq issues, and an additional monthly per Subscriber fee of $20 for NYSE and regional issues. A ``Subscriber'' is ``any access that a distributor of the data entitlement package(s) provides to: (1) Access the information in the data entitlement package(s); or (2) communicate with the distributor so as to cause the distributor to access the information in the data entitlement package(s).'' \7\ The current monthly charges are based on the number of Subscribers, without regard to whether a Subscriber is used for non-display or display usage. --------------------------------------------------------------------------- \7\ See Note 5. --------------------------------------------------------------------------- For firms that utilize BX TotalView internally for non-display purposes, the product may also be purchased through an enterprise license fee of $16,000 per month for unlimited internal use of non- display data. This enterprise license, which provides an alternative to monthly per Subscriber fees, is designed to relieve firms with a large number of internal Subscribers from the administrative burden of identifying, tracking and reporting such Subscribers. Proposed Changes BX TotalView is one of a number of market information services offered by the Exchange. Such services are inextricably connected to trade execution: Market information services require trade orders to provide useful information, and investors utilize market information to make trading decisions. Over the seven years that have elapsed since the current fee schedule for non-display usage and enterprise licenses for BX TotalView were introduced,\8\ the Exchange has invested in an array of upgrades to both its trade execution and market information services, which have increased the value of these services overall, and BX TotalView in particular.\9\ --------------------------------------------------------------------------- \8\ See Securities Exchange Act Release No. 62001 (April 29, 2010), 75 FR 25014 (May 6, 2010) (SR-BX-2010-027). \9\ Many of these upgrades are common to several Nasdaq- affiliated exchanges, as improvements to the products and services of one exchange are reproduced in other exchanges. --------------------------------------------------------------------------- The Exchange proposes to adjust its fee schedule for BX TotalView to reflect the value of the many investments improving the product, which include:Glimpse Snapshot Facility. In 2013, the Exchange substantially updated the Glimpse snapshot facility, which allows firms to obtain a snapshot of the order book at any point during the trading day. The service may be used to validate order book displays or to recover from data gaps during the trading day.\10\ --------------------------------------------------------------------------- \10\ See http://www.nasdaqtrader.com/TraderNews.aspx?id=dtn2013-33. --------------------------------------------------------------------------- Enhanced Data Feed. In 2014, the Exchange enhanced the BX TotalView data feed by: (i) Converting to binary codes to make more efficient use of bandwidth and to provide greater timestamp granularity; (ii) adding a symbol directory message to identify a security and its key characteristics; and (iii) adding the Market Wide Circuit Breaker (``MWCB'') Decline Level message to inform recipients of the setting for MWCB breach points for the trading day, and an MWCB Status Level Message to inform data recipients when an MWCB has breached an established level.\11\ --------------------------------------------------------------------------- \11\ See http://www.nasdaqtrader.com/TraderNews.aspx?id=dtn2013-45 and http://www.nasdaqtrader.com/TraderNews.aspx?id=dtn2013-33. --------------------------------------------------------------------------- Reg SHO Circuit breaker. In 2010, the Exchange instituted a Regulation SHO restricted indicator message. This message is disseminated if the price of the security declines by 10 percent or more from the prior closing value during normal market hours.\12\ --------------------------------------------------------------------------- \12\ See http://www.nasdaqtrader.com/TraderNews.aspx?id=dtn2010-023. --------------------------------------------------------------------------- Geographic Diversity. In 2015, all of the Nasdaq Exchanges moved their Disaster Recovery (``DR'') center from Ashburn, Virginia, to Chicago, Illinois. As a result, customers can both receive market data and send orders through the Chicago facility, potentially reducing overall networking costs. Adding such geographic diversity helps protect the market in the event of a catastrophic event impacting the entire East Coast.\13\ --------------------------------------------------------------------------- \13\ See http://www.nasdaqtrader.com/TraderNews.aspx?id=dtn2015-17. --------------------------------------------------------------------------- Chicago ``B'' Feeds. In 2017, all of the Nasdaq exchanges added a multicast IP address for proprietary equity and options data feeds in Chicago, allowing firms the choice of having additional redundancy to ensure data continuity.\14\ --------------------------------------------------------------------------- \14\ See http://www.nasdaqtrader.com/TraderNews.aspx?id=dtn2017-02. --------------------------------------------------------------------------- Extended Transmission Hours. In 2014, the Exchange began to transmit data between 3:00 and 4:00 a.m. Eastern, approximately three hours earlier than previously, to provide customers with an opportunity to test connectivity before pre-market sessions open at 7:00 a.m. Eastern.\15\ --------------------------------------------------------------------------- \15\ The extended schedule for data transmission did not extend pre-market trading hours. See http://www.nasdaqtrader.com/TraderNews.aspx?id=dtn2014-08. --------------------------------------------------------------------------- This proposed fee change for BX TotalView differs from the corresponding fee change recently proposed for PSX TotalView \16\ in that: (i) The monthly non-display usage fee for Professional Subscribers is proposed to be $50 for PSX TotalView, and $55 for BX TotalView, and (ii) the proposed monthly enterprise license fee for non-display usage of PSX TotalView is $17,000, while the corresponding fee proposal for BX TotalView is $20,000. [[Page 4094]] These differences are justified by differences in the usage of the two exchanges, as well as certain network investments that are unique to BX. --------------------------------------------------------------------------- \16\ See SR-PHLX-2018-10. --------------------------------------------------------------------------- BX has approximately 25 percent more market participants than PSX, as measured by Market Participant Identifier (``MPID''). This greater number of market participants results in more trades: BX processed approximately twice the number of trading messages as PSX in 2017, and, as of February 2017, BX had nearly 5 times more add/remove liquidity than PSX. These differences in usage are reflected in significantly different growth rates: The peak one second transaction rate for BX increased by 78 percent between 2012 and 2017, while the same measure for PSX increased by only 20 percent over the same period. BX also has invested in two network enhancements that are unique to that Exchange: Price Improvement Indicator. In 2014, the Exchange introduced a Price Improvement Indicator (``PII'') \17\ message. The purpose of this indicator is to denote when a Retail Price Improvement order better than the best displayed bid and/or offer price for a given security is available.\18\ --------------------------------------------------------------------------- \17\ See Securities Exchange Act Release No. 73410 (October 23, 2014), 79 FR 64447 (October 29, 2014) (SR-BX-2014-048). \18\ See http://www.nasdaqtrader.com/TraderNews.aspx?id=dtn2014-18. --------------------------------------------------------------------------- Additional Data Feed at Carteret. In 2017, the Exchange added a new source IP address for the BX data feeds at its Carteret facility, providing additional redundancy to ensure data continuity.\19\ --------------------------------------------------------------------------- \19\ See http://www.nasdaqtrader.com/TraderNews.aspx?id=dtn2017-16. --------------------------------------------------------------------------- The proposed price increases are also justified by the fact that, while usage of the BX exchange increased and the Exchange invested in a number of enhancements to its data feed, fees for BX fell in real terms as a result of price inflation.\20\ The proposed increase to the monthly non-display usage fee amounts to an annual increase of approximately 4.65 percent over the relevant period, and the proposed enterprise license fee increase translates to an annual increase of approximately 3.24 percent over the relevant period, both of which are partially offset by inflation. --------------------------------------------------------------------------- \20\ The Consumer Price Index indicates a price increase of approximately 13 percent between April 2010 and November 2017. See https://www.bls.gov/data/inflation_calculator.htm. --------------------------------------------------------------------------- As a result of these substantial upgrades, the Exchange proposes two substantive changes to the BX TotalView fee schedule: (i) Introduce a monthly non-display usage fee of $55 per Subscriber based upon Direct Access; and (ii) increase the monthly enterprise license fee for non- display usage based upon Direct Access from $16,000 to $20,000.\21\ --------------------------------------------------------------------------- \21\ In addition to these two substantive changes, the Exchange proposes four technical changes. First, the Exchange proposes to add the phrase ``for display usage'' to Rule 7023(a)(1) to distinguish between display usage fees, which shall remain unchanged, and non- display usage fees, which will increase. Second, the Exchange proposes to change the reference to per Subscriber fees in new Rule 7023(a)(3) from (a)(1) to (a)(2) because non-display fees have been moved from section (a)(1) to (a)(2) for Professionals that take the feed through Direct Access. Third, the Exchange proposes to renumber former Rules 7023(a)(2) and (a)(3) to Rules 7023(a)(3) and (a)(4), respectively, to reflect the introduction of new Rule 7023(a)(2). Fourth, the Exchange proposes to revise proposed Rule 7023(a)(4) (``Free-Trial Offers'') to reflect the new fee set forth in proposed Rule 7023(a)(2). --------------------------------------------------------------------------- The current fee structure allows firms to purchase BX TotalView for all issues for display or non-display usage by professionals for a per Subscriber monthly charge of $40 ($20 for Nasdaq issues and $20 for NYSE and regional issues). The Exchange proposes to remove non-display usage based upon Direct Access from those fees, and institute a separate fee for non-display usage based upon Direct Access for all Nasdaq, NYSE and regional issues.\22\ Fees for non-professionals will not change. The effect of this proposal would be to leave the total fees for display usage and non-display usage not based upon Direct Access by professionals for all issues unchanged at $40, but to increase the monthly fee to $55 per month for non-display usage by professionals based upon Direct Access.\23\ With this change, the pricing structure for BX TotalView will conform to the pricing structure for Nasdaq TotalView (which has differential fees for display and non-display usage),\24\ the proposed pricing structure for PSX TotalView (proposed in a separate filing for the PSX Exchange),\25\ as well as the non-display fee structure for NYSE and other exchanges.\26\ As noted elsewhere, differential pricing for display and non-display usage has become the industry norm. --------------------------------------------------------------------------- \22\ Any Subscriber within a firm that obtains Exchange data through a Subscriber from that same firm with Direct Access has obtained such data ``based upon Direct Access.'' \23\ ``Direct Access'' means a telecommunications interface with the Exchange for receiving Exchange data, or receiving an Exchange data feed within the Exchange co-location facility, or receiving Exchange data via an Extranet access provider or other such provider that is fee-liable under Rule 7025. See BX Rule 7019(c). \24\ See Nasdaq Rule 7023(b)(2). \25\ See SR-PHLX-2018-10. BX fees are higher than PSX fees because of differences in usage between the two exchanges, as well as differences in infrastructure investments, as described above. \26\ See, e.g., NYSE PDP Market Data Pricing (November 3, 2017), found at https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf. --------------------------------------------------------------------------- The second proposal will increase the monthly enterprise license fee for internal non-display usage based upon Direct Access from $16,000 to $20,000. BX TotalView is optional in that the Exchange is not required to offer it and broker-dealers are not required to purchase it. Firms can discontinue use at any time and for any reason, including an assessment of the fees charged. The proposed change does not change the cost of any other Exchange product. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\27\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\28\ 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. --------------------------------------------------------------------------- \27\ 15 U.S.C. 78f(b). \28\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- 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.'' \29\ --------------------------------------------------------------------------- \29\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). --------------------------------------------------------------------------- Likewise, in NetCoalition v. Securities and Exchange Commission \30\ (``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.\31\ 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.'' \32\ --------------------------------------------------------------------------- \30\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \31\ See NetCoalition, at 534-535. \32\ Id. at 537. --------------------------------------------------------------------------- Further, ``[n]o one disputes that competition for order flow is `fierce.' [[Page 4095]] . . . 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'. . . .'' \33\ --------------------------------------------------------------------------- \33\ Id. at 539 (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)). --------------------------------------------------------------------------- The Exchange believes that the proposed fee changes are equitable allocations of reasonable dues, fees and other charges in accordance with Section 6(b)(4) of the Act, and not designed to permit unfair discrimination between customers, issuers, brokers, or dealers in accordance with Section 6(b)(5) of the Act. Both the monthly non- display per Subscriber usage fee and the monthly enterprise license fee for non-display usage are equitable allocations because, as has been widely recognized, display and non-display functions provide different value to the consumer, and it has become standard industry practice to charge differing fees for these two different modes of data consumption. In addition, discounts based on high levels of usage such as the enterprise license for non-display usage have routinely been adopted by exchanges and approved as equitable allocations of reasonable dues, fees and other charges.\34\ As such, the proposed fees vary solely based on reasonable and well-established industry norms regarding types of data usage, as discussed above. --------------------------------------------------------------------------- \34\ For example, the Commission has approved pricing discounts for market data under Nasdaq Rule 7023. --------------------------------------------------------------------------- The proposed changes do not permit unfair discrimination between customers, issuers, brokers, or dealers because the Exchange makes all services and products subject to these fees available on a non- discriminatory basis to similarly-situated recipients. The proposed fees are structured in a manner comparable to the corresponding fees of Nasdaq already in effect, and compare favorably to fees charged by Nasdaq for the same product. The fees are uniform except with respect to reasonable and well-established distinctions among classes of data as discussed above. The Exchange also distinguishes between usage based on Direct Access and other methods of connection: Non-display usage that is based upon Direct Access will be charged $55 per month, while other non- display usage will be charged a total of $40 per month for all issues. This distinction is an equitable allocation of reasonable dues, fees and other charges because Direct Access provides the customer with source information in the original raw format, which provides customers with certainty that they are receiving data without conflation or manipulation. This distinction does not permit unfair discrimination between customers, issuers, brokers, or dealers because the price differential is based on the difference in value to the customer. In addition, the Exchange proposes to introduce clarifying language stating that the enterprise license for non-display data will be available only to firms with Direct Access. This is an equitable allocation of reasonable dues, fees and other charges because firms with sufficient activity to purchase an enterprise license have a Direct Access connection. As such, the proposed language simply clarifies how the enterprise license will be used with respect to Direct Access, in a similar manner to the way that Direct Access is addressed in proposed Rules 7023(a)(1) and (a)(2), without affecting the service of any specific customer. This proposed change does not permit unfair discrimination between customers, issuers, brokers, or dealers for the same reason: The proposed language is simply a clarification that will not lead to any actual difference in usage. The Act does not prohibit all distinctions among customers, but rather discrimination that is unfair. 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.'' \35\ Accordingly, ``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.'' \36\ The proposed fees, like all market data fees, are constrained by the Exchange's need to compete for order flow as discussed below, and are subject to competition from other exchanges and among broker-dealers for customers. If the Exchange is incorrect in its assessment of price, it may lose market share as a result. --------------------------------------------------------------------------- \35\ Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21). \36\ Id. --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. BX TotalView is a type of depth-of-book product, which consists of ``outstanding limit orders to buy stock at prices lower than, or to sell stocks at prices higher than, the best prices on each exchange.'' \37\ The question of whether the prices of depth-of-book products are constrained by competitive forces was examined in 2016 by an Administrative Law Judge in an application for review by the Securities Industry and Financial Markets Association of actions taken by Self- Regulatory Organizations.\38\ After a four-day hearing and presentation of substantial evidence, the administrative law judge stated that ``competition plays a significant role in restraining exchange pricing of depth-of-book products'' \39\ because ``depth-of-book products from different exchanges function as substitutes for each other,'' \40\ and, as such, ``the threat of substitution from depth-of-book customers constrains their depth-of-book prices.'' \41\ As a result, ``[s]hifts in order flow and threats of shifting order flow provide a significant competitive force in the [[Page 4096]] pricing of . . . depth-of-book data.'' \42\ The judge concluded that ``[u]nder the standards articulated by the Commission and D.C. Circuit, the Exchanges have shown that they are subject to significant competitive forces in setting fees for depth-of-book data: The availability of alternatives to the Exchanges' depth-of-book products, and the Exchanges' need to attract order flow from market participants constrains prices.'' \43\ --------------------------------------------------------------------------- \37\ Securities Industry and Financial Markets Association, Initial Decision Release No. 1015, 2016 SEC LEXIS 2278 at 4 (A.L.J. June 1, 2016) (quoting NetCoalition v. SEC, 615F3d 525, 529-30 (D.C. Cir. 2010)). \38\ Id. \39\ Id. at 92. \40\ Id. \41\ Id. at 93. \42\ Id. at 104. \43\ Id. at 86. --------------------------------------------------------------------------- The proposed changes will: (i) Introduce a monthly non-display usage fee of $55 per Subscriber for BX TotalView based upon Direct Access; and (ii) increase the monthly enterprise license fee for non- display usage of BX TotalView based upon Direct Access from $16,000 to $20,000. These proposed price changes will not impose any burden on competition because market data fees are but one aspect of the overall competition among exchanges to solicit order flow; if the overall price of interacting with the Exchange rises above competitive levels because of market data fees, market forces would cause the Exchange to lose market share. Market forces constrain fees for BX TotalView, as well as other market data fees, in the competition among exchanges and other entities to attract order flow and in the competition among Distributors for customers. Order flow is the ``life blood'' of the exchanges. Broker- dealers currently have numerous alternative venues for their order flow, including self-regulatory organization (``SRO'') markets, as well as internalizing broker-dealers (``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 Trade Reporting Facilities (``TRFs'') compete to attract internalized transaction reports. The existence of fierce competition for order flow implies a high degree of price sensitivity on the part of BDs, which may readily reduce costs by directing orders toward the lowest-cost trading venues. The level of competition and contestability in the market for order flow is demonstrated by the numerous examples of entrants that swiftly grew into some of the largest electronic trading platforms and proprietary data producers: Archipelago, Bloomberg Tradebook, Island, RediBook, Attain, TracECN, BATS Trading and BATS/Direct Edge. A proliferation of dark pools and other ATSs operate profitably with fragmentary shares of consolidated market volume. For a variety of reasons, competition from new entrants, especially for order execution, has increased dramatically over the last decade. Each SRO, TRF, ATS, and BD that competes for order flow is permitted to produce proprietary data products. Many currently do or have announced plans to do so, including NYSE, NYSE American, NYSE Arca, CBOE, and IEX. This is because Regulation NMS deregulated the market for proprietary data. While BDs had previously published their proprietary data individually, Regulation NMS encourages market data vendors and BDs to produce proprietary products cooperatively in a manner never before possible. Order routers and market data vendors can facilitate production of proprietary data products for single or multiple BDs. The potential sources of proprietary products are virtually limitless. The markets for order flow and proprietary data are inextricably linked: A trading platform cannot generate market information unless it receives trade orders. As a result, the competition for order flow constrains the prices that platforms can charge for proprietary data products. Firms make decisions on how much and what types of data to consume based on the total cost of interacting with BX and other exchanges. Data fees are but one factor in a total platform analysis. If the cost of the product exceeds its expected value, the broker- dealer will choose not to buy it. A supracompetitive increase in the fees charged for either transactions or proprietary data has the potential to impair revenues from both products. In this manner, the competition for order flow will constrain prices for proprietary data products. Competition among Distributors provides another form of price discipline for proprietary data products. If the price of BX TotalView were set above competitive levels, Distributors purchasing BX TotalView would be at a disadvantage relative to their competitors, and would therefore either curtail their purchase or forego the product altogether. Market forces constrain the price of depth-of-book data such as BX TotalView through the competition for order flow and in the competition among vendors for customers. If the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. 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.\44\ --------------------------------------------------------------------------- \44\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-BX-2018-005 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-2018-005. 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 [[Page 4097]] 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-2018-005 and should be submitted on or before February 20, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\45\ --------------------------------------------------------------------------- \45\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-01534 Filed 1-26-18; 8:45 am] BILLING CODE 8011-01-P
![4092 Federal Register / Vol. 83, No. 19 / Monday, January 29, 2018 / Notices
C. Self-Regulatory Organization’s action is necessary or appropriate in the Number SR–NASDAQ–2018–005, and
Statement on Comments on the public interest, for the protection of should be submitted on or before
Proposed Rule Change Received From investors, or otherwise in furtherance of February 20, 2018.
Members, Participants, or Others the purposes of the Act. If the For the Commission, by the Division of
No written comments were either Commission takes such action, the Trading and Markets, pursuant to delegated
solicited or received. Commission shall institute proceedings authority.32
to determine whether the proposed rule Eduardo A. Aleman,
III. Date of Effectiveness of the should be approved or disapproved. Assistant Secretary.
Proposed Rule Change and Timing for
Commission Action IV. Solicitation of Comments [FR Doc. 2018–01541 Filed 1–26–18; 8:45 am]
BILLING CODE 8011–01–P
Because the proposed rule change Interested persons are invited to
submit written data, views, and
does not (i) significantly affect the
arguments concerning the foregoing,
protection of investors or the public SECURITIES AND EXCHANGE
including whether the proposed rule
interest; (ii) impose any significant COMMISSION
change is consistent with the Act.
burden on competition; and (iii) become
Comments may be submitted by any of [Release No. 34–82567; File No. SR–BX–
operative for 30 days from the date on 2018–005]
the following methods:
which it was filed, or such shorter time
as the Commission may designate if Electronic Comments Self-Regulatory Organizations; Nasdaq
consistent with the protection of • Use the Commission’s internet BX, Inc.; Notice of Filing and
investors and the public interest, the comment form (http://www.sec.gov/ Immediate Effectiveness of Proposed
proposed rule change has become rules/sro.shtml); or Rule Change To Amend Its Fees at
effective pursuant to Section 19(b)(3)(A) • Send an email to rule-comments@ Rule 7023
of the Act 27 and Rule 19b–4(f)(6) sec.gov. Please include File Number SR–
thereunder.28 January 23, 2018.
NASDAQ–2018–005 on the subject line.
A proposed rule change filed under Pursuant to Section 19(b)(1) of the
Rule 19b–4(f)(6) 29 normally does not Paper Comments Securities Exchange Act of 1934
become operative for 30 days after the • Send paper comments in triplicate (‘‘Act’’),1 and Rule 19b–4 thereunder,2
date of filing. However, pursuant to to Secretary, Securities and Exchange notice is hereby given that on January
Rule 19b–4(f)(6)(iii),30 the Commission Commission, 100 F Street NE, 18, 2018, Nasdaq BX, Inc. (‘‘BX’’ or
may designate a shorter time if such Washington, DC 20549–1090. ‘‘Exchange’’) filed with the Securities
action is consistent with the protection All submissions should refer to File and Exchange Commission (‘‘SEC’’ or
of investors and the public interest. The Number SR–NASDAQ–2018–005. This ‘‘Commission’’) the proposed rule
Exchange has asked the Commission to file number should be included on the change as described in Items I, II, and
waive the 30-day operative delay so that subject line if email is used. To help the III below, which Items have been
the proposal may become operative Commission process and review your prepared by the Exchange. The
upon filing. The Commission believes comments more efficiently, please use Commission is publishing this notice to
that waiving the 30-day operative delay only one method. The Commission will solicit comments on the proposed rule
is consistent with the protection of post all comments on the Commission’s change from interested persons.
investors and the public interest as it internet website (http://www.sec.gov/ I. Self-Regulatory Organization’s
will allow the Exchange to align its rules/sro.shtml). Copies of the Statement of the Terms of Substance of
initial options listing standards with submission, all subsequent the Proposed Rule Change
that of its affiliates, and the Exchange’s amendments, all written statements
proposal does not raise new issues. The Exchange proposes to amend its
with respect to the proposed rule
Accordingly, the Commission hereby fees at Rule 7023 to modify the fee
change that are filed with the
waives the 30-day operative delay schedule for BX TotalView to reflect
Commission, and all written
requirement and designates the substantial enhancements to this
communications relating to the
proposed rule change as operative upon product since the current BX TotalView
proposed rule change between the
filing.31 fees were set in 2010.
Commission and any person, other than The text of the proposed rule change
At any time within 60 days of the those that may be withheld from the
filing of the proposed rule change, the is available on the Exchange’s website at
public in accordance with the http://nasdaqbx.cchwallstreet.com/, at
Commission summarily may provisions of 5 U.S.C. 552, will be
temporarily suspend such rule change if the principal office of the Exchange, and
available for website viewing and at the Commission’s Public Reference
it appears to the Commission that such printing in the Commission’s Public Room.
Reference Room, 100 F Street NE,
27 15 U.S.C. 78s(b)(3)(A). Washington, DC 20549, on official II. Self-Regulatory Organization’s
28 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– business days between the hours of Statement of the Purpose of, and
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent 10:00 a.m. and 3:00 p.m. Copies of the Statutory Basis for, the Proposed Rule
to file the proposed rule change, along with a brief filing also will be available for Change
description and text of the proposed rule change, inspection and copying at the principal In its filing with the Commission, the
at least five business days prior to the date of filing office of the Exchange. All comments
of the proposed rule change, or such shorter time Exchange included statements
received will be posted without change.
sradovich on DSK3GMQ082PROD with NOTICES
as designated by the Commission. The Exchange concerning the purpose of and basis for
has satisfied this requirement. Persons submitting comments are the proposed rule change and discussed
29 17 CFR 240.19b–4(f)(6). cautioned that we do not redact or edit any comments it received on the
30 17 CFR 240.19b–4(f)(6)(iii).
personal identifying information from proposed rule change. The text of these
31 For purposes only of waiving the 30-day
comment submissions. You should
operative delay, the Commission has also
considered the proposed rule’s impact on
submit only information that you wish 32 17 CFR 200.30–3(a)(12).
efficiency, competition, and capital formation. See to make available publicly. All 1 15 U.S.C. 78s(b)(1).
15 U.S.C. 78c(f). submissions should refer to File 2 17 CFR 240.19b–4.
VerDate Sep<11>2014 18:19 Jan 26, 2018 Jkt 244001 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 E:\FR\FM\29JAN1.SGM 29JAN1](https://thefederalregister.org/doc/83_FR_4111/page/1.svg)
![4094 Federal Register / Vol. 83, No. 19 / Monday, January 29, 2018 / Notices
These differences are justified by Access; and (ii) increase the monthly display usage has become the industry
differences in the usage of the two enterprise license fee for non-display norm.
exchanges, as well as certain network usage based upon Direct Access from The second proposal will increase the
investments that are unique to BX. $16,000 to $20,000.21 monthly enterprise license fee for
BX has approximately 25 percent The current fee structure allows firms internal non-display usage based upon
more market participants than PSX, as to purchase BX TotalView for all issues Direct Access from $16,000 to $20,000.
measured by Market Participant for display or non-display usage by BX TotalView is optional in that the
Identifier (‘‘MPID’’). This greater professionals for a per Subscriber Exchange is not required to offer it and
number of market participants results in monthly charge of $40 ($20 for Nasdaq broker-dealers are not required to
more trades: BX processed issues and $20 for NYSE and regional purchase it. Firms can discontinue use
approximately twice the number of issues). The Exchange proposes to at any time and for any reason,
trading messages as PSX in 2017, and, remove non-display usage based upon including an assessment of the fees
as of February 2017, BX had nearly 5 Direct Access from those fees, and charged.
times more add/remove liquidity than institute a separate fee for non-display The proposed change does not change
PSX. These differences in usage are usage based upon Direct Access for all the cost of any other Exchange product.
reflected in significantly different Nasdaq, NYSE and regional issues.22 2. Statutory Basis
growth rates: The peak one second Fees for non-professionals will not
The Exchange believes that its
transaction rate for BX increased by 78 change. The effect of this proposal proposal is consistent with Section 6(b)
percent between 2012 and 2017, while would be to leave the total fees for of the Act,27 in general, and furthers the
the same measure for PSX increased by display usage and non-display usage not objectives of Sections 6(b)(4) and 6(b)(5)
only 20 percent over the same period. based upon Direct Access by of the Act,28 in particular, in that it
BX also has invested in two network professionals for all issues unchanged at provides for the equitable allocation of
enhancements that are unique to that $40, but to increase the monthly fee to reasonable dues, fees and other charges
Exchange: $55 per month for non-display usage by among members and issuers and other
• Price Improvement Indicator. In professionals based upon Direct persons using any facility, and is not
2014, the Exchange introduced a Price Access.23 With this change, the pricing designed to permit unfair
Improvement Indicator (‘‘PII’’) 17 structure for BX TotalView will conform discrimination between customers,
message. The purpose of this indicator to the pricing structure for Nasdaq issuers, brokers, or dealers.
is to denote when a Retail Price TotalView (which has differential fees The Commission and the courts have
Improvement order better than the best for display and non-display usage),24 repeatedly expressed their preference
displayed bid and/or offer price for a the proposed pricing structure for PSX for competition over regulatory
given security is available.18 TotalView (proposed in a separate filing intervention in determining prices,
• Additional Data Feed at Carteret. In for the PSX Exchange),25 as well as the products, and services in the securities
2017, the Exchange added a new source non-display fee structure for NYSE and markets. In Regulation NMS, while
IP address for the BX data feeds at its other exchanges.26 As noted elsewhere, adopting a series of steps to improve the
Carteret facility, providing additional differential pricing for display and non- current market model, the Commission
redundancy to ensure data continuity.19 highlighted the importance of market
The proposed price increases are also 21 In addition to these two substantive changes,
forces in determining prices and SRO
justified by the fact that, while usage of the Exchange proposes four technical changes.
revenues and, also, recognized that
the BX exchange increased and the First, the Exchange proposes to add the phrase ‘‘for
display usage’’ to Rule 7023(a)(1) to distinguish current regulation of the market system
Exchange invested in a number of between display usage fees, which shall remain ‘‘has been remarkably successful in
enhancements to its data feed, fees for unchanged, and non-display usage fees, which will promoting market competition in its
BX fell in real terms as a result of price increase. Second, the Exchange proposes to change
broader forms that are most important to
inflation.20 The proposed increase to the the reference to per Subscriber fees in new Rule
7023(a)(3) from (a)(1) to (a)(2) because non-display investors and listed companies.’’ 29
monthly non-display usage fee amounts fees have been moved from section (a)(1) to (a)(2) Likewise, in NetCoalition v. Securities
to an annual increase of approximately for Professionals that take the feed through Direct and Exchange Commission 30
4.65 percent over the relevant period, Access. Third, the Exchange proposes to renumber (‘‘NetCoalition’’) the D.C. Circuit upheld
and the proposed enterprise license fee former Rules 7023(a)(2) and (a)(3) to Rules
7023(a)(3) and (a)(4), respectively, to reflect the the Commission’s use of a market-based
increase translates to an annual increase introduction of new Rule 7023(a)(2). Fourth, the approach in evaluating the fairness of
of approximately 3.24 percent over the Exchange proposes to revise proposed Rule market data fees against a challenge
relevant period, both of which are 7023(a)(4) (‘‘Free-Trial Offers’’) to reflect the new claiming that Congress mandated a cost-
partially offset by inflation. fee set forth in proposed Rule 7023(a)(2).
22 Any Subscriber within a firm that obtains based approach.31 As the court
As a result of these substantial Exchange data through a Subscriber from that same emphasized, the Commission ‘‘intended
upgrades, the Exchange proposes two firm with Direct Access has obtained such data in Regulation NMS that ‘market forces,
substantive changes to the BX ‘‘based upon Direct Access.’’ rather than regulatory requirements’
TotalView fee schedule: (i) Introduce a 23 ‘‘Direct Access’’ means a telecommunications
play a role in determining the market
monthly non-display usage fee of $55 interface with the Exchange for receiving Exchange
data, or receiving an Exchange data feed within the data . . . to be made available to
per Subscriber based upon Direct Exchange co-location facility, or receiving Exchange investors and at what cost.’’ 32
data via an Extranet access provider or other such Further, ‘‘[n]o one disputes that
17 See Securities Exchange Act Release No. 73410 provider that is fee-liable under Rule 7025. See BX competition for order flow is ‘fierce.’
(October 23, 2014), 79 FR 64447 (October 29, 2014) Rule 7019(c).
sradovich on DSK3GMQ082PROD with NOTICES
(SR–BX–2014–048). 24 See Nasdaq Rule 7023(b)(2).
27 15 U.S.C. 78f(b).
18 See http://www.nasdaqtrader.com/ 25 See SR–PHLX–2018–10. BX fees are higher
28 15 U.S.C. 78f(b)(4) and (5).
TraderNews.aspx?id=dtn2014-18. than PSX fees because of differences in usage
19 See http://www.nasdaqtrader.com/ 29 Securities Exchange Act Release No. 51808
between the two exchanges, as well as differences
TraderNews.aspx?id=dtn2017-16. in infrastructure investments, as described above. (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
20 The Consumer Price Index indicates a price 26 See, e.g., NYSE PDP Market Data Pricing 30 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
increase of approximately 13 percent between April (November 3, 2017), found at https:// 2010).
31 See NetCoalition, at 534–535.
2010 and November 2017. See https://www.bls.gov/ www.nyse.com/publicdocs/nyse/data/NYSE_
data/inflation_calculator.htm. Market_Data_Pricing.pdf. 32 Id. at 537.
VerDate Sep<11>2014 18:19 Jan 26, 2018 Jkt 244001 PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 E:\FR\FM\29JAN1.SGM 29JAN1](https://thefederalregister.org/doc/83_FR_4111/page/3.svg)
![Federal Register / Vol. 83, No. 19 / Monday, January 29, 2018 / Notices 4095
. . . As the SEC explained, ‘[i]n the U.S. Access will be charged $55 per month, B. Self-Regulatory Organization’s
national market system, buyers and while other non-display usage will be Statement on Burden on Competition
sellers of securities, and the broker- charged a total of $40 per month for all
dealers that act as their order-routing issues. This distinction is an equitable The Exchange does not believe that
agents, have a wide range of choices of allocation of reasonable dues, fees and the proposed rule change will impose
where to route orders for execution’; other charges because Direct Access any burden on competition not
[and] ‘no exchange can afford to take its provides the customer with source necessary or appropriate in furtherance
market share percentages for granted’ information in the original raw format, of the purposes of the Act. In terms of
because ‘no exchange possesses a which provides customers with inter-market competition, the Exchange
monopoly, regulatory or otherwise, in certainty that they are receiving data notes that it operates in a highly
the execution of order flow from broker without conflation or manipulation. competitive market in which market
dealers’. . . .’’ 33 This distinction does not permit unfair participants can readily favor competing
The Exchange believes that the discrimination between customers, venues if they deem fee levels at a
proposed fee changes are equitable particular venue to be excessive, or
issuers, brokers, or dealers because the
allocations of reasonable dues, fees and rebate opportunities available at other
price differential is based on the
other charges in accordance with venues to be more favorable. In such an
difference in value to the customer.
Section 6(b)(4) of the Act, and not environment, the Exchange must
designed to permit unfair In addition, the Exchange proposes to continually adjust its fees to remain
discrimination between customers, introduce clarifying language stating competitive with other exchanges and
issuers, brokers, or dealers in that the enterprise license for non- with alternative trading systems that
accordance with Section 6(b)(5) of the display data will be available only to have been exempted from compliance
Act. Both the monthly non-display per firms with Direct Access. This is an with the statutory standards applicable
Subscriber usage fee and the monthly equitable allocation of reasonable dues, to exchanges. Because competitors are
enterprise license fee for non-display fees and other charges because firms free to modify their own fees in
usage are equitable allocations because, with sufficient activity to purchase an response, and because market
as has been widely recognized, display enterprise license have a Direct Access participants may readily adjust their
and non-display functions provide connection. As such, the proposed order routing practices, the Exchange
different value to the consumer, and it language simply clarifies how the believes that the degree to which fee
has become standard industry practice enterprise license will be used with changes in this market may impose any
to charge differing fees for these two respect to Direct Access, in a similar burden on competition is extremely
different modes of data consumption. In manner to the way that Direct Access is limited.
addition, discounts based on high levels addressed in proposed Rules 7023(a)(1)
of usage such as the enterprise license BX TotalView is a type of depth-of-
and (a)(2), without affecting the service book product, which consists of
for non-display usage have routinely of any specific customer. This proposed
been adopted by exchanges and ‘‘outstanding limit orders to buy stock at
change does not permit unfair prices lower than, or to sell stocks at
approved as equitable allocations of discrimination between customers,
reasonable dues, fees and other prices higher than, the best prices on
issuers, brokers, or dealers for the same each exchange.’’ 37 The question of
charges.34 As such, the proposed fees reason: The proposed language is
vary solely based on reasonable and whether the prices of depth-of-book
simply a clarification that will not lead products are constrained by competitive
well-established industry norms
to any actual difference in usage. forces was examined in 2016 by an
regarding types of data usage, as
discussed above. The Act does not prohibit all Administrative Law Judge in an
The proposed changes do not permit distinctions among customers, but application for review by the Securities
unfair discrimination between rather discrimination that is unfair. As Industry and Financial Markets
customers, issuers, brokers, or dealers the Commission has recognized, ‘‘[i]f Association of actions taken by Self-
because the Exchange makes all services competitive forces are operative, the Regulatory Organizations.38 After a four-
and products subject to these fees self-interest of the exchanges themselves day hearing and presentation of
available on a non-discriminatory basis will work powerfully to constrain substantial evidence, the administrative
to similarly-situated recipients. The unreasonable or unfair behavior.’’ 35 law judge stated that ‘‘competition plays
proposed fees are structured in a Accordingly, ‘‘the existence of a significant role in restraining exchange
manner comparable to the significant competition provides a pricing of depth-of-book products’’ 39
corresponding fees of Nasdaq already in substantial basis for finding that the because ‘‘depth-of-book products from
effect, and compare favorably to fees terms of an exchange’s fee proposal are different exchanges function as
charged by Nasdaq for the same equitable, fair, reasonable, and not substitutes for each other,’’ 40 and, as
product. The fees are uniform except unreasonably or unfairly such, ‘‘the threat of substitution from
with respect to reasonable and well- discriminatory.’’ 36 The proposed fees, depth-of-book customers constrains
established distinctions among classes like all market data fees, are constrained their depth-of-book prices.’’ 41 As a
of data as discussed above. by the Exchange’s need to compete for result, ‘‘[s]hifts in order flow and threats
The Exchange also distinguishes order flow as discussed below, and are of shifting order flow provide a
between usage based on Direct Access subject to competition from other significant competitive force in the
and other methods of connection: Non- exchanges and among broker-dealers for
sradovich on DSK3GMQ082PROD with NOTICES
display usage that is based upon Direct customers. If the Exchange is incorrect 37 Securities Industry and Financial Markets
Association, Initial Decision Release No. 1015, 2016
in its assessment of price, it may lose SEC LEXIS 2278 at 4 (A.L.J. June 1, 2016) (quoting
33 Id. at 539 (quoting Securities Exchange Act
market share as a result. NetCoalition v. SEC, 615F3d 525, 529–30 (D.C. Cir.
Release No. 59039 (December 2, 2008), 73 FR
74770, 74782–83 (December 9, 2008) (SR– 2010)).
38 Id.
NYSEArca–2006–21)). 35 Securities Exchange Act Release No. 59039
39 Id. at 92.
34 For example, the Commission has approved (December 2, 2008), 73 FR 74770 (December 9,
pricing discounts for market data under Nasdaq 2008) (SR–NYSEArca–2006–21). 40 Id.
Rule 7023. 36 Id. 41 Id. at 93.
VerDate Sep<11>2014 18:19 Jan 26, 2018 Jkt 244001 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 E:\FR\FM\29JAN1.SGM 29JAN1](https://thefederalregister.org/doc/83_FR_4111/page/4.svg)
![4096 Federal Register / Vol. 83, No. 19 / Monday, January 29, 2018 / Notices
pricing of . . . depth-of-book data.’’ 42 Direct Edge. A proliferation of dark market share as a result. Accordingly,
The judge concluded that ‘‘[u]nder the pools and other ATSs operate profitably the Exchange does not believe that the
standards articulated by the with fragmentary shares of consolidated proposed changes will impair the ability
Commission and D.C. Circuit, the market volume. For a variety of reasons, of members or competing order
Exchanges have shown that they are competition from new entrants, execution venues to maintain their
subject to significant competitive forces especially for order execution, has competitive standing in the financial
in setting fees for depth-of-book data: increased dramatically over the last markets.
The availability of alternatives to the decade.
Exchanges’ depth-of-book products, and Each SRO, TRF, ATS, and BD that C. Self-Regulatory Organization’s
the Exchanges’ need to attract order competes for order flow is permitted to Statement on Comments on the
flow from market participants produce proprietary data products. Proposed Rule Change Received From
constrains prices.’’ 43 Many currently do or have announced Members, Participants, or Others
The proposed changes will: (i) plans to do so, including NYSE, NYSE No written comments were either
Introduce a monthly non-display usage American, NYSE Arca, CBOE, and IEX. solicited or received.
fee of $55 per Subscriber for BX This is because Regulation NMS
TotalView based upon Direct Access; deregulated the market for proprietary III. Date of Effectiveness of the
and (ii) increase the monthly enterprise data. While BDs had previously Proposed Rule Change and Timing for
license fee for non-display usage of BX published their proprietary data Commission Action
TotalView based upon Direct Access individually, Regulation NMS The foregoing rule change has become
from $16,000 to $20,000. These encourages market data vendors and effective pursuant to Section
proposed price changes will not impose BDs to produce proprietary products 19(b)(3)(A)(ii) of the Act.44
any burden on competition because cooperatively in a manner never before At any time within 60 days of the
market data fees are but one aspect of possible. Order routers and market data filing of the proposed rule change, the
the overall competition among vendors can facilitate production of Commission summarily may
exchanges to solicit order flow; if the proprietary data products for single or temporarily suspend such rule change if
overall price of interacting with the multiple BDs. The potential sources of it appears to the Commission that such
Exchange rises above competitive levels proprietary products are virtually action is: (i) Necessary or appropriate in
because of market data fees, market limitless. the public interest; (ii) for the protection
forces would cause the Exchange to lose The markets for order flow and of investors; or (iii) otherwise in
market share. proprietary data are inextricably linked: furtherance of the purposes of the Act.
Market forces constrain fees for BX A trading platform cannot generate If the Commission takes such action, the
TotalView, as well as other market data market information unless it receives Commission shall institute proceedings
fees, in the competition among trade orders. As a result, the to determine whether the proposed rule
exchanges and other entities to attract competition for order flow constrains should be approved or disapproved.
order flow and in the competition the prices that platforms can charge for
among Distributors for customers. Order proprietary data products. Firms make IV. Solicitation of Comments
flow is the ‘‘life blood’’ of the decisions on how much and what types Interested persons are invited to
exchanges. Broker-dealers currently of data to consume based on the total submit written data, views, and
have numerous alternative venues for cost of interacting with BX and other arguments concerning the foregoing,
their order flow, including self- exchanges. Data fees are but one factor including whether the proposed rule
regulatory organization (‘‘SRO’’) in a total platform analysis. If the cost change is consistent with the Act.
markets, as well as internalizing broker- of the product exceeds its expected Comments may be submitted by any of
dealers (‘‘BDs’’) and various forms of value, the broker-dealer will choose not the following methods:
alternative trading systems (‘‘ATSs’’), to buy it. A supracompetitive increase
Electronic Comments
including dark pools and electronic in the fees charged for either
communication networks (‘‘ECNs’’). transactions or proprietary data has the • Use the Commission’s internet
Each SRO market competes to produce potential to impair revenues from both comment form (http://www.sec.gov/
transaction reports via trade executions, products. In this manner, the rules/sro.shtml); or
and two FINRA-regulated Trade competition for order flow will • Send an email to rule-comments@
Reporting Facilities (‘‘TRFs’’) compete constrain prices for proprietary data sec.gov. Please include File Number SR–
to attract internalized transaction products. BX–2018–005 on the subject line.
reports. The existence of fierce Competition among Distributors
Paper Comments
competition for order flow implies a provides another form of price
high degree of price sensitivity on the discipline for proprietary data products. • Send paper comments in triplicate
part of BDs, which may readily reduce If the price of BX TotalView were set to Secretary, Securities and Exchange
costs by directing orders toward the above competitive levels, Distributors Commission, 100 F Street NE,
lowest-cost trading venues. purchasing BX TotalView would be at a Washington, DC 20549–1090.
The level of competition and disadvantage relative to their All submissions should refer to File
contestability in the market for order competitors, and would therefore either Number SR–BX–2018–005. This file
flow is demonstrated by the numerous curtail their purchase or forego the number should be included on the
examples of entrants that swiftly grew product altogether. subject line if email is used. To help the
Market forces constrain the price of
sradovich on DSK3GMQ082PROD with NOTICES
into some of the largest electronic Commission process and review your
trading platforms and proprietary data depth-of-book data such as BX comments more efficiently, please use
producers: Archipelago, Bloomberg TotalView through the competition for only one method. The Commission will
Tradebook, Island, RediBook, Attain, order flow and in the competition post all comments on the Commission’s
TracECN, BATS Trading and BATS/ among vendors for customers. If the internet website (http://www.sec.gov/
changes proposed herein are rules/sro.shtml). Copies of the
42 Id. at 104. unattractive to market participants, it is
43 Id. at 86. likely that the Exchange will lose 44 15 U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014 18:19 Jan 26, 2018 Jkt 244001 PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 E:\FR\FM\29JAN1.SGM 29JAN1](https://thefederalregister.org/doc/83_FR_4111/page/5.svg)
![Federal Register / Vol. 83, No. 19 / Monday, January 29, 2018 / Notices 4097
submission, all subsequent redeemable in large aggregations only FOR FURTHER INFORMATION CONTACT:
amendments, all written statements (‘‘Creation Units’’); (b) secondary market Barbara T. Heussler, Senior Counsel, at
with respect to the proposed rule transactions in Fund shares to occur at (202) 551–6990, or Robert H. Shapiro,
change that are filed with the negotiated market prices rather than at Branch Chief, at (202) 551–6821
Commission, and all written net asset value (‘‘NAV’’); (c) certain (Division of Investment Management,
communications relating to the Funds to pay redemption proceeds, Chief Counsel’s Office).
proposed rule change between the under certain circumstances, more than SUPPLEMENTARY INFORMATION: The
Commission and any person, other than seven days after the tender of shares for following is a summary of the
those that may be withheld from the redemption; (d) certain affiliated application. The complete application
public in accordance with the persons of a Fund to deposit securities may be obtained via the Commission’s
provisions of 5 U.S.C. 552, will be into, and receive securities from, the website by searching for the file
available for website viewing and Fund in connection with the purchase number, or for an applicant using the
printing in the Commission’s Public and redemption of Creation Units; and Company name box, at http://
Reference Room, 100 F Street NE, (e) certain registered management www.sec.gov/search/search.htm or by
Washington, DC 20549, on official investment companies and unit calling (202) 551–8090.
business days between the hours of investment trusts outside of the same
10:00 a.m. and 3:00 p.m. Copies of the group of investment companies as the Summary of the Application
filing also will be available for Funds (‘‘Funds of Funds’’) to acquire 1. Applicants request an order that
inspection and copying at the principal shares of the Funds. would allow Funds to operate as index
office of the Exchange. All comments exchange traded funds (‘‘ETFs’’).1 Fund
APPLICANTS: Salt Financial, LLC (the
received will be posted without change. shares will be purchased and redeemed
‘‘Initial Adviser’’), a Delaware limited
Persons submitting comments are at their NAV in Creation Units only. All
liability company that is to be registered
cautioned that we do not redact or edit orders to purchase Creation Units and
as an investment adviser under the
personal identifying information from all redemption requests will be placed
Investment Advisers Act of 1940, ETF
comment submissions. You should by or through an ‘‘Authorized
Series Solutions (the ‘‘Trust’’), a
submit only information that you wish Participant’’, which will have signed a
to make available publicly. All Delaware statutory trust registered
under the Act as an open-end participant agreement with the
submissions should refer to File Distributor. Shares will be listed and
Number SR–BX–2018–005 and should management investment company with
multiple series, and Quasar Distributors, traded individually on a national
be submitted on or before February 20, securities exchange, where share prices
2018. LLC (the ‘‘Distributor’’), a Delaware
limited liability company and broker- will be based on the current bid/offer
For the Commission, by the Division of dealer registered under the Securities market. Any order granting the
Trading and Markets, pursuant to delegated
Exchange Act of 1934 (‘‘Exchange Act’’). requested relief would be subject to the
authority.45 terms and conditions stated in the
Eduardo A. Aleman, FILING DATE: The application was filed application.
Assistant Secretary. on November 29, 2017. 2. Each Fund will hold investment
[FR Doc. 2018–01534 Filed 1–26–18; 8:45 am] HEARING OR NOTIFICATION OF HEARING: positions selected to correspond
BILLING CODE 8011–01–P An order granting the requested relief generally to the performance of an
will be issued unless the Commission Underlying Index. In the case of Self-
orders a hearing. Interested persons may Indexing Funds, an affiliated person, as
SECURITIES AND EXCHANGE request a hearing by writing to the defined in section 2(a)(3) of the Act
COMMISSION Commission’s Secretary and serving (‘‘Affiliated Person’’), or an affiliated
applicants with a copy of the request, person of an Affiliated Person (‘‘Second-
[Investment Company Act Release No.
32974; 812–14847] personally or by mail. Hearing requests Tier Affiliate’’), of the Trust or a Fund,
should be received by the Commission of the Adviser, of any sub-adviser to or
Salt Financial, LLC, et al. by 5:30 p.m. on February 20, 2018 and promoter of a Fund, or of the Distributor
should be accompanied by proof of will compile, create, sponsor or
January 23, 2018. service on applicants, in the form of an maintain the Underlying Index.2
AGENCY: Securities and Exchange affidavit, or for lawyers, a certificate of
Commission (‘‘Commission’’). service. Pursuant to rule 0–5 under the 1 Applicants request that the order apply to Salt
ACTION: Notice. Financial US Large Cap Magnified Exposure ETF,
Act, hearing requests should state the a new series of the Trust, and any additional series
Notice of an application for an order nature of the writer’s interest, any facts of the Trust and any other open-end management
under section 6(c) of the Investment bearing upon the desirability of a investment company or series thereof (each,
hearing on the matter, the reason for the included in the term ‘‘Fund’’), each of which will
Company Act of 1940 (the ‘‘Act’’) for an operate as an ETF and will track a specified index
exemption from sections 2(a)(32), request, and the issues contested. comprised of domestic or foreign equity and/or
5(a)(1), 22(d), and 22(e) of the Act and Persons who wish to be notified of a fixed income securities (each, an ‘‘Underlying
rule 22c–1 under the Act, under hearing may request notification by Index’’). Each Fund will (a) be advised by the Initial
writing to the Commission’s Secretary. Adviser or an entity controlling, controlled by, or
sections 6(c) and 17(b) of the Act for an under common control with the Initial Adviser or
exemption from sections 17(a)(1) and ADDRESSES: Secretary, Securities and its successor (each, an ‘‘Adviser’’) and (b) comply
17(a)(2) of the Act, and under section Exchange Commission, 100 F Street NE, with the terms and conditions of the application.
Washington, DC 20549–1090; For purposes of the requested Order, ‘‘successor’’ is
sradovich on DSK3GMQ082PROD with NOTICES
12(d)(1)(J) for an exemption from limited to an entity that results from a
sections 12(d)(1)(A) and 12(d)(1)(B) of Applicants: Salt Financial, LLC, 79 reorganization into another jurisdiction or a change
the Act. The requested order would Madison Avenue, 8th Floor, New York, in the type of business organization.
permit (a) index-based series of certain New York 10016; ETF Series Solutions, 2 Each Self-Indexing Fund will post on its website
open-end management investment 615 East Michigan Street, Milwaukee, the identities and quantities of the investment
positions that will form the basis for the Fund’s
companies (‘‘Funds’’) to issue shares Wisconsin 53202; Quasar Distributors, calculation of its NAV at the end of the day.
LLC, 777 East Wisconsin Avenue, 6th Applicants believe that requiring Self-Indexing
45 17 CFR 200.30–3(a)(12). Floor, Milwaukee, Wisconsin 53202. Continued
VerDate Sep<11>2014 18:19 Jan 26, 2018 Jkt 244001 PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 E:\FR\FM\29JAN1.SGM 29JAN1](https://thefederalregister.org/doc/83_FR_4111/page/6.svg)
Document Created: 2018-01-27 00:57:55
Document Modified: 2018-01-27 00:57:55
| 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 4092 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR