Self-Regulatory Organizations; New York Stock Exchange, Inc.; Order Approving Proposed Rule Change Relating to the Real-Time NYSE OpenBook® Service and OpenBook® Fees and Order Approving Proposed Rule Change Relating to the Contract Terms Governing Vendor Displays of NYSE OpenBook® Data, and Notice of Filing and Order Granting Accelerated Approval of Amendment No. 2 Thereto, 17934-17938 [E6-5058]
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17934
Federal Register / Vol. 71, No. 67 / Friday, April 7, 2006 / Notices
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.12
Nancy M. Morris,
Secretary.
[FR Doc. E6–5084 Filed 4–6–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53585; File Nos. SR–NYSE–
2004–43 and SR–NYSE–2005–32]
Self-Regulatory Organizations; New
York Stock Exchange, Inc.; Order
Approving Proposed Rule Change
Relating to the Real-Time NYSE
OpenBook Service and OpenBook
Fees and Order Approving Proposed
Rule Change Relating to the Contract
Terms Governing Vendor Displays of
NYSE OpenBook Data, and Notice of
Filing and Order Granting Accelerated
Approval of Amendment No. 2 Thereto
March 31, 2006.
I. Introduction
On August 11, 2004, the New York
Stock Exchange, Inc. (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
update NYSE OpenBook
(‘‘OpenBook’’) limit order information
in real time and to increase the monthly
per-terminal fee for the real-time
OpenBook service (‘‘Real-Time Fee
Proposal’’).3 The Real-Time Fee
Proposal was published for comment in
the Federal Register on September 2,
2004.4 The Commission received nine
letters regarding the Real-Time Fee
Proposal.5 Several commenters on the
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 File No. SR–NYSE–2004–43.
4 See Securities Exchange Act Release No. 50275
(August 26, 2004), 69 FR 53760.
5 See letters to Jonathan G. Katz, Secretary,
Commission, from Lisa M. Utasi, President, and
Kimberly Unger, Executive Director, The Security
Traders Association of New York, Inc. (‘‘STANY’’),
dated September 22, 2004 (‘‘STANY Letter’’);
Richard A. Korhammer, Chief Executive Officer,
Lava Trading Inc. (‘‘Lava’’), dated September 23,
2004 (‘‘Lava Letter’’); Thomas F. Secunda,
Bloomberg L.P. (‘‘Bloomberg’’), dated September 23,
2004 (‘‘Bloomberg Letter I’’); Ellen L.S. Koplow,
Executive Vice President and General Counsel,
Ameritrade Holding Corporation, dated September
23, 2004 (‘‘Ameritrade Letter I’’); Christopher P.
Gilkerson, Vice President and Associate General
Counsel, Charles Schwab (‘‘Schwab’’), dated
September 23, 2004 (‘‘Schwab Letter’’); David
Colker, Chief Executive Office and President,
National Stock Exchange (‘‘NSX’’), dated September
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Real-Time Fee Proposal argued that the
existing OpenBook contractual
provisions, which prohibit vendors from
consolidating OpenBook data with data
from other market centers, are
anticompetitive and discriminatory.6
Other commenters believed that the
NYSE should file for public comment
and Commission review and approval
the contract terms that would govern the
distribution of OpenBook data.7
On May 13, 2005, the NYSE filed a
proposed rule change containing
proposed contract terms, set forth in a
revised version of Exhibit C to the
‘‘Agreement for the Receipt and Use of
Market Data,’’ that would govern the
displays and dissemination of
OpenBook data (the ‘‘Exhibit C
Proposal’’).8 The NYSE filed
Amendment No. 1 to the Exhibit C
Proposal on June 16, 2005.9 The Exhibit
C Proposal, as amended by Amendment
No. 1 (‘‘Original Exhibit C Proposal’’),
was published for comment in the
24, 2004 (‘‘NSX Letter I’’); Eliot Wagner, Chair,
Technology and Regulation Committee, the
Securities Industry Association (‘‘SIA’’), and
Christopher Gilkerson, Chair, Market Data
Subcommittee, SIA, dated October 22, 2004 (‘‘SIA
Letter I’’); Meyer S. Furcher, Chairman and Chief
Executive Officer, Philadelphia Stock Exchange,
Inc. dated October 11, 2004; and letter from R.
Bruce Josten, Executive Vice President, Government
Affairs, U.S. Chamber of Commerce, to the
Honorable William Donaldson, Chairman,
Commission, dated September 27, 2004 (‘‘U.S.
Chamber of Commerce Letter I’’).
6 See, e.g., Bloomberg Letter I (the OpenBook
contract terms are unfairly discriminatory because
some, but not all, OpenBook subscribers would be
able to consolidate OpenBook information with
limit order information from other markets);
Schwab Letter (the current contractual provisions
governing the distribution of OpenBook data
discriminate against vendors and their clients, and
are anticompetitive, because they restrict
redistribution and consolidation with other
markets’ data); Ameritrade Letter I (the proposal
discriminates among market participants because
vendors, unlike institutions and professionals, are
prohibited from enhancing OpenBook data or
commingling it with data from other market
centers); and SIA Letter I (some members have
suggested that the existing OpenBook contractual
provisions may be anticompetitive because they
restrict redistribution and consolidation with other
markets’ data), supra note 5.
7 See, e.g., Schwab Letter, SIA Letter I, and U.S.
Chamber of Commerce Letter I, supra note 5. See
also NSX Letter I and Lava Letter, supra note 5 (the
contract terms should be included so that the public
can assess the impact of the proposal on
transparency and competition among market
centers).
8 File No. SR–NYSE–2005–32. The Commission
received a comment letter on June 3, 2005 from
Bloomberg. See letter from Kim Borg, Bloomberg, to
Annette L. Nazareth, Director, Division of Market
Regulation, Commission, dated June 2, 2005.
Bloomberg resubmitted this comment letter on July
22, 2005. See supra note 11.
9 In Amendment No. 1 provided a copy of its
current Exhibit C marked to indicate the changes
that the NYSE proposed. NYSE did not propose any
substantive changes to the proposal in Amendment
No. 1.
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Federal Register on July 1, 2005.10 The
Commission received six comment
letters regarding the Original Exhibit C
Proposal.11 The NYSE responded to the
comments regarding the Real-Time Fee
Proposal and the Original Exhibit C
Proposal on September 30, 2005.12 The
NYSE filed Amendment No. 2 to the
Exhibit C Proposal on February 26,
2006.13 This order approves the RealTime Fee Proposal and the Exhibit C
Proposal, as amended by Amendment
No. 2. In addition, the Commission is
publishing notice to solicit comment on,
and is simultaneously approving, on an
accelerated basis, Amendment No. 2 to
the Exhibit C Proposal.
II. Background
The OpenBook service is a
compilation of limit order data that the
NYSE provides to market data vendors,
broker-dealers, private network
providers, and other entities through a
data feed. The Commission approved
the current fees for the OpenBook
service in 2001.14 In its 2001 OpenBook
proposal, the NYSE described, but did
not file with the Commission, the
contractual provisions governing market
data vendors’ receipt and display of
OpenBook data. These provisions,
which are in effect today, prohibit
market data vendors from providing
displays that integrate OpenBook data
10 See Securities Exchange Act Release No. 51925
(June 24, 2005), 70 FR 38226.
11 See letters to Jonathan G. Katz, Secretary,
Commission, from David Colker, Chief Executive
Officer and President, NSX, dated July 20, 2005
(‘‘NSX Letter II’’); Phylis M. Esposito, Executive
Vice President, Chief Strategy Officer, Ameritrade,
dated July 22, 2005 (‘‘Ameritrade Letter II’’);
Christopher Gilkerson, Chair, SIA Technology and
Regulation Committee and Andrew Wels, Chair,
SIA Market Data Subcommittee, dated July 22, 2005
(‘‘SIA Letter II’’); Kim Bang, Bloomberg, dated July
22, 2005 (‘‘Bloomberg Letter II’’); Kim Bang,
Bloomberg, dated October 19, 2005 (‘‘Bloomberg
Letter III’’); and letter to the Honorable Cynthia
Glassman, Acting Chairman, Commission, from R.
Bruce Josten, Executive Vice President, Government
Affairs, U.S. Chamber of Commerce, dated July 22,
2005 (‘‘U.S. Chamber of Commerce Letter II’’).
12 See letters from Mary Yeager, Assistant
Secretary, NYSE, to Jonathan G. Katz, Secretary,
Commission, dated September 30, 2005 (‘‘NYSE
Response Letters’’). One of the NYSE Response
Letters addresses the comments raised by
Bloomberg, while the other NYSE Response Letter
addresses the comments of the remaining
commenters.
13 As described more fully below, Amendment
No. 2 revises Exhibit C to permit a vendor to
provide a display that integrates OpenBook
information with information from other markets
without attributing the OpenBook information to
the NYSE, provided the vendor satisfies certain
requirements. Amendment No. 2 replaces and
supersedes the originally proposed Exhibit C in its
entirety.
14 See Securities Exchange Act Release No. 45138
(December 7, 2001), 66 FR 64895 (December 14,
2001) (order approving File No. SR–NYSE–2001–
42) (‘‘OpenBook Fee Order’’).
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with limit order data from other markets
or trading systems.15 In the OpenBook
Fee Order, the Commission indicated
specifically that it was not approving or
disapproving the OpenBook contract
terms and, in fact, signaled that the
contractual provisions restricting
vendor redissemination of OpenBook
data, including the prohibition on
providing enhanced, integrated, or
consolidated data, were ‘‘on their face
discriminatory and may raise fair access
[issues] under the Act.’’ 16
In October 2002, the NYSE filed a
proposal to permit the display and use
of quotations in NYSE-traded stocks to
show additional depth in the market for
those stocks, i.e., Liquidity Quotes.17
The Commission approved the Liquidity
Quote proposal on the condition that
the NYSE remove from the contract
terms governing the receipt of Liquidity
Quote data the prohibition on data feed
recipients, including vendors,
integrating Liquidity Quote data with
other markets’ data or with the display
of other markets’ data.18 However, the
Commission concluded that the NYSE
could require that vendors: (1) Provide
the NYSE with attribution in any
display that included Liquidity Quote
data; and (2) make Liquidity Quote
available to their customers as a
separate branded package.19
After agreeing to the conditions in the
Liquidity Quote Conditional Order, the
NYSE revised the Liquidity Quote
contract terms by removing the
prohibition on integrating Liquidity
Quote data with other markets’ data. In
addition, the NYSE sought to revise the
contract terms to establish new display
requirements for vendors. Bloomberg
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15 Specifically,
the contract terms governing the
receipt of OpenBook data: (1) Prohibit vendors from
providing displays that integrate OpenBook data
with limit order data from other markets or trading
systems, although a vendor may allow its
subscribers to view other entities’ limit orders sideby-side with, or on the same page as, displays of
OpenBook information; and (2) preclude a data feed
recipient from retransmitting the OpenBook data
feed. See OpenBook Fee Order, supra note 14.
16 See OpenBook Fee Order, supra note 14.
17 Liquidity Quote data reflected aggregated NYSE
trading interest at a specific price interval below the
best bid (in the case of a liquidity bid) or at a
specific price interval above the best offer (in the
case of a liquidity offer).
18 See Securities Exchange Act Release No. 47614
(April 2, 2003), 68 FR 17140 (April 8, 2003) (order
conditionally approving File No. SR–NYSE–2002–
55) (‘‘Liquidity Quote Conditional Order’’).
Although the NYSE had not filed the Liquidity
Quote contract terms with the Commission, the
Commission concluded that it was required to
consider comments regarding the contract terms
because they related to the manner in which the
Liquidity Quote proposal would operate. See
Liquidity Quote Conditional Order at note 39 and
accompanying text.
19 See Liquidity Quote Conditional Order, supra
note 18.
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successfully challenged these display
requirements as constituting a denial of
access under Sections 19(d) and 19(f) of
the Act.20 In the Bloomberg Order, the
Commission found that the contract
terms governing the display of Liquidity
Quote data were NYSE rules that were
required to be filed and approved
pursuant to Section 19(b) of the Act.21
The NYSE subsequently filed the
Liquidity Quote contract terms with the
Commission as a proposed rule change,
which the Commission approved.22
Among other things, the Liquidity
Quote contract terms required that
vendors: (1) Indicate the number of
shares attributable to Liquidity Quote
bids and offers in any display that
aggregated Liquidity Quote bids and
offers with interest from other markets;
(2) identify each element or line of
Liquidity Quote information included in
an integrated display or montage with
either ‘‘NYSE Liquidity Quote’’ or
‘‘NYLQ’’; (3) offer its subscribers a
Liquidity Quote product that was
separate and apart from information
products that included other markets’
data; and (4) provide the NYSE with
sample screen shots of displays that
included Liquidity Quote information at
the time the vendor commences to
provide the display to subscribers.23 As
described more fully below, the contract
terms that the NYSE filed in the
Original Exhibit C Proposal were similar
to the contract terms that the
Commission approved for the Liquidity
Quote data product.
III. Description of the Proposals
A. The Exhibit C Proposal
In the Original Exhibit C Proposal, the
NYSE proposed to amend the existing
OpenBook Exhibit C to eliminate the
prohibition on vendors’ integrating
OpenBook data with data from other
market centers and to require vendors
20 See Securities Exchange Act Release No. 49076
(January 14, 2004) (Administrative Proceeding File
No. 3–11129) (In the Matter of Bloomberg L.P. for
Review of Action Taken by the NYSE) (‘‘Bloomberg
Order’’).
21 See Bloomberg Order, supra note 20. Because
the NYSE had not filed the Liquidity Quote contract
terms with the Commission, the Commission
concluded that the contract terms could not provide
a basis for the NYSE’s denial of Bloomberg’s access
to Liquidity Quote data.
22 See Securities Exchange Act Release No. 51438
(March 28, 2005), 70 FR 17137 (April 4, 2005)
(order approving File No. SR–NYSE–2004–32)
(‘‘Liquidity Quote Order’’).
23 See Liquidity Quote Order, supra note 22. In
the Liquidity Quote Order, the Commission stated
that the Liquidity Quote contract terms ‘‘do not
apply and have not been considered or approved by
the Commission as acceptable for the distribution
of NYSE OpenBook data.’’ See Liquidity Quote
Order, supra note 22, at note 41 and accompanying
text.
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17935
to: (1) Identify as NYSE data each
element or line of OpenBook
information included in an integrated
display of trading interest across market
centers; (2) indicate at each price level
the number of shares attributable to
OpenBook bids and offers when the
vendor aggregates bids and offers from
multiple market centers in an integrated
display; (3) provide customers with a
stand-alone OpenBook display if the
vendor provides an integrated display;
and (4) provide the NYSE with a sample
of each new screen shot to demonstrate
the manner in which the vendor
displays OpenBook information and any
modification to previous displays.
These OpenBook vendor display
requirements would not apply to any
OpenBook subscriber’s internal displays
of OpenBook data. Thus, an OpenBook
subscriber that distributes the data
internally would be able to integrate the
OpenBook data with data from other
markets through its own applications or
software, without the attribution
requirements applicable to market data
vendors.
The Commission received six
comment letters regarding the Original
Exhibit C Proposal.24 Several
commenters argued that the attribution
requirements contained in the Original
Exhibit C Proposal would act as a de
facto ban on the commingling of market
data.25 One commenter asserted that the
attribution requirement would limit the
visibility of competing market centers
and diminish the amount of depth and
analytics that could be displayed,
thereby reducing transparency and
market efficiency.26 Another commenter
asserted that ‘‘[t]raders need a * * *
view of available prices without
attribution that allows them to see a
greater range of price and liquidity
points than can be seen on a market
monitor with attribution.’’27 The
commenter argued, further, that it
would not be possible to build a
readable market monitor of aggregated
volume if market attribution were
required for each market center
included in the aggregated volume at
each price point.28
In addition, this commenter
maintained that the Original Exhibit C
Proposal would discriminate unfairly
24 See
note 11, supra.
e.g., NSX Letter II, SIA Letter II, and U.S.
Chamber of Commerce Letter II, supra note 11. See
also Bloomberg II, supra note 11 (proposal would
prohibit the effective integration of OpenBook data
with data from other market centers).
26 See U.S Chamber of Commerce Letter II, supra
note 11. See also NSX Letter II; SIA Letter II;
Ameritrade Letter II; and Bloomberg Letter II, supra
note 11.
27 See Bloomberg Letter II, supra note 11.
28 Id.
25 See
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against small and medium-sized brokerdealers that cannot afford to maintain
research or software-development
departments and must rely on vendors
to provide aggregated market
monitors.29 Similarly, the SIA stated
that many of its members:
Depend on vendors to provide them with
market data both to use internally and to
disseminate to investors. The NYSE proposal
mandates that vendors provide special
‘attribution’ for all NYSE OpenBook data
* * * This compulsory identifier would
consume finite screen space, reducing the
amount of trading depth vendors could
display, undermining their ability to create
analytics, and negatively impacting the
market data ultimately made available to
* * * members and clients. At the same
time, the NYSE attribution requirement
would crowd competing market centers off
data vendor screens. These restrictions could
significantly decrease the transparency of the
securities markets and inhibit competition
among markets.30
This commenter also maintained that
the Original Exhibit C Proposal would
impose an unnecessary burden on
competition because its requirements
would ‘‘impede alternative uses of data
and require a particular display that
gives preeminence to the NYSE’s data
and branding.’’ 31
B. Amendment No. 2 to the Exhibit C
Proposal
In response to the commenters’
concerns regarding the attribution
requirements in the Original Exhibit C
Proposal, the NYSE filed Amendment
No. 2 to the Exhibit C Proposal.
Amendment No. 2 replaces and
supersedes the originally filed Exhibit C
in its entirety.
The revised Exhibit C provided in
Amendment No. 2 (the ‘‘New Exhibit
C’’) will allow vendors to provide
displays that commingle OpenBook
information with information from other
markets without attribution of the NYSE
name or the number of shares (‘‘NonAttributed Integrated Displays’’), so long
as the vendors comply with the
requirements described below.32 The
29 See
Bloomberg Letters II and III, supra note 11.
SIA Letter II, supra note 11.
31 See SIA Letter II, supra note 11. Another
commenter contended that the NYSE lacks the
authority to regulate the activities of entities that
are not NYSE members, including market data
vendors. See Bloomberg Letter III, supra note 11. In
this regard, the commenter notes that Section
6(b)(5) of the Act prohibits a national securities
exchange from regulating ‘‘by virtue of any
authority conferred by this title matters not related
to the purposes of this title or the administration
of the exchange.’’ This commenter argues that the
Original Exhibit C Proposal is inconsistent with
Section 6(b)(5) of the Act because it represents an
attempt by the NYSE to use its regulatory authority
to further its private commercial interests.
32 Under both the Original Exhibit C Proposal and
the New Exhibit C, the display requirements do not
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30 See
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NYSE states that it is doing so primarily
because the NYSE wishes to respond to
the increasing demand from
professional investors for a real-time
OpenBook product and because the
NYSE realizes that order book
information is already prevalent in the
marketplace and that investors have
become accustomed to screen displays
that aggregate the liquidity of multiple
markets’ books without attribution.
In the New Exhibit C, the Exchange
proposes to require a vendor that makes
Non-Attributed Integrated Displays
available to also make available a
second display that includes the
‘‘NYSE’’ identifier and the number of
shares attributable to OpenBook bids
and offers (‘‘Attributed Integrated
Displays’’). The vendor must make the
Attributed Integrated Displays available
in a manner that allows the user to have
easy and ready access to them from the
Non-Attributed Integrated Display
screens.
As in the Original Exhibit C Proposal,
a vendor that makes Integrated Displays
available must also make OpenBook
information available as a product that
is separate and apart from information
products that include other market
centers’ information.
The New Exhibit C also would require
the vendor:
(a) To make its subscribers aware of
the availability of the Attributed
Integrated Displays and the stand-alone
OpenBook product in the same manner
as it makes its subscribers aware of NonAttributed Integrated Displays; and
(b) No later than at the time it first
commences to provide a new or
modified Attributed Integrated Display,
or an OpenBook-only display, to others,
to submit to the Exchange for inclusion
in Exhibit A a screen shot of that
Attributed Integrated Display or
OpenBook-only display and a
description of the means of access to
that screen.
In addition, the NYSE represents that
it intends to review with the industry
whether there is sufficient demand for
depth-of-book information among
nonprofessional subscribers to justify a
depth-of-book product and fee for
nonprofessional subscribers. The
Exchange notes that its Hybrid initiative
may have an impact on the demand for
such a product.
C. The Real-Time Fee Proposal
The NYSE currently updates
OpenBook information every five
seconds. The current fee for the
apply to a data recipient that distributes OpenBook
data to its officers, partners, and employees or to
those of its affiliates.
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OpenBook service is comprised of two
components: (1) $5,000 per month for
receipt of and the right to redistribute
the OpenBook data feed; and (2) $50.00
per month for each terminal through
which an end user displays OpenBook
data. In the Real-Time Fee Proposal, the
NYSE proposes to make available a
second OpenBook service that would
update OpenBook limit order
information in real time. The $5,000 per
month fee would entitle an entity to
receive and redistribute the five-second
delayed data feed, the real-time data
feed, or both. In addition, the NYSE
proposes to increase the per-terminal
component of the real-time OpenBook
service fee to $60.00 per month.
The Commission received nine
comments regarding the Real-Time Fee
Proposal.33 Two commenters supported
NYSE’s proposal to make OpenBook
data available on a real-time basis.
However, these commenters raised
concerns about the contract terms and
fees associated with OpenBook.34
Several commenters argued that the
NYSE has failed to justify the amount of
the proposed real-time OpenBook fee.35
In particular, the commenters
maintained that the NYSE has not
provided the data necessary to
determine whether the $60 per terminal
fee has any relation to costs, or whether
it is an equitable allocation of the costs
associated with using its facilities.36
Similarly, one commenter asserted that
the NYSE’s fees for market data ‘‘bear no
demonstrated relation to the costs the
NYSE incurs in collecting and
disseminating the data,’’ and that the
Act requires that such fees ‘‘be subjected
to a rigorous cost-based analysis.’’ 37
Another commenter noted that the
NYSE provided no data regarding its
costs or the formula it uses to determine
the equitable allocation of its costs.38
The commenter believed that without
this information, the Commission lacks
33 See
note 5, supra.
Ameritrade Letter I and STANY Letter
supra note 5.
35 See, e.g., Ameritrade Letter I; Bloomberg Letter
I; U.S. Chamber of Commerce Letter I; Schwab
Letter, supra note 5; and SIA Letter II, supra note
11.
36 See Schwab Letter, supra note 5, and SIA Letter
II, supra note 11. See also Ameritrade Letter I (the
Commission should require the NYSE to support its
OpenBook fees by detailing the costs of providing
the data), supra note 5; and U.S. Chamber of
Commerce Letters I and II (asserting that ‘‘there is
no way to ascertain whether the $60 per month
terminal fee bears any relationship to costs, whether
those costs are reasonably allocated, [and] whether
the Congressional mandate that market data fees be
‘fair and reasonable’ is being met’’), supra notes 5
and 11.
37 See Bloomberg Letter I, supra note 5.
38 See Ameritrade Letter II, supra note 11. See
also SIA Letter II, supra note 11.
34 See
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a legally sufficient foundation to
approve the proposed fee.39
Some commenters criticized the lack
of a separate OpenBook fee for nonprofessional investors.40 One
commenter maintained that the NYSE’s
proposal fails to explain how the lack of
a non-professional OpenBook fee meets
the requirements of Section 6(b)(5) of
the Act, which, among other things,
requires that the rules of a national
securities exchange be designed to
promote a free and open market and a
national market system, to protect
investors and the public interest, and to
prevent unfair discrimination between
customers, brokers, and dealers.41 The
commenter asserted that the proposed
OpenBook fee places retail investors at
a disadvantage and operates as a denial
of access to retail investors, including
active traders.42 Similarly, another
commenter believed that the NYSE’s
proposal ‘‘would create a bifurcated
market in which retail investors are
clearly disadvantaged.’’ 43 The
commenters also noted that Nasdaq
provides a non-professional fee for its
similar TotalView product.44
In its response to the commenters, the
NYSE reiterated its assertion that the
$60 per month per terminal fee for the
real-time OpenBook service reflects an
equitable allocation of the overall costs
of using the NYSE’s facilities.45 The
NYSE also noted that in approving the
current OpenBook fees, the Commission
found that the fees were consistent with
Section 6(b)(4) of the Act and were
reasonable when compared to similar
types of services provided by other
markets.46 In addition, the NYSE stated
that the Commission has approved a
monthly $70 charge for professional
subscribers to Nasdaq’s TotalView
service, which is comparable to the
OpenBook service.47
With respect to the lack of a nonprofessional fee for the OpenBook
service, the NYSE asserted that it has
‘‘noted no discernible demand for
OpenBook from retail investors.’’ 48
39 See
Ameritrade Letter II, supra note 11.
Schwab Letter, supra note 5, and SIA
Letters I and II, supra notes 5 and 11. See also
Ameritrade Letter I, supra note 5 (the Commission
should require the NYSE to revise its fee structure
so that OpenBook data may be ‘‘provided to retail
investors at a cost reasonably related to the actual
cost of providing the data feed’’).
41 See Schwab Letter, supra note 5.
42 See Schwab Letter, supra note 5.
43 See Ameritrade Letter I, supra note 5.
44 See SIA Letters I and II, supra notes 5 and 11,
and Schwab Letter, supra note 5.
45 See NYSE Response Letters, supra note 12.
46 See NYSE Response Letters, supra note 12,
citing the OpenBook Fee Order, supra note 14.
47 See NYSE Response Letters, supra note 12. See
also NASD Rule 7010(q), ‘‘Nasdaq TotalView.’’
48 See NYSE Response Letters, supra note 12.
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40 See
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However, the NYSE represented that it
intends to review with the industry
whether there is sufficient demand for
depth-of-book information among nonprofessional subscribers to justify a
depth-of-book product and fee for nonprofessional subscribers.49 The NYSE
also noted that its Hybrid initiative may
have an impact on the demand for such
a product.50
IV. Discussion and Commission
Findings
For the reasons discussed below, the
Commission finds that the Exhibit C
Proposal, as amended by Amendment
No. 2, and the Real-Time Fee Proposal,
are consistent with the requirements of
the Act and the rules and regulations
thereunder applicable to a national
securities exchange.51
A. Exhibit C Proposal
The Commission finds that the
Exhibit C Proposal, as amended by
Amendment No. 2, is consistent with
Section 6(b)(5) of the Act,52 which
requires, among other things, that the
rules of a national securities exchange
be designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system and, in general, to protect
investors and the public interest. In
addition, the Commission finds that the
Exhibit C Proposal, as amended by
Amendment No. 2, is consistent with
Section 6(b)(8) of the Act,53 which
requires that the rules of a national
securities exchange not impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
The Commission has considered the
comments received regarding the
Original Exhibit C Proposal and believes
that the NYSE has addressed the
commenters’ concerns in the New
Exhibit C. In the New Exhibit C, the
NYSE has decided to allow market data
vendors to provide the integrated
screens that commenters state that end
users desire. The Commission believes
that the NYSE’s New Exhibit C should
allow market data vendors to provide
their subscribers with useful data
without imposing unnecessary
49 See Amendment No. 2 to the Exhibit C
Proposal.
50 See Amendment No. 2 to the Exhibit C
Proposal.
51 In approving these rules, the Commission has
considered their impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
52 15 U.S.C. 78f(b)(5).
53 15 U.S.C. 78f(b)(8).
PO 00000
Frm 00133
Fmt 4703
Sfmt 4703
17937
restrictions, which should help to
perfect the mechanism of a free and
open market.
B. Real-Time Fee Proposal
The Commission finds that the RealTime Fee Proposal is consistent with
Section 6(b)(4) of the Act,54 which
requires that the rules of a national
securities exchange provide for the
equitable allocation of reasonable dues,
fees, and other charges among its
members and issuers and other persons
using its facilities. Specifically, the
Commission believes that the NYSE’s
proposed monthly per-terminal fee of
$60 for real-time OpenBook data is
reasonable when compared to the fees
for Nasdaq’s TotalView service.55
The Commission has considered the
commenters’ concerns that the proposed
OpenBook fee discriminates unfairly
against retail investors. The Commission
notes, however, that the NYSE has
represented that it intends to review
with the industry whether there is
sufficient demand for depth-of-book
information among non-professional
subscribers to justify a depth-of-book
product and fee for non-professional
subscribers.56 The NYSE acknowledges
that its Hybrid initiative may have an
impact on the demand for such a
product.57
C. Accelerated Approval of Amendment
No. 2 to the Exhibit C Proposal
The Commission finds good cause for
approving Amendment No. 2 to the
Exhibit C Proposal prior to 30 days after
the date of publication of notice of filing
thereof in the Federal Register. The
NYSE filed Amendment No. 2 to the
Exhibit C Proposal in response to the
comments submitted regarding the
Original Exhibit C Proposal. Because
Amendment No. 2 to the Exhibit C
Proposal responds to the commenters’
concerns, the Commission finds good
cause for approving Amendment No. 2
to the Exhibit C Proposal on an
accelerated basis.
V. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning Amendment No.
2 to the Exhibit C Proposal, including
whether Amendment No. 2 to the
Exhibit C Proposal is consistent with the
54 15
U.S.C. 78f(b)(4).
note 47, supra, and accompanying text. See
also OpenBook Fee Order, supra note 14, at note
5 (discussing other markets’ fees for limit order
book information).
56 See Amendment No. 2 to the Exhibit C
proposal.
57 See Amendment No. 2 to the Exhibit C
proposal.
55 See
E:\FR\FM\07APN1.SGM
07APN1
17938
Federal Register / Vol. 71, No. 67 / Friday, April 7, 2006 / Notices
Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
No. SR–NYSE–2005–32 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–9303.
All submissions should refer to File
Number SR–NYSE–2005–32. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://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 inspection and copying in
the Commission’s Public Reference
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of the NYSE. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NYSE–2005–32 and should
be submitted on or before April 28,
2006.
wwhite on PROD1PC61 with NOTICES
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,58 that the
Real-Time Fee Proposal (SR–NYSE–
2004–43) and the Exhibit C Proposal
(SR–NYSE–2005–32), as amended by
Amendment No. 2 to the Exhibit C
Proposal, are approved, and that
Amendment No. 2 to the Exhibit C
Proposal is approved on an accelerated
basis.
58 15
U.S.C. 78s(b)(2).
VerDate Aug<31>2005
19:13 Apr 06, 2006
Jkt 208001
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.59
Nancy M. Morris,
Secretary.
[FR Doc. E6–5058 Filed 4–6–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53584; File No. SR–Phlx–
2006–04]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule
Change and Amendments No. 1 and 2
Thereto Relating to Dissemination of
Index Values
March 31, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
12, 2006, the Philadelphia Stock
Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Phlx. The
Phlx filed Amendment No. 1 to the
proposed rule change on March 23,
2006 and submitted notification of
withdrawal of Amendment No. 1 on
March 24, 2006. On March 24, 2006, the
Phlx filed Amendment No. 2 to the
proposed rule change.3 The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx proposes to continue the
listing and trading of options on various
stock indices upon making certain
changes to the procedures for
dissemination of the values of the
indices. Specifically, Phlx has
determined to license the current and
closing index values underlying options
currently listed pursuant to Commission
approval pursuant to Rule 19b–4 rule
filings, namely, the Phlx Gold/Silver
SectorSM (‘‘XAUSM’’), Phlx Oil Service
SectorSM (‘‘OSXSM’’), Phlx
Semiconductor Sector (‘‘SOXSM’’), and
the Phlx Utility SectorSM (‘‘UTYSM’’)
(together, the ‘‘Approved Index
59 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Amendment No. 2 supersedes and replaces the
original filing in its entirety.
1 15
PO 00000
Frm 00134
Fmt 4703
Sfmt 4703
Options’’), as well as values of most of
Phlx’s other proprietary indexes, to its
wholly owned subsidiary, the
Philadelphia Board of Trade (‘‘PBOT’’),4
for the purpose of selling, reproducing,
and distributing the index values over
PBOT’s Market Data Distribution
Network (‘‘MDDN’’).5 The Exchange
proposes that the index values
underlying the Approved Index Options
will no longer be disseminated as
described in their respective Rule 19b–
4 filings and approval orders.6 The
Exchange is also seeking approval to
cease disseminating the current and
closing index values of all its
proprietary indexes over the facilities of
the Consolidated Tape Association
(‘‘CTA’’), and to disseminate such
values solely over the PBOT’s MDDN.7
Finally, the Exchange is seeking
approval for the subscriber fees to be
charged to market data vendors by
PBOT for all the values of Phlx’s
proprietary indexes disseminated by
PBOT’s MDDN.
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
Phlx included statements concerning
the purpose of and basis for the
proposed rule change. The text of these
4 PBOT is a dormant designated contract market
regulated by the Commodity Futures Trading
Commission (the ‘‘CFTC’’). Until November 30,
2005, when it became dormant, PBOT listed futures
contracts on a number of foreign currencies. PBOT
has applied to the CFTC for reinstatement for
dormancy and expects to launch a new electronic
trading platform, PBOT XL, in the near future.
5 Phlx also lists and trades options on a number
of other stock indices whose values will not be
disseminated by PBOT. Those indices will continue
to be maintained, and options thereon will continue
to be listed, as they are today. PBOT has, however,
secured a similar license from one other index
provider, and Phlx anticipates that PBOT will enter
into similar license agreements with proprietors of
other indexes underlying options traded on the
Phlx.
6 See Securities Exchange Act Release Nos. 20437
(December 2, 1983), 48 FR 55229 (December 9,
1983) (XAU); 38207 (January 27, 1997), 62 FR 5268
(February 4, 1997) (OSX); 34546 (August 18, 1994),
59 FR 43881 (August 25, 1994) (SOX); 24889
(September 9, 1987), 52 FR 35021 (September 16,
1987) (UTY).
7 Phlx’s proprietary indexes are, in addition to the
indexes underlying the Approved Index Options,
the Phlx Defense SectorSM, Phlx Drug SectorSM,
Phlx Europe SectorSM, Phlx Housing SectorSM, and
the Phlx World Energy IndexSM, all of which were
listed pursuant to Phlx Rule 1009A(b), the
Exchange’s generic index option listing standard
rule. Phlx’s proprietary indexes are owned and
maintained by Phlx. The Exchange has determined
not to remove the Phlx World Energy IndexSM
(‘‘XWE’’SM) and the Phlx Europe SectorSM
(‘‘XEX’’SM) from CTA immediately, but is
requesting approval to do so when and if the
Exchange determines that disseminating these
indexes in the same manner as its other proprietary
indexes will be appropriate.
E:\FR\FM\07APN1.SGM
07APN1
]]>Agencies
[Federal Register Volume 71, Number 67 (Friday, April 7, 2006)]
[Notices]
[Pages 17934-17938]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-5058]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53585; File Nos. SR-NYSE-2004-43 and SR-NYSE-2005-32]
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Order Approving Proposed Rule Change Relating to the Real-Time NYSE
OpenBook[supreg] Service and OpenBook[supreg] Fees and Order Approving
Proposed Rule Change Relating to the Contract Terms Governing Vendor
Displays of NYSE OpenBook[supreg] Data, and Notice of Filing and Order
Granting Accelerated Approval of Amendment No. 2 Thereto
March 31, 2006.
I. Introduction
On August 11, 2004, the New York Stock Exchange, Inc. (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to update NYSE OpenBook[supreg] (``OpenBook'')
limit order information in real time and to increase the monthly per-
terminal fee for the real-time OpenBook service (``Real-Time Fee
Proposal'').\3\ The Real-Time Fee Proposal was published for comment in
the Federal Register on September 2, 2004.\4\ The Commission received
nine letters regarding the Real-Time Fee Proposal.\5\ Several
commenters on the Real-Time Fee Proposal argued that the existing
OpenBook contractual provisions, which prohibit vendors from
consolidating OpenBook data with data from other market centers, are
anticompetitive and discriminatory.\6\ Other commenters believed that
the NYSE should file for public comment and Commission review and
approval the contract terms that would govern the distribution of
OpenBook data.\7\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ File No. SR-NYSE-2004-43.
\4\ See Securities Exchange Act Release No. 50275 (August 26,
2004), 69 FR 53760.
\5\ See letters to Jonathan G. Katz, Secretary, Commission, from
Lisa M. Utasi, President, and Kimberly Unger, Executive Director,
The Security Traders Association of New York, Inc. (``STANY''),
dated September 22, 2004 (``STANY Letter''); Richard A. Korhammer,
Chief Executive Officer, Lava Trading Inc. (``Lava''), dated
September 23, 2004 (``Lava Letter''); Thomas F. Secunda, Bloomberg
L.P. (``Bloomberg''), dated September 23, 2004 (``Bloomberg Letter
I''); Ellen L.S. Koplow, Executive Vice President and General
Counsel, Ameritrade Holding Corporation, dated September 23, 2004
(``Ameritrade Letter I''); Christopher P. Gilkerson, Vice President
and Associate General Counsel, Charles Schwab (``Schwab''), dated
September 23, 2004 (``Schwab Letter''); David Colker, Chief
Executive Office and President, National Stock Exchange (``NSX''),
dated September 24, 2004 (``NSX Letter I''); Eliot Wagner, Chair,
Technology and Regulation Committee, the Securities Industry
Association (``SIA''), and Christopher Gilkerson, Chair, Market Data
Subcommittee, SIA, dated October 22, 2004 (``SIA Letter I''); Meyer
S. Furcher, Chairman and Chief Executive Officer, Philadelphia Stock
Exchange, Inc. dated October 11, 2004; and letter from R. Bruce
Josten, Executive Vice President, Government Affairs, U.S. Chamber
of Commerce, to the Honorable William Donaldson, Chairman,
Commission, dated September 27, 2004 (``U.S. Chamber of Commerce
Letter I'').
\6\ See, e.g., Bloomberg Letter I (the OpenBook contract terms
are unfairly discriminatory because some, but not all, OpenBook
subscribers would be able to consolidate OpenBook information with
limit order information from other markets); Schwab Letter (the
current contractual provisions governing the distribution of
OpenBook data discriminate against vendors and their clients, and
are anticompetitive, because they restrict redistribution and
consolidation with other markets' data); Ameritrade Letter I (the
proposal discriminates among market participants because vendors,
unlike institutions and professionals, are prohibited from enhancing
OpenBook data or commingling it with data from other market
centers); and SIA Letter I (some members have suggested that the
existing OpenBook contractual provisions may be anticompetitive
because they restrict redistribution and consolidation with other
markets' data), supra note 5.
\7\ See, e.g., Schwab Letter, SIA Letter I, and U.S. Chamber of
Commerce Letter I, supra note 5. See also NSX Letter I and Lava
Letter, supra note 5 (the contract terms should be included so that
the public can assess the impact of the proposal on transparency and
competition among market centers).
---------------------------------------------------------------------------
On May 13, 2005, the NYSE filed a proposed rule change containing
proposed contract terms, set forth in a revised version of Exhibit C to
the ``Agreement for the Receipt and Use of Market Data,'' that would
govern the displays and dissemination of OpenBook data (the ``Exhibit C
Proposal'').\8\ The NYSE filed Amendment No. 1 to the Exhibit C
Proposal on June 16, 2005.\9\ The Exhibit C Proposal, as amended by
Amendment No. 1 (``Original Exhibit C Proposal''), was published for
comment in the Federal Register on July 1, 2005.\10\ The Commission
received six comment letters regarding the Original Exhibit C
Proposal.\11\ The NYSE responded to the comments regarding the Real-
Time Fee Proposal and the Original Exhibit C Proposal on September 30,
2005.\12\ The NYSE filed Amendment No. 2 to the Exhibit C Proposal on
February 26, 2006.\13\ This order approves the Real-Time Fee Proposal
and the Exhibit C Proposal, as amended by Amendment No. 2. In addition,
the Commission is publishing notice to solicit comment on, and is
simultaneously approving, on an accelerated basis, Amendment No. 2 to
the Exhibit C Proposal.
---------------------------------------------------------------------------
\8\ File No. SR-NYSE-2005-32. The Commission received a comment
letter on June 3, 2005 from Bloomberg. See letter from Kim Borg,
Bloomberg, to Annette L. Nazareth, Director, Division of Market
Regulation, Commission, dated June 2, 2005. Bloomberg resubmitted
this comment letter on July 22, 2005. See supra note 11.
\9\ In Amendment No. 1 provided a copy of its current Exhibit C
marked to indicate the changes that the NYSE proposed. NYSE did not
propose any substantive changes to the proposal in Amendment No. 1.
\10\ See Securities Exchange Act Release No. 51925 (June 24,
2005), 70 FR 38226.
\11\ See letters to Jonathan G. Katz, Secretary, Commission,
from David Colker, Chief Executive Officer and President, NSX, dated
July 20, 2005 (``NSX Letter II''); Phylis M. Esposito, Executive
Vice President, Chief Strategy Officer, Ameritrade, dated July 22,
2005 (``Ameritrade Letter II''); Christopher Gilkerson, Chair, SIA
Technology and Regulation Committee and Andrew Wels, Chair, SIA
Market Data Subcommittee, dated July 22, 2005 (``SIA Letter II'');
Kim Bang, Bloomberg, dated July 22, 2005 (``Bloomberg Letter II'');
Kim Bang, Bloomberg, dated October 19, 2005 (``Bloomberg Letter
III''); and letter to the Honorable Cynthia Glassman, Acting
Chairman, Commission, from R. Bruce Josten, Executive Vice
President, Government Affairs, U.S. Chamber of Commerce, dated July
22, 2005 (``U.S. Chamber of Commerce Letter II'').
\12\ See letters from Mary Yeager, Assistant Secretary, NYSE, to
Jonathan G. Katz, Secretary, Commission, dated September 30, 2005
(``NYSE Response Letters''). One of the NYSE Response Letters
addresses the comments raised by Bloomberg, while the other NYSE
Response Letter addresses the comments of the remaining commenters.
\13\ As described more fully below, Amendment No. 2 revises
Exhibit C to permit a vendor to provide a display that integrates
OpenBook information with information from other markets without
attributing the OpenBook information to the NYSE, provided the
vendor satisfies certain requirements. Amendment No. 2 replaces and
supersedes the originally proposed Exhibit C in its entirety.
---------------------------------------------------------------------------
II. Background
The OpenBook service is a compilation of limit order data that the
NYSE provides to market data vendors, broker-dealers, private network
providers, and other entities through a data feed. The Commission
approved the current fees for the OpenBook service in 2001.\14\ In its
2001 OpenBook proposal, the NYSE described, but did not file with the
Commission, the contractual provisions governing market data vendors'
receipt and display of OpenBook data. These provisions, which are in
effect today, prohibit market data vendors from providing displays that
integrate OpenBook data
[[Page 17935]]
with limit order data from other markets or trading systems.\15\ In the
OpenBook Fee Order, the Commission indicated specifically that it was
not approving or disapproving the OpenBook contract terms and, in fact,
signaled that the contractual provisions restricting vendor
redissemination of OpenBook data, including the prohibition on
providing enhanced, integrated, or consolidated data, were ``on their
face discriminatory and may raise fair access [issues] under the Act.''
\16\
---------------------------------------------------------------------------
\14\ See Securities Exchange Act Release No. 45138 (December 7,
2001), 66 FR 64895 (December 14, 2001) (order approving File No. SR-
NYSE-2001-42) (``OpenBook Fee Order'').
\15\ Specifically, the contract terms governing the receipt of
OpenBook data: (1) Prohibit vendors from providing displays that
integrate OpenBook data with limit order data from other markets or
trading systems, although a vendor may allow its subscribers to view
other entities' limit orders side-by-side with, or on the same page
as, displays of OpenBook information; and (2) preclude a data feed
recipient from retransmitting the OpenBook data feed. See OpenBook
Fee Order, supra note 14.
\16\ See OpenBook Fee Order, supra note 14.
---------------------------------------------------------------------------
In October 2002, the NYSE filed a proposal to permit the display
and use of quotations in NYSE-traded stocks to show additional depth in
the market for those stocks, i.e., Liquidity Quotes.\17\ The Commission
approved the Liquidity Quote proposal on the condition that the NYSE
remove from the contract terms governing the receipt of Liquidity Quote
data the prohibition on data feed recipients, including vendors,
integrating Liquidity Quote data with other markets' data or with the
display of other markets' data.\18\ However, the Commission concluded
that the NYSE could require that vendors: (1) Provide the NYSE with
attribution in any display that included Liquidity Quote data; and (2)
make Liquidity Quote available to their customers as a separate branded
package.\19\
---------------------------------------------------------------------------
\17\ Liquidity Quote data reflected aggregated NYSE trading
interest at a specific price interval below the best bid (in the
case of a liquidity bid) or at a specific price interval above the
best offer (in the case of a liquidity offer).
\18\ See Securities Exchange Act Release No. 47614 (April 2,
2003), 68 FR 17140 (April 8, 2003) (order conditionally approving
File No. SR-NYSE-2002-55) (``Liquidity Quote Conditional Order'').
Although the NYSE had not filed the Liquidity Quote contract terms
with the Commission, the Commission concluded that it was required
to consider comments regarding the contract terms because they
related to the manner in which the Liquidity Quote proposal would
operate. See Liquidity Quote Conditional Order at note 39 and
accompanying text.
\19\ See Liquidity Quote Conditional Order, supra note 18.
---------------------------------------------------------------------------
After agreeing to the conditions in the Liquidity Quote Conditional
Order, the NYSE revised the Liquidity Quote contract terms by removing
the prohibition on integrating Liquidity Quote data with other markets'
data. In addition, the NYSE sought to revise the contract terms to
establish new display requirements for vendors. Bloomberg successfully
challenged these display requirements as constituting a denial of
access under Sections 19(d) and 19(f) of the Act.\20\ In the Bloomberg
Order, the Commission found that the contract terms governing the
display of Liquidity Quote data were NYSE rules that were required to
be filed and approved pursuant to Section 19(b) of the Act.\21\
---------------------------------------------------------------------------
\20\ See Securities Exchange Act Release No. 49076 (January 14,
2004) (Administrative Proceeding File No. 3-11129) (In the Matter of
Bloomberg L.P. for Review of Action Taken by the NYSE) (``Bloomberg
Order'').
\21\ See Bloomberg Order, supra note 20. Because the NYSE had
not filed the Liquidity Quote contract terms with the Commission,
the Commission concluded that the contract terms could not provide a
basis for the NYSE's denial of Bloomberg's access to Liquidity Quote
data.
---------------------------------------------------------------------------
The NYSE subsequently filed the Liquidity Quote contract terms with
the Commission as a proposed rule change, which the Commission
approved.\22\ Among other things, the Liquidity Quote contract terms
required that vendors: (1) Indicate the number of shares attributable
to Liquidity Quote bids and offers in any display that aggregated
Liquidity Quote bids and offers with interest from other markets; (2)
identify each element or line of Liquidity Quote information included
in an integrated display or montage with either ``NYSE Liquidity
Quote'' or ``NYLQ''; (3) offer its subscribers a Liquidity Quote
product that was separate and apart from information products that
included other markets' data; and (4) provide the NYSE with sample
screen shots of displays that included Liquidity Quote information at
the time the vendor commences to provide the display to
subscribers.\23\ As described more fully below, the contract terms that
the NYSE filed in the Original Exhibit C Proposal were similar to the
contract terms that the Commission approved for the Liquidity Quote
data product.
---------------------------------------------------------------------------
\22\ See Securities Exchange Act Release No. 51438 (March 28,
2005), 70 FR 17137 (April 4, 2005) (order approving File No. SR-
NYSE-2004-32) (``Liquidity Quote Order'').
\23\ See Liquidity Quote Order, supra note 22. In the Liquidity
Quote Order, the Commission stated that the Liquidity Quote contract
terms ``do not apply and have not been considered or approved by the
Commission as acceptable for the distribution of NYSE OpenBook
data.'' See Liquidity Quote Order, supra note 22, at note 41 and
accompanying text.
---------------------------------------------------------------------------
III. Description of the Proposals
A. The Exhibit C Proposal
In the Original Exhibit C Proposal, the NYSE proposed to amend the
existing OpenBook Exhibit C to eliminate the prohibition on vendors'
integrating OpenBook data with data from other market centers and to
require vendors to: (1) Identify as NYSE data each element or line of
OpenBook information included in an integrated display of trading
interest across market centers; (2) indicate at each price level the
number of shares attributable to OpenBook bids and offers when the
vendor aggregates bids and offers from multiple market centers in an
integrated display; (3) provide customers with a stand-alone OpenBook
display if the vendor provides an integrated display; and (4) provide
the NYSE with a sample of each new screen shot to demonstrate the
manner in which the vendor displays OpenBook information and any
modification to previous displays. These OpenBook vendor display
requirements would not apply to any OpenBook subscriber's internal
displays of OpenBook data. Thus, an OpenBook subscriber that
distributes the data internally would be able to integrate the OpenBook
data with data from other markets through its own applications or
software, without the attribution requirements applicable to market
data vendors.
The Commission received six comment letters regarding the Original
Exhibit C Proposal.\24\ Several commenters argued that the attribution
requirements contained in the Original Exhibit C Proposal would act as
a de facto ban on the commingling of market data.\25\ One commenter
asserted that the attribution requirement would limit the visibility of
competing market centers and diminish the amount of depth and analytics
that could be displayed, thereby reducing transparency and market
efficiency.\26\ Another commenter asserted that ``[t]raders need a * *
* view of available prices without attribution that allows them to see
a greater range of price and liquidity points than can be seen on a
market monitor with attribution.''\27\ The commenter argued, further,
that it would not be possible to build a readable market monitor of
aggregated volume if market attribution were required for each market
center included in the aggregated volume at each price point.\28\
---------------------------------------------------------------------------
\24\ See note 11, supra.
\25\ See e.g., NSX Letter II, SIA Letter II, and U.S. Chamber of
Commerce Letter II, supra note 11. See also Bloomberg II, supra note
11 (proposal would prohibit the effective integration of OpenBook
data with data from other market centers).
\26\ See U.S Chamber of Commerce Letter II, supra note 11. See
also NSX Letter II; SIA Letter II; Ameritrade Letter II; and
Bloomberg Letter II, supra note 11.
\27\ See Bloomberg Letter II, supra note 11.
\28\ Id.
---------------------------------------------------------------------------
In addition, this commenter maintained that the Original Exhibit C
Proposal would discriminate unfairly
[[Page 17936]]
against small and medium-sized broker-dealers that cannot afford to
maintain research or software-development departments and must rely on
vendors to provide aggregated market monitors.\29\ Similarly, the SIA
stated that many of its members:
---------------------------------------------------------------------------
\29\ See Bloomberg Letters II and III, supra note 11.
Depend on vendors to provide them with market data both to use
internally and to disseminate to investors. The NYSE proposal
mandates that vendors provide special `attribution' for all NYSE
OpenBook data * * * This compulsory identifier would consume finite
screen space, reducing the amount of trading depth vendors could
display, undermining their ability to create analytics, and
negatively impacting the market data ultimately made available to *
* * members and clients. At the same time, the NYSE attribution
requirement would crowd competing market centers off data vendor
screens. These restrictions could significantly decrease the
transparency of the securities markets and inhibit competition among
markets.\30\
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\30\ See SIA Letter II, supra note 11.
This commenter also maintained that the Original Exhibit C Proposal
would impose an unnecessary burden on competition because its
requirements would ``impede alternative uses of data and require a
particular display that gives preeminence to the NYSE's data and
branding.'' \31\
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\31\ See SIA Letter II, supra note 11. Another commenter
contended that the NYSE lacks the authority to regulate the
activities of entities that are not NYSE members, including market
data vendors. See Bloomberg Letter III, supra note 11. In this
regard, the commenter notes that Section 6(b)(5) of the Act
prohibits a national securities exchange from regulating ``by virtue
of any authority conferred by this title matters not related to the
purposes of this title or the administration of the exchange.'' This
commenter argues that the Original Exhibit C Proposal is
inconsistent with Section 6(b)(5) of the Act because it represents
an attempt by the NYSE to use its regulatory authority to further
its private commercial interests.
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B. Amendment No. 2 to the Exhibit C Proposal
In response to the commenters' concerns regarding the attribution
requirements in the Original Exhibit C Proposal, the NYSE filed
Amendment No. 2 to the Exhibit C Proposal. Amendment No. 2 replaces and
supersedes the originally filed Exhibit C in its entirety.
The revised Exhibit C provided in Amendment No. 2 (the ``New
Exhibit C'') will allow vendors to provide displays that commingle
OpenBook information with information from other markets without
attribution of the NYSE name or the number of shares (``Non-Attributed
Integrated Displays''), so long as the vendors comply with the
requirements described below.\32\ The NYSE states that it is doing so
primarily because the NYSE wishes to respond to the increasing demand
from professional investors for a real-time OpenBook product and
because the NYSE realizes that order book information is already
prevalent in the marketplace and that investors have become accustomed
to screen displays that aggregate the liquidity of multiple markets'
books without attribution.
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\32\ Under both the Original Exhibit C Proposal and the New
Exhibit C, the display requirements do not apply to a data recipient
that distributes OpenBook data to its officers, partners, and
employees or to those of its affiliates.
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In the New Exhibit C, the Exchange proposes to require a vendor
that makes Non-Attributed Integrated Displays available to also make
available a second display that includes the ``NYSE'' identifier and
the number of shares attributable to OpenBook bids and offers
(``Attributed Integrated Displays''). The vendor must make the
Attributed Integrated Displays available in a manner that allows the
user to have easy and ready access to them from the Non-Attributed
Integrated Display screens.
As in the Original Exhibit C Proposal, a vendor that makes
Integrated Displays available must also make OpenBook information
available as a product that is separate and apart from information
products that include other market centers' information.
The New Exhibit C also would require the vendor:
(a) To make its subscribers aware of the availability of the
Attributed Integrated Displays and the stand-alone OpenBook product in
the same manner as it makes its subscribers aware of Non-Attributed
Integrated Displays; and
(b) No later than at the time it first commences to provide a new
or modified Attributed Integrated Display, or an OpenBook-only display,
to others, to submit to the Exchange for inclusion in Exhibit A a
screen shot of that Attributed Integrated Display or OpenBook-only
display and a description of the means of access to that screen.
In addition, the NYSE represents that it intends to review with the
industry whether there is sufficient demand for depth-of-book
information among nonprofessional subscribers to justify a depth-of-
book product and fee for nonprofessional subscribers. The Exchange
notes that its Hybrid initiative may have an impact on the demand for
such a product.
C. The Real-Time Fee Proposal
The NYSE currently updates OpenBook information every five seconds.
The current fee for the OpenBook service is comprised of two
components: (1) $5,000 per month for receipt of and the right to
redistribute the OpenBook data feed; and (2) $50.00 per month for each
terminal through which an end user displays OpenBook data. In the Real-
Time Fee Proposal, the NYSE proposes to make available a second
OpenBook service that would update OpenBook limit order information in
real time. The $5,000 per month fee would entitle an entity to receive
and redistribute the five-second delayed data feed, the real-time data
feed, or both. In addition, the NYSE proposes to increase the per-
terminal component of the real-time OpenBook service fee to $60.00 per
month.
The Commission received nine comments regarding the Real-Time Fee
Proposal.\33\ Two commenters supported NYSE's proposal to make OpenBook
data available on a real-time basis. However, these commenters raised
concerns about the contract terms and fees associated with
OpenBook.\34\ Several commenters argued that the NYSE has failed to
justify the amount of the proposed real-time OpenBook fee.\35\ In
particular, the commenters maintained that the NYSE has not provided
the data necessary to determine whether the $60 per terminal fee has
any relation to costs, or whether it is an equitable allocation of the
costs associated with using its facilities.\36\ Similarly, one
commenter asserted that the NYSE's fees for market data ``bear no
demonstrated relation to the costs the NYSE incurs in collecting and
disseminating the data,'' and that the Act requires that such fees ``be
subjected to a rigorous cost-based analysis.'' \37\ Another commenter
noted that the NYSE provided no data regarding its costs or the formula
it uses to determine the equitable allocation of its costs.\38\ The
commenter believed that without this information, the Commission lacks
[[Page 17937]]
a legally sufficient foundation to approve the proposed fee.\39\
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\33\ See note 5, supra.
\34\ See Ameritrade Letter I and STANY Letter supra note 5.
\35\ See, e.g., Ameritrade Letter I; Bloomberg Letter I; U.S.
Chamber of Commerce Letter I; Schwab Letter, supra note 5; and SIA
Letter II, supra note 11.
\36\ See Schwab Letter, supra note 5, and SIA Letter II, supra
note 11. See also Ameritrade Letter I (the Commission should require
the NYSE to support its OpenBook fees by detailing the costs of
providing the data), supra note 5; and U.S. Chamber of Commerce
Letters I and II (asserting that ``there is no way to ascertain
whether the $60 per month terminal fee bears any relationship to
costs, whether those costs are reasonably allocated, [and] whether
the Congressional mandate that market data fees be `fair and
reasonable' is being met''), supra notes 5 and 11.
\37\ See Bloomberg Letter I, supra note 5.
\38\ See Ameritrade Letter II, supra note 11. See also SIA
Letter II, supra note 11.
\39\ See Ameritrade Letter II, supra note 11.
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Some commenters criticized the lack of a separate OpenBook fee for
non-professional investors.\40\ One commenter maintained that the
NYSE's proposal fails to explain how the lack of a non-professional
OpenBook fee meets the requirements of Section 6(b)(5) of the Act,
which, among other things, requires that the rules of a national
securities exchange be designed to promote a free and open market and a
national market system, to protect investors and the public interest,
and to prevent unfair discrimination between customers, brokers, and
dealers.\41\ The commenter asserted that the proposed OpenBook fee
places retail investors at a disadvantage and operates as a denial of
access to retail investors, including active traders.\42\ Similarly,
another commenter believed that the NYSE's proposal ``would create a
bifurcated market in which retail investors are clearly
disadvantaged.'' \43\ The commenters also noted that Nasdaq provides a
non-professional fee for its similar TotalView product.\44\
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\40\ See Schwab Letter, supra note 5, and SIA Letters I and II,
supra notes 5 and 11. See also Ameritrade Letter I, supra note 5
(the Commission should require the NYSE to revise its fee structure
so that OpenBook data may be ``provided to retail investors at a
cost reasonably related to the actual cost of providing the data
feed'').
\41\ See Schwab Letter, supra note 5.
\42\ See Schwab Letter, supra note 5.
\43\ See Ameritrade Letter I, supra note 5.
\44\ See SIA Letters I and II, supra notes 5 and 11, and Schwab
Letter, supra note 5.
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In its response to the commenters, the NYSE reiterated its
assertion that the $60 per month per terminal fee for the real-time
OpenBook service reflects an equitable allocation of the overall costs
of using the NYSE's facilities.\45\ The NYSE also noted that in
approving the current OpenBook fees, the Commission found that the fees
were consistent with Section 6(b)(4) of the Act and were reasonable
when compared to similar types of services provided by other
markets.\46\ In addition, the NYSE stated that the Commission has
approved a monthly $70 charge for professional subscribers to Nasdaq's
TotalView service, which is comparable to the OpenBook service.\47\
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\45\ See NYSE Response Letters, supra note 12.
\46\ See NYSE Response Letters, supra note 12, citing the
OpenBook Fee Order, supra note 14.
\47\ See NYSE Response Letters, supra note 12. See also NASD
Rule 7010(q), ``Nasdaq TotalView.''
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With respect to the lack of a non-professional fee for the OpenBook
service, the NYSE asserted that it has ``noted no discernible demand
for OpenBook from retail investors.'' \48\ However, the NYSE
represented that it intends to review with the industry whether there
is sufficient demand for depth-of-book information among non-
professional subscribers to justify a depth-of-book product and fee for
non-professional subscribers.\49\ The NYSE also noted that its Hybrid
initiative may have an impact on the demand for such a product.\50\
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\48\ See NYSE Response Letters, supra note 12.
\49\ See Amendment No. 2 to the Exhibit C Proposal.
\50\ See Amendment No. 2 to the Exhibit C Proposal.
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IV. Discussion and Commission Findings
For the reasons discussed below, the Commission finds that the
Exhibit C Proposal, as amended by Amendment No. 2, and the Real-Time
Fee Proposal, are consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\51\
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\51\ In approving these rules, the Commission has considered
their impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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A. Exhibit C Proposal
The Commission finds that the Exhibit C Proposal, as amended by
Amendment No. 2, is consistent with Section 6(b)(5) of the Act,\52\
which requires, among other things, that the rules of a national
securities exchange be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market and a national market system and, in general, to protect
investors and the public interest. In addition, the Commission finds
that the Exhibit C Proposal, as amended by Amendment No. 2, is
consistent with Section 6(b)(8) of the Act,\53\ which requires that the
rules of a national securities exchange not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\52\ 15 U.S.C. 78f(b)(5).
\53\ 15 U.S.C. 78f(b)(8).
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The Commission has considered the comments received regarding the
Original Exhibit C Proposal and believes that the NYSE has addressed
the commenters' concerns in the New Exhibit C. In the New Exhibit C,
the NYSE has decided to allow market data vendors to provide the
integrated screens that commenters state that end users desire. The
Commission believes that the NYSE's New Exhibit C should allow market
data vendors to provide their subscribers with useful data without
imposing unnecessary restrictions, which should help to perfect the
mechanism of a free and open market.
B. Real-Time Fee Proposal
The Commission finds that the Real-Time Fee Proposal is consistent
with Section 6(b)(4) of the Act,\54\ which requires that the rules of a
national securities exchange provide for the equitable allocation of
reasonable dues, fees, and other charges among its members and issuers
and other persons using its facilities. Specifically, the Commission
believes that the NYSE's proposed monthly per-terminal fee of $60 for
real-time OpenBook data is reasonable when compared to the fees for
Nasdaq's TotalView service.\55\
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\54\ 15 U.S.C. 78f(b)(4).
\55\ See note 47, supra, and accompanying text. See also
OpenBook Fee Order, supra note 14, at note 5 (discussing other
markets' fees for limit order book information).
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The Commission has considered the commenters' concerns that the
proposed OpenBook fee discriminates unfairly against retail investors.
The Commission notes, however, that the NYSE has represented that it
intends to review with the industry whether there is sufficient demand
for depth-of-book information among non-professional subscribers to
justify a depth-of-book product and fee for non-professional
subscribers.\56\ The NYSE acknowledges that its Hybrid initiative may
have an impact on the demand for such a product.\57\
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\56\ See Amendment No. 2 to the Exhibit C proposal.
\57\ See Amendment No. 2 to the Exhibit C proposal.
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C. Accelerated Approval of Amendment No. 2 to the Exhibit C Proposal
The Commission finds good cause for approving Amendment No. 2 to
the Exhibit C Proposal prior to 30 days after the date of publication
of notice of filing thereof in the Federal Register. The NYSE filed
Amendment No. 2 to the Exhibit C Proposal in response to the comments
submitted regarding the Original Exhibit C Proposal. Because Amendment
No. 2 to the Exhibit C Proposal responds to the commenters' concerns,
the Commission finds good cause for approving Amendment No. 2 to the
Exhibit C Proposal on an accelerated basis.
V. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 2 to the Exhibit C Proposal,
including whether Amendment No. 2 to the Exhibit C Proposal is
consistent with the
[[Page 17938]]
Act. Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-NYSE-2005-32 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-9303.
All submissions should refer to File Number SR-NYSE-2005-32. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://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 inspection and
copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of the NYSE. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NYSE-2005-32 and should be submitted on or before April
28, 2006.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\58\ that the Real-Time Fee Proposal (SR-NYSE-2004-43) and the
Exhibit C Proposal (SR-NYSE-2005-32), as amended by Amendment No. 2 to
the Exhibit C Proposal, are approved, and that Amendment No. 2 to the
Exhibit C Proposal is approved on an accelerated basis.
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\58\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\59\
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\59\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-5058 Filed 4-6-06; 8:45 am]
BILLING CODE 8010-01-P
