Self-Regulatory Organizations; New York Stock Exchange, LLC; Order Approving Proposed Rule Change To Introduce a NYSE Order Imbalance Information Fee, 11159-11162 [E9-5569]
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Federal Register / Vol. 74, No. 49 / Monday, March 16, 2009 / Notices
to properly reflect the amount
previously filed with the Commission.
2. Statutory Basis
The Exchange believes that its
proposal to amend its schedule of fees
is consistent with Section 6(b) of the
Act 8 in general, and furthers the
objectives of Section 6(b)(4) of the Act 9
in particular, in that it is an equitable
allocation of reasonable fees and other
charges among Exchange members. The
Exchange believes that the amendment
to the Monthly Firm Cap is equitable in
that it proposes to eliminate all section
index options. Additionally, the
proposed amendments to the formatting
of the fee schedule will create a more
user friendly fee schedule. The proposal
to correct the typographical error in the
Examination Fee should eliminate
confusion among members as to the
amount of the fee.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 10 and
paragraph (f)(2) of Rule 19b–4 11
thereunder. At any time within 60 days
of the filing of the proposed rule change,
the Commission may summarily
abrogate such rule change if it appears
to the Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposal 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 rulecomments@sec.gov. Please include File
No. SR–Phlx–2009–20 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File No.
SR–Phlx–2009–20. 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 changes 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, 100 F Street, NE., Washington,
DC 20549, 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 Phlx. 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 No.
SR–Phlx–2009–20 and should be
submitted on or before April 6, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–5571 Filed 3–13–09; 8:45 am]
11159
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59543; File No. SR–NYSE–
2008–132]
Self-Regulatory Organizations; New
York Stock Exchange, LLC; Order
Approving Proposed Rule Change To
Introduce a NYSE Order Imbalance
Information Fee
March 9, 2009.
I. Introduction
On December 19, 2008, the New York
Stock Exchange, LLC (‘‘NYSE’’ or the
‘‘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
introduce a fee for access to its NYSE
Order Imbalance Information datafeed.
The proposed rule change was
published for comment in the Federal
Register on January 13, 2009.3 The
Commission received no comment
letters on the proposal. This order
approves the proposed rule change.
II. Description of the Proposal
The Exchange proposes to make the
NYSE Order Imbalance Information
datafeed available as a stand-alone
market data product, separate and apart
from NYSE OpenBook, and proposes to
charge recipients of the NYSE Order
Imbalance Information datafeed $500
per month.
Currently, NYSE makes available to
recipients of NYSE OpenBook an
additional datafeed containing Order
Imbalance Information. NYSE Order
Imbalance Information is a datafeed of
real-time order imbalances that
accumulate prior to the opening of
trading on the Exchange and prior to the
close of trading on the Exchange. These
orders are subject to execution at the
market’s opening or closing price, as the
case may be, and represent issues that
are likely to be of particular trading
interest at the opening or closing. The
Exchange distributes information about
these imbalances in real-time at
specified intervals prior to the opening
and closing auctions. NYSE Order
Imbalance Information also includes the
imbalance information that the
Exchange is required to disseminate
under NYSE Rule 123C(5), as well as
automated real-time streaming order
imbalance information at specified
intervals.
BILLING CODE 8011–01–P
8 15
U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(4).
10 15 U.S.C. 78s(b)(3)(A)(ii).
11 17 CFR 240.19b–4(f)(2).
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15:38 Mar 13, 2009
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 59202
(January 6, 2009), 74 FR 1744.
2 17
12 17
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Federal Register / Vol. 74, No. 49 / Monday, March 16, 2009 / Notices
The Exchange believes that by making
NYSE Order Imbalance Information
datafeed available as a stand-alone
market data product it would enable all
investors to gain access to information
regarding opening and closing
imbalances on the Exchange, especially
because the Exchange is not imposing
end-user fees, is not requiring end-users
to sign contracts and is making vendor
receipt and use of the information
inexpensive and very few
administrative burdens (e.g., no
reporting requirements and no end-user
contracts). Currently, many investors
have not been able to access this data
because they do not subscribe to the
NYSE OpenBook services. The
Exchange anticipates that this will
provide important information to
millions of investors.
Initially, the Exchange proposes to
make order imbalance information
available at the following intervals.
For Opening Order Imbalances
• Every five minutes between 8:30
a.m. EST and 9 a.m. EST.
• Every one minute between 9 a.m.
EST and 9:20 a.m. EST.
• Every 15 seconds between 9:20 a.m.
EST and the opening (or 9:35 a.m. EST
if the opening is delayed).
For Closing Order Imbalances
• Every fifteen seconds between 3:40
p.m. EST and 3:50 p.m. EST.
• Every five seconds between 3:50
p.m. EST and 4 p.m. EST.
If the Exchange were to change these
intervals, it would notify NYSE Order
Imbalance Information recipients in
advance and/or post the changes on the
Exchange’s Web.site.
The Fee
The proposed fee of $500 per month
for recipients of the NYSE Order
Imbalance Information datafeed applies
whether the recipient receives the
datafeed directly from the Exchange or
indirectly from an intermediary. The fee
entitles the datafeed recipient to make
displays of that information available to
an unlimited number of subscribers for
no extra charge. The Exchange is not
proposing to impose an end-user or
display device fee on those subscribers.
The fee would allow vendors to
redistribute NYSE Order Imbalance
Information: (i) Without having to
differentiate between professional
subscribers and nonprofessional
subscribers; (ii) without having to
account for the extent of access to the
data; (iii) without having to procure
contracts with its subscribers for the
benefit of the Exchange; and (iv)
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15:38 Mar 13, 2009
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without having to report the number of
its subscribers.
By establishing the access fee at what
it terms as an inexpensive rate and
declining to impose an end-user fee on
the consumption of NYSE Order
Imbalance Information, the Exchange
states that it seeks to enable all investors
to gain access to information regarding
opening and closing imbalances on the
Exchange. The Exchange believes that
the fee enables the investment
community that has an interest in the
receipt of order imbalance information
to contribute to the Exchange’s
operating costs in a manner that is
appropriate for this market data
product.
Continued Distribution Through NYSE
OpenBook
The Exchange would continue to
permit NYSE OpenBook datafeed
recipients to receive the NYSE Order
Imbalance Information datafeed as part
of the NYSE OpenBook package without
having to pay the $500 fee or any other
additional charge. Those NYSE
OpenBook datafeed recipients may then
redistribute the NYSE Order Imbalance
Information to any of their subscribers,
whether or not the subscriber also
receives NYSE OpenBook information.
The Exchange imposes no end-user
charge on those subscribers.
Contracts
The Exchange proposes to provide the
NYSE Order Imbalance Information
datafeed available under the same
contracting arrangement that the
Commission has approved for the
receipt and use of market datafeeds
under the CTA and CQ Plans. That
arrangement contemplates that each
datafeed recipient enter into the
Commission-approved standard form of
‘‘Agreement for Receipt and Use of
Market Data’’ that Network A uses for
data redistributors and other parties that
use the data for purposes other than
interrogation.4 Exhibit A to each of
those agreements would need to be
updated to reflect the receipt and use of
NYSE Order Imbalance Information.
The Exchange states that this
arrangement would not require an enduser of the information (other than a
4 The Participants in the CTA and CQ Plans first
submitted the Consolidated Vendor Form to the
Commission for immediate effectiveness in 1990.
See Release No. 34–28407 (September 6, 1990); 55
FR 37276 (September 10, 1990) (File No. 4–281).
The Commission approved a revised version of it
in 1996 in conjunction with the participants’
restatement of the CTA and CQ Plans. See Release
No. 34–37191 (May 9, 1996); 61 FR 24842 (May 16,
1996) (File No. SR–CTA/CQ–96–1).
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data feed recipient) to enter into any
agreement.
III. Discussion
The Commission has reviewed
carefully the proposed rule change and
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange. In particular, it is
consistent with Section 6(b)(4) of the
Act,5 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 parties
using its facilities, and Section 6(b)(5) of
the Act,6 which requires, among other
things, that the rules of a national
securities 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, and
not be designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Commission also finds that the
proposed rule change is consistent with
the provisions of Section 6(b)(8) of the
Act,7 which requires that the rules of an
exchange not impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. Finally, the
Commission finds that the proposed
rule change is consistent with Rule
603(a) of Regulation NMS,8 adopted
under Section 11A(c)(1) of the Act,
which requires an exclusive processor
that distributes information with respect
to quotations for or transactions in an
NMS stock to do so on terms that are
fair and reasonable and that are not
unreasonably discriminatory.9
The Commission has reviewed the
proposal using the approach set forth in
the NYSE Arca Order for non-core
market data fees.10 In the NYSE Arca
5 15
U.S.C. 78f(b)(4).
U.S.C. 78f(b)(5).
7 15 U.S.C. 78f(b)(8).
8 17 CFR 242.603(a).
9 NYSE is an exclusive processor of NYSE data
under Section 3(a)(22)(B) of the Act, 15 U.S.C.
78c(a)(22)(B), which defines an exclusive processor
as, among other things, an exchange that distributes
information with respect to quotations or
transactions on an exclusive basis on its own
behalf.
10 Securities Exchange Act Release No. 59039
(December 2, 2008), 73 FR 74770 (December 9,
2008) (SR–NYSEArca–2006–21) (‘‘NYSE Arca
Order’’). In the NYSE Arca Order, the Commission
describes a variety of competitive factors that apply
to exchanges when distributing non-core market
data products. The Commission hereby incorporates
6 15
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Order, the Commission stated that
‘‘when possible, reliance on competitive
forces is the most appropriate and
effective means to assess whether the
terms for the distribution of non-core
data are equitable, fair and reasonable,
and not unreasonably
discriminatory.’’ 11 It noted that the
‘‘existence of significant competition
provides a substantial basis for finding
that the terms of an exchange’s fee
proposal are equitable, fair, reasonable,
and not unreasonably or unfairly
discriminatory.’’ 12 If an exchange ‘‘was
subject to significant competitive forces
in setting the terms of a proposal,’’ the
Commission will approve a 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.’’ 13
As noted in the NYSE Arca Order, the
standards in Section 6 of the Act and
Rule 603 of Regulation NMS do not
differentiate between types of data and
therefore apply to exchange proposals to
distribute both core data and non-core
data.14 Core data is the best-priced
quotations and comprehensive last-sale
reports of all markets that the
Commission, pursuant to Rule 603(b),
requires a central processor to
consolidate and distribute to the public
pursuant to joint-SRO plans.15 In
contrast, individual exchanges and
other market participants distribute
non-core data voluntarily.16 The
mandatory nature of the core data
disclosure regime leaves little room for
competitive forces to determine
products and fees.17 Non-core data
products and their fees are, by contrast,
much more sensitive to competitive
forces.18 The Commission therefore is
able to use competitive forces in its
determination of whether an exchange’s
proposal to distribute non-core data
meets the standards of Section 6 and
Rule 603. Because NYSE’s instant
proposal relates to the distribution of
non-core data, the Commission will
apply the market-based approach set
forth in the NYSE Arca Order.
The proposed rule change should
benefit investors by facilitating wider
availability of NYSE Order Imbalance
Information. The proposal would allow
market participants that are currently
not subscribers to the NYSE OpenBook
market data product to receive NYSE
Order Imbalance Information as a standalone product. Vendors would be
allowed to redistribute the Order
Imbalance Information to an unlimited
number of subscribers for no extra
charge. The Commission notes that
under the proposal even though NYSE
Order Imbalance Information would be
sold as a stand-alone product, that
NYSE OpenBook datafeed recipients
would continue to receive the Order
Imbalance datafeed without having to
pay any additional charge. In addition,
the Commission notes that those NYSE
OpenBook datafeed recipients would
then be able to redistribute without
charge the NYSE Order Imbalance
Information to any of their subscribers,
whether or not the subscriber also
receives NYSE OpenBook information.
The NYSE Open Imbalance
Information product that is before the
Commission is a non-core data product
and, as in the Commission’s NYSE Arca
Order analysis, at least two broad types
of significant competitive forces applied
to NYSE in setting the terms of this
proposal: (i) NYSE’s compelling need to
attract order flow from market
participants; 19 and (ii) the availability
to market participants of alternatives to
purchasing NYSE’s data.
Attracting order flow is the core
competitive concern of any equity
exchange, including NYSE. Attracting
order flow is an essential part of an
NYSE’s competitive success. If NYSE
cannot attract order flow to its market,
it will not be able to execute
transactions. If NYSE cannot execute
transactions on its market, it will not
generate transaction revenue. If NYSE
cannot attract orders or execute
transactions on its market, it will not
have market data to distribute, for a fee
or otherwise, and will not earn market
data revenue and thus not be
competitive with other exchanges that
have this ability.
Table 1 below provides a useful
recent snapshot of the state of
competition in the U.S. equity markets
in the month of January 2009: 20
TABLE 1—REPORTED SHARE VOLUME IN U.S-LISTED EQUITIES DURING JANUARY 2009 (%)
Trading venue
All stocks
NYSE-listed
NASDAQ-listed
NASDAQ ........................................................
All Non-Exchange ..........................................
NYSE Arca .....................................................
NYSE .............................................................
BATS ..............................................................
International Stock Exchange ........................
National Stock Exchange ..............................
Chicago Stock Exchange ..............................
CBOE Stock Exchange .................................
NYSE Alternext ..............................................
NASDAQ OMX BX ........................................
27.1
26.7
17.9
14.8
10.7
1.3
0.6
0.4
0.2
0.1
0.0
20.5
26.2
15.7
26.2
9.0
1.4
0.7
0.4
0.0
0.0
0.0
39.9
31.0
15.8
0.0
10.8
1.4
0.7
0.3
0.1
0.0
0.0
The market share percentages in Table
1 strongly indicate that NYSE must
compete vigorously for order flow to
maintain its share of trading volume.
This compelling need to attract order
flow imposes significant pressure on
by reference the data and analysis from the NYSE
Arca Order into this order.
11 Id. at 74771.
12 Id. at 74782.
13 Id. at 74781.
14 Id. at 74779.
15 Id. See 17 CFR 242.603(b). (‘‘Every national
securities exchange on which an NMS stock is
traded and national securities association shall act
jointly pursuant to one or more effective national
market system plans to disseminate consolidated
information, including a national best bid and
national best offer, on quotations for and
transactions in NMS stocks. Such plan or plans
shall provide for the dissemination of all
consolidated information for an individual NMS
stock through a single plan processor.’’).
16 NYSE Arca Order, supra note 10, at 74779.
17 Id.
18 Id.
19 Id. at 74782. (‘‘Attracting order flow is the core
competitive concern of any equity exchange—it is
the ‘‘without which, not’’ of an exchange’s
competitive success. If an exchange cannot attract
orders, it will not be able to execute transactions.
If it cannot execute transactions, it will not generate
transaction revenue. If an exchange cannot attract
orders or execute transactions, it will not have
market data to distribute, for a fee or otherwise, and
will not earn market data revenue.’’).
20 Source: ArcaVision (available at https://
www.arcavision.com).
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NYSE to act reasonably in setting its
fees for NYSE market data, particularly
given that the market participants that
must pay such fees often will be the
same market participants from whom
NYSE must attract order flow. These
market participants particularly include
the large broker-dealer firms that control
the handling of a large volume of
customer and proprietary order flow.
Given the portability of order flow from
one trading venue to another, any
exchange that sought to charge
unreasonably high data fees would risk
alienating many of the same customers
on whose orders it depends for
competitive survival. Specifically with
respect to trading prior to the open and
close, for example, the Commission
notes that exchanges other than the
NYSE currently offer, or could easily
offer, trading services that compete with
the NYSE open and close.
In addition to the need to attract order
flow, the availability of alternatives to
NYSE’s Order Imbalance Information
significantly affect the terms on which
NYSE can distribute this market data.21
In setting the fees for its NYSE
OpenBook data, NYSE must consider
the extent to which market participants
would choose one or more alternatives
instead of purchasing the exchange’s
data. The various self-regulatory
organizations, the several Trade
Reporting Facilities of FINRA, and ECNs
that produce proprietary data are all
sources of competition. Accordingly, a
variety of alternative sources of
information impose significant
competitive pressures on the NYSE in
setting the terms for distributing its
market data. The Commission believes
that the availability of those
alternatives, as well as the NYSE’s
compelling need to attract order flow,
imposed significant competitive
pressure on the NYSE to act equitably,
21 See Richard Posner, Economic Analysis of Law
§ 9.1 (5th ed., 1998) (discussing the theory of
monopolies and pricing). See also U.S. Dep’t of
Justice & Fed’l Trade Comm’n, Horizontal Merger
Guidelines § 1.11 (1992), as revised (1997)
(explaining the importance of alternatives to the
presence of competition and the definition of
markets and market power). Courts frequently refer
to the Department of Justice and Federal Trade
Commission merger guidelines to define product
markets and evaluate market power. See, e.g., FTC
v. Whole Foods Market, Inc., 502 F. Supp. 2d 1
(D.D.C. 2007); FTC v. Arch Coal, Inc., 329 F. Supp.
2d 109 (D.D.C. 2004). In considering antitrust
issues, courts have recognized the value of
competition in producing lower prices. See, e.g.,
Leegin Creative Leather Products v. PSKS, Inc., 127
S. Ct. 2705 (2007); Atlanta Richfield Co. v. United
States Petroleum Co., 495 U.S. 328 (1990);
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574 (1986); State Oil Co. v. Khan, 522 U.S.
3 (1997); Northern Pacific Railway Co. v. U.S., 356
U.S. 1 (1958).
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fairly, and reasonably in setting the
terms of its proposal.
Because the NYSE was subject to
significant competitive forces in setting
the terms of the proposal, the
Commission will approve the proposal
in the absence of a substantial
countervailing basis to find that its
terms nevertheless fail to meet an
applicable requirement of the Act or the
rules thereunder. An analysis of the
proposal does not provide such a basis,
nor were there any comments on this
filing, so no one raised any issues under
this portion of the test. For example, the
proposal does not unreasonably
discriminate among types of users. The
proposed fee entitles the datafeed
recipient to make displays of the
information available to an unlimited
number of subscribers at no extra
charge.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,22 that the
proposed rule change (SR–NYSE–2008–
132) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–5569 Filed 3–13–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59544; File No. SR–NYSE–
2008–131]
Self-Regulatory Organizations; New
York Stock Exchange, LLC; Order
Approving 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
March 9, 2009.
I. Introduction
On December 18, 2008, the New York
Stock Exchange, LLC (‘‘NYSE’’ or the
‘‘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
introduce a nonprofessional subscriber
fee for its NYSE OpenBook product
22 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
23 17
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offerings and to revise the unit of count
that determines the device fees payable
by data recipients. The proposed rule
change was published for comment in
the Federal Register on January 12,
2009.3 The Commission received two
comment letters on the proposal.4 NYSE
responded to the comment letters on
February 25, 2009.5 This order approves
the proposed rule change.
II. Description of the Proposal
A. Unit of Count
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. NYSE believes the
proposal is designed to be more closely
aligned with current data consumption,
reduce costs for the Exchange’s
customers, and potentially serve as a
model for additional pricing
efficiencies.
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: (i) NYSE BestQuote,6 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
3 See Securities Exchange Act Release No. 59198
(January 5, 2009), 74 FR 1268.
4 See February 2, 2009 letter from Ira D.
Hammerman, Senior Managing Director and
General Counsel, Securities Industry and Financial
Markets Association (‘‘SIFMA’’), to Elizabeth M.
Murphy, Secretary, Commission (‘‘SIFMA Letter’’);
February 2, 2009 letter from Jeffrey T. Brown,
Senior Vice President, Charles Schwab Corporation
(‘‘Schwab’’), to Florence Harmon, Deputy Secretary,
Commission, (‘‘Schwab Letter’’).
5 See February 25, 2009 letter from Janet M.
Kissane, Senior Vice President—Legal & Corporate
Secretary, Office of the General Counsel, NYSE, to
Elizabeth M. Murphy, Secretary, Commission
(‘‘NYSE Letter’’).
6 NYSE added NYSE BestQuote to the NYSE
OpenBook Realtime package in October 2006. See
Securities Exchange Act Release No. 54594 (October
12, 2006); 71 FR 61819 (October 19, 2006) (SR–
NYSE–2006–81).
E:\FR\FM\16MRN1.SGM
16MRN1
]]>Agencies
[Federal Register Volume 74, Number 49 (Monday, March 16, 2009)]
[Notices]
[Pages 11159-11162]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-5569]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59543; File No. SR-NYSE-2008-132]
Self-Regulatory Organizations; New York Stock Exchange, LLC;
Order Approving Proposed Rule Change To Introduce a NYSE Order
Imbalance Information Fee
March 9, 2009.
I. Introduction
On December 19, 2008, the New York Stock Exchange, LLC (``NYSE'' or
the ``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 introduce a fee for access to its NYSE Order
Imbalance Information datafeed. The proposed rule change was published
for comment in the Federal Register on January 13, 2009.\3\ The
Commission received no comment letters on the proposal. This order
approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 59202 (January 6,
2009), 74 FR 1744.
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II. Description of the Proposal
The Exchange proposes to make the NYSE Order Imbalance Information
datafeed available as a stand-alone market data product, separate and
apart from NYSE OpenBook, and proposes to charge recipients of the NYSE
Order Imbalance Information datafeed $500 per month.
Currently, NYSE makes available to recipients of NYSE OpenBook an
additional datafeed containing Order Imbalance Information. NYSE Order
Imbalance Information is a datafeed of real-time order imbalances that
accumulate prior to the opening of trading on the Exchange and prior to
the close of trading on the Exchange. These orders are subject to
execution at the market's opening or closing price, as the case may be,
and represent issues that are likely to be of particular trading
interest at the opening or closing. The Exchange distributes
information about these imbalances in real-time at specified intervals
prior to the opening and closing auctions. NYSE Order Imbalance
Information also includes the imbalance information that the Exchange
is required to disseminate under NYSE Rule 123C(5), as well as
automated real-time streaming order imbalance information at specified
intervals.
[[Page 11160]]
The Exchange believes that by making NYSE Order Imbalance
Information datafeed available as a stand-alone market data product it
would enable all investors to gain access to information regarding
opening and closing imbalances on the Exchange, especially because the
Exchange is not imposing end-user fees, is not requiring end-users to
sign contracts and is making vendor receipt and use of the information
inexpensive and very few administrative burdens (e.g., no reporting
requirements and no end-user contracts). Currently, many investors have
not been able to access this data because they do not subscribe to the
NYSE OpenBook services. The Exchange anticipates that this will provide
important information to millions of investors.
Initially, the Exchange proposes to make order imbalance
information available at the following intervals.
For Opening Order Imbalances
Every five minutes between 8:30 a.m. EST and 9 a.m. EST.
Every one minute between 9 a.m. EST and 9:20 a.m. EST.
Every 15 seconds between 9:20 a.m. EST and the opening (or
9:35 a.m. EST if the opening is delayed).
For Closing Order Imbalances
Every fifteen seconds between 3:40 p.m. EST and 3:50 p.m.
EST.
Every five seconds between 3:50 p.m. EST and 4 p.m. EST.
If the Exchange were to change these intervals, it would notify
NYSE Order Imbalance Information recipients in advance and/or post the
changes on the Exchange's Web.site.
The Fee
The proposed fee of $500 per month for recipients of the NYSE Order
Imbalance Information datafeed applies whether the recipient receives
the datafeed directly from the Exchange or indirectly from an
intermediary. The fee entitles the datafeed recipient to make displays
of that information available to an unlimited number of subscribers for
no extra charge. The Exchange is not proposing to impose an end-user or
display device fee on those subscribers.
The fee would allow vendors to redistribute NYSE Order Imbalance
Information: (i) Without having to differentiate between professional
subscribers and nonprofessional subscribers; (ii) without having to
account for the extent of access to the data; (iii) without having to
procure contracts with its subscribers for the benefit of the Exchange;
and (iv) without having to report the number of its subscribers.
By establishing the access fee at what it terms as an inexpensive
rate and declining to impose an end-user fee on the consumption of NYSE
Order Imbalance Information, the Exchange states that it seeks to
enable all investors to gain access to information regarding opening
and closing imbalances on the Exchange. The Exchange believes that the
fee enables the investment community that has an interest in the
receipt of order imbalance information to contribute to the Exchange's
operating costs in a manner that is appropriate for this market data
product.
Continued Distribution Through NYSE OpenBook
The Exchange would continue to permit NYSE OpenBook datafeed
recipients to receive the NYSE Order Imbalance Information datafeed as
part of the NYSE OpenBook package without having to pay the $500 fee or
any other additional charge. Those NYSE OpenBook datafeed recipients
may then redistribute the NYSE Order Imbalance Information to any of
their subscribers, whether or not the subscriber also receives NYSE
OpenBook information. The Exchange imposes no end-user charge on those
subscribers.
Contracts
The Exchange proposes to provide the NYSE Order Imbalance
Information datafeed available under the same contracting arrangement
that the Commission has approved for the receipt and use of market
datafeeds under the CTA and CQ Plans. That arrangement contemplates
that each datafeed recipient enter into the Commission-approved
standard form of ``Agreement for Receipt and Use of Market Data'' that
Network A uses for data redistributors and other parties that use the
data for purposes other than interrogation.\4\ Exhibit A to each of
those agreements would need to be updated to reflect the receipt and
use of NYSE Order Imbalance Information. The Exchange states that this
arrangement would not require an end-user of the information (other
than a data feed recipient) to enter into any agreement.
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\4\ The Participants in the CTA and CQ Plans first submitted the
Consolidated Vendor Form to the Commission for immediate
effectiveness in 1990. See Release No. 34-28407 (September 6, 1990);
55 FR 37276 (September 10, 1990) (File No. 4-281). The Commission
approved a revised version of it in 1996 in conjunction with the
participants' restatement of the CTA and CQ Plans. See Release No.
34-37191 (May 9, 1996); 61 FR 24842 (May 16, 1996) (File No. SR-CTA/
CQ-96-1).
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III. Discussion
The Commission has reviewed carefully the proposed rule change and
finds that the proposed rule change is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to a
national securities exchange. In particular, it is consistent with
Section 6(b)(4) of the Act,\5\ 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 parties using its facilities, and Section 6(b)(5) of the
Act,\6\ which requires, among other things, that the rules of a
national securities 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, and not be designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\5\ 15 U.S.C. 78f(b)(4).
\6\ 15 U.S.C. 78f(b)(5).
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The Commission also finds that the proposed rule change is
consistent with the provisions of Section 6(b)(8) of the Act,\7\ which
requires that the rules of an exchange not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act. Finally, the Commission finds that the proposed rule change
is consistent with Rule 603(a) of Regulation NMS,\8\ adopted under
Section 11A(c)(1) of the Act, which requires an exclusive processor
that distributes information with respect to quotations for or
transactions in an NMS stock to do so on terms that are fair and
reasonable and that are not unreasonably discriminatory.\9\
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\7\ 15 U.S.C. 78f(b)(8).
\8\ 17 CFR 242.603(a).
\9\ NYSE is an exclusive processor of NYSE data under Section
3(a)(22)(B) of the Act, 15 U.S.C. 78c(a)(22)(B), which defines an
exclusive processor as, among other things, an exchange that
distributes information with respect to quotations or transactions
on an exclusive basis on its own behalf.
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The Commission has reviewed the proposal using the approach set
forth in the NYSE Arca Order for non-core market data fees.\10\ In the
NYSE Arca
[[Page 11161]]
Order, the Commission stated that ``when possible, reliance on
competitive forces is the most appropriate and effective means to
assess whether the terms for the distribution of non-core data are
equitable, fair and reasonable, and not unreasonably discriminatory.''
\11\ It noted that the ``existence of significant competition provides
a substantial basis for finding that the terms of an exchange's fee
proposal are equitable, fair, reasonable, and not unreasonably or
unfairly discriminatory.'' \12\ If an exchange ``was subject to
significant competitive forces in setting the terms of a proposal,''
the Commission will approve a 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.'' \13\
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\10\ Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21) (``NYSE
Arca Order''). In the NYSE Arca Order, the Commission describes a
variety of competitive factors that apply to exchanges when
distributing non-core market data products. The Commission hereby
incorporates by reference the data and analysis from the NYSE Arca
Order into this order.
\11\ Id. at 74771.
\12\ Id. at 74782.
\13\ Id. at 74781.
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As noted in the NYSE Arca Order, the standards in Section 6 of the
Act and Rule 603 of Regulation NMS do not differentiate between types
of data and therefore apply to exchange proposals to distribute both
core data and non-core data.\14\ Core data is the best-priced
quotations and comprehensive last-sale reports of all markets that the
Commission, pursuant to Rule 603(b), requires a central processor to
consolidate and distribute to the public pursuant to joint-SRO
plans.\15\ In contrast, individual exchanges and other market
participants distribute non-core data voluntarily.\16\ The mandatory
nature of the core data disclosure regime leaves little room for
competitive forces to determine products and fees.\17\ Non-core data
products and their fees are, by contrast, much more sensitive to
competitive forces.\18\ The Commission therefore is able to use
competitive forces in its determination of whether an exchange's
proposal to distribute non-core data meets the standards of Section 6
and Rule 603. Because NYSE's instant proposal relates to the
distribution of non-core data, the Commission will apply the market-
based approach set forth in the NYSE Arca Order.
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\14\ Id. at 74779.
\15\ Id. See 17 CFR 242.603(b). (``Every national securities
exchange on which an NMS stock is traded and national securities
association shall act jointly pursuant to one or more effective
national market system plans to disseminate consolidated
information, including a national best bid and national best offer,
on quotations for and transactions in NMS stocks. Such plan or plans
shall provide for the dissemination of all consolidated information
for an individual NMS stock through a single plan processor.'').
\16\ NYSE Arca Order, supra note 10, at 74779.
\17\ Id.
\18\ Id.
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The proposed rule change should benefit investors by facilitating
wider availability of NYSE Order Imbalance Information. The proposal
would allow market participants that are currently not subscribers to
the NYSE OpenBook market data product to receive NYSE Order Imbalance
Information as a stand-alone product. Vendors would be allowed to
redistribute the Order Imbalance Information to an unlimited number of
subscribers for no extra charge. The Commission notes that under the
proposal even though NYSE Order Imbalance Information would be sold as
a stand-alone product, that NYSE OpenBook datafeed recipients would
continue to receive the Order Imbalance datafeed without having to pay
any additional charge. In addition, the Commission notes that those
NYSE OpenBook datafeed recipients would then be able to redistribute
without charge the NYSE Order Imbalance Information to any of their
subscribers, whether or not the subscriber also receives NYSE OpenBook
information.
The NYSE Open Imbalance Information product that is before the
Commission is a non-core data product and, as in the Commission's NYSE
Arca Order analysis, at least two broad types of significant
competitive forces applied to NYSE in setting the terms of this
proposal: (i) NYSE's compelling need to attract order flow from market
participants; \19\ and (ii) the availability to market participants of
alternatives to purchasing NYSE's data.
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\19\ Id. at 74782. (``Attracting order flow is the core
competitive concern of any equity exchange--it is the ``without
which, not'' of an exchange's competitive success. If an exchange
cannot attract orders, it will not be able to execute transactions.
If it cannot execute transactions, it will not generate transaction
revenue. If an exchange cannot attract orders or execute
transactions, it will not have market data to distribute, for a fee
or otherwise, and will not earn market data revenue.'').
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Attracting order flow is the core competitive concern of any equity
exchange, including NYSE. Attracting order flow is an essential part of
an NYSE's competitive success. If NYSE cannot attract order flow to its
market, it will not be able to execute transactions. If NYSE cannot
execute transactions on its market, it will not generate transaction
revenue. If NYSE cannot attract orders or execute transactions on its
market, it will not have market data to distribute, for a fee or
otherwise, and will not earn market data revenue and thus not be
competitive with other exchanges that have this ability.
Table 1 below provides a useful recent snapshot of the state of
competition in the U.S. equity markets in the month of January 2009:
\20\
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\20\ Source: ArcaVision (available at https://
www.arcavision.com).
Table 1--Reported Share Volume in U.S-Listed Equities during January 2009 (%)
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Trading venue All stocks NYSE-listed NASDAQ-listed
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NASDAQ..................................................... 27.1 20.5 39.9
All Non-Exchange........................................... 26.7 26.2 31.0
NYSE Arca.................................................. 17.9 15.7 15.8
NYSE....................................................... 14.8 26.2 0.0
BATS....................................................... 10.7 9.0 10.8
International Stock Exchange............................... 1.3 1.4 1.4
National Stock Exchange.................................... 0.6 0.7 0.7
Chicago Stock Exchange..................................... 0.4 0.4 0.3
CBOE Stock Exchange........................................ 0.2 0.0 0.1
NYSE Alternext............................................. 0.1 0.0 0.0
NASDAQ OMX BX.............................................. 0.0 0.0 0.0
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The market share percentages in Table 1 strongly indicate that NYSE
must compete vigorously for order flow to maintain its share of trading
volume. This compelling need to attract order flow imposes significant
pressure on
[[Page 11162]]
NYSE to act reasonably in setting its fees for NYSE market data,
particularly given that the market participants that must pay such fees
often will be the same market participants from whom NYSE must attract
order flow. These market participants particularly include the large
broker-dealer firms that control the handling of a large volume of
customer and proprietary order flow. Given the portability of order
flow from one trading venue to another, any exchange that sought to
charge unreasonably high data fees would risk alienating many of the
same customers on whose orders it depends for competitive survival.
Specifically with respect to trading prior to the open and close, for
example, the Commission notes that exchanges other than the NYSE
currently offer, or could easily offer, trading services that compete
with the NYSE open and close.
In addition to the need to attract order flow, the availability of
alternatives to NYSE's Order Imbalance Information significantly affect
the terms on which NYSE can distribute this market data.\21\ In setting
the fees for its NYSE OpenBook data, NYSE must consider the extent to
which market participants would choose one or more alternatives instead
of purchasing the exchange's data. The various self-regulatory
organizations, the several Trade Reporting Facilities of FINRA, and
ECNs that produce proprietary data are all sources of competition.
Accordingly, a variety of alternative sources of information impose
significant competitive pressures on the NYSE in setting the terms for
distributing its market data. The Commission believes that the
availability of those alternatives, as well as the NYSE's compelling
need to attract order flow, imposed significant competitive pressure on
the NYSE to act equitably, fairly, and reasonably in setting the terms
of its proposal.
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\21\ See Richard Posner, Economic Analysis of Law Sec. 9.1 (5th
ed., 1998) (discussing the theory of monopolies and pricing). See
also U.S. Dep't of Justice & Fed'l Trade Comm'n, Horizontal Merger
Guidelines Sec. 1.11 (1992), as revised (1997) (explaining the
importance of alternatives to the presence of competition and the
definition of markets and market power). Courts frequently refer to
the Department of Justice and Federal Trade Commission merger
guidelines to define product markets and evaluate market power. See,
e.g., FTC v. Whole Foods Market, Inc., 502 F. Supp. 2d 1 (D.D.C.
2007); FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109 (D.D.C. 2004). In
considering antitrust issues, courts have recognized the value of
competition in producing lower prices. See, e.g., Leegin Creative
Leather Products v. PSKS, Inc., 127 S. Ct. 2705 (2007); Atlanta
Richfield Co. v. United States Petroleum Co., 495 U.S. 328 (1990);
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574
(1986); State Oil Co. v. Khan, 522 U.S. 3 (1997); Northern Pacific
Railway Co. v. U.S., 356 U.S. 1 (1958).
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Because the NYSE was subject to significant competitive forces in
setting the terms of the proposal, the Commission will approve the
proposal in the absence of a substantial countervailing basis to find
that its terms nevertheless fail to meet an applicable requirement of
the Act or the rules thereunder. An analysis of the proposal does not
provide such a basis, nor were there any comments on this filing, so no
one raised any issues under this portion of the test. For example, the
proposal does not unreasonably discriminate among types of users. The
proposed fee entitles the datafeed recipient to make displays of the
information available to an unlimited number of subscribers at no extra
charge.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\22\ that the proposed rule change (SR-NYSE-2008-132) be, and
hereby is, approved.
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\22\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-5569 Filed 3-13-09; 8:45 am]
BILLING CODE 8011-01-P
