Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Introduce a NYSE OpenBook® Nonprofessional Subscriber Fee and To Revise the Unit of Count That Determines the Device Fees Payable by Data Recipients, 1268-1273 [E9-348]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 7 (Monday, January 12, 2009)]
[Notices]
[Pages 1268-1273]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-348]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59198; File No. SR-NYSE-2008-131]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Introduce a NYSE 
OpenBook[supreg] Nonprofessional Subscriber Fee and To Revise the Unit 
of Count That Determines the Device Fees Payable by Data Recipients

January 5, 2009.
    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 December 18, 2008, the New York Stock Exchange LLC (``NYSE'' 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 Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to introduce a nonprofessional subscriber 
fee for its NYSE OpenBook[supreg] product offerings and to revise the 
unit of count that determines the device fees payable by data 
recipients.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NYSE 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. NYSE has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    (a) Background. NYSE OpenBook responds to the desire of some market 
participants for depth-of-book data. It is a compilation of limit order 
data that the Exchange provides to market data vendors through a data 
feed.
    NYSE OpenBook is a packaged suite of data feed products. It 
includes:
    i. NYSE OpenBook Realtime, by which the Exchange makes NYSE 
OpenBook Realtime available on a snapshot basis, with updates 
distributed in real-time at intervals of one second; and
    ii. NYSE OpenBook Ultra, by which the Exchange updates NYSE 
OpenBook information upon receipt of each displayed limit order, or 
upon an event that removes limit orders from NYSE OpenBook (i.e., 
cancellation or execution).
    For no additional charge, the Exchange makes available to 
recipients of NYSE OpenBook additional data feeds containing:
    iii. NYSE BestQuote,\3\ which allows customers to see NYSE's best 
bid and offer as made available through the Consolidated Quotation 
System, and which may contain additional market interest that is not 
displayed in the NYSE limit order book and that, therefore, is not 
available in NYSE OpenBook; and
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    \3\ NYSE added NYSE BestQuote to the NYSE OpenBook Realtime 
package in October 2006. See Release No. 34-54594 (October 12, 
2006); 71 FR 61819 (October 19, 2006); File No. SR-NYSE-2006-81.
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    iv. Order Imbalance Information, which includes information 
regarding order imbalances prior to the market opening and closing 
auctions.

[[Page 1269]]

    In June 2008, the Exchange added NYSE OpenBook Ultra and Order 
Imbalance Information to the NYSE OpenBook package of products.\4\ In 
the NYSE OpenBook Ultra filing, NYSE stated that it would temporarily 
make NYSE OpenBook Ultra and Order Imbalance Information available at 
no additional fee beyond the charges that the Exchange currently 
imposes for the receipt and use of NYSE OpenBook Realtime and NYSE 
BestQuote. It also stated that the Exchange would submit any proposed 
new or modified fees to the Commission as proposed rule changes and 
would not impose any new or modified charges on data feed recipients 
and end-users prior to Commission approval. This proposed rule change 
proposes to establish a discounted fee for nonprofessional subscribers 
that receive and use NYSE OpenBook products.
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    \4\ See Release No. 34-57861; 73 FR 31905 (June 4, 2008); File 
No. SR-NYSE-2008-42.
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    Currently, an end-user of NYSE OpenBook pays (or its Vendor pays on 
its behalf) the monthly per-terminal NYSE OpenBook device fee of $60. 
In addition, a NYSE OpenBook data feed recipient pays a monthly $5,000 
access fee for NYSE OpenBook, plus the per-terminal fee if the data 
feed recipient also displays the data. These fees currently apply 
regardless of whether the recipient receives NYSE OpenBook Realtime or 
NYSE OpenBook Ultra and whether the subscriber is a professional 
subscriber or a nonprofessional subscriber. The recipients receive NYSE 
Order Imbalance Information and NYSE BestQuote for no additional 
charge.
    (b) Subscribers and Data Feed Recipients. After consultation with 
the Exchange's market data customers, including large and small 
redistributors and broker-dealers, the Exchange found that the 
marketplace desires a simplified fee structure for its products, 
especially regarding the methodology for counting the ``devices'' that 
are the subject of the device fee. As technology has made it 
increasingly difficult to define ``device'' and to control who has 
access to devices, the markets have struggled to make device counts 
uniform among their customers.
    i. The Original Model. The markets created the ``device fee'' 
metric in 1960, when market data vendors first made interrogation 
services available to their subscribers. During the 1960s, 1970s and 
1980s, a vendor would typically link its servers to display devices 
that the vendor provided to its subscribers. The linkages allowed the 
subscriber to interrogate the vendor's database for vendor-prepared 
displays of stock prices and quotes. The subscriber could do no more 
than view the vendor-provided displays of prices and quotes. The vendor 
reported the number of display devices through which each subscriber 
could receive the vendor's displays and the exchanges imposed fees on 
the subscribers based on that number of devices.
    The markets deemed any party that received access to the price and 
quote data feeds to constitute something other than a subscriber. 
Access to a data feed meant the receipt of prices and quotes in a 
manner that allowed the recipient to manipulate and re-format the data 
(as opposed to a subscriber's receipt of the vendor's read-only 
controlled displays). Such parties (``Data Feed Recipients'') used 
their data feed access:
    a. To create interrogation services that they would vend to their 
subscribers;
    b. To make the data feeds available to other parties; or
    c. To use the data internally for display, analysis, portfolio 
valuation or other purposes other than display.
    The markets imposed access fees on such parties, fees that the 
markets have never imposed on subscribers' receipt of controlled 
display services.
    ii. The Impact of Technology. During and after the 1980s, the 
markets and supporting technology evolved dramatically. Networks of 
personal computers replaced direct links between the vendor and each 
subscriber device as the standard means for distributing a vendor's 
interrogation service to subscribers. Vendors and subscribers applied 
``user id and password'' entitlements to control access to the vendor's 
interrogation services. In time, controlled display devices became more 
sophisticated and enabled the subscriber to use the data for analysis 
and other non-display functions, functions previously reserved only for 
Data Feed Recipients. Vendors began to provide services in which they 
controlled access, but no longer provided pre-set displays of data. 
This evolutionary process blurred the historic distinctions between 
Data Feed Recipients' uses of data and subscribers' uses of data. As a 
result, the traditional measures for billing purposes (i.e., device 
fees for subscribers; access, program classification and device fees 
for Data Feed Recipients) became difficult to apply. This has resulted 
in unnecessary burdens and costs to customers and exchanges alike.
    (c) The Proposed Solution. As part of a one-year pilot and a wider 
initiative to simplify and modernize market data administration, the 
Exchange proposes to redefine some of the basic ``units of measure'' 
that Vendors are required to report to the Exchange and on which the 
Exchange bases its fees for its NYSE OpenBook product packages. The 
Exchange believes that these changes more closely align with current 
data consumption, will reduce costs for the Exchange's customers, and, 
if successful, will serve as a model for additional pricing 
efficiencies.
    Under the proposal, the Exchange will no longer define the Vendor-
subscriber relationship based on the manner in which a Data Feed 
Recipient or subscriber receives data (i.e., through controlled 
displays or through data feeds). Instead, the Exchange proposes to 
adopt billing criteria that are more objective. The following basic 
principles underlie this proposal.
    i. Vendors.
     ``Vendors'' are market data vendors, broker-dealers, 
private network providers and other entities that control Subscribers' 
access to data through Subscriber Entitlement Controls.
    ii. Subscribers.
     ``Subscribers'' are unique individual persons or devices 
to which a Vendor provides data. Any individual or device that receives 
data from a Vendor is a Subscriber, whether the individual or device 
works for or belongs to the Vendor, or works for or belongs to an 
entity other than the Vendor.
     Only a Vendor may control Subscriber access to data.
     Subscribers may not redistribute data in any manner.
    iii. Subscriber Entitlements.
     A Subscriber Entitlement is a Vendor's permissioning of a 
Subscriber to receive access to data through an Exchange-approved 
Subscriber Entitlement Control.
     A Vendor may not provide data access to a Subscriber 
except through a unique Subscriber Entitlement.
     The Exchange will require each Vendor to provide a unique 
Subscriber Entitlement to each unique Subscriber.
     At prescribed intervals (normally monthly), the Exchange 
will require each Vendor to report each unique Subscriber Entitlement.
    iv. Subscriber Entitlement Controls.
     A Subscriber Entitlement Control is the Vendor's process 
of permissioning Subscribers' access to data.
     Prior to using any Subscriber Entitlement Control or 
changing a previously approved Subscriber Entitlement Control, a Vendor 
must provide the Exchange with a demonstration and a detailed written 
description of the control or change and the Exchange must have 
approved it in writing.
     The Exchange will approve a Subscriber Entitlement Control 
if it

[[Page 1270]]

allows only authorized, unique end-users or devices to access data or 
monitors access to data by each unique end-user or device.
     Vendors must design Subscriber Entitlement Controls to 
produce an audit report and make each audit report available to the 
Exchange upon request. The audit report must identify:
    A. Each entitlement update to the Subscriber Entitlement Control;
    B. The status of the Subscriber Entitlement Control; and
    C. Any other changes to the Subscriber Entitlement Control over a 
given period.
     Only the Vendor may have access to Subscriber Entitlement 
Controls.
    The Exchange recognizes that each Vendor and Subscriber will use 
NYSE OpenBook data differently and that the Exchange is one of many 
markets with whom Vendors and Subscribers may enter into arrangements 
for the receipt and use of data. In recognition of that, the Exchange's 
proposed solution does not restrict how Vendors may use NYSE OpenBook 
data in their display services and encourages Vendors to create and 
promote innovative uses of NYSE OpenBook information. For instance, a 
Vendor may use NYSE OpenBook data to create derived information 
displays, such as displays that aggregate NYSE OpenBook data with data 
from other markets.\5\
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    \5\ In the case of derived displays, the Vendor is required to: 
(i) Pay the Exchange's device fees (described below); (ii) include 
derived displays in its reports of NYSE OpenBook usage; and (iii) 
use reasonable efforts to assure that any person viewing a display 
of derived data understands what the display represents and the 
manner in which it was derived.
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    The proposal does not discriminate among data recipients and users, 
as the new ``unit of measure'' concepts would apply equally to 
everyone.
    The Exchange intends for the pilot period to provide an opportunity 
for it and its customers to assess specific usage issues and to enable 
the Exchange to establish a leadership role in effecting change after 
soliciting feedback from customers and other industry participants.
    (d) Unit of Count. Subject to the rules set forth below, the 
Exchange will require Vendors to count every Subscriber Entitlement, 
whether it be an individual person or a device. This means that the 
Vendor must include in the count every person and device that has 
access to the data, regardless of the purposes for which the individual 
or device uses the data. The Exchange believes that eliminating current 
exceptions to the device-reporting obligation will subject the count to 
a more objective process and will simplify the reporting obligation for 
Vendors. Previously, the Exchange has not required Vendors to report 
certain programmers and other individuals who receive access to data 
for certain specific, non-trading purposes. These exceptions require 
the Exchange to monitor the manner through which end-users consume data 
and adds cost for both the Exchange and customers. To simplify the 
process, the Exchange will require Vendors to report all entitlements 
in accordance with the following rules.
    i. In connection with a Vendor's external distribution of NYSE 
OpenBook data, the Vendor should count as one Subscriber Entitlement 
each unique Subscriber that the Vendor has entitled to have access to 
the Exchange's market data. However, where a device is dedicated 
specifically to a single individual, the Vendor should count only the 
individual and need not count the device.
    ii. In connection with a Vendor's internal distribution of NYSE 
OpenBook data, the Vendor should count as one Subscriber Entitlement 
each unique individual (but not devices) that the Vendor has entitled 
to have access to the Exchange's market data.
    iii. The Vendor should identify and report each unique Subscriber. 
If a Subscriber uses the same unique Subscriber Entitlement to gain 
access to multiple market data services, the Vendor should count that 
as one Subscriber Entitlement. However, if a unique Subscriber uses 
multiple Subscriber Entitlements to gain access to one or more market 
data services (e.g., a single Subscriber has multiple passwords and 
user identifications), the Vendor should report all of those Subscriber 
Entitlements.
    iv. Vendors should report each unique individual person who 
receives access through multiple devices as one Subscriber Entitlement 
so long as each device is dedicated specifically to that individual.
    v. The Vendor should include in the count as one Subscriber 
Entitlement devices serving no entitled individuals. However, if the 
Vendor entitles one or more individuals to use the same device, the 
Vendor should include only the entitled individuals, and not the 
device, in the count.
    (e) Proposed Nonprofessional Subscriber Fee.
    i. The Fee. In addition to the ``unit of measure'' pilot program, 
the Exchange also proposes to establish a fee applicable to the receipt 
and use of NYSE OpenBook data by nonprofessional Subscribers. Until 
now, the Exchange has not established a separate fee for the receipt of 
NYSE OpenBook data by nonprofessional Subscribers. NYSE OpenBook 
subscribers currently pay a device fee of $60. In previous filings, the 
Exchange has declared that it would consider designing a limit order 
data product suited for the retail, nonprofessional customer if it 
perceived a suitable demand for it. In the proposed rule change, the 
Exchange proposes to reduce the NYSE OpenBook device fee to $15 per 
month for those investors who qualify as nonprofessional Subscribers. 
The Exchange proposes to impose the charge on the Vendor, rather than 
on the nonprofessional Subscriber, regardless of whether the Vendor 
provides NYSE OpenBook Realtime or NYSE OpenBook Ultra.
    ii. Qualification as a Nonprofessional Subscriber. In establishing 
a reduced rate for nonprofessional Subscribers, the Exchange proposes 
to apply the same criteria for qualification as a ``nonprofessional 
subscriber'' as the CTA and CQ Plan Participants use. As is true under 
the CTA and CQ Plans, classification as a nonprofessional subscriber is 
subject to Exchange review and requires the subscriber to attest to his 
or her nonprofessional subscriber status. A ``nonprofessional 
subscriber'' is a natural person who uses the data solely for his 
personal, non-business use and who is neither:
    a. Registered or qualified with the Securities and Exchange 
Commission, (``SEC''), the Commodities Futures Trading Commission, any 
state securities agency, any securities exchange or association, or any 
commodities or futures contract market or association,
    b. Engaged as an ``investment adviser'' as that term is defined in 
section 202(a)(11) of the Investment Advisors Act of 1940 (whether or 
not registered or qualified under that act), nor
    c. Employed by a bank or other organization exemption from 
registration under Federal and/or state securities laws to perform 
functions that would require him/her to be so registered or qualified 
if he/she were to perform such function for an organization not so 
exempt.
    Individuals that qualify as nonprofessional subscribers would be 
eligible to enjoy the lower nonprofessional subscriber rate regardless 
of whether they receive the NYSE OpenBook service from a Vendor that 
receives the NYSE OpenBook datafeed directly from the Exchange, or from 
a Vendor that receives the database indirectly through an intermediary.

[[Page 1271]]

    (f) Nonprofessional Subscriber Fee Cap. The Exchange proposes to 
introduce a monthly maximum amount (the ``Maximum Amount'') that a 
broker-dealer would have to pay to provide NYSE OpenBook Realtime or 
NYSE OpenBook Ultra to any number of nonprofessional Subscribers so 
long as each such Subscriber maintains a brokerage account with the 
broker-dealer. The broker-dealer must be registered as a broker/dealer 
under the Securities Exchange Act of 1934.
    The Exchange proposes to set the Maximum Amount at $25,000 per 
month for each month falling in calendar year 2008. For the months 
falling in each subsequent calendar year, the Maximum Amount shall 
increase or decrease by the percentage increase or decrease in the 
annual cost-of-living adjustment (``COLA'') that the U.S. Social 
Security Administration applies to Supplemental Security Income for the 
calendar year preceding that subsequent calendar year. For example, if 
the COLA for calendar year 2008 is a two percent increase, then the 
monthly Maximum Amount for months falling in calendar year 2009 would 
increase by two percent to $25,500.
    The Exchange anticipates that the broker-dealers that will enjoy 
the benefits of the maximum monthly payment are broker-dealers 
servicing a large customer base. As such, they have in place procedures 
that:
    i. Enable them to procure readily the nonprofessional subscriber 
attestation from each nonprofessional customer, a requirement that is a 
prerequisite for qualification as a nonprofessional subscriber; and
    ii. Enable them to review periodically the accounts included under 
their nonprofessional cap to ensure their nonprofessional status.
    The Exchange also realizes that these broker-dealers may have a 
small number of account-holding customers that technically do not 
qualify for the nonprofessional Subscriber fee, but whom a broker-
dealer may inadvertently include under the cap because of the 
complexities of managing thousands or even millions of accounts. As a 
practical response to compliance and the costs of administration, the 
Exchange is proposing the following guidelines under which the Exchange 
will not penalize a broker-dealer using the nonprofessional Subscriber 
fee cap if the broker-dealer includes a limited number of account-
holding professional Subscribers under the cap.
    A broker-dealer may include professional Subscribers in the 
calculation of the monthly maximum amount so long as:
    i. Nonprofessional Subscribers comprise no less than 95 percent of 
the pool of Subscribers that are included in the calculation;
    ii. Each professional Subscriber included in the calculation 
maintains an active brokerage account directly with the broker-dealer 
(that is, with the broker-dealer rather than with a correspondent firm 
of the broker-dealer); and
    iii. Each professional Subscriber that is included in the 
calculation is not affiliated with the broker-dealer or any of its 
affiliates.
    iv. All Subscribers receive access to the identical service, 
regardless of whether the Subscribers are professional Subscribers or 
nonprofessional Subscribers.
    v. Upon discovery of the inclusion in the cap of an individual that 
does not qualify as a nonprofessional Subscriber, the broker-dealer 
takes reasonable action to reclassify and report that individual as a 
professional Subscriber during the immediately following reporting 
period.
    A professional Subscriber is ``affiliated'' with a broker-dealer if 
he or she is an officer, partner, member, or employee of the broker-
dealer or an affiliate of the broker-dealer or enjoys a similar status 
with the broker-dealer or affiliate.
    Notwithstanding clauses (iii) and (v), the broker-dealer may 
include a professional Subscriber that is affiliated with the broker-
dealer or its affiliates (subject to clauses (i) and (ii)) if he or she 
accesses market data on-line through his or her personal account solely 
for the non-business purpose of managing his or her own portfolio.
    Notwithstanding clause (v), professional Subscribers may constitute 
up to five percent of the pool of Subscribers that the broker-dealer 
includes in the calculation of the monthly maximum amount if those 
professional Subscribers can only view data derived from NYSE OpenBook 
Ultra:
    (i) Through the Subscriber's online brokerage account; and
    (ii) In an inquiry/response per-quote display (i.e., not in a 
streaming display).
    The purpose of this exception is to permit broker-dealers that 
primarily serve non-institutional brokerage account holders to offer a 
consistent online client experience without undue administrative 
burdens. At the same time, the Exchange must guard against potential 
abuse of this exception. Therefore, the Exchange intends to monitor its 
use closely and reserves the right to deny application of this 
exception if it discovers that a broker-dealer is misusing it, such as 
by opening up retail brokerage accounts to disseminate data to 
institutional clients.
    If the $15 per-device fee would allow a broker-dealer to pay less 
than the Maximum Amount for any month, the broker-dealer may pay the 
lower amount for that month.
    The Exchange intends for the Maximum Amount to enable much wider 
distribution of NYSE OpenBook data to retail investors holding 
brokerage accounts. This will further the goal of market transparency 
for investors. The low fee enabling wider retail investor access, 
coupled with the five percent ``de minimis'' exception for professional 
Subscribers in the Subscriber Pool, reduce administrative burdens and 
produce a fee that is fair and reasonable. Moreover, the Maximum Amount 
compares favorably with monthly maximums payable to Nasdaq and to the 
CTA Plan Participants. Nasdaq set its maximum at $25,000 per month for 
nonprofessional subscribers' receipt of TotalView,\6\ although Nasdaq 
also requires the additional purchase of its Level 2 product at $9 per 
nonprofessional subscriber. Nasdaq's maximum does not apply to OpenView 
or to its Level 1 or NQDS services. For calendar year 2007, the CTA 
Plan Participants set the maximum at $660,000 per month for internal 
distribution of consolidated quotation information within a broker-
dealer's organization and for the broker-dealer's distribution to 
nonprofessional subscribers that maintain brokerage accounts (the ``CTA 
Maximum Amount'').
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    \6\ Through TotalView, Nasdaq provides real-time information 
relating to the displayed quotes and orders of Nasdaq participants 
in UTP Plan Securities. TotalView displays quotes and orders at 
multiple prices.
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    (g) The Fee and the Maximum Amount are Non-Discriminatory. As a 
result of the fee reduction for the receipt of NYSE OpenBook data by 
nonprofessional Subscribers, the Exchange would apply one device fee in 
respect of professional Subscribers to NYSE OpenBook services and a 
different, lower device fee in respect of nonprofessional Subscribers. 
The use of a lower fee for nonprofessional Subscribers than for 
professional Subscribers has a long history. The Exchange played an 
active role in CTA's adoption of the first nonprofessional subscriber 
fee 25 years ago \7\ and that

[[Page 1272]]

reduced fee for nonprofessional subscribers has succeeded in 
substantially broadening the access of individual investors to real-
time market information. The Exchange believes that a nonprofessional 
Subscriber fee for NYSE OpenBook is likely to broaden the access of 
individual investors to NYSE OpenBook information and thereby to 
further the statutory goals expressed in section 11A(a)(1)(c) of the 
Securities Exchange Act of 1934 (the ``Exchange Act'').
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    \7\ See the Sixth Substantive Amendment and Sixth Charges 
Amendment to the CTA Plan (``Non-Professional Subscribers''), File 
No. S7-433, Release Nos. 34-20002 (July 22, 1983), 34-20239 
(September 30, 1983) and 34-20386 (November 17, 1983).
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    Section 603(a)(2) of Regulation NMS requires markets to distribute 
market data ``on terms that are not unreasonably discriminatory.'' 
Given the differences in data usage between professional subscribers 
and nonprofessional subscribers and the industry's long acceptance of 
different fees for professional subscribers and nonprofessional 
subscribers, the Exchange believes that the proposed nonprofessional 
subscriber fee does not unreasonably discriminate against the 
professional subscriber fee.
    Similarly, the establishment of the Maximum Amount mirrors other 
industry fee caps, such as the CTA Maximum Amount and Nasdaq's 
TotalView fee cap. The Maximum Amount encourages wider retail 
distribution by the Exchange's largest NYSE OpenBook vendors. Any 
vendor is entitled to take advantage of the Maximum Amount. In the 
Exchange's view, limiting the fee exposure of its largest vendors does 
not unreasonably discriminate against other vendors under section 
603(a)(2) of Regulation NMS.
    (h) The Fee and the Maximum Amount Are Fair and Reasonable. The 
Exchange believes that the reduction in the device fee for 
nonprofessional Subscribers to $15 and the Maximum Amount comport with 
the standard that the Commission established for determining whether 
market data fees relating to non-core market data products are fair and 
reasonable. (``Non-core products'' refers to products other than the 
consolidated products that markets offer collectively under the joint 
industry plans.) In its recent ``Order Setting Aside Action by 
Delegated Authority and Approving Proposed Rule Change Relating to NYSE 
Arca Data'' (the ``NYSE ArcaBook Approval Order''),\8\ the Commission 
reiterated its position from its release approving Regulation NMS that 
it should ``allow market forces, rather than regulatory requirements, 
to determine what, if any, additional quotations outside the NBBO are 
displayed to investors.'' \9\
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    \8\ See Release No. 34-59039 (December 2, 2008); File No. SR-
NYSEArca-2006-21.
    \9\ See Regulation NMS Release, 70 FR at 37566-37567 (addressing 
differences in distribution standards between core data and non-core 
data).
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    The Commission went on to state that:

    The Exchange Act and its legislative history strongly support 
the Commission's reliance on competition, whenever possible, in 
meeting its regulatory responsibilities for overseeing the SROs and 
the national market system. Indeed, competition among multiple 
markets and market participants trading the same products is the 
hallmark of the national market system.\10\

    \10\ NYSE ArcaBook Approval Order at pp. 46-47.
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    The Commission then articulated the standard that it will apply in 
assessing the fairness and reasonableness of market data fees for non-
core products, as follows:

    With respect to non-core data, * * * the Commission has 
maintained a market-based approach that leaves a much fuller 
opportunity for competitive forces to work. This market-based 
approach to non-core data has two parts. The first is to ask whether 
the exchange was subject to significant competitive forces in 
setting the terms of its proposal for non-core data, including the 
level of any fees. If an exchange was subject to significant 
competitive forces in setting the terms of a proposal, the 
Commission will approve the proposal unless it determines that there 
is a substantial countervailing basis to find that the terms 
nevertheless fail to meet an applicable requirement of the Exchange 
Act or the rules thereunder.\11\
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    \11\ Id. at pp. 48-49.

    The Exchange believes that by this standard or any other standard, 
the proposed nonprofessional Subscriber fee and the Maximum Amount are 
fair and reasonable. NYSE OpenBook is subject to significant 
competitive forces and the reduction in the device fee and the 
establishment of a Maximum Amount represent, in part, responses to that 
competition. To start, the Exchange competes intensely for order flow. 
It competes with the other 10 national securities exchanges that 
currently trade equities, with electronic communication networks, with 
quotes posted in FINRA's Alternative Display Facility and Trade 
Reporting Facilities, with alternative trading systems, and with 
securities firms that primarily trade as principal with their customer 
order flow ``and the competition is fierce.'' \12\
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    \12\ Id. at p. 52.
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    In addition, NYSE OpenBook is in competition with a number of 
alternative products. NYSE OpenBook does not provide a complete picture 
of the full market for a security. Rather, an investor has potentially 
dozens of different information sources to choose from in determining 
where to send an order. The 12 SROs, the several Trade Reporting 
Facilities of FINRA, and ECNs that produce proprietary data are all 
sources of competition. Each is currently permitted to produce depth-
of-book products, and many currently do, including Nasdaq, NYSE Arca, 
and BATS. In addition, investors can probe market depth by ``pinging'' 
the various markets (by routing oversized marketable limit orders) to 
access an exchange's total liquidity available at an order's limit 
price or better. In addition, NYSE OpenBook faces the threat of 
competition from the independent distribution of order data by 
securities firms and data vendors.
    Moreover, the Exchange believes that the great majority of 
investors do not believe that it is necessary to purchase a depth-of-
book product from the Exchange, given other sources of information on 
market depth in Exchange-listed stocks. The Exchange has a substantial 
trading share in Exchange-listed stocks, yet less than 10 percent of 
professional users that purchase core data in Exchange-listed stocks 
through CTA also purchase NYSE OpenBook. As the Commission said in the 
NYSE ArcaBook Approval Order, ``the fact that 95% of the professional 
users of [Nasdaq] core data choose not to purchase the depth-of-book 
order data of a major exchange strongly suggests that no exchange has 
monopoly pricing power for its depth-of-book order data.'' \13\
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    \13\ Id. at p. 64.
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    In addition, the Exchange believes that no substantial 
countervailing basis exists to support a finding that the 
nonprofessional fee for NYSE OpenBook fails to meet the requirement of 
the Exchange Act.
    In sum, the availability of a variety of alternative sources of 
information imposes significant competitive pressures on NYSE OpenBook 
and NYSE's compelling need to attract order flow imposes significant 
competitive pressure on NYSE to act equitably, fairly, and reasonably 
in setting NYSE OpenBook fees. The significant reduction in the NYSE 
OpenBook device fee, from $60 to $15, for investors who qualify as 
nonprofessional Subscribers and the establishment of the Maximum Amount 
are, in part, responses to that pressure.
    (i) Impact of Changes. The Exchange anticipates that switching from 
the ``per-device'' metric to the ``Subscriber'' metric will enable the 
Exchange to reclassify as Subscribers certain of its customers that the 
Exchange currently classifies as Vendors. The reclassified customers 
would no longer be subject to

[[Page 1273]]

access fees. This will essentially lower their fees from $5,000 per 
month to $60 per month per individual and device. In addition, the 
``Subscriber'' metric should reduce administrative costs, as it should 
simplify the processes of counting customer entitlements and reporting.
    The introduction of the proposed nonprofessional Subscriber Fee, 
subject to the monthly Maximum Amount payable, will respond to the 
growing demand from broker-dealers to provide depth-of-book information 
to their account-holding customers. It will lower the fees payable for 
NYSE OpenBook data in respect of nonprofessional Subscribers from $60 
per month per individual and device to $15 per month per individual and 
device.
    The Exchange believes that the nonprofessional Subscriber Fee 
reflects an equitable allocation of its overall costs to users of its 
facilities. The Exchange believes that the proposed fee and the Maximum 
Amount are fair and reasonable and that it is fair and reasonable to 
charge nonprofessional subscribers lower rates than their professional 
subscriber counterparts.
    (j) Contracts. The Exchange will require each nonprofessional 
Subscriber that receives NYSE OpenBook Realtime or NYSE OpenBook Ultra 
from a vendor, broker-dealer or other entity to enter into the Network 
A nonprofessional subscriber agreement or an agreement that 
incorporates the essential terms of the nonprofessional subscriber 
agreement.\14\
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    \14\ The Network A nonprofessional subscriber agreement has been 
in effect since the CTA and CQ Plan Participants first filed it with 
the Commission in 1983. See Release No. 34-20385 (November 17, 
1983).
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2. Statutory Basis
    The bases under the Securities Exchange Act of 1934 (the ``1934 
Act'') for the proposed rule change are the requirement under section 
6(b)(4) \15\ that an exchange have rules that provide for the equitable 
allocation of reasonable dues, fees and other charges among its members 
and other persons using its facilities and the requirements under 
section 6(b)(5) \16\ that the rules of an exchange be designed 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.
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    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C. 78f(b)(5).
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.

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

    The Exchange has not solicited, and does not intend to solicit, 
comments regarding the proposed rule change. The Exchange has not 
received any unsolicited written comments from members or other 
interested parties.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-NYSE-2008-131 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2008-131. 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, on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also 
will be available for inspection and copying at the principal office of 
the Exchange. 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-2008-131 and should be submitted on or before February 2, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-348 Filed 1-9-09; 8:45 am]
BILLING CODE 8011-01-P