83 FR 50127 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rules 7039, 7047, 7049, 7055, and 7061 To Update the Definition of the Term FINRA/Nasdaq Trade Reporting Facility
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 193 (October 4, 2018)
Federal Register Volume 83, Issue 193 (October 4, 2018)
| Page Range | 50127-50130 | |
| FR Document | 2018-21584 |
[Federal Register Volume 83, Number 193 (Thursday, October 4, 2018)] [Notices] [Pages 50127-50130] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-21584] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-84317; File No. SR-NASDAQ-2018-075] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rules 7039, 7047, 7049, 7055, and 7061 To Update the Definition of the Term FINRA/Nasdaq Trade Reporting Facility September 28, 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 September 19, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' or ``Exchange'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I and II 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 Rules \3\ 7039, 7047, 7049, 7055, and 7061 to update the definition of the term ``FINRA/Nasdaq Trade Reporting Facility (`TRF')'' for Nasdaq Basic, Nasdaq Last Sale (``NLS''), Nasdaq InterACT, the Short Sale Monitor and the Limit Locator to reflect approval of a second FINRA/Nasdaq TRF in Chicago, as described in further detail below. --------------------------------------------------------------------------- \3\ References to rules are to Nasdaq rules, unless otherwise noted. --------------------------------------------------------------------------- The text of the proposed rule change is available on the Exchange's website at http://nasdaq.cchwallstreet.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of [[Page 50128]] 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 update the definition of the term ``FINRA/ Nasdaq Trade Reporting Facility (`TRF')'' for Nasdaq Basic, NLS, Nasdaq InterACT, the Short Sale Monitor and the Limit Locator to reflect approval of a second FINRA/Nasdaq TRF in Chicago. The Commission has approved a proposed rule change by FINRA to establish a second FINRA/Nasdaq TRF in Chicago as consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association.\4\ Consistent with the findings of the Commission, the Exchange proposes to define the term ``FINRA/Nasdaq Trade Reporting Facility'' in Rules 7039 (NLS and NLS Plus Data Feeds), 7047 (Nasdaq Basic), 7049 (Nasdaq InterACT), 7055 (Short Sale Monitor) and 7061 (Limit Locator) as the ``FINRA/Nasdaq Trade Reporting Facility (`TRF') Carteret and the FINRA/Nasdaq TRF Chicago.'' The Exchange anticipates that the FINRA/Nasdaq TRF Chicago will begin to accept trade reports for Reg NMS securities on September 24, 2018, and the Exchange will begin to distribute such data in the NLS and NLS Plus Data Feeds, Nasdaq Basic, Nasdaq InterACT, the Short Sale Monitor, and the Limit Locator on that same date. The Exchange expects to retire existing versions of these products, which do not include reports from the FINRA/Nasdaq TRF Chicago, on December 31, 2018.\5\ --------------------------------------------------------------------------- \4\ See Securities Exchange Act Release No. 83559 (June 29, 2018), 83 FR 31589 (July 6, 2018) (SR-FINRA-2018-013) (approving the FINRA/Nasdaq TRF Chicago); see also Securities Exchange Act Release No. 83082 (April 20, 2018), 83 FR 18379 (April 26, 2018) (SR-FINRA- 2018-013) (proposing the FINRA/Nasdaq TRF Chicago). \5\ The new data feeds for NLS, NLS Plus, Nasdaq Basic, the Short Sale Monitor, and the Limit Locator will include coding that identifies the market system that generated the trade report message, which will enable the recipient to distinguish between information from the FINRA/Nasdaq TRF Chicago and the FINRA/Nasdaq TRF Carteret. To utilize that coding, Distributors will be required to make certain technical modifications to their software. Nasdaq is working with Distributors to ensure that all such modifications will be complete before the FINRA/Nasdaq TRF Chicago commences operations, but, as a courtesy to any Distributor that has not made such modifications before such operations commence, Nasdaq will continue to make legacy feeds available until December 31, 2018. --------------------------------------------------------------------------- This is a conforming change to the FINRA filing that will not change any fee or charge by the Exchange. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\6\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\7\ in particular, in that it fosters cooperation and coordination with persons engaged in regulating and processing information with respect to securities, facilitates transactions in securities, protects investors and the public interest, and does not unfairly discriminate between customers, issuers, brokers or dealers. As described above, the Exchange proposes to update the definition of the FINRA/Nasdaq TRF for Nasdaq Basic, NLS, Nasdaq InterACT, the Short Sale Monitor and the Limit Locator to reflect approval of a second FINRA/Nasdaq TRF in Chicago. Updating the definition of ``FINRA/Nasdaq TRF'' to mean ``the FINRA/Nasdaq TRF Carteret and the FINRA/Nasdaq TRF Chicago'' fosters cooperation with persons engaged in regulating and processing securities information, facilitates transactions in securities and protects investors and the public interest by conforming the Exchange's rule book to FINRA's, and by reflecting the findings of the Commission that creation of the Chicago facility is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association. The proposal does not unfairly discriminate between customers, issuers, brokers or dealers because all customers, issuers, brokers and dealers will receive the benefit of a Nasdaq rule book that conforms to FINRA's rule book and decisions by the Commission. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78f(b). \7\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- In adopting Regulation NMS, the Commission granted self-regulatory organizations (``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.\8\ --------------------------------------------------------------------------- \8\ 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 market data products affected by this proposal are all voluntary products for which market participants can readily find substitutes. Accordingly, Nasdaq is constrained from pricing these products in a manner that would be inequitable or unfairly discriminatory. Moreover, the fees for these products, like all proprietary data fees, are constrained by the Exchange's need to compete for order flow. 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. The proposed change--which will simply define FINRA/Nasdaq TRF as it is used in the context of several market data products to reflect approval of a second FINRA/Nasdaq TRF in Chicago--does not impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Act, but rather provides both current and potential customers more precise description of the information contained in certain Exchange products without changing any fee or charge by the Exchange. 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 [[Page 50129]] 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 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).\9\ --------------------------------------------------------------------------- \9\ 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). --------------------------------------------------------------------------- In Nasdaq's case, it is costly to build and maintain a trading platform, but the incremental cost of trading each additional share on an existing platform, or distributing an additional instance of data, is very low. Market information and executions are each produced jointly (in the sense that the activities of trading and placing orders are the source of the information that is distributed) and 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, Nasdaq would be unable to defray its platform costs of providing the joint products. Similarly, data products cannot make use of TRF trade reports without the raw material of the trade reports themselves, and therefore necessitate the costs of operating, regulating,\10\ 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. --------------------------------------------------------------------------- \10\ It should be noted that the costs of operating the FINRA/ Nasdaq TRF borne by Nasdaq include regulatory charges paid by Nasdaq to FINRA. --------------------------------------------------------------------------- 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, Nasdaq believes that market data products can enhance order flow to Nasdaq 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. Competition among trading platforms can be expected to constrain the aggregate return each platform earns from the sale of its joint products, but different platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. Nasdaq pays rebates to attract orders, charges relatively low prices for market information and charges relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower liquidity rebates to attract orders, setting relatively low prices for accessing posted liquidity, and setting relatively high prices for market information. Still others may provide most data free of charge and rely exclusively on transaction fees to recover their costs. Finally, some platforms may incentivize use by providing opportunities for equity ownership, which may allow them to charge lower direct fees for executions and data. 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 [[Page 50130]] cost of executions, or the volume of both data and executions will fall.\11\ --------------------------------------------------------------------------- \11\ 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 the 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. 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 Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b- 4(f)(6) thereunder.\13\ --------------------------------------------------------------------------- \12\ 15 U.S.C. 78s(b)(3)(A). \13\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b- 4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. --------------------------------------------------------------------------- A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act \14\ normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay so that the proposed rule change may become operative upon filing. Waiver of the operative delay would allow the Exchange to reflect in its rules that there are now two Nasdaq TRFs to which trades can be reported and would provide customers with more precise information about the data contained within certain Exchange products. For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.\16\ --------------------------------------------------------------------------- \14\ 17 CFR 240.19b-4(f)(6). \15\ 17 CFR 240.19b-4(f)(6)(iii). \16\ For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- 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 necessary or appropriate in the public interest, for the protection of investors, or 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 change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic commentsUse the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number SR-NASDAQ-2018-075 on the subject line. Paper comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number SR-NASDAQ-2018-075. 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-NASDAQ-2018-075, and should be submitted on or before October 25, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\17\ --------------------------------------------------------------------------- \17\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-21584 Filed 10-3-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Notices 50127
and enforce written policies and Order, and any other applicable SECURITIES AND EXCHANGE
procedures reasonably designed to exemptive orders. Such conditions and COMMISSION
maintain sufficient financial resources restrictions would, among other things,
[Release No. 34–84317; File No. SR–
to withstand, at a minimum, a default prohibit investment if the two year NASDAQ–2018–075]
by the two participant families to which credit default spread of France or
it has the largest exposures in extreme Germany exceeds 45 basis points (which Self-Regulatory Organizations; The
but plausible market conditions.38 the CFTC considered to approximate the Nasdaq Stock Market LLC; Notice of
As discussed above, the Commission risk level of the United States).42 Filing and Immediate Effectiveness of
believes that the proposed changes Finally, the Treasury Policy’s Euro Proposed Rule Change To Amend
facilitating the investment of Euro- investment guidelines would set a target Rules 7039, 7047, 7049, 7055, and 7061
denominated Customer Origin Cash and of 100% of investment through To Update the Definition of the Term
House Origin Cash in French and overnight reverse repos, meaning a FINRA/Nasdaq Trade Reporting Facility
German sovereign debt would improve reverse repo transaction for which the
the safeguarding of such cash, and September 28, 2018.
agreed upon repurchase date is the
would thereby help reduce risks to ICC’s Pursuant to Section 19(b)(1) of the
business day immediately following the
margin system and GF. As described Securities Exchange Act of 1934
purchase date.
above, the proposed rule change would (‘‘Act’’),1 and Rule 19b–4 thereunder,2
provide ICC two reasonably safe For all the reasons discussed above, notice is hereby given that on
investments for such cash—French and the Commission believes that in September 19, 2018, The Nasdaq Stock
German sovereign debt—which ICC facilitating investment in French and Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
could use to maintain and preserve the German sovereign debt with minimal filed with the Securities and Exchange
cash in ICC’s margin system and GF, credit risk and creating risk controls Commission (‘‘Commission’’) the
which in turn could help ICC to surrounding such investments, the proposed rule change as described in
maintain margin requirements to limit proposed rule change would allow ICC Items I and II below, which Items have
its credit exposures to participants to hold Customer Origin Cash and been prepared by the Exchange. The
under normal market conditions. House Origin Cash in a manner that Commission is publishing this notice to
Likewise, by improving the safeguarding minimizes risk of loss or of delay in solicit comments on the proposed rule
and investment of the cash in the GF, ICC’s access to them and would allow change from interested persons.
which ICC collects from CPs to maintain ICC to invest such funds in instruments I. Self-Regulatory Organization’s
such sufficient financial resources, the with minimal credit, market and Statement of the Terms of Substance of
Commission believes the proposed rule liquidity risk. the Proposed Rule Change
change would help ICC to maintain
Therefore, for these reasons, the The Exchange proposes to amend
sufficient financial resources to
withstand, at a minimum, a default by Commission finds that the proposed Rules 3 7039, 7047, 7049, 7055, and
the two participant families to which it rule change is consistent with Rule 7061 to update the definition of the term
has the largest exposures in extreme but 17Ad–22(d)(3).43 ‘‘FINRA/Nasdaq Trade Reporting
plausible market conditions. IV. Conclusion Facility (‘TRF’)’’ for Nasdaq Basic,
Therefore, for these reasons, the Nasdaq Last Sale (‘‘NLS’’), Nasdaq
Commission finds that the proposed On the basis of the foregoing, the InterACT, the Short Sale Monitor and
rule change is consistent with Rules Commission finds that the proposal is the Limit Locator to reflect approval of
17Ad–22(b)(2) and 17Ad–22(b)(3).39 consistent with the requirements of the a second FINRA/Nasdaq TRF in
Act, and in particular, with the Chicago, as described in further detail
C. Consistency With Rule 17Ad–22(d)(3)
requirements of Section 17A(b)(3)(F) of below.
Rule 17Ad–22(d)(3) requires that ICC the Act 44 and Rules 17Ad–22(b)(2), The text of the proposed rule change
establish, implement, maintain and 17Ad–22(b)(3), and 17Ad–22(d)(3) is available on the Exchange’s website at
enforce written policies and procedures thereunder.45 http://nasdaq.cchwallstreet.com, at the
reasonably designed to hold assets in a principal office of the Exchange, and at
manner that minimizes risk of loss or of It is therefore ordered pursuant to
the Commission’s Public Reference
delay in its access to them and invest Section 19(b)(2) of the Act 46 that the
Room.
assets in instruments with minimal proposed rule change (SR–ICC–2018–
credit, market and liquidity risk.40 009) be, and hereby is, approved.47 II. Self-Regulatory Organization’s
As described above, the proposed rule For the Commission, by the Division of
Statement of the Purpose of, and
change would allow the investment of Trading and Markets, pursuant to delegated
Statutory Basis for, the Proposed Rule
Euro-denominated Customer Origin authority.48 Change
Cash and House Origin Cash in French Eduardo A. Aleman, In its filing with the Commission, the
and German sovereign debt, allowing Exchange included statements
Assistant Secretary.
ICC to avoid holding such cash in concerning the purpose of and basis for
[FR Doc. 2018–21585 Filed 10–3–18; 8:45 am]
demand deposits at commercial banks. the proposed rule change and discussed
Moreover, the proposed rule change BILLING CODE 8011–01–P
any comments it received on the
would prohibit investment in French proposed rule change. The text of these
42 CFTC Order, 83 FR at 35243–35245.
and German sovereign debt when such statements may be examined at the
43 17 CFR 240.17Ad–22(d)(3).
investment would not comply with the places specified in Item IV below. The
daltland on DSKBBV9HB2PROD with NOTICES
44 15 U.S.C. 78q–1(b)(3)(F).
conditions and restrictions set forth in 45 17 CFR 240.17Ad–22(b)(2), (b)(3), and (d)(3).
Exchange has prepared summaries, set
CFTC Regulation 1.25,41 the CFTC 46 15 U.S.C. 78s(b)(2). forth in sections A, B, and C below, of
47 In approving the proposed rule change, the
38 17 CFR 240.17Ad–22(b)(3). 1 15
Commission considered the proposal’s impact on U.S.C. 78s(b)(1).
39 17 CFR 240.17Ad–22(b)(2), (b)(3). efficiency, competition, and capital formation. 15 2 17 CFR 240.19b–4.
40 17 CFR 240.17Ad–22(d)(3). U.S.C. 78c(f). 3 References to rules are to Nasdaq rules, unless
41 17 CFR 1.25. 48 17 CFR 200.30–3(a)(12). otherwise noted.
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the most significant aspects of such 2. Statutory Basis broker-dealers may choose to receive (and
statements. pay for) additional market data based on their
The Exchange believes that its own internal analysis of the need for such
A. Self-Regulatory Organization’s proposal is consistent with Section 6(b) data.8
Statement of the Purpose of, and of the Act,6 in general, and furthers the
objectives of Section 6(b)(5) of the Act,7 The Commission was speaking to the
Statutory Basis for, the Proposed Rule
in particular, in that it fosters question of whether broker-dealers
Change
cooperation and coordination with should be subject to a regulatory
1. Purpose persons engaged in regulating and requirement to purchase data, such as
The Exchange proposes to update the processing information with respect to depth-of-book data, that is in excess of
definition of the term ‘‘FINRA/Nasdaq securities, facilitates transactions in the data provided through the
Trade Reporting Facility (‘TRF’)’’ for securities, protects investors and the consolidated tape feeds, and the
Nasdaq Basic, NLS, Nasdaq InterACT, public interest, and does not unfairly Commission concluded that the choice
the Short Sale Monitor and the Limit discriminate between customers, should be left to them. Accordingly,
Locator to reflect approval of a second issuers, brokers or dealers. As described Regulation NMS removed unnecessary
FINRA/Nasdaq TRF in Chicago. above, the Exchange proposes to update regulatory restrictions on the ability of
The Commission has approved a the definition of the FINRA/Nasdaq TRF exchanges to sell their own data,
proposed rule change by FINRA to for Nasdaq Basic, NLS, Nasdaq thereby advancing the goals of the Act
establish a second FINRA/Nasdaq TRF InterACT, the Short Sale Monitor and and the principles reflected in its
in Chicago as consistent with the the Limit Locator to reflect approval of legislative history. If the free market
requirements of the Act and the rules a second FINRA/Nasdaq TRF in should determine whether proprietary
and regulations thereunder applicable to Chicago. Updating the definition of data is sold to broker-dealers at all, it
a national securities association.4 ‘‘FINRA/Nasdaq TRF’’ to mean ‘‘the follows that the price at which such
Consistent with the findings of the FINRA/Nasdaq TRF Carteret and the data is sold should be set by the market
Commission, the Exchange proposes to FINRA/Nasdaq TRF Chicago’’ fosters as well.
define the term ‘‘FINRA/Nasdaq Trade cooperation with persons engaged in The market data products affected by
Reporting Facility’’ in Rules 7039 (NLS regulating and processing securities this proposal are all voluntary products
and NLS Plus Data Feeds), 7047 (Nasdaq information, facilitates transactions in for which market participants can
Basic), 7049 (Nasdaq InterACT), 7055 securities and protects investors and the readily find substitutes. Accordingly,
(Short Sale Monitor) and 7061 (Limit public interest by conforming the Nasdaq is constrained from pricing
Locator) as the ‘‘FINRA/Nasdaq Trade Exchange’s rule book to FINRA’s, and these products in a manner that would
Reporting Facility (‘TRF’) Carteret and by reflecting the findings of the be inequitable or unfairly
the FINRA/Nasdaq TRF Chicago.’’ The Commission that creation of the Chicago discriminatory. Moreover, the fees for
Exchange anticipates that the FINRA/ facility is consistent with the these products, like all proprietary data
Nasdaq TRF Chicago will begin to requirements of the Act and the rules fees, are constrained by the Exchange’s
accept trade reports for Reg NMS and regulations thereunder applicable to need to compete for order flow.
securities on September 24, 2018, and a national securities association. The B. Self-Regulatory Organization’s
the Exchange will begin to distribute proposal does not unfairly discriminate Statement on Burden on Competition
such data in the NLS and NLS Plus Data between customers, issuers, brokers or
Feeds, Nasdaq Basic, Nasdaq InterACT, dealers because all customers, issuers, The Exchange does not believe that
the Short Sale Monitor, and the Limit brokers and dealers will receive the the proposed rule change will impose
Locator on that same date. The benefit of a Nasdaq rule book that any burden on competition not
Exchange expects to retire existing conforms to FINRA’s rule book and necessary or appropriate in furtherance
versions of these products, which do not decisions by the Commission. of the purposes of the Act. The
include reports from the FINRA/Nasdaq In adopting Regulation NMS, the proposed change—which will simply
TRF Chicago, on December 31, 2018.5 Commission granted self-regulatory define FINRA/Nasdaq TRF as it is used
This is a conforming change to the organizations (‘‘SROs’’) and broker- in the context of several market data
FINRA filing that will not change any dealers increased authority and products to reflect approval of a second
fee or charge by the Exchange. flexibility to offer new and unique FINRA/Nasdaq TRF in Chicago—does
market data to the public. It was not impose a burden on competition not
4 See Securities Exchange Act Release No. 83559
believed that this authority would necessary or appropriate in furtherance
(June 29, 2018), 83 FR 31589 (July 6, 2018) (SR– expand the amount of data available to of the purposes of the Act, but rather
FINRA–2018–013) (approving the FINRA/Nasdaq
TRF Chicago); see also Securities Exchange Act consumers, and also spur innovation provides both current and potential
Release No. 83082 (April 20, 2018), 83 FR 18379 and competition for the provision of customers more precise description of
(April 26, 2018) (SR–FINRA–2018–013) (proposing market data. The Commission the information contained in certain
the FINRA/Nasdaq TRF Chicago). concluded that Regulation NMS—by Exchange products without changing
5 The new data feeds for NLS, NLS Plus, Nasdaq
deregulating the market in proprietary any fee or charge by the Exchange.
Basic, the Short Sale Monitor, and the Limit Locator
will include coding that identifies the market data—would itself further the Act’s The market for data products is
system that generated the trade report message, goals of facilitating efficiency and extremely competitive and firms may
which will enable the recipient to distinguish competition: freely choose alternative venues and
between information from the FINRA/Nasdaq TRF data vendors based on the aggregate fees
Chicago and the FINRA/Nasdaq TRF Carteret. To [E]fficiency is promoted when broker-
utilize that coding, Distributors will be required to dealers who do not need the data beyond the assessed, the data offered, and the value
provided. Numerous exchanges compete
daltland on DSKBBV9HB2PROD with NOTICES
make certain technical modifications to their prices, sizes, market center identifications of
software. Nasdaq is working with Distributors to the NBBO and consolidated last sale with each other for listings, trades, and
ensure that all such modifications will be complete information are not required to receive (and market data itself, providing virtually
before the FINRA/Nasdaq TRF Chicago commences pay for) such data. The Commission also
operations, but, as a courtesy to any Distributor that limitless opportunities for entrepreneurs
believes that efficiency is promoted when
has not made such modifications before such
operations commence, Nasdaq will continue to 8 See Securities Exchange Act Release No. 51808
6 15 U.S.C. 78f(b).
make legacy feeds available until December 31, (June 9, 2005), 70 FR 37496 (June 29, 2005)
2018. 7 15 U.S.C. 78f(b)(5). (‘‘Regulation NMS Adopting Release’’).
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![50130 Federal Register / Vol. 83, No. 193 / Thursday, October 4, 2018 / Notices
cost of executions, or the volume of both A proposed rule change filed Paper comments
data and executions will fall.11 pursuant to Rule 19b–4(f)(6) under the
Moreover, the level of competition Act 14 normally does not become • Send paper comments in triplicate
and contestability in the market is operative for 30 days after the date of its to Secretary, Securities and Exchange
evident in the numerous alternative filing. However, Rule 19b–4(f)(6)(iii) 15 Commission, 100 F Street NE,
venues that compete for order flow, permits the Commission to designate a Washington, DC 20549–1090.
including SRO markets, internalizing shorter time if such action is consistent All submissions should refer to File
broker-dealers and various forms of with the protection of investors and the Number SR–NASDAQ–2018–075. This
alternative trading systems (‘‘ATSs’’), public interest. The Exchange has
including dark pools and electronic file number should be included on the
requested that the Commission waive
communication networks (‘‘ECNs’’). subject line if email is used. To help the
the 30-day operative delay so that the
Each SRO market competes to produce Commission process and review your
proposed rule change may become
transaction reports via trade executions, operative upon filing. Waiver of the comments more efficiently, please use
and the FINRA-regulated TRFs compete operative delay would allow the only one method. The Commission will
to attract internalized transaction Exchange to reflect in its rules that there post all comments on the Commission’s
reports. It is common for broker-dealers are now two Nasdaq TRFs to which internet website (http://www.sec.gov/
to further exploit this competition by trades can be reported and would rules/sro.shtml). Copies of the
sending their order flow and transaction provide customers with more precise submission, all subsequent
reports to multiple markets, rather than information about the data contained amendments, all written statements
providing them all to a single market. within certain Exchange products. For with respect to the proposed rule
Competitive markets for order flow, these reasons, the Commission believes change that are filed with the
executions, and transaction reports that waiver of the 30-day operative Commission, and all written
provide pricing discipline for the inputs delay is consistent with the protection communications relating to the
of proprietary data products. The large of investors and the public interest. proposed rule change between the
number of SROs, TRFs, broker-dealers, Accordingly, the Commission hereby Commission and any person, other than
and ATSs that currently produce waives the operative delay and those that may be withheld from the
proprietary data or are currently capable designates the proposed rule change public in accordance with the
of producing it provides further pricing operative upon filing.16 provisions of 5 U.S.C. 552, will be
discipline for proprietary data products.
At any time within 60 days of the available for website viewing and
Each SRO, TRF, ATS, and broker-dealer
filing of the proposed rule change, the printing in the Commission’s Public
is currently permitted to produce
Commission summarily may Reference Room, 100 F Street NE,
proprietary data products, and many
temporarily suspend such rule change if Washington, DC 20549 on official
currently do or have announced plans to
it appears to the Commission that such business days between the hours of
do so, including Nasdaq, NYSE, NYSE
action is necessary or appropriate in the 10:00 a.m. and 3:00 p.m. Copies of the
American, NYSE Arca, IEX, and BATS/
public interest, for the protection of filing also will be available for
Direct Edge.
investors, or otherwise in furtherance of inspection and copying at the principal
C. Self-Regulatory Organization’s the purposes of the Act. If the office of the Exchange. All comments
Statement on Comments on the Commission takes such action, the received will be posted without change.
Proposed Rule Change Received From Commission shall institute proceedings
Persons submitting comments are
Members, Participants, or Others to determine whether the proposed rule
cautioned that we do not redact or edit
No written comments were either change should be approved or
personal identifying information from
solicited or received. disapproved.
comment submissions. You should
III. Date of Effectiveness of the IV. Solicitation of Comments submit only information that you wish
Proposed Rule Change and Timing for Interested persons are invited to to make available publicly. All
Commission Action submit written data, views, and submissions should refer to File
Because the foregoing proposed rule arguments concerning the foregoing, Number SR–NASDAQ–2018–075, and
change does not: (i) Significantly affect including whether the proposed rule should be submitted on or before
the protection of investors or the public change is consistent with the Act. October 25, 2018.
interest; (ii) impose any significant Comments may be submitted by any of For the Commission, by the Division of
burden on competition; and (iii) become the following methods: Trading and Markets, pursuant to delegated
operative for 30 days from the date on Electronic comments authority.17
which it was filed, or such shorter time Eduardo A. Aleman,
as the Commission may designate, it has • Use the Commission’s internet Assistant Secretary.
become effective pursuant to Section comment form (http://www.sec.gov/
[FR Doc. 2018–21584 Filed 10–3–18; 8:45 am]
19(b)(3)(A) of the Act 12 and Rule 19b– rules/sro.shtml); or
• Send an email to rule-comments@
BILLING CODE 8011–01–P
4(f)(6) thereunder.13
sec.gov. Please include File Number SR–
11 Cf. Ohio v. American Express, No. 16–1454 (S.
NASDAQ–2018–075 on the subject line.
Ct. June 25, 2018), https://www.supremecourt.gov/
opinions/17pdf/16-1454_5h26.pdf (recognizing the
of filing of the proposed rule change, or such
daltland on DSKBBV9HB2PROD with NOTICES
need to analyze both sides of a two-sided platform
market in order to determine its competitiveness). shorter time as designated by the Commission.
12 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b–4(f)(6).
13 17 CFR 240.19b–4(f)(6). As required under Rule 15 17 CFR 240.19b–4(f)(6)(iii).
19b–4(f)(6)(iii), the Exchange provided the 16 For purposes only of waiving the 30-day
Commission with written notice of its intent to file operative delay, the Commission also has
the proposed rule change, along with a brief considered the proposed rule’s impact on
description and the text of the proposed rule efficiency, competition, and capital formation. See
change, at least five business days prior to the date 15 U.S.C. 78c(f). 17 17 CFR 200.30–3(a)(12).
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Document Created: 2018-10-04 02:03:02
Document Modified: 2018-10-04 02:03:02
| 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 50127 |
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